10-Q 1 t15348_10q.htm FORM 10-Q Unassociated Document
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q
 

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

FOR THE QUARTER ENDED June 30, 2007


COMMISSION FILE NUMBER 0-21202

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


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


7000 Central Parkway
Suite 330
Atlanta, GA 30328
(Address of principal executive offices)

678-672-3100
(Telephone number of registrant)
 

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

Yes x No o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.

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

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

Yes o No x
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
 
Outstanding as of August 10, 2007:

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

1


FIRSTWAVE TECHNOLOGIES, INC.

FORM 10-Q

For the quarter ended June 30, 2007
 

 
 
   
Page No.
     
 
     
 
     
 
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Item 5 Other Information
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20

2

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements
 
FIRSTWAVE TECHNOLOGIES, INC.
Condensed Consolidated Balance Sheets
(in thousands)


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

3
 

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


     
For the Three Months Ended  
    
For the Six Months Ended 
  
 
 
June 30, 
 
 
June 30,
 
 
June 30,
 
 
June 30,
 
     
2006
 
 
2007
 
 
2006
 
 
2007
 
Net Revenues
                          
Software
  
$
542
  
$
180
  
$
589
  
$
240
  
Services
    
20
   
92
   
114
   
170
 
Maintenance
    
396
   
311
   
854
   
636
 
Other
    
-
   
6
   
-
   
8
 
     
958
   
589
   
1,557
   
1,054
 
Cost and Expenses
                          
Cost of revenues
                          
Software
    
212
   
(3
)
  
385
   
11
 
Services
    
2
   
89
   
4
   
203
 
Maintenance
    
179
   
57
   
357
   
118
 
Other
    
-
   
15
   
-
   
27
 
Sales and marketing
    
28
   
357
   
81
   
528
 
Product development
    
73
   
157
   
150
   
331
 
General and administrative
    
210
   
234
   
463
   
488
 
     
704
   
906
   
1,440
   
1,706
 
                           
Operating Income (loss)
    
254
   
(317
)
  
117
   
(652
)
                           
Interest income
    
27
   
29
   
49
   
54
 
                           
Income (loss) before income taxes
    
281
   
(288
)
  
166
   
(598
)
                           
Income taxes
    
-
   
-
   
-
   
-
 
Net Income (loss)
    
281
   
(288
)
  
166
   
(598
)
                           
Dividends on preferred stock
    
(71
)
  
(70
)
  
(142
)
  
(140
)
                           
Net Income (loss) applicable to common shareholders
  
$
210
  
$
(358
)
$
24
  
$
(738
)
                           
Income (loss) per common share - Basic
 
$
0.08
  
$
(0.12
)
$
0.01
  
$
(0.26
)
Income (loss) per common share - Diluted
  
$
0.07
  
$
(0.12
)
$
0.01
  
$
(0.26
)
                           
Weighted average shares - Basic
   
2,784
   
2,880
   
2,749
   
2,871
 
Weighted average shares - Diluted
    
2,811
   
2,880
   
2,776
   
2,871
 
                           
                           
                           
 
            
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
4

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

For the Six Months Ended June 30, 2007
 
 
Common Stock 
Preferred Stock
 
Additional
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
paid-in 
 
 
Accumulated
 
 
 
 
 
 
Shares  
 
 
Amount
 
 
Shares
 
 
Amount
 
 
capital
 
 
Deficit
 
 
Total
 
                                             
                                             
Balance at December 31, 2006
    
2,868,302
 
$
13
    
33,720
 
$
2,981
  
$
25,296
  
$
(25,442
)
$
2,848
  
                                             
Issuance of common stock in exchange
                                            
for services rendered
    
23,040
                     
50
         
50
 
Conversion of preferred stock
    
16,667
         
(500
)
  
(50
)
  
50
         
-
 
Dividends on preferred stock
                            
(140
)
        
