<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
         For the fiscal year ended December 31, 1998.

                                       OR

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934
         For the transition period from ________to_________.

                         Commission File Number: 0-21202
                                                 -------     
                         FIRSTWAVE(R) TECHNOLOGIES, INC.
                         -------------------------------
             (Exact name of registrant as specified in its charter)

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)

       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, 1999: approximately $10,305,176.

Number of shares of Common Stock outstanding as of March 23, 1999: 5,152,588.


<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 6, 1999 are incorporated by reference into Part
III of this Report. Other than those portions specifically incorporated by
reference herein, the 1998 Annual Report to Shareholders and the Proxy Statement
for the Annual Meeting of Shareholders to be held on May 6, 1999 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

Effective March 1, 1998, the Company changed its name from Brock(TM)
International, Inc. to Firstwave Technologies, Inc. The name change results from
the acquisition of Netgain(TM) Corporation and expansion strategies including
the launch of a new product suite, Netgain Enterprise. Firstwave embraces the
entrepreneurial spirit and advanced technology of the energetic Netgain team,
while leveraging Brock's strengths as an established international company.

Firstwave Technologies, Inc. provides innovative customer relationship
management (CRM) solutions to enterprises located throughout the world. The
company markets and supports three product lines: Netgain Enterprise,
Takecontrol(R) and Firstwave for Unix. Netgain Enterprise is an Internet-based
CRM system designed to enable companies to leverage the World Wide Web and its
capabilities to create and maintain profitable, mutually beneficial
relationships. Netgain Enterprise will encompass activities and processes with
prospects and customers throughout their entire relationship lifecycle from
pre-sales marketing to post-sales service. The first component of the Netgain
Enterprise suite, Netgain Sales, was released in September 1998. 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. Firstwave for Unix product line is a
traditional UNIX, character-based CRM solution. All product lines assist
companies in maximizing their customers' satisfaction and thereby maximizing
lifetime customer value. Firstwave's software products operate on personal
computers and a wide range of server platforms.


COMPANY STRATEGY

Firstwave's long term vision is to create a next-generation CRM platform that
leverages Internet technologies to bring value to users in the form of longer,
more profitable relationships with its customers. Firstwave's CRM solutions are
designed to bridge communication gaps between a company's internal departments
such as marketing, sales and technical support and its outside constituents such
as customers, vendors and business partners. Conventional CRM applications are
often found by users to be complex, expensive to maintain and difficult to use.
As a result, the incidence of incomplete implementations and failure to meet
established expectations is quite high. Furthermore, due to the limitations of
client/server technologies, these systems have not extended critical information
to customers, indirect channels, partners or other interested parties (the
"extended enterprise") who exist outside the boundaries of the corporation.


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The evolution and maturation of several technologies, in combination with the
emergence of the Internet as a factor in commercial activities, has created an
environment of new possibilities for CRM solutions. The Company believes that
the future environment will be one in which customers will demand:

-        Relationships be based in knowledge
         -        Companies must have knowledge of customer's needs and wants
         -        Companies must provide full, easy access to information about
                  its goods and services

-        Anyone representing an enterprise must be equally informed and prepared
         to serve the customers' needs

-        Customers will determine the most appropriate means of interaction with
         the companies that they do business with

-        Speed of interaction will be the key to successful relationships
         -        Identify needs
         -        Determine solution
         -        Deliver solution

Netgain Enterprise was created to address this environment and was designed to
enable companies to pursue a new standard of excellence in their interactions
with their customers. It leverages its architecture, e-Framework(TM) which
deploys state-of-the-art Internet technologies and integration standards, to
gather, store and share customer-related information among the entire extended
enterprise, including the customers themselves.

Netgain Enterprise enables all users to have a single view of the customer by
integrating information from multiple sources throughout the enterprise, and
from external on-line sources of data. Because the Internet is the
communications platform for Netgain, the information can be easily distributed
to any users that interact with customers including marketers, direct sales
reps, customer service reps, channel reps and others, regardless of their
physical location. As such, Netgain Enterprise facilitates the collaborative
efforts of the entire company and its agents (the "extended enterprise") in
generating a focused and unified CRM effort.

Netgain Enterprise's automation capabilities will enable users to analyze
customer requirements and interact with them appropriately - with the
appropriate information, at the appropriate time, using the appropriate medium.

Over time, the Company will release components of Netgain Enterprise to address
all phases of a customer relationship - pre-sales, sales and post-sales
activities.

The revenues and relationships of the Company's mature existing businesses
provide a sound platform for launching new products and services. The Company
remains dedicated to the thousands of people who are currently using Firstwave
products in over 20 countries. The Company is committed to continued support and
development of its products and is developing a more modern version of
Takecontrol using the Microsoft Visual Basic environment. The Company will
continue to maintain its Unix products, provide award-winning Takecontrol
client/server applications, support Year 2000 requirements, remain compatible
with the most popular database managers and operating systems, and provide
personal service whenever customers need it.


PROVIDING VALUE-ADDED SERVICES AND ENHANCEMENTS TO EXISTING CUSTOMERS

Firstwave focuses on providing value to its existing customers by offering an
array of post-sales consulting, training, and support services. Because the
Company's customers use Firstwave products to support strategic and
mission-critical aspects of their businesses, a high level of customer service
is critical to 


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customer satisfaction in the Company's market. Management believes that the
Company's commitment to service and support has been and will continue to be a
significant element of its business strategy. Firstwave's professional services
organization provides consulting and technical assistance to the Company's
customers through fee-based consulting, system installation and configuration,
training and system support services. The Company seeks to differentiate itself
from its competitors by offering superior customer service.


LEVERAGE STRATEGIC ALLIANCES

The sales performance solutions the Company delivers to customers are a
combination of Firstwave's efforts and those of various strategic alliance
partners. The Company seeks to select strategic partners who are best in-class
providers of hardware, software, telephony and consulting. Alliance partners
provide value-added offerings to supplement functionality, joint marketing and
lead generation opportunities or system integration expertise. The Company has
also developed interfaces with many complementary software offerings like
Microsoft Outlook, Microsoft Word, Microsoft Access, Synchrologic's(TM) database
synchronization products, marketing encyclopedia and product configuration from
Calico Technologies(TM), Seagate's Crystal Reports(TM), Internet-based
information from Harris InfoSource(TM) and Internet-based travel services from
Worldspan(R). The Company will respond to market needs for complete solutions
beyond just software. For instance, in December 1998, Firstwave announced a
partnership with MultiSoft(TM) Corporation to offer 24X7 end user support as
well as remote Netgain Enterprise application hosting. Firstwave expects to
continue to integrate with other complementary offerings.


EXPANDING INTERNATIONAL OPERATIONS 

On April 30, 1998, Firstwave Technologies, Inc. acquired Co-cam UK, its largest
Takecontrol distributor. This acquisition brought additional revenues to
Firstwave and strengthened our European presence. Firstwave Technologies UK,
Ltd. now has responsibility for development of our overall business in Europe.
During their first eight months of ownership Firstwave UK contributed $2.3
million of incremental revenue.

Management believes that Firstwave is positioned to take advantage of the
enterprise Internet market opportunity over the next several years. e-Framework,
the architecture upon which Netgain Enterprise is built, will facilitate easy
translation of the system's applications, menus, screens and reports into many
foreign languages without the need for source code alterations.

The Company's strategy for expanding its international operations outside of the
UK involves maintaining a core group of trained distributors, primarily with
non-exclusive territorial rights, who demonstrate commitment to customer service
and support. The Company has established a network of international distributors
serving customers in 20 different countries and it continues to seek qualified
international distributors. Prior to being authorized to market Firstwave
products, potential international distributors are required to participate in
Company-sponsored certification sessions.


SOFTWARE PRODUCTS 

Firstwave's systems consist of three main families of software applications: the
Takecontrol series, the Firstwave for Unix series and Netgain Enterprise. The
Takecontrol and Unix series feature integrated modules that address the complete
sales cycle: lead generation, lead qualification, account management (both
in-house sales and field sales), and post-sale customer support. Takecontrol is
an integrated client/server sales, marketing and customer service solution.
Firstwave for Unix is a character-based Unix system. The systems' open
architecture, modular design and use of relational databases provide an
integrated approach to enterprise-wide information management, yet allows
customers to automate a single departmental function first and then expand
incrementally to company-wide applications by adding modules and users. 


