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FORM 10-K

SECURITIES AND EXCHANGE
COMMISSIONWashington, DC 20549

|(Mark One)
|----------
|x         
|          

OR

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

Commission File Number:  0-21202

Firstwave Technologies, Inc.(Exact name of registrant
as specified in its charter)

|Georgia                                                              |  | 58-1588291                       
|-------------------------------------------------------------------- |  | ---------------------------------
|(State
  or other jurisdiction of
  incorporation or organization)   |  | (IRS Employer Identification No.)
|                                                                     |  |                                  
|2859 Paces
  Ferry Road, Suite 1000, Atlanta, Georgia                |  | 30339                            
|(Address of principal executive offices)                             |  | (Zip Code)                       
|                                                                     |  |                                  
|Registrants
  telephone number, including area code: (770) 431-1200
|                                                                     |  |                                  
|Securities
  registered pursuant to Section 12(b) of the Act:       
|                                                                    
|None                                                                
|                                                                     |  |                                  
|Securities
  registered pursuant to Section 12(g) of the Act:       
|                                                                    
|Common Stock,
  $.0019 par value                                    
|(Title of Class)                                                    

Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YesxNoo

Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.o

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

Aggregate
market value of the voting stock held by non-affiliates of the Registrant,
based on the closing price as quoted on the Nasdaq Small Cap Market
on:   June 30, 2003:    $18,812,453

Number
of shares of Common Stock outstanding as of March 23, 2004:  2,673,808

DOCUMENTS
INCORPORATED BY REFERENCE

Portions
of the Companys definitive Proxy Statement for its Annual Meeting of
Shareholders to be held on May 6, 2004 are incorporated by reference into Part
III of this Report.

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Firstwave Technologies, Inc.
Annual Report on Form 10-K
For the Year Ended December 31, 2003

Table of Contents

|Part I     |                                                                                                   
|---------- | --------------------------------------------------------------------------------------------------
|           |                                                                                                   
|Item 1.    | Business                                                                                          
|           |                                                                                                   
|Item 2.    | Properties                                                                                        
|           |                                                                                                   
|Item 3.    | Legal
  Proceedings                                                                               
|           |                                                                                                   
|Item 4.    | Submission of
  Matters to a Vote of Security Holders                                             
|           |                                                                                                   
|Part II    |                                                                                                   
|           |                                                                                                   
|Item 5.    | Market for
  Registrants Common Stock and Related Stockholder Matters                            
|           |                                                                                                   
|Item 6.    | Selected
  Financial Data                                                                         
|           |                                                                                                   
|Item 7.    | Managements
  Discussion and Analysis of Financial Condition and Results of Operations           
|           |                                                                                                   
|Item 7A.   | Quantitative
  and Qualitative Market Risk Disclosure                                             
|           |                                                                                                   
|Item 8.    | Financial
  Statements and Supplementary Data                                                     
|           |                                                                                                   
|Item 9.    | Changes in and
  Disagreements with Accountants on Accounting and Financial Disclosure            
|           |                                                                                                   
|Item 9A.   | Controls and
  Procedures                                                                         
|           |                                                                                                   
|Part III   |                                                                                                   
|           |                                                                                                   
|Item 10.   | Directors and
  Executive Officers of the Registrant                                              
|           |                                                                                                   
|Item 11.   | Executive
  Compensation                                                                          
|           |                                                                                                   
|Item 12.   | Security
  Ownership of Certain Beneficial Owners and Management and Related Stockholder
  Matters
|           |                                                                                                   
|Item 13.   | Certain
  Relationships and Related Transactions                                                  
|           |                                                                                                   
|Item 14.   | Principal
  Accounting Fees and Services                                                          
|           |                                                                                                   
|Part IV    |                                                                                                   
|           |                                                                                                   
|Item 15.   | Exhibits,
  Financial Statement Schedules, and Reports on Form 8-K                                
|           |                                                                                                   
|Signatures |                                                                                                   

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Part I

Item
1.  Business

Safe Harbor
for Forward Looking Statements

Except for historical
information contained herein, this section and other parts of this Form 10-K
contain forward-looking statements within the meaning of various provisions
of the Securities Act of 1933 and the Securities Exchange Act of 1934. Such
forward-looking statements can generally be identified by words such as will,
expect, intends, believes, anticipates, should and words of similar
meaning. Firstwave Technologies, Inc. (Firstwave or the Company) notes that
the forward-looking statements involve a number of risks and uncertainties that
could cause actual results to differ materially from any such statement, such
as potential fluctuations in quarterly results due to delays in purchase
decisions and other adverse market conditions, whether the Company will be able
to continue diversification of its revenues, competition and technological
developments, the Companys capital requirements and other liquidity concerns,
the Companys ability to continue to comply with NASDAQ listing requirements,
and the size, timing, and contractual terms of orders, and also the risks and
uncertainties discussed under the caption Certain Factors Affecting Forward
Looking Statements in this Annual Report on Form 10-K. The information set
forth herein is provided as of the date hereof.

General

Headquartered
in Atlanta, Georgia, with an office in Surrey, England, Firstwave is a
leading provider of Customer Relationship Management (CRM) solutions to
mid-size and large-scale enterprises worldwide. Firstwave believes in the
basics: Take care of your customers and your customers will take care of you.
Our customer-first commitment goes far beyond service and support. Knowing our
customers business is our business.

Firstwaves corporate and
product mission reflects our customer-first commitment: To develop and
integrate the best software solutions to manage customer interactions and
information. We strive to provide our clients with effective CRM, robust
technology and the highest standard of customer service.

A leader in Sports and
High Tech CRM, Firstwave offers a suite of industry-focused solutions.
Firstwave CRM solutions are designed to help companies keep current customers
loyal, close more sales and capture more market share.  Our CRM solutions offer sales, marketing and
customer service automation and project and product quality management.

Firstwave CRM is adaptive
and scalable and easily integrates with existing systems. This allows for rapid
deployment and, typically, a lower total cost of ownership.

In March 2003, Firstwave
acquired Connect-Care, Inc., an Atlanta-based CRM company.  Connect-Cares focus was on delivering a CRM
solution for the high-tech industry. 
The Connect-Care products and management team have become an integral
part of Firstwaves software solutions and infrastructure.

Firstwave supports
several product lines: Firstwave CRM (includes eCRM and v.10 products),
Firstwave Sports, Firstwave Technology and TakeControl.

Firstwave
CRM Solutions

Firstwave
CRM

Firstwave provides
enterprise-wide CRM software solutions specifically designed for the sports
& entertainment and high-tech industries. By embracing a customer-focused
business strategy, Firstwaves CRM solutions help improve an organizations efficiency
enabling revenue growth, cost containment and customer retention.

Firstwave CRM handles the
collaboration and interaction between workforce, customers and prospects.
Through the use of Firstwave CRM, companies have the ability to increase revenue
growth, customer retention and employee productivity.

Firstwave offers a
variety of tools, applications and access options designed to enhance the
customer experience across the entire enterprise. Firstwave CRM consists of the
following modules:

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|Firstwave Analytics -
  Powerful customer analytics to drive customer strategy                        
|-------------------------------------------------------------------------------------------------------
|First-Sales - Easily
  manage sales cycle for increased revenue and efficiency                        
|First-Market -
  Comprehensive marketing campaign and content management                              
|First-Support - Increase
  customer satisfaction, retention and loyalty                               
|First-Survey - Keep a
  pulse on customer preferences through poll and survey management              
|First-Project - Streamline
  service delivery and project management                                  
|First-Quality - Close the
  customer feedback loop and quickly identify product issues                
|First-Web - Reduce
  customer support costs and improve communication through customized web
  portals

Firstwave Sports

Designed specifically for
todays sports organizations, Firstwave Sports is a powerful CRM and ticketing
integration software solution for national governing bodies, leagues,
collegiate athletics, professional teams and sports promoters. From a single
view of each individual participant, the Company believes that Firstwave Sports  promotes robust ticketing integration, fan
loyalty and participant management solutions for todays highly competitive
sports marketplace.

Sport

Firstwave Sports is a
robust database, organization and management solution that is designed to help
organizations drive revenue, increase targeted marketing and market discovery,
and reduce administration costs. 
Additionally, Firstwave Sports is designed to allow organizations to
improve day-to-day communication with members and participants of all levels.

Organizations use Firstwave
Sports to optimize internal administration capabilities, automate competition
scheduling and results posting, conduct online training and learning programs,
and drive revenue through the use of its analytics.

Club

Whether the organization
is a professional team, fan club, collegiate athletics program or league,
Firstwave Sports is designed to integrate all participant touch points
throughout an organization, while capturing valuable individual data. Firstwave
Sports helps organizations to manage each participant and fan interaction for
improved communication and results.

By capturing demographic
data and purchasing history on members, fans and participants, Firstwave Sports
provides an organizations sponsors and advertisers with increased value and
impact.

Event

Ticket sales, sponsors,
logistics, venues, catering, teams and referees are among the details that must
be managed to create a successful event. Firstwave Sports helps manage the
burden of event administration activities while capturing valuable demographics
about individual patrons for increased targeted cross-marketing and up-selling
opportunities.

The Firstwave Sports
solution encompasses league and event administration, venue management and
competition scheduling, a comprehensive ticketing and database system, and a
participant and fan management system. Additionally, via the web, event
attendees can access results, line-ups, game details and venue information.

Firstwave
Technology

Firstwave Technology is
an enterprise-wide CRM solution specifically designed for todays fast-paced
software and hardware company. Maintaining our customer-first commitment,
Firstwave Technology gives high tech companies the tools to improve operational
efficiency, maximize revenue and legacy investments, and increase customer
satisfaction, loyalty and retention.

Firstwave Technology
handles the collaboration and interaction between a companys workforce,
customers and prospects.

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Firstwaves CRM product
suite is built on Microsoft technologies and includes support for multiple
databases, including Oracle and Microsoft SQL. 
In addition to offering support for multiple database technologies,
Firstwave offers a plug-in based architecture allowing for a flexible approach
to changing business logic and new data sources.  We remain dedicated to our existing customers and continue to
pursue best-of-breed distributors on a global level while staying on the
cutting edge of the worlds most current technologies, including database
managers and operating systems.

TakeControl

The TakeControl suite
consists of CRM systems designed to optimize sales, marketing and customer
service operations through delivering highly functional solutions.

TakeControl Sales creates
a virtual sales environment through linking field and office personnel into a
powerful sales team by automating account and opportunity management
procedures.  Management tools include a
report writing facility, scheduling features, full account and contact details,
and graphical analysis tools.

TakeControl Marketing
pinpoints marketing opportunities to support and enhance differing marketing
campaigns. Specializing on capturing the information required from prospects
and customers, it delivers key facilities such as call scripting, mail merge,
order taking, and activity scheduling to provide a compilation of simplified,
yet precise, information.

TakeControl Customer
Support establishes a support center that builds customer satisfaction and
loyalty by providing support team members with instant access to customer
information to quickly log and trouble-shoot problems while shortening response
times.  It also identifies the trends of
calls received within the support center to enable future improvements based on
customer feedback.

Providing
value and enhancements to existing customers

We are committed to
providing value to our existing customers through post-sales consulting,
training, support services and product enhancements.  We seek to differentiate ourselves from our competitors not only
through our industry-focused solutions, product features and technology, but
also through an often overlooked yet critical business function  customer
service.  High customer satisfaction is
important to the success of Firstwave.

Leveraging
strategic alliances

We market our CRM
solutions through a combination of our direct sales channel and the efforts of
our strategic alliance partners.  By
leveraging the expertise of our strategic partners, we hope to focus on our
core competency of providing innovative industry-based solutions.  Our goal is to select strategic partners who
are strong providers of hardware, software, and consulting. In 2003, we forged
partnerships with new companies, including Business Objects.

Professional
Services

For nearly two decades,
Firstwave has maintained its customer-first commitment, stemming from a basic
customer service principle: Take care of your customers and your customers will
take care of you. From this philosophy comes the Firstwave client services
organization.

Firstwave client services
is dedicated to gaining a comprehensive understanding of each customer and
their values, business processes and critical business objectives. From this
understanding, Firstwave client services enables clients to optimize their use
of Firstwave CRM and services to achieve those objectives.

Firstwave client services
is also committed to finding out how clients can use Firstwave products and
services to enhance revenue opportunities and increase customer satisfaction.
Firstwave client services provides value to Firstwave customers through ongoing
support and maintenance programs.

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The Firstwave client
services organization is composed of four main components:

| |  | Client Relations                    
| | - | ------------------------------------
| |  | Professional Services
  (Consulting)
| |  | Technical Support                   
| |  | Firstwave University                

Firstwaves
customer-first commitment goes beyond service and support - knowing our
clients business is our business. In order to help our  customer achieve its goals, we focus on
clearly understanding all the nuances of our customers business and providing
a support system that compliments unique business requirements.

For our Firstwave
customers, our Client Relations offers:

| |  | Management of subscription
  services and renewals                 
| | - | -------------------------------------------------------------------
| |  | Efficient and reliable
  coordination between Firstwave departments
| |  | Net Satisfaction Index
  (NSI) Surveys                             
| |  | Customer advocacy                                                  
| |  | Customer-first commitment                                          

Client Relations is the
focal point for escalating concerns to all other Firstwave divisions. Part of
the Client Relations mission is to try to ensure that our customers see
tangible benefits from Firstwave subscription services like CustomCare,
technical support and software maintenance. Firstwave Client Relations provides
our customers organization with customer value reports and continuously seeks
feedback to help instill confidence in our products, services, knowledge and
experience.

Client Relations provides
documented customer interface processes, reliable delivery of service and
continuous improvement throughout the Company. Client Relations is committed to
sustaining and improving our customer service performance through the use of
best practices, NSI measurements and systematic analysis.

Firstwave professional
services uses a flexible, requirements-driven, implementation methodology that
scales from workgroup to enterprise environments. Proven through hundreds of
implementation projects, our approach can accommodate an entire range of
implementation options from big-bang to pilot project and fast follower
rollouts. We offer an array of services that promote customer self-sufficiency
and provide cost-effective utilization of consulting resources, for both new
and existing customers.

Firstwave
Professional Services include:

| |  | Planning Services -
  implementation planning, requirements gathering, consultation and call
  center/help desk process consulting                                   
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Design Services - web form
  design, application customization, custom report generation, First-Sync
  rules development, third party integration and data migration
| |  | Installation Services -
  deployment for web/application server, client/server application, database
  server and First-Sync/database synchronization               
| |  | Consulting Services -
  general consulting, project management, system audit and review                                                                              

Firstwave offers a highly
skilled team of support professionals to resolve any issues that may arise when
using Firstwave CRM. We strive to provide top-notch customer service through
clear and proven escalation paths, resolution procedures, tenured support staff
and an extensive FAQ library.

Working closely with the
development, quality assurance, professional services and client relations
teams, Firstwave support is dedicated to keeping our clients CRM investment at
peak performance. To compliment our telephone support services, we also provide
access to our help desk via fax, e-mail and web.

We offer:

| |  | Phone and e-mail support                                            
| | - | --------------------------------------------------------------------
| |  | Live 5 x 11 assistance                                              
| |  | Extended hours coverage for
  live assistance available upon request
| |  | Customer web resource                                               
| |  | Media fulfillment                                                   
| |  | Application version
  control/management                            

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Education
and Training

Firstwave University
offers in-depth training on all Firstwave products. These courses are designed
for the users, administrators and developers of the Firstwave suite of
applications. Firstwave University introduces best practices for using
Firstwave CRM by applying best practices structured around the unique business
needs of our customers organization. 
Customers can maximize their investment in CRM, while benefiting all
areas of the Company including marketing, sales, support and account
management.

Customer service
representatives, managers, systems administrators and others can attend classes
designed and presented specifically to meet their needs. They can choose to
take a complete training program for certification or a few specific courses
for targeted improvement.

Firstwave University has
a wide array of training and education courses to fit individual needs. Public
classes are regularly scheduled in our Atlanta corporate training center and in
our Surrey, England office. For our customers convenience, training can also
be conducted on-site at their preferred location.  Firstwave customers can view the latest training center schedule
and sign up for classes via our customer support portal, available at
http://support. firstwave.net.   We
charge customers for education and training services on a per-attendee basis
with a minimum daily charge.  For
classes conducted at customer sites, we charge a per-day rate for a set number
of attendees.

Sources
of Revenues, Pricing and Material Terms for Licensing Agreements

The first component of
revenue is software revenues, which consists of license fees.  The Companys CRM solutions are generally
licensed on a per-user model, except for hosting services offered as an option
for Firstwave Technology.  Customers
generally pay a license fee for the software based upon the number of licensed
users for the application as well as for the tool set.  Hosting allows organizations to deploy the
applications without the need for internal hardware infrastructure or system
administrative capabilities.  All
license fees are fixed and determinable, whether under the per-user model or
hosting model.

The second component of
our revenue is services, which consist of professional consulting, technical
services and training services.  Consulting
and technical services are charged on an hourly basis and may be billed in
advance or weekly, pursuant to customer work orders.  Training services are charged on a per-attendee basis with a
minimum daily charge.  For classes
conducted at customer sites, we charge a per-day rate for a set number of
attendees.  Actual travel expenses are
billed as incurred.  Hosting services
are priced as a monthly or yearly fixed amount based upon the number of users
and are recognized as services revenues ratably by month over the period of
services.

The third component is
maintenance revenues, which are derived from the provision of: (1) customer
support in the form of customer services via communication channels, and (2)
updates and enhancements of products and related documentation provided on a
when and if available basis.  Customers
are provided maintenance and support for an annual fee.  This fee is billed monthly, quarterly, or
annually and is subject to changes in pricing upon 90 days written notice to
the customer.

Customers

Firstwaves customers
operate in many industries, but we have a dedicated focus in the high-tech and
sports marketplaces.   Our
industry-focused solutions are developed specifically for the industries we
target, taking into consideration their unique needs, revenue sources and
customer demands.

During 2003, we continued
to have a concentration of revenue derived from our relationship with
Electronic Data Systems, Ltd., a leading global services company which is a
customer of our Firstwave UK subsidiary. 
The table shown below illustrates the percentage of total revenue EDS
contributed each year shown.

|                                |  | Year ended December 31, |     
|------------------------------- |  | ----------------------- | ----
|                                |  |                         |     
|                                |  | 2003                    |     
|                                |  |                         |     
|EDS as % of total YTD
  revenue |  |                         | 55.2
|                                |  |                         |     

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Except for software
license agreements and our services and support relationship with this customer
we have no other relationship with them.

We are pursuing
strategies to continue to transition our revenue stream away from dependency on
this one large customer to a more diverse customer base.  Although we anticipate future small projects
with this customer, the Companys software and services revenues will
significantly decrease if not replaced with other customer accounts or if we
have not successfully diversified the sources of our revenues pursuant to our
business strategies. The acquisition of Connect-Care and the release of our
Sports and Entertainment initiative have assisted in diversifying our customer
base.

Sales
and Marketing

In North America, we
market and sell our Firstwave CRM solutions and
services through direct sales and indirect channels.  International sales are accomplished by direct selling through
our United Kingdom office and, to a lesser extent, indirectly through
distributors in other countries.  The
North American Sales department, overseen by a senior level sales executive,
consists of Telesales Representatives (TR), Pre-Sales Engineers, and Account
Executives (AE).  The TRs initiate
contact with leads and qualify them using the telephone and the Internet as
primary tools.  Qualified leads are
turned over to AEs.  Our sales team
conducts a face-to-face meeting, scopes the requirements of the potential
customer with professional services, assists in providing a cost justification
for the purchase and provides references before closing business.

