UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      DC 20549





FORM
      10-Q







QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF


THE
      SECURITIES EXCHANGE ACT OF 1934





FOR
      THE
      QUARTER ENDED June 30, 2007








COMMISSION
      FILE NUMBER 0-21202





**FIRSTWAVE
      TECHNOLOGIES, INC.**


(Exact
      name of Registrant as specified in its charter)





**Georgia**
              **58-1588291**(State
                  of incorporation)
              (IRS
                  Employer ID #)





**7000
      Central Parkway**


**Suite
      330**


**Atlanta,
      GA 30328**


(Address
      of principal executive offices)





**678-672-3100**


(Telephone
      number of registrant)







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
o




Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer.





Large
      accelerated filer o     Accelerated
      filer o     Non-accelerated
      filer x


Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).





Yes
oNo
x




Indicate
      the number of shares outstanding of each of the issuer’s classes of common
      stock, as of the latest practicable date.




Outstanding
      as of August 10, 2007:





Common
      Stock, no par value 2,908,009 shares


1





**FIRSTWAVE
      TECHNOLOGIES, INC.**





**FORM
      10-Q**





**For
      the quarter ended June 30, 2007**







**Index**






Page
                No.**Part
                I.**
            **Financial
                Information**Item
                1.
            Financial
                Statements (unaudited)Condensed
                Consolidated Balance Sheets - December 31, 2006
                and June 30, 2007
            3Condensed
                Consolidated Statements of Operations - For the
                Three and Six Months Ended June 30, 2006 and 2007
            4Condensed
                Consolidated Statement of Changes in
                Shareholders' Equity - For the Six Months Ended June 30,
                2007
            5Condensed
                Consolidated Statements of Cash Flows - For
                the Six Months Ended June 30, 2006 and 2007
            6Notes
                to Condensed Consolidated Financial
                Statements
            7Item
                2.
            Management's
                Discussion and Analysis of Financial Condition
                and Results of Operations
            14Item
                3.
            Quantitative
                and Qualitative Disclosures about Market
                Risk
            17Item
                4.
            Controls
                and Procedures
            17Item
                5.
            Effect
                of New Accounting Pronouncements
            17**Part
                II.**
            **Other
                Information**Item
                1A
            Risk
                Factors
            18Item
                4
            Submission
                of Matters to a Vote of Security
                Holders
            18Item
              5
            Other
              Information
            18Item
                6.
            Exhibits
            18Signatures
            19Exhibit
                Index
            20


2


**Part
      I. FINANCIALINFORMATION**





**Item
      1. FinancialStatements**




**FIRSTWAVE
      TECHNOLOGIES, INC.**


**CondensedConsolidated
      Balance Sheets**


**(in
      thousands)**








**December
                31,**
            
            
            **June
                30,****2006**
            
            
            **2007****(unaudited)****ASSETS****Current
                assets****Cash
                and cash equivalents**
            
            $
            997
            
            $
            1,016**Accounts
                receivable, less allowance for****doubtful
                accounts of $20 and $24, respectively**
            
            
            248
            
            
            345**Note
                receivable, current**
            
            
            500
            
            
            553**Prepaid
                expenses**
            
            
            425
            
            
            257**Total
                current assets**
            
            
            2,170
            
            
            2,171**Property
                and equipment, net**
            
            
            55
            
            
            48**Investment**
            
            
            8
            
            
            5**Intangible
                assets**
            
            
            418
            
            
            354**Goodwill**
            
            
            593
            
            
            593**Note
                receivable**
            
            
            580
            
            
            0**Total
                assets**
            
            $
            3,824
            
            $
            3,171**LIABILITIES
                AND SHAREHOLDERS' EQUITY****Current
                liabilities****Accounts
                payable**
            
            $
            138
            
            $
            127**Deferred
                revenue**
            
            
            703
            
            
            676**Accrued
                employee compensation and benefits**
            
            
            59
            
            
            77**Dividends
                payable**
            
            
            46
            
            
            46**Other
                accrued liabilities**
            
            
            30
            
            
            20**Total
                current liabilities**
            
            
            976
            
            
            946**Shareholders'
                equity**
            
            
            2,848
            
            
            2,225**Total
                liabilities and shareholders' equity**
            
            $
            3,824
            
            $
            3,171






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





3




**FIRSTWAVE
        TECHNOLOGIES, INC.**
 **Condensed
        Consolidated Statements of Operations**
 **(in
        thousands, except per share amounts)**
 **(unaudited)**
 **For
                    the Three Months Ended**
                
                
                **For
                    the Six Months Ended****June
                    30,**
                
                
                **June
                    30,**
                
                
                **June
                    30,**
                
                
                **June
                    30,****2006**
                
                
                **2007**
                
                
                **2006**
                
                
                **2007****Net
                    Revenues****Software**
                
                $
                542
                
                $
                180
                
                $
                589
                
                $
                240**Services**
                
                
                20
                
                
                92
                
                
                114
                
                
                170**Maintenance**
                
                
                396
                
                
                311
                
                
                854
                
                
                636**Other**
                
                
                -
                
                
                6
                
                
                -
                
                
                8958
                
                
                589
                
                
                1,557
                
                
                1,054**Cost
                    and Expenses****Cost
                    of revenues****Software**
                
                
                212
                
                
                (3
                )
                
                385
                
                
                11**Services**
                
                
                2
                
                
                89
                
                
                4
                
                
                203**Maintenance**
                
                
                179
                
                
                57
                
                
                357
                
                
                118**Other**
                
                
                -
                
                
                15
                
                
                -
                
                
                27**Sales
                    and marketing**
                
                
                28
                
                
                357
                
                
                81
                
                
                528**Product
                    development**
                
                
                73
                
                
                157
                
                
                150
                
                
                331**General
                    and administrative**
                
                
                210
                
                
                234
                
                
                463
                
                
                488704
                
                
                906
                
                
                1,440
                
                
                1,706**Operating
                    Income (loss)**
                
                
                254
                
                
                (317
                )
                
                117
                
                
                (652
                )**Interest
                    income**
                
                
                27
                
                
                29
                
                
                49
                
                
                54**Income
                    (loss) before income taxes**
                
                
                281
                
                
                (288
                )
                
                166
                
                
                (598
                )**Income
                    taxes**
                
                
                -
                
                
                -
                
                
                -
                
                
                -**Net
                    Income (loss)**
                
                
                281
                
                
                (288
                )
                
                166
                
                
                (598
                )**Dividends
                    on preferred stock**
                
                
                (71
                )
                
                (70
                )
                
                (142
                )
                
                (140
                )**Net
                    Income (loss) applicable to common shareholders**
                
                $
                210
                
                $
                (358
                )
                $
                24
                
                $
                (738
                )**Income
                    (loss) per common share - Basic**
                
                $
                0.08
                
                $
                (0.12
                )
                $
                0.01
                
                $
                (0.26
                )**Income
                    (loss) per common share - Diluted**
                
                $
                0.07
                
                $
                (0.12
                )
                $
                0.01
                
                $
                (0.26
                )**Weighted
                    average shares - Basic**
                
                
                2,784
                
                
                2,880
                
                
                2,749
                
                
                2,871**Weighted
                    average shares - Diluted**
                
                
                2,811
                
                
                2,880
                
                
                2,776
                
                
                2,871




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


4


**FIRSTWAVE
        TECHNOLOGIES, INC.**
 **CondensedConsolidated
        Statement of Changes in Shareholders'
        Equity**
 **(In
        thousands, except share data)**
 **(unaudited)**
 
