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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D. C. 20549



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FORM 10-QSB



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(Mark One)

|x | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------



For the quarterly period ended June 30, 2004



OR



| ̈ | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
|- | ---------------------------------------------------------------



For the transition period from              to



COMMISSION FILE NUMBER: 0-30983



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ADVANT-E CORPORATION

(Exact name of small business issuer as specified in its charter)



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



2680 Indian Ripple
Rd.

Dayton, Ohio 45440

(Address of principal executive offices)



(937) 429-4288

(Issuers telephone number)



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Check whether
the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 ̈



As of July 23, 2004 the issuer had 6,244,917 outstanding shares of
Common Stock, $.001 Par Value.



Transitional Small Business Disclosure
Format:    Yes ̈No  x



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PART I. FINANCIAL INFORMATION



ITEM 1. FINANCIAL STATEMENTS



ADVANT-E CORPORATION AND SUBSIDIARY

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited)



|                                                              |  |                             |           |      |                           |   |      |           |      |           |  
|------------------------------------------------------------- |  | --------------------------- | --------- | ---- | ------------------------- | - | ---- | --------- | ---- | --------- | -
|                                                              |  | Three Months Ended June 30, |           |      | Six Months Ended June 30, |  
|                                                              |  | 2004                        |           | 2003 |                           |   | 2004 |           | 2003 |          
|Revenue                                                       |  | $                           | 851,982   |      | 715,108                   |   |      | 1,690,617 |      | 1,364,486 |  
|Cost of revenue                                               |  |                             | 310,264   |      | 305,352                   |   |      | 604,481   |      | 609,164   |  
|                                                              |  |                             |           |      |                           |   |      |           |      |           |  
|Gross margin                                                  |  |                             | 541,718   |      | 409,756                   |   |      | 1,086,136 |      | 755,322   |  
|                                                              |  |                             |           |     
|Marketing, general and administrative expenses                |  |                             | 361,375   |      | 358,707                   |   |      | 713,972   |      | 732,818   |  
|                                                              |  |                             |           |      |                           |   |      |           |      |           |  
|Operating income                                              |  |                             | 180,343   |      | 51,049                    |   |      | 372,164   |      | 22,504    |  
|Interest                                                      |  |                             |          |      | 53,076                    |   |      | 2,180     |      | 106,362   |  
|                                                              |  |                             |           |      |                           |   |      |           |      |           |  
|Income (loss) before taxes                                    |  |                             | 180,343   |      | (2,027                    | ) |      | 369,984   |      | (83,858   | )
|Income taxes (benefit)                                        |  |                             | 73,000    |      | 3,952                     |   |      | 148,400   |      | (8,055    | )
|                                                              |  |                             |           |      |                           |   |      |           |      |           |  
|Net income (loss)                                             |  | $                           | 107,343   |      | (5,979                    | ) |      | 221,584   |      | (75,803   | )
|                                                              |  |                             |           |      |                           |   |      |           |      |           |  
|Basic earnings (loss) per common share                        |  | $                           | 0.02      |      | 0.00                      |   |      | 0.04      |      | (0.01     | )
|                                                              |  |                             |           |      |                           |   |      |           |      |           |  
|Diluted earnings (loss) per common share                      |  | $                           | 0.02      |      | 0.00                      |   |      | 0.03      |      | (0.01     | )
|                                                              |  |                             |           |      |                           |   |      |           |      |           |  
|Weighted average common shares outstanding                    |  |                             | 6,244,917 |      | 5,661,002                 |   |      | 6,244,917 |      | 5,661,002 |  
|                                                              |  |                             |           |      |                           |   |      |           |      |           |  
|Weighted average common shares outstanding, assuming dilution |  |                             | 6,722,654 |      | 5,661,002                 |   |      | 6,627,694 |      | 5,661,002 |  
|                                                              |  |                             |           |      |                           |   |      |           |      |           |  



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



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ADVANT-E CORPORATION AND SUBSIDIARY

CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited)



