10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D. C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2011

¨ 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: 0-30983

ADVANT-E CORPORATION

(Exact name of registrant as specified in its charter)

DELAWARE	88-0339012
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

2434 Esquire Dr.

Beavercreek, Ohio 45431

(Address of principal executive offices)

(937) 429-4288

(Registrant’s telephone number, including area code)

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 past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined by Rule12b-2 of the Exchange Act).    Yes  ¨    No  x

As of November 14, 2011 the issuer had 66,722,590 outstanding shares of Common Stock, $.001 Par Value.

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

ADVANT-E CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Unaudited)

	Three Months Ended September 30,					Nine Months Ended September 30,
	2011		2010			2011		2010
Revenue	$	2,447,674		2,380,510			7,107,718		6,918,147
Cost of revenue		955,698		913,522			2,850,509		2,769,072
Gross margin		1,491,976		1,466,988			4,257,209		4,149,075
Marketing, general and administrative expenses		802,075		803,341			2,389,125		2,478,280
Operating income		689,901		663,647			1,868,084		1,670,795
Other income (expense), net		892		(2,964	)		2,933		(959	)
Income before income taxes		690,793		660,683			1,871,017		1,669,836
Income tax expense		235,251		226,452			637,928		571,486
Net income	$	455,542		434,231			1,233,089		1,098,350
Earnings per share – basic and diluted	$	.007		.006			.018		.016
Weighted average shares outstanding – basic and diluted		66,722,590		66,722,590			66,722,590		66,722,590

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

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ADVANT-E CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

	September 30,  2011 (Unaudited)		December 31, 2010
Assets
Current Assets:
Cash and cash equivalents	$	3,953,427		2,963,172
Accounts receivable, net		752,404		743,020
Prepaid software maintenance costs		208,554		174,013
Prepaid expenses and deposits		69,267		99,234
Deferred income taxes		210,818		153,643
Total current assets		5,194,470		4,133,082
Software development costs, net		291,224		308,832
Property and equipment, net		147,952		228,121
Goodwill		1,474,615		1,474,615
Other intangible assets, net		180,973		244,508
Total assets	$	7,289,234		6,389,158
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	157,181		79,986
Dividends payable		667,226		—
Income taxes payable		33,396		33,619
Accrued salaries and other expenses		340,706		180,311
Deferred revenue		810,330		673,810
Total current liabilities		2,008,839		967,726
Deferred income taxes		204,807		244,481
Total liabilities		2,213,646		1,212,207
Shareholders’ equity:
Common stock, $.001 par value; 100,000,000 shares authorized; 66,722,590 shares issued and outstanding		66,723		66,723
Paid-in capital		1,936,257		1,936,257
Retained earnings		3,072,608		3,173,971
Total shareholders’ equity		5,075,588		5,176,951
Total liabilities and shareholders’ equity	$	7,289,234		6,389,158

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

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ADVANT-E CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)

	Nine Months Ended September 30,
	2011			2010
Cash flows from operating activities:
Net income	$	1,233,089			1,098,350
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation		114,861			158,995
Amortization of software development costs		58,244			30,669
Amortization of other intangible assets		63,534			63,534
Loss on disposal of property and equipment		—			4,688
Deferred income taxes		(96,849	)		(39,253	)
Increase (decrease) in cash and cash equivalents arising from changes in assets and liabilities:
Accounts receivable		(9,384	)		(112,854	)
Prepaid software maintenance costs		(34,541	)		(31,734	)
Prepaid expenses and deposits		29,967			19,341
Prepaid income taxes		—			39,798
Accounts payable		77,195			(11,701	)
Income taxes payable		(223	)		35,901
Accrued salaries and other expenses		160,395			175,913
Deferred revenue		136,520			125,393
Net cash flows from operating activities		1,732,808			1,557,040
Cash flows from investing activities:
Purchases of property and equipment		(34,691	)		(101,832	)
Software development costs		(40,636	)		(148,650	)
Net cash flows from investing activities		(75,327	)		(250,482	)
Cash flows from financing activities:
Dividends paid		(667,226	)		(667,226	)
Net increase in cash and cash equivalents		990,255			639,332
Cash and cash equivalents, beginning of period		2,963,172			2,713,996
Cash and cash equivalents, end of period	$	3,953,427			3,353,328
Supplemental disclosures of cash flow items:
Income taxes paid	$	735,000			535,000
Non-cash transactions:
Declared dividends payable no later than December 31, 2011		667,226			—
Retirement of shares		—			28,192

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

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ADVANT-E CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited)

September 30, 2011

Note 1: Basis of Presentation, Organization and Other Matters

The accompanying unaudited interim consolidated condensed financial statements as of September 30, 2011 and for the three and nine month periods ended September 30, 2011 and 2010, together with the accompanying consolidated condensed balance sheet as of December 31, 2010, which has been derived from audited financial statements, have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although management believes that the disclosures made are adequate to make the information not misleading. In the opinion of management, the unaudited interim consolidated condensed financial statements include all adjustments, which were normal and recurring in nature, considered necessary for a fair presentation of financial position, results of operations, and cash flows for the interim periods.

Results of operations for the three and nine months ended September 30, 2011 are not necessarily indicative of the results to be expected for the full year ending December 31, 2011. These unaudited interim consolidated condensed financial statements should be read in conjunction with the consolidated financial statements, accounting policies, and financial notes thereto included in Advant-e Corporation’s 2010 Form 10-K filed with the Securities and Exchange Commission.

Nature of Operations

Advant-e Corporation through its wholly-owned subsidiaries, Edict Systems, Inc. and Merkur Group, Inc. (collectively, the “Company”), develops, markets, resells, and hosts software and provides services that allow its customers to send and receive business documents electronically in standard and proprietary formats. Edict Systems specializes in providing hosted Electronic Data Interchange solutions that utilize the Internet as the primary communications method. Customers use Edict Systems solutions to connect with business partners, integrate data with internal systems, expand and manage electronic trading communities, and validate data via a hosted business rule service. Merkur Group develops and resells software, provides professional services, and provides technical maintenance and support that enables customers to automate delivery and receipt of business documents. Merkur Group provides proprietary software that integrates and connects large Supply Chain Management (SCM), Customer Relationship Management (CRM), and Enterprise Resource Planning (ERP) systems with third party software that provides multiple delivery and document capture options. Customers consist of businesses across a number of industries primarily throughout the United States, and to a much lesser extent some foreign locations, principally Canada, Mexico, and Puerto Rico.

