**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**Washington, D.C. 20549

**FORM 10-QSB**

(Mark One)

[**X**]   QUARTERLYREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

**For thequarterly period ended March 31, 2006**

[   ]   TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT 

For thetransition period from_________, 20__, to________, 20__.

Commission FileNumber: 000-31395

**VillageEDOCS**---------------------------------------------------------------------------(Exact name of small business issuer as specified in its charter)

| **California**                                                      | **33-0668917**                                     |
|---------------------------------------------------------------------|----------------------------------------------------|
| ---------------------------------------------------------------     | -------------------------------------------------  |
| (State or Other  Jurisdiction of Incorporation or Organization)     | I.R.S. Employer  Identification Number             |
|                                                                |                                               |
| **14471 Chambers  Road, Suite 105, Tustin, California  92780** | **(714) 734-1030**                                 |
| ---------------------------------------------------------------     | -------------------------------------------------- |
| (Address of  principal executive offices)                           | (Issuer's telephone  number, including area code)  |

Check whether the issuer (1) filed all reports required tobe filed by Section 13 or 15(d) of the Exchange Act during the preceding 12months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements for thepast 90 days.

|  | YES | **X** | NO |   |
|--|-----|-------|----|--------|
|  |     | ----  |    | ----   |

Indicate by check mark whether the registrant is a shellcompany (as defined in Rule 12b-2 of the Exchange Act).

|  | YES |   | NO**** | **X** |
|--|-----|--------|--------|-------|
|  |     | ----   |        | ----  |

**APPLICABLE ONLY TOISSUERS INVOLVED IN BANKRUPTCYPROCEEDINGS DURING THE PRECEDING FIVE YEARS**

Check whether the registrant filed all documents and reportsrequired to be filed by Section 12, 13, or 15(d) of the Exchange Act after thedistribution of securities under a plan confirmed by a court.

|  | YES |   | NO |   |
|--|-----|--------|----|--------|
|  |     | ----   |    | ----   |

** **

**APPLICABLE ONLY TOCORPORATE ISSUERS**

There were 101,667,526 shares of the Registrant's commonstock outstanding as of April 30, 2006. 

| Transitional Small Business Format (check one) | YES |      | NO |  **X** |
|------------------------------------------------|-----|------|----|-------------|
|                                                |     | ---- |    | ----        |

----

**VillageEDOCS**

**Index**

** **

| ** ** | ** **                         | Page No. |
|------------|------------------------------------|----------|
| ** ** | **PART I. FINANCIAL  INFORMATION** |          |  |
|            |                                    |          |  |  |  |
|            | Item 1.                            |          |  Consolidated Financial Statements |  |  |
|            |                                    |          |  Consolidated Balance Sheet as of March 31, 2006  (Unaudited) |  | 1 |
|            |                                    |          |  Consolidated Statements of Operations for the three months  ended March 31, 2006 and 2005* (Unaudited) |  | 2 |
|            |                                    |          |  Consolidated Statements of Cash Flows for the three months  ended March 31, 2006 and 2005* (Unaudited) |  | 3 |
|            |                                    |          |  Notes to Unaudited Consolidated Financial Statements |  | 5 |
|            | Item 2.                            |          |  Management's Discussion and Analysis or Plan of  Operations |  | 23 |
|            | Item 3.                            |          |  Controls and Procedures |  | 34 |
|            |                                    |          |  |  |  |
| ** ** | **PART II. OTHER  INFORMATION**    |          |  |
|            |                                    |          |  |  |  |
|            | Item 1.                            |          |  Legal Proceedings |  | 35 |
|            | Item 2.                            |          |  Unregistered Sales of Equity Securities and Use of  Proceeds |  | 35 |
|            | Item 3.                            |          |  Defaults Upon Senior Securities |  | 35 |
|            | Item 4.                            |          |  Submission of Matters to a Vote of Security Holders |  | 35 |
|            | Item 5.                            |          |  Other Information |  | 35 |
|            | Item 6.                            |          |  Exhibits |  | 36 |
|            |                                    |          |  Signatures |  | 41 |
|            |                                    |          |  |  |  |
|            |                                    | *        | Restated |  |  |

** **

----

| **VillageEDOCS and  subsidiaries**                                                           |  |                  |                 |
|----------------------------------------------------------------------------------------------|--|------------------|-----------------|
| **Consolidated Balance Sheet**                                                               |  |                  |                 |
| **(Unaudited)**                                                                              |  |                  |                 |
|                                                                                              |  | **March 31,**    | ** **      |
|                                                                                              |  | **2006**         | ** **      |
| ** **                                                                                   |  |                  |                 |
| **ASSETS**                                                                                   |  |                  |                 |
| Current assets:                                                                              |  |                  |                 |
| Cash                                                                                         |  |  $          | 384,533    |  |
| Accounts receivable, net of allowance  for doubtful                                          |  |                  |                 |
| accounts of $62,000                                                                          |  | 997,755     |                 |
| Inventories, net                                                                             |  | 181,845     |                 |
| Other current assets                                                                         |  | 54,447      |                 |
| Total current assets                                                                         |  | 1,618,580   |                 |
|                                                                                              |  |                  |                 |
| Property and equipment, net                                                                  |  | 340,703     |                 |
| Other assets                                                                                 |  | 28,575      |                 |
| Goodwill                                                                                     |  | 5,166,132   |                 |
| Other intangible assets, net                                                                 |  | 1,088,848   |                 |
|                                                                                              |  |  $          | 8,242,838  |  |
|                                                                                              |  |                  |                 |
|                                                                                              |  |                  |                 |
| **LIABILITIES AND STOCKHOLDERS' EQUITY**                                                     |  |                  |                 |
| Current liabilities:                                                                         |  |                  |                 |
| Accounts payable                                                                             |  |  $          | 320,941    |  |
| Accrued expenses                                                                             |  | 981,379     |                 |
| Deferred revenue                                                                             |  | 997,033     |                 |
|     Notes payable to related parties                                     |  | 120,000     |                 |
|     Current portion of convertible notes  payable to related parties     |  | 200,000     |                 |
|         Total current liabilities                         |  | 2,619,353   |                 |
|                                                                                              |  |                  |                 |
| Convertible notes and accrued interest payable to related  parties,                          |  |                  |                 |
| net of unamortized debt  discount of $23,240                                                 |  | 137,794     |                 |
|         Total  liabilities                           |  | 2,757,147   |                 |
|                                                                                              |  |                  |                 |
| Commitments and contingencies                                                                |  |                  |                 |
|                                                                                              |  |                  |                 |
| Stockholders' equity:                                                                        |  |                  |                 |
| Series A Preferred stock, par  value $0.001 per share:                                       |  |                  |                 |
| Authorized  -- 48,000,000  shares                                                       |  |                  |                 |
|         Issued and outstanding --  11,000,000 shares |  | 11,000      |                 |
| (liquidation preference of $550,000)                                                         |  |                  |                 |
| Common stock, no par value:                                                                  |  |                  |                 |
| Authorized -- 400,000,000  shares                                                            |  |                  |                 |
|         Issued and outstanding -- 101,667,526 shares      |  | 13,314,884  |                 |
|     Additional paid-in capital                                           |  | 13,320,287  |                 |
|     Accumulated deficit                                                  |  | (21,160,480)     |                 |
| Total stockholders' equity                                                                   |  | 5,485,691   |                 |
|                                                                                              |  |  $          | 8,242,838  |  |
|                                                                                              |  |                  |                 |
| See accompanying notes to consolidated financial  statements.                                |  |                  |                 |
|                                                                                              |  |                  |                 |

