** **

**U.S. SECURITIES ANDEXCHANGE COMMISSION**Washington, D.C. 20549----------------------------

**FORM 10-KSB**

(**X**) ANNUALREPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 

| **For  the fiscal year ended December 31, 2006** | **Commission  File Number:  00031395** |
|--------------------------------------------------|---------------------------------------------|

**VillageEDOCS**

(Name of Small Business Issuer in itsCharter)

| ** ** | **California**                                                  | ** ** | **33-0668917**                                                                         | ** ** |
|------------|-----------------------------------------------------------------|------------|----------------------------------------------------------------------------------------|------------|
|            | ---------------------------------------------------             |            | ------------------------------                                                         |            |
|            | (State or other jurisdiction of  incorporation or organization) |            | (I.R.S. Employer Identification No.)                                                   |            |
|            |                                                                 |            |                                                                                        |            |
| ** ** | **14471 Chambers Road, Suite 105, Tustin,  CA**                 | ** ** | **92780**                                                                              |       |
|            | ---------------------------------------------------             |            | -----------------------------                                                          |            |
|            | (Address of principal executive  offices)                       |            | (Zip Code)                                                                             |            |
|            |                                                                 |            |                                                                                        |            |
|            | Issuer's Telephone Number:                                      |            | **  (714)  734-1030          ** |       |

Securitiesregistered under Section 12(b) of the Exchange Act:

|  | Title of  each class |  | Name of  each exchange on which registered |  |
|--|----------------------|--|--------------------------------------------|--|
|  | **NONE**             |  | **N/A**                                    |  |
|  |                      |  |                                            |  |

Securitiesregistered under Section 12(g) of the Exchange Act:

 

**Common Stock,  no par value**(Title of each class)

Check whetherthe issuer (1) filed all reports required to be filed by Section 13 or 15(d) ofthe Exchange Act during the past 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days.   YES(**X**)                              NO()

Check ifdisclosure of delinquent filers in response to Item 405 of Regulation S-B isnot contained herein, and will not be contained, to the best of issuer'sknowledge, in definitive proxy or information statements incorporated byreference in Part III of this Form 10-KSB or any amendment to this Form10-KSB.  (**X**)

Indicate by acheck mark whether the issuer is a shell company.  YES(   )____NO (**X**)

Stateissuer's revenues for its most recent fiscal year:  **$12,912,173**

State theaggregate market value of the voting stock held by non-affiliates of theissuer:  **$3,939,581 as of February 28, 2007.**

Number of sharesof the issuer's common stock, no par value, outstanding as of February 28, 2007:  **147,868,127shares**.

DOCUMENTSINCORPORATED BY REFERENCE:  None.

TransitionalSmall Business Disclosure Format                YES (   )____NO(**X**)

Indicateby check mark whether the Issuer  is an accelerated filer (as defined in Rule12b-2 of the Act)        YES (   )____NO (**X**)

 

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**VillageEDOCS**

FORM 10-KSB INDEX

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006

|  |          |            |                                                                                                                         |      |
|--|----------|------------|-------------------------------------------------------------------------------------------------------------------------|------|
|  |          |            |                                                                                                                         | Page |
|  | PART I   |            |                                                                                                                         |      |
|  |          |            |                                                                                                                         |      |
|  |          | Item 1.    | Description  of Business                                                                                                | 3    |
|  |          | Item 2.    | Description  of Property                                                                                                | 9    |
|  |          |            |                                                                                                                         |      |
|  |          | Item 3.    | Legal  Proceedings                                                                                                      | 10   |
|  |          |            |                                                                                                                         |      |
|  |          | Item 4.    | Submission  of Matters to a Vote of Security Holders                                                                    | 11   |
|  |          |            |                                                                                                                         |      |
|  | PART II  |            |                                                                                                                         |      |
|  |          |            |                                                                                                                         |      |
|  |          | Item 5.    | Market for  Equity Securities and Related Stockholder Matters                                                           | 12   |
|  |          |            |                                                                                                                         |      |
|  |          | Item 6.    | Management's  Discussion and Analysis or Plan of Operation                                                              | 13   |
|  |          |            |                                                                                                                         |      |
|  |          | Item 7.    | Financial  Statements                                                                                                   | 41   |
|  |          |            |                                                                                                                         |      |
|  |          | Item 8.    | Changes In  and Disagreements with Accountants on Accounting and Financial Disclosure                                   | 41   |
|  |          |            |                                                                                                                         |      |
|  |          | Item 8A.   | Controls  and Procedures                                                                                                | 41   |
|  |          |            |                                                                                                                         |      |
|  |          | Item 8B.   | Other  Information                                                                                                      | 41   |
|  |          |            |                                                                                                                         |      |
|  | PART III |            |                                                                                                                         |      |
|  |          |            |                                                                                                                         |      |
|  |          | Item 9.    | Directors,  Executive Officers, Promoters and Control Persons;  Compliance With Section  16(a) of the Exchange Act | 43   |
|  |          |            |                                                                                                                         |      |
|  |          | Item 10.   | Executive  Compensation                                                                                                 | 46   |
|  |          |            |                                                                                                                         |      |
|  |          | Item 11.   | Security Ownership  of Certain Beneficial Owners and Management and Related Stockholder Matters                         | 59   |
|  |          |            |                                                                                                                         |      |
|  |          | Item 12.   | Certain  Relationships and Related Transactions and Director Independence                                               | 49   |
|  |          |            |                                                                                                                         |      |
|  |          | Item 13.   | Exhibits                                                                                                                | 64   |
|  |          |            |                                                                                                                         |      |
|  |          | Item 14.   | Principal  Accountant Fees and Services                                                                                 | 72   |
|  |          |            |                                                                                                                         |      |
|  |          | Signatures |                                                                                                                         | 73   |
|  |          |            |                                                                                                                         |      |

 

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###### PART I

** **

**ITEM 1. ****DESCRIPTION OF BUSINESS**

**IMPORTANTNOTIFICATIONS**

*This Annual Report on Form 10-KSB includes forward-looking statementswithin the meaning of Section 21E of the Securities Exchange Act of 1934, asamended. All statements that do not directly and exclusively relate tohistorical facts constitute forward-looking statements within the meaning ofthe Private Securities Litigation Reform Act of 1995.  You are cautioned not toput undue reliance on any forward-looking statements.  For these statements, weclaim the protection of the safe harbor for forward-looking statementscontained in Section 21E of the Exchange Act.  For important additional andspecific information regarding these statements, we strongly urge you to referto the captions entitled "**CAUTIONARY INFORMATION ABOUTFORWARD-LOOKING STATEMENTS" and "CERTAIN FACTORS THAT MAY AFFECTFUTURE RESULTS" which can be found in Item 6. Management's Discussion andAnalysis or Plan of Operation of this Annual Report on Form 10-KSB.*

** **

The Company's Internet website address iswww.villageedocs.com.  The Company's annual reports on Form 10-KSB, quarterlyreports on Form 10-QSB, current reports on Form 8-K, and all amendmentsthereto, are available free of charge on the Company's website as soon asreasonably practical after such reports are electronically filed with, orfurnished to, the U.S. Securities and Exchange Commission.

** **

** **

** **

**BUSINESS OVERVIEW**

General

VillageEDOCSis a global outsource provider of business process solutions that simplify,facilitate and enhance critical business processes.  Our mission is to providesolutions that facilitate the movement of business critical information betweenbusiness enterprises and their trading partners.  Our strategy is to furtherdevelop innovative solutions to existing services to expand our ability tobenefit our enterprise clients and increase the breadth and size of the marketswe satisfy today.  Our acquisition growth strategy is focused on acquiringintellectual and technology assets that continue to accelerate the expansion ofour client solutions.

Clientsuse our hosted services and client premise solutions for a spectrum ofbusiness-critical communications and business processes, including just-in-timemanufacturing, receivables, invoice delivery, securities filings, insurance andhealthcare transactions, document capture and automation, utility and taxbilling, electronic payment capture, general ledger, marketing campaigns, andprinting of documents and other applications.

Ourtarget markets include financial services, healthcare, manufacturing, and localgovernment, and we served approximately 1,200 active clients, includingapproximately 25,000 individual users, as of December 31, 2006.  We have amulti-channel sales approach, selling directly to clients through our telesalesand field sales and tele-marketing professionals and indirectly throughstrategic partners.

Unlessotherwise indicated by the context, the "Company" means the parentcompany, VillageEDOCS and our wholly-owned subsidiaries, GoSolutions, Inc.,MessageVision, Inc., Tailored Business Systems, Inc., and Phoenix Forms, Inc.

Weare incorporated in the State of California and have been in business since1995.  Our corporate headquarters are located at 14471 Chambers Road, Suite105, Tustin, CA 92780, and our telephone number is (714) 734-1030.  As of December31, 2006, we had 78 employees, and we service clients throughout the world.

IndustryBackground

Abusiness enterprise's success is dependent upon the ability to communicate withan ever-expanding number of prospects, clients and trading partners.  Businessenterprises are challenged to support an increasing number of communicationmethods while required to meet more stringent compliance and regulation. Today's global competition and markets effectively require business enterprisesto have increased speed of communication, accuracy, security management, andcontrol of business processes.

Businessenterprises are increasingly outsourcing their inter-enterprise businessprocesses to services like ours.  We offer a wide spectrum of business processsolutions, a scalable global platform and proven expertise.

BusinessServices

Wemarket a complete set of business communications services and solutions thatenable business enterprise clients to increase competitiveness and efficiencythrough the automation of labor- and paper-intensive business processes. Webelieve that our communications technologies-based services improve and enhancedata delivery and critical business communications for global enterprises.  Webelieve our hosted "on demand" solutions enable organizations to pay as theyutilize services, outsourcing the friction points of business documentprocessing, communications, and messaging, while retaining control of businessinformation, processes, and services.

OperatingSegments

Weconduct our business through four wholly-owned subsidiaries.  GoSolutions, Inc.("GoSolutions", "GSI"), operates our enhanced voice and data communicationsservices.  MessageVision, Inc. ("MessageVision," "MVI")operates our Internet-based document delivery services.  Tailored BusinessSystems, Inc. ("TBS") operates our government accounting products andservices business.  Phoenix Forms, Inc. ("Resolutions,""PFI") operates our e-forms, archiving, imaging, and workflowservices.

Segmentrevenue and profit information for MessageVision, TBS, and Resolutions ispresented in Note 12 of the Company's 2006 Consolidated Financial Statements, includedas Exhibit 99.1 to this report.  See "Management's Discussion andAnalysis of Financial Condition or Plan of Operation"  for additionalfinancial data and commentary on recent financial results for operatingsegments.

GoSolutions- Enhanced Voice and Data Communications Services

GoSolutions(29% of consolidated revenues in 2006), which we acquired in May 2006, offersnext generation communications services to enterprise customers through itshosted suite of enhanced telephony applications.  GoSolutions develops,licenses and delivers technology to address the expanding needs of thetelecommunications market.  

Asof February 28, 2007, GSI had over 23,000 active users.  GSI has twowholly-owned subsidiaries: Go Solo Technologies, Inc. and GoSolutions Canada, Inc.,which has no significant operations. During 2006, independent representativesof one customer accounted for 50% of GSI's consolidated net sales (includingsales prior to acquisition).

*GoSolutions Overview*

GoSolutions' Enhanced Services Platform (ESP) offers a portfolioof progressive, Telco-grade calling services including basic voicemail,enhanced voicemail (which includes speech navigation and Web/phone messageaccess), unified communications, audio and Web conferencing solutions.  AllGoSolutions' applications can be bundled with traditional voice and dataproducts to provide the enhanced features found with VoIP offerings in thetraditional Time Division Multiplexing space.  

*Basic Voicemail*

GoSolutions has created a voicemail platform that enablescompanies to start out with the basics and add enhanced features as they grow. Features offered by GoSolutions consist of the following:

•              Call Forward Busy No Answer is set by ServiceProvider at the Local Exchange Carrier to transfer caller to the GoSolutionsESP; 

•              Outside callers leave voicemail in the user'smailbox; 

•              Subscriber dials own number to check messages fromsubscribed direct inward dial number; 

•              Subscribers can listen, reply and send voicemail;and

•              Shared 800 access available to check messages whiletraveling.

*Enhanced VoiceMail*

In addition to the features of GoSolutions' Basic Voicemail,GoSolutions' Enhanced Voicemail solution offers subscribers a virtual attendantwith Find Me call routing capable of ringing up to 9 numbers. Privacy featuresallow callers to hear who's calling and either accept the call or transfer thecaller to voicemail.  A Web interface is available to check messages online.Enhanced Voicemail subscribers enjoy an enhanced professional image and theconfidence of never missing another call or potential opportunity. EnhancedVoicemail is offered with a generic brand. Private branding and custom brandingoptions are also available.

All the Basic Voicemail features are included, plus: 

•              Subscriber web access to playback voicemailmessages online; 

•              Find Me allows callers to have the party located atmultiple destinations; and 

•              Message notification sends subscriber an email orSMS text message to their cell phone notifying them of new voicemail messages.

*Premium Unified Communications*

GoSolutions' flagship product, Unified Communications, is morethan just a voicemail system. It is a next-generation communications suite thatmakes end-user's lives simple and more efficient. 

GoSolutions' unified communications solution enables subscribersto have a unified inbox. All voice, fax, and email messages are centrallylocated and accessible via the phone or the Web. 

Web access is compatible with MS Outlook. Users receive all theirmessages by consolidating them into the most widely used email applicationavailable. 

In addition, users can use GoSolutions' speech recognition systemto send and receive voicemail and email over the phone.

*Corporate Directory*

GoSolutions' has combined flexible technology in conjunction witha custom IVR application to deliver a corporate directory product. Proprietaryspeech recognition technology directs a caller to a main line to access othersub accounts (users or departments) by name. Out of office attendant included. 

Unlimited scalability for any organization. 

Corporate directory solutions are generally private branded forcustomers.

*GoSolutions Conferencing*

GoSolutions offers both audio and Web conferencing services. 

Audio Conferencing - Subscribers can hold instantaneous conferencecalls on a reservationless conference bridge, using our custom-switchingsoftware. Customers can host a call or have individual callers pay for theirown time on the conference call on a self-moderated conference bridge.Available bundled with other products for a unique, differentiating service. 

Web Conferencing - Allows subscribers to collaborate online in afeature-rich Internet browser meeting window. Growing in popularity, thisoption is attractive to individuals, small, and large businesses alike that arelooking to reduce travel and presentation overhead. Custom-branding option isavailable.

Netsales to external customers for the period from May 1, 2006 (date ofacquisition) through December 31, 2006 were $3,720,998.

MessageVision- Electronic Document Delivery Services

MessageVision(22% of consolidated revenues in 2006) is a California corporation formed in2004 to operate the historical business of VillageEDOCS, an Internet-basedelectronic document delivery service.

Webelieve that MessageVision provides superior flexibility, availability,reliability, scalability, and security to enterprises.  Virtually all industrysegments produce documents that require extreme attention to content, format,security, and accuracy prior to delivery to the recipient.  One feature thatMVI's service provides is the ability for a user to send an electronic faxdocument to an individual or to a broadcast list of thousands through a webbrowser, e-mail package, Microsoft Windows-based application, Enterprise ResourcePlanning or Customer Relationship Management system, or a proprietary corporateinformation system.   In addition, MVI provides "inbound" faxservices that enable our clients to receive fax documents electronically. Oncereceived electronically, documents may be stored digitally, printed, forwarded,sent to a fax machine, deleted with a single click, or annotated using populardesktop software.  The service also fulfills the reliability and capacityconsiderations normally applied to production applications.  When a fax isreceived by the service, it can be sent directly to an individual's email,central administrator for further distribution, or to back office applicationsfor processing.  Users are assigned a personal toll or toll-free number.

Anotherexample of MVI's service is the ability to capture information from anypredefined output format, standard interface, data stream (i.e., API, Barcode,Print, Spool, Control File etc.) or directly from the actual document.

Ourintegration tools automatically extract data values to automate businessprocesses such as creating and distributing forms, addressing and re-routingfaxes and email transmissions, and archiving data for immediate retrieval.

Asof February 28, 2007, MVI had approximately 400 active clients.  During 2006,no single customer accounted for more than 10% of consolidated net sales.

Weuse proprietary, internally-developed document processing and transmissionsystems to create and send or receive documents for our clients.  We provide Internet-basedfax services that integrate with existing Internet-connected systems withincompanies where invoices, statements, purchase orders, ticket confirmations,and other key documents originate. A typical application is characterized bythe need to deliver time sensitive, personalized documents to a disparate groupof recipients in multiple formats and delivery methods.  Our services aredesigned for use by a wide range of industries and enterprise sizes using suchdiverse platforms as Microsoft Windows NT/2000/XP, UNIX, and IBM iSeries(AS/400). Our clients currently include manufacturing companies, E-commerceproviders, application service providers, food service corporations, valueadded resellers, weather reporting services, public relations firms, and directmarketing organizations.   Businesses using J.D. Edwards, Oracle, Peoplesoft,Infinium, IBS and SAP environments, among others, can use our service to becomefax-enabled without traditional capital expenditures and ongoing maintenancecosts.  We offer our clients the flexibility to send Microsoft Office, Corel,IBM PCL, Adobe PDF, next-generation HTML, and other types of documents throughour Internet fax service.  In addition, our service is compatible withvirtually any foreign language including character-based Pacific Rim, Middleand Far Eastern languages.  In addition, we offer our clients robust activityreporting and job control functions that are not offered by many of ourcompetitors.  We offer document management solutions that provide electronicdocument presentation functions that enable our clients to automaticallygenerate and deliver presentation-quality documents from enterprise systemssuch as ERP, CRM, and E-Commerce and to populate a database with data from adocument that has either been scanned or received as a fax.

MVIcharges our clients a fee primarily based upon either the number of pagesdelivered and received, or upon the number of minutes expended, for thedelivery or receipt of our clients' documents during the month.  In some cases,we charge one-time and annual perpetuation fees for custom-developed clientsolutions.  Our net revenues are impacted by the number of effective businessdays in a given period.

Netsales to external customers for the fiscal years ended December 31, 2006 and 2005were $2,890,640 and $3,093,450, respectively.

TailoredBusiness Systems, Inc. - Government Accounting Products and Services

TBS(32% of consolidated revenues in 2006) is a Georgia corporation established in1973.  The Company acquired TBS in February 2004.  TBS is engaged in thebusiness of creating, maintaining, training, customizing and supportingcomputer application programs primarily for the use of city and countygovernments, the sale and installation of computer equipment and supplies, the printingand ordering of forms, the furnishing of consulting services, and theimplementation of internal computer networks in communication with IBM iSeriesservers.  We generate revenues from TBS' established client base in the form ofvolume printing, billing, and fulfillment services as well as maintenance andtraining revenues.  We have achieved a dominant share of the Georgia market forsmall to medium government entities, enjoying 75% of the city and municipalgovernment market and 31% of the county government market in that state. Ourgoals include expanding our business model to governmental entities regionallyand, eventually, nationwide.  In addition, we intend to expand revenue bothfrom printing and from subscription-based hosted solutions.

Asof February 28, 2007, TBS had approximately 400 active clients.  During 2006,no single customer accounted for more than 10% of consolidated net sales.

Wecharge for our proprietary software and for general-purpose hardware used inproviding in-house solutions.  When a client elects to use the hostedApplication Service Provider service, we charge a monthly fee per user for theuse of the Internet based services.  For our online payment services, chargesare usage-based.  In addition to our application offerings, we charge forconsulting, installation, implementation, support, annual maintenance andtraining.  We charge separately for printing and forms jobs based on thespecific nature of the requirements.  For printing, it is generally per mailingand for forms on a per page basis.  We deliver an efficient, economical andsecure environment for our municipal clients.  Our net revenues vary quarterlybased on the budget and property tax assessment cycles of our local governmentclients.

Netsales for the fiscal years ended December 31, 2006 and 2005 were $4,130,458 and$3,779,211, respectively.

Resolutions- Electronic Document Management Services / Electronic Forms

Resolutions(17% of consolidated revenues in 2006) provides products for documentmanagement,  document imaging, electronic forms, document archiving, and e-mailarchiving.   Resolutions' solutions are intended to help companies manage theentire life cycle of business critical information, whether it is to beprinted, distributed, emailed, faxed, archived, imaged or just retrieved andviewed on screen.  Our solutions have the power and flexibility to allow ourcustomers to optimize the processing and delivery of the entire range ofbusiness documents and help them to keep their businesses competitive by makingit easier to generate, store, manage, protect, retrieve, and distribute theirinformation.

Resolutionsoffers the full spectrum of Enterprise Content Management, providing a simple,intuitive, yet powerful, Knowledge Management software that allowsorganizations of all sizes to Process, Capture, Manage, and Protect their vitalbusiness information.  Our proven software puts users in a position to optimizethe content and appearance of documents and to deliver them via Print, Fax,E-Mail, Web, or Imaging and Archiving.  Resolutions' suite of products include:R-Forms, for electronic forms design presentation and distribution;  R-Fax, anenterprise fax solution for production, desktop, and broadcast faxing; R-Checks, a turnkey check printing solution;  R-Output Manager, a report andmulti-page document automation manager that delivers reports and electronicforms to recipients via print, email, fax, post-to-web or archive; and Redmap,a full function imaging and archiving solution. 

Asof February 28, 2007, Resolutions had approximately 300 active clients.  During2006, no single customer accounted for more than 10% of consolidated net sales.

Netsales to external customers for the fiscal year ended December 31, 2006 were $2,170,077. Net sales to external customers for the period from April 1, 2005 (effectivedate of acquisition) through December 31, 2005 were $1,895,785.

Productsand Services Development

TheCompany actively and continually engages in development of additional productsand services to offer to our existing and potential new clients.

Ourability to sustain our development activities is dependent upon theavailability of sufficient funds from operations or other sources such asproceeds received by the Company from the sale of common stock, bank lines ofcredit or other credit facilities.

Competition

Manyof our existing competitors, as well as a number of potential new competitors,have longer operating histories, greater name recognition, larger customerbases and significantly greater financial, technical and marketing resourcesthan the Company's subsidiaries. Such competitors may be able to undertake moreextensive marketing campaigns, adopt more aggressive pricing policies and makemore attractive offers to potential employees and distribution partners.  Webelieve that GSI and MVI can compete effectively because we offer our clientscertain capabilities that much of the competition does not offer, such ascustom integration, private-labeling, intelligent document routing, enhanceddelivery tracking, time-released training messaging, integrated distributionlists, call transfer functionality, and electronic document presentation.  Webelieve TBS can compete effectively because we provide affordable and reliablefull-service solutions tailored to the needs of local governments.  We believeResolutions can compete effectively because we offer affordable yet completesolutions to manage electronic documents.  However, there can be no assurancethat our competitors will not develop and market similar products and servicesthat are equal or superior to ours, or that achieve greater market acceptancethan our offerings.

Outlookand Strategy

Weintend to continue our focus on obtaining growth from higher margin productsand services at GSI, MVI and TBS, as well as growth from Resolutions and otheracquisitions of companies that consistently generate net income and positivecash flows.  We believe that this strategy offers the best opportunity for theCompany's operations to continue to generate positive operating income and cashflows from operations and to achieve net income.

During2006, we pursued our strategy of preparing VillageEDOCS for significantgrowth.  One area that we focused on was adding to the leadership team so thatsufficient management resources would be in place to properly manage ourplanned growth.  Should additional growth capital become available during 2007,we intend to direct the capital toward increasing sales and marketing while holdingdown costs for general and administrative as well as product and technologyexpenses.

GovernmentRegulation

Ourservices relate principally to the Internet and telecommunications.Accordingly, we are subject to legal and regulatory developments affectingeither Internet or telecommunications services in general. Due to theincreasing popularity and use of the Internet, a number of laws and regulationshave been adopted at the international, federal, state and local levels withrespect to the Internet. Many of these laws cover issues such as privacy,freedom of expression, pricing, on-line products and services, taxation,advertising, intellectual property, information security and the convergence oftraditional telecommunications services with Internet communications. Moreover,a number of laws and regulations have been proposed and are currently beingconsidered by federal, state, local and foreign legislatures with respect tothese issues. The nature of any new laws and regulations and the manner inwhich existing and new laws and regulations may be interpreted and enforcedcannot be fully determined.

Researchand Development

Themarkets for our services are evolving rapidly, requiring ongoing expendituresfor research and development and timely introduction of new services andservice enhancements. Our future success will depend, in part, on our abilityto enhance our current services, to respond effectively to technologicalchanges, to sell additional services to our existing customer base and tointroduce new services and technologies that address the growing needs of ourtarget markets and existing clients.

Employees

Asof February 28, 2007, VillageEDOCS had six full-time employees, four of whomare executive officers.  GoSolutions had twenty nine full-time employees. These employees include three engaged in sales and marketing, nine in customerservice, three in product development, ten in engineering and operations, andfour in administration.  MessageVision had twelve full-time employees. Theseemployees include two engaged in sales and marketing, seven in engineering andoperations, and two in administration.  TBS had nineteen full-time employees,including one engaged in sales and marketing, three in technology development,twelve in operations, and three in administration.  Resolutions had twelvefull-time employees, three in sales, seven in operations and technologydevelopment, and two in administration. 

** **

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**ITEM2.  DESCRIPTION OF PROPERTY**

VillageEDOCS and its subsidiaries occupyoffice space in California, Georgia and Florida.  The operations ofVillageEDOCS and MVI are conducted from approximately 3,600 square feet ofleased office space located at 14471 Chambers Road, Suite 105, Tustin,California 92780.  We lease the Tustin office space pursuant to an operatinglease agreement expiring in May 2007 at a cost of $5,380 per month.  Theoperations of GoSolutions are conducted from approximately 8,000 square feet ofleased office space located at 10701 Danka Way North, Suite 100, St. Petersburg,Florida  33716.  GoSolutions leases the St. Petersburg office space pursuant toa noncancelable operating lease agreement expiring in April 30, 2011 at a costof $12,653 per month.    The building in which the office space is located isowned by an entity in which a member of GoSolutions Equity LLC (a significantshareholder of VillageEDOCS) owns an interest.  The operations of TBS areconducted from approximately 6,200 square feet of leased office space locatedat 40 Joe Kennedy Blvd., Statesboro, GA  30458.  The Company leases theStatesboro office space pursuant to an operating lease expiring in January 2009at a cost of $6,200 per month.  The office building is owned by a partnershipcontrolled by TBS' former owners, who are presently employees of TBS (see"*Certain Relationships and Related Transactions* ").  Theoperations of Resolutions are conducted from approximately 5,500 square feet ofleased office space located at 3360 Martin Farm Road, Suwanee GA 30024 at acost of $7,333 per month expiring in April of 2010.

