SECURITIES AND EXCHANGE COMMISSION
Washington D. C. 20549
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FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
COMMISSION FILE NUMBER:
ADVANT-E CORPORATION
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(Name of Small Business Issuer in its Charter)
DELAWARE 88-0339012
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(State or other jurisdiction of (I.R.S Employer
incorporation or organization) Identification No.)
1619 MARDON DR.
DAYTON, OH 45432
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(Address of principal executive offices)
937-429-4288
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(Issuer's telephone number, including area code)
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 November 10, 2000, the issuer had 5,566,668 outstanding shares of
Common Stock, $.001 Par Value.
Transitional Small business Disclosure Format: Yes [ ] No [X]
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ADVANT-E CORPORATION (FORMERLY TWILIGHT PRODUCTIONS, LTD.) AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
September December
30, 31,
2000 1999
A S S E T S (Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 116,842 $233,086
Accounts receivable, net 123,816 122,169
Deferred income taxes 75,798 --
Prepaid expenses 7,353 12,017
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Total current assets 323,809 367,272
SOFTWARE DEVELOPMENT COSTS, net 223,962 204,542
PROPERTY AND EQUIPMENT, net 47,064 49,513
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Total assets $ 594,835 $621,327
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Bank notes payable $ 118,140 $115,894
Accounts payable 44,417 63,417
Accrued expenses 40,906 19,108
Deferred income taxes -- 905
Deferred revenue 204,930 168,724
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Total current liabilities 408,393 368,048
SHAREHOLDERS' EQUITY
Common stock 5,566 5,378
Paid-in capital 1,190,291 890,480
Stock subscriptions receivable (100,176) --
Retained earnings (deficit) (909,239) (642,579)
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Total shareholders' equity 186,442 253,279
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Total liabilities and shareholders' equity $ 594,835 $621,327
The accompanying notes are an integral part of the financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
ADVANT-E CORPORATION (FORMERLY TWILIGHT PRODUCTIONS, LTD.)
AND SUBSIDIARY
Three Months Ended Nine Months Ended
September, 30 September, 30
2000 1999 2000 1999
REVENUES
Product sales,license fees, 224,711 299,656 588,890 656,380
and Transaction fees
Other income 754 4,317 9,176 18,116
------- ------- ------- -------
Total revenues 225,465 303,973 598,066 674,496
OPERATING EXPENSES
Cost of sales 1,826 7,730 16,228 16,579
Salaries and benefits 140,256 150,237 567,054 413,856
General and administrative 67,971 86,209 226,664 224,847
Depreciation 10,824 5,006 21,878 15,019
Amortization 33,295 16,152 75,701 43,011
Bad debt expense (recovery) (10,000) -- 25,000 5,000
Interest 4,984 2,540 16,857 4,832
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Total operating expenses 249,156 267,874 949,382 723,144
INCOME (LOSS) BEFORE TAXES (23,691) 36,099 (351,316) (48,648)
INCOME TAXES PROVISION (BENEFIT) -- 12,810 (84,656) 6,698
------- ------- ------- ------
NET INCOME (LOSS) (23,691) 23,289 (266,660) (55,346)
RETAINED EARNINGS (DEFICIT),
BEGINNING OF PERIOD (885,548) (286,438) (642,579) (207,803)
RETAINED EARNINGS (DEFICIT),
END OF PERIOD (909,239) (263,149) (909,239) (263,149)
EARNINGS (LOSS) PER SHARE
Basic (0.00) 0.00 (0.05) (0.01)
Diluted (0.00) 0.00 (0.05) (0.01)
AVERAGE SHARES OUTSTANDING
Basic 5,474,151 5,378,173 5,410,400 5,378,173
Diluted 5,661,173 5,661,173 5,661,173 5,661,173
The accompanying notes are an integral part of the financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
ADVANT-E CORPORATION (FORMERLY TWILIGHT PRODUCTIONS, LTD.)
