---

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 SEPTEMBER 30, 2003

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 1000 Atlanta, 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
o
|----- | ----

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2
of the Exchange Act).

|Yes
o | 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 November 12, 2003:

Common
Stock, no par value         2,671,866 shares

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##### 

FIRSTWAVE TECHNOLOGIES, INC.

FORM 10-Q

For the quarter ended September 30, 2003

Index

|                                                                                                   |                                                                                                                        | Page No.
|-------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------- | --------
|                                                                                                   |                                                                                                                        |         
|Part I.    Financial Information                                                                   |                                                                                                                       
|                                                                                                   |                                                                                                                        |         
|Item   1.  Financial Statements                                                                    |                                                                                                                       
|                                                                                                   |                                                                                                                        |         
|                                                                                                   | Consolidated Balance Sheet - December 31, 2002 and September   30,
2003                                                | 3       
|                                                                                                   |                                                                                                                        |         
|                                                                                                   | Consolidated Statement of Operations - For the Three and Nine   Months
Ended September 30, 2002 and September 30, 2003 | 4       
|                                                                                                   |                                                                                                                        |         
|                                                                                                   | Consolidated Statement of Changes in Shareholders Equity -   For
the Nine Months Ended September 30, 2003             | 5       
|                                                                                                   |                                                                                                                        |         
|                                                                                                   | Consolidated Statement of Cash Flows - For the Nine Months   Ended
September 30, 2002 and September 30, 2003           | 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                              | 18                                                                                                                    
|                                                                                                   |                                                                                                                        |         
|Item   4.  Controls and Procedures                                                                 | 18                                                                                                                    
|                                                                                                   |                                                                                                                        |         
|Part II.  Other   Information                                                                      |                                                                                                                       
|                                                                                                   |                                                                                                                        |         
|Item 6.  Exhibits and Reports   on Form 8-K                                                        | 19                                                                                                                    
|                                                                                                   |                                                                                                                        |         
|Item 10.  Exhibits  Material   Contracts                                                          | 19                                                                                                                    

2



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##### 

PART I.  FINANCIAL INFORMATION

Item 1.    Financial Statements

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

|                                                                                          |  | Dec 31,   2002 |       | Sept 30,   2003 |  
|----------------------------------------------------------------------------------------- |  | -------------- | ----- | --------------- | -
|                                                                                          |  |                |       |                 |  
|ASSETS                                                                                    |  |                |       |                 |  
|Current assets:                                                                           |  |                |       |                 |  
|Cash and cash equivalents                                                                 |  | $              | 3,779 |                 | $
|Accounts receivable, less allowance for
doubtful accounts of $88 and   $386, respectively |  |                | 2,406 |                 |  
|Prepaid expenses and other assets                                                         |  |                | 664   |                 |  
|                                                                                          |  |                |       |                 |  
|Total current assets                                                                      |  |                | 6,849 |                 |  
|Property and equipment, net                                                               |  |                | 738   |                 |  
|Software development costs, net                                                           |  |                | 2,041 |                 |  
|Intangible assets                                                                         |  |                | 0     |                 |  
|Goodwill                                                                                  |  |                | 175   |                 |  
|                                                                                          |  |                |       |                 |  
|                                                                                          |  | $              | 9,803 |                 | $
|                                                                                          |  |                |       |                 |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                      |  |                |       |                 |  
|Current liabilities:                                                                      |  |                |       |                 |  
|Accounts payable                                                                          |  | $              | 909   |                 | $
|Deferred revenue                                                                          |  |                | 812   |                 |  
|Accrued employee compensation and
benefits                                                |  |                | 417   |                 |  
|Borrowings                                                                                |  |                | 0     |                 |  
|Dividends payable                                                                         |  |                | 42    |                 |  
|Other accrued liabilities                                                                 |  |                | 802   |                 |  
|                                                                                          |  |                |       |                 |  
|Total current liabilities                                                                 |  |                | 2,982 |                 |  
|Shareholders equity                                                                      |  |                | 6,821 |                 |  
|                                                                                          |  |                |       |                 |  
|                                                                                          |  | $              | 9,803 |                 | $
|                                                                                          |  |                |       |                 |  