Additionally, the Company leases space andoperating systems equipment from AT&T in Irvine, California and from Qwestin Tampa, Florida, primarily to support the service operations of MVI and GSI. The highly secure facilities are served by all major global telecommunicationscarriers and are physically-, environmentally-, and utility-redundant siteswith multiple telecommunications feeds, multiple emergency power generators,and emergency fuel reserves. These fully redundant systems and emergency powerprovisions are designed to provide non-stop service and no single point offailure.

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**ITEM3.  LEGAL PROCEEDINGS**

 

Litigationand Claim

Inconnection with our acquisition of GSI, we are entitled to certain rights ofindemnification from GoSolutions Equity, LLC, which is a former shareholder ofGSI that became a shareholder of the Company as a result of our acquisition ofGSI.  We have made a claim of indemnification from this entity in connectionwith the bankruptcy of one of GSI's significant customers - Vartec Telecom,Inc. - and the facts and circumstances relating to the procurement andmaintenance of the Primerica Life Insurance account and related Citigroupaffiliates.  GoSolutions Equity, LLC has indicated that it does not believe thatwe have a valid basis for making such indemnification claims.

Wehave not engaged in meaningful discussions with GoSolutions Equity, LLC as itrelates to our indemnification claims notice and their response to such claimsnotice.  Accordingly, we are unable to advise whether we will be successful inour indemnification claims against GoSolutions Equity, LLC.  Pursuant to ouragreement with GSI, if we are successful, GoSolutions Equity, LLC would only berequired to return up to approximately 4.4 million of our shares issued to thatentity to satisfy such indemnification claims.  GoSolutions Equity, LLC is notrequired to contribute cash to satisfy any indemnification claims.

InMarch 2007, GSI was served by the Trustee for Vartec Telecom, Inc. in the UnitedStates Bankruptcy Court for the Northern District of Texas, Dallas Division,Case No. 04-81694-hdh-7.  The complaint seeks recovery of approximately$400,000 for alleged preferential transfers made in 2004.  VillageEDOCS and GSIintend to vigorously defend in an attempt to settle this case.  The Company hasbeen advised that the maximum potential loss should be approximately $150,000;however, based on the early stage of this case, it is difficult to evaluate themerits of the claim and too early to predict with any certainty the ultimateoutcome of this case.

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**ITEM4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**

On April 25, 2006, holders of a majority of thevoting capital stock of the Company acted by written consent in lieu of aspecial meeting of shareholders to provide for the following:

1.               The election of five directors to serve until the 2007 annualmeeting of stockholders and until their successors are elected and qualified;and 

2.               Amend the Company's Bylaws to create the position of ChiefExecutive Officer and describe the powers and responsibilities of the ChiefExecutive Officer; and

3.               Amend the Company's Bylaws to set the number of Directors to notless than three (3) nor more than nine (9).

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**PART II**

** **

**ITEM5.  MARKET FOR EQUITY SECURITIES AND RELATED STOCKHOLDER MATTERS**

** **

Ourcommon stock is traded on the Over-the-Counter Bulletin Board ("OTCBB").  The following sets forth the range of high and low bid quotations for theperiods indicated as reported by Nasdaq Trading and Market Services.  Suchquotations reflect prices between dealers without retail mark-up, markdown orcommission and may not represent actual transactions.  The Company'scommon stock is quoted on the OTCBB under the symbol VEDO.  The stock isthinly traded and transactions in the stock are sporadic and infrequent.

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|   | Quarter Ended      | High Bid | Low Bid |   |
|--------|--------------------|----------|---------|--------|
|   | March 31, 2005     | $0.165   | $0.125  |   |
|   | June 30, 2005      | $0.200   | $0.130  |   |
|   | September 30, 2005 | $0.200   | $0.130  |   |
|   | December 31, 2005  | $0.190   | $0.120  |   |
|   | March 31, 2006     | $0.165   | $0.080  |   |
|   | June 30, 2006      | $0.200   | $0.080  |   |
|   | September 30, 2006 | $0.100   | $0.060  |   |
|   | December 31, 2006  | $0.140   | $0.085  |   |

```
 
```

Asof December 31, 2006, there were 362****holders of record of the Company'scommon stock and one holder of record of the Company's preferred stock.

Dividend Policy

We have never declared dividends orpaid cash dividends on our common stock.  We intend to retain and use anyfuture earnings for the development and expansion of our business and do notanticipate paying any cash dividends in the foreseeable future.  

Recent Sales of Unregistered Securities

Thefollowing provides information concerning all sales of securities within thelast fiscal quarter of 2006 that were not registered under the Securities Actof 1933, as amended (the "Securities Act"):

OnOctober 31, 2006, the Company issued an aggregate of 500,000 shares of itsrestricted common stock to a consultant in connection with a placement agency agreement. The 500,000 shares were valued at $0.09 per share (fair value on date ofissuance) and the Company recorded $45,000 of consulting expense in accordancewith the nature of the services provided.

Alloffers and sales of our securities described above were made pursuant toSection 4(2) of the Securities Act of 1933 and Regulation D promulgatedthereunder.

----

**ITEM 6.  MANAGEMENT'SDISCUSSION AND ANALYSIS OR PLAN OF OPERATION**

 

**INTRODUCTION**

 

The following Management Discussion and Analysis or Plan of Operation ("MD&A")is intended to help the reader understand VillageEDOCS.  MD&A is presentedin the following seven sections:

-         BusinessOverview 
-         CriticalAccounting Policies and Estimates 
-         RecentAccounting Standards and Pronouncements 
-         Resultsof Operations 
-         Liquidityand Capital Resources 
-         CautionaryInformation About Forward-Looking Statements; and 
-         CertainFactors That May Affect Future Results. 

MD&A is provided as a supplement to, and should be read inconjunction with, our audited consolidated balance sheet as of December 31, 2006and our audited consolidated statements of operations, stockholders' equity(deficit) and cash flows for each of the years in the two-year period thenended and the related notes thereto. 

In MD&A, we use "we," "our," "us,""VillageEDOCS," and "the Company" to refer to VillageEDOCSand its wholly-owned subsidiaries, unless the context requires otherwise. Amounts and percents in tables may not total due to rounding.  This discussioncontains forward-looking statements based upon current expectations thatinvolve risks and uncertainties, such as our plans, objectives, expectationsand intentions. The Company cautions readers that important facts and factorsdescribed in MD&A and elsewhere in this document sometimes have affected,and in the future could affect our actual results, and could cause our actualresults during 2007 and beyond to differ materially from those expressed in anyforward-looking statements made by, or on behalf of, the Company. 

The Company's Internet web site address is www.villageedocs.com.  The Company'sannual reports on Form 10-KSB, quarterly reports on Form 10-QSB, and currentreports of Form 8-K, and all amendments thereto, are available free of chargeon our website as soon as reasonably practical after such reports areelectronically filed with, or furnished to, the U.S. Securities and ExchangeCommission.  The information on the Company's web site is not incorporated byreference in this annual report on Form 10-KSB.

Asreported in the Report of Independent Registered Public Accounting Firm on ourDecember 31, 2006 consolidated financial statements, the Company has sufferedrecurring losses from operations and has a working capital deficit that raisessubstantial doubt about our ability to continue as a going concern. 

Effective April 1, 2005, we acquired Resolutions and, effective May 1,2006, we acquired GoSolutions.  The acquisition of Resolutions in 2005 hascaused our results of operations during 2005 to vary significantly from thosereported for 2004 due to the consolidation of Resolutions during most of 2005. Moreover, the acquisition of GoSolutions has caused our results of operationssince May 1, 2006 and during 2006 to vary significantly from those reported for2005 due to the consolidation of GoSolutions.

Our business and results of operations are affected by a wide variety offactors, as we discuss under the caption "*Certain Factors That May AffectFuture Results*" and elsewhere in this report, which could materially andadversely affect us and our actual results.  As a result of these factors, wemay experience material fluctuations in future operating results on a quarterlyor annual basis, which could materially and adversely affect our business,financial condition, operating results and stock price.

Any forward-looking statements herein speak only as of the date hereof.Except as required by applicable law, we undertake no obligation to publiclyrelease the results of any revisions to these forward-looking statements thatmay be made to reflect events or circumstances after the date hereof or toreflect the occurrence of unanticipated events.

 

**BUSINESS OVERVIEW**

 

***General***

Weare incorporated in the State of California and have been in business since1995.  We conduct our business through four wholly-owned subsidiaries.  GSI, ourmost recent acquisition, provides enhanced voice and data communicationsservices.  MVI operates our Internet based document delivery services.  TBSoperates our government accounting products and services business.  Resolutionssells and operates our e-forms, archiving, imaging, and workflow products andservices.

Wegenerate revenue, operating income, and cash flows from:

- subscription     agreements for enhanced voice, data, and conferencing services;
- usage     charges for delivery and other services involving electronic documents;
- usage     charges for our governmental accounting and online payment hosted     application services;
- recurring     fixed monthly service fees for access to voice, data, or application     services;
- per     item and flat fee charges for volume printing services to governmental     entities;
- fees     for professional service;
- wholesale     enhanced voicemail services;
- the     sale of licenses for proprietary software and third party software;
- fees     for maintenance and support agreements;
- installation     services;
- sales     of third party computer hardware; and
- fees     for training.

***OurObjective***

Acore component of our mission is to provide solutions that facilitate themovement of business information between business enterprises using a dynamicand diverse set of delivery methods and content formats.  Our products andservices have been designed to help enterprises meet various communicationschallenges, including the need to:

- communicate     with an ever-expanding number of trading partners, customers, and     enterprises;
- increase     the control, management, speed, accuracy and security of the information     delivered;
- manage     an increasing set of methods used to communicate (print/mail, email, web,     fax, XML, and wireless);
- cost-effectively     implement a solution that will allow the enterprise to endure the slow     acceptance of a common set of delivery methods;
- meet     the communications challenges with a service that is more robust than     available commercial grade proprietary technologies; and
- mitigate     the negative impact of delivery methods on workflow, business process and     security requirements.

Ourtarget markets include Financial Services, Healthcare, Manufacturing, and LocalGovernment, and we serve approximately 5,100 active clients.

Whilewe do have some sources of non-recurring revenue, such as hardware sales andthird party software, we focus on developing and maintaining sources of monthlyrecurring revenue, such as providing subscribers with solutions for theircritical day to day business processes for the movement of businessinformation.

***KeyItems in 2006***

In2006, we made significant progress toward achieving our strategic objectivesby:

- acquiring     GSI effective May 1, 2006, a company with strategic products and services     (2006 revenue: $3,720,998);

- increasing consolidated net     revenue for 2006 by 47% due to a 9% increase in our TBS subsidiary, a 14%     increase in our Resolutions subsidiary resulting from the consolidation of     the net revenue of Resolutions during the first quarter of 2006, and the     consolidation of $3,720,998 of net revenue of GSI from May 1, 2006 (date     of acquisition);

- reducing net loss for 2006     by $7.2 million compared to 2005 as a result of the conversion to common     stock of all debt containing embedded derivatives; and

- preparing     to successfully execute our planned growth strategy  by strengthening the     management team.  During 2006, we hired Jerry Kendall as President and Joe     Torano as Sr. V.P. of Sales and Marketing.

***Areasof Focus***

*Growth Strategy*

Ourcurrent and future growth strategy is focused on acquiring intellectual andtechnology assets that improve our ability to take a client's unstructuredcontent and documents and deliver it to the other party through the method preferredby each party, presenting the content in a manner that surpasses our client'sgoals.  In essence, we strive to bring a Business Process Management disciplineto their information.  We believe that if we are successful in executing thisstrategy, our clients will enjoy improved compliance, collaboration, costcontainment, and superior continuity of business processes.

Ourultimate vision is to become a business process management/workflow servicethat provides competency and functionality in the following areas: 

- Web Content Management;
- Digital Asset Management;
- Email Management;
- Records Management;
- Documentation Management;
- Information Indexing;
- Categorization/Taxonomy;
- Recognition;
- Document Imaging;
- Form Processing;
- Scanning;
- Collaboration
- Repositories, Storage;
- Long Term Archival;
- Content Integration,;
- Search and Retrieval;
- Content Syndication;
- Localization and Personalization; and
- Publication (paper or electronic).

Weintend to continue our focus on obtaining growth from sales of higher marginproducts and services at GSI, MVI, TBS, and Resolutions and by acquiring companiesthat consistently generate net income and positive cash flows.  We believethat this strategy offers the best opportunity for our operations to continueto generate positive operating income and cash flows from operations and toachieve net income. 

Ouracquisition strategy is focused in two areas: service infrastructure andvertical market silo.  The service infrastructure area is our focus to acquireenterprises that fulfill our identified strategic technological corecompetencies.  The vertical market silo acquisition strategy is to acquirecompanies that assist us in penetrating our target market segments of financialservices, healthcare, manufacturing, and local government.

*CapitalFormation*

During2007, we are actively seeking additional financing by issuing equity or obtaininga combination of equity and debt financing from new shareholders and/or lenders. Although we believe the Company will generate adequate cash to sustainoperations at current levels, we may require additional funding to invest inresources that will enable us to operate profitably on a consistent,month-over-month basis. We continue to caution that there can be no assurancethat funding will be available on acceptable terms, if at all, or that any suchfunds we raise would enable us to maintain profitable operations. 

Inspite of the impact of new laws, regulations, and accounting pronouncementsthat have significantly increased our cost of operating as a public company, weintend to contain general and administrative costs where possible.  Shouldadditional growth capital become available during 2007, we intend to direct thecapital toward increasing sales and marketing while holding down costs forgeneral and administrative as well as product and technology expenses to theextent possible.

*OrganizationalEnhancements*

Ourgoal is to drive efficiency and effectiveness throughout our group ofcompanies.  We are working to align each business unit around shared goals andperformance targets.  In addition, we are striving to maximize cross-sellingactivities and we are devoting strategic product management and technicalresources both to strengthening the integration of our existing products andservices and to developing new products and services that will allow us tooffer our clients powerful new solutions comprised of the best that each of ourbusiness units has to offer.

***Challengesand Risks***

Lookingforward, management has identified certain challenges and risks that demand ourattention.  Of these, two key challenges and risks are discussed below.

*IncreasedCompetition and Capabilities in the Marketplace*

Weface strong competition from well-established national and global companies aswell as from relatively new companies. We must continue to selectively expandinto other profitable segments of our markets and offer powerful product andservice offerings in order to increase our share of the marketplace.  Theintroduction of new technologies could render our existing products andservices obsolete or unmarketable or require us to invest in research anddevelopment at much higher rates with no assurance of developing competitiveproducts. Changes in technologies or customer requirements also may cause thedevelopment cycle for our new products and services to be lengthy and result insignificant development costs.  Competitive pressures may impair our ability toachieve profitability

*CapitalResources*

We believe that current and future available capital resources,including the net proceeds from sale of our products and services, will be sufficientto fund our operations at current levels for the foreseeable future.  However,the exact amount of funds that we will require will depend upon many factors,and it is possible that we will require additional financing.  Such sources offinancing could include capital infusions, additional equity financing, or debtofferings. There can be no assurance that additional funding will be availableon acceptable terms, if at all, or that such funds if raised, would enable theCompany to achieve and maintain profitable operations.  Theinability to obtain such financing could have a material adverse effect on ourbusiness, financial condition and results of operations.

Seealso the section entitled *Certain Factors That May Affect Future Results*below for more information about risks and uncertainties facing VillageEDOCS.

**Critical Accounting Policies and estimates **

Inpreparing our consolidated financial statements, we make estimates, assumptionsand judgments that can have a significant effect on our revenues, income/lossfrom operations, and net income/net loss, as well as on the value of certainassets on our consolidated balance sheet.  We believe that there are severalaccounting policies that are critical to an understanding of our historical andfuture performance as these policies affect the reported amounts of revenues,expenses, and significant estimates and judgments applied by management.

Whilethere are a number of accounting policies, methods and estimates affecting our consolidatedfinancial statements, areas that are particularly significant include:

- revenue     recognition;
- stock-based     compensation;
- software     development costs;
- goodwill and     other intangible assets;
- long-lived assets;
- beneficial     conversion features
- income     taxes; and
- contingencies

Inaddition, please refer to Note 3 to the accompanying consolidated financialstatements for further discussion of our significant accounting policies.

**RevenueRecognition. **Werecognize revenue in accordance with Staff Accounting Bulletin ("SAB") No. 101,"*Revenue Recognition in Financial Statements*", as revised by SABNo. 104.  As such, we recognize revenue when persuasive evidence of anarrangement exists, title transfer has occurred, or the services have beenperformed, the price is fixed or readily determinable and collectibility isprobable.  Sales are recorded net of sales discounts.  

Wehave adopted Statement of Position ("SOP") 97-2, "*Software RevenueRecognition*," as well as SOP 98-9, "*Modification of SOP 97-2,Software Revenue Recognition with Respect to Certain Transactions*." The SOPs generally require revenue earned on software arrangements involvingmultiple elements to be allocated to each element based on the relative fairmarket values of each of the elements. The fair value of an element must bebased on vendor-specific objective evidence ("VSOE") of fair value. Softwarelicense revenue generated by TBS and Resolutions allocated to a softwareproduct is recognized upon delivery of the product, or deferred and recognizedin future periods to the extent that an arrangement includes one or moreelements that are to be delivered at a future date and for which VSOE has notbeen established.  Maintenance and support revenue is recognized ratably overthe maintenance term.  First-year maintenance typically is sold with therelated software license and renewed on an annual basis thereafter. Estimatedfair values of ongoing maintenance and support obligations are based onseparate sales of renewals to other customers or upon renewal rates quoted inthe contracts. For such arrangements with multiple obligations, we allocaterevenue to each component of the arrangement based on the estimated fair valueof the undelivered elements. Fair value of services, such as consulting ortraining, is based upon separate sales of these services. At times, we mayenter into multiple-customer contracts in which we allocate revenue based onthe number of specified users at each customer, and recognizes revenue uponcustomer acceptance and satisfying the other applicable conditions of the abovedescribed accounting policy. 

Servicesrevenue is recognized as the service is performed assuming that sufficientevidence exists to estimate the fair value of the services.  Consulting andtraining services are billed based on contractual hourly rates and revenues arerecognized as the services are performed. Consulting services primarily consistof implementation services related to the installation of our products which donot require significant customization to or modification of the underlyingsoftware code. 

Revenuefrom subscription agreements consists of fixed monthly fees and usage charges,generally based on per minute rates.  Subscription agreement revenue related toMVI and GSI usage service charges are billed monthly in arrears and the associatedrevenues are recognized in the month of service. Recurring charges for theGoSoloTM platform are billed in advance on a monthly basis and recorded asdeferred revenues.  We recognize subscription agreement revenue ratably overthe service period, which management believes approximates the actual provisionof services. Professional service fee revenue consists of consulting feescharged to enterprise clients for GoSoloTM platform enhancements.  We recognizeprofessional service fee revenue on a time and materials basis over the serviceperiod, which management believes approximates the actual provision ofservices.  Wholesale enhanced voicemail services consists of fees charged totelecommunications providers for use of the GoSoloTM platform to provide theircustomers with hosted electronic voicemail, billed monthly in arrears and theassociated revenues are recognized in the month of service.

Significantmanagement judgments and estimates must be made in connection withdetermination of the revenue to be recognized in any accounting period. If wemade different judgments or utilized different estimates for any period,material differences in the amount and timing of revenue recognized couldresult. 

 

**Stock-BasedCompensation****. **OnJanuary 1, 2006, we adopted Statement of Financial Accounting Standards No. 123(revised 2004), "*Share-Based Payment*," ("SFAS 123(R)") which requiresthe measurement and recognition of compensation expense for all share-basedpayment awards made to our employees and directors based on estimated fairvalues. We adopted SFAS 123(R) using the modified prospective transactionmethod, which requires the application of the accounting standard as of January1, 2006, the first day of our fiscal year 2006. Our consolidated financial statementsas of and for the year ended December 31, 2006 reflect the impact of SFAS123(R). In accordance with the modified prospective transition method, ourconsolidated financial statements for prior periods have not been restated toreflect, and do not include, the impact of SFAS 123(R). The value of theportion of the award that is ultimately expected to vest is recognized as anexpense over the requisite service periods in our consolidated statement ofoperations. Prior to the adoption of SFAS 123(R), we accounted for stock-basedawards to employees and directors using the intrinsic value method inaccordance with APB 25 as allowed under Statement of Financial AccountingStandards No. 123, "*Accounting for Stock-Based Compensation* " (SFAS123). As stock-based compensation expense recognized in the consolidated statementof operations for 2006 is based on awards ultimately expected to vest, it hasbeen reduced for estimated forfeitures. SFAS 123(R) requires forfeitures to beestimated at the time of grant and revised, if necessary, in subsequent periodsif actual forfeitures differ from those estimated.  The estimated averageforfeiture rate for the year ended December 31, 2006, of approximately 11% wasbased on historical forfeiture experience and estimated future employeeforfeitures.

Stock-basedcompensation expense recognized as operating expense under SFAS 123(R) for the yearended December 31, 2006 was $557111, determined by the Black-Scholes valuationmodel, and consisting of stock-based compensation expense related to employee  stock options. See Note 3 to the consolidated financial statementsfor additional information.

 

**SoftwareDevelopment Costs**. We capitalize software development costs pursuant to SFAS No. 86, "*Accountingfor the Costs of Computer Software to be Sold, Leased or Otherwise Marketed*,"after technological feasibility of the software is established, which isgenerally the completion of a working prototype and ends upon general releaseof the product to our customers. All costs incurred in the research anddevelopment of new software and costs incurred prior to the establishment oftechnological feasibility are expensed as incurred. Capitalized costs consistof direct costs and allocated overhead associated with the development of thesoftware products.  Amortization of software development costs commences whenthe product becomes available for general release to customers and is computedbased on the straight-line method over the software's estimated economic lifeof approximately three years.  We review the unamortized software developmentcosts at each balance sheet date and, if necessary, will write down the balanceto net realizable value if the unamortized costs exceed the net realizablevalue of the asset.

 

**Goodwilland Other Intangible Assets**.  In accordance with SFAS No. 141, "*BusinessCombinations*," we record the assets acquired and liabilities assumed inbusiness combinations at their respective fair values at the date ofacquisition, with any excess purchase price recorded as goodwill. Because ofthe expertise required to value intangible assets, we typically engageindependent valuation specialists to assist us in determining those values.Valuation of intangible assets entails significant estimates and assumptionsincluding, but not limited to, estimating future cash flows from product sales,developing appropriate discount rates, continuation of customer relationshipsand renewal of customer contracts, and approximating the useful lives of theintangible assets acquired. To the extent actual results differ from theseestimates, our future results of operations may be affected. The Company hasadopted SFAS No. 142 "*Goodwill and Other Intangible Assets*." Under SFAS No. 142, goodwill and other intangible assets with indefinite livesare no longer subject to periodic amortization but are instead reviewedannually for impairment, or more frequently if impairment indicators arise.

Webelieve that the accounting estimates related to impairment of goodwill andother intangible assets are "critical accounting estimates" because(1) they are highly susceptible to change from period to period because theyrequire company management to make assumptions about future sales and cost ofsales, and (2) the impact that recognizing an impairment would have on theassets reported on our consolidated balance sheet as well as our net loss wouldbe material.  Management's assumptions about future sales prices and futuresales volumes have fluctuated in the past and are expected to continue to doso.

Inestimating future sales, we use our internal budgets.  We develop our budgetsbased on recent sales data for existing products and services, planned timingof new product and service launches, and customer commitments related toexisting and newly developed products and services.

Ineach of the last two years, we have used the services of independent valuationfirms to assist us with identifying and valuing intangible assets and testingthe reported carrying value of our goodwill and intangible assets.  In eachyear we determined that, based on our assumptions, as well as the impairmentanalysis conducted by the valuation firm, that the sum of the expected futurediscounted cash flows exceeded the reported carrying value and therefore we didnot recognize an impairment loss.

Ifwe had been required to recognize an impairment loss on our goodwill andintangible assets, it would likely not have materially affected our liquidityand capital resources because we are not subject to any restrictive covenantsrelated to the net income we report in our consolidated financial statements.

 

**Long-LivedAssets. **Weassess the recoverability of our long-lived assets by determining whether thedepreciation and amortization of long-lived assets over their remaining livescan be recovered through projected undiscounted future cash flows.  The amountof long-lived asset impairment, if any, is measured based on fair value and ischarged to operations in the period in which long-lived asset impairment isdetermined by management.****

 

**BeneficialConversion Feature. **The convertible feature of certain of our convertible notesprovides for a rate of conversion that is below market value. Such feature isnormally characterized as a "beneficial conversion feature"("BCF"). Pursuant to Emerging Issues Task Force Issue No. 98-5("EITF 98-5"), "*Accounting For Convertible Securities withBeneficial Conversion Features or Contingently Adjustable Conversion Ratio*"and Emerging Issues Task Force Issue No. 00-27,"*Application of EITFIssue No. 98-5 To Certain Convertible Instruments*," the relative fairvalues of the BCFs have been recorded as a discount from the face amount of therespective debt instrument. We are amortizing the discount using the effectiveinterest method through maturity of such instruments.  We will record thecorresponding unamortized debt discount related to the BCF and warrants asinterest expense when the related instrument is converted into our commonstock.

**IncomeTaxes.** We account for income taxes using the asset and liability method under whichdeferred tax assets or liabilities are calculated at the balance sheet dateusing current tax laws and rates in effect for the year in which thedifferences are expected to affect taxable income. Valuation allowances areestablished, when necessary, to reduce deferred tax assets to the amountsexpected to be realized.

