SANTA ANA, Calif.--(BUSINESS WIRE)--VillageEDOCS, Inc. (OTCBB:VEDO), a Solution as a Service company, today announced its financial results for the third quarter of 2009.

Third Quarter and Nine Months Highlights

• Although revenue of $3.6 million for the third quarter of 2009 was 14% lower than we reported for the third quarter of 2008, revenue for the nine months ended September 30, 2009 increased 6% over the 2008 period to $11.6 million due to the strength of the first and second quarters.
• Gross margin improved to 61% compared to 59% in the first nine months of 2008
• Gross profit increased 8% to $7 million in the first nine months of 2009 compared to $6.5 million in the 2008 period
• Operating expenses for as a percentage of revenue in the nine month periods increased to 66% in 2009 from 62% in 2008
• Net loss in the 2009 nine-month period was $733,931, an increase of 121% compared to the loss of $332,700 for the nine months ended September 30, 2008. Net loss in the third quarter of 2009 was $281,157 compared to a net income of $318,800 in the third quarter of 2008
• Retired $184,000 in accrued expenses
• The net amount of debt outstanding on lines of credit and notes payable decreased by approximately $219,000 in the nine months ended September 30, 2009 because we repaid more debt than we incurred

"While the weakness in the economy has clearly impacted our results, thanks to cost controls and a strong base of recurring revenue, we believe we have excelled in working with the resources available to us during a challenging year," said Mr. Mason Conner, CEO of VillageEDOCS, Inc. "We continue to focus on sales from higher margin products, bolstering our recurring revenue streams, and controlling expenses while directing more resources to sales, marketing, and client services."

Third Quarter and Nine Months 2009 Results

Net revenue from external customers for the three months ended September 30, 2009 was $3,659,351, a 14% decrease compared to net revenue for the prior year quarter of $4,273,114. Revenue from Integrated Communications decreased 19% due to decreases in user subscription fees and revenue from corporate clients. Revenue decreased at Government Accounting Solutions by 12% due to decreases in revenue from printing, software, maintenance, and hardware sales. These decreases were partially offset by an increase in revenue from online services. Revenue from Electronic Document Delivery Services decreased 14% due to a decrease in outbound revenue as a result of customer attrition and reduced usage volumes. Revenue from Electronic Content Management decreased 9% due to lower software sales compared to the prior year quarter.

Net revenue from external customers for the nine months ended September 30, 2009 was $11,593,193, a 6% increase over net revenue for the prior year period of $10,965,907. Revenue from Integrated Communications decreased 1% due to decreases in user subscription fees and revenue from corporate clients. Revenue from Government Accounting Solutions decreased 11% due to decreases in revenue from printing, software, maintenance, and hardware sales. These decreases were partially offset by an increase in revenue from online services. Revenue from Electronic Document Delivery Services decreased 7% due to a decrease in outbound revenue as a result of customer attrition and reduced usage volumes. Revenue from Electronic Content Management increased 273% due to comparing nine months in the 2009 period with two months in the 2008 period (from August 1, 2008, the date of acquisition). On a pro forma basis, the revenue from Electronic Content Management for the nine months ended September 30, 2008 was $2,244,951.

Gross profit for the three months ended September 30, 2009 decreased 19% to $2,119,946 as compared to $2,611,500 for the 2008 quarter. The decrease in the 2009 quarter of $491,554 resulted from decreases of $59,062, $48,838, $97,381 and $286,273 from Electronic Document Delivery Services, Government Accounting Solutions, Electronic Content Management, and Integrated Communications, respectively. Gross profit margin for the 2009 and 2008 quarters was 58% and 61%, respectively.

Gross profit for the nine months ended September 30, 2009 increased 8% to $7,025,708 as compared to $6,521,256 for the 2008 period. The increase in the 2009 period of $504,452 resulted from an increase of $715,170 from Electronic Content Management (nine months in 2009 compared to two months in 2008), which was offset by decreases of $63,059, $130,703, and $16,956 from Electronic Document Delivery Services, Government Accounting Solutions, and Integrated Communications, respectively. Gross profit margin for the 2009 and 2008 nine month periods was 61% and 59%, respectively.

During the three months ended September 30, 2009, the operating expenses of Corporate, Electronic Document Delivery Services, and Integrated Communications decreased 21%, 18%, and 3%, respectively. Operating expenses of Government Accounting Solutions increased by 16% compared to the 2008 quarter. Operating expenses of Electronic Content Management increased 47% compared to the 2008 quarter as a result of comparing three months in 2009 compared with two months (from the August 1, 2009 date of acquisition) in the 2008 quarter.