 **For
        the Six Months Ended June 30, 2007**




**Common
                  Stock**
              **Preferred
                  Stock**
              
              **Additional****paid-in**
              
              
              **Accumulated****Shares**
              
              
              **Amount**
              
              
              **Shares**
              
              
              **Amount**
              
              
              **capital**
              
              
              **Deficit**
              
              
              **Total****Balance
                  at December 31, 2006**
              
              
              2,868,302
              
              $
              13
              
              
              33,720
              
              $
              2,981
              
              $
              25,296
              
              $
              (25,442
              )
              $
              2,848**Issuance
                  of common stock in exchange****for
                  services rendered**
              
              
              23,040
              
              
              
              
              
              
              
              
              
              
              
              50
              
              
              
              
              
              50**Conversion
                  of preferred stock**
              
              
              16,667
              
              
              
              
              
              (500
              )
              
              (50
              )
              
              50
              
              
              
              
              
              -**Dividends
                  on preferred stock**
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (140
              )
              
              
              
              
              (140
              )**Stock
                  option expense**
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              65
              
              
              
              
              
              65**Net
                  loss**
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (598
              )
              
              (598
              )**Balance
                  at end of period**
              
              
              2,908,009
              
              $
              13
              
              
              33,220
              
              $
              2,931
              
              $
              25,321
              
              $
              (26,040
              )
              $
              2,225









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









5




**FIRSTWAVE
        TECHNOLOGIES, INC.**
 **CondensedConsolidated
        Statements of Cash
        Flows**
 **(in
        thousands)**
 **(unaudited)**
  **For
                  the Six Months
                  Ended****June
                  30,**
              
              
              **June
                  30,****2006**
              
              
              **2007****Cash
                  flows provided by operating activities**
              
              $
              603
              
              $
              171**Cash
                  flows from investing activities**
              
              
              -
              
              
              (12
              )**Cash
                  flows from financing activities****Proceeds
                  from options exercised**
              
              
              95**Payment
                  of dividends on preferred stock**
              
              
              (142
              )
              
              (140
              )**Net
                  cash used in financing activities**
              
              
              (47
              )
              
              (140
              )**Increase
                  in cash and cash equivalents**
              
              
              556
              
              
              19**Cash
                  and cash equivalents, beginning of period**
              
              
              360
              
              
              997**Cash
                  and cash equivalents, end of period**
              
              $
              916
              
              $
              1,016**Supplemental
                  disclosure of cash flow information****Cash
                  paid for income taxes**
              
              $
              -
              
              $
              -**Cash
                  paid for interest**
              
              $
              -
              
              $
              -**Supplemental
                  disclosure of non-cash investing****and
                  financing activities****Proceeds
                  from issuance of common stock in****exchange
                  for services rendered**
              
              $
              127
              
              $
              50$
              127
              
              $
              50






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






6




**FIRSTWAVE
      TECHNOLOGIES, INC.**


**Notesto
      Condensed Consolidated Financial
      Statements**


**June
      30, 2007**






**1.**  **Description
      of Business and Basis of Presentation**





***Description
      of the Company***


Headquartered
      in Atlanta, Georgia, Firstwave (“Firstwave” or “Company”) is a provider of lead
      generation, lead nurturing and customer management and tracking solutions built
      upon a suite of Customer Relationship Management (CRM) products. Firstwave's
      solutions help customers find new prospects, continuously engage these prospects
      throughout the sales cycle and maintain contact with customers throughout their
      lifecycle. Firstwave’s modular internet marketing, sales lead, and customer
      management solutions help customers achieve results. The Company was
      incorporated in October 1984 in the State of Georgia, and has one subsidiary,
      Connect-Care, Inc., acquired in March 2003, which is incorporated under the
      laws
      of the State of Georgia. Our product solutions include client-server based
      CRM
      products, web-based (on demand or behind the firewall) CRM products and a series
      of marketing products and services integrated with our CRM product
      suite.





***Basis
      of Presentation***


The
      accompanying unaudited condensed consolidated financial statements have been
      prepared in accordance with accounting principles generally accepted in the
      United States of America for interim financial information and the instructions
      to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, the condensed
      consolidated financial statements do not include all of the information and
      footnotes required by accounting principles generally accepted in the United
      States of America for complete financial statement presentations and should
      be
      read in conjunction with the consolidated financial statements contained in
      the
      Company’s Form 10-K for the year ended December 31, 2006. In the opinion of
      management, all adjustments (consisting only of normal recurring adjustments)
      considered necessary for a fair presentation of the unaudited condensed
      consolidated financial statements have been included.





The
      condensed consolidated balance sheet at December 31, 2006 has been derived
      from
      the audited consolidated financial statements for the Company at that date,
      but
      does not include all of the information and footnotes required by accounting
      principles generally accepted in the United States of America for complete
      financial statement presentations.





On
      June
      3, 2005, Firstwave entered into a Stock Purchase Agreement (the “Agreement”)
      with AllAboutTickets LLC (the “Buyer”) now doing business as First Sports
      International (“FSI”). Pursuant to the Agreement, effective May 1, 2005, the
      Company sold to Buyer all of the issued share capital of Firstwave Technologies
      UK, Ltd., a subsidiary of the Company, located at The Pavillion, 1 Atwell Place,
      Thames Ditton, Surrey, England, KT7 ONF (the “Target”). The Company has also
      entered into a License Agreement (the “License Agreement”) with Buyer and
      Target, dated June 3, 2005, pursuant to which it granted to Buyer a
      non-exclusive, non-transferable, non-assignable, limited worldwide and revocable
      license to use, modify, recompile, reproduce, distribute and maintain the object
      code version of certain portions of its software and the Source Code materials
      relating to that software for use only in the “sports industry,” as defined in
      the License Agreement. Both the Stock Purchase Agreement and the License
      Agreement were filed with the Securities and Exchange Commission as Exhibits
      to
      Form 8-K on June 9, 2005.





On
      July
      1, 2005, we entered into a consulting arrangement with FSI to provide service
      and maintenance to our existing U.K. CRM customers. These CRM customers remain
      customers of Firstwave, but FSI provides the services to support these
      customers. If FSI were not to provide the services, we would either provide
      the
      support services ourselves or would contract with another third party in the
      U.K. to provide such services. These customers are not associated with the
      sports customers acquired by FSI as part of the sale of the U.K. Subsidiary
      on
      June 3, 2005, and they are part of the continuing operations of Firstwave.
      Under
      the terms of this outsourcing arrangement, FSI receives a fee of 20% of the
      maintenance revenues upon collection, for providing local support. The agreement
      was renewed for one year under the same terms and conditions in July of 2006,
      except that the fee was reduced to 15% of the maintenance revenues upon
      collection.





