**U.S. SECURITIES AND EXCHANGE 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,  2002** | **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:

**CommonStock,  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**)

Stateissuer's revenues for its most recent fiscal year:  **$1,611,546**

State theaggregate market value of the voting stock held by non-affiliates of theissuer:  **$897,785 as of February 28, 2003.**

Number ofshares of the issuer's common stock, no par value, outstanding as of February28, 2003:  **30,920,702 shares**.

DOCUMENTSINCORPORATED BY REFERENCE:  None.

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

Indicateby check mark whether the Issuer  is anaccelerated filer (as defined in Rule 12b-2 of the Act        YES (   )____NO (**X**)

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**VillageEDOCS**

FORM 10-KSB INDEX

FOR THE FISCAL YEAR ENDED DECEMBER 31,2002

|        |          |            |                                                                                        |        |
|--------|----------|------------|----------------------------------------------------------------------------------------|--------|
|        |          |       |                                                                                        | Page   |
|   | PART I   |       |                                                                                        |   |
|        |          |       |                                                                                        |   |
|        |          | Item 1.    | Description  of Business                                                               | 3      |
|   |     |       |                                                                                   |   |
|        |          | Item 2.    | Description  of Property                                                               | 4      |
|        |          |       |                                                                                        |   |
|        |          | Item 3.    | Legal  Proceedings                                                                     | 5      |
|        |          |       |                                                                                        |   |
|        |          | Item 4.    | Submission  of Matters to a Vote of Security Holders                                   | 5      |
|        |          |       |                                                                                        |   |
|   | PART II  |       |                                                                                        |   |
|        |          |       |                                                                                        |   |
|        |          | Item 5.    | Market for  Equity Securities and Related Stockholder Matters                          | 7      |
|        |          |       |                                                                                        |   |
|        |          | Item 6.    | Management's  Discussion and Analysis of Financial Condition and Results of Operations | 8      |
|        |          |       |                                                                                        |   |
|        |          | Item 7.    | Financial  Statements                                                                  | 18     |
|        |          |       |                                                                                        |   |
|        |          | Item 8.    | Changes in  and Disagreements with Accountants on Accounting and Financial Disclosures | 18     |
|        |          |       |                                                                                        |   |
|   | PART III |       |                                                                                        |   |
|        |          |       |                                                                                        |   |
|        |          | Item 9.    | Directors,  Executive Officers, Promoters and Control Persons of the Company           | 19     |
|        |          |       |                                                                                        |   |
|        |          | Item 10.   | Executive  Compensation                                                                | 22     |
|        |          |       |                                                                                        |   |
|        |          | Item 11.   | Security  Ownership of Certain Beneficial Owners and Management                        | 25     |
|        |          |       |                                                                                        |   |
|        |          | Item 12.   | Certain  Relationships and Related Transactions                                        | 27     |
|        |          |       |                                                                                        |   |
|        |          | Item 13.   | Exhibits  and Reports on Form 8-K                                                      | 29     |
|        |          |       |                                                                                        |   |
|        |          | Item 14.   | Controls  and Procedures                                                               | 30     |
|        |          |            |                                                                                        |   |
|        |          | Signatures |                                                                                        | 31     |
|        |          |            | Certifications                                                                         |   |

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**PART I**

** **

**ITEM 1.   DESCRIPTIONOF BUSINESS**

 

**FORWARD-LOOKINGINFORMATION**

*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. These statements are based on our plans, intentions, expectation, andbelief and are subject to certain risks and uncertainties that could causeactual results to differ materially from those projected or expressed herein.The words "anticipated," "believe," "expect,""plan," "intended," "seek," "estimate,""project," "will," "could," "may," andsimilar expressions are intended to identify forward-looking statements. Thesestatements include, among others, information regarding future operations,future capital expenditures, and future net cash flow. Such statements reflectthe Company's current views with respect to future events and financialperformance and involves risks and uncertainties, including, withoutlimitation, general economic and business conditions, changes in foreign,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 "Factors That May Affect Future Results"inItem 6 of this Annual Report. Our future results and stockholder values maydiffer materially from those expressed in these forward- looking statements.Many of the factors that will determine these results and values are beyond ourability to control or predict. Investors are cautioned not to put unduereliance on any forward-looking statements. For these statements, we claim theprotection of the safe harbor for forward-looking statements contained inSection 21E of the Exchange Act.*

**WEBSITEACCESS TO REPORTS**

Ourprincipal executive offices are currently located at 14471 Chambers Road, Suite#105, Tustin, CA  92780.  The Company's Internet website address is www.villageedocs.com.  The Company's annual reports on Form 10-KSB,quarterly reports on Form 10-QSB, and current reports of Form 8-K, and allamendments thereto, are available free of charge on the Company's website assoon as reasonably practical after such reports are electronically filed with,or furnished to, the U.S. Securities and Exchange Commission.

**OVERVIEW**

VillageEDOCS(the "Company" or "We") is incorporated in the State ofCalifornia. The Company was originally incorporated in 1995 in Delaware asSoftTek, Inc. In August 1997, we changed our name to SoftTek Technologies Inc.and reincorporated in California. In 1999 we changed our name to VillageFax.com,Inc., and then, as of July 11, 2000, to VillageEDOCS. Until late 1998, theCompany provided product marketing services and fax server products, which werediscontinued in 1998.  Since late 1998,we have provided worldwide, Internet-based, business-to-business fax services.Our Internet-based fax service enables a user to send a fax to an individual orto a broadcast list of thousands through their familiar web browser (i.e.Microsoft Explorer, Netscape Navigator, etc.), e-mail package (i.e. MicrosoftExchange,  Microsoft Outlook, NetscapeMail, Eudora, etc.), Microsoft Windows-based application, Enterprise ResourcePlanning or Customer Relationship Management system, or proprietary CorporateInformation System.  As of February 28,2003, we had approximately 475 active clients. During 2002, no single customer accounted for more than 7% of net sales.

Weuse proprietary, internally-developed document processing and transmissionsystems to create and send or receive documents for our clients.  We provide Internet-based fax services thatintegrate with existing Internet-connected systems within companies whereinvoices, statements, purchase orders, ticket confirmations, and other keydocuments originate. A typical application is characterized by the need todeliver time sensitive, personalized documents to a disparate group ofrecipients in multiple formats and delivery methods.  Our services are designed for use by a wide range of industriesand enterprise sizes using such diverse platforms as Microsoft Windows NT/2000,UNIX, and IBM iSeries (AS/400). Our clients currently include manufacturingcompanies, E-commerce providers, application service providers, food servicecorporations, value added resellers, weather reporting services, publicrelations firms, and direct marketing organizations.    Twelve of our clients are Global 500 companies.   Businesses using J.D. Edwards, Oracle,Peoplesoft, Infinium, IBS and SAP environments, among others, can use ourservice to become fax-enabled without traditional capital expenditures andongoing maintenance costs.  We offer ourclients the flexibility to send Microsoft Office, Corel, IBM PCL, Adobe PDF,next-generation HTML, and other types of documents through our Internet faxservice.  In addition, our service is compatiblewith virtually any foreign language including character-based Pacific Rim,Middle and Far Eastern languages.  Inaddition, we offer our clients robust activity reporting and job controlfunctions that are not offered by many of our competitors.  In early 2002, we introduced a capabilitythat enables clients with web-enabled wireless devices such as mobiletelephones and personal digital assistants to use any fax machine as a personalprinter for their wireless device.   Inearly 2003, we introduced, in concert with a business partner, new 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.

Theconcept of providing an outsourced Internet-based fax and electronic documentsolution to businesses is relatively new and no one can determine withcertainty whether there is sufficient or sustainable demand for such servicesto support a large number of businesses providing the service. Additionally,technology changes could cause current faxing methods to become obsolete ormake it possible for companies to fax over the Internet using free or low-costsoftware, hardware and bandwidth access. 

**SERVICESDEVELOPMENT**

Weactively and continually engage in development of additional services to offerto our existing and potential clients. Our ability 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. 

**SALES**

TheCompany charges its clients a fee primarily based upon either the number ofpages delivered and received, or upon the number of minutes expended, for thedelivery or receipt of our clients' documents during the month.  Sales for the fiscal years ended December31, 2002 and 2001 were $1,611,546 and $1,266,653, respectively. 

**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. Such competitors may be able to undertake more extensivemarketing campaigns, adopt more aggressive pricing policies and make moreattractive offers to potential employees and distribution partners. While webelieve that we can compete effectively because we offer our clients certaincapabilities that much of the competition does not offer, such as customintegration, private-labeling, and electronic document presentation, there canbe no assurance that the Company's competitors will not develop Internet-basedelectronic document services that are equal or superior to ours, or thatachieve greater market acceptance than the Company's offerings.

**OUTLOOKAND STRATEGY**

During2003, we intend to continue to increase our focus on obtaining high margincustomers, as we believe that this strategy offers the best opportunity for theCompany's operations to become profitable. During 2002 we pursued this strategy and, while it resulted in somewhatslower growth in net sales than in 2001, we were successful in signing up moreestablished companies with greater potential for stable, recurring monthlyrevenues.  We were pleased to addseveral Global 500 companies to our client list during 2002 and intend tocontinue our strategy to sell to more large and well-established companiesduring 2003.

Inaddition, we intend to continue our strategy of cost containment.  Should additional growth capital becomeavailable during 2003, we intend to direct the capital toward increasing salesand marketing assets while holding down costs for general and administrative aswell as product and technology. 

Finally,we have recently made the decision to accelerate our growth by actively seekingout and pursuing opportunities to acquire businesses that provide complementaryand strategic document management technologies, greater market penetration, newrevenue streams, or new sales channels for our current service offerings.

**EMPLOYEES**

Asof February 28, 2003, the Company had 24 full-time employees including its twoexecutive officers. These employees include 12 engaged in sales and marketing,2 in technology development, 6 in operations, and 4 in administration. 

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**ITEM 2.  DESCRIPTION OF PROPERTY**

TheCompany occupies approximately 3,600 square feet of leased office space. Thespace is located at 14471 Chambers Road, Suite 105, Tustin, California 92780.The lease expires in May 2004.   Thecost of the occupied space is approximately $6,000 per month. Additionally, welease space and operating systems equipment for our service operations from SBCPacific Bell, Irvine, California at a cost of approximately $4,000 permonth.  In 2001, we moved out of theExodus facility that formerly housed our systems equipment and relocated theequipment to a newly-built SBC Pacific Bell facility, which allowed us to takeadvantage of significantly lower variable telecommunications costs, upgrade ourtelecommunications access capabilities, significantly improve scalability, andimprove security.  The SBC Pacific Bellfacility is served by all major global telecommunications carriers and is aphysically, environmentally, and utility redundant site with multipletelecommunications feeds, multiple emergency power generators, and emergencyfuel reserves. These fully redundant systems and emergency power provisions aredesigned to provide non-stop service and no single point of failure.