(140
)
Stock option expense
                            
65
         
65
 
Net loss
                                  
(598
)
  
(598
)
     
 
    
 
    
 
    
 
    
 
    
  
    
 
  
                                             
Balance at end of period
    
2,908,009
 
$
13
    
33,220
 
$
2,931
  
$
25,321
  
$
(26,040
)
$
2,225
  
 
 

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

5
 
FIRSTWAVE TECHNOLOGIES, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)

     
For the Six Months Ended 
  
 
 
June 30, 
 
 
June 30,
 
 
 
 
2006
 
 
2007
  
               
               
Cash flows provided by operating activities
  
$
603
  
$
171
  
               
Cash flows from investing activities
    
-
   
(12
)
               
Cash flows from financing activities
             
Proceeds from options exercised
    
95
       
Payment of dividends on preferred stock
    
(142
)
  
(140
)
Net cash used in financing activities
    
(47
)
  
(140
)
               
Increase in cash and cash equivalents
    
556
   
19
 
Cash and cash equivalents, beginning of period
    
360
   
997
 
Cash and cash equivalents, end of period
  
$
916
  
$
1,016
  
               
Supplemental disclosure of cash flow information
          
Cash paid for income taxes
  
$
-
  
$
-
  
Cash paid for interest
  
$
-
  
$
-
  
               
Supplemental disclosure of non-cash investing
          
and financing activities
              
Proceeds from issuance of common stock in
              
exchange for services rendered
  
$
127
  
$
50
  
   
$
127
  
$
50
  
               
               
 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
6
 
FIRSTWAVE TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
June 30, 2007
 
 
1. Description of Business and Basis of Presentation

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

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

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

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

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

On October 10, 2005, the Company entered into a three-year OEM/Outsourcing Agreement and a Licensing Agreement with M1 Global, an Atlanta-based technology company. Under the terms of the agreements, M1 Global has licensed the Firstwave CRM database schema to develop its future products, and is a non-exclusive reseller of Firstwave products. Although the agreements included the outsourcing of Firstwave’s Professional Services and Support functions to M1 Global, Firstwave is currently providing its own coverage in those areas and no longer pays M1 Global for these services. The agreements provide that M1 Global also pays royalty commissions to Firstwave as follows: 33% on licenses and 20% on services. During the first six months of 2006, M1 Global handled most of the professional services and paid a commission of 20% of services revenues to Firstwave. Commissions received from M1 Global for professional services for 2006 were $72,259. As we have increased our professional services staff since July of 2006, the amount of professional services provided by M1 Global to our customers, and the commissions received from M1 Global, have declined. In addition, during the first six months of 2006, M1 Global provided most of the maintenance services for our customers in exchange for a quarterly fee of $154,000 per quarter. Since July of 2006, we have hired additional personnel for customer support, and the support services provided by M1 Global have been reduced. The quarterly fees to M1 Global were approximately $90,000 in the third quarter and $78,000 in the fourth quarter of 2006. For 2007, there have been no fees paid or payable to M1Global through July 31, 2007.
 
7

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

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

2. Use of Estimates and Critical Accounting Policies

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

Critical Accounting Policies
The Company believes that the following accounting policies are critical to understanding the condensed consolidated financial statements:
·
Revenue Recognition
·
Valuation of Intangible Assets


3. Summary of Significant Accounting Policies

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

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

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

Services revenue is recognized as services are performed. Our software product is able to function independently in a customer’s environment without additional services. Our training, implementation, email, and customization services are optional services to our customers and are not necessary for the functioning of the software product. Our software is offered as a stand-alone product. It can be implemented with minimal services. The essential functionality of the software, such as database support and maintenance, preparation of marketing campaigns, and standard workflow, is functional and can be utilized by the customer upon installation as intended by the customer. At a customer’s request, the software can also be implemented with additional services, such as data conversion and workflow modifications, which are not significant to the functionality of the software, but rather tailor features to most effectively function in the customer’s environment.
 
