SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

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

FOR THE QUARTER ENDED JUNE 30, 2004



COMMISSION FILE NUMBER 0-21202

FIRSTWAVE TECHNOLOGIES, INC.(Exact name of Registrant as specified in its charter)



Georgia

58‐1588291(State of incorporation)

(IRS Employer ID #)




2859 Paces Ferry Road, Suite 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 __

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

Yes __  No  X

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

Outstanding as of August 10, 2004:

Common Stock, no par value           2,693,623 shares

---

FIRSTWAVE TECHNOLOGIES,
INC.

FORM 10-Q

For the quarter ended June 30,
2004

Index

Page No.Part I. Financial InformationItem 1.Financial StatementsConsolidated Balance Sheet - December 31, 2003 andJune 30, 2004
	
	3Consolidated Statement of Operations - For the Three and Six 
 
 Months Ended June 30, 2003 and June 30, 2004
	
	4Consolidated Statement of Changes in Shareholders' Equity - 
 For the Six Months Ended June 30, 2004
	
	5Consolidated Statement of Cash Flows - For the Six Months Ended
 June 30, 2003 and June 30, 2004
	
	6Notes to Consolidated Financial Statements
	
	7Item 2.
	
	Management's Discussion and Analysis of 
 
 Financial Condition and Results of Operations
	
	15Item 3.
	
	Quantitative and Qualitative Disclosures About Market Risk
	
	18Item 4.
	
	Controls and Procedures
	
	19Part II.
	
	Other InformationItem 4.
	
	Submission of Matters to a Vote of Security Holders
	
	19Item 6.
	
	Exhibits and Reports on Form 8-K
	
	20


2

Part I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

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

Dec 31,


June 30,2003


2004(unaudited)ASSETSCurrent assetsCash and cash equivalents

$2,704


$1,861Accounts receivable, less allowance
fordoubtful accounts of $98 and $97,
respectively

1,230


779Prepaid marketing expenses

200


817Other prepaid expenses

791


965Total current assets

4,925


4,422Property and equipment, net

489


403Software development costs,
net

2,966


2,408Intangible assets

1,029


914Goodwill

2,398


2,400Total assets

$11,807


$10,547LIABILITIES AND SHAREHOLDERS' EQUITYCurrent liabilitiesAccounts payable

$568


$672Deferred revenue

1,429


1,240Accrued employee compensation and
benefits

368


199Borrowings

500


500Dividends payable

41


43Other accrued liabilities

532


235Total current liabilities

3,438


2,889Shareholders' equity

8,369


7,658Total liabilities and shareholders' equity

$11,807


$10,547


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

3FIRSTWAVE TECHNOLOGIES,
INC.Consolidated Statement of
Operations(in thousands, except per share
amounts)(unaudited)

For the Three Months Ended

For the Six Months EndedJune 30,

June 30,

June 30,

June 30,2003

2004

2003

2004Net RevenuesSoftware


$772

$927

$2,379

$1,268Services


1,517

711

3,657

1,333Maintenance


690

698

1,219

1,362Other


11

29

16

632,990

2,365

7,271

4,026Cost and ExpensesCost of revenuesSoftware


189

318

479

689Services


796

622

1,749

1,242Maintenance


172

116

313

257Other


11

27

16

53Sales and marketing

976

618

2,077

1,392Product development

267

313

506

673General and administrative

438

489

1,221

9892,849

2,503

6,361

5,295Operating
income/(loss)

141

(138)

910

(1,269)Interest income/(expense)

9

(4)

20

(5)Income/(loss) before income taxes
150

(142)

930

(1,274)Income taxes


0

0

(1)

0Net income/(loss)


$150

($142)

$929

($1,274)Dividends on preferred stock

(55)

(58)

(110)

(113)Net income/(loss) applicable tocommon shareholders

$95

($200)

$819

($1,387)Basic:Earnings/(loss) per share

$0.04

($0.07)

$0.33

($0.52)Weighted average shares

2,632

2,682

2,505

2,676Diluted:Earnings/(loss) per share

$0.04

($0.07)

$0.28

($0.52)Weighted average shares

3,460

2,682

3,354

2,676


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

4

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

For the Six Months Ended June 30, 2004

AccumulatedOtherCommon Stock

Preferred Stock

Additional

Compre-

compre-paid-in

hensive

hensive

AccumulatedShares

Amount

Shares

Amount

capital

loss

loss

Deficit

TotalBalance at December 31, 2003
2,672,728

$13

27,020

$2,333

$25,691



($400)

($19,268)

$8,369Issuance of Series D Preferred Stock

7,000

680

$680Exercise of common stock options
2,292

4

4Issuance of common stock
18,411

44

44Dividends

(113)

(113)Comprehensive lossNet loss

(1,274)

(1,274)

(1,274)Foreign currency translation
       adjustment

(52)

(52)

(52)Comprehensive loss

(1,326)Balance at June 30, 2004
2,693,431

$13

34,020

$3,013

$25,626



($452)

($20,542)

