<PAGE>   1

                                    FORM 10-K

                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

(Mark One)
[ X ]        ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
             EXCHANGE ACT OF 1934 [FEE REQUIRED]
             For the fiscal year ended December 31, 1999.

                                       OR

[   ]        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
             EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
             For the transition period from ________to_________.

                         Commission File Number: 0-21202
                                                 -------

                         FIRSTWAVE(R) TECHNOLOGIES, INC.
                         -------------------------------
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                                            <C>
GEORGIA                                                                               58-1588291
------------------------------------------------------------------------------------------------
(State or other jurisdiction of                                (IRS Employer Identification No.)
 incorporation or organization)

2859 PACES FERRY ROAD, SUITE 1000, ATLANTA, GEORGIA                                        30339
------------------------------------------------------------------------------------------------
(Address of principal executive offices)                                              (Zip Code)
</TABLE>

       Registrant's telephone number, including area code: (770) 431-1200
                                                           --------------

           Securities registered pursuant to Section 12(b) of the Act:

                                      NONE
                                      ----

           Securities registered pursuant to Section 12(g) of the Act:

                           COMMON STOCK, NO PAR VALUE
                           --------------------------
                                (Title of Class)

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 the 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 ]

Aggregate market value of the voting stock held by non-affiliates of the
Registrant as of March 23, 2000: approximately $54,846,723.

Number of shares of Common Stock outstanding as of March 23, 2000: 5,799,811.


<PAGE>   2


                       DOCUMENTS INCORPORATED BY REFERENCE


Portions of the Company's definitive Proxy Statement for its Annual Meeting of
Shareholders to be held on May 9, 2000 are incorporated by reference into Part
III of this Report. Other than those portions specifically incorporated by
reference herein, the 1999 Annual Report to Shareholders and the Proxy Statement
for the Annual Meeting of Shareholders to be held on May 9, 2000 are not deemed
to be filed as part of this Report.



                                     PART I

ITEM 1.  BUSINESS

This section and other parts of this Form 10-K contain forward-looking
statements that involve uncertainties and risk. Firstwave(R) Technologies,
Inc.'s results may differ from the results discussed in the forward-looking
statements. Factors that might cause such differences include, but are not
limited to, those items discussed below and the details in "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

GENERAL

Firstwave Technologies, Inc. provides Internet-based customer relationship
management (eCRM) solutions to companies located throughout the world. The
Company markets and supports three product lines: Firstwave eRM, Takecontrol(R),
and Firstwave for Unix. Firstwave eRM is a seamlessly integrated, web-based
suite of applications created to fulfill and manage the e-business relationship
needs of a company in the areas of sales, marketing, and support. Firstwave eRM
manages a company's customer life cycle management, from prospecting targets in
a pre-sales environment to post sales service and account management. The sales
application was released as Netgain(TM) Sales in September 1998 and the
marketing and support applications were integrated with the sales application to
form one integrated application, Firstwave eRM, in December 1999. Takecontrol is
a Microsoft(R) Windows-based, integrated client/server CRM solution that meets
the need to automate marketing, sales and customer service operations for
companies in multiple industries. The Firstwave for Unix product line is a
traditional UNIX, character-based CRM solution.

COMPANY STRATEGY

Firstwave continues its vision of creating an Internet-centric CRM platform that
leverages the Internet to bring value to companies by lowering their total cost
of ownership while enhancing their relationships with customers, prospects and
partners. Unlike web-based systems, web-enabled or client server, CRM
applications historically are costly and take months to implement, are expensive
to maintain and do not provide the flexibility within the product that is
demanded today. Additionally, users of traditional CRM products find them
complex and difficult to use, resulting in a low user acceptance rate. Firstwave
strives to create a user-friendly environment for its users, offering a web site
address to hit over the Internet for application access and an easy web-based
interface once inside the application.

Firstwave's Internet-based applications are also extended to a customer's
channel and business partners outside the internal offices with granular
security measures in place allowing those partners to see only what that company
chooses to allow them to see. Web-enabled or client server CRM applications have
limited partner capabilities.

Management believes that the future of CRM applications must be built around the
Internet (tying in all customer management functions including marketing, sales
and support), be designed with the ability to customize a product to fit a
company or partner's needs and have the ability to be remotely hosted. In the
past year Firstwave has dedicated its Development resources to accomplish that
vision.



                                       2
<PAGE>   3


The Company's Internet-based product suite, Firstwave eRM, provides marketing,
sales and support capabilities using Internet technologies. Users can market to
targets utilizing campaign management functionality within the eMarketing
application and turn them over as leads to the sales team. The sales team, using
the eSales application, can then manage their opportunities and accounts
efficiently with added value in order to close sales. Those new customers are
then managed through the eSupport application, where any support issues can be
tracked and resolved quickly and effectively by using a customized knowledge
base and escalation procedures.

Firstwave has also developed a tool set, eWorkbench, that allows for extensive
customizations to the Firstwave eRM product suite. Management believes this tool
set is the strongest and most effective in the industry. Features of eWorkbench
include the ability to set security levels for different users including sales
representatives, marketing representatives, customer support personnel and
business partners outside the company and the capability to change the look and
feel of the application. Business objects within the application are also easily
changed within eWorkbench.

Management's belief in the rise of the Application Service Provider (ASP) model
has led to the development of an ASP optimized-architecture. This architecture,
released in the 3.1 version, allows ASPs to host multiple companies and multiple
applications on a single server, a critical requirement for the success of the
ASP model. Management believes that more companies, especially in Firstwave's
target market of mid-size companies, may choose to have Firstwave eRM hosted
remotely using a lease vs. purchase approach. The Company has recently begun
marketing its products for this model, which when implemented, should provide
recurring revenue for the Company and eliminate many of the difficulties a
company has in implementing and maintaining a software application in-house.

Management believes Internationalization of the Company's product suite is the
next step in becoming an international presence in the eCRM industry and will
provide a key differentiator from the Company's competitors. The application
suite has multi-lingual and multi-currency capabilities.

The Company supports Oracle database technology and the Linux and Unix operating
systems for Firstwave eRM. The Company currently supports the integration of
Firstwave eRM data with Personal Digital Assistants. With the advent of wireless
technology and the anticipated improvement of wireless connection speeds, the
Company believes the demand for this technology will increase.

The Company is committed to its Internet product vision and strengthening the
client base significantly in the near-term. The Company remains dedicated to its
existing customers of Firstwave eRM, Takecontrol and Firstwave for UNIX and
continues to pursue best-of-breed distributors on a global level while staying
on the cutting edge of the world's most current technologies, including database
managers and operating systems.

PROVIDING VALUE AND ENHANCEMENTS TO EXISTING CUSTOMERS

As a core business strategy, Firstwave is committed to its existing customers by
providing value through post-sales consulting, training, support services and
product enhancements. Impeccable customer service is critical to the success of
Firstwave and its reputation as a customer-centric company in the CRM industry.
The Company seeks to differentiate itself from its competitors not only through
product features and technology, but also through an often-overlooked yet
critical business function - customer service.

LEVERAGE STRATEGIC ALLIANCES

The CRM solutions delivered by the Company are a combination of Firstwave's
direct selling efforts and those of various strategic alliance partners. By
leveraging the expertise of our partners, the Company is able to focus on its
core competency of providing innovative web based solutions. The Company's goal
is to select strategic partners who are "best in-class" providers of hardware,
software, telephony, and



                                       3
<PAGE>   4


consulting. In addition, Firstwave strongly supports a domestic and
international distribution network committed to developing the market and
promoting sales of the Company's products.

BUSINESS PARTNER SUPPORT

The Firstwave Business Partner program ensures that the Company achieves its
goal by accommodating any opportunity regardless of size or complexity. The
Company wants to ensure our partners are well equipped with the skills and tools
necessary to help them tackle any of these opportunities. These relationships
enable Firstwave to continue to improve service levels so customers can enjoy
quick results and seamless integration of Firstwave eRM solutions.

INTERNATIONAL OPERATIONS

In addition to its corporate headquarters in Atlanta, Georgia, Firstwave
maintains an office in London, England and the Company's global network of
distributors provides an international footprint in over 35 countries.

Through a distributorship with Asia Pathways Pte Ltd, effective February 2000,
Firstwave has established a more formal presence in Asia. Management believes
with the development of an internationalized product suite and a presence in a
growing market for customer relationship management products, the Company will
open a new channel for revenue.

SOFTWARE PRODUCTS

Firstwave actively markets three software applications: Firstwave eRM,
Takecontrol and Firstwave for UNIX. Firstwave eRM consists of eMarketing,
eSales, and eSupport and allows companies to build a secure and synchronized
view of their customers, channels, prospects and partners with one completely
integrated application.

The eRM application suite is a 100% web-based application that can be rapidly
deployed and highly customized. The Company believes that Internet technology,
the ability for a product to be customized easily and a quick implementation of
a customer relationship management application are essential criteria for
success in today's CRM marketplace.

Firstwave eSales extends the sales team to include inside users, mobile users,
remote users and indirect channel partners. It allows a company's extended sales
organization to manage existing customers and prospects for new business and
encourages cross-selling and up-selling opportunities. The current status of a
company's sales pipeline can be traced real-time and customized reports can be
created to provide senior management with information needed to make key
decisions. As in eMarketing, data accumulated through the eSales application is
available to users of other applications within the eRM suite.

Firstwave eMarketing delivers critical marketing information as part of the
comprehensive web-based suite. It empowers a company's marketing organization to
target an audience, manage campaigns, generate qualified leads and turn them
over to sales to close deals, thereby synthesizing its marketing with sales and
support data for a single secure and synchronized view of customers, channels,
prospects and partners.

Firstwave eSupport delivers critical support information as part of its
comprehensive web-based suite. It enhances the support process and revenue
stream by facilitating one-call issue resolution, allowing better opportunities
for cross-selling and up-selling to existing customers and enhancing the
maintenance collection process. eSupport tracks issues and enhancements, manages
and supports customer needs and service agreements and provides for the
escalation of issues to more senior support levels.



                                       4
<PAGE>   5


ERM ARCHITECTURE

Firstwave eRM's object-oriented, open architecture, eFramework, has a
significant impact on usability, customization and deployment of the eRM product
suite. Metadata technology is used to configure the application and to capture
customizations. This means that Firstwave eRM is able to support users' business
processes without changing underlying source code.

SERVICES

The Company seeks to differentiate itself from other providers of marketing,
sales and support software by offering an array of specialized professional
services on a fee basis. Firstwave's services consist of (1) education and
training services, (2) implementation and customizations, and (3) customer
support services.

EDUCATION AND TRAINING

Firstwave's comprehensive customer training program is designed to accommodate
the diverse needs of its customers. Courses are held on a regularly scheduled
basis at the Company's Atlanta headquarters, its London, England office and at
customer sites upon request. Firstwave charges its customers for education and
training services on a per-attendee basis with a minimum daily charge. For
classes conducted at customer sites, the Company charges a per-day rate for a
set number of attendees.

The current curriculum for Firstwave eRM consists of Firstwave End User
Training, System Administrator Training and Customization Training (Level 1 and
Level 2). The classes may be conducted at Firstwave, the customer site or via
the Internet. End User Training is intended for individuals who will use any
application within the Firstwave eRM suite. System Administrator Training is for
technical and administrative professionals who will be required to setup,
maintain and administer the Firstwave eRM application. Customization Training is
for technical and administrative professionals who will be responsible for the
customization of Firstwave eRM. In order for distributors or customers to become
fully certified application integrators, they must attend all training sessions,
including both levels of Customization Training.