Our marketing department
is responsible for generating leads and promoting brand awareness and mind
share among CRM industry professionals and companies within our target
industries that are in need of a CRM solution. Primary marketing functions
include web-based direct marketing, traditional direct marketing, advertising,
public and analyst relations, vertical market research and development, search
engaging optimization, tradeshows, speaking opportunities and other
Internet-based marketing initiatives. 
Additionally, the marketing department is responsible for product
positioning and strategy, general product marketing activities, market research
and competitive analysis and provides competitive customer and prospect input
into our product development efforts.

Competition

Our competition comes
from a multitude of software vendors, including existing CRM vendors, new
web-based CRM vendors and ERP vendors who have penetrated the CRM industry
through acquisitions or product development.

Our primary competitors
in the United States are Peoplesoft, Epiphany, Onyx, Microsoft, UpShot, Pivotal,
and SalesLogix while in the United Kingdom we frequently compete against
Chordiant, Pega and Peoplesoft.  These
companies offer comprehensive packages, which include marketing, sales, and
service.  These companies also have
integrated some Internet technology into their products and have customization
capabilities within their product sets. 
SAP, Oracle and Siebel Systems, due to their large international
presence and market share, are also competitors at the enterprise level.  There are also hundreds of vendors
addressing the needs evident in this industry, including specialists who
provide cross-industry solutions and vertically focused solutions, such as for
pharmaceuticals or finance.

We compete on product
features and functionality specific to the industry we are competing in,
flexibility, .NET technology, product intuitiveness, distributor strategies and
value by placing an emphasis on customer and partner service and support.  Although we frequently compete favorably
with respect to these factors, there can be no assurance that we will be able
to achieve the innovation, product development and market share necessary to
maintain competitive advantage.

Proprietary
Rights and Licenses

We depend upon a
combination of trade secrets, copyright and trademark laws, license agreements,
non-disclosure and other contractual provisions with customers and employees to
protect our proprietary rights in our products.  We also maintain confidentiality agreements with our
employees.  Because Firstwave CRM allows
customers to customize their applications without altering the source code, the
source code for our products is neither licensed nor provided to customers,
although we have contractually agreed in certain instances to have our source
code held in escrow by a third party. 
Notwithstanding these precautions, it may be possible for

8

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unauthorized persons to
copy aspects of the products or to obtain information that we regard as
proprietary.  There can be no assurance
that these protections will be adequate or that competitors will not
independently develop technologies that are substantially equivalent or
superior to our technology.

Employees

As
of March 1, 2004, the Company employed 65 persons, including 13 sales and
marketing professionals, 26 service and support representatives, 13
administrative personnel and 13 persons involved in product innovation and
development. We also employ contractors from time to time to meet the
requirements of product deadlines and/or customer projects. We believe that the
Companys future growth and success will rely on our ability to retain and
attract highly skilled and motivated personnel in all areas of our
operations.

Certain
Factors Affecting Forward-Looking Statements

An investment in our
common stock involves a significant degree of risk. Prospective investors
should carefully consider the following factors that may affect our current and
future operations and prospects. If any of the following risks actually occur,
our business, financial condition or results of operations could be materially
adversely affected, the trading price of our common stock could decline, and
you may lose all or part of your investment.

Negative
cash flow and the difficulty of raising additional capital may adversely affect
our operations and the price of our common stock.

With the exception of the
years ended December 31,2001 and 2002, we have experienced negative cash flows
and may experience negative cash flow in the future.  We require significant amounts of capital to fund our business operations
and product development efforts.  The
rate at which our capital is utilized is affected by the operational,
acquisition and developmental costs we incur and our ability to generate sales,
services and maintenance revenues.

If we are unable to generate
sufficient cash from operations, we will evaluate alternative means of
financing to meet our needs.  We cannot be certain that additional financing
will be available on favorable terms if or when we require it, or if it will be
available at all.  If we are unable to 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 affect on our business, financial condition and
ability to reduce losses or generate profits.

In the past, we have
funded our operating losses and working capital needs through cash flow from
operations and from the proceeds of equity offerings and debt financings.  If we raise additional funds through the
issuance of equity, equity-linked or debt securities, those securities may have
rights, preferences or privileges senior to those of the rights of our common
stock and, in light of our current market capitalization, our shareholders may
experience substantial dilution.

In July 2003, the Company
entered into a Revolving Credit facility with RBC Centura whereby the Company
may borrow up to $1.0 million.  As part
of the agreement, the Company made certain financial covenants, which it must
continue to meet for the term of the facility. 
In December 2003, the Company was not in compliance with these covenants
and requested a waiver and a modification of the terms.  On March 1, 2004, RBC Centura granted the
waiver and modified the terms of the covenants.  The Company cannot guarantee that it will not again fail to
comply with the covenants.  In addition,
if such failure occurs, the Company cannot guarantee that waivers will be
obtained or that future modifications of these covenants may occur.  If the Company is unable to comply with the
terms of the financial covenants, obtain a waiver from such covenants or modify
the covenants, RBC Centura may demand immediate payment of amounts outstanding
or take possession of the Companys assets.

Our
revenues have been highly dependent upon a limited number of customers; if
these customers decrease or cease purchasing our software and services, our
revenues would significantly decrease if we were unable to replace these customers.

During 2003, we continued
to have a concentration of revenue derived from our relationship with
Electronic Data Systems, Ltd., a leading global services company which is a
customer of our Firstwave UK 
subsidiary.  The table shown
below illustrates the percentage of total revenue EDS contributed each year
shown.

|                                |  | Year ended December 31, |     
|------------------------------- |  | ----------------------- | ----
|                                |  |                         |     
|                                |  | 2003                    |     
|                                |  |                         |     
|EDS as % of total YTD
  revenue |  |                         | 55.2
|                                |  |                         |     

9

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We are pursuing
strategies to continue to transition our revenue stream away from dependency on
this one large customer to a more diverse customer base.  Although we anticipate future small projects
with this customer, the Companys software and services revenues will
significantly decrease if not replaced with other customer accounts or if we
have not successfully diversified the sources of our revenues pursuant to our
business strategies.

We have
in the past and may in the future experience significant fluctuations in our
operating results and rate of growth, and the price of our common stock may be
adversely affected by these fluctuations.

Our quarterly operating
results have in the past and may in the future vary or decrease significantly
depending on factors such as:

| |  | the effect of past and future acquisitions,                                          
| | - | -------------------------------------------------------------------------------------
| |  | the size and timing of significant orders,                                           
| |  | the impact of estimates of our future operating
  results published by third parties,
| |  | the timing of revenue from software sales and
  professional services,               
| |  | the timing of new product and service announcements,                                 
| |  | changes in pricing policies by us and our
  competitors,                             
| |  | market acceptance of new and enhanced versions of
  our products,                    
| |  | changes in operating expenses,                                                       
| |  | changes in our strategy,                                                             
| |  | personnel changes,                                                                   
| |  | the introduction of alternative technologies, and                                    
| |  | general economic factors.                                                            

We have limited or no
control over many of these factors. 
Investors are cautioned that as a matter of policy we do not provide
earnings projections or guidance to any financial analysts or other publishers
of financial reports. If we change this policy, which we do not anticipate, we
will make a public announcement regarding such change.  Until such time, if any, you should not rely
upon any such information, reports, statements, estimates or projections of
financial analysts, publishers of financial reports or others as having been
provided or endorsed by us.  We
expressly do not adopt or endorse, and expressly disclaim, any and all such
independent third party information, reports, statements, estimates and
projections.

Our expense levels are
based, in part, on our expectations as to future revenues. If revenue levels
are below our expectations, we may be unable or unwilling to reduce expenses
proportionately and our operating results are likely to be adversely affected.
As a result, we believe that period-to-period comparisons of our results of
operations are not necessarily meaningful and should not be relied upon as
indications of future performance. Due to all these factors, it is likely that
in some future quarter our operating results will be below the expectations of
investors. In that event, the price of our common stock will likely be adversely
affected.

We have
foreign exchange risk related to our wholly owned subsidiary located in Surrey,
England, and fluctuations in exchange rates could affect our revenues.

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 the subsidiary
are translated from the local currency into U.S. Dollars upon
consolidation.  As exchange rates vary,
net sales and other operating results, when translated, may differ materially
from expectations. During 2003, the average foreign currency exchange rate
increased 8% compared to exchange rates during 2002.  This rate increase accounted for approximately $598,000 in total
revenue during 2003.  The average foreign
currency exchange rate during 2002 increased 3% compared to exchange rates
during 2001.  This rate increase
accounted for an increase of revenue of approximately $215,000 during 2002.  The average foreign currency exchange rate
during 2001 decreased 5% compared to exchange rates during 2000.  This rate decrease accounted for a decrease
of revenue of approximately $158,000 in 2001.

10

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Our
stock price has been and may continue to be highly volatile.

The trading price of our
common stock fluctuates significantly. 
Trading prices of our common stock may fluctuate in response to a number
of events and factors such as:

| |  | general economic conditions,                    
| | - | ------------------------------------------------
| |  | conditions or trends in the CRM industry,       
| |  | fluctuations in the stock market in general, and
| |  | quarterly variations in operating results.      

Decreases
or delays in our target customers information technology spending and other
circumstances that result from poor economic conditions may harm our revenues;
if general economic conditions do not improve or worsen, our revenues may be
materially harmed.

Some of our customers and
prospective customers have indicated that they have reduced their budgets
available for spending on outsourced technology applications or have delayed
purchase decisions for information technology products like ours due, in part,
to difficult economic conditions.  If
the economy does not improve or worsens our customers may continue to delay or
reduce their spending on CRM software and customization. When economic
conditions weaken, sales cycles for sales of software products tend to lengthen
and companies information technology budgets tend to be reduced. Accordingly,
our revenues could suffer and the price of our common stock may decline and we
may experience a material adverse impact on our business, operating results,
and financial condition.

The
market for our CRM software and services is subject to rapid change stemming
from customer requirements and changes in related technologies, including
hardware, operating systems and telecommunications; if we fail to improve our
products in response to these changes, our sales may decline.

The market for our CRM
software and services is subject to rapid change, including technological
advances, changes in customer requirements and frequent new product introductions
and enhancements. Our future success depends upon our ability to enhance our
current products and continue to develop and market new products that maintain
technological leadership, address the increasingly sophisticated needs of
customers and achieve broad market acceptance. In particular, we believe that
we must continue to respond quickly to customer needs for additional
functionality and to ongoing advances in hardware, operating systems and
telecommunications. Any failure by us to anticipate or respond rapidly to
technological advances, new products and enhancements and changes in customer
requirements could have a material adverse affect on our competitive position
or render some of our products obsolete or less desirable than available alternatives.

With the release of
Firstwave Sports and any other new product release, we are subject to the risks
generally associated with new product introductions and applications, including
lack of market acceptance, delays in development and implementation, and
failure of products to perform as expected. In order to introduce and market
new or enhanced products successfully with minimal disruption in customer
purchasing patterns, we must manage the transition from existing products.
There can be no assurance that we will be successful in developing and
marketing, on a timely basis, product enhancements or products that respond to
technological advances by others, that our new products will adequately address
the changing needs of the market or that we will successfully manage product
transitions. Further, failure to generate sufficient cash from operations or
financing activities to develop or obtain improved products and technologies
could have a material adverse effect on our results of operations and financial
condition.

To grow
our business, we may acquire additional companies, including by issuing shares
of our stock, which may subject us to additional risks and may dilute your
ownership.

To initiate our growth
strategies, we acquired Connect-Care, Inc. and we may acquire other
businesses.  An inability to identify,
acquire and integrate businesses, products or services that complement our
business may negatively affect our ability to grow.  We cannot guarantee that we will be able to identify and acquire
suitable candidates on acceptable terms. 
We also cannot provide any assurance that we will be able to arrange
adequate financing, complete additional transaction or successfully integrate
the acquired businesses.  As in the case
of the Connect-Care merger, we may issue shares of stock in future acquisitions
or in financing transactions, which would dilute the ownership percentages of
our existing shareholders.  Acquisitions
and stock offerings may also distract management and result in the incurrence
of debt, expenses related to goodwill and other intangible assets and
unforeseen liabilities, all of which could have a material adverse effect on
our business and financial condition. 
In addition, we may not be able to successfully compete with other
companies

11

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for acquisition
candidates. In order for any acquisition to be successful, we would have to
successfully and quickly integrate the new business with our business,
including:

| |  | cross-market and sell our services and products to
  the new business customers;                                  
| | - | -------------------------------------------------------------------------------------------------------------------
| |  | minimize duplicative managerial, sales and marketing
  efforts and eliminate redundant costs of our operations; and
| |  | make the new business personnel operate together
  with our personnel in a cost-effective manner.                 

If we do not integrate
our operations successfully, we may fail to achieve our business goals.  This would likely cause a slow-down in our
growth rate that may result in a decrease in the value of your investment.

Our CRM
software products, like most software products of a complex nature, may contain
undetected errors; as a result, we could experience delays, additional expenses
or lost revenues.

Software products as
complex as those we offer may contain undetected errors.  We could experience delays or lost revenues
during the period required to correct those errors. There can be no assurance
that, despite testing by us and by current and potential customers, errors will
not be found in our software.  If our
products are found to contain errors, the result to us could be:

| |  | a loss of or delay in market acceptance,                                                            
| | - | ----------------------------------------------------------------------------------------------------
| |  | additional and unexpected expenses to fund further
  product development,                           
| |  | additional and unexpected expenses to add
  programming personnel to complete a development project,
| |  | loss of revenue because of the inability to sell the
  new product on a timely basis, and           
| |  | loss of revenue due to adverse effect on our
  reputation,                                          

any one or more of which
could have a material adverse affect on us.

Like
most providers of complex software, our most valuable asset is an intangible,
intellectual property; protection of our proprietary rights can be difficult,
complex and expensive; if we are unable to protect our proprietary rights, then
our competitive position could be weakened, which may reduce our revenues.

We derive a significant portion
of our revenues from license, service and maintenance fees generated from our
software.  We do not have any patents on
our software; rather we rely on a combination of trade secrets, copyright and
trademark laws, non-disclosure and other contractual provisions and technical
measures to protect our proprietary rights. 
We may be required to spend significant resources to monitor and police
our proprietary rights. There can be no assurance that these protections will
be adequate or that our competitors will not independently develop technologies
that are substantially equivalent or superior to our technologies.

Other software providers
could copy or otherwise obtain and use our products or technology without
authorization. They also could develop similar technology independently which
may infringe our proprietary rights. We may not be able to detect infringement
and may lose a competitive position in the market before we do so. In addition,
competitors may design around our technology or develop competing technologies.
The laws of some foreign countries do not protect proprietary rights to the
same extent as the laws of the United States. If we fail to successfully
enforce our proprietary rights, our competitive position may be harmed.

Because
it is not difficult to enter our industry, we expect increased competition from
the introduction of superior products or by pricing pressure from competitors,
all of which could harm our business.

The market for our
products is characterized by significant price competition, and we expect that
we will face increasing pricing pressures from our current competitors. In
addition, some of our competitors may have significant advantages including the
ability to adapt quickly to new technologies and changes in customer demands,
and substantially greater resources and market presence.  For example, Microsoft Corporation launched
its CRM product in late 2002 and may decide to pursue companies that we target
as our customers, which could cause us to lose customers or fail to attract new
customers for our products.  Moreover,
because there are low barriers to entry into the software market, we believe
that competition will increase in the future. Accordingly, there can be no
assurance that we will be able to provide products that compare favorably with
the products of our competitors or that competitive pressures will not require
us to reduce our prices. Any material reduction in the price of our products
would negatively affect gross margins as a percentage of new revenue and would
require us to increase software unit sales in order to maintain net revenues.

12

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The
terms of our preferred stock include preferences over our common stock and the issuance of additional
shares of preferred stock may have a material adverse effect on the market
value of our common stock.

Our board of directors
has the authority to issue up to 1,000,000 shares of preferred stock and to fix
the rights, preferences, privileges and restrictions, including voting rights,
of these shares without any further vote or action by our shareholders.  At December 31, 2003 shares of outstanding
preferred stock were as follows:

| |  | 10,000 shares of Series A Convertible Preferred
  Stock
| | - | -------------------------------------------------------
| |  | 7,020 shares of Series B Convertible Preferred Stock   
| |  | 10,000 shares of Series C Convertible Preferred
  Stock

The rights of the holders
of the common stock are subject to, and may be adversely affected by, the
rights of the holders of Series A, Series B and Series C Convertible Preferred
Stock and any other preferred stock that may be issued in the future. The
issuance of the Series A, Series B and Series C Convertible Preferred Stock and
any future issuances of other classes of preferred stock, while providing
desirable flexibility in connection with possible acquisitions and other corporate
purposes, could have the effect of making it more difficult for a third party
to acquire a majority of our outstanding voting stock, thereby delaying,
deferring or preventing a change in control of our company. Furthermore, the
Series A, Series B and Series C Convertible Preferred Stock have other rights,
including economic rights, senior to the common stock and, as a result, the
existence of our preferred stock may have a material adverse effect on the
market value of our common stock. Any future issuances of other classes of
preferred stock may have other rights, including economic rights, senior to the
common stock, and as a result, the issuance of new preferred stock could have a
material adverse effect on the market value of our common stock. We may, in the
future, adopt other measures that may have the effect of delaying, deferring or
preventing a change in control of our company. Some of these measures may be
adopted without any further vote or action by our shareholders. We have no
present plans to adopt any of those types of measures.

We are
reliant upon certain key personnel for expertise in the CRM software market and
in the technical aspects of the CRM software product; the loss of such key
personnel could affect our ability to successfully grow our business.

We depend in large part
upon the continued service of our executive officers and other key sales,
engineering and technical staff with expertise in our industry and products.
The loss of the services of our executive officers and other key personnel
could harm our operations. Currently, none of our officers or key personnel are
bound by an employment agreement, and we do not maintain key person insurance
on any of our employees. We would also be harmed if one or more of our officers
or key employees decided to join a competitor or otherwise compete with us.

The
market for CRM software has fluctuated over the past several years, and we are
uncertain as to its future; if the market for CRM software does not grow, our
revenues may be reduced.

The CRM software market
is fluctuating, and our success depends on its growth. If the market for CRM
software does not grow as quickly or become as large as anticipated, our
revenues may be reduced.  Our potential
customers may:

| |  | not understand or see the benefits of using these
  products,                
| | - | -----------------------------------------------------------------------------
| |  | not achieve favorable results using these products,                          
| |  | experience technical difficulty in implementing or
  using these products, or
| |  | use alternative methods to solve the same business
  problems.               

In addition, because our
products can be used in connection with internet commerce and we are currently
developing additional internet commerce solutions, if the internet commerce
market does not grow as quickly as anticipated, we may experience sales which
are lower than our expectations.

Our
products can have long sales cycles which makes it difficult to plan expenses
and forecast results.

It takes between three
and six months to complete the majority of our sales, and some sales take
longer to complete. Therefore, it is difficult to predict the quarter in which
a particular sale will occur and to plan expenditures accordingly. The length
of the period between initial contact with a potential customer and their
purchase of products and services is due to several factors, including:

| |  | the complex nature of our products,
| | - | -----------------------------------

13

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| |  | our need to educate potential customers about the
  uses and benefits of our products,                                   
| | - | -------------------------------------------------------------------------------------------------------------------------
| |  | the purchase of our products may require a
  significant investment of resources by a customer,                          
| |  | customer budget cycles which affect the timing of
  purchases,                                                           
| |  | uncertainty regarding future economic conditions,                                                                        
| |  | customer requirements for competitive evaluation and
  internal approval before purchasing our products,                 
| |  | customer delay of purchases due to announcements or
  planned introductions of new products by us or our competitors, and
| |  | large customer purchasing procedures, which may
  require a longer time to make decisions.                               