On
      October 10, 2005, the Company entered into a three-year OEM/Outsourcing
      Agreement and a Licensing Agreement with M1 Global, an Atlanta-based technology
      company. Under the terms of the agreements, M1 Global has licensed the Firstwave
      CRM database schema to develop its future products, and is a non-exclusive
      reseller of Firstwave products. Although the agreements included the outsourcing
      of Firstwave’s Professional Services and Support functions to M1 Global,
      Firstwave is currently providing its own coverage in those areas and no longer
      pays M1 Global for these services. The agreements provide that M1 Global also
      pays royalty commissions to Firstwave as follows: 33% on licenses and 20% on
      services. During the first six months of 2006, M1 Global handled most of the
      professional services and paid a commission of 20% of services revenues to
      Firstwave. Commissions received from M1 Global for professional services for
      2006 were $72,259. As
      we
      have increased our professional services staff since July of 2006 ,
      the
      amount of professional services provided by M1 Global to our customers, and
      the
      commissions received from M1
      Global, have declined. In addition, during the first six months of 2006, M1
      Global provided most of the maintenance
      services for our customers in exchange for a quarterly fee of $154,000 per
      quarter. Since July of 2006, we have hired additional personnel for customer
      support, and the support services provided by M1 Global have been reduced.
      The
      quarterly fees to M1 Global were approximately $90,000 in the third quarter
      and
      $78,000 in the fourth quarter of 2006. For 2007, there have been no fees paid
      or
      payable to M1Global through July 31, 2007.




7





On
      May
      31, 2006, Firstwave entered into an agreement with ListK that granted Firstwave
      the right to use ListK’s marketing lists, custom marketing list generation
      capabilities, and email delivery capabilities in exchange for a royalty and
      services prepayment of $97,500 payable in unregistered Firstwave common stock.
      Fifty thousand shares of common stock were issued representing the royalty
      payment, calculated on the closing price of Firstwave stock at May 31, 2006,
      the
      contract closing date. Future royalty and service payments to ListK will be
      made
      partially in cash and partially in additional unregistered stock after the
      initial prepayment has been applied to amounts due for royalties and services
      delivered. Firstwave has no future performance commitments regarding the
      prepayment agreement. As of June 30, 2007, the balance of the prepayment is
      $25,111.





The
      condensed consolidated financial statements include the accounts of Firstwave
      Technologies, Inc. and its wholly owned subsidiary, Connect-Care, Inc. All
      intercompany transactions and balances have been eliminated in
      consolidation.







**2.**  **Use
      of Estimates and Critical Accounting Policies**





***Use
      of Estimates***


The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions which affect the reported amounts of assets and
      liabilities and the disclosure of contingent assets and liabilities at the
      date
      of the financial statements and the reported amounts of revenues and expenses
      during the reporting period. Examples of estimates that require management’s
      judgment include revenue recognition, accounts receivable reserve, valuation
      of
      long-lived assets, investment(s) and intangible assets, and valuation of
      goodwill. Management bases its estimates on historical experience and on various
      other factors that are believed to be reasonable under the circumstances. All
      accounting estimates and the basis for these estimates are discussed among
      the
      Company’s senior management and members of the Audit Committee. Actual results
      could differ from those estimates.





***Critical
      Accounting Policies***


The
      Company believes that the following accounting policies are critical to
      understanding the condensed consolidated financial statements:


·
            Revenue
                Recognition


·
            Valuation
                of Intangible Assets








**3.**  **Summary
      of Significant Accounting Policies**





***Revenue
      recognition***


The
      Company recognizes revenue in accordance with Statement of Position (SOP) 97-2,
      “Software Revenue Recognition,” as amended by SOP 98-9 “ *Modification
      of SOP 97-2, "Software Revenue Recognition*,”
and
      related interpretations.





Revenue
      from software product licenses is recognized upon shipment of the product when
      the Company has a signed contract, the fees are fixed and determinable, no
      significant obligations remain and collection of the resulting receivable is
      probable.





The
      Company’s products are licensed on a per-user model, except for hosting
      services. In accordance with Paragraph 8 of SOP 97-2, license revenues under
      the
      per-user model are recognized under the Company’s revenue recognition polices
      when revenue recognition criteria are met. Hosting services are priced as a
      monthly or yearly fixed amount based upon number of users, and are recognized
      ratably by month over the period of service. Hosting services revenues are
      consolidated into services revenues on the Company’s financial
      statements.





Services
      revenue is recognized as services are performed. Our software product is able
      to
      function independently in a customer’s environment without additional services.
      Our training, implementation, email, and customization services are optional
      services to our customers and are not necessary for the functioning of the
      software product. Our software is offered as a stand-alone product. It can
      be
      implemented with minimal services. The essential functionality of the software,
      such as database support and maintenance, preparation of marketing campaigns,
      and standard workflow, is functional and can be utilized by the customer upon
      installation as intended by the customer. At a customer’s request, the software
      can also be implemented with additional services, such as data conversion and
      workflow modifications, which are not significant to the functionality of the
      software, but rather tailor features to most effectively function in the
      customer’s environment.




8





The
      revenue for the customization or implementation services is recognized as the
      services are provided and earned. Revenue is allocated to software and services
      based on vendor specific objective evidence of fair values. Because the software
      is a stand-alone product that can be used for the customer’s purpose upon
      installation, and because any services performed have insignificant effect
      on
      the functionality of the software, services revenues are accounted for
      separately in accordance with Paragraph 69 of SOP 97-2.





The
      Company has not recorded any unbilled receivables related to implementation
      and
      customization service revenues, and the Company has accounted for any
      implementation and customization service revenues that have been billed as
      the
      services were performed, in accordance with Paragraphs 65 and 66 of SOP 97-2.





The
      Company has arrangements with customers that provide for the delivery of
      multiple elements, including software licenses and services. The Company
      allocates and recognizes revenue related to each of the multiple elements based
      on vendor specific objective evidence of the fair value of each element and
      when
      there are no undelivered elements essential to the functionality of the
      delivered element. Vendor specific objective evidence is based on standard
      pricing for each of the elements in our multiple element arrangements. Revenue
      associated with the various elements of multiple element arrangements is based
      on such vendor specific objective evidence as the price charged for each element
      is the same as when the element would be sold separately from any other element.
      Standard pricing does not vary by customer or by duration, or by requirements
      of
      the arrangement.





Maintenance
      revenue is recognized on a **** pro-rata
      basis over the term of the maintenance agreements.





Advanced
      billings for services and maintenance contracts are recorded as deferred revenue
      on the Company's balance sheet, with revenue recognized as the services are
      performed and on a pro-rata basis over the term of the maintenance agreements.





The
      Company provides an allowance for doubtful accounts based on management’s
      estimate of receivables that will be uncollectible. The estimate is based on
      historical charge-off activity and current account status.





***Goodwill
      and other intangibles***


In
      accordance with SFAS 142 “Goodwill and Other Intangible Assets,” intangible
      assets with indefinite useful lives must be tested periodically for impairment.
      Examples of matters requiring management’s judgment regarding the existence of
      impairment of an intangible asset, and the resulting fair value, would include
      management’s assessment of adverse changes in legal factors, market conditions,
      loss of key personnel or the sale of a significant portion of a reporting unit.
      If the fair value of the intangible asset is determined to be less than the
      carrying value, the Company would record an impairment loss. SFAS
      142
      prescribes a two-phase approach for impairment testing. The first phase screens
      for impairment, while the second phase (if necessary) measures the impairment. Goodwill
      and Other Intangible Assets were evaluated for impairment at the end of the
      second quarter of 2007 in accordance with SFAS 142 “Goodwill and Other
      Intangible Assets,” and it was determined there was no instance of impairment of
      recorded Goodwill or Other Intangible Assets.