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Netgain Enterprise deploys state-of-the-art Internet technologies and
integration standards, to gather, store and share customer-related information
among the entire extended enterprise, including the customers themselves. The
resulting benefit is longer, more satisfying and more profitable relationships
between users and customers.

The first component of the Netgain Enterprise is Netgain Sales. Netgain Sales is
one of the first completely Web-based sales information systems. It tracks and
maintains all current and historical information surrounding sales
opportunities, accounts, contacts and activities. It leverages the Internet to
extend a sales team to include inside users, mobile users, remote users and
indirect channel partners. Easy, anytime, anywhere, secure access to data such
as customer profiles, sales activities and competitive data are valuable
attributes of this application.

Netgain Sales solves the issues that have limited the success of similar
applications of the past. The application is presented within a browser and is
operated like other Web-based applications so it is easy to use. Through its
Netgain Internet Business Center, Netgain Sales is able to automatically query
Internet sources for information about customers and prospects currently being
worked on. This provides value to sales reps unavailable in other applications.

Netgain Enterprise's object-oriented, open architecture, eFramework, has a
significant impact on usability and deployment of Netgain Sales. Issues such as
slow connection speeds and shared processors to accommodate Internet users are
solved without sacrificing functionality or user interface. Meta-data technology
is used to configure the application and to capture customizations. This means
that Netgain Enterprise is able to support users' business processes without
changing underlying source code.


TAKECONTROL SOFTWARE ARCHITECTURE

The Takecontrol product series was developed specifically for the client/server
model of computing with support for the occasionally connected environment. The
product takes advantage of many technologies including the Company's application
development environment, ToolShop(R), standard Microsoft Windows Graphical User
Interface, Internet protocols, and a variety of relational databases, including
Microsoft SQL Server and Access, Oracle, Sybase and Informix.

Firstwave customers' system administrators can readily modify applications,
menus, screens and database access methods from within the product. ToolShop is
provided with each license and includes tools for building unique
customizations, add-on enhancements and integrated applications to legacy
systems.

The modules of the Takecontrol series are described below.

Marketing. This tailored solution allows users to generate, track, manage and
report on leads as they develop through each stage of the sales cycle using
sophisticated database marketing tools. In-house sales, telesales and field
sales professionals can use the Marketing module to organize and coordinate the
effective use of imported lists and/or internal data through campaign and
project management. Shared and/or dedicated telemarketing call queues and
targeted direct mailing lists allow representatives to maintain account
information and comprehensive account histories in addition to generating new
leads. The module contains extensive reporting features to allow managers to
effectively monitor marketing and telemarketing efforts. The Takecontrol Web
module captures leads directly from the Internet and a flexible but powerful
filter application pre-qualifies the incoming leads prior to inclusion in the
customer's database.

Sales. This solution provides the mobile or inside sales professional with a
sophisticated sales and marketing system on a laptop or desktop computer. It
gives the remote sales professional a complete set of sales performance tools
for opportunity management, account management and sales planning and
forecasting. The module features a centralized relational database with integral
functions to manage lead qualification, opportunity management, strategic
selling, activity scheduling, reporting, forecasting and sales analysis, and
integrates with corporate information systems facilitating the flow of
information across the sales, marketing and customer service departments. Sales
reps have access to a sales reference library 


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and can access information on objection handling, pricing, competitors and
prospect histories. Takecontrol also incorporates a Web-based, marketing
encyclopedia add-on module called NewsSt@nd(TM). This intelligent-agent
technology monitors and gathers customer, partner and competitive information
and delivers it to the end user automatically. NewsSt@nd provides the right
information at the right time, giving the sales representatives an edge over the
competition. The Sales module provides a sophisticated data synchronization
facility that permits the sales professional to easily make updates to the
corporate database and his or her local database to ensure data integrity and
consistency.

Customer Service. Companies can focus on and improve customer satisfaction by
reliably capturing and tracking incoming customer calls, prioritizing customers'
problems and assigning problems to the correct customer service representative
for an appropriate and timely response. Cases are tracked and monitored based on
severity and can be automatically escalated based on customer specific criteria.
The module's problem-tracking database, an on-line information source containing
all known support problems with their proven solutions, provides information to
customer service representatives for solving technical, training and
documentation-related problems. The Customer Support/Help Desk module also
includes extensive reporting capabilities so managers can monitor the volume of
call activity, response time and customer service representative productivity.
The Web Support module allows customers to access and add to their case
information via the Internet, thereby reducing telephone call overhead.


SERVICES

Management believes that the need for expertise in installing, customizing and
using sales, marketing and customer service systems will grow as the
sophistication of software solutions increases due to product evolution and as
software is increasingly employed as a strategic sales tool. The Company seeks
to differentiate itself from other providers of sales, marketing and customer
service software by offering an array of specialized professional services on a
fee basis. Firstwave's services consist of (i) education and training services,
(ii) implementation and customizations, and (iii) 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 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 Netgain Enterprise consists of Netgain Sales and
Netgain System Administrator. The classes may be conducted at Firstwave, the
customer site or via the Web. Netgain Sales is intended for individuals who will
use the application to create and maintain customer relationships through all
phases of the sales cycle. Netgain System Administrator is for individuals who
will setup, maintain and administer the Netgain Sales application.

The current curriculum for Takecontrol consists of Application classes for each
module, ToolShop Design Environment I & II, and Data Synchronization
Configuration. These courses provide information on system and database
administration and the use of Firstwave application and development tools,
including the ToolShop, to tailor the standard modules. Classes are also offered
for End-User Training.


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IMPLEMENTATION AND CUSTOMIZATIONS

Firstwave's professional services organization 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 and other special processing requirements
related to the implementation of Netgain Enterprise, Takecontrol and Firstwave
for Unix. Professional services are charged on a time and expenses basis.


CUSTOMER SUPPORT

Firstwave's customer support group uses the Takecontrol Customer Support module
to track individualized service. It provides Firstwave representatives with
access to a problem-tracking database that includes an on-line 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.

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 REVENUE, PRICING AND MATERIAL TERMS OF LICENSING AGREEMENTS 

Software revenues consist of license fees for Netgain Enterprise, Takecontrol
and Firstwave for Unix. The Company also receives revenues from third-party
software. Customers pay a license fee for the software based upon the number of
licensed users.

Netgain Enterprise offers customers several pricing alternatives that reflect
how it may be deployed across the Internet to users throughout the extended
enterprise. Perpetual licenses are available on a concurrent or per user model.
Concurrent user licensing allows Netgain Enterprise to be cost-effectively
deployed to a high number of occasional users.

Subscription pricing provides organizations the opportunity to deploy the
application without the need for a high capital outlay.

Remote hosting services allow organizations to deploy the applications without
the need for internal hardware infrastructure or system administrative
capabilities.

For Takecontrol and Firstwave for Unix, the Company grants non-exclusive,
non-transferable, perpetual licenses that are site- and computer-specific. The
license agreement specifies that the Company will provide its software in object
code format and that the Company will retain the source code.



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The second component of the Company's revenues is services, consisting 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.

The Company's maintenance revenues are derived from the provision of: (i)
customer support in the form of "hotline" telephone services and (ii) updates
and enhancements of products and related documentation. Customers are provided
maintenance and support services 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 sales,
marketing, and service management. This wide range of companies demonstrates the
broad applicability of the Company's product lines. The Company currently has
systems installed in many industries, including manufacturing, financial
services, communications, computers and software, travel, hospitality and
retail. The Company's customer base includes medium-sized independent companies
as well as divisions of Fortune 1000 companies. The Company has licensed its
products for thousands of users located in 20 countries. More than 200 customers
currently subscribe to maintenance services.


SALES AND MARKETING

The Company markets and sells its products and services to the North American
marketplace through direct channels. Internationally the products and services
are marketed and sold directly through Firstwave UK and through indirect
channels via Firstwave distributors. The US and UK direct channel is supported
by 24 sales and marketing professionals as of December 31, 1998.

The Sales department is organized into Business Development Representatives
("BDR") and Account Executives. BDR's initiate contact with leads and qualify
them using the telephone and the Internet as primary tools. Account Executives
are responsible for on-site visits and contract negotiations. The sales cycle
for new customers averages 3-4 months after initial contact and typically
includes requirements gathering, Web-based product demonstrations, technical
discovery, customization, demonstration and pilot.

The Company's Marketing department is responsible for generating leads through a
variety of activities including Internet-based marketing, public relations,
trade shows, Web seminars, strategic partnerships and direct mail. The Marketing
department is an end-user of Netgain Enterprise for database marketing, lead
tracking and analysis. Leads that are not initially qualified for a direct sales
effort are maintained in the database and contacted periodically to identify
changes in circumstances that might result in a sales opportunity.