----

** **

| **VillageEDOCS and  subsidiaries**                            | ** ** | ** ** |                                   |                 |                  |            |
|---------------------------------------------------------------|------------|------------|-----------------------------------|-----------------|------------------|------------|
| **Consolidated Statements of Operations**                     | ** ** | ** ** |                                   |                 |                  |            |
| **(Unaudited)**                                               | ** ** | ** ** |                                   |                 |                  |            |
| ** **                                                    | ** ** | ** ** | **Three Months  Ended March 31,** |                 |
| ** **                                                    | ** ** | ** ** | ** **                        | ** **      | **2005**         |            |
|                                                               |            |            | **2006**                          | ** **      | **(Restated)**   | ** ** |
| Net sales                                                     |            |            |  $                           | 2,067,839  |                  |  $    | 1,411,982  |  |
| Cost of sales                                                 |            |            | 704,112                      |                 | 551,486     |            |
| Gross profit                                                  |            |            | 1,363,727                    |                 | 860,496     |            |
| Operating expenses:                                           |            |            |                                   |                 |                  |            |
| Product and technology                                        |            |            |                                   |                 |                  |            |
| development                                                   |            |            | 262,120                      |                 | 189,958     |            |
| Sales and marketing                                           |            |            | 323,764                      |                 | 298,714     |            |
| General and administrative                                    |            |            | 941,755                      |                 | 625,401     |            |
| Depreciation and amortization                                 |            |            | 82,761                       |                 | 51,560      |            |
| Total operating expenses                                      |            |            | 1,610,400                    |                 | 1,165,633   |            |
| Loss from operations                                          |            |            | (246,673)                         |                 | (305,137)        |            |
|                                                               |            |            |                                   |                 |                  |            |
| Other income                                                  |            |            | 592                          |                 | -           |            |
| Change in fair value of derivative liability                  |            |            | -                            |                 | 5,323       |            |
| Interest expense, net of interest income                      |            |            | (23,308)                          |                 | (391,121)        |            |
| Loss before provision for                                     |            |            |                                   |                 |                  |            |
| income taxes                                                  |            |            | (269,389)                         |                 | (690,935)        |            |
|                                                               |            |            |                                   |                 |                  |            |
| Provision for income taxes                                    |            |            | 4,000                        |                 | 4,200       |            |
| Net loss                                                      |            |            |  $                           | (273,389)       |                  |  $    | (695,135) |  |
|                                                               |            |            |                                   |                 |                  |            |
| Basic and diluted loss available to                           |            |            |                                   |                 |                  |            |
| common stockholders per common                                |            |            |                                   |                 |                  |            |
| share                                                         |            |            |  $                           | -     |                  |  $    | (0.01) |  |
|                                                               |            |            |                                   |                 |                  |            |
| Weighted average shares outstanding -                         |            |            |                                   |                 |                  |            |
|  basic and diluted                                       |            |            | 99,813,513                   |                 | 59,363,429  |            |
|                                                               |            |            |                                   |                 |                  |            |
| See accompanying notes to consolidated financial  statements. |            |            |                                   |
|                                                               |            |            |                                   |                 |                  |            |

----

 

| **VillageEDOCS and subsidiaries**                           |  |               |               |                |            |
|-------------------------------------------------------------|--|---------------|---------------|----------------|------------|
| **Consolidated Statements of Cash Flows (Unaudited)**       |  |               |               |                |            |
| **For the Three Months Ended March 31, 2006 and 2005**      |  |               |               |                |            |
| ** **                                                  |  | **2006**      |               | **2005**       |            |
|                                                             |  | ** **    | ** **    | **(Restated)** | ** ** |
| Cash Flows from Operating Activities:                       |  |               |               |                |            |
| Net loss                                                    |  |  $       | (273,389)     |                |  $    | (695,135) |  |
| Adjustments to reconcile net  loss to net cash              |  |               |               |                |            |
| used in operating activities:                               |  |               |               |                |            |
| Depreciation and amortization                               |  | 82,761   |               | 51,560    |            |
| Provision for doubtful accounts  receivable                 |  | 100      |               | 69,000    |            |
| Estimated fair value of common  stock issued for            |  |               |               |                |            |
| services rendered                                           |  | -        |               | 9,240     |            |
| Estimated fair value of stock  options issued for services  |  | 80,200   |               | -         |            |
| Amortization of beneficial  conversion feature and          |  |               |               |                |            |
|    warrants issued with  convertible notes        |  | 3,669    |               | 306,546   |            |
| Change in fair value of  derivative liability               |  | -        |               | (5,323)        |            |
| Changes in operating assets and  liabilities:               |  |               |               |                |            |
| Accounts receivable                                         |  | 23,384   |               | (43,328)       |            |
| Inventories                                                 |  | 8,180    |               | 1,595     |            |
| Other current assets                                        |  | 8,907    |               | 617       |            |
| Other assets                                                |  | 5,372    |               | 4,666     |            |
| Accounts payable                                            |  | 12,252   |               | (18,371)       |            |
| Accrued expenses and accrued  interest                      |  | (38,345)      |               | 121,160   |            |
| Deferred revenue                                            |  | (35,796)      |               | 97,062    |            |
| Net cash used in operating  activities                      |  | (122,705)     |               | (100,711)      |            |
| Cash Flows from Investing Activities:                       |  |               |               |                |            |
| Purchases of property and  equipment                        |  | (15,412)      |               | (4,678)        |            |
| Additions to capitalized  software development costs        |  | (9,401)       |               | -         |            |
| Costs incurred for purchase of  TBS                         |  | -        |               | (5,000)        |            |
| Net cash used in investing  activities                      |  | (24,813)      |               | (9,678)        |            |
| Cash Flows from Financing Activities:                       |  |               |               |                |            |
| Proceeds from notes payable to  related parties             |  | 10,000   |               | -         |            |
| Payments on capital lease  obligations                      |  | -        |               | (2,363)        |            |
| Principal payments on notes  payable                        |  | -        |               | (1,490)        |            |
| Principal payments on  convertible notes to related parties |  | (200,000)     |               | -         |            |
| Payments on notes payable to  related parties               |  | (40,000)      |               | (200,000)      |            |
| Net cash used in financing  activities                      |  | (230,000)     |               | (203,853)      |            |
| Net change in cash                                          |  | (377,518)     |               | (314,242)      |            |
|                                                             |  |               |               |                |            |
| Cash, beginning of period                                   |  | 762,051  |               | 458,009   |            |
| Cash, end of period                                         |  |  $       | 384,533  |                |  $    | 143,767  |  |
| Supplemental disclosure of cash flow information -          |  |               |               |                |            |
| Cash paid during the period  for:                           |  |               |               |                |            |
| Interest                                                    |  |  $       | 18,107   |                |  $    | 9,345  |  |
| Income taxes                                                |  |  $       | 4,000    |                |  $    | 2,400  |  |
| continued.                                                  |  |               |               |                |            |