IMPLEMENTATION AND CUSTOMIZATIONS

Firstwave's Professional Services Organization (PSO) is chartered to facilitate
the customers' successful implementation and utilization of Firstwave products
and to accelerate the implementation process. Firstwave uses its professional
services organization as a logical extension of its sales force and believes
that its professional services organization differentiates the Company from most
of its competitors. Typical services provided include systems analysis and
design, installation planning and coordination, database configuration, screen
and report tailoring, application development, data conversion, systems
interconnectivity, project management training and other special processing
requirements related to the implementation of Firstwave eRM. Standard
professional services are offered to clients during the initial sales process
and PSO can be contracted for assistance with future enhancement projects.
Pricing is determined by the scope of the client requirements.

CUSTOMER SUPPORT

Firstwave's customer support group uses Firstwave products to track
individualized service. It provides Firstwave representatives with access to a
problem-tracking database that includes an online problem solving library for
quick resolution of inquiries and technical problems and maintains a library of
product enhancement requests from customers and Firstwave employees. Each
customer support representative has immediate access to the customer's account
history while engaged in resolving technical issues. In addition to hotline
telephone services, customer support also includes the provision of updates and
enhancements of Firstwave products and related documentation.



                                       5
<PAGE>   6


The Company routinely monitors the effectiveness of its customer support group.
Firstwave has implemented a system in which the customer assigns a priority to
each call placed to the support team. The Company also provides surveys each
month to randomly selected customers to evaluate the quality and responsiveness
of its support efforts.

Management believes that the emphasis the Company places on the customer support
function further differentiates it from most other sales and marketing software
providers. Customer support is offered as part of an annual maintenance fee and,
therefore, generally is not charged separately on an hourly or other basis.

SOURCES OF REVENUES, PRICING AND MATERIAL TERMS FOR LICENSING AGREEMENTS

Software revenues consist of license fees for Firstwave eRM, Takecontrol and
Firstwave for Unix. The Company also receives revenues from third-party software
and various distributor agreements. Customers generally pay a license fee for
the software based upon the number of licensed users. Firstwave eRM also offers
customers several pricing alternatives that reflect the various ways it may be
deployed across the Internet throughout the extended enterprise. Perpetual
licenses are available on a per user model. Subscription pricing through remote
hosting services will provide organizations the opportunity to deploy the
application without the need for a high capital outlay. Remote hosting services
will also allow organizations to deploy the applications without the need for
internal hardware infrastructure or system administrative capabilities.
Takecontrol and Firstwave for Unix offer a pricing model based on concurrent
users.

The second component of the Company's revenues is services, which consists of
professional consulting and training services. Consulting services are charged
on an hourly basis and billed weekly pursuant to customer work orders. Training
services are charged on a per-attendee basis with a minimum daily charge. For
classes conducted at customer sites, the Company charges a per-day rate for a
set number of attendees. Actual travel expenses are billed as incurred.

The Company's maintenance revenues are derived from the provision of: (1)
customer support in the form of customer services via communication channels,
and (2) updates and enhancements of products and related documentation.
Customers are provided maintenance and support for an annual fee. This fee is
billed monthly, quarterly, or annually and is subject to changes in pricing upon
90 days' notice to the customer.

CUSTOMERS

The Company markets its products as a cross-industry solution for those
companies looking for an integrated marketing, sales and support solution.
Systems have been installed in many industries, including technology,
manufacturing, financial services, communications, travel, hospitality and
retail. The Company has licensed its products for thousands of users located in
13 countries with more than 200 customers currently subscribing to maintenance
services.

SALES AND MARKETING

The Company markets and sells its product and services through direct sales and
indirect channels to the North American marketplace. International marketing and
selling is accomplished by direct selling through the Company's United Kingdom
office and indirectly through Firstwave distributors. The North American and
International direct channel is supported by 19 sales and marketing
professionals as of December 31, 1999.

The North American Sales department, overseen by a senior level sales executive,
consists of Business Development Representatives (BDR) and Account Executives
(AE). The BDRs initiate contact with leads and qualify them using the telephone
and the Internet as primary tools. Qualified leads are turned over to AEs. The
Firstwave sales team conducts an Internet demonstration of the product, scopes
the



                                       6
<PAGE>   7


requirements of the potential customer with professional services, assists in
providing a cost justification for the purchase and provides references before
closing business.

The Company's marketing department is responsible for generating leads and
promoting brand awareness and mind share among CRM industry professionals and
companies seeking a solution from this market. Primary marketing functions
include web-based direct marketing, traditional direct marketing, advertising,
public and analyst relations and other Internet-based marketing initiatives. The
Marketing department accomplishes many of its goals and objectives through use
of Firstwave eMarketing, an application included in the Company's flagship
product, Firstwave eRM.

Additionally, the Marketing department is responsible for product positioning
and strategy, general product marketing activities, market research and
competitive analysis, and provides competitive customer and prospect input into
the Company's product development efforts.

PRODUCT INNOVATION AND DEVELOPMENT

The Company plans to further the growth of Firstwave eRM by using it as a basis
for companies wanting to incorporate an Internet-based, integrated CRM solution
into their business processes. Firstwave's architecture, eFramework, with its
object orientation, adherence to Microsoft standards, incorporation of emerging
web technologies and ASP optimization, facilitates this approach. The Internet
technology embedded within eFramework also allows information residing in
Firstwave eRM to be accessed by wireless Personal Digital Assistants (PDA's).

The technology will be taken international this year as the next version of
Firstwave eRM contains internationalization features, allowing the product to
support multiple languages as well as have multiple currency capabilities.

Relational database management systems supported by Firstwave are Microsoft SQL
Server, Oracle and Microsoft Access.

In June 1999, the Company released 3.0 version of Firstwave eRM, which contained
the extensive tool set, eWorkbench, for customizations. Firstwave partnered with
Sterling Software in September of 1999, enabling the Company to provide a
best-of-breed reporting tool for Firstwave users. At the end of 1999, Firstwave
released the integrated application, Firstwave eRM, complete with marketing,
sales and support.

COMPETITION

The Company faces competition from a multitude of software vendors, including
existing CRM vendors, new web-based CRM vendors and ERP vendors who have
penetrated the CRM industry through acquisitions or product development.

The primary competitors for the Company are Onyx, Pivotal and SalesLogix. These
companies have a middle market focus and offer comprehensive "full solution"
packages which include marketing, sales, and support. These companies also have
integrated some Internet technology into their products and have customization
capabilities within their product sets. The ASP model is also being evaluated by
the afore-mentioned companies.

YouCentric, formerly SalesVision, and Silknet are other CRM vendors who are
viewed as competitors of the Company due to the Internet technology used in
their products. Both companies, it should be noted, do have an upper-tier market
strategy compared to the Company's middle market focus with its product. Siebel
Systems, due to its large international presence and market share, is also a
competitor of the Company. There are also hundreds of vendors addressing the
needs evident in this industry, including specialists who provide cross-industry
solutions and vertically focused solutions, such as pharmaceuticals or finance.



                                       7
<PAGE>   8


The Company competes on product flexibility, Internet technology, product
intuitiveness, off-site hosting options, distributor strategies, value, and
heavy emphasis on customer and partner service and support. Management believes
the Company competes favorably with respect to these factors. There can be no
assurance that the Company will be able to achieve the innovative product
development and marketshare necessary to maintain competitive advantage.

PROPRIETARY RIGHTS AND LICENSES

The Company depends upon a combination of trade secret, copyright and trademark
laws, license agreements, non-disclosure and other contractual provisions with
customers and employees to protect its proprietary rights in its products. The
Company also maintains confidentiality agreements with its employees. Because
the Company's product allows customers to customize their applications without
altering the source code, the source code for the Company's products is neither
licensed nor provided to customers, although the company has contractually
agreed in certain instances to have its source code held in escrow by a third
party. Notwithstanding these precautions, it may be possible for unauthorized
persons to copy aspects of the Company's products or to obtain information that
the Company regards as proprietary. There can be no assurance that these
protections will be adequate or that the Company's competitors will not
independently develop technologies that are substantially equivalent or superior
to the Company's technology.

EMPLOYEES

As of December 31, 1999, the Company employed 93 persons, including 19 sales and
marketing professionals, 37 service and support representatives, 16
administrative personnel and 21 persons involved in product innovation and
development. Management believes that the Company's future growth and success
will rely on its ability to retain and attract highly skilled and motivated
personnel in all areas of its operations.

ITEM 2.  PROPERTIES.

As of December 31, 1999 the Company's headquarters and principal operations were
located in approximately 30,000 square feet of leased office space. The office
building is located in metropolitan Atlanta, Georgia. The Company also has
operations located outside London, England in approximately 6,000 square feet of
leased office space.

ITEM 3.  LEGAL PROCEEDINGS.

From time to time, the Company may be involved in litigation relating to claims
arising out of its operations in the normal course of business. As of the date
of this Report, the Company was not engaged in any legal proceedings that are
expected, individually or in the aggregate, to have a material adverse effect on
the Company.

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

None.



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<PAGE>   9


                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.

The Company's Common Stock trades on the NASDAQ Stock Market, Inc.

The following table shows the price range of the Company's Common Stock (high
and low close information) for the indicated fiscal quarters. The prices
represent quotations between dates and do not necessarily represent actual
transactions and do not include retail mark-ups, mark-downs or commissions.

<TABLE>
<CAPTION>
1999      First     Second      Third      Fourth         1998      First     Second      Third      Fourth
-------------------------------------------------         -------------------------------------------------
<S>       <C>       <C>         <C>        <C>            <C>       <C>       <C>         <C>        <C>
High      $3.25      $2.50      $8.63      $4.25          High      $5.63      $5.13      $5.13      $3.88
Low       $1.75      $1.38      $1.50      $1.94          Low       $4.31      $4.25      $2.50      $1.63
-------------------------------------------------         -------------------------------------------------
</TABLE>

As of December 31, 1999 there were approximately 107 shareholders of record and
approximately 4,200 persons or entities that hold common stock in nominee name.
There were no common stock dividends declared during 1999 or 1998.

ITEM 6.  SELECTED FINANCIAL DATA.

The following table sets forth selected financial data about the Company for
each of the last five fiscal years. The information presented below has been
derived from the Company's audited Financial Statements.


<TABLE>
<CAPTION>
                                                                For the Year Ended December 31,
                                                            (In thousands, except per share amounts)

                                                    1999           1998           1997           1996           1995
                                                ---------------------------------------------------------------------
<S>                                             <C>            <C>            <C>            <C>            <C>
Net revenues                                    $ 11,193       $ 14,537       $ 15,848       $ 23,222       $ 28,001
Loss before income taxes                          (1,912)        (3,034)        (1,377)       (10,115)        (4,928)
Income tax (provision) benefit                       (40)           (91)          (133)         1,055          1,837
Net loss                                          (1,952)        (3,125)        (1,510)        (9,060)        (3,091)
Net loss applicable to common shareholders        (2,075)        (3,125)        (1,510)        (9,060)        (3,091)
Basic and diluted net loss per share               (0.40)         (0.61)         (0.30)         (1.81)         (0.63)
Total assets                                      12,023         11,322         14,286         18,367         26,045
Total non current liabilities                         --             --             --            125             --
Common stock subject to repurchase              $     --       $     --       $    300       $     --       $     --
Basic and diluted weighted average
  shares outstanding                               5,250          5,125          5,035          5,000          4,932
</TABLE>


                                       9
<PAGE>   10


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


The following discussion should be read in conjunction with the Financial
Statements and Notes thereto of the Company presented elsewhere herein.


RESULTS OF OPERATIONS

The following table sets forth for the periods indicated selected financial data
and the percentages of the Company's net revenues represented by each line item
presented. It also sets forth the percentage change in each line item presented
from 1998 to 1999. Certain percentage columns do not add to 100% due to
rounding.