Principles of Consolidation

The consolidated condensed financial statements include the accounts of Advant-e Corporation and its wholly-owned subsidiaries, Edict Systems, Inc., and Merkur Group, Inc. Inter-company accounts and transactions are eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with U. S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates used in preparing these financial statements include those considered in the assessment of recoverability of capitalized software development costs, the assessment of potential impairment of goodwill, the assessment of the collectability of accounts receivable and the recording of prepaid software maintenance costs and deferred revenue. A reasonable possibility exists that estimates used will change within the next year.

Note 2: Software Development costs

Software development costs at September 30, 2011 and the changes during the nine months then ended are summarized as follows:

	Cost		Accumulated Amortization		Net
Balance, January 1, 2011	$	1,821,567		1,512,735		308,832
Additions		40,636		—		40,636
Amortization expense		—		58,244		(58,244	)
Balance, September 30, 2011	$	1,862,203		1,570,979		291,224

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Software development costs are for internal use software and for website development and related enhancements. The balance consists primarily of development costs related to the latest version of the Company’s Web EDI. No such costs were capitalized subsequent to the quarter ended March 31, 2011 as the majority of the enhancements related to this upgrade have been completed.

Note 3: Line of Credit

At September 30, 2011, the Company has a $1,500,000 bank line of credit. Borrowings under the line of credit accrue interest at the bank’s prime commercial rate, are collateralized by substantially all of the assets of the Company’s subsidiaries, and are payable in full when the line of credit expires on April 25, 2012. Interest is payable monthly. The line of credit is guaranteed by the Company’s Chief Executive Officer. No borrowings were outstanding as of September 30, 2011 and 2010 and during the nine month periods then ended.

Note 4: Income taxes

Income tax expense consists of the following:

	Three Months  Ended September 30,						Nine Months  Ended September 30,
	2011			2010			2011			2010
Current expense	$	269,835			235,600			734,777			610,739
Deferred benefit		(34,584	)		(9,148	)		(96,849	)		(39,253	)
Total income tax expense	$	235,251			226,452			637,928			571,486

Note 5: Operating Segment Information

The Company has two reportable segments: Internet-based electronic commerce document processing (Edict Systems, Inc.) and software-based electronic commerce document processing (Merkur Group, Inc.). The Company evaluates the performance of each reportable segment on income before income taxes excluding the effects of acquisition-related amortization of other intangible assets and related income taxes. The accounting policies of the segments are the same as those for the Company. The Company’s reportable segments are managed as separate business units.

The following segment information is for the three months ended September 30, 2011 and 2010:

	Three Months Ended September 30, 2011
	Internet-based		Software		Reconciling Items  (a)			Total Consolidated
Revenue	$	2,122,076		325,598		—			2,447,674
Income before income taxes		651,650		60,321		(21,178	)		690,793
Income tax expense (benefit)		221,943		20,509		(7,201	)		235,251
Net income		429,707		39,812		(13,977	)		455,542
Segment assets at September 30, 2011		3,744,121		1,890,628		1,654,485			7,289,234
	Three Months Ended September 30, 2010
	Internet-based		Software		Reconciling Items (a)			Total Consolidated
Revenue	$	2,000,599		379,911		—			2,380,510
Income before income taxes		587,797		94,064		(21,178	)		660,683
Income tax expense (benefit)		201,633		32,020		(7,201	)		226,452
Net income		386,164		62,044		(13,977	)		434,231
Segment assets at September 30, 2010		3,234,496		1,740,775		1,802,181			6,777,452

The following segment information is for the nine months ended September 30, 2011 and 2010:

	Nine Months Ended September 30, 2011
	Internet-based		Software		Reconciling Items  (a)			Total Consolidated
Revenue	$	6,091,959		1,028,278		(12,519	)		7,107,718
Income before income taxes		1,732,772		201,779		(63,534	)		1,871,017
Income tax expense (benefit)		590,919		68,613		(21,604	)		637,928
Net Income		1,141,853		133,166		(41,930	)		1,233,089

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	Nine Months Ended September 30, 2010
	Internet-based		Software		Reconciling Items (a)			Total Consolidated
Revenue	$	5,795,291		1,122,856		—			6,918,147
Income before income taxes		1,497,229		236,141		(63,534	)		1,669,836
Income tax expense (benefit)		512,742		80,348		(21,604	)		571,486
Net Income		984,487		155,793		(41,930	)		1,098,350

(a) Reconciling items generally consist of the elimination of intersegment revenues of $12,519 for the sale of software in 2011, at cost, and goodwill, other intangible assets and related amortization in connection with the Merkur Group, Inc. acquisition.

Revenue from customers located in areas outside the United States, principally in Canada, Mexico, and Puerto Rico, totaled less than 3% of consolidated revenue in the three and nine months ended September 30, 2011 and 2010.

Note 6: Dividend

On May 12, 2011 the Company’s Board of Directors declared a dividend of $0.02 per share payable in two equal installments of $.01 per share each. The first installment totaling $667,226 was paid in June 2011. The Company reported as a current liability the second installment totaling $667,226 to be paid no later than December 31, 2011.

Note 7: Subsequent Event—Building Lease and Related Party

Effective on November 1, 2011 the Company moved its corporate office and principal place of business to a building owned by an entity that is wholly-owned by the Company’s CEO and majority shareholder. The Company is in the process of negotiating the terms of a lease agreement for the building. The Company is the sole tenant of the 19,000 square feet building, and anticipates leasing the space for $10 per square foot, or $190,000 per year, plus paying all building expenses including interior and exterior maintenance, structural repairs, taxes, insurance, utilities and all other related expenses. The Company anticipates that the lease will expire on October 31, 2018.

The Company is entering into this lease due to its need for the following: additional 7,000 square feet of space to provide sufficient space for all employees to work in one building, sufficient space to provide ample parking for all employees and visitors, sufficient space to allow for expansion, improved offices and working conditions for employees, better location, increased fire protection, improved infrastructure, and increases in employee efficiency and customer service levels.

Note 8: Recently Issued Accounting Pronouncements

In October 2009, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2009-13, “Multiple-Deliverable Revenue Arrangements,” which amends Accounting Standards Codification (ASC) Topic 605, “Revenue Recognition.” ASU 2009-13 amends the ASC to eliminate the residual method of allocation for multiple-deliverable revenue arrangements, and requires that arrangement consideration be allocated at the inception of an arrangement to all deliverables using the relative selling price method. The ASU also establishes a selling price hierarchy for determining the selling price of a deliverable, which includes: (1) vendor-specific objective evidence if available, (2) third-party evidence if vendor-specific objective evidence is not available, and (3) estimated selling price if neither vendor-specific nor third-party evidence is available. Additionally, ASU 2009-13 expands the disclosure requirements related to a vendor’s multiple-deliverable revenue arrangements. The changes to the ASC as a result of this update are effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. The adoption of this guidance had no material impact on the Company’s consolidated condensed financial statements.