***Concentration
      of credit risk***


The
      Company is subject to credit risk primarily due to its trade receivables and
      its
      note receivable. The note receivable from AllAboutTickets LLC is more fully
      detailed in Note 4, Discontinued Operations. The Company has credit risk due
      to
      the high concentration of trade receivables through certain customers. The
      customer accounts receivable that represented more than 10% of total accounts
      receivable are shown below.




**December
                  31, 2006**
              
              **June
                  30, 2007**CapGemini
                  UK
              22.9%
              
              0.0%Idexx
                  Systems
              23.1%
              
              0.5%Barclaycard
              0.0%
              
              15.5%Northrop
                  Grumman
              0.0%
              
              19.8%Pro
                  Marketing
              2.7%
              
              12.0%


***Significant
      Customers***


For
      the
      second quarter of 2006 and 2007, none of our customers contributed more than
      10%
      of total revenue. For the six months ended June 30, 2007, none of our customers
      contributed more than 10% of total revenue. For the six months ended June 30,
      2006, one of our customers contributed more than 10% of total revenue, Galactus,
      Inc., contributed 33% of total revenue due to the payment for the assignment
      of
      the .Net Integrated Development Environment tool.




9





***Basic
      and diluted*** ***net
      loss per common share***


Basic
      net
      loss per common share is based on the weighted average number of shares of
      common stock outstanding during the period. Stock options and convertible
      preferred stock are included in the diluted earnings per share calculation
      when
      they are not antidilutive. Net loss applicable to common shareholders includes
      a
      charge for dividends related to the Company’s outstanding preferred
      stock.




The
      potentially dilutive common shares relate to options granted under the Company’s
      stock compensation plans and convertible preferred shares. The Company has
      excluded the outstanding stock options to purchase 531,919 shares of common
      stock from the calculations of diluted loss per share for the second quarter
      of
      2007 and for the six months ended June 30, 2007, because all such securities
      are
      antidilutive. For the six months ended June 30, 2006, the Company excluded
      outstanding stock options to purchase 136,000 shares of common stock from the
      calculation of diluted loss for share.





Preferred
      shares convertible to shares of common stock outstanding but not included in
      the
      computation of diluted loss per share amounted to 872,000 shares of common
      stock
      for the second quarter of 2007 because all such securities are
      antidilutive.





***Impairment
      of long-lived assets***


The
      Company evaluates impairment of long-lived assets whenever events or changes
      in
      circumstances indicate that the carrying amount of such assets may not be
      recoverable. If the sum of the expected future undiscounted cash flows is less
      than the carrying amount of the asset, an impairment loss would be recognized.
      Measurement of an impairment loss for long-lived assets is based on the fair
      value of the asset.





***Segment
      reporting***


Management
      believes that the Company has only a single segment consisting of software
      sales
      with related services and support. The information presented in the condensed
      consolidated statement of operations reflects the revenues and costs associated
      with this segment that management uses to make operating decisions and assess
      performance.





***Cash
      and Cash Equivalents***


Cash
      and
      cash equivalents include amounts on deposit with financial institutions and
      money market investments with original maturities of less than ninety
      days.








**4.**  **Discontinued
      Operations**





On
      June
      3, 2005, Firstwave entered into the Stock Purchase Agreement with AllAboutTickets
      LLC (“Buyer”), now doing business as First Sports International, as described in
      Note 1. Pursuant to the Agreement, effective May 1, 2005, the Company sold
      to
      Buyer all of the issued share capital of Firstwave Technologies UK, Ltd., a
      subsidiary of the Company. This sale of the Company’s UK Subsidiary was
      accounted for as a discontinued operation. The total price for the stock
      purchase transaction was $2,214,000, of which $256,000 in cash was received
      at
      closing and $1,620,000 was included in a non-interest bearing Promissory Note
      that calls for payments to be made over a maximum of three years. The Company
      had previously prepaid $338,000 of royalties to a third party, the benefit
      of
      which was sold in the transaction and included in the purchase price. The Buyer
      is paying the company for the use of such prepaid royalties as software revenue
      is achieved by the Buyer.





As
      of
      June 30, 2007, the remaining balance of the promissory note is $600,000, and
      is
      shown as a current asset in the balance sheet as of June 30, 2007, since it
      is
      payable prior to June 30, 2008. Under the License Agreement, Buyer will pay
      quarterly royalty amounts to the Company if such royalty amounts exceed the
      quarterly payments due under the Promissory Note and such amounts will be
      applied against the final payment due on the note. In accordance with APB
      21,“Interest on Receivables and Payables,” imputed interest was calculated at
      8%, resulting in an unamortized discount at May 31, 2005 totaling $233,000
      and
      recorded as a direct reduction from the face amount of the note. Through June
      2007, $186,000 of such interest has been amortized, resulting in a balance
      of
      $47,000 in unamortized discount as of June 30, 2007. As of June 30, 2007, the
      Company had received $158,000 from the buyer with another $94,000 due as a
      receivable from the buyer in payments against the prepaid royalties. The balance
      of the prepaid royalties as of June 30, 2007 was $86,000. There was no activity
      from discontinued operations for the second quarter of 2006 and 2007 or for
      the
      six months ended June 30 2006 and 2007.





10








**5.**  **Goodwill
      and Intangibles**





As
      of
      June 30, 2007, the Company had $354,000 of Intangible Assets and $593,000 of
      Goodwill as a result of acquisitions in 1998 and 2003, after subsequent
      amortization expense and impairment charges. Goodwill and Other Intangible
      Assets were evaluated for impairment at the end of the second quarter of 2007
      in
      accordance with SFAS 142 “Goodwill and Other Intangible Assets,” and it was
      determined there was no instance of impairment of recorded Goodwill or Other
      Intangible Assets.




The
      weighted average amortization period for the intangible assets with finite
      useful lives is six years. There are no significant residual values in the
      intangible assets. The Company began amortization of the above-mentioned
      intangible assets relating to the acquisitions effective April 1, 2003.





The
      following table presents details of intangible assets with finite lives (in
      thousands):





**December
                  31, 2006**
              
              
              **June
                  30, 2007**Gross
                  carrying
              
              
              Accumulated
              
              
              Gross
                  carrying
              
              
              Accumulatedamount
              
              
              amortization
              
              
              amount
              
              
              amortizationAmortizable
                  intangible assetsConnect-Care
                  Technology
              
              $
              300
              
              $
              300
              
              $
              300
              
              $
              300Connect-Care
                  Customer Relationships
              
              
              900
              
              
              482
              
              
              900
              
              
              546Total
              
              $
              1,200
              
              $
              782
              
              $
              1,200
              
              $
              846Aggregrate
                  Amortization ExpenseFor
                  the Six months ended June 30, 2007
              
              $
              64Estimated
                  Amortization ExpenseFor
                  the six months ending December 31, 2007
              
              $
              65For
                  year ending December 31, 2008
              
              $
              129For
                  year ending December 31, 2009
              
              $
              129For
                  year ending December 31, 2010
              
              $
              31






**6.
      Stock-Based Compensation**




***Stock
      Incentive Plan***


In
      May
      2005 the shareholders of Firstwave Technologies, Inc. approved the Company’s
      2005 Stock incentive Plan which provides for the granting of options and other
      types of awards for shares of our Company’s common stock for the Company’s
      employees, directors, advisors and consultants. There was an aggregate of
      335,841 shares remaining available for issuance under the Company’s stock
      incentive plan as of June 30, 2007. Stock options granted to date generally
      have
      had an exercise price per share equal to the closing market value per share
      of
      the common stock on the day before the grant and expire ten years from the
      date
      of grant. Some of these options become exercisable in annual increments over
      a
      four-year period beginning one year from the grant date while others became
      immediately exercisable upon their grant.