8

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

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

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

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

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

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

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

Concentration of credit risk
The Company is subject to credit risk primarily due to its trade receivables and its note receivable. The note receivable from AllAboutTickets LLC is more fully detailed in Note 4, Discontinued Operations. The Company has credit risk due to the high concentration of trade receivables through certain customers. The customer accounts receivable that represented more than 10% of total accounts receivable are shown below.
 
 
December 31, 2006
  
June 30, 2007
CapGemini UK
22.9%
  
0.0%
Idexx Systems
23.1%
  
0.5%
Barclaycard
0.0%
  
15.5%
Northrop Grumman
0.0%
  
19.8%
Pro Marketing
2.7%
  
12.0%
 
 
Significant Customers
For the second quarter of 2006 and 2007, none of our customers contributed more than 10% of total revenue. For the six months ended June 30, 2007, none of our customers contributed more than 10% of total revenue. For the six months ended June 30, 2006, one of our customers contributed more than 10% of total revenue, Galactus, Inc., contributed 33% of total revenue due to the payment for the assignment of the .Net Integrated Development Environment tool.
 
9

Basic and diluted net loss per common share
Basic net loss per common share is based on the weighted average number of shares of common stock outstanding during the period. Stock options and convertible preferred stock are included in the diluted earnings per share calculation when they are not antidilutive. Net loss applicable to common shareholders includes a charge for dividends related to the Company’s outstanding preferred stock.
 
The potentially dilutive common shares relate to options granted under the Company’s stock compensation plans and convertible preferred shares. The Company has excluded the outstanding stock options to purchase 531,919 shares of common stock from the calculations of diluted loss per share for the second quarter of 2007 and for the six months ended June 30, 2007, because all such securities are antidilutive. For the six months ended June 30, 2006, the Company excluded outstanding stock options to purchase 136,000 shares of common stock from the calculation of diluted loss for share.

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

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

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

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


4. Discontinued Operations

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

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

10


5. Goodwill and Intangibles

As of June 30, 2007, the Company had $354,000 of Intangible Assets and $593,000 of Goodwill as a result of acquisitions in 1998 and 2003, after subsequent amortization expense and impairment charges. Goodwill and Other Intangible Assets were evaluated for impairment at the end of the second quarter of 2007 in accordance with SFAS 142 “Goodwill and Other Intangible Assets,” and it was determined there was no instance of impairment of recorded Goodwill or Other Intangible Assets.
 
The weighted average amortization period for the intangible assets with finite useful lives is six years. There are no significant residual values in the intangible assets. The Company began amortization of the above-mentioned intangible assets relating to the acquisitions effective April 1, 2003.

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


     
December 31, 2006  
    
June 30, 2007 
  
 
 
Gross carrying 
 
 
Accumulated
 
 
Gross carrying
 
 
Accumulated
 
 
 
amount 
 
 
amortization
 
 
amount
 
 
amortization
  
Amortizable intangible assets
                          
Connect-Care Technology
  
$
300
  
$
300
  
$
300
  
$
300
  
Connect-Care Customer Relationships
    
900
   
482
   
900
   
546
 
Total
  
$
1,200
  
$
782
  
$
1,200
  
$
846
  
                           
Aggregrate Amortization Expense
                          
For the Six months ended June 30, 2007
  
$
64
                  
                           
Estimated Amortization Expense
                         
For the six months ending December 31, 2007
  
$
65
                    
For year ending December 31, 2008
  
$
129
                    
For year ending December 31, 2009
  
$
129
                    
For year ending December 31, 2010
  
$
31
                    
 
 
6. Stock-Based Compensation
 
Stock Incentive Plan
In May 2005 the shareholders of Firstwave Technologies, Inc. approved the Company’s 2005 Stock incentive Plan which provides for the granting of options and other types of awards for shares of our Company’s common stock for the Company’s employees, directors, advisors and consultants. There was an aggregate of 335,841 shares remaining available for issuance under the Company’s stock incentive plan as of June 30, 2007. Stock options granted to date generally have had an exercise price per share equal to the closing market value per share of the common stock on the day before the grant and expire ten years from the date of grant. Some of these options become exercisable in annual increments over a four-year period beginning one year from the grant date while others became immediately exercisable upon their grant.
 
