SOURCE: VillageEDOCS Inc.

November 16, 2006 14:00 ET

VillageEDOCS' Revenues for Third Quarter of 2006 Up 48% From 2005 and Gross Profit Up 74%

TUSTIN, CA -- (MARKET WIRE) -- November 16, 2006 -- VillageEDOCS (OTCBB: VEDO) announced today its financial results for the three and nine months ended September 30, 2006.

"We are happy to report revenue of $3,885,644 for the third quarter of 2006 and revenue for the first nine months of $8,987,575," said Mason Conner, Chief Executive Officer of VillageEDOCS.

Mr. Conner continued, "GoSolutions, which we acquired on May 1, 2006, contributed $2,300,646 to our revenue in the five months ended September 30, 2006. For the first nine months of 2006, Resolutions increased revenue by 20% over the 2005 period and Tailored Business Systems increased revenue by 10% over the 2005 period. We are looking forward to building on these results for the remainder of 2006 and for 2007 by improving operating income at GoSolutions, Tailored Business Systems, and Resolutions, and by improving revenue at MessageVision. We expect GoSolutions to have a significant and positive effect on revenue and income from operations for the fourth quarter of 2006 and during 2007. GoSolutions' 2005 income from operations was $743,847 on net revenue of $6,996,534."

Thus far during 2006, we accomplished several strategic objectives which include:

--  Acquisition of GoSolutions, Inc. ("GSI"), a company with strategic
    products and services;
--  Began a business integration process taking advantage of scale of
    operations;
--  In the third quarter, we strengthened the leadership team with the
    appointment of Joe Torano as S.V.P. of Sales and Marketing.  This year so
    far we have appointed Jerry Kendall as President, Thor Bendickson as Chief
    Technology Officer, and Fred Burris as VP of Finance;
--  Retained Agile Equity, a New York-based investment bank, to lead the
    identification and evaluation of potential acquisitions;
--  Retained StoneGate Securities, a Texas-based investment bank, to lead
    the capital formation activity for our next acquisition;
--  Achieved organic revenue growth during the first nine months.  We
    increased net revenue at TBS and Resolutions which, together with the
    revenue of GSI (acquired May 1, 2006) and MVI contributed to a 42% increase
    in consolidated revenue; and
--  Reduced the net loss for the nine months ended September 30, 2006 by
    $7,201,791 compared to the 2005 period.
    
We believe that we have made crucial investment in key people that will drive our success in organic growth during 2007 and beyond. At the same time, we continue to focus on growth by acquisition," added Mr. Conner.

Net revenue from external customers for the three months ended September 30, 2006 was $3,885,644, a 48% increase over net revenue for the prior year quarter of $2,620,854.

For the three months ended September 30, 2006, TBS generated 32% of the Company's net revenue, MVI generated 18% of the Company's net revenue, GSI generated 34% of the Company's net revenue, and Resolutions generated 17% of the Company's net revenue. During the three months ended September 30, 2005, TBS generated 47% of the Company's net revenue, MVI generated 30% of the Company's net revenue, and Resolutions generated 24% of the Company's net revenue.

The increase of $1,264,790 in the 2006 quarter resulted from the contribution of $1,304,569 in revenue from GSI and a 6% increase from Resolutions, which were offset by an 11% decrease in revenue from MVI that resulted from a decrease in sales staff and related expenses. TBS's revenue increased less than 1% compared to the prior year quarter.

GSI contributed $1,304,569 in revenue and an operating loss of $24,172 for the three months ended September 30, 2006 (includes $208,085 in depreciation and amortization expense, $150,000 of which was attributable to an adjustment that resulted from identifying intangible assets and recording eight months of related amortization expense in the third quarter).

MVI contributed $690,803 in revenue and $94,280 in operating income for the three months ended September 30, 2006 (includes $2,202 in depreciation and amortization expense). The electronic document delivery service operated by MVI has achieved an operating income for eleven consecutive quarters.

For the third quarter of 2006, TBS contributed $1,229,915 in revenue and an operating income of $188,385 (includes $34,495 in depreciation and amortization expense). As discussed above, TBS's revenue was consistent when compared to the third quarter of 2005. However, operating income for the quarter improved by 62% compared to the 2005 quarter due to an increase in printing revenue as a percentage of overall revenue.

Resolutions contributed $660,357 in revenue for the third quarter of 2006 and reported an operating income of $112,054 (includes $46,926 in depreciation and amortization expense). Revenue was up 6% compared to the 2005.

Gross profit margin for the third quarter of 2006 was 67% as compared to 57% for the 2005 quarter.

During the third quarter of 2006, the Company recorded $116,077 in compensation expense in connection with the vesting of employee incentive stock options, which is included in our operating loss for the quarter. Non-operating interest expense was down substantially during the 2006 quarter ($35,547) as compared to the 2005 quarter ($849,667) due to the conversion of approximately $5 million in debt during 2005. In addition, during 2006 we have not recorded, and do not expect to record, any expenses related to derivative liabilities.

Net loss for the three months ended September 30, 2006 was $35,436, or $0.00 per share, compared to a net loss of $711,279, or $0.01 per share, for the three months ended September 30, 2005 on weighted average shares of 146,868,127 and 94,345,283, respectively.