***Accounting
      for Share-Based Compensation***


Effective
      January 1, 2006, we adopted Statement of Financial Accounting Standards No.
      123(R) ("SFAS 123(R)"), which requires the measurement of compensation expense
      for all share-based awards made to employees and directors based on estimated
      fair values on the date of grant and recognition of compensation expense over
      the expected vesting period. We adopted SFAS 123(R) using the modified
      prospective transition method, and accordingly, prior period results have not
      been restated. Under the transition method, compensation cost recognized on
      or
      after January 1, 2006 includes: (a) compensation cost for all share-based awards
      granted prior to, but not yet vested as of January 1, 2006, based on the grant
      date fair value estimated in accordance with the original provisions of SFAS
      123, and (b) compensation cost for all share-based awards granted on or after
      January 1, 2006, based on the grant date fair value estimated in accordance
      with
      SFAS 123(R). No stock-based compensation expense related to stock options was
      recognized in the Statement of Operations for options granted during periods
      prior to January 1, 2006, as all stock options granted prior to such date were
      fully vested as of December 31, 2005. The Company granted stock options to
      purchase 22,000 shares during the second quarter of 2006. No stock options
      were
      granted during the second quarter of 2007. In accordance with SFAS 123(R),
      $27,170 in stock compensation expense was recorded for the second quarter of
      2007, for stock options granted prior to the second quarter of 2007. For the
      six
      months ended June 30, 2006 and 2007, respectively, $2,400 and $65,000 in stock
      compensation expense were recorded.




11





Effective
      January 1, 2006, expected volatilities are based on historical volatility of
      our
      stock. We also use historical data to estimate the term that options are
      expected to be outstanding and the forfeiture rate of options granted. The
      interest rate is based on the U.S. Treasury rates. The total value of the award
      is expensed on a straight line basis over the vesting period. As of June 30,
      2007, unrecognized compensation cost related to unvested stock option awards
      totaled $363,194 and is expected to be recognized over a weighted average period
      of 4 years.





On
      November 10, 2005, the Financial Accounting Standards Board (“FASB”) issued FASB
      Staff Position No. SFAS 123(R)-3 (“FSP 123(R)-3”), Transition Election Related
      to Accounting for Tax Effects of Share-Based Payment Awards. We have adopted
      the
      transition method provided in FSP 123(R)-3 for calculating the tax effects
      of
      stock-based compensation expense. We use the “with and without” approach, which
      compares the actual income taxes payable for the period to the amount of tax
      payable that would have been incurred absent the deduction for employee
      share-based awards in excess of the amount of compensation expense recognized
      for financial reporting. As a result of this approach, tax net operating loss
      carryforwards not generated from share-based awards in excess of expense
      recognized for financial reporting are considered utilized before the current
      period’s share-based compensation expense deduction. No tax expense was recorded
      during the second quarter of 2007 and 2006 or for the six months ended June
      30,
      2007 and 2006 because the Company’s deferred tax assets are fully reserved.
      Stock compensation expense reduced income before income taxes by $2,400 for
      the
      six months ended June 30, 2006 and increased loss before income taxes by $65,000
      for the six months ended June 30, 2007, and such amounts were credited directly
      to Additional Paid in Capital. If and when all tax net loss carryforwards are
      utilized, we will subsequently record an income tax benefit which will also
      be
      credited to equity.




***Stock
      Options***


There
      were no options granted, exercised, or expired, during the three month period
      ended June 30, 2007. There were options to purchase 25,000 shares that were
      forfeited during the three month period ended June 30, 2007. The balance of
      outstanding stock options to purchase shares was 531,919 as of June 30, 2007.





**7.****Related
      Party Transactions******





The
      former President and COO of the Company, who resigned from the Company on March
      22, 2005, invested $30,000 in Series D Convertible Preferred Stock in June
      of
      2004. In addition, he is the General Manager of FSI, the buyer of the Company’s
      UK Subsidiary as detailed above in Note 1. On May 1, 2006, he converted his
      Series D Convertible Preferred Stock into 10,000 shares of the Company’s common
      stock; therefore, no dividends have been paid to him since this conversion.
      For
      the first quarter of 2006, $675 was paid to him as dividends.





The
      Chairman and CEO of the Company earned $50,625 in the second quarter of 2007
      and
      2006 and $101,250 for the six months ended June 30, 2007 and 2006 for dividends
      related to his $2,250,000 investment in Series A Convertible Preferred Stock,
      Series B Convertible Preferred Stock, and Series C Convertible Preferred
      Stock. ****





**8.** **Income
      Taxes**





The
      Company has not recorded any income tax provisions during the six months ended
      2006 or 2007 due to its tax net loss carryforwards which were fully reserved
      as
      of December 31, 2006 and June 30, 2007. As of June 30, 2007, the Company has
      U.S. net operating loss carryforwards of approximately $25,600,000 which expire
      in years 2009 through 2019.




**9.** **Recent
      Accounting Pronouncements**




In
      June
      2006, the Financial Accounting Standards Board (“FASB”) issued Financial
      Interpretation (“FIN”) No. 48, “Accounting for Uncertainty in Income Taxes — an
      Interpretation of FASB Statement No. 109.” FIN 48 addresses the accounting for
      uncertainty in income taxes recognized in an enterprise’s financial statements
      in accordance with SFAS No. 109, “Accounting for Income Taxes.” FIN 48
      prescribes specific criteria for the financial statement recognition and
      measurement of the tax effects of a position taken or expected to be taken
      in a
      tax return. This interpretation also provides guidance on derecognition of
      previously recognized tax benefits, classification of tax liabilities on the
      balance sheet, recording interest and penalties on tax underpayments, accounting
      in interim periods, and disclosure requirements. FIN 48 is effective for fiscal
      periods beginning after December 15, 2006. The Company adopted FIN 48 on January
      1, 2007, and the adoption had no material effect on its consolidated financial
      position or results of operations as of June 30, 2007.




12




In
      March
      2006, the EITF reached a consensus on EITF Issue No. 06-3, “How Taxes Collected
      from Customers and Remitted to Governmental Authorities Should Be Presented
      in
      the Income Statement (That Is, Gross versus Net Presentation),” (“EITF No.
      06-3”). This EITF requires the adoption of a policy for presenting taxes in the
      income statement either on a gross or net basis. Gross or net presentation
      may
      be elected for each different type of tax, but similar taxes should be presented
      consistently. Taxes within the scope of this EITF would include taxes that
      are
      imposed on a revenue transaction between the seller and a customer (e.g., sales
      taxes, use taxes, value-added taxes, and some types of excise taxes). EITF
      No.
      06-3 was effective for the Company’s financial statements for interim and annual
      reporting periods beginning January 1, 2007, and the impact was not material
      to
      the Company’s results of operations. The Company’s policy is to present the net
      amount of such taxes in its statement of operations.





