VillageEDOCS Reports Second Quarter and Six Months Financial Results; Continued Cost Controls Result in 67% Decrease in Q2 Net Loss

SANTA ANA, CA–(EMWNews – August 15, 2008) – VillageEDOCS, Inc. (OTCBB: VEDO), a Solution

as a Service (SaaS) company, which is the largest segment of the Software

as a Service (SaaS) market, today announced financial results for the

second quarter and six months ended June 30, 2008.

2008 Second Quarter/ Six Months Highlights:

--  Consolidated net revenue of $3,414,808 for Q2-08, up 2% from

    $3,335,435 in Q2-07;

--  Total operating expenses decreased 14% over prior year first half,

    with operating expenses at Corporate level decreasing  21%;

--  Net income increased significantly at GSI Unit to $473,980 versus

    $169,685 for the first half of 2007;

--  Consolidated net loss for Q2-08 decreased $320,410 or 67% to $156,665

    versus $477,075 in the year ago period;

--  Net borrowings on lines of credit during the six months ended June 30,

    2008 were approximately $95,000 compared to approximately $347,000 during

    the first half of 2007.

    

“We are pleased with our performance in the second quarter of 2008, and we

are particularly gratified with the significant reductions in operating

expenses at each of our business units, as well as at the corporate level,

resulting in a 67% reduction in net loss in the quarter. We continue to see

the positive effects of our emphasis on cost controls while at the same

time focusing on sales of higher margin products and services. We are

especially satisfied with the significant revenue increase in the quarter

at our TBS business unit, which showed a 23% sales increase over the prior

year period,” said Mason Conner, President and Chief Executive Officer of

VillageEDOCS, Inc.

“Our recent acquisition of Questys Solutions is in keeping with our

strategy of continuing to acquire intellectual and technology assets that

will enhance, broaden and improve our product offerings. This strategic

acquisition, which increases our client roster to more than 1,400, provides

a critical document management component and cohesiveness to our suite of

outsourced business solutions, which will accelerate our growth and enable

us to significantly expand sales opportunities within each of our operating

business units, as well as attract new business,” Mr. Conner added.

For the second quarter ended June 30, 2008, VillageEDOCS had consolidated

net revenue of $3,414,808 a 2% increase over net revenue for the prior year

quarter of $3,335,435. Net loss for the three months ended June 30, 2008,

decreased 67% to $156,665, or $0.00 per share, compared with a net loss of

$477,075, or $0.00 per share, for the three months ended June 30, 2007, on

weighted average shares of 152,770,913 and 149,309,709, respectively.

Consolidated operating expenses during the 2008 period were 62% of sales

compared to 76% of sales in the 2007 period.

Included in the second quarter 2008 net loss of $156,665 was $237,034 of

loss from non-cash depreciation and amortization charges and non-cash stock

option vesting charges (2007: $464,025). Adjusted Earnings (as defined

below) of $191,533 for the three months ended June 30, 2008, compares with

Adjusted Earnings of $18,012 in the same period a year ago (see

reconciliation that follows).

During the second quarter of 2008, total operating expenses were

$2,111,186, a decrease of $431,977, or 17%, from the prior year quarter.

The overall decrease resulted from decreases at each of the Company’s

operating units plus a 17% reduction in operating expenses of the holding

company. Consolidated operating expenses during the second quarter of 2008

were 62% of sales compared to 76% of sales in the 2007 quarter. Gross

profit margin in the second quarter of 2008 was 59% compared with 63% in

the year ago period.

For the six months ended June 30, 2008, consolidated net revenue was

$6,692,793 compared with consolidated net revenue of $6,593,984 for the

prior year period. Net loss for the six months ended June 30, 2008,

decreased 34% to $651,500, or $0.00 per share, compared with a net loss of

$979,837, or $0.01 per share, for the six months ended June 30, 2007, on

weighted average shares of 152,770,913 and 148,444,518, respectively.

Consolidated operating expenses during the 2008 six month period were

$4,468,838, or 67% of sales, compared with $5,183,242, or 79% of sales, in

the corresponding 2007 six month period. Gross profit margin in the first

six months of 2008 was 58% compared with 63% in the first half of 2007.

Declines in gross margin during the three and six months ended June 30,

2008 are primarily the result of lower sales at our electronic document

delivery service segment resulting from exposure to the financial services

market as well as increases in sales of lower margin, third party products

in the government accounting solutions segment. To address this change,

management has directed additional resources to promote increased sales of

our proprietary service offerings, which traditionally have been more

profitable for us.

About VillageEDOCS, Inc.

VillageEDOCS, Inc., through its MessageVision subsidiary, is a leading

provider of comprehensive business-to-business information delivery and

document management services and products for organizations with mission

critical needs, including major corporations, government agencies and

non-profit organizations. Through its Tailored Business Systems subsidiary,

VillageEDOCS provides accounting and billing solutions for county and local

governments. Through its GoSolutions subsidiary, VillageEDOCS provides

enhanced voice and data delivery services. Through its Questys Solutions

subsidiary, VillageEDOCS provides advanced electronic document/content

management and automated data capture solutions to a variety of markets in

the U.S. and abroad. For further information, visit our website at

www.villageedocs.com.

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)

because depreciation, amortization, interest, tax, equity compensation, and

stock option vesting expenses during 2008 and 2009 are expected to be at

least as material as they were during 2007.