<TABLE>
<CAPTION>
                                           Year Ended December 31,
                                ------------------------------------------------            % Change
(in thousands)                        1999                         1998                   1998 to 1999
------------------------------------------------------------------------------------------------------
<S>                              <C>          <C>            <C>          <C>             <C>
Revenues
  Software                       $  2,430      21.7%         $  3,528      24.3%             -31.1%
  Services                          3,422      30.6%            5,035      34.6%             -32.0%
  Maintenance                       4,923      44.0%            5,431      37.4%              -9.4%
  Other                               418       3.7%              543       3.7%             -23.0%
                                 --------                    --------
       Net revenues                11,193     100.0%           14,537     100.0%             -23.0%
                                 --------                    --------

Costs and expenses
  Cost of revenues
       Software                       920       8.2%              744       5.1%              23.7%
       Services                     2,400      21.4%            3,566      24.5%             -32.7%
       Maintenance                  1,494      13.3%            1,643      11.3%              -9.1%
       Other                          395       3.5%              500       3.4%             -21.0%
  Sales and marketing               3,612      32.3%            5,983      41.2%             -39.6%
  Product development               1,618      14.5%            2,080      14.3%             -22.2%
  General & administrative          2,789      24.9%            3,233      22.2%             -13.7%
                                 --------                    --------

Operating loss                     (2,035)    -18.2%           (3,212)    -22.1%             -36.6%
                                 --------                    --------
Interest income net                   123       1.1%              178       1.2%             -30.9%
                                 --------                    --------
Loss before income taxes         $ (1,912)    -17.1%         $ (3,034)    -20.9%             -37.0%
                                 --------                    --------
</TABLE>


In general, competition in the software industry has increasingly been
characterized by shortening product cycles. No assurance can be given that the
Company will be immune to this trend. If the product cycle for the Company's
systems proves to be shorter than management anticipates, the Company's pricing
structure and revenues could be impaired. In addition, in order to remain
competitive, the Company may be required to expend a greater percentage of its
revenues on product innovation and development than has historically been the
case. In either case, the Company's gross profit margins and results of
operations could be materially adversely affected.



                                       10
<PAGE>   11


1999 COMPARED TO 1998

The year ended December 31, 1999 was a year of transition for the Company, from
a software company that was dependent on its legacy product, Takecontrol, to an
Internet business being driven by its web-based product, Firstwave eRM (formerly
known as Netgain Sales). Although the year began with declining revenues from
existing product lines, the Company had innovative new products in development
which were released throughout the year. During 1999 the Company gained industry
recognition, new business partners, renewed investor interest, and a growing
revenue stream from a suite of new products.

Total revenues decreased 23.0% from $14,537,000 in 1998 to $11,193,000 in 1999
mainly due to decreases in software and services revenues. Software revenue
decreased 31.1% from $3,528,000 in 1998 to $2,430,000 in 1999 primarily as a
result of declining sales related to the Takecontrol product and a slower than
expected ramp-up in sales related to the Firstwave eRM product. Also, the
Company chose to price the new product at introductory prices resulting in a
lower average deal price compared to the Takecontrol product. Revenues from
international software licenses decreased 53.6% from $2,848,000 in 1998 to
$1,321,000 in 1999, and decreased as a percentage of total revenues from 19.6%
in 1998 to 11.8% in 1999 due to decreased sales by International distributors.
During 1999 international license revenues were primarily from system expansions
of existing Takecontrol customers. Release of an internationalized (language and
currency) version of Firstwave eRM is expected in 2000. Although international
license revenue decreased, total revenues from international sources, which
includes maintenance, software license fees and customizations remained
consistent at 52.5% of total revenues in 1999 compared to 52.7% in 1998, due to
additional revenues provided by Firstwave UK. During 1999 Firstwave UK was a
wholly owned subsidiary for the entire twelve month period compared to eight
months during 1998 following the April 30, 1998 acquisition.

Services revenues decreased 32.0% from $5,035,000 in 1998 to $3,422,000 in 1999.
The decrease in services revenue is consistent with the decrease in software
license revenue as the Company typically provides separate implementation and
training services at the time of software sales. Maintenance revenues remained
strong in 1999 with a decrease of only 9.4% from $5,431,000 in 1998 to
$4,923,000 in 1999 primarily as the result of declining sales of the Takecontrol
product.

Costs of software revenues increased 23.7% from $744,000 in 1998 to $920,000 in
1999 and, as a percentage of software revenues, increased from 21.1% in 1998 to
37.9% in 1999. The increases were primarily due to increased amortization costs
in 1999 related to releases of Firstwave eRM. Costs of software revenues include
costs of third-party software, amortization of capitalized software, and costs
of packaging, media and documentation materials.

Costs of revenues for services decreased 32.7% from $3,566,000 in 1998 to
$2,400,000 in 1999. The decrease is related to decreases in the number of
service personnel and related costs due to changes implemented by management as
a result of lower services and license revenues. Costs of revenues for services
as a percentage of services revenues remained constant at 70.1% in 1999 compared
to 70.8% in 1998. Costs of revenues for maintenance decreased 9.1% from
$1,643,000 in 1998 to $1,494,000 in 1999. The decrease in maintenance cost is
primarily due to decreased royalty costs related to decreased maintenance
revenues generated by international distributors. Costs of revenues for
maintenance as a percentage of maintenance revenues remained constant at 30.3%.

Sales and marketing expenses decreased 39.6% from $5,983,000 in 1998 to
$3,612,000 in 1999, and decreased as a percentage of total revenues from 41.2%
in 1998 to 32.3% for 1999. The decrease is primarily due to decreases in sales
commissions to third party distributors as a result of decreased software
license revenues. The Company has also made changes to its marketing plan,
decreasing costs in trade shows and travel by using the Company's website and
other automated approaches to obtain sales leads.

The Company's product innovation and development expenditures, which includes
amounts capitalized, increased 52.6% from $2,280,000 in 1998 to $3,479,000 in
1999, and increased as a percentage of total



                                       11
<PAGE>   12


revenues from 15.7% in 1998 to 31.1% in 1999. Software development costs
capitalized increased from $200,000 in 1998 to $1,861,000 in 1999. These
increases are related to continued development of Firstwave eRM. The Company
expects that the additional versions of Firstwave eRM will further improve the
product's viability in the CRM market.

General and administrative expenses decreased 13.7% from $3,233,000 in 1998 to
$2,789,000 in 1999 primarily due to lower administrative expenses related to
overall reduced staff levels and decreases in professional services and bad debt
expense. The year over year decrease is inclusive of the additional costs
associated with maintaining the London office and demonstrates the Company's
effective implementation of cost cutting initiatives.

Interest income decreased 30.9% from $178,000 in 1998 to $123,000 in 1999 due to
fluctuations in invested cash balances.

1998 COMPARED TO 1997

Total revenues decreased 8.3% from $15,848,000 in 1997 to $14,537,000 in 1998
mainly due to decreases in software revenue offset by increases in services and
maintenance revenues. Software revenue decreased 32.7% from $5,239,000 in 1997
to $3,528,000 in 1998 primarily as a result of fewer Takecontrol licenses sold
to new customers. Revenues from international software licenses decreased 14.1%
from $3,314,000 in 1997 to $2,848,000 in 1998, and decreased as a percentage of
total revenues from 20.9% in 1997 to 19.6% in 1998 due to decreased sales by
Asia and Pacific Rim distributors. Total revenues from international sources,
which includes maintenance, software license fees and customizations, increased
from 33.9% of total revenues in 1997 to 52.7% of total revenues in 1998 due to
additional revenues provided by Firstwave UK and decreased domestic Takecontrol
software licenses.

Services revenues increased 4.7% from $4,810,000 in 1997 to $5,035,000 in 1998
primarily due to the additional services revenues provided by Firstwave UK.
Maintenance revenues remained strong with a 4.7% increase from $5,189,000 in
1997 to $5,431,000 in 1998.

Costs of software revenues increased 10.2% from $675,000 in 1997 to $744,000 in
1998 and, as a percentage of software revenues, increased from 12.9% in 1997 to
21.1% in 1998. The increases were primarily due to increased amortization costs
in 1998 which included twelve months of Takecontrol amortization, compared to
ten months of amortization in 1997 after a February 1997 release. Costs of
software revenues include costs of third-party software, amortization of
capitalized software costs, and costs of packaging and documentation materials
and related media costs.

Costs of revenues for services increased 1.1% from $3,528,000 in 1997 to
$3,566,000 in 1998 due to the addition of Firstwave UK service personnel. Costs
of revenues for services as a percentage of services revenues decreased from
73.3% in 1997 to 70.8% in 1998. Costs of revenues for maintenance decreased 2.6%
from $1,687,000 in 1997 compared to $1,643,000 in 1998 primarily due to
decreased international maintenance revenues. Costs of revenues for maintenance
as a percentage of maintenance revenues also decreased from 32.5% in 1997
compared to 30.3% in 1998.

Sales and marketing expenses decreased slightly from $6,012,000 in 1997 to
$5,983,000 in 1998, but increased as a percentage of total revenues from 37.9%
in 1997 compared to 41.2% for 1998. The decrease in total expense is primarily
due to decreases in sales commissions consistent with decreases in software
license revenues offset by the addition of Firstwave UK personnel and costs
associated with marketing materials for the new corporate identity and new
product launch.

The Company's product innovation and development expense including write-off of
in process research and development cost, net of costs capitalized, decreased
22.9% from $2,699,000 in 1997 to $2,080,000 in 1998, and decreased as a
percentage of total revenues from 17.0% in 1997 to 14.3% in 1998. The decrease
in net cost is primarily due to the in-process research and development one time
charge of $696,000 related to the acquisition of Netgain Corporation during the
fourth quarter of 1997, offset by



                                       12
<PAGE>   13


additional development personnel and personnel related costs in 1998 associated
with the development of the Netgain product line.

The Company capitalized additional product development expenditures of $200,000
during the fourth quarter of 1998 related to releases of version 1.1 and 2.0 of
Netgain Sales.

General and administrative expenses increased 47.9% from $2,186,000 in 1997 to
$3,233,000 in 1998. As a percentage of total revenues, general and
administrative expenses increased from 13.8% in 1997 to 22.2% in 1998. These
increases resulted primarily from the addition of Firstwave UK and its London
office, offset by domestic decreases in rent expense due to subleasing excess
office space. Professional fees increased in 1998 due to the one-time favorable
settlement of a legal dispute that resulted in a $603,000 credit to general and
administrative expense during the third quarter of 1997. Interest income
decreased 13.9% from $208,000 in 1997 to $179,000 in 1998, due to decreased
interest on invested cash balances.


BALANCE SHEET

Net accounts receivable decreased 38.4% from $3,146,000 at December 31, 1998 to
$1,937,000 at December 31, 1999 primarily due to lower revenues. Property and
equipment decreased 38.6% from $1,501,000 at December 31, 1998 to $922,000 at
December 31, 1999 due to year to date depreciation and disposals, offset by
additional fixed asset purchases. Intangible assets, which represents goodwill
related to the 1998 acquisition of Firstwave UK, decreased 26.1% from $644,000
at December 31, 1998 to $476,000 at December 31, 1999 due to amortization.
Capitalized software increased 149.1% from $770,000 at December 31, 1998 to
$1,918,000 at December 31, 1999 due to additional capitalization of $1,861,000
in development costs net of $713,000 in amortization. Accounts payable decreased
57.9% from $1,354,000 at December 31, 1998 to $570,000 at December 31, 1999
consistent with the decrease in operating expenses. Accrued employee
compensation and benefits decreased 39.1% from $284,000 at December 31, 1998 to
$173,000 at December 31, 1999 due to compensation and benefits associated with
fewer employees. Dividends payable at December 31, 1999 were $123,000 related to
the issuance of preferred stock during 1999. There were no dividends payable in
the comparable period of 1998.


LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 1999, the Company had cash and cash equivalents of $2,029,000
and investments of $1,631,000. The Company historically has been financed from
operations and sales of equity instruments. The Company had no line of credit
payable or notes payable outstanding at December 31, 1999.