The delay or failure to
complete sales in a particular quarter could reduce our revenues in that quarter,
as well as subsequent quarters over which revenues for the sale would likely be
recognized. If our sales cycle unexpectedly lengthens in general or for one or
more large orders, it would adversely affect the timing of our revenues.

Because
our business involves the electronic transmission and storage of data, privacy
and security concerns, particularly related to the use of our software on the
internet, may limit the effectiveness of and reduce the demand for our
products.

The effectiveness of our
software products relies on the storage and use of customer data collected from
various sources, including information collected on web sites, as well as other
data derived from customer registrations, billings, purchase transactions and
surveys. Our collection and use of that data for customer profiling may raise
privacy and security concerns. Our customers generally have implemented
security measures to protect customer data from disclosure or interception by
third parties. However, these security measures may not be effective against
all potential security threats. If a well-publicized breach of customer data
security were to occur, our software products may be perceived as less
desirable, impacting our future sales and profitability.

In addition, due to privacy
concerns, some internet commentators, consumer advocates, and governmental or
legislative bodies have suggested legislation to limit the use of customer
profiling technologies. The European Union and some European countries have
already adopted some restrictions on the use of customer profiling data. In
addition, internet users can, if they choose, configure their web browsers to
limit the collection of user data for customer profiling. Should many internet
users choose to limit the use of customer profiling technologies, or if major
countries or regions adopt legislation or other restrictions on the use of
customer profiling data, our software would be less useful to customers, our
sales could decrease and our results of operations could be materially adversely
affected.

Item
2.  Properties.

As of December 31, 2003,
the Companys headquarters and principal operations were located in
approximately 17,000 square feet of leased office space in metropolitan
Atlanta, Georgia. This lease, which expires in October 2005, includes scheduled
base rent increases over the life of the lease.  Our United Kingdom operation leases approximately 4,000 square
feet of office space located in Surrey, England pursuant to a new lease that
expires in December 2006, but may be terminated earlier by either party with
six months notice. Although this amended UK lease has taken effect,
documentation has not been finalized. The total amount of base rent is being
charged to rent expense on the straight-line method over the term of both
leases.

Item
3.  Legal Proceedings.

From time to time, the
Company may be involved in litigation relating to claims arising out of its
operations in the normal course of business. 
As of the date of this Report, the Company was not engaged in any legal
proceedings that are expected, individually or in the aggregate, to have a
material adverse effect on the Company.

In July of 2003,
Firstwave filed a complaint with the Cobb County, Georgia Superior Court
seeking the identity of the person or persons who accessed the Companys
website thousands of times in a short period, allegedly accessed information
that they knew or should have known was material non-public information of the
Company, and published such information on a message board and possibly traded
stock of the Company on the basis of this material non-public information.  After discovery of the identity of the
person, the Company dismissed the action and turned the matter over to the U.S.
Securities and Exchange Commission for investigation.  The Company and its counsel have met with the enforcement
division of the U.S. Securities and Exchange Commission and intend to cooperate
fully in the investigation and prosecution of this individual.

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

None

14

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PART II

Item
5.  Market for Registrants Common Stock
and Related Stockholder Matters.

Our common stock is
traded on the NASDAQ SmallCap Market under the symbol FSTW. The following
table sets forth, for the calendar quarters indicated, the high and low close
prices of the Companys common stock.

|2003 |  | First
  Quarter |       | Second
  Quarter |   | Third
  Quarter |  | Fourth
  Quarter |      | 2002 |   | First
  Quarter |  | Second
  Quarter |  | Third
  Quarter |      | Fourth
  Quarter |  
|---- |  | --------------- | ----- | ---------------- | - | --------------- |  | ---------------- | ---- | ---- | - | --------------- |  | ---------------- |  | --------------- | ---- | ---------------- | -
|     |  |                 |       |                  |   |                 |  |                  |      |      |   |                 |  |                  |  |                 |      |                  |  
|High |  | $               | 17.79 |                  | $ | 20.41           |  | $                | 9.40 |      | $ | 6.89            |  | High             |  | $               | 4.24 |                  | $
|Low  |  | $               | 10.23 |                  | $ | 7.80            |  | $                | 6.61 |      | $ | 4.15            |  | Low              |  | $               | 1.35 |                  | $
|     |  |                 |       |                  |   |                 |  |                  |      |      |   |                 |  |                  |  |                 |      |                  |  

As
of December 31, 2003, there were approximately 71 shareholders of record and
approximately 3,100 persons or entities that hold common stock in nominee
name.  There were no common stock
dividends declared during 2003 or 2002. 
Pursuant to a merger agreement, on March 3, 2003 Firstwave issued
200,000 shares of common stock to the shareholders of Connect-Care, Inc. in
exchange for all outstanding shares of Connect-Care stock.  These 200,000 shares, valued at $2,630,000,
were registered effective July 25, 2003.

Item
6.  Selected Financial Data.

The
following table sets forth selected financial data about the Company for each
of the last five fiscal years.  The
information presented below has been derived from the Companys audited
financial statements.

|                                                      |  | For the Year Ended December 31,            |       
|----------------------------------------------------- |  | ------------------------------------------ | ------
|                                                      |  | (In thousands, except per share
  amounts) |       
|                                                      |  |                                            |       
|                                                      |  | 2003                                       |       
|                                                      |  |                                            |       
|                                                      |  |                                            |       
|Net revenues                                          |  | $                                          | 11,904
|Income/(loss) before income
  taxes                   |  |                                            | (774  
|Income tax (provision)/benefit                        |  |                                            | (1    
|Net income/(loss)                                     |  |                                            | (775  
|Net income/(loss)
  applicable to common shareholders |  |                                            | (996  
|Basic earnings/(loss) per
  share                     |  |                                            | (0.39 
|Diluted earnings/(loss) per
  share                   |  |                                            | (0.39 
|Total assets                                          |  |                                            | 11,807
|Redeemable preferred stock                            |  |                                            | -     
|Basic weighted average
  shares outstanding           |  |                                            | 2,572 
|Diluted weighted average
  shares outstanding *       |  |                                            | 2,572 

*Stock
options and convertible preferred stock are not included in the diluted
earnings per share if they are antidilutive

Item
7. Managements Discussion and Analysis of Financial Condition and Results of
Operations.

The following discussion should be read in conjunction with
the Financial Statements and Notes thereto presented elsewhere herein. This
section contains forward-looking statements that reflect the Companys
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 previously under the caption Certain Factors
Affecting Forward-Looking Statements and the discussion below in Managements Discussion
and Analysis of Financial Condition and Results of Operations.

Overview

Firstwave is a leading
provider of CRM solutions to mid-size and large-scale enterprises worldwide.
Firstwaves corporate and product mission reflects our customer-first
commitment: To develop and integrate the best

15

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software solutions to
manage customer interactions and information. 
As a provider of sports and high tech CRM, Firstwave offers a suite of
industry-focused solutions.  Firstwave
CRM is adaptive, scalable and easily integrates with existing systems.  Headquartered
in Atlanta, Georgia, with an  office in Surrey, England, Firstwave supports several product
lines:  Firstwave CRM (includes eCRM and
v.10 products), Firstwave Sports, Firstwave Technology (Connect-Care) and
TakeControl.

On March 3, 2003,
Firstwave acquired Connect-Care, Inc. a provider of CRM software solutions for
software companies. In exchange for all outstanding shares of Connect-Care
stock, Firstwave issued 200,000 shares of Firstwave common stock, with a market
value of $2,630,000, to the shareholders of Connect-Care and granted such
shareholders certain registration rights. 
The results of Connect-Cares operations have been included in the
Companys financial statements since March 3, 2003.

The Company has recently
announced agreements with three sports organizations, sports coach UK,
ChampionsWorld LLC, and All England Lawn Tennis & Croquet Club (AELTC) for
Wimbledon championships.  sports coach
UK is the UKs leading coaching authority and has selected Firstwave to provide
its CRM and coaching management solution. 
ChampionsWorld is a major U.S.-based sports promoter and chose Firstwave
to provide a fan management solution and support to its event management
needs.  The agreement with
ChampionsWorld has a recurring revenue component under which Firstwave expects
to receive revenue from tickets and fan memberships annually over the next four
years.  AELTC intends to use Firstwave
for its overall event administration. 
The sports coach UK and ChampionsWorld agreements were signed in
December 2003, and the agreement with AELTC was signed in 2004.  While we are unable to give any assurance
that we will recognize substantial revenues in the future, we believe that the
combination of these three agreements has the potential to allow us to generate
significant revenue cumulatively over the next four years. Because we are not
yet able to anticipate with any certainty the revenues that we may generate
under these agreements, this Annual Report on Form 10K, including this
Managements Discussion section, does not include any projected revenues from
these agreements.

Results
of Operations

The following table sets
forth for the periods indicated selected financial data and the percentages of
our net revenues represented by each line item presented.  It also sets forth the percentage change in
each line item presented from 2002 to 2003. 
Certain percentage columns do not add to 100% due to rounding.

|                                  |                                | Year Ended December 31, |      | Year Ended December 31, |      | % Change | 
|--------------------------------- | ------------------------------ | ----------------------- | ---- | ----------------------- | ---- | -------- | 
|(in
  thousands)                  |                                | 2003                    |      | % of revenue            |      | 2002     | 
|                                  |                                |                         |      |                         |      |          | 
|                                  |                                |                         |      |                         |      |          | 
|Revenues                          |                                |                         |      |                         |      |          | 
|                                  | Software                       |                         | $    | 3,820                   |      | 32.1     | 
|                                  | Services                       |                         |      | 5,423                   |      | 45.6     | 
|                                  | Maintenance                    |                         |      | 2,608                   |      | 21.9     | 
|                                  | Other                          |                         |      | 53                      |      | 0.4      | 
|                                  |                                |                         |      |                         |      |          | 
|                                  | Net
  revenues                 |                         |      | 11,904                  |      | 100.0    | 
|                                  |                                |                         |      |                         |      |          | 
|                                  |                                |                         |      |                         |      |          | 
|Costs and expenses                |                                |                         |      |                         |      |          | 
|                                  | Cost of
  revenues             |                         |      |                         |      |          | 
|                                  | Software                       |                         |      | 1,239                   |      | 10.4     | 
|                                  | Services                       |                         |      | 3,135                   |      | 26.3     | 
|                                  | Maintenance                    |                         |      | 609                     |      | 5.1      | 
|                                  | Other                          |                         |      | 53                      |      | 0.4      | 
|                                  | Sales and
  marketing          |                         |      | 3,970                   |      | 33.4     | 
|                                  | Product
  development          |                         |      | 1,349                   |      | 11.3     | 
|                                  | General
  & administrative     |                         |      | 2,348                   |      | 19.7     | 
|                                  |                                |                         |      |                         |      |          | 
|                                  | Total
  operating cost and exp |                         |      | 12,703                  |      | 106.7    | 
|                                  |                                |                         |      |                         |      |          | 
|Operating income/(loss)           |                                |                         | (799 | )                       | (6.7 | )        | 
|                                  |                                |                         |      |                         |      |          | 
|Interest income,net               |                                |                         | 25   |                         | 0.2  |          | 
|                                  |                                |                         |      |                         |      |          | 
|                                  |                                |                         |      |                         |      |          | 
|Income/(loss) before income taxes |                                | $                       | (774 | )                       | (6.5 | )        | 
|                                  |                                |                         |      |                         |      |          | 
|                                  |                                |                         |      |                         |      |          | 

16

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In general, competition
in the software industry has increasingly been characterized by shortening
product cycles.  No assurance can be given
that we will be immune to this trend. 
If the product cycle for our systems proves to be shorter than
management anticipates, our pricing structure and revenues could be impaired.  In addition, in order to remain competitive,
we may be required to expend a greater percentage of our revenues on product
innovation and development than has historically been the case.  In either case, our gross profit margins and
results of operations could be materially adversely affected.  See Certain Factors Affecting Forward-Looking
Statements in Part I, Item 1 of this Annual Report.

2003
Compared to 2002

Revenue

Total revenues, which
includes software license fees, services, and maintenance, decreased 17.4% from
$14,404,000 in 2002 to $11,904,000 in 2003 primarily due to a decrease in
services revenues partially offset by increases in software revenues and
maintenance revenues.  License fees,
hourly rates for services and maintenance fees were not increased in 2003.  The increases in software revenues and maintenance
revenues are attributable to increases in the volume of software licenses sold
and maintenance performed. None of the increases in software revenues and
maintenance revenues was attributed to increases in price.

Software revenues
increased 30.2% from $2,934,000 in 2002 to $3,820,000 in 2003 as a result of
increased sales of the Firstwave CRM products, including Firstwave Sports, our
new Sports and Entertainment solution, and Firstwave Technology, the software
offering available as a result of the Connect-Care acquisition.  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.

Total revenues from
international sources decreased from 87.7% of total revenues in 2002 to 68.0%
in 2003 due to decreased services revenue from our UK subsidiary and increased
total revenues from US operations. 
Revenues from international software licenses increased 1.8% from
$2,404,000 in 2002 to $2,447,000 in 2003, and increased as a percentage of
total revenues from 16.7% in 2002 to 20.6% in 2003 due to increased software
sales by our UK subsidiary and total lower revenues for the Company in
2003.  Revenues from Firstwave UK
contributed all international revenues. No revenue was derived from
international distributors during 2003, as compared to $78,000 in 2002. The
decrease in revenue derived from international distributors is related to the
decreased use of our Takecontrol product by international customers which, due
to the age and life cycle of the product, was expected.  Revenues and associated costs from
international distributors were immaterial to the Companys overall financial
statements as they represented none of the gross margin in 2003 and only 0.2%
of the gross margin in 2002.  Although
we have begun renewing our relationships with distributors in Europe and
Australia and look forward to activity from these distributors, there has been
limited activity thus far.  During 2004,
we expect revenue derived from US sources to continue to increase and we expect
a decrease in UK total revenues relative to 2003 levels due to the successful
completion of the multi-year services project with Electronic Data Systems,
Ltd.

Services revenues decreased
44.6% from $9,785,000 in 2002 to $5,423,000 in 2003.  The decrease in services revenues is primarily due to decreases
in two large services engagements. 
These two engagements represented 94% of our total services revenues for
2002.  While one of these projects
continued into 2003, the scale of services decreased compared to 2002
representing 78% of total services revenues for 2003. The Company has
successfully completed a multi-year services project, and the Companys
services revenues will significantly decrease if not replaced with other
customer projects or if we do not successfully diversify the sources of our
revenues pursuant to our business strategies. Our services revenues are subject
to fluctuations based on variations of the length and number of active service
engagements in a given quarter.

The strategies for
transitioning our revenue stream away from dependence on a few large customers
include acquisition of companies with customer bases bringing in recurring
maintenance revenues and a potential for upgrade licenses and services
revenues.  The Connect-Care acquisition
of March 3, 2003 was the first such acquisition to help diversify our revenue
stream.  We are also focusing on
vertical markets to increase the prospects in our pipeline with targeted
companies for our solutions.  Our
vertical markets include high tech companies and sports associations.  During the fourth quarter of 2003, the first
full quarter after its release, Champions World LLC and sportscoach UK were two
organizations that licensed First Sports. 
Another strategy we are pursuing to diversify our revenues is the
recruitment of strategic alliances and resellers for leads and channel
distribution of our software.

Maintenance revenues
increased 57.7% from $1,654,000 in 2002 to $2,608,000 in 2003. The increase is
due to the addition of maintenance revenue from the Connect-Care acquisition
and additional maintenance revenues

17

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associated with
additional software revenues from the CRM product line.  Maintenance revenues are the result of
renewal agreements from previous software license agreements as well as new
license agreements. During 2004, we expect maintenance revenues to increase
slightly as we increase license revenues with our CRM products.

The results of operations
of Firstwave Technologies UK Ltd are exposed to foreign currency exchange rate
fluctuations as the financial results of the subsidiary are translated from the
local currency into U.S. Dollars upon consolidation.  As exchange rates vary, net sales and other operating results,
when translated, may differ materially from expectations.  During 2003, the average foreign currency
exchange rate increased 8% compared to exchange rates during 2002.  This rate increase accounted for
approximately $598,000 in total revenue during 2003.  The average foreign currency exchange rate during 2002 increased
3% compared to exchange rates during 2001. 
This rate increase accounted for an increase of revenue of approximately
$215,000 during 2002.  The average
foreign currency exchange rate during 2001 decreased 5% compared to exchange
rates during 2000.  This rate decrease
accounted for a decrease of revenue of approximately $158,000 in 2001.

Cost of
Revenue

Costs of software
revenues increased 3.5% from $1,197,000 in 2002 to $1,239,000 in 2003 and as a
percentage of software revenue decreased from 40.8% in 2002 to 32.4% in 2003.
The decrease of costs of software as a percentage of software revenue is
primarily the result of  the relatively
consistent amounts of capitalized software amortization costs of $1,110,000
during 2003 and $1,172,000 in 2002, with increased software revenues for 2003,
resulting in an increase in the software revenue margin.  Costs of software revenues include costs of third-party
software, amortization of capitalized software, and costs of packaging, media
and documentation.   Amortization of
capitalized software represented 89.6% of total cost of software revenues
during 2003, compared to 97.9% in 2002. 
For 2004, we anticipate amortization expense to remain the significant
majority of cost of software.

Costs of revenues for
services decreased 3.6% from $3,252,000 in 2002 to $3,135,000 in 2003.  The decrease is a result of decreases in
outside consultants and bundled travel associated with the decrease in services
revenue. Costs of revenues for services as a percentage of services revenues
increased from 33.2% in 2002 to 57.8% in 2003 primarily due to certain fixed
personnel costs, which at lower revenue levels result in a decrease in the
services revenue margin.

Costs of revenues for
maintenance increased 18.3% from $515,000 in 2002 to $609,000 in 2003.  The increase is primarily due to increased
payroll costs related to additional personnel from the Connect-Care acquisition.  This increase in costs is consistent with
increased maintenance revenue.  Costs of
revenues for maintenance as a percentage of maintenance revenues decreased from
31.1% in 2002 to 23.4% in 2003.

Sales and Marketing Expense

Sales and marketing
expenses increased 14.0% from $3,481,000 in 2002 to $3,970,000 in 2003, and
increased as a percentage of total revenues from 24.2% in 2002 to 33.4% in
2003.  The increase in expense is
attributed to increases in payroll costs and telemarketing services. During
2004, we anticipate continued increases in sales and marketing expenses as we
continue to implement marketing programs focused on creating awareness,
generating qualified leads, and development of new marketing channels.  If the resulting projected revenues do not
increase as quickly as expected, or at the rate we expect, we may experience an
adverse impact on our business and operating results.

Product
Development Expense

The Companys product
innovation and development expenditures which consist principally of salaries,
contract services, and certain other expenses related to development and
modifications of software products, including amounts capitalized, increased
57.4% from $2,150,000 in 2002 to $3,384,000 in 2003, and increased as a
percentage of total revenues from 14.9% in 2002 to 28.4% in 2003.  Software development costs capitalized
increased from $1,451,000 in 2002 to $2,035,000 in 2003.  The increase is primarily related to
increased payroll costs related to an increase in development personnel and
fees associated with outside contractors related to the development of our
latest version of the CRM product including the new sports and entertainment
offering, Firstwave Sports.