|                                                                                   |  |               |           |   |                   |   |           |  
|---------------------------------------------------------------------------------- |  | ------------- | --------- | - | ----------------- | - | --------- | -
|                                                                                   |  | June 30, 2004 |           |   | December 31, 2003 |  
|Assets                                                                             |  |               |           |   |                   |   |           |  
|                                                                                   |  |              
|Current Assets                                                                     |  |               |           |   |                   |   |           |  
|Cash and cash equivalents                                                          |  | $             | 529,578   |   |                   | $ | 216,448   |  
|Accounts receivable, net                                                           |  |               | 244,428   |   |                   |   | 215,895   |  
|Prepaid expenses and deposit                                                       |  |               | 9,362     |   |                   |   | 16,187    |  
|Deferred income taxes                                                              |  |               | 157,000   |   |                   |   | 266,400   |  
|                                                                                   |  |               |           |   |                   |   |           |  
|Total current assets                                                               |  |               | 940,368   |   |                   |   | 714,930   |  
|                                                                                   |  |               |           |   |                   |   |           |  
|Software development costs, net                                                    |  |               | 401,909   |   |                   |   | 481,678   |  
|                                                                                   |  |              
|Property and equipment, net                                                        |  |               | 261,202   |   |                   |   | 168,687   |  
|                                                                                   |  |               |           |   |                   |   |           |  
|Total assets                                                                       |  | $             | 1,603,479 |   |                   | $ | 1,365,295 |  
|                                                                                   |  |               |           |   |                   |   |           |  
|Liabilities and Shareholders Equity                                               |  |               |           |   |                   |   |           |  
|                                                                                   |  |              
|Current liabilities                                                                |  |               |           |   |                   |   |           |  
|Accounts payable                                                                   |  | $             | 104,975   |   |                   | $ | 72,172    |  
|Accrued salaries and other expenses                                                |  |               | 88,226    |   |                   |   | 71,867    |  
|Deferred revenue                                                                   |  |               | 122,279   |   |                   |   | 90,931    |  
|Notes payable                                                                      |  |               |          |   |                   |   | 94,965    |  
|                                                                                   |  |               |           |   |                   |   |           |  
|Total current liabilities                                                          |  |               | 315,480   |   |                   |   | 329,935   |  
|                                                                                   |  |               |           |   |                   |   |           |  
|Long-term liabilities                                                              |  |               |           |   |                   |   |           |  
|Deferred income taxes                                                              |  |               | 195,000   |   |                   |   | 156,000   |  
|                                                                                   |  |               |           |   |                   |   |           |  
|Total liabilities                                                                  |  |               | 510,480   |   |                   |   | 485,935   |  
|                                                                                   |  |               |           |   |                   |   |           |  
|Shareholders equity                                                               |  |               |           |   |                   |   |           |  
|Common stock, $.001 par value; 20,000,000 shares authorized; 6,244,917 outstanding |  |               | 6,245     |   |                   |   | 6,245     |  
|Paid-in capital                                                                    |  |               | 1,483,482 |   |                   |   | 1,491,427 |  
|Accumulated deficit                                                                |  |               | (396,728  | ) |                   |   | (618,312  | )
|                                                                                   |  |               |           |   |                   |   |           |  
|Total shareholders equity                                                         |  |               | 1,092,999 |   |                   |   | 879,360   |  
|                                                                                   |  |               |           |   |                   |   |           |  
|Total liabilities and shareholders equity                                         |  | $             | 1,603,479 |   |                   | $ | 1,365,295 |  
|                                                                                   |  |               |           |   |                   |   |           |  



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



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ADVANT-E CORPORATION AND SUBSIDIARY

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)



|                                                                                                      |  |                           |          |   |      |          |  
|----------------------------------------------------------------------------------------------------- |  | ------------------------- | -------- | - | ---- | -------- | -
|                                                                                                      |  | Six Months Ended June 30, |         
|                                                                                                      |  | 2004                      |          |   | 2003 |         
|Cash flows from operating activities                                                                  |  |                           |          |   |      |          |  
|Net income (loss)                                                                                     |  | $                         | 221,584  |   |      | (75,803  | )
|Adjustments to reconcile net income (loss) to net cash provided by operating activities:              |  |                           |          |   |      |          |  
|Depreciation                                                                                          |  |                           | 34,099   |   |      | 22,846   |  
|Amortization of software development costs                                                            |  |                           | 164,014  |   |      | 139,881  |  
|Deferred income taxes (benefit)                                                                       |  |                           | 148,400  |   |      | (8,055   | )
|Amortization of note discount resulting from valuation of warrants and beneficial conversion features |  |                           |         |   |      | 43,586   |  
|Increase (decrease) in cash arising from changes in assets and liabilities:                           |  |                           |          |   |      |          |  
|Accounts receivable                                                                                   |  |                           | (28,533  | ) |      | (17,612  | )
|Prepaid expenses                                                                                      |  |                           | 6,825    |   |      | 9,666    |  
|Accounts payable                                                                                      |  |                           | 32,803   |   |      | (24,253  | )
|Accrued salaries, interest and other expenses                                                         |  |                           | 16,359   |   |      | 66,545   |  
|Deferred revenue                                                                                      |  |                           | 31,348   |   |      | (16,538  | )
|                                                                                                      |  |                           |          |   |      |          |  
|Net cash provided by operating activities                                                             |  |                           | 626,899  |   |      | 140,263  |  
|                                                                                                      |  |                           |          |   |      |          |  
|Cash flows from investing activities                                                                  |  |                           |          |   |      |          |  
|Purchases of equipment                                                                                |  |                           | (126,614 | ) |      | (22,083  | )
|Software development costs                                                                            |  |                           | (84,245  | ) |      | (83,166  | )
|                                                                                                      |  |                           |          |   |      |          |  
|Net cash used in investing activities                                                                 |  |                           | (210,859 | ) |      | (105,249 | )
|                                                                                                      |  |                           |          |   |      |          |  
|Cash flows from financing activities                                                                  |  |                           |          |   |      |          |  
|Payments on bank notes                                                                                |  |                           | (94,965  | ) |      | (6,867   | )
|Payments of direct costs of securities registration                                                   |  |                           | (7,945   | ) |      |         |  
|                                                                                                      |  |                           |          |   |      |          |  
|Net cash used in financing activities                                                                 |  |                           | (102,910 | ) |      | (6,867   | )
|                                                                                                      |  |                           |          |   |      |          |  
|Net increase in cash and cash equivalents                                                             |  |                           | 313,130  |   |      | 28,147   |  
|                                                                                                      |  |                          
|Cash and cash equivalents, beginning of period                                                        |  |                           | 216,448  |   |      | 98,740   |  
|                                                                                                      |  |                           |          |   |      |          |  
|Cash and cash equivalents, end of period                                                              |  | $                         | 529,578  |   |      | 126,887  |  
|                                                                                                      |  |                           |          |   |      |          |  
|Supplemental disclosures of cash flow information                                                     |  |                           |          |   |      |          |  
|Interest paid                                                                                         |  | $                         | 3,014    |   |      | 12,382   |  