During 1999, the Company renewed its $3,000,000 line of credit agreement with
its bank for another one-year term. The line of credit, which expires September
15, 2000, bears interest at prime rate but increases to prime plus .50% if the
Company fails to attain certain quarterly financial targets. The line of credit
is secured by the assets of the Company.

The Company issued 20,000 shares of Series A Preferred Stock for $2.0 million
during the second quarter of 1999 and 500,000 shares of unregistered restricted
Common Stock for $1.5 million during the third quarter of 1999.

Management believes that its present liquidity position, recent equity infusions
and the expected cash flow from operations are sufficient to finance the
Company's operations during 2000 and beyond.

The Company has no material commitments for capital expenditures. Management
does not believe that inflation has historically had a material effect on the
Company's results of operations.



                                       13
<PAGE>   14


YEAR 2000

The Company's current product lines are year 2000 compliant. All of the
Company's customers were notified of the availability of a year 2000 compliant
version of the Company's product and the Company assisted its customers in
migrating to current product versions as requested. Although the Company has
designed and tested the most current versions of its products to be year 2000
compliant, there can be no assurance that they do not contain undetected errors
or other defects associated with year 2000 date functions.

As of December 31, 1999 all internal systems had been addressed and the Company
was completely year 2000 compliant. There have been no material issues related
to year 2000 in the Company's products or internal systems as of March 23, 2000.

QUARTERLY FINANCIAL DATA (UNAUDITED)

The table below sets forth certain unaudited operating results for each of the
eight quarters in the two-year period ended December 31, 1999. This information
has been prepared by the Company on the same basis as the Financial Statements
appearing elsewhere in this document and includes all adjustments necessary to
present fairly this information when read in conjunction with the Company's
Financial Statements and Notes thereto. The Company's operating results for any
one quarter are not necessarily indicative of results for any future period.

<TABLE>
<CAPTION>
                                                                    Quarter ended
                            3/31/99     6/30/99    9/30/99     12/31/99      3/31/98       6/30/98       9/30/98       12/31/98
                            ---------------------------------------------------------------------------------------------------
                                                       (in thousands, except per share amounts)
<S>                         <C>        <C>         <C>         <C>           <C>           <C>           <C>           <C>
Net revenues                $ 3,462    $ 2,700     $ 2,543     $ 2,488       $ 3,610       $ 3,738       $ 3,762       $ 3,427
Operating loss                 (854)      (397)       (433)       (351)         (610)         (725)         (855)       (1,022)
Net loss                       (840)      (396)       (402)       (314)         (573)         (717)         (826)       (1,009)
Net loss applicable to
 common shareholders           (840)      (426)       (447)       (362)         (573)         (717)         (826)       (1,009)
Basic and diluted
 loss per share               (0.16)     (0.08)      (0.08)      (0.06)        (0.11)        (0.14)        (0.16)        (0.20)
</TABLE>



                                       14
<PAGE>   15


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Information included under Item 14 (a) (1) and (2)


REPORT OF INDEPENDENT ACCOUNTANTS


To the Board of Directors and Shareholders
of Firstwave Technologies, Inc.:


In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) on page 31 present fairly, in all material
respects, the financial position of Firstwave Technologies, Inc. and its
subsidiary at December 31, 1999 and 1998, and the results of their operations,
changes in shareholders' equity and cash flows for each of the three years in
the period ended December 31, 1999, in conformity with generally accepted
accounting principles. In addition, in our opinion, the financial statement
schedule listed in the index under Item 14(a)2 on page 31 presents fairly, in
all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements. These financial
statements and financial statement schedule are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards, which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.



PricewaterhouseCoopers LLP
Atlanta, Georgia
January 31, 2000



                                       15
<PAGE>   16


CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)


<TABLE>
<CAPTION>
                                                                       DECEMBER 31,
                                                                   1999           1998
<S>                                                             <C>            <C>
ASSETS
Current assets
  Cash and cash equivalents                                     $  2,029       $  2,245
  Investment securities, held to maturity                          1,631             --
  Accounts receivable, less allowance for doubtful
    accounts of $345 and $425                                      1,937          3,146
  Deferred tax asset                                                 200            200
  Prepaid expenses and other assets                                  289            195
                                                                --------       --------
      Total current assets                                         6,086          5,786

Property and equipment, net                                          922          1,501
Software development costs, net                                    1,918            770
Intangible asset                                                     476            644
Deferred tax asset                                                 2,621          2,621
                                                                --------       --------
                                                                $ 12,023       $ 11,322
                                                                ========       ========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
  Accounts payable                                              $    570       $  1,354
  Sales tax payable                                                  152            265
  Deferred revenue                                                 1,519          1,581
  Accrued employee compensation and benefits                         173            284
  Dividends payable                                                  123             --
  Other accrued liabilities                                           78             78
                                                                --------       --------
      Total current liabilities                                    2,615          3,562
                                                                --------       --------

Commitments and contingencies

Shareholders' equity
  Preferred stock, no par; 1,000,000 shares authorized;
    20,000 shares issued and outstanding; $100 per share
    liquidation preference                                         2,000             --
  Common stock, stated value, $.0019 per share; 10,000,000
    shares authorized; 5,740,283 and 5,151,322 shares
    issued and outstanding                                            11             10
  Additional paid-in capital                                      21,574         19,813
  Cumulative translation account                                      (5)            34
  Accumulated deficit                                            (14,172)       (12,097)
                                                                --------       --------
                                                                   9,408          7,760
                                                                --------       --------
                                                                $ 12,023       $ 11,322
                                                                ========       ========
</TABLE>


       The accompanying notes are an integral part of these consolidated
                             financial statements.


                                       16
<PAGE>   17


CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                 FOR THE YEAR ENDED
                                                                    DECEMBER 31,
                                                          1999           1998           1997
<S>                                                   <C>            <C>            <C>
Net revenues
  Software                                            $  2,430       $  3,528       $  5,239
  Services                                               3,422          5,035          4,810
  Maintenance                                            4,923          5,431          5,189
  Other                                                    418            543            610
                                                      --------       --------       --------
                                                        11,193         14,537         15,848
Costs and expenses
  Cost of revenues
    Software                                               920            744            675
    Services                                             2,400          3,566          3,528
    Maintenance                                          1,494          1,643          1,687
    Other                                                  395            500            606
  Sales and marketing                                    3,612          5,983          6,012
  Product development                                    1,618          2,080          2,003
  General and administrative                             2,789          3,233          2,186
  In process research and development                       --             --            696
                                                      --------       --------       --------
      Operating loss                                    (2,035)        (3,212)        (1,545)

Interest income, net                                       123            178            168
                                                      --------       --------       --------
      Loss before income taxes                          (1,912)        (3,034)        (1,377)
                                                      --------       --------       --------
Income tax provision                                       (40)           (91)          (133)
                                                      --------       --------       --------
      Net loss                                        $ (1,952)      $ (3,125)      $ (1,510)
                                                      --------       --------       --------

Dividends on preferred stock                              (123)            --             --
                                                      --------       --------       --------
      Net loss applicable to common shareholders      $ (2,075)      $ (3,125)      $ (1,510)
                                                      ========       ========       ========

Basic and diluted net loss per share                  $  (0.40)      $  (0.61)      $  (0.30)
                                                      ========       ========       ========
Basic and diluted weighted average
  shares outstanding                                     5,250          5,125          5,035
                                                      ========       ========       ========
</TABLE>


       The accompanying notes are an integral part of these consolidated
                             financial statements.


                                       17
<PAGE>   18


CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)


<TABLE>
<CAPTION>
                                                                                                      UNREALIZED       COMPRE-
                                                 COMMON STOCK        PREFERRED STOCK    ADDITIONAL    GAIN/(LOSS)      HENSIVE
                                              -------------------    -----------------   PAID-IN     ON INVESTMENT     INCOME
                                               SHARES     AMOUNT      SHARES   AMOUNT    CAPITAL       SECURITIES      (LOSS)
                                              --------   --------    -------   -------  ----------   --------------  ----------
<S>                                           <C>        <C>         <C>       <C>      <C>          <C>             <C>
Balance at December 31, 1996                  4,936,555   $    9         --    $   --     $ 18,909          $(14)     $    --

Exercise of common stock options                 88,899       --                               281            --           --
Employee stock purchases                          7,573       --                                25            --           --
Issuance of stock options                            --       --                               114            --           --
Net loss                                             --       --         --        --           --            --           --
                                              ---------   ------     ------    ------     --------          ----      -------
Balance at December 31, 1997                  5,033,027        9         --        --       19,329           (14)          --

Exercise of common stock options                 34,511       --                               112            --           --
Employee stock purchases                          6,081       --                                19            --           --
Issuance of stock options                            --       --                                 7            --           --
Issuance of stock in connection
  with Net gain acquisition                      77,703        1                               346            --           --
Realized loss on investment
  securities                                         --       --                                --            14           --
Comprehensive loss
Net loss                                             --       --                                --            --       (3,125)
Foreign currency translation adjustment              --       --                                --            --           34
                                                                                                                      -------
  Comprehensive loss                                                                                                   (3,091)
                                                                                                                      -------

                                              ---------   ------     ------    ------     --------          ----
Balance at December 31, 1998                  5,151,322       10         --        --       19,813            --

Series A convertible preferred stock                                 20,000     2,000
Exercise of common stock options                 84,066                                        243            --           --
Employee stock purchases                          4,895                                          9            --           --
Issuance of stock and warrants                  500,000        1                             1,509            --           --

Comprehensive loss
Net loss                                             --       --         --        --           --            --       (2,075)
Foreign currency translation adjustment              --       --         --        --           --            --          (39)
                                                                                                                      -------
  Comprehensive loss                                                                                                  $(2,114)
                                                                                                                      -------
                                              ---------   ------     ------    ------     --------          ----
Balance at December 31, 1999                  5,740,283   $   11     20,000    $2,000     $ 21,574          $ --
                                              ---------   ------     ------    ------     --------          ----


<CAPTION>

                                                Accumulated
                                                   other
                                               comprehensive    Accumulated
                                               income/(loss)      deficit            Total
                                               -------------      -------           -------

<S>                                            <C>              <C>                <C>
Balance at December 31, 1996                       $  --          $(7,462)         $ 11,442

Exercise of common stock options                      --               --               281
Employee stock purchases                              --               --                25
Issuance of stock options                             --               --               114
Net loss                                              --           (1,510)           (1,510)
                                                   ------         -------           -------
Balance at December 31, 1997                          --           (8,972)           10,352

Exercise of common stock options                      --               --               112
Employee stock purchases                              --               --                19
Issuance of stock options                             --               --                 7
Issuance of stock in connection
  with Net gain acquisition                           --               --               347
Realized loss on investment
  securities                                          --               --                14
Comprehensive loss
Net loss                                              --           (3,125)           (3,125)
Foreign currency translation adjustment               34               --                34
  Comprehensive loss
                                                   ------         -------           -------
Balance at December 31, 1998                          34          (12,097)            7,760

Series A convertible preferred stock                                                  2,000
Exercise of common stock options                      --               --               243
Employee stock purchases                              --               --                 9
Issuance of stock and warrants                        --               --             1,510

Comprehensive loss
Net loss                                              --           (2,075)           (2,075)
Foreign currency translation adjustment              (39)              --               (39)

  Comprehensive loss
                                                   ------        --------           -------
Balance at December 31, 1999                       $  (5)        $(14,172)          $ 9,408
                                                   ------        --------           -------
</TABLE>

       The accompanying notes are an integral part of these consolidated
                             financial statements.