The overall net loss in the third quarter of 2006 was comprised of net income of $96,185, $188,385, and $110,429 from MVI, TBS, and Resolutions, respectively as offset by net losses of $19,408 and $411,027 from GSI and corporate, respectively.

Net revenue from external customers for the nine months ended September 30, 2006 was $8,987,575, a 42% increase over net revenue for the prior year period of $6,308,354.

For the nine months ended September 30, 2006, GSI, MVI, TBS, and Resolutions generated 26%, 24%, 32%, and 18% of the Company's net revenue, respectively. During the nine months ended September 30, 2005, MVI, TBS, and Resolutions generated 37%, 41%, and 22% of the Company's net revenue, respectively.

The increase of $2,679,221 in the 2006 period resulted from the contribution of $2,300,646 in revenue from GSI, a 10% increase in revenue from TBS, and a 20% increase in revenue from Resolutions. These increases were offset by a 7% decrease in revenue from MVI that resulted from a decrease in sales staff and related expenses.

GSI contributed $2,300,646 in revenue and $121,358 in operating income for the nine months ended September 30, 2006 (includes $260,347 in depreciation and amortization expense).

MVI contributed $2,199,925 in revenue and $577,278 in operating income for the nine months ended September 30, 2006 (includes $24,011 in depreciation and amortization expense).

For the first nine months of 2006, TBS contributed $2,864,614 in revenue and an operating income of $18,679 (includes $107,752 in depreciation and amortization expense). TBS improved revenue as compared to the 2005 period and has improved gross margin due to an increase in printing revenue as a percentage of overall revenue during the 2006 period.

Resolutions contributed $1,622,390 in revenue for the first nine months of 2006 and reported an operating income of $57,375 (includes $104,699 in depreciation and amortization expense). Revenue was up 20% compared to the 2005 period due to the consolidation of nine months of revenue in 2006 compared to six months in 2005.

Gross profit margin for the first nine months of 2006 and 2005 was 66%, compared to 61% for the 2005 period.

During the first nine months of 2006, the Company recorded $360,668 in compensation expense in connection with the vesting of employee incentive stock options. Non-operating interest expense was down substantially during the 2006 period ($85,214) as compared to the 2005 period ($8,017,991) due to the conversion of approximately $5 million in debt during 2005. During the 2006 period, interest charges incurred pursuant to convertible promissory notes, including embedded derivatives, decreased significantly as a result of the conversion to equity of approximately $5 million in debt during 2005. Interest expense during the 2005 period included non-cash charges of $7,410,730 related to the amortization of debt discount, $434,572 related to an inducement for the conversion of convertible notes payable, and $39,000 related to amortization of debt issue costs. In addition, during 2006 we have not recorded, and do not expect to record, any expenses related to derivative liabilities.

Net loss for the nine months ended September 30, 2006 was $665,518, or $0.01 per share, compared to a net loss of $7,867,309, or $0.10 per share for the 2005 period on weighted average shares of 127,182,192 and 78,276,650, respectively. The overall net loss in the first nine months of 2006 was comprised of net income of $578,602, $18,679, $52,536, and $123,944 from MVI, TBS, Resolutions, and GSI, respectively, as offset by a net loss of $1,439,279 from corporate.

About VillageEDOCS

VillageEDOCS, through its MessageVision subsidiary, is a leading provider of comprehensive business-to-business business information delivery services and products for organizations with mission-critical needs, including major corporations, government agencies and non-profit organizations. Through its Tailored Business Systems subsidiary, VillageEDOCS provides accounting and billing solutions for county and local governments. Through its Resolutions subsidiary, VillageEDOCS provides products for document management, document imaging, electronic forms, document archiving, and e-mail archiving. Through its GoSolutions subsidiary, VillageEDOCS provides enhanced voice and data delivery services. For further information, visit our website at www.villageedocs.com.

Cautionary Statement Regarding Forward-Looking Information

All statements in this press release that do not directly and exclusively relate to historical facts constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements made in this press release, including, without limitation, those relating to our belief about the benefits the Company has derived, or may derive, from pursuing its acquisition strategy or from acquiring GoSolutions or from new management personnel or consultants, our expectations regarding future operating results, including such for the fourth quarter of 2006, and our belief that we will not record any derivative liabilities during 2006, are forward-looking statements. These statements, and other forward looking statements in this press release, represent the Company's plans, intentions, expectations and belief and are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected or expressed herein. These include, without limitation, risks associated with acquisitions, including GoSolutions, such as the inability to assimilate and integrate new operations and retain key personnel, uncertainties in the market, competition, legal, regulatory initiatives, success of marketing efforts, availability, terms and deployment of capital, personnel risks, and other risks detailed in the Company's SEC reports, of which many are beyond the control of the Company. Trading in the Company's common stock is limited, and marketability of the stock is restricted by penny stock regulations and the fact that our common stock is traded on the OTCBB. The Company does not presently qualify, and may never qualify, to be listed or quoted on any exchange or other market. The Company assumes no obligation to update or alter the information in this press release. Investors are cautioned not to put undue reliance on any forward-looking statements. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in Section 21E of the Exchange Act.

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