SECURITIES
AND EXCHANGE COMMISSIONWashington,  DC 20549FORM 10-Q

QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OFTHE SECURITIES EXCHANGE ACT OF 1934

FOR THE
QUARTER ENDED MARCH 31, 2004

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 #)

2859 Paces
Ferry Road, Suite 1000Atlanta, GA 30339(Address of principal executive offices)

770-431-1200(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 ___

Indicate by
check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of
the Exchange Act).Yes___  No _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
      May 13, 2004: |                       
|------------------------------------- | ----------------------
|                                      |                       
|Common
      Stock, no par value      | 2,693,431
      shares

---

FIRSTWAVE
TECHNOLOGIES, INC.

FORM 10-Q

For the
quarter ended March 31, 2004

Index

|                   |                                                                                                                   |  | Page
      No.
|------------------ | ----------------------------------------------------------------------------------------------------------------- |  | --------------
|**Part
      I.**  | **Financial
      Information**                                                                                   |  |               
|                   |                                                                                                                   |  |               
|Item 1.            | Financial Statements                                                                                              |  |               
|                   |                                                                                                                   |  |               
|                   | Consolidated Balance
      Sheet - December 31, 2003 and March 31, 2004                                           |  | 3             
|                   |                                                                                                                   |  |               
|                   | Consolidated Statement
      of Operations - For the Three Months Ended March 31, 2003 and March 31,
      2004   |  | 4             
|                   |                                                                                                                   |  |               
|                   | Consolidated Statement
      of Changes in Shareholders' Equity - For the Three Months Ended March 31,
      2004 |  | 5             
|                   |                                                                                                                   |  |               
|                   | Consolidated Statement
      of Cash Flows - For the Three Months Ended March 31, 2003 and March 31,
      2004   |  | 6             
|                   |                                                                                                                   |  |               
|                   | Notes to Consolidated
      Financial Statements                                                                  |  | 7             
|                   |                                                                                                                   |  |               
|Item 2.            | Managements Discussion
      and Analysis of Financial Condition and Results of Operations                       |  | 15            
|                   |                                                                                                                   |  |               
|Item 3.            | Quantitative and Qualitative
      Disclosures About Market Risk                                                  |  | 17            
|                   |                                                                                                                   |  |               
|Item 4.            | Controls and Procedures                                                                                           |  | 18            
|                   |                                                                                                                   |  |               
|**Part
      II.** | **Other Information**                                                                                             |  |               
|                   |                                                                                                                   |  |               
|Item 6.            | Exhibits and Reports
      on Form 8-K                                                                            |  | 18            

2

---

PART I.
FINANCIAL INFORMATION

Item 1.
Financial Statements

FIRSTWAVE
TECHNOLOGIES, INC.Consolidated Balance Sheet(in thousands)

|                                                                                              |  | Dec
      31,
      2003 |        | Mar
      31,
      2004
|--------------------------------------------------------------------------------------------- |  | ------------------------ | ------ | ------------------------
|**ASSETS**                                                                                    |  |                          |        |                         
|Current
      assets:                                                                         |  |                          |        |                         
|Cash
      and cash equivalents                                                               |  | $                        | 2,704  |                         
|Accounts
      receivable, less allowance for doubtful accounts of $98 and $115, respectively |  |                          | 1,230  |                         
|Prepaid
      expenses and other assets                                                       |  |                          | 991    |                         
|Total
      current assets                                                                    |  |                          | 4,925  |                         
|                                                                                              |  |                          |        |                         
|Property
      and equipment, net                                                             |  |                          | 489    |                         
|Software
      development costs, net                                                         |  |                          | 2,966  |                         
|Intangible
      assets                                                                       |  |                          | 1,029  |                         
|Goodwill                                                                                      |  |                          | 2,398  |                         
|                                                                                              |  | $                        | 11,807 |                         
|**LIABILITIES
      AND SHAREHOLDERS' EQUITY**                                                |  |                          |        |                         
|Current
      liabilities:                                                                    |  |                          |        |                         
|Accounts
      payable                                                                        |  | $                        | 568    |                         
|Deferred
      revenue                                                                        |  |                          | 1,429  |                         
|Accrued
      employee compensation and benefits                                              |  |                          | 368    |                         
|Borrowings                                                                                    |  |                          | 500    |                         
|Dividends
      payable                                                                       |  |                          | 41     |                         
|Other
      accrued liabilities                                                               |  |                          | 532    |                         
|Total
      current liabilities                                                               |  |                          | 3,438  |                         
|                                                                                              |  |                          |        |                         
|Shareholders'
      equity                                                                    |  |                          | 8,369  |                         
|                                                                                              |  | $                        | 11,807 |                         