In addition, the Marketing department is responsible for product positioning and
strategy, product management, 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 propel the growth of Netgain Enterprise by using it as a
basis for rich, market-driven CRM solutions for companies wanting to incorporate
the Internet into their business processes. Netgain's architecture, eFramework,
with its object orientation, adherence to Microsoft standards and incorporation
of emerging Web technologies facilitates this approach. The Internet not only
serves as a communications medium within the company and between customer and
company, but it provides an 


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abundant source of information which can assist all personnel in forming
mutually beneficial relationships with prospects and customers. Netgain
Enterprise has unique capabilities to leverage these attributes.

In January 1999, the Company announced the Netgain Internet Business Center
(TM)(NIBC). NIBC facilitates the creation of intelligent, context-sensitive
Internet queries and enables automatic downloading of selected information from
Internet sources directly into a user's Netgain database. NIBC will be available
in Version 3.0 of Netgain Sales which is scheduled for release in the second
quarter of 1999 and is an example of innovations to come.

In addition, the Company is developing a new client/server product based upon
the Microsoft Visual Basic environment. This new product, Takecontrol Today,
will be tightly integrated with Microsoft Outlook 98 for contact and activity
management, allowing sales professionals to perform daily tasks in a familiar
environment. It is being developed in a phased approach using converted portions
of the current Takecontrol product and employing business components based upon
Microsoft's Component Object Model (COM). It will primarily be sold to existing
customers who are looking for more modern user interface features based upon an
open programming environment.


ONGOING SYSTEM ENHANCEMENTS

Firstwave was the first enterprise class CRM provider to integrate Microsoft
Outlook 97 with a sales and marketing automation solution. This year, Firstwave
released Takecontrol'99, which includes integration into the popular Microsoft
Office 97 application suite, industry-standard Seagate Crystal Reports and
Oracle(R) 8.

This release added several innovative capabilities to the full function
Takecontrol suite. A graphical script builder makes building telemarketing and
telesales scripts easier than ever using simple drag-drop operations to connect
prompts and define call paths. A new Open Object Interface allows better
programmatic integration to other desktop and mainframe applications. This
version remains year 2000 compliant (as was Takecontrol'98), following industry
guidelines supplied by industry analysts. It enables customers to properly
handle date information and ensures all existing data is processed properly for
the new millennium.

In addition to the initial release of Netgain Sales, Version 2.0 was released
during 1998. This release added the ability to utilize the application and
access needed customer and opportunity data while disconnected from the
Internet. Deploying Synchrologic's database synchronization technology, Version
2.0 allows Netgain Sales to conform to the working environments of direct sales
personnel - in an automobile, in an airplane, in a hotel room or at a client
site.


COMPETITION

The Company faces competition from a variety of software vendors, including
sales automation and customer support software vendors and software tools
vendors.

In the sales automation software market, the Company faces competition from
dozens of companies including SalesLogix(TM), Pivotal Software(TM) and
Upshot(TM). In this market, primary competitive factors include breadth and
completeness of the customer interaction solution, Internet capabilities,
technological architecture, customization capabilities, and ability to offer a
tailored, comprehensive solution.

In the integrated, multi-national CRM market in which the Company competes,
there are an increasing number of vendors vying for market share. In addition,
the sophistication of such solutions can require a professional services staff
for the product to be effectively implemented, customized and supported if the
customer does not have such qualified staff in-house or available for the
project.



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The Company's products compete on the basis of product flexibility,
customization capability, application features, platform configurations, value,
and customer service. Management believes the Company's products compete
favorably with respect to these factors. Certain of the Company's competitors
also provide cross-industry solutions, while others focus on specific markets
such as the pharmaceutical industry. There can be no assurance that the Company
will be able to achieve the innovative product development necessary to maintain
competitive advantage.


PROPRIETARY RIGHTS AND LICENSES

Firstwave employs an on-line code management system, which requires successful
accessing of a series of permission levels prior to modifying the source code,
to protect the proprietary nature of its intellectual property. The Company also
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, 1998, the Company employed 108 persons, including 24 sales
and marketing professionals, 39 service and support representatives, 19
administrative personnel and 26 persons involved in product innovation and
development. Management believes that the Company's future growth and success
will depend on its ability to retain and to continue to attract highly skilled
and motivated personnel in all areas of its operations.


ITEM 2.  PROPERTIES.

As of December 31, 1998 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 7,000 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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                                     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>
1998            First     Second      Third     Fourth   1997           First     Second     Third     Fourth
-------------------------------------------------------  ------------------------------------------------------
<S>            <C>        <C>        <C>        <C>      <C>           <C>        <C>        <C>        <C>   
High           $ 5.63     $ 5.13     $ 5.13     $ 3.88   High          $ 4.50     $ 6.50     $ 5.75     $ 5.25
Low            $ 4.31     $ 4.25     $ 2.50     $ 1.63   Low           $ 3.00     $ 2.19     $ 4.50     $ 3.44
-------------------------------------------------------  ------------------------------------------------------
</TABLE>

As of December 31, 1998 there were approximately 85 shareholders of record and
approximately 1,725 persons or entities that hold common stock in nominee name.
There were no dividends declared during 1998 or 1997.

On December 31, 1997, the Company issued 67,989 shares of Common Stock to Carpe
Fund, LP in connection with the acquisition of Netgain Corporation. The Company
issued such shares to Carpe Fund in full payment and satisfaction of two
promissory notes in principal amounts totaling $300,000 issued by Netgain to
Carpe Fund. Pursuant to an agreement between the Company and Carpe Fund, the
value of these shares was determined by the average of the per share closing
prices of the Common Stock for each of the ten days preceding the closing date
of the Netgain acquisition. These shares were issued in reliance upon the
exemption from the registration requirements of the Securities Act of 1933, as
amended (the "Securities Act"), provided by Section 4(2) thereof. These shares
were subsequently registered for resale under the Securities Act.


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)
                                                          1998        1997      1996        1995        1994
                                                        -------------------------------------------------------
<S>                                                     <C>        <C>        <C>         <C>          <C>
Net revenues                                            $14,537    $ 15,848   $ 23,222    $ 28,001     $ 30,697
Income (loss) before income taxes                        (3,034)     (1,377)   (10,115)     (4,928)         737
Income tax (provision) benefit                              (91)       (133)     1,055       1,837         (192)
Net income (loss)                                        (3,125)     (1,510)    (9,060)     (3,091)         545
Basic and diluted net income (loss) per share             (0.61)      (0.30)     (1.81)      (0.63)        0.11
Total assets                                             11,322      14,286     18,367      26,045       29,127
Total non current liabilities                                --          --        125          --          960
                                                                                                                
Common stock subject to repurchase                      $    --    $    300    $    --    $     --    $      --
Basic and diluted weighted average common
   and common share equivalents                           5,125       5,035      5,000       4,932        4,960
                                                                                
</TABLE>



                                       11
<PAGE>   12



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 1997 to 1998. Certain percentage columns do not add to 100% due to
rounding.


<TABLE>
<CAPTION>
                                              Year Ended December 31,                              % Change
(in thousands)                           1998                            1997                     1997 to 1998
--------------------------------------------------------------------------------------------------------------
<S>                                  <C>            <C>               <C>           <C>                  <C>  
Revenues
    Software                         $  3,528       24.3%             $ 5,239       33.1%               -32.7%
    Services                            5,035       34.6%               4,810       30.4%                 4.7%
    Maintenance                         5,431       37.4%               5,189       32.7%                 4.7%
    Other                                 543        3.7%                 610        3.8%               -11.0%
                                     -------------------              ------------------                ------
         Net revenues                  14,537      100.0%              15,848      100.0%                -8.3%
                                     -------------------              ------------------                ------

Costs and expenses
    Cost of revenues
         Software                         744        5.1%                 675        4.3%                10.2%
         Services                       3,566       24.5%               3,528       22.3%                 1.1%
         Maintenance                    1,643       11.3%               1,687       10.6%                -2.6%
         Other                            500        3.4%                 606        3.8%               -17.5%
    Sales and marketing                 5,983       41.2%               6,012       37.9%                -0.5%
    Product development                 2,080       14.3%               2,003       12.6%                 3.8%
    General & administrative            3,233       22.2%               2,186       13.8%                47.9%
    In process research and
      development                           0       0.00%                 696       4.39%              -100.0%

                                     -------------------              ------------------                ------
Operating loss                         (3,212)     -22.1%              (1,545)      -9.7%               107.9%
                                     -------------------              ------------------                ------
Interest income net                       178        1.2%                 168        1.1%                 6.0%
                                     -------------------              ------------------                ------
Loss before income taxes             $ (3,034)     -20.9%            $ (1,377)      -8.7%               120.3%
                                     -------------------              ------------------                ------
</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.



