SOURCE: VillageEDOCS, Inc.

August 15, 2008 09:30 ET

VillageEDOCS Reports Second Quarter and Six Months Financial Results; Continued Cost Controls Result in 67% Decrease in Q2 Net Loss

SANTA ANA, CA--(Marketwire - August 15, 2008) - VillageEDOCS, Inc. (OTCBB: VEDO), a Solution as a Service (SaaS) company, which is the largest segment of the Software as a Service (SaaS) market, today announced financial results for the second quarter and six months ended June 30, 2008.

2008 Second Quarter/ Six Months Highlights:

--  Consolidated net revenue of $3,414,808 for Q2-08, up 2% from
    $3,335,435 in Q2-07;
--  Total operating expenses decreased 14% over prior year first half,
    with operating expenses at Corporate level decreasing  21%;
--  Net income increased significantly at GSI Unit to $473,980 versus
    $169,685 for the first half of 2007;
--  Consolidated net loss for Q2-08 decreased $320,410 or 67% to $156,665
    versus $477,075 in the year ago period;
--  Net borrowings on lines of credit during the six months ended June 30,
    2008 were approximately $95,000 compared to approximately $347,000 during
    the first half of 2007.
    

"We are pleased with our performance in the second quarter of 2008, and we are particularly gratified with the significant reductions in operating expenses at each of our business units, as well as at the corporate level, resulting in a 67% reduction in net loss in the quarter. We continue to see the positive effects of our emphasis on cost controls while at the same time focusing on sales of higher margin products and services. We are especially satisfied with the significant revenue increase in the quarter at our TBS business unit, which showed a 23% sales increase over the prior year period," said Mason Conner, President and Chief Executive Officer of VillageEDOCS, Inc.

"Our recent acquisition of Questys Solutions is in keeping with our strategy of continuing to acquire intellectual and technology assets that will enhance, broaden and improve our product offerings. This strategic acquisition, which increases our client roster to more than 1,400, provides a critical document management component and cohesiveness to our suite of outsourced business solutions, which will accelerate our growth and enable us to significantly expand sales opportunities within each of our operating business units, as well as attract new business," Mr. Conner added.

For the second quarter ended June 30, 2008, VillageEDOCS had consolidated net revenue of $3,414,808 a 2% increase over net revenue for the prior year quarter of $3,335,435. Net loss for the three months ended June 30, 2008, decreased 67% to $156,665, or $0.00 per share, compared with a net loss of $477,075, or $0.00 per share, for the three months ended June 30, 2007, on weighted average shares of 152,770,913 and 149,309,709, respectively. Consolidated operating expenses during the 2008 period were 62% of sales compared to 76% of sales in the 2007 period.

Included in the second quarter 2008 net loss of $156,665 was $237,034 of loss from non-cash depreciation and amortization charges and non-cash stock option vesting charges (2007: $464,025). Adjusted Earnings (as defined below) of $191,533 for the three months ended June 30, 2008, compares with Adjusted Earnings of $18,012 in the same period a year ago (see reconciliation that follows).

During the second quarter of 2008, total operating expenses were $2,111,186, a decrease of $431,977, or 17%, from the prior year quarter. The overall decrease resulted from decreases at each of the Company's operating units plus a 17% reduction in operating expenses of the holding company. Consolidated operating expenses during the second quarter of 2008 were 62% of sales compared to 76% of sales in the 2007 quarter. Gross profit margin in the second quarter of 2008 was 59% compared with 63% in the year ago period.

For the six months ended June 30, 2008, consolidated net revenue was $6,692,793 compared with consolidated net revenue of $6,593,984 for the prior year period. Net loss for the six months ended June 30, 2008, decreased 34% to $651,500, or $0.00 per share, compared with a net loss of $979,837, or $0.01 per share, for the six months ended June 30, 2007, on weighted average shares of 152,770,913 and 148,444,518, respectively. Consolidated operating expenses during the 2008 six month period were $4,468,838, or 67% of sales, compared with $5,183,242, or 79% of sales, in the corresponding 2007 six month period. Gross profit margin in the first six months of 2008 was 58% compared with 63% in the first half of 2007.

Declines in gross margin during the three and six months ended June 30, 2008 are primarily the result of lower sales at our electronic document delivery service segment resulting from exposure to the financial services market as well as increases in sales of lower margin, third party products in the government accounting solutions segment. To address this change, management has directed additional resources to promote increased sales of our proprietary service offerings, which traditionally have been more profitable for us.

About VillageEDOCS, Inc.

VillageEDOCS, Inc., through its MessageVision subsidiary, is a leading provider of comprehensive business-to-business information delivery and document management 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 GoSolutions subsidiary, VillageEDOCS provides enhanced voice and data delivery services. Through its Questys Solutions subsidiary, VillageEDOCS provides advanced electronic document/content management and automated data capture solutions to a variety of markets in the U.S. and abroad. For further information, visit our website at www.villageedocs.com.