                                      18

<PAGE>   19


CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                            FOR THE YEAR ENDED
                                                                                DECEMBER 31,
                                                                       1999        1998           1997
<S>                                                                  <C>          <C>          <C>
Cash flows from operating activities
  Net loss                                                           $(1,952)     $(3,125)     $ (1,510)
  Adjustments to reconcile net loss to net cash
    provided by operating activities
     Depreciation and amortization                                     1,670        1,741         1,565
     Write off in process research and development                        --           --           696
     (Gain)/loss on disposal of fixed assets                              71          (13)          142
     Provision for bad debts                                              81           83            22
     Deferred income taxes                                                --           --           (65)
     Stock compensation                                                   10            7           114
     Changes in assets and liabilities (net of acquisition)
       Accounts receivable                                             1,119         (182)        1,051
       Prepaid expenses and other assets                                 (94)         121           (46)
       Accounts payable                                                 (783)         146          (148)
       Accrued restructuring                                              --         (325)         (786)
       Sales tax payable                                                (112)           2          (115)
       Deferred revenue                                                  (62)        (114)           81
       Accrued employee compensation and benefits                       (111)        (361)          (66)
       Other accrued liabilities                                          --           59           (78)
                                                                     -------      -------      --------
             Total adjustments                                         1,789        1,164         2,367
                                                                     -------      -------      --------
             Net cash provided by (used in) operating activities        (163)      (1,961)          857
                                                                     -------      -------      --------
Cash flows from investing activities
  Software development costs                                          (1,861)        (200)           --
  Business acquisitions                                                   --         (246)         (697)
  Purchases of property and equipment,net                               (309)        (496)         (261)
  Purchase of investment securities                                   (1,631)      (9,394)      (16,155)
  Proceeds from sale of investment securities                             --        9,408        19,755
                                                                     -------      -------      --------
             Net cash provided by (used in) investing activities      (3,801)        (928)        2,642
                                                                     -------      -------      --------
Cash flows from financing activities
  Proceeds from issuance of preferred stock                            2,000           --            --
  Proceeds from issuance of common stock                               1,500           --            --
  Exercise of common stock options                                       243          112           281
  Proceeds from employee stock purchase plan                               9           19            25
  Borrowing from/(repayment to) line of credit, net                       --           --        (1,975)
  Proceeds from/(repayments to) note payable, net                         --           --          (208)
                                                                     -------      -------      --------
             Net cash provided by (used in) financing activities       3,752          131        (1,877)
                                                                     -------      -------      --------
Effect of exchange rate changes on cash                                   (4)          34            --
Net increase (decrease) in cash                                         (216)      (2,724)        1,622
Cash and cash equivalents, beginning of year                           2,245        4,969         3,347
                                                                     -------      -------      --------
Cash and cash equivalents, end of year                               $ 2,029      $ 2,245      $  4,969
                                                                     -------      -------      --------

Supplemental disclosure of cash flow information
  Cash paid during the year for interest                             $    --      $     1      $     84
                                                                     -------      -------      --------
  Cash paid for income taxes                                         $    40      $    91      $    198
                                                                     -------      -------      --------
</TABLE>


       The accompanying notes are an integral part of these consolidated
                             financial statements.


                                       19


<PAGE>   20


NOTES TO FINANCIAL STATEMENTS


1.       DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Firstwave Technologies, Inc. (the "Company") is a provider of Internet
         customer relationship management solutions. The Firstwave eRM
         (Internet Relationship Management) Suite is a seamlessly integrated,
         100% web-based suite of applications created to fulfill and manage the
         e-business relationship needs of a company in the areas of sales,
         marketing, and support.

         REVENUE RECOGNITION
         Revenue from product sales is recognized upon shipment of the product
         when the Company has no significant obligations remaining and
         collection of the resulting receivable is probable. The Company
         accrues for estimated warranty costs at the time it recognizes
         revenue. Services revenue is recognized as services are performed.
         Maintenance revenue is recognized on a pro rata basis over the term of
         the maintenance agreements.

         International revenues are generated by independent distributors who
         offer licenses of the Company's products in specific geographic areas.
         Under the terms of the Company's international distributor agreements,
         international distributors collect license fees and maintenance
         revenues on behalf of the Company, and generally remit 50% to 60% of
         standard license fees and maintenance revenues they produce. The
         Company recognizes international sales at the gross license amount,
         with the amount paid to the distributors reflected as a selling
         expense. The Company's international maintenance fees are reflected as
         maintenance revenues, with the amount retained by distributors shown
         as a cost of maintenance revenue. International revenues also include
         revenue from Firstwave Technologies UK, Ltd., a wholly owned
         subsidiary.

         The Company's adoption of American Institute of Certified Public
         Accountants Statement of Position, 97-2, Software Revenue Recognition,
         as of January 1, 1998 did not have a material impact on its financial
         statements.

         Advanced billings for services and maintenance contracts are recorded
         as deferred revenue in the accompanying balance sheet.

         CONSOLIDATION
         The consolidated financial statements include the accounts of
         Firstwave Technologies, Inc. and its wholly owned subsidiary,
         Firstwave Technologies UK, Ltd. All significant intercompany profits,
         transactions, and balances have been eliminated in consolidation.

         ACCOUNTING ESTIMATES
         The preparation of financial statements in conformity with generally
         accepted accounting principles requires management to make estimates
         and assumptions that affect the reported amounts of assets and
         liabilities at the date of the financial statements and the reported
         amounts of revenues and expenses during the reporting period. Actual
         results could differ from those estimates.

         CONCENTRATION OF CREDIT RISK
         Financial instruments that potentially subject the Company to
         concentration of credit risk consist primarily of investment
         securities and trade receivables. The Company invests in marketable
         securities including government securities with high credit ratings
         and commercial paper. Credit risk from concentration of trade
         receivables is minimized as a result of the diverse nature of the
         Company's customer base.

         CASH AND CASH EQUIVALENTS
         Cash and cash equivalents include all highly liquid investment
         instruments with an original maturity of three months or less.


                                      20
<PAGE>   21

NOTES TO FINANCIAL STATEMENTS



         INVESTMENT SECURITIES
         In accordance with FAS 115, "Accounting for Certain Investments in
         Debt and Equity Securities," the Company classifies its investment
         securities as held-to-maturity based on their intent and ability to
         hold the securities and accordingly, the Company recorded the
         investment securities at cost. The investment securities will mature
         in February, 2000.

         PROPERTY AND EQUIPMENT
         Property and equipment are recorded at cost less accumulated
         depreciation and amortization. Depreciation and amortization for
         financial reporting purposes are recorded using the straight-line
         method over estimated useful lives ranging from three to six years.
         Expenditures for maintenance and repairs are charged to expense as
         incurred.

         SOFTWARE DEVELOPMENT COSTS
         Capitalized software development costs consist principally of salaries
         and certain other expenses related to development and modifications of
         software products capitalized in accordance with the provisions of FAS
         86, "Accounting for the Costs of Computer Software to be Sold, Leased,
         or Otherwise Marketed". Capitalization of such costs begins only upon
         establishment of technological feasibility as defined in FAS 86 and
         ends when the resulting product is available for sale. All costs
         incurred to establish the technological feasibility of software
         products are classified as research and development and are expensed
         as incurred.

         Software development costs which are capitalized are subsequently
         reported at the lower of unamortized cost or net realizable value.
         Amortization of capitalized software costs is provided at the greater
         of the ratio of current product revenue to the total of current and
         anticipated product revenue or on a straight-line basis over the
         estimated economic life of the software, which is not more than three
         years. It is possible that those estimates of anticipated product
         revenues, the remaining estimated economic life of the product, or
         both could be reduced due to changing technologies.

         INCOME TAXES
         The Company accounts for income taxes utilizing the liability method
         and deferred income taxes are determined based on the estimated future
         tax effects of differences between the financial reporting and income
         tax basis of assets and liabilities given the provisions of the
         enacted tax laws.

         STOCK-BASED COMPENSATION
         The Company has chosen to continue to account for stock-based
         compensation using the intrinsic value method prescribed in Accounting
         Principles Board Opinion No. 25, "Accounting for Stock Issued to
         Employees," and related Interpretations and to elect the disclosure
         option of FAS 123, "Accounting for Stock-Based Compensation".
         Accordingly, compensation cost for stock options is measured as the
         excess, if any, of the quoted market price of the Company's stock at
         the date of the grant over the amount an employee must pay to acquire
         the stock.

         FOREIGN CURRENCIES
         Assets and liabilities recorded in foreign currencies are translated
         at the exchange rate on the balance sheet date and the effects of
         foreign currency translation adjustments are included as a component
         of stockholders' equity.

         BASIC AND DILUTED NET LOSS PER COMMON SHARE
         Basic net loss per common share is based on the weighted average
         number of shares of common stock outstanding during the period. Stock
         options and convertible preferred stock would have been included in
         the diluted net loss per share calculation had they not been
         antidilutive. Net loss applicable to common shareholders includes a
         charge for dividends related to the Company's outstanding convertible
         preferred stock.


                                      21
<PAGE>   22

NOTES TO FINANCIAL STATEMENTS

2.       ACQUISITIONS

         On April 30, 1998 the Company acquired its largest international
         distributor, Co-cam UK. Based in London, Co-cam UK now operates as
         Firstwave Technologies UK, Ltd. The transaction was an asset purchase
         from PMS Creative Ltd., a wholly owned subsidiary of Policy Management
         Systems Corporation. The purchase price of approximately $426,000 was
         payable in cash in four quarterly installments beginning July 31, 1998
         after an initial payment at closing of approximately $85,000. The
         excess of cost over the estimated fair value of the net assets
         acquired was $455,000 (including cost of acquisition of approximately
         $180,000) and was accounted for as goodwill which is being amortized
         over five years.

         On December 31, 1997, Brock Acquisition, Inc., a wholly-owned
         subsidiary of the Company, acquired legal title to the net assets of
         Netgain Corporation, an Internet application developer, in exchange
         for $697,000 in cash and 67,989 shares of the Company's common stock
         valued at $300,000 (recorded as common stock subject to repurchase at
         December 31, 1997). The shares subject to repurchase were registered
         by the Company in February 1998 at which time the repurchase feature
         automatically terminated. After expensing $696,000 of in-process
         research and development costs, the excess of cost over fair value of
         net assets acquired amounted to $245,000 which was accounted for as
         goodwill and is being amortized over five years. The acquisition was
         accounted for using the purchase method of accounting. Brock
         Acquisition, Inc. changed its name to Netgain Inc. and was
         subsequently merged with the Company. In addition, 200,000 shares of
         the Company's common stock were placed in escrow as of December 31,
         1997 to be issued to the former shareholders of Netgain Corporation
         upon attainment of certain future revenue targets for the sale of
         Netgain products. Such targets were not achieved and accordingly these
         shares were not issued. In July 1998, the Company issued 9,714
         additional shares of its common stock valued at $46,433 to four of the
         former shareholders of Netgain Corporation to settle matters directly
         related to the acquisition. This amount has been recorded as goodwill
         in the accompanying financial statements.

         The following presents the unaudited pro forma consolidated results of
         operations as if both acquisitions had occurred as of January 1, 1997.
         (in thousands, except per share data):

<TABLE>
<CAPTION>
                                                            DECEMBER 31,
                                                         1998             1997
                                                             Unaudited
         <S>                                         <C>              <C>
         Revenues                                    $ 15,489         $ 19,656
         Net loss                                      (3,345)          (2,123)
         Basic and diluted net loss per share            (.65)            (.42)
</TABLE>


3.       PROPERTY AND EQUIPMENT

         Property and equipment are summarized as follows (in thousands):

<TABLE>
<CAPTION>
                                                                     DECEMBER 31,
                                                                   1999            1998

         <S>                                                     <C>             <C>
         Computer hardware and other equipment                   $ 3,377         $ 4,140
         Furniture and fixtures                                    1,037             979
         Purchased software                                        1,106           1,098
                                                                 -------         -------
                                                                   5,520           6,217
         Less:  Accumulated depreciation and amortization         (4,598)         (4,716)
                                                                 -------         -------
                                                                 $   922         $ 1,501
                                                                 =======         =======
</TABLE>


                                      22
<PAGE>   23


NOTES TO FINANCIAL STATEMENTS


         Depreciation and amortization of property and equipment totaled
         approximately $808,000, $1,119,000, and $1,146,000 in 1999, 1998 and
         1997, respectively.