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 |       | For the   Nine Months Ended |  
|----------------------------------------------------- |  | ---------------------------- | ----- | --------------------------- | -
|                                                      |  |                              |       |                             |  
|                                                      |  | Sept 30,2002                 |       | Sept 30,2003                |  
|                                                      |  |                              |       |                             |  
|Net Revenues                                          |  |                              |       |                             |  
|Software                                              |  | $                            | 405   |                             | $
|Services                                              |  |                              | 2,325 |                             |  
|Maintenance                                           |  |                              | 407   |                             |  
|Other                                                 |  |                              | 4     |                             |  
|                                                      |  |                              |       |                             |  
|                                                      |  |                              | 3,141 |                             |  
|                                                      |  |                              |       |                             |  
|Cost and Expenses                                     |  |                              |       |                             |  
|Cost of revenues                                      |  |                              |       |                             |  
|Software                                              |  |                              | 281   |                             |  
|Services                                              |  |                              | 759   |                             |  
|Maintenance                                           |  |                              | 118   |                             |  
|Other                                                 |  |                              | 4     |                             |  
|Sales and marketing                                   |  |                              | 791   |                             |  
|Product development                                   |  |                              | 213   |                             |  
|General and   administrative                          |  |                              | 475   |                             |  
|                                                      |  |                              |       |                             |  
|                                                      |  |                              | 2,641 |                             |  
|                                                      |  |                              |       |                             |  
|Operating   income/(loss)                             |  |                              | 500   |                             |  
|Interest income                                       |  |                              | 17    |                             |  
|                                                      |  |                              |       |                             |  
|Income/(loss) before income
taxes                     |  |                              | 517   |                             |  
|Income taxes                                          |  |                              | 0     |                             |  
|                                                      |  |                              |       |                             |  
|Net income/(loss)                                     |  | $                            | 517   |                             | $
|                                                      |  |                              |       |                             |  
|Dividends on preferred stock                          |  |                              | (62   | )                           |  
|                                                      |  |                              |       |                             |  
|Net income/(loss) applicable to common   shareholders |  | $                            | 455   |                             | $
|                                                      |  |                              |       |                             |  
|Basic:                                                |  |                              |       |                             |  
|Earnings/(loss) per   share                           |  | $                            | 0.21  |                             | $
|                                                      |  |                              |       |                             |  
|Weighted average   shares                             |  |                              | 2,212 |                             |  
|                                                      |  |                              |       |                             |  
|Diluted:                                              |  |                              |       |                             |  
|Earnings/(loss) per   share                           |  | $                            | 0.16  |                             | $
|                                                      |  |                              |       |                             |  
|Weighted average   shares                             |  |                              | 3,200 |                             |  
|                                                      |  |                              |       |                             |  

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

4



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##### 

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

For the Nine Months Ended September 30, 2003

|                                                            |  |              |           |                 |   |        |  |        |        |   |   |       |   | Addl   paid-in capital |        | Compre-   hensive   loss |   | Accumulated   Other   compre-   hensive   loss |   | Accumulated   Deficit |      | Total |  
|----------------------------------------------------------- |  | ------------ | --------- | --------------- | - | ------ |  | ------ | ------ | - | - | ----- | - | ----------------------- | ------ | ------------------------ | - | ---------------------------------------------- | - | --------------------- | ---- | ----- | -
|                                                            |  | Common Stock |           | Preferred Stock |   |        |  |        |        |  
|                                                            |  |              |           |                 |   |        |  |        |        |  
|                                                            |  | Shares       |           | Amount          |   | Shares |  | Amount |        |   |   |       |   |                        
|                                                            |  |              |           |                 |   |        |  |        |        |   |   |       |   |                         |        |                          |   |                                                |   |                       |      |       |  
|Balance at   December 31, 2002                              |  |              | 2,328,713 |                 | $ | 12     |  |        | 29,020 |   | $ | 2,483 |   | $                       | 22,950 |                          | $ | 0                                              |   | $                     | (131 | )     | $
|Exercise of   common stock options                          |  |              | 55,580    |                 |   | 1      |  |        |        |   |   |       |   |                         | 231    |                          |   |                                                |   |                       |      |       |  
|Issuance   of common stock                                  |  |              | 3,444     |                 |   |        |  |        |        |   |   |       |   |                         | 40     |                          |   |                                                |   |                       |      |       |  
|Shares   issued for Connect Care
acquisition                |  |              | 200,000   |                 |   |        |  |        |        |   |   |       |   |                         | 2,535  |                          |   |                                                |   |                       |      |       |  
|Conversion   of Series C Preferred Stock 
to common   stock |  |              | 83,333    |                 |   |        |  |        | (2,000 | ) |   | (150  | ) |                         | 150    |                          |   |                                                |   |                       |      |       |  
|Dividends                                                   |  |              |           |                 |   |        |  |        |        |   |   |       |   |                         | (165   | )                        |   |                                                |   |                       |      |       |  
|Comprehensive   loss:                                       |  |              |           |                 |   |        |  |        |        |   |   |       |   |                         |        |                          |   |                                                |   |                       |      |       |  
|Net   loss                                                  |  |              |           |                 |   |        |  |        |        |   |   |       |   |                         |        |                          |   | (191                                           | ) |                       |      |       |  
|Foreign   currency translation
adjustment                   |  |              |           |                 |   |        |  |        |        |   |   |       |   |                         |        |                          |   | (86                                            | ) |                       | (86  | )     |  
|                                                            |  |              |           |                 |   |        |  |        |        |   |   |       |   |                         |        |                          |   |                                                |   |                       |      |       |  
|Comprehensive   loss                                        |  |              |           |                 |   |        |  |        |        |   |   |       |   |                         |        |                          |   | (277                                           | ) |                       |      |       |  
|                                                            |  |              |           |                 |   |        |  |        |        |   |   |       |   |                         |        |                          |   |                                                |   |                       |      |       |  
|                                                            |  |              |           |                 |   |        |  |        |        |   |   |       |   |                         |        |                          |   |                                                |   |                       |      |       |  
|Balance   at September 30, 2003                             |  |              | 2,671,070 |                 | $ | 13     |  |        | 27,020 |   | $ | 2,333 |   | $                       | 25,741 |                          |   |                                                |   | $                     | (217 | )     | $
|                                                            |  |              |           |                 |   |        |  |        |        |   |   |       |   |                         |        |                          |   |                                                |   |                       |      |       |  