On a consolidated basis, operating expenses in the 2009 quarter included $47,191 in compensation expense related to the vesting of stock options, compared to $98,604 in the 2008 quarter.

During the nine months ended September 30, 2009, the operating expenses of Corporate, Electronic Document Delivery Services, and Government Accounting Solutions decreased 22%, 14%, and 1%, respectively. Operating expenses of Integrated Communications increased 5%. Electronic Content Management incurred $1,527,721 of operating expenses which are not comparable to the 2008 period because of the date of acquisition.

On a consolidated basis, operating expenses in the 2009 period included $154,250 in compensation expense related to the vesting of stock options, compared to $221,016 in the 2008 period.

Net loss for the quarter ended September 30, 2009 was $281,157, compared to a net income of $318,800, for the quarter ended September 30, 2008. Basic and diluted loss per share for the quarter ended September 30, 2009 was $0.00 and $0.00 per share, respectively, based on weighted average shares of 193,046,613 and 193,046,613, respectively. Basic and diluted net income per share for the quarter ended September 30, 2008 was $0.00 and $0.00 per share, respectively, based on weighted average shares of 167,118,739 and 201,883,203, respectively.

Net loss for the nine months ended September 30, 2009 was $733,931, compared to a net loss of $332,700, for the nine months ended September 30, 2008. Basic and diluted loss per share for the nine months ended September 30, 2009 and 2008 was $0.00 in each of the respective periods on weighted average shares of 188,460,464 and 157,606,078, respectively.

Adjusted earnings for the third quarter of 2009 decreased to $68,654 from $586,530 for the 2008 quarter. Adjusted earnings for the nine months ended September 30, 2009 decreased to $479,187 from $712,207 for the 2008 period (see reconciliation below).

Financial Condition

As of September 30, 2009, VillageEDOCS had $0.3 million in cash and cash equivalents and $1.9 million outstanding under a line of credit and notes payable. Stockholders' equity at September 30, 2009 was $7.6 million.

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 about 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 September 30,								Nine Months Ended September 30,
		2009				2008				2009				2008
GAAP Net Income (Loss)		$	(281,157	)		$	318,800			$	(733,931	)		$	(332,700	)
Depreciation and amortization, including amortization of intangible assets			221,547				188,378				695,382				554,153
Non-cash stock option vesting expense			58,558				98,604				202,638				221,016
Interest expense, net of interest income			37,185				62,851				123,051				175,674
Other (income) expense, net			(2,103	)			(49,968	)			(12,760	)			(103,371	)
(Benefit) provision for income taxes			34,624				(57,135	)			57,452				(24,137	)
Change in fair value of derivative liability			-				-				(3,100	)			-
Non recurring termination charges in workforce restructuring			-				-				97,610				146,087
Estimated fair value of common stock and warrants issued for services			-				25,000				52,845				75,485
Adjusted Earnings		$	68,654			$	586,530			$	479,187			$	712,207

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 September 30,								Nine Months Ended September 30,
		2009				2008				2009				2008
Net sales		$	3,659,351			$	4,273,114			$	11,593,193			$	10,965,907
Cost of sales			1,539,405				1,661,614				4,567,485				4,444,651
Gross profit			2,119,946				2,611,500				7,025,708				6,521,256
Operating expenses:
Product and technology development			513,282				448,322				1,545,147				1,219,705
Sales and marketing			505,093				492,427				1,766,448				1,434,132
General and administrative			1,091,475				1,207,825				3,588,019				3,597,800
Depreciation and amortization			221,547				188,378				695,382				554,153
Total operating expenses			2,331,397				2,336,952				7,594,996				6,805,790
Income (loss) from operations			(211,451	)			274,548				(569,288	)			(284,534	)
Change in fair value of derivative liability			-				-				3,100				-
Interest expense			(37,185	)			(62,851	)			(123,051	)			(175,674	)
Other income, net			2,103				49,968				12,760				103,371
Income (loss) before provision for income taxes			(246,533	)			261,665				(676,479	)			(356,837	)
(Provision) benefit for income taxes			(34,624	)			57,135				(57,452	)			24,137
Net income (loss)		$	(281,157	)		$	318,800			$	(733,931	)		$	(332,700	)
Net income (loss) available to common shareholders per common share:
Basic		$	-			$	-			$	-			$	-
Diluted		$	-			$	-			$	-			$	-
Weighted average shares outstanding -
Basic			193,046,613				167,118,739				188,460,464				157,606,078
Diluted			193,046,613				201,883,203				188,460,464				157,606,078
See accompanying notes to unaudited condensed consolidated financial statements.