Accounting for Share-Based Compensation
Effective January 1, 2006, we adopted Statement of Financial Accounting Standards No. 123(R) ("SFAS 123(R)"), which requires the measurement of compensation expense for all share-based awards made to employees and directors based on estimated fair values on the date of grant and recognition of compensation expense over the expected vesting period. We adopted SFAS 123(R) using the modified prospective transition method, and accordingly, prior period results have not been restated. Under the transition method, compensation cost recognized on or after January 1, 2006 includes: (a) compensation cost for all share-based awards granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS 123, and (b) compensation cost for all share-based awards granted on or after January 1, 2006, based on the grant date fair value estimated in accordance with SFAS 123(R). No stock-based compensation expense related to stock options was recognized in the Statement of Operations for options granted during periods prior to January 1, 2006, as all stock options granted prior to such date were fully vested as of December 31, 2005. The Company granted stock options to purchase 22,000 shares during the second quarter of 2006. No stock options were granted during the second quarter of 2007. In accordance with SFAS 123(R), $27,170 in stock compensation expense was recorded for the second quarter of 2007, for stock options granted prior to the second quarter of 2007. For the six months ended June 30, 2006 and 2007, respectively, $2,400 and $65,000 in stock compensation expense were recorded.
 
11

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

On November 10, 2005, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position No. SFAS 123(R)-3 (“FSP 123(R)-3”), Transition Election Related to Accounting for Tax Effects of Share-Based Payment Awards. We have adopted the transition method provided in FSP 123(R)-3 for calculating the tax effects of stock-based compensation expense. We use the “with and without” approach, which compares the actual income taxes payable for the period to the amount of tax payable that would have been incurred absent the deduction for employee share-based awards in excess of the amount of compensation expense recognized for financial reporting. As a result of this approach, tax net operating loss carryforwards not generated from share-based awards in excess of expense recognized for financial reporting are considered utilized before the current period’s share-based compensation expense deduction. No tax expense was recorded during the second quarter of 2007 and 2006 or for the six months ended June 30, 2007 and 2006 because the Company’s deferred tax assets are fully reserved. Stock compensation expense reduced income before income taxes by $2,400 for the six months ended June 30, 2006 and increased loss before income taxes by $65,000 for the six months ended June 30, 2007, and such amounts were credited directly to Additional Paid in Capital. If and when all tax net loss carryforwards are utilized, we will subsequently record an income tax benefit which will also be credited to equity.
 
Stock Options
There were no options granted, exercised, or expired, during the three month period ended June 30, 2007. There were options to purchase 25,000 shares that were forfeited during the three month period ended June 30, 2007. The balance of outstanding stock options to purchase shares was 531,919 as of June 30, 2007.


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

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

8. Income Taxes

The Company has not recorded any income tax provisions during the six months ended 2006 or 2007 due to its tax net loss carryforwards which were fully reserved as of December 31, 2006 and June 30, 2007. As of June 30, 2007, the Company has U.S. net operating loss carryforwards of approximately $25,600,000 which expire in years 2009 through 2019.
 
9. Recent Accounting Pronouncements 
 
In June 2006, the Financial Accounting Standards Board (“FASB”) issued Financial Interpretation (“FIN”) No. 48, “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109.” FIN 48 addresses the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes.” FIN 48 prescribes specific criteria for the financial statement recognition and measurement of the tax effects of a position taken or expected to be taken in a tax return. This interpretation also provides guidance on derecognition of previously recognized tax benefits, classification of tax liabilities on the balance sheet, recording interest and penalties on tax underpayments, accounting in interim periods, and disclosure requirements. FIN 48 is effective for fiscal periods beginning after December 15, 2006. The Company adopted FIN 48 on January 1, 2007, and the adoption had no material effect on its consolidated financial position or results of operations as of June 30, 2007.
 