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

5



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##### 

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

|                                                                       |  | For the   Nine Months Ended |                
|---------------------------------------------------------------------- |  | --------------------------- | ---------------
|                                                                       |  |                             |                
|                                                                       |  |                             | Sept 30,   2002
|                                                                       |  |                             |                
|Cash flows provided by operating
activities                            |  | $                           | 3,517          
|                                                                       |  |                             |                
|Cash flows from investing
activities                                   |  |                             |                
|Software development   costs                                           |  |                             | (581           
|Purchases of   property and equipment                                  |  |                             | (690           
|Acquisition of
Connect-Care                                            |  |                             | 0              
|                                                                       |  |                             |                
|Net cash used in   investing activities                                |  |                             | (1,271         
|                                                                       |  |                             |                
|Cash flows from financing activities                                   |  |                             |                
|Proceeds from   issuance of common stock                               |  |                             | 5              
|Proceeds from   borrowings                                             |  |                             | 0              
|Payment of   dividends on preferred stock                              |  |                             | (372           
|                                                                       |  |                             |                
|Net cash provided   by/(used in) financing
activities                  |  |                             | (367           
|                                                                       |  |                             |                
|Foreign currency translation adjustment                                |  |                             | (76            
|                                                                       |  |                             |                
|Increase/(decrease) in cash and cash   equivalents                     |  |                             | 1,803          
|Cash and cash equivalents, beginning of   period                       |  |                             | 1,860          
|                                                                       |  |                             |                
|Cash and cash equivalents, end of period                               |  | $                           | 3,663          
|                                                                       |  |                             |                
|Supplemental disclosure of cash flow
information                       |  |                             |                
|Cash paid for   income taxes                                           |  | $                           | 0              
|                                                                       |  |                             |                
|Cash paid for   interest                                               |  | $                           | 0              
|                                                                       |  |                             |                
|Supplemental schedule of noncash investing   and financing activities: |  |                             |                

The Company acquired Connect-Care, Inc. 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



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##### 

FIRSTWAVE TECHNOLOGIES, INC.Notes to Consolidated Financial
Statements September 30, 2003

|1. | Description of Business and Basis of Presentation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | Description of the Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | Firstwave®   Technologies, Inc. is a global provider of strategic,
industry-focused, CRM   software solutions that automate and optimize how companies win, maintain and   grow customer
relationships.  The   Firstwave product line consists of the Firstwave CRM Product Suite, which   provides focused solutions to
the following four industries: software and   technology, sports and entertainment, manufacturing and the public sector.   The
Firstwave CRM Product Suite includes Firstwave eCRM®,   Firstwave IDE®and Firstwave for Technology.
Firstwave eCRM is a   web-based application, built with COM+ technology or .NET technology.  Firstwave IDE is the toolset
supporting   Firstwave eCRM.  In addition to the   Firstwave CRM Product Suite, Firstwave also provides and supports
Takecontrol®,   a client-server based product, and Firstwave for UNIX®.          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | Basis of Presentation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | The   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/A for the period ended December 31, 2002.  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, 2002 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 Estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | The   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.  Actual results   could differ from those estimates.                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | Critical Accounting Policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | The 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   recognition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | The Company   recognizes revenue in accordance with Statement of Position (SOP) 97-2,
Software Revenue Recognition, as amended by SOP 98-9, and related   interpretations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | 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 license
revenue.  Services revenue is recognized as services   are performed.  Maintenance revenue is   recognized ratably over the
period of coverage.                                                                                                                                                                                                                                                                                                                                                                                           

7



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##### 

| | 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. 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, because the price charged for each
element is the same as when the element would be sold separately from any   other element.  Pricing does not vary   by customer,
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   collect license fees and maintenance revenues on behalf of the
Company, and   remit to the Company 50% to 60% of standard license fees and maintenance   revenues they produce.  The Company
recognizes international sales at the gross license amount, with the amount   paid to the distributors reflected as a sales and
marketing expense.  The Companys international maintenance   fees are reflected as maintenance revenues, with the amount
retained by   distributors shown as a cost of maintenance revenue.  There have been no revenues derived from   independent
international distributors during 2003.                                                                                                                                                                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | Revenues   from nonmonetary exchanges are recorded at the fair value of the products and
services provided or received, whichever is more clearly evident.  There have been no nonmonetary exchanges   during
2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 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 for
maintenance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | The Company   provides an allowance for doubtful accounts based on managements estimate
of   receivables that may become uncollectible.    The estimate is based on historical charge-off activity and current   account
status.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | Software   development costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | Capitalized   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.  Since 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.

8



---



##### 

| | Impairment of   Intangible Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In accordance with SFAS No 142 Goodwill and Other Intangible   Assets, intangible
assets with indefinite useful lives must be tested   periodically for impairment. Examples of 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.                                                                                                                                                                                                                                                                                                                                                         
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | Concentration of   credit risk and revenue                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | The 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   Firstwave UK, whose customer, Electronic Data Services,
Ltd, represented 72%   of the Companys total revenues for the first quarter of 2003, 47% of the   Companys total revenues
for the second quarter of 2003, and 62% of the   Companys total revenues for the third quarter of 2003.  This customer
also accounted for 59% of   the Companys total Accounts Receivable outstanding at March 31, 2003, 42% of   the Companys
total Accounts Receivable outstanding at June 30, 2003, and 67%   of the Companys total Accounts Receivable outstanding at
September 30,   2003.  If this customer decreases its   purchasing of the Companys software and services, revenues would
significantly decrease if not replaced with other customer accounts.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | Stock-Based Compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | Effective   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 No.   123 to stock-based employee awards, (in thousands, except for
per share   data).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