In 2003, Firstwave
continued its development efforts on both its tools and its CRM products.  In the fall of 2002, Firstwave contracted
with Extreme Logic for services to assist our development efforts.  Such partnership continued through June of
2003. Central to this effort is the Firstwave IDE.  The Firstwave IDE is an application code generation tool that can
be used to generate Microsoft .Net applications using a non-programming
paradigm.  This product will continue to
be enhanced and extended as part of the 2004 development effort.

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As part of the effort
related to the CRM product line, the latest generation, Firstwave CRM 10 was
released in June of 2003.  Firstwave
Sports was launched in October of 2003. 
This product provides CRM functionality to the sports and entertainment
marketplace.  Development for the CRM
and sports and entertainment products will continue into 2004.

The Firstwave Analytics
product is the outcome of both internal and external development by
Firstwave.  Based on an Original
Equipment Manufacturer (OEM) agreement between Firstwave and Business Objects,
Firstwave Analytics will provide both CRM and sports and entertainment
customers a reporting and analytic environment.

General
and Administrative Expense

General and
administrative expenses increased 4.0% from $2,257,000 in 2002 to $2,348,000 in
2003 primarily due to amortization of intangible assets related to the
Connect-Care acquisition and increases in employee benefits, insurance, and
professional fees, offset by a favorable change in the foreign currency
translation rate during the year.

Net
Interest Income

Net interest income
decreased 52.8% from $53,000 in 2002 to $25,000 in 2003.  While the Company had no interest expense in
2002, the interest expense for 2003 is related to the Companys $1,000,000 line
of credit with RBC Centura. The Company had borrowings of $500,000 against the
line of credit at December 31, 2003, and year to date interest related to the
line of credit totaled approximately $6,600.

Income
Tax Expense

Income tax expense was
$1,000 in 2003 related to withholding tax on an international cash receipt
compared to no income tax expense in 2002. 
In 2002, income tax expense generated from net income was completely
offset by the utilization of net operating loss carryforwards as opposed to the
current years net loss.  As of December
31, 2003 the Company had a US net operating loss carryforward of approximately
$22,000,000, which expires in years 2009 through 2018, and approximately
$2,900,000 in foreign net operating loss carryforwards.  A valuation allowance has been created for
all deferred tax assets as of 2003 and 2002, respectively.

2002
Compared to 2001

Revenue

Total revenues increased
69.4% from $8,501,000 in 2001 to $14,404,000 in 2002 primarily due to increases
in software license and services revenues. 
Software revenue increased 144.3% from $1,201,000 in 2001 to $2,934,000
in 2002 as a result of increased sales of the Firstwave CRM product.  Our software revenues are significantly
dependent upon the timing of closing of license agreements.

Revenues from
international software licenses increased 234.4% from $719,000 in 2001 to
$2,404,000 in 2002, and increased as a percentage of total revenues from 8.5%
in 2001 to 16.7% in 2002 due to increased software sales by our UK
subsidiary.  Total revenues from international
sources, which includes maintenance, software license fees and customizations,
increased from 71.4% of total revenues in 2001 to 87.7% in 2002 due to
increased software and services revenue from our UK subsidiary.  Revenues from Firstwave UK contributed the
majority of international revenues with only a nominal amount of revenue
derived from international distributors. 
The decrease in revenue derived from international distributors is
related to the decreased use of our Takecontrol product by international
customers.

Services revenues
increased 112.2% from $4,611,000 in 2001 to $9,785,000 in 2002.  The increase in services revenue was
primarily due to two large services engagements.  Both of these engagements, handled by our UK subsidiary,
represented 94% of our total services revenues for 2002.

The increases in license
and services revenues from 2001 to 2002 were attributable to increases in the
volume of software licenses sold and services performed.  During 2002, we did not increase our price
per licensed software user, or our hourly rate for professional services.  These volume increases in software and
services revenues were primarily due to revenues generated through our UK
subsidiary and our partnership with a leading global services company.

Maintenance revenues
decreased 36.6% from $2,610,000 in 2001 to $1,654,000 in 2002 primarily as the
result of cancellations of maintenance agreements of customers who were using
the Takecontrol and Firstwave for Unix product lines.  Maintenance revenues are the result of renewal agreements from
previous software license sales as well as new license agreements. During 2002,
we experienced increased maintenance revenues related

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to the CRM product, which
related to new software license sales, and as expected, decreased maintenance
revenue from the Takecontrol and Unix product lines.

The results of operations
of our wholly owned subsidiary located in Surrey, England are exposed to
foreign currency exchange rate fluctuations as the financial results of the
subsidiary are translated from the local currency into U.S. Dollars upon
consolidation.  As exchange rates vary,
net sales and other operating results, when translated, may differ materially
from expectations.  During 2002, the
average foreign currency exchange rate increased 3% compared to exchange rates
during 2001.  This rate increase
accounted for approximately $215,000 in total revenue during 2002.  The average foreign currency exchange rate
during 2001 decreased 5% compared to exchange rates during 2000.  This rate decrease accounted for a decrease
of revenue of approximately $158,000 during 2001.  The average foreign currency exchange rate during 2000 decreased
5% compared to exchange rates during 1999. 
This rate decrease accounted for a decrease of revenue of approximately
$121,000 in 2000.

Cost of
Revenue

Costs of software
revenues decreased 6.7% from $1,283,000 in 2001 to $1,197,000 in 2002 and, as a
percentage of software revenue decreased from 106.8% in 2001 to 40.8% in 2002.
The decrease of costs of software as a percentage of software revenue was
primarily the result of consistent capitalized software amortization costs
during 2002 and 2001, with significantly increased software revenues for 2002,
which resulted in a decrease in the margin between costs and revenue.  The cost of software revenue decreased 6.7%
while software revenue increased 144%, which resulted in the cost being a lower
percentage of revenue. Costs of software revenues included costs of third-party
software, amortization of capitalized software, and costs of packaging, media
and documentation.   Amortization of
capitalized software represented 97.9% of total cost of software revenues
during 2002, compared to 97.0% in 2001.

Costs of revenues for
services increased 62.4% from $2,003,000 in 2001 to $3,252,000 in 2002.  The increases were a result of increases in
payroll, outside consultants, and bundled travel consistent with the increase
in services revenue. Costs of revenues for services as a percentage of services
revenues decreased from 43.4% in 2001 to 33.2% in 2002 due to higher
utilization rates of service personnel.

Costs of revenues for
maintenance decreased 41.3% from 
$878,000 in 2001 to $515,000 in 2002. 
The decrease in maintenance cost was related to decreased royalty costs
consistent with decreased maintenance revenues generated by international
distributors.  Costs of revenues for
maintenance as a percentage of maintenance revenues decreased from 33.6% in
2001 to 31.1% in 2002.

Sales and Marketing Expense

Sales and marketing
expenses increased 40.8% from $2,472,000 in 2001 to $3,481,000 in 2002, but
decreased as a percentage of total revenues from 29.1% in 2001 to 24.2% in
2002.  The increase in expense was
attributed to increases in payroll costs due to the expansion of the sales team
as well as increases in telemarketing services and public relations.

Product
Development Expense

The Companys product
innovation and development expenditures, which included amounts capitalized,
increased 115.9% from $996,000 in 2001 to $2,150,000 in 2002, and increased as
a percentage of total revenues from 11.7% in 2001 to 14.9% in 2002.  Software development costs capitalized
increased from $426,000 in 2001 to $1,451,000 in 2002.  The increase was primarily related to
increased payroll costs related to an increase in development personnel and
increased used of outside consultants related to enhancements to the CRM
product line.  Enhancements to our CRM product line during 2002 included performance enhancements and extended functionality of the sales and marketing modules.   In
addition, we began development of our .NET version of our CRM product in the
fall of 2002 in partnership with Extreme Logic.

General
and Administrative Expense

General and
administrative expenses decreased 9.0% from $2,481,000 in 2001 to $2,257,000 in
2002 primarily due to a favorable change in the foreign currency translation
rate during the year.

Net
Interest Income/Expense

Net interest income
increased 193.0% from $57,000 in net interest expense in 2001 to $53,000 in net
interest income in 2002.

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Balance
Sheet

Net accounts receivable
decreased 48.9% from $2,406,000 at December 31, 2002 to $1,230,000 at December
31, 2003 consistent with lower total revenues during fourth quarter 2003
compared to fourth quarter 2002.  The allowance
for doubtful accounts increased 87.5% from $88,000 at December 31, 2002 to
$98,000 at December 31, 2003 primarily due to increased reserves related to
sales to Connect-Care customers subsequent to the acquisition and increased
reserve related to customers of Firstwave UK. 
Other assets increased 49.2% from $664,000 at December 31, 2002 to
$991,000 at December 31, 2003 due to the prepayment of third party license
royalties and prepaid marketing expenses. Property and equipment decreased
33.7% from $738,000 at December 31, 2002 to $489,000 at December 31, 2003 due
to fixed asset purchases offset by year-to-date depreciation and
disposals.  Capitalized software
increased 45.3% from $2,041,000 at December 31, 2002 to $2,966,000 at December
31, 2003 due to additional capitalization of $2,035,000 in development costs
net of $1,110,000 in amortization. 
During 2004 we anticipate a decrease in this asset, as we are expecting
the amortization to exceed expected amounts of additional capitalization in
2004. Intangible assets of $1,029,000 at December 31, 2003 relate to the
$1,200,000 acquisition of Connect-Care technology and customer relationship
intangibles, net of $171,000 in amortization expense. Goodwill increased
1270.3% from $175,000 at December 31, 2002 to $2,398,000 at December 31, 2003
due to the Connect-Care acquisition.

Accounts payable
decreased 37.5% from $909,000 at December 31, 2002 to $568,000 at December 31,
2003.  At December 31, 2002, accounts
payable included a large balance with Extreme Logic, an outside consultant
agency working on a development project that was completed in 2003. Therefore,
there was no similar balance at December 31, 2003.  Sales tax payable decreased 48.0% from $717,000 at December 31,
2002 to $373,000 at December 31, 2003 primarily due to a decrease of accrued
VAT payable in the UK consistent with decreased revenue in the fourth quarter
of 2003 compared to the fourth quarter of 2002.  Deferred revenue increased 76.0% from $812,000 at December 31,
2002 to $1,429,000 at December 31, 2003 due to increased annual maintenance
billings related to the CRM product line and maintenance and professional
services billings revenues associated with the additional customer base
acquired in the Connect-Care acquisition. 
The annual maintenance fees will be recognized as maintenance revenue
ratably over the term of the maintenance agreement, and the professional
services fees will be recognized as services revenues when the work is
performed.   Accrued employee
compensation and benefits decreased 11.8% from $417,000 at December 31, 2002 to
$368,000 at December 31, 2003 due to decreased accruals related to incentives
and commissions consistent with decreased software revenues for fourth quarter
2003 compared to fourth quarter 2002 and the Companys lower financial
performance which is a component in incentive calculations.  Borrowings at December 31, 2003 were
$500,000 due to the initial draw on the Companys line of credit with RBC
Centura.  The Company had no debt at
December 31, 2002.  Other accrued
liabilities increased 87.1% from $85,000 at December 31, 2002 to $159,000 at
December 31, 2003 primarily due to the timing of payments related to payroll
withholdings.

Liquidity
and Capital Resources

As of December 31, 2003,
we had cash and cash equivalents of $2,704,000, a decrease of 28.4% over the
cash balance of $3,779,000 at December 31, 2002.  The decreased cash balance is primarily due to lower total
revenues while the Company continued to invest in its technology and sales and
marketing efforts.

During
2003, 55.2% of our total revenue was attributed to our relationship with
Electronic Data Systems Ltd, a leading global services company.  During 2002, this same relationship
accounted for 71.9% of total revenues. 
The Company has successfully completed the multi-year services project
with this customer.  The Companys
services revenues will significantly decrease if not replaced with other
customer projects or if we do not successfully diversify the sources of our
revenues pursuant to our business strategies.

On July 29, 2003, the
Company signed a Revolving Credit facility loan with RBC Centura whereby the
Company may borrow up to $1,000,000. 
The Company had borrowings of $500,000 against the line of credit as of
December 31, 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 weighted average interest rate for
year ended December 31, 2003 was 4.12%.  
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. As of December
31, 2003, based on eligible accounts receivables, the Company had $500,000 of
additional credit available on the line of credit. 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 December 31, 2003, the Company was not
in compliance with certain required covenants,

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however RBC Centura has
waived this non-compliance as of December 31, 2003, and modified the covenants
for 2004. The modified covenants include maintaining a ratio of (i)
unrestricted cash and equivalents plus net accounts receivable to (ii) amount
borrowed against the line of credit, of at least 3.00 to 1.00 and tangible net
worth of at least $3,500,000.  As of
March 10, 2004, the Company was in compliance with all covenants.  In addition, the Company will be required to
maintain a minimum cash balance in principal depository accounts with RBC of at
least $750,000.

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.  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.

We capitalized $2,035,000
in software development costs during 2003, as compared to $1,451,000 during
2002.  These amounts relate to continued
development and enhancements to our Firstwave CRM product including the
development of our new Sports and Entertainment solution, Firstwave Sports.

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.

Taxes

As of December 31,
2003, we had general business tax credit carryforwards of approximately
$245,000, which will expire in 2008 through 2011.  We also have U.S. net operating loss carryforwards for federal
and state income tax reporting purposes of approximately $22,000,000 which
expire in years 2009 through 2018, and approximately $2,900,000 in foreign net
operating loss carryforwards. The Internal Revenue Code contains provisions
that limit the use in any future period of net operating loss and tax credit
carryforwards upon the occurrence of specific events. A valuation allowance has
been created for all deferred tax assets.

Off
Balance Sheet Arrangements

The Company does not have
off-balance sheet arrangements, financings, or other relationships with
unconsolidated entities known as Variable Interest Entities (VIEs).  In the ordinary course of business the
Company leases certain real properties and equipment as disclosed in Note 11 in
the Notes to Financial Statements.

Contractual
Obligations

At December 31, 2003, our
outstanding contractual obligations included (in thousands):

|                  |  | Less than
  one year |       | Greater than
  one year to
  three years |  | Total |    
|----------------- |  | -------------------- | ----- | ---------------------------------------- |  | ----- | ---
|                  |  |                      |       |                                          |  |       |    
|RBC borrowings    |  | $                    | 500   |                                          |  | $     | -  
|Lease commitments |  |                      | 763   |                                          |  |       | 966
|                  |  |                      |       |                                          |  |       |    
|Total             |  | $                    | 1,263 |                                          |  | $     | 966
|                  |  |                      |       |                                          |  |       |    

Critical
Accounting Policies

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

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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.

Software revenue 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 as hosting services revenues ratably by month over
the period of service.  Hosting services
revenues are consolidated into services revenues on the Companys financial
statements.

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

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

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

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

International revenues
are primarily generated by Firstwave UK and independent distributors who offer
licenses of the Companys products in specific geographic areas. During 2002,
under the terms of the Companys international distributor agreements,
international distributors collected license fees and maintenance revenues on
behalf of the Company, and remitted 50% to 60% of standard license fees and
maintenance revenues they produced. 
Pursuant to EITF 99-19, the Company recognizes these distributor sales
at the gross license amount because the Company retains title to the products,
holds the risk and rewards of ownership, such as risk of loss for collection,
and responsibility for providing the product to the customer. The Company is
responsible for establishing and maintaining the pricing of the product and
performs any source code changes to the product.  The independent distributors are considered agents of the Company
and work on a commission basis. The commissions paid are reflected as a selling
expense in the Companys financial statements. 
The maintenance fees generated by distributor revenues are reflected as
maintenance revenues, with the amount retained by distributors shown as a cost
of maintenance revenue. There were no international distributor revenues in
2003, compared to $78,000 in 2002.

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 fourth quarter of 2003, the
Company entered into an agreement with a customer to exchange a total of
$200,000 in software licenses, services, and maintenance in exchange for
marketing sponsorships at future sporting events. The revenue recorded in the
fourth quarter of 2003

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on this transaction was
$125,400 in software revenues and $74,600 in deferred revenue. 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 $200,000 is reflected in other assets on the
Companys balance sheet and will be shown as marketing expense when the Company
participates in sponsorships at future sporting events.  This transaction is indicative of a trend
that may continue where some of the revenue generated by our Sports solution
will be non-monetary exchanges for future sponsorship marketing expenses.

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 generally accepted accounting
principles.  Management of the UK
subsidiary reports 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 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 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 intangibles

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.  SFAS No 142 prescribes a two-phase approach
for impairment testing of goodwill.  The
first phase screens for impairment; while the second phase (if necessary)
measures the impairment.   The Company
completed its annual analysis during the fourth quarter of 2003 and found no
instance of impairment of its recorded goodwill. Therefore, no further action
was required.

24

---

---

Recent
Accounting Pronouncements

FASB Statement No. 148, Accounting for Stock-Based Compensation  Transition
and Disclosure  An Amendment of FASB Statement No. 123, was issued
in December 2002 and provides alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based employee
compensation. In addition, SFAS No. 148 amends the disclosure requirements of
SFAS No. 123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results.  The disclosure requirements of this
statement are effective for fiscal years ending after December 15, 2002 and are
included in the consolidated financial statements.

FASB Statement No. 150, Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity, was issued in May
2003 and establishes standards for how to classify and measure certain
financial instruments with characteristics of both liabilities and equity.  This statement is effective for financial
instruments entered into or modified after May 31, 2003, and otherwise is
effective at the beginning of the first interim period beginning after June 15,
2003.  The adoption of the provisions of
this statement did not have a material impact on the consolidated financial
statements of the Company.

FASB Interpretation No.
45, Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Guarantees of Indebtedness of Others an
interpretation of FASB Statements No. 5, 57, and 107 and rescission of FASB
Interpretation No. 34 was issued in November 2002 and elaborates on
the disclosures to be made by a guarantor in its interim and annual financial
statements about its obligations under certain guarantees that it has
issued.  It also clarifies that a
guarantor is required to recognize, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in issuing the
guarantee.  The provisions of this
interpretation are required prospectively for guarantees issued or modified
after December 31, 2002.  The adoption
of the provisions of this FASB Interpretation did not have a material impact on
the consolidated financial statements of the Company.

FASB Interpretation No.
46, Consolidation of Variable Interest
Entities an interpretation of ARB No. 51, as amended by FASB
Interpretation No. 46R, was issued in January 2003 and addresses consolidation
by business enterprises of variable interest entities.  The Company does not have variable interest
entities as defined by this Interpretation and therefore, the adoption of the
provisions of this FASB Interpretation did not have a material impact on the
consolidated financial statements of the Company.