12
 
In March 2006, the EITF reached a consensus on EITF Issue No. 06-3, “How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross versus Net Presentation),” (“EITF No. 06-3”). This EITF requires the adoption of a policy for presenting taxes in the income statement either on a gross or net basis. Gross or net presentation may be elected for each different type of tax, but similar taxes should be presented consistently. Taxes within the scope of this EITF would include taxes that are imposed on a revenue transaction between the seller and a customer (e.g., sales taxes, use taxes, value-added taxes, and some types of excise taxes). EITF No. 06-3 was effective for the Company’s financial statements for interim and annual reporting periods beginning January 1, 2007, and the impact was not material to the Company’s results of operations. The Company’s policy is to present the net amount of such taxes in its statement of operations.

10. Subsequent Events

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

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

Overview

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

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

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

Results of Operations

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

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

Services revenues increased 360.0% from $20,000 in the second quarter of 2006 to $92,000 in the second quarter of 2007. For the six months ended June 30, 2007, services revenues increased 49.1% to $170,000 from $114,000 for the six months ended June 30, 2006. The increases are due to additional services projects. In the second quarter of 2006, the Company’s outsourcing partner, M1 Global, was performing the services for the Company’s customers, while the Company was performing those services in the second quarter of 2007.
 
14

Maintenance revenues decreased 21.5% from $396,000 in the second quarter of 2006 to $311,000 in the second quarter of 2007. For the six months ended June 30, 2007, maintenance revenues decreased 25.5% to $636,000 from $854,000 for the six months ended June 30, 2006. Maintenance revenues are the result of renewal agreements from previous software license sales as well as new license agreements. The decreases were due to reduced renewals of maintenance agreements from existing customers and reduced new software licenses.
 
Cost of software revenues decreased 101.4% from $212,000 in the second quarter of 2006 to ($3,000) in the second quarter of 2007.  In the first quarter of 2007, the Company had recorded $9,000 for lead generation activities as Cost of Software Revenues rather than Sales and Marketing Expense as recorded in prior quarters.  Although immaterial, the Company reclassified the amount to Sales and Marketing Expense, which resulted in a negative balance in Cost of Software Revenues for the second quarter of 2007. Cost of software revenues includes amortization of capitalized software costs, costs of third party software, media costs, and documentation materials. The decreases are due to the costs associated with the assignment of the .Net Integrated Development Environment tool and capitalized software amortization expense in the second quarter of 2006. There was no amortization expense in the second quarter of 2007 or for the six months ended June 30, 2007.
 
Cost of revenues for services increased from $2,000 in the second quarter of 2006 to $89,000 in the second quarter of 2007. For the six months ended June 30, 2007, cost of revenues for services increased to $203,000 from $4,000 for the six months ended June 30, 2006. The increases are primarily due to an increase in personnel to perform professional services rather than outsourcing professional services to M1 Global.
 
Cost of revenues for maintenance decreased 68.2% from $179,000 in the second quarter of 2006 to $57,000 in the second quarter of 2007. For the six months ended June 30, 2007, cost of revenues for maintenance decreased 66.9% to $118,000 from $357,000 for the six months ended June 30, 2006. The decreases are the result of the quarterly fees paid to M1 Global under the outsourcing arrangement in the second quarter of 2006 and for the six months ended June 30, 2006 for the support of our domestic customers, offset by additional personnel in-house to handle the support services in the second quarter of 2007 and for the six months ended June 30, 2007. There were no fees paid to M1 Global in the second quarter of 2007 or for the six months ended June 30, 2007, and there were $154,000 in fees paid to M1 Global in the second quarter of 2006 and $308,000 in fees paid to M1 Global for the six months ended June 30, 2006.