**Contingencies.****** From time to time weare or may be subject to various claims and contingencies, sometimes related tolegal proceedings.  Due to their nature, such legal proceedings involveinherent uncertainties including, but not limited to, court rulings,negotiations between affected parties, and governmental actions.  Managementassesses the probability of loss for such contingencies and accrues a liabilityand/or discloses the relevant circumstances, as appropriate.

**RECENTACCOUNTING STANDARDS AND PRONOUNCEMENTS**

Referto Note 3 of Notes to Consolidated Financial Statements for a discussion ofrecent accounting standards and pronouncements.

** **

** **

**RESULTSOF OPERATIONS**

**Year Ended December 31, 2006 Compared to Year EndedDecember 31, 2005**

**NetRevenue from External Customers**

Netrevenue from external customers for 2006 was $12,912,173, a 47% increase over 2006net revenue of $8,768,446.  

During2006, GSI, MVI, TBS, and Resolutions generated 29%, 22%, 32%, and 17% of ournet revenue, respectively.  During 2005, MVI, TBS, and Resolutions generated 35%,43%, and 22% of our net revenue, respectively.

|                                            |  | Year  Ended                                                                                                                                                                | Year  Ended                                                                                                                                                                |                                                                                                                |         |
|--------------------------------------------|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------|---------|
|                                            |  | December  31,                                                                                                                                                              | December  31,                                                                                                                                                              | Variance                                                                                                       |         |
|                                            |  | 2006                                                                                                                                                                       | 2005                                                                                                                                                                       | Amount                                                                                                         | Percent |
|                                            |  |                                                                                                                                                                            |                                                                                                                                                                            |                                                                                                                |         |
| Net revenue from external customers:       |  |                                                                                                                                                                            |                                                                                                                                                                            |                                                                                                                |         |
|                                            |  |                                                                                                                                                                            |                                                                                                                                                                            |                                                                                                                |         |
| Electronic document delivery services      |  | $            2,890,640                                                                                              | $         3,093,450                                                                                                                | $ (202,810)                                                                                                    | -7%     |
| Government accounting solutions            |  |               4,130,458                                                                                   |              3,779,211                                                                                    |       351,247                                                          | 9%      |
| Electronic forms                           |  |               2,170,077                                                                                   |              1,895,785                                                                                    |       274,292                                                               | 14%     |
| Integrated communications                  |  |                3,720,998                                                                        |                            -   |    3,720,998                                                                          | 100%    |
| Corporate                                  |  |                            -   |                            -   |                  -   |         |
| Total net revenue from  external customers |  | $          12,912,173                                                                                                    | $          8,768,446                                                                                                     | $4,143,727                                                                                                | 47%     |

Asanticipated, the most significant factor in the increase in consolidatedrevenue during 2006 was the consolidation of the revenue of GSI from the dateof acquisition (May 1, 2006).

Revenueincreased 9% at TBS due to increases in revenue from printing, maintenanceagreements, online services, and software that resulted from pursuing astrategy to expand our sales of printing business into new areas, building uponthe property tax form processing which has historically produced the largestshare of our overall printing revenue.  These increases were partially offsetby decreases in hardware sales, installation, and training which resulted inpart from our strategy to promote online, usage-based services rather thansingle unit product sales.

Revenueincreased 14% at Resolutions due to increases in sales of our proprietaryproducts and services as offset by decreases in sales of maintenance agreementsfor certain third party software products that resulted from the expiration ofcertain of our contracts with third party software companies.  In addition,revenue for 2006 increased due to the consolidation of Resolution's results forthe full year as compared to nine months in 2005 (from date of acquisition).

Revenuedecreased at MVI by 7% due to a slight reduction in revenue from monthly fixedcharges and a temporary reduction in sales staff and related expenses.  During2006, sales efforts were directed toward pursuing sales to larger clients. While such sales typically involve longer and more complex sales cycles, webelieve they provide a greater protection from pricing erosion due to theadditional functionality and integration that are elements more often associatedwith our larger client relationships.

**Costof Sales**

Thefollowing is a comparison of the components of consolidated cost of sales:

|                                       |  | Year  Ended                                                                                                                                                                | Year  Ended                                                                                                                                                               |                                                                                                                |         |
|---------------------------------------|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------|---------|
|                                       |  | December  31,                                                                                                                                                              | December  31,                                                                                                                                                             | Variance                                                                                                       |         |
|                                       |  | 2006                                                                                                                                                                       | 2005                                                                                                                                                                      | Amount                                                                                                         | Percent |
|                                       |  |                                                                                                                                                                            |                                                                                                                                                                           |                                                                                                                |         |
| Cost of sales:                        |  |                                                                                                                                                                            |                                                                                                                                                                           |                                                                                                                |         |
|                                       |  |                                                                                                                                                                            |                                                                                                                                                                           |                                                                                                                |         |
| Electronic document delivery services |  | $                946,941                                                                             | $              956,722                                                                                   | $     (9,781)                                                                              | -1%     |
| Government accounting solutions       |  |               2,533,461                                                                              |              1,509,488                                                                                   |    1,023,973                                                                          | 68%     |
| Electronic forms                      |  |          792,280                                                                                                              |             593,106                                                                                                |  199,174                                                                                        | 34%     |
| Integrated communications             |  |                  834,720                                                                   |                           -        |     834,720                                                                           | 100%    |
| Corporate                             |  |                            -   |                           -   |                  -   |         |
| Total cost of sales:                  |  | $            5,107,402                                                                                              | $         3,059,316                                                                                                          | $ 2,048,086                                                                                          | 67%     |

Costof sales for 2006 were $5,107,402 as compared to the $3,059,316 reported for2005.  Total cost of sales during 2006 represented 40% of net sales as comparedto 35% during 2005.

Costof sales for MVI during 2006 represented 33% of net sales as compared with 31%of net sales in 2005.

Costof sales for TBS during 2006 represented 61% of net sales as compared with 40%of net sales in 2005.  The increased costs at TBS were largely attributable tothe increase in revenue as well as reallocation of staff resources whichincreased operations staff costs and correspondingly reduced administrativestaff expenses.  

Costof sales for Resolutions during 2006 represented 19% of net sales as comparedwith 16% of net sales in 2005.  The increased costs at Resolutions reflect achange in revenue mix where sales of lower margin products and services weremore prominent during 2006 due to the reduction in revenue from maintenanceagreements, which generally provide greater margins.

Costof sales for GSI during 2006 represented 20% of net sales.

**GrossProfit**

Grossprofit for 2006 increased 37% to $7,804,771 as compared to $5,709,130 in 2005. The increase in 2006 of $2,095,641 resulted from the addition of $2,886,278from GSI as well as an increase of $75,118 from Resolutions.  These increases wereoffset by decreases of $193,029 and $672,726 from MVI and TBS, respectively. Gross profit margin for 2006 was 60% compared to 65% for 2005.

**OperatingExpenses**

Thefollowing is a comparison of the components of consolidated operating expenses:

|                                       |  | Year  Ended                                                                                          | Year  Ended                                                                                                                                                                            |                                                                |         |
|---------------------------------------|--|------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------|---------|
|                                       |  | December  31,                                                                                        | December  31,                                                                                                                                                                          | Variance                                                       |         |
|                                       |  | 2006                                                                                                 | 2005                                                                                                                                                                                   | Amount                                                         | Percent |
|                                       |  |                                                                                                      |                                                                                                                                                                                        |                                                                |         |
| Operating expenses                    |  |                                                                                                      |                                                                                                                                                                                        |                                                                |         |
|                                       |  |                                                                                                      |                                                                                                                                                                                        |                                                                |         |
| Electronic document delivery services |  | $              1,179,012            | $         1,386,338                                                                                                                                 | $   (207,326)                                        | -15%    |
| Government accounting solutions       |  |               1,375,461        |                2,270,659                                                                                         |       (895,198)                       | -39%    |
| Electronic forms                      |  |                1,293,189  | 893,086                                                                                                                                                                                |         400,103   | 45%     |
| Integrated communications             |  |                 2,595,251 |                              -   |      2,595,251                   | 100%    |
| Corporate                             |  |                 2,157,851 | 1,033,861                                                                                                                                                                              |      1,123,990                   | 109%    |
| Total operating  expenses:            |  | $              8,600,764            | $        5,583,944                                                                                                                                  | $ 3,016,820                                          | 54%     |

During2006, Corporate's operating expenses increased $1,123,940 from 2005 as a resultof increased compensation, legal and accounting expenses incurred in connectionwith our strategy to better prepare our company to manage planned growth,including acquisition-related growth.  In addition, we recognized $557,111 incompensation expense associated with the vesting of incentive stock options asa result of the adoption of SFAS No. 123(R).

During2006, MVI's operating expenses decreased by 15%.  Product and technologydevelopment increased by 14% to $415,815 from the $365,125 reported in 2005 asa result of increased compensation expenses.  Sales and marketing decreased by 41%to $373,536 from the $636,055 reported in 2005 as a result of staffreductions.  General and administrative was $347,340 during 2006 which is flatcompared to 2005.  Depreciation and amortization expense increased $4,890 to$42,321.

During2006, TBS's operating expenses decreased by 39%.    Product and technologydevelopment decreased $183,150 to $377,044 as compared to $560,194 reported in2005 due to decreased reliance on consultants and reallocation of staffresources.  Sales and marketing decreased 10% to $220,909 and general andadministrative decreased $658,823 to $656,735 from the $1,315,558 reported in2005 due to reallocation of staff resources.  Depreciation and amortizationexpenses decreased 19% to $120,773.

During2006, Resolutions operating expenses increased by 45%, largely due to comparingtwelve months of 2006 to the nine month period beginning with the date ofacquisition (April 1, 2005).  Product and technology development increased 27%to $180,430 due to compensation expenses, sales and marketing increased 32% to$337,411 due to hiring additional sales resources, and general andadministrative increased 63% to $636,729 due to reallocation of staffresources.  Depreciation and amortization expenses increased 30% to $138,619.  

Duringthe period from May 1, 2006 (date of acquisition) through December 31, 2006,GSI incurred $2,595,251 of operating expenses.  Sales and marketing, productand technology, general and administrative, and depreciation and amortizationexpenses were $558,800, $632,756, $999,411, and $404,464, respectively.

**OperatingIncome**

Asa result of the foregoing, the Company reported an operating loss for 2006 of $795,993,compared to an operating income of $125,186 for 2005.

Thefollowing is a comparison of the components of consolidated income (loss) fromoperations:

|                                       |  | Year  Ended                                                                                                               | Year  Ended                                                                                                                                              |                                                    |         |
|---------------------------------------|--|---------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------|---------|
|                                       |  | December  31,                                                                                                             | December  31,                                                                                                                                            | Variance                                           |         |
|                                       |  | 2006                                                                                                                      | 2005                                                                                                                                                     | Amount                                             | Percent |
|                                       |  |                                                                                                                           |                                                                                                                                                          |                                                    |         |
| Operating income (loss):              |  |                                                                                                                           |                                                                                                                                                          |                                                    |         |
|                                       |  |                                                                                                                           |                                                                                                                                                          |                                                    |         |
| Electronic document delivery services |  | $             764,687                               | $          750,390                                                                                | $      14,297   | 2%      |
| Government accounting solutions       |  |                 221,536              |                     (936)                                 |       222,472   | *       |
| Electronic forms                      |  |                   84,608   |                409,593                                                   | (324,985)                                          | -79%    |
| Integrated communications             |  |               291,027                          |                        -    | 291,027                                  | 100%    |
| Corporate                             |  |   (2,157,851)                                                                                                        |   (1,033,861)                                                                                                                                       | (1,123,990)                                        | 109%    |
| Total operating income  (loss)        |  | $          (795,993)                                                         | $          125,186                                                                                     | $   (921,179)                            | *       |
|                                       |  |                                                                                                                           |                                                                                                                                                          |                                                    |         |
| * calculation is not  meaningful      |  |                                                                                                                           |                                                                                                                                                          |                                                    |         |

Inaddition to increases in compensation, legal, and accounting expenses, twoother factors that contributed to this significant change were an increase indepreciation and amortization of $445,437 over 2005 (largely due to an increasein intangible assets and related amortization expense) and the adoption of SFASNo. 123(R), which increased operating expenses by $557,111 over 2005.

**Changein Fair Value of Derivative Liability**

Duringthe year ended December 31, 2005, we recognized other income of $130,903 relatedto recording our derivative liabilities at fair value.  At December 31, 2005,there were no derivative liabilities since the variable debt instruments weresettled in full during 2005.  At the settlement date, the remaining derivativeliabilities with a value of $7,302,899 were reclassified to additional paid-incapital.

**InterestExpense, net**

Duringthe year ended December 31, 2006, interest expense, net decreased by 99% to $112,233from the $8,074,489 reported in 2005.

During2006, the most significant element of interest expense were interest charges incurredin connection with borrowing $840,000 against GSI's revolving credit line.  Inaddition, we incurred charges for interest on promissory notes and convertiblepromissory notes payable to related parties and amortization of debt discount.

During2005, interest expense included:

- Amortization     of beneficial conversion feature and debt issue costs of $1,129,770;
- Amortization     of the fair value of the warrant issued to Barron Partners, LP of     $6,400,000; and
- The     fair value of $434,572 related to common stock issued in connection with     induced conversions.

**NetLoss**

Netloss for 2006 was $882,132, or $0.01 per share, compared to a net loss of $8,144,928,or $0.10 per share, for 2005 on weighted average shares of 131,185,095 and 82,728,108,respectively.

Thefollowing is a comparison of the components of consolidated net loss:

|                                       |  | Year  Ended                                                                                                                                       | Year  Ended                                                                                                                                                                      |                                                               |         |
|---------------------------------------|--|---------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------|---------|
|                                       |  | December  31,                                                                                                                                     | December  31,                                                                                                                                                                    | Variance                                                      |         |
|                                       |  | 2006                                                                                                                                              | 2005                                                                                                                                                                             | Amount                                                        | Percent |
|                                       |  |                                                                                                                                                   |                                                                                                                                                                                  |                                                               |         |
| Net income (loss):                    |  |                                                                                                                                                   |                                                                                                                                                                                  |                                                               |         |
|                                       |  |                                                                                                                                                   |                                                                                                                                                                                  |                                                               |         |
| Electronic document delivery services |  | $              822,206                                                      | $            778,923                                                                                            | $     43,283                    | 6%      |
| Government accounting solutions       |  |                     223,236              |               (1,161,493)                                                                                       |      1,384,729                  | *       |
| Electronic forms                      |  |                       78,161   |               (6,076,850)                                                                                       |      6,155,011                  | *       |
| Integrated communications             |  |                  278,305                                |                             -   |        278,305   | 100%    |
| Corporate                             |  |            (2,284,040)                                                                          |             (1,685,508)                                                                                                   |       (598,532)                      | 36%     |
| Total net loss                        |  | $            (882,132)                                                                     | $       (8,144,928)                                                                                                                                | $ 7,262,796                                         | -89%    |
|                                       |  |                                                                                                                                                   |                                                                                                                                                                                  |                                                               |         |
| * calculation is not  meaningful      |  |                                                                                                                                                   |                                                                                                                                                                                  |                                                               |         |

** **

** **

**LIQUIDITYAND CAPITAL RESOURCES**

During2006, our net cash position decreased by $193,232 to $568,819. Our operatingactivities provided net cash of $376,624; however, our investing and financingactivities used net cash of $29,219 and $540,637, respectively.

Netcash provided by operating activities for 2006 was $376,624, and increase of $17,335from the $359,289 provided by operating activities during 2005.

Ourinvesting activities consisted of costs incurred for the acquisition of GSI, cashacquired in the acquisition of GSI, the purchase of computer equipment, andadditions to capitalized software development costs. Net cash used in investingactivities decreased $452,610 to $29,219 from the $481,829 used in investingactivities during 2005.

Netcash used in financing activities for 2006 was $540,637, and included $10,000of proceeds from notes payable to related parties, as offset by $546,562 ofpayments on note and convertible notes related to the TBS, GSI and Resolutionsacquisitions.  Net cash provided by financing activities for 2005 was $426,582and included proceeds from notes payable to related parties of $80,000 andproceeds from a note payable of $715,000, as offset by $200,000 of payments onnotes related to the TBS and Resolutions acquisitions. 

EffectiveMay 1, 2006, we acquired GSI.   GSI's income from operations for the year endedDecember 31, 2005 was $743,847 on net revenue of $6,996,534.  VillageEDOCS'2005 income from operations was $125,186 on net revenue of $8,768,446.  Had theacquisition been in effect throughout all of 2005, the unaudited net revenue ofVillageEDOCS and GoSolutions would have been $15,764,980.  Accordingly, weexpect the acquisition of GoSolutions to have a significant and positive effecton our results for 2007 since we will be consolidating their results for all of2007 as compared to eight months in 2006.

Wedo not currently have any material commitments for capital expenditures otherthan those expenditures incurred in the ordinary course of business. 

Dueto a deficit in net tangible assets, we have historically been unable to obtainoperating lines of credit from traditional banking institutions.  During 2005,TBS renewed a $100,000 operating line of credit which it has not utilized as ofthe date of this report.  On June 30, 2006, VillageEDOCS secured a $500,000operating line of credit guaranteed by a shareholder on which it has a balanceof $350,000 as of the date of this report.  On June 28, 2006, GSI renewed a$1,000,000 operating line of credit guaranteed by four shareholders on which ithas a balance of $840,000 as of December 31, 2006.  The $840,000 was used inconnection with our acquisition of GSI.

Substantialrisk exists that a decrease in demand for our products and services wouldreduce the availability of cash from this source since our operating cash flowsare derived from products and services that are subject to rapid technologicalchange.

Sinceour inception, our operating and investing activities have used substantiallymore cash than they have generated. We believe that we have made considerableprogress toward achieving profitable operations by increasing revenues fromelectronic document delivery services and through our acquisition of TBS,Resolutions, and GSI.  In addition, we are actively seeking opportunities toacquire or otherwise combine with businesses that are operating profitably andgenerating positive cash flows.  However, at present and for the foreseeablefuture, we believe that we will continue to need working capital to fund thegrowth of our businesses and to absorb the increasing costs associated withoperating as a fully reporting company in the prevailing regulatoryenvironment.  Accordingly, we may experience negative operating and investingcash flows during certain months during 2007 until MVI, TBS, Resolutions, andGSI consistently generate net cash flows sufficient to offset the anticipatedexpenses of operating the holding company.  While we believe that our availablecash resources combined with our current revenue streams will be sufficient tomeet our anticipated working capital requirements for the next twelve months,we will require additional financing during 2007 to fund capital expenditurerequirements in the ordinary course of business and to make required principalpayments pursuant to our operating lines of credit.  Should our current revenuestreams or margins be subjected to even minor decreases, our fundingrequirements could be greater.

Webelieve that sustainable profitability is achievable; however, we have ahistory of losses.  While GSI, MVI, TBS, and Resolutions have reported bothmonthly operating incomes and monthly operating losses during 2006, operatingincomes have been insufficient to offset operating losses, interest expense andcorporate overhead.  If we are not successful in sustaining and increasingoperating profits from our four reporting segments, or reducing expenses of theholding company, we may never achieve profitability for the Company as a whole.

BetweenNovember 2000 and at least December 2004, our operating shortfalls were fundedby one shareholder, an affiliate, to whom we owe $65,000 in principal andapproximately $100,000 in interest as of December 31, 2006. This shareholderhas no obligation to continue to fund any future operating shortfalls.  We maybe required to alter the terms of the convertible promissory note held by thisshareholder to induce this shareholder or other such potential lenders to provideadditional loans, which could result in this shareholder or other suchpotential lenders obtaining rights, preferences or privileges senior to thoseof other creditors or our stockholders.

Thisestimate is a forward-looking statement that involves risks and uncertainties.The actual time period may differ materially from that indicated as a result ofa number of factors so that we cannot assure you that our cash resources willbe sufficient for anticipated or unanticipated working capital and capitalexpenditure requirements for this period. We have advised that we will need toraise additional capital in the future to meet our operating and investing cashrequirements. Such sources of financing could include capital infusions,additional equity financing, or debt offerings. There can be no assurance thatadditional funding will be available on acceptable terms, if at all, or thatsuch funds if raised, would enable the Company to achieve and maintainprofitable operations. If we are not able to obtain sufficient additional fundsfrom investors, we may be unable to sustain all or part of our operations.  Ifwe raise additional funds through the issuance of securities, these securitiesmay have rights, preferences or privileges senior to those of our common stock,and our stockholders may experience additional dilution to their equityownership. 

TheReport of Independent Registered Public Accounting Firm on our December 31, 2006consolidated financial statements includes an explanatory paragraph stating thatthe recurring losses incurred from operations and a working capital deficitraise substantial doubt about our ability to continue as a going concern. Thefinancial statements do not include any adjustments that might result from theoutcome of this uncertainty.

**CAUTIONARYINFORMATION ABOUT FORWARD-LOOKING STATEMENTS**

ThisAnnual Report on Form 10-KSB includes forward-looking statements within themeaning of Section 21E of the Securities Exchange Act of 1934, as amended. Allstatements that do not directly and exclusively relate to historical factsconstitute forward-looking statements within the meaning of the PrivateSecurities Litigation Reform Act of 1995.  The "forward-looking statements"safe harbor does not apply to our company because we issue "penny stock" andare excluded from the safe harbor pursuant to Section 27A(b)(1)(C) of theSecurities Act of 1933, as amended, and Section 21E(h)(1)(C) of the SecuritiesExchange Act of 1934, as amended (the "Exchange Act"). Our forward-lookingstatements are based on our plans, intentions, expectation, and belief and aresubject to certain risks and uncertainties that could cause actual results todiffer materially from those projected or expressed herein. You can identifythese statements by forward-looking words such as "may","will", "expect", "intend","anticipate", "believe", "expect","plan", "seek", "estimate", "project", "could", and "continue" or similar words. You should read statements thatcontain these words carefully because they discuss our expectations about ourfuture performance, contain projections of our future operating results or ofour future financial condition, or state other "forward-looking"information. . These statements include, among others, information regardingfuture operations, future capital expenditures, and future net cash flow. Suchstatements reflect the Company's current views with respect to future eventsand financial performance and involves risks and uncertainties, including,without limitation, general economic and business conditions, changes inforeign, political, social and economic conditions, regulatory initiatives andcompliance with governmental regulations, the ability to achieve further marketpenetration and additional customers, and various other matters, many of whichare beyond the Company's control, including, without limitation, the risksdescribed under the caption "*Certain Factors That May Affect FutureResults"* in Item 6 of this Annual Report. Our future results andstockholder values may differ materially from those expressed in these forward-looking statements. Many of the factors that will determine these results andvalues are beyond our ability to control or predict. We assume no obligation toupdate any forward-looking statements.  Investors are cautioned not to putundue reliance on any forward-looking statements, which speak only as of thedate of this Annual Report on Form 10-KSB.  Readers should also consult thecautionary statements and risk factors listed from time to time in our Reports,and all amendments thereto, on Forms 10-QSB, 8-K, and other SEC filings

Forwardlooking statements in this Annual Report on Form 10-KSB include, withoutlimitation:

Thestatements under the heading "Item 1.  Business" and inMD&A under the caption *Business Overview* concerning (1) our strategyto develop innovative solutions to expand our ability to benefit our enterpriseclients and increase the breadth and size of the markets we satisfy today, (2)our strategy to focus on acquiring intellectual and technology assets thatcontinue to accelerate expansion of our client solutions, (3) our goal toexpand the business model of TBS regionally and nationwide and to expandrevenue both from printing and from subscription-based hosted solutions, (4)our belief that we offer a complete set of business communication services andsolutions and a scalable global platform, (5) our belief that our servicesimprove and enhance data delivery or help customers to optimize the processingand delivery of the entire range of business documents, (6) our belief aboutthe benefits businesses will derive from our software and service solutions andabout its capabilities, (7) our intent to focus on obtaining growth from highermargin products and services and to make acquisitions of companies thatconsistently generate net income and positive cash flows, (8) our belief as thereason that each of our businesses can compete effectively, (9) our strategy ofpreparing for significant growth and the expected benefits of adding to our leadershipteam, and (10) our strategy of directing new capital primarily towardincreasing sales and marketing, which statements are subject to various risksand uncertainties, including, without limitation, our limited operatinghistory, risks that we may not successfully implement our acquisition program,risks associated with assimilating acquired personnel and technology into theCompany, the risk that we will not be able to compete effectively because ourmarket place is highly competitive and has low barriers to entry, and ourdependence on third party technology suppliers to provide key software andinfrastructure.

Thestatements under "Item 3. Legal Proceedings" concerning our belief as to themerits of the Vartec Telecom case, our belief that we have viable claimdefenses, and our estimate as to the potential outcome.

Thestatements in MD&A under the captions *Introduction*and *BusinessOverview*of our strategies, beliefs, plans, expectations, anticipations andhopes with respect to (1) our expectations about the business prospects of  MVI,TBS, Resolutions, and GSI, (2) our belief that we have improved our corporategovernance, (3) our current and future growth strategy to increase the size ofour management team, acquire intellectual and technology assets and ourexpectations about the benefits we may derive, (4) our belief about our visionto become a business process management/workflow service and the benefits weexpect to derive, (5) our acquisition strategy, (6) our expectations regardingchallenges and risks that we believe are key challenges and risks, and (7) ourbelief that obtaining planned financings will allow us to generate adequatecash flows to sustain operations at current levels until we being to operateprofitably on a consistent, month-over month basis, which statements aresubject to various risks and uncertainties, including, without limitation, ourlimited operating history, risks that we may not be able to obtain anyadditional financing at terms acceptable to us, or at all, risks that we maynot successfully implement our acquisition program, risks associated withassimilating acquired personnel and technology into the Company, and the riskthat we will not be able to compete effectively because our market place ishighly competitive and has low barriers to entry. 