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**ITEM 3.  LEGAL PROCEEDINGS**

TheCompany is not a party in any lawsuits. 

A marketing company had threatened legal actionrelated to its claim that the Company owes it $48,000 for services rendered.The Company agreed that it owed $24,000 for such services, which amount isrecorded as a liability in the Company's financial statements as of December31, 2002.   On January 28, 2003, theCompany entered into an agreement with the sole principal of the marketingcompany pursuant to which the principal agreed to accept 109,091 shares of theCompany's common stock in full and final settlement of all claims against theCompany by the marketing company and its principal.  The shares were issued on February 11, 2003.

Inearly 1999, the Company received communications from a company asserting theownership of certain United States and Canadian patents and making a licensingproposal for these patents on unspecified terms. The Company has not acceptedthe licensing proposal. If these claims prove accurate and the Company is notable to enter into a licensing agreement on acceptable terms, it would have amaterial adverse effect on the Company. 

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**ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS**

During the year endedDecember 31, 2002, C. Alan and Joan P. Williams, the holders of  18,451,502 shares of common stock,representing 61.5% of the issued and outstanding shares of the Company entitledto vote, filed with the Company three written consents to the adoption of thefollowing actions.  

On July 1, 2002, awritten consent was filed to amend ARTICLE IV of the Articles of Incorporationof the Company to read as follows: "This Corporation is authorized to issueonly one class of shares of stock which shall be designated as common stock;the total number of shares which the Corporation is authorized to issue isNinety million (90,000,000)."

On November 27, 2002, awritten consent was filed to ratify and approve the 2002 Equity Incentive Plan,approve an increase in the number of shares of the Company's common stockreserved for issuance pursuant to the VillageEDOCS 2002 Equity Incentive Planto a total of 11,634,584 shares, and approve the registration with theSecurities and Exchange Commission of the common stock of the Company which maybe issued pursuant to the 1997 Stock Option Plan, the VillageEDOCS 2002 EquityIncentive Plan, and any other stock options agreements in effect as of November27, 2002.

On December 4, 2002, awritten consent was filed in lieu of an annual meeting to elect to the Board ofDirectors of the Company, to hold office until the next shareholders meeting ofthe Company, each of K. Mason Conner, H. Jay Hill, and J. Thomas Zender, and toappoint Corbin & Wertz LLP to serve as the Company's independent publicaccountants for 2002.

The Company did notsolicit votes in connection with the above actions.

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**PART II**

** **

**ITEM 5. MARKET FOR EQUITY SECURITIES AND RELATED STOCKHOLDER MATTERS**

On January 29, 2002, trading in the Company's common stock commenced on the over-the-counter market.  The first trade took place on January 31, 2002.  The following sets forth the range of high and low bid quotations for the periods indicated as reported by Nasdaq Trading and Market Services.  Such quotations reflect prices between dealers without retail mark-up, markdown or commission and may not represent actual transactions.  The Company's common stock is quoted on the OTC Bulletin Board under the symbol VEDO.  The stock is thinly traded and transactions in the stock are sporadic and infrequent.

|   | **Quarter Ended**                | **High Bid** |   | **Low Bid** |   |
|--------|----------------------------------|--------------|--------|-------------|--------|
|   | -------------------------------- | ----------   |   | ----------  |   |
|   | March 31, 2002                   | $0.26        |   | $0.15       |   |
|   | June 30, 2002                    | $0.17        |   | $0.08       |   |
|   | September 30, 2002               | $0.09        |   | $0.05       |   |
|   | December 31, 2002                | $0.27        |   | $0.06       |   |
|   |                             |         |   |        |   |

Asof December 31, 2002, there were 386 holders of record of the Company'scommon stock.

TheCompany has never paid a cash dividend on its common stock nor does the Companyanticipate paying cash dividends on its common stock in the near future.  It is the present policy of the Company notto pay cash dividends on the common stock but to retain earnings, if any, tofund growth and expansion.  Any paymentof cash dividends on the common stock in the future will be dependent upon theCompany's financial condition, results of operations, current and anticipatedcash requirements, plan for expansion, as well as other factors the Board ofDirectors deems relevant.

Recent Sales of Unregistered Securities

The following providesinformation concerning all sales of securities within the last two fiscal yearsthat were not registered under the Securities Act of 1933, as amended (the"Securities Act"):

During the year endedDecember 31, 2002, the Company issued 212,839 shares of restricted common stockfor $2,129 in cash in connection with the exercise of warrants, and 32,000shares of restricted common stock in consideration for $6,000 in consultingservices rendered.

On May 15, 2002, C. AlanWilliams and Joan P. Williams acquired 15,686,502 shares of the restrictedcommon stock of the Company by exercising their conversion rights with respectto $2,039,245 in convertible promissory notes payable by the Company.

Options to purchase7,203,532 shares of the Company's common stock under the 2002 Plan at per-shareprices ranging from $0.17 to $0.21 (the fair market value on the dates ofgrant) were issued to employees during the year ended December 31, 2002,vesting on various dates from the date of grant through November, 2007.

Options to purchase45,000 shares at $0.19 (the fair market value on the date of grant) weregranted to a non-employee consultant during the year ended December 31,2002.  These options vest on variousdates one year from the date of grant through January 2007.  Total consulting expense to be recognized inthe statement operations over the vesting period pursuant to SFAS No. 123 is$4,050, none of which was recognized during the year ended December 31, 2002.

Options to purchase555,555 shares of the Company's common stock at $0.18 per share (which wasbelow the fair market value on the date of grant), vesting immediately, wereissued to a non-employee in consideration for legal services during the yearended December 31, 2002 

During the year endedDecember 31, 2002, the Company issued a warrant to purchase 24,019 shares ofthe Company's common stock at $0.01 per share to an employee

During the year endedDecember 31, 2001, the Company issued 203,687 shares of restricted common stockin connection with the exercise of warrants for $2,037 in cash.

During the year endedDecember 31, 2001, stock options to purchase 35,000 shares at $2.50 were grantedto a non-employee consultant.  Theseoptions vest one year from the date of grant.

Options to purchase403,144 shares of the Company's common stock at $2.50 per share (estimated fairmarket value on the date of grant) were issued to employees during the yearended December 31, 2001, vesting on various dates from January 2001 throughOctober 2006.

All offers and sales ofour securities described above were made pursuant to Section 4(2) of theSecurities Act of 1933 and Regulation D promulgated thereunder.

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**ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS**

General

The following Management Discussionand Analysis of Financial Condition and Results of Operations should be read inconjunction with the audited balance sheet as of December 31, 2002 and theaudited statements of operations, stockholders' equity and cash flows for eachof the years in the two-year period then ended and the related notesthereto.  This discussion containsforward-looking statements based upon current expectations that involve risksand uncertainties, such as our plans, objectives, expectations and intentions.

Asreported in the Independent Auditors' Report on our December 31, 2002 financialstatements, the Company has suffered recurring losses from operations, hadsignificant negative cash flows from operations, and has a net capitaldeficiency that raises substantial doubt about our ability to continue as agoing concern. 

The Company cautions readers thatimportant facts and factors described in this Management Discussion andAnalysis of Financial Condition and Results of Operations and elsewhere in thisdocument sometimes have affected, and in the future could affect, the Company'sactual results, and could cause the Company's actual results during 2003 andbeyond to differ materially from those expressed in any forward-lookingstatements made by, or on behalf of, the Company. 

Managementis seeking additional financing by issuing convertible debt to existingshareholders during 2003. In addition, management plans to seek equity or acombination of equity and debt financing from new shareholders and/or lendersin 2003. Management is actively pursuing financing arrangements. During Januaryand February of 2003, one of our shareholders loaned us  $202,000 to fund our operating shortfalls;however, he has no binding obligation to continue providing funds. If theplanned financings are obtained and/or the shareholder continues to cover ouroperating shortfalls, the Company believes it will have adequate cash tosustain operations until it becomes profitable. There can be no assurance thatfunding will be available on acceptable terms, if at all, or that such funds,if raised, would enable the Company to achieve and maintain profitable operations.

CriticalAccounting Policies

Inpreparing our financial statements, we make estimates, assumptions andjudgments that can have a significant effect on our revenues, income/loss fromoperations, and net income/net loss, as well as on the value of certain assets onour balance sheet.  We believe thatthere are several accounting policies that are critical to an understanding ofour historical and future performance as these policies affect the reportedamounts of revenues, expenses, and significant estimates and judgments appliedby management.  While there are a numberof accounting policies, methods and estimates affecting our financialstatements, areas that are particularly significant include revenue recognition,stock-based compensation, and web site development costs.  In addition, please refer to Note 3 to theaccompanying financial statements for further discussion of our accountingpolicies.

*RevenueRecognition.*  The Company provides internet-enabled faxservices to businesses and charges for these services on either a per pagefaxed or per minute used basis. Service revenues are recognized when theservices are performed.  

*Stock-BasedCompensation*.  The Company accounts for non-employeestock-based compensation under Statement of Financial Accounting Standards No.123 ("SFAS 123"), "Accounting For Stock-Based Compensation."  SFAS 123 defines a fair value based methodof accounting for stock-based compensation. However, SFAS 123 allows an entity to continue to measure compensationcost related to stock and stock options issued to employees using the intrinsicmethod of accounting prescribed by Accounting Principles Board Opinion No. 25,as amended ("APB 25"), "Accounting for Stock Issued toEmployees." Under APB 25, compensation cost, if any, is recognized over therespective vesting period based on the difference, on the date of grant,between the fair value of the Company's common stock and the grant price.Entities electing to remain with the accounting method of APB 25 must make proforma disclosures of net income and earnings per share, as if the fair valuemethod of accounting defined in SFAS 123 had been applied. The Company haselected to account for its stock-based compensation to employees under APB 25.

*WebSite Development*.  The Company capitalizes costs related to itsweb site development in accordance with the Emerging Issues Task Force IssueNo. 00-2, "Accounting for Web Site Development Costs."  Web site development costs are amortizedusing the straight-line method over the estimated useful life of three years.