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

3

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FIRSTWAVE
TECHNOLOGIES, INC.Consolidated Statement of Operations(in thousands, except per share
amounts)(unaudited)

|                                                          |  | For
      the Three Months Ended
|--------------------------------------------------------- |  | --------------------------------
|
|Net
      Revenues                                        |  |                                 
|Software                                                  |  | $                               
|Services                                                  |  |                                 
|Maintenance                                               |  |                                 
|Other                                                     |  |                                 
|                                                          |  |                                 
|Cost
      and Expenses                                   |  |                                 
|Cost
      of revenues                                    |  |                                 
|Software                                                  |  |                                 
|Services                                                  |  |                                 
|Maintenance                                               |  |                                 
|Other                                                     |  |                                 
|Sales
      and marketing                                 |  |                                 
|Product
      development                                 |  |                                 
|General
      and administrative                          |  |                                 
|                                                          |  |                                 
|                                                          |  |                                 
|Operating
      income/(loss)                             |  |                                 
|                                                          |  |                                 
|Interest
      income/(expense)                           |  |                                 
|Income/(loss)
      before income taxes                   |  |                                 
|Income
      taxes                                        |  |                                 
|Net income/(loss)                                         |  | $                               
|                                                          |  |                                 
|Dividends
      on preferred stock                        |  |                                 
|                                                          |  |                                 
|Net income/(loss)
      applicable to common shareholders |  |                                 
|                                                          |  | $                               
|Basic:                                                    |  |                                 
|Earnings/(loss)
      per share                           |  | $                               
|Weighted
      average shares                             |  |                                 
|                                                          |  |                                 
|Diluted:                                                  |  |                                 
|Earnings/(loss)
      per share                           |  | $                               
|Weighted
      average shares                             |  |                                 

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

4

---

FIRSTWAVE
TECHNOLOGIES, INC.Consolidated Statement of Changes in Shareholders' Equity(In
thousands, except share data)(unaudited)

For the
Three Months Ended March 31, 2004

|                                              | Common Stock |  | Preferred Stock |  |        |  |        |  |         |   |  |         |   |  |              |   |  |                
|--------------------------------------------- | ------------ |  | --------------- |  | ------ |  | ------ |  | ------- | - |  | ------- | - |  | ------------ | - |  | ---------------
|
|Balance
      at December 31, 2003            | 2,672,728    |  | $      13       |  | 27,020 |  | $2,333 |  | $25,691 |   |  | $     0 |   |  | ($
      400 | ) |  | ($
      19,268
|                                              |              |  |                 |  |        |  |        |  |         |   |  |         |   |  |              |   |  |                
|Exercise
      of common stock options        | 625          |  |                 |  |        |  |        |  | 4       |   |  |         |   |  |              |   |  |                
|                                              |              |  |                 |  |        |  |        |  |         |   |  |         |   |  |              |   |  |                
|Issuance
      of common stock                | 455          |  |                 |  |        |  |        |  | 2       |   |  |         |   |  |              |   |  |                
|                                              |              |  |                 |  |        |  |        |  |         |   |  |         |   |  |              |   |  |                
|Dividends                                     |              |  |                 |  |        |  |        |  | (55     | ) |  |         |   |  |              |   |  |                
|                                              |              |  |                 |  |        |  |        |  |         |   |  |         |   |  |              |   |  |                
|Comprehensive
      loss:                     |              |  |                 |  |        |  |        |  |         |   |  |         |   |  |              |   |  |                
|Net loss                                      |              |  |                 |  |        |  |        |  |         |   |  | (1,132  | ) |  |              |   |  | (1,132         
|Foreign
      currency translation adjustment |              |  |                 |  |        |  |        |  |         |   |  | (91     | ) |  | (91          | ) |  |                
|Comprehensive
      loss                      |              |  |                 |  |        |  |        |  |         |   |  | (1,223  | ) |  |              |   |  |                
|                                              |              |  |                 |  |        |  |        |  |         |   |  |         |   |  |              |   |  |                
|Balance
      at March 31, 2004               | 2,673,808    |  | $      13       |  | 27,020 |  | $2,333 |  | $25,642 |   |  |         |   |  | ($ 491       | ) |  | ($ 20,400      

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

5

---

FIRSTWAVE
TECHNOLOGIES, INC.Consolidated Statement of Cash Flows(in thousands)(unaudited)

|                                                      | For the Three Months Ended
|----------------------------------------------------- | --------------------------
|
|Cash flows provided by/(used in) operating activities |                           
|                                                      |                           
|Cash flows from investing activities                  |                           
|Software development costs                            |                           
|Purchases of property and equipment, net              |                           
|Acquisition of Connect-Care                           |                           
|                                                      |                           
|Net cash used in investing activities                 |                           
|                                                      |                           
|Cash flows from financing activities                  |                           
|Proceeds from issuance of common stock                |                           
|Payment of dividends on preferred stock               |                           
|                                                      |                           
|Net cash provided by/(used in) financing activities   |                           
|                                                      |                           
|Foreign currency translation adjustment               |                           
|                                                      |                           
|Increase/(decrease) in cash and cash equivalents      |                           
|Cash and cash equivalents, beginning of period        |                           
|                                                      |                           
|Cash and cash equivalents, end of period              |                           
|                                                      |                           
|Supplemental disclosure of cash flow information      |                           
|Cash paid for income taxes                            |                           
|                                                      |                           
|Cash paid for interest                                |                           
|                                                      |                           

Supplemental
schedule of noncash investing andfinancing activities:The Company
acquired Connect-Care, Inc. on March 3, 2003 in a transaction whereby Connect Care merged
into a subsidiary of the  Company in exchange for 200,000 shares of Firstwave common
stock.  At the time of the acquisition, Connect Care  had liabilities of $624,244 which,
by virtue of the merger, became liabilities of our new wholly-owned subsidiary,
Connect-Care, Inc.