$7,658


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

5

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

For the Six
Months EndedJune 30, 2003

June 30, 2004Cash flows provided by/(used in) operating activities
$1,338

($1,181)Cash flows from investing activitiesSoftware development costs

(1,510)

(94)Purchases of property and equipment, net
(74)

(86)Acquisition of Connect-Care

(178)

0Net cash used in investing
activities

(1,762)

(180)Cash flows from financing activitiesProceeds from issuance of preferred stock
0

680Proceeds from issuance of common stock
193

5Payment of dividends on preferred stock
(111)

(111)Net cash provided by financing
activities
82

574Foreign currency translation adjustment
(49)

(56)Increase/(decrease) in cash and cash equivalents
(391)

(843)Cash and cash equivalents, beginning of period
3,779

2,704Cash and cash equivalents, end of period
$3,388

$1,861Supplemental disclosure of cash flow informationCash paid for income taxes

$1

$0Cash paid for interest

$0

$11


Supplemental schedule of noncash investing and
  financing activities:

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

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

6

FIRSTWAVE TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements
June 30, 2004



1.Description of Business and Basis of Presentation

Description of the CompanyHeadquartered in Atlanta, Georgia, with anoffice in Surrey, England,
Firstwave Technologies, Inc. (“Firstwave” or “the Company”) is a global
provider of strategic CRM solutions specifically designed for the Sports and High Technology industries.  Firstwave’s
solutions provide companies with fit-to-purpose features that are designed to optimize how companies win, maintain and grow
customer and organizational relationships while improving the overall customer experience.  Firstwave’s corporate and
productmission reflects our customer-first commitment: To develop and integrate the best software solutions
to manage customer interactions and information.  Firstwave supports several product lines: Firstwave CRM (includes eCRM and
v.10 products), First Sports, Firstwave Technology and TakeControl.

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

The consolidated balance sheet at December 31, 2003 has been derived from the audited consolidated
financial statements for the Company at that date, but does not include all of the information and footnotes required by accounting
principles generally accepted in the United States for complete financial statements.

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

2.     Use of estimates and Critical Accounting
Policies

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

Critical Accounting PoliciesThe Company believes that the following accounting policies are critical to understanding the
consolidated financial statements:

> Revenue Recognition
>     Capitalization of Software Development Costs
>     Intangible Assets

3.     Summary of Significant Accounting Policies

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

7

Revenue from software product sales is recognized upon shipment of the
product when the Company has a signed contract, the fees are fixed and determinable, no significant obligations remain and
collection of the resulting receivable is probable.  The Company accrues for estimated warranty costs at the time it
recognizes revenue.

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

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

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

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

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

The Company has agreements with customers, particularly relating to sporting events, whereby it will
recognize revenue at a future date based on a per-ticket or per-fan membership basis. The amount the Company will receive per
ticket or membership is variable, but is pre-determined in the terms of the agreements. Although tickets may be sold in advance of
the event, the Company will recognize these revenues after the events occur.  During the second quarter of 2004, we did not
recognize any revenues from ticketing or fan memberships.

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

8

Revenues from non-monetary exchanges are recorded at the fair value of the
products and services provided or received, whichever is more clearly evident.  During the second
quarter of 2004, the Company entered into agreements with three customers which involved an exchange of software licenses,
services, and/or maintenance for marketing sponsorships.  In two of the agreements, the payments involved both cash and
exchanges for marketing sponsorships. The total revenue recorded in the second quarter of 2004 related to these transactions was
$855,000 in software license revenue and $64,000 in services revenue. These three agreements represented $451,000 in accounts
receivable, $635,000 in prepaid marketing expenses, and $167,000 in deferred revenue during the second quarter of 2004.  The
deferred revenue will be recognized as services revenues when the services are performed and as maintenance revenues ratably over
the term of the maintenance agreement. The prepaid marketing expense of $635,000 is reflected in other assets on the
Company’s balance sheet. The sponsorship packages include “Official CRM Supplier”
designations, rights to use customer logos in marketing materials, links to client websites, and tickets, hospitality packages, and
ads in programs of specific future sporting events.  These prepaid items will be shown as marketing expenses ratably over the
term of the agreement as it relates to an Official Designation or when the future sporting event occurs.

The designation of “Official CRM Supplier” and other sponsorship benefits supports the
Company’s marketing strategy and brand awareness efforts.  Firstwave has an official designation with the Rugby Football
Union, the ChampionsWorld Soccer Series, the Arena Football League, the Atlanta Sports Council, the Chick-fil-A Peach Bowl and iSe
Hospitality.  Within the Sports Industry, sponsorships are a common tool for a company to promote its goods and/or services
with a popular organization or event.

These types of designations provide two primary benefits.  First, the Company receives
recognition in the general marketing and advertising that the organization or event executes, thereby helping to promote and
identify our brand in the market.  As a sponsor, we receive advertising and logo placement within event programs, on-site
signage such as field boards, and additional forms of awareness opportunities.