** **

**RESULTSOF OPERATIONS**

NetSales 

Netsales for the fiscal year ended December 31, 2002 were $1,611,546, a 27%increase over net sales for fiscal 2001 of $1,266,653. The increase in 2002reflected an improvement in the volume of sales to more profitable customersand an overall increase in customers.  In December 2002, the Company billed 248 customers as compared with 129customers billed in December 2001. 

Substantiallyall sales in 2002 and 2001 were from our Internet-based document deliveryservices. 

Costof Sales 

Costof sales for the fiscal year ended December 31, 2002 were $803,983, an 11%decrease over the cost of sales of $906,941 for the fiscal year ended December31, 2001.   While net sales increased27%, cost of sales decreased as a result of lower fixed and variabletelecommunications costs throughout the year.

GrossProfit 

Gross profit for the fiscal year endedDecember 31, 2002 increased $447,851 to $807,563, from the gross profit of$359,712 for the fiscal year ended December 31, 2001.    The significant increase is attributable to a reduction infixed and variable telecommunications costs combined with increased salesvolume and, to a lesser extent, pricing for the Company's Internet-based faxdelivery services.

OperatingExpenses 

Operating expenses for the fiscal yearended December 31, 2002 decreased by $116,583 to $1,835,219 compared to$1,951,802 for the fiscal year ended December 31, 2001, a decrease of 6%.Included in operating expenses for 2002 and 2001 were non-cash expenses due toissuance of certain stock, stock options, and warrants for services valuedat  $94,806 and $185,330, respectively.Excluding these non-cash charges and depreciation and amortization, operatingexpenses in 2002 decreased by $149,976 to $1,522,653 compared to $1,672,629reported in 2001.  Product andtechnology development decreased by $100,162 to $432,293 in 2002 from the$532,455 reported in 2001 due to capitalization of certain payroll costsrelated to web site development. Sales and marketing increased by $137,295 to$564,633 from the $427,338 reported in 2001 due to increases in sales staff andsales lead generation programs.  Generaland administrative decreased by $183,204 to $714,962 from the $898,166 reportedin 2001.  The overall decrease wascomprised of increases in several areas including salaries, health insurance,rent, and legal, which were offset by decreases in non-cash compensationcharges, liability insurance, placement fees, accounting, and travel.  Depreciation and amortization expenseincreased by $29,488 to $123,331 from the $93,843 reported in 2001 due to anincrease in amortization of capitalized web site development costs.  During 2002, expenses related to product andtechnology development, sales and marketing, general and administrative, anddepreciation and amortization represented 27%, 35%, 44%, and 8% of net sales,respectively.

InterestIncome and Expense 

Interestexpense of $263,847 for the fiscal year ended December 31, 2002 was $73,715more than interest expense of $190,132 for the fiscal year ended December 31,2001.  The increase in interest expensein 2002 is attributable to $94,429 of imputed interest expense related tosecured promissory notes that were issued with conversion prices that werelower than the fair market value of the Company's common stock on the dates ofissuance.

IncomeTaxes 

Asthe Company has incurred operating losses through December 31, 2002 and 2001,the provision for income taxes consists only of minimum state taxes of $800 peryear. At December 31, 2002 the Company had approximately $9,754,000 of federaland $8,638,000 of state net operating loss carryforwards for tax reportingpurposes available to offset future taxable income. Deferred tax assets consistprimarily of the tax aspects of net operating loss carryforwards. The Companyhas provided a full valuation allowance on the deferred tax assets because ofthe uncertainty regarding realizability of the net operating losscarryforwards. 

NetLoss 

Asa result of the above factors, net loss for the fiscal year ended December 31,2002 decreased by $490,706 to $1,292,303 from the net loss of $1,783,009reported for the fiscal year ended December 31, 2001, a decrease of 28%. 

LossPer Share 

Basicand diluted net loss per share for the fiscal year ended December 31, 2002 was$(0.05) compared to basic and diluted net loss per share of $(0.13) for thefiscal year ended December 31, 2001. This difference is due to the decrease innet loss and, more significantly, a 10,204,010 increase in weighted averageshares outstanding during 2002.

**LIQUIDITY**

During the fiscal year ended December 31,2002, the Company's net cash position increased by $14,006 to $53,327. Althoughthe Company generated $1,007,787 from financing activities, the Company'soperating and investing activities used net cash of  $841,387 and $152,394, respectively.  These activities contributed to a net working capital deficit asof December 31, 2002 of $186,176.

Netcash used in operating activities for the fiscal year ended December 31, 2002was $841,387, a decrease of $323,030 from the $1,164,417 used in operatingactivities for the fiscal year ended December 31, 2001, mainly due to thedecrease in net loss for 2002. 

TheCompany's investing activities consisted of the purchase of computer equipmentand costs incurred for web site development. Net cash used for investmentactivities increased $149,665 to $152,394 from the $2,729 reported for 2001 dueto increased equipment purchases and capitalized web site development costs. 

TheCompany's financing activities include proceeds from the exercise of warrantsto purchase common stock, issuance of convertible notes payable, and principalpayments on capital leases.  Net cashprovided by financing activities for the fiscal year ended December 31, 2002was $1,007,787, and included proceeds of $1,110,000 and $2,129 from stockholder loans and warrant exercises,respectively, and principal payments on capital leases of $104,342. Net cashprovided by financing activities for the fiscal year ended December 31, 2001was $1,124,201, and included proceeds of $1,235,000 and $2,037 from stockholder loans and warrant exercises,respectively, and principal payments on capital leases of $112,836. 

**CAPITALRESOURCES**

TheCompany does not currently have any material commitments for capitalexpenditures other than those expenditures incurred in the ordinary course ofbusiness. 

Since our inception, our operating and investingactivities have used substantially more cash than they have generated. Becausewe will continue to need working capital to fund the growth of our business, weexpect to continue to experience negative operating and investing cash flowsfor the remainder of 2003. We currently anticipate that our available cashresources will be insufficient to meet our anticipated working capital andcapital expenditure requirements through December 31, 2003.  Accordingly, we believe we will require upto approximately$3 million in additional financing to support our operationsuntil we become profitable.  In our opinion, togetherwith our current revenue stream, we have sufficient cash to operate at adequatestaffing levels through June 2003.

Between November 2000 and at least May 2003, ouroperating shortfalls have been, and are expected to be, funded by oneshareholder, an affiliate, who has loaned us $2,991,245 through February 28,2003 for that purpose. Assuming that this shareholder continues to fund ouroperations, we will be able to sustain operations at current levels. However,this shareholder has no obligation to continue to fund our operating shortfallsand could stop doing so at any time.  Wemay be required to alter the terms of the convertible promissory notes held bythis shareholder to induce this shareholder or other such potential lenders toprovide additional loans, which could result in this shareholder or other suchpotential lenders obtaining rights, preferences or privileges senior to thoseof other creditors or our stockholders.

This estimate is a forward-looking statementthat involves risks and uncertainties. The actual time period may differmaterially from that indicated as a result of a number of factors so that wecannot assure you that our cash resources will be sufficient for anticipated orunanticipated working capital and capital expenditure requirements for thisperiod. We have stated that we will need to raise additional capital in thefuture to meet our operating and investing cash requirements. 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. If we are not able toobtain sufficient additional funds from investors, we may be unable to sustainour 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. 

While we strongly believe that sustainableprofitability is achievable and we intend to continue our strategy of increasingsales to more profitable clients while attempting to reduce variable costs ofsales and overhead, we have a history of losses, have never been profitable,and may never achieve profitability. Should we achieve profitability in any period, we cannot be certain thatwe will sustain or increase such profitability on a quarterly or annual basis. 

From inception through December 31, 2002, wegenerated revenue of only approximately $3,678,000 and we incurred totalexpenses of approximately $12,461,000 during that same period. We have incurrednet losses each year since our inception. As of December 31, 2002, we had anaccumulated deficit of $9,864,210.  To date, we have fundedour capital requirements and our business operations primarily with fundsprovided from the sale of common stock and from shareholder borrowings,supplemented by revenues from sales of our services. From inception to February28, 2003, the Company has received approximately $5,483,000 from thesale of common stock and convertible notes, $2,039,245 of which were convertedinto shares of common stock on May 15, 2002.

TheIndependent Auditors' Report on our December 31, 2002 financial statementsincludes an explanatory paragraph stating that the recurring losses incurredfrom operations and a working capital deficiency raise substantial doubt aboutour ability to continue as a going concern. The financial statements do notinclude any adjustments that might result from the outcome of this uncertainty.

**FACTORSTHAT MAY AFFECT FUTURE RESULTS**

The risks and uncertainties describedbelow are not the only ones we face. Additional risks and uncertainties notpresently known to us may also adversely impact our business operations. If anyof the following risks actually occur, our business, financial condition, oroperating results could be negatively affected. 

Someof the information in this Annual Report on Form 10-KSB containsforward-looking statements

Some of the information in this Annual Report on Form 10-KSB containsforward-looking statements that involve substantial risks and uncertainties.You can identify these statements by forward-looking words such as"may", "will", "expect", "intend","anticipate", "believe", "estimate" and"continue" or similar words. You should read statements that containthese words carefully because they discuss our expectations about our futureperformance, contain projections of our future operating results or of ourfuture financial condition, or state other "forward-looking"information.We believe 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 prospectus, provideexamples of risks, uncertainties and events that may cause our actual resultsto differ materially from the expectations we describe in our forward-lookingstatements. Before you invest in our common stock, you should be aware that theoccurrence of any of the events described in these risk factors and elsewherein this prospectus could have a material and adverse effect on our business,results of operations and financial condition and that upon the occurrence ofany of these events, the trading price of our common stock could decline andyou could lose all or part of your investment.

Ourlimited operating history makes evaluating our business and prospectsdifficult. 

Wehave a limited operating history on which you can base an evaluation of ourbusiness and future prospects. You should carefully consider our prospects inlight of the risks and difficulties frequently encountered by early stagecompanies in new and rapidly evolving markets. Our success will depend in part uponour ability to implement and execute our business and marketing strategy. Thereis a risk that we will not be able to accomplish our objectives. Failure toachieve any of our objectives could negatively affect our business, financialcondition and results of operations. 

Themarket for business-to-business electronic commerce solutions is extremelycompetitive and we may not be able to compete effectively. 

Becausethe business-to-business market place is highly competitive and has lowbarriers to entry, we cannot assure you that we will be able to competeeffectively. We expect competition to intensify as current competitors expandtheir product offerings and new competitors like us enter the market. We cannotassure you that we will be able to compete successfully against current orfuture competitors, or that competitive pressures we face will not harm ourbusiness, operating results, or financial condition. 