                    VillageEDOCS, Inc. and Subsidiaries

RECONCILIATION OF GAAP NET INCOME TO NON-GAAP ADJUSTED EARNINGS (unaudited)



                                 Three Months Ended     Six Months Ended

                                      June 30,              June 30,

                                  2008       2007       2008       2007

                               =========  =========  =========  =========

 GAAP Net Loss                 $(156,665) $(477,075) $(651,500) $(979,837)

(a) Depreciation and

 amortization, including

 amortization of intangible

 assets                          184,130    236,114    365,775    472,766

(b) Non-cash stock option

 vesting expense pursuant to

 SFAS 123(R)                      52,904    227,911    122,412    454,486

(c) Interest expense, net of

 interest income                  46,575     29,434    112,823     57,269

(d) Other (income) expense,

 net                              (1,811)    61,760    (53,403)    54,339

(e) (Benefit) provision for

 income taxes                      5,621     21,962     32,998     26,072

(f) (Income) from discontinued

 operations                            -    (89,474)         -   (186,172)

(g) Non recurring termination

 charges in workforce

 restructuring                         -          -    146,087          -

(h) Amortization of non-cash

 portion of debt issuance cost

 and debt discount                35,778      3,669     89,444      7,338

(i) Estimated fair value of

 common stock and warrants

 issued for services              25,001      3,711     50,485     46,211

                               ---------  ---------  ---------  ---------

 Adjusted Earnings             $ 191,533  $  18,012  $ 215,121  $ (47,689)

                               =========  =========  =========  =========

Cautionary Statement Regarding Forward-Looking Information

All statements in this press release that do not directly and exclusively

relate to historical facts constitute forward-looking statements within the

meaning of the Private Securities Litigation Reform Act of 1995.

Statements made in this press release, including, without limitation, those

relating to our belief about the benefits the Company has derived, or may

derive, from pursuing its acquisition strategy or from new management

personnel or consultants, and our expectations regarding future operating

results, including such for the remainder of 2008, are forward-looking

statements. These statements, and other forward-looking statements in this

press release, represent the Company’s plans, intentions, expectations and

belief and are subject to certain risks and uncertainties that could cause

actual results to differ materially from those projected or expressed

herein. These include, without limitation, risks associated with

acquisitions, such as the inability to complete a transaction or to

assimilate and integrate new operations and retain key personnel,

uncertainties in the market, competition, legal, regulatory initiatives,

success of marketing efforts, availability, terms and deployment of

capital, personnel risks, and other risks detailed in the Company’s SEC

reports, of which many are beyond the control of the Company. Trading in

the Company’s common stock is limited, and marketability of the stock is

restricted by penny stock regulations and the fact that our 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. The

Company assumes no obligation to update or alter the information in this

press release. Investors are cautioned not to put undue reliance on any

forward-looking statements. For these statements, we claim the protection

of the safe harbor for forward-looking statements contained in Section 21E

of the Exchange Act.

VillageEDOCS, Inc. and subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)





                           Three Months Ended         Six Months Ended

                                June 30,                  June 30,

                            2008         2007         2008         2007

                        ===========  ===========  ===========  ===========

Net sales               $ 3,414,808  $ 3,335,435  $ 6,692,793  $ 6,593,984

Cost of sales             1,409,902    1,245,665    2,783,037    2,439,071

                        -----------  -----------  -----------  -----------

   Gross profit           2,004,906    2,089,770    3,909,756    4,154,913

                        -----------  -----------  -----------  -----------

Operating expenses:

  Product and

   technology

   Development              365,450      442,571      771,383      919,370

  Sales and marketing       496,757      572,994      941,705    1,071,393

  General and

   administrative         1,064,849    1,325,403    2,389,975    2,787,713

  Depreciation and

   amortization             184,130      202,195      365,775      404,766

                        -----------  -----------  -----------  -----------

   Total operating

    expenses              2,111,186    2,543,163    4,468,838    5,183,242

                        -----------  -----------  -----------  -----------

   Loss from operations    (106,280)    (453,393)    (559,082)  (1,028,329)



Interest expense, net

 of interest income         (46,575)     (29,434)    (112,823)     (57,269)

Other income (expense),

 net                          1,811      (61,760)      53,403      (54,339)

                        -----------  -----------  -----------  -----------

   Loss before

    provision for

    income taxes           (151,044)    (544,587)    (618,502)  (1,139,937)



Provision for income

 taxes                       (5,621)     (21,962)     (32,998)     (26,072)

                        -----------  -----------  -----------  -----------

   Loss from continuing

    operations             (156,665)    (566,549)    (651,500)  (1,166,009)



Income from

 discontinued

 operations                       -       89,474            -      186,172

                        -----------  -----------  -----------  -----------

   Net loss             $  (156,665) $  (477,075) $  (651,500) $  (979,837)

                        ===========  ===========  ===========  ===========



Basic and diluted loss

 available to

 common stockholders

 per common share

   Loss from continuing

    operations          $         -  $         -  $         -  $     (0.01)

   Income from

    discontinued

    operations          $         -  $         -  $         -  $         -

                        -----------  -----------  -----------  -----------

   Loss per share       $         -  $         -  $         -  $     (0.01)

                        ===========  ===========  ===========  ===========



Weighted average shares

 outstanding -

 basic and diluted      152,770,913  149,309,709  152,770,913  148,444,518

                        ===========  ===========  ===========  ===========







See accompanying notes to unaudited condensed consolidated financial

statements.