In addition, we are able to capitalize upon on relationship with the organization through the use of
the organization’s marks and logos in our marketing materials.  We believe this helps establish our credibility when we
attend conferences, generates publicity when announcing the sponsorship and helps open doors for sales contacts. Organizations in
the sports industry keep a close watch on each other’s sponsors, partners and vendors.  We plan to continue to maximize
our association with these high profile organizations and search out additional opportunities that help distinguish our brand in
the market, and to use these relationships and opportunities in our marketing materials and campaigns to increase market awareness
and generate future revenue producing opportunities.

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

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

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

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

Software development costsCapitalized software development costs consist principally of salaries, contract services, and
certain other expenses related to development and modifications of software products capitalized in accordance with the provisions
of SFAS 86, "Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed.”  Capitalization
of such costs begins only upon establishment of technological feasibility as defined in SFAS 86 and ends when the resulting product
is available for sale. The Company evaluates the establishment of technological feasibility

9

based on the
existence of a working model of the software product.  Capitalized costs may include costs related to product enhancements
resulting in new features and increased functionality as well as writing the code in a new programming language.  In this
case, as the version enhancements are built on an already detailed design under an existing source code, technological feasibility
is established early for each version.  All costs incurred to establish the technological feasibility of software products are
classified as research and development and are expensed as incurred.

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

Goodwill and other intangiblesIn accordance with SFAS No 142 “Goodwill and Other Intangible Assets,” intangible assets
with indefinite useful lives must be tested periodically for impairment.  Examples of matters requiring management’s
judgment regarding the existence of impairment of an intangible asset, and the resulting fair value, would include
management’s assessment of adverse changes in legal factors, market conditions, or loss of key personnel. If the fair value
of the intangible asset is determined to be less than the carrying value, the Company would record an impairment loss.  SFAS No 142 prescribes a two-phase approach for impairment testing of goodwill.  The first phase screens for
impairment; while the second phase (if necessary) measures the impairment.  Goodwill was evaluated for impairment during the
second quarter of 2004 in accordance with SFAS 142 “Goodwill and Other Intangible Assets,” and it was determined there
was no instance of impairment of recorded Goodwill.

Concentration of credit riskThe Company is subject to credit risk primarily due to its trade receivables. The Company has credit
risk due to the high concentration of trade receivables through certain customers. The
customer accounts receivable which represented more than 10% of total accounts receivable are shown
below.

> Dec 31,
> 
> June 30,2003
> 
> 2004sports coach UK
> 65.3%
> 
> 4.3%Rugby Football Union
> 2.9%
> 
> 49.1%iSe Hospitality
> 0.0%
> 
> 16.1%The Football Association
> 0.0%
> 
> 12.3%

Significant CustomerThe table below identifies customers who contributed more than 10% of total revenue for each period
shown.

> Qtr ending
> 
> Qtr endingJune 30,
> 
> June 30,2003
> 
> 2004Electronic Data Systems, Ltd.
> 46.6%
> 
> 12.1%Rugby Football Union
> 0.0%
> 
> 30.9%

10

Stock-based compensationEffective for 2002, the Company adopted SFAS 148, “Accounting for Stock-Based Compensation -
Transition and Disclosure,” which did not have a material impact on the consolidated financial statements.  The Company
has chosen to continue to account for stock-based compensation using the intrinsic value method prescribed in Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related Interpretations and to elect the disclosure option of
SFAS 123, "Accounting for Stock-Based Compensation.”   Accordingly, compensation cost for stock options is measured
as the excess, if any, of the quoted market price of the Company's stock at the date of the grant over the amount an employee must
pay to acquire the stock.

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

> For the Three Months Ended
> 
> For the Six Months EndedJune 30,
> 
> June 30,2003
> 
> 2004
> 
> 2003
> 
> 2004Net income/(loss) applicable to commonshareholders, as reported
> 
> $
> 95
> 
> $
> (200)
> 
> $
> 819
> 
> $
> (1,387)Stock based employee compensation, net of relatedtax effects under the
> fair value based method
> 
> 
> 148
> 
> 
> 522
> 
> 
> 277
> 
> 
> 694Net income/(loss) applicable to commonshareholders, as adjusted
> 
> $
> (53)
> 
> $
> (722)
> 
> $
> 542
> 
> $
> (2,081)Earnings/(loss) per share:Basic - as reported
> 
> $
> 0.04
> 
> $
> (0.07)
> 
> $
> 0.33
> 
> $
> (0.52)Basic - as adjusted
> 
> $
> (0.02)
> 
> $
> (0.27)
> 
> $
> 0.22
> 
> $
> (0.78)Diluted - as reported
> 
> $
> 0.04
> 
> $
> (0.07)
> 
> $
> 0.28
> 
> $
> (0.52)Diluted - as adjusted
> 
> $
> 0.00
> 
> $
> (0.27)
> 
> $
> 0.19
> 
> $
> (0.78)

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 June 30, 2003 and June 30, 2004,
respectively: dividend yield of 0% for both quarters; expected volatility of 145% and 130%, and risk-free interest rate of 2.55%
and 3.72%. For the six month period ended June 30, 2003 and June 30, 2004, respectively; the assumptions used were dividend yield
of 0% for both years; average expected volatility of 146% and 132%, and average risk-free interest rate of 2.73% and
3.36%.