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



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ADVANT-E CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited)



Note 1: Basis of Presentation



The accompanying unaudited consolidated financial statements include the accounts of Advant-e Corporation and its wholly-owned subsidiary Edict Systems, Inc. (the
Company).



The statements have been prepared in accordance with
U.S. generally accepted accounting principles for interim financial information and the instructions to Form 10-QSB. Accordingly, they do not include all of the information and notes to financial statements required by U.S. generally accepted
accounting principles for complete financial statements. In the opinion of management, the unaudited consolidated financial statements include all adjustments considered necessary for a fair presentation of financial position, results of operations,
and cash flows for the interim periods.



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.



Results of operations for the six months ended June 30, 2004 are not necessarily indicative of the results to be expected for the full year
ending December 31, 2004. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements, accounting policies, and financial notes thereto included in Advant-e Corporations 2003 Form
10-KSB filed with the Securities and Exchange Commission.



Note 2: Software
Development Costs



Software development costs at June 30, 2004 and the
changes during the six months then ended are summarized as follows:



|                         |  |      |           |                          |         |     |          |  
|------------------------ |  | ---- | --------- | ------------------------ | ------- | --- | -------- | -
|                         |  | Cost |           | Accumulated Amortization |         | Net |         
|Balance, January 1, 2004 |  | $    | 1,067,297 |                          | 585,619 |     | 481,678  |  
|Additions                |  |      | 84,245    |                          |         |     | 84,245   |  
|Amortization             |  |      |           |                          | 164,014 |     | (164,014 | )
|                         |  |      |           |                          |         |     |          |  
|Balance, June 30, 2004   |  | $    | 1,151,542 |                          | 749,633 |     | 401,909  |  
|                         |  |      |           |                          |         |     |          |  



The unamortized costs relate
exclusively to internal use software and costs associated with web site development and related enhancements.



The ongoing assessment of recoverability of capitalized software development costs requires considerable judgment by management with respect to certain



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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.



Note 3: Deferred revenue



Deferred revenue is comprised of the following:



|                                                                                                                                          |  |               |         |                   |   |       
|----------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------- | ----------------- | - | ------
|                                                                                                                                          |  | June 30, 2004 |         | December 31, 2003
|Annual software license fees recognized as revenue ratably over twelve months                                                             |  | $             | 52,734  |                   |   | 58,451
|Amounts received for customized Web EDI and EnterpriseEC development recognized as revenue over twelve months when services are
performed |  |               | 43,533  |                   |   | 14,625
|Advance payments from a customer in exchange for discounted future services recognized as revenue monthly as services are
performed       |  |               | 26,012  |                   |   | 17,855
|                                                                                                                                          |  |               |         |                   |   |       
|                                                                                                                                          |  | $             | 122,279 |                   | $ | 90,931
|                                                                                                                                          |  |               |         |                   |   |       



Note 4: Income taxes



Income tax expense (benefit) for the three months ended June 30, 2004 and
2003 and for the six months ended June 30, 2004 and 2003 consist solely of deferred taxes. The current tax expense for the three months ended June 30, 2004 of $136,900 and for the six months ended June 30, 2004 of $214,000 was offset by the benefit
from a net operating loss carryforward.