AND SUBSIDIARY
Nine Months Ended
September 30,
2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss (266,660) (55,346)
Adjustments to reconcile net loss to cash
provided by (used in) operating activities:
Depreciation 21,878 15,019
Amortization 75,701 43,011
Deferred income tax (benefit) provision (76,703) 6,698
Increase (decrease) in cash arising from
changes in assets and liabilities:
Accounts receivable (1,647) 14,007
Refundable income tax 20,472
Film costs (8,731)
Other assets 4,664 (7,304)
Accounts payable (19,000) (20,869)
Accrued expenses 21,798 20,834
Deferred revenue 36,206 (11,794)
Net cash (used in) provided by (203,763) 15,997
operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of equipment (19,429) (37,396)
Software costs capitalized (95,121) (70,567)
Net cash used in investing activities (114,550) (107,963)
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on bank line of credit and other
note payable 67,358 50,755
Payments on bank line of credit (65,112) (22,321)
Proceeds from sale of common stock 199,823 --
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Net cash provided by financing 202,069 28,434
activities
NET DECREASE IN CASH AND CASH EQUIVALENTS (116,244) (63,532)
Cash and cash equivalents, beginning of period 233,086 378,196
CASH AND CASH EQUIVALENTS, END OF PERIOD 116,842 314,664
SUPPLEMENTAL DISCLOSURE OF CASH FLOW ITEMS
Interest paid 16,857 4,832
Income tax (refunds) (7,953)
The accompanying notes are an integral part of the financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION, ORGANIZATION AND OTHER MATTERS
NATURE OF OPERATIONS - Advant-E Corporation (formerly Twilight Productions,
Ltd.) through its wholly-owned subsidiary, Edict Systems, Inc., develops and
markets electronic data interchange and electronic commerce software products
and services that enable its customers to send and receive business documents
electronically in standard and proprietary formats. Customers consist of
businesses across a number of industries throughout the United States.
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include
the accounts of Advant-e Corporation and its wholly-owned subsidiary, Edict
Systems, Inc. Intercompany accounts and transactions are eliminated in
consolidation.
USE OF ESTIMATES - The preparation of financial statements in conformity with
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.
CASH EQUIVALENTS - The Company classifies as cash equivalents all highly liquid
investments with original maturities of three months or less.
ACCOUNTS RECEIVABLE - Accounts receivable are reported net of the allowance for
uncollectible accounts. The allowance for uncollectible accounts was $50,000
at September 30, 2000 and $25,000 at December 31, 1999.
PROPERTY AND EQUIPMENT - Property and equipment are carried at cost. Costs of
normal maintenance and repairs are charged to expense as incurred. Impairment
of asset value is recognized whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
Depreciation is provided using accelerated methods for financial reporting
purposes at rates based on useful lives of five to seven years. Depreciation
expense was $21,878 and $15,019 in the nine months ended September 30, 2000 and
1999 respectively.
REVENUE RECOGNITION - Revenue from product sales are recorded when the product
is shipped and the services are performed. Ongoing license fees are recognized
ratably over the contract period.
DEFERRED INCOME TAXES - Deferred income taxes are provided for temporary
differences in recognition of assets and liabilities for financial statements
and for income tax purposes. In addition, deferred income taxes are provided
to recognize future tax benefits of tax credits and net operating loss
carryforwards, to the extent realization of such benefits is more likely than
not.
NOTE 2 - BUSINESS COMBINATION
On April 10, 2000, Advant-e Corporation ("Advant-e") and Edict Systems, Inc.
("Edict") entered into a merger agreement. The merger agreement provides for a
business combination between Advant-e in which Edict became a wholly owned
subsidiary of Advant-e. Under the terms of the merger, Edict's issued and
outstanding shares were exchanged for 4,359,000 Advant-e's shares.
In connection with the merger described above, Advant-e assigned all rights,
title and interest in and to the two films it had produced to Chaverim
Productions, Ltd., an entity owned by the former officers and directors of
Advant-e, in exchange for Advant-e's release from any and all obligations and
liabilities arising from the production of the films.
As part of the merger, Advant-e entered into an agreement with Halter Financial
Group, Inc. ("HFG"), a financial services provider, whereby HFG agreed to
provide services to Advant-e in support of the Merger and post-merger services
relating to public relations, investor relations, and assisting with regulatory
filing requirements. HFG was compensated for these services by the issuance of
400,000 shares of Advant-e's common stock.
