• 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.