SOURCE: VillageEDOCS

November 16, 2005 06:30 ET

VillageEDOCS' Q3 Revenues Up 56% From 2004 and Gross Profit Up 69%

TUSTIN, CA -- (MARKET WIRE) -- November 16, 2005 --VillageEDOCS (OTC BB: VEDO) announced today its financial results for the quarter ended September 30, 2005.

"We are excited to report revenue of $2,620,854 and income from operations of $183,242 for the third quarter of 2005," said Mason Conner, President and CEO of VillageEDOCS.

Mr. Conner continued, "While we are pleased that our operating companies have reported net sales of $6,308,354 for the first nine months of the year and continue to achieve growth, we are also very happy to report that the holders of almost $1.02 million in notes payable exercised their right to convert their debt to common and preferred stock during the quarter, bringing the total conversion of debt to stock for the first nine months of 2005 to approximately $6 million. This represents the conversion of almost 100% of the promissory notes outstanding as of the beginning of the year, and 100% of the promissory notes issued during the year, excluding promissory notes related to acquisition agreements."

Our remaining promissory note debt consists of $580,000 in acquisition-related notes with either multi-year or performance-based contractual repayment schedules, as well as approximately $157,000 in convertible notes and accrued interest held by Alan and Joan Williams. We are working toward the conversion of the remaining Williams debt before year-end.

While the $1.02 million in conversions during the third resulted in a substantial reduction of debt, and will help our operating results going forward, they did contribute to the non-cash interest charges of $811,679 during the third quarter.

During the third quarter, Barron Partners LP converted their $800,000 promissory note into 16,000,000 shares of preferred stock. Subsequently, they converted 2,500,000 shares of preferred stock into an equal number of shares of common stock. In addition, Barron holds warrants that, if exercised, could potentially fund future acquisitions.

We are continuing to successfully execute our acquisition strategy. The Company currently has taken the position of disclosing acquisition-related activities only as dictated by regulatory requirements.

We are actively involved in reaping the benefits of scale that our past acquisitions have created, sharing disciplines and skill sets of key employees across multiple business units. We have achieved early successes in cross-selling solutions offered by MessageVision ("MVI"), Tailored Business Systems ("TBS"), and Resolutions to provide clients at each business unit with a broader spectrum of more powerful integrated solutions.

MVI contributed $777,684 in revenue and $252,871 in operating income for the quarter. The electronic document delivery service operated by MVI has achieved an operating income for seven consecutive quarters.

For the third quarter of 2005, TBS contributed $1,220,271 in revenue and reported an operating income of $116,428. Historically, TBS reports the strongest revenues during the third and fourth quarters due to seasonal property tax bill printing services. In 2004, TBS printed over 2 million bills that represented over $2 billion in revenue to its governmental entity clients.

In its second quarter as a subsidiary of VillageEDOCS, e-forms and imaging and archiving provider Resolutions contributed $622,899 in revenue and reported an operating income of $49,330.

Net sales for the three months ended September 30, 2005 were $2,620,854, a 56% increase over net sales for the prior year quarter of $1,682,917. The increase of $937,937 in the 2005 quarter resulted from an increase of $69,657 (10%) in revenue from MVI as well as an increase of $245,381 (25%) in revenue of TBS and the addition of $622,899 in sales from Resolutions.

Gross profit for the three months ended September 30, 2005 increased 69% to $1,496,604 as compared to $883,180 for the prior year quarter. The increase in the 2005 quarter of $613,424 resulted from an increase of $100,841 from MVI, an increase of $173,859 from TBS, and the addition of $338,742 from Resolutions. Gross profit margin for the 2005 quarter was 57% as compared to 52% for the 2004 quarter.

Operating expenses for the three months ended September 30, 2005 increased by 78% to $1,313,362 from the $737,127 reported in the three months ended September 30, 2004. Of the total increase of $576,235, $105,548 and $216,261 are attributable to increases in operating expenses of corporate and TBS, respectively. These increases were offset by a decrease of $34,968 from MVI. In addition, Resolutions incurred $289,394 of operating expenses during the quarter.

During the three months ended September 30, 2005, corporate, MVI, TBS, and Resolutions incurred respective operating expenses of $235,387, $326,576, $462,005, and $289,394. During the three months ended September 30, 2004, corporate, MVI and TBS incurred respective operating expenses of $129,839, $361,544, and $245,744.

As a result of the foregoing, the Company reported an operating income for the three months ended September 30, 2005 of $183,242, compared to an operating income of $146,053 for the three months ended September 30, 2004. The overall operating income in the 2005 quarter was comprised of an operating loss of $235,387 from corporate, offset by operating incomes from MVI, TBS, and Resolutions of $252,871, $116,428, and $49,330 respectively. The overall operating income in the 2004 quarter was comprised of operating income of $117,062 and $158,830 from MVI and TBS, respectively, offset by an operating loss from corporate of $129,839.

Interest expense for the quarter ended September 30, 2005 increased by 373% to $822,980 from the $173,790 reported in the prior year quarter. Although interest charges incurred pursuant to the terms of convertible promissory notes decreased significantly as a result of the conversion to equity of approximately $6 million in debt and accrued interest during 2005, these decreases were offset by $683,626 in charges related to the beneficial conversion feature and the relative fair value of warrants associated with borrowings from current and prior years and the conversion to equity thereof.

Net loss for the three months ended September 30, 2005 was $684,592, or $0.01 per share, compared to a net loss of $27,737, or $0.00 per share for the three months ended September 30, 2004 on weighted average shares of 94,345,283 and 35,911,544, respectively. The overall net loss in the 2005 quarter was comprised of net income of $252,160, $76,574 and $44,197 from MVI, TBS, and Resolutions, respectively, as offset by a net loss from corporate of $1,057,523. The overall net loss in the 2004 quarter was comprised of a net loss of $233,762 from corporate, offset by net income from TBS and MVI of $156,350 and $49,675, respectively.

About VillageEDOCS

VillageEDOCS, through our 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 our Tailored Business Systems subsidiary, we provide accounting and billing solutions for county and local governments. Through our Resolutions subsidiary, we provide products for document management, archiving, document imaging, imaging software, document scanning, e-mail archiving, document imaging software, electronic forms, and document archiving. 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. These statements 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 uncertainties in the market, competition, legal, regulatory initiatives, success of marketing efforts, availability, terms and deployment of capital, and other risks detailed in the Company's SEC reports, of which many are beyond the control of the Company. The Company assumes no obligation to update or alter the information in this news 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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