The increase in the compensation expense from $148,000 in the second quarter of 2003 compared to
$522,000 in the second quarter of 2004 is primarily due to options issued during the second quarter of 2004 that were immediately
vested.

There is no tax benefit included in the stock-based employee compensation expense determined under
the fair-value-based method for the three and six month periods ended June 30, 2003 and June 30, 2004, as the Company established a
full valuation allowance for its net deferred tax assets.

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

11

Shown below is a reconciliation of the numerators and denominators of the
basic and diluted per share computations for income from continuing operations (in thousands, except per share data):

For the Three Months Ended

For the Six Months EndedJune 30, 2004

June 30, 2004Income

Shares

Per Share

Income

Shares

Per Share(Numerator)

(Denominator)

Amount

(Numerator)

(Denominator)

AmountNet loss
$
(142)




$
(1,274)Less: Preferred Stock Dividends
(58)




(113)Basic EPSLoss applicable to common shareholders
$
(200)

2,682

$
(0.07)

$
(1,387)

2,676

$
(0.52)Effect of Dilutive Securities(1)Warrants


19



19Convertible Preferred Stock
58

703


113

684Stock Options


18




2458

740


113

727Diluted EPSLoss applicable to common shareholders
$
(200)

2,682

$
(0.07)

$
(1,387)

2,676

$
(0.52)(1) Not included because anti-dilutiveFor the Three Months Ended

For the Six Months EndedJune 30, 2003

June 30, 2003Income

Shares

Per Share

Income

Shares

Per Share(Numerator)

(Denominator)

Amount

(Numerator)

(Denominator)

AmountNet income
$
150




$
929Less: Preferred Stock Dividends
(55)




(110)Basic EPSIncome applicable to common shareholders
$
95

2,632

$
0.04

$
819

2,505

$
0.33Effect of Dilutive SecuritiesWarrants


19



19Convertible Preferred Stock
55

665


110

665Stock Options


144




16555

828



110

849Diluted EPSIncome applicable to common shareholders
$
150

3,460

$
0.04

$
929

3,354

$
0.28


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

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

12

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

# 4.Acquisition

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

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

> For the Six Months EndedJune 30,2003
> 
> 2004Revenues
> 
> $
> 7,618
> 
> $
> 4,026Net income/(loss) applicableto common shareholders
> $
> 395
> 
> $
> (1,387)Earnings/(loss) per shareBasic
> 
> $
> 0.15
> 
> $
> (0.52)Diluted
> 
> $
> 0.15
> 
> $
> (0.52)

5.     Goodwill and
Intangibles

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

The weighted average amortization period for these intangible assets subject to
amortization is six years. There are no significant residual values in the intangible assets.  The Company began amortization
of the intangible assets effective April 1, 2003.  Goodwill was evaluated for impairment during the second quarter of 2004 in
accordance with SFAS 142 “Goodwill and Other Intangible Assets,” and it was determined there was no instance of
impairment of recorded Goodwill.



13The following table presents details of acquired intangible assets (in
thousands):

December 31, 2003

June 30, 2004Gross carrying

Accumulated

Gross carrying

Accumulatedamount

amortization

amount

amortizationAmortizable intangible assetsConnect-Care Technology

$
300

$
75

$
300

$
125Connect-Care Customer Relationships

900

96

900

161Total

$
1,200

$
171

$
1,200

$
286Aggregate Amortization ExpenseFor the six months ended June 30, 2004

$
115Estimated Amortization ExpenseFor year ended December 31, 2004

$
229For year ended December 31, 2005

$
229For year ended December 31, 2006

$
154For year ended December 31, 2007

$
129For year ended December 31, 2008

$
129


6.     Borrowings

On July 29, 2003, the Company signed a one-year “Revolving Credit Facility” loan with
RBC Centura whereby the Company was able to borrow up to $1,000,000.  The Company had borrowings of $500,000 against the line
of credit as of June 30, 2004. The Revolving Facility bears interest at a variable rate equal to the one month London Interbank
Offered Rate (LIBOR) plus 300 basis points, or the “RBC Centura Prime
Rate plus 0.50%, at our option. The weighted average interest rate for the
three months ended June 30, 2004 was 4.10%.  The first $500,000 of the
Revolving Facility is available on a non-formula basis. Once advances under the
Revolving Facility exceed $500,000, any advances are based on a borrowing base
of 75% of eligible accounts receivable as determined by a certified borrowing
base report.  The loan is secured by the assets of the Company.  The
Company must comply with certain financial covenants per the terms of the
agreement.  As of June 30, 2004, the Company was in compliance with the
required covenants.

