VillageEDOCS Announces Second Quarter and Six Months 2009 Results

VillageEDOCS, Inc. (OTCBB:VEDO), a Software as a Service (SaaS) company, today announced its financial results for the second quarter of 2009.

Second Quarter & Six Months 2009 Highlights

-- Revenue increased 19% year-over-year to $4.1 million for the quarter and to $7.9 million for the six months ended June 30, 2009.

-- Gross margin improved to 63% compared to 59% in the second quarter of 2008.

-- Gross profit increased 29% year-over-year to $2.6 million for the quarter.

-- Income from operations for the second quarter 2009 was $34,141, up from a loss of $106,280 in the same quarter of 2008.

-- Adjusted earnings increased 155% for the quarter to $0.4 million compared to $0.2 million in 2008; and 227% for the six month period to $0.4 million in 2009 from $0.1 million in 2008.

-- Net loss improved 80% to $32,031 from $156,665 for the second quarter and 31% to $452,774 from $651,500 for the six month period.

-- Retired approximately $343,000 in accrued expenses and notes payable debt for the six month period that existed as of December 31, 2008.

"Our results for the second quarter of 2009 reflect our committed focus on higher margin SaaS offerings, while continuing our emphasis on cost of sales controls. We are particularly satisfied with the revenue increase in the quarter in our integrated communications offering and the contribution from our electronic content management offering," said Mr. Mason Conner, President and CEO of VillageEDOCS, Inc. "We are concentrating on our sales and marketing efforts and plan to invest in its expansion. As we accelerate our cross-selling initiatives and provide additional offerings on our MessageVision Platform, we will capitalize on our existing infrastructure thereby increasing our operating income."

Second Quarter & Six Months 2009 Results

Net revenue increased 19% year-over-year to $4.1 million for the three months ended June 30, 2009 and to $7.9 million for the six months ended June 30, 2009. The increase was primarily attributable to the addition of QSI which was acquired in 2008 and contributed $0.7 million for the quarter and $1.3 million for the six month period. Increased sales from Integrated Communications (GSI) which increased 6% over the second quarter of 2008 and 9% for the six month period also contributed. The expansion in sales in Integrated Communications was due to increases in user subscription fees, which were partially offset by decreases in revenue from corporate clients. Revenue decreased 11% for the quarter and 10% for the six month period in Government Accounting Solutions (TBS) due to decreases in revenue from printing, software and hardware sales. Revenue decreased 4% for the quarter and 3% for the six month period in Electronic Document Delivery Services (MVI) due to a decrease in outbound revenue as a result of customer attrition and reduced usage volumes.

Gross profit in the second quarter of 2009 was $2.6 million, an increase of 29% over the same period a year ago. For the six months ended June 30, 2009, gross profit increased 25% to $4.9 million. Gross margin was 63%, an increase compared to gross margin of 59% for the second quarter of 2008, and 62% for the six month period, compared to gross margin of 58% in the same period 2008.

Operating expenses in the second quarter of 2009 were $2.6 million, up 21% from $2.1 million in the second quarter of 2008. Corporate decreased operating expenses for the second quarter by 30% to $0.4 million in 2009 from $0.6 million in 2008. The increase was mainly the result of higher selling, general and administrative expenses, which were primarily attributable to the addition of QSI and an increase in the Integrated Communications division. For the six months ended June 30, 2009 operating expenses were $5.3 million, up 18% from $4.5 million in the same period 2008.

Operating income was $34,141 for the second quarter 2009 compared to an operating loss of $0.1 million in 2008. For the six month period, operating loss improved 36% to $0.4 million in 2009 compared to $0.6 million in 2008. Net loss for the second quarter of 2009 was $32,031, or $0.00 per diluted share, compared to net loss of $0.2 million, or $0.00 per diluted share, in the second quarter of 2008. Diluted earnings per share were calculated using a weighted average share count of 192.1 million in the second quarter of 2009, compared to 152.8 million a year ago. For the six months ended June 30, 2009 net loss was $0.5 million compared to $0.7 million for the same period 2008.