Thestatements in MD&A under the caption *Critical Accounting Policies*regardingcalculation of allowances, reserves, and other estimates that are based onhistorical experience, the judgment of management, and various otherassumptions that are believed to be reasonable under the circumstances, theresults of which for the basis for making judgments about the carrying value ofassets and liabilities that are not readily apparent from any other sources,our beliefs about critical accounting policies, and the significant judgmentsand estimates used in the preparation of our consolidated financial statements,which statements are subject to certain risks, including, among other things,the inaccuracy of our beliefs regarding critical accounting policies and thatactual customer reserves or other estimates may be different from ourestimates, requiring revisions to our estimated allowance for doubtfulaccounts, additional inventory write-downs, impairment charges, restructuringcharges, litigation, warranty, and other reserves.

Thestatements in MD&A under the caption *Results of Operations*of ourstrategies, beliefs, plans, expectations, anticipations and hopes with respectto Net Revenue, Gross Profit, Operating Expenses, Income (Loss) fromOperations, and Net Loss and our strategies, beliefs, plans, expectations,anticipations and hopes with respect to Liquidity and Capital Resources setforth in MD&A under the caption Liquidity and Capital Resources, including,without limitation (1) our belief that we have made considerable progresstoward achieving profitable operations by increasing revenues from electronicdocument delivery services and through our recent acquisition of TBS,Resolutions, and GSI, (2) our strategy of actively seeking to combine withbusiness that operate profitably and generate positive cash flows, (3) ourbelief that sustainable profitability is achievable, (4) our expectations aboutfuture funding requirements, and (5) our belief that current cash position,cash generated through operations and equity offerings and available borrowingswill be sufficient to meet our needs through at least the next twelve months,which statements are subject to various risks and uncertainties, including,without limitation, our limited operating history, risks that we may not beable to obtain any additional financing at terms acceptable to us, or at all,the risk that we may be unable to sustain all or part of our operations if weare not able to obtain sufficient additional funds from investors, the riskthat our funding requirements could be greater should our current revenuestreams or margins decrease, risks that we may not successfully implement ouracquisition program, risks associated with assimilating acquired personnel andtechnology into the Company, and the risk that we will not be able to competeeffectively because our market place is highly competitive and has low barriersto entry.

**CERTAINFACTORS THAT MAY AFFECT FUTURE RESULTS**

Webelieve it is important to communicate our expectations to our stockholders.There may be events in the future, however, that we are not able to predictaccurately or over which we have no control. The risk factors listed in thissection, as well as any cautionary language in this report, provide examples ofrisks, uncertainties and events that may cause our actual results to differmaterially from the expectations we describe in our forward-looking statements.Before you make an investment decision with respect to our common stock, youshould be aware that the occurrence of any of the events described in theserisk factors and elsewhere in this report could have a material and adverseeffect on our business, results of operations and financial condition and thatupon the occurrence of any of these events, the trading price of our commonstock could decline and you could lose all or part of your investment.

The risks and uncertainties described below are not the only ones weface. Additional risks and uncertainties not presently known to us may alsoadversely impact our business operations. If any of the following risksactually occur, our business, financial condition, or operating results couldbe negatively affected.

We have alimited operating history which makes financial forecasting and evaluation ofour business and prospects difficult and we have received an opinion from ourindependent registered public accounting firm regarding our ability to continueas a going concern.

Our limited operating history makes itdifficult to forecast our future operating results.  We were founded and beganoperating in March 1999, but did not report income from operations until thequarter ended June 30, 2004, and have reported net losses through December 31,2006. We do not have a long history upon which to base forecasts of futureoperating results, and any predictions about our future revenues and expensesmay not be as accurate as they would be if we had a longer business history. 

The likelihood ofour future success must be considered in light of such limited operatinghistory, as well as the problems, expenses, difficulties, complications anddelays frequently encountered in connection with any business. There can be noassurance that our future revenues will ever be significant or that ouroperations will ever be profitable.

The Report ofIndependent Registered Public Accounting Firm on our December 31, 2006consolidated financial statements includes an explanatory paragraph statingthat the recurring losses incurred from operations and a working capitaldeficiency raise substantial doubt about our ability to continue as a goingconcern. The financial statements do not include any adjustments that mightresult from the outcome of this uncertainty.

Our ability tooperate is conditioned on our ability to obtain additional financing.

Our ability tosatisfy our future capital requirements and implement our growth plans willdepend upon many factors, including the financial resources available to us,the expansion of our sales and marketing efforts and the status ofcompetition.  We believe that current and future available capital resources,including the net proceeds from sale of our products and services, will besufficient to fund our operations at current levels for the foreseeable future. However, the exact amount of funds that we will require will depend upon manyfactors, and it is possible that we will require additional financing.  Therecan be no assurance that additional financing will be available to us onacceptable terms, or at all. If additional funds are raised by issuing equitysecurities, further dilution to the existing stockholders will result. Ifadequate funds are not available, we may be required to delay, reduce oreliminate its programs or obtain funds through arrangements with partners orothers that may require us to relinquish rights to certain of its products,technologies or other assets. Accordingly, the inability to obtain suchfinancing could have a material adverse effect on our business, financial condition and results ofoperations.

We cannot predict whetherwe will be successful together with GoSolutions because the combined businessmodel is unproven and markets in which they are operating are developing.

Though we believe we havesuccessfully integrated two other acquisitions in the last three years, theGoSolutions' and VillageEDOCS' combined business strategy is unproven, and itis too early to gauge reliably market penetration rates for our services. Todate, neither GoSolutions nor VillageEDOCS have established a definite demandor a reliable cost to add a customer for these services. In addition, there canbe no assurance that GoSolutions or VillageEDOCS will be successful in theoffering of any additional services that are currently planned.  If the demandis lower than anticipated, or the cost to add a customer is higher thananticipated, our business, prospects, financial condition and results ofoperations would be materially and adversely affected. 

GoSolutions currentlydepends on one large customer for the majority of its revenue.

For 2006 (including the period prior to acquisition), fifty percent (50%)of GoSolutions' revenue was derived from independent representatives ofPrimerica Life Insurance Company ("PLIC"). PLIC represents the majority ofGoSolutions' client base. PLIC has also been instrumental in assistingGoSolutions with broadening its appeal within Citigroup, notably with TravelersLife and Annuity, National Benefit Life, Traveler's Bank, Citigroup AssetManagement and Citibank Mortgage (collectively "Citigroup Affiliates"). PLIC iscurrently endorsing GoSolutions flagship service, *GoSolo*, and is undercontract to do so only until the end of 2007; however, if GoSolutionscontractual relationship with PLIC were to deteriorate, or terminate, it isvery likely that GoSolutions ongoing progress with the Citigroup Affiliateswould also be adversely affected.

We may have difficulty inretaining our customers, which may prevent our long-term success.

We anticipate that our salesand marketing and other costs of acquiring new subscriptions outside of ourexisting client base will be substantial relative to the monthly fees derivedfrom subscriptions. Accordingly, we believe that our long-term success dependslargely on our ability to retain our existing customers, while continuing to attractnew ones. We continue to invest significant resources in our networkinfrastructure and customer and technical support capabilities to provide highlevels of customer service. We cannot be certain that these investments willmaintain or improve customer retention. We believe that competition from ourcompetitors has caused, and may continue to cause, some of our customers toswitch to a competing service provider. In addition, some new customers use ourservices only as a novelty and do not become consistent users of the serviceand, therefore, may be more likely to discontinue their service. These factorsadversely affect our customer retention rates. Any decline in customerretention rates could have a material adverse effect on our business, prospects,financial condition and results of operations.

We are dependent on thirdparty technologies and services.

We have incorporatedtechnology developed by third parties in our services to be provided to ourpartners. We will continue to incorporate third-party technology in futureproducts and services. We have limited control over whether or when thesethird-party technologies will be developed or enhanced. In addition, ourcompetitors may acquire interests in these third parties or their technologies,which may render the technology unavailable to us. If a third party fails orrefuses to timely develop, license or support technology necessary to ourservices, market acceptance of our services could be adversely affected. Inaddition, we rely on, and will continue to rely on, services supplied by thirdparties such as telecommunications, Internet access and electrical power. Ifthese services fail to meet industry standards for quality and reliability,market acceptance of our services could be adversely affected.

Our services may becomesubject to burdensome telecommunications regulation which could increase ourcosts or restrict our service offerings.

Our *GoSolo* serviceprovides Internet messaging and telecommunication services through datatransmissions over both the public switched telecommunication network ("PSTN")and the Internet. The PSTN based telecommunications services provided by *GoSolo*are subject to regulation by the Federal Communications Commission ("FCC"),state public utility commissions and foreign governmental authorities. Theseregulations affect the prices we pay for transmission services, the competitionwe face from telecommunications services and other aspects of our market. TheFCC does not currently regulate the Internet messaging services provided aspart of *GoSolo.* However, as Internet services and telecommunicationsservices converge or as the services we offer expand, there may be increasedregulation of our business. Therefore, in the future, we believe it will verylikely become subject to additional agency regulations. Changes in theregulatory environment could decrease our revenues, increase our costs andrestrict our service offerings. 

The markets in which we operate are highlycompetitive, and we may be unable to compete successfully against new entrantsand established industry competitors with significantly greater financialresources.

Competition in the converging Internet andtelecommunications industries is becoming increasingly intense.  We facecompetition for products and services from both public and private companies,as well as general voice mail providers, fax providers, paging companies,Internet service providers, email providers and internet telephony companies.Competitive pressures may impair our ability to achieve profitability. Theincreased competition may also make it more difficult for us to successfullyenter into strategic relationships with major companies, particularly if thegoal is to have an exclusive relationship with a particular company.  Wecompete against other companies that provide one or more of the services thatwe currently provide.  In addition, these competitors may add services to theirofferings to provide enhanced telephony services comparable to those offered bythe combined companies.  Future competition could come from a variety ofcompanies both in the Internet industry and the telecommunications industry.These industries include major companies that have much greater resources thanwe have, have been in operation for many years, and have large customer bases.These companies may be able to develop and expand their communications andnetwork infrastructures more quickly, adapt more swiftly to new or emergingtechnologies and changes in customer requirements, take advantage of acquisitionand other opportunities more readily, and devote greater resources to themarketing and sale of their products and services than we may be able to do.There can be no assurance that additional competitors will not enter marketsthat we plan to serves or that we will be able to compete effectively.Increased competition may result in price reductions, reduced gross margins andloss of market share. We may be unable to attain, maintain or enhance ourcompetitive position against current and future competitors.

Our industry is subject to rapidtechnological change and we must adapt quickly to compete effectively. 

The markets in which we compete arecharacterized by (i) rapidly changing technology in information systems,networks, and information security software; (ii) evolving industry standardsand communications protocols; and (iii) frequent improvements in products andservices. Speech driven communications in particular have experienced rapidchanges. These changes can be attributable to frequent new productintroductions, continuing advances in technology, and changes in customerrequirements and preferences. To succeed, we must continually improve ourcurrent products and services and develop and introduce new products andservices that are competitive in terms of price, performance, and quality.These products must adequately address the information security requirements ofour customers and their evolving information systems and networks.

The introduction of new technologies couldrender our existing products and services obsolete or unmarketable or requireus to invest in research and development at much higher rates with no assuranceof developing competitive products. Changes in technologies or customerrequirements also may cause the development cycle for our new products andservices to be lengthy and result in significant development costs. We may notbe able to counter challenges to our current products and services, and ourfuture products and service offerings may not keep pace with the technologicalchanges implemented by competitors, developers of operating systems ornetworking systems, or persons seeking to breach information security. Ourproducts and services may not satisfy evolving preferences of customers andprospects. Because of the complexity of our applications, which operate on oruse multiple platforms and communications protocols, we may experience delaysin introducing new products and service enhancements primarily due todevelopment difficulties or shortages of development personnel. There can be noassurance that we will not experience lengthy delays or other difficulties thatcould delay or prevent the successful development, introduction or marketing ofnew products and services or service enhancements. If we fail to develop andintroduce new products or improve existing services in a timely fashion, suchfailure may have a material adverse effect on our business, prospects,financial condition and results of operations.

Our failure to manage growth effectivelycould impair our business.

We believe that our recent acquisition ofGoSolutions will open new cross-marketing opportunities in each company'srespective customer base. This expansion of business could place a significantstrain on our management, financial resources, and other resources.  There canbe no assurance that such expansion will occur.  

Weintend to continue to grow by increasing our sales efforts and completingstrategic acquisitions. To effectively manage our growth, we must, among otherthings: 

- engage,     train and manage a larger sales force and additional service personnel; 
- expand     the geographic coverage of our sales force; 
- expand     our information systems; 
- identify     and successfully integrate acquired businesses into our operations; and 
- administer     appropriate financial and administrative control procedures. 

Ouranticipated growth will likely place a significant strain on our management,financial, operational, technical, sales and administrative resources. Our ability to manage future growth, if it occurs,will also depend upon the capacity, reliability and security of our networkinfrastructure.  Anyfailure to effectively manage our growth or to promptly address and respond tothese circumstances may cause our business to suffer and our stock price todecline. 

Weintend to acquire new and complementary businesses, products and technologiesand may be unable to complete these acquisitions or may not be able tosuccessfully integrate an acquired business in a cost-effective andnon-disruptive manner 

Oursuccess depends on our ability to continually enhance and broaden our productofferings in response to changing technologies, customer demands andcompetitive pressures. To this end, we have, from time to time, engaged in theprocess of identifying, analyzing and negotiating possible acquisitiontransactions and we expect to continue to do so in the future. We may choose toacquire new and complementary businesses, products, technologies and/orservices instead of developing them ourselves. We may, however, facecompetition for acquisition targets from larger and more established companieswith greater financial resources, making it more difficult for us to completeacquisitions. We cannot provide any assurance that we will be successful in consummatingfuture acquisitions on favorable terms or that we will realize the benefitsthat we anticipate from one or more acquisitions that we consummate.Integrating any business, product technology or service we acquire could beexpensive and time-consuming and/or disrupt our ongoing business. Further, weare aware of the numerous risks associated therewith, including but not limitedto: 

- diversion     of management's attention from day-to-day operational matters and current     products and customers; 
- lack     of synergy, or the inability to realize expected synergies; 
- failure     to commercialize the new technology or business; 
- failure     to meet the expected performance of the new technology or business; 
- failure     to retain key employees and customer or supplier relationships; 
- lower-than-expected     market opportunities or market acceptance of any new products;
- unexpected     reduction of sales of existing products and services by new products or     services; 
- inability     to achieve the financial and strategic goals for the acquired and combined     businesses;
- difficulty     in maintaining controls, procedures and policies during the transition and     integration;
- difficulty     effectively integrating the acquired technologies or products with our     current products and technologies, particularly where such products reside     on different technology platforms;
- difficulty     managing geographically-dispersed operations;
- adverse     effect on our relationships with partner companies or third-party     providers of technology or products; and
- failure     of our due diligence process to identify significant issues with product     quality, product architecture, legal or tax contingencies, and product     development, among other things.

Inaddition, as a successor we may be subject to certain liabilities of ouracquisition targets.  Weare, and will be, required to review goodwill and other intangible assets forimpairment in connection with past and future acquisitions.  We may be requiredto sustain significant exit or impairment charges if products or servicesacquired in business combinations are unsuccessful, which may materiallyincrease operating expenses.

Ourinability to consummate one or more acquisitions on such favorable terms or ourfailure to realize the intended benefits from one or more acquisitions, couldhave a material adverse effect on our business, liquidity, financial positionand/or results of operations, including as a result of our incurrence ofindebtedness and related interest expense and our assumption of unforeseencontingent liabilities. In addition, in order to finance any acquisitions, wewill need to raise additional funds through public or private equity or debtfinancings. In that event, we could be forced to obtain financing on terms thatare not favorable to us and, in the case of equity financing, that result indilution to our stockholders. 

Chargesto earnings resulting from past or future acquisitions or internalreorganizations may adversely affect our operating results. 

Underpurchase accounting, we allocate the total purchase price to an acquiredcompany's net tangible assets, amortizable intangible assets and in-processresearch and development based on their fair values as of the date of theacquisition and record the excess of the purchase price over those fair valuesas goodwill. Management's estimates of fair value are based upon assumptionsbelieved to be reasonable but which are inherently uncertain. As a result, anyof the following or other factors could result in material charges that wouldadversely affect our results: 

- Loss     on impairment of goodwill and/or other intangible assets;  
- Changes     in the useful lives or the amortization of identifiable intangible     assets;  
- Accrual     of newly identified pre-merger contingent liabilities, in which case the     related charges could be required to be included in earnings in the period     in which the accrual is determined to the extent it is identified     subsequent to the finalization of the purchase price allocation; and  
- Charges     to income to reduce our cost structure.

Inaddition, fluctuations in the price of our common stock may expose us to therisk of securities class action lawsuits. Defending against such lawsuits couldresult in substantial costs and divert management's attention and resources.Furthermore, any settlement or adverse determination of these lawsuits couldsubject us to significant liabilities. 

Ourbusiness and users may be subject to sales tax and other taxes.

Theapplication of indirect taxes (such as sales and use tax, value added tax, orVAT, goods and services tax, business tax, and gross receipt tax) to e-commercebusinesses such as MVI and MVI's users is a complex and evolving issue. Many ofthe fundamental statutes and regulations that impose these taxes wereestablished before the growth of the Internet and e-commerce. In many cases, itis not clear how existing statutes apply to the Internet or e-commerce. Inaddition, some jurisdictions have implemented laws specifically addressing theInternet or some aspect of e-commerce and several other proposals have been madeat the U.S. federal, state and local level that would impose additional taxeson the sale of goods and services through the Internet. These proposals, ifadopted, could substantially impair the growth of e-commerce, hamper ourability to retain and attract new customers and diminish our ability to derivefinancial benefit from our activities. In December 2004, the U.S. federalgovernment enacted legislation extending the moratorium on states and otherlocal authorities imposing access or discriminatory taxes on the Internetthrough November 2007. This moratorium does not prohibit federal, state, orlocal authorities from collecting taxes on our income or from collecting taxesthat are due under existing tax rules. The application of existing, new, or futurelaws could have adverse effects on our business, prospects and operatingresults. There have been, and will continue to be, substantial ongoing costsassociated with complying with the various indirect tax requirements in thenumerous markets in which we conduct or will conduct business.

Ourproducts and technology depend on the continued availability of licensedtechnology from third parties. The loss of such products and technology wouldsignificantly and adversely affect our business. 

Welicense and will continue to license certain technology and software from thirdparties. These licenses are integral to our business. If any of theserelationships were terminated or if any of these third parties were to ceasedoing business, we would be forced to spend significant time and money toreplace the licensed software. We cannot assure you that we would be able toreplace these licenses. This could have a material adverse effect on ourbusiness, financial condition, and operating results.

Thesuccessful operation of our business depends upon the provisioning of criticaltechnology from other companies.

Wedepend upon third parties for several critical elements of our business,including various technology and infrastructure components. We rely on private third-partyproviders for our Internet and telephony connections and for co-location of asignificant portion of our communications servers. Any protracted disruption inthe services provided by any of these suppliers, or any failure by them tohandle current or higher volumes of activity could have a material adverseeffect on our business, prospects, financial condition, operating results andcash flows.

Anincrease in the cost of email transmissions could have a material adverseeffect on our business.

Werely on email for the delivery of some of MVI's electronic documents.  Inaddition, the Company regularly communicates with our clients via email. Ifregulations or other changes in the industry lead to a charge associated withthe sending or receiving of email, the cost of providing MVI's services wouldincrease and, if significant, could materially adversely affect our business,prospects, financial condition, operating results and cash flows.

Werely significantly on the revenue generated by our fax services.

During2006, approximately 22% of our net revenue was fax-related.  Our future successis therefore subject to the continued use of fax as a messaging medium and/orour ability to diversify our service offerings and derive more revenue from otherservices, such as voice, email and unified messaging solutions.  If the demandfor fax as a messaging medium decreases, and we are unable to replace lostrevenues from decreased usage of our fax services with a proportional increasein our customer base or with revenues from our other services, our business,financial condition, operating results and cash flows could be materially andadversely affected.

Webelieve that one of the attractions to fax versus alternatives, such as email,is that fax signatures are a generally accepted method of executing contracts.  Variousgovernmental and non-governmental entities, many of which possess greaterresources than we do, are attempting to create a universally accepted methodfor electronically signing documents. Widespread adoption of so-called "digitalsignatures" could reduce demand for our fax services and, as a result, couldhave a material adverse effect on our business, prospects, financial condition,operating results and cash flows.

Protection of our intellectualproperty is limited and there is a risk of third party claims of infringement.

We regard our software asproprietary, and our success and ability to compete depends, in part, on ourability to protect our proprietary technology and operate without infringingupon the rights of others; we may fail to do so.  We will rely on copyright andtrade secret laws, trademarks, confidentiality procedures and contractualprovisions to protect our proprietary software, documentation, and otherproprietary information. In addition, we execute confidentiality andnon-disclosure agreements with our employees and limit access to distributionof our proprietary information. These efforts will allow us to rely upon theknowledge and experience of our management and technical personnel, to marketour existing products, and to develop new products. The departure of any of ourmanagement or technical personnel, the breach of their confidentiality andnon-disclosure obligations to us, or the failure to achieve our intellectualproperty objectives may have a material adverse effect on our business.Although we believe that the effectiveness of our products and services doesnot depend entirely upon the secrecy of our proprietary or licensed technology,the public disclosure of our technology could reduce the level of our productlicensing. Further, litigation to defend and enforce our intellectual propertyrights could result in substantial costs and diversion of our resources andcould have a material adverse effect on our business, prospects, financialcondition and results of operations regardless of the final outcome of suchlitigation. Despite our efforts to safeguard and maintain our proprietaryrights, we may not be successful in doing so or the steps taken by us in thisregard may not be adequate to deter misappropriation or independentthird-parties from copying or otherwise obtaining and using our products,services, technology, or other information that we regard as proprietary. Also,others may independently develop similar technologies or duplicate ourtechnology.  Our inability to protect our proprietary rights may have amaterial adverse effect on us. As the number of similar products and servicesin the industry increases and the functionality of these products furtheroverlap, we may increasingly become subject to claims of infringement ormisappropriation of the intellectual property or proprietary rights of others.Other third parties could assert infringement or misappropriation claimsagainst us in the future with respect to current or future products andservices. Any claims or litigation, with or without merit, could be costly andcould result in a diversion of management's attention and of our resources.

Specifically, GoSolutions hasbeen notified that it may be infringing on one or more patents held by WebleySystems, Inc. Although, in connection with its merger with GoSolutions, wereceived a written declaration of counsel that based upon such firm's review ofthe actions of GoSolutions, as stated in a GoSolutions certificate describingsuch actions, it is more likely than not that a court would determine thatGoSolutions acted in good faith, and reasonably believed it had a right to actin the manner that was found to be infringing by Webley, there is no assurancethat the ultimate outcome of the Webley Systems, Inc. patent infringement claimwill not have an adverse impact upon us.  We and GoSolutions agreed to carveout the Webley Systems, Inc. patent infringement claims as a matter giving us aright of indemnification against GoSolutions pursuant to the merger documents.

Our business could beadversely affected if we infringe on intellectual property rights of thirdparties. 

Litigation regardingintellectual property rights is common in the software and technologyindustries. 

In the past, we have receivedletters alleging that we have infringed the intellectual property rights ofCatchCurve, Inc. with respect to its AudioFax technology.  To avoid the costsof litigating the matter with CatchCurve or migrating our fax service softwareto another provider, we have entered into a license agreement with CatchCurvefor its AudioFax technology. 

GoSolutions has in the pastreceived letters alleging that they are infringing the intellectual propertyrights of Parus Holdings, the parent company of Webley Systems.  We havereceived advice from an intellectual property attorney with experience in thisindustry with respect to the validity of the claim of the Parus patent, andhave been made aware that there is substantial evidence to the effect thatthere existed prior art to the Parus patent that could impact itseffectiveness. We have made efforts to migrate away from the technologies thatare affected, and plan to continue to derive larger portions of revenue fromdifferent technologies to reduce any exposure to this intellectual property.

We may in the future be thesubjects of claims for infringement, invalidity, or indemnification claimsbased on such claims of other parties' proprietary rights. These claims, withor without merit, could be time consuming and costly to defend or litigate,divert our attention and resources, or require us to enter into royalty orlicensing agreements. There is a risk that such licenses would not be availableon reasonable terms, or at all. Although we believe we have the ability to useour intellectual property to operate, market, and license our existing productswithout incurring liability to third parties, there is a risk that our productsand services infringe the intellectual property rights of third parties. 

Our success depends on theretention of existing executive officers and the ability to hire and retainadditional key personnel.

Our future performancedepends in significant part upon the continued service of the executiveofficers named in the "Management" section of this prospectus and other keytechnical, sales and management personnel. The loss of the services of one ormore of any of the named executive officers or other key employees could have amaterial adverse effect on the business, prospects, financial condition andresults of our operations.  Our future success also depends on its continuingability to attract and retain highly qualified technical, sales and managerialpersonnel.  Competition for such personnel is intense.  Some technical jobcategories are under conditions of severe shortage in the United States. We maynot be able to recruit or retain the caliber of staff required to carry outessential functions at the pace necessary to sustain or expand our business.  There can be no assurance that we canretain our key employees or that we can attract, assimilate or retain otherhighly qualified technical, sales and managerial personnel in the future.

The Internet could becomesubject to regulations that affect our business.

Our business segments, bothdirectly and indirectly, rely on the Internet and other electroniccommunications gateways. We intend to expand our use of these gateways. Todate, the use of the Internet has been relatively free from regulatoryrestraints. However, legislation, regulations, or interpretations may beadopted in the future that constrain our own and our customers' abilities totransact business through the Internet or other electronic communicationsgateways. There is a risk that any additional regulation of the use of suchgateways could have a material adverse effect on our business and financialcondition.

Our current and futurerevenues are unpredictable and our quarterly operating results may fluctuatesignificantly.