In October 2009, the FASB issued ASU No. 2009-14, “Certain Revenue Arrangements That Include Software Elements,” which amends ASC Topic 985, “Software.” ASU 2009-14 amends the ASC to change the accounting model for revenue arrangements that include both tangible products and software elements, such that tangible products containing both software and non-software components that function together to deliver the tangible product’s essential functionality are no longer within the scope of software revenue guidance. The changes to the ASC as a result of this update are effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. The adoption of this guidance had no material impact on the Company’s consolidated condensed financial statements.

In December 2010, the FASB issued ASU No. 2010-28, “Intangibles-Goodwill and Other: When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts.” ASU 2010-28 amends ASC Topic 305 requiring an entity that has recognized goodwill and has one or more reporting units whose carrying amount for the purposes of performing Step 1 of the impairment test is zero or negative to perform Step 2 of the goodwill impairment test. The changes to the ASC as a result of this update are effective for interim periods and fiscal years beginning after December 15, 2010. The adoption of this guidance had no material impact on the Company’s consolidated condensed financial statements.

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In May 2011, the FASB issued ASU No. 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS.” ASU 2011-04 amends ASC Topic 820 to include increased transparency of valuation inputs and investment categorization and provide consistency in application of fair value under U.S. GAAP and IFRS. The changes to the ASC as a result of this update are effective for fiscal years and interim periods beginning after December 15, 2011. The Company believes the adoption of this guidance will not have a material impact on the Company’s consolidated condensed financial statements.

In June 2011, the FASB issued ASU No. 2011-05, “Presentation of Comprehensive Income.” ASU 2011-05 amends ASC Topic 220 to allow an entity to present components of net income and other comprehensive income in one continuous statement, referred to as the statement of comprehensive income or in two separate, but consecutive statements. This ASU eliminates the current option to report other comprehensive income and its components in the statement of changes in equity, but it does not change the components that are currently recognized in net income or comprehensive income under current guidance. The changes to the ASC as a result of this update are effective for fiscal years and interim periods beginning after December 15, 2011. The Company believes the adoption of this guidance will not have a material impact on the Company’s consolidated condensed financial statements.

In September 2011, the FASB issued ASU No. 2011-08, “Intangibles-Goodwill and Other: Testing Goodwill for Impairment.” This standard was issued to address concerns about the cost and complexity of performing the first step of the two-step goodwill impairment test required under Topic 350, Intangibles-Goodwill and Other. The objective of this Update is to simplify how entities, both public and nonpublic, test goodwill for impairment. The amendments in the Update permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350. The more-likely-than-not threshold is defined as having a likelihood of more than 50 percent. Under the amendments in this Update, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount. The guidance is effective for impairment tests for fiscal years beginning after December 15, 2011. The Company believes the adoption of this guidance will not have a material impact on the Company’s consolidated condensed financial statements.

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ITEM 2—MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward Looking Statements

This Form 10-Q contains forward-looking statements, including statements regarding the expectations of future operations. For this purpose, any statements contained in this Form 10-Q that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “estimate,” “continue” or comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, and actual results may differ materially depending on a variety of factors, many of which are not within the Company’s control. These factors include, but are not limited to, economic conditions generally and in the industries in which the Company may participate, competition within the chosen industry, including competition from much larger competitors, technological advances, and the failure to successfully develop business relationships. In light of these risks and uncertainties, you are cautioned not to place undue reliance on these forward-looking statements. This item should be read in conjunction with “Item 1. Financial Statements” and other items contained elsewhere in this report.

Products and services

Advant-e Corporation through its wholly-owned subsidiaries, Edict Systems, Inc. and Merkur Group, Inc. (collectively, the “Company”), develops, markets, resells, and hosts software and provides services that allow its customers to send and receive business documents electronically in standard and proprietary formats. Edict Systems specializes in providing hosted Electronic Data Interchange solutions that utilize the Internet as the primary communications method. Customers use Edict Systems solutions to connect with business partners, integrate data with internal systems, expand and manage electronic trading communities, and validate data via a hosted business rule service. Merkur Group develops and resells software, provides professional services, and provides technical maintenance and support that enables customers to automate delivery and receipt of business documents. Merkur Group provides proprietary software that integrates and connects large Supply Chain Management (SCM), Customer Relationship Management (CRM), and Enterprise Resource Planning (ERP) systems with third party software that provides multiple delivery and document capture options. Customers consist of businesses across a number of industries primarily throughout the United States, and to a much lesser extent some foreign locations, principally Canada, Mexico, and Puerto Rico.

Critical Accounting Policies and Estimates

Revenue recognition

Revenues from Internet-based products and services are comprised of four components—account activation and trading partner set-up fees, monthly subscription fees, usage-based transactional fees and customer payments for the Company’s development of applications designed to meet specific customer specifications.

Revenues earned from account activation and trading partner set-up fees are recognized after the Company performs consultative work required in order to establish an electronic trading partnership between the customer and their desired trading partners. Trading partnerships, once established, require no ongoing effort on the part of the Company and customers are able to utilize the electronic trading partnerships either directly with their customers or via a service provider other than the Company.

Revenue from monthly subscription fees is recognized over the period to which the subscription applies.

Revenue from usage based transaction fees is recognized in the period in which the transactions are processed.

Revenue from customer payments for the Company’s development of applications designed to meet specific customer specifications is recognized over the contract period, generally twelve months.

Revenue from the sale of software and related products is recognized upon delivery of the software to the customer when title and risk of loss are transferred, and is accounted for under the provisions of ASC Topic 985-605, Software Industry Revenue Recognition. Revenue from the sale of software and related products is recorded at gross, and the related software purchases are included in cost of revenue. Customers have a 30-day period in which they can choose to accept or return the software. Historically, customer returns have not been significant. Revenue from maintenance contracts is recognized over the life of the maintenance and support contract period, generally twelve months. Revenue from professional services is recognized upon performance of those services.

Software Development Costs

The Company accounts for the costs of computer software that it develops for internal use and costs associated with operation of its web sites in accordance with the Accounting Standards Codification (ASC) Topic 350, “Intangibles-Goodwill and Other” by capitalizing those costs. Such capitalized costs represent solely the salaries and benefits of employees working on the graphics and content development stages, or adding functionality or features. In accordance with ASC Topic 350, overhead, general and administrative and training costs are not capitalized. The Company accounts for the costs of computer software that it sells, leases and markets as a separate product in accordance with ASC Topic 985, “Software”. Capitalized costs are amortized by the straight-line method over the remaining estimated economic lives of the software application, generally three years, and are reported at the lower of unamortized cost or net realizable value.