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

6

---

FIRSTWAVE
TECHNOLOGIES, INC.Notes to
Consolidated Financial StatementsMarch 31,
2004

|1. |  | Description
of Business and Basis of Presentation
|-- |  | -------------------------------------------------

| | Description
of the CompanyHeadquartered  in Atlanta, Georgia, with an office in Surrey,
England, Firstwave Technologies,  Inc. (Firstwave or  the Company)
is a leading provider of  Customer Relationship Management (CRM)  solutions to mid-size
and large-scale  enterprises worldwide. Firstwaves corporate  and product mission
reflects  our customer-first commitment: To develop and integrate the  best software
solutions to manage customer interactions and information. As a provider  of  sports and
high tech CRM, Firstwave offers a suite of industry-focused  solutions.  Firstwave CRM is
adaptive, scalable and easily integrates with  existing systems.  Firstwave supports
several product lines: Firstwave CRM  (includes eCRM and v.10  products), Firstwave
Sports, Firstwave Technology and  TakeControl.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Basis
of PresentationThe
accompanying unaudited consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States
for interim financial information and with the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. Accordingly, the consolidated financial statements
do not include all of the information and footnotes required by accounting
principles generally accepted in the United States for complete financial
statements and should be read in conjunction with the consolidated financial
statements contained in the Companys Form 10-K for the period ended
December 31, 2003. In the opinion of management, all adjustments (consisting
only of normal recurring adjustments) considered necessary for a fair
presentation of the consolidated financial statements have been included.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
consolidated balance sheet at December 31, 2003 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 for complete financial  statements.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

|2. |  | Use
of estimates and Critical Accounting Policies
|-- |  | -------------------------------------------------

| | Use
of EstimatesThe
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that 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 which require managements judgment
include revenue recognition, accounts receivable reserve, valuation of
long-lived assets and intangible assets, and goodwill. Management bases its
estimates on historical experience and on other various factors which are
believed to be reasonable under the circumstances. All accounting estimates and
the basis for these estimates are discussed between the Companys senior
management and the Audit Committee. Actual results could differ from those
estimates.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Critical
Accounting PoliciesThe
Company believes that the following accounting policies are critical to
understanding the consolidated financial statements:
     ·    Revenue Recognition
     ·    Capitalization  of Software Development Costs
     ·    Intangible Assets
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3. |  | Summary
of Significant Accounting Policies
|-- |  | ------------------------------------------

| | Revenue
recognitionThe
Company recognizes revenue in accordance with Statement of Position (SOP) 97-2,
Software Revenue Recognition, as amended by SOP 98-9, and related
interpretations.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

7

---

| | Revenue
from software product sales 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 accrues for
estimated warranty costs at the time it  recognizes revenue.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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, 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.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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 revenue is 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.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | International
revenues are primarily generated by Firstwave UK and 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
collected license fees and maintenance revenues on  behalf of the Company, and remitted
50% to 60% of standard license fees and  maintenance revenues they produced. Pursuant to
EITF 99-19, the Company  recognizes these distributor sales at the gross license amount
because the  Company retains title to the products, holds the risk and rewards of
ownership,  such as risk of loss for collection, and responsibility for providing the
product to the customer. The Company is responsible for establishing and  maintaining the
pricing of the product and performs any source code changes to  the product. The
independent distributors are considered agents of the Company  and work on a commission
basis. The commissions paid are reflected as a selling  expense in the Companys
financial statements. The maintenance fees  generated by distributor revenues are
reflected as maintenance revenues, with  the amount retained by distributors shown as a
cost of maintenance revenue.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Revenues
from non-monetary exchanges are recorded at the fair value of the products and  services
provided or received, whichever is more clearly evident.  There were no
non-monetary transactions during the first quarter of 2004.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

8

---

| | Maintenance
revenue is recognized on apro 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.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Companys US accounting management oversees reporting procedures in the UK  and
monitors their transactions on a timely basis. The US management reviews  transactions
and sales contracts as such transactions and sales are occurring to  ensure that revenues
are recognized under the Companys revenue recognition  policy and that expenses and
other transactions are reported in accordance with  accounting principles generally
accepted in the United States.  Management of the UK subsidiary report directly to US
management, with US  management substantially involved in all aspects of UK operations.
As such, US  management has established procedures to insure that international revenues
are  recognized properly and on a timely basis.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Software
development costsCapitalized
software development costs consist principally of salaries, contract services,
and certain other expenses related to development and modifications of software
products capitalized in accordance with the provisions of SFAS 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 SFAS 86 and ends when
the resulting product is available for sale. The Company evaluates the
establishment of technological feasibility based on the existence of a working
model of the software product. Capitalized costs may include costs related to
product enhancements resulting in new features and increased functionality as
well as writing the code in a new programming language. In this case, as the
version enhancements are built on an already detailed design under an existing
source code, technological feasibility is established early for each version.
All costs incurred to establish the technological feasibility of software
products are classified as research and development and are expensed as
incurred.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company evaluates the realizability of unamortized capitalized software costs at  each
balance sheet date. Software development costs which are capitalized are  subsequently
reported at the lower of unamortized cost or net realizable value.  If the unamortized
capitalized software cost exceeds the net realizable value of  the asset, the amount
would be written off accordingly. The net realizable value  of the capitalized software
development costs is the estimated future gross  revenues of the software product reduced
by the estimated future costs of  completing and disposing of that product. Amortization
of capitalized software  costs is provided at the greater of the ratio of current product
revenue to the  total of current and anticipated product revenue or on a straight-line
basis  over the estimated economic life of the software, which is not more than three
years. It is possible that those estimates of anticipated product revenues, the
remaining estimated economic life of the product, or both could be reduced due  to
changing technologies. The amortization of software development costs is  presented as a
cost of software revenue in the Companys financial  statements.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Goodwill
and other intangiblesIn
accordance with SFAS No 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, or loss of key personnel. If the fair value of
the intangible asset is determined to be in excess of the carrying value, the
Company would record an impairment loss. SFAS No 142 prescribes a two-phase
approach for impairment testing of goodwill. The first phase screens for
impairment; while the second phase (if necessary) measures the impairment. The
Company completed its annual analysis during the fourth quarter of 2003 and
found no instance of impairment of its recorded goodwill.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Concentration
of credit riskThe
Company is subject to credit risk primarily due to its trade receivables. The
Company has credit risk due to the high concentration of trade receivables
through certain customers.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