|                                                                                                   |  | For the   Three Months Ended   Sept 30, |       | For the   Nine Months Ended   Sept 30, |  
|-------------------------------------------------------------------------------------------------- |  | --------------------------------------- | ----- | -------------------------------------- | -
|                                                                                                   |  |                                         |       |                                        |  
|                                                                                                   |  | 2002                                    |       | 2003                                   |  
|                                                                                                   |  |                                         |       |                                        |  
|Net income/(loss) as   reported                                                                    |  | $                                       | 455   |                                        | $
|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  |  |                                         | 456   |                                        |  
|                                                                                                   |  |                                         |       |                                        |  
|Net income/(loss) as   adjusted                                                                    |  | $                                       | (1    | )                                      | $
|                                                                                                   |  |                                         |       |                                        |  
|Earnings/(loss) per share:                                                                         |  |                                         |       |                                        |  
|Basic - as reported                                                                                |  | $                                       | 0.21  |                                        | $
|                                                                                                   |  |                                         |       |                                        |  
|Basic - as adjusted                                                                                |  |                                         | (0.00 | )                                      | $
|                                                                                                   |  |                                         |       |                                        |  
|Diluted - as reported                                                                              |  | $                                       | 0.16  |                                        | $
|                                                                                                   |  |                                         |       |                                        |  
|Diluted - as adjusted                                                                              |  |                                         | (0.00 | )                                      | $
|                                                                                                   |  |                                         |       |                                        |  



9



---



##### 

| | 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 September 30, 2002
and September 30,   2003, respectively; dividend yield of 0% for both quarters; expected   volatility of 149% and 141%, and risk-free
interest rate of 3.82% and   3.14%.  For the nine month periods   ended September 30, 2002 and September 30, 2003, respectively,
the   assumptions used were dividend yield of 0% for both periods; average expected   volatility of 149% and 144%, and average
risk-free interest rate of 3.82% and   2.87%.                                                                                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | The decrease   in the compensation expense from $456,000 in the third quarter of 2002
compared to $171,000 in the third quarter of 2003 is primarily due to options   issued in the third quarter of 2002 related to a
Stock Exchange Program.  On March 19, 2002 the Company completed a   Stock Exchange Program that offered each of its directors
and employees who   held options under the Option Plan with an exercise price of greater than   $10.00 the opportunity to surrender
those options for cancellation in   exchange for new options to be granted no sooner than six months and one day   after
cancellation.  The options   cancelled in March 2002 under this program totaled 81,684. The Company   granted 81,684 new options
on September 20, 2002.  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 and nine month periods ended   September 30, 2003 and September 30,
2002, as the Company established a full   valuation allowance for its net deferred tax assets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | Basic and diluted   net income per common share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | Basic 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 Sept 30, 2003 |        | For Nine   Months Ended Sept 30, 2003 | 
|----------------------------------------- |  | --------------------------------- | ------ | ------------------------------------- | 
|                                          |  |                                   |        |                                       | 
|                                          |  | Income   (000s)   (Numerator)    |        | Shares   (000s)   (Denominator)      | 
|                                          |  |                                   |        |                                       | 
|Net income/(loss)                         |  |                                   | (1,120 | )                                     | 
|Less: Preferred Stock   Dividends         |  |                                   | (55    | )                                     | 
|                                          |  |                                   |        |                                       | 
|Basic EPS                                 |  |                                   |        |                                       | 
|Income available to common   shareholders |  |                                   | (1,175 | )                                     | 
|Effect of   Dilutive
Securities           |  |                                   |        |                                       | 
|Warrants                                  |  |                                   |        |                                       | 
|Convertible Preferred Stock               |  |                                   | 55     |                                       | 
|Stock Options                             |  |                                   |        |                                       | 
|                                          |  |                                   |        |                                       | 
|                                          |  |                                   | 55     | (1)                                   | 
|Diluted   EPS                             |  |                                   |        |                                       | 
|Income available to common   shareholders |  |                                   | (1,175 | )                                     | 
|(1) Not included because
anti-dilutive    |  |                                   |        |                                       | 

10



---



##### 

|                                          |  | For   Quarter Ended Sept 30, 2002 |     | For Nine   Months Ended Sept 30, 2002 | 
|----------------------------------------- |  | --------------------------------- | --- | ------------------------------------- | 
|                                          |  |                                   |     |                                       | 
|                                          |  | Income   (000s)   (Numerator)    |     | Shares   (000s)   (Denominator)      | 
|                                          |  |                                   |     |                                       | 
|Net income                                |  |                                   | 517 |                                       | 
|Less: Preferred Stock   Dividends         |  |                                   | (62 | )                                     | 
|                                          |  |                                   |     |                                       | 
|Basic EPS                                 |  |                                   |     |                                       | 
|Income available to common   shareholders |  |                                   | 455 |                                       | 
|Effect of   Dilutive
Securities           |  |                                   |     |                                       | 
|Warrants                                  |  |                                   |     |                                       | 
|Convertible Preferred Stock               |  |                                   | 62  |                                       | 
|Stock Options                             |  |                                   |     |                                       | 
|                                          |  |                                   |     |                                       | 
|                                          |  |                                   | 62  |                                       | 
|Diluted   EPS                             |  |                                   |     |                                       | 
|Income available to common
shareholders   |  |                                   | 517 |                                       | 