The following is a reconciliation of
the income tax expense (benefit) to the amount computed at the statutory rate of 34%:



|                                                                                                             |  |                             |        |      |                           |   |      |        |      |         |  
|------------------------------------------------------------------------------------------------------------ |  | --------------------------- | ------ | ---- | ------------------------- | - | ---- | ------ | ---- | ------- | -
|                                                                                                             |  | Three Months Ended June 30, |        |      | Six Months Ended June 30, |  
|                                                                                                             |  | 2004                        |        | 2003 |                           |   | 2004 |        | 2003 |        
|Income taxes (benefit) at statutory rate                                                                     |  | $                           | 61,000 |      | (689                      | ) |      | 64,500 |      | (28,512 | )
|State income taxes                                                                                           |  |                             | 12,000 |      | (359                      | ) |      | 10,900 |      | (5,031  | )
|Amount attributable to lower graduated rates expected to apply when tax benefits are expected to be realized |  |                             |       |      | (2,410                    | ) |      |       |      | 10,672  |  
|Non-deductible interest on debt discount amortization                                                        |  |                             |       |      | 7,410                     |   |      |       |      | 14,816  |  
|                                                                                                             |  |                             |        |      |                           |   |      |        |      |         |  
|Federal income tax expense (benefit) applicable to income (loss) before income tax                           |  | $                           | 73,000 |      | 3,952                     |   |      | 75,400 |      | (8,055  | )
|                                                                                                             |  |                             |        |      |                           |   |      |        |      |         |  



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Management has not recognized a valuation allowance for the net deferred tax assets because it believes that it is more
likely than not that future taxable income will result in realization of such assets. This amount, however, could be reduced in the near term if estimates of future taxable income during the net operating loss carryforward period are reduced. The
Companys remaining net operating loss carryforwards of approximately $323,000 begin to expire in 2020.



Note 5: Earnings (loss) per share



The
reconciliation of the numerators and denominators of the basic and diluted earnings per share calculations for the three months and the six months ended June 30, 2004 and 2003, respectively, follows:



|                                                                                 |  |                    |         |   |                      |           |                  |   |       |  
|-------------------------------------------------------------------------------- |  | ------------------ | ------- | - | -------------------- | --------- | ---------------- | - | ----- | -
|                                                                                 |  | Income (Numerator) |         |   | Shares (Denominator) |           | Per Share Amount |  
|Three months ended June 30, 2004                                                 |  |                    |         |   |                      |           |                  |   |       |  
|Basic earnings per share:                                                        |  |                    |         |   |                      |           |                  |   |       |  
|Net income available to common shareholders                                      |  | $                  | 107,343 |   |                      | 6,244,917 |                  | $ | 0.02  |  
|                                                                                 |  |                    |        
|Effect of dilutive securities:                                                   |  |                    |         |   |                      |           |                  |   |       |  
|Outstanding warrants                                                             |  |                    |        |   |                      | 477,737   |                  |   |      |  
|                                                                                 |  |                    |         |   |                      |           |                  |   |       |  
|Diluted earnings per share:                                                      |  |                    |         |   |                      |           |                  |   |       |  
|Net income available to common shareholders plus assumed exercise of warrants    |  | $                  | 107,343 |   |                      | 6,722,654 |                  | $ | 0.02  |  
|                                                                                 |  |                    |         |   |                      |           |                  |   |       |  
|Three months ended June 30, 2003                                                 |  |                    |         |   |                      |           |                  |   |       |  
|Basic earnings (loss) per share:                                                 |  |                    |         |   |                      |           |                  |   |       |  
|Net loss available to common shareholders                                        |  | $                  | (5,979  | ) |                      | 5,661,002 |                  | $ | 0.00  |  
|                                                                                 |  |                    |        
|Effect of dilutive securities:                                                   |  |                    |         |   |                      |           |                  |   |       |  
|Outstanding warrants                                                             |  |                    |        |   |                      |          |                  |   |      |  
|Convertible subordinated notes                                                   |  |                    |        |   |                      |          |                  |   |      |  
|                                                                                 |  |                    |         |   |                      |           |                  |   |       |  
|Diluted earnings (loss) per share:                                               |  |                    |         |   |                      |           |                  |   |       |  
|Loss available to common shareholders plus assumed exercise and conversion       |  | $                  | (5,979  | ) |                      | 5,661,002 |                  | $ | 0.00  |  
|                                                                                 |  |                    |         |   |                      |           |                  |   |       |  
|Six months ended June 30, 2004                                                   |  |                    |         |   |                      |           |                  |   |       |  
|Basic earnings per share:                                                        |  |                    |         |   |                      |           |                  |   |       |  
|Net income available to common shareholders                                      |  | $                  | 221,584 |   |                      | 6,244,917 |                  | $ | 0.04  |  
|                                                                                 |  |                    |        
|Effect of dilutive securities:                                                   |  |                    |         |   |                      |           |                  |   |       |  
|Outstanding warrants                                                             |  |                    |        |   |                      | 374,959   |                  |   | (0.01 | )
|Convertible subordinated notes                                                   |  |                    | 200     |   |                      | 7,818     |                  |   |      |  
|                                                                                 |  |                    |         |   |                      |           |                  |   |       |  
|Diluted earnings per share:                                                      |  |                    |         |   |                      |           |                  |   |       |  
|Net income available to common shareholders plus assumed exercise and conversion |  | $                  | 221,784 |   |                      | 6,627,694 |                  | $ | 0.03  |  
|                                                                                 |  |                    |         |   |                      |           |                  |   |       |  
|Six months ended June 30, 2003                                                   |  |                    |         |   |                      |           |                  |   |       |  
|Basic earnings (loss) per share:                                                 |  |                    |         |   |                      |           |                  |   |       |  
|Net loss available to common shareholders                                        |  | $                  | (75,803 | ) |                      | 5,661,002 |                  | $ | (0.01 | )
|                                                                                 |  |                    |        
|Effect of dilutive securities:                                                   |  |                    |         |   |                      |           |                  |   |       |  
|Outstanding warrants                                                             |  |                    |        |   |                      |          |                  |   |      |  
|Convertible subordinated notes                                                   |  |                    |        |   |                      |          |                  |   |      |  
|                                                                                 |  |                    |         |   |                      |           |                  |   |       |  
|Diluted earnings (loss) per share:                                               |  |                    |         |   |                      |           |                  |   |       |  
|Loss available to common shareholders plus assumed exercise and conversion       |  | $                  | (75,803 | ) |                      | 5,661,002 |                  | $ | (0.01 | )
|                                                                                 |  |                    |         |   |                      |           |                  |   |       |  