Sales and marketing expense increased 1175.0% from $28,000 in the second quarter of 2006 to $357,000 in the second quarter of 2007. For the six months ended June 30, 2007, sales and marketing expense increased 551.9% to $528,000 from $81,000 for the six months ended June 30, 2006. The increases are due to added sales and marketing activity and personnel costs in the second quarter of 2007 and for the six months ended June 30, 2007, as well as increased costs associated with the prepaid software royalty fees from FSI.
 
The Company’s product development expenses increased 115.1% from $73,000 in the second quarter of 2006 to $157,000 in the second quarter of 2007. For the six months ended June 30, 2007, product innovation and development expenses increased 120.7% to $331,000 from $150,000 for the six months ended June 30, 2006. The increases are primarily related to increases in payroll costs associated with additional personnel. No development costs have been capitalized during 2006 or 2007.

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

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

The above factors combined to result in a net loss applicable to common shareholders of $358,000 in the second quarter of 2007 compared to net income applicable to common shareholders of $210,000 in the second quarter of 2006. Net loss per basic and diluted share was $0.12 for the second quarter of 2007 compared to net income per basic share of $0.08 and net income per diluted share of $0.07 in the second quarter of 2006. For the six months ended June 30, 2007, net loss applicable to common shareholders was $738,000 compared to net income applicable to common shareholders of $24,000 for the six months ended June 30, 2006. Net loss per basic and diluted share for the six months ended June 30, 2007 was $0.26 compared to net income per basic and diluted share of $0.01 for the six months ended June 30, 2006. For the second quarter of 2006, the number of basic weighted average shares outstanding was 2,784,000 and the number of diluted weighted average shares outstanding was 2,811,000, compared to 2,880,000 basic and diluted outstanding shares for the second quarter of 2007.
 
15

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

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

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

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

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

Liquidity and Capital Resources

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

Our future capital requirements will depend on many factors, including our ability to generate positive cash flows, continue to collect the note receivable from FSI, retain our maintenance revenues from existing customers, control expenses, and generate additional revenues from other sources. Any projections of future cash needs and cash flows are subject to substantial uncertainty. We have no material commitments for capital expenditures. We do not believe that inflation has historically had a material effect on our Company's results of operations. We have expanded our employee base, increased our sales and marketing activities, and have moved into new facilities. We anticipate that these new expenditures will have an impact on our operating costs, cash flows, and requirements for capital.
 
16

Item 3. Quantitative and Qualitative Disclosures About Market Risk
 
The Company is subject to market risk exposures of varying correlations and volatilities, primarily relating to interest rate risk. The Company does not currently engage in hedging activities or otherwise use derivatives to alter the interest characteristics of its financial assets. Although a decrease in interest rates could reduce the interest income we earn on our cash and cash equivalents, at this time management does not believe a change in interest rates will materially affect the Company's financial position or results of operations.

Item 4. Controls and Procedures

Based on the most recent evaluation, which was completed in consultation with management as of the end of the period covered by the filing of this Form 10-Q, the Company’s Chairman, Chief Executive Officer and Principal Financial Officer believes the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) were effective as of the date of such evaluation in timely alerting the Company’s management to material information required to be included in this Form 10-Q and other Exchange Act filings.
 
Item 5. Effect of New Accounting Pronouncements

None


17


PART II. OTHER INFORMATION


Item 1A. Risk Factors
There were no material changes to the risk factors disclosed in the Company’s Form 10K for the year ended December 31, 2006 as filed with the Securities and Exchange Commission. One risk factor has been added.
We may fail to meet the continued listing requirements of the NASDAQ Capital Market, which may cause our stock to be delisted and to become subject to the "penny stock" regulations.
 