|   | Foreign currency translation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | The   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 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 would   be 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 consolidated statement of operations   reflects the
revenues and costs associated with this segment that management   uses to make operating decisions and assess
performance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|4. | Borrowings                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | On July 29,   2003, the Company signed a Revolving Facility loan with RBC Centura
whereby   the Company may borrow up to $1,000,000.    The Company borrowed $500,000 against the line of credit effective
September 30, 2003. 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 Borrowers   option.  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 and 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 September 30, 2003, the Company was in compliance with   all required
covenants.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|5. | Acquisition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | On March 3,   2003, Firstwave Technologies, Inc. (Firstwave), a Georgia
corporation,   acquired Connect-Care, Inc. (Connect-Care), a Georgia corporation that   provides customer relationship
management (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.                                                                                        

11



---



##### 

| | In exchange   for all outstanding shares of Connect-Care stock, Firstwave issued 200,000
shares of Firstwave common stock to the shareholders of Connect-Care and granted   such shareholders certain registration
rights.  Additional consideration of $300,000 in cash may be payable if   certain revenue goals, as set forth in
Section 3.1 of the Merger   Agreement, are attained.  Such amount   would be paid on or prior to the earlier of
(i) the date Firstwave files   its Annual Report on Form 10-K with respect to the fiscal year ending   December 31, 2003 or
(ii) March 31, 2004.                                                                                                                                                                                                                                                                                                                 
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | The $300,000   earn-out provision of the merger agreement with Connect-Care makes this
payment contingent upon the attainment of certain total revenues, including   license revenues and associated maintenance revenues
that would be recognized   according to SOP 97-2, during 2003 from March through December.  Such earn-out is contingent
consideration   based upon future financial performance.    Such revenue attainment is offset by any net accounts receivable
shown   as of February 28, 2003, not collected by December 31, 2003.  If the revenue targets are realized, the   $300,000 will
be paid in full.  If the   revenue targets are partially realized, then the payout is payable   ratably.  If the revenue
target is   met, the payout will be accounted for on Firstwaves financial statements as   an increase to the purchase price of
the acquisition and an increase to   goodwill.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | The Company   is accounting for the $300,000 as contingent consideration in accordance with
paragraphs 25 through 28 of SFAS 141. Because the amount, if any, of   contingent consideration was not determinable at the
acquisition date, no   amount for the contingency will be recorded in the Companys financial   statements until the contingency
is resolved, or the consideration is issued   or becomes issuable. The Company expects that, should any amount of   contingent
consideration be issuable, such amount would result in an   additional element of the cost of acquiring Connect-Care.                                                                                                                                                                                                                                                                                                        
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | An analysis   of each material asset acquired and each material liability assumed from the
acquisition of Connect-Care was completed to ensure accuracy of fair   value.  All line items represented   fair value because
of each items short-term nature.  The Company evaluated each asset and   liability and the timing in which assets would be
received and liabilities   would be settled and determined that these amounts represented their fair   values.                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | The   following table summarizes the estimated fair value of the assets acquired   and
liabilities assumed at the date of acquisition.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

|Current Assets          |  | $ | 771,660    |  
|----------------------- |  | - | ---------- | -
|Property and Equipment  |  | $ | 29,504     |  
|Intangible Assets       |  | $ | 1,200,000  |  
|Goodwill                |  | $ | 2,209,762  |  
|                        |  |   |            |  
|Total   assets acquired |  | $ | 4,210,926  |  
|                        |  |   |            |  
|Current liabilities     |  | $ | (1,425,408 | )
|                        |  |   |            |  
|Net assets acquired     |  | $ | 2,785,518  |  
|                        |  |   |            |  

| | Of the   $3,409,762 of acquired intangible assets, $300,000 was assigned as an   estimated fair
value of the Connect-Care technology, $900,000 was assigned as   an estimated fair value for customer relationships based on
potential future   revenues that may be derived from such customer relationships and the   remaining balance of $2,209,762 was
assigned to goodwill with an indefinite   life.  We believe this goodwill   reflects such matters as (but not limited to)
personnel that we 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 No. 142 Goodwill and
Other Intangible   Assets.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | During the   third quarter of 2003 an additional $4,792 in acquisition costs were recorded
related to the Connect-Care acquisition.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

12



---



##### 

| | The   following table summarizes the comprehensive purchase price, including net   liabilities
assumed and costs to date related to the acquisition.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------

|Purchase Price                 |  | $ | 2,630,000 |  |  | 200,000   shares at $13.15 | 
|------------------------------ |  | - | --------- |  |  | -------------------------- | 
|Net liabilities assumed        |  | $ | 624,244   |  |  |                            | 
|Cost of acquisition to date    |  | $ | 155,518   |  |  |                            | 
|                               |  |   |           |  |  |                            | 
|Comprehensive purchase   price |  | $ | 3,409,762 |  |  |                            | 
|                               |  |   |           |  |  |                            | 

