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First Quarter 2009 Highlights
-- Revenue increased 18% year-over-year to $3.8 million
-- Gross margin improved to 60% compared to 58% in the first quarter of
2008
-- Gross profit increased 22% year-over-year to $2.3 million
-- Operating expenses as a percentage of revenue decreased to 70% from
72% a year ago
-- Net loss improved 15% to $420,743 from $494,835 a year ago
-- Received a major order from Florida Medical Record Services using our
combined document delivery and content management services
-- Retired $261,000 in accrued expenses and notes payable debt
"We are pleased to report our results for the first quarter of 2009. We achieved revenue growth in the first quarter over last year, reduced our expenses as a percentage of revenue and continued to maintain high gross margins in light of a challenging economic environment," said Mr. Mason Conner, CEO of VillageEDOCS, Inc. "We continue to focus on sales from higher margin products and controlling expenses."
First Quarter 2009 Results
Net revenue increased 18% year-over-year to $3.8 million for the three months ended March 31, 2009. The increase was primarily attributable to the addition of QSI, which was acquired in 2008, as well as increased sales from GSI which increased 12% over the first quarter of 2008. The expansion in sales at GSI was due to increases in user subscription fees, which were partially offset by decreases in revenue from corporate clients. Revenue decreased 9% at TBS due to decreases in revenue from printing, software and hardware sales. In keeping with its strategic goals, the Company focused on higher margin products by promoting online, usage-based services thereby increasing revenue from online and support services for TBS. Revenue decreased 3% at MVI due to a decrease in inbound revenue as a result of customer attrition.
Gross profit in the first quarter of 2009 was $2.3 million, an increase of 22% over the same period a year ago. Gross margin was 60%, an increase compared to gross margin of 58% for the first quarter of 2008. The increase was attributable to a reduction in cost of sales as a percentage of revenue and the addition of QSI. Although cost of sales increased to $1.5 million from $1.4 million in the first quarter of 2008, as a percentage of sales, cost of sales decreased to 40% from 42% in the same period a year ago.
Operating expenses in the first quarter of 2009 were $2.7 million, up 15% from $2.4 million in the first quarter of 2008. The increase was mainly the result of higher selling, general and administrative expenses, which were primarily attributable to the addition of QSI. As a percentage of revenue, operating expenses were down 2% from the same period last year. This was principally attributed to decreased expenses by Corporate, TBS & MVI.
Net loss for the first quarter of 2009 was $0.4 million, or $0.00 per diluted share, compared to net loss of $0.5 million, or $0.00 per diluted share, in the first quarter of 2008. Diluted earnings per share was calculated using a weighted average share count of 180.3 million in the first quarter of 2009, compared to 150.2 million a year ago.
Adjusted earnings for the first quarter of 2009 increased to $13,883 from a loss of $30,078 for the same period in 2008.
Financial Condition
As of March 31, 2009, VillageEDOCS had $0.4 million in cash and cash equivalents and $1.9 million in debt. Stockholders' equity at March 31, 2009 was $7.7 million.
Recent Events
On May 11, 2009, the Company announced that it secured additional financing from a large shareholder in the amount of $430,000. The financing was in the form of an unsecured note and has a term of thirty-six (36) months. The proceeds from the financing were used to retire an existing credit line with a financial institution.
Business Outlook
"We are confident about the prospects for our business in 2009 and will continue to focus on growing our customer base and cross-selling our product suite to our existing customers. We will continue to increase our market share through new product development and continued integration of our product lines for our MessageVision Platform as well as making strategic acquisitions that continue to support our growth," said Mr. Mason Conner, CEO of VillageEDOCS, Inc.
About VillageEDOCS, Inc.
VillageEDOCS (VEDO) provides the MessageVision Platform (MVP). The MessageVision Platform is a SaaS offering that ships business information electronically and manages it by capturing, forming and delivering information using business process management and communication. MVP is a combination of unified communications and business process management solutions blended into a single, scalable platform; eliminating the need for capital expenditures, operational costs and broad technology risks. MVP provides a single source for a wide range of business information management and communication applications on a pay-as-you-go financial model. For further information on VillageEDOCS, visit our website at www.villageedocs.com.