Also on April 10, 2000, Advant-e entered into a stock purchase agreement
with HFG and Art Howard Beroff ("Beroff"), a former director and officer of
Advant-e prior to the merger with Edict. The stock purchase agreement
requires HFG and Beroff, or their designees, to each purchase 141,500 shares
of Advant-e for $150,000 each resulting in Advant-e's issuance of 283,000
shares of common stock for an aggregate consideration of $300,000,
(approximately $1.06 per share). This offering was made pursuant to Rule 504
under the Securities Act. As of September 30, 2000 188,495 shares were
purchased for an aggregate purchase price of $199,823.
The merger has been accounted for as a pooling of interests, and accordingly
all prior period consolidated financial statements have been restated to
include the combined results of operations, financial position and cash flows
of Advant-e. For Federal income tax purposes, the merger is expected to be
accounted for as a tax free reorganization.
The following information presents certain income statement data of the
separate companies for the periods preceding the merger:
Three months ended
March 31,
1999 1998 2000
(Unaudited)
Net
sales
Edict 815,197 675,056 199,043
Advant-e - - -
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815,197 675,056 199,043
Net income (loss)
Edict (46,692) 1,422 (81,503)
Advant-e (388,084) (96,912) (13,515)
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(434,776) (95,490) (95,018)
NOTE 3 - SOFTWARE DEVELOPMENT COSTS
The Company accounts for the costs of computer software that it sells, leases
and markets as a separate product in accordance with FASB Statement No. 86.
The Company accounts for the costs of computer software that it develops for
internal use in accordance with the AICPA Statement of Position 98-1. Such
costs that are capitalized are amortized by the straight-line method over the
remaining estimated economic lives of the software product, from two to three
years. Capitalized software costs amounted to $382,229 at September 30, 2000
and and $287,108 at December 31, 1999, and the related accumulated amortization
was $158,267 and $82,566, respectively.
NOTE 4 - RELATED PARTY TRANSACTIONS
The Company leases its office space from a shareholder of the Company. This
space is leased on a month to month basis for $3,000 per month. Lease payments
made under this arrangement were $27,000 and $25,800 in the nine months ended
September 30, 2000 and 1999 respectively. As part of this arrangement, the
Company pays the real estate taxes of the leased property. Payments made by
the Company for taxes were $3,522 and $9,716 in the nine months ended September
30, 2000 and 1999 respectively.
NOTE 5 - BANK NOTES PAYABLE AND OTHER NOTE PAYABLE
In 1997 the Company obtained a $35,000 line of credit from Star Bank.
Outstanding borrowings accrue interest at the Bank's prime rate plus two
percent, 11.5% at September 30, 2000. Outstanding borrowings under this
agreement were $29,745 at September 30, 2000 and $34,794 at December 31, 1999.
The majority shareholder has personally guaranteed this line of credit. This
line of credit is collateralized by substantially all business assets of the
Company.
In 1999 the Company obtained an $80,000 line of credit from Huntington Bank.
Outstanding borrowings accrue interest at the Bank's prime rate plus one-half
of one percent, 10% at September 30, 2000. During 1999 this line of credit
was converted into a $100,000 commercial note. Outstanding borrowings under
this agreement were $88,395 at September 30, 2000 and $81,100 at December 31,
1999. The majority shareholder has personally guaranteed this line of credit.
This loan is collateralized by substantially all business assets of the Company.
On February 2, 2000 the Company borrowed $50,000 from an unrelated corporation
at a rate of interest of 10% per year. The note and interest were paid in full
in August 2000.
NOTE 6 - PROFIT SHARING PLAN
In 1997 the Company established a profit sharing and 401(k) plan covering
substantially all employees. The Company may make annual discretionary
contributions to the plan based on participants' contributions. The Company
made no contributions to the plan in 2000 and 1999.
NOTE 7 - INCOME TAX PROVISION (BENEFIT)
The deferred income tax asset at September 30, 2000 and the deferred income tax
liability at December 31, 1999 result from the recognition of income tax
benefits resulting from tax credits and net operating loss carryforwards, to the
extent realization of such benefits is more likely than not.
Deferred income taxes of $75,798 at September 30, 2000 consist of $13,967
related to temporary differences and $61,831 of income tax benefits resulting
from the current year net operating loss. No valuation allowance has been
recognized for the net operating loss tax benefits because management believes
it is more likely than not that the related net deferred tax asset will be
realized. 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.