                                       12
<PAGE>   13


1998 COMPARED TO 1997

The plan for 1998 was to continue to stabilize operating performance and develop
capacity for future growth. In 1998 the Company launched a new corporate
identity - Firstwave Technologies, Inc. Firstwave is the combination of three
companies: (1) Brock International, Inc., an established public company, (2)
Netgain Corporation, an early stage technology company, which was acquired on
December 31, 1997, and (3) Co-cam UK, the Company's largest distributor which
was acquired on April 30, 1998. The Company believes the combination of these
three synergistic companies each with its own expertise, is a solid platform to
launch its new generation of customer relationship management solutions based on
Internet technologies.

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 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.



                                       13
<PAGE>   14

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.


1997 COMPARED TO 1996

The Company implemented a restructuring plan in December 1996 that was designed
to restore financial health and lay the foundation for future growth. See Note
13 of Notes to Financial Statements for details and information regarding
one-time expenses associated with the restructuring. The plan for 1997 was to
stabilize operating performance, leverage assets, make progress toward
profitability each quarter, while developing the capacity for future growth. The
Company accomplished these goals during 1997. While revenues decreased from
1996, they, along with expense reductions, were on target with the plan. The
reduction in personnel and enhancements in expense management included in the
restructuring plan are the primary reasons for the overall decreases in
expenses.

Total revenues decreased 31.8% from $23,222,000 in 1996 to $15,848,000 in 1997
as a result of decreased software, services and other revenues. Software
revenues decreased 46.7% from $9,834,000 in 1996 to $5,239,000 in 1997 primarily
as a result of fewer licenses sold to new customers. Revenues from international
software licenses decreased 39.4% from $5,471,000 in 1996 to $3,314,000 in 1997,
and decreased as a percentage of total revenues from 23.6% in 1996 to 20.9% in
1997. However, total revenues from international sources, which includes
maintenance, software license fees and customizations, remained consistent at
33.9% of total revenues in 1997 compared to 33.3% in 1996.

Services revenues decreased 33.8% from $7,267,000 in 1996 to $4,810,000 in 1997
primarily due to the decrease in software license revenues. Maintenance revenues
increased slightly from $5,143,000 in 1996 to $5,189,000 in 1997.

While revenues declined on an annual basis, the Company showed improvement in
the fourth quarter of 1997 when compared to third quarter 1997 and fourth
quarter 1996. Fourth quarter 1997 total revenues increased 38.2% over third
quarter 1997 and 3.1% over fourth quarter 1996. Software revenues for fourth
quarter 1997 increased 161.5% over third quarter 1997 and 41.5% over fourth
quarter 1996 as a result of increased international revenue.

Costs of software revenues decreased 86.2% from $4,883,000 in 1996 to $675,000
in 1997 and, as a percentage of software revenues, decreased from 49.7% in 1996
to 12.9% in 1997. The decreases were primarily due to an adjustment in 1996 of
approximately $2,583,000 to write down remaining capitalized software to net
realizable value, as well as, the associated decrease in the amount of
amortization of capitalized software costs from $2,080,000 in 1996 to $419,000
in 1997.

Costs of revenues for services decreased 40.3% from $5,908,000 in 1996 to
$3,528,000 in 1997 due to decreases in service personnel, and personnel related
costs. Costs of revenues for services as a percentage of services revenues
decreased from 81.3% in 1996 to 73.3% in 1997. Costs of revenues for maintenance
decreased 15.7% from $2,002,000 in 1996 compared to $1,687,000 in 1997. Costs of
revenues for maintenance as a percentage of maintenance revenues also decreased
from 38.9% in 1996 compared to 32.5% in 1997.

Sales and marketing expenses decreased 40.4% from $10,083,000 in 1996 to
$6,012,000 in 1997, and decreased as a percentage of total revenues from 43.4%
in 1996 compared to 37.9% for 1997. The decrease is primarily due to decreases
in sales commissions consistent with decreases in software license revenues and
decreases in personnel and personnel related costs including travel. 


                                       14
<PAGE>   15

The Company's product innovation and development expense, net of costs
capitalized, including the write-off of in process research and development
costs of $696,000, increased 34.3% from $2,010,000 in 1996 to $2,699,000 in
1997, and increased as a percentage of total revenues from 8.7% in 1996 to 17.0%
in 1997. The Company capitalized additional product development expenditures of
$2,657,000 in 1996. No additional capitalization was recorded during 1997
because development activities qualifying for capitalization were immaterial.
The increase in net cost is primarily due to the combination of no new costs
being capitalized and 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.

General and administrative expenses decreased 63.7% from $6,027,000 in 1996 to
$2,186,000 in 1997. As a percentage of total revenues, general and
administrative expenses decreased from 26.0% in 1996 to 13.8% in 1997. These
decreases resulted from decreases in bad debt expense consistent with the
decrease in revenue, a favorable settlement of a legal dispute which resulted in
a $603,000 credit to general and administrative expense during the third quarter
of 1997, rent expense related to reduction in office space as a result of
restructuring, and decreases in personnel and related costs.

Interest income decreased 7.6% from $225,000 in 1996 to $208,000 in 1997, due to
decreased interest on invested cash balances. Interest expense decreased 74.4%
from $156,000 in 1996 to $40,000 in 1997, due to the March 1997 payment in full
of the outstanding line of credit balance and equipment note payable.


BALANCE SHEET

Cash and cash equivalents decreased 54.8% from $4,969,000 at December 31, 1997
to $2,245,000 at December 31, 1998 due to cash invested in product development,
launch of the Netgain product, and acquisition costs and funding of operations
of Firstwave UK. Intangible assets increased 162.9% from $245,000 at December
31, 1997 to $644,000 at December 31, 1998 due to goodwill related to the
acquisition of Co-cam UK offset by the related amortization. Capitalized
software decreased 29.3% from $1,089,000 at December 31, 1997 to $770,000 at
December 31, 1998 due to amortization expense offset by additional capitalized
software related to Netgain Sales versions 1.1 and 2.0. Accounts payable
increased 56.0% from $868,000 at December 31, 1997 to $1,354,000 at December 31,
1998 due the acquisition of Co-cam. Accrued restructuring costs decreased 100%
from $325,000 at December 31, 1997 to no accrual at December 31, 1998 due to the
expiration of non-cancelable leases of excess office space. Accrued employee
compensation and benefits decreased 53.8% from $614,000 at December 31, 1997 to
$284,000 at December 31, 1998 due to lower commissions payable associated with
lower software revenue and lower employee incentives due to changing from an
annual plan in 1997 to a quarterly plan in 1998. Common stock subject to
repurchase related to the acquisition of Netgain Corporation was reclassified to
stockholder's equity after the shares were registered on February 13, 1998.


LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 1998, the Company had cash and cash equivalents of
$2,245,000. Cash provided by (used in) operating activities was ($1,961,000) and
$857,000 for 1998 and 1997, respectively. Cash provided by (used in) investing
activities was ($928,000) and $2,642,000 for 1998 and 1997, respectively. Cash
used to purchase property and equipment was $496,000 and $261,000, respectively,
for 1998 and 1997. Cash provided by (used in) financing activities was $131,000
and ($1,877,000) for 1998 and 1997, respectively. The Company had no line of
credit payable or notes payable outstanding at December 31, 1998.

In March 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 March 15,
2000, bears interest at prime rate plus 1.5% and reduces to prime rate upon the
Company's attainment of quarterly targets for results of operations or
additional financing objectives. The line of credit is secured by the assets of
the Company.



                                       15
<PAGE>   16

Funds generated from operations and the net remaining proceeds from the
Company's initial public offering were sufficient to finance the Company's
operations during 1998. The Company believes that funds generated from
operations, cash on hand, and the renewal of the line of credit agreement will
sufficiently fund the operations for 1999.


YEAR 2000

The Company's current product line is year 2000 compliant. However, some of the
Company's customers are running older product versions that are not year 2000
compliant. All of the Company's customers have been notified of the availability
of a year 2000 compliant version of the Company's product they are running and
the Company has been encouraging its customers to migrate to current product
versions. 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 that may result in material costs to the Company.