The ongoing assessment of recoverability of capitalized software development costs requires considerable judgment by management with respect to certain external factors, including, but not limited to, anticipated future revenues, estimated economic life and changes in software and hardware technologies. Impairment of asset value is considered whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Goodwill and Other Intangible Assets

Management assesses goodwill related to the July 2, 2007 acquisition of Merkur Group, Inc. for impairment on an annual basis at year-end, and between annual tests if an event occurs or circumstances change that may more likely than not reduce the fair value of the reporting unit below its carrying value. Significant management judgment is required in assessing the impairment of goodwill, including the assignment of assets and liabilities and determination of fair value. Management uses the discounted cash flow method,

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which requires significant judgments and assumptions for estimates of future cash flows, growth rate, and useful life of the cash flows, and determination of the cost of capital. Changes in these estimates and assumptions could materially affect the determination of fair value and goodwill impairment, if any.

Recently Issued Accounting Pronouncements

For a description of recently issued accounting pronouncements, including the expected dates of adoption and estimated effects, if any, on the Company’s consolidated condensed financial statements, see Note 8: Recently Issued Accounting Pronouncements in the Notes to Consolidated Condensed Financial Statements of this Form 10-Q.

Results of Operations: Third Quarter of 2011 Compared to Third Quarter of 2010

Revenue

Revenue for the Company in the third quarter of 2011 increased 3% compared to the third quarter of 2010. Revenue for Edict Systems increased by 6% and revenue for Merkur Group decreased by 14%.

	Q3 2011				Q3 2010				Increase (Decrease)
	Amount		% of Total		Amount		% of Total		Amount			%
Edict Systems	$	2,122,076		87		2,000,599		84		121,477			6
Merkur Group		325,598		13		379,911		16		(54,313	)		(14	)
Revenue	$	2,447,674		100		2,380,510		100		67,164			3

Edict Systems Revenue

Revenue in the third quarter of 2011 and 2010 from the sale of Internet-based Electronic Data Interchange (EDI) products and services sold by Edict Systems is summarized below:

	Q3 2011				Q3 2010				Increase (Decrease)
	Amount		% of Total		Amount		% of Total		Amount			%
Web EDI
GroceryEC	$	1,432,064		68		1,369,842		69		62,222			5
AutomotiveEC		173,893		8		156,705		8		17,188			11
Other Web EDI		46,241		2		48,163		2		(1,922	)		(4	)
EnterpriseEC		372,431		17		378,928		19		(6,497	)		(2	)
Other products and services		97,447		5		46,961		2		50,486			108
Total	$	2,122,076		100		2,000,599		100		121,477			6

• Revenue from GroceryEC and AutomotiveEC increased 5% and 11%, respectively, due to an increase in the volume of transactions processed.

• Revenue from EnterpriseEC, the Company’s value added network (VAN), decreased slightly primarily due to decreased VAN services revenue from small customers that was partially offset by increased volume of transactions processed for large grocery companies. Significant pricing pressures and the availability of alternate connectivity options continue to adversely affect revenue growth for EnterpriseEC.

• Revenue from other products and services increased by $50,486, or 108%, primarily due to increased web-based testing and certification fees resulting from the Company’s trading community ramping services in the grocery industry.

The Company is continuing to focus on increasing activity in currently supported industries and on developing additional business in other industries, primarily healthcare, but also in consumer packaged goods and manufacturing.

10

Merkur Group Revenue

Revenue in the third of 2011 and 2010 from the sale of software based products and services sold by Merkur Group is summarized below:

	Q3 2011				Q3 2010				Increase (Decrease)
	Amount		% of Total		Amount		% of Total		Amount			%
Software	$	39,179		12		50,288		13		(11,109	)		(22	)
Hardware		6,582		2		20,485		5		(13,903	)		(68	)
Maintenance contracts		225,946		69		221,509		59		4,437			2
Professional services		41,570		13		81,010		21		(39,440	)		(49	)
Other		12,321		4		6,619		2		5,702			86
Total	$	325,598		100		379,911		100		(54,313	)		(14	)

Revenue from the sale of software, hardware, and professional services, totaling $87,331 in Q3 2011, declined from $151,783 in Q3 2010, or by 42%, as customers continued to postpone software decisions due to the sluggish economy and the uncertainty of the general business and political climate.

Net income

Net income for the third quarter of 2011 compared to the third quarter of 2010 is summarized below.

	Q3 2011			Q3 2010			Increase (Decrease)
							Amount			%
Edict Systems	$	429,707			386,164			43,543			11
Merkur Group		39,812			62,044			(22,232	)		(36	)
Amortization of intangible assets, net of income tax effects		(13,977	)		(13,977	)		—			—
Net income	$	455,542			434,231			21,311			5

• The increase for Edict Systems was due to revenue growth partially offset by increased technical personnel related costs.

• The decrease for Merkur Group was due to decreased revenue from the sale of software, hardware and professional services.

Gross margin and cost of revenue

The Company’s gross margin, as a percent of revenue, decreased from 62% in the third quarter of 2010 to 61% in the third quarter of 2011 due primarily to the decrease in Merkur Group revenue from the sale of software, hardware, and professional services and due to related Merkur Group fixed technical personnel costs that were not absorbed as revenue declined.

Marketing, general and administrative expenses

Marketing, general and administrative expenses decreased by less than 1% in the third quarter of 2011 compared to the third quarter of 2010 as the Company continued to control expenses in an uncertain economic environment.

Results of Operations: Nine Months Ended September 30, 2011 compared to Nine Months Ended September 30, 2010

Revenue

Revenue for the Company in the first nine months of 2011 increased 3% compared to the first nine months of 2010. Revenue for Edict Systems increased by 5% and revenue for Merkur Group decreased by 10%.

	Nine months ended September 30, 2011				Nine months ended September 30, 2010				Increase (Decrease)
	Amount		% of Total		Amount		% of Total		Amount			%
Edict Systems	$	6,091,959		85		5,795,291		84		296,668			5
Merkur Group		1,015,759		15		1,122,856		16		(107,097	)		(10	)
Revenue	$	7,107,718		100		6,918,147		100		189,571			3

11

Edict Systems Revenue

Revenue in the first nine months of 2011 and 2010 from the sale of Internet based Electronic Data Interchange (EDI) products and services sold by Edict Systems is summarized below:

	Nine months ended September 30, 2011				Nine months ended September 30, 2010				Increase (Decrease)
	Amount		% of Total		Amount		% of Total		Amount			%
Web EDI
GroceryEC	$	4,166,892		69		4,005,918		69		160,974			4
AutomotiveEC		503,487		8		465,058		8		38,429			8
Other Web EDI		141,610		2		148,665		3		(7,055	)		(5	)
EnterpriseEC		1,092,560		18		1,056,998		18		35,562			3
Other products and services		187,410		3		118,652		2		68,758			58
Total	$	6,091,959		100		5,795,291		100		296,668			5

• Revenue from GroceryEC and AutomotiveEC increased 4% and 8%, respectively, due to an increase in the volume of transactions processed.

