Company News

FOR IMMEDIATE RELEASE

VillageEDOCS Announces Second Quarter and Six Months 2009 Results -- Adjusted Earnings Increase Over 150% from Last Year -- Revenues Increase 19%

SANTA ANA, CA, AUGUST 18, 2009—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:

"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.

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.