Forward-Looking Statements
This press release, together with other statements and information publicly disseminated by the Company, contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Forward-looking statements, which are based on certain assumptions and describe the Company's future plans, strategies and expectations, are generally identifiable by use of the words "believe," "expect," "intend," "anticipate," "estimate," "project" or similar expressions. You should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond the Company's control and which could materially affect actual results, performances or achievements. Factors that may cause actual results to differ materially from current expectations include the risk factors discussed in the Company's filings with the Securities and Exchange Commission. Except as otherwise required by the federal securities laws, the Company disclaims any obligation or undertaking to publicly release any updates or revisions to any forward-looking statement contained herein (or elsewhere) to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. Trading in the Company's common stock is limited, and marketability of the stock is restricted by penny stock regulations and the fact that the 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.
VillageEDOCS, Inc. and subsidiaries
Reconciliation of GAAP Net Income to Non-GAAP Adjusted Earnings
(unaudited)
Three Months Ended
March 31,
2009 2008
---------- ----------
GAAP Net Loss $ (420,743) $ (494,835)
Depreciation and amortization, including
amortization of intangible assets 242,999 181,645
Non-cash stock option vesting expense pursuant to
SFAS 123(R) 82,413 69,508
Interest expense, net of interest income 45,795 66,248
Other (income), net (17,930) (51,592)
Provision for income taxes 4,000 27,377
Change in fair value of derivative liability (3,100) -
Non recurring termination charges in workforce
restructuring 57,255 146,087
Estimated fair value of common stock and warrants
issued for services 23,194 25,484
---------- ----------
Adjusted Earnings $ 13,883 $ (30,078)
========== ==========
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) due to depreciation, amortization, interest, tax, equity compensation, and stock option vesting expenses during 2009 and 2010.
VillageEDOCS, Inc. and subsidiaries
Condensed Consolidated Statements of Operations
(unaudited)
Three Months Ended March 31,
2009 2008
------------- -------------
Net sales $ 3,857,949 $ 3,277,985
Cost of sales 1,536,553 1,373,135
------------- -------------
Gross profit 2,321,396 1,904,850
------------- -------------
Operating expenses:
Product and technology
development 506,992 405,933
Sales and marketing 618,890 444,948
General and administrative 1,344,493 1,325,126
Depreciation and amortization 242,999 181,645
------------- -------------
Total operating expenses 2,713,374 2,357,652
------------- -------------
Loss from operations (391,978) (452,802)
Change in fair value of derivative liability 3,100 -
Interest expense, net of interest income (45,795) (66,248)
Other income, net 17,930 51,592
------------- -------------
Loss before provision for
income taxes (416,743) (467,458)
Provision for income taxes 4,000 27,377
------------- -------------
Net loss $ (420,743) $ (494,835)
------------- -------------
Basic and diluted loss available ------------- -------------
to common stockholders per common share: $ - $ -
------------- -------------
Weighted average shares outstanding -
basic and diluted 180,270,913 150,218,437
------------- -------------
VillageEDOCS, Inc. and subsidiaries
Condensed Consolidated Balance Sheets
March 31, December 31,
2009 2008
(unaudited) (audited)
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 385,322 $ 567,447
Accounts receivable, net of allowance for
doubtful accounts of approximately $26,000
and $47,000, respectively 807,699 1,093,606
Inventories 34,041 41,031
Prepaid expenses and other current assets 181,495 282,397
Debt issuance costs, net - 17,883
------------ ------------
Total current assets 1,408,557 2,002,364
Property and equipment, net 364,337 388,788
Other assets 26,164 28,811
Goodwill 7,244,732 7,244,732
Other intangibles, net 3,653,046 3,826,728
------------ ------------
$ 12,696,836 $ 13,491,423
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 579,367 $ 514,086
Current portion of accrued expenses and
other liabilities 1,697,075 1,736,419