Quarterly
Financial Data (Unaudited)

The
table below sets forth certain unaudited operating results for each of the
eight quarters in the two-year period ended December 31, 2003.  This information has been prepared on the
same basis as the Financial Statements appearing elsewhere in this document and
includes all adjustments necessary to present fairly this information when read
in conjunction with the Financial Statements and Notes thereto.  Our operating results for any one quarter
are not necessarily indicative of results for any future period.

|                                                         |  | Quarter
  ended                            |      
|-------------------------------------------------------- |  | ------------------------------------------ | -----
|                                                         |  | 3/31/03                                    |      
|                                                         |  |                                            |      
|                                                         |  | (in thousands, except per share
  amounts) |      
|                                                         |  |                                            |      
|Net revenues                                             |  | $                                          | 4,281
|Operating income/(loss)                                  |  |                                            | 769  
|Net income/(loss)                                        |  |                                            | 779  
|Net income/(loss) applicable
     to common shareholders |  |                                            | 724  
|                                                         |  |                                            |      
|Basic earnings/(loss) per share                          |  |                                            | 0.30 
|Diluted earnings/(loss) per share                        |  |                                            | 0.24 

Software revenue decreased 30.3% from $1,150,000 in
the fourth quarter of 2002 to $801,000 in the fourth quarter of 2003 primarily
due to a large license agreement in the fourth quarter of 2002. Our software
revenues are significantly dependent upon the size and timing of closing of
license agreements.  Services revenues
decreased 64.7% from $2,045,000 in the fourth quarter of 2002 to $721,000 in
the fourth quarter of 2003 primarily due to the completion of a multi-year
services project.   Our services
revenues are subject to fluctuations based on length and number of active
engagements in a given quarter.

25

---

---

Item 7A.
Quantitative and Qualitative Market Risk Disclosure

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, management does not believe a change in interest
rates will materially affect the Companys financial position or results of
operations in 2004.

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

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

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

The foreign currency that
the Company transfers to the United States comes from the operations of the UK
subsidiary in the normal course of business. 
Since the UK subsidiary has recognized the majority of the revenues
generated by the Company in 2003, it also, therefore, has collected the
majority of the payments for those revenues. 
After covering the expenses to operate the subsidiary, the Company has
had excess currency in the UK.  These
transactions are not economic hedges of a net investment in the UK subsidiary
and are not intercompany transactions of a long-term nature.   The cash payments from the UK subsidiary to
the US parent are payments against a short term intercompany account.  The intercompany account represents items
owed to the US parent for royalty charges and intercompany charges assessed on
the UK subsidiary.  These items are
intercompany in nature and are eliminated in the consolidation of the Companys
financial statements.  Cash payments
against the intercompany balance are made regularly by the UK subsidiary to the
US parent. The Company tries to time the actual payments from the UK subsidiary
to the US parent to occur when the currency exchange rate of British Pounds to
US Dollars is strong, thus yielding favorable conversion results.  The intercompany account charges are
denominated in UK currency, converted to US dollars, and eliminated in the
preparation of the Companys consolidated financial statements.  The exchange risk to the Company is if the
exchange rate decreases, the carrying value of the intercompany balance
decreases and results in a charge against income.  The tax consequences of this intercompany activity is that the US
parent recognizes income on the US corporate tax return for the intercompany
charges assessed on the UK subsidiary.

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.

26

---

---

Item 8.  Financial Statements and Supplementary Data.

Information
included under Item 15 (a) (1) and (2)

REPORT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To The Board of Directors
Firstwave Technologies, Inc.
Atlanta, Georgia

We
have audited the accompanying consolidated balance sheets of Firstwave
Technologies, Inc. and Subsidiaries (the Company) as of December 31, 2003 and
2002, and the related consolidated statements of operations, changes in
shareholders equity and cash flows for each of the years in the three-year
period ended December 31, 2003.  These
consolidated financial statements are the responsibility of the Companys
management.  Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.

We
conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. 
An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the consolidated financial statements.  An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.  We believe that our audits provide a
reasonable basis for our opinion.

In
our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Firstwave
Technologies, Inc. and Subsidiaries as of December 31, 2003 and 2002, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 2003, in conformity with accounting
principles generally accepted in the United States of America.

/s/Cherry, Bekaert &
Holland, L.L.P.
Atlanta, Georgia
March 12, 2004

27

---

---

Firstwave
Technologies, Inc.Consolidated Balance Sheet(in thousands, except share data)

|                                                                                                                                                                                                                                                                                                          |  | December 31, |        
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | -------
|                                                                                                                                                                                                                                                                                                          |  |              |        
|                                                                                                                                                                                                                                                                                                          |  | 2003         |        
|                                                                                                                                                                                                                                                                                                          |  |              |        
|Assets                                                                                                                                                                                                                                                                                                    |  |              |        
|Current
  assets                                                                                                                                                                                                                                                                                          |  |              |        
|Cash
  and cash equivalents                                                                                                                                                                                                                                                                               |  | $            | 2,704  
|Accounts
  receivable, less allowance for doubtful
          accounts of $98 and $88 in
  2003 and 2002, respectively                                                                                                                                                                                     |  |              | 1,230  
|Prepaid
  expenses and other assets                                                                                                                                                                                                                                                                       |  |              | 991    
|                                                                                                                                                                                                                                                                                                          |  |              |        
|Total
  current assets                                                                                                                                                                                                                                                                                    |  |              | 4,925  
|                                                                                                                                                                                                                                                                                                          |  |              |        
|Property
  and equipment, net                                                                                                                                                                                                                                                                             |  |              | 489    
|Software
  development costs, net                                                                                                                                                                                                                                                                         |  |              | 2,966  
|Intangible
  assets                                                                                                                                                                                                                                                                                       |  |              | 1,029  
|Goodwill                                                                                                                                                                                                                                                                                                  |  |              | 2,398  
|                                                                                                                                                                                                                                                                                                          |  |              |        
|Total
  assets                                                                                                                                                                                                                                                                                            |  | $            | 11,807 
|                                                                                                                                                                                                                                                                                                          |  |              |        
|                                                                                                                                                                                                                                                                                                          |  |              |        
|Liabilities
  and Shareholders Equity                                                                                                                                                                                                                                                                    |  |              |        
|Current
  liabilities                                                                                                                                                                                                                                                                                     |  |              |        
|Accounts
  payable                                                                                                                                                                                                                                                                                        |  | $            | 568    
|Sales
  tax payable                                                                                                                                                                                                                                                                                       |  |              | 373    
|Deferred
  revenue                                                                                                                                                                                                                                                                                        |  |              | 1,429  
|Accrued
  employee compensation and benefits                                                                                                                                                                                                                                                              |  |              | 368    
|Borrowings                                                                                                                                                                                                                                                                                                |  |              | 500    
|Dividends
  payable                                                                                                                                                                                                                                                                                       |  |              | 41     
|Other
  accrued liabilities                                                                                                                                                                                                                                                                               |  |              | 159    
|                                                                                                                                                                                                                                                                                                          |  |              |        
|Total
  current liabilities                                                                                                                                                                                                                                                                               |  |              | 3,438  
|                                                                                                                                                                                                                                                                                                          |  |              |        
|                                                                                                                                                                                                                                                                                                          |  |              |        
|Commitments
  and contingencies                                                                                                                                                                                                                                                                           |  |              |        
|                                                                                                                                                                                                                                                                                                          |  |              |        
|Shareholders
  equity                                                                                                                                                                                                                                                                                    |  |              |        
|Preferred
  stock, no par value; 1,000,000 shares authorized;
          43,687 shares issued; 27,020
  and 29,020 outstanding
          at 2003 and 2002,
  respectively
          17,020 shares @$100 per share
  liquidation preference
          10,000 shares @$75 per share
  liquidation preference |  |              | 2,333  
|                                                                                                                                                                                                                                                                                                          |  |              |        
|Common
  stock, par value, $.0019 per share; 10,000,000
          shares authorized; 2,672,728
  and 2,328,713 shares issued
          and outstanding at 2003 and
  2002, respectively                                                                                                                   |  |              | 13     
|                                                                                                                                                                                                                                                                                                          |  |              |        
|Additional
  paid-in capital                                                                                                                                                                                                                                                                              |  |              | 25,691 
|Accumulated
  other comprehensive loss                                                                                                                                                                                                                                                                    |  |              | (400   
|Accumulated
  deficit                                                                                                                                                                                                                                                                                     |  |              | (19,268
|                                                                                                                                                                                                                                                                                                          |  |              |        
|Total
  shareholders equity                                                                                                                                                                                                                                                                              |  |              | 8,369  
|                                                                                                                                                                                                                                                                                                          |  |              |        
|                                                                                                                                                                                                                                                                                                          |  |              |        
|Total
  liabilities and shareholders equity                                                                                                                                                                                                                                                              |  | $            | 11,807 
|                                                                                                                                                                                                                                                                                                          |  |              |        

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

28

---

---

Firstwave
Technologies, Inc.
Consolidated Statement of Operations
(in thousands, except per share data)

|                                                      |  | For the year ended
  December 31, |       
|----------------------------------------------------- |  | --------------------------------- | ------
|                                                      |  |                                   |       
|                                                      |  | 2003                              |       
|                                                      |  |                                   |       
|                                                      |  |                                   |       
|Net
  revenues                                        |  |                                   |       
|Software                                              |  | $                                 | 3,820 
|Services                                              |  |                                   | 5,423 
|Maintenance                                           |  |                                   | 2,608 
|Other                                                 |  |                                   | 53    
|                                                      |  |                                   |       
|                                                      |  |                                   | 11,904
|                                                      |  |                                   |       
|Costs
  and expenses                                  |  |                                   |       
|Cost
  of revenues                                    |  |                                   |       
|Software                                              |  |                                   | 1,239 
|Services                                              |  |                                   | 3,135 
|Maintenance                                           |  |                                   | 609   
|Other                                                 |  |                                   | 53    
|Sales
  and marketing                                 |  |                                   | 3,970 
|Product
  development                                 |  |                                   | 1,349 
|General
  and administrative                          |  |                                   | 2,348 
|                                                      |  |                                   |       
|Operating
  income/(loss)                             |  |                                   | (799  
|                                                      |  |                                   |       
|Interest
  income, net                                |  |                                   | 25    
|Other
  income                                        |  |                                   | -     
|                                                      |  |                                   |       
|Income/(loss)
  before income taxes                   |  |                                   | (774  
|                                                      |  |                                   |       
|Income
  tax provision                                |  |                                   | (1    
|                                                      |  |                                   |       
|Net
  income/(loss)                                   |  |                                   | (775  
|                                                      |  |                                   |       
|                                                      |  |                                   |       
|Dividends
  on preferred stock                        |  |                                   | (221  
|                                                      |  |                                   |       
|Net
  income/(loss) applicable to common shareholders |  | $                                 | (996  
|                                                      |  |                                   |       
|                                                      |  |                                   |       
|Basic
  earnings/(loss) per share                     |  | $                                 | (.39  
|                                                      |  |                                   |       
|                                                      |  |                                   |       
|Basic
  weighted average shares outstanding           |  |                                   | 2,572 
|                                                      |  |                                   |       
|                                                      |  |                                   |       
|Diluted earnings/(loss) per share                     |  | $                                 | (.39  
|                                                      |  |                                   |       
|                                                      |  |                                   |       
|Diluted weighted average shares outstanding           |  |                                   | 2,572 
|                                                      |  |                                   |       

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

29

---

---

Firstwave
Technologies, Inc.
Consolidated Statement of Changes in Shareholders Equity
(in thousands, except share data)

|                                                        |  |                   |           |                   |   | Additional
  paid-in
  capital |  | Compre-
  hensive
  income
  (loss) |        | Accumulated
  other
  comprehensive
  income/(loss) |   | Accumulated
  deficit |   | Total |       
|------------------------------------------------------- |  | ----------------- | --------- | ----------------- | - | ------------------------------ |  | ----------------------------------- | ------ | --------------------------------------------------- | - | --------------------- | - | ----- | ------
|                                                        |  | Common
  Stock(1) |           | Preferred
  Stock
|                                                        |  |                   |           |                  
|                                                        |  | Shares            |           | Amount            |   | Shares                         |  | Amount                             
|                                                        |  |                   |           |                   |   |                                |  |                                     |        |                                                     |   |                       |   |       |       
|Balance
  at December 31, 2000                          |  |                   | 2,096,157 |                   | $ | 12                             |  |                                     | -      |                                                     |   | -                     |   | $     | 22,587
|                                                        |  |                   |           |                   |   |                                |  |                                     |        |                                                     |   |                       |   |       |       
|Exercise
  of common stock options                      |  |                   | 567       |                   |   | -                              |  |                                     | -      |                                                     |   | -                     |   |       | 3     
|Employee
  stock purchases                              |  |                   | 3,556     |                   |   | -                              |  |                                     | -      |                                                     |   | -                     |   |       | 9     
|Shares
  issued at reverse split due to rounding        |  |                   | 71        |                   |   | -                              |  |                                     | -      |                                                     |   | -                     |   |       | -     
|Series
  A Convertible Preferred Stock (2)              |  |                   | -         |                   |   | -                              |  |                                     | 10,000 |                                                     |   | 1,000                 |   |       | -     
|Series
  B Convertible Preferred Stock (2)              |  |                   | -         |                   |   | -                              |  |                                     | 7,020  |                                                     |   | 702                   |   |       | -     
|Series
  C Convertible Preferred Stock (3)              |  |                   | -         |                   |   | -                              |  |                                     | 16,667 |                                                     |   | 1,131                 |   |       | -     
|Dividends                                               |  |                   | -         |                   |   |                                |  |                                     | -      |                                                     |   | -                     |   |       | (196  
|Comprehensive
  loss                                    |  |                   |           |                   |   |                                |  |                                     |        |                                                     |   |                       |   |       |       
|Net
  loss                                              |  |                   | -         |                   |   | -                              |  |                                     | -      |                                                     |   | -                     |   |       | -     
|Foreign
  currency translation adjustment               |  |                   | -         |                   |   | -                              |  |                                     | -      |                                                     |   | -                     |   |       | -     
|                                                        |  |                   |           |                   |   |                                |  |                                     |        |                                                     |   |                       |   |       |       
|Comprehensive
  loss                                    |  |                   | -         |                   |   | -                              |  |                                     | -      |                                                     |   | -                     |   |       | -     
|                                                        |  |                   |           |                   |   |                                |  |                                     |        |                                                     |   |                       |   |       |       
|Balance
  at December 31, 2001                          |  |                   | 2,100,351 |                   |   | 12                             |  |                                     | 33,687 |                                                     |   | 2,833                 |   |       | 22,403
|                                                        |  |                   |           |                   |   |                                |  |                                     |        |                                                     |   |                       |   |       |       
|Exercise
  of common stock options                      |  |                   | 33,807    |                   |   | -                              |  |                                     | -      |                                                     |   | -                     |   |       | 197   
|Employee
  stock purchases                              |  |                   | 97        |                   |   | -                              |  |                                     | -      |                                                     |   | -                     |   |       | -     
|Conversion
  of Series C Preferred Stock to Common      |  |                   | 194,458   |                   |   | -                              |  |                                     | (4,667 | )                                                   |   | (350                  | ) |       | 350   
|Dividends                                               |  |                   | -         |                   |   |                                |  |                                     | -      |                                                     |   | -                     |   |       | -     
|Comprehensive
  income                                  |  |                   |           |                   |   |                                |  |                                     |        |                                                     |   |                       |   |       |       
|Net
  income                                            |  |                   | -         |                   |   | -                              |  |                                     | -      |                                                     |   | -                     |   |       | -     
|Foreign
  currency translation adjustment               |  |                   | -         |                   |   | -                              |  |                                     | -      |                                                     |   | -                     |   |       | -     
|                                                        |  |                   |           |                   |   |                                |  |                                     |        |                                                     |   |                       |   |       |       
|Comprehensive
  income                                  |  |                   | -         |                   |   | -                              |  |                                     | -      |                                                     |   | -                     |   |       | -     
|                                                        |  |                   |           |                   |   |                                |  |                                     |        |                                                     |   |                       |   |       |       
|Balance
  at December 31, 2002                          |  |                   | 2,328,713 |                   |   | 12                             |  |                                     | 29,020 |                                                     |   | 2,483                 |   |       | 22,950
|                                                        |  |                   |           |                   |   |                                |  |                                     |        |                                                     |   |                       |   |       |       
|Exercise
  of common stock options                      |  |                   | 56,311    |                   |   | 1                              |  |                                     | -      |                                                     |   | -                     |   |       | 233   
|Employee
  stock purchases                              |  |                   | 65        |                   |   | -                              |  |                                     | -      |                                                     |   | -                     |   |       | -     
|Issuance
  of common stock for Connect Care acquisition |  |                   | 200,000   |                   |   | -                              |  |                                     |        |                                                     |   |                       |   |       | 2,535 
|Issuance
  of common stock                              |  |                   | 4,306     |                   |   |                                |  |                                     |        |                                                     |   |                       |   |       | 44    
|Conversion
  of Series C Preferred Stock to Common      |  |                   | 83,333    |                   |   | -                              |  |                                     | (2,000 | )                                                   |   | (150                  | ) |       | 150   
|Dividends                                               |  |                   | -         |                   |   |                                |  |                                     | -      |                                                     |   | -                     |   |       | (221  
|Comprehensive
  income                                  |  |                   |           |                   |   |                                |  |                                     |        |                                                     |   |                       |   |       |       
|Net
  income                                            |  |                   | -         |                   |   | -                              |  |                                     | -      |                                                     |   | -                     |   |       | -     
|Foreign
  currency translation adjustment               |  |                   | -         |                   |   | -                              |  |                                     | -      |                                                     |   | -                     |   |       | -     
|                                                        |  |                   |           |                   |   |                                |  |                                     |        |                                                     |   |                       |   |       |       
|Comprehensive
  income                                  |  |                   | -         |                   |   | -                              |  |                                     | -      |                                                     |   | -                     |   |       | -     
|                                                        |  |                   |           |                   |   |                                |  |                                     |        |                                                     |   |                       |   |       |       
|Balance
  at December 31, 2003                          |  |                   | 2,672,728 |                   | $ | 13                             |  |                                     | 27,020 |                                                     | $ | 2,333                 |   | $     | 25,691
|                                                        |  |                   |           |                   |   |                                |  |                                     |        |                                                     |   |                       |   |       |       

|(1) | Represents
  values after 1 for 3 reverse stock split effective 9/12/01.                                                                                                                                                                                                  
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Represents
  amounts reclassified from redeemable securities to permanent equity per an
  amendment to the Companys Articles of Incorporation and shareholder approval
  effective 9/7/01.  Net of 10,000 shares
  of Series A converted to common shares April 26, 2000.
|(3) | Represents
  shares issued upon shareholder approval establishing Series C preferred Stock
  and conversion of debt.                                                                                                                                                      