A Year 2000 evaluation was completed during 1998 to assess the Company's Year
2000 readiness related to its internal systems. As of December 31, 1998 all
critical systems had been addressed and the Company was 80% complete in bringing
the balance of internal systems into compliance. The Company expects to
substantially complete year 2000 readiness preparations by the end of June 1999
and to continue testing through calendar 1999. Although the cost associated with
completing year 2000 readiness for the Company's internal systems has been
determined to be immaterial, there can be no assurance that the Company will not
experience serious unanticipated negative consequences caused by undetected
errors or defects in the technology used in its internal systems, which are
composed of third party software and hardware. The Company is in the process of
implementing contingency plans and business resumption plans that will be
completed during the remainder of fiscal 1999.

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.


QUARTERLY FINANCIAL DATA (UNAUDITED)

The tables below set forth certain unaudited operating results for each of the
eight quarters in the two- year period ended December 31, 1998. 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
                                   3/31/98     6/30/98   9/30/98  12/31/98    3/31/97  6/30/97    9/30/97   12/31/97
                                                        (in thousands, except per share amounts)

<S>                              <C>        <C>        <C>        <C>        <C>       <C>        <C>       <C>    
Net revenues                     $ 3,610    $ 3,738    $ 3,762    $3,427     $3,408    $4,080     $ 3,510   $ 4,850
Operating income (loss)             (610)      (725)      (855)   (1,022)      (807)     (288)          9      (459)
Net income (loss)                   (573)      (717)      (826)   (1,009)      (799)     (244)         55      (522)
Basic and diluted
 income (loss) per share           (0.11)     (0.14)     (0.16)    (0.20)     (0.16)    (0.05)       0.01     (0.10)
</TABLE>



                                       16
<PAGE>   17



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) and (2) on page 33 present fairly, in all material
respects, the financial position of Firstwave Technologies, Inc. and its
subsidiary at December 31, 1998 and 1997, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1998, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements 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
February 2, 1999


                                       17
<PAGE>   18




CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)
==============================================================================


<TABLE>
<CAPTION>
                                                                                         DECEMBER 31,
                                                                                       1998         1997
<S>                                                                                 <C>            <C>     
ASSETS
Current assets
    Cash and cash equivalents                                                       $  2,245       $  4,969
    Accounts receivable, less allowance for doubtful
      accounts of $425 and $703                                                        3,146          3,047
    Deferred tax assets                                                                  200            459
    Prepaid expenses and other                                                           195            177
                                                                                    --------       --------
        Total current assets                                                           5,786          8,652

Property and equipment, net                                                            1,501          1,938
Software development costs, net                                                          770          1,089
Intangible asset                                                                         644            245
Deferred tax asset                                                                     2,621          2,362
                                                                                    --------       --------

                                                                                    $ 11,322       $ 14,286
                                                                                    ========       ========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
    Accounts payable                                                                $  1,354       $    868
    Accrued restructuring costs                                                           --            325
    Sales tax payable                                                                    265            263
    Deferred revenue                                                                   1,581          1,545
    Accrued employee compensation and benefits                                           284            614
    Other accrued liabilities                                                             78             19
                                                                                    --------       --------
        Total current liabilities                                                      3,562          3,634


Common stock subject to repurchase                                                        --            300
                                                                                    --------       --------
                                                                                       3,562          3,934
                                                                                    --------       --------
Commitments and contingencies

Shareholders' equity
    Preferred stock, no par; 1,000,000 shares authorized; and
      no shares issued or outstanding
    Common stock, stated value $.0019 per share; 10,000,000 shares authorized;
      5,151,322 and 5,033,027 shares
      issued and outstanding                                                              10              9
    Additional paid-in capital                                                        19,813         19,329
    Unrealized loss on investment securities                                              --            (14)
    Cumulative translation account                                                        34             --
    Accumulated deficit                                                              (12,097)        (8,972)
                                                                                    --------       --------
                                                                                       7,760         10,352
                                                                                    --------       --------

                                                                                    $ 11,322       $ 14,286
                                                                                    ========       ========

</TABLE>
                 The accompanying notes are an integral part of
                    these consolidated financial statements.



                                       18
<PAGE>   19


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


<TABLE>
<CAPTION>
                                                       FOR THE YEAR ENDED        
                                                          DECEMBER 31,           
                                                 1998           1997           1996
<S>                                          <C>            <C>            <C>     
Net revenues
    Software                                 $  3,528       $  5,239       $  9,834
    Services                                    5,035          4,810          7,267
    Maintenance                                 5,431          5,189          5,143
    Other                                         543            610            978
                                             --------       --------       --------
                                               14,537         15,848         23,222

Cost and expenses
    Cost of revenues
      Software                                    744            675          4,883
      Services                                  3,566          3,528          5,908
      Maintenance                               1,643          1,687          2,002
      Other                                       500            606            895
    Sales and marketing                         5,983          6,012         10,083
    Product development                         2,080          2,003          2,010
    General and administrative                  3,233          2,186          6,027
    In process research and development            --            696             --
    Restructuring costs                            --             --          1,598
                                             --------       --------       --------
        Operating loss                         (3,212)        (1,545)       (10,184)

Interest expense                                   (1)           (40)          (156)
Interest income                                   179            208            225
                                             --------       --------       --------
        Loss before income taxes               (3,034)        (1,377)       (10,115)

Income tax benefit (provision)                    (91)          (133)         1,055
                                             --------       --------       --------

        Net loss                             $ (3,125)      $ (1,510)      $ (9,060)
                                             ========       ========       ========

Net loss per share
    Basic                                    $  (0.61)      $  (0.30)      $  (1.81)
                                             ========       ========       ========

    Diluted                                  $  (0.61)      $  (0.30)      $  (1.81)
                                             ========       ========       ========

Weighted average shares outstanding
    Basic                                       5,125          5,035          5,000
                                             ========       ========       ========

    Diluted                                     5,125          5,035          5,000
                                             ========       ========       ========

</TABLE>

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


                                       19
<PAGE>   20

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

<TABLE>
<CAPTION>


                                                                             UNREALIZED    COMPRE-   OTHER
                                                                ADDITIONAL  GAIN/(LOSS)    HENSIVE   COMPRE-   RETAINED
                                                COMMON STOCK     PAID-IN   ON INVESTMENT   INCOME    HENSIVE   EARNINGS
                                             SHARES     AMOUNT   CAPITAL     SECURITIES     (LOSS)   INCOME     (DEFICIT)   TOTAL
<S>                                         <C>         <C>     <C>        <C>            <C>       <C>        <C>       <C>     
Balance at December 31, 1995                4,908,815    $  9   $18,744     $    (121)    $    --   $      --  $  1,598  $ 20,230
Exercise of common stock options                9,242      --        59            --          --          --        --        59
Employee stock purchases                       18,498      --       106            --          --          --        --       106
Unrealized gain on investment
   securities                                      --      --        --           107          --          --        --       107
Net loss                                           --      --        --            --          --          --    (9,060)   (9,060)
                                         ------------    ----   -------     ---------     -------   ---------  --------  --------
Balance at December 31, 1996                4,936,555       9    18,909           (14)         --          --    (7,462)   11,442
Exercise of common stock options               88,899      --       281            --          --          --        --       281
Employee stock purchases                        7,573      --        25            --          --          --        --        25
Issuance of stock options                          --      --       114            --          --          --        --       114
Net loss                                           --      --        --            --          --          --    (1,510)   (1,510)
                                         ------------    ----   -------     ---------     -------   ---------  --------  --------
Balance at December 31, 1997                5,033,027       9    19,329           (14)         --          --    (8,972)   10,352
Exercise of common stock options               34,511               112            --          --          --        --       112
Employee stock purchases                        6,081                19            --          --          --        --        19
Issuance of stock options                          --                 7            --          --          --        --         7
Issuance of stock in connection
   with Netgain acquisition                    77,703       1       346            --          --          --        --       347
Realized loss on investment
   securities                                      --      --        --            14          --          --        --        14

Comprehensive loss
Net loss                                           --      --        --            --      (3,125)         --    (3,125)   (3,125)
Foreign currency translation adjustment            --      --        --            --          34          34        --        34
                                                                                          -------
   Comprehensive loss                                                                     $(3,091)
                                         ------------    ----   -------     ---------     =======   ---------  --------  --------
Balance at December 31, 1998                5,151,322    $ 10   $19,813     $      --               $      34  $(12,097) $  7,760
                                         ============    ====   =======     =========               =========  ========  ========


</TABLE>
                 The accompanying notes are an integral part of
                    these consolidated financial statements.