9

---

| | The
customer accounts receivable which represented more than 10% of total accounts
receivable are shown below:
| | --------------------------------------------------------------------------------------------------------------

|                | Dec 31, | Mar 31,
|--------------- | ------- | -------
|
|sports coach UK |         |        

| | Significant
CustomerThe
Company continued to have a concentration of revenue derived from its
relationship with Electronic Data Systems, Ltd. The table below identifies
customers who contributed more than 10% of total revenue for each period shown.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                | Qtr endingMar 31, | Qtr endingMar 31,
|--------------- | ----------------- | -----------------
|
|EDS             |                   |                  
|sports coach UK |                   |                  

| | Stock-based
compensationEffective
for 2002, the Company adopted SFAS 148, Accounting for Stock-Based
Compensation  Transition and Disclosure, which did not have a
material impact on the consolidated financial statements. 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 SFAS 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.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company has adopted the disclosure-only provisions of SFAS 123, Accounting  for
Stock-Based Compensation. The following table illustrates the effect  on net income
and net income per share if the Company had applied the fair value  recognition
provisions of SFAS 123 to stock-based employee awards, (in  thousands, except for per
share data).
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                        | For the
      Three Months Ended
      Mar 31,
|------------------------------------------------------- | ----------------------------------------------
|
|Net
      income/(loss) as reported                     |                                               
|Stock
      based employee compensation, net of related |                                               
|tax
      effects included in net income as reported    |                                               
|                                                        |                                               
|Stock
      based employee compensation, net of related |                                               
|tax
      effects under the fair value based method     |                                               
|                                                        |                                               
|Net
      income/(loss) as adjusted                     |                                               
|                                                        |                                               

10

---

|                           | For the Three Months EndedMar 31,
|-------------------------- | ---------------------------------
|
|Earnings/(loss) per share: |                                  
|Basic - as reported        |                                  
|                           |                                  
|Basic - as adjusted        |                                  
|                           |                                  
|Diluted - as reported      |                                  
|                           |                                  
|Diluted - as adjusted      |                                  
|                           |                                  

The  fair value
of each option grant is estimated on the date of grant using the  Black-Scholes
option-pricing model with the following weighted-average  assumptions used  for the
quarters ended March 31, 2003 and March 31, 2004,  respectively; dividend yield  of 0%
for both quarters; expected volatility of  143% and 133%, and risk-free interest  rate of
2.91% and 2.99%.

The  increase
in the compensation expense from $129,000 in the first quarter of 2003  compared  to
$172,000 in the first quarter of 2004 is primarily due to options  issued during 2003
resulting in a higher number of options outstanding and  subject to valuation. Options
are issued at the market price of the  Companys common stock at the date of grant.

There  is no
tax benefit included in the stock-based employee compensation expense  determined under
the fair-value-based method for the three month periods ended  March 31, 2003 and March
31, 2004, as the Company established a full valuation  allowance for its net deferred tax
assets.

Basic and
diluted net income per common shareBasic
net income 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 income applicable to common shareholders includes
a charge for dividends related to the Companys outstanding preferred
stock.

Shown  below is
a reconciliation of the numerators and denominators of the basic and  diluted per share
computations for income from continuing operations.

|                                        | For Quarter Ended March 31, 2004
|--------------------------------------- | --------------------------------
|
|Net income/(loss)                       |                                 
|Less: Preferred Stock Dividends         |                                 
|                                        |                                 
|Basic EPS                               |                                 
|Income available to common shareholders |                                 
|                                        |                                 
|Effect of Dilutive Securities           |                                 
|Warrants                                |                                 
|Convertible Preferred Stock             |                                 
|Stock Options                           |                                 
|                                        |                                 
|                                        |                                 
|Diluted EPS                             |                                 
|Income available to common shareholders |                                 
|                                        |                                 

|(1) |  | Not
included because anti-dilutive
|--- |  | ----------------------------------