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

30

---

---

Firstwave
Technologies, Inc.
Consolidated Statement of Cash Flows
(in thousands)

|                                                                                                |  | For Year Ended
  December 31, |       
|----------------------------------------------------------------------------------------------- |  | ----------------------------- | ------
|                                                                                                |  |                               |       
|                                                                                                |  | 2003                          |       
|                                                                                                |  |                               |       
|Cash
  flows from operating activities                                                          |  |                               |       
|Net
  income/(loss)                                                                             |  | $                             | (775  
|Adjustments
  to reconcile net income/(loss) to net cash
          used in operating activities |  |                               |       
|Depreciation
  and amortization                                                                 |  |                               | 1,660 
|(Gain)/loss
  on disposal of fixed assets                                                       |  |                               | (8    
|Provision
  for bad debts                                                                       |  |                               | (10   
|Stock
  compensation                                                                            |  |                               | 44    
|Changes
  in assets and liabilities                                                             |  |                               |       
|Accounts
  receivable                                                                           |  |                               | 1,889 
|Prepaid
  expenses and other assets                                                             |  |                               | (284  
|Accounts
  payable                                                                              |  |                               | (695  
|Sales
  tax payable                                                                             |  |                               | (344  
|Deferred
  revenue                                                                              |  |                               | (148  
|Accrued
  employee compensation and benefits                                                    |  |                               | (356  
|Other
  accrued liabilities                                                                     |  |                               | 74    
|                                                                                                |  |                               |       
|Total
  adjustments                                                                             |  |                               | 1,822 
|                                                                                                |  |                               |       
|Net
  cash provided by operating activities                                                     |  |                               | 1,047 
|                                                                                                |  |                               |       
|Cash
  flows from investing activities                                                          |  |                               |       
|Software
  development costs                                                                    |  |                               | (2,035
|Purchases
  of property and equipment,net                                                       |  |                               | (93   
|Acquisition
  of Connect Care, net of cash acquired                                             |  |                               | (130  
|Purchase
  of investment securities                                                             |  |                               | -     
|Proceeds
  from sale of investment securities                                                   |  |                               | -     
|Loss
  on investments                                                                           |  |                               | -     
|                                                                                                |  |                               |       
|Net
  cash used in investing activities                                                         |  |                               | (2,258
|                                                                                                |  |                               |       
|Cash
  flows from financing activities                                                          |  |                               |       
|Proceeds
  from issuance of convertible preferred stock, net                                    |  |                               | -     
|Issuance
  of common stock                                                                      |  |                               | (95   
|Exercise
  of common stock options                                                              |  |                               | 234   
|Proceeds
  from employee stock purchase plan                                                    |  |                               | -     
|Proceeds
  from borrowings                                                                      |  |                               | 500   
|Repayment
  of borrowings                                                                       |  |                               | -     
|Proceeds
  from investments used to secure borrowings                                           |  |                               | -     
|Payment
  of dividends on convertible preferred stock                                           |  |                               | (222  
|                                                                                                |  |                               |       
|Net
  cash provided by/(used in) financing activities                                           |  |                               | 417   
|                                                                                                |  |                               |       
|Effect
  of exchange rate changes on cash                                                       |  |                               | (281  
|                                                                                                |  |                               |       
|Net
  increase/(decrease) in cash                                                               |  |                               | (1,075
|Cash
  and cash equivalents, beginning of year                                                  |  |                               | 3,779 
|                                                                                                |  |                               |       
|Cash
  and cash equivalents, end of year                                                        |  | $                             | 2,704 
|                                                                                                |  |                               |       
|                                                                                                |  |                               |       
|Supplemental
  disclosure of cash flow information                                              |  |                               |       
|Cash
  paid for interest                                                                        |  | $                             | 4     
|                                                                                                |  |                               |       
|Cash
  paid for income taxes                                                                    |  | $                             | 1     
|                                                                                                |  |                               |       

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

31

---

---

Firstwave
Technologies, Inc.
Notes to Financial Statements

|1. | Description
  of Business and Basis of Presentation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | Description
  of the Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | Headquartered in Atlanta,
  Georgia, with an office in Surrey, England, Firstwave Technologies, Inc.
  (Firstwave or the Company) is a leading provider of Customer Relationship
  Management (CRM) solutions to mid-size and large-scale enterprises worldwide.
  Firstwaves corporate and product mission reflects our customer-first
  commitment: To develop and integrate the best software solutions to manage
  customer interactions and information. 
  As a provider of sports and high tech CRM, Firstwave offers a suite of
  industry-focused solutions.  Firstwave
  CRM is adaptive, scalable and easily integrates with existing systems.  Firstwave supports several product lines:
  Firstwave CRM (includes eCRM and v.10 products), Firstwave Sports, Firstwave
  Technology and TakeControl.                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | Basis of
  presentation and liquidity considerations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | Fair
  value of financial instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | The Company has
  identified cash, investments, accounts receivable, accounts payable and debt
  as financial instruments of the Company. Due to the nature of these financial
  instruments the Company believes that the fair value of these financial
  instruments approximates their carrying value.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | Consolidation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | The consolidated
  financial statements include the accounts of Firstwave Technologies, Inc. and
  its wholly owned subsidiaries, Connect-Care, Inc. from date of acquistion and
  Firstwave Technologies UK, Ltd.  All
  intercompany transactions and balances have been eliminated in consolidation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | Liquidity                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | Maintaining the Companys
  future capital requirements will depend on many factors, including its
  ability to increase revenue levels and keep costs of operations down to
  generate positive cash flows, as well as the timing and extent of spending to
  support product development efforts and expansion of sales and marketing, and
  market acceptance of the Companys products. 
  Although the Company has historically been able to satisfy its cash
  requirements, there can be no assurance that efforts to obtain sufficient
  financing for operations will be successful in the future.  The Companys future capital needs will be
  highly dependent upon the Companys ability to control expenses and generate
  additional software license revenues, and any projections of future cash
  needs and cash flows are subject to uncertainty.  If the Company is unable to obtain the necessary additional
  capital, it 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 its business, financial condition, and the
  Companys ability to reduce losses or generate profits.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|2. | 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.  Examples of
  estimates which require managements judgment include revenue recognition,
  accounts receivable reserve, valuation of long-lived assets and intangible
  assets, and goodwill.  Management
  bases its estimates on historical experience and on other various factors
  which are believed to be reasonable under the circumstances.  All accounting estimates and the basis for
  these estimates are discussed between the Companys senior management and the
  Audit Committee. Actual results could differ from those estimates.                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

32

---

---

Firstwave
Technologies, Inc.
Notes to Financial Statements

| | 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 as hosting services revenues ratably by month over
  the period of service.  Hosting
  services revenues are consolidated into services revenues on the Companys
  financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | Services revenue is
  recognized as services are performed. Our software product is able to
  function independently in a customers environment without additional
  services.  Our training,
  implementation, and customization services are optional services to our
  customers and are not necessary for the functioning of the software product.
  Our software is offered as a stand-alone product.  It can be implemented with minimal services.  The essential functionality of the software,
  such as database support and maintenance, preparation of marketing campaigns,
  and standard workflow, is functional and can be utilized by the customer upon
  installation as intended by the customer. 
  At a customers request, the software can also be implemented with
  additional services, such as data conversion and workflow modifications,
  which are not significant to the functionality of the software, but rather
  tailor features to most effectively function in the customers environment.                                                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | The revenue for the
  customization or implementation services is recognized as the services are
  provided and earned.  Revenue is
  allocated to software and services based on vendor specific objective
  evidence of fair values.  Because the
  software is a stand-alone product that can be used for the customers purpose
  upon installation, and because any services performed have insignificant
  effect on the functionality of the software, services revenue is accounted
  for separately in accordance with Paragraph 69 of SOP 97-2.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | The Company has not
  recorded any unbilled receivables related to implementation and customization
  service revenues, and the Company has accounted for any implementation and
  customization service revenues that have been billed as the services were
  performed, in accordance with Paragraphs 65 and 66 of SOP 97-2.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | The Company has arrangements
  with customers that provide for the delivery of multiple elements, including
  software licenses, and services. The Company allocates and recognizes revenue
  related to each of the multiple elements based on vendor specific objective
  evidence of the fair value of each element and when there are no undelivered
  elements essential to the functionality of the delivered element. Vendor
  specific objective evidence is based on standard pricing for each of the
  elements in our multiple element arrangements. Revenue associated with the
  various elements of multiple element arrangements is based on such
  vendor-specific objective evidence as the price charged for each element is
  the same as when the element would be sold separately from any other element.  Standard pricing does not vary by customer
  or by duration, or by requirements of the arrangement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | International revenues
  are primarily generated by Firstwave UK and independent distributors who
  offer licenses of the Companys products in specific geographic areas. During
  2002, under the terms of the Companys international distributor agreements,
  international distributors collected license fees and maintenance revenues on
  behalf of the Company, and remitted 50% to 60% of standard license fees and
  maintenance revenues they produced. 
  Pursuant to EITF 99-19, the Company recognizes these distributor sales
  at the gross license amount because the Company retains title to the
  products, holds the risk and rewards of ownership, such as risk of loss for
  collection, and responsibility for providing the product to the customer. The
  Company is responsible for establishing and maintaining the pricing of the
  product and performs any source code changes to the product.  The independent distributors are
  considered agents of the Company and work on a commission basis. The
  commissions paid are reflected as a selling expense in the Companys
  financial statements.  The maintenance
  fees generated by distributor revenues are reflected as maintenance revenues,
  with the amount retained by distributors shown as a cost of maintenance
  revenue. There were no international distributor revenues in 2003, compared
  to $78,000 in 2002.

33

---

---

Firstwave
Technologies, Inc.
Notes to Financial Statements

| | 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 fourth quarter of 2003, the
  Company entered into a agreement with a customer to exchange a total of
  $200,000 in software licenses, services, and maintenance in exchange for
  marketing sponsorships at future sporting events. The revenue recorded in the
  fourth quarter of 2003 on this transaction was $125,400 in software revenues
  and $74,600 in deferred revenue. 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 $200,000 is reflected in other assets on the Companys balance
  sheet and will be shown as marketing expense when the Company participates in
  sponsorships at future sporting events.                                                                                                                                                                                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | 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 generally accepted accounting
  principles.  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 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.  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 intangibles                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | 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.  SFAS No 142 prescribes a two-phase
  approach for impairment testing of goodwill. 
  The first                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

34

---

---

Firstwave
Technologies, Inc.
Notes to Financial Statements

| | phase screens for
  impairment; while the second phase (if necessary) measures the impairment.   The Company completed its annual analysis
  during the fourth quarter of 2003 and found no instance of impairment of its
  recorded goodwill. Therefore, no further action was required.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                          
| | Concentration
  of credit risk                                                                                                                                                                                                                                                           
| | 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 certain
  customers.                                                                                            
| |                                                                                                                                                                                                                                                                                          
| | The customer accounts
  receivable which represented more than 10% of total accounts receivable are
  shown below:                                                                                                                                                                       

| |                            |  | December 31, |     
| | -------------------------- |  | ------------ | ----
| |                            |  |              |     
| |                            |  | 2003         |     
| |                            |  |              |     
| | EDS                        |  |              | 9.4 
| | The
  Football Association |  |              | 0.0 
| | sports
  coach UK          |  |              | 65.3

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

| |     |  | Year ended December 31, |     
| | --- |  | ----------------------- | ----
| |     |  |                         |     
| |     |  | 2003                    |     
| |     |  |                         |     
| | EDS |  |                         | 55.2
| |     |  |                         |     

| | 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/(loss) and net income/(loss) 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).                                                                                                                                                                                                                                                                                                                                                                                                               

| |                                                                                                          |  | Year Ended
  December 31, |       
| | -------------------------------------------------------------------------------------------------------- |  | ------------------------- | ------
| |                                                                                                          |  |                           |       
| |                                                                                                          |  | 2003                      |       
| |                                                                                                          |  |                           |       
| | Net
  income/(loss) as reported                                                                          |  | $                         | (996  
| |                                                                                                          |  |                           |       
| | 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 |  |                           | 556   
| |                                                                                                          |  |                           |       
| | Net
  income/(loss) as adjusted                                                                          |  | $                         | (1,552
| |                                                                                                          |  |                           |       

35

---

---

Firstwave
Technologies, Inc.
Notes to Financial Statements

| |                              |  | Year Ended
  December 31, |     
| | ---------------------------- |  | ------------------------- | ----
| |                              |  |                           |     
| |                              |  | 2003                      |     
| |                              |  |                           |     
| | Earnings/(loss)
  per share: |  |                           |     
| | Basic
  - as reported        |  | $                         | (.39
| |                              |  |                           |     
| | Basic
  - as adjusted        |  | $                         | (.60
| |                              |  |                           |     
| |                              |  |                           |     
| | Diluted
  - as reported      |  | $                         | (.39
| |                              |  |                           |     
| | Diluted
  - as adjusted      |  | $                         | (.60
| |                              |  |                           |     

| | The fair value of each
  option grant and the employees purchase rights is estimated on the date of
  grant using the Black-Scholes option-pricing model with the following
  weighted-average assumptions used in 2003, 2002 and 2001, respectively:
  dividend yield of 0% for all years; expected volatility of 143%, 149% and
  146%, and risk-free interest rate ranging from 2.96% to 4.55% and expected
  life of 4.5 years for grants in all years and 90 days for stock purchase
  rights for all quarters.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | There is no tax benefit
  included in the stock-based employee compensation expense determined under
  the fair-value-based method for the twelve month periods ended December 31,
  2003 and December 31, 2002, as the Company established a full valuation
  allowance for its net deferred tax assets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | Basic
  and diluted net income/(loss) per common share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | Basic net income/(loss)
  per common share is based on the weighted average number of shares of common
  stock outstanding during the period. 
  Stock options and convertible preferred stock would have been included
  in the diluted earnings per share calculation had they not been antidilutive.  Net income/(loss) applicable to common
  shareholders includes a charge for dividends related to the Companys
  outstanding preferred stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | Net income/(loss)
  applicable to common shareholders for 2001 includes a one-time non-cash
  charge of $416,675 incurred during the third quarter related to a beneficial
  conversion feature associated with the issuance by the Company of Series C
  Convertible Preferred Stock.  The
  Series C Convertible Preferred Stock is convertible into common stock of the
  Company pursuant to a formula that was based upon 75% of the average trading
  price of the Companys common stock over the twenty trading days prior to
  shareholder approval to establish this class of preferred stock.  Because the conversion price determined by
  this formula was less than the trading price of the common stock on the
  commitment date, current accounting standards required the Company to
  determine the value of this beneficial conversion feature and to record that
  amount as a dividend on preferred stock, resulting in a charge to net
  income/(loss) available to common shareholders.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | The total number of
  common shares included in the Companys computation of diluted income per
  share was 1,003,088 in 2002, and the number of common shares that would have
  been included in the Companys computation of diluted loss per share if they
  had been dilutive was 791,419 in 2003 and 982,837 in 2001.  Weighted average options to purchase
  shares of common stock outstanding but not included in the computation of
  diluted EPS were 126,227 in 2003, 67,427 in 2002, and 245,542 in 2001.  These options were not included in the
  computation of diluted EPS because the options exercise price was greater
  than the average market price of the common shares.                                                                                                                                                                                                                                                                                                               

36

---

---

Firstwave
Technologies, Inc.
Notes to Financial Statements

| | 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 Year Ended December 31, 2003 |  
| | ----------------------------------------------------------------- |  | -------------------------------- | -
| |                                                                   |  |                                  |  
| |                                                                   |  | Income
  (Numerator)             |  
| |                                                                   |  |                                  |  
| | Net
  loss                                                        |  |                                  | $
| | Less:
  Preferred Stock Dividends                                 |  |                                  |  
| |                                                                   |  |                                  |  
| |                                                                   |  |                                  |  
| | Basic EPS                                                         |  |                                  |  
| | Loss
  available to common shareholders                           |  |                                  |  
| |                                                                   |  |                                  |  
| | Effect of Dilutive Securities                                     |  |                                  |  
| | Warrants                                                          |  |                                  |  
| | Convertible
  Preferred Stock                                     |  |                                  |  
| | Stock
  Options                                                   |  |                                  |  
| |                                                                   |  |                                  |  
| |                                                                   |  |                                  |  
| | Diluted EPS                                                       |  |                                  |  
| | Loss
  available to common shareholders                           |  |                                  | $
| |                                                                  
| | (1)
  Not included in Diluted EPS because they were anti-dilutive

| |                                           |  | For Year Ended December 31, 2002 |  
| | ----------------------------------------- |  | -------------------------------- | -
| |                                           |  |                                  |  
| |                                           |  | Income
  (Numerator)             |  
| |                                           |  |                                  |  
| | Net
  income                              |  |                                  | $
| | Less:
  Preferred Stock Dividends         |  |                                  |  
| |                                           |  |                                  |  
| |                                           |  |                                  |  
| | Basic EPS                                 |  |                                  |  
| | Income
  available to common shareholders |  |                                  |  
| |                                           |  |                                  |  
| | Effect of Dilutive Securities             |  |                                  |  
| | Warrants                                  |  |                                  |  
| | Convertible
  Preferred Stock             |  |                                  |  
| | Stock
  Options                           |  |                                  |  
| |                                           |  |                                  |  
| |                                           |  |                                  |  
| | Diluted EPS                               |  |                                  |  
| | Income
  available to common shareholders |  |                                  | $

37

---

---

Firstwave
Technologies, Inc.
Notes to Financial Statements

| |                                                                   |  | For Year Ended December 31, 2001 |  
| | ----------------------------------------------------------------- |  | -------------------------------- | -
| |                                                                   |  |                                  |  
| |                                                                   |  | Income
  (Numerator)             |  
| |                                                                   |  |                                  |  
| | Net
  loss                                                        |  |                                  | $
| | Less:
  Preferred Stock Dividends                                 |  |                                  |  
| |                                                                   |  |                                  |  
| |                                                                   |  |                                  |  
| | Basic EPS                                                         |  |                                  |  
| | Loss
  available to common shareholders                           |  |                                  |  
| |                                                                   |  |                                  |  
| | Effect of Dilutive Securities                                     |  |                                  |  
| | Warrants                                                          |  |                                  |  
| | Convertible
  Preferred Stock                                     |  |                                  |  
| | Stock
  Options                                                   |  |                                  |  
| |                                                                   |  |                                  |  
| |                                                                   |  |                                  |  
| | Diluted EPS                                                       |  |                                  |  
| | Loss
  available to common shareholders                           |  |                                  | $
| |                                                                   |  |                                  |  
| | (1)
  Not included in Diluted EPS because they were anti-dilutive

| | Foreign
  currency translation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The financial statements
  of the Companys UK 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.  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.  During 2003, the Company recognized
  $425,000 in benefit from favorable changes in the foreign currency
  translation rate during the year.  During
  2002 and 2001, the Company recognized $327,000 in benefit and $47,000 in expense
  respectively, related to foreign currency translation.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | 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 an asset 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.                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | Cash and
  cash equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | Cash and cash equivalents
  include all highly liquid investment instruments with an original maturity of
  three months or less.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | Investment
  securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | In accordance with SFAS
  115, "Accounting for Certain Investments in Debt and Equity
  Securities," the Company classifies its investment securities as
  held-to-maturity based on their intent and ability to hold the
  securities.  At December 31, 2003 and
  2002, the Company did not have any investments in debt or equity securities.                                                                                                                                                                                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | Property
  and equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | Property and equipment consist of furniture,
  computers, other office equipment, and purchased software, recorded at cost
  less accumulated depreciation and amortization.  Depreciation and amortization for financial reporting purposes
  are recorded using the straight-line method over estimated useful lives
  ranging from three to six years. 
  Expenditures for maintenance and repairs are charged to expense as
  incurred.                                                                                                                                                                                                                                                                                         

38

---

---

Firstwave
Technologies, Inc.
Notes to Financial Statements

|   |  | Income
  taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |  | The Company accounts for
  income taxes utilizing the liability method and deferred income taxes are
  determined based on the estimated future tax effects of differences between
  the financial reporting and income tax basis of assets and liabilities given
  the provisions of the enacted tax laws. 
  A valuation allowance is provided if, based upon the weight of
  available evidence, it is more likely than not that some or all of the
  deferred tax assets will not be realized.                                                                                                                                                                                                                                                                                                                                                                                    
|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |  | Comprehensive Income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |  | Comprehensive income
  consists of net income and other gains and losses affecting shareholders
  equity that, under generally accepted accounting principles are excluded from
  net income.  For the Company, such
  items include primarily the cumulative translation adjustment converting the
  financial position and statement of operations of our UK subsidiary to US
  dollars.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|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.                                                                                                                                                
|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |  | 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 contingent consideration of $300,000 in cash would have
  been payable if certain revenue goals, as set forth in Section 3.1 of
  the Merger Agreement, were attained.                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |  | The Company accounted 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 was recorded in the Companys financial statements until the
  contingency was resolved, or the consideration was issued or became issuable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |  | The $300,000 earn-out
  provision of the merger agreement with Connect-Care was 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 was contingent consideration based upon future
  financial performance.  Such revenue
  attainment would be offset by any net accounts receivable shown as of
  February 28, 2003 that was not collected by December 31, 2003.  Such amount was to 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.  As of
  December 31, 2003 the revenue goals were not met, and therefore, no
  additional consideration is payable.
|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |  | 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 based on 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.                                                                                                                                                                                                                                                                                                                                                                                                                    