• Revenue from EnterpriseEC, the Company’s value added network, increased by 3% in the first nine months of 2011 compared to the first nine months of 2010 due to increased volume of EDI transactions processed for large grocery companies. However, significant pricing pressures and the availability of alternate connectivity options continue to adversely affect revenue growth for EnterpriseEC.

• Revenue from other products and services increased by $68,758, or 58%, primarily due to increased web-based testing and certification fees resulting from the Company’s trading community ramping services, primarily in the grocery industry.

Merkur Group Revenue

Revenue in the first nine months of 2011 and 2010 from the sale of software based products and services sold by Merkur Group is summarized below:

	Nine months ended September 30, 2011				Nine months ended September 30, 2010				Increase (Decrease)
	Amount		% of Total		Amount		% of Total		Amount			%
Software	$	97,131		9		175,047		16		(77,916	)		(45	)
Hardware		58,289		6		81,733		7		(23,444	)		(29	)
Maintenance contracts		690,055		68		657,121		59		32,934			5
Professional services		139,770		14		189,480		16		(49,710	)		(26	)
Other		30,514		3		19,475		2		11,039			57
Total	$	1,015,759		100		1,122,856		100		(107,097	)		(10	)

Revenue from the sale of software and related hardware and professional services, totaling $295,190 in the first nine months of 2011, declined from $446,260 in the first nine months of 2010, or by 34%, as customers continued to postpone software decisions due to the sluggish economy and the uncertainty of the general business and political climate. Recurring revenue from maintenance contracts, however, increased by 5% to $690,055 in the first nine months of 2011.

Net Income

Net income for the first nine months of 2011 compared to the first nine months of 2010 is summarized below:

	Nine months  ended September 30, 2011			Nine months  ended September 30, 2010			Increase (Decrease)
							Amount			%
Edict Systems	$	1,141,853			984,487			157,366			16
Merkur Group		133,166			155,793			(22,627	)		(14	)
Amortization of intangible assets, net of income tax effects		(41,930	)		(41,930	)		—			—
Net Income	$	1,233,089			1,098,350			134,739			12

12

• The increase for Edict Systems was primarily due to revenue growth which was partially offset by increased technical personnel related expenses as Edict continued to implement its new Web EDI version.

• Net income for Merkur Group declined primarily due to decreased revenue partially offset by reduced personnel related expenses.

Revenue from customers in foreign locations

Although the Company has no facilities or operations in foreign locations, the Company derived in the nine months ended September 30, 2011 and 2010 less than 3% of its revenue from customers located in areas outside the United States, principally in Canada, Mexico, and Puerto Rico.

Gross margin and cost of revenue

The Company’s gross margin, as a percent of revenue, was approximately 60% in the first nine months of both 2011 and 2010. The gross margin for Edict Systems was 64% for both periods as increased revenue was sufficient to offset increased technical personnel related expenses. The gross margin for Merkur Group declined from 45% to 42% due to reduced revenue from the sale software, hardware, and professional services and due to fixed technical personnel related expenses that were not absorbed as revenue declined.

Marketing, general and administrative expenses

Marketing, general and administrative expenses decreased by $89,155, or 4%, in the first nine months of 2011 compared to the first nine months of 2010, due primarily to reduced personnel related expenses.

Liquidity and Capital Resources

In the first nine months of 2011, the Company generated net cash flows from operating activities of $1,732,808. The Company paid dividends of $667,226 and invested $75,327 in property and equipment for infrastructure improvements and software development costs for the new version of Web EDI.

Management believes that the Company will have sufficient financial resources to meet business requirements during the remainder of 2011, including payment of the dividend installment of $667,226 due to be paid before December 31, 2011. The dividend installment is reported as a current liability on the September 30, 2011 consolidated condensed balance sheet.

Changes in Consolidated Condensed Balance Sheet from December 31, 2010 to September 30, 2011

Some balance sheet changes that occurred from December 31, 2010 to September 30, 2011 that are not described elsewhere in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are described below:

• Accounts payable increased $77,195 due to the costs associated with the software maintenance billings, which were ratably higher in the third quarter of 2011 than in the fourth quarter of 2010.

• Accrued salaries and other expenses increased $160,395 due to the timing of payroll periods and accruals for unpaid but earned employee bonuses and vacation pay.

• Deferred revenue increased by $136,520 due to sales of software maintenance contracts and sales of applications designed to meet specific customer specifications for services to be performed in future periods. Prepaid software maintenance costs associated with the sale of software maintenance contracts increased ratably by $34,541.

• Total shareholders’ equity decreased $101,363 as a result of the declaration of a $.02 per share dividend on May 12, 2011 totaling $1,334,452, partially offset by net income for the nine months of $1,233,089.

Building Lease and Related Party

Effective on November 1, 2011 the Company moved its corporate office and principal place of business to a building owned by an entity that is wholly-owned by the Company’s CEO and majority shareholder. The Company is in the process of negotiating the terms of a lease agreement for the building. The Company is the sole tenant of the 19,000 square feet building, and anticipates leasing the space for $10 per square foot, or $190,000 per year, plus paying all building expenses including interior and exterior maintenance, structural repairs, taxes, insurance, utilities and all other related expenses. The Company anticipates that the lease will expire on October 31, 2018 and that the lease payment terms will be at or below market rates for comparable office space in the Beavercreek, Ohio area.

13

The Company is entering into this lease due to its need for the following: additional 7,000 square feet of space to provide sufficient space for all employees to work in one building, sufficient space to provide ample parking for all employees and visitors, sufficient space to allow for expansion, improved offices and working conditions for employees, better location, increased fire protection, improved infrastructure, and increases in employee efficiency and customer service levels.

ITEM 4. Controls and Procedures

Attached as exhibits to the Form 10-Q are certifications of the Company’s Chief Executive Officer (CEO) and Chief Financial Officer (CFO), which are required in accordance with Rule 13a-14 of the Securities Exchange Act of 1934, as amended (the Exchange Act). These “Controls and Procedures” section includes information concerning the controls and controls evaluation referred to in the certifications, and it should be read in conjunction with the certifications for a more complete understanding of the topics presented.

The CEO and the CFO have conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this Form 10-Q. Disclosure controls and procedures are designed to reasonably assure that information required to be disclosed in our reports filed under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures are also designed to reasonably assure that such information is accumulated and communicated to our management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosures.

Based upon the controls evaluation, our CEO and CFO have concluded that the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed in reports that the Company files or submits under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, to allow timely decisions regarding required disclosure; and that the Company’s disclosure controls and procedures were effective during the period covered by the Company’s report on Form 10-Q for the quarterly period ended September 30, 2011.

