VillageEDOCS' Q2 Revenues Up 71 Percent from 2004

Gross Profit Up 66 Percent Operating Income


TUSTIN, Calif., Aug. 17, 2005 (PRIMEZONE) -- VillageEDOCS (OTCBB:VEDO) announced today its financial results for the quarter ended June 30, 2005.

"We are excited to report revenue of $2,275,518 and income from operations of $228,505 for the second quarter of 2005," said Mason Conner, President and CEO of VillageEDOCS.

Mr. Conner continued, "While our operating companies continue to achieve growth, we are pleased to report the holders of almost $1.5 million in notes payable and accrued interest agreed to convert to common stock during the quarter, bringing the total conversion of debt to stock for the first six months of 2005 to $5.2 million, which represents the retirement of 94% of our convertible notes payable and accrued interest, excluding the promissory note to Barron Partners LP which is convertible to preferred stock."

While the $1.5 million conversion resulted in a substantial reduction of debt, and will help our operating results going forward, it did result in a non-cash interest charge of $314,000 during the second quarter. We are making progress toward the conversion to common stock during the third quarter of the remaining $375,000 of convertible notes payable and accrued interest held by Al and Joan Williams.

During the second quarter, we received $800,000 from Barron Partners LP and secured a relationship that includes funding of our ongoing acquisition plans through future warrant exercises. Although this financing resulted in increased cash, it also generated substantial non-cash interest charges of $301,804 during the second quarter.

We purchased Resolutions effective April 1, 2005, adding e-forms and imaging and archiving capabilities to our suite of solutions.

During the second quarter, Ricardo Salas, CEO of iLIANT, and Jerry Kendall, CEO of Technology Research Corporation, joined the Company's board of directors, increasing the board to five members. "The participation of Messrs. Kendall and Salas speaks to the power of the vision, market opportunity, and our improved financial strength," said Mr. Conner.

MessageVision ("MVI") contributed $809,494 in revenue and $231,824 in operating income for the quarter. The electronic document delivery service operated by MVI has achieved an operating income for six consecutive quarters.

At Tailored Business Systems ("TBS"), for the second quarter of 2005, TBS contributed $734,695 in revenue and reported an operating income of $43,260 for the quarter. 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 first quarter as a VillageEDOCS subsidiary, Resolutions contributed $731,329 in revenue and reported an operating income of $193,280.

Net sales for the three months ended June 30, 2005 were $2,275,518, a 71% increase over net sales for the prior year quarter of $1,330,346. The increase of $945,172 in the 2005 quarter resulted from an increase of $131,280 (19%) in revenue from MVI as well as an increase of $82,563 (13%) in revenue of TBS and the addition of $731,329 in sales from Resolutions.

Gross profit for the three months ended June 30, 2005 increased 66% to $1,508,112 as compared to $910,327 for the prior year quarter. The increase in the 2005 quarter of $597,785 resulted from an increase of $113,044 from MVI, a decrease of $81,551 from TBS, and the addition of $566,292 from Resolutions. Gross profit margin for the 2005 quarter was 66% as compared to 68% for the 2004 quarter.

Operating expenses for the three months ended June 30, 2005 increased by 58% to $1,279,607 from the $811,392 reported in the three months ended June 30, 2004. Of the total increase of $468,215, $162,746 is attributable to increases in operating expenses of corporate, offset by decreases of $55,635 and $11,908 attributable to MVI and TBS, respectively, in addition to $373,012 of operating expenses of Resolutions.

During the three months ended June 30, 2005, corporate incurred $239,859 in operating expenses, an increase of $162,746 from the $77,113 reported in the 2004 quarter as a result of increased compensation costs and legal and accounting expenses.

During the three months ended June 30, 2005, MVI incurred $311,943 in operating expenses, a decrease of 15% from the $367,578 reported in the 2004 quarter. Product and technology development increased $7,428 to $91,204 from the $83,776 reported in the prior year quarter as a result of compensation expenses. Sales and marketing increased by $17,345 to $168,512 from the $151,167 reported in the prior year quarter as a result of staff increases. General and administrative decreased by $39,142 to $62,005 from the $101,147 reported in the prior year quarter as a result of reduced consulting, legal, and compensation expenses. Depreciation and amortization expense decreased $41,266 as a result of an increase in fully depreciated computer equipment.

During the three months ended June 30, 2005, TBS incurred $354,793 in operating expenses, a decrease of 3% as compared to the $366,701 reported in the 2004 quarter. Product and technology development increased $44,658 to $71,693 as compared to $27,035 reported in the 2004 quarter due to compensation expenses. Sales and marketing increased $5,082 to $93,660 from the $88,578 reported in the 2004 quarter. General and administrative decreased $91,682 to $137,253 from the $228,935 reported in the 2004 quarter as a result of a departmental staff restructuring. Depreciation and amortization expenses increased to $52,187 from the $22,153 reported in the 2004 quarter due to amortization of intangible assets identified during the first quarter of 2005.

During the three months ended June 30, 2004, Resolutions incurred $373,012 in operating expenses. Sales and marketing, general and administrative, and depreciation and amortization expenses were $18,225, $282,867, and $71,920, respectively.

