SOURCE: VillageEDOCS, Inc.

April 03, 2007 12:00 ET

VillageEDOCS' 2006 Revenues Up 47% From 2005 and Gross Profit Up 37%

TUSTIN, CA -- (MARKET WIRE) -- April 3, 2007 -- VillageEDOCS (OTCBB: VEDO) announced today its financial results for 2006.

"We are very pleased to report revenue of $12,912,173 for 2006. These results in 2006 reflect a year of significant accomplishment for VillageEDOCS -- a year of strong operating results and tangible, sustainable progress in shaping the company to further strengthen our ability to drive reliable organic growth and integrate new acquisitions," said Chief Executive Officer, Mason Conner. "Reliable growth is always in style for long-term investors. Our investors have looked at our company over an extended horizon. Over the past four years, our revenue has grown from $1.9 million to $12.9 million. It took courage for our shareholders to continue to invest in the company. We thank all of you who have invested in the VillageEDOCS in the past and those who invest in the future."

Mr. Conner continued, "Being a reliable growth company requires consistent execution on strategic principles that drive performance every quarter of every year. In 2006, we invested in capabilities that create stronger organic growth and strengthened our ability to assimilate new acquisitions. These capabilities include investing in leadership. Jerry Kendall joined in March as President and COO of VillageEDOCS with responsibility for all Strategic Business Units. Joe Torano joined in September as Executive Vice President of Sales and Marketing with responsibility for all sales and marketing. We engaged a New York-based investment banking firm to assist us in expanding our acquisition activities."

Net revenue from external customers for 2006 was $12,912,173, a 47% increase over 2005 net revenue of $8,768,446.

During 2006, our wholly owned subsidiaries GoSolutions, Inc. ("GSI"), MessageVision, Inc. ("MVI"), Tailored Business Systems, Inc. ("TBS), and Phoenix Forms, Inc. ("Resolutions") generated 29%, 22%, 32%, and 17% of our net revenue, respectively. During 2005, MVI, TBS, and Resolutions generated 35%, 43%, and 22% of our net revenue, respectively.

As anticipated, the most significant factor in the increase in consolidated revenue during 2006 was the consolidation of the revenue of GSI from the date of acquisition (May 1, 2006).

Revenue increased 9% at TBS due to increases in revenue from printing, maintenance agreements, online services, and software that resulted from pursuing a strategy to expand our sales of printing business into new areas, building upon the property tax form processing which has historically produced the largest share of our overall printing revenue. These increases were partially offset by decreases in hardware sales, installation, and training which resulted in part from our strategy to promote online, usage-based services rather than single unit product sales.

Revenue increased 14% at Resolutions due to increases in sales of our proprietary products and services as offset by decreases in sales of maintenance agreements for certain third party software products that resulted from the expiration of certain of our contracts with third party software companies. In addition, revenue for 2006 increased due to the consolidation of Resolution's results for the full year as compared to nine months in 2005 (from date of acquisition).

Revenue decreased at MVI by 7% due to a slight reduction in revenue from monthly fixed charges and a temporary reduction in sales staff and related expenses. During 2006, sales efforts were directed toward pursuing sales to larger clients. While such sales typically involve longer and more complex sales cycles, we believe they provide a greater protection from pricing erosion due to the additional functionality and integration that are elements more often associated with our larger client relationships.

Gross profit for 2006 increased 37% to $7,804,771 as compared to $5,709,130 in 2005. The increase in 2006 of $2,095,641 resulted from the addition of $2,886,278 from GSI as well as an increase of $75,118 from Resolutions. These increases were offset by decreases of $193,029 and $672,726 from MVI and TBS, respectively. Gross profit margin for 2006 was 60% compared to 65% for 2005

Operating expenses for 2006 increased 54% to $8,600,764 compared to $5,583,944 reported in 2005. The most significant factor in the total increase was the addition of approximately $2.6 million in operating expenses of GSI.

In addition, operating expenses for the holding company increased by 109% as a result of (1) increased compensation, legal, and accounting expenses incurred in connection with our strategy to better prepare our company to manage planned growth, (2) recognizing approximately $560,000 in non-cash compensation expense associated with the vesting of incentive stock options as a result of the adoption of Statement of Financial Accounting Standards No. 123 (revised 2004), "Share-Based Payment," ("SFAS 123(R)") effective January 1, 2006.

Operating expenses were also impacted by significantly higher depreciation and amortization expenses, which increased by approximately $445,000 to $738,504 primarily due to an increase in amortization expense related to approximately $3.1 million in intangible assets acquired in our purchase of GSI.

As a result of the foregoing, the Company reported an operating loss for 2006 of $795,993, compared to an operating income of $125,186 for 2005.

Net loss for 2006 was $882,132, or $0.01 per share, compared to a net loss of $8,144,928, or $0.10 per share, for 2005 on weighted average shares of 131,185,095 and 82,728,108, respectively.

During 2006, our operations provided net cash of $376,624; however, our investing and financing activities used net cash of $29,219 and $540,637, respectively.

We used $546,562 in cash repaying debt to the former TBS owners, the former Resolutions owners, and to dissenting shareholders of GSI whose claims were settled after the acquisition was closed.

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, and our expectations regarding future operating results, including such for 2007, 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, 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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