|                                                                       |  | ** **   | ** **   | **2005**       |
|-----------------------------------------------------------------------|--|--------------|--------------|----------------|
|                                                                       |  | **2006**     | ** **   | **(Restated)** |
| Supplemental Schedule of Noncash Investing and Financing  Activities: |  |              |
|                                                                       |  |              |              |                |
| Issuance of common stock as  acquisition cost                         |  |  $      | -       |                |  $ | 323,400  |
| Issuance of common stock on  conversion of preferred stock            |  |  $      | 2,500   |                |  $ | -  |
| Issuance of common stock on  conversion of debt                       |  |              |              |                |
| and accrued interest                                                  |  |  $      | -       |                |  $ | 3,682,609  |
|                                                                       |  |              |              |                |
| See accompanying notes to consolidated financial  statements.         |  | *** *** | *** *** |                |

----

**VillageEDOCS**

**Notes to Unaudited Consolidated Financial Statements -March 31, 2006 and 2005**

** **

**1.          Management'sRepresentation**

The management of VillageEDOCS (the "Company") without audithas prepared the consolidated financial statements included herein.  Theaccompanying unaudited consolidated financial statements have been prepared inaccordance with accounting principles generally accepted in the United Statesof America for interim financial information.  Certain information and notedisclosures normally included in the consolidated financial statements preparedin accordance with accounting principles generally accepted in the UnitedStates of America have been omitted.  In the opinion of the management of theCompany, all adjustments considered necessary for fair presentation of the consolidatedfinancial statements have been included and were of a normal recurring nature,and the accompanying consolidated financial statements present fairly the consolidatedfinancial position as of March 31, 2006, and the results of operations for thethree months ended March 31, 2006 and 2005.

It is suggested that these unaudited consolidated financialstatements be read in conjunction with the audited financial statements andnotes thereto for the year ended December 31, 2005, included in the Company'sAnnual Report on Form 10-KSB filed with the Securities and Exchange Commissionon April 14, 2006.  The interim results are not necessarily indicative of theresults for a full year.

** **

**2.          Background,Organization and Basis of Presentation**

VillageEDOCS was incorporated in 1995 in Delaware andreincorporated in California in 1997. The Company has historically operated an electronicdocument delivery service marketed to organizations throughout the UnitedStates and internationally.  On February 17, 2004, the Company acquiredTailored Business Systems, Inc. ("TBS").  TBS provides variousprogramming, processing and printing services to governmental entities,including installing software, hardware, printing and mailing of property taxforms.  On June 16, 2004, the holders of a majority of the voting capital stockof the Company voted to approve a Plan of Restructuring that included thereorganization of the Company's electronic document delivery business into awholly owned subsidiary of the Company.  In connection with the reorganization,the Company formed MessageVision, Inc. ("MVI") on October 25, 2004.  EffectiveApril 1, 2005, the Company acquired Phoenix Forms, Inc. dba Resolutions("PFI" or "Resolutions").  Resolutions provides productsfor document management, document archiving, document imaging, imagingsoftware, document scanning, e-mail archiving, document imaging software, andelectronic forms.  Effective May 1, 2006, the Company acquired GoSolutions,Inc. ("GSI").  GSI provides enhanced voice and data communicationsservices including speech-driven messaging, unified communications, and audioconferencing applications. The unaudited consolidated financial statementsinclude the accounts of the Company and those of MVI, TBS and Resolutions, itswholly owned subsidiaries, since October 25, 2004, February 17, 2004, and April1, 2005, respectively.   All significant inter-company transactions andbalances have been eliminated in consolidation.

*Restatement of Previously Issued Financial Statements*

During the year ended December 31, 2005, the Companydetermined that the manner in which it accounted for the variable conversionrate and an embedded put option of certain of its convertible notes payable(see Note 6) was not in accordance with Statement of Financial AccountingStandards ("SFAS") No. 133 *"Accounting for DerivativeInstruments and Hedging Activities,"*(SFAS No. 133).  The Companydetermined that the variable conversion feature was an embedded derivativeinstrument and that the conversion option was an embedded put option pursuantto SFAS No. 133. The accounting treatment of derivative financial instrumentsrequired that the Company record the derivatives and related warrants at theirfair values as of the inception date of the note agreements and at fair valueas of each subsequent balance sheet date.  In addition, under the provisions ofEITF Issue No. 00-19, *"Accounting for Derivative Financial InstrumentsIndexed to, and Potentially Settled in, a Company's Own Stock,"* as a resultof entering into the convertible note agreements, the Company was required toclassify all other non-employee warrants as derivative liabilities and recordthem at their fair values at each balance sheet date.  Any change in fair valuewas recorded as non-operating, non-cash income or expense at each balance sheetdate.  If the fair value of the derivatives was higher at the subsequentbalance sheet date, the Company recorded a non-operating, non-cash charge.  Ifthe fair value of the derivatives was lower at the subsequent balance sheetdate, the Company recorded non-operating, non-cash income.  Accordingly, inconnection with the restatement adjustments, the Company has appropriatelyreflected the non-operating, non-cash income or expense resulting from thechanges in fair value. The Company had previously not recorded the embeddedderivative instruments as a liability and did not record the related changes infair value. 