As a result of the foregoing, the Company reported an operating income for the three months ended June 30, 2005 of $228,505, compared to an operating income of $98,935 for the three months ended June 30, 2004. The overall operating income in the 2005 quarter was comprised of an operating loss of $239,859 from corporate, offset by operating incomes from MVI, TBS, and Resolutions of $231,824, $43,260, and $193,280 respectively. The overall operating income in the 2004 quarter was comprised of operating income of $63,055 and $112,993 from MVI and TBS, respectively, offset by an operating loss from corporate of $77,113.

Interest expense for the quarter ended June 30, 2005 increased by 555% to $1,110,475 from the $169,551 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 of notes payable to equity of approximately $4.46 million in debt, these decreases were offset by $727,123 in charges related to the beneficial conversion feature associated with borrowings from current and prior years and the conversion to equity thereof.

Net loss for the three months ended June 30, 2005 was $881,970, or $0.01 per share, compared to a net loss of $62,569, or $0.00 per share for the three months ended June 30, 2004 on weighted average shares of 77,934,956 and 35,911,544, respectively. The overall net loss in the 2005 quarter was comprised of net income of $239,022, $43,260 and $193,280 from MVI, TBS, and Resolutions, respectively, as offset by a net loss from corporate of $1,357,532. The overall net loss in the 2004 quarter was comprised of net losses of $127,114 and $53,543 from corporate and MVI, respectively, offset by net income from TBS of $118,088.

Net sales for the six months ended June 30, 2005 were $3,687,500, a 64% increase over net sales for the prior year period of $2,245,791. The increase of $1,441,709 in the 2005 quarter resulted from an increase of $302,731 in revenue from MVI as well as an increase of $407,649 in revenue of TBS. In addition, the Company reported $731,329 in revenue from Resolutions.

Gross profit for the six months ended June 30, 2005 increased 60% to $2,368,608 as compared to $1,481,479 for the prior year period. The increase in the 2005 period of $887,129 resulted from increases of $297,845 and $22,992 from MVI and TBS, respectively, and the addition of $566,292 from Resolutions. Gross profit margin for the 2005 period was 64% as compared to 66% for the 2004 period.

Operating expenses for the six months ended June 30, 2005 increased by 59% to $2,436,000 from the $1,530,027 reported in the six months ended June 30, 2004. Of the total increase of $905,973, $128,953, $60,035, and $343,973 are attributable to increases in operating expenses of corporate, MVI and TBS, respectively, and $373,012 in operating expenses of Resolutions.

During the six months ended June 30, 2005, corporate incurred $418,902 in operating expenses, an increase of $128,953 from the $289,949 reported in the 2004 period as a result of increased staff, legal, and accounting expenses.

During the six months ended June 30, 2005, MVI incurred $739,521 in operating expenses, an increase of 9% over the $679,486 reported in the 2004 period. Product and technology development increased $10,611 to $185,460 from the $174,849 reported in the prior year period as a result of compensation costs. Sales and marketing increased by $38,962 to $356,118 from the $317,156 reported in the prior year period as a result of staff increases. General and administrative increased by $52,262 to $178,347 from the $126,085 reported in the prior year period as a result of staff increases. Depreciation and amortization expense decreased $41,800 as a result of an increase in fully depreciated computer equipment.

During the six months ended June 30, 2005, TBS incurred $904,565 in operating expenses, an increase of 61% over the $560,592 reported in the 2004 period. The increases in product and technology development, sales and marketing, general and administrative, and in depreciation and amortization expenses to $167,395, $204,768, 458,029, and $74,373, respectively, are attributable to comparing six full months in the 2005 period to four and one-half months in the 2004 period.

As a result of the foregoing, the Company reported an operating loss for the six months ended June 30, 2005 of $67,392, compared to an operating loss of $48,548 for the six months ended June 30, 2004. The overall operating loss in the 2005 period was comprised of operating losses of $418,902 and $164,285 from corporate and TBS, respectively, offset by operating income from MVI and Resolutions of $322,515 and $193,280, respectively. The overall operating loss in the 2004 period was comprised of operating income of $84,705 and $156,696 from MVI and TBS, respectively, offset by an operating loss from corporate of $289,949.

Interest expense for the period ended June 30, 2005 increased by 413% to $1,410,515 from the $274,827 reported in the prior year period. Although interest charges incurred pursuant to the terms of convertible promissory notes decreased significantly as a result of the conversions to equity of convertible notes payable during the 2005 period, these decreases were offset by $942,608 in charges related to the beneficial conversion feature associated with borrowings from current and prior years and the conversion to equity thereof.

Net loss for the six months ended June 30, 2005 was $1,482,107, or $0.02 per share, compared to a net loss of $324,486, or $0.01 per share, for the six months ended June 30, 2004 on weighted average shares of 69,194,342 and 34,727,364, respectively. The overall net loss in the 2005 period was comprised of net losses of $1,832,190 and $165,218 from corporate and TBS, respectively, offset by net income from MVI and Resolutions of $322,021 and $193,280, respectively. The overall net loss of $324,486 in the 2004 period was comprised of net losses of $368,042 and 108,596 from corporate and MVI, respectively, offset by net income of $152,152 from TBS.

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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