**10.** **Subsequent
      Events**





On
        August
        13, 2007, Firstwave entered into Amendment #1 to the Agreement with ListK
        LLC
        dated May 31, 2006. The original Agreement is more fully described above
        in Note
        1 to the Condensed Consolidated Financial Statements on Page 8. Amendment
        #1
        continues Firstwave’s right to use ListK’s marketing lists, custom marketing
        list generation capabilities, and email delivery capabilities in exchange
        for a
        royalty and services prepayment of $625,000 payable in 300,000 shares of
        unregistered Firstwave common stock at a fair market value of $2.00 per share
        and $25,000 in cash. Firstwave has no future performance commitments regarding
        the prepayment. This transaction will be classified as an asset on the Company’s
        Consolidated Balance Sheet until used for lead generation revenues and will
        increase the Company’s shareholder’s equity.


13


**Item
      2. Management’sDiscussion 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 in the Company’s Annual Report on
      Form 10-K for the year ended December 31, 2006. This Report contains
      forward-looking statements that reflect management’s expectations, estimates,
      and projections for future periods based on information (financial and
      otherwise) available to management as of the end of the period covered by this
      Quarterly Report. These statements may be identified by the use of
      forward-looking words such as “may”, “will”, “believe”, “anticipate”,
“estimate”, “expect”, “projects”, or “intends”. Actual events and results may
      differ from the results anticipated by the forward-looking statements. Factors
      that might cause such differences include, but are not limited to, those items
      discussed under the caption "Certain Factors Affecting Forward-Looking
      Statements" presented in the Company’s Annual Report on Form 10-K for the year
      ended December 31, 2006 and other factors discussed in the Company’s press
      releases and other Reports filed with the Securities and Exchange
      Commission.*





**Overview**





Headquartered
      in Atlanta, Georgia, Firstwave Technologies, Inc. (“Firstwave” or “the Company”)
      is a
      provider of demand
      generation, lead leakage and revenue retention solutions built on top of the
      Company’s suite of CRM (Customer Relationship Management) products. Firstwave’s
      solutions increase visibility throughout the sales cycle, keeping customer
      pipelines perpetually full of qualified leads, their prospects warm, and their
      customers loyal. With 20 years of sales management software, Firstwave’s modular
      internet marketing, sales lead and customer management solutions, customers
      achieve results at every opportunity.  Firstwave
      supports several product lines: The Wave Series of internet-based products,
      Firstwave CRM (includes eCRM and v.10 products), Firstwave Technology and
      TakeControl.





On
      October 10, 2005, the Company entered into a three-year OEM/Outsourcing
      Agreement and a Licensing Agreement with M1 Global. Under the terms of the
      agreements, M1 Global has licensed the Firstwave CRM database schema to develop
      its future products, and is a non-exclusive reseller of Firstwave products.
      Although the agreements included the outsourcing of Firstwave’s Professional
      Services and Support functions to M1 Global, Firstwave is currently providing
      its own coverage in those areas and no longer pays M1 Global for these services.
      The agreements provide that M1 Global also pays royalty commissions to Firstwave
      as follows: 33% on licenses and 20% on services. During the first quarter of
      2006, M1 Global handled most of the professional services and paid a commission
      of 20% of services revenues to Firstwave. Commissions received from M1 Global
      for professional services during the first quarter of 2006 were $30,651. As
      we
      have increased our professional services staff since July of 2006, the amount
      of
      professional services provided by M1 Global to our customers, and the
      commissions received from M1 Global, have declined. There were no commissions
      received from M1 Global for professional services during the second quarter
      of
      2007. In addition, during the second quarter of 2006, M1 Global provided most
      of
      the maintenance
      services for our customers in exchange for a quarterly fee of $154,000. Since
      July of 2006, we have hired additional personnel for customer support, and
      the
      support services provided by M1 Global have been reduced. The quarterly fees
      to
      M1 Global were approximately $90,000 in the third quarter and $78,000 in the
      fourth quarter of 2006. For 2007, there have been no fees paid or payable to
      M1Global through July 31, 2007.





As
      of
      June 30, 2007, the Company employed 17 individuals, including 3 executive and
      administrative personnel, 4 sales and marketing personnel, 4 professional
      services personnel, 2 customer support personnel, and 4 employees in product
      innovation and development. As of June 30, 2006, the Company employed 5
      individuals, including 3 executive and administrative personnel and 2 employees
      in product innovation and development. The increase in personnel is due to
      bringing the professional services and customer support services in-house,
      as
      further described above, and adding to the marketing and sales departments.





**Results
      of Operations**





Total
      revenues decreased 38.5% from $958,000 in the second quarter of 2006 to $589,000
      in the second quarter of 2007. For the six months ended June 30, 2007, total
      revenues decreased 32.3% to $1,054,000 from $1,557,000 for the six months ended
      June 30, 2006. The decreases are primarily due to a decrease in software
      revenues. In the second quarter of 2006, the Company received $500,000 in
      payment of the assignment of its .Net Integrated Development Environment tool.





Software
      revenues decreased 66.8% from $542,000 in the second quarter of 2006 to $180,000
      in the second quarter of 2007. For the six months ended June 30, 2007, software
      revenues decreased 59.3% to $240,000 from $589,000 for the six months ended
      June
      30, 2006. In the second quarter of 2006, the Company received $500,000 in
      payment of a one-time transaction of the assignment of its .Net Integrated
      Development Environment tool. Our software revenues remain significantly
      dependent upon the size and timing of closing of license agreements.





Services
      revenues increased 360.0% from $20,000 in the second quarter of 2006 to $92,000
      in the second quarter of 2007. For the six months ended June 30, 2007, services
      revenues increased 49.1% to $170,000 from $114,000 for the six months ended
      June
      30, 2006. The increases are due to additional services projects. In the second
      quarter of 2006, the Company’s outsourcing partner, M1 Global, was performing
      the services for the Company’s customers, while the Company was performing those
      services in the second quarter of 2007.




14





Maintenance
      revenues decreased 21.5% from $396,000 in the second quarter of 2006 to $311,000
      in the second quarter of 2007. For the six months ended June 30, 2007,
      maintenance revenues decreased 25.5% to $636,000 from $854,000 for the six
      months ended June 30, 2006. Maintenance revenues are the result of renewal
      agreements from previous software license sales as well as new license
      agreements. The decreases were due to reduced renewals of maintenance agreements
      from existing customers and reduced new software licenses.




Cost
      of
      software revenues decreased 101.4% from $212,000 in the second quarter of 2006
      to ($3,000) in the second quarter of 2007.  In the first quarter of 2007,
      the Company had recorded $9,000 for lead generation activities as Cost of
      Software Revenues rather than Sales and Marketing Expense as recorded in prior
      quarters.  Although immaterial, the Company reclassified the amount to
      Sales and Marketing Expense, which resulted in a negative balance in Cost of
      Software Revenues for the second quarter of 2007. Cost
      of
      software revenues includes amortization of capitalized software costs, costs
      of
      third party software, media costs, and documentation materials. The decreases
      are due to the costs associated with the assignment of the .Net Integrated
      Development Environment tool and capitalized software amortization expense
      in
      the second quarter of 2006. There was no amortization expense in the second
      quarter of 2007 or for the six months ended June 30, 2007.




Cost
      of
      revenues for services increased from $2,000  in
      the
      second quarter of 2006 to $89,000 in the second quarter of 2007. For the six
      months ended June 30, 2007, cost of revenues for services increased to $203,000
      from $4,000 for the six months ended June 30, 2006. The increases are primarily
      due to an increase in personnel to perform professional services rather than
      outsourcing professional services to M1 Global.