| | 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. The
Connect-Care   technology asset consists of the source code for the Connect-Care   product.  We believe we will continue   to
derive revenue from licensing this product to new and existing   customers.  The customer relationship   asset represents the
existing customer base of Connect-Care which we believe   will continue to contribute revenue from the purchase of additional
licenses   of the Connect-Care product, purchase of additional service engagements, and   renewals of annual maintenance
agreements.    We also expect that some of the existing active customers or former   customers may transition to the Firstwave
eCRM product. Of the $3,409,762   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 $2,209,762 was
assigned to goodwill.  The weighted average amortization period   for these intangible assets 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,   recording $57,141 in amortization expense in both the second and third   quarters of 2003.  Goodwill will be
evaluated for impairment in accordance with SFAS No. 142 Goodwill and   Other Intangible Assets.  There was
no change in the carrying amount of goodwill during the third quarter of   2003.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | The following table presents details of Acquired Intangible Assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

|                                               |  | December   31, 2002       |         | September   30, 2003       | 
|---------------------------------------------- |  | ------------------------- | ------- | -------------------------- | 
|                                               |  |                           |         |                            | 
|                                               |  | Gross   carrying   amount |         | Accumulated   amortization | 
|                                               |  |                           |         |                            | 
|Amortized intangible assets                    |  |                           |         |                            | 
|Connect-Care Technology                        |  |                           |        |                            | 
|Connect-Care Customer
Relationships            |  |                           |        |                            | 
|                                               |  |                           |         |                            | 
|Total                                          |  |                           |        |                            | 
|                                               |  |                           |         |                            | 
|Aggregrate Amortization   Expense              |  |                           |         |                            | 
|For the Nine months ended   September 30, 2003 |  |                           | 114,282 |                            | 
|Estimated Amortization   Expense               |  |                           |         |                            | 
|For year ended December 31,   2003             |  |                           | 171,429 |                            | 
|For year ended December 31,   2004             |  |                           | 228,571 |                            | 
|For year ended December 31,   2005             |  |                           | 228,571 |                            | 
|For year ended December 31,   2006             |  |                           | 153,571 |                            | 
|For year ended December 31,   2007             |  |                           | 128,571 |                            | 

13



---



##### 

| | The following table presents the unaudited pro forma consolidated   results of operations as if
the acquisition had occurred as of January 1 of   each year presented, (in thousands, except per share data).
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                     |  | Quarter   Ended |                 | Nine   Months Ended |  
|-------------------- |  | --------------- | --------------- | ------------------- | -
|                     |  |                 |                 |                     |  
|                     |  |                 | Sept 30,   2002 |                     |  
|                     |  |                 |                 |                     |  
|Revenues             |  | $               | 4,237           |                     | $
|Net   Income         |  | $               | 538             |                     | $
|Earnings   per share |  |                 |                 |                     |  
|Basic                |  | $               | 0.22            |                     | $
|Diluted              |  | $               | 0.18            |                     | $

|6. | Subsequent Events                                                                                                                                                                                                                                                                                                                                                                  
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                    
|   | During the third quarter of 2003, the Company continued work on a   material services project
which was required to be delivered by September 30,   2003. Because the Company did not meet that delivery date, it was required to
deliver the project by October 31, 2003.    The Company did deliver the project on October 31, 2003, and the   customer began
acceptance testing.

14



---



##### 

Item 2.

FIRSTWAVE TECHNOLOGIES, INC.Managements Discussion and Analysis
of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the Financial Statements and
Notes thereto of the Company presented in the Companys Annual Report on Form 10-K/A for the year ended December 31, 2002. 
This section contains forward-looking statements that reflect managements expectations, estimates, and projections for future
periods.  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/A for
the year ended December 31, 2002.

OverviewFirstwave® Technologies, Inc. is a global provider of
strategic, industry-focused, CRM software solutions that automate and optimize how companies win, maintain and grow customer
relationships.  The Firstwave product line consists of the Firstwave CRM Product Suite, which provides focused solutions to the
following four industries: software and technology, sports and entertainment, manufacturing and the public sector. The Firstwave CRM
Product Suite includes Firstwave eCRM®, Firstwave IDE®and Firstwave for Technology. Firstwave eCRM
is a web-based application, built with COM+ technology or .NET technology.  Firstwave IDE is the toolset supporting Firstwave
eCRM.  In addition to the Firstwave CRM Product Suite, Firstwave also provides and supports Takecontrol®, a
client-server based product, and Firstwave for UNIX®.

Results of OperationsTotal revenues decreased 24.6% from
$3,141,000 in the third quarter of 2002 to $2,369,000 in the third quarter of 2003 primarily due to a decrease in services revenues.
For the nine month period ended September 30th, total revenues decreased 10.7% from $10,798,000 in 2002 to $9,640,000 in
2003.

Software revenues increased 58.0% from $405,000 in the third quarter of 2002 to $640,000 in the
third quarter of 2003.  For the nine month period ended September 30th, software revenues increased 69.2% from $1,784,000 in
2002 to $3,019,000 in 2003.  These increases are primarily due to software license agreements entered into with Electronic Data
Services, Ltd. during the first and third quarters of 2003.  Our software revenues are significantly dependent upon the timing
of closing of license agreements and current quarterly results may not be indicative of future performance.