We have a limited operatinghistory, and have generated only limited revenues to date. We cannot forecastwith any degree of certainty the amount of revenue to be generated by any ofour services. In addition, we cannot predict the consistency of our quarterlyoperating results.  Factors which may cause our operating results to fluctuatesignificantly from quarter to quarter include:

|  |        |                                                                                    |
|--|--------|------------------------------------------------------------------------------------|
|  | • | our ability to attract new and repeat customers;                                   |
|  |        |                                                                                    |
|  | • | our ability to keep current with the evolving requirements of our  target market;  |
|  |        |                                                                                    |
|  | • | our ability to protect our proprietary technology;                                 |
|  |        |                                                                                    |
|  | • | the ability of our competitors to offer new or enhanced products or  services; and |
|  |        |                                                                                    |
|  | • | unanticipated delays or cost increases with respect to research and  development.  |

Because of these and otherfactors, we believe that quarter-to-quarter comparisons of our results ofoperations are not good indicators of our future performance. If our operatingresults fall below the expectations of securities analysts and investors insome future periods, then our stock price may decline. 

One shareholder owns asignificant portion of our outstanding common stock and is able to influenceour actions.

One shareholder and his wifeown 58,653,171 shares, or approximately 40%, of the outstanding shares of ourcommon stock as of February 28, 2007.  In addition, as of February 28, 2007,these individuals hold warrants to purchase an additional 5,000,000 shares ofour common stock at $0.10 per share and secured convertible promissory notesconvertible into an additional 1,188,943 shares of our common stock at $0.14per share.  Although these individuals do not own a majority of our outstandingshares, the significant number of shares they own gives them the ability togreatly influence the election of our board of directors and to approve ordisapprove all other matters requiring the vote of shareholders. In addition, webelieve that Barron Partners, LP owns up to 5,000,000 shares, or approximately3% of the outstanding shares of our common stock as of February 28, 2007 andhas the right to acquire up to 33,500,000 shares of the common stock pursuantto outstanding shares of the Series A Preferred Stock (convertible to33,500,000 shares of the common stock on a one-for-one basis). Barron Partners,LP will also be able to significantly influence corporate actions requiringshareholder consent.  In addition, GoSolutions Equity LLC owns 26,786,840shares, or approximately 18% of the outstanding shares of our common stock asof February 28, 2007.  Each of Barron Partners, LP and GoSolutions Equity LLCwill also be able to significantly influence corporate actions requiringshareholder consent.

Our Certificate ofIncorporation limits director liability, thereby making it difficult to bringany action against them for breach of fiduciary duty. 

As permitted by Californialaw, our Certificate of Incorporation limits the liability of directors to usor our stockholders for monetary damages for breach of a director's fiduciaryduty except for liability in certain instances. As a result of its charterprovision and California law, stockholders may have limited rights to recoveragainst directors for breach of fiduciary duty. 

 

*The following risks relateprincipally to our common stock and its market value:*

Penny stock regulationsmay impose certain restrictions on marketability of our stock. 

The Commission has adoptedregulations which generally define a "penny stock" to be any equity securitythat has a market price (as defined) of less than $5.00 per share, subject tocertain exceptions. As a result, our common stock is subject to rules thatimpose additional sales practice requirements on broker-dealers who sell suchsecurities to persons other than established customers and accredited investors(generally those with assets in excess of $1,000,000 or annual income exceeding$200,000, or $300,000 with their spouse). For transactions covered by theserules, the broker-dealer must make a special suitability determination for thepurchase of such securities and have received the purchaser's written consentto the transaction prior to the purchase. Additionally, for any transactioninvolving a penny stock, unless exempt, the rules require delivery, prior tothe transaction, of a risk disclosure document mandated by the Commissionrelating to the penny stock market. The broker-dealer must also disclose thecommission payable to both the broker-dealer and the registered representative,current quotations for the securities and, if the broker-dealer is the solemarket maker, the broker-dealer must disclose this fact and the broker-dealerspresumed control over the market. Finally, monthly statements must be sentdisclosing recent price information for the penny stock held in the account andinformation on the limited market in penny stocks. Consequently, the "pennystock" rules may restrict the ability of broker-dealers to sell our securitiesand may affect the ability of our shareholders to sell our securities in thesecondary market and the price at which such purchasers can sell any suchsecurities. 

We have never paiddividends on our common stock and do not expect to pay any in the foreseeablefuture. 

We have not paid anydividends on our common stock since our inception and do not intend to paydividends on our common stock in the foreseeable future. Any earnings that wemay realize in the foreseeable future will be retained to finance our growth. 

The number of shareseligible for future sale may adversely affect the market for our common stock. 

As of December 31, 2006, wehad 147,368,127 shares of our common stock issued and outstanding,approximately 137,000,000 of which were "restricted securities" when issued.  Rule144 of the Commission provides, in essence, that a person holding "restrictedsecurities" for a period of one year may sell only an amount every three monthsequal to the greater of (a) one percent of the issued and outstanding shares,or (b) the average weekly volume of sales during the four calendar weekspreceding the sale. The amount of "restricted securities" which a person who isnot an affiliate may sell is not so limited, since non-affiliates may sellwithout volume limitation their shares held for two years if there is adequatecurrent public information available concerning us. In such an event,"restricted securities" would be eligible for sale to the public at an earlierdate. The sale in the public market of such shares of common stock mayadversely affect prevailing market prices of the common stock.

On December 7, 2006, we fileda registration statement with respect to approximately 136,000,000 of ourissued and outstanding shares.  The registration statement was declaredeffective by the Commission on December 27, 2006. 

Outstanding options andwarrants could affect the market price of our common stock. 

As of December 31, 2006,there were outstanding stock options and warrants to purchase an aggregate of 54,537,557shares of our common stock at exercise prices ranging between $0.10 per shareand $2.50 per share. The exercise of such outstanding options and warrants willdilute the percentage ownership of our stockholders, and any sales in thepublic market of shares of common stock underlying such securities mayadversely affect prevailing market prices for the common stock. Moreover, theterms upon which we will be able to obtain additional equity capital may beadversely affected since the holders of such outstanding securities can beexpected to exercise their respective rights therein at a time when we would,in all likelihood, be able to obtain any needed capital on terms more favorableto us than those provided in such securities.

Ourstock price will fluctuate which could result in substantial losses forinvestors.

Themarket price for our common stock may fluctuate significantly in response to anumber of factors, some of which are beyond our control. These factors include:

|  |        |                                                                                                                            |
|--|--------|----------------------------------------------------------------------------------------------------------------------------|
|  | • | Quarterly  variations in operating results;                                                                                |
|  |        |                                                                                                                            |
|  | • | Changes  in financial estimates by securities analysts;                                                                    |
|  |        |                                                                                                                            |
|  | • | Announcements  by us or our competitors of new products, significant contracts,  acquisitions, or strategic relationships; |
|  |        |                                                                                                                            |
|  | • | Disputes  concerning our proprietary rights or any future patents, trademarks or  copyrights;                              |
|  |        |                                                                                                                            |
|  | • | Publicity  about us, our products and services, or our competitors;                                                        |
|  |        |                                                                                                                            |
|  | • | Additions  or departures of key personnel;                                                                                 |
|  |        |                                                                                                                            |
|  | • | Any  future sales of our common stock or other securities;                                                                 |
|  |        |                                                                                                                            |
|  | • | Stock  market price and volume fluctuations of publicly-traded companies; and                                              |
|  |        |                                                                                                                            |
|  | • | Business  combination transactions.                                                                                        |

These and other externalfactors have caused and may continue to cause the market price and demand forour common stock to fluctuate substantially, which may limit or prevent investorsfrom readily selling their shares of common stock and may otherwise negativelyaffect the liquidity of our common stock. 

In the past, securities classaction litigation has often been brought against companies following periods ofvolatility in the market price of their securities. If securities class actionlitigation is brought against us, it could result in substantial costs and adiversion of management's attention and resources, which could hurt ourbusiness. 

Trading in our commonstock on the OTCBB may be limited thereby making it more difficult forinvestors to resell their shares of our common stock. 

Our common stock trades onthe OTCBB. The OTCBB is not an exchange and, because trading of securities onthe OTCBB is often more sporadic than the trading of securities listed on anexchange or NASDAQ, you may have difficulty reselling any of your shares. 

Our common shareholdersmay experience substantial dilution.

The sale of a substantialnumber of shares of our common stock in the public market, or the prospect ofsuch sales, could materially and adversely affect the market price of theCompany's common stock. We are authorized to issue up to 400,000,000 shares ofcommon stock. To the extent of such authorization, our Board of Directors willhave the ability, without seeking stockholder approval, to issue additionalshares of common stock in the future for such consideration as the Board ofDirectors may consider sufficient. The issuance of additional common stock inthe future will reduce the proportionate ownership and voting power of theCompany's common stock held by existing stockholders. Sales in the publicmarket of substantial amounts of our common stock, including sales of commonstock issuable upon exercise of options and warrants, could depress prevailingmarket prices for our common stock. Even the perception that such sales couldoccur might impact market prices for the common stock. The existence ofoutstanding options and warrants may prove to hinder our future equity financings.

If we fail to maintaineffective internal controls over financial reporting, the price of our commonstock may be adversely affected.

Our internal control overfinancial reporting may have weaknesses and conditions that need to beaddressed, the disclosure of which may have an adverse impact on the price ofour common stock.  We are required to establish and maintain appropriateinternal controls over financial reporting.  Failure to establish thosecontrols, or any failure of those controls once established, could adverselyimpact our public disclosures regarding our business, financial condition orresults of operations.  In addition, management's assessment of internalcontrols over financial reporting may identify weaknesses and conditions thatneed to be addressed in our internal controls over financial reporting or othermatters that may raise concerns for investors.  Any actual or perceivedweaknesses and conditions that need to be addressed in our internal controlover financial reporting, disclosure of management's assessment of our internalcontrols over financial reporting or disclosure of our public accounting firm'sattestation to or report on management's assessment of our internal controlsover financial reporting may have an adverse impact on the price of our commonstock.

Standardsfor compliance with Section 404 of the Sarbanes-Oxley Act of 2002 areuncertain, and if we fail to comply in a timely manner, our business could beharmed and our stock price could decline.

Rules adopted by the SECpursuant to Section 404 of the Sarbanes-Oxley Act of 2002 require annualassessment of our internal controls over financial reporting, and attestationof our assessment by our independent registered public accounting firm. Currently, we believe these two requirements will apply to our annual reportsfor fiscal 2007 and 2008, respectively.  The standards that must be met formanagement to assess the internal controls over financial reporting aseffective are evolving and complex, and require significant documentation,testing, and possible remediation to meet the detailed standards.  We expect to incursignificant expenses and to devote resources to Section 404 compliance during2007 and on an ongoing basis.  It is difficult for us to predict how long itwill take to complete the assessment of the effectiveness of our internalcontrol over financial reporting for each year and to remediate anydeficiencies in our internal control over financial reporting. As a result, wemay not be able to complete the assessment and remediation process on a timelybasis.  In addition, the attestationprocess by our independent registered public accounting firm is new and we mayencounter problems or delays in completing the implementation of any requestedimprovements and receiving an attestation of our assessment by our independentregistered public accounting firm.  In the event that our Chief Executive Officer,Chief Financial Officer or independent registered public accounting firmdetermine that our internal control over financial reporting is not effectiveas defined under Section 404, we cannot predict how regulators will react orhow the market prices of our shares will be affected; however, we believe thatthere is a risk that investor confidenceand share value may be negatively impacted.

Wecannot be certain that our internal control over financial reporting will beeffective or sufficient in the future. 

Ourability to manage our operations and growth requires us to maintain effectiveoperations, compliance and management controls, as well as our internal controlover financial reporting. We may not be able to implement necessaryimprovements to our internal control over financial reporting in an efficientand timely manner and may discover deficiencies and weaknesses in existingsystems and controls, especially when such systems and controls are tested byincreased rate of growth or the impact of acquisitions. In addition, upgradesor enhancements to our computer systems could cause internal control weaknesses.

Itmay be difficult to design and implement effective internal control overfinancial reporting for combined operations as we integrate acquiredbusinesses. In addition, differences in existing controls of acquiredbusinesses may result in weaknesses that require remediation when internalcontrols over financial reporting are combined.. The integration of twocompliant systems could result in a noncompliant system or an acquired companymay not have compliant systems. In either case, the effectiveness of ourinternal control may be impaired. 

Ifwe fail to maintain an effective system of internal control or if management orour independent registered public accounting firm were to discover materialweaknesses in our internal control systems we may be unable to produce reliablefinancial reports or prevent fraud. If we are at a future time required toassert that our internal control over financial reporting is effective at anytime and are unable to make such an assertion, or if our independent registeredpublic accounting firm is required to attest to the effectiveness of ourinternal controls but is unable to deliver a report at all or can deliver onlya qualified report, we could be subject to regulatory enforcement and may loseinvestor confidence in our ability to operate in compliance with existinginternal control rules and regulations, either of which could result in adecline in our stock price.

SignificantIndebtedness

Our significant debt could adversely affect our financial resources andprevent us from satisfying our debt service obligations.  We have a significantamount of indebtedness and are very likely to incur additional indebtedness inthe future.  In the future, we may not generate sufficient cash flow fromoperations, or have future borrowings available to us, sufficient to pay ourdebt.

Inorder to finance the acquisition consideration for future acquisitions, we mayincur additional significant indebtedness. This additional indebtedness may,among other things, require us to: 

- Maintain     a specific ratio of net debt to consolidated EBITDA or other measurements;      
- Dedicate     a significant portion of our cash flow from operations to payments on this     debt, thereby reducing the availability of cash flow to fund capital     expenditures, to pursue other acquisitions or investments in new     technologies and for general corporate purposes;  
- Increase     our vulnerability to general adverse economic conditions; and  
- Limit     our flexibility in planning for, or reacting to, changes in or challenges     relating to its business and industry.  

Inaddition, the terms of the financing obligations may contain restrictions,including limitations on our ability to:  

- Incur     additional indebtedness;  
- Create     or incur liens;  
- Dispose     of assets;  
- Consolidate     or merge with or acquire another entity;  
- Pay     dividends, redeem shares of capital stock or effect stock repurchases;     and  
- Make     loans and investments.  

Therequirements and limitations that could be associated with additionalindebtedness have the potential to increase our vulnerability to generaladverse economic conditions, and limit our ability to respond to changes andchallenges in our business. In addition, a failure to comply with any suchrestrictions could result in a default under these financing obligations orcould require us to obtain waivers from our lenders for failure to comply withthese restrictions. The occurrence of a default that we are unable to cure orthe inability to secure a necessary consent or waiver could have a material adverseeffect on our business, financial condition or results of operations. 

Ourofficers and directors may be able to influence stockholder actions. 

Executiveofficers and directors, in the aggregate, beneficially own approximately 12% ofour outstanding voting stock (including rights to purchase common stock). Thesestockholders acting together may be able to significantly influence mattersrequiring approval by our stockholders, including the election of directors,and the approval of mergers or other business combination transactions in amanner that could conflict with our other stockholders. 

Ourconvertible preferred stock may adversely impact VillageEDOCS and our commonstockholders or have a material adverse affect on VillageEDOCS.

Wehave issued shares of Series A Preferred Stock to Barron Partners LP, the termsof which may have a material adverse effect on our financial condition andresults of operations. The preferred stock has a liquidation preference in theamount of $1,675,000 which must be paid before common stockholders wouldreceive funds in the event of liquidation, 

** **

** **

----

**ITEM 7.  FINANCIAL STATEMENTS**

 

               Exhibit99.1, "*VillageEDOCS Financial Statements*" is incorporated herein by thisreference.

----

 

**ITEM 8.  CHANGES IN AND DISAGREEMENTS WITHACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.**

None.

----

 

**ITEM8A. - CONTROLS AND PROCEDURES**

(a)As of December 31, 2006, an evaluation was carried out under the supervisionand with the participation of the Company's management, including our ChiefExecutive Officer and our Chief Financial Officer, of the effectiveness of thedesign and operation of our disclosure controls and procedures (as defined inRule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934).  Basedupon that evaluation, the Chief Executive Officer and the Chief FinancialOfficer concluded that the design and operation of these disclosure controlsand procedures during the year ended December 31, 2006 were effective in timelyalerting them to the material information relating to the Company (or theCompany's consolidated subsidiaries) required to be included in the Company'speriodic filings with the SEC, subject to the various limitations oneffectiveness set forth below under the heading, "LIMITATIONS ON THE EFFECTIVENESSOF INTERNAL CONTROLS," such that the information relating to the Company,required to be disclosed in SEC reports (i) is recorded, processed, summarizedand reported within the time periods specified in SEC rules and forms, and (ii)is accumulated and communicated to the Company's management, including our CEOand CFO, as appropriate to allow timely decisions regarding requireddisclosure.  

TheCompany's management has concluded that the consolidated financial statementsincluded in this Annual Report on Form 10-KSB fairly present in all materialrespects the Company's financial condition, results of operations and cashflows for the periods presented in conformity with accounting principlesgenerally accepted in the United States of America.

(b)Changes in internal control over financial reporting. There were no changes inthe Company's internal control over financial reporting that occurred duringthe quarter ended December 31, 2006 that has materially affected, or arereasonably likely to materially affect, the Company's internal control overfinancial reporting. 

LIMITATIONSON THE EFFECTIVENESS OF INTERNAL CONTROLS 

TheCompany's management, including the CEO and CFO, does not expect that ourdisclosure controls and procedures or our internal control over financialreporting will necessarily prevent all fraud and material error. An internalcontrol system, no matter how well conceived and operated, can provide onlyreasonable, not absolute, assurance that the objectives of the control systemare met. Further, the design of the control system must reflect the fact thatthere are resource constraints, and the benefits of controls must be consideredrelative to their costs. Because of the inherent limitations in all controlsystems, no evaluation of controls can provide absolute assurance that allcontrol issues and instances of fraud, if any, within the Company have beendetected. These inherent limitations include the realities that judgments indecision-making can be faulty, and that breakdowns can occur because of simpleerror or mistake. Additionally, controls can be circumvented by the individualacts of some persons, by collusion of two or more people, or by managementoverride of the internal control. The design of any system of controls also isbased in part upon certain assumptions about the likelihood of future events,and there can be no assurance that any design will succeed in achieving itsstated goals under all potential future conditions. Over time, control maybecome inadequate because of changes in conditions, and/or the degree ofcompliance with the policies or procedures may deteriorate.

----

 

**PART III**

 

##### ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS,PROMOTERS AND CONTROL PERSONS OF THE COMPANY

**DIRECTORS, EXECUTIVE OFFICERS, AND SIGNIFICANTEMPLOYEES OF THE COMPANY**

**Directors and Executive Officers**

The following table sets forth certaininformation with respect to each person who is a director, executive officer,or significant employee of the Company or its subsidiary as of December 31,2006.

|  | Name               | Age | Position                                                                 |
|--|--------------------|-----|--------------------------------------------------------------------------|
|  |                    |     |                                                                          |
|  | J. Thomas Zender   | 67  | Chairman of the Board                                                    |
|  |                    |     |                                                                          |
|  | K. Mason Conner    | 49  | Chief Executive Officer, Director                                        |
|  |                    |     |                                                                          |
|  | Jerry T. Kendall   | 63  | President, Chief Operating Officer, Director                             |
|  |                    |     |                                                                          |
|  | H. Jay Hill        | 67  | Executive Vice President of Corporate  Development, Director             |
|  |                    |     |                                                                          |
|  | Ricardo A. Salas   | 43  | Director                                                                 |
|  |                    |     |                                                                          |
|  | Michael A. Richard | 39  | Chief Financial Officer and Secretary                                    |
|  |                    |     |                                                                          |
|  | Thor R. Bendickson | 44  | Chief Technology Officer of the Company,  President of GoSolutions, Inc. |
|  |                    |     |                                                                          |
|  | Joe Torano         | 50  | Senior Vice President of Sales and Marketing                             |
|  |                    |     |                                                                          |

Executiveofficers are appointed by the Board of Directors and, subject to the terms oftheir employment agreements, serve until their successors are duly elected andqualify, subject to earlier removal by the Board of Directors.   Directors areelected at the annual meeting of shareholders to serve for their term and untiltheir successors are duly elected and qualify, or until their earlierresignation, removal from office, or death. The remaining directors may fillany vacancy in the Board of Directors for an unexpired term. The term of thecurrent directors continues until the next annual meeting of shareholders to beheld in 2007.  Mr. Zender has been a director since August 1997, Mr. Hill sinceOctober 1997, Mr. Conner since October 1998, and Messrs. Kendall and Salassince July 2005.

**BusinessExperience of Executive Officers, Directors, and Significant Employees**

J.THOMAS ZENDER has been a director since 1997 and has been Chairman of the Boardsince January 2001. He is an information technology industry consultantspecializing in strategic business development with 36 years of management andmarketing experience. He has held management positions at General Electric,Honeywell, ITT and other companies. Mr. Zender has been an officer in threepublicly held corporations, one NYSE listed company and two NASDAQ tradedcompanies. From 1996 through 2001, Mr. Zender served as an interim executivefor several companies in their early stage, including CEO of VillageEDOCS from1997 to 1999. He serves on the board of Ottawa University in Ottawa, Kansas.Mr. Zender currently serves on our Audit Committee and our CompensationCommittee.

K.MASON CONNER has been our Chief Executive Officer since 1999. Mr. Conner joinedthe Company as Vice-President of Sales in 1997 and has been a Board Membersince 1998, Acting Vice-President of Sales between 1998 and 2002, and Presidentbetween 1998 and March 2006, and Mr. Conner is also a Director of TBS andResolutions. He has 27 years in sales and business management experience,including 23 years of direct and channel sales experience in the voice and datacommunications products and services industry. In the early 1980's he wasinvolved in the application of Internet Protocol technologies. In the late1980s and early 1990s he was a principal strategist for an internationalinitiative to transform K-12 education through the use of the Internet. He wasa principal consultant with LTS for the electronic vulnerability threat assessmentof the Los Angeles Airport Department after the "UnaBomber" threat.He has held sales management positions with Banyan Systems, Doelz Networks, andTimeplex. During the five years prior to joining the Company, Mr. Conner wasDirector of Sales at Telecom Multimedia Systems from 1996 to 1997, VicePresident of Sales at Lo Tiro-Sapere from 1995 to 1996, and Vice President ofSales at Digital Network Architectures from 1991 to 1995. 

JERRYT. KENDALL joined the board of directors in the second quarter of 2005. OnMarch 1, 2006, Mr. Kendall was appointed to serve as our President and ChiefOperating Officer. Mr. Kendall is also President of the Company's wholly-ownedsubsidiaries, MVI and TBS.  He has 40 years experience in technology sales andmanagement. He has held executive management positions for 27 of those years atpublicly held corporations, one New York Stock Exchange listed company andthree NASDAQ listed companies. He was President and CEO at two of thosecompanies, Sr. VP at one and Executive VP and President of the Americas atanother. From April 2003 to August 2005, he was the President and ChiefOperating Officer, was later appointed Chief Executive Officer, and additionally,served as a Director of Technology Research Corporation ("TRC"), a$39 million dollar public, electrical safety products, manufacturing company. Priorto TRC, Mr. Kendall held a number of executive management positions, includingExecutive VP and President of the Americas, with Sensormatic ElectronicsCorporation, then a $1.2 billion, publicly held, electronics security company.Mr. Kendall's experience began with IBM in the mainframe business, included 10years with Paradyne Corporation in high speed data communications and movedforward to include other specialty segments of hardware and softwareapplications.   

H.JAY HILL has been a director since 1997 and became the Executive Vice Presidentof Corporate Development in May 2003. Mr. Hill is also a Vice President ofTailored Business Systems, Inc., one of our wholly-owed subsidiaries. For thelast 20 years, he has primarily been a senior executive in turnaroundsituations in information technology and telecommunication companies. FromNovember 2000 to May 2003, Mr. Hill was CEO, President and a Director ofLightPort Advisors, Inc, a private Internet service provider for the financialservices market. He has held similar positions with Unitron MedicalCommunications, Inc. (d/b/a Moon Communications) (1999-2000) and AmnetCorporation (Netlink) (1989-1994), and has held senior sales and marketingmanagement positions with SunCoast Environmental Controls (1996-1999),Technology Research Corporation (1994-1996), Harris Corporation, DoelzNetworks, Paradyne/AT&T, and Inforex. His primary background in sales andmarketing commenced with Philadelphia Electric Company and IBM. Mr. Hillcurrently serves on our Audit Committee and our Compensation Committee.

RICARDOSALAS joined the board of directors in the second quarter of 2005.  Mostrecently, Mr. Salas served as the President and Chief Executive Officer ofLiquidmetal Technologies. From January 2000 through June 2005, Mr. Salas servedas Chief Executive Officer of iLIANT Corporation, an information technology andoutsourcing service firm in the health care industry, and he continues to serveas Chairman of iLIANT. From 1987 through 2004, he was Vice President of J.Holdsworth Capital Ltd., a private investment firm. As an officer of J.Holdsworth Capital Ltd., Mr. Salas held positions in various investmentsincluding Medical Manager Corporation as a vice president between June 1999 andJanuary 2000, National Medical Systems, Inc. as vice president between April1994 and February 1997, and Uni Flange Corporation as vice president betweenJune 1989 and June 1994. He currently serves as a director of VillageEDOCS, aprovider of business information delivery services and products. Mr. Salasreceived his B.A. in Economics in 1986 from Harvard University in Cambridge,Massachusetts. Mr. Salas currently serves on our Audit Committee and ourCompensation Committee.

MICHAELA. RICHARD joined the Company in February 2001 and is the Chief FinancialOfficer and Corporate Secretary. Mr. Richard is also a Director and theSecretary of our wholly-owned subsidiaries, TBS and Resolutions and a Directorof GSI. Mr. Richard has over 15 years of diverse management and publiccorporate reporting experience for start-up and early stage ventures. From1999-2000 he served as V.P. Controller for The BigHub.com, Inc., a public newmedia company providing unique content, private label search engine, e-commercesolutions, and direct mail. From 1995-1999, Mr. Richard served first asController and then as Vice President, Accounting (principal accountingofficer), and finally as a Director of PortaCom Wireless, Inc., a publicdeveloper and operator of companies with contracts to provide wirelesstelecommunication services in China and other emerging markets.

THORBENDICKSON is the Company's Chief Technology Officer and the President of GSI.Mr. Bendickson has been employed by GSI for over five years. Prior to joiningGSI, he was Senior Vice President - Strategic Consulting for Mediacentric Groupand Chief Operating Officer for ECWerks, Inc., a management and technologyconsulting services company focused on designing, developing and deliveringebusiness solutions.  Mr. Bendickson holds a BS in Computer Science andAccounting from Florida State University.