Manyof our competitors will have, and potential competitors may have, moreexperience developing software and matching solutions, larger technical staffs,larger customer bases, greater brand recognition, and greater financial andother resources than we have. In addition, competitors may be able to developproducts and services that are superior to our products and services, thatachieve greater customer acceptance or that have significantly improvedfunctionality as compared to our existing and future products and services.There is a risk that the business-to-business electronic commerce solutionsoffered by our competitors now or in the future will be perceived as superiorto ours. 

SignificantIndebtedness

Our significant debt could adverselyaffect our financial resources and prevent us from satisfying our debt serviceobligations.  We have a significantamount of indebtedness and are very likely to incur additional indebtedness inthe future.  We presently do notgenerate sufficient cash flow from operations. In the future, we may not generate sufficient cash flow from operations,or have future borrowings available to us, sufficient to pay our debt.

TheInternet could become subject to regulations that affect our business. 

Ourbusiness segments, both directly and indirectly, rely on the Internet and otherelectronic communications gateways. We intend to expand our use of thesegateways. To date, the use of the Internet has been relatively free fromregulatory restraints. However, legislation, regulations, or interpretationsmay be adopted in the future that constrain our own and our customers'abilities to transact business through the Internet or other electroniccommunications gateways. There is a risk that any additional regulation of theuse of such gateways could have a material adverse effect on our business,financial condition, and operating results. 

Wedepend on key personnel and will need to recruit new personnel as we grow. 

Aswe attempt to expand our customer base, we will need to add additional keypersonnel as we continue to grow. If we cannot attract and retain enough qualifiedand skilled staff, the growth of our business may be limited. Our ability toprovide services to clients and expand our business depends, in part, on ourability to attract and retain staff with professional experiences that arerelevant to technology development and other functions we perform. Competitionfor personnel with these skills is intense. Some technical job categories areunder conditions of severe shortage in the United States. In addition,restrictive immigration quotas could prevent us from recruiting skilled stafffrom outside the United States. We may not be able to recruit or retain thecaliber of staff required to carry out essential functions at the pacenecessary to sustain or expand our business. 

Webelieve our future success will depend in part on the continued employment andperformance of our senior management, our ability to retain and motivate ourofficers and key employees, and our ability to identify, attract, hire, train,retain, and motivate other highly skilled technical, managerial, marketing, andcustomer service personnel. 

Ifwe are not able to protect our proprietary technology, our ability to competeeffectively could be damaged. 

Despiteany precautions we may take, a third party may be able to copy or otherwiseobtain and use our software or other proprietary information withoutauthorization or develop similar software independently. We cannot assure youthat the steps we have taken or will take will prevent misappropriation of ourtechnology. Litigation may be necessary in the future to determine the validityand scope of the proprietary rights of others, or defend against claims ofinfringement or invalidity. This litigation, whether successful orunsuccessful, could result in substantial costs and diversions of resources,either of which could harm our business. 

Ourbusiness could be adversely affected if we infringe intellectual propertyrights of third parties. 

Litigationregarding intellectual property rights is common in the software and technologyindustries. We have in the past received letters alleging that we areinfringing the intellectual property rights of AudioFax. We do not believe theproprietary nature of the AudioFax software is critical to our current orfuture market competitiveness. Several providers of fax service software havepatent license agreements with AudioFax, and it is our understanding that ouruse of these other fax software platforms would indemnify us from anyinfringement of AudioFax patents. We currently plan to migrate to a faxsoftware platform that is compatible with current technology, has existinglicense agreements with AudioFax, and will indemnify us from infringement ofAudioFax patents. This migration is subject to the Company's ability to obtainthe additional capital needed for the license fees for the other fax softwareplatforms. We may in the future be the subjects of claims for infringement,invalidity, or indemnification claims based on such claims of other parties'proprietary rights. These claims, with or without merit, could be timeconsuming and costly to defend or litigate, divert our attention and resources,or require us to enter into royalty or licensing agreements. There is a riskthat such licenses would not be available on reasonable terms, or at all.Although we believe we have the ability to use our intellectual property tooperate, market, and license our existing products without incurring liabilityto third parties, there is a risk that our products and services infringe theintellectual property rights of third parties. 

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.

Actsof terrorism, responses to acts of terrorism and acts of war may impact ourbusiness and our ability to raise capital.

TheSeptember 11, 2001 terrorist attacks in the United States are unprecedentedacts of international terrorism. We cannot predict the continued effect of thoseacts on the economy of the United States or on the global economy. Future actsof war or terrorism, national or international responses to such acts, andmeasures taken to prevent such acts may harm our ability to raise capital orour ability to operate.  In addition,the threat of future terrorist acts or acts of war may have effects on thegeneral economy or on our business that are difficult to predict. We are notinsured against damage or interruption of our business caused by terrorist actsor acts of war.

Ourcurrent and future revenues are unpredictable and our quarterly operatingresults may fluctuate significantly.

Wehave a limited operating history, and have generated only limited revenues todate. We cannot forecast with any degree of certainty the amount of revenue tobe generated by any of our services. In addition, we cannot predict theconsistency of our quarterly operating results. Factors which may cause ouroperating results to fluctuate significantly from quarter to quarter include: - our ability to attract new and repeat customers;- our ability to keep current with the evolving requirements of our targetmarket;- 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 anddevelopment.Because of these and other factors, we believe that quarter-to-quartercomparisons of our results of operations are not good indicators of our futureperformance. If our operating results fall below the expectations of securitiesanalysts and investors in some future periods, then our stock price maydecline. 

One shareholder owns a majority of ouroutstanding common stock and is able to control our actions.

Oneshareholder and his wife own 18,351,502 shares, or 59%, of the outstandingshares of our common stock as of February 28, 2003.  These individuals have the ability to elect our entire board ofdirectors and to approve or disapprove all other matters requiring the vote ofshareholders.

Ourofficers and directors may be able to influence stockholder actions. 

Executiveofficers and directors, in the aggregate, beneficially own approximately 6% ofour outstanding voting stock. These stockholders acting together may be able tosignificantly influence matters requiring approval by our stockholders,including the election of directors, and the approval of mergers or otherbusiness combination transactions in a manner that could conflict with ourother stockholders. 

OurCertificate of Incorporation limits director liability, thereby making itdifficult to bring any action against them for breach of fiduciary duty. 

Aspermitted by California law, the Company's Certificate of Incorporation limitsthe liability of directors to the Company or its stockholders for monetarydamages for breach of a director's fiduciary duty except for liability incertain instances. As a result of the Company's charter provision andCalifornia law, stockholders may have limited rights to recover againstdirectors for breach of fiduciary duty. 

Pennystock regulations may impose certain restrictions on marketability of ourstock. 

TheSecurities and Exchange Commission (the "Commission) has adoptedregulations which generally define a "penny stock" to be any equitysecurity that has a market price (as defined) of less than $5.00 per share,subject to certain exceptions. As a result, our Common Stock is subject torules that impose additional sales practice requirements on broker-dealers whosell such securities to persons other than established customers and accreditedinvestors (generally those with assets in excess of $1,000,000 or annual incomeexceeding $200,000, or $300,000 with their spouse). For transactions covered bythese rules, the broker-dealer must make a special suitability determinationfor the purchase of such securities and have received the purchaser's writtenconsent to the transaction prior to the purchase. Additionally, for anytransaction involving a penny stock, unless exempt, the rules require delivery,prior to the transaction, of a risk disclosure document mandated by theCommission relating to the penny stock market. The broker-dealer must alsodisclose the commission payable to both the broker-dealer and the registeredrepresentative, current quotations for the securities and, if the broker-dealeris the sole market maker, the broker-dealer must disclose this fact and thebroker-dealers presumed control over the market. Finally, monthly statementsmust be sent disclosing recent price information for the penny stock held inthe account and information on the limited market in penny stocks.Consequently, the "penny stock" rules may restrict the ability ofbroker-dealers to sell the Company's securities and may affect the ability ofpurchasers in this Offering to sell the Company's securities in the secondarymarket and the price at which such purchasers can sell any such securities. 

Wehave never paid dividends on our common stock and do not expect to pay any inthe foreseeable future. 

TheCompany has not paid any dividends on its Common Stock since its inception anddoes not intend to pay dividends on its Common Stock in the foreseeable future.Any earnings that the Company may realize in the foreseeable future will beretained to finance the growth of the Company. 

Thenumber of shares eligible for future sale may adversely affect the market forour common stock. 

Asof December 31, 2002, the Company had 29,981,487 shares of its Common Stockissued and outstanding, approximately 27,000,000 of which are "restrictedsecurities". Rule 144 of the Commission provides, in essence, that aperson holding "restricted securities" for a period of one year maysell only an amount every three months equal to the greater of (a) one percentof the Company's issued and outstanding shares, or (b) the average weeklyvolume of sales during the four calendar weeks preceding the sale. The amountof "restricted securities" which a person who is not an affiliate ofthe Company may sell is not so limited, since non-affiliates may sell withoutvolume limitation their shares held for two years if there is adequate currentpublic information available concerning the Company. In such an event,"restricted securities" would be eligible for sale to the public atan earlier date. The sale in the public market of such shares of Common Stockmay adversely affect prevailing market prices of the Common Stock. 

Outstandingoptions could affect the market price of our common stock. 

Asof December 31, 2002, there were outstanding stock options to purchase anaggregate of 10,865,200 shares of Common Stock at exercise prices rangingbetween of $0.17 per share and $2.50 per share.  The exercise of such outstanding options will dilute the percentageownership of the Company's stockholders, and any sales in the public market ofshares of Common Stock underlying such securities may adversely affectprevailing market prices for the Common Stock. Moreover, the terms upon whichthe Company will be able to obtain additional equity capital may be adverselyaffected since the holders of such outstanding securities can be expected toexercise their respective rights therein at a time when the Company would, inall likelihood, be able to obtain any needed capital on terms more favorable tothe Company than those provided in such securities. 

Ourstock price will fluctuate which could result in substantial losses forinvestors

The market price for our common stock may fluctuate significantly in responseto a number of factors, some of which are beyond our control. These factorsinclude: 

| · | 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 patents or proprietary rights;                                                                    |
| · | Publicity  about our company, our products, or our competitors;                                                            |
| · | Publicity  regarding actual or potential medical results relating to products under  development by us or our competitors; |
| · | Additions  or departures of key personnel;                                                                                 |
| · | Any  future sales of our common stock or other securities; and                                                             |
| · | Stock  market price and volume fluctuations of publicly-traded companies.                                                  |
|          |                                                                                                                            |

Theseand other external factors have caused and may continue to cause the marketprice and demand for our common stock to fluctuate substantially, which maylimit or prevent investors from readily selling their shares of common stockand may otherwise negatively affect the liquidity of our common stock. In the past, securities class action litigation has often been brought againstcompanies following periods of volatility in the market price of theirsecurities. If securities class action litigation is brought against us itcould result in substantial costs and a diversion of our management's attentionand resources, which could hurt our business. 