                                       20
<PAGE>   21


CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
==============================================================================

<TABLE>
<CAPTION>

                                                                            FOR THE YEAR ENDED
                                                                               DECEMBER 31,
                                                                       1998        1997         1996
<S>                                                                  <C>        <C>         <C>      
Cash flows from operating activities
   Net loss                                                          $(3,125)   $ (1,510)   $ (9,060)
   Adjustments to reconcile net loss to net cash
     provided by operating activities
       Depreciation and amortization                                   1,741       1,565       3,431
       Write down of software development cost to net
         realizable value                                                 --          --       2,583
       Write off in process research and development                      --         696          --
       (Gain)/loss on disposal of fixed assets                           (13)        142         646
       Provision for bad debts                                            83          22       1,837
       Deferred income taxes                                              --         (65)     (1,130)
       Stock compensation                                                  7         114          --
       Changes in assets and liabilities (net of acquisition)
         Accounts receivable                                            (182)      1,051       2,135
         Prepaid expenses and other                                      121         (46)         40
         Accounts payable                                                146        (148)         55
         Accrued restructuring                                          (325)       (786)      1,111
         Sales tax payable                                                 2        (115)       (255)
         Deferred revenue                                               (114)         81        (507)
         Accrued employee compensation and benefits                     (361)        (66)       (446)
         Other accrued liabilities                                        59         (78)        (46)
                                                                     -------    --------    --------
               Total adjustments                                       1,164       2,367       9,454
                                                                     -------    --------    --------
               Net cash provided by (used in) operating activities    (1,961)        857         394
                                                                     -------    --------    --------
Cash flows from investing activities
   Software development costs                                           (200)         --      (2,186)
   Business acquisitions                                                (246)       (697)         --
   Purchases of property and equipment                                  (496)       (261)       (869)
   Purchase of investment securities                                  (9,394)    (16,155)    (13,689)
   Proceeds from sale of investment securities                         9,408      19,755      18,051
                                                                     -------    --------    --------
               Net cash provided by (used in) investing activities      (928)      2,642       1,307
                                                                     -------    --------    --------
Cash flows from financing activities
   Exercise of common stock options                                      112         281          59
   Proceeds from employee stock purchase plan                             19          25         106
   Borrowing from/(repayment to) line of credit, net                      --      (1,975)        990
   Proceeds from/(repayments to) note payable, net                        --        (208)        208
                                                                     -------    --------    --------
               Net cash provided by (used in) financing activities       131      (1,877)      1,363
                                                                     -------    --------    --------
Foreign currency translation adjustment                                   34          --          --
Net increase (decrease) in cash                                       (2,724)      1,622       3,064
Cash and cash equivalents, beginning of year                           4,969       3,347         283
                                                                     -------    --------    --------
Cash and cash equivalents, end of year                                 2,245       4,969       3,347
                                                                     -------    --------    --------
Supplemental disclosure of cash flow information
   Cash paid during the year for interest                            $     1    $     84    $    157
                                                                     -------    --------    --------
   Cash paid for income taxes                                        $    91    $    198    $     73
                                                                     -------    --------    --------
</TABLE>

                                       21
<PAGE>   22


NOTES TO FINANCIAL STATEMENTS
==============================================================================



1.       DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Firstwave Technologies, Inc. (the "Company") provides computer-based
         systems to automate customers' business activities, including sales
         lead generation and monitoring, account management, and post-sale
         customer support. Effective March 1998, the Company changed its name
         from Brock International, Inc. to Firstwave Technologies, Inc.

         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% 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. Credit risk
         from concentration of trade receivables is minimized as a result of the
         large and 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.



                                       22
<PAGE>   23

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 available-for-sale based on their intent and ability to
         hold the securities and accordingly, unrealized holding gains and
         losses are presented as a separate component of shareholders' equity.

         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 reasonably possible that those estimates of anticipated
         product revenues, the remaining estimated economic life of the product,
         or both may be reduced significantly in the near term due to changing
         technologies. As a result, the carrying amount of capitalized software
         costs may be reduced materially in the near term.

         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. At December 31, 1998, accumulated foreign
         translation gains were $34,000.

         BASIC AND DILUTED NET INCOME/(LOSS) PER COMMON SHARE
         Basic net income/(loss) per common share is based on the weighted
         average number of shares of common stock outstanding during the period.
         Stock options were the only securities issued which would have been
         included in the diluted income/(loss) per share calculation had they
         not been antidilutive.



                                       23
<PAGE>   24

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 is
         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 net
         of 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 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 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,
                                                                                   1998            1997
         <S>                                                                   <C>               <C>     
         Computer hardware and other equipment                                 $  4,140          $  3,672
         Furniture and fixtures                                                     979             1,289
         Purchased software                                                       1,098             1,027
                                                                               --------          --------
                                                                                  6,217             5,988
         Less:  Accumulated depreciation and amortization                        (4,716)           (4,050)
                                                                               --------          --------
                                                                               $  1,501          $  1,938
                                                                               ========          ========
</TABLE>


                                       24
<PAGE>   25
NOTES TO FINANCIAL STATEMENTS
==============================================================================

         Depreciation and amortization of property and equipment totaled
         approximately $1,119,000, $1,146,000 and $1,351,000 in 1998, 1997 and
         1996, respectively.


4.       PRODUCT DEVELOPMENT EXPENSES

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

<TABLE>
<CAPTION>

                                                                              YEAR ENDED DECEMBER 31,
                                                                           1998          1997           1996

         <S>                                                             <C>           <C>            <C>    
         Total development expenses                                      $ 2,280       $ 2,003        $ 4,667
         Less:  Additions to capitalized software
             development before amortization                                 200            --          2,657
                                                                         -------       -------        -------
         Product development expenses                                    $ 2,080       $ 2,003        $ 2,010
                                                                         =======       =======        =======
</TABLE>


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

<TABLE>
<CAPTION>
                                                                                  YEAR ENDED DECEMBER 31,
                                                                            1998        1997            1996

         <S>                                                             <C>           <C>            <C>    
         Balance at beginning of year, net                               $  1,089      $ 1,508        $ 3,985
         Additions                                                            200           --          2,657
         Amortization expense                                               (519)         (419)        (2,080)
         Discontinuance of product prior to release                             -           --           (471)
         Write-down to net realizable value                                     -           --         (2,583)
                                                                         --------      -------        -------
         Balance at end of year, net                                     $    770      $ 1,089        $ 1,508
                                                                         ========      =======        =======
</TABLE>


         During the fourth quarter of 1996, the Company wrote off capitalized
         software costs of approximately $471,000 related to its restructuring
         (see Note 13). In addition, during the fourth quarter of 1996, the
         Company recorded an adjustment of approximately $2,583,000 to write
         down remaining capitalized software costs of its Takecontrol product
         line to net realizable value.


5.       BORROWINGS

         On March 21, 1997, the Company paid off its existing line of credit and
         equipment note payable and the agreements were terminated. The line of
         credit agreement required that the Company pay a quarterly fee of .375%
         on the unused portion of the line of credit and accrued interest at the
         prime rate.

         In March 1998, the Company and its bank executed a $3,000,000 line of
         credit arrangement, which expires on March 31, 1999. The line of credit
         bears interest at the prime rate plus 1% and reduces to the prime rate
         upon the Company's attainment of quarterly income objectives. The line
         of credit is secured by substantially all of the corporate assets of
         the Company with a negative pledge on intellectual property. There were
         no borrowings against the line of credit as of December 31, 1998. (See
         Note 15)



                                       25
<PAGE>   26
NOTES TO FINANCIAL STATEMENTS
==============================================================================

6.       INCOME TAXES

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

<TABLE>
<CAPTION>
                                                 YEAR ENDED DECEMBER 31,
                                     1998             1997               1996

<S>                                  <C>           <C>               <C>           
         Current
                  Foreign            $ 91          $   198           $    73       
                                                                                   
         Deferred                                                                           
                  Federal              --              (55)             (938)      
                  State                --              (10)             (178)      
                  Foreign              --               --               (12)      
                                     ----          -------           -------       
                                     $ 91          $   133           $(1,055)      
                                     ====          =======           =======     
</TABLE>