Services revenues decreased 55.1% from $2,325,000 in the third quarter of 2002 to $1,045,000 in
the third quarter of 2003 and, for the nine month period ended September 30th, decreased 39.3% from $7,740,000 in 2002 to $4,702,000
in 2003.  During 2002 we had a significant services engagement with Electronic Data Services, Ltd.  While we continued our
services engagement with Electronic Data Services, Ltd during 2003, the scale of the services decreased compared to 2002.  Our
services revenues are subject to fluctuations based on variations of the length of and number of active service engagements in a
given quarter.

During the third quarter of 2003, we continued to have a concentration of revenue derived from
our relationship with Electronic Data Services, Ltd.  During 2003, this customer contributed 72% of our total revenue for the
first quarter, 47% of total revenue during the second quarter, and 62% of total revenue during the third quarter.  If this
customer decreases its purchasing of our software and services, our revenues would significantly decrease if not replaced with other
customer accounts.  We are pursuing strategies to continue to transition our revenue stream away from dependency on a few large
customers to a more diverse customer base.  The acquisition of Connect-Care has assisted in diversifying our customer
base.

Maintenance revenues increased 64.1% from $407,000 in the third quarter of
2002 to $668,000 in the third quarter of 2003 and, for the nine month period ended September 30th, increased 50.0% from $1,258,000 in
2002 to $1,887,000 in 2003.  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.

The Connect-Care acquisition brought a customer base to Firstwave with recurring maintenance
revenues and the potential for software license upgrades and additional services engagements.  These revenues will be recognized
in accordance with SOP 97-2 and in the same manner as previously recognized on Connect-Cares financial statements. 
In addition, the nature of the costs associated with these revenues is similar to the nature of Firstwaves costs of revenues
(i.e., labor associated with performing the services and maintenance work), and we do not anticipate price increases.  There are
no materials or inventory to consider with respect to cost of revenues.

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Cost of software revenues increased 37.4% from $281,000 in the third quarter of 2002 to
$386,000 in the third quarter of 2003 due to increased amortization expense related to the June 30, 2003 release of Firstwave CRM
Version 10 and Firstwave IDE.  For the nine month period ended September 30th,cost of software revenues decreased
6.8% from $928,000 in 2002 to $865,000 in 2003.  The decrease is due to lower amortization expense related to full amortization
of previous versions of our software, partially offset by higher amortization expense related to the most recent version of the
software released on June 30, 2003.  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 decreased from
69.4% in the third quarter of 2002 to 60.3% the third quarter of 2003 primarily due to the decrease in
amortization of capitalized software expense detailed above in conjunction with an increase in software revenue resulting in an
increase in the software revenue margin.

Cost of revenues for services increased 3.6% from $759,000 in the third
quarter of 2002 to $786,000 in the third quarter of 2003. This increase is primarily due to increases in payroll and payroll related
costs associated with additional employees resulting from the Connect-Care acquisition, offset by decreases in costs for outside
consultants and travel expenses consistent with decreased services revenues. The cost of revenues for services as a percentage of
services revenues increased from 32.7% in the third quarter of 2002 to 75.2% in the third quarter of 2003 primarily due to certain
fixed personnel costs, which at lower revenue levels result in a decrease in the services revenue margin.  For the nine month
period ended September 30th, cost of revenues for services increased 2.8% from $2,465,000 in 2002 to $2,535,000 in 2003 primarily due
to increased payroll costs.

Cost of revenues for maintenance increased 53.4% from $118,000 in the third quarter of 2002 to
$181,000 in the third quarter of 2003, and for the nine month period ended September 30th, increased 24.1% from $398,000 in 2002 to
$494,000 in 2003. The increase is primarily due to increased payroll costs related to the Connect-Care acquisition.  This
increase is consistent with increased maintenance revenue.

Sales and marketing expense increased 25.3% from $791,000 in the third quarter of 2002 to
$991,000 in the third quarter of 2003 and, for the nine month period ended September 30th, increased 26.0% from $2,435,000 in 2002 to
$3,068,000 in 2003.  The increases are the result of increases in payroll costs, commission expenses and travel expenses.

The Companys product innovation and development expenditures, which includes amounts
capitalized, increased 14.3% from $630,000 in the third quarter of 2002 to $720,000 in the third quarter of 2003.  For the nine
month period ended September 30th, product development expenditures increased 157.8% from $1,061,000 in 2002 to $2,735,000 in 2003.
The increase is primarily related to increased payroll costs and fees associated with outside contractors related to the development
of our latest version of the CRM product.  Software development costs capitalized during the three and nine months ended
September 30, 2002 were $417,000 and $581,000 respectively, and for the three and nine months ended September  30, 2003 were
$213,000 and $1,722,000 respectively.  We believe total product innovation and development expenditures will decrease somewhat
from these levels for the remainder of the year, but if the Company pursues other development
opportunities, these expenses could increase.

General and administrative expenses increased 32.6% from $475,000 in the
third quarter of 2002 to $630,000 in the third quarter of 2003 and, for the nine month period ended September 30th, increased 13.0%
from $1,638,000 in 2002 to $1,851,000 in 2003.  These increases were primarily due to amortization of intangible assets related
to the Connect-Care acquisition and increased personnel resulting in increased payroll and payroll related costs.

Dividends on preferred stock decreased 11.3% from $62,000 in the third quarter of 2002 to
$55,000 in the third quarter of 2003 due to the conversion of Series C Convertible Preferred Stock, held by an outside investor, into
common stock during the second half of 2002 and the first quarter of 2003.