Tradingin our common stock on the OTC Bulletin Board may be limited thereby making itmore difficult for investors to resell their shares of our common stock. 

Our common stock trades on the OTC Bulletin Board. The OTC Bulletin Board isnot an exchange and, because trading of securities on the OTC Bulletin Board isoften more sporadic than the trading of securities listed on an exchange orNASDAQ, you may have difficulty reselling any of the shares that you purchasefrom the selling shareholders. 

Ourcommon  shareholders may experiencesubstantial dilution

The sale of a substantial number of shares of our common stock in the publicmarket, or the prospect of such sales, could materially and adversely affectthe market price of our common stock. We are authorized to issue up to90,000,000 shares of common stock. To the extent of such authorization, ourBoard of Directors will have the ability, without seeking stockholder approval,to issue additional shares of common stock in the future for such considerationas our Board of Directors may consider sufficient. The issuance of additionalcommon stock in the future will reduce the proportionate ownership and votingpower of our 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 equityfinancings. 

** **

**RECENTDEVELOPMENTS**

DuringJanuary and February 2003, the Company has obtained cash of $202,000 inconsideration for convertible notes issued to one stockholder, who is anaffiliate. The notes bear interest at 10 percent per annum. The notes andaccrued interest are due at the earlier of one of three events: 1) acquisitionof a controlling interest in the Company by a third party; 2) October 31, 2005;or 3) the receipt by the Company of $3,000,000 or more from an equityfinancing. If the Company achieves the equity financing, the stockholders havethe option to convert the notes plus accrued interest into common stock at thelower of $2.50 per share or the price per share of common stock issued in theequity financing. If the Company is acquired, the stockholders have the optionto convert the notes plus accrued interest into common stock at the lower of$2.50 per share or the price per share paid by the acquirer. The notes areconvertible at any time at the option of the holder at a price equal to thelower of $0.07 per share or the average of the Company's common stock closingbid price on the OTCBB, NASDAQ, or other established securities exchange ormarket for the ten (10) consecutive trading days prior to the date the holderdelivers written notice of conversion election to the Company.

**NEWACCOUNTING PRONOUNCEMENTS**

In December 2002, SFAS No. 148, "Accounting forStock-Based Compensation - Transition and Disclosure", was issued.  SFAS No. 148 amends SFAS No. 123 to providealternative methods of transition for a voluntary change to the fair valuebased method of accounting for stock-based employee compensation.  In addition, SFAS No. 148 amends thedisclosure requirements of SFAS No. 123 to require prominent disclosures inboth annual and interim financial statements about the method of accounting forstock-based employee compensation and the effect of the method used on reportedresults.  The provisions of SFAS No. 148are effective for financial statements for fiscal years ending after December15, 2002.  The Company adopted the disclosure provisions of SFAS No. 148 inthe financial statements filed pursuant toItem 7 of this report.  TheCompany does not anticipate adopting the fair value based method of accountingfor stock-based compensation.

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**ITEM 7.  FINANCIAL STATEMENTS.**

                Exhibit 99.1, "*VillageEDOCSFinancial Statements*" is incorporated herein by this reference.

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|  |  |  |  |  |
|--|--|--|--|--|

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

EffectiveJanuary 1, 2003, certain principals of Corbin & Wertz("C&W"), the Company's independent auditors, formed Corbin &Company LLP ("C&C"), as a successor public accounting firm and transferredsubstantially all of C&W's audit and attest clients to C&C.  As a result, on January 10, 2003 the Boardof Directors has approved the engagement of C&C by the Company as itsindependent auditors for the fiscal year ending December 31, 2002.

C&Wdid not resign or decline to stand for reelection, but were dismissed onJanuary 10, 2003 to allow the appointment of C&C. 

Duringthe past two fiscal years ending December 31, 2001, C&W's audit opinion onthe Company's financial statements did not contain an adverse opinion or adisclaimer of opinion, nor was it modified as to audit scope or accountingprinciples. C&W's report was modified to include an explanatory paragraphwhere they expressed substantial doubt about the Company's ability to continueas a going concern.

Therewere no disagreements with C&W during the past two most recent fiscal yearsand through the date of their dismissal on any matter of accounting principalsor practices, financial statement disclosure or auditing scope or procedure.Additionally, there were no other reportable matters as defined in Item304(a)(1)(iv)(B) of Regulation S-B during that period of time. 

C&Whas furnished the Company with a letter addressed to the Commission stating itsagreement and absence of any disagreement with the statements made by theCompany in response to this Item.

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**PART III**

** **

**ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS OF THECOMPANY**

**DIRECTORSAND EXECUTIVE OFFICERS OF THE COMPANY**

Thefollowing table sets forth certain information with respect to each person whois a director or an executive officer of the Company as of February 28, 2003. 

|  | Name                        | Age    | Position                                                |
|--|-----------------------------|--------|---------------------------------------------------------|
|  | --------------------------- | ------ | ------------------------------------------------------- |
|  |                             |        |                                                         |
|  | J.  Thomas Zender           | 63     | Chairman  of the Board, Corporate Secretary             |
|  |                             |   |                                                         |
|  | K.  Mason Conner            | 46     | President,  Chief Executive Officer, Director           |
|  |                             |   |                                                         |
|  | H.  Jay Hill                | 63     | Director                                                |
|  |                             |   |                                                         |
|  | Robert  L. Daniels          | 65     | Vice  President, Engineering and Operations             |
|  |                             |   |                                                         |
|  | Michael  A. Richard         | 34     | Vice  President, Controller                             |
|  |                             |   |                                                         |
|  | Randy  C. Steyer            | 52     | Vice  President, Sales                                  |
|  |                             |        |                                                         |
|  |                             |        |                                                         |

Executiveofficers are appointed by the Board of Directors and serve until theirsuccessors are duly elected and qualify, subject to earlier removal by theBoard of Directors. Directors are elected at the annual meeting of shareholdersto serve for their term and until their successors are duly elected andqualify, or until their earlier resignation, removal from office, or death. Theremaining directors may fill any vacancy in the Board of Directors for anunexpired term. The term of the current directors continues until the nextannual meeting of shareholders to be held in 2003. Mr. Zender has been adirector since August 1997, Mr. Hill since October 1997, and Mr. Conner sinceOctober 1998. 

**BUSINESSEXPERIENCE OF EXECUTIVE OFFICERS AND DIRECTORS**

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.  Hehas been an officer in three publicly held corporations, one NYSE listedcompany and two NASDAQ traded companies. From 1996 through 2001 Mr. Zenderserved as an interim executive for several companies in their early stage,including CEO of VillageEDOCS from 1997 to 1999.  He serves on the boards of two companies in the informationtechnology sector, one publicly traded and the other privately held.  Currently, Mr. Zender is President and CEOof Unity, a global not-for-profit organization, where he also serves on theboard of directors.  

K.Mason Conner joined the Company as Vice-President of Sales in 1997 and has beenPresident and a Board Member, since 1998, Acting Vice-President of Salesbetween 1998 and 2002, and Chief Executive Officer since 1999. He has 26 yearsin sales and business management experience, including 19 years of direct andchannel sales experience in the voice and data communications products andservices industry. In the early 1980's he was involved in the application of InternetProtocol technologies with the military. In the late 1980s and early 1990s hewas a principal strategist for an international initiative to transform K-12education through the use of the Internet. He was a lead consultant with LTSfor the electronic vulnerability threat assessment of the Los Angeles AirportDepartment after the "UnaBomber" threat. He has held senior salesmanagement positions with Banyan Systems, Doelz Networks, and Timeplex. Duringthe five years prior to joining the Company, Mr. Conner was Director of Salesat Telecom Multimedia Systems from 1996 to 1997, Vice President of Sales at LoTiro-Sapere from 1995 to 1996, and Vice President of Sales at Digital NetworkArchitectures from 1991 to 1995. 

H.Jay Hill has been a director since 1997. For the last 19 years, he has primarily been a senior executive inturnaround situations in information technology and telecommunicationcompanies. From November 2000 to present, Mr. Hill has been CEO, President and aDirector of LightPort Advisors, Inc, a private Internet service provider forthe financial services market.  He hasheld similar positions with Unitron Medical Communications, Inc. (d/b/a MoonCommunications) (1999-2000) and Amnet Corporation (Netlink) (1989-1994), andhas held senior sales and marketing management positions with SunCoastEnvironmental Controls (1996-1999), Technology Research Corporation(1994-1996), Harris Corporation, Doelz Networks, Paradyne/AT&T, andInforex.  His primary background insales and marketing commenced with Philadelphia Electric Company and IBM.  During 1999, Moon Communications, which wasthen a subsidiary of Sabratek Corp., filed for protection under Chapter 11 ofthe U.S. Bankruptcy Code in connection with the reorganization of Sabratek. 

RobertL. Daniels has been Vice President of Operations since 1999 and Chairman of ourAdvisory Board since 1997. From 1995 to 1999 Mr. Daniels was President of Lo Tiro-Sapere Corporation. In the late 1960s he began his involvement in theapplication of Internet Protocol technologies within the military. Throughoutthe late 1980s and early 1990s he was involved in an international initiativeto transform K-12 education through the use of the Internet. He was theconsultant with LTS for the electronic vulnerability threat assessment of theLos Angeles Airport Department after the "UnaBomber" threat. Mr.Daniels has 38 years of management and technical-services operationsexperience, including 25 years of experience in Internet Protocol technologies.He has held senior technical management positions at Pacific Bell, PacificTelesis, Doelz Networks, and MIDACS. He has a Ph.D. in Information SystemsManagement, MBA, and is Lt. Col. (Ret.) USMC. 

MichaelA. Richard joined VillageEDOCS in February 2001 and is our V.P. Controller.  Mr. Richard has over 12 years of diversemanagement and public corporate reporting experience for start-up and earlystage ventures.  From 1999-2000 heserved as V.P. Controller for The BigHub.com, Inc., a public new media companyproviding unique content, private label search engine, e-commerce solutions,and controlling a direct mail operation. From 1995-1999, Mr. Richard served first as Controller and then as VicePresident, Accounting (principal accounting officer), and finally as a Directorof PortaCom Wireless, Inc., a public developer and operator of companies withcontracts to provide wireless telecommunication services in China and otheremerging markets.