  
         The difference between the (benefit) 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,
                                                               1998           1997           1996
<S>                                                         <C>             <C>            <C>    
         Federal statutory tax rate                         (34.0)%         (34.0)%         (34.0)%
         State income taxes, net of federal benefit          (3.1)%          (5.5)%          (2.8)%
         Change in valuation allowance                       32.2%           37.2%           29.6%
         Foreign income taxes                                 2.9%           14.4%            1.0%
         Other                                                4.9%           (2.4)%          (3.4)%
                                                            -----           -----           -----
                                                              2.9%            9.7%          (10.5)%
                                                            =====           =====           =====
</TABLE>



                                       26


<PAGE>   27
NOTES TO FINANCIAL STATEMENTS
==============================================================================


         At December 31, 1998 and 1997, deferred tax (assets) liabilities are
         comprised of the following (in thousands):


<TABLE>
<CAPTION>
                                                                                          YEAR ENDED
                                                                                          DECEMBER 31,
                                                                                     1998              1997
         <S>                                                                     <C>               <C>
         Gross deferred tax liabilities
             Capitalization of software development costs                        $     293         $     413
             Depreciation                                                              213               371
                                                                                 ---------         ---------
                                                                                       506               784
                                                                                 ---------         ---------
         Gross deferred tax assets
             Net operating loss carryforwards                                       (7,195)           (5,764)
             Tax credit carryforwards                                                 (288)             (876)
             In process research and development                                      (247)             (216)
             Allowance for doubtful accounts receivable                               (162)             (341)
             Accrued expenses                                                          (38)             (115)
             Other                                                                    (114)               (3)
                                                                                 ---------         ---------
                                                                                    (8,044)           (7,315)
             Valuation allowance                                                     4,717             3,710
                                                                                 ---------         ---------
                                                                                    (3,327)           (3,605)
                 Net deferred tax assets                                            (2,821)           (2,821)
         Less:  Current portion                                                        200               459
                                                                                 ---------         ---------
                                                                                 $  (2,621)        $  (2,362)
                                                                                 =========         =========
</TABLE>


         At December 31, 1998, 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 $18,955,000 which expire in years 2009 through 2013.

         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. During 1998, the Company recorded an increase in the
         valuation allowance of approximately $1,007,000. Management's estimate
         of the valuation allowance could be affected in the near term based on
         results of operations in future periods.


7.       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 key 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 to key employees 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 

                                       27
<PAGE>   28
NOTES TO FINANCIAL STATEMENTS
==============================================================================


         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.

         Prior to adoption of the Option Plan, certain officers and key
         employees of the Company were granted nonqualified options to purchase
         the Company's common shares. In each case, the exercise price of the
         options equaled the estimated fair market value of the common stock on
         the date of grant. Pursuant to the plan, if any option expires or
         terminates without being exercised, the Board may grant options with
         respect to those non-purchased shares to the same Optionee or to
         another employee of the Company. At December 31, 1998, 7,001 options
         were available for grant and there were no options outstanding related
         to this 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, 1995       482,727     $8.00 - 19.50       $        9.10
            Granted                          1,755,384      3.13 - 10.25                5.80       $        2.01
            Exercised                           (5,250)     4.52 -  8.00                6.47
            Canceled or expired             (1,332,543)     6.50 - 21.50                7.89
                                          ------------

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

        Options exercisable
            at December 31, 1998               150,567
                                          ============
</TABLE>


         The following table summarizes information about stock options
         outstanding at December 31, 1998:

<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
                                         1998               LIFE             PRICE              1998             PRICE
         --------------------------------------------------------------------------------------------------------------
         <S>                <C>                      <C>                 <C>            <C>                  <C>    
         $1.875 - $2.750              281,000               9.44         $   2.497            13,950         $   2.437
         $3.125 - $3.125              437,500               7.92             3.125            62,500             3.125
         $3.250 - $5.000              338,547               8.34             4.337            74,117             3.791
                            ------------------                                              --------
         $1.875 - $5.000            1,057,047               8.46             3.346           150,567             3.389
</TABLE>


                                       28
<PAGE>   29
NOTES TO FINANCIAL STATEMENTS
==============================================================================


         During July and November 1996, the Company provided holders of options
         with exercise prices ranging from $6.50 to $21.50 and $4.52 to $4.75,
         respectively, the election to reprice their options at the then current
         market price. As a result of this election, 253,042 and 497,421 options
         were canceled and reissued in July 1996 and November 1996,
         respectively. Options repriced in November included those previously
         repriced in July. The new option exercise price equals the market price
         on the date of the repricing and, correspondingly, compensation expense
         was not recognized. The vesting period of these options remained
         unchanged. However, employees, excluding officers and directors, who
         elected to reprice their options could not exercise vested options
         until July 1997.

         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 is 62,500 options
         per year from the date of grant. At December 31, 1998, 62,500 of these
         options had been exercised and 62,500 were fully vested and available
         for exercise. The vesting period for the remaining 250,000 options is
         the earlier of the year 2002 or, if the Company's stock price reaches
         certain targets, vesting will occur in blocks of 50,000 options for
         each target price met. The options exercise price equals the market
         price on the date of grant and, correspondingly, compensation expense
         was not recognized. At December 31, 1998, none of these options were
         vested.


8.       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 1998 and 1997, 6,081
         and 7,573 shares, respectively, were issued under the ESP. At December
         31, 1998, options to purchase 1,266 shares were outstanding under the
         ESP.

9.       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 1998,1997 and 1996
         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,
                                                          1998               1997          1996
         <S>                                          <C>                <C>            <C>
         Net loss
             As reported                              $  (3,125)         $  (1,510)     $ (9,060)
             Pro forma                                   (3,478)            (1,825)       (9,859)

         Net loss per share
             Basic and diluted
               As reported                                (0.61)             (0.30)        (1.81)
               Pro forma                                  (0.68)             (0.36)        (1.97)
</TABLE>



                                       29
<PAGE>   30
NOTES TO FINANCIAL STATEMENTS
==============================================================================


         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 1998, 1997 and 1996, respectively: dividend yield of 0% for all
         years; expected volatility of 71%, 52%, and 47%, risk-free interest
         rate ranging from 4.91% 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, 1998 and
         1997, $7,000 and $109,000 respectively, was recorded to expense related
         to options granted to non-employees.


10.      COMMITMENTS AND CONTINGENCIES

         The Company leases office space, equipment and automobiles under
         noncancelable lease agreements expiring on various dates through 2001.
         At December 31, 1998, future minimum rentals for noncancelable leases
         are as follows (in thousands):

                                                        MINIMUM
         YEAR ENDING                                     ANNUAL
         DECEMBER 31,                                   RENTALS

<TABLE>
         <S>                                          <C>      
         1999                                         $     875
         2000                                               593
         2001                                                41
                                                      ---------
                                                      $   1,509
                                                      =========
</TABLE>


         Net rent expense under these and other agreements was approximately
         $619,000, $627,000 and $1,036,000 for the years ended December 31,
         1998, 1997 and 1996, respectively. Rent expense was offset by rental
         income from subleased office space in the amounts of $295,000, $93,000,
         and $8,000 for the years ended December 31, 1998, 1997, and 1996
         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.


11.      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, 1998, 1997 and 1996, the Company made matching
         contributions of approximately $59,100, $66,400 and $78,000,
         respectively, to the 401(k) Plan and no discretionary contributions.




                                       30
<PAGE>   31
NOTES TO FINANCIAL STATEMENTS
==============================================================================


12.      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,
                                                  1998              1997           1996
         <S>                                 <C>               <C>            <C>      
         United States                       $   6,877         $  10,470      $  15,495
         Europe                                  6,341             3,962          5,495
         South America                             714               193            954
         Australia and New Zealand                 501               595            811
         Asia                                       68               410            381
         South Africa                               36               218             86
                                             ---------         ---------      ---------
                                             $  14,537         $  15,848      $  23,222
                                             =========         =========      ========= 
</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 $220,000, or 14.7% of the consolidated balance, are domiciled
         in the United Kingdom.


13.      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. The Plan resulted in a pre-tax charge of approximately
         $1,598,000. The charge principally reflected severance costs resulting
         from workforce reductions of 41 employees and realignments throughout
         the Company, write off of certain nonproductive assets (including
         abandonment of a software product prior to release), employee
         termination costs and costs associated with noncancelable leases net of
         estimated sublease rental income. 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.


14.      RELATED PARTY TRANSACTIONS

         During 1997 the Company entered into an agreement with a majority
         shareholder relating to a contract for $150,000 in professional
         services provided by a third party. The shareholder coordinated the
         relationship between the Company and the third party with payments to
         the third party being made by the shareholder and reimbursed by the
         Company. As of December 31, 1997, there were no outstanding
         payables/receivables with the shareholder relating to this transaction.