During the year ended December 31, 2005, the Company alsodetermined that certain transactions involving the issuance of its common stockand warrants to employees in connection with the acquisitions of TBS andResolutions were not recorded in accordance with SFAS No. 141 *"BusinessCombinations."*

The following tables present asummary of the effects of the restatement adjustments on the Company'sconsolidated balance sheet at March 31, 2005 and the statements of operationsfor the three months ended March 31, 2005.

Consolidated balance sheet atMarch 31, 2005:

|                                 |  |   | **As Previously Reported** | ** ** | ** ** | **Restatement Adjustments**                              | ** **                        | ** ** | **Restated**            |
|---------------------------------|--|---|----------------------------|------------|------------|----------------------------------------------------------|-----------------------------------|------------|-------------------------|
|                                 |  |   | Debit (Credit) Balance     | ** ** | ** ** | Debit (Credit)                                           | ** **                        | ** ** | Debit (Credit)

Balance |
|                                 |  |   |                            |            |            |                                                          |                                   |            |                         |
| Goodwill                        |  | $ | 2,464,946             |            | $          | (9,240)

(76,000)                                        | (1)

(2)                          | $          | 2,379,706               |
|                                 |  |   |                            |            |            |                                                          |                                   |            |                         |
| Derivative  Liability           |  | $ | -                          |            | $          | 5,323

(1,030,402)                                       | (3)

(4)                          | $          | (1,025,079)             |
|                                 |  |   |                            |            |            |                                                          |                                   |            |                         |
| Convertible  notes payable, net |  | $ | (1,943,157)                |            | $          | (91,081)

189,617                                        | (5)

(6)                          | $          | (1,844,621)             |
|                                 |  |   |                            |            |            |                                                          |                                   |            |                         |
| Stockholders'  Equity           |  | $ | (1,298,558)           |            | $          | 536,390

245,031

59,364

9,240

76,000

(5,323)

91,081 | (7)

(8)

(9)

(1)

(2)

(3)

(5) | $          | (286,775)               |
|                                 |  |   |                            |            |            |                                                          |                                   |            |                         |

Consolidated statement of operations for the three monthsended March 31, 2005:

|                                               |  |   | **As Previously Reported** | ** ** | ** ** | **Restatement Adjustments** | ** ** | ** ** | **Restated**            |
|-----------------------------------------------|--|---|----------------------------|------------|------------|-----------------------------|------------|------------|-------------------------|
|                                               |  |   | Debit (Credit) Balance     | ** ** | ** ** | Debit (Credit)              | ** ** | ** ** | Debit (Credit)

Balance |
|                                               |  |   |                            |            |            |                             |            |            |                         |
| Operating  expenses                           |  | $ | 1,156,393             |            | $          | 9,240                       | (1)        | $          | 1,165,633               |
|                                               |  |   |                            |            |            |                             |            |            |                         |
| Change in  fair value of derivative liability |  | $ | -                          |            | $          | (5,323)                     | (3)        | $          | (5,323)                 |
|                                               |  |   |                            |            |            |                             |            |            |                         |
| Interest  expense                             |  | $ | 300,040                    |            | $          | 91,081                      | (5)        | $          | 391,121                 |
|                                               |  |   |                            |            |            |                             |            |            |                         |
| Net loss                                      |  | $ | 600,137                    |            | $          | 94,998                      | (10)       | $          | 695,135                 |
|                                               |  |   |                            |            |            |                             |            |            |                         |
| Loss per  common share - basic and diluted    |  | $ | (0.01)                     |            | $          | -                           |            | $          | (0.01)                  |
|                                               |  |   |                            |            |            |                             |            |            |                         |

1)     Torecord the reclassification of compensation paid to an employee in connectionwith the acquisition of TBS which was allocated to the purchase price tocompensation expense.

2)     Torecord the reclassification of the fair value of common stock issued.

3)     Torecord the change in fair value of the liability during the three months endedMarch 31, 2005.

4)     Torecord the estimated fair value of the warrant liability at December 31, 2004.

5)     Recordadditional amortization of debt discount related to recording the fair value ofthe warrants, as prescribed under EITF 00-19.

6)     Torecord the additional debt discount based on the fair value of the warrants andembedded put option issued with certain convertible notes.

7)     Torecord the reclassification of the fair value of warrants issued withconvertible notes from additional paid-in capital to derivative liabilityduring prior periods.

8)     Torecord the change in fair value of the derivative liability through December31, 2004.

9)     Recordadditional amortization of debt discount during the year ended December 31,2004 related to recording the fair value of the warrants, as prescribed underEITF 00-19.

10)  To record thenet effects of (1), (3) and (5) noted above.

 

**3.          GoingConcern**

The accompanying consolidated financial statements have beenprepared assuming that the Company will continue as a going concern. TheCompany has incurred significant losses since inception.  The Company's lossesare continuing and are expected to continue until such time as the Company isable to sufficiently expand its existing businesses or is able to consummatebusiness combination transactions with other businesses whose profits aresufficient to offset any ongoing losses from operating the holding company thatowns GSI, Resolutions, TBS and MVI.

The Company's success is dependent upon numerous items,certain of which are the successful growth of revenues from its products andservices, its ability to obtain new customers in order to achieve levels ofrevenues adequate to support the Company's current and future cost structure,and its success in obtaining financing for equipment and operations, for whichthere is no assurance. Unanticipated problems, expenses, and delays arefrequently encountered in establishing and maintaining profitable operations. These include, but are not limited to, competition, the need to developcustomer support capabilities and market expertise, setbacks in productdevelopment, technical difficulties, market acceptance and sales andmarketing.  The failure of the Company to meet any of these conditions couldhave a materially adverse effect on the Company and may force the Company toreduce or curtail operations. No assurance can be given that the Company canachieve or maintain profitable operations.

The Company believes it will have adequate cash to sustainoperations until it achieves sustained profitability.  However, until theCompany has a history of maintaining revenue levels sufficient to support itsoperations and repay its working capital deficit, the Company may requireadditional financing. Sources of financing could include capital infusions,additional equity financing or debt offerings.  Although cash flows fromoperations have recently improved to a level sufficient to support operatingexpenses, should such cash flows decrease for any reason, management plans toobtain debt and equity financing from new and existing stockholders.    Therecan be no assurance that funding will be available on acceptable terms, if atall, or that such funds, if raised, would enable the Company to achieve orsustain profitable operations.