RandySteyer has been our Vice President of Sales & Marketing since July2002.  He has over 25 years of sales,marketing, turnaround and operations experience, holding senior positions atearly stage and Fortune 500 companies in high technology and in documentationsoftware solutions.  These include ComputerGlobal, StreamServe and AT&T Capital where he held revenue responsibilitiesfor over $50 Million dollars.  From2001-2002 he held the position of Chief Operating Officer for Computer Global a$26 million UNIX and storage reseller. In 2001 he was the Worldwide VicePresident of Sales for Yube an early stage ASP provider of CRM Solutions andfrom 2001-1996 was President of North American Sales for StreamServe anelectronic documentation software provider after merging the company withSigForms.

**BOARDOF DIRECTORS**

TheCompany's Bylaws fix the size of the Board of Directors at no fewer than threeand no more than five members, to be elected annually by a plurality of thevotes cast by the holders of Common Stock, and to serve until the next annualmeeting of stockholders and until their successors have been elected or untiltheir earlier resignation or removal. We currently have three directors, all ofwhom were elected to their current terms on December 4, 2002.  The Company currently has no Audit or CompensationCommittees.

**DEPENDENCE ON KEY MANAGEMENT**

The Company'sperformance depends substantially on the continued services and performance ofits senior management and other key personnel. The Company's performance also depends on its ability to retain andmotivate its other qualified officers and key employees.   The loss of services of one or more ofthese employees could have a material adverse effect on the business of theCompany.  There can be no assurance thatthe Company will be successful in attracting and retaining such personnel.  Competition for such personnel is intense.

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**ITEM 10.  EXECUTIVE COMPENSATION**

**SUMMARYCOMPENSATION TABLE**

Thefollowing table shows the compensation paid or accrued by the Company for thefiscal years ended December 31, 2002 and 2001 to or for the account of thePresident and Chief Executive Officer. No other executive officer or directorof the Company received benefits or annual salary and bonus of $100,000 or moreduring the stated period. Accordingly, the summary compensation table does notinclude compensation of other executive officers. 

|  | --------------------------------------------------------------------------------------------------------------- |
|--|-----------------------------------------------------------------------------------------------------------------|
|  |                                                                                                                 |   | ANNUAL COMPENSATION | LONG-TERM COMPENSATION |
|  | -----------------------                                                                                         |   | ----------------------------------------- | ---------------------------------------- |
|  | Name & Principal                                                                                            |   | Salary | Bonus | Other | Stock options | LTIP Payouts | Other |
|  | Position                                                                                                        |   | ($) | ($) | ($) | (#) | ($) | ($) |
|  | -----------------------                                                                                         |   | ----------- | -------- | ------------ | -------------- | --------------- | ------- |
|  | Fiscal 2002                                                                                                     |   |   |   |   |   |   |   |
|  | -----------------------                                                                                         |   |   |   |   |   |   |   |
|  | Mason Conner                                                                                                    |   |   |   |   |   |   |   |
|  | President, CEO                                                                                                  |   | $105,000 | -- | -- | 1,719,658 | -- | -- |
|  | -----------------------                                                                                         |   |   |   |   |   |   |   |
|  | Fiscal 2001                                                                                                     |   |   |   |   |   |   |   |
|  | -----------------------                                                                                         |   |   |   |   |   |   |   |
|  | Mason Conner                                                                                                    |   |   |   |   |   |   |   |
|  | President, CEO                                                                                                  |   | $105,000 | -- | -- |     34,536 | -- | -- |
|  | --------------------------------------------------------------------------------------------------------------- |

**EMPLOYMENTAND OTHER AGREEMENTS**

TheCompany has a written employment agreement with Mason Conner dated September 3,1999, which sets forth the terms and provisions of his employment as Presidentand Chief Executive Officer. Under the agreement, Mr. Conner is to be paid abase salary of $105,000 per year effective July 1, 1999, and has options topurchase 500,000 shares of the Company's common stock at $0.25 per share whichvest over five years from his start date of September 15, 1997 and expireSeptember 15, 2007, and options to purchase 100,000 shares of our common stockat $0.25 per share which  vested May 31,1999 and expire May 31, 2009.   OnAugust 4, 2000, the Company granted Mr. Conner options to purchase 31,138shares (which represents 4% of all options issued to employees in 2000) of ourcommon stock at $2.50 per share, which vest over five years from the date ofgrant and expire August 4, 2010.  OnOctober 1, 2001, the Company granted Mr. Conner options to purchase 34,536shares (which represented 8% of all options issued to employees in 2001) of ourcommon stock at $2.50 per share, which vest over five years from the date ofgrant and expire October 1, 2011.  OnJanuary 30, 2002, the Company granted Mr. Conner options to purchase 1,719,658 shares(which represented 24% of all options issued to employees in 2002) of ourcommon stock at $0.1875 per share, which vest over two years from the date ofgrant and expire January 30, 2012.

The following table provides informationconcerning grants of options to purchase the Company's common stock that wemade to our chief executive officer during the fiscal year ended December 31,2002.  We did not grant stockappreciation rights to this individual during 2002.

|  | ---------------------------------------------------------------------------------------------- |
|--|------------------------------------------------------------------------------------------------|
|  |                                                                                                | Number  of | Percentage  of Total | Exercise |   |
|  |                                                                                                | Securities Underlying | Options Granted to | Price Per | Expiration |
|  | Name                                                                                           | Options  Granted | Employees  in 2002 | Share | Date |
|  | --------------------                                                                           | --------------------- | ------------------- | ------------ | ------------- |
|  | Mason Conner                                                                                   | 1,719,658 | 24% | $0.19 | 1/30/12 |
|  | ---------------------------------------------------------------------------------------------- |

** FISCALYEAR END OPTION VALUES AND EXERCISES**

Thefollowing table provides information with respect to the year-end value ofunexercised stock options for each of the executive officers named in thesummary executive compensation table. The dollar values of unexercised optionsare calculated by determining the difference between the fair market value atfiscal year end of the common stock underlying the options and the exerciseprice of the options. The fair market value is $0.27 per share, the per shareprice of our common stock on the OTCBB on December 30, 2002. No stock optionswere exercised during the fiscal years ended December 31, 2002 and 2001.

|  | ---------------------------------------------------------------------------------------------- |
|--|------------------------------------------------------------------------------------------------|
|  |                                                                                                | Number  of Securities Underlying | Value  of Unexercised |
|  |                                                                                                | Unexercised Options at   FYE | In-the-Money Options at FYE |
|  | Name                                                                                           | Exercisable/Unexercisable | Exercisable/Unexercisable |
|  | --------------------                                                                           | ---------------------------------- | ----------------------------------- |
|  | Mason Conner                                                                                   | 619,362  / 1,719,658 | $12,000  / $153,872 |
|  | ---------------------------------------------------------------------------------------------- |

**STOCKOPTIONS**

EffectiveJanuary 30, 2002, the Board of Directors of the Company adopted an equityincentive plan (the "2002 Plan") that authorizes the issuance of options toacquire up to 6,226,258 shares of common stock to employees and certain outsideconsultants.   On November 25, 2002, theBoard of Directors of the Company increased the number of shares reserved forissuance pursuant to the 2002 Plan to 11,634,584 shares.  On November 27, 2002, the stockholders ofthe Company approved the 2002 Plan and the number of shares reserved forissuance pursuant to the 2002 Plan.  The2002 Plan allows for the issuance of either non-qualified or, subject tostockholder approval, incentive stock options pursuant to Section 422 of theInternal Revenue Code. Options vest at the discretion of the Board of Directorsas determined at the grant date, but not longer than a ten-year term.  Under the 2002 Plan, the exercise price ofeach option shall not be less than fair market value on the date the option isgranted.  The number of options under the2002 Plan available for grant at December 31, 2002 were 3,933,830.

Optionsto purchase 7,203,532 shares of the Company's common stock under the 2002 Planat per-share prices ranging from $0.17 to $0.21 (the fair market value on thedates of grant) were issued to employees during the year ended December 31,2002, vesting on various dates from the date of grant through November, 2007.

Optionsto purchase 45,000 shares at $0.19 (the fair market value on the date of grant)were granted to a non-employee consultant under the 2002 Plan during the yearended December 31, 2002.  These optionsvest on various dates one year from the date of grant through January2007.  

Optionsto purchase 555,555 shares of the Company's common stock at $0.18 per share(which was below the fair market value on the date of grant), vestingimmediately, were issued to a non-employee under the 2002 Plan in considerationfor legal services during the year ended December 31, 2002.  We paid this firm $9,751 in cash for legalservices in 2002.

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 to 5,000,000shares of common stock to employees and certain outside consultants.  The 1997 Plan allows for the issuance ofeither non-qualified or incentive stock options pursuant to Section 422 of theInternal Revenue Code. Options vest at the discretion of the Board of Directorsas determined at the grant date, but not longer than a ten-year term.  Under the 1997 Plan, the exercise price ofeach option shall not be less than 85 percent of fair market value on the datethe option is granted.  The number ofoptions under the 1997 Plan available for grant at December 31, 2002 and 2001were 1,835,554 and 1,519,584, respectively.

**BOARDOF DIRECTOR COMPENSATION**

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.Each current director was granted options to purchase 31,138 shares of ourcommon stock at $2.50 per share as compensation for the term that began on June24, 1999 and expired October 25, 2000. On October 25, 2000 the same directorswere re-elected. On October 1, 2001, the same directors were granted options topurchase 34,536 shares of our common stock at $2.50 per share as compensationfor the term that expired on October 5, 2001. There has been no determination made as to the number and exercise priceof options that will be issued to our directors for service during the currentterm**. **Directors are reimbursedfor out-of-pocket expenses incurred by them in connection with attendingmeetings. All directors have options to purchase shares of the Company's CommonStock as set forth in the table inItem 11 of this Annual Report on Form10-KSB. The Company has no other arrangements regarding compensation forservices as a director. 