ITEM 2 - MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD LOOKING STATEMENTS
The following discussion and analysis of the Company's consolidated financial
condition and results of operation for the fiscal quarter ended September 30,
2000, should be read in conjunction with the Company's consolidated financial
statements included elsewhere herein.
When used in conjunction in the following discussions, the words "believes,"
"anticipates," "intends," "expects," and similar expressions are intended to
identify forward-looking statements. Such statements are subject to certain
risks and uncertainties, which could cause results to differ materially from
those projected, including, but not limited to, those set forth in Item 2,
Section E, Page 12, "Risk Factors." of our previously filed Form 10SB.
OVERVIEW
Advant-e Corporation (formerly Twilight Productions, Ltd.) through its wholly-
owned subsidiary, Edict Systems, Inc., develops and markets electronic data
interchange and electronic commerce software products and services that enable
its customers to send and receive business documents electronically in standard
and proprietary formats via traditional Value Added Networks and the Internet.
Customers consist of businesses across a number of industries throughout the
United States.
Edict Systems, Inc. is currently made up of four strategic business units:
1. Electronic Commerce and Bar Coding Software
FORMULA_ONE(R) EDI software and Bar Code Label Modules
2. Internet Value Added Network Services
EnterpriseEC(R)
3. Web-based Electronic Commerce document processing system
for the Grocery Industry supply chain
GroceryEC.com
4. Other vertical industry portals ("Vortals")
MfgEC.com, LogisticsEC.com, etc.
Software is billed in advance with recurring license and maintenance fees
billed annually. EnterpriseEC(R), GroceryEC.com, and other "vortals"
typically have a start-up fee and transactional fees billed in advance
of service.
The company is currently focusing on increasing transaction fees relating to
GroceryEC.com, EnterpriseEC(R), and other "vortals".
At the end of September, 2000, GroceryEC.com supported 19 grocery retailers and
had approximately 642 production customers generating transaction revenues.
EnterpriseEC(R) did not generate any start-up or transaction fees during the
current period. Management anticipates that transaction fees generated by
EnterpriseEC(R) will begin in the first quarter of 2001.
LogicticsEC.com generated $30,000 in start-up revenues in the 3rd quarter.
Management anticipates that transaction fees generated by LogisticsEC.com will
begin in the 4th quarter of 2000.
MfgEC.com did not generate any start-up or transaction fees during this
period. Several companies are using this system in a beta mode and management
anticipates transaction fees being billed in the first quarter of 2001.
MfgEC.com is the first "vortal" that combines Electronic Commerce document
processing via the Internet with integrated bar code label generation
capabilities.
Several other "vortals" are planned for release in 2001. The Company owns
Internet domain names for AutomotiveEC.com, RetailEC.com, HealthcareEC.com,
PetroleumEC.com, HighTechEC.com, EZEC.com, EasyEC.com, and DrugStoreEC.com.
The Company experienced a reduction in EDI software and bar code label module
revenues due to a shift in focus from these product lines to the companys'
Internet products and services.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
Revenue was $225,465 and $303,973 respectively in the three months ended
September 30, 2000 ("Q3 2000") and September 30, 1999 ("Q3 1999"). The
reduction in revenues is attributed to the company changing its primary focus
from EDI and bar coding software to internet-based services in 2000. During Q3
2000, recognized internet based revenues accounted for approximately 46% of
revenues for the quarter.
Operating expenses decreased to $249,156 for Q3 2000 from $267,874 in Q3 1999
due primarily to lower general and administrative expenses, lower salaries and
benefits, a bad debt recovery estimate of $10,000, and increased capitalized
development costs.
The company experienced a net loss in Q3 2000 of $23,691, or (.00) per share
vs. a net profit in Q3 1999 of $23,289, or .00 per share. The decrease in net
profit is primarily due to lower revenues offset slightly by lower operating
expenses.
Liquidity and Capital Resources
Since its inception, the Company has incurred operating losses, net losses and
negative cash flows from operations, due in large part by the Company's previous
business of producing and marketing low budget feature-length films, of which
two films were produced but did not generate any revenue.