VillageEDOCS, Inc. and subsidiaries
Condensed Consolidated Balance Sheets
		September 30,				December 31,
		2009				2008
		(unaudited)				(audited)
ASSETS
Current assets:
Cash and cash equivalents		$	324,433			$	567,447
Accounts receivable, net of allowance for doubtful accounts of approximately $48,000 and $47,000, respectively			1,101,342				1,093,606
Inventories			63,815				41,031
Prepaid expenses and other current assets			122,474				282,397
Debt issuance costs, net			-				17,883
Total current assets			1,612,064				2,002,364
Property and equipment, net			310,788				388,788
Other assets			26,014				28,811
Goodwill			7,244,732				7,244,732
Other intangibles, net			3,308,185				3,826,728
		$	12,501,783			$	13,491,423
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	483,741			$	514,086
Current portion of accrued expenses and other liabilities			1,526,165				1,736,419
Deferred revenue			947,556				1,026,184
Current portion of capital lease obligation			6,895				20,180
Lines of credit			431,292				890,563
Current portion of notes payable and accrued interest payable to related parties, net of unamortized debt discount of $47,808 and $47,808, respectively			760,563				438,682
Convertible note and accrued interest payable to related party			-				178,370
Total current liabilities			4,156,212				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 and accrued interest payable to related parties, net of current portion and unamortized debt discount of $39,835 and $75,690, respectively			563,528				604,310
Convertible note and accrued interest payable to related party, net of current portion			183,245				-
Derivative liability			4,650				-
Total liabilities			4,907,635				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 -- 193,046,613 and 180,270,913 shares, respectively			19,305				18,027
Additional paid-in capital			33,943,359				33,618,742
Accumulated deficit			(26,402,016	)			(25,670,695	)
Total stockholders' equity			7,594,148				7,999,574
		$	12,501,783			$	13,491,423
See accompanying notes to unaudited condensed consolidated financial statements.

VillageEDOCS, Inc. and subsidiaries
Condensed Consolidated Statements of Cash Flows
(unaudited)
		Nine Months Ended September 30,
		2009				2008
Cash Flows from Operating Activities:
Net loss		$	(733,931	)		$	(332,700	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization			695,382				554,153
Provision for (recovery of) doubtful accounts receivable			521				(10,000	)
Estimated fair value of stock options issued to employees for services rendered			202,638				221,016
Estimated fair value of warrants issued to consultants			23,194				75,485
Change in fair value of derivative liability			(3,100	)			-
Common stock issued to employees for services			29,651				-
Amortization of debt discount and debt issuance costs			53,738				143,111
Changes in operating assets and liabilities:
Accounts receivable			(8,257	)			(118,515	)
Inventories			(22,784	)			(6,066	)
Prepaid expenses and other current assets			106,622				(22,672	)
Other assets			2,797				-
Accounts payable			(30,345	)			(18,555	)
Accrued expenses, other liabilities and interest			(183,647	)			(428,206	)
Deferred revenue			(78,628	)			147,797
Net cash provided by operating activities			53,851				204,848
Cash Flows from Investing Activities:
Purchases of property and equipment			(62,872	)			(111,761	)
Cash paid in acquisition of QSI, net of cash acquired			-				(286,435	)
Costs incurred for purchase of QSI			-				(227,291	)
Cash acquired from sale of PFI			-				53,832
Net cash used in investing activities			(62,872	)			(571,655	)
Cash Flows from Financing Activities:
(Payments) proceeds from lines of credit, net of proceeds/repayments			(459,271	)			429,881
Proceeds from notes payable to related parties			865,000				300,000
Payments on notes payable to related parties			(624,700	)			-
Cash paid for debt issuance costs			-				(65,000	)
Payments on capital lease obligation			(15,022	)			(14,149	)
Net cash (used in) provided by financing activities			(233,993	)			650,732
Net change in cash and cash equivalents			(243,014	)			283,925
Cash and cash equivalents, beginning of period			567,447				749,911
Cash and cash equivalents, end of period		$	324,433			$	1,033,836
Supplemental disclosure of cash flow information -
Cash paid during the period for:
Interest		$	51,959			$	46,866
Income taxes		$	144,822			$	172,340
Supplemental Schedule of Noncash Investing		Nine Months Ended September 30,
and Financing Activities:		2009				2008
Issuance of common stock as acquisition cost		$	-			$	2,200
Issuance of note payable to related party in acquisition		$	-			$	900,000
Estimated fair value of common stock issued in connection with acquisition		$	-			$	547,800
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
Reclassification of common stock issued to employees for services from accrued liabilities to additional paid-in capital		$	98,106			$	-
See accompanying notes to unaudited condensed consolidated financial statements.

VillageEDOCS, Inc.
Mason Conner, President and Chief Executive Officer
714-368-8711
mconner@villageedocs.com