These factors, among others, raise substantial doubt aboutthe Company's ability to continue as a going concern.  The consolidated financialstatements do not include any adjustments to reflect the possible futureeffects on the recoverability and classification of assets or theclassification of liabilities that might result from the outcome of theseuncertainties.

 

**4.           Summaryof Significant Accounting Policies**

Segments of an Enterprise andRelated Information 

TheCompany has adopted Statement of Financial Accounting Standards ("SFAS")No. 131, "*Disclosures about Segments of an Enterprise and Related Information*."SFAS No. 131 requires the Company to report information about segments of itsbusiness in annual financial statements and requires it to report selectedsegment information in its quarterly reports issued to stockholders. SFAS No.131 also requires entity-wide disclosures about the products and services anentity provides, the material countries in which it holds assets and reportsrevenues and its major customers. The Company's four reportable segments aremanaged separately based on fundamental differences in their operations. Duringthe three months ended March 31, 2006, the Company operated in the following fourreportable segments (see Note 10): 

> 
(a)  Electronic document deliveryservices,(b)  Government accounting products and services,(c)  Electronic forms, and(d)  Corporate. 

TheCompany evaluates performance and allocates resources based upon operatingincome. The accounting policies of the reportable segments are the same asthose described in this summary of significant accounting policies.

Concentration of Credit Risk

TheCompany extends credit to its customers and performs ongoing credit evaluationsof such customers.  The Company does not obtain collateral to secure itsaccounts receivable.  The Company evaluates its accounts receivable on aregular basis for collectibility and provides for an allowance for potentialcredit losses as deemed necessary.  At March 31, 2006, the Company has recordedan allowance for doubtful accounts of $62,000.  No single customer accounted formore than 10% of accounts receivable at March 31, 2006.  No single customeraccounted for more than 10% of total sales for the three months ended March 31,2006 and 2005.   

Use of Estimates in the Preparation of FinancialStatements

Thepreparation of financial statements in conformity with accounting principlesgenerally accepted in the United States of America requires management to makeestimates and assumptions that affect the reported amounts of assets andliabilities and disclosure of contingent assets and liabilities at the date ofthe financial statements and the reported amounts of revenues and expensesduring the reporting period. Significant estimates made by management are,among others, the realizability of accounts receivable, inventories, recoverabilityof long-lived assets, valuation of stock options, warrants, derivativeliabilities, and deferred tax assets.   Actual results could differ from thoseestimates.

Property and Equipment

Propertyand equipment are stated at cost and are depreciated using the straight-linemethod over the estimated useful lives of the assets, ranging from three toseven years.  Equipment under capital lease obligations is depreciated over theshorter of the estimated useful life or the term of the lease.  Major bettermentsand renewals are capitalized, while routine repairs and maintenance are chargedto expense when incurred.

Revenue Recognition

TheCompany recognizes revenue in accordance with Staff Accounting Bulletin ("SAB")No. 101, "*Revenue Recognition in Financial Statements,"*as revised by SAB No. 104.  As such, the Company recognizes revenue whenpersuasive evidence of an arrangement exists, title transfer has occurred, orservices have been performed, the price is fixed or readily determinable andcollectibility is probable.  Sales are recorded net of sales discounts.

TheCompany has adopted Statement of Position ("SOP") 97-2, *"SoftwareRevenue Recognition"*, as well as SOP 98-9, *"Modification ofSOP 97-2, Software Revenue Recognition with Respect to CertainTransactions."*  The SOPs generally require revenue earned onsoftware arrangements involving multiple elements to be allocated to eachelement based on the relative fair market values of each of the elements. Thefair value of an element must be based on vendor-specific objective evidence("VSOE") of fair value. Software license revenue generated by TBS andResolutions, allocated to a software product is recognized upon delivery of theproduct, or deferred and recognized in future periods to the extent that anarrangement includes one or more elements that are to be delivered at a futuredate and for which VSOE has not been established.  Maintenance and supportrevenue is recognized ratably over the maintenance term.  First-yearmaintenance typically is sold with the related software license and renewed onan annual basis thereafter. Estimated fair values of ongoing maintenance andsupport obligations are based on separate sales of renewals to other customersor upon renewal rates quoted in the contracts. For such arrangements withmultiple obligations, the Company allocates revenue to each component of thearrangement based on the estimated fair value of the undelivered elements. Fairvalue of services, such as consulting or training, is based upon separate salesof these services. The Company at times may enter into multiple-customercontracts in which the Company allocates revenue based on the number ofspecified users at each customer, and recognizes revenue upon customeracceptance and satisfying the other applicable conditions of the abovedescribed accounting policy. 

Servicesrevenue is recognized as the service is performed assuming that sufficientevidence exists to estimate the fair value of the services.  Consulting andtraining services are billed based on contractual hourly rates and revenues arerecognized as the services are performed. Consulting services primarily consistof implementation services related to the installation of the Company'sproducts which do not require significant customization to or modification ofthe underlying software code. 

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

Risks andUncertainties

The Company operates incompetitive industries that are subject to intense competition, government regulationand rapid technological change.  The Company's operations are subject tosignificant risks and uncertainties including financial, operational,technological, regulatory and other risks associated with an expandingbusiness, including the potential risk of business failure.

Loss per Share

Basic loss per share iscomputed by dividing loss available to common stockholders by the weightedaverage number of common shares assumed to be outstanding during the period ofcomputation. Diluted loss per share is computed similar to basic loss per shareexcept that the denominator is increased to include the number of additionalcommon shares that would have been outstanding if the potential shares had beenissued and if the additional common shares were dilutive.  All potentiallydilutive shares, 15,800,000 and 21,500,000 as of March 31, 2006 and 2005,respectively, have been excluded from diluted loss per share, as their effectwould be anti-dilutive for the periods then ended.

Software DevelopmentCosts

The Company capitalizessoftware development costs pursuant to SFAS No. 86, *"Accounting for theCosts of Computer Software to be Sold, Leased or Otherwise Marketed,"*after technological feasibility of the software is established, which isgenerally the completion of a working prototype and ends upon general releaseof the product to the Company's customers. All costs incurred in the researchand development of new software and costs incurred prior to the establishmentof technological feasibility are expensed as incurred. Capitalized costsconsist of direct costs and allocated overhead associated with the developmentof the software products.  Amortization of software development costs commenceswhen the product becomes available for general release to customers and iscomputed based on the straight-line method over the software's estimatedeconomic life of approximately three years.  The Company reviews theunamortized software development costs at each balance sheet date and, ifnecessary, will write down the balance to net realizable value if theunamortized costs exceed the net realizable value of the asset.