7.     Preferred Stock

During June 2004, the Company issued 7,000 shares of Series D Convertible Preferred Stock in a
private placement. The Company received $700,000 in gross proceeds and incurred approximately $20,000 in expenses related to this
offering.  The Preferred Stock has voting rights and accumulates dividends at an annual rate of 9%, payable monthly in cash or
shares of common stock, and is convertible at the holder’s option into Common Stock of the Company at anytime after June 15,
2005, at a conversion rate of $3.00 per share of Common Stock.  The Series D Convertible Preferred Stock has a liquidation
preference of $100 per share plus all accrued and unpaid dividends but ranks junior to the Company’s Series A Convertible
Preferred Stock, Series B Convertible Preferred Stock and Series C Convertible Preferred Stock with respect to payment upon
liquidation and dividends.

8.     Related Party Transactions

The President and COO of the Company participated in the Series D Convertible Preferred Stock
offering during June 2004 purchasing 300 shares of Series D Convertible Preferred Stock for a total investment of $30,000. He will
be paid monthly dividends of  $225.  The Chairman and CEO of the Company is paid $16,875 monthly for dividends related to
his $2,250,000 investment in Series A Convertible Preferred Stock, Series B Convertible Preferred Stock, and Series C Convertible
Preferred Stock.

14

9.     Subsequent Events

On July 29, 2004, the Company renewed its Revolving Line of Credit with RBC Centura.  The
renewal was made on the terms and conditions set forth in the original Loan Agreement dated July 29, 2003 with the following
modifications: the principal amount was decreased from a maximum of $1,000,000 to a maximum of $500,000, no margin formula or
certified borrowing base is required for any borrowings under the Line of Credit, and the maturity date was extended to July 27,
2005.Under the terms of the original Loan Agreement, the Company is required to maintain a balance of
$750,000 in a depository account with RBC Centura for the term of the credit facility.

##### Item 2.  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 for the year ended December 31, 2003.  This
section contains forward-looking statements that reflect management’s expectations, estimates, and projections for future
periods based on information (financial and otherwise) available to management as of the end of the period covered by this
Quarterly Report.  These statements may be identified by the use of forward-looking words such as “may”,
“will”, “believe”, “anticipate”, “estimate”, “expect”,
“projects”, or “intends”.  Actual events and results may differ from the results anticipated by the
forward-looking statements.  Factors that might cause such differences include, but are not limited to, those items discussed
under the caption "Certain Factors Affecting Forward-Looking Statements" presented in the Company’s Annual Report on Form
10-K for the year ended December 31, 2003.

OverviewHeadquartered in Atlanta, Georgia, with anoffice in Surrey, England,
Firstwave Technologies, Inc. (“Firstwave” or “the Company”) is a global
provider of strategic CRM solutions specifically designed for the Sports and High Tech industries.  Firstwave’s
solutions provide companies with fit-to-purpose features that are designed to optimize how companies win, maintain and grow
customer and organizational relationships while improving the overall customer experience.  Firstwave’s corporate and
productmission reflects our customer-first commitment: To develop and integrate the best software solutions
to manage customer interactions and information.  Firstwave supports several product lines: Firstwave CRM (includes eCRM and
v.10 products), First Sports, Firstwave Technology and TakeControl.

Results of OperationsTotal revenues decreased 20.9% from $2,990,000 in the second quarter of 2003 to $2,365,000 in the
second quarter of 2004 primarily due to decreased services revenues partially offset by increased software revenue.  As of
June 30, 2004, total revenues decreased 44.6% from $7,271,000 in 2003 to $4,026,000 in 2004 due to decreases in software and
services revenue. The primary cause of the decrease in total revenues is due to diminished revenue from our relationship with
Electronic Data Systems, Ltd., which contributed 61.5% of our total revenue during the first six months 2003, compared to 16.4% of
total revenue during the first six months of 2004.  Although we successfully completed implementation of the multi-year
services project for Electronic Data Systems, Ltd. during 2003, we continue to provide additional services and support and
maintenance to this customer.  During the second quarter of 2004 two customers represented 43.0% of total revenues: Rugby
Football Union representing 30.9% and Electronic Data Systems, Ltd. representing 12.1%.

We believe that by concentrating on vertical markets to increase prospects for our solutions in our
pipeline with targeted companies, we may begin to transition our revenue stream away from dependence on a few large
customers.  The vertical markets we are currently targeting are high technology and sports and entertainment.

Software revenues increased 20.1% from $772,000 in the second quarter of 2003 to $927,000 in the
second quarter of 2004 primarily due to licensing of our new Sports and Entertainment solution. There were no software revenues
from our Sports solution in the second quarter of 2003. As of June 30, 2004, software revenue decreased 46.7% from $2,379,000 in
2003 to $1,268,000 in 2004. During the first quarter of 2003, we recognized a large software license agreement with Electronic Data
Systems, Ltd.  Our software revenues remain significantly dependent upon the size and timing of closing of license
agreements.