----

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIALOWNERS AND MANAGEMENT

Thefollowing table sets forth certain information with respect to the beneficialownership of shares of the Company's Common Stock owned as of February 28, 2003beneficially by (i) each person who beneficially owns more than 5% of theoutstanding Common Stock, (ii) each director of the Company, (iii) thePresident and Chief Executive Officer of the Company (the only executiveofficer of the Company whose cash and non-cash compensation for servicesrendered to the Company for the year ended December 31, 2001 exceeded$100,000), and (iv) directors and executive officers as a group: 

|  | ---------------------------------------------------------------------------- |                                       |
|--|------------------------------------------------------------------------------|---------------------------------------|
|  | Name of  Beneficial                                                          | Amount and  Nature of                 | Percent |  |
|  | Owner (1)                                                                    | Beneficial  Ownership (2)             | of Class  (3)(4) |  |
|  | -------------------------------                                              | ------------------------              | ---------------- |  |
|  | James Townsend (5)                                                           |   9,919,378                 | 18.8 |  |
|  |                                                                              |                                  |   |  |
|  | C. Alan Williams (6)                                                         | 30,586,273                            | 57.9 |  |
|  |                                                                              |                                  |   |  |
|  | K. Mason Conner (7)                                                          |   1,307,225                 |   2.5 |  |
|  |                                                                              |                                  |   |  |
|  | J. Thomas Zender (8)                                                         |      733,127 |   1.4 |  |
|  |                                                                              |                                  |   |  |
|  | H. Jay Hill (9)                                                              |      356,627 |   * |  |
|  |                                                                              |                                  |   |  |
|  | All directors and executive                                                  |                                  |   |  |
|  | officers as a group (6 persons)                                              |   3,300,313                 |   6.3 |  |
|  | ---------------------------------------------------------------------------- |                                       |

*indicates less than 1%

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

(2)  Represents sole voting and investment powerunless otherwise indicated. 

(3)  Based on approximately 30,920,702 shares ofthe Company's Common Stock outstanding at February 28, 2003, plus, as to eachperson listed, that  portion of CompanyCommon Stock subject to outstanding options, warrants, and convertible debtwhich may be exercised or converted by such person, and as to all directors andexecutive officers as a group, unissued shares of  Company Common Stock as to which the members of such group havethe right to acquire beneficial ownership upon the exercise of stock optionsor  warrants, or conversion ofconvertible debt within the next  60days.

(4)  Excludes 7,960,829 shares reserved forissuance under outstanding options and warrants.

(5)  Includes warrants to acquire 49,256 sharesof Common Stock at $2.50 per share, debt convertible to 6,566,075 shares ofCommon Stock at $0.10 per share, and options to acquire 19,362 shares of CommonStock at $2.50 per share.

(6)  Includes $1,222,295 of debt convertible to12,234,771 shares of Common Stock at $0.07 to $2.50 per share.

(7)  Includes options to acquire 600,000 sharesof Common Stock at $0.25 per share, options to acquire 19,362 shares at $2.50per share, and options to acquire 687,863 shares at $0.1875 per share.

(8)Includes options to acquire 290,000 shares of Common Stock at $0.20 per share,options to acquire 19,362 shares at $2.50 per share, and options to acquire183,765 shares at $0.1875 per share.

(9)Includes options to acquire 200,000 shares of Common Stock at $0.20 per share,options to acquire 19,362 shares at $2.50 per share, and options to acquire137,265 shares at $0.1875 per share.

 

**SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS**

The following providesinformation, as of December 31, 2002, concerning compensation plans (includingindividual compensation arrangements) under which equity securities of theCompany 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 |  10,865,200                                                                         | $0.43                                                                       | 5,769,384                                                                                                                             |        |
|        |                                                 |                                                                                               |                                                                             |                                                                                                                                                 |        |
|   |                                            |                                                                                          |                                                                        |                                                                                                                                            |   |
|        | Equity compensation  plans not                  |                                                                                               |                                                                             |                                                                                                                                                 |        |
|        |    approved  by security holders |          89,275                             | $1.83                                                                       |  --                                                                                                               |        |
|        |                                                 | ------------------                                                                            | ------------------                                                          | --------------------                                                                                                                            |        |
|        |       Total       | 10,954,475                                                                               | $0.43                                                                       | 5,769,384                                                                                                                                  |        |

For a completedescription of the Company's equity compensation plans, please refer to Note 6of our audited financial statements as of December 31, 2002, which are filed asExhibit 99.1 hereto.

----

**ITEM 12.  CERTAIN RELATIONSHIPS AND RELATEDTRANSACTIONS**

During2001, the Company borrowed $1,135,000 from C. Alan Williams and $100,000 fromJames Townsend and issued convertible promissory notes.  Both Mr. Williams and Mr. Townsend areshareholders and Mr. Townsend was a Director of the Company from 1997 toDecember 19, 2001.  These loans weremade to the Company to fund its operating cash shortfalls. These loans bear aninterest rate of 10% and are payable upon the earlier of (i) acquisition of theCompany by a third party, (ii) October 31, 2003, or (iii) receipt by theCompany of equity financing of $5,000,000 or more. If the Company obtainsequity financing of $5,000,000 or more, the holders will have the right toconvert the principal amount of the note and any accrued interest thereon intoshares of the Company's common stock at the lower of $2.50 for each share ofstock or the price per share of the common stock issued in the equityfinancing. If the Company is acquired, they will have the right to convertprincipal and interest on the note into shares of common stock at the lower of$2.50 per share, or the per share price paid by the person who acquires theCompany. 

During2002, the Company borrowed $1,110,000 from C. Alan and Joan P. Williams andissued convertible promissory notes bearing interest at 10 percent perannum.  The notes and accrued interestare due at the earlier of one of three events: 1) October 31, 2005; 2)acquisition of controlling interest in the Company by a third party; or 3) theCompany achieves equity financing of a minimum of $3,000,000.  If the Company is acquired, the principaland accrued interest on the notes, as modified, are convertible into shares ofthe Company's common stock at the lower of $2.50 per share or the price paidper share by the acquirer.  In addition,the principal and accrued interest on $530,000 of these convertible promissorynotes, as modified, are convertible into shares of the Company's common stockat a conversion price equal to the lower of $2.50 per share or the average ofthe Company's common stock closing bid price on the OTCBB, NASDAQ or otherestablished securities exchange or market for the ten (10) consecutive tradingdays prior to the date Mr. and Mrs. Williams deliver written notice of theirconversion election to the Company.  Theprincipal and accrued interest on an additional $220,000 of these convertiblepromissory notes issued between October 30, 2002 and December 31, 2002 areconvertible into shares of the Company's common stock at a conversion priceequal to the lower of $0.07 per share (which was below the fair market value onthe date of issuance) or the average of the Company's common stock closing bidprice on the OTCBB, NASDAQ or other established securities exchange or marketfor the ten (10) consecutive trading days prior to the date Mr. and Mrs.Williams deliver written notice of their conversion election to theCompany.  The beneficial conversionfeature resulted in a charge to interest expense in the accompanying statementof operations of $94,429 during the year ended December 31, 2002.

Totalinterest expense recognized on all the convertible notes payable was $147,327and $168,790 during the years ended December 31, 2002 and 2001,respectively.  Total interest accruedand not paid on the convertible notes payable to related parties as of December31, 2002 totaled $404,945 and is included in convertible notes and accruedinterest payable to related parties in the accompanying balance sheet.

Asan inducement for the extension of the due date with respect to $2,039,245 inconvertible promissory notes issued through April 10, 2002 and due between June2002 and October 2003 (the "Notes") and as inducement for receipt of up to$610,000 in debt financing during 2002, the Company entered into two agreementsdated May 9, 2002 with Mr. and Mrs. Williams, a Promissory Note ModificationAgreement and a Security Agreement (the "May 9, 2002 Agreements").  Pursuant to the May 9, 2002 Agreements, theNotes were modified and now include the following terms:  the Notes, as modified, are secured by asecurity interest in all of the Company's assets. The principal and accruedinterest on the Notes, as modified, are due at the earlier of one of threeevents: 1) October 31, 2005; 2) acquisition of controlling interest in theCompany by a third party; or 3) the Company achieves equity financing of aminimum of $3,000,000.  If the Companyis acquired, the principal and accrued interest on the Notes, as modified, areconvertible into shares of the Company's common stock at the lower of $2.50 pershare or the price paid per share by the acquirer.  In addition, the principal and accrued interest on the Notes, asmodified, are convertible at any time into shares of the Company's common stockat a conversion price equal to the lower of $2.50 per share or the average ofthe Company's common stock closing bid price on the OTCBB, NASDAQ or otherestablished securities exchange or market for the ten (10) consecutive tradingdays prior to the date Mr. and Mrs. Williams deliver written notice of hisconversion election to the Company.  Inaddition, the May 9, 2002 Agreements grant to Mr. and Mrs. Williams piggybackregistration rights with respect to all previously unregistered shares of theCompany's common stock held by them, whether issued for cash or for conversionof the Notes, as modified.  As there wasno beneficial conversion feature related to these modifications, no interestexpense was recorded during the year ended December 31, 2002.

OnMay 15, 2002, C. Alan Williams and Joan P. Williams acquired 15,686,502 sharesof the restricted common stock of the Company by exercising their conversionrights with respect to $2,039,245 in convertible promissory notes payable bythe Company, at a conversion price of $0.13 per share, the average of theCompany's common stock closing bid price on the OTCBB for the ten (10)consecutive trading days prior to May 15, 2002.

AtDecember 31, 2002, the outstanding principal balance of convertible securedpromissory notes payable to Mr. and Mrs. Williams was $750,000.

OnJuly 15, 2002, the Company entered into a Promissory Note ModificationAgreement with James Townsend with respect to $507,747 in convertiblepromissory notes issued through January 12, 2001 and due between June 2002 andOctober 2003 (the "Townsend Notes"). Pursuant to this agreement, the Townsend Notes were modified and nowinclude the following terms:  theprincipal and accrued interest on the Notes, as modified, are due at theearlier of one of three events: 1) October 31, 2005; 2) acquisition ofcontrolling interest in the Company by a third party; or 3) the Companyachieves equity financing of a minimum of $3,000,000.  If the Company is acquired, the principal and accrued interest onthe Notes, as modified, are convertible into shares of the Company's commonstock at the lower of $2.50 per share or the price paid per share by the acquirer.  In addition, the principal and accruedinterest on the Notes, as modified, are convertible at any time into shares ofthe Company's common stock at a conversion price equal to the lower of $0.10per share or the average of the Company's common stock closing bid price on theOTCBB, NASDAQ or other established securities exchange or market for the ten(10) consecutive trading days prior to the date Mr. Townsend delivers writtennotice of his conversion election to the Company.  In addition, the agreement grants to Mr. Townsend piggybackregistration rights with respect to all previously unregistered shares of theCompany's common stock held by him, whether issued for cash or for conversionof the Notes, as modified.  As there wasno beneficial conversion feature related to these modifications, no interestexpense was recorded during 2002. 