                                       31
<PAGE>   32
NOTES TO FINANCIAL STATEMENTS
==============================================================================


         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 current year payments were made according to a
         contract dated January 1, 1998, the thirty-month contract requires
         payments of royalties on a quarterly basis with a minimum payment of
         $36,750 per quarter.


15.      SUBSEQUENT EVENTS (UNAUDITED)

         In March 1999, the Company renewed its $3,000,000 line of credit
         agreement for another one-year term. The line of credit, which expires
         March 15, 2000, bears interest at the prime rate plus 1.5% and reduces
         to the prime rate upon the Company's attainment of quarterly targets
         for results of operations or additional financing objectives. The line
         of credit is secured by the assets of the Company.

         The Company's Articles of Incorporation provide for the issuance of
         shares of preferred stock from time to time in one or more series and
         the Board of Directors, without further approval from the Company's
         shareholders, is authorized to fix the rights and terms applicable to
         each such series. The Board of Directors has approved the issuance, in
         a private placement in reliance upon the exemption from the
         registration provisions of the Securities Act of 1933, as amended,
         afforded by Regulation D thereof, of shares of Series A Convertible
         Preferred Stock. The proposed terms of the Series A Convertible
         Preferred Stock include (i) an aggregate offering amount of up to
         $2,000,000; (ii) dividends to be paid at a rate of 9% per annum in
         either cash or in shares of the Company's common stock, at the
         Company's option; (iii) the convertibility of the shares of the
         Preferred Stock into shares of the Company's Common Stock at a
         conversion price equal to 120% of the average closing price for the
         Company's common stock for the 20 trading days prior to subscription
         for the Preferred Stock; (iv) liquidation preferences; (v) voting
         rights with the Company's common stock. On March 26, 1999, Richard T.
         Brock, the President and Chief Executive Officer of the Company,
         subscribed for an aggregate amount of $1,000,000 of Series A
         Convertible Preferred Stock.



                                       32
<PAGE>   33
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 6, 1999.

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 6, 1999.

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 6, 1999.

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 6, 1999.


                                     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
               -   Balance Sheet at December  31, 1998 and December  31, 1997.
               -   Statement of Operations for the three years ended 
                   December  31, 1998.
               -   Statement of Changes in Shareholders' Equity for the three 
                   years ended December  31, 1998.
               -   Statement of Cash Flows for the three years ended
                   December  31, 1998.
               -   Notes to Financial Statements

           2.  Financial Statement Schedules
               -   Schedule II - Valuation and Qualifying Accounts, for the
                   three years ended December 31, 1998.


                                       33
<PAGE>   34


3.  Exhibits

<TABLE>
<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.

10.2             Promissory Note in the amount of up to $2,250,000 dated as of December 15, 1992 by the
                 Company in favor of NationsBank of Georgia, N.A. (1)

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)).

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)

10.8             Selective Distribution Agreement dated September 1, 1991 between the Company and
                 Co-Cam Computer Services (U.K.) Ltd. (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)

10.15            Option Agreement, dated July 25, 1997, between the Company and Netgain
                 Corporation.(4)

10.16            Agreement and Plan of Merger, dated December 31, 1997, among the Company, Netgain
                 Corporation, and Brock Acquisition, Inc.(5)

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)
</TABLE>


                                       34
<PAGE>   35

<TABLE>
<S>              <C>
10.18            Eighth 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.

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)).

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)).

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)).

13               1998 Annual Report to Shareholders.

23               Consent of Independent Accountants.  See pages 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 2 in the Company's Form 8-K 
dated January 13, 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.


(b) Form 8-K:
     None


                                       35
<PAGE>   36


CONSENT OF INDEPENDENT ACCOUNTANTS




We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-3 (No. 333-46319) 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 February 2, 1999 appearing on page 17 of
this Form 10-K.





PRICEWATERHOUSECOOPERS LLP

Atlanta, Georgia
March 29, 1999












                                       36
<PAGE>   37


                                   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 29, 1999                 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.

<TABLE>
<S>                                   <C>
Date:  March 29, 1999                 /s/  Richard T. Brock                                         
                                      --------------------------------------------
                                      Richard T. Brock
                                      President and Chief Executive Officer
                                        (Principal Executive Officer)


Date:  March 29, 1999                 /s/  Judith A. Vitale                                          
                                      --------------------------------------------
                                      Judith A. Vitale
                                      Director Finance and Administration
                                      (Principal Financial and Accounting Officer)


Date:  March 29, 1999                 /s/  James R. Porter                                             
                                      --------------------------------------------
                                      James Porter
                                      Chairman



Date:  March 29, 1999                 /s/  John F. Keane                                             
                                      --------------------------------------------
                                      John F. Keane
                                      Director


Date:  March 29, 1999                 /s/  Michael T. McNeight                                       
                                      --------------------------------------------
                                      Michael T. McNeight
                                      Director
</TABLE>


                                       37
<PAGE>   38


                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS


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



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



                                                  FOR THE YEAR ENDED DECEMBER 31, 1996
                                                         (THOUSANDS OF DOLLARS)

<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                   $    1,415        $    1,837        $   1,281       $   1,971
                                                  ==========        ==========        =========       =========

Tax asset valuation allowance                     $      197        $    2,998        $        0      $   3,195
                                                  ==========        ==========        ==========      =========
</TABLE>


                                       38


<PAGE>   39
















                                  EXHIBIT INDEX





















                                       39
<PAGE>   40


                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit                                                                                                                    
Number           Description                                                                               Page 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 reference to             N/A
                 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              N/A
                 Incorporation and Amended and Restated By-Laws of the Company defining rights
                 of holders of Common Stock of the Company.
10.2             Promissory Note in the amount of up to $2,250,000 dated as of December 15, 1992 by the       N/A
                 Company in favor of NationsBank of Georgia, N.A. (1)
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 Plan (incorporated       N/A
                 herein by reference to Exhibit 4(a) of the Company's Registration Statement on Form S-8
                 (Registration No. 333-55939)).
10.5             Tax Indemnification Agreement dated February 4, 1993 among the Company and                   N/A
                 certain of its shareholders.(2)
10.6             Form of Selective Distribution Agreement for International Distributors. (1)                 N/A
10.7             Form of Software License Agreement. (1)                                                      N/A
10.8             Selective Distribution Agreement dated September 1, 1991 between the Company and             N/A
                 Co-Cam Computer Services (U.K.) Ltd. (1)
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 the                    N/A
                 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                    N/A
                 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                    N/A
                 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                    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.(3)
10.14            Firstwave Technologies, Inc. Employee Stock Purchase Plan. (incorporated herein by           N/A
                 reference to Exhibit 4(a) of the Company's Registration Statement on Form S-8
                 (Registration No. 333-55971)).
10.15            Option Agreement, dated July 25, 1997, between the Company and Netgain                       N/A
                 Corporation.(4)
10.16            Agreement and Plan of Merger, dated December 31, 1997, among the Company, Netgain            N/A
                 Corporation, and Brock Acquisition, Inc. (5)
10.17            Seventh Amendment to Lease Agreement dated as of January 20, 1998 between the Company        N/A
                 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>


                                       40

<PAGE>   41


<TABLE>
<CAPTION>
Exhibit                                                                                                     Page
Number           Description                                                                                Number  
------           -----------                                                                                ------
<S>              <C>                                                                                        <C> 
10.18            Eighth Amendment to Lease Agreement dated as of January 20, 1998 between                     42
                 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.
10.19            First Amendment to Firstwave Technologies, Inc. 1993 Stock Option Plan (incorporated         N/A
                 herein by reference to Exhibit 4(c) of the Company's Registration Statement on Form S-8
                 (Registration No. 333-55939)).
10.20            First Amendment to Firstwave Technologies, Inc. Employee Stock Purchase Plan                 N/A
                 (incorporated herein by reference to Exhibit 4(b) of the Company's Registration
                 Statement on Form S-8 (Registration No. 333-55971)).
10.21            Board of Directors Compensation Plan (incorporated herein by                                 N/A
                 reference to Exhibit 4(b) of the Company's Registration
                 Statement on Form S-8 (Registration No. 333-55939)).
13               1998 Annual Report to Shareholders.                                                          47
23               Consent of Independent Accountants.  See pages immediately preceding the                     36
                 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 2 in the Company's Form 8-K dated
January 13, 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.



                                       41