11

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|                                        | For Quarter Ended March 31, 2003
|--------------------------------------- | --------------------------------
|
|Net income                              |                                 
|Less: Preferred Stock Dividends         |                                 
|                                        |                                 
|Basic EPS                               |                                 
|Income available to common shareholders |                                 
|                                        |                                 
|                                        |                                 
|Effect of Dilutive Securities           |                                 
|Warrants                                |                                 
|Convertible Preferred Stock             |                                 
|Stock Options                           |                                 
|                                        |                                 
|                                        |                                 
|Diluted EPS                             |                                 
|Income available to common shareholders |                                 
|                                        |                                 

| | Foreign
currency translationThe  financial statements of the Companys international
subsidiary are  translated into U.S. dollars at current exchange rates, except for
revenues and  expenses, which are translated at average exchange rates during each
reporting  period. Currency transaction gains or losses are included in the results of
operations as general and administrative expenses in the Companys  financial
statements. Net exchange gains or losses resulting from the  translation of assets and
liabilities are included as a component of accumulated  other comprehensive income in
shareholders equity.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Impairment of
long-lived assetsThe
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 would be based on the fair value of the asset.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

|4. |  | Acquisition On March 3, 2003, Firstwave acquired  Connect-Care, Inc., a provider of
CRM software solutions for software companies.  Connect-Care was acquired pursuant to a
Merger Agreement dated March 3, 2003  (the Merger Agreement) by and among
Firstwave, CC Subsidiary, Inc.,  a wholly-owned subsidiary of Firstwave (Merger Sub),
Connect-Care,  and certain shareholders of Connect-Care. Pursuant to the Merger
Agreement,  Merger Sub merged with and into Connect-Care, and Connect-Care, which was the
surviving corporation in the Merger, became a wholly-owned subsidiary of  Firstwave. The
results of Connect-Cares operations have been included in  the Companys
financial statements since March 3, 2003.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

12

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| | The
following  table presents the unaudited pro forma consolidated results of  operations as
if the  acquisition had occurred as of January 1, 2003 (in  thousands):
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                   | Quarter Ended
|------------------ | -------------
|
|Revenues           |              
|Net Income         |              
|Earnings per share |              
|Basic              |              
|Diluted            |              

|5. |  | Goodwill
and Intangibles The
primary objective of the Connect-Care acquisition was to acquire the customer
relationships of the customer base of Connect-Care and, to a lesser degree, to
acquire utilization of Connect-Care technology. Of the $3,410,000 purchase
price, $300,000 was assigned as an estimated fair value to the intangible asset
Connect-Care technology with an estimated useful life of three years, $900,000
was assigned as an estimated fair value to the intangible asset Connect-Care
customer relationships with an estimated useful life of seven years, and
$2,210,000 was assigned to goodwill. The value assigned to customer
relationships was based on potential future revenues that may be derived from
such customer relationships. We believe this goodwill reflects such matters as
(but not limited to) personnel obtained in the acquisition, new customer
opportunities that we will have as a result of our involvement with the acquired
customers, relationships we will develop through the acquisition, and expertise
and name recognition we will receive through this acquisition. Goodwill will be
evaluated periodically for impairment in accordance with SFAS 142 Goodwill
and Other Intangible Assets.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
weighted average amortization period for these intangible assets subject to
amortization is six years. There are no significant residual values in the
intangible assets. The Company began amortization of the intangible assets  effective
April 1, 2003. Goodwill was evaluated for impairment during the first  quarter of 2004 in
accordance with SFAS 142 Goodwill and Other Intangible  Assets and it was
determined there was no change in the carrying amount of  goodwill.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
following table presents details of acquired intangible assets (in thousands):
| | ----------------------------------------------------------------------------------

|                                    | December 31, 2003 |  | March 31, 2004
|----------------------------------- | ----------------- |  | --------------
|
|Amortized intangible assets         |                   |  |               
|Connect-Care Technology             |                   |  | $             
|Connect-Care Customer Relationships |                   |  |               
|                                    |                   |  |               
|Total                               |                   |  | $             
|                                    |                   |  |               

13

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|                                          | 
|----------------------------------------- | 
|Aggregrate Amortization Expense           | 
|For the three months ended March 31, 2004 | 
|Estimated Amortization Expense            | 
|For year ended December 31, 2004          | 
|For year ended December 31, 2005          | 
|For year ended December 31, 2006          | 
|For year ended December 31, 2007          | 
|For year ended December 31, 2008          | 

|6. |  | Borrowings
|-- |  | ----------

| | On
July 29, 2003, the Company signed a one-year Revolving Credit  Facility loan
with RBC Centura whereby the Company may borrow up to  $1,000,000. The Company had
borrowings of $500,000 against the line of credit as  of March 31, 2004. The Revolving
Facility bears interest at a variable rate  equal to the one month London Interbank
Offered Rate (LIBOR) plus 300 basis  points, or the RBC Centura Prime Rate plus
0.50%, at our option. The  weighted average interest rate for the three months ended
March 31, 2004 was  4.10%. The first $500,000 of the Revolving Facility is available on a
non-formula basis. Once advances under the Revolving Facility exceed $500,000,  any
advances are based on a borrowing base of 75% of eligible accounts  receivable as
determined by a certified borrowing base report. The loan is  secured by the assets of
the Company. The Company must comply with certain  financial covenants per the terms of
the agreement. As of March 31, 2004, the  Company was in compliance with the required
covenants.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

14

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Item 2.