Non-GAAP Financial Measure: Adjusted Earnings

We believe "Adjusted Earnings," which is a non-GAAP financial measure, provides useful information to investors and management by excluding certain income, expenses, and gains and losses that may not be indicative of our core operating and financial results. We believe that "Adjusted Earnings" is a useful performance measure because certain items included in the calculation of net income (loss) may either mask or exaggerate trends in our ongoing operating performance. We expect to use "Adjusted Earnings" on an ongoing basis to track and assess our financial performance. You, however, should not consider "Adjusted Earnings" in isolation or as a substitute for net income (loss) or any other measure for determining our operating performance that is calculated in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP," "GAAP"). "Adjusted Earnings" is not necessarily comparable to similarly titled measures employed by other companies. We expect future Adjusted Earnings to vary significantly from anticipated future net income (loss) because depreciation, amortization, interest, tax, equity compensation, and stock option vesting expenses during 2008 and 2009 are expected to be at least as material as they were during 2007.

                    VillageEDOCS, Inc. and Subsidiaries
RECONCILIATION OF GAAP NET INCOME TO NON-GAAP ADJUSTED EARNINGS (unaudited)

                                 Three Months Ended     Six Months Ended
                                      June 30,              June 30,
                                  2008       2007       2008       2007
                               =========  =========  =========  =========
 GAAP Net Loss                 $(156,665) $(477,075) $(651,500) $(979,837)
(a) Depreciation and
 amortization, including
 amortization of intangible
 assets                          184,130    236,114    365,775    472,766
(b) Non-cash stock option
 vesting expense pursuant to
 SFAS 123(R)                      52,904    227,911    122,412    454,486
(c) Interest expense, net of
 interest income                  46,575     29,434    112,823     57,269
(d) Other (income) expense,
 net                              (1,811)    61,760    (53,403)    54,339
(e) (Benefit) provision for
 income taxes                      5,621     21,962     32,998     26,072
(f) (Income) from discontinued
 operations                            -    (89,474)         -   (186,172)
(g) Non recurring termination
 charges in workforce
 restructuring                         -          -    146,087          -
(h) Amortization of non-cash
 portion of debt issuance cost
 and debt discount                35,778      3,669     89,444      7,338
(i) Estimated fair value of
 common stock and warrants
 issued for services              25,001      3,711     50,485     46,211
                               ---------  ---------  ---------  ---------
 Adjusted Earnings             $ 191,533  $  18,012  $ 215,121  $ (47,689)
                               =========  =========  =========  =========

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 new management personnel or consultants, and our expectations regarding future operating results, including such for the remainder of 2008, 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 complete a transaction or 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.

VillageEDOCS, Inc. and subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)


                           Three Months Ended         Six Months Ended
                                June 30,                  June 30,
                            2008         2007         2008         2007
                        ===========  ===========  ===========  ===========
Net sales               $ 3,414,808  $ 3,335,435  $ 6,692,793  $ 6,593,984
Cost of sales             1,409,902    1,245,665    2,783,037    2,439,071
                        -----------  -----------  -----------  -----------
   Gross profit           2,004,906    2,089,770    3,909,756    4,154,913
                        -----------  -----------  -----------  -----------
Operating expenses:
  Product and
   technology
   Development              365,450      442,571      771,383      919,370
  Sales and marketing       496,757      572,994      941,705    1,071,393
  General and
   administrative         1,064,849    1,325,403    2,389,975    2,787,713
  Depreciation and
   amortization             184,130      202,195      365,775      404,766
                        -----------  -----------  -----------  -----------
   Total operating
    expenses              2,111,186    2,543,163    4,468,838    5,183,242
                        -----------  -----------  -----------  -----------
   Loss from operations    (106,280)    (453,393)    (559,082)  (1,028,329)

Interest expense, net
 of interest income         (46,575)     (29,434)    (112,823)     (57,269)
Other income (expense),
 net                          1,811      (61,760)      53,403      (54,339)
                        -----------  -----------  -----------  -----------
   Loss before
    provision for
    income taxes           (151,044)    (544,587)    (618,502)  (1,139,937)

Provision for income
 taxes                       (5,621)     (21,962)     (32,998)     (26,072)
                        -----------  -----------  -----------  -----------
   Loss from continuing
    operations             (156,665)    (566,549)    (651,500)  (1,166,009)

Income from
 discontinued
 operations                       -       89,474            -      186,172
                        -----------  -----------  -----------  -----------
   Net loss             $  (156,665) $  (477,075) $  (651,500) $  (979,837)
                        ===========  ===========  ===========  ===========

Basic and diluted loss
 available to
 common stockholders
 per common share
   Loss from continuing
    operations          $         -  $         -  $         -  $     (0.01)
   Income from
    discontinued
    operations          $         -  $         -  $         -  $         -
                        -----------  -----------  -----------  -----------
   Loss per share       $         -  $         -  $         -  $     (0.01)
                        ===========  ===========  ===========  ===========

Weighted average shares
 outstanding -
 basic and diluted      152,770,913  149,309,709  152,770,913  148,444,518
                        ===========  ===========  ===========  ===========



See accompanying notes to unaudited condensed consolidated financial
statements.

Contact Information

  • Contact:
    Mason Conner
    Chief Executive Officer
    VillageEDOCS
    714-368-8711
    -or-
    Ron Stabiner
    Vice President
    The Wall Street Group, Inc.
    212-888-4848