During the second quarter of 2004, the Company entered into agreements with three customers which
involved an exchange of software licenses, services, and/or maintenance for marketing sponsorships.  In two of the agreements,
the payments involved both cash and exchanges for marketing sponsorships. The total revenue recorded in the second quarter of 2004
related to these transactions was $855,000 in software license revenue and $64,000 in services revenue. These three agreements
represented an additional $451,000 in accounts receivable, $635,000 in prepaid marketing expenses, and $167,000 in deferred

15

revenue during the second quarter of 2004.  The deferred revenue will be recognized as services revenues
when the services are performed and as maintenance revenues ratably over the term of the maintenance agreement. The prepaid
marketing expense of $635,000 is reflected in other assets on the Company’s balance sheet. The
sponsorship packages include “Official CRM Supplier” designations, rights to use customer logos in marketing materials,
links to client websites, and tickets, hospitality packages, and ads in programs of specific future sporting events.  These
prepaid items will be shown as marketing expenses ratably over the term of the agreement as it relates to an Official Designation
or when the future sporting event occurs.

The designation of “Official CRM Supplier” and other sponsorship benefits supports the
Company’s marketing strategy and brand awareness efforts.  Firstwave has an official designation with the Rugby Football
Union, the ChampionsWorld Soccer Series, the Arena Football League, the Atlanta Sports Council, the Chick-fil-A Peach Bowl and iSe
Hospitality.  Within the Sports Industry, sponsorships are a common tool for a company to promote its goods and/or services
with a popular organization or event.

These types of designations provide two primary benefits.  First, the Company receives
recognition in the general marketing and advertising that the organization or event executes, thereby helping to promote and
identify our brand in the market.  As a sponsor, we receive advertising and logo placement within event programs, on-site
signage such as field boards, and additional forms of awareness opportunities.

In addition, we are able to capitalize upon our relationship with the organization through the use
of the organization’s marks and logos in our marketing materials.  We believe this helps establish our credibility when
we attend conferences, generates publicity when announcing the sponsorship and helps open doors for sales contacts. Organizations
in the sports industry keep a close watch on each other’s sponsors, partners and vendors.  We plan to continue to
maximize our association with these high profile organizations and search out additional opportunities that help distinguish our
brand in the market, and to use these relationships and opportunities in our marketing materials and campaigns to increase market
awareness and generate future revenue producing opportunities.

Services revenues decreased 53.1% from $1,517,000
in the second quarter of 2003 to $711,000 in the second quarter of 2004, and as
of June 30, 2004, decreased 63.6% from $3,657,000 in 2003 to $1,333,000 in 2004. 
Although we  successfully completed implementation of the multi-year
services project for Electronic Data Systems, Ltd during 2003, we continue to
provide additional services to this customer.  Our services revenues will
significantly decrease from 2003 levels if the services revenues we derived from
the multi-year contract is not replaced with other customer accounts. Our
services revenues are subject to fluctuations based on variations in the length
of and number of active service engagements in a given quarter.

Maintenance revenues increased 1.2% from $690,000 during the second quarter of 2003 to $698,000 in
the second quarter of 2004.  As of June 30, 2004, maintenance increased 11.7% from $1,219,000 in 2003 to $1,362,000 in 2004.
The year to date increase is due to the addition of maintenance revenues from the Connect-Care acquisition and additional revenues
associated with the CRM product line, including First Sports.  Maintenance revenues are the result of renewal agreements from
previous software license sales as well as new license agreements.

Cost of software revenues increased 68.3% from $189,000 in the second quarter of 2003 to $318,000 in
the second quarter of 2004 and as of June 30, 2004, increased 43.8% from $479,000 in 2003 to $689,000 in 2004 due to increased
amortization expense related to the June 30, 2003 release of Firstwave CRM Version 10 and Firstwave IDE. Cost of software revenues
includes amortization of capitalized software costs, costs of third party software, media costs, and documentation materials. Cost
of software as a percentage of software revenues increased from 24.5% in the second quarter of 2003 to 34.3% the second quarter of
2004. The decrease in software margin is primarily due to the increase in amortization of capitalized software expense related to
the release of Firstwave CRM Version 10 and Firstwave IDE partially offset by the increase in software revenue.

Cost of revenues for services decreased 21.9% from $796,000 in the second quarter of 2003 to
$622,000 in the second quarter of 2004 and as of June 30, 2004, decreased 29.0% from $1,749,00 in 2003 to $1,242,000 in 2004. 
These decreases are primarily due to decreases in payroll, resulting from a reduction in the number of services personnel, and
payroll related costs, including travel expenses, consistent with decreased services revenues. The cost of revenues for services as
a percentage of services revenues increased from 52.5% in the second quarter of 2003 to 87.5% in the second quarter of 2004
primarily due to certain fixed personnel costs, which at lower revenue levels result in a decrease in the services revenue
margin.