FIRSTWAVE
TECHNOLOGIES, INC.Managements
Discussion and Analysis ofFinancial
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, 2003. This section 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, 2003.

OverviewHeadquartered in Atlanta,
Georgia, with an office in Surrey, England, Firstwave Technologies, Inc.
(Firstwave or the Company) is a leading provider of
Customer Relationship Management (CRM) solutions to mid-size and large-scale
enterprises worldwide. Firstwaves corporate and product mission reflects
our customer-first commitment: To develop and integrate the best software
solutions to manage customer interactions and information. As a provider of
sports and high tech CRM, Firstwave offers a suite of industry-focused
solutions. Firstwave CRM is adaptive, scalable and easily integrates with
existing systems. Firstwave supports several product lines: Firstwave CRM
(includes eCRM and v.10 products), Firstwave Sports, Firstwave Technology and
TakeControl.

Results of
OperationsTotal revenues decreased
61.2% from $4,281,000 in the first quarter of 2003 to $1,661,000 in the first
quarter of 2004 due to decreased software and services revenues.

Software
revenues decreased  78.8% from $1,607,000 in the first quarter of 2003 to $341,000 in the
first  quarter of 2004. The revenues we expected to receive as a result of the  launch in
October 2003 of our new Sports and Entertainment  initiative, Firstwave Sports, have not
been realized as quickly as we  originally anticipated. During the first quarter of 2003,
we closed a  large software license contract related to our relationship with Electronic
Data  Systems, Ltd., but there were no corresponding large contract  commitments in the
first quarter 2004 to offset the resulting  decrease in revenues. Our software revenues
remain  significantly dependent upon the timing of closing of license agreements.

Services revenues
decreased 70.9% from $2,140,000 in the first quarter of 2003 to  $622,000 in the first
quarter of 2004. Although we successfully delivered the  multi-year services project for
Electronic Data Systems, Ltd, we continued to  receive work and have a concentration
of revenue  derived from our relationship with this customer during  the first quarter of
2004. Electronic Data Systems, Ltd contributed  72.6% of our total revenue during the
first quarter of 2003 compared to 22.5% of  total revenue during the first quarter of
2004. We continue to provide  additional services and receive support and maintenance
revenues from this  customer. Our services revenues will significantly decrease from 2003
levels if  the services revenue we derived from the multi-year  contract is not replaced
with other customer accounts. Our services  revenues are subject to fluctuations based on
variations in the  length of and number of active service engagements in a given quarter.

We are pursuing
strategies  to transition our revenue stream away from dependency on a few large
customers  to a more diverse customer base. We believe that by concentrating on  vertical
markets to increase prospects in our pipeline with targeted companies  for our solutions,
we may begin to transition our revenue stream  away from dependence on a few large
customers.  The vertical  markets we are currently targeting are high tech companies  and
sports associations.

Maintenance
revenues  increased 25.5% from $529,000 in the first quarter of 2003 to $664,000 in the
first quarter of 2004. The increase is due to the addition of maintenance  revenues from
the Connect-Care acquisition and additional revenues associated  with the CRM product
line. Maintenance revenues are the result of renewal  agreements from previous software
license sales as well as new license  agreements.

Cost of
software revenues  increased 27.9% from $290,000 in the first quarter of 2003 to $371,000
in the  first quarter of 2004 due to increased amortization expense related to the June
30, 2003 release of Firstwave CRM Version 10 and Firstwave IDE. Cost of software
revenues includes amortization of capitalized software costs, costs of third  party
software, media costs, and documentation materials. Cost of software as a  percentage of
software revenue increased from 18.1% in the first quarter of 2003  to 108.8% the first
quarter of 2004 primarily due to the increase in  amortization of capitalized software
expense related to the release of  Firstwave CRM Version 10 and Firstwave IDE in
conjunction with a decrease  in software revenue resulting in a decrease in the software
revenue margin.

15

---

An impairment
analysis was  performed at March 31, 2004 in accordance with paragraph 15 of FAS 142. It
was  determined that the carrying amount of capitalized software is recoverable and  does
not exceed its fair value; therefore, no impairment loss was recorded.

Cost of
revenues for  services decreased 34.9% from $953,000 in the first quarter of 2003 to
$620,000  in the first quarter of 2004. This decrease is primarily due to decreases in
payroll, resulting from a reduction in the number of services  personnel, and payroll
related costs, including travel expenses,  consistent with decreased services revenues.
The cost of revenues for services  as a percentage of services revenues increased from
44.5% in the first quarter  of 2003 to 99.7% in the first quarter of 2004 primarily due
to certain fixed  personnel costs, which at lower revenue levels result in a decrease in
the  services revenue margin.

Cost of
revenues for  maintenance remained consistent at $141,000 in the first quarter of 2003
and the  first quarter of 2004. The cost of revenues for maintenance as a percentage of
maintenance revenue decreased from 26.7% in the first quarter of 2003 to 21.2%  in the
first quarter of 2004 due to the increase in maintenance revenues.