39

---

---

Firstwave Technologies, Inc.
Notes to Financial Statements

| |  | The following table
  summarizes the estimated fair value of the assets acquired and liabilities
  assumed at the date of acquisition (in thousands):
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------

| | Current Assets          |  | $ | 772    |  
| | ----------------------- |  | - | ------ | -
| | Property and Equipment  |  |   | 29     |  
| | Intangible Assets       |  |   | 1,200  |  
| | Goodwill                |  |   | 2,210  |  
| |                         |  |   |        |  
| | Total assets
  acquired |  |   | 4,211  |  
| |                         |  |   |        |  
| |                         |  |   |        |  
| | Current liabilities     |  |   | (1,425 | )
| |                         |  |   |        |  
| |                         |  |   |        |  
| | Net assets
  acquired   |  | $ | 2,786  |  
| |                         |  |   |        |  

| |  | The following table
  summarizes the comprehensive purchase price, including net liabilities
  assumed and costs to date related to the acquisition (in thousands):
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Purchase Price               |  | $ | 2,630 |  | (200,000
  shares at $13.15)
| | ---------------------------- |  | - | ----- |  | ----------------------------
| | Net liabilities assumed      |  |   | 624   |  |                             
| | Cost of acquisition to date  |  |   | 156   |  |                             
| |                              |  |   |       |  |                             
| | Comprehensive purchase price |  | $ | 3,410 |  |                             
| |                              |  |   |       |  |                             

| |  | 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 CRM product. 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 No. 142 Goodwill and
  Other Intangible Assets.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | 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 quarterly during the second through fourth quarters of 2003.  Goodwill was evaluated for impairment
  during the fourth quarter of 2003 in accordance with SFAS No. 142
  Goodwill and Other Intangible Assets and it was determined there was no change
  in the carrying amount of goodwill.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

40

---

---

Firstwave
Technologies, Inc.
Notes to Financial Statements

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

| |                                       |  | December
  31, 2003     |  
| | ------------------------------------- |  | ----------------------- | -
| |                                       |  |                         |  
| |                                       |  | Gross carrying
  amount |  
| |                                       |  |                         |  
| | Amortizable intangible assets         |  |                         |  
| | Connect-Care
  Technology             |  |                         | $
| | Connect-Care
  Customer Relationships |  |                         |  
| |                                       |  |                         |  
| | Total                                 |  |                         | $
| |                                       |  |                         |  

| | Aggregrate Amortization
  Expense             |  |  |   |     | 
| | --------------------------------------------- |  |  | - | --- | 
| | For the nine months ended
  December 31, 2003 |  |  | $ | 171 | 
| |                                               |  |  |   |     | 
| | Estimated Amortization Expense                |  |  |   |     | 
| | For year ended December 31,
  2004            |  |  | $ | 229 | 
| | For year ended December 31,
  2005            |  |  |   | 229 | 
| | For year ended December 31,
  2006            |  |  |   | 154 | 
| | For year ended December 31,
  2007            |  |  |   | 129 | 
| | For year ended December 31,
  2008            |  |  | $ | 129 | 

| |  | 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):
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                           |  | Year
  Ended     |       
| | ------------------------- |  | ---------------- | ------
| |                           |  |                  |       
| |                           |  | Dec
  31,
  2003 |       
| |                           |  |                  |       
| |                           |  |                  |       
| | Revenues                  |  | $                | 12,251
| |                           |  |                  |       
| | Net income/(loss)         |  | $                | (1,420
| |                           |  |                  |       
| | Earnings/(loss) per share |  |                  |       
| | Basic                     |  | $                | (0.53 
| | Diluted                   |  | $                | (0.53 

41

---

---

Firstwave
Technologies, Inc.
Notes to Financial Statements

|5. |  | Property
  and Equipment                                          
|-- |  | ------------------------------------------------------------------
|   |  |                                                                   
|   |  | Property and equipment
  are summarized as follows (in thousands):

| |                                                  |  | December 31, |       
| | ------------------------------------------------ |  | ------------ | ------
| |                                                  |  |              |       
| |                                                  |  | 2003         |       
| |                                                  |  |              |       
| |                                                  |  |              |       
| | Computer hardware and other
  equipment          |  | $            | 1,825 
| | Furniture and fixtures                           |  |              | 773   
| | Purchased software                               |  |              | 1,740 
| |                                                  |  |              |       
| |                                                  |  |              | 4,338 
| | Less:  Accumulated depreciation and amortization |  |              | (3,849
| |                                                  |  |              |       
| |                                                  |  | $            | 489   
| |                                                  |  |              |       

|   |  | Depreciation and
  amortization of property and equipment totaled  $379,000,  $310,000, and
  $356,000, in 2003, 2002 and 2001, respectively.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------
|   |  |                                                                                                                                              
|6. |  | Product
  Development Expenses                                                                                                               
|   |  |                                                                                                                                              
|   |  | Product development expenses
  are summarized as follows (in thousands):                                                                     

| |                                                                                |  | Year ended December 31, |      
| | ------------------------------------------------------------------------------ |  | ----------------------- | -----
| |                                                                                |  |                         |      
| |                                                                                |  | 2003                    |      
| |                                                                                |  |                         |      
| |                                                                                |  |                         |      
| | Total development expenses                                                     |  | $                       | 3,384
| | Less:  Additions to capitalized software
      development before amortization |  |                         | 2,035
| |                                                                                |  |                         |      
| | Product development expenses                                                   |  | $                       | 1,349
| |                                                                                |  |                         |      

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

| |                                     |  | Year ended December 31, |       
| | ----------------------------------- |  | ----------------------- | ------
| |                                     |  |                         |       
| |                                     |  | 2003                    |       
| |                                     |  |                         |       
| |                                     |  |                         |       
| | Balance at beginning of year,
  net |  | $                       | 2,041 
| | Additions                           |  |                         | 2,035 
| | Amortization expense                |  |                         | (1,110
| |                                     |  |                         |       
| | Balance at end of year,
  net       |  | $                       | 2,966 
| |                                     |  |                         |       

|7. |  | Borrowings                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |  | On July 29, 2003, the
  Company signed a Revolving Credit facility loan with RBC Centura whereby
  the Company may borrow up to $1,000,000. 
  The Company had borrowings of $500,000 against the line of credit as
  of December 31, 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 weighted average interest rate for year ended December 31, 2003
  was 4.12%.  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.  As of December
  31, 2003,

42

---

---

Firstwave Technologies, Inc.
Notes to Financial Statements

|   |  | based on eligible accounts receivables, the Company had $500,000 of
  additional credit available on the line of credit.  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 December 31, 2003, the Company was not in compliance with
  certain required covenants. RBC Centura has waived this non-compliance as of
  December 31, 2003, and modified the covenants for 2004. The modified
  covenants include maintaining a ratio of (i) unrestricted cash and equivalents plus net accounts receivable
  to (ii) amount borrowed against the line of credit, of at least 3.00 to 1.00
  and tangible net worth of at least $3,500,000.  As of March 10, 2004, the Company was in compliance with all
  covenants.  In addition, the Company
  will be required to maintain a minimum cash balance in principal depository
  accounts with RBC of at least $750,000.                                                                                                                                                                                                                                                                                                                                                                                     
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|8. |  | Shareholders
  Equity                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |  | Preferred Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |  | On September 7, 2001,
  16,667 shares of the Companys Series C Convertible Preferred Stock were
  issued.  The Series C Preferred Stock
  has voting rights and accumulates dividends at a rate of 9% payable in cash
  monthly and are convertible into Common Stock of the Company at anytime at a
  conversion rate of $1.80 per share of common stock.  The preferred stock has a liquidation preference of $75 per share
  plus all accrued and unpaid dividends. 
  The Company incurred $119,000 in legal fees and cost related to the
  special proxy mailing associated with this offering.  These costs were netted from the proceeds
  received for the stock.  In 2003,
  2,000 shares of this offering were converted to 83,333 shares of common stock
  and in 2002, 4,667 shares of this offering were converted to 194,458 shares
  of common stock pursuant to the original terms of the preferred stock.  At December 31, 2003, there were 10,000
  shares of Series C Preferred Stock outstanding and $5,625 of dividends
  payable related to this offering.  Net
  income/(loss) applicable to common shareholders included a year to date
  charge of approximately $68,000, $99,000 and $36,000 in dividends related to
  the Series C convertible preferred stock for years ending December 31, 2003,
  2002, and 2001, respectively.
|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |  | During the fourth quarter
  of 2000, the Company issued 7,020 shares of Series B Convertible Preferred
  Stock in a private placement. The Company received $702,000 in November 2000
  related to this offering.  The Series
  B Convertible Preferred Stock has voting rights and accumulates dividends at
  a rate of 9% payable in cash monthly, effective January 2002, and is
  convertible into common stock of the Company at anytime after May 15, 2001,
  at a conversion rate of $8.10 per share of common stock.  The preferred stock has a liquidation
  preference of $100 per share plus all accrued and unpaid dividends.  At December 31, 2003, there were 7,020
  shares of Series B Preferred Stock outstanding and $5,265 in dividends
  payable related to this offering. Net income/(loss) applicable to common
  shareholders included a year to date charge of approximately $63,000 per year
  in dividends related to the Series B convertible preferred stock for years
  ending December 31, 2003, 2002, and 2001.                                                                                                                                                                                                                                                                                                                
|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |  | During the second quarter
  of 1999, the Company issued 20,000 shares of Series A Convertible Preferred
  Stock in a private placement. The Company received $1,000,000 in March 1999
  and $1,000,000 in April 1999 related to this offering.  The Series A Convertible Preferred Stock
  has voting rights and accumulates dividends at a rate of 9% payable in cash
  monthly, effective January 2002, and is convertible into common stock of the
  Company at anytime after April 25, 2000, at a conversion rate of $6.18 per
  share of common stock.  The preferred
  stock has a liquidation preference of $100 per share plus all accrued and
  unpaid dividends and becomes redeemable at 
  $100 per share at the option of the Board of Directors after April 26,
  2001.  During 2000, 10,000 shares of
  this offering were converted to 161,812 shares of common stock pursuant to
  the original terms of the preferred stock. 
  At December 31, 2003, there were 10,000 shares of Series A Convertible
  Preferred Stock outstanding and $7,500 dividends payable related to this
  offering.  Net income/(loss)
  applicable to common shareholders included a year to date charge of $90,000
  per year in dividends related to the Series A convertible preferred stock for
  years ending December 31, 2003, 2002, and 2001.            
|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |  | Common Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |  | On September 7, 2001,
  Shareholders approved an amendment to the Companys Articles of Incorporation
  to effect a reverse stock split of all issued and outstanding shares of the
  Companys common stock at a ratio not to exceed one-for-three.  The Companys Board of Directors voted to
  effect a one-for-three reverse stock split of the Companys common stock,
  effective September 12, 2001.  The
  reverse stock split reduced the number of shares issued and outstanding from
  6,300,841 to 2,100,351 effective September 12, 2001.  The Company did not issue fractional
  shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

43

---

---

Firstwave Technologies, Inc.
Notes to Financial Statements

|9. |  | Income Taxes                                                                               
|-- |  | -------------------------------------------------------------------------------------------
|   |  |                                                                                            
|   |  | The components of the
  provision/(benefit) for income taxes are as follows (in thousands):

| |                                 |  | Year
  ended December 31, |     
| | ------------------------------- |  | ------------------------- | ----
| |                                 |  |                           |     
| |                                 |  | 2003                      |     
| |                                 |  |                           |     
| | Current                         |  |                           |     
| | Foreign                         |  | $                         | 1   
| |                                 |  |                           |     
| | Deferred                        |  |                           |     
| | United
  States                 |  |                           | 338 
| | Foreign                         |  |                           | (630
| | Change in
  valuation allowance |  |                           | 292 
| |                                 |  |                           |     
| |                                 |  | $                         | 1   
| |                                 |  |                           |     

| |  | The difference between
  the provision for income taxes at the approximate statutory income tax rate
  of 34% and the Companys effective tax rate is as follows:
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                               |  | Year ended December 31, |      
| | ----------------------------- |  | ----------------------- | -----
| |                               |  |                         |      
| |                               |  | 2003                    |      
| |                               |  |                         |      
| |                               |  |                         |      
| | Statutory income taxes        |  |                         | -34.0
| | State income taxes            |  |                         | -4.0 
| | Change in valuation allowance |  |                         | 38.0 
| | Foreign income taxes          |  |                         | 0.0  
| | Other                         |  |                         | 0.0  
| |                               |  |                         |      
| |                               |  |                         | 0.0  
| |                               |  |                         |      

| |  | At December 31, 2003 and
  2002, deferred tax (assets) liabilities are comprised of the following
  (in thousands):
| |  | -------------------------------------------------------------------------------------------------------------------

| |                                                |  | Year
  endedDecember 31, |       
| | ---------------------------------------------- |  | ------------------------ | ------
| |                                                |  |                          |       
| |                                                |  | 2003                     |       
| |                                                |  |                          |       
| | Gross deferred tax liabilities                 |  |                          |       
| | Capitalization
  of software development costs |  | $                        | 1,009 
| | Depreciation                                   |  |                          | 151   
| | Other                                          |  |                          | -     
| |                                                |  |                          |       
| |                                                |  |                          | 1,160 
| |                                                |  |                          |       
| | Gross deferred tax assets                      |  |                          |       
| | Net
  operating loss carryforwards             |  |                          | (9,600
| | Tax credit
  carryforwards                     |  |                          | (83   
| | Allowance
  for doubtful accounts receivable   |  |                          | (34   
| | Accrued
  expenses                             |  |                          | -     
| |                                                |  |                          |       
| |                                                |  |                          | (9,717
| | Valuation
  allowance                          |  |                          | 8,557 
| |                                                |  |                          |       
| |                                                |  |                          | (1,160
| |                                                |  |                          |       
| | Net
  deferred tax assets                      |  | $                        | -     
| |                                                |  |                          |       

44

---

---

Firstwave Technologies, Inc.
Notes to Financial Statements

|    |  | The Company has general
  business tax credit carryforwards of approximately $245,000 which will expire
  in years 2008 through 2011.  At
  December 31, 2003 the Company has U.S. net operating loss carryforwards of
  approximately $22,000,000 which expire in years 2009 through 2018, and
  approximately $2,900,000 in foreign net operating loss carryforwards.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |  | SFAS 109 specifies that
  deferred tax assets are to be reduced by a valuation allowance if it is more
  likely than not that some portion or all of the deferred tax assets will not
  be realized.  A valuation allowance
  has been provided for those net operating loss carryforwards and foreign tax
  credits which are estimated to expire before they are utilized.  Managements estimate of the valuation
  allowance could be effected in the near term based on results of operations
  in future periods.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10. |  | Stock
  Option Plans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |  | In February 1993, the
  Board of Directors adopted a Stock Option Plan (the Option Plan).  The Company has reserved 816,667 shares of
  common stock for issuance under the Option Plan.  Pursuant to the terms of the Option Plan, a committee of the
  Board of Directors is authorized to grant options to employees of the Company
  who are eligible to receive options under the Option Plan.  The committee is further authorized to
  establish the exercise price, which for incentive stock options will be equal
  to the fair market value of the stock at the date of grant.  A portion of the options granted vest on
  the first anniversary of the date of grant and the remainder vest over a two
  to five-year period thereafter as specified by the individual grant
  agreements. Vesting may accelerate based on Company performance criteria or
  change of control, as specified by the original individual grant agreements.
  Any options which may contain such acceleration clause(s) would be set forth
  in the original stock option agreement and would not represent any kind of
  modification thereof.  Options expire
  ten years after the date of grant.
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |  | At December 31, 2003,
  265,441 options were available for grant and 384,829 options were outstanding
  related to the Option Plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |  | A summary of stock option
  activity is as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

| |                                    |  | Shares |          | ExercisePrice
  Per Share |   | WeightedAvg Exercise
  Price |   | WeightedAverage
  Fair Value |  
| | ---------------------------------- |  | ------ | -------- | ------------------------- | - | ---------------------------- | - | ---------------------------- | -
| |                                    |  |        |          |                           |   |                              |   |                              |  
| |                                    |  |        |          |                           | $ |                              | $ |                              | $
| | Outstanding at December 31,
  2000 |  |        | 268,574  |                           |   | 3.93 - 54.57                 |   | 11.58                        |  
| |                                    |  |        |          |                           |   |                              |   |                              |  
| |                                    |  |        |          |                           |   |                              |   |                              |  
| | Adjustment
  due to 1 for 3 split  |  |        | 13       |                           |   |                              |   |                              |  
| | Granted                            |  |        | 183,121  |                           |   | .95 - 6.19                   |   | 2.95                         |  
| | Exercised                          |  |        | (567     | )                         |   | 4.78                         |   | 4.78                         |  
| | Canceled
  or expired              |  |        | (115,396 | )                         |   | 1.38 - 54.56                 |   | 10.81                        |  
| |                                    |  |        |          |                           |   |                              |   |                              |  
| |                                    |  |        |          |                           |   |                              |   |                              |  
| | Outstanding at December 31,
  2001 |  |        | 335,745  |                           |   | .95 - 35.81                  |   | 7.15                         |  
| |                                    |  |        |          |                           |   |                              |   |                              |  
| |                                    |  |        |          |                           |   |                              |   |                              |  
| | Granted                            |  |        | 195,785  |                           |   | 2.20 - 14.60                 |   | 6.58                         |  
| | Exercised                          |  |        | (33,807  | )                         |   | 1.38 - 9.75                  |   | 5.79                         |  
| | Canceled
  or expired              |  |        | (141,125 | )                         |   | 1.32 - 35.81                 |   | 9.78                         |  
| |                                    |  |        |          |                           |   |                              |   |                              |  
| |                                    |  |        |          |                           |   |                              |   |                              |  
| | Outstanding at December 31,
  2002 |  |        | 356,598  |                           |   | .95 - 16.50                  |   | 5.93                         |  
| |                                    |  |        |          |                           |   |                              |   |                              |  
| |                                    |  |        |          |                           |   |                              |   |                              |  
| | Granted                            |  |        | 219,734  |                           |   | 5.50 - 16.50                 |   | 9.87                         |  
| | Exercised                          |  |        | (56,311  | )                         |   | .95 - 11.25                  |   | 4.15                         |  
| | Canceled
  or expired              |  |        | (135,192 | )                         |   | .95 - 16.50                  |   | 6.63                         |  
| |                                    |  |        |          |                           |   |                              |   |                              |  
| |                                    |  |        |          |                           |   |                              |   |                              |  
| | Outstanding at December 31,
  2003 |  |        | 384,829  |                           |   | 1.32 - 16.50                 |   | 8.21                         |  
| |                                    |  |        |          |                           |   |                              |   |                              |  