The above factors combined to result in a 358.2% decrease in net income available to common
shareholders from a net income of $455,000 in the third quarter of 2002 to a net loss of  $1,175,000 in the third quarter of
2003, and a net income per basic and diluted share of $0.21 and $0.16 respectively, for the third quarter of 2002 compared to a net
loss of $.044 per basic and diluted share for the third quarter of 2003.  At September 30, 2002 the number of basic weighted
average shares outstanding were 2,212,000 compared to 2,660,000 at September 30, 2003.  The increase in basic weighted average
shares outstanding is primarily related to the conversion of Series C Convertible Preferred Shares, held by an outside investor, into
approximately 278,000 common shares and the issuance of 200,000 shares related to the Connect-Care acquisition.

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Balance Sheet

Net accounts receivable decreased 34.8% from $2,406,000 at December 31, 2002 to $1,570,000 at
September 30, 2003 primarily due to the collection of outstanding receivables related to a large license agreement and two large
services agreements invoiced during December 2002, offset by the addition of current receivables related to customers obtained in the
Connect-Care acquisition. The allowance for doubtful accounts increased 338.6% from $88,000 at December 31, 2002 to $386,000 at
September 30, 2003 primarily due to the Connect-Care acquisition.  At the date of acquisition, Connect-Care had a general
reserve for bad debt of $66,534 and an additional reserve of $229,342 related to a customer dispute in arbitration.  The amount
in dispute was fully reserved due to the uncertainty of the recoverability of the receivable. Other assets increased 72.1% from
$664,000 at December 31, 2002 to $1,143,000 at September 30, 2003 primarily due to an increase in prepaid
expenses related to the deferral of costs associated with the material services project that has continued into the fourth quarter of
2003 and the prepayment of third party license royalties.   Property and equipment decreased 22.8% from $738,000 at
December 31, 2002 to $570,000 at September 30, 2003, due to year-to-date depreciation offset by new asset purchases and the addition
of Connect-Care fixed assets. Capitalized software increased 47.6% from $2,041,000 at December 31, 2002 to $3,012,000 at September
30, 2003 due to additional capitalization of $1,722,000 in development costs related to Firstwave CRM Version 10 and Firstwave IDE,
less $751,000 in year-to-date amortization expense.  Intangible assets of $1,086,000 at September 30, 2003 relate to the
$1,200,000 acquisition of Connect-Care technology and customer relationship intangibles, net of $114,000 in amortization expense.
Goodwill increased 1265.7% from $175,000 at December 31, 2002 to $2,390,000 at September 30, 2003 due to
the Connect-Care acquisition.  Accounts payable decreased 13.6% from $909,000 at December 31, 2002 to $785,000 at September 30,
2003 due to the decrease of payables related to outside consultants offset by current payables related to the Connect-Care
acquisition. Deferred revenue increased 46.7% from $812,000 at December 31, 2002 to $1,191,000 at September 30, 2003 primarily due to
deferred maintenance and professional services revenues acquired in the Connect-Care acquisition.  Accrued employee compensation
increased 21.8% from $417,000 at December 31, 2002 to $508,000 at September 30, 2003 due to increased vacation and incentive
compensation accruals related to the addition of employees from the Connect-Care acquisition. Borrowings at September 30, 2003 were
$500,000 due to the initial draw on the Companys Line of Credit with RBC Centura.  The Company had no borrowings at
December 31, 2002.   Other accrued liabilities decreased 50.9% from $802,000 at December 31, 2002
to $394,000 at September 30, 2003 primarily due to a decrease of accrued VAT payable in the UK consistent with decreased revenue.

Liquidity and Capital Resources

As of September 30, 2003, the balance of cash and cash equivalents was $2,834,000 compared to
$3,779,000 at December 31, 2002.

During the year 2002, 71.9% of our total revenue was attributed to our relationship with
Electronic Data Services Ltd, a leading global services company.  During the first nine months of 2003, this same relationship
accounted for 61.9% of total revenues.  If this party decreases its purchasing of our software and services, our revenues and
cash position would significantly decrease if not replaced with other customer accounts.

On July 29, 2003, the Company signed a Revolving Facility loan with RBC Centura
whereby the Company may borrow up to $1,000,000.  The Company borrowed $500,000 against the line of credit effective September
30, 2003. 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 Borrowers option.  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 and 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
September 30, 2003, the Company was in compliance with all 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 the third quarter of 2003, we implemented cost-cutting measures throughout the organization,
which were structured so they should have little or no impact on 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 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.

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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 primarily 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 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.

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 takes 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 on the Companys financial statements.  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

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|Item 5.    Other Information               
|-------------------------------------------
|                                           
|                                           
|Item 6.    Exhibits and Reports on Form 8-K
|                                           
|a.                                         
|                                           
|                                           
|                                           
|                                           
|                                           
|b.                                         
|                                           
|                                           
|                                           
|                                           
|                                           
|                                           
|                                           
|Item   10.    Exhibits  Material Contracts
|                                           
|10.30                                      
|                                           
|10.31                                      
|                                           

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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:  November   12, 2003 |                                | /s/ Judith A. Vitale                                                      
|                           |                                |                                                                           
|                           |                                | Judith A. Vitale   Chief Financial Officer   (Principal Financial Officer)
|                           |                                |                                                                           

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