JOETORANO is the Company's Senior Vice President of Sales and Marketing.  Mr.Torano has over 25 years of international executive experience in operations,business planning, sales, and marketing in the technology sector.  Beforejoining the Company, Mr. Torano was Chief Operating Officer of ADOSCorporation, a provider of smart document management solutions.  Prior to ADOS,he served as Chief Operating Officer and a Director of FormScape, Inc., anenterprise document management software company.  Prior to FormScape, Mr.Torano held various sales and marketing leadership positions at IBM for twentyyears in its Mainframe, Networking and PC Company.

##### Our Corporate Governance Practices

Wehave always believed in strong and effective corporate governance proceduresand practices. In that spirit, we have summarized several of our corporategovernance practices below.

| **Adopting  Governance Guidelines**                  |    |  Our board of directors has adopted a set of  corporate governance guidelines to establish a framework within which it will  conduct its business and to guide management in its running of your Company.  The governance guidelines can be found on our website at www.villageedocs.com  and are summarized below.                                                                                                                                                                                                                                                 |
|------------------------------------------------------|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                      |              |
| **Monitoring  Board Effectiveness**                  |    | It is important that our board of directors  and its committees are performing effectively and in the best interest of the  Company and its stockholders. The board of directors and each committee are  responsible for annually assessing their effectiveness in fulfilling their  obligations.                                                                                                                                                                                                                                                                        |
|                                                      |              |
| **Conducting  Formal Independent Director Sessions** |    | At the conclusion of each regularly scheduled board  meeting, the independent directors meet without our management or any  non-independent directors.                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                                                      |              |
| **Hiring  Outside Advisors**                         |    | The board and each of its committees may  retain outside advisors and consultants of their choosing at our expense,  without management's consent.                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                      |              |
| **Avoiding  Conflicts of Interest**                  |    | We expect our directors, executives and  employees to conduct themselves with the highest degree of integrity, ethics  and honesty. Our credibility and reputation depend upon the good judgment, ethical  standards and personal integrity of each director, executive and employee. In  order to provide assurances to the Company and its stockholders, we have  implemented standards of business conduct which provide clear conflict of  interest guidelines to its employees and directors, as well as an explanation  of reporting and investigatory procedures. |
|                                                      |              |
|                                                      |         |

| **Providing  Transparency** |    | We believe it is important that stockholders  understand our governance practices. In order to help ensure transparency of  our practices, we have posted information regarding our corporate governance  procedures on our website at www.villageedocs*.*com. |  
 
**Communications  with the Board of Directors**

  

Although we do not have a formal policy regarding  communications with the board of directors, stockholders may communicate with  the board of directors by writing to the Company at VillageEDOCS Attention:  Investor Relations, 14471 Chambers Road, Suite 105, Tustin, CA 92780.  Stockholders who would like their submission directed to a member of the board  may so specify, and the communication will be forwarded, as appropriate.

 
 
**Standards  of Business Conduct**

  

The board of directors has adopted a Code of  Business Conduct and Ethics for all of our employees and directors, including  the Company's principal executive and senior financial officers. You can  obtain a copy of our Code of Business Conduct and Ethics via our website at www.villageedocs.com,  or by making a written request to the Company at VillageEDOCS, Attention:  Investor Relations, 14471 Chambers Road, Suite 105, Tustin, CA 92780. We will  disclose any amendments to the Code of Business Conduct and Ethics, or waiver  of a provision therefrom, on our website at the same address.

 
**Ensuring Auditor Independence**

  

We have taken a number  of steps to ensure the continued independence of our independent registered  public accounting firm.  That firm reports directly to the Audit Committee,  which also has the ability to pre-approve or reject any non-audit services  proposed to be conducted by our independent registered public accounting firm.
 REPORT OF THE COMPENSATION COMMITTEE ONEXECUTIVE COMPENSATION
General

The Compensation Committee of the Board of Directors iscurrently composed of two independent directors, Messrs. Zender and Salas, whohave no "interlocking relationships" (as defined by the SEC), and Mr. Hill, whorecuses himself from votes and discussions on his own compensation.

We are engaged in highly competitive businesses andcompete nationally for personnel at the executive and technical staff level. Outstanding candidates are aggressively recruited, often at premium salaries. Highly qualified employees are essential to our success.  We are committed toproviding competitive compensation that helps attract, retain, and motivate thehighly skilled people we require.  We strongly believe that a considerableportion of the compensation for the Chief Executive Officer and other topexecutives must be tied to the achievement of business objectives, completing acquisitions,and to business unit and overall financial performance, both current andlong-term.

Executive Compensation

Ourexecutive compensation program is administered by the Compensation Committee.The role of the Compensation Committee is to review and approve salaries andother compensation of the executive officers of the Company, to administer theLong-Term Incentive Plan, and to review and approve stock option grants to allemployees including the executive officers of the Company.

General Compensation Philosophy

Ourcompensation philosophy is that total cash compensation should vary with ourperformance and any long-term incentive should be closely aligned with theinterest of the stockholders.  Total cash compensation for the executiveofficers consists of the following components:
- Base     salary
- An     executive officer bonus that is related to growth in our sales and     operating earnings.

Long-termincentives are realized through the granting of stock options to executives andkey employees through the 2002 Equity Incentive Plan.  We have also grantedwarrants to certain of our executive officers.  We have no other long-termincentive plans for our officers and employees.

**BaseSalary and Executive Officer Bonus Target**

Currentbase salaries for the executive officers were determined by arms' lengthnegotiations with the Board of Directors.  Messrs. Conner, Kendall, Richard andHill have employment contracts with the Company which sets a base salary and,with respect to Messrs. Conner, Kendall, and Hill, allows for bonus targets andlevels to be set at the sole discretion of this committee. During 2006, none ofthe executive officers reached their bonus targets, hence no bonuses wereawarded to executive officers in 2006, nor will bonuses be awarded in 2007 forperformance in 2006.

Chief Executive OfficerCompensation

Thecurrent base salary for the Chief Executive Officer of $225,000 is setaccording to his employment contract, which also includes provision for annualbonuses at the sole discretion of this committee.  No bonuses were awarded tothe Chief Executive Officer in 2006 and none were accrued based upon 2006performance.

Stock Options

Stockoptions are granted to aid in the retention of executive and key employees andto align the interests of executive and key employees with those of thestockholders.  The level of stock options granted (i.e., the number of sharessubject to each stock option grant) is based on the employee's ability toimpact future corporate results.  An employee's ability to impact futurecorporate results depends on the level and amount of job responsibility of theindividual.  Therefore, the level of stock options granted is proportional tothe Compensation Committee's evaluation of each employee's job responsibility. For example, Mason Conner, as the Chief Executive Officer, has the highestlevel of responsibility and would typically be awarded the highest level ofstock options.  Stock options are granted at a price not less than the fairmarket value on the date granted.

**ITEM 10. EXECUTIVE COMPENSATION**

The following table sets forth the aggregate compensation, foreach of the last two years, awarded to, earned by or paid to:

(a)

  

our chief executive officer;

    

(b)

  

each of our two most highly compensated executive officers who  were serving as executive officers at the end of the most recently completed  fiscal year and whose total salary and bonus exceeds $100,000 per year; or

(c)

any additional individuals for whom disclosure would have been  provided under (b) but for the fact that the individual was not serving as an  executive officer of our company at the end of the most recently completed  fiscal year (collectively, the "Named Executive Officers").

 

**SUMMARYCOMPENSATION TABLE**

** **

**Name and Principal  Position**

**Year**

**Salary**

**($)**

**Bonus**

**($)**

**Stock Awards**

**($)**

**Option Awards**

**($)**

**Non-Equity Incentive  plan Compensation ($)**

**Total**

**($)**

** **

** **

** **

** **

** **

** **

** **

** **

K.  Mason Conner, President and CEO 

2006

210,000

- 

-

-

-

210,000

2005

165,833

- 

12,257

358,200

-

536,290

Jerry  T. Kendall, President,

Chief  Operating Officer

2006

166,667

- 

-

120,000

-

286,667

2005

-

-

-

-

-

-

H.  Jay Hill, Executive Vice President - Corporate Development

2006

183,333

- 

7,260

-

-

190,593

2005

130,000

22,120

9,240

386,850

-

548,210

Michael  A. Richard, CFO and Secretary

2006

125,417

- 

-

-

-

125,417

2005

98,720

- 

-

40,000

-

138,720

** **

** **

** **

** **

** **

** **

** **

** **

               

Assumptions relating to the estimated fair value of stock optionsgranted to Mr. Kendall  during 2006 which we are accounting for in accordancewith SFAS 123(R) are as follows:  risk-free interest rate of 3.55%; expecteddividend yield 0%; expected option life of 5.0 years; and volatility of 316%. Assumptions relating to the estimated fair value of stock options and warrants grantedto Messrs. Conner, Kendall, Hill, and Richard during 2005, which we areaccounting for in accordance with SFAS 123(R) are as follows: risk-freeinterest rate of 3.8%; expected dividend yield 0%; expected option  life of5.29 years; and volatility of 209%.  Please see Note 3 to our consolidatedfinancial statements for further discussion of our assumptions relating to theestimated fair value of equity awards.

**NARRATIVE DISCLOSURE TO SUMMARY COMPENSATION TABLE**

We compensate our executive officers through a combination of abase salary, a cash bonus, and options to purchase shares of our common stock. In addition, in the future, we may provide other perquisites to some of ourexecutive officers.  The bonus paid Mr. Hill in 2005 was determined by our boardof directors, and was based on the performance of the executive officer and thecompany.  We do not have a formal plan for determining the compensation of ourexecutive officers. Instead, each executive officer negotiates their respectiveemployment agreement with us.

All agreements with our named executive officers that provide forpayments to such named executive officers at, following or in connection withthe resignation, retirement or other termination of such named executiveofficers, or a change in control of our company or a change in theresponsibilities of such named executive officers following a change in controlare set forth  in the following description of their respective employmentagreements.

**EMPLOYMENTAND OTHER AGREEMENTS**

Wehave entered into employment agreements with K. Mason Conner, our ChiefExecutive Officer, Jerry T. Kendall, our President and Chief Operating Officer,H. Jay Hill, our Executive Vice President - Corporate Development, and MichaelRichard, our Chief Financial Officer.  In addition, in connection with ouracquisition of GSI, we have entered into an employment agreement with Thor R.Bendickson. On June 16, 2004, a written consent was filed with the Company toapprove the employment agreements with Messrs. Conner, Hill, and Richard and onApril 28, 2005 and again on May 1, 2006, each of these agreements was amended.Following is a summary of the significant terms of each of the employmentagreements:

K.MASON CONNER. Mr. Conner's employment agreement, dated as of June 10, 2004, andamended as of May 1, 2006, provides for Mr. Conner to serve as our Presidentand Chief Executive Officer for a term ending June 14, 2010. The employmentagreement provides that, the term of the agreement shall automatically beextended for successive one year renewal terms, provided that if either Mr.Conner or the Company gives the other party at least ninety days advancewritten notice of his or its intention to not renew the agreement for anadditional term, the agreement will terminate upon the expiration of thecurrent term.

Pursuantto the employment agreement, Mr. Conner received a base salary of $150,000 forthe period from June 15, 2004 until April 16, 2005, at which time his basesalary was increased to $180,000. Effective as of May 1, 2006, Mr. Conner'sannual salary was increased to $225,000. The Board will review his salary atannual intervals, and may adjust his annual base salary from time to time asthe Board of Directors or its Compensation Committee deems to be appropriate,provided, however, that the salary for the twelve month period beginning May 1,2007 and each succeeding year shall not be less than 105% of the salary for theprior year. Mr. Conner is entitled to an incentive bonus based upon theCompany's net income. For the 2004 fiscal year, Mr. Conner was paid a bonusequal to 10% of the Company's net income. For the year 2005, the percentagebonus will be 7% of the net income paid in cash and 5% paid in Company shares.The number of Company shares issuable to the Executive shall be based upon theaverage closing price of the Company's shares for the ten (10) trading daysending on March 31st of the following year. Each year subsequent to 2005, theboard will establish the percentages; during 2006 and 2007 the percentagesshall not be less than 4% and 2% respectively. 

Pursuantto the employment agreement, we have granted Mr. Conner options for 3,500,000shares of our common stock (the "Option Shares"). The Option Shareswill vest over a five year period and may be exercised during the seven yearperiod after vesting. If Mr. Conner voluntarily resigns or is terminated forcause, all unvested options will be forfeited and cancelled; provided, that Mr.Conner shall be fully vested in one-half of his then unvested Option Shares (A)in the event of his termination by the Company other than for cause, (B) uponthe consummation of a Change in Control, or (C) upon Mr. Conner's death ordisability. The Company has agreed to use its best efforts to register, andmaintain the effectiveness of a registration statement on Form S-8, for resaleall of the Option Shares granted to Mr. Conner and, at any time that Form S-8is not effective, to grant him piggyback registration with respect to anyregistration statement filed by the Company. 

Mr.Conner also is entitled to participate in any benefits plans maintained by theCompany for its executives or employees and is entitled to four weeks annualvacation. He is also entitled to be reimbursed for business expenses incurredby him in promoting the Company's business. 

IfMr. Conner's employment is terminated for reasons other than death, disability,cause, or voluntary termination by Mr. Conner, the Company will be obligated tomake monthly payments to Mr. Conner for twelve (12) months. Each monthlypayment shall be equal to one-twelfth (1/12th) of twice Mr. Conner's annualbase salary, as in effect on the date of termination. In addition, anyrestricted stock, stock options or other awards granted to him will becomeimmediately vested in full and, in the case of stock options, exercisable infull.  Mr. Conner will also be permitted to continue to participate for aperiod of one year, at the Company's expense, in all benefit and insuranceplans, coverage and programs in which he was participating as of thetermination date.

TheCompany may terminate the agreement if it determines that Mr. Conner has beenunable to attend to his duties for at least ninety (90) days because of amedically diagnosable physical or mental condition, and has received a writtenopinion from a physician acceptable to the Board that such condition preventshim from resuming full performance of his duties and is likely to continue foran indefinite period. Upon such termination, the Company shall pay Mr. Conner amonthly disability benefit equal to one-twelfth (1/12th) of his current annualbase salary at the time he became permanently disabled until the earliest of(i) the month in which the he returns to active employment, either with theCompany or otherwise, (ii) the end of the initial term of the agreement, or thecurrent renewal term, as the case may be, or (iii) the twenty-fourth monthafter the date of the termination. Any such payments shall be reduced by anyamounts paid to Mr. Conner under any long-term disability plan or otherdisability program or insurance policies maintained or provided by the Company.

IfMr. Conner is terminated for Cause, he shall be entitled to receive his basesalary through the date of termination and any non-forfeitable benefits earnedand payable to him under the terms of deferred compensation or incentive plansmaintained by the Company. In the event of a Change in Corporate Control, anyrestricted stock, stock options or other awards granted to Mr. Conner shallbecome immediately vested in full and, in the case of stock options,exercisable in full. Additionally, if at any time during the twelve (12)consecutive months following or six (6) months prior to the occurrence of aChange in Corporate Control, Mr. Conner is involuntarily terminated (other thanfor Cause) by the Company, he shall be entitled to lump sum severance pay in anamount equal to the sum of (i) 299% of his annual base salary in effect at thetime of the Change in Corporate Control plus (ii) 299% of the annual bonus paidto him with respect to the last fiscal year ending prior to the Change inCorporate Control.

JERRYT. KENDALL. On March 1, 2006, we entered into an executive employment agreementwith Jerry T. Kendall, who is also a director of the Company.  The employmentagreement provides for Mr. Kendall to serve as our President and ChiefOperating Officer for a term of two years from March 1, 2006.  The employmentagreement provides that, the term of the agreement shall automatically beextended for successive one year renewal terms, provided that if either Mr.Kendall or the Company gives the other party at least ninety days advancewritten notice of his or its intention to not renew the agreement for anadditional term, the agreement will terminate upon the expiration of thecurrent term.

Pursuantto his employment agreement, Mr. Kendall will receive a base salary of$200,000. The Company will review Mr. Kendall's salary at annual intervals, andmay adjust his annual base salary from time to time as the Board of Directorsor its Compensation Committee deems to be appropriate, provided, however, thatthe salary for the twelve month period beginning March 1, 2007 and eachsucceeding year shall not be less than 105% of the salary for the prior year.Mr. Kendall is entitled to an incentive bonus based upon the Company's EBITDA(EBITDA is defined as net income from operations as presented in the Company'smost recent audited statement of operations less depreciation and amortizationexpense).  For the 2006 fiscal year, the percentage bonus, prorated for themonths employed in 2006, will be 3% of the EBITDA paid in cash and 2% paid inCompany shares.  The number of Company shares issuable to Mr. Kendall shall bebased upon the average closing price of the Company's shares for the ten (10)trading days ending on March 31st of the following year. Each year subsequentto 2006, the board will establish the percentages no later than January 31.

Pursuantto his employment agreement, the Company has granted Mr. Kendall options for4,000,000 shares of its common stock which will vest over a five year periodand may be exercised during the seven year period after vesting.  If Mr.Kendall voluntarily resigns or is terminated for cause, all unvested optionswill be forfeited and cancelled; provided, that Mr. Kendall shall be fullyvested in any of his then unvested option shares (A) in the event of histermination by the Company other than for cause, (B) upon the consummation of aChange in Control, or (C) upon Mr. Kendall's death or disability.  The Companyhas agreed to use its best efforts to register, and maintain the effectivenessof a registration statement on Form S-8, for resale all of the option sharesgranted to Mr. Kendall and, at any time that Form S-8 is not effective, togrant him piggyback registration with respect to any registration statementfiled by the Company.

Mr.Kendall also is entitled to participate in any benefits plans maintained by theCompany for its executives or employees and is entitled to four weeks annualvacation. He is also entitled to be reimbursed for business expenses incurredby him in promoting the Company's business.

IfMr. Kendall's employment is terminated for reasons other than death,disability, cause, or voluntary termination by Mr. Kendall, the Company will beobligated to make monthly payments to Mr. Kendall for the remaining term of theagreement but not more than six (6) months if the termination occurs within thefirst twelve months from the effective date and not less than twelve (12)months if the termination occurs subsequent to the first twelve months from theeffective date. Each monthly payment shall be equal to one-twelfth (1/12th) ofMr. Kendall's annual base salary, as in effect on the date of termination. Inaddition, any restricted stock, stock options or other awards granted to himwill become immediately vested in full and, in the case of stock options,exercisable in full. Mr. Kendall will also be permitted to continue toparticipate for a period of one year, at the Company's expense, in all benefitand insurance plans, coverage and programs in which he was participating as ofthe termination date.

TheCompany may terminate the agreement if it determines that Mr. Kendall has beenunable to attend to his duties for at least ninety (90) days because of amedically diagnosable physical or mental condition, and has received a writtenopinion from a physician acceptable to the Board that such condition preventshim from resuming full performance of his duties and is likely to continue foran indefinite period.  Upon such termination, the Company shall pay Mr. Kendalla monthly disability benefit equal to one-twelfth (1/12th) of his currentannual base salary at the time he became permanently disabled until theearliest of (i) the month in which the he returns to active employment, eitherwith the Company or otherwise, (ii) the end of the initial term of theagreement, or the current renewal term, as the case may be, or (iii) thetwenty-fourth month after the date of the termination. Any such payments shallbe reduced by any amounts paid to Mr. Kendall under any long-term disabilityplan or other disability program or insurance policies maintained or providedby the Company.

IfMr. Kendall is terminated for Cause, he shall be entitled to receive his basesalary through the date of termination and any non-forfeitable benefits earnedand payable to him under the terms of deferred compensation or incentive plansmaintained by the Company.

Inthe event of a non-renewal of the employment agreement, Mr. Kendall will vest25% of the unvested portion of the stock option granted in connection with theagreement and any stock options granted Mr. Kendall prior to the employmentagreement, have a modified term of the covenant not to compete equal to thegreater of twelve months or the number of months of severance pay granted, andwill receive a series of monthly payments for a minimum of twelve months, eachof which shall be equal to one-twelfth of Mr. Kendall's annual base salary asin effect at the end of the term.

Inthe event of a Change in Corporate Control, any restricted stock, stock optionsor other awards granted to Mr. Kendall shall become immediately vested in fulland, in the case of stock options, exercisable in full. Additionally, if at anytime during the twelve (12) consecutive months following or six (6) monthsprior to the occurrence of a Change in Corporate Control, Mr. Kendall isinvoluntarily terminated (other than for Cause) by the Company, he shall beentitled to lump sum severance pay in an amount equal to the sum of 100% of hisannual base salary in effect at the time of the Change in Corporate Control.

H.JAY HILL.  Mr. Hill's employment agreement, dated as of June 10, 2004, asamended May 1, 2006, provides for Mr. Hill to serve as our Executive VicePresident - Corporate Development for a term commencing June 16, 2004 andending June 15, 2010. The employment agreement provides that, the term of theagreement shall automatically be extended for successive one year renewalterms, provided that if either Mr. Hill or the Company gives the other party atleast ninety days advance written notice of his or its intention to not renewthe agreement for an additional term, the agreement will terminate upon theexpiration of the current term. 

Theemployment agreement provides for Mr. Hill to receive a base salary of $120,000until April 16, 2005, at which time his base salary was increased to $150,000.Effective May 1, 2006, Mr. Hill's annual salary was increased to $200,000. TheBoard will review Mr. Hill's salary at annual intervals, and may adjust hisannual base salary from time to time as the Board of Directors or itsCompensation Committee deems to be appropriate, provided, however, that thesalary for the twelve month period beginning May 1, 2007 and each succeedingyear shall not be less than 105% of the salary for the prior year.

Mr.Hill will be paid an incentive bonus based on the Company's profitability.  Atthe end of each fiscal year, commencing with 2005, Mr. Hill will earn apercentage of the net income under GAAP to be paid the month following thefiling of the 10K report. For the year 2005, the percentage bonus will be 5% ofthe net income paid in cash and 4% paid in Company shares. The number ofCompany shares issuable to Mr. Hill shall be based upon the average closingprice of the Company's shares for the ten (10) trading days ending on March31st of the following year. Each year subsequent to 2005, the board willestablish the percentages; during 2006 and 2007 the percentages shall not beless than 3% and 2% respectively.

Pursuantto the employment agreement, we have granted Mr. Hill options for 500,000shares of our common stock (the "Option Shares"). The Option Shareswill vest over a five year period and may be exercised during the seven yearperiod after vesting. If Mr. Hill voluntarily resigns or is terminated forcause, all unvested options will be forfeited and cancelled; provided, that Mr.Hill shall be fully vested in then unvested Option Shares (A) in the event ofhis termination by the Company other than for cause, (B) upon the consummationof a Change in Control, or (C) upon Mr. Hill's death or disability. The Companyhas agreed to use its best efforts to register, and maintain the effectivenessof a registration statement on Form S-8, for resale all of the Option Sharesgranted to Mr. Hill and, at any time that Form S-8 is not effective, to granthim piggyback registration with respect to any registration statement filed bythe Company.

Mr.Hill also is entitled to participate in any benefits plans maintained by theCompany for its executives or employees and is entitled to four weeks annualvacation. He is also entitled to be reimbursed for business expenses incurredby him in promoting the Company's business.

IfMr. Hill's employment is terminated for reasons other than death, disability,or voluntary termination by Mr. Hill, the Company will be obligated to makemonthly payments to Mr. Hill for each month during the remaining term of theemployment agreement, but not less than twelve (12) months. Each monthlypayment shall be equal to one-twelfth (1/12th) of twice Mr. Hill's annual basesalary, as in effect on the date of termination.  In addition, any restrictedstock, stock options or other awards granted to him will become immediatelyvested in full and, in the case of stock options, exercisable in full. Mr. Hillwill also be permitted to continue to participate for a period of one year, atthe Company's expense, in all benefit and insurance plans, coverage andprograms in which he was participating as of the termination date.

TheCompany may terminate the agreement if it determines that Mr. Hill has beenunable to attend to his duties for at least ninety (90) days because of amedically diagnosable physical or mental condition, and has received a writtenopinion from a physician acceptable to the Board that such condition preventshim from resuming full performance of his duties and is likely to continue foran indefinite period.  Upon such termination, the Company shall pay Mr. Hill amonthly disability benefit equal to one-twelfth (1/12th) of his current annualbase salary at the time he became permanently disabled until the earliest of(i) the month in which the he returns to active employment, either with theCompany or otherwise, (ii) the end of the initial term of the agreement, or thecurrent renewal term, as the case may be, or (iii) the twenty-fourth monthafter the date of the termination. Any such payments shall be reduced by any amountspaid to Mr. Hill under any long-term disability plan or other disabilityprogram or insurance policies maintained or provided by the Company.

IfMr. Hill is terminated for Cause, he shall be entitled to receive his basesalary through the date of termination and any non-forfeitable benefits earnedand payable to him under the terms of deferred compensation or incentive plansmaintained by the Company.

Inthe event of a Change in Corporate Control, any restricted stock, stock optionsor other awards granted to Mr. Hill shall become immediately vested in fulland, in the case of stock options, exercisable in full. Additionally, if at anytime during the twelve (12) consecutive months following or six (6) monthsprior to the occurrence of a Change in Corporate Control, Mr. Hill isinvoluntarily terminated (other than for Cause) by the Company, he shall beentitled to lump sum severance pay in an amount equal to the sum of (i) 200% ofhis annual base salary in effect at the time of the Change in Corporate Controlplus (ii) 200% of the annual bonus paid to him with respect to the last fiscalyear ending prior to the Change in Corporate Control. 

MICHAELRICHARD. Mr. Richard's employment agreement, dated as of June 10, 2004, asamended May 1, 2006, provides for Mr. Richard to serve as our Chief FinancialOfficer for a term commencing June 15, 2004 and ending June 14, 2008.  Theemployment agreement provides that, the term of the agreement shallautomatically be extended for successive one year renewal terms, provided thatif either Mr. Richard or the Company gives the other party at least ninety daysadvance written notice of his or its intention to not renew the agreement foran additional term, the agreement will terminate upon the expiration of thecurrent term.