Adjusted earnings for the second quarter of 2009 increased to $0.4 million from $0.2 million the same period in 2008. For the six months ended June 30, 2009 adjusted earnings was $0.4 million, an increase from $0.1 million in 2008.

Financial Condition

As of June 30, 2009, VillageEDOCS had $0.3 million in cash and cash equivalents and $1.9 million in debt. Stockholders' equity at June 30, 2009, was $7.8 million.

Recent Events

In July 2009, the Company announced that Gerik Degner had joined its board of directors effective August 10, 2009. In addition, the Company's CEO, Mason Conner, appeared on Critical Mass on LA Talk Radio. On August 6, 2009 the Company announced that it secured additional financing from a large shareholder in the amount of $435,000. The financing was in the form of an unsecured note and has a term of twelve (12) months. The proceeds from the financing were used to retire an existing credit line with a financial institution as well as the August 1, 2009 installment in connection with the purchase of the Questys subsidiary.

Business Outlook

"We are pleased with our progression through the first six months of 2009. With the addition of Gerik Degner to our board of directors, the increased visibility we are obtaining in the market and continued growth of our MessageVision Platform sales I believe we are well positioned to capitalize on the market opportunity we have," stated Mr. Conner.

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 June 30,          Six Months Ended June 30,
                                                                        2009              2008                   2009               2008
GAAP Net Loss                                                           $   (32,031 )     $   (156,665 )     $   (452,774 )     $   (651,500 )
Depreciation and amortization, including amortization of intangible     230,836               184,130            473,835            365,775
assets
Non-cash stock option vesting expense pursuant to SFAS 123(R)           61,667                52,904             144,080            122,412
Interest expense, net of interest income                                40,071                46,575             85,866             112,823
Other (income) expense, net                                             7,273                 (1,811   )         (10,657  )         (53,403  )
Provision for income taxes                                              18,828                5,621              22,828             32,998
Change in fair value of derivative liability                            -                     -                  (3,100   )         -
Non recurring termination charges in workforce restructuring            40,355                -                  97,610             146,087
Estimated fair value of common stock and warrants issued for services   29,651                25,001             52,845             50,485
Adjusted Earnings                                                       $   396,650       $   155,755        $   410,533        $   125,677

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 June 30,                 Six Months Ended June 30,
                                                                         2009                  2008                  2009                  2008
Net sales                                                            $   4,075,893         $   3,414,808         $   7,933,842         $   6,692,793
Cost of sales                                                            1,491,527             1,409,902             3,028,080             2,783,037
Gross profit                                                             2,584,366             2,004,906             4,905,762             3,909,756
Operating expenses:
Product and technology development                                       524,873               365,450               1,031,865             771,383
Sales and marketing                                                      642,465               496,757               1,261,355             941,705
General and administrative                                               1,152,051             1,064,849             2,496,544             2,389,975
Depreciation and amortization                                            230,836               184,130               473,835               365,775
Total operating expenses                                                 2,550,225             2,111,186             5,263,599             4,468,838
Income (loss) from operations                                            34,141                (106,280    )         (357,837    )         (559,082    )
Change in fair value of derivative liability                             -                     -                     3,100                 -
Interest expense, net of interest income                                 (40,071     )         (46,575     )         (85,866     )         (112,823    )
Other income (expense), net                                              (7,273      )         1,811                 10,657                53,403
Loss before provision for income taxes                                   (13,203     )         (151,044    )         (429,946    )         (618,502    )
Provision for income taxes                                               (18,828     )         (5,621      )         (22,828     )         (32,998     )
Net loss                                                             $   (32,031     )     $   (156,665    )     $   (452,774    )     $   (651,500    )
Basic and diluted loss available to common shareholders per common   $   -                 $   -                 $   -                 $   -
share:
Weighted average shares outstanding - basic and diluted                  192,063,867           152,770,913           186,129,383           152,770,913

SOURCE: VillageEDOCS, Inc.

VillageEDOCS 
Aubrye Harris-Foote 
Director, Investor Relations 
714-368-8754 
aharris@villageedocs.com