Sales and
marketing expense  decreased 29.7% from $1,101,000 in the first quarter of 2003 to
$774,000 in the  first quarter of 2004. The decrease is the result of decreases in
payroll,  telemarketing, and commission expense consistent with the decrease in software
revenue.

The Companys
product  innovation and development expenditures, which includes amounts capitalized,
decreased 64.3% from $1,214,000 in the first quarter of 2003 to $434,000 in the  first
quarter of 2004. The decrease is primarily related to a  decrease in payroll costs and
expenses associated with outside  contractors related to the development of CRM Version
10 and the IDE, both  of which were released in June 2003. Software development costs
capitalized during the three months ended March 31, 2003 and 2004 were $975,000  and
$74,000 respectively.

General and
administrative  expenses decreased 36.1% from $783,000 in the first quarter of 2003 to
$500,000  in the first quarter of 2003. The decrease is primarily due to decreases in
payroll costs and favorable foreign currency translation rates during the first  quarter
of 2004.

Dividends on
preferred  stock remained consistent at $55,000 in both the first quarter of 2003 and the
first quarter of 2004.

The above
factors combined  to result in a net loss of $1,187,000 in the first quarter of 2004,
representing  a decrease of 264.0% from net income of $724,000 in the first quarter of
2003.  Net income per basic and diluted share was $0.30 and $0.24 respectively, for the
first quarter of 2003 compared to a net loss of $0.44 per basic and  diluted share for
the first quarter of 2004. At March 31, 2003 the number of  basic weighted average shares
outstanding were 2,430,000 compared to 2,674,000  at March 31, 2004. The increase in
basic weighted average shares  outstanding is primarily related the issuance of 200,000
shares related to the  Connect-Care acquisition in March of 2003.

Balance Sheet Net accounts receivable
decreased 11.7% from $1,230,000 at December 31, 2003 to $1,086,000 at March 31,
2004 primarily due to the collection of outstanding receivables and to reduced
invoicing during the first quarter of 2004 consistent with lower revenues
compared to fourth quarter 2003. Other assets increased 28.5% from $991,000 at
December 31, 2003 to $1,273,000 at March 31, 2004, primarily due to an increase
in prepaid expenses related to third party royalties, prepaid rent, and prepaid
trade show deposits. Property and equipment remained at $489,000,
with year-to-date depreciation equaling new asset
purchases. Capitalized software decreased 9.2% from $2,966,000 at December 31,
2003 to $2,693,000 at March 31, 2004 despite additional
capitalization of $74,000 in development costs due to
year-to-date amortization expense of $347,000.
Intangible assets of $1,029,000 at December 31,2003 relate to the $1,200,000
acquisition of Connect-Care technology and customer relationship intangibles,
net of $229,000 in amortization expense.

Accounts
payable increased  62.5% from $568,000 at December 31, 2003 to $923,000 at March 31, 2004
due to  the timing of payment of certain payables. Deferred revenue increased  11.6% from
$1,429,000 at December 31, 2003 to $1,594,000 at March 31, 2004 due  to increases in and
the timing of billing for annual maintenance renewals.  Accrued employee compensation
decreased 40.0% from $368,000 at December 31, 2003  to $221,000 at March 31, 2004 due to
the payment of commissions accrued at year  end and lower first quarter accruals,
consistent with the decrease in revenue.  Borrowings at March 31, 2004 remained at
$500,000 due to the initial draw on the  Companys Line of Credit with RBC Centura.
Other accrued liabilities  decreased 53.4% from $532,000 at December 31, 2003 to $248,000
at March 31, 2004  primarily due to a decrease in the accrued VAT payable in the UK
consistent with decreased revenue.

16

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Liquidity
and  Capital Resources

As of March 31,
2004, the  balance of cash and cash equivalents was $1,711,000 compared to $2,704,000 at
December 31, 2003.

During the year
2003, 55.2%  of our total revenue was attributed to our relationship with Electronic Data
Systems Ltd, a leading global services company. During the first three months of  2004,
this same relationship accounted for 22.5% of total revenues. Although we  have
successfully completed delivery of their multi-year  services project, we continue to
provide additional services and receive support  and maintenance revenues from this
customer. Our revenues will significantly  decrease from 2003 levels if the services
revenue we derived from the  delivered multi-year contract is not replaced with other
customer accounts.

On July 29,
2003,  we signed a one-year Revolving Credit Facility loan with RBC Centura
whereby we may borrow up to $1,000,000. We  had borrowings of $500,000 against the line
of credit as of March 31,  2004. The Revolving Facility bears interest at a variable rate
equal to the one  month London Interbank Offered Rate (LIBOR) plus 300 basis points, or
the  RBC Centura Prime Rate plus 0.50%, at our option. The weighted  average
interest rate for the three months ended March 31, 2004 was 4.10%. The  first $500,000 of
the Revolving Facility is available on a non-formula basis.  Once advances under the
Revolving Facility exceed $500,000, any advances are  based on a borrowing base of 75% of
eligible accounts receivable as determined  by a certified borrowing base report. The
loan is secured by the assets of the  Company. The Company must comply with certain
financial covenants per the terms  of the agreement. As of March 31, 2004, the Company
was in compliance with the  required covenants.