Cost
      of
      revenues for maintenance decreased 68.2% from $179,000 in the second quarter
      of
      2006 to $57,000 in the second quarter of 2007. For the six months ended June
      30,
      2007, cost of revenues for maintenance decreased 66.9% to $118,000 from $357,000
      for the six months ended June 30, 2006. The decreases are the result of the
      quarterly fees paid to M1 Global under the outsourcing arrangement in the second
      quarter of 2006 and for the six months ended June 30, 2006 for the support
      of
      our domestic customers, offset by additional personnel in-house to handle the
      support services in the second quarter of 2007 and for the six months ended
      June
      30, 2007. There were no fees paid to M1 Global in the second quarter of 2007
      or
      for the six months ended June 30, 2007, and there were $154,000 in fees paid
      to
      M1 Global in the second quarter of 2006 and $308,000 in fees paid to M1 Global
      for the six months ended June 30, 2006.





Sales
      and
      marketing expense increased 1175.0% from $28,000 in the second quarter of 2006
      to $357,000 in the second quarter of 2007. For the six months ended June 30,
      2007, sales and marketing expense increased 551.9% to $528,000 from $81,000
      for
      the six months ended June 30, 2006. The increases are due to added sales and
      marketing activity and personnel costs in the second quarter of 2007 and for
      the
      six months ended June 30, 2007, as well as increased costs associated with
      the
      prepaid software royalty fees from FSI.




The
      Company’s product development expenses increased 115.1% from $73,000 in the
      second quarter of 2006 to $157,000 in the second quarter of 2007. For the six
      months ended June 30, 2007, product innovation and development expenses
      increased 120.7% to $331,000 from $150,000 for the six months ended June 30,
      2006. The increases are primarily related to increases in payroll costs
      associated with additional personnel. No development costs have been capitalized
      during 2006 or 2007.





General
      and administrative expenses increased 11.4% from $210,000 in the second quarter
      of 2006 to $234,000 in the second quarter of 2007. For the six months ended
      June
      30, 2007, general and administrative expenses increased 5.4% to $488,000 from
      $463,000 for the six months ended June 30, 2006. The increases are primarily
      due
      to an increase in rent expense.





Dividends
      on preferred stock were $71,000 for the second quarter of 2006, and $70,000
      for
      the second quarter of 2007. For the six months ended June 30, 2007, total
      dividends on preferred stock were $140,000, and for the six months ended June
      30, 2006, total dividends on preferred stock were $142,000.





The
      above
      factors combined to result in a net loss applicable to common shareholders
      of
      $358,000 in the second quarter of 2007 compared to net income applicable to
      common shareholders of $210,000 in the second quarter of 2006. Net loss per
      basic and diluted share was $0.12 for the second quarter of 2007 compared to
      net
      income per basic share of $0.08 and net income per diluted share of $0.07 in
      the
      second quarter of 2006. For the six months ended June 30, 2007, net loss
      applicable to common shareholders was $738,000 compared to net income applicable
      to common shareholders of $24,000 for the six months ended June 30, 2006. Net
      loss per basic and diluted share for the six months ended June 30, 2007 was
      $0.26 compared to net income per basic and diluted share of $0.01 for the six
      months ended June 30, 2006. For the second quarter of 2006, the number of basic
      weighted average shares outstanding was 2,784,000 and the number of diluted
      weighted average shares outstanding was 2,811,000, compared to 2,880,000 basic
      and diluted outstanding shares for the second quarter of 2007.




15





**Balance
      Sheet**




Cash
      and
      cash equivalents of $1,016,000 at June 30, 2007 increased 1.9% from the cash
      and
      cash equivalents balance of $997,000 at December 31, 2006. The increase is
      primarily due to the payment of the note receivable by FSI in June of 2007,
      offset by the cash used in operating activities of the business, which includes
      costs of additional personnel, administrative costs, and lower maintenance
      revenues.





Net
      accounts receivable increased 39.1% from $248,000 at December 31, 2006 to
      $345,000 at June 30, 2007, primarily due to increased services revenues invoiced
      and outstanding as of June 30, 2007. Prepaid expenses decreased 39.5% from
      $425,000 at December 31, 2006 to $257,000 at June 30, 2007, primarily due to
      reductions in the prepaid royalty expenses associated with the FSI agreement.
      Net property and equipment decreased 12.7% from $55,000 at December 31, 2006
      to
      $48,000 at June 30, 2007 as a result of year-to-date depreciation. Intangible
      assets decreased 15.3% from $418,000 at December 31, 2006 to $354,000 at June
      30, 2007, due to year-to-date amortization expense. There was no capitalized
      software development balance as of June 30, 2007.





Accounts
      payable decreased 8.0% from $138,000 as of December 31, 2006 to $127,000 as
      of
      June 30, 2007 due to payments made at the end of the second quarter of 2007
      for
      operating activities. Deferred revenue decreased 3.8% from $703,000 at December
      31, 2006 to $676,000 at June 30, 2007 due to decreases in and the timing of
      billing for annual maintenance renewals. Accrued employee compensation and
      benefits increased 30.5% from $59,000 as of December 31, 2006 to $77,000 at
      June
      30, 2007, primarily as a result of an increase in the number of personnel.
      Other
      accrued liabilities decreased 33.33% from $30,000 at December 31, 2006 to
      $20,000 as of June 30, 2007 primarily due to lower sales tax payable.





On
      June
      3, 2005, Firstwave entered into the Stock Purchase Agreement with
      AllAboutTickets LLC (“Buyer”), now doing business as First Sports International,
      as described in Note 1. Pursuant to the Agreement, effective May 1, 2005, the
      Company sold to Buyer all of the issued share capital of Firstwave Technologies
      UK, Ltd., a subsidiary of the Company. This sale of the Company’s UK Subsidiary
      was accounted for as a discontinued operation. The total price for the stock
      purchase transaction was $2,214,000, of which $256,000 in cash was received
      at
      closing and $1,620,000 was included in a non-interest bearing Promissory Note
      that calls for payments to be made over a maximum of three years. The Company
      had previously prepaid $338,000 of royalties to a third party, the benefit
      of
      which was sold in the transaction and included in the purchase price. The Buyer
      is paying the company for the use of such prepaid royalties as software revenue
      is achieved by the Buyer.





As
      of
      June 30, 2007, the remaining balance of the promissory note is $600,000, and
      is
      shown as a current asset in the balance sheet as of June 30, 2007, since it
      is
      payable prior to June 30, 2008. Under the License Agreement, Buyer will pay
      quarterly royalty amounts to the Company if such royalty amounts exceed the
      quarterly payments due under the Promissory Note and such amounts will be
      applied against the final payment due on the note. In accordance with APB 21,
      “Interest on Receivables and Payables,” imputed interest was calculated at 8%,
      resulting in an unamortized discount at May 31, 2005 totaling $233,000 and
      recorded as a direct reduction from the face amount of the note. Through June
      2007, $186,000 of such interest has been amortized, resulting in a balance
      of
      $47,000 in unamortized discount as of June 30, 2007. As of June 30, 2007, the
      Company had received $158,000 from the buyer with another $94,000 due as a
      receivable from the buyer in payments against the prepaid royalties. The balance
      of the prepaid royalties as of June 30, 2007 was $86,000. Total payments against
      the note receivable since the effective date have totaled $1,019,000, with
      the
      final payment of $600,000 due June of 2008.