Due to the merger with Edict Systems on April 10, 2000, the Company expects to
finance operations with internally generated cash flows and proceeds from
existing stock purchase agreements. The Company is currently seeking outside
capital to fund additional growth if such capital can be obtained at terms that
are acceptable to the Company.
The balance of Cash, Cash Equivalents, and Short-term Investments decreased to
$116,842 in Q3 2000 from $314,664 in Q3 1999. The decrease is primarily
attributable to investment in development and marketing of the Company's
Internet related products and services.
PART II-OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On April 10, 2000, Advant-e entered into a stock purchase agreement with HFG and
Art Howard Beroff ("Beroff"), a former director and officer of Advant-e prior
to the merger with Edict. The agreement requires HFG and Beroff, or their
designees, to each purchase 141,500 shares of Advant-e for $150,000 each
resulting in Advant-e's issuance of 283,000 shares of common stock for an
aggregate consideration of $300,000. (approximately $1.06 per share).
This offering was made pursuant to Rule 504 under the Securities Act.
Through the date of the filing of this report, the Company has issued 188,495
shares of its common stock pursuant to this agreement (141,195 to HFG or
designees and 47,000 to Beroff or designees). for a total of $199,823 ($150,000
from HFG or designees and $49,823 from Beroff or designees).
The proceeds of the issuance are being used to fund further investment in and
the development of our electronic commerce products, expansion of our sales
and marketing activities and working capital and other general corporate
purposes.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On September 6, 2000 the Board of Directors, by unanimous written consent,
adopted a resolution proposing and declaring advisable an amendment to the
Company's Certificate of Incorporation effecting a name change from Twilight
Productions Ltd. to Advant-e Corporation. The amendment was adopted by written
consent of Stockholders holding 82% of the then issued and outstanding shares
of the Company.
ITEM 5. OTHER INFORMATION
Due to the merger with Edict Systems, Inc. on April 10, 2000, the Company's
Board of Directors changed independent auditors to the auditors of Edict
Systems.
On August 1, 2000 the Company notified Mark Bindiger, CPA (Bindiger) that he was
Dismissed as the Companys independent auditor.
The Company and Mark Bindiger have not, in connection with the audit of the
Company's financial statements for each of the prior two years ended December
31, 1999 and December 31, 1998 or for any subsequent interim prior to and
including August 1, 2000, had any disagreement on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure, which disagreement, if not resolved to Bindiger's satisfaction,
would have caused Bindiger to make reference to the subject matter on the
disagreement in connection with his reports.
The reports of Bindiger on the Company's financial statements for the past two
fiscal years did not contain an adverse opinion or a disclaimer of opinion and
were not qualified or modified as to uncertainty, audit scope or accounting
principles.
Also on August 1, 2000, the Company appointed Battelle & Battelle LLP as its
independent auditor and Battelle & Battelle LLP accepted such appointment.
The Company had no relationship with Battelle & Battelle LLP required to be
reported pursuant to Regulation S-B item 304(a)(2) during the two years ended
December 31, 1999 and December 31, 1998, or the subsequent interim period prior
to and including August 1, 2000.
ITEM 6. INDEX TO EXHIBITS
Exhibit Method
Number Description of Filing
------- ----------- ---------
2 Plan of acquisition, reorganization, arrangement, N/A
liquidation, or succession
3(a)(i) Amended Certificate of Incorporation Previously
Filed*
3(a)(ii) By-laws Previously
Filed**
4 Instruments defining the rights of security Previously
holders including indentures Filed*
10 Material contracts Previously
Filed**
11 Statement re: computation of per share earnings N/A
15 Letter on unaudited interim financial information N/A
18 Letter on change in accounting principles N/A
19 Report furnished to security holders N/A
22 Published report regarding matters submitted N/A
to vote
23 Consent of experts and counsel N/A
24 Power of attorney N/A
27 Financial data schedule Filed
Herewith
99 Additional Exhibits N/A
* Filed with Amendment No. 2 to Form 10-SB filed as of October 13, 2000
** Filed with Amendment No. 1 to Form 10-SB filed as of July 17, 2000
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
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(Registrant)
November 14, 2000 By: /s/ Jason K. Wadzinski
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Jason K. Wadzinski
Chief Executive Officer
November 14, 2000 By: /s/ John F. Sheffs
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John F. Sheffs
Treasurer