4.       PRODUCT DEVELOPMENT EXPENSES

         Product development expenses are summarized as follows (in thousands):

<TABLE>
<CAPTION>
                                                      YEAR ENDED DECEMBER 31,
                                                      1999      1998      1997

         <S>                                        <C>       <C>       <C>
         Total development expenses                 $3,479    $2,280    $2,003
         Less: Additions to capitalized software
           development before amortization           1,861       200        --
                                                    ------    ------    ------
         Product development expenses               $1,618    $2,080    $2,003
                                                    ======    ======    ======
</TABLE>

         The activity in the capitalized software development account is
         summarized as follows (in thousands):

<TABLE>
<CAPTION>
                                                    YEAR ENDED DECEMBER 31,
                                                 1999        1998        1997

         <S>                                  <C>         <C>         <C>
         Balance at beginning of year, net    $   770     $ 1,089     $ 1,508
         Additions                              1,861         200          --
         Amortization expense                    (713)       (519)       (419)
                                              -------     -------     -------
         Balance at end of year, net          $ 1,918     $   770     $ 1,089
                                              =======     =======     =======
</TABLE>


5.       BORROWINGS

         In March 1998, the Company and its bank executed a $3,000,000 line of
         credit arrangement. The line of credit, which expires September 15,
         2000, bears interest at prime rate but increases to prime plus .50% if
         the Company fails to attain certain quarterly financial targets. The
         line of credit agreement is secured by the assets of the Company.
         There were no borrowings against the line of credit as of December 31,
         1999.


6.       SHAREHOLDERS' EQUITY

         During the third quarter of 1999, the Company issued, in a private
         placement to an institutional accredited investor, 500,000
         unregistered restricted shares of authorized Common Stock at $3.00 per
         share for an aggregate amount of $1,500,000.

         During the second quarter of 1999, the Company issued 20,000 shares of
         Series A Convertible Preferred Stock in a private placement to two
         officers. The Company received $1,000,000 in March 1999 and $1,000,000
         in April 1999 related to this offering. The Preferred Stock has voting
         rights and accumulates dividends at a rate of 9% payable annually when
         declared by the Board of Directors and are convertible into Common
         Stock of the Company at anytime after April 25, 2000, at a conversion
         rate of $2.06 per share of Common Stock. The preferred stock has a
         liquidation preference of $100 per share plus all accrued and unpaid
         dividends and becomes redeemable at $100 per share at the option of
         the Board of Directors after April 26, 2001. At December 31, 1999


                                      23
<PAGE>   24

NOTES TO FINANCIAL STATEMENTS


         there were $123,000 dividends payable related to the Preferred Stock,
         which were paid in January 2000.


7.       INCOME TAXES

         The components of the provision for income taxes are as follows (in
         thousands):

<TABLE>
<CAPTION>
                                    YEAR ENDED DECEMBER 31,
                                     1999    1998     1997
         <S>                         <C>    <C>     <C>
         Current
           Foreign                    $40    $ 91    $ 198

         Deferred
           Federal                     --      --      (55)
           State                       --      --      (10)
           Foreign                     --      --       --
                                      ---    ----    -----
                                      $40    $ 91    $ 133
                                      ===    ====    =====
</TABLE>

         The difference between the provision for income taxes at the statutory
         federal income tax rate of 34% and the Company's effective tax rate is
         as follows:

<TABLE>
<CAPTION>
                                                                YEAR ENDED DECEMBER 31,
                                                              1999       1998       1997

        <S>                                                 <C>        <C>        <C>
        Federal statutory tax rate                          -34.0%     -34.0%     -34.0%
        State income taxes, net of federal benefit           -4.0%      -3.1%      -5.5%
        Change in valuation allowance                        12.9%      32.2%      37.2%
        Foreign income taxes                                  2.1%       2.9%      14.4%
        Other                                                25.0%       4.9%      -2.4%
                                                            -----       ----       ----
                                                              2.1%       2.9%       9.7%
                                                            =====       ====       ====
</TABLE>


                                      24
<PAGE>   25


NOTES TO FINANCIAL STATEMENTS


         At December 31, 1999 and 1998, deferred tax (assets) liabilities are
         comprised of the following (in thousands):

<TABLE>
<CAPTION>
                                                                 YEAR ENDED
                                                                 DECEMBER 31,
                                                               1999         1998
         <S>                                                <C>          <C>
         Gross deferred tax liabilities
           Capitalization of software development costs     $   728      $   293
           Depreciation                                         231          213
           Other                                                 93           --
                                                            -------      -------
                                                              1,052          506
                                                            -------      -------
         Gross deferred tax assets
           Net operating loss carryforwards                  (8,046)      (7,195)
           Tax credit carryforwards                            (288)        (288)
           In process research and development                 (229)        (247)
           Allowance for doubtful accounts receivable          (151)        (162)
           Accrued expenses                                     (50)         (38)
           Other                                                (72)        (114)
                                                            -------      -------
                                                             (8,836)      (8,044)
           Valuation allowance                                4,963        4,717
                                                            -------      -------
                                                             (3,873)      (3,327)
               Net deferred tax assets                       (2,821)      (2,821)
         Less: Current portion                                  200          200
                                                            -------      -------
                                                            $(2,621)     $(2,621)
                                                            =======      =======
</TABLE>


         At December 31, 1999, the Company has alternative minimum tax credit
         and general business tax credit carryforwards of approximately $43,000
         and $245,000, respectively, which will expire in years 2008 through
         2011. The Company also has net operating loss carryforwards of
         approximately $20,870,000 which expire in years 2009 through 2014.

         FAS 109 specifies that deferred tax assets are to be reduced by a
         valuation allowance if it is more likely than not that some portion or
         all of the deferred tax assets will not be realized. A valuation
         allowance has been provided for those net operating loss carryforwards
         and foreign tax credits which are estimated to expire before they are
         utilized. Management's estimate of the valuation allowance could be
         affected in the near term based on results of operations in future
         periods.


8.       STOCK OPTION PLANS

         In February 1993, the Board of Directors adopted a Stock Option Plan
         (the "Option Plan"). The Company has reserved 1,200,000 shares of
         common stock for issuance under the Option Plan. Pursuant to the terms
         of the Option Plan, a committee of the Board of Directors is
         authorized to grant options to employees of the Company who are
         eligible to receive options under the Option Plan. The committee is
         further authorized to establish the exercise price, which for
         incentive stock options will be equal to the fair market value of the
         stock at the date of grant. A portion of the options granted vest on
         the first anniversary of the date of grant and the remainder vest over
         a two to five-year period thereafter as specified by the individual
         grant agreements. Vesting may accelerate based on Company performance
         criteria as specified by the individual grant agreements. Options
         previously granted to non-management directors under a formula, as
         specified by the Option Plan, become exercisable in one-fourth
         increments on the first, second, third and fourth anniversaries of the
         date of grant. Options expire ten years after the date of grant.


                                      25
<PAGE>   26

NOTES TO FINANCIAL STATEMENTS


         At December 31, 1999, 417,073 options were available for grant and
         623,447 options were outstanding related to the Option Plan.

         A summary of stock option activity is as follows:

<TABLE>
<CAPTION>
                                                                EXERCISE      WEIGHTED       WEIGHTED
                                                                 PRICE      AVG EXERCISE      AVERAGE
                                                  SHARES       PER SHARE       PRICE       FAIR VALUE
                                                                    $             $              $
         <S>                                   <C>             <C>          <C>            <C>
         Outstanding at December 31, 1996         900,318      3.13 - 8.00      7.24
           Granted                                424,119      2.31 - 4.94      3.32           1.83
           Exercised                              (88,899)     3.13 - 3.25      3.21
           Canceled or expired                   (205,662)     2.75 - 8.00      3.38
                                                ---------

         Outstanding at December 31, 1997       1,029,876      2.31 - 4.94      3.20
           Granted                                461,500      1.88 - 5.00      3.53           2.10
           Exercised                              (34,511)            3.25      3.25
           Canceled or expired                   (399,818)     2.50 - 5.00      3.48
                                                ---------

         Outstanding at December 31, 1998       1,057,047      1.88 - 5.00      3.35
           Granted                                634,200      1.59 - 5.00      3.26           2.31
           Exercised                              (67,398)     2.56 - 5.00      3.14
           Canceled or expired                 (1,000,402)     1.59 - 5.00      3.22
                                                ---------
         Outstanding at December 31, 1999         623,447      1.59 - 5.00      3.49
                                                =========

         Options exercisable
           at December 31, 1999                   112,295                       3.59
                                                =========
</TABLE>

 The following table summarizes information about stock options outstanding at
December 31, 1999:

<TABLE>
<CAPTION>
                                        OPTIONS OUTSTANDING                OPTIONS EXERCISABLE
                                 NUMBER      WEIGHTED                         NUMBER
                           OUTSTANDING        AVERAGE      WEIGHTED      OUTSTANDING      WEIGHTED
                                    AT      REMAINING       AVERAGE               AT       AVERAGE
                          DECEMBER 31,    CONTRACTUAL      EXERCISE     DECEMBER 31,      EXERCISE
                                  1999           Life         Price             1999         Price
          <S>             <C>             <C>              <C>          <C>               <C>
          $1.59 - $3.25        230,897           8.11         $2.48           75,583         $2.99
          $3.69 - $4.00        292,700           9.53          3.82                0             -
          $4.69 - $5.00         99,850           7.72          4.82           36,712          4.81
                               -------                                      --------
          $1.59 - $5.00        623,447           8.71          3.49          112,295          3.59
                               =======                                      ========
</TABLE>


         In December 1996, the Company granted nonqualified stock options to an
         officer of the Company to acquire up to 500,000 shares of the
         Company's common stock. The vesting period for 250,000 options was
         62,500 options per year from the date of grant. The vesting period for
         the remaining 250,000 options was the earlier of the year 2002 or, if
         the Company's stock price reached certain targets, vesting would occur
         in blocks of 50,000 options for each target price met. The option
         exercise price equaled the market price on the date of grant and,
         correspondingly, compensation expense was not recognized. As of
         December 31, 1999, 125,000 of these options had been


                                      26
<PAGE>   27

NOTES TO FINANCIAL STATEMENTS


         exercised and 375,000 were cancelled as of December 31, 1999 when the
         officer was no longer employed by the Company.


9.       EMPLOYEE STOCK PURCHASE PLAN

         The Company has reserved 70,000 shares of common stock for issuance
         under its Employee Stock Purchase Plan ("ESP"). The ESP was designed
         to qualify as an employee stock purchase plan under Section 423 of the
         Internal Revenue Code. The ESP provides that eligible employees may
         contribute up to 10% of their base earnings each quarter for an option
         to purchase the Company's common stock. The exercise price of the
         option was 85% of the lower of the fair market value of the common
         stock at either the beginning or end of the quarter. Effective April
         1, 1998, the exercise price is 85% of the fair market value of the
         common stock on the last business day of each quarter. No compensation
         expense is recorded in connection with this plan. During 1999 and
         1998, 4,895 and 6,081 shares, respectively, were issued under the ESP.
         At December 31, 1999, 53,627 shares had been issued cumulatively under
         the plan and options to purchase 404 shares were outstanding.