Our future
capital  requirements will depend on many factors, including our ability to obtain
positive cash flows, market acceptance of our products, and the timing and  extent of
spending to support product development efforts and expansion of sales  and marketing.
Our future capital needs will be highly dependent upon our  ability to control expenses
and generate additional software license revenues,  and any projections of future cash
needs and cash flows are subject to  substantial uncertainty. At the end of April 2004,
we implemented cost-cutting  measures throughout the organization, designed to reduce
costs while  maintaining our ability to deliver license revenues  and maintain customer
satisfaction. However, if we are unable to fund expenses  from operations or obtain the
necessary additional capital, we may be required  to reduce the scope of planned product
development and sales and marketing  efforts, as well as further reduce the size of
current staff, all of  which could have a material adverse effect on our business,
financial condition,  and ability to reduce losses or generate profits.

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.

Item  3.
Quantitative and Qualitative Disclosures About Market Risk

The Company is
subject to  market risk exposures of varying correlations and volatilities, including
interest rate risk and foreign exchange rate risk. Currently, the Company  maintains its
cash position in money market funds and other bank accounts. 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 our interest income, at this  time management does not believe a change in
interest rates will materially  affect the Companys financial position or results
of operations.

The Company has
a variable  interest rate on the current line of credit which bears interest at the
London  Interbank Offered Rate (LIBOR) plus 3.00%. Due to the amount of the
borrowings and the short term nature of the debt, we do not believe we have a
significant risk due to potential fluctuations in interest rates for loans at  this time.
Changes in interest rates could make it more costly to borrow money  in the future and
may impede our future acquisition and growth strategies if  management determines that
the costs associated with borrowing funds are too  high to implement these strategies.

The results of
operations  of Firstwave Technologies, UK Ltd, our wholly owned subsidiary located in
Surrey, England, are exposed to foreign exchange rate fluctuations as the  financial
results of this subsidiary are translated from the local currency to  U.S. Dollars upon
consolidation. Because of the significance of the operations  of this subsidiary to our
consolidated operations, as exchange rates vary, net  sales and other operating results,
when translated, may differ materially from  our prior performance and our expectations.
In addition, because of the  significance of our overseas operations, we could also be
significantly affected  by weak economic conditions in foreign markets that could reduce
demand for our  products and further negatively impact the results of our operations in a
material and adverse manner. As a result of these market risks, the price of our  stock
could decline significantly and rapidly.

17

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The Company
manages the  risk by monitoring on a regular basis the fluctuations in foreign currency
exchange rates as they relate to our UK Subsidiary, and attempts to take action  if the
foreign currency exchange rate would result in a material impact to the  Companys
financial statements upon translation from the local currency,  the British pound, to the
US Dollar. The action taken in these instances by the  Company is to move the currency
from the UK Subsidiary to the Companys  headquarters when doing so would be
beneficial for the Company.

The Company
does not engage  in any hedging activities. As foreign currency exchange rates vary, the
fluctuations in revenues and expenses may materially impact the financial  statements
upon consolidation. A weaker US dollar would result in an increase to  revenues and
expenses upon consolidation, and a stronger US dollar would result  in a decrease to
revenues and expenses upon consolidation.

Item  4.  Controls
and Procedures

Based on their
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 and Chief Executive Officer and Chief Financial Officer believe 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.

PART II.
OTHER  INFORMATION

Item  1.
   Legal Proceedings                Not Applicable

Item 2.
   Changes in Securities                Not Applicable

Item  3.
   Defaults Upon Senior Securities                Not Applicable

Item 4.
    Submission of Matters to a Vote of Security Holders                Not Applicable

Item  5.
   Other Information                Not Applicable

Item 6.
   Exhibits and Reports on Form 8-K

| | a. | Exhibit
10.33 Waiver and First Amendment to Secured Loan Agreement dated July  29, 2003, by the
Company in favor of RBC Centura.
| | -- | --------------------------------------------------------------------------------------------------------------------------------

| | Exhibit
31.1 Certification of Periodic Report by the Chief Executive Officer pursuant to  Rule
13a-14(a) of the Securities Exchange Act of 1934.
| | ------------------------------------------------------------------------------------------------------------------------------------------------

| | Exhibit
31.2 Certification of Periodic Report by the Chief Financial Officer pursuant to  Rule
13a-14(a) of the Securities Exchange Act of 1934.
| | ------------------------------------------------------------------------------------------------------------------------------------------------

| | Exhibit
32 Certification of Chief Executive Officer and Chief Financial Officer pursuant  to 18
U.S.C. Section 1350.
| | --------------------------------------------------------------------------------------------------------------------

| | b. | Reports
of Form 8-K filed during the quarter ended March 31, 2004:
| | -- | ------------------------------------------------------------------

| | On
February 10, 2004, Firstwave filed a current report on Form 8-K with the press  release
of February 10, 2004 reporting financial results for the fourth quarter  of 2003 and year
ending 2003.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

18

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SIGNATURES

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

| | FIRSTWAVE
TECHNOLOGIES, INC.
| | ----------------------------

DATE: May 13,
2004

| | /s/
Judith A. Vitale
| | --------------------

| | Judith
A.  VitaleChief Financial Officer(Principal Financial Officer)
| | ---------------------------------------------------------------------

19

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