SOURCE: VillageEDOCS Inc.

August 20, 2007 10:10 ET

VillageEDOCS' Revenues and Gross Profit for Q2 Each Up 26% From Q2 of 2006

SANTA ANA, CA--(Marketwire - August 20, 2007) - VillageEDOCS (OTCBB: VEDO) announced today its financial results for the three and six months ended June 30, 2007.

"We are pleased to report revenue of $3,812,925 for the second quarter of 2007 that resulted in $264,400 in aggregate net income from our revenue-producing business units, excluding the cost of operating the corporate segment. For the first half of 2007, we achieved revenue of $7,633,135 that resulted in $702,911 in aggregate net income from our revenue-producing business units, excluding the cost of operating the corporate segment. Our net loss for the first half of 2007 of $979,837 included non-cash depreciation and amortization charges of $472,605 and non-cash stock option vesting expenses of $454,486. Because of our current size, these charges represent a significant percentage of our total operating expenses, which is why we believe it is useful to point them out to readers of our financial statements," said Mason Conner, Chief Executive Officer of VillageEDOCS.

Key Items for First Half of 2007:

--  Consolidated net revenue for the first half of 2007 increased by 50%
    over the 2006 period to $7,633,135 due to a 24% increase from Tailored
    Business Systems ("TBS"), an 8% increase from Resolutions, a 3% increase
    from MessageVision ("MVI"), and the consolidation of $3,019,136 of net
    revenue of GoSolutions ("GSI") which we acquired on May 1, 2006;
    
--  Although operating expenses increased during the first half of 2007
    compared to the 2006 period, the most significant factor in the overall
    increase was the addition of $1,592,147 in operating expenses of GSI (six
    months in the 2007 period compared to two months in the 2006 period).
    Consolidated operating expenses during the 2007 period were 74% of sales
    compared to 75% of sales in the 2006 period;
    
--  Operating expenses decreased at TBS (-36%) and Resolutions (-29%).
    These decreases were offset by increases at MVI (+31%) and Corporate
    (+70%);
    
--  Net income increased significantly at TBS to $113,587 compared to a
    net loss for the first half of 2006;
    
--  Resolutions reported net income of $186,172 for the first half of 2007
    compared to a net loss for the first half of 2006;
    
--  GSI contributed $169,685 of net income for the first half of 2007.
    
--  Net loss for the six months ended June 30, 2007 of $979,837 included
    depreciation and amortization of $472,605, stock option vesting expense of
    $454,486, net interest expense of $58,107, net other expense of $54,339,
    and tax expense of $26,072.
    

"We continue to strive for growth and profit and we believe we are well on our way to making 2007 the strongest year in our history," added Mr. Conner.

Net revenue from external customers for the three months ended June 30, 2007 was $3,812,925, a 26% increase over net revenue for the prior year quarter of $3,034,092.

For the three months ended June 30, 2007, TBS generated 25% of our net revenue, MVI generated 20% of our net revenue, GSI generated 42% of our net revenue, and Resolutions generated 13% of our net revenue. During the three months ended June 30, 2006, TBS generated 25% of our net revenue, MVI generated 25% of our net revenue, GSI generated 33% of our net revenue, and Resolutions generated 17% of our net revenue.

The increase of $778,833 in the 2007 quarter resulted from a 61% increase in revenue from GSI, a 29% increase from TBS, and an 8% decrease from Resolutions.

As anticipated, the most significant factor in the increase in consolidated revenue during the second quarter of 2007 was the consolidation of a full three months of revenue of GSI compared to two months during 2006 (acquired May 1, 2006).

Revenue increased 29% at TBS, decreased 8% at Resolutions, and increased nominally at MVI as compared to the prior year quarter.

Gross profit for the three months ended June 30, 2007 increased 26% to $2,430,276 as compared to $1,921,301 for the 2006 quarter.

Operating expenses for the three months ended June 30, 2007 increased by 25% to $2,793,861 from the $2,227,078 reported in the 2006 quarter. Of the total increase of $566,783, $179,960, $548,276 and $139,617 are attributable to increases in operating expenses of Corporate, GSI and MVI, respectively, as offset by decreases of $186,616 and $114,454 from TBS and Resolutions, respectively. The increase at GSI resulted from additional non-recurring compensation expense as well as the impact of comparing three full months in the 2007 quarter to two months in the 2006 quarter (we acquired GSI effective May 1, 2006).

As a result of the foregoing, the Company reported an operating loss for the three months ended June 30, 2007 of $363,585, compared to an operating loss of $305,777 for the three months ended June 30, 2006.

TBS, Resolutions, and GSI each reported significant improvements in operating income (loss). However, these improvements were offset by reduced operating income at MVI and increased operating loss of the Corporate segment resulting from increased amortization expense and stock option vesting expense as compared to the 2006 quarter.

Net loss for the three months ended June 30, 2007 was $477,075, or $0.00 per share, compared to a net loss of $356,693, or $0.00 per share, for the three months ended June 30, 2006 on weighted average shares of 149,309,799 and 146,535,158, respectively.

Net loss for the three months ended June 30, 2007 included depreciation and amortization of $236,114, stock option vesting expense of $227,911, net interest expense of $29,768, net other expense of $61,760, and tax expense of $21,962.

About VillageEDOCS

VillageEDOCS, through its MessageVision subsidiary, is a leading provider of comprehensive 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 the remainder of 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, 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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