10.      STOCK COMPENSATION

         The Company has adopted the disclosure only provisions of FAS 123,
         "Accounting for Stock-Based Compensation." Had compensation cost for
         the Company's stock option grants described above been determined
         based on the fair value at the grant date for awards in 1999, 1998 and
         1997 consistent with the provisions of FAS 123, the Company's net loss
         and loss per share would have been reduced to the pro forma amounts
         indicated below (in thousands):

<TABLE>
<CAPTION>
                                                                      YEAR ENDED
                                                                     DECEMBER 31,
                                                             1999           1998           1997
         <S>                                            <C>            <C>            <C>
         Net loss applicable to common shareholders
           As reported                                  $  (2,075)     $  (3,125)     $  (1,510)
           Pro forma                                       (2,267)        (3,478)        (1,825)

         Net loss per share
           Basic and diluted
             As reported                                    (0.40)         (0.61)         (0.30)
             Pro forma                                      (0.43)         (0.68)         (0.36)
</TABLE>



         The fair value of each option grant and the employees' purchase rights
         is estimated on the date of grant using the Black-Scholes
         option-pricing model with the following weighted-average assumptions
         used in 1999, 1998 and 1997, respectively: dividend yield of 0% for
         all years; expected volatility of 92%, 71%, and 52%, risk-free
         interest rate ranging from 4.78% to 6.32% and expected life of 4.5
         years for grants in all years and 90 days for stock purchase rights
         for all quarters.

         In accordance with FAS 123, for the years ended December 31, 1999,
         1998 and 1997, $10,000, $7,000 and $109,000 respectively, was recorded
         to expense related to options and warrants granted to non-employees.


                                      27
<PAGE>   28

NOTES TO FINANCIAL STATEMENTS


11.      COMMITMENTS AND CONTINGENCIES

         The Company leases office space, equipment and automobiles under
         noncancelable lease agreements expiring on various dates through 2005.
         At December 31, 1999, future minimum rentals for noncancelable leases
         are as follows (in thousands):

<TABLE>
<CAPTION>
                              MINIMUM
        YEAR ENDING            ANNUAL
        DECEMBER 31,          RENTALS
        <S>                  <C>
        2000                 $  1,050
        2001                 $  1,029
        2002                 $    991
        2003                 $    962
        2004                 $    775
        2005                 $    483
                             --------
                             $  5,290
                             ========
</TABLE>


         Net rent expense under these and other agreements was approximately
         $1,056,000, $619,000, and $627,000 for the years ended December 31,
         1999, 1998 and 1997, respectively. Rent expense was offset by rental
         income from subleased office space in the amounts of $46,000,
         $295,000, and $93,000, for the years ended December 31, 1999, 1998,
         and 1997 respectively.

         The Company is subject to legal proceedings and claims which may arise
         in the ordinary course of its business. In the opinion of management,
         the amount of the ultimate liability with respect to these actions
         will not materially affect the financial position of the Company.
         During 1997 the Company settled a legal dispute resulting in the
         receipt of $970,000 which included $367,000 in outstanding accounts
         receivable with the remaining $603,000 credited to general and
         administrative expense.


12.      EMPLOYEE SAVINGS PLAN

         Effective August 1, 1991, the Company established a defined
         contribution plan (the "401(k) Plan") which qualifies under Section
         401 (k) of the Internal Revenue Code for the benefit of eligible
         employees and their beneficiaries. Employees may elect to contribute
         up to 20% of their annual compensation to the 401(k) Plan. For each
         payroll period, the Company matches 30% of the lesser of (1) the
         participants' contribution or (2) 5% of the participants'
         compensation. In addition, the Company may make discretionary annual
         contributions. For the years ended December 31, 1999, 1998 and 1997,
         the Company made matching contributions of approximately $34,500,
         $59,100, and $66,400, respectively, to the 401(k) Plan and no
         discretionary contributions.


                                      28
<PAGE>   29

NOTES TO FINANCIAL STATEMENTS


13.      SEGMENT INFORMATION

         During June 1997, the Financial Accounting Standards Board issued
         Financial Accounting Standard No. 131 "Disclosures about Segments of
         an Enterprise and Related Information" (FAS 131). The statement
         requires detailed disclosures surrounding operating segments and
         certain enterprise-wide disclosures. Management believes that it has
         only a single segment consisting of software sales with related
         services and support. The enterprise-wide disclosures required by FAS
         131 are presented below. The Company exports its products through
         agreements with international distributors that it grants territorial
         rights.

         A summary of international revenues including the Company's UK
         subsidiary by geographic area is as follows (in thousands):

<TABLE>
<CAPTION>
                                                  YEAR ENDED
                                                 DECEMBER 31,
                                          1999        1998        1997

         <S>                           <C>         <C>         <C>
         United States                 $ 5,318     $ 6,877     $10,470
         Europe                          5,026       6,341       3,962
         South America                      50         714         193
         Australia and New Zealand         787         501         595
         Asia                               --          68         410
         South Africa                       12          36         218
                                       -------     -------     -------
                                       $11,193     $14,537     $15,848
                                       =======     =======     =======
</TABLE>



         Long-lived assets of the Company are recorded primarily in the United
         States. However, as a result of the Co-cam acquisition (Note 2), fixed
         assets of $211,000, or 22.9% of the consolidated balance, are
         domiciled in the United Kingdom.


14.      RESTRUCTURING

         During the fourth quarter of 1996, the Company implemented a
         restructuring plan (the "Plan") designed to enhance overall
         competitiveness, productivity, and efficiency through the reduction of
         overhead costs. As of December 31, 1996, $1,111,000 was accrued
         related to this restructuring. During 1998 and 1997, $325,000 and
         $786,000 were charged against the accrual respectively resulting in a
         zero balance as of December 31, 1998.


15.      RELATED PARTY TRANSACTIONS

         During 1997 the Company entered into an agreement with a significant
         shareholder relating to a contract for $150,000 in professional
         services provided by a third party. As of December 31, 1997, there
         were no outstanding payables/receivables with the shareholder relating
         to this transaction.

         During 1998 and 1997, the Company incurred expense of $147,000 and
         $175,000, respectively, related to a third party software provider
         whose President was a member of the Board of Directors of the Company
         through April 1998. The 1998 payments were made according to a
         contract dated January 1, 1998. This thirty-month contract requires
         payments of royalties on a quarterly basis with a minimum payment of
         $36,750 per quarter.


                                      29
<PAGE>   30



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.

The information required by this item is incorporated by reference to
information under the caption "Election of Directors - Director Nominee
Biographical Information", "- Executive Officers" and "- Compliance with
Section 16(a) of the Securities Exchange Act of 1934" of the Company's Proxy
Statement for the Annual Meeting of Shareholders to be held on May 9, 2000.

ITEM 11.  EXECUTIVE COMPENSATION.

The information required by this item is incorporated by reference to
information under the captions "Election of Directors - Additional Information
Concerning the Board of Directors" and "Executive Compensation" (exclusive of
the subsections entitled "Compensation Committee Report on Executive
Compensation" and "Performance Graph") in the Company's Proxy Statement for the
Annual Meeting of Shareholders to be held on May 9, 2000.

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

The information required by this item is incorporated by reference to
information under the caption "Beneficial Ownership of Common Stock" in the
Company's Proxy Statement for the Annual Meeting of Shareholders to be held on
May 9, 2000.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The information required by this item is incorporated by reference to
information under the caption "Executive Compensation - Compensation Committee
Interlocks and Insider Participation" and "Certain Transactions" in the
Company's Proxy Statement for the Annual Meeting of Shareholders to be held on
May 9, 2000.


                                      30
<PAGE>   31



                                    PART IV

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

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

           1.   Financial Statements
                  -        Report of Independent Accountants
                  -        Consolidated Balance Sheet at December 31, 1999 and
                           December 31, 1998
                  -        Consolidated Statement of Operations for the three
                           years ended December 31, 1999
                  -        Consolidated Statement of Changes in Shareholders'
                           Equity for the three years ended December 31, 1999
                  -        Consolidated Statement of Cash Flows for the three
                           years ended December 31, 1999
                  -        Notes to Financial Statements


           2.   Financial Statement Schedules
                  -        Schedule II - Valuation and Qualifying Accounts, for
                           the three years ended  December 31, 1999


                                      31
<PAGE>   32


<TABLE>
<CAPTION>
3.    Exhibits

<S>      <C>
3.1      Amended and Restated Articles of Incorporation of the Company.(1)
3.2      Amended and Restated By-laws of the Company (incorporated herein by
         reference to Exhibit 3(b) of the Company's Registration Statement on
         Form S-8 (Registration No. 333-55939)).
4.1      See Exhibits 3.1 and 3.2 for provisions of the Amended and Restated
         Articles of Incorporation and Amended and Restated By-Laws of the
         Company defining rights of holders of Common Stock of the Company.
10.3     Lease dated January 30, 1988 between the Company and Atlanta Overlook
         Associates #3 concerning the Company's principal offices located at
         2859 Paces Ferry Road, Atlanta, GA, as amended by that certain First
         Amendment of Office Building Lease dated as of December 27, 1988 and
         as further amended by that certain Second Amendment of Office Building
         Lease dated as of October 2, 1989. (1)
10.4     Firstwave Technologies, Inc. Amended and Restated 1993 Stock Option
         Plan (incorporated herein by reference to Exhibit 4(a) of the
         Company's Registration Statement on Form S-8 (Registration No.
         333-55939)). (7)
10.5     Tax Indemnification Agreement dated February 4, 1993 among the Company
         and certain of its shareholders. (2)
10.6     Form of Selective Distribution Agreement for International
         Distributors. (1)
10.7     Form of Software License Agreement. (1)
10.9     Computer Software License Marketing Agreement dated December 21, 1987
         between the Company and Co-Cam Computer Services, Pty. Ltd. (1)
10.10    Third Amendment to Lease Agreement dated as of March 10, 1993 between
         the Company and State of California Public Employees Retirement System
         relating to the Company's principal offices located at 2859 Paces
         Ferry Road, Atlanta, GA. (2)
10.11    Fourth Amendment to Lease Agreement dated as of June 24, 1993 between
         the Company and State of California Public Employees Retirement System
         relating to the Company's principal offices located at 2859 Paces
         Ferry Road, Atlanta, GA. (2)
10.12    Fifth Amendment to Lease Agreement dated as of March 22, 1994 between
         the Company and State of California Public Employees Retirement System
         relating to the Company's principal offices located at 2859 Paces
         Ferry Road, Atlanta, GA. (2)
10.13    Sixth Amendment to Lease Agreement dated as of September 22, 1994
         between the Company and State of California Public Employees
         Retirement System relating to the Company's principal offices located
         at 2859 Paces Ferry Road, Atlanta, GA.(3)
10.14    Firstwave Technologies, Inc. Employee Stock Purchase Plan.
         (incorporated herein by reference to Exhibit 4(a) of the Company's
         Registration Statement on Form S-8 (Registration No. 333-55971) (7)
10.15    Option Agreement, dated July 25, 1997, between the Company and Netgain
         Corporation.(4)
10.17    Seventh Amendment to Lease Agreement dated as of January 20, 1998
         between the Company and State of California Public Employees
         Retirement System relating to the Company's principal
         offices located at 2859 Paces Ferry Road, Atlanta, GA. (6)
10.18    Eighth Amendment to Lease Agreement dated as of May 8, 1998 between
         the Company and State of California Public Employees Retirement System
         relating to the Company's principal offices located at 2859 Paces
         Ferry Road, Atlanta, GA. (5)
</TABLE>


                                      32
<PAGE>   33

<TABLE>
<S>      <C>
10.19    First Amendment to Firstwave Technologies, Inc. 1993 Stock Option Plan
         (incorporated herein by reference to Exhibit 4(c) of the Company's
         Registration Statement on Form S-8 (Registration No. 333-55939)). (7)
10.20    First Amendment to Firstwave Technologies, Inc. Employee Stock
         Purchase Plan (incorporated herein by reference to Exhibit 4(b) of the
         Company's Registration Statement on Form S-8 (Registration No.
         333-55971)). (7)
10.21    Board of Directors Compensation Plan (incorporated herein by reference
         to Exhibit 4(b) of the Company's Registration Statement on Form S-8
         (Registration No. 333-55939)). (7)
10.22    Ninth Amendment to Lease Agreement dated as of February 3, 2000
         between the Company and National Office Partners Limited Partnership
         relating to the Company's principal offices located at 2859 Paces
         Ferry Road, Atlanta, GA.
10.23    Tenth Amendment to Lease Agreement dated as of February 28, 2000
         between the Company and National Office Partners Limited Partnership
         relating to the Company's principal offices located at 2859 Paces
         Ferry Road, Atlanta, GA.
13       1999 Annual Report to Shareholders.
23       Consent of Independent Accountants. See page immediately preceding the
         signature page to this Report.
27       Financial Data Schedule (for SEC use only).
</TABLE>

(1)Incorporated herein by reference to exhibit of the same number in the
Company's Registration Statement on Form S-1 (Registration No. 33-57984).
(2)Incorporated herein by reference to exhibit of the same number in the
Company's Form 10-K for the year ended December 31, 1993.
(3)Incorporated herein by reference to exhibit of the same number in the
Company's Form 10-K for the year ended December 31, 1994.
(4)Incorporated herein by reference to exhibit of the same number in the
Company's Form 10-Q for the quarter ended June 30, 1997.
(5) Incorporated herein by reference to exhibit of the same number in the
Company's Form 10-K for the year ended December 31, 1998.
(6)Incorporated herein by reference to exhibit of the same number in the
Company's Form 10-K for the year ended December 31, 1997.
(7)Management contract or compensatory plan or arrangement required to be filed
pursuant to Item 14(c) of Form 10-K.