**Liquidity
      and Capital Resources**





Cash
      and
      cash equivalents of $1,016,000 at June 30, 2007 increased 1.9% from the cash
      and
      cash equivalents balance of $997,000 at December 31, 2006. The increase is
      primarily due to the payment of the note receivable by FSI in June of 2007,
      offset by the cash used in operating activities of the business, which includes
      costs of additional personnel, administrative costs, and lower maintenance
      revenues.





Our
      future capital requirements will depend on many factors, including our ability
      to generate positive cash flows, continue to collect the note receivable from
      FSI, retain our maintenance revenues from existing customers, control expenses,
      and generate additional revenues from other sources. Any projections of future
      cash needs and cash flows are subject to substantial uncertainty. We have no
      material commitments for capital expenditures. We do not believe that inflation
      has historically had a material effect on our Company's results of operations.
      We have expanded our employee base, increased our sales and marketing
      activities, and have moved into new facilities. We anticipate that these new
      expenditures will have an impact on our operating costs, cash flows, and
      requirements for capital.




16





**Item
      3. Quantitativeand Qualitative Disclosures About
      Market Risk**




The
      Company is subject to market risk exposures of varying correlations and
      volatilities, primarily relating to interest rate risk. The Company does not
      currently engage in hedging activities or otherwise use derivatives to alter
      the
      interest characteristics of its financial assets. Although a decrease in
      interest rates could reduce the interest income we earn on our cash and cash
      equivalents, at this time management does not believe a change in interest
      rates
      will materially affect the Company's financial position or results of
      operations.





**Item
      4.**  **Controlsand
      Procedures**





Based
      on
      the most recent evaluation, which was completed in consultation with management
      as of the end of the period covered by the filing of this Form 10-Q, the
      Company’s Chairman, Chief Executive Officer and Principal Financial Officer
      believes the design and operation of the Company’s disclosure controls and
      procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under
      the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) were
      effective as of the date of such evaluation in timely alerting the Company’s
      management to material information required to be included in this
      Form 10-Q and other Exchange Act filings.




**Item
      5. Effectof New Accounting
      Pronouncements**





None





17





**PART
      II. OTHERINFORMATION**








Item
      1A. RiskFactors


There
        were no material changes to the risk factors disclosed in the Company’s Form 10K
        for the year ended December 31, 2006 as filed with the Securities and Exchange
        Commission. One risk factor has been added.


We
        may
        fail to meet the continued listing requirements of the NASDAQ Capital Market,
        which may cause our stock to be delisted and to become subject to the "penny
        stock" regulations.


To
        maintain our listing on the NASDAQ Capital Market, we are required, among
        other
        things, to maintain a minimum shareholder’s equity of at least $2.5 million. On
        June 30, 2007, our shareholder’s equity balance was $2.25 million.  We have
        not received a notice from NASDAQ, and we believe that the transaction
        described above in Note 10 to the Condensed Consolidated Financial Statements
        on
        Page 13 has now increased our shareholder's equity back above $2.5
        million.  While we believe that our shareholder's equity is now above
        the minimum requirement, there is no guarantee that we will be able
        to maintain the requirements for continued listing. If
        our
        shares are delisted from NASDAQ, our stockholders could find it difficult
        to sell our
        stock and the market price and market liquidity of our common stock may be
        adversely affected. If our common stock is delisted from NASDAQ, we may apply
        to
        have our shares quoted on NASDAQ’s Bulletin Board or in the “pink sheets”
maintained by the National Quotation Bureau, Inc. The Bulletin Board and
        the “pink sheets” are generally considered to be less efficient markets than the
        NASDAQ Capital Market. In addition, if our shares are no longer listed on
        NASDAQ
        or another national securities exchange in the United States, our shares
        may be
        subject to the “penny stock” regulations. In general, regulations of the SEC
        define a "penny stock" to be an equity security that is not listed on a national
        securities exchange or the NASDAQ Stock Market and that has a market price
        of
        less than $5.00 per share or with an exercise price of less than $5.00 per
        share, subject to certain exceptions. If our common stock becomes a penny
        stock,
        additional sales practice requirements would be imposed on broker-dealers
        that
        sell such securities to persons other than certain qualified investors. For
        transactions involving a penny stock, unless exempt, a broker-dealer must
        make a
        special suitability determination for the purchaser and receive the purchaser's
        written consent to the transaction prior to the sale. In addition, the rules
        on
        penny stocks require delivery, prior to and after any penny stock transaction,
        of disclosures required by the SEC. If our common stock were subject to the
        rules on penny stocks, the market liquidity for our common stock could be
        severely and adversely affected. Accordingly, the ability of holders of our
        common stock to sell their shares in the secondary market may also be adversely
        affected.








Item
      4. Submissionof Matters to a Vote of Security
      Holders





The
      Annual Meeting of Shareholders was held on May 3, 2007, in Atlanta, Georgia,
      at
      which the following matters were submitted to a vote of the
      shareholders:





1.
      Votes
      cast for or withheld regarding the election of six (6) Directors




Name
                  of Nominee
              Votes
                  For
              Votes
                  WithheldRoger
                  A. Babb
              3,303,385
              93,433Richard
                  T. Brock
              3,346,574
              50,244I.
                  Sigmund Mosley
              3,303,421
              93,397John
                  N. Spencer, Jr.
              3,303,518
              93,300John
                  N. Sterling
              3,352,517
              44,301Judith
                  A. Vitale
              3,347,783
              49,035







The
      nominees for directors were elected by a majority.








2.
      Ratification of selection of Cherry, Bekaert & Holland, L.L.P. as the
      Company’s independent auditors




Votes
                    For
                Votes
                    Against
                Abstain3,370,134
                23,875
                2,809


The
      ratification was adopted by a majority.




Item
        5. Other Information
 On
          August
          13, 2007, Firstwave entered into Amendment #1 to the Agreement with ListK
          LLC
          dated May 31, 2006. Amendment #1 continues Firstwave’s right to use ListK’s
          marketing lists, custom marketing list generation capabilities, and email
          delivery capabilities in exchange for a royalty and services prepayment
          of
          $625,000 payable in 300,000 shares of unregistered Firstwave common stock
          at a
          fair market value of $2.00 per share and $25,000 in cash. The exhibits
          to
          Amendment #1 detail the pricing for the various services. Firstwave has
          the
          ability to renew at similar level pricing if it so chooses. All other terms
          and
          conditions of the original agreement are followed. Firstwave has no future
          performance commitments regarding the prepayment.




Item
      6. Exhibits


The
      Exhibits to this Report on Form 10Q are listed in the accompanying Exhibit
      Index.







18




**SIGNATURE**








Pursuant
      to the requirements of the Securities Exchange Act of 1934, the registrant
      has
      duly caused this report to be signed on its behalf by the undersigned thereunto
      duly authorized.




**FIRSTWAVE
                TECHNOLOGIES, INC.**
              (Registrant)Date: August
              14, 2007
            By:
            /s/ Richard
              T. BrockRichard
              T. BrockChief
                Executive Officer and
              Principal
                Accounting Officer






19





EXHIBITINDEX










Exhibit Number
              DescriptionExhibit31.1
              Certification of Periodic Report by
                the Chief
                Executive Officer and Principal Financial Officerpursuant to Rule 13a-14(a) of the Securities Exchange Act of
                1934.Exhibit
                  32
              Certification
                of Chief Executive Officer and Principal Financial Officer pursuant
                to 18
                U.S.C. Section 1350.










20