Inventories

Inventories consist primarily ofsupplies, forms and envelopes and are stated at the lower of cost (usingfirst-in, first-out method) or market.

Goodwill and Other IntangibleAssets

Goodwill represents the excess ofacquisition cost over the net assets acquired in a business combination and isnot amortized in accordance with SFAS No. 142, "*Goodwill and OtherIntangible Assets.*" The provisions of SFAS No. 142 require that theCompany allocate its goodwill to its various reporting units, determine thecarrying value of those businesses, and estimate the fair value of thereporting units so that a two-step goodwill impairment test can be performed. In the first step of the goodwill impairment test, the fair value of eachreporting unit is compared to its carrying value.  Management reviews, onan annual basis, the carrying value of goodwill in order to determine whetherimpairment has occurred.  Impairment is based on several factors includingthe Company's projection of future discounted operating cash flows. If animpairment of the carrying value were to be indicated by this review, theCompany would perform the second step of the goodwill impairment test in orderto determine the amount of goodwill impairment, if any. 

There were no changes in thecarrying amount of goodwill for the three months ended March 31, 2006.

Identifiable intangibles acquiredin connection with business acquisitions are recorded at their respective fairvalues (see Note 5).  Deferred income taxes have been recorded to theextent of differences between the fair value and the tax basis of the assetsacquired and liabilities assumed.  

Long-Lived Assets

In the event that facts andcircumstances indicate that equipment or other long-lived assets may beimpaired, an evaluation of recoverability would be performed.  If anevaluation is required, the estimated future discounted cash flows associatedwith the asset are compared to the asset's carrying amount to determine if animpairment charge is necessary.  The amount of long-lived assetimpairment, if any, is charged to operations in the period in which long-livedasset impairment is determined.  At March 31, 2006, management believes thereis no impairment of its long-lived assets.  There can be no assurance,however, that market conditions will not change or demand for the Company's productsor services will continue, which could result in impairment of long-livedassets in the future.

Stock-Based Compensation

At March 31, 2006, the Company hadtwo stock-based compensation plans. Prior to January 1, 2006, the Companyaccounted for these plans under the recognition and measurement provisions ofAccounting Principles Board ("APB") Opinion No. 25, *Accounting forStock Issued to Employees*, and related interpretations, as permitted bySFAS No. 123, *Accounting for Stock Based Compensation*. No stock-basedemployee compensation cost was recognized in the statement of operations forthe three months ended March 31, 2005, as all options granted under these planshad an exercise price equal to or greater than the market value of theunderlying common stock on the date of grant.

Effective January 1, 2006, on thefirst day of the Company's fiscal year 2006, the Company adopted the fair valuerecognition provisions of SFAS No. 123(R), *Share Based Payments*, usingthe modified-prospective transition method. Under this transition method,compensation cost recognized in the three months ended March 31, 2006 includes:(a) compensation cost for all share-based payments granted and not yet vestedprior to January 1, 2006, based on the grant date fair value estimated inaccordance with the original provisions of SFAS No. 123, and (b) compensationcost for all share-based payments granted subsequent to December 31, 2005 basedon the grant-date fair value estimated in accordance with the provisions ofSFAS No. 123(R). Results for prior periods have not been restated. Sincestock-based compensation expense recognized in the statement of operations forthe three months ended March 31, 2006 is based on awards ultimately expected tovest, the compensation expense has been reduced for estimated forfeitures. SFASNo. 123(R) requires forfeitures to be estimated at the time of grant andrevised, if necessary, in subsequent periods if actual forfeitures differ fromthose estimates. We estimated forfeitures to be 21% of the options issued basedon historical forfeiture experience.

The Company calculates stock-basedcompensation by estimating the fair value of each option using theBlack-Scholes option pricing model. The Company's determination of fair valueof share-based payment awards are made as of their respective dates of grantusing that option pricing model and is affected by the Company's stock price aswell as assumptions regarding a number of subjective variables. These variablesinclude, but are not limited to the Company's expected stock price volatilityover the term of the awards and actual and projected employee stock optionexercise behavior. The Black-Scholes option pricing model was developed for usein estimating the value of traded options that have no vesting or hedgingrestrictions and are fully transferable. Because the Company's employee stockoptions have certain characteristics that are significantly different fromtraded options, the existing valuation models may not provide an accuratemeasure of the fair value of the Company's employee stock options. Although thefair value of employee stock options is determined in accordance with SFAS No.123(R) using an option-pricing model, that value may not be indicative of thefair value observed in a willing buyer/willing seller market transaction. Thecalculated compensation cost is recognized on a straight-line basis over thevesting period of the option.

The Company has issued stockoptions to employees and directors whose only condition for vesting arecontinued employment or service during the related vesting period.  Optionawards are generally granted with an exercise price equal to the market priceof the Company's stock at the date of grant. Option awards generally have avesting schedule of three or five years and are exercisable over a 5 to 10 yearservice period.

Prior to the adoption of SFAS No.123(R), the Company presented all tax benefits of deductions resulting from theexercise of stock options as operating cash flows in the statement of cash flows. Statement 123(R) requires the cash flows resulting from the tax benefits resultingfrom tax deductions in excess of the compensation cost recognized for thoseoptions (excess tax benefit) to be classified as financing cash flows.  Asthere were no stock option exercised during the three month period ended March31, 2006, there was no excess tax benefit to the Company.

For the three months ended March31, 2006, the Company recognized compensation cost of $80,200 as a result ofthe adoption of SFAS No. 123(R).  This cost has been recorded as salariesexpense and is included in general and administrative expenses in theaccompanying statement of operations.  As a result of adopting SFAS No. 123(R)on January 1, 2006, the Company's net loss for the three months ended March 31,2006 was $273,389.  The Company's net loss for the three months ended March 31,2006 was $80,200 higher that it would have been if it had continued to accountfor share-based compensation under APB Opinion No. 25.  The Company's net lossper common share, basic and diluted, for the three months ended March 31, 2006was $0.  The Company's net loss per common share, basic and diluted, for thethree months ended March 31, 2006 would have been $0 if it had continued toaccount for share-based compensation under APB Opinion No. 25.