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In both the three-month and the six-month periods ended March 31, 2003 the effects of the outstanding warrants and the
assumed conversion of the convertible subordinated notes are antidilutive.



At
June 30, 2004 the Company has outstanding warrants for the issuance of 750,000 shares of the Companys common stock at $1.205 per common share; for the issuance of 250,000 shares at $1.25 per common share; and for the issuance of 20,000 shares
at $1.48 per common share. The warrants are exercisable as follows: 925,000 warrants through dates that range from September 27, 2005 through December 13, 2005, 20,000 warrants through June 25, 2006, and 75,000 warrants through December 5, 2006.



ITEM 2 - MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS



Forward Looking Statements



This Form 10-QSB contains forward-looking statements, including statements regarding the
expectations of future operations. For this purpose, any statements contained in this Form 10-QSB 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, or 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. The Company acknowledges that the safe harbor contained in the Litigation Reform Act of 1995 is not
applicable to the disclosure in this Form 10-QSB.



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This item should be read in conjunction with Item 1. Financial Statements and other items contained elsewhere
in this report.



Products and services



The Company, through its wholly owned subsidiary Edict Systems, Inc., is a provider of
business-to-business (B2B) electronic commerce (e-commerce) products and services, offering EDI-based and proprietary solutions for businesses of all sizes. The Company develops, markets, and supports B2B e-commerce software
products and provides Internet-based communication and data processing services that enable businesses to process transactions electronically.



The Companys software products enable businesses to integrate e-commerce data into their businesses and enable smaller companies to process electronic transactions.



The Company provides consultative services for its customers, generally small
and medium sized suppliers of larger companies, where the Company interfaces between its customers and the buyers to facilitate the EDI connectivity required for document processing.



The following comprise the Companys four principal business products/services:



| | Web EDIInternet-based supply chain solution for the grocery and other industries
|- | ---------------------------------------------------------------------------------



| | EnterpriseECInternet-based Electronic Business Transaction Network Services
|- | ----------------------------------------------------------------------------



| | Formula_OneEDI software and Bar Code Label Module software
|- | -----------------------------------------------------------



| | Value-Added ApplicationsInternet-based solutions that enhance the value of electronic commerce capabilities
|- | ------------------------------------------------------------------------------------------------------------



Critical Accounting Estimates and Policies



Revenue recognition for Web-EDI and EnterpriseEC subscription fees



The Company recognizes monthly subscription fees of $25 per month per customer ($45 if the
Customer does not pay by credit card) and $5 per month per trading partner the customer connects to (up to 5 partners) upon the completion of one month of services. These fees are non-refundable. The Company recognizes transaction fees (document
processing fees) upon completion of the processed transactions; these transactions are invoiced or charged to a customers credit card once per month at the end of a monthly period. These fees are non-refundable and are only billed after
services are provided.



The Company recognizes as revenues one-time Account
Activation Fees ($100 per new customer), Trading Partner Setup Fees ($50 per partner for web-EDI) and Interconnect Setup Fees ($50 per interconnect) after the Company performs consultative work required in order to establish the electronic trading
partnership between the customer and their desired trading partner. The Companys EDI administration, technical support and systems maintenance personnel provide these consultative services that enable the Companys customers (suppliers)
and their trading partners (usually buying organizations of large companies or hubs) to conduct EDI transactions as requested by the hub by interfacing with the hub on behalf of the Companys customers. Because



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each hub has established processes in place to migrate a non-EDI supplier to an EDI-enabled supplier, and because these
procedures vary among the hubs, the Company acts as a liaison between its customers and the hub to establish this EDI connection. Since most of the Companys customers are small to medium-sized companies, they recognize that the Company has the
resources and expertise to establish this connection for them. This trading partner connection and relationship, once established, is portable to other EDI service providers if the customer chooses to do so.



Time periods of these web-EDI agreements can be cancelled at any time by customers with
30-days prior written notice. EnterpriseEC agreements can be cancelled at any time during the one-year contract period with 90-days prior written notice and in subsequent years, when the agreement extends automatically on a month-to-month basis,
with 30-days prior written notice.