During the period covered by this report, there were no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 6. Exhibits

Exhibit Number	Description	Method of Filing
3(i)	Amended Certificate of Incorporation	Previously filed (A)
3(ii)	By-laws	Previously filed (B)
4	Instruments defining the rights of security holders including indentures	Previously filed (C)
31.1	Rule 13a-14(a)/15d-14(a) Certification	Filed herewith
31.2	Rule 13a-14(a)/15d-14(a) Certification	Filed herewith
32.1	Section 1350 Certification	Filed herewith
32.2	Section 1350 Certification	Filed herewith
101.INS*	XBRL Instance Document	Submitted electronically
101.SCH*	XBRL Taxonomy Extension Schema Document	Submitted electronically
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document	Submitted electronically
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document	Submitted electronically
101.LAB*	XBRL Taxonomy Extension Label Linkbase Document	Submitted electronically
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document	Submitted electronically

(A) Filed with Form 10-K filed as of March 30, 2010

(B) Filed with Amendment No. 1 to Form 10-SB filed as of July 17, 2000

(C) Form of Common Stock Certificate Filed with Amendment No. 2 to Form 10-SB filed as of October 13, 2000.

* In accordance with Regulation S-T, the XBRL-related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall be deemed to be “furnished” and not “filed.”

14

Signatures

In accordance with 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.

	Advant-e Corporation
		(Registrant)
November 14, 2011	By:	/s/ Jason K. Wadzinski
		Jason K. Wadzinski
		Chief Executive Officer
		Chairman of the Board of Directors
November 14, 2011	By:	/s/ James E. Lesch
		James E. Lesch
		Chief Financial Officer
		Principal Accounting Officer
		Member of the Board of Directors

15

EX-31.1

Exhibit 31.1—Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a)

I, Jason K. Wadzinski, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Advant-e Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the period presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in the Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: November 14, 2011	By:	/s/ Jason K. Wadzinski
		Jason K. Wadzinski
		Chief Executive Officer

EX-31.2

Exhibit 31.2—Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a)

I, James E. Lesch, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Advant-e Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the period presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in the Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: November 14, 2011	By:	/s/ James E. Lesch
		James E. Lesch
		Chief Financial Officer

EX-32.1

Exhibit 32.1—Certification of Chief Executive Officer pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002

In connection with the quarterly report on Form 10-Q of Advant-e Corporation (the “Company”) for the quarterly period ended September 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “report”), the undersigned, Jason K. Wadzinski, Chief Executive Officer of the Company, certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that:

(1) The report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 14, 2011	By:	/s/ Jason K. Wadzinski
		Jason K. Wadzinski
		Chief Executive Officer

EX-32.2

Exhibit 32.2—Certification of Chief Executive Officer pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002

In connection with the quarterly report on Form 10-Q of Advant-e Corporation (the “Company”) for the quarterly period ended September 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “report”), the undersigned, Jason K. Wadzinski, Chief Executive Officer of the Company, certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that:

(1) The report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 14, 2011	By:	/s/ James E. Lesch
		James E. Lesch
		Chief Financial Officer

XML

CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited) (USD $)	Sep. 30, 2011	Dec. 31, 2010
Current Assets:
Cash and cash equivalents	$ 3,953,427	$ 2,963,172
Accounts receivable, net	752,404	743,020
Prepaid software maintenance costs	208,554	174,013
Prepaid expenses and deposits	69,267	99,234
Deferred income taxes	210,818	153,643
Total current assets	5,194,470	4,133,082
Software development costs, net	291,224	308,832
Property and equipment, net	147,952	228,121
Goodwill	1,474,615	1,474,615
Other intangible assets, net	180,973	244,508
Total assets	7,289,234	6,389,158
Current liabilities:
Accounts payable	157,181	79,986
Dividends payable	667,226	0
Income taxes payable	33,396	33,619
Accrued salaries and other expenses	340,706	180,311
Deferred revenue	810,330	673,810
Total current liabilities	2,008,839	967,726
Deferred income taxes	204,807	244,481
Total liabilities	2,213,646	1,212,207
Shareholders’ equity:
Common stock, $.001 par value; 100,000,000 shares authorized; 66,722,590 shares issued and outstanding	66,723	66,723
Paid-in capital	1,936,257	1,936,257
Retained earnings	3,072,608	3,173,971
Total shareholders’ equity	5,075,588	5,176,951
Total liabilities and shareholders’ equity	$ 7,289,234	$ 6,389,158

XML

CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited) (Parenthetical) (USD $)	Sep. 30, 2011	Dec. 31, 2010
Shareholders’ equity:
Common stock, par value	$ 0.001	$ 0.001
Common stock authorized shares	100,000,000	100,000,000
Common stock shares issued	66,722,590	66,722,590
Common stock shares outstanding	66,722,590	66,722,590

XML

Document and Entity Information	9 Months Ended
	Sep. 30, 2011	Nov. 14, 2011
Document and Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2011
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q3
Entity Registrant Name	ADVANT E CORP
Entity Central Index Key	0000925043
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		66,722,590

XML

Subsequent Event-Building Lease and Related Party

9 Months Ended

Sep. 30, 2011

Subsequent Event-Building Lease and Related Party

Note 7: Subsequent Event—Building Lease and Related Party

Effective on November 1, 2011 the Company moved its corporate office and principal place of business to a building owned by an entity that is wholly-owned by the Company’s CEO and majority shareholder. The Company is in the process of negotiating the terms of a lease agreement for the building. The Company is the sole tenant of the 19,000 square feet building, and anticipates leasing the space for $10 per square foot, or $190,000 per year, plus paying all building expenses including interior and exterior maintenance, structural repairs, taxes, insurance, utilities and all other related expenses. The Company anticipates that the lease will expire on October 31, 2018.

The Company is entering into this lease due to its need for the following:  additional 7,000 square feet of space to provide sufficient space for all employees to work in one building, sufficient space to provide ample parking for all employees and visitors, sufficient space to allow for expansion, improved offices and working conditions for employees, better location, increased fire protection, improved infrastructure, and increases in employee efficiency and customer service levels.

XML

Line of Credit

9 Months Ended

Sep. 30, 2011

Line of Credit

Note 3: Line of Credit

At September 30, 2011, the Company has a $1,500,000 bank line of credit. Borrowings under the line of credit accrue interest at the bank’s prime commercial rate, are collateralized by substantially all of the assets of the Company’s subsidiaries, and are payable in full when the line of credit expires on April 25, 2012. Interest is payable monthly. The line of credit is guaranteed by the Company’s Chief Executive Officer. No borrowings were outstanding as of September 30, 2011 and 2010 and during the nine month periods then ended.