(b) Form 8-K:
     None


                                      33
<PAGE>   34

CONSENT OF INDEPENDENT ACCOUNTANTS


We hereby consent to the incorporation by reference the Registration Statements
on Form S-3 (No. 333-46319, and No. 333-83417) and the Registration Statements
on Form S-8 (No. 33-66456, No. 33-75374, No. 33-81102, No. 33-88304, No.
333-55939 and No. 333-55971) of Firstwave Technologies, Inc. of our report
dated January 31, 2000 appearing on page 15 of this Form 10-K.





PricewaterhouseCoopers LLP

Atlanta, Georgia
March 29, 2000


                                      34
<PAGE>   35





                                   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.

                                   Firstwave Technologies, Inc.



Date:  March 27, 2000              By:    /s/  Richard T. Brock
                                       ---------------------------------------
                                      Richard T. Brock
                                      President and Chief 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 and in the capacities and on the dates indicated.

Date:  March 27, 2000              /s/  Richard T. Brock
                                   -------------------------------------------
                                   Richard T. Brock
                                   President and Chief Executive Officer
                                   (Principal Executive Officer)


Date:  March 27, 2000              /s/  Judith A. Vitale
                                   -------------------------------------------
                                   Judith A. Vitale
                                   Vice President Finance and Administration
                                   (Principal Financial and Accounting Officer)


Date:  March 27, 2000              /s/  James R. Porter
                                   -------------------------------------------
                                   James R. Porter
                                   Chairman



Date:  March 27, 2000              /s/  Roger A. Babb
                                   -------------------------------------------
                                   Roger A. Babb
                                   Director


Date:  March 27, 2000              /s/  John F. Keane
                                   -------------------------------------------
                                   John F. Keane
                                   Director



Date:  March 27, 2000              /s/  Michael T. McNeight
                                   -------------------------------------------
                                   Michael T. McNeight
                                   Director


                                      35
<PAGE>   36


                SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

                      FOR THE YEAR ENDED DECEMBER 31, 1999
                             (THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
                                    BALANCE AT                                          BALANCE AT
                                    BEGINNING        CHARGED TO         ACCOUNTS           END
                                        OF            COSTS AND          WRITTEN           OF
    DESCRIPTION                       PERIOD           EXPENSES       OFF/RELEASED        PERIOD
    -----------                       ------           --------       ------------      ----------

<S>                                 <C>              <C>              <C>               <C>
Allowance for doubtful accounts     $      425       $         81       $      161      $      345
                                    ==========       ============       ==========      ==========

Tax asset valuation allowance       $    4,717       $        246       $        0      $    4,963
                                    ==========       ============       ==========      ==========
</TABLE>





                     FOR THE YEAR ENDED DECEMBER 31, 1998
                            (THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
                                      BALANCE AT                                       BALANCE AT
                                      BEGINNING       CHARGED TO        ACCOUNTS           END
                                         OF           COSTS AND          WRITTEN           OF
    DESCRIPTION                        PERIOD          EXPENSES        OFF/RELEASED      PERIOD
    -----------                        ------          --------        ------------      ------

<S>                                  <C>              <C>               <C>            <C>
Allowance for doubtful accounts      $      703       $       66        $     344      $      425
                                     ==========       ==========        =========      ==========

Tax asset valuation allowance        $    3,710       $    1,007        $       0      $    4,717
                                     ==========       ==========        =========      ==========
</TABLE>



                      FOR THE YEAR ENDED DECEMBER 31, 1997
                             (THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
                                     BALANCE AT                                       BALANCE AT
                                      BEGINNING        CHARGED TO       ACCOUNTS          END
                                         OF             COSTS AND        WRITTEN          OF
    DESCRIPTION                        PERIOD           EXPENSES      OFF/RELEASED      PERIOD
    -----------                        ------           --------      ------------      ------
<S>                                  <C>               <C>              <C>            <C>
Allowance for doubtful accounts      $    1,971        $       22       $   1,290      $     703
                                     ==========        ==========       =========      =========

Tax asset valuation allowance        $    3,195        $      515       $       0      $   3,710
                                     ==========        ==========       =========      =========
</TABLE>



                                      36
<PAGE>   37







                                 EXHIBIT INDEX



                                       37
<PAGE>   38


                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit                                                                            Page
Number           Description                                                      Number
------           -----------                                                      ------
<S>      <C>                                                                      <C>
3.1      Amended and Restated Articles of Incorporation of the Company.(1)          N/A
3.2      Amended and Restated By-laws of the Company (incorporated herein by        N/A
         reference to Exhibit 3(b) of the Company's Registration Statement
         on Form S-8 (Registration No. 333-55939)).
4.1      See Exhibits 3.1 and 3.2 for provisions of the Amended and Restated        N/A
         Articles of Incorporation and Amended and Restated By-Laws of the
         Company defining rights of holders of Common Stock of the Company.
10.3     Lease dated January 30, 1988 between the Company and Atlanta Overlook      N/A
         Associates #3 concerning the Company's principal offices located
         at 2859 Paces Ferry Road, Atlanta, GA, as amended by that certain
         First Amendment of Office Building Lease dated as of December 27, 1988
         and as further amended by that certain Second Amendment of Office
         Building Lease dated as of October 2, 1989. (1)
10.4     Firstwave Technologies, Inc. Amended and Restated 1993 Stock Option        N/A
         Plan (incorporated herein by reference to Exhibit 4(a) of the
         Company's Registration Statement on Form S-8 (Registration No.
         333-55939)). (7)
10.5     Tax Indemnification Agreement dated February 4, 1993 among the Company     N/A
         and certain of its shareholders.(2)
10.6     Form of Selective Distribution Agreement for International                 N/A
         Distributors. (1)
10.7     Form of Software License Agreement.(1)                                     N/A
10.9     Computer Software License Marketing Agreement dated December 21, 1987      N/A
         between the Company and Co-Cam Computer Services, Pty. Ltd. (1)
10.10    Third Amendment to Lease Agreement dated as of March 10, 1993 between      N/A
         the Company and State of California Public Employees Retirement
         System relating to the Company's principal offices located at 2859
         Paces Ferry Road, Atlanta, GA.(2)
10.11    Fourth Amendment to Lease Agreement dated as of June 24, 1993 between      N/A
         the Company and State of California Public Employees Retirement
         System relating to the Company's principal offices located at 2859
         Paces Ferry Road, Atlanta, GA.(2)
10.12    Fifth Amendment to Lease Agreement dated as of March 22, 1994 between      N/A
         the Company and State of California Public Employees Retirement
         System relating to the Company's principal offices located at 2859
         Paces Ferry Road, Atlanta, GA.(2)
10.13    Sixth Amendment to Lease Agreement dated as of September 22, 1994          N/A
         between the Company and State of California Public Employees
         Retirement System relating to the Company's principal offices located
         at 2859 Paces Ferry Road, Atlanta, GA.(3)
10.14    Firstwave Technologies, Inc. Employee Stock Purchase Plan.                 N/A
         (incorporated herein by reference to Exhibit 4(a) of the Company's
         Registration Statement on Form S-8 (Registration No. 333-55971)). (7)
10.15    Option Agreement, dated July 25, 1997, between the Company and Netgain     N/A
         Corporation.(4)
10.17    Seventh Amendment to Lease Agreement dated as of January 20, 1998          N/A
         between the Company and State of California Public Employees
         Retirement System relating to the Company's principal offices located
         at 2859 Paces Ferry Road, Atlanta, GA(6)
</TABLE>


                                       38
<PAGE>   39



<TABLE>
<CAPTION>
Exhibit                                                                                Page
Number           Description                                                          Number
------           -----------                                                          ------
<S>      <C>                                                                          <C>
10.18    Eighth Amendment to Lease Agreement dated as of May 8, 1998 between            N/A
         the Company and State of California Public Employees Retirement System
         relating to the Company's principal offices located at 2859 Paces
         Ferry Road, Atlanta, GA. (5)
10.19    First Amendment to Firstwave Technologies, Inc. 1993 Stock Option Plan         N/A
         (incorporated herein by reference to Exhibit 4(c) of the Company's
         Registration Statement on Form S-8 (Registration No. 333-55939)). (7)
10.20    First Amendment to Firstwave Technologies, Inc. Employee Stock                 N/A
         Purchase Plan (incorporated herein by reference to Exhibit 4(b) of the
         Company's Registration Statement on Form S-8 (Registration No.
         333-55971)). (7)
10.21    Board of Directors Compensation Plan (incorporated herein by reference         N/A
         to Exhibit 4(b) of the Company's Registration Statement on Form S-8
         (Registration No. 333-55939)). (7)
10.22    Ninth Amendment to Lease Agreement dated as of February 3, 2000                40
         between the Company and National Office Partners Limited Partnership
         relating to the Company's principal offices located at 2859 Paces
         Ferry Road, Atlanta, GA.
10.23    Tenth Amendment to Lease Agreement dated as of February 28, 2000               45
         between the Company and National Office Partners Limited Partnership
         relating to the Company's principal offices located at 2859 Paces
         Ferry Road, Atlanta, GA. N/A
13       1999 Annual Report to Shareholders.                                            56
23       Consent of Independent Accountants. See page immediately preceding the         34
         signature page to this Report.
27       Financial Data Schedule (for SEC use only).
</TABLE>

(1)Incorporated herein by reference to exhibit of the same number in the
Company's Registration Statement on Form S-1 (Registration No. 33-57984).
(2)Incorporated herein by reference to exhibit of the same number in the
Company's Form 10-K for the year ended December 31, 1993.
(3)Incorporated herein by reference to exhibit of the same number in the
Company's Form 10-K for the year ended December 31, 1994.
(4)Incorporated herein by reference to exhibit of the same number in the
Company's Form 10-Q for the quarter ended June 30, 1997.
(5) Incorporated herein by reference to exhibit of the same number in the
Company's Form 10-K for the year ended December 31, 1998.
(6)Incorporated herein by reference to exhibit of the same number in the
Company's Form 10-K for the year ended December 31, 1997.
(7) Management contract or compensatory plan or arrangement required to be
filed pursuant to Item 14(c) of Form 10-K.


                                      39
<PAGE>   40












                                 EXHIBIT 10.22





                                       40