The following table illustrates theeffect on net income and net income per share for the three months ended March31, 2005 as if the Company had applied the fair value recognition provisions ofSFAS 123 to options granted under the Company's stock option plans. Forpurposes of this pro forma disclosure, the fair value of the options isestimated using the Black Scholes option-pricing model and amortized on astraight-line basis to expense over the options' vesting period:

|                                                   |  |  | Three Months   |
|---------------------------------------------------|--|--|----------------|
|                                                   |  |  | Ended          |
|                                                   |  |  | March 31, 2005 |
|                                                   |  |  | (Restated)     |
|                                                   |  |  |                |
| Net loss - as reported                            |  |  |  $        | (695,135) |
| Add:  Share-based employee compensation      |  |  |                |
|  expense included in net loss, net           |  |  |                |
|  of related tax effects - as reported        |  |  | --        |
| Deduct:  Share-based employee compensation   |  |  |                |
|  expense determined under fair value method, |  |  |                |
|  net of related tax effects - pro forma      |  |  | (135,000)      |
| Net loss - pro forma                              |  |  | (820,135)      |
|                                                   |  |  |                |
| Basic and diluted loss available to common        |  |  |                |
| stockholders per common share -  as reported      |  |  |  $        | (0.01) |
|                                                   |  |  |                |
| Basic and diluted loss available to common        |  |  |                |
| stockholders per common share -  pro forma        |  |  |  $        | (0.01) |
|                                                   |  |  |                |

*Share Option Plans*

The Company has in effect twoshare-based plans under which non-qualified and incentive stock options havebeen granted to employees, non-employees and board members. The Board ofDirectors determines eligibility, vesting schedules and exercise prices foroptions granted under the plans. We issue new shares to satisfy stock optionexercises and stock purchases under our share-based plans.

The number of options under the2002 Plan available for grant at March 31, 2006 was 31,695,532.  The number ofoptions under the 1997 Plan available for grant at March 31, 2006 was 2,134,798.

The fair value of each share-basedaward is estimated on the grant date using the Black Scholes option-pricingmodel. Expected volatilities are based on the historical volatility of theCompany's stock price. The expected term of options granted subsequent to theadoption of SFAS 123R is derived using the simplified method as defined in theSEC's Staff Accounting Bulletin 107, *Implementation of FASB 123R* and isderived from historical data on employee exercises and post-vesting employmenttermination behavior. The risk-free rate for periods within the contractuallife of the option is based on the U.S. Treasury interest rates in effect atthe time of grant. The fair value of options granted was estimated using thefollowing weighted-average assumptions:

|                          |  | Three Months Ended |
|--------------------------|--|--------------------|
|                          |  | March 31,          |
|                          |  | 2006               |  | 2005 |
|                          |  |                    |  |  |
| Expected term (in years) |  | 5.00               |  | 5.29 |
| Expected volatility      |  | 253%               |  | 209% |
| Risk-free interest rate  |  | 3.55%              |  | 3.80% |

A summary of option activity underthe stock option plans and changes during the three months ended March 31, 2006are presented below:

|                                               |  | March 31, 2006   |
|-----------------------------------------------|--|------------------|
|                                               |  |                  | Weighted-Average |  |
|                                               |  |                  |  | Remaining | Aggregate |
|                                               |  |                  | Exercise | Contractual | Intrinsic |
|                                               |  | Shares           | Price | Term (Years) | Value |
| Outstanding at December 31, 2005              |  | 27,184,670  |  $ | 0.22  |  |  |
| Granted                                       |  | 4,090,000   |  $ | 0.15  |  |  |
| Cancelled/forfeited                           |  | (105,000)        |  $ | 0.21  |  |  |
| Exercised                                     |  | -           |  |  |  |
| Outstanding at March 31, 2006                 |  | 31,169,670  |  $ | 0.21  | 5.25 |  $ | 52,500  |
| Options exercisable at March 31, 2006         |  | 22,415,528  |  $ | 0.26  | 4.73 |  $ | 52,500  |
| Vested and expected to vest at March 31, 2006 |  | 29,321,030       |  $ | 0.25 | 5.67 |  $ |   - |

The weighted average grant datefair value of options granted during the three months ended March 31, 2006 and2005, was $0.15 and $0.18, respectively.

As of March 31, 2006, totalunrecognized forfeiture adjusted compensation costs related to nonvested stockoptions was $983,981, which is expected to be recognized as an expense over aweighted average period of approximately 4.16 years.

Beneficial Conversion Feature 

The convertible features ofconvertible notes provides for a rate of conversion that is below market value(see Note 6). Such feature is normally characterized as a "beneficialconversion feature" ("BCF"). Pursuant to EITF No. 98-5 *"AccountingFor Convertible Securities with Beneficial Conversion Features or ContingentlyAdjustable Conversion Ratio"* and EITF No. 00-27,*"Applicationof EITF Issue No. 98-5 To Certain Convertible Instruments,"* therelative fair values of the BCFs have been recorded as a discount from the faceamount of the respective debt instrument. The Company is amortizing thediscount using the effective interest method through maturity of suchinstruments.

Advertising

The Company expenses alladvertising costs as incurred.  Advertising costs were $22,087 and $16,450 forthe three months ended March 31, 2006 and 2005, respectively.

Product and Technology Development

Product and technology developmentexpense includes personnel costs relating to developing the features, contentand functionality of MVI's internet-enabled fax services and web site, TBS'sgovernment accounting software, and Resolution's electronic form software.  Productand technology development costs are expensed as incurred.

Warranty Costs

The Company provides a limited 90day warranty on certain products sold. Estimated future warranty obligationsrelated to certain products and services are provided by charges to operationsin the period in which the related revenue is recognized. As of March 31, 2006,management of the Company determined that a warranty reserve was notnecessary.  In addition, the charges to expense during the three months ended March31, 2006 and 2005 were insignificant.

Derivative Instruments

In connection with the issuance ofcertain convertible notes payable (see Note 6), the terms of the notes payableprovided for a conversion of the notes into shares of the Company's commonstock at a rate which was determined to be variable. The Company determinedthat the variable conversion feature was an embedded derivative instrumentpursuant to SFAS No. 133, *"Accounting for Derivative Instruments andHedging Activities,"* as amended. The accounting treatment ofderivative financial instruments required that the Company record thederivatives and related warrants at their fair values as of the inception dateof the note agreements and at fair value as of each subsequent balance sheetdate. In addition, under the provisions of EITF Issue No. 00-19, *"Accountingfor Derivative Financial Instruments Indexed to, and Potentially Settled in, aCompany's Own Stock,"* as a result of entering into the noteagreements, the Company was required to classify all other non-employeewarrants as derivative liabilities and record them at their fair values at eachbalance sheet date. Any change in fair value was recorded as non-operating,non-cash income or expense at each balance sheet date. If the fair value of thederivatives was higher at the subsequent balance sheet date, the Companyrecorded a non-operating, non-cash charge. If the fair value of the derivativeswas lower at the subsequent balance sheet date, the Company recordednon-operating, non-cash income. 