XML

Recently Issued Accounting Pronouncements

9 Months Ended

Sep. 30, 2011

Recently Issued Accounting Pronouncements

Note 8: Recently Issued Accounting Pronouncements

In October 2009, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2009-13, "Multiple-Deliverable Revenue Arrangements," which amends Accounting Standards Codification (ASC) Topic 605, "Revenue Recognition." ASU 2009-13 amends the ASC to eliminate the residual method of allocation for multiple-deliverable revenue arrangements, and requires that arrangement consideration be allocated at the inception of an arrangement to all deliverables using the relative selling price method. The ASU also establishes a selling price hierarchy for determining the selling price of a deliverable, which includes: (1) vendor-specific objective evidence if available, (2) third-party evidence if vendor-specific objective evidence is not available, and (3) estimated selling price if neither vendor-specific nor third-party evidence is available. Additionally, ASU 2009-13 expands the disclosure requirements related to a vendor’s multiple-deliverable revenue arrangements. The changes to the ASC as a result of this update are effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. The adoption of this guidance had no material impact on the Company’s consolidated condensed financial statements. 

In October 2009, the FASB issued ASU No. 2009-14, "Certain Revenue Arrangements That Include Software Elements," which amends ASC Topic 985, "Software." ASU 2009-14 amends the ASC to change the accounting model for revenue arrangements that include both tangible products and software elements, such that tangible products containing both software and non-software components that function together to deliver the tangible product’s essential functionality are no longer within the scope of software revenue guidance. The changes to the ASC as a result of this update are effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. The adoption of this guidance had no material impact on the Company’s consolidated condensed financial statements.  

In December 2010, the FASB issued ASU No. 2010-28, “Intangibles-Goodwill and Other: When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts.” ASU 2010-28 amends ASC Topic 305 requiring an entity that has recognized goodwill and has one or more reporting units whose carrying amount for the purposes of performing Step 1 of the impairment test is zero or negative to perform Step 2 of the goodwill impairment test. The changes to the ASC as a result of this update are effective for interim periods and fiscal years beginning after December 15, 2010. The adoption of this guidance had no material impact on the Company’s consolidated condensed financial statements. 

In May 2011, the FASB issued ASU No. 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS.” ASU 2011-04 amends ASC Topic 820 to include increased transparency of valuation inputs and investment categorization and provide consistency in application of fair value under U.S. GAAP and IFRS. The changes to the ASC as a result of this update are effective for fiscal years and interim periods beginning after December 15, 2011. The Company believes the adoption of this guidance will not have a material impact on the Company’s consolidated condensed financial statements.

In June 2011, the FASB issued ASU No. 2011-05, “Presentation of Comprehensive Income.” ASU 2011-05 amends ASC Topic 220 to allow an entity to present components of net income and other comprehensive income in one continuous statement, referred to as the statement of comprehensive income or in two separate, but consecutive statements. This ASU eliminates the current option to report other comprehensive income and its components in the statement of changes in equity, but it does not change the components that are currently recognized in net income or comprehensive income under current guidance. The changes to the ASC as a result of this update are effective for fiscal years and interim periods beginning after December 15, 2011. The Company believes the adoption of this guidance will not have a material impact on the Company’s consolidated condensed financial statements.

In September 2011, the FASB issued ASU No. 2011-08, “Intangibles-Goodwill and Other: Testing Goodwill for Impairment.” This standard was issued to address concerns about the cost and complexity of performing the first step of the two-step goodwill impairment test required under Topic 350, Intangibles-Goodwill and Other. The objective of this Update is to simplify how entities, both public and nonpublic, test goodwill for impairment. The amendments in the Update permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350. The more-likely-than-not threshold is defined as having a likelihood of more than 50 percent. Under the amendments in this Update, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount. The guidance is effective for impairment tests for fiscal years beginning after December 15, 2011. The Company believes the adoption of this guidance will not have a material impact on the Company’s consolidated condensed financial statements.

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Basis of Presentation, Organization and Other Matters

9 Months Ended

Sep. 30, 2011

Basis of Presentation, Organization and Other Matters

Note 1: Basis of Presentation, Organization and Other Matters

The accompanying unaudited interim consolidated condensed financial statements as of September 30, 2011 and for the three and nine month periods ended September 30, 2011 and 2010, together with the accompanying consolidated condensed balance sheet as of December 31, 2010, which has been derived from audited financial statements, have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although management believes that the disclosures made are adequate to make the information not misleading. In the opinion of management, the unaudited interim consolidated condensed financial statements include all adjustments, which were normal and recurring in nature, considered necessary for a fair presentation of financial position, results of operations, and cash flows for the interim periods. 

Results of operations for the three and nine months ended September 30, 2011 are not necessarily indicative of the results to be expected for the full year ending December 31, 2011. These unaudited interim consolidated condensed financial statements should be read in conjunction with the consolidated financial statements, accounting policies, and financial notes thereto included in Advant-e Corporation’s 2010 Form 10-K filed with the Securities and Exchange Commission.

Nature of Operations

Advant-e Corporation through its wholly-owned subsidiaries, Edict Systems, Inc. and Merkur Group, Inc. (collectively, the “Company”), develops, markets, resells, and hosts software and provides services that allow its customers to send and receive business documents electronically in standard and proprietary formats. Edict Systems specializes in providing hosted Electronic Data Interchange solutions that utilize the Internet as the primary communications method. Customers use Edict Systems solutions to connect with business partners, integrate data with internal systems, expand and manage electronic trading communities, and validate data via a hosted business rule service. Merkur Group develops and resells software, provides professional services, and provides technical maintenance and support that enables customers to automate delivery and receipt of business documents. Merkur Group provides proprietary software that integrates and connects large Supply Chain Management (SCM), Customer Relationship Management (CRM), and Enterprise Resource Planning (ERP) systems with third party software that provides multiple delivery and document capture options. Customers consist of businesses across a number of industries primarily throughout the United States, and to a much lesser extent some foreign locations, principally Canada, Mexico, and Puerto Rico.

Principles of Consolidation

The consolidated condensed financial statements include the accounts of Advant-e Corporation and its wholly-owned subsidiaries, Edict Systems, Inc., and Merkur Group, Inc. Inter-company accounts and transactions are eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with U. S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates used in preparing these financial statements include those considered in the assessment of recoverability of capitalized software development costs, the assessment of potential impairment of goodwill, the assessment of the collectability of accounts receivable and the recording of prepaid software maintenance costs and deferred revenue. A reasonable possibility exists that estimates used will change within the next year.