The Company periodically receives payments
from customers in advance for the Companys development of Web-EDI and EnterpriseEC applications designed to meet specific customer specifications for processing Internet transactions. The Company expects to re-sell some of these applications,
with minor modifications, to other customers. The Company recognizes these advance payments as revenue over the twelve-month contract period. The Company recognizes revenue from the transaction fees that result from processing Internet transactions
upon completion of the processed transactions at the end of each month. These transaction fees are non-refundable and are only invoiced after services are provided.



Software Development Costs



The Company capitalizes software development costs and amortizes those costs over a three-year estimated economic life of the software applications. Internet technology
can change and does change quickly. As a result, any or all of our products could have an economic life of less than (or more than) three years. In addition, our products could become economically obsolete if we cannot sell the products in the
marketplace at a margin that is adequate to produce cash flow. We review quarterly the economic lives of our capitalized products, expected cash flow, and profitability of our products. Capitalized software costs are reported at the lower of
unamortized cost or net realizable value.



Deferred Income Taxes



Deferred income taxes are provided to recognize future tax benefits of
net operating loss carry forwards, to the extent realization of such benefits is more likely than not. Deferred income taxes are also provided for temporary differences in recognition of assets and liabilities for financial statements and for income
tax purposes. The tax rates used are those expected to be in effect when the temporary differences reverse.



Results of Operations



Revenue



Revenue for the second quarter of 2004 exceeded revenue for the second
quarter of 2003 by $136,186, or 19%. Revenue for the first six months of 2004 exceeded revenue for the first six months of 2003 by $326,131, or 24%.



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The following table details revenues by product and percentage growth for the quarters ended June 30, 2004 and 2003,
respectively:



|                               |  |                        |         |      |                           |                  |     |    |      |   |           |  |                  |  |     |   
|------------------------------ |  | ---------------------- | ------- | ---- | ------------------------- | ---------------- | --- | -- | ---- | - | --------- |  | ---------------- |  | --- | --
|                               |  | Quarter Ended June 30, |         |      | Six Months Ended June 30, |                 
|                               |  | 2004                   |         | 2003 |                           | Growth (Decline) |     |    | 2004 |   | 2003      |  | Growth (Decline) | 
|Internet products and services |  |                        |         |      |                           |                  |     |    |      |   |           |  |                  |  |     |   
|Web-EDI - GroceryEC            |  | $                      | 729,456 |      | 593,895                   |                  | 23  | %  |      |   | 1,432,875 |  | 1,149,928        |  | 24  | % 
|Web-EDI - other                |  |                        | 25,968  |      | 20,425                    |                  | 27  | %  |      |   | 54,177    |  | 40,824           |  | 33  | % 
|EnterpriseEC                   |  |                        | 71,218  |      | 41,177                    |                  | 73  | %  |      |   | 136,438   |  | 74,689           |  | 83  | % 
|                               |  |                        |         |      |                           |                  |     |    |      |   |           |  |                  |  |     |   
|                               |  |                        | 826,642 |      | 655,497                   |                  | 26  | %  |      |   | 1,623,490 |  | 1,265,441        |  | 28  | % 
|Software and software licenses |  |                        | 25,340  |      | 59,611                    |                  | (58 | )% |      |   | 67,127    |  | 99,045           |  | (32 | )%
|                               |  |                        |         |      |                           |                  |     |    |      |   |           |  |                  |  |     |   
|                               |  | $                      | 851,982 |      | 715,108                   |                  | 19  | %  |      | $ | 1,690,617 |  | 1,364,486        |  | 24  | % 
|                               |  |                        |         |      |                           |                  |     |    |      |   |           |  |                  |  |     |   



Web-EDI for the grocery industry
continues to provide the largest source of revenue for the Company. The Company is a leading provider of web-based B2B e-commerce in the grocery industry with its GroceryEC service. Revenue from the sale of software and software licenses continues
its overall decline as the Companys major focus is, and has been since the year 2000, on Internet products and services.



The Company is continuing its program of strengthening its sales and marketing capabilities to help in achieving increased market share in the grocery industry, improved
marketing of Web-EDI services to companies in other industries and increased revenues from EnterpriseEC services. In addition, the Company is attempting to identify and develop new products that have significant sales potential.



Expenses



Marketing, general and administrative amounted to approximately 42% of revenue in both the three months and the six months ended June 30,
2004.



Interest expense in the second quarter of 2004 declined significantly
compared to the second quarter of 2003. This occurred because in the first quarter of 2004 the Company paid in full the principal and accrued interest on all outstanding interest bearing payables.



Margins



The Company reported income before taxes of $180,343, or 21% of revenue, in the quarter ended June 30, 2004. The second quarter of 2004 was
the third consecutive quarter in which income before taxes as a percent of revenue exceeded 20%. The Company intends to continue its goal to achieve a pre-tax income of at least 20% of revenues per year with continued efforts to grow revenue and
contain costs.