45

---

---

Firstwave Technologies, Inc.
Notes to Financial Statements

| | Options
  exercisable  |  | Shares |         |  |  | Weighted
  Avg Exercise
  Price |  |       |  | 
| | ---------------------- |  | ------ | ------- |  |  | ------------------------------- |  | ----- |  | 
| |                        |  |        |         |  |  |                                 |  |       |  | 
| | at
  December 31, 2003 |  |        | 118,860 |  |  |                                 |  | 7.52  |  | 
| | at
  December 31, 2002 |  |        | 109,298 |  |  |                                 |  | 6.87  |  | 
| | at
  December 31, 2001 |  |        | 78,292  |  |  |                                 |  | 11.44 |  | 

| |  | 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 exchanged under this program totaled 81,684, and the
  Company granted 81,684 new options on September 20, 2002, which are included
  in the 195,785 options granted in 2002 as shown above.  There were two instances of options granted
  to participants in the six-month period prior to cancellation of
  options.  As required by the Stock
  Exchange Program, such options were forfeited in order to participate in the
  program.  The new options were consistent
  with the Companys stock compensation practices, the length of time from
  cancellation and granting was at least six months and one day, and the
  exercise price equaled the fair value of the stock at the date of grant.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  | The following table
  summarizes information about stock options outstanding at December 31, 2003:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

| |                  |  | Options
  Outstanding                        |         | Options
  Exercisable                            | 
| | ---------------- |  | -------------------------------------------- | ------- | ------------------------------------------------ | 
| |                  |  |                                              |         |                                                  | 
| |                  |  | Number
  Outstandingat
  December 31,
  2003 |         | Weighted
  AverageRemaining
  Contractual
  Life | 
| |                  |  |                                              |        
| | $  1.32 - $ 7.01 |  |                                              | 153,441 |                                                  | 
| | $  7.31 - $10.50 |  |                                              | 137,592 |                                                  | 
| | $11.06 - $16.50  |  |                                              | 93,796  |                                                  | 
| |                  |  |                                              |         |                                                  | 
| | $  1.32 - $16.50 |  |                                              | 384,829 |                                                  | 
| |                  |  |                                              |         |                                                  | 

|11. |  | Commitments
  and Contingencies                                                                                                                                                                                                      
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  |                                                                                                                                                                                                                                      
|    |  | The Company leases office
  space and equipment under noncancelable lease agreements expiring on various
  dates through 2006. At December 31, 2003, future minimum rentals for
  noncancelable leases are as follows (in thousands):

| | Year ending
  December 31, |  | Minimum
  Annual
  Rentals |      
| | -------------------------- |  | -------------------------- | -----
| |                            |  |                            |      
| | 2004                       |  | $                          | 763  
| | 2005                       |  |                            | 660  
| | 2006                       |  |                            | 306  
| |                            |  |                            |      
| |                            |  | $                          | 1,729
| |                            |  |                            |      

| |  | Net rent expense under
  these and other agreements was approximately 
  $780,000, $972,000, and 
  $940,000, for the years ended December 31, 2003, 2002 and 2001,
  respectively.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

46

---

---

Firstwave Technologies, Inc.
Notes to Financial Statements

|    |  | The Company is subject to
  legal proceedings and claims which may arise in the ordinary course of its
  business.  In the opinion of
  management, the amount of the ultimate liability with respect to these
  actions will not materially effect the financial position of the
  Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|12. |  | Employee
  Benefit Plans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |  | 401(k) Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |  | Effective August 1, 1990
  the Company established a defined contribution plan (the 401(k) Plan) which
  qualifies under Section 401(k) of the Internal Revenue Code for the benefit
  of eligible employees and their beneficiaries.  Employees may elect to contribute up to 100% of their annual
  compensation to the 401(k) Plan, subject to Internal Revenue Service annual
  contribution limits.  For each payroll
  period, the Company matches 30% of the lesser of (1) the participants
  contribution or (2) 7.5% of the participants compensation.  In addition, the Company may make
  discretionary annual contributions. 
  For the years ended December 31, 2003, 2002 and 2001, the Company made
  matching contributions of approximately $55,000,  $39,500, and $22,000, respectively, to the 401(k) Plan and no
  discretionary contributions were made.                               
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |  | Employee Stock Purchase Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |  | The Company has reserved
  40,000 shares of common stock for issuance under its Employee Stock Purchase
  Plan (ESPP), which was effective January 31, 1995.  The ESPP was designed to qualify as an
  employee stock purchase plan under Section 423 of the Internal Revenue Code.
  The ESPP provides that eligible employees may contribute up to 10% of their
  base earnings each quarter for an option to purchase the Companys common
  stock.  Effective April 1, 1998, the
  exercise price is 85% of the fair market value of the common stock on the
  last business day of each quarter.  No
  compensation expense is recorded in connection with this plan.  During 2003 and 2002, 65 and 97 shares,
  respectively, were issued under the ESPP. 
  At December 31, 2003, 22,304 shares had been issued cumulatively under
  the plan and there were options to purchase 83 shares outstanding.
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|13. |  | Segment
  Information                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |  | During June 1997, the
  Financial Accounting Standards Board issued Financial Accounting Standard No.
  131 - Disclosures about Segments of an Enterprise and Related Information
  (SFAS 131).  The statement requires
  detailed disclosures surrounding operating segments and certain
  enterprise-wide disclosures. 
  Management believes that it has only a single segment consisting of
  software sales with related services and support. The enterprise-wide
  disclosures required by SFAS 131 are presented below.  The Company exports its products through
  agreements with international distributors to whom it grants territorial
  rights.                                                                                                                                                                                                                                                
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |  | A summary of
  international revenues, including the Companys UK subsidiary, by geographic
  area is as follows (in thousands):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

| |                           |  | Year
  Ended December 31, |       
| | ------------------------- |  | ------------------------- | ------
| |                           |  |                           |       
| |                           |  | 2003                      |       
| |                           |  |                           |       
| | United States             |  | $                         | 3,814 
| | Europe                    |  |                           | 8,090 
| | South America             |  |                           | -     
| | Australia and New Zealand |  |                           | -     
| | Asia                      |  |                           | -     
| |                           |  |                           |       
| |                           |  | $                         | 11,904
| |                           |  |                           |       

| |  | Long-lived assets of the
  Company are located primarily in the United States and in the office of the
  Companys wholly owned subsidiary, Firstwave Technologies UK Ltd.  Fixed assets of approximately $77,000, or
  15.7% of the consolidated fixed asset balance, are located in the United
  Kingdom.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

47

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Firstwave
Technologies, Inc.
Notes to Financial Statements

|14. |  | Related
  Party Transactions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |  | On February 12, 2001 the
  Company executed a promissory note with its President and Chief Executive
  Officer in the amount of $750,000. 
  The note accrued interest at 9% and was payable in full with interest
  on January 15, 2002.  The note was
  secured by a junior lien on all of the Companys assets, subordinate to the
  Companys bank line of credit.  On
  September 7, 2001, with shareholder approval, the Company issued 10,000
  shares of Series C Convertible Preferred Stock to its President and CEO, in
  exchange for the promissory note dated February 12, 2001.
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |  | During the years ending
  December 31, 2003 and 2002, the Company paid dividends and interest in the
  amount of  $202,500, and $363,000,
  respectively, to its President and CEO. 
  The dividends relate to his $2,250,000 investment in the Companys
  Preferred Stock, and the related interest on dividends earned in 2000 and
  paid in 2002.  At both December 31,
  2003 and 2002 the Company had $16,875 accrued but not yet paid related to
  Preferred Stock dividends owed to its President and CEO.                                                                            

48

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Item 9.  Changes
in and Disagreements with Accountants on Accounting and Financial Disclosure.None

Item 9A.
Controls and ProceduresEvaluation
of disclosure controls and proceduresBased on their most
recent evaluation, which was completed in consultation with management within
90 days of the filing of this Form 10-K, 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-14 and 15d-14 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-K and other Exchange Act filings.

Changes in internal
controlsThere were no
significant changes (including corrective actions with regard to significant
deficiencies or material weaknesses) in the Companys internal controls or
other factors that could significantly affect these controls subsequent to the
date of the evaluation described above.

PART III

Item 10. 
Directors and Executive Officers of the Registrant.The information required by this item is incorporated by reference to
information under the caption Election of Directors - Director Nominee
Biographical Information, - Executive Officers, and - Compliance with
Section 16(a) of the Securities Exchange Act of 1934 of the Companys Proxy
Statement for the Annual Meeting of Shareholders to be held on May 6, 2004.

Code of
EthicsThe
Company has adopted a Code of Business Conduct and Ethics that applies to all
of our directors, officers, and employees. 
The Code of Business Conduct and Ethics is posted on the Companys
web-site at www.firstwave.net 
under the caption Codes and Charters under Investor Relations.

Item 11. 
Executive Compensation.The
information required by this item is incorporated by reference to information
under the captions Election of Directors - Additional Information Concerning
the Board of Directors and Executive Compensation (exclusive of the
subsections entitled Compensation Committee Report on Executive Compensation
and Performance Graph) in the Companys Proxy Statement for the Annual
Meeting of Shareholders to be held on May 6, 2004.

Item 12. 
Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters.The information required by this item is incorporated by reference to
information under the caption Beneficial Ownership of Common Stock in the
Companys Proxy Statement for the Annual Meeting of Shareholders to be held on
May 6, 2004.

Item 13. 
Certain Relationships and Related Transactions.The
information required by this item is incorporated by reference to information
under the caption Executive Compensation - Compensation Committee Interlocks
and Insider Participation and Certain Transactions in the Companys Proxy
Statement for the Annual Meeting of Shareholders to be held on May 6, 2004.

Item 14. Principal Accounting Fees
and ServicesThe information required by this item is incorporated by reference to
information under the caption Independent Accountants in the Companys Proxy
Statement for the Annual Meeting of Shareholders to be held on May 6, 2004.

49

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PART
IV

Item 15. 
Exhibits, Financial Statements, Schedules and Reports on Form 8-K.

| | (a) | The
  following documents are filed as part of this report:
| | --- | -----------------------------------------------------------
| |     |                                                            
| |     | 1.                                                         
| |     |                                                            
| |     |                                                            
| |     |                                                            
| |     |                                                            
| |     |                                                            
| |     |                                                            
| |     |                                                            
| |     | 2.                                                         
| |     |                                                            
| |     |                                                            
| |     | 3.                                                         
| |     |                                                            
| |     |                                                            
| |     |                                                            
| |     |                                                            
| |     |                                                            
| |     |                                                            
| |     |                                                            
| |     |                                                            
| |     |                                                            
| |     |                                                            
| |     |                                                            
| |     |                                                            
| |     |                                                            
| |     |                                                            
| |     |                                                            
| |     |                                                            

50

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| |  |  | 10.13 | Sixth
  Amendment to Lease Agreement dated as of September 22, 1994 between the
  Company and State of California Public Employees Retirement System relating
  to the Companys principal offices located at 2859 Paces Ferry Road, Atlanta,
  GA.(3)
| |  |  | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  | 10.14 | Firstwave
  Technologies, Inc. Employee Stock Purchase Plan. (incorporated herein by
  reference to Exhibit 4(a) of the Companys Registration Statement on Form S-8
  (Registration No. 333-55971) (7)                                               
| |  |  | 10.17 | Seventh
  Amendment to Lease Agreement dated as of January 20, 1998 between the Company
  and State of California Public Employees Retirement System relating to the
  Companys principal offices located at 2859 Paces Ferry Road, Atlanta, GA.(6)  
| |  |  | 10.18 | Eighth
  Amendment to Lease Agreement dated as of May 8, 1998 between the Company and
  State of California Public Employees Retirement System relating to the
  Companys principal offices located at 2859 Paces Ferry Road, Atlanta, GA. (5)       
| |  |  | 10.19 | First
  Amendment to Firstwave Technologies, Inc. 1993 Stock Option Plan
  (incorporated herein by reference to Exhibit 4(c) of the Companys
  Registration Statement on Form S-8 (Registration No. 333-55939)). (7)                                 
| |  |  | 10.20 | First
  Amendment to Firstwave Technologies, Inc. Employee Stock Purchase Plan
  (incorporated herein by reference to Exhibit 4(b) of the Companys
  Registration Statement on Form S-8 (Registration No. 333-55971)). (7)                           
| |  |  | 10.21 | Board
  of Directors Compensation Plan (incorporated herein by reference to Exhibit
  4(b) of the Companys Registration Statement on Form S-8 (Registration No.
  333-55939)). (7)                                                                   
| |  |  | 10.22 | Ninth
  Amendment to Lease Agreement dated as of February 3, 2000 between the Company
  and National Office Partners Limited Partnership relating to the Companys
  principal offices located at 2859 Paces Ferry Road, Atlanta, GA.(8)              
| |  |  | 10.23 | Tenth
  Amendment to Lease Agreement dated as of February 28, 2000 between the
  Company and National Office Partners Limited Partnership relating to the
  Companys principal offices located at 2859 Paces Ferry Road, Atlanta, GA.(8)             
| |  |  | 10.24 | Certificate
  of Designation of Series C Convertible Preferred Stock. (4)                                                                                                                                                                             
| |  |  | 10.25 | Registration
  Rights Agreement dated July 18, 2001 between the Company and Mercury Fund
  No.1 LTD and Mercury Fund II, LTD. (4)                                                                                                                     
| |  |  | 10.26 | Eleventh
  Amendment to Lease Agreement dated as of October 28, 2002 between the Company
  and National Office Partners Limited Partnership relating to the Companys
  principal offices located at 2859 Paces Ferry Road, Atlanta, GA.(9)           
| |  |  | 10.27 | Software
  License Agreement dated July 25, 2001, by and between Firstwave Technologies
  UK Limited and Electronic Data Systems Ltd.(10)                                                                                                             
| |  |  | 10.28 | Software
  Development and License Agreement dated December 23, 2002, by and between The
  Football Association Limited and Firstwave Technologies UK Ltd.(10)(11)                                                                                    
| |  |  | 10.29 | Software
  License Agreement dated September 2, 2002, between The Football Association
  and Firstwave Technologies UK Limited.(10)                                                                                                                   
| |  |  | 10.30 | Letter
  Amendment  dated February 10, 2004 amending
  the Software Development and License Agreement dated December 23, 2003, by
  and between the The Football Association Limited and Firstwave Technologies
  UK Ltd.                             
| |  |  | 14.1  | Firstwave
  Technologies, Inc. Code of Business Conduct and Ethics                                                                                                                                                                                    
| |  |  |       |                                                                                                                                                                                                                                                       
| |  |  | 21.1  | Subsidiaries
  of the Company.                                                                                                                                                                                                                        
| |  |  | 23.1  | Consent
  of Independent Accountants.                                                                                                                                                                                                                 
| |  |  | 31.1  | Certification pursuant to Section 302 of
  the Sarbanes-Oxley Act of 2002                                                                                                                                                                             
| |  |  | 31.2  | Certification pursuant to Section 302 of
  the Sarbanes-Oxley Act of 2002                                                                                                                                                                             
| |  |  | 32    | Certification pursuant to Section 906 of
  the Sarbanes-Oxley Act of 2002                                                                                                                                                                             

| |  |  | (1)Incorporated herein by reference to
  exhibit of the same number in the Companys Registration Statement on Form
  S-1 (Registration No. 33-57984).                  
| |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  | (2)Incorporated herein by reference to
  exhibit of the same number in the Companys Form 10-K for the year ended
  December 31, 1993.                                  
| |  |  | (3)Incorporated herein by reference to
  exhibit of the same number in the Companys Form 10-K for the year ended
  December 31, 1994.                                  
| |  |  | (4)Incorporated herein by reference to
  exhibits attached to the proxy statement dated August 17, 2001 for Special
  Meeting of Shareholders held on September 7, 2001.

51

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| |     |  | (5)Incorporated herein by reference to
  exhibit of the same number in the Companys Form 10-K for the year ended
  December 31, 1998.                                                                                                             
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |  | (6)Incorporated herein by reference to
  exhibit of the same number in the Companys Form 10-K for the year ended
  December 31, 1997.                                                                                                             
| |     |  | (7)Management contract or compensatory plan
  or arrangement required to be filed pursuant to Item 14(c) of Form 10-K.                                                                                                                             
| |     |  | (8)Incorporated herein by reference to
  exhibit of the same number in the Companys Form 10-K for the year ended
  December 31, 1999.                                                                                                             
| |     |  | (9)not used                                                                                                                                                                                                                                        
| |     |  | (10)Incorporated herein by reference to
  exhibits attached to the Companys Registration Statement on Form S-3 filed
  with the Commission March 18, 2003.                                                                                        
| |     |  | (11)Confidential treatment has been requested
  with respect to portions of this document pursuant to Rule 406 of the
  Securities Act. The redacted portions of this document were filed separately
  with the Securities and Exchange Commission.
| |     |  |                                                                                                                                                                                                                                                    
| | (b) |  | Reports of Form 8-K filed
  during the quarter ended December 31, 2003:                                                                                                                                                                            
| |     |  |                                                                                                                                                                                                                                                    
| |     |  | On October 28, 2003,
  Firstwave filed a current report on Form 8-K with the press release of
  October 28, 2003, reporting financial results for the third quarter of 2003.                                                                       
| |     |  |                                                                                                                                                                                                                                                    
| |     |  | On October 9, 2003,
  Firstwave filed a current report on Form 8-K with the press release of
  October 9, 2003 reporting preliminary financial results for the third quarter
  of 2003.                                                            
| |     |  |                                                                                                                                                                                                                                                    

52

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.

|                      | Firstwave
  Technologies, Inc.
|--------------------- | ------------------------------
|                      |                               
|                      |                               
|Date:  March 23, 2004 | By:                           
|                      |                               
|                      |                               
|                      |                               

Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.

|Date:  March 23, 2004 | /s/
  Richard T. Brock                         | 
|--------------------- | ---------------------------------------------- | 
|                      |                                                | 
|                      | Richard
  T. Brock                            
|                      | Chairman
  and Chief Executive Officer        
|                      | (Principal
  Executive Officer)               
|                      |                                               
|                      |                                               
|Date:  March 23, 2004 | /s/
  David R. Simmons                         | 
|                      |                                                | 
|                      | David
  R. Simmons                            
|                      | President
  and Chief Operating Officer       
|                      |                                               
|                      |                                               
|Date:  March 23, 2004 | /s/
  Judith A. Vitale                         | 
|                      |                                                | 
|                      | Judith
  A. Vitale                            
|                      | Chief
  Financial Officer                     
|                      | (Principal
  Financial and Accounting Officer)
|                      |                                               
|                      |                                               
|Date:  March 23, 2004 | /s/
  Roger A. Babb                            | 
|                      |                                                | 
|                      | Roger
  A. Babb                               
|                      | Lead
  Director                               
|                      |                                               
|                      |                                               
|Date:  March 23, 2004 | /s/
  Vincent J. Dooley                        | 
|                      |                                                | 
|                      | Vincent
  J. Dooley                           
|                      | Director                                      
|                      |                                               
|                      |                                               
|Date:  March 23, 2004 | /s/
  John F. Keane                            | 
|                      |                                                | 
|                      | John
  F. Keane                               
|                      | Director                                      
|                      |                                               
|                      |                                               
|Date:  March 23, 2004 | /s/
  Alan I. Rothenberg                       | 
|                      |                                                | 
|                      | Alan
  I. Rothenberg                          
|                      | Director                                      
|                      |                                               
|                      |                                               
|Date:  March 23, 2004 | /s/
  John N. Spencer, Jr.                     | 
|                      |                                                | 
|                      | John N. Spencer, Jr.                          
|                      | Director                                      

53

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