OnJuly 30, 2002, the Company granted Mr. and Mrs. Williams a full ratchetanti-dilution right to receive additional shares of the Company's common stockin the event that Mr. Townsend converts some or all of his outstandingpromissory notes to the Company's common stock at any price lower than $0.13per share such that Mr. and Mrs. William's conversion price shall be equivalentto Mr. Townsend's conversion price with respect to the same number of shares.

Duringthe year ended December 31, 2002, the Company entered into a ConsultingServices Agreement with the Company's founder to provide marketingcommunications services for up to four months in consideration for up to320,000 shares of the Company's common stock. The compensation shall be earned on a pro-rata basis at the end of eachof four thirty-day work periods and only upon receipt and acceptance by theCompany of the related party's work product. No shares were earned under this agreement during the year endedDecember 31, 2002.  On February 11,2003, 320,000 of these shares were issued and were valued at $44,800, the fairmarket value on the date of issuance.

----

**ITEM13.  EXHIBITS AND REPORTS ON FORM 8-K**

(a)                Exhibits

|              |                                                                                                                                                                                                                                                                                                                                  |
|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Exhibit  No. | Description                                                                                                                                                                                                                                                                                                                      |
| 3.1          | Articles of Incorporation, as amended  **                                                                                                                                                                                                                                                                                   |
| 3.2          | By-laws   **                                                                                                                                                                                                                                                                                                                |
| 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.                     |
| 10.1         | Engagement  Agreement dated November 12, 2002 by and between the Company and Magnum  Financial Group, LLC.  Previously  filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-QSB for  the period ended September 30, 2002 and incorporated herein by reference.                                               |
| 10.2         | Consulting  Services agreement dated October 28, 2002 by and between the Company and Tim  Dales.  Previously filed as Exhibit  10.2 to the Company's Quarterly Report on Form 10-QSB for the period ended  September 30, 2002 and incorporated herein by reference.                                                         |
| 10.3         | 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.                                                   |
| 10.4         | 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.                                                            |
| 99.1         | VillageEDOCS  Financial Statements For The Fiscal Years Ended December 31, 2002 and 2001  and Independent Auditors' Report.*                                                                                                                                                                                                     |
| 99.2         | 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 28, 2003 by K. Mason Conner,  Chief Executive Officer.*                                                                                                                            |
| 99.3         | 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 28, 2003 by Michael A.  Richard, Principal Accounting Officer.*                                                                                                                    |

*              Filedherewith.

**           Filed with the Form 10-SB filed byVillageEDOCS on August 29, 2000

* *

(b)                Reportson Form 8-K

|  | None. |  |
|--|-------|--|
|  |       |  |
|  |       |  |

 

----

**ITEM14 - CONTROLS AND PROCEDURES**

Asrequired by Rule 13a-15 under the Securities Exchange Act of 1934, within the90 days prior to the filing date of this report, the Company carried out anevaluation of the effectiveness of the design and operation of the Company'sdisclosure controls and procedures. This evaluation was carried out under the supervision and with theparticipation of the Company's management, including the Company's ChiefExecutive Officer and the Company's Chief Financial Officer, who concluded thatthe Company's disclosure controls and procedures are effective.  There have been no significant changes inthe Company's internal control or in other factors, which could significantlyaffect internal controls subsequent to the date the Company carried out itsevaluation.

Disclosurecontrols and procedures are controls and other procedures that are designed toensure that information required to be disclosed in the Company reports filedor submitted under the Exchange Act is recorded, processed, summarized andreported, within the time periods specified in the Securities and ExchangeCommission's rules and forms.  Disclosurecontrols and procedures include, without limitation, controls and proceduresdesigned to ensure that information required to be disclosed in Company reportsfiled under the Exchange Act is accumulated and communicated to management,including the Company's Chief Executive Officer and Chief Financial Officer asappropriate, to allow timely decisions regarding required disclosure.

----

**SIGNATURES**

In accordance withSection 13 or 15(d) of the Securities Exchange Act of 1934, the registrant hascaused this registration statement to be signed on its behalf by theundersigned, thereunto duly authorized.

|        | VillageEDOCS                            |
|--------|-----------------------------------------|
|        | (Registrant)                            |
|        |                                         |
|        | **VillageEDOCS**                        |
|        |                                         |
|   |                                    |
|        | By:   /s/  Michael A. Richard |
|        | Michael A. Richard                      |
|        | V.P. Controller and                     |
|        | Principal Accounting  Officer           |
|        |                                         |
|   |                                    |
|        | Date:  March 28, 2003              |

                Pursuant to the requirements of the Securities Act of1933, this Registration Statement has been signed by the following persons inthe capacities and on the dates indicated.

|  | **SIGNATURE**                     | **TITLE**                     | **DATE**                       |
|--|-----------------------------------|-------------------------------|--------------------------------|
|  |                                   |                               |                                |
|  |                                   |                               |                                |
|  | /s/ K. Mason Conner               |                               | March 28, 2003                 |
|  | --------------------------------- |                               | ------------------------------ |
|  | K. Mason Conner                   | Director,                     |                                |
|  |                                   | Chief Executive  Officer      |                                |
|  |                                   |                               |                                |
|  | /s/ Michael A. Richard            |                               | March 28, 2003                 |
|  | --------------------------------- |                               | ------------------------------ |
|  | Michael A. Richard                | V.P. Controller               |                                |
|  |                                   | Principal Accounting  Officer |                                |
|  |                                   |                               |                                |
|  | /s/ J. Thomas Zender              |                               | March 28, 2003                 |
|  | --------------------------------- |                               | ------------------------------ |
|  | J. Thomas Zender                  | Director,                     |                                |
|  |                                   | Chairman of the Board         |                                |
|  |                                   |                               |                                |
|  | /s/ H. Jay Hill                   |                               | March 28, 2003                 |
|  | --------------------------------- |                               | ------------------------------ |
|  | H. Jay Hill                       | Director                      |                                |

----

 

**CERTIFICATIONUNDER**

**SECTION302 OF THE SARBANES-OXLEY ACT OF 2002**

I certify that:

1.             I reviewed the annual report onForm 10-KSB of VillageEDOCS;

2.             Based on my knowledge, this annualreport does not contain any untrue statement of a material fact or omit tostate a material fact necessary to make the statements made, in light of thecircumstances under which such statements were made, not misleading withrespect to the period covered by this annual report;

3.             Based on my knowledge, the financialstatements, and other financial information included in this annual report,fairly present in all materials respects the financial condition, results ofoperations and cash flows of the registrant as of, and for, the periodpresented in this annual report;

4.             The Registrant's other certifyingofficers and I are responsible for establishing and maintaining disclosure controlsand procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for theRegistrant and have:

                 a)            designed such disclosure controls and procedures toensure that material information relating to the Registrant, including itsconsolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this annual report is being prepared;

                 b)            evaluated the effectiveness of the Registrant'sdisclosure controls and procedures as of a date within 90 days prior to thefiling date of this annual report (the "Evaluation Date"); and

                 c)            presented in this annual report our conclusions about theeffectiveness of the disclosure controls and procedures based on our evaluationas of the Evaluation Date;

5.             The Registrant's other certifyingofficers and I have disclosed, based on our most recent evaluation, to theregistrant's auditors and the audit committee of the Registrant's board ofdirectors (or persons performing the equivalent functions);

                 a)             allsignificant deficiencies in the design or operation of internal controls whichcould adversely affect the Registrant's ability to record, process, summarizeand report financial data and have identified for the Registrant's auditors anymaterial weaknesses in internal controls; and

                 b)            any fraud, whether or not material, that involvesmanagement or other employees who have a significant role in the Registrant'sinternal controls; and

6.             The Registrant's other certifyingofficers and I have indicated in this annual report whether there weresignificant changes in internal controls or in other factors that couldsignificantly affect internal controls subsequent to the date of our mostrecent evaluation, including any corrective actions with regard to significantdeficiencies and material weaknesses.

| Date:  March 28, 2003                                                             | /s/ K. Mason Conner                        |
|---------------------------------------------------------------------------------------------|--------------------------------------------|
|           ------------------------------- | ------------------------------------------ |
|                                                                                             | President and Chief Executive Officer      |

----

 

**CERTIFICATIONUNDER**

**SECTION302 OF THE SARBANES-OXLEY ACT OF 2002**

I certify that:

1.             I reviewed the annual report onForm 10-KSB of VillageEDOCS;

2.             Based on my knowledge, this annualreport does not contain any untrue statement of a material fact or omit tostate a material fact necessary to make the statements made, in light of thecircumstances under which such statements were made, not misleading withrespect to the period covered by this annual report;

3.            Based on my knowledge, the financialstatements, and other financial information included in this annual report,fairly present in all materials respects the financial condition, results ofoperations and cash flows of the registrant as of, and for, the periodpresented in this annual report;

4.             The Registrant's other certifyingofficers and I are responsible for establishing and maintaining disclosurecontrols and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)for the Registrant and have:

                 a)            designed such disclosure controls and procedures toensure that material information relating to the Registrant, including itsconsolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this annual report is being prepared;

                 b)            evaluated the effectiveness of the Registrant'sdisclosure controls and procedures as of a date within 90 days prior to thefiling date of this annual report (the "Evaluation Date"); and

                 c)            presented in this annual report our conclusions about theeffectiveness of the disclosure controls and procedures based on our evaluationas of the Evaluation Date;

5.             The Registrant's other certifyingofficers and I have disclosed, based on our most recent evaluation, to theregistrant's auditors and the audit committee of the Registrant's board of directors(or persons performing the equivalent functions);

                 a)             allsignificant deficiencies in the design or operation of internal controls whichcould adversely affect the Registrant's ability to record, process, summarizeand report financial data and have identified for the Registrant's auditors anymaterial weaknesses in internal controls; and

                 b)            any fraud, whether or not material, that involvesmanagement or other employees who have a significant role in the Registrant'sinternal controls; and

6.             The Registrant's other certifyingofficers and I have indicated in this annual report whether there weresignificant changes in internal controls or in other factors that couldsignificantly affect internal controls subsequent to the date of our most recentevaluation, including any corrective actions with regard to significantdeficiencies and material weaknesses.

| Date:  March 28, 2003                                                             | /s/ Michael A. Richard                      |
|---------------------------------------------------------------------------------------------|---------------------------------------------|
|           ------------------------------- | ------------------------------------------  |
|                                                                                        | Controller and Principal Accounting Officer |