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Income taxes

9 Months Ended

Sep. 30, 2011

Income taxes

Note 4: Income taxes

Income tax expense consists of the following:

	Three Months Ended September 30,		Nine Months Ended September 30,
	2011	2010	2011	2010
Current expense	$ 269,835	235,600	734,777	610,739
Deferred benefit	(34,584 )	(9,148 )	(96,849             )	(39,253 )
Total income tax expense	$ 235,251	226,452	637,928	571,486

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Operating Segment Information

9 Months Ended

Sep. 30, 2011

Operating Segment Information

Note 5: Operating Segment Information

The Company has two reportable segments: Internet-based electronic commerce document processing (Edict Systems, Inc.) and software-based electronic commerce document processing (Merkur Group, Inc.). The Company evaluates the performance of each reportable segment on income before income taxes excluding the effects of acquisition-related amortization of other intangible assets and related income taxes. The accounting policies of the segments are the same as those for the Company. The Company’s reportable segments are managed as separate business units.

The following segment information is for the three months ended September 30, 2011 and 2010:

	Three Months Ended September 30, 2011
	Internet-based	Software	Reconciling Items (a)	Total Consolidated
Revenue	$  2,122,076	325,598	—	2,447,674
Income before income taxes	651,650	60,321	(21,178 )	690,793
Income tax expense (benefit)	221,943	20,509	(7,201 )	235,251
Net income	429,707	39,812	(13,977 )	455,542
Segment assets at September 30, 2011	3,744,121	1,890,628	1,654,485	7,289,234

	Three Months Ended September 30, 2010
	Internet-based	Software	ReconcilingItems (a)	TotalConsolidated
Revenue	$ 2,000,599	379,911	—	2,380,510
Income before income taxes	587,797	94,064	(21,178 )	660,683
Income tax expense (benefit)	201,633	32,020	(7,201 )	226,452
Net income	386,164	62,044	(13,977)	434,231
Segment assets at September 30, 2010	3,234,496	1,740,775	1,802,181	6,777,452

The following segment information is for the nine months ended September 30, 2011 and 2010:

			Nine Months Ended September 30, 2011
			Internet-based	Software		Reconciling Items (a)	Total Consolidated
	Revenue		$ 6,091,959	1,028,278		(12,519)	7,107,718
	Income before income taxes		1,732,772	201,779		(63,534 )	1,871,017
	Income tax expense (benefit)		590,919	68,613		(21,604 )	637,928
	Net Income		1,141,853	133,166		(41,930 )	1,233,089
		Nine Months Ended September 30, 2010
		Internet-based			Software	ReconcilingItems (a)	TotalConsolidated
Revenue		$ 5,795,291			1,122,856	—	6,918,147
Income before income taxes		1,497,229			236,141	(63,534 )	1,669,836
Income tax expense (benefit)		512,742			80,348	(21,604 )	571,486
Net Income		984,487			155,793	(41,930 )	1,098,350

(a)  Reconciling items generally consist of the elimination of intersegment revenues of $12,519 for the sale of software in 2011, at cost, and goodwill, other intangible assets and related amortization in connection with the Merkur Group, Inc. acquisition.

Revenue from customers located in areas outside the United States, principally in Canada, Mexico, and Puerto Rico, totaled less than 3% of consolidated revenue in the three and nine months ended September 30, 2011 and 2010.

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Dividend

9 Months Ended

Sep. 30, 2011

Dividend

Note 6: Dividend

On May 12, 2011 the Company’s Board of Directors declared a dividend of $0.02 per share payable in two equal installments of $.01 per share each. The first installment totaling $667,226 was paid in June 2011. The Company reported as a current liability the second installment totaling $667,226 to be paid no later than December 31, 2011.

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CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (USD $)	9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010
Cash flows from operating activities:
Net income	$ 1,233,089	$ 1,098,350
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation	114,861	158,995
Amortization of software development costs	58,244	30,669
Amortization of other intangible assets	63,534	63,534
Loss on disposal of property and equipment	0	4,688
Deferred income taxes	(96,849)	(39,253)
Increase (decrease) in cash and cash equivalents arising from changes in assets and liabilities:
Accounts receivable	(9,384)	(112,854)
Prepaid software maintenance costs	(34,541)	(31,734)
Prepaid expenses and deposits	29,967	19,341
Prepaid income taxes	0	39,798
Accounts payable	77,195	(11,701)
Income taxes payable	(223)	35,901
Accrued salaries and other expenses	160,395	175,913
Deferred revenue	136,520	125,393
Net cash flows from operating activities	1,732,808	1,557,040
Cash flows from investing activities:
Purchases of property and equipment	(34,691)	(101,832)
Software development costs	(40,636)	(148,650)
Net cash flows from investing activities	(75,327)	(250,482)
Cash flows from financing activities:
Dividends paid	(667,226)	(667,226)
Net increase in cash and cash equivalents	990,255	639,332
Cash and cash equivalents, beginning of period	2,963,172	2,713,996
Cash and cash equivalents, end of period	3,953,427	3,353,328
Supplemental disclosures of cash flow items:
Income taxes paid	735,000	535,000
Non-cash transactions:
Declared dividends payable no later than December 31, 2011	667,226	0
Retirement of shares	$ 0	$ 28,192

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Software Development costs

9 Months Ended

Sep. 30, 2011

Software Development costs

Note 2: Software Development costs

Software development costs at September 30, 2011 and the changes during the nine months then ended are summarized as follows:

	Cost	Accumulated Amortization	Net
Balance, January 1, 2011	$ 1,821,567	1,512,735	308,832
Additions	40,636	—	40,636
Amortization expense	—	58,244	(58,244)
Balance, September 30, 2011	$ 1,862,203	1,570,979	291,224

Software development costs are for internal use software and for website development and related enhancements. The balance consists primarily of development costs related to the latest version of the Company’s Web EDI. No such costs were capitalized subsequent to the quarter ended March 31, 2011 as the majority of the enhancements related to this upgrade have been completed. 

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CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Unaudited) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010
Revenue	$ 2,447,674	$ 2,380,510	$ 7,107,718	$ 6,918,147
Cost of revenue	955,698	913,522	2,850,509	2,769,072
Gross margin	1,491,976	1,466,988	4,257,209	4,149,075
Marketing, general and administrative expenses	802,075	803,341	2,389,125	2,478,280
Operating income	689,901	663,647	1,868,084	1,670,795
Other income (expense), net	892	(2,964)	2,933	(959)
Income before income taxes	690,793	660,683	1,871,017	1,669,836
Income tax expense	235,251	226,452	637,928	571,486
Net income	$ 455,542	$ 434,231	$ 1,233,089	$ 1,098,350
Earnings per share - basic and diluted	$ 0.007	$ 0.006	$ 0.018	$ 0.016
Weighted average shares outstanding - basic and diluted	66,722,590	66,722,590	66,722,590	66,722,590