To maintain our listing on the NASDAQ Capital Market, we are required, among other things, to maintain a minimum shareholder’s equity of at least $2.5 million. On June 30, 2007, our shareholder’s equity balance was $2.25 million.  We have not received a notice from NASDAQ, and we believe that the transaction described above in Note 10 to the Condensed Consolidated Financial Statements on Page 13 has now increased our shareholder's equity back above $2.5 million.  While we believe that our shareholder's equity is now above the minimum requirement, there is no guarantee that we will be able to maintain the requirements for continued listing. If our shares are delisted from NASDAQ, our stockholders could find it difficult to sell our stock and the market price and market liquidity of our common stock may be adversely affected. If our common stock is delisted from NASDAQ, we may apply to have our shares quoted on NASDAQ’s Bulletin Board or in the “pink sheets” maintained by the National Quotation Bureau, Inc. The Bulletin Board and the “pink sheets” are generally considered to be less efficient markets than the NASDAQ Capital Market. In addition, if our shares are no longer listed on NASDAQ or another national securities exchange in the United States, our shares may be subject to the “penny stock” regulations. In general, regulations of the SEC define a "penny stock" to be an equity security that is not listed on a national securities exchange or the NASDAQ Stock Market and that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. If our common stock becomes a penny stock, additional sales practice requirements would be imposed on broker-dealers that sell such securities to persons other than certain qualified investors. For transactions involving a penny stock, unless exempt, a broker-dealer must make a special suitability determination for the purchaser and receive the purchaser's written consent to the transaction prior to the sale. In addition, the rules on penny stocks require delivery, prior to and after any penny stock transaction, of disclosures required by the SEC. If our common stock were subject to the rules on penny stocks, the market liquidity for our common stock could be severely and adversely affected. Accordingly, the ability of holders of our common stock to sell their shares in the secondary market may also be adversely affected.


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

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

1. Votes cast for or withheld regarding the election of six (6) Directors
 
Name of Nominee
Votes For
Votes Withheld
     
Roger A. Babb
3,303,385
93,433
Richard T. Brock
3,346,574
50,244
I. Sigmund Mosley
3,303,421
93,397
John N. Spencer, Jr.
3,303,518
93,300
John N. Sterling
3,352,517
44,301
Judith A. Vitale
3,347,783
49,035
 

The nominees for directors were elected by a majority.


2. Ratification of selection of Cherry, Bekaert & Holland, L.L.P. as the Company’s independent auditors
 
Votes For
Votes Against
Abstain
     
3,370,134  
23,875
2,809
 
The ratification was adopted by a majority.
 
Item 5. Other Information
On August 13, 2007, Firstwave entered into Amendment #1 to the Agreement with ListK LLC dated May 31, 2006. Amendment #1 continues Firstwave’s right to use ListK’s marketing lists, custom marketing list generation capabilities, and email delivery capabilities in exchange for a royalty and services prepayment of $625,000 payable in 300,000 shares of unregistered Firstwave common stock at a fair market value of $2.00 per share and $25,000 in cash. The exhibits to Amendment #1 detail the pricing for the various services. Firstwave has the ability to renew at similar level pricing if it so chooses. All other terms and conditions of the original agreement are followed. Firstwave has no future performance commitments regarding the prepayment.
 
Item 6. Exhibits
The Exhibits to this Report on Form 10Q are listed in the accompanying Exhibit Index.
 


18

 


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
     
 
FIRSTWAVE TECHNOLOGIES, INC.
(Registrant)
 
 		  
 		  
 
Date: August 14, 2007 By:   /s/ Richard T. Brock
 
Richard T. Brock
 
Chief Executive Officer and
Principal Accounting Officer

 
 

19




 
Exhibit Number  Description
   
Exhibit 31.1
Certification of Periodic Report by the Chief Executive Officer and Principal Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
   
Exhibit 32  
 Certification of Chief Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350.
 
 
 
 
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