Cost of revenues for maintenance decreased 32.6% from $172,000 in the second quarter of 2003 to
$116,000 in the second quarter of 2004 and as of June 30, 2004, decreased 17.9% from $313,000 in 2003 to $257,000 in 2004. 
These decreases are due to decreases in payroll costs associated with a reduction in

16

the number of maintenance personnel. The cost of
revenues for maintenance as a percentage of maintenance revenue decreased from
24.9% in the second quarter of 2003 to 16.6% in the second quarter of 2004 due
to the decreases in cost of revenues for maintenance.

Sales and marketing expense decreased 36.7% from $976,000 in the second quarter of 2003 to $618,000
in the second quarter of 2004 and as of June 30, 2004, decreased 33.0% from $2,077,000 in 2003 to $1,392,000 in 2004.  The
decreases are the result of decreases in payroll expenses, telemarketing costs, and costs relating to investor
relations.

The Company’s product innovation and development expenditures, which includes amounts
capitalized, decreased 58.5% from $802,000 in the second quarter of 2003 to $333,000 in the second quarter of 2004 and as of June
30, 2004, decreased 62.0% from $2,016,000 in 2003 to $767,000. The decreases are primarily related to a decrease in payroll costs
and expenses associated with outside contractors related to the development of CRM Version 10 and the IDE, both of which were
released in June 2003.  Software development costs capitalized during the three and six months ended June 30, 2003 were
$534,000 and $1,509,000 respectively and for the three and six months ended June 30, 2004 were $20,000 and $94,000
respectively.  A net realizable analysis was performed at June 30, 2004 in accordance SFAS 86. It was determined that the
unamortized capitalized software does not exceed its net realizable value; therefore, no impairment loss was recorded.

General and administrative expenses increased 11.6% from $438,000 in the second quarter of 2003 to
$489,000 in the second quarter of 2004 primarily due to an unfavorable foreign currency exchange rate during the second quarter of
2004 partially offset by decreased payroll and professional services. As of June 30, 2004, general and administrative expenses
decreased 19.0% from $1,221,000 in 2003 to $989,000 in 2004. The year-to-date decrease is primarily due to decreases in payroll
costs and fluctuations in the foreign currency exchange rate.

Dividends on preferred stock increased slightly from $55,000 in the second quarter of 2003 to
$58,000 in the second quarter of 2004 due to pro-rated dividends related to the issuance of $700,000 of Series D Convertible
Preferred Stock in June of 2004.

The above factors combined to result in net loss of  $200,000 in the second quarter of 2004
compared to  net income of $95,000 in the second quarter of 2003.  Net income per basic and diluted share was $0.04 for
the second quarter of 2003 compared to a net loss of $0.07 per basic and diluted share for the second quarter of 2004.  At
June 30, 2003, the number of basic weighted average shares outstanding were 2,632,000 compared to 2,682,000 at June 30,
2004.

Balance Sheet

Net accounts receivable decreased 36.7% from $1,230,000 at December 31, 2003 to $779,000 at June 30,
2004 primarily due to the collection of outstanding receivables and lower software license revenues invoiced. Prepaid marketing
expenses increased 308.5% from $200,000 at December 31, 2003 to $817,000 at June 30, 2004 due to an increase in prepaid expenses
related to sports sponsorships. Other prepaid expenses increased 22.0% from $791,000 at December 31, 2003 to $965,000 at June 30,
2004, primarily due to an increase in prepaid expenses related to third party software royalties.  Property and equipment
decreased 17.6% from $489,000 at December 31, 2003 to $403,000 at June 30, 2004 as a result of year-to-date depreciation partially
offset by new asset purchases.  Capitalized software decreased 18.8% from $2,966,000 at December 31, 2003 to $2,408,000 at
June 30, 2004 due to additional capitalization of $94,000 in development costs offset by to year-to-date amortization expense of
$652,000.  Intangible assets decreased 11.2% from $1,029,000 at December 31,2003 to $914,000 at June 30, 2004 due to $115,000
in year-to-date amortization expense.

Accounts payable increased 18.3% from $568,000 at December 31, 2003 to $672,000 at June 30, 2004 due
to the timing of payment of certain payables. Deferred revenue decreased 13.2% from $1,429,000 at December 31, 2003 to $1,240,000
at June 30, 2004 due to six months of revenue recognition of annual maintenance contracts billed in advance at year end, offset by
billings and amortization of current year annual maintenance renewals.  Accrued employee compensation decreased 45.9% from
$368,000 at December 31, 2003 to $199,000 at June 30, 2004 due to the payment of commissions and incentives during the first six
months of 2004 which were accrued at year end 2003 and lower second quarter 2004 incentive accruals. Borrowings at June 30, 2004
remained at $500,000, the initial draw on the Company’s Line of Credit with RBC Centura. Other accrued liabilities decreased
55.8% from $532,000 at December 31, 2003 to $235,000 at June 30, 2004 primarily due to a decrease in and timing of the accrued VAT
payable in the UK.

17

Liquidity and Capital Resources

As of June 30, 2004, the balance of cash and cash equivalents was $1,861,000 compared to $2,704,000
at December 31, 2003.