Theemployment agreement provides for Mr. Richard to receive a base salary of$95,000 until April 16, 2005, at which time his base salary was increased to$100,000. Effective May 1, 2006, Mr. Richard's annual base salary was increasedto $125,000 and to $160,000 on October 1, 2006.  The Board will review Mr.Richard's salary at annual intervals, and may adjust his annual base salaryfrom time to time as the Chief Executive Officer deems to be appropriate,provided, however, that the salary for the twelve month period beginning May 1,2007 and each succeeding year shall not be less than 105% of the salary for theprior year.

Pursuantto the employment agreement, we have granted Mr. Richard options for 650,000shares of our common stock (the "Option Shares"). The Option Shareswill vest over a five year period and may be exercised during the seven yearperiod after vesting. If Mr. Richard voluntarily resigns or is terminated forcause, all unvested options will be forfeited and cancelled; provided, that Mr.Richard shall be fully vested in then unvested Option Shares (A) in the eventof his termination by the Company other than for cause, (B) upon theconsummation of a Change in Control, or (C) upon Mr. Richard's death ordisability.  The Company has agreed to use its best efforts to register, andmaintain the effectiveness of a registration statement on Form S-8, for resaleall of the Option Shares granted to Mr. Richard and, at any time that Form S-8is not effective, to grant him piggyback registration with respect to anyregistration statement filed by the Company.

Mr.Richard also is entitled to participate in any benefits plans maintained by theCompany for its executives or employees and is entitled to three weeks annualvacation. He is also entitled to be reimbursed for business expenses incurredby him in promoting the Company's business. If Mr. Richard's employment isterminated for reasons other than death, disability, or voluntary terminationby Mr. Richard, the Company will be obligated to make monthly payments to Mr.Richard for each month during the remaining term of the employment agreement,but not less than six (6) months.  Each monthly payment shall be equal toone-twelfth (1/12th) of his annual base salary, as in effect on the date of termination.In addition, any restricted stock, stock options or other awards granted to himwill become immediately vested in full and, in the case of stock options,exercisable in full. Mr. Richard will also be permitted to continue toparticipate for a period of six (6) months, at the Company's expense, in allbenefit and insurance plans, coverage and programs in which he wasparticipating as of the termination date.

TheCompany may terminate the agreement if it determines that Mr. Richard has beenunable to attend to his duties for at least ninety (90) days because of amedically diagnosable physical or mental condition, and has received a writtenopinion from a physician acceptable to the Board that such condition preventshim from resuming full performance of his duties and is likely to continue foran indefinite period.  Upon such termination, the Company shall pay Mr. Richarda monthly disability benefit equal to one-twelfth (1/12th) of his currentannual base salary at the time he became permanently disabled until theearliest of (i) the month in which the he returns to active employment, eitherwith the Company or otherwise, (ii) the end of the initial term of theagreement, or the current renewal term, as the case may be, or (iii) the sixthmonth after the date of the termination.  Any such payments shall be reduced byany amounts paid to Mr. Richard under any long-term disability plan or otherdisability program or insurance policies maintained or provided by the Company.

IfMr. Richard is terminated for Cause, he shall be entitled to receive his basesalary through the date of termination and any non-forfeitable benefits earnedand payable to him under the terms of deferred compensation or incentive plansmaintained by the Company.

Inthe event of a Change in Corporate Control, any restricted stock, stock optionsor other awards granted to Mr. Richard shall become immediately vested in fulland, in the case of stock options, exercisable in full.  Additionally, if atany time during the twelve (12) consecutive months following or six (6) monthsprior to the occurrence of a Change in Corporate Control, Mr. Richard isinvoluntarily terminated (other than for Cause) by the Company, he shall beentitled to lump sum severance pay in an amount equal to the sum of (i) 50% ofhis annual base salary in effect at the time of the Change in Corporate Controlplus (ii) 50% of the annual bonus paid to him with respect to the last fiscalyear ending prior to the Change in Corporate Control.

THORBENDICKSON. Mr. Bendickson's employment agreement, dated as of April 27, 2006provides for Mr. Bendickson to serve as President of GSI for a term of threeyears. The employment agreement provides that, the term of the agreement shallautomatically be extended for successive one year renewal terms, provided thatif either Mr. Bendickson or GSI gives the other party at least sixty daysadvance written notice of his or its intention to not renew the agreement foran additional term, the agreement will terminate upon the expiration of thecurrent term.

Theemployment agreement provides for Mr. Bendickson to receive a base salary of$190,000 for the first twelve months and $200,000 for the second twelvemonths.  Thereafter, the CEO of VillageEDOCS will review his base salary atannual intervals and determine a salary; provided, however, that any such basesalary shall not be less than 105% of the prior year's base salary. Mr.Bendickson is also entitled to participate in an incentive compensation planbased upon GSI attaining certain operating objectives.

Pursuantto the employment agreement, we have granted Mr. Bendickson options for2,500,000 shares of our common stock (the "Option Shares"). TheOption Shares will vest over a five year period and may be exercised during theseven year period after vesting.  If Mr. Bendickson voluntarily resigns or isterminated for cause, all unvested options will be forfeited and cancelled;provided, that Mr. Bendickson shall be fully vested in then unvested OptionShares (A) in the event of his termination by the Company other than for cause,(B) upon the consummation of a Change in Control, or (C) upon his death ordisability. The Company has agreed to use its best efforts to register, andmaintain the effectiveness of a registration statement on Form S-8, for resaleall of the Option Shares granted to Mr. Bendickson.

Mr.Bendickson also is entitled to participate in any benefits plans maintained bythe Company for its executives or employees and is entitled to five weeksannual vacation. He is also entitled to be reimbursed for business expensesincurred by him.

Ifhis employment is terminated for reasons other than death, disability,"good reason", or voluntary termination by Mr. Bendickson, theCompany will be obligated to make monthly payments equal to his monthly basesalary for the longer of twelve months or the remaining term of the employmentagreement.

JOETORANO.  Mr. Torano's employment offer letter, dated September 28, 2006,provides for Mr. Torano to serve as Senior Vice President of Sales andMarketing and to receive a base salary of $160,000 per year.  His employment isat-will.  Mr. Torano is entitled to incentive bonus payments based uponachieving certain growth targets.

Pursuantto the employment offer letter, the Company has agreed to grant Mr. Toranooptions to purchase 2,000,000 shares of our common stock at $0.15 per sharewhich will vest over a five year period and may be exercised during the sevenyear period after vesting. If Mr. Torano's employment is terminated for any reason,all vested and unvested options will be forfeited and cancelled if unexercisedin the ninety day period following the date of any such termination.  Inaddition, Mr. Torano will be granted options to purchase an additional 250,000shares at market price on the date of grant after the twelfth and twenty-fourthmonths from his date of hire, and options to purchase 500,000 shares at marketprice on the date of grant after the thirty-sixth month from his date of hire.

Mr.Torano also is entitled to participate in any benefits plans maintained by theCompany for its executives or employees and is entitled to three weeks annualvacation. He is also entitled to be reimbursed for business expenses incurredby him in promoting the Company's business.

Inthe event of a Change in Corporate Control, any stock options granted to Mr.Torano shall become immediately vested in full and, in the case of stockoptions, exercisable in full.

Theforegoing descriptions of the employment agreements are qualified in theirentirety by reference to the actual terms of each agreement, copies of whichhave been filed with the Commission.

** **

**OUTSTANDINGEQUITY AWARDS AT FISCAL YEAR-END TABLE**

The following table presentsinformation regarding outstanding options held by our named executive officersas of the end of our fiscal year ended December 31, 2006.

**Name**

**Option Awards**

** **

** **

** **

** **

**Stock Awards**

** **

** **

** **

** **

**Number  of Securities Underlying Unexercised Options**

**Number  r of Securities Underlying Unexercised Options**

**Equity  Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned  Options**

**Option**

**Option  Expiration**

**Number  of Shares or Units of Stock That Have Not Vested**

**Market  Value of Shares or Units of Stock That Have Not Vested**

**Equity  Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That  Have Not Vested**

**Equity  Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or  Other Rights That Have Not Vested**

** **

**(#)**

**(#)**

**(#)**

**Exercise**

**Date**

**(#)**

**($)**

**(#)**

**($)**

** **

**Price**

** **

**Exercisable**

**Unexercisable**

**($)**

** **

** **

** **

** **

** **

** **

** **

** **

** **

** **

**K. Mason Conner (1)**

500,000 

- 

- 

0.25 

9/15/07 

- 

- 

- 

- 

** **

100,000 

- 

- 

0.25 

5/31/09 

- 

- 

- 

- 

** **

31,138 

- 

- 

2.50 

8/4/10 

- 

- 

- 

- 

** **

34,536 

- 

- 

2.50 

10/1/11 

- 

- 

- 

- 

** **

1,719,658 

- 

- 

0.19 

1/30/07 

- 

- 

- 

- 

** **

3,500,000 

- 

- 

0.15 

6/15/12 

- 

- 

- 

- 

** **

2,000,000 

- 

- 

0.16 

12/27/12 

- 

- 

- 

- 

** **

**Jerry T. Kendall (2)**

120,000 

480,000 

- 

0.18 

7/16/12 

- 

- 

- 

- 

** **

4,000,000 

- 

0.15 

3/1/14 

- 

- 

- 

- 

** **

**H. Jay Hill (1)**

200,000 

- 

- 

0.20 

11/6/07 

- 

- 

- 

- 

** **

31,138 

- 

- 

2.50 

8/4/10 

- 

- 

- 

- 

** **

34,536 

- 

- 

2.50 

10/1/11 

- 

- 

- 

- 

** **

686,325 

- 

- 

0.19 

1/30/07 

- 

- 

- 

- 

** **

1,500,000 

- 

- 

0.18 

8/15/13 

- 

- 

- 

- 

** **

1,000,000 

- 

- 

0.10 

8/15/13 

- 

- 

- 

- 

** **

500,000 

- 

- 

0.15 

6/15/12 

- 

- 

- 

- 

** **

2,000,000 

- 

- 

0.16 

12/27/12 

- 

- 

- 

- 

** **

**Michael A. Richard (1)**

150,000 

- 

- 

2.50 

2/27/11 

- 

- 

- 

- 

** **

387,500 

- 

- 

0.19 

1/30/07 

- 

- 

- 

- 

** **

650,000 

- 

- 

0.15 

6/15/12 

- 

- 

- 

- 

** **

250,000 

- 

- 

0.16 

12/27/12 

- 

- 

- 

- 

** **

 

(1) These options held by Messrs.Conner, Hill, and Richard are vested in full as of December 31, 2006.  

(2) These options held by Mr. Kendallvest as follows:  0% vested immediately upon grant with the remaindervesting in equal annual installments through March 2011.

 

**STOCKOPTIONS**

TheCompany has adopted an equity incentive plan (the "2002 Plan") thatauthorizes the issuance of options to acquire up to 60,000,000 shares of commonstock, as amended, to employees and certain outside consultants.  The 2002 Planallows for the issuance of either non-qualified or, subject to stockholderapproval, incentive stock options pursuant to Section 422 of the InternalRevenue Code.  Options vest at the discretion of the Board of Directors asdetermined at the grant date, but not longer than a ten-year term. Under the2002 Plan, the exercise price of each option shall not be less than fair marketvalue on the date the option is granted.

During1997, the Board of Directors of the Company adopted a stock option plan (the"1997 Plan") that authorizes the issuance of options to acquire up to5,000,000 shares of common stock to employees and certain outside consultants. The 1997 Plan allows for the issuance of either non-qualified or incentivestock options pursuant to Section 422 of the Internal Revenue Code. Optionsvest at the discretion of the Board of Directors as determined at the grantdate, but not longer than a ten-year term. Under the 1997 Plan, the exerciseprice of each option shall not be less than 85 percent of fair market value onthe date the option is granted.

AtDecember 31, 2006, we have outstanding options to purchase 38,971,557 shares ofour common stock pursuant to the 2002 Plan and the 1997 Plan.  The number ofoptions under both the 2002 Plan and the 1997 Plan available for grant atDecember 31, 2006 is approximately 26,000,000 (see Notes to accompanying consolidatedfinancial statements).

**DIRECTOR COMPENSATION**

The following table presentsinformation regarding compensation paid to our non-employee directors for ourfiscal year ended December 31, 2006.

** **

**Name**

**Fees Earned or Paid in  Cash**

**($)**

**Stock Awards**

**($)**

**Option Awards**

**($)**

**Non-Equity Incentive  Plan Compensation**

**($)**

**Change in Pension Value  and Nonqualified Deferred Compensation Earnings**

**($)**

**All Other Compensation**

**($)**

**Total**

**($)**

** **

** **

** **

** **

** **

** **

** **

** **

Ricardo  A. Salas

-

-

-

-

-

-

-

J.  Thomas Zender

-

-

-

-

-

-

-

** **

** **

** **

** **

** **

** **

** **

** **

** **

**NARRATIVEDISCLOSURE TO DIRECTOR COMPENSATION TABLE**

Membersof our board of directors receive no cash compensation for services as adirector or for attendance at or participation in meetings. Directors receiveoptions to purchase common stock as compensation for services as a director. Inpast years, directors have received options to purchase the Company's commonstock in consideration for services as a director. There has been nodetermination made as to the number and exercise price of options, if any, thatwill be issued to either K. Mason Conner or H. Jay Hill for service duringterms following the term that expired on October 5, 2001. During 2005, ourBoard of Directors approved compensation arrangements with Jerry T. Kendall andRicardo A. Salas in connection with their services as Directors. Pursuant tothese arrangements, we issued options to purchase 600,000 shares of our commonstock at $0.18 per share to each of Messrs. Kendall and Salas, vesting at arate of 200,000 shares per year. Directors are reimbursed for out-of-pocketexpenses incurred by them in connection with attending meetings. All directorshave options to purchase shares of the Company's common stock as set forth inthe table in this Registration Statement. The Company has no other arrangementsregarding compensation for services as a director.

**COMMITTEESOF THE BOARD AND AUDIT COMMITTEE FINANCIAL EXPERT**

TheBoard of Directors has an Audit Committee and a Compensation Committee. 

AUDITCOMMITTEE. The Audit Committee of the Board of Directors (the "AuditCommittee") monitors the integrity of the Company's financial statements,the independence and qualifications of the independent registered publicaccounting firm, the performance of the Company's independent registered publicaccounting firm and the effectiveness of the Company's disclosure controls andprocedures and internal controls. It is also responsible for retaining,evaluating, and, if appropriate, recommending the termination of the Company'sindependent registered public accounting firm. The Audit Committee has beenestablished under a charter approved by the Board. Our Audit Committee consistsof Messrs. Zender, Hill, and Salas.  Mr. Salas serves as Chairman.  During 2006the Audit Committee met one time.  In March 2006, Mr. Zender replaced Mr.Kendall on the Audit Committee in connection with Mr. Kendall's appointment asthe Company's President and Chief Executive Officer. Because our board ofdirectors is comprised of only five members, the Audit Committee includes onemember of executive management, H. Jay Hill, who is not considered to beindependent within the meaning of Item 7(d)(3)(iv) of Schedule 14A of theSecurities Exchange Act of 1934, as amended. We are not required by the OTCBBto have an audit committee comprised entirely of independent directors. We donot have an audit committee financial expert as defined by Item 401(e) ofRegulation S-B of the Exchange Act at this time because we believe that we arenot in a position to attract suitable candidates due to insufficient capitalresources. In addition, we are not required by the OCTBB to have an auditcommittee financial expert.

COMPENSATIONCOMMITTEE. The Compensation Committee of the Board of Directors (the"Compensation Committee") administers the benefits, incentives andcompensation of the Company's executive officers, reviews the performance ofthe Company's executive officers, reviews and approves executive compensationpolicy and objectives, concludes whether Company executives are compensatedaccording to such standards, makes recommendations to the Board of Directorswith respect to compensation, and carries out the Board's responsibilitiesrelating to all forms of executive compensation. The Compensation Committee hasbeen established under a charter approved by the Board. Non-qualified stockoptions which are granted to the members of the Compensation Committee arerecommended by the Company's Chief Executive Officer and approved by the Boardof Directors. Our Compensation Committee consists of Messrs. Zender, Hill, andSalas..  Mr. Zender serves as Chairman.  During 2006 the Compensation Committeemet one time.  In March 2006, Mr. Zender replaced Mr. Kendall on theCompensation Committee in connection with Mr. Kendall's appointment as theCompany's President and Chief Executive Officer.  Because our board ofdirectors is comprised of only five members, the Compensation Committeeincludes one member of executive management, H. Jay Hill.  Mr. Hill recuses himself from votes and discussionson his own compensation.  We are not required by the OTCBB to have acompensation committee comprised entirely of independent directors.

**ITEM11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT**

The following table sets forth certain information with respect to the beneficial ownership of shares of the Company's common stock owned as of February 28, 2007 beneficially by (i) each person who beneficially owns more than 5% of the outstanding common stock, (ii) each director of the Company, (iii) the President and Chief Executive Officer of the Company, the executive officers and significant employees of the Company whose cash and non-cash compensation for services rendered to the Company for the year ended December 31, 2006 exceeded $100,000), and (iv) directors, executive officers, and significant employees as a group:

**Name of Beneficial**

**Amount and Nature of**

**Percent**

**Owner (1)**

**Beneficial Ownership  (2)**

**of Class (3) (4) (15)**

James  Townsend (5) 

11,147,720 

6.4

C.  Alan Williams (6)

64,842,114 

37.5

K.  Mason Conner (7)

8,209,438 

4.7

J.  Thomas Zender (8)

1,714,499 

1.0

H.  Jay Hill (9)

6,565,999 

3.8

Jerry  T. Kendall (10)

 920,000 

 * 

Ricardo  A. Salas (11)

 140,000 

 * 

Thor  R. Bendickson (12)

1,636,532 

 *

Joe  Torano 

250,000 

 *

Michael  Richard (13)

1,504,167

*

GoSolutions  Equity LLC (14)

26,786,840

15.5

All  directors, executive officers,  

and  significant employees as a

group  (8 persons)

20,874,635

12.1

*  Less than 1 %

 

(1)  The address of each individual is in care of the Company.

(2)  Represents sole voting and investment power unless otherwise indicated.

(3)  Based on approximately 147,868,127 shares of the Company's common stock outstanding at February 28, 2007, plus, as to each person listed, that portion of the Company's common stock subject to outstanding options, warrants, and convertible debt which may be exercised or converted by such person, and as to all directors and executive officers as a group, unissued shares of the Company's common stock as to which the members of such group have the right to acquire beneficial ownership upon the exercise of stock options or warrants, or conversion of convertible debt within 60 days of February 28, 2007.

(4)  Excludes 36,212,985 shares reserved for issuance under outstanding options and warrants.

(5)  Includes options to acquire 66,261 shares of common stock at $2.50 per share.

(6)  Includes $166,452 of debt and accrued interest convertible to 1,888,943 shares of common stock at $0.14 per share and warrants to acquire 5,000,000 shares at $0.10 per share.

(7)  Includes 124,106 shares and options to acquire 600,000 shares of common stock at $0.25 per share, options to acquire 65,674 shares at $2.50 per share, options to acquire 1,719,658 shares at $0.19 per share, options to acquire 3,500,000 shares at $0.15 per share, options to acquire 2,000,000 shares at $0.16 per share, and warrants to acquire 200,000 shares at $0.15 per share.

(8)  Includes options to acquire 290,000 shares of common stock at $0.20 per share, options to acquire 66,261 shares at $2.50 per share, options to acquire 918,825 shares at $0.19 per share, and options to acquire 200,000 shares at $0.15 per share.

(9)  Includes options to acquire 200,000 shares of common stock at $0.20 per share, options to acquire 65,674 shares at $2.50 per share, options to acquire 686,325 shares at $0.19 per share, options to acquire 1,500,000 shares at $0.18 per share, options to acquire 1,000,000 shares at $0.10 per share, options to acquire 500,000 shares at $0.15 per share, options to acquire 2,000,000 shares at $0.16 per share, and warrants to acquire 350,000 shares at $0.15 per share.

(10)  Includes options to acquire 120,000 shares of common stock at $0.18 per share and options to acquire 800,000 shares at $0.15 per share.

(11)  Includes options to acquire 120,000 shares of common stock at $0.18 per share.

(12)  Includes option to acquire 500,000 shares of common stock at $0.15 per share

(13)  Includes options to purchase 150,000 shares of common stock at $2.50 per share, options to purchase 387,500 shares of common stock at $0.1875 per share, options to purchase 650,000 shares of common stock at $0.15 per share, and options to purchase 250,000 shares at $0.16 per share.

(14)  The members of GoSolutions Equity LLC are Daniel M. Doyle, Sr., H. Scott Seltzer, Larry C. Morgan, Shaun C. Pope (who is an employee of GSI), Tom C. Lokey, and William Thompson Thorn, III.

(15)  Excludes up to 33,500,000 shares of our common stock underlying conversion of our Convertible Series A Preferred Stock issued to Barron Partners, LP ("Barron").  We have entered into an agreement with Barron which provides that Barron will not acquire any additional shares of our common stock in the open market or convert our Convertible Series A Preferred Stock into our common stock or exercise warrants if the effect of such a purchase, exercise or conversion would be to increase Barron's equity ownership position above 4.99%.  Accordingly, because it is not anticipated that Barron will acquire beneficial ownership within the next 60 days or shares of our common stock above 4.99% of our outstanding number of shares of common stock, such securities are excluded from the above table.

 

**SecuritiesAuthorized for Issuance Under Equity Compensation Plans**

Thefollowing provides information, as of December 31, 2006, concerningcompensation plans (including individual compensation arrangements) under whichequity securities of the Company are authorized for issuance.

** **

**(a)**

**(b)**

**(c)**

** **

** **

** **

** **

**Plan Category**

** **

** **

** **

** **

**Number of securities to  be issued upon exercise of outstanding options, warrants and rights**

** **

** **

** **

**Weighed-average  exercise price of outstanding options, warrants**

**and rights**

** **

**Number of securities  remaining available for future issuances under equity compensation plans  (excluding securities reflected in**

**column (a))**

Equity compensation plans

   approved by security holders

38,971,557 

 $

0.21 

26,028,443 

Equity compensation plans not

   approved by security holders

15,566,000 

 $

0.13 

-- 

      Total

54,537,557 

 $

0.19

26,028,443 

For a complete description of our equitycompensation plans, please refer to Note 7 of our consolidated financialstatements as of December 31, 2006, which are filed as Exhibit 99.1 hereto.

** **
 
** ITEM 12.  CERTAINRELATIONSHIPS AND RELATED TRANSACTIONS**

 

Review and Approval of Related PersonTransactions.

In the future, the Audit Committee will reviewall relationships and transactions in which the company and our directors andexecutive officers or their immediate family members are participants todetermine whether such persons have a direct or indirect material interest. Thecompany's legal consultant is primarily responsible for the development andimplementation of processes and controls to obtain information from thedirectors and executive officers with respect to related person transactionsand for then determining, based on the facts and circumstances, whether thecompany or a related person has a direct or indirect material interest in thetransaction. As required under SEC rules, transactions that are determined tobe directly or indirectly material to the company or a related person aredisclosed in the company's proxy statement. In addition, the Audit Committeereviews and approves or ratifies any related person transaction that isrequired to be disclosed. As set forth in the Audit Committee's key practices,in the course of its review and approval or ratification of a disclosablerelated party transaction, the committee considers: 

•

the nature of the related person's interest in  the transaction; 

•

the material terms of the transaction,  including, without limitation, the amount and type of transaction; 

•

the importance of the transaction to the  related person; 

•

the importance of the transaction to the  company; 

•

whether the transaction would impair the  judgment of a director or executive officer to act in the best interest of  the company; and 

•

any other matters the committee deems  appropriate. 

Anymember of the Audit Committee who is a related person with respect to atransaction under review may not participate in the deliberations or voterespecting approval or ratification of the transaction, provided, however, thatsuch director may be counted in determining the presence of a quorum at ameeting of the committee that considers the transaction. 

Description of Related Party Transactions

TBSleases the building that houses substantially all of its operations fromPerimeter Center Partners, which is controlled by James L. Campbell and StephenA. Garner.  Messrs. Campbell and Garner are the former owners of TBS and aresignificant employees of the Company.  The lease commenced on February 1, 2004and has a term of five years, with monthly payments of $6,200 per month.  TheCompany has executed a Guaranty with respect to the lease. 

GSIleases the St. Petersburg office space pursuant to a noncancelable operatinglease agreement expiring in April 30, 2011 at a cost of $12,653 per month.   The building in which the office space is located is owned by an entity inwhich a member of GoSolutions Equity LLC (a related party) owns an interest.  

OnMay 1, 2006 and in connection with the acquisition of GSI, the Company issued42,663,879 shares of its restricted common stock to approximately 37shareholders of GSI.  The shares were valued at $0.10 per share (the estimatedfair value on the date of acquisition).

OnMay 1, 2006 and in connection with the acquisition of TBS, the Company issued1,100,000 shares of its restricted common stock to each of James L. Campbelland Stephen A. Garner, pursuant to the acquisition agreement.  The shares werevalued at $0.11 per share (the estimated fair value on the date that the shareswere earned).

OnJune 29, 2006 and in connection with the acquisition of TBS, the Company issued66,000 shares of its restricted common stock to H. Jay Hill, who is an officerand director of the Company, as a finder's fee.  The shares were valued at$0.11 per share (the estimated fair value on the date that the shares wereearned).

DuringFebruary 2005 and in connection with the acquisition of TBS, the Company agreedto issue 1,100,000 shares of its restricted common stock to each of James L.Campbell and Stephen A. Garner pursuant to the acquisition agreement.

DuringFebruary 2005 and in connection with the acquisition of TBS, the Company agreedto issue 66,000 shares of its restricted common stock to H. Jay Hill, who is anofficer and director of the Company, pursuant to Mr. Hill's employmentagreement

OnApril 15, 2005 and in connection with the acquisition of PFI, the Companyissued warrants to purchase an aggregate of 10,000,000 shares of VillageEDOCS'common stock at $0.15 per share.  The warrants were valued at $2,100,000(estimated based on the Black Scholes option pricing model) and will vest atvarious amounts during the third, twelfth, twenty-fourth, and thirty-sixthmonths following the date of closing.