The Companys gross margin, as a percent of revenue, of
64% in both the first quarter of 2004 and the first six months of 2004 improved over 2003 levels (57% and 55%, respectively) primarily due to the revenue increases in both periods in 2004 compared to 2003.



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Income taxes (benefit)



Income taxes in the first six months of 2004 were recorded at a 40% tax rate; no income taxes are currently payable, however, because the Company has a net operating
loss carryforward sufficient to offset taxable income. At June 30, 2004 the Company has a remaining unused net operating loss carryforward of $323,000.



Capitalized Development Costs



The following table sets forth the cost and accumulated amortization of the products comprising the Software Development Costs asset at June 30, 2004:



|                     |  |      |           |                          |         |     |        
|-------------------- |  | ---- | --------- | ------------------------ | ------- | --- | -------
|Product              |  | Cost |           | Accumulated Amortization |         | Net
|GroceryEC (Web EDI)  |  | $    | 428,260   |                          | 385,804 |     | 42,456 
|Web EDI enhancements |  |      | 252,621   |                          | 69,666  |     | 182,955
|EnterpriseEC         |  |      | 470,661   |                          | 294,163 |     | 176,498
|                     |  |      |           |                          |         |     |        
|Total                |  | $    | 1,151,542 |                          | 749,633 |     | 401,909
|                     |  |      |           |                          |         |     |        



GroceryEC (WebEDI) is the
Companys largest and primary source of revenue. Sales of EnterpriseEC continue to grow in 2004, up 83% from the first six months of 2003. Based on our current marketplace analysis and marketing efforts we expect EnterpriseEC product revenues
and cash flows to continue to increase.



Liquidity and Capital Resources



In the quarter ended June 30, 2004 the Company reported net cash provided
by operating activities of $360,717, affording it the ability to acquire computer equipment and related software to increase data processing throughput and other capabilities at a cost of $120,742 and to increase its cash balance from March 31, 2004
by $193,184 to $529,578 at June 30, 2004.



ITEM 3. CONTROLS AND PROCEDURES



Disclosure controls and procedures. The Chief Executive Officer and the
Director of Accounting have carried out an evaluation of the effectiveness of Advant-es disclosure controls and procedures that are designed to ensure that information relating to Advant-e required to be disclosed by Advant-e in the reports
that it files or submits under the Securities and Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms. Based upon this
evaluation, these officers have concluded, that as of June 30, 2004, Advant-es disclosure controls and procedures were adequate.



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



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ITEM 5. OTHER INFORMATION



(a) The Securities and Exchange Commission informed the Company that its registration statement for 1,603,915 common shares became effective
on July 23, 2004. The shares included 583,915 outstanding shares that were issued to former holders of the Companys convertible subordinated notes and 1,020,000 shares to be issued upon the exercise of warrants held principally by former note
holders.



PART II. OTHER INFORMATION



ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K



(a) Exhibits



|               |  |                                                                                                                                                                         |  |                    
|-------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------
|Exhibit Number |  | Description                                                                                                                                                             |  | Method of Filing   
|2              |  | Agreement and Plan of Merger, dated as of April 10, 2000, among Edict Systems, Inc., Twilight Productions, and Twilight Acquisitions Sub, Inc.                          |  | Previouslyfiled (I)
|               |  |                                                                                                                                                                        
|3(i)           |  | Amended Certificate of Incorporation                                                                                                                                    |  | Previouslyfiled (A)
|               |  |                                                                                                                                                                        
|3(ii)          |  | By-laws                                                                                                                                                                 |  | Previouslyfiled (B)
|               |  |                                                                                                                                                                        
|4.1            |  | Form of Common Stock Certificate                                                                                                                                        |  | Previouslyfiled (A)
|               |  |                                                                                                                                                                        
|4.2            |  | Form of Note Purchase Agreement and Convertible Subordinated Note underlying the original Issuance of $200,000 of 15% Convertible Subordinated Notes                    |  | Previouslyfiled (C)
|               |  |                                                                                                                                                                        
|4.3            |  | Form of Note Purchase Agreement, Convertible Subordinated Note, and Warrant Certificate underlying the total issuance of $525,000 of 15% Convertible Subordinated Notes |  | Previouslyfiled (E)
|               |  |                                                                                                                                                                        
|4.4            |  | Form of Note Purchase Agreement, Convertible Subordinated Note, and Warrant Certificate Underlying the total issuance of $250,000 of 10% Convertible Subordinated Notes |  | Previouslyfiled (H)
|               |  |                                                                                                                                                                        
|4.5            |  | Agreements to convert Convertible Subordinated Notes into shares of the Companys common stock                                                                          |  | Previouslyfiled (K)
|4.5.1          |  | The Pinnacle Fund, L.P.                                                                                                                                                 |  |                    
|4.5.2          |  | Halter Financial Group, Inc.                                                                                                                                            |  |                    
|4.5.3          |  | Gary C. Evans                                                                                                                                                           |  |                    
|4.5.4          |  | Ray Washburne and Richard S. Neely (Charter Private Equity)                                                                                                             |  |                    
|4.5.5          |  | Barwell Partners, Ltd.                                                                                                                                                  |  |                    
|4.5.6          |  | Blair Baker                                                                                                                                                             |  |                    
|4.5.7          |  | Covenant Investments, L.P.                                                                                                                                              |  |                    
|4.5.8          |  | Rene Larrave                                                                                                                                                            |  |                    
|4.5.9          |  | Scott Brock                                                                                                                                                             |  |                    