During the year 2003, 55.2% of our total revenue was attributed to our relationship with Electronic
Data Systems Ltd, a leading global services company.  During the first six months of 2004,
this same relationship accounted for 16.4% of total revenues.  Although we successfully completed implementation of their
multi-year services project, we continue to provide additional services and receive support and maintenance revenues from this
customer.  Our revenues could significantly decrease from 2003 levels if the services revenue we derived from the delivered
multi-year contract is not replaced with other customer accounts.

On July 29, 2003, we signed a one-year “Revolving Credit Facility” loan with RBC Centura
whereby we were able to borrow up to $1,000,000. On July 29, 2004, the Company renewed its Revolving Line of Credit with RBC
Centura, which lowered the maximum amount we may borrow under the facility to a maximum of $500,000. We had borrowings of $500,000
against the line of credit as of June 30, 2004. The Revolving Facility bears interest at a variable rate equal to the one month
London Interbank Offered Rate (LIBOR) plus 300 basis points, or the “RBC Centura Prime Rate” plus 0.50%, at our option.
The weighted average interest rate for the three months ended June 30, 2004 was 4.10%.  The Revolving Line of Credit is
available on a non-formula basis. All loans under the facility are secured by the assets of the Company.  The maturity date is
July 27, 2005.  The Company must comply with certain financial covenants per the terms of the agreement.  As of June 30,
2004, the Company was in compliance with the required covenants.

During June 2004, the Company issued 7,000 shares of Series D Convertible Preferred Stock in a
private placement. The Company received $700,000 in gross proceeds and incurred approximately $20,000 in expenses related to this
offering.  The Company intends to use the net proceeds of the Series D Convertible Preferred Stock for working capital and
general corporate purposes including further marketing and sales efforts in connection with its vertical market strategy in the
Sports and Entertainment industry.

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

We have no material commitments for capital expenditures.  We do not believe that inflation has
historically had a material effect on our Company's results of operations.

##### Item 3.  Quantitative and Qualitative Disclosures About Market Risk

The Company is subject to market risk exposures of varying correlations and volatilities, including
interest rate risk and foreign exchange rate risk.  Currently, the Company maintains its cash position in money market funds
and other bank accounts.  The Company does not currently engage in hedging activities or otherwise use derivatives to alter
the interest characteristics of its financial assets.  Although a decrease in interest rates could reduce our interest income,
at this time management does not believe a change in interest rates will materially affect the Company's financial position or
results of operations.

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

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

18

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 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.

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

##### 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 ProceedingsNot
Applicable

Item 2.    Changes in SecuritiesNot Applicable

Item 3.    Defaults Upon Senior SecuritiesNot
Applicable

Item 4.    Submission of Matters to a Vote of Security Holders

The Annual Meeting of Shareholders was held on May 6, 2004, in Atlanta, Georgia, at which the
following matters were submitted to a vote of the shareholders:

1. 
Votes cast for or withheld regarding the election of two (2) Directors for a term of three
years.

> Name of Nominee
> 
> 
> Votes For
> 
> Votes Withheld
> 
> Non-votesDavid R. Simmons
> 
> 2,957,075
> 
> 49,484
> 
> 332,393John N. Spencer, Jr.
> 
> 2,907,979
> 
> 98,580
> 
> 332,393

Both Nominees for Director were elected by a majority.

2. 

Votes cast for the ratification of the classification of the director positions into three classes
     which will serve staggered three-year terms.

> Votes For
> 
> Votes Against
> 
> Abstain
> 
> Non-votes882,783
> 
> 205,023
> 
> 2,168
> 
> 2,248,978

Due to broker non-votes, we were not able to complete a formal ratification from shareholders. The
non-ratification has no impact on the mandate of the classification of the Board as required by the Company’s Articles of
Incorporation. The Board will continue to be classified as specified in the proxy statement dated April 1, 2004.

19

Item 5.    Other InformationNot Applicable

Item 6.    Exhibits and Reports on Form 8-K

|a. | Exhibit 10.34  Second Amendment to Loan Agreement and Revolving Line of Credit Note by and
between Firstwave Technologies, Inc. and RBC Centura Bank.                                 
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | Exhibit 31.1 Certification of Periodic Report by the Chief Executive Officer
    pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.                                   
|   | Exhibit 31.2 Certification of Periodic Report by the Chief Financial Officer
    pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.                                   
|   | Exhibit 32 Certification of Chief Executive Officer and Chief Financial Officer
pursuant to 18 U.S.C. Section 1350.                                                                   
|b. | Reports of Form 8-K filed during the quarter ended June 30, 2004:                                                                                                                     
|   | On April 27, 2004, Firstwave filed a current report on Form 8-K with the press release of April 27,
2004 reporting financial results for the first quarter of 2004.                   
|   | On June 18, 2004, Firstwave filed a current report on Form 8-K with the press release of June 18,
2004 reporting the issuance of 7,000 shares of Series D Convertible Preferred Stock.



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:   August 11, 2004 | /s/ Judith A. Vitale Judith A. Vitale
 Chief Financial Officer
 (Principal Financial Officer)











20