Inconnection with the acquisition of Resolutions, the Company issued promissorynotes in the amount of $120,000 and $80,000 to Alexander Riess and WilliamFalcon, respectively.  The notes bear interest at 5% per annum and are due inten monthly installments, payment of which is subject to certain conditionsincluding availability of sufficient positive cash flow from the operations ofResolutions following the acquisition.  As of December 31, 2005, the Companyhad paid $160,000 in principal and $4,433 of interest due pursuant to thepromissory notes.  As of February 28, 2006, all amounts due pursuant to thepromissory notes had been paid by the Company.

Alsoin connection with the acquisition on Resolutions, Messrs. Riess and Falcon haveloaned the Company $48,000 and $32,000, respectively, as of December 31, 2005. As of February 28, 2006, the aggregate balance of these shareholder loans was$100,000.  Subject to the acquisition agreement, the Company will repay theprincipal amount of the loans together with accrued interest at a rate of 7.5percent per annum over a ten-month period commencing March 1, 2006.

AtDecember 31, 2005, the balance of these related party notes (including the$30,000 in notes payable assumed in the acquisition of Resolutions) was$150,000.

OnApril 15, 2005 and in connection with the acquisition of PFI, the Companyagreed to issue warrants to purchase an aggregate of 200,000 and 350,000 sharesof VillageEDOCS' common stock at $0.15 per share to K. Mason Conner and H. JayHill, respectively, as a finder's fee.  Messrs. Conner and Hill are directorsand executive officers of the Company.  The warrants were valued at $105,000(based on the Black Scholes option pricing model).

OnApril 15, 2005 and in connection with the acquisition of Resolutions, theCompany agreed to issue 76,606 shares of restricted common stock to K. MasonConner as a finder's fee.  The shares were valued at $12,257 (estimated fairvalue based on the closing price of the Company's common stock on the dateearned).

Boardof Director Independence

Thestandards relied upon by the Board of Directors in affirmatively determiningwhether a director is "independent" are those of the Nasdaq, which include thefollowing objective standards: 

(a) a director who is an employee, or whoseimmediate family member (defined as a spouse, parent, child, sibling, father-and mother-in-law, son- and daughter-in-law and anyone, other than a domesticemployee, sharing the director's home) is an executive officer of the Company,would not be independent for a period of three years after termination of suchrelationship; 

(b) a director who receives, or whose immediatefamily member receives, payments of more than $60,000 during any period oftwelve consecutive months from the Company, except for certain permittedpayments, would not be independent for a period of three years after ceasing toreceive such amount; 

(c) a director who is or who has an immediatefamily member who is, a current partner of the Company's outside auditor or whowas, or who has an immediate family member who was, a partner or employee ofthe Company's outside auditor who worked on the Company's audit at any timeduring any of the past three years would not be independent until a period of threeyears after the termination of such relationship; 

(d) a director who is, or whose immediate familymember is, employed as an executive officer of another company where any of theCompany's present executive officers serve on the other company's compensationcommittee would not be independent for a period of three years after the end ofsuch relationship; and 

(e) a director who is, or who has an immediatefamily member who is, a partner in, or a controlling shareholder or anexecutive officer of any organization that makes payments to, or receivespayments from, the Company for property or services in an amount that, in anysingle fiscal year, exceeds the greater of $200,000, or 5% of such othercompany's consolidated gross revenues, would not be independent until a periodof three years after falling below such threshold.. In addition, no directorwill qualify as "independent" unless the Board affirmatively determines thatthe director has no material relationship with the Company (either, directly oras a partner, shareholder or officer of an organization that has a relationshipwith the Company). 

TheBoard of Directors, in applying the above-referenced standards, hasaffirmatively determined that the Company's current "independent" directorsare: J. Thomas Zender and Ricardo A. Salas.
****
**ITEM13.  EXHIBITS**

 

2.2

Plan  of Internal Restructuring previously filed as Exhibit B to the Company's  Schedule 14C Information Statement filed on July 23, 2004 and incorporated  herein by reference.  **

2.3

Stock  Purchase Agreement dated as of April 1, 2005 and executed April 15, 2005 by  and among VillageEDOCS Acquisition Corp, Phoenix Forms, Inc., and Its  Shareholders.  Previously filed as Exhibit 2.1 to the Company's Current  Report on Form 8-K filed on April 19, 2005. **

2.4

Merger  Agreement, dated as of February 17, 2006, by and among VillageEDOCS, VEDO  Merger Sub, Inc., GoSolutions, Inc. and certain stockholders of  GoSolutions.  Previously filed as Exhibit 2.1 to the Company's Current  Report on Form 8-K filed on February 21, 2006. **

2.5

Articles  of Merger and Plan of Merger.  Previously filed as Exhibit 99.2 to the  Company's Current Report on Form 8-K filed on May 4, 2006. **

3.1

Articles  of Incorporation, as amended.  Previously filed with the Company's Form  10-SB filed on August 29, 2000.  **

3.2

By-laws.   Previously filed with the Company's Form 10-SB filed on August 29, 2000.  **

3.3

Article  of Amendment to Articles of Incorporation to increase authorized number of  common shares.  Previously filed with the Company's 14C Information  Statement filed on July 23, 2004. **

3.4

Article  of Amendment to Articles of Incorporation to increase authorized number of  common shares and to create a class of preferred stock.  Previously  filed with the Company's 14C Information Statement filed on June 7, 2005. **

3.5

Form  of Certificate of Designations of Preferences, Rights and Limitations of  Series A Convertible Preferred Stock.  Previously filed as Exhibit 4.8  to the Company's Current Report on Form 8-K filed on April 19, 2005. **

3.6

Certificate  of Amendment of Articles of Incorporation to increase authorized number of  common shares.  Previously filed with the Company's Current Report on  Form 8-K filed on January 20, 2006. **

4.1

Letter  Agreement dated July 30, 2002 by and between the Company, C. Alan Williams,  and Joan P. Williams previously filed as Exhibit 4.1 to the Company's  Quarterly Report on Form 10-QSB for the period ended June 30, 2002 and  incorporated herein by reference.  **

4.2

Promissory  Note Modification Agreement dated July 15, 2002 by and between the Registrant  and James W. Townsend previously filed as Exhibit 4.1 to the Company's  Current Report on Form 8-K filed on July 2, 2002 and incorporated herein by  reference. **

4.3

Form  of Unsecured Convertible Promissory Note. Previously filed as Exhibit 4.5 to  the Registrant's Quarterly Report on Form 10-QSB filed with the Securities  and Exchange Commission on May 15, 2002 and incorporated herein by reference.  **

4.4

Form  of Convertible Secured Promissory Note. Previously filed as Exhibit 4.6 to  the Registrant's Quarterly Report on Form 10-QSB filed with the Securities  and Exchange Commission on May 15, 2002 and incorporated herein by reference.  **

4.5

2002  Equity Incentive Plan dated as of January 30, 2002.  Previously filed as  Exhibit 4.1 to the Registrant's Quarterly Report on Form 10-QSB filed with  the Securities and Exchange Commission on May 15, 2002 and incorporated  herein by reference. **

4.6

Form  of Stock Option Agreement.  Previously filed as Exhibit 4.2 to the  Registrant's Quarterly Report on Form 10-QSB filed with the Securities and  Exchange Commission on May 15, 2002 and incorporated herein by reference. **

4.7

Promissory  Note Modification Agreement dated May 9, 2002 by and among the Company, Joan  P. Williams and C. Alan Williams.  Previously filed as Exhibit 4.3 to  the Registrant's Quarterly Report on Form 10-QSB filed with the Securities  and Exchange Commission on May 15, 2002 and incorporated herein by reference.  **

4.8

Security  Agreement dated May 9, 2002 by and among the Company, Joan P. Williams and C.  Alan Williams.  Previously filed as Exhibit 4.4 to the Registrant's  Quarterly Report on Form 10-QSB filed with the Securities and Exchange  Commission on May 15, 2002 and incorporated herein by reference. **

4.9

Promissory  Note to Stephen A. Garner dated February 17, 2004 previously filed as Exhibit  4.1 to the Company's Current Report on Form 8-K filed on February 18, 2004  and incorporated herein by reference. **

4.10

Promissory  Note to James L. Campbell dated February 17, 2004 previously filed as Exhibit  4.2 to the Company's Current Report on Form 8-K filed on February 18, 2004  and incorporated herein by reference. **

4.11

Guaranty  by Tailored Business Systems, Inc. to Stephen A. Garner dated February 17,  2004 previously filed as Exhibit 4.3 to the Company's Current Report on Form  8-K filed on February 18, 2004 and incorporated herein by reference. **

4.12

Guaranty  by Tailored Business Systems, Inc. to James L. Campbell dated February 17,  2004 previously filed as Exhibit 4.4 to the Company's Current Report on Form  8-K filed on February 18, 2004 and incorporated herein by reference. **

4.13

Form  of Security Agreement dated February 17, 2004 by and between Tailored  Business Systems, Inc. and Stephen A. Garner previously filed as Exhibit 4.5  to the Company's Current Report on Form 8-K filed on February 18, 2004 and  incorporated herein by reference. **

4.14

Form  of Security Agreement dated February 17, 2004 by and between Tailored  Business Systems, Inc. and James L. Campbell previously filed as Exhibit 4.6  to the Company's Current Report on Form 8-K filed on February 18, 2004 and  incorporated herein by reference. **

4.15

Registration  Rights Agreement dated February 17, 2004 by and between VillageEDOCS and  Stephen A. Garner previously filed as Exhibit 4.7 to the Company's Current  Report on Form 8-K filed on February 18, 2004 and incorporated herein by  reference. **

4.16

Registration  Rights Agreement dated February 17, 2004 by and between VillageEDOCS and  James L. Campbell previously filed as Exhibit 4.8 to the Company's Current  Report on Form 8-K filed on February 18, 2004 and incorporated herein by  reference. **

4.17

Form  of Stock Pledge Agreement dated February 17, 2004 by and between Tailored  Business Systems, Inc. and Stephen A. Garner previously filed as Exhibit 4.9  to the Company's Current Report on Form 8-K filed on February 18, 2004 and  incorporated herein by reference. **

4.18

Form  of Stock Pledge Agreement dated February 17, 2004 by and between Tailored  Business Systems, Inc. and James L. Campbell previously filed as Exhibit 4.10  to the Company's Current Report on Form 8-K filed on February 18, 2004 and  incorporated herein by reference. **

4.19

Notice  of Intent to Exercise Conversion Right dated February 10, 2005 by Joan P.  Williams and C. Alan Williams.  Previously filed as Exhibit 4.5 to the  Company's Current Report on Form 8-K filed on February 14, 2005. **

4.20

Promissory  Note to Alexander Riess dated April 15, 2005.  Previously filed as  Exhibit 4.1 to the Company's Current Report on Form 8-K filed on April 19,  2005. **

4.21

Promissory  Note to William R. Falcon dated April 15, 2005.  Previously filed as  Exhibit 4.2 to the Company's Current Report on Form 8-K filed on April 19,  2005. **

4.22

Common  Stock Purchase Warrant to Alexander Riess dated as of April 1, 2005.   Previously filed as Exhibit 4.3 to the Company's Current Report on Form 8-K  filed on April 19, 2005. **

4.23

Common  Stock Purchase Warrant to William R. Falcon dated as of April 1, 2005.   Previously filed as Exhibit 4.4 to the Company's Current Report on Form 8-K  filed on April 19, 2005. **

4.24

Note  Purchase Agreement dated April 13, 2005 by and between VillageEDOCS and  Barron Partners LP.  Previously filed as Exhibit 4.5 to the Company's  Current Report on Form 8-K filed on April 19, 2005. **

4.25

Convertible  Note to Barron Partners LP dated April 13, 2005.  Previously filed as  Exhibit 4.6 to the Company's Current Report on Form 8-K filed on April 19,  2005. **

4.26

Registration  Rights Agreement dated April 13, 2005 by and between VillageEDOCS and Barron  Partners LP.  Previously filed as Exhibit 4.7 to the Company's Current  Report on Form 8-K filed on April 19, 2005. **

4.27

Form  of Certificate of Designations of Preferences, Rights and Limitations of  Series A Convertible Preferred Stock.  Previously filed as Exhibit 4.8  to the Company's Current Report on Form 8-K filed on April 19, 2005. **

4.28

Stock  Purchase Warrant "A" dated April 13, 2005 to Barron Partners  LP.  Previously filed as Exhibit 4.9 to the Company's Current Report on  Form 8-K filed on April 19, 2005. **

4.29

Stock  Purchase Warrant "B" dated April 13, 2005 to Barron Partners  LP.  Previously filed as Exhibit 4.10 to the Company's Current Report on  Form 8-K filed on April 19, 2005. **

4.30

Form  of Note Assignment.  Previously filed as Exhibit 4.1 to the Company's  Current Report on Form 8-K filed on July 6, 2005. **

4.31

Form  of Promissory Note Modification Agreement.  Previously filed as Exhibit  4.2 to the Company's Current Report on Form 8-K filed on July 6, 2005. **

4.32

Form  of Notice of Intent to Exercise Conversion Right.  Previously filed as  Exhibit 4.3 to the Company's Current Report on Form 8-K filed on July 6,  2005. **

4.33

Notice  of conversion by Barron Partners LP dated September 30, 2005.  Previously  filed as Exhibit 4.6 to the Company's Current Report on Form 8-K filed on  October 5, 2005. **

4.34

Form  of Convertible Secured Promissory Note by and among C. Alan Williams, Joan P.  Williams, and the Company previously filed as Exhibit 4.19 to the Company's  Annual Report on Form 10-KSB filed on April 14, 2006 and incorporated herein  by reference. **

4.35

Convertible  Secured Promissory Note dated February 16, 2004 by and among C. Alan  Williams, Joan P. Williams, and the Company previously filed as Exhibit 4.20  to the Company's Annual Report on Form 10-KSB filed on April 14, 2006 and  incorporated herein by reference. **

4.36

Notice  of conversion by Barron Partners LP dated October 21, 2005.  Previously  filed as Exhibit 4.1 to the Company's Current Report on Form 8-K filed on  October 24, 2005 and incorporated herein by reference. **

4.37

Notice  of conversion by Barron Partners LP dated March 8, 2006.  Previously  filed as Exhibit 4.1 to the Company's Current Report on Form 8-K filed on  March 9, 2006 and incorporated herein by reference. **

4.38

Registration  Rights Agreement dated as of April 28, 2006 by and among VillageEDOCS and the  principal stockholders of GoSolutions, Inc.  Previously filed as Exhibit  99.5 to the Company's Current Report on Form 8-K filed on May 4, 2006. **

4.39

Principal  VEDO Stockholders Voting Agreement dated as of April 28, 2006 by and among  Barron Partners, LP, C. Alan Williams, Joan P. Williams and GoSolutions,  Inc.  Previously filed as Exhibit 99.6 to the Company's Current Report  on Form 8-K filed on May 4, 2006. **

4.40

Indemnity/Contribution  Agreement effective April 30, 2006, by and among VillageEDOCS, GoSolutions  Equity, LLC (the "LLC"), and the principals of the LLC identified  on the signature page thereto.  Previously filed as Exhibit 99.7 to the  Company's Current Report on Form 8-K filed on May 4, 2006. **

4.41

Settlement  and Release Agreement dated as of April 28, 2006 by and among VillageEDOCS,  GoSolutions, Inc., The Zant Group Trust and Louis J. Zant.  Previously  filed as Exhibit 99.9 to the Company's Current Report on Form 8-K filed on  May 4, 2006. **

4.42

Second  Extension Agreement dated as of April 28, 2006 by and between The Zant Group  Trust and GoSolutions, Inc.  Previously filed as Exhibit 99.9 to the  Company's Current Report on Form 8-K filed on May 4, 2006. **

4.43

Settlement  and Release Agreement dated as of June 30, 2006, by and among VillageEDOCS,  GoSolutions, Inc., Bruce H. Bennett and Sandra G. Bennett.  Previously filed  as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on July 12,  2006. **

4.44

Warrant  Exchange Agreement dated as of November 20, 2006 by and between the Company  and Barron Partners, LP.  Previously filed as Exhibit 10.1 to the Company's  Amended Current Report on Form 8-K/A filed on November 22, 2006.**

10.1

Consulting  and Other Services agreement dated January 28, 2003 by and between the  Company and Paul Allen.  Previously filed as Exhibit 4.8 to the  Company's Registration Statement on Form S-8 filed with the Securities and  Exchange Commission on January 29, 2003 and incorporated herein by reference.  **

10.2

Employment  Offer Letter dated April 23, 2004 by and between Tailored Business Systems,  Inc. and James L. Kolassa.  Previously filed as Exhibit 10.2 to the  Company's Annual Report on Form 10-KSB filed on March 31, 2005 and  incorporated herein by reference. **

10.3

Debt  settlement agreement dated January 28, 2003 by and between the Company and  James R. Spoerl.  Previously filed as Exhibit 4.9 to the Company's  Registration Statement on Form S-8 filed with the Securities and Exchange  Commission on January 29, 2003 and incorporated herein by reference. **

10.4

Employment  Agreement dated February 17, 2004 by and between Tailored Business Systems,  Inc. and Stephen A. Garner previously filed as Exhibit 10.1 to the Company's  Current Report on Form 8-K filed on February 18, 2004 and incorporated herein  by reference. **

10.5

Employment  Agreement dated February 17, 2004 by and between Tailored Business Systems,  Inc. and James L. Campbell previously filed as Exhibit 10.2 to the Company's  Current Report on Form 8-K filed on February 18, 2004 and incorporated herein  by reference. **

10.6

General  Release and Noncompetition Agreement dated February 17, 2004 by Stephen A.  Garner in favor of Tailored Business Systems, Inc. previously filed as  Exhibit 10.3 to the Company's Current Report on Form 8-K filed on February  18, 2004 and incorporated herein by reference. **

10.7

General  Release and Noncompetition Agreement dated February 17, 2004 by James L.  Campbell in favor of Tailored Business Systems, Inc. previously filed as  Exhibit 10.4 to the Company's Current Report on Form 8-K filed on February  18, 2004 and incorporated herein by reference. **

10.8

Lease  Agreement dated February 17, 2004 by and between Perimeter Center Partners  and Tailored Business Systems, Inc. previously filed as Exhibit 10.5 to the  Company's Current Report on Form 8-K filed on February 18, 2004 and  incorporated herein by reference. **

10.9

Employment  Agreement dated June 10, 2004 by and between the Company and K. Mason Conner  previously filed as Exhibit C to the Company's Schedule 14C Information  Statement filed on July 23, 2004 and incorporated herein by reference. **

10.10

Employment  Agreement dated June 10, 2004 by and between the Company and H. Jay Hill  previously filed as Exhibit D to the Company's Schedule 14C Information  Statement filed on July 23, 2004 and incorporated herein by reference. **

10.11

Employment  Agreement dated June 10, 2004 by and between the Company and Michael Richard  previously filed as Exhibit E to the Company's Schedule 14C Information  Statement filed on July 23, 2004 and incorporated herein by reference. **

10.12

Employment  Agreement dated as of April 1, 2005 by and between Phoenix Forms, Inc. and  Alexander Riess.  Previously filed as Exhibit 10.1 to the Company's  Current Report on Form 8-K filed on April 19, 2005. **

10.13

Employment  Agreement dated as of April 1, 2005 by and between Phoenix Forms, Inc. and  William R Falcon.  Previously filed as Exhibit 10.2 to the Company's  Current Report on Form 8-K filed on April 19, 2005. **

10.14

Release  of Claims Agreement dated as of April 1, 2005 by Alexander Riess in favor of  Phoenix Forms, Inc.  Previously filed as Exhibit 10.3 to the Company's  Current Report on Form 8-K filed on April 19, 2005. **

10.15

Release  of Claims Agreement dated as of April 1, 2005 by William R. Falcon in favor  of Phoenix Forms, Inc.  Previously filed as Exhibit 10.4 to the  Company's Current Report on Form 8-K filed on April 19, 2005. **

10.16

Amendment  No. 1 to Executive Employment Agreement dated April 28, 2005 by and between  the Registrant and K. Mason Conner.  Previously filed as Exhibit 10.1 to  the Company's Current Report on Form 8-K filed on April 29, 2005. **

10.17

Amendment  No. 1 to Executive Employment Agreement dated April 28, 2005 by and between  the Registrant and H. Jay Hill.  Previously filed as Exhibit 10.2 to the  Company's Current Report on Form 8-K filed on April 29, 2005. **

10.18

Amendment  No. 1 to Executive Employment Agreement dated April 28, 2005 by and between  the Registrant and Michael A. Richard.  Previously filed as Exhibit 10.3  to the Company's Current Report on Form 8-K filed on April 29, 2005. **

10.19

Executive  Employment Agreement, dates as of March 1, 2006, by and between the Company  and Jerry T. Kendall.  Previously files as Exhibit 10.1 to the Company's  Current Report on Form 8-K filed on March 1, 2006. **

10.20

Amendment  No. 2 to Michael Richard Executive Employment Agreement effective as of May  1, 2006.  Previously filed as Exhibit 99.11 to the Company's Current  Report on Form 8-K filed on May 4, 2006. **

10.21

Amendment  No. 2 to H. Jay Hill Executive Employment Agreement effective as of May 1,  2006.  Previously filed as Exhibit 99.12 to the Company's Current Report  on Form 8-K filed on May 4, 2006. **

10.22

Amendment  No. 2 to K. Mason Conner Executive Employment Agreement effective as of May  1, 2006.  Previously filed as Exhibit 99.13 to the Company's Current  Report on Form 8-K filed on May 4, 2006. **

10.23

Thor  Bendickson Employment Agreement effective as of May 1, 2006.  Previously  filed as Exhibit 99.14 to the Company's Current Report on Form 8-K filed on  May 4, 2006. **

10.24

Shaun  Charles Pope Employment Agreement effective as of May 1, 2006.  Previously  filed as Exhibit 99.15 to the Company's Current Report on Form 8-K filed on  May 4, 2006. **

10.25

Frederick  A. Burris Employment Agreement effective as of  May 1, 2006.   Previously filed as Exhibit 99.16 to the Company's Current Report on Form 8-K  filed on May 4, 2006. **

10.26

Patent  License Agreement, dated as of May 12, 2006, by and between VillageEDOCS and  Catch Curve, Inc..  Previously filed as Exhibit 10.1 to the Company's  Current Report on Form 8-K filed on May 16, 2006. **

 

14.1

Code  of Ethics.  Previously filed as Exhibit 14.1 to the Company's Annual Report  on Form 10-KSB filed on March 29, 2004 and incorporated herein by reference

21.1

Subsidiaries  of the Registrant.*

31.1

Certification  Under Section 302 of The Sarbanes-Oxley Act of 2002 signed and dated March  30, 2007 by K. Mason Conner, Chief Executive Officer.*

31.2

Certification  Under Section 302 of The Sarbanes-Oxley Act of 2002 signed and dated March 30,  2007by Michael A. Richard, Chief Financial Officer.*

32.1

Certification  Pursuant To 18 U.S.C. §1350, As Adopted Pursuant To Section 906 of the  Sarbanes-Oxley Act of 2002 signed and dated March 30, 2007  by K. Mason  Conner, Chief Executive Officer.**

32.2

Certification  Pursuant To 18 U.S.C. §1350, As Adopted Pursuant To Section 906 of the  Sarbanes-Oxley Act of 2002 signed and dated March 30, 2007 by Michael A.  Richard, Chief Financial Officer.**

99.1

VillageEDOCS  Financial Statements For The Fiscal Years Ended December 31, 2006 and 2005  together with Report of Independent Registered Public Accounting Firm.*

*

Filed  herewith

**

Previously  filed
****
 

**ITEM14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES.**

Thefollowing table sets forth fees billed to us by our independent registeredpublic accounting firm during the fiscalyears ended December 31, 2006 and 2005 for: (i) services rendered for the auditof our annual financial statements and the review of our quarterly financialstatements, (ii) services by our independent registered public accounting firm that are reasonably related to theperformance of the audit or review of our financial statements and that are notreported as Audit Fees, including procedures related to our acquisition of GSIand Resolutions (iii) services rendered in connection with tax compliance, taxadvice, and tax planning, and (iv) all other fees for services rendered. "All Other Fees" consisted of fees related to our proxy statements, registrationstatements, SEC comment letters, and press releases.

2006

2005

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

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

(i)

Audit  Fees

$   185,000

$    115,500

(ii)

Audit  Related Fees

40,000

10,500

(iii)

Tax  Fees

40,000

8,500

(iv)

All  Other Fees

- 

20,500

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

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

      Total

$   265,000

$    155,000

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

=================
 SIGNATURES
In accordance withSection 13 or 15(d) of the Securities Exchange Act of 1934, the registrant hascaused this Annual Report on Form 10-KSB to be signed on its behalf by theundersigned, thereunto duly authorized.

VillageEDOCS

(Registrant)

**VillageEDOCS**

** **

** **

 

By:   /s/ Michael A. Richard

Michael A. Richard

Chief Financial Officer and

Principal Accounting Officer

Date:  March 30, 2007

               Pursuant to the requirements ofthe Securities Exchange Act of 1934, this Annual Report on Form 10-KSB has beensigned by the following persons below on behalf of the registrant and in thecapacities and on the dates indicated.

**SIGNATURE**

**TITLE**

**DATE**

 

 

 

 

 

 

 

 

 

/s/ K. Mason Conner

 

March 30, 2007

K. Mason Conner

Director,

Chief Executive Officer

/s/ Michael A. Richard

March 30, 2007

Michael A. Richard

Chief Financial Officer,

Principal Accounting Officer

/s/ J. Thomas Zender

March 30, 2007

J. Thomas Zender

Director,

Chairman of the Board

/s/ Jerry T. Kendall

March 30, 2007

Jerry T. Kendall

Director, President, and

Chief Operating Officer

/s/ Ricardo A. Salas

March 30, 2007

Ricardo A. Salas

Director

/s/ H. Jay Hill

March 30, 2007

H. Jay Hill

Executive Vice President,

Director |
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