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|     |  |                                                                                                                                                  |  |                    
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------------------
|     |  |                                                                                                                                                 
|10.1 |  | Lease Agreement, dated as of January 1, 2000, between Jason K. Wadzinski and EDICT Systems, Inc.                                                 |  | Previouslyfiled (B)
|     |  |                                                                                                                                                 
|10.2 |  | Stock Purchase Agreement, dated April 10, 2000, among Twilight Productions, Ltd., Halter Financial Group, Inc. and Art Howard Beroff             |  | Previouslyfiled (B)
|     |  |                                                                                                                                                 
|10.3 |  | Software Term License Agreement, including Amendment No. 1, dated as of April 18, 2001 between Cyclone Commerce, Inc. and Edict Systems Inc.     |  | Previouslyfiled (D)
|     |  |                                                                                                                                                 
|10.4 |  | Lease, dated as of July 30, 2002, between Fritz J. Russ and Dolores H. Russ and Edict Systems, Inc.                                              |  | Previouslyfiled (F)
|     |  |                                                                                                                                                 
|31.1 |  | Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13A-14(a)                                                      |  | Filedherewith      
|     |  |                                                                                                                                                 
|31.2 |  | Certification of Director of Accounting pursuant to Securities Exchange Act Rule 13A-14(a)                                                       |  | Filedherewith      
|     |  |                                                                                                                                                 
|32.1 |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002 |  | Filedherewith      
|     |  |                                                                                                                                                 
|32.2 |  | Certification of Director of Accounting pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002  |  | Filedherewith      

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|(A) | Filed with Amendment No. 2 to Form 10-SB filed as of October 13, 2000
|--- | ---------------------------------------------------------------------

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

|(C) | Filed as Exhibit 4(ii) to Form 10-QSB for the quarterly period ended March 31, 2001 filed as of May 9, 2001, and filed as Exhibit 4(ii) to Form 10-QSB/A-1 for the quarterly period
ended March 31, 2001 as amended, as filed on January 13, 2003.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(D) | Filed with Form 10-QSB for the quarterly period ended June 30, 2001 filed as of August 14, 2001 and filed with Form 10-QSB/A-1 for the quarterly period ended June 30, 2001, filed as
of January 13, 2003.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(E) | Filed as Exhibits 4(ii) and 4(iii) to Form 10-QSB for the quarterly period ended September 30, 2001 filed as of November 14, 2001, and filed as Exhibits 4(ii) and 4(iii) to Form
10-QSB/A-1 for the quarterly period ended September 30, 2001, as amended, as filed as of January 13, 2003.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(F) | Filed with Form 10-QSB for the quarterly period ended March 31, 2003 filed as of May 15, 2003.
|--- | ----------------------------------------------------------------------------------------------

|(H) | Filed with Form 10-QSB for the quarterly period ended September 30, 2002 as of December 16, 2002.
|--- | -------------------------------------------------------------------------------------------------

|(I) | Filed as Exhibit 2 with Amendment No. 1 to Form 10-SB as of July 11, 2000.
|--- | --------------------------------------------------------------------------

|(K) | Filed with Form 10-KSB for the fiscal year ended December 31, 2003 as of March 23, 2004.
|--- | ----------------------------------------------------------------------------------------



(b) Reports on Form 8-K



The Company filed Form 8-K on April 19, 2004 to announce that on April 16, 2004 the Company issued a press release announcing that it had reached a major milestone by
processing over $8 billion worth of purchase orders via Web EDI Solutions. The text of the press release was attached as an exhibit to the Form 8-K.



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The Company filed Form 8-K on April 29, 2004 to announce that on the same date the Company issued a press release
announcing its financial results for the quarterly period ended March 31, 2004. The press release included the Companys Consolidated Condensed Balance Sheets at March 31, 2004 and December 31, 2003, the Consolidated Condensed Statements of
Operations for the quarterly periods ended March 31, 2004 and 2003, and the Consolidated Condensed Statements of Cash Flows for the quarterly periods ended March 31, 2004 and 2003. The text of the press release including the above described
financial statements was attached as an exhibit to the Form 8-K.



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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)        
|               |  |                     
|August 6, 2004 |  | By:                  |  | /s/ Jason K. Wadzinski 
|               |  |                      |  | Jason K. Wadzinski     
|               |  |                      |  | Chief Executive Officer
|               |  |                     
|August 6, 2004 |  | By:                  |  | /s/ John F. Sheffs     
|               |  |                      |  | John F. Sheffs         
|               |  |                      |  | Treasurer