Deferred revenue 825,461 1,026,184
Current portion of capital lease obligation 16,985 20,180
Lines of credit 400,496 890,563
Current portion of notes payable to related
parties, net of unamortized debt discount
of $47,808 and $47,808, respectively 382,748 438,682
Convertible note and accrued interest payable
to related party 179,995 178,370
------------ ------------
Total current liabilities 4,082,127 4,804,484
Accrued expenses and other liabilities, net of
current portion - 81,318
Capital lease obligation, net of current
portion - 1,737
Notes payable to related parties, net of
current portion and unamortized debt discount
of $63,739 and $75,690, respectively 950,705 604,310
Derivative liability 4,650 -
------------ ------------
Total liabilities 5,037,482 5,491,849
------------ ------------
Commitments and contingencies
Stockholders' equity:
Series A Preferred stock, par value $0.001 per
share:
Authorized -- 48,000,000 shares
Issued and outstanding -- 33,500,000 shares 33,500 33,500
(liquidation preference of $1,675,000)
Common stock, par value $0.0001 per share:
Authorized -- 500,000,000 shares
Issued and outstanding -- 180,270,913
shares 18,027 18,027
Additional paid-in capital 33,696,655 33,618,742
Accumulated deficit (26,088,828) (25,670,695)
------------ ------------
Total stockholders' equity 7,659,354 7,999,574
------------ ------------
$ 12,696,836 $ 13,491,423
------------ ------------
VillageEDOCS, Inc. and subsidiaries
Condensed Consolidated Statements of Cash Flows
(unaudited)
Three Months Ended
March 31,
2009 2008
---------- ----------
Cash Flows from Operating Activities:
Net loss $ (420,743) $ (494,835)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 242,999 181,645
Recovery of doubtful accounts receivable (22,401) (8,923)
Estimated fair value of stock options issued to
employees for services rendered 82,413 69,508
Estimated fair value of warrants issued to
consultants 23,194 25,484
Change in fair value of derivative liability (3,100) -
Amortization of debt discount and debt issuance
costs 29,834 53,666
Changes in operating assets and liabilities,
net of acquisitions and divestitures:
Accounts receivable 308,308 96,408
Inventories 6,990 2,670
Prepaid expenses and other current assets 67,790 7,369
Other assets 2,647 1,341
Accounts payable 65,281 20,010
Accrued expenses, other liabilities and
interest (119,037) (203,466)
Deferred revenue (200,723) 48,770
---------- ----------
Net cash provided by (used in) operating
activities 63,452 (200,353)
---------- ----------
Cash Flows from Investing Activities:
Purchases of property and equipment (29,088) (60,954)
Cash acquired from sale of PFI - 53,832
---------- ----------
Net cash used in investing activities (29,088) (7,122)
---------- ----------
Cash Flows from Financing Activities:
Proceeds from lines of credit, net of repayments (60,067) 56,580
Cash paid for debt issuance costs - (65,000)
Payments on capital lease obligation (4,932) (4,646)
Principal payments on notes payable to related
parties (151,490) -
---------- ----------
Net cash used in financing activities (216,489) (13,066)
---------- ----------
Net change in cash and cash equivalents (182,125) (220,541)
Cash and cash equivalents, beginning of period 567,447 749,911
---------- ----------
Cash and cash equivalents, end of period $ 385,322 $ 529,370
---------- ----------
Supplemental disclosure of cash flow information -
Cash paid during the period for:
Interest $ 14,336 $ 22,352
---------- ----------
Income taxes $ 30,486 $ 47,400
---------- ----------
Supplemental Schedule of Noncash Investing
and Financing Activities:
Cumulative effect of accounting change to
accumulated deficit for derivative liabilities $ 2,610 $ -
========== ==========
Cumulative effect of accounting change to
additional paid-in capital for derivative
liabilities $ 6,200 $ -
---------- ----------
Estimated fair value of warrants issued as debt
issuance costs $ - $ 149,661
---------- ----------
Reclassification of warrant from accrued
liabilities to additional paid-in capital $ - $ 50,000
---------- ----------
Repayment of line of credit with issuance of
related party debt $ 430,000 $ -
---------- ----------
Contacts: Aubrye Harris-Foote Director, Investor Relations VillageEDOCS 714-368-8754 aharris@villageedocs.com
SOURCE: VillageEDOCS, Inc.
mailto:aharris@villageedocs.com
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