During the three months ended March31, 2005, the Company recognized other income of  $5,323 related to recordingthe derivative liabilities at fair value. At March 31, 2006, there are noderivative liabilities since the related variable debt instruments were settledin full in fiscal 2005. At the settlement date, the remaining derivativeliabilities with a value of $7,302,899 were reclassified to additional paid-incapital. 

Warrant-related derivatives werevalued using the Black-Scholes Option Pricing Model with the followingassumptions during the three months ended March 31, 2005: dividend yield of 0%;average annual volatility of 209% ; and average risk free interest rates of3.8%.

Other Expense

Based on certain asserted claims ofpotential patent infringements from Catch Curve, Inc., a Delaware corporation ("CatchCurve"), the Company recorded an estimated expense of $325,000 at December 31, 2005related to potential settlement costs of the claims.    On May 12, 2006,the Company entered into a Patent License Agreement (the "License Agreement")with Catch Curve.  Pursuant to the License Agreement, Catch Curve granted theCompany a worldwide, non-exclusive, non-divisible, fully paid-up license to usecertain patented technology in connection with any facsimile products orservices made or sold by the Company or its subsidiaries.  The Company isobligated to make aggregate license payments of $600,000 over a period of up tothirty-two months beginning on May 12, 2006, at which time no further paymentsare required under the License Agreement.   The license payment amounts due ineach of the years ended December 31, 2006, 2007, and 2008 are $240,000,$180,000, and $180,000, respectively. The License Agreement stipulates that$350,000 of the total license fee is attributable to sales of products andservices prior to the date of the License Agreement.  The remainder of $250,000is attributable to sales of products and services subsequent to the date of theLicense Agreement. Accordingly, on May 12, 2006, the Company recorded anadditional $25,000 of other expense and recorded an intangible asset in theamount of $250,000.  The intangible asset will be amortized over 58 months, thecurrent remaining life of the patents covered by the License Agreement.

 

**5.**            **Acquisitions and IntangibleAssets**

TBS

On February 17, 2004, the Companypurchased 100% of the issued and outstanding capital stock of TBS from StephenA. Garner and James L. Campbell.

Resolutions

Effective April 1, 2005,VillageEDOCS purchased 100% of the issued and outstanding capital stock ofResolutions from its two shareholders, Alexander Riess and William Falcon.  Theacquisition closed on April 15, 2005.

The unaudited pro forma combinedhistorical results, as if Resolutions had been acquired January 1, 2005 areestimated as follows: 

|                         |  |  | Three Months Ended |
|-------------------------|--|--|--------------------|
|                         |  |  | March 31, 2005     |
| Net sales               |  |  |  $            | 1,847,369  |
| Net loss                |  |  |  $            | 1,352,297  |
| Weighted average common |  |  |                    |
| shares outstanding:     |  |  |                    |
| Basic and diluted       |  |  | 59,363,429    |
| Loss per share:         |  |  |                    |
| Basic and diluted       |  |  |  $            | (0.02) |

The unaudited pro forma informationhas been prepared for comparative purposes only and does not purport to beindicative of what would have occurred had the acquisition actually been madeat such date, nor is it necessarily indicative of future operating results.

*Acquisition of GoSolutions, Inc.*

OnFebruary 17, 2006, the Company and VEDO Merger Sub, Inc., a wholly ownedsubsidiary of the Company ("Merger Sub"), entered into a Merger Agreement (the"Merger Agreement") with GoSolutions, Inc. ("GSI") and certain GSIstockholders.  Pursuant to the Merger Agreement, upon the closing, GSI andMerger Sub merged with GSI continuing as the surviving entity, and the GSIstockholders were entitled to receive merger consideration of an aggregate of60,000,000 shares of the Company's common stock, subject to certain holdbacksand adjustments. 

On April7, 2006, the Company and the Merger Sub entered into an Amended Agreement andPlan of Reorganization (the "Amended Merger Agreement") with GoSolutions.  Thepurpose of the amendment was to extend to April 30, 2006 the date upon whichall closing conditions must be satisfied or waived.  

On May 2,2006 notice was received from the Florida Department of State that the Articlesand Plan of Merger in connection with the Merger of VEDO Merger Sub, Inc., awholly owned subsidiary of VillageEDOCS, with GSI, pursuant to which GSIcontinues as the surviving entity and a wholly-owned subsidiary of VillageEDOCS(the "Merger"), were accepted and effective as of May 1, 2006.

 Aftertaking into account a settlement agreement with a former GSI stockholder whohad dissented to the Merger (the "Zant Settlement Agreement") andremaining GSI dissenting shareholders, VillageEDOCS will issue approximately42,613,811 shares of its common stock as Merger consideration.  Approximately15,820,754 common shares of VillageEDOCS otherwise issuable in the Merger weresimultaneously redeemed as part of the Zant Settlement Agreement.  GSI shareholders,who would otherwise be entitled to approximately 1,565,435 shares ofVillageEDOCS common shares in connection with the Merger, have exerciseddissenters' rights, and accordingly these shares have not been issued as partof the Merger.  Such dissenting shareholders represent approximately 2.6% ofthe total Merger consideration otherwise issuable to the GSI shareholders. VillageEDOCS and GSI are in the preliminary stages of evaluating the merits ofthe dissenting shareholders position, and intend to comply with all legalrequirements under Florida law in connection with dissenting shareholders. VillageEDOCS believes that the terms and conditions of the Merger with GSI werefair and reasonable.  Furthermore, given that the total number of dissentingshares was relatively immaterial (approximately 2.6%), VillageEDOCS does notbelieve that the ultimate resolution of this matter will have a materialadverse effect on its financial position.

*Other Intangible Assets*

Other intangible assets consist ofthe following as of March 31, 2006: 

|  |                                                                |  | Estimated Useful  Life |   | Gross  Carrying | Accumulated  | Net Carrying  |
|--|----------------------------------------------------------------|--|------------------------|---|-----------------|--------------|---------------|
|  |                                                                |  | (Years)                |   | Amount          | Amortization | Amount        |
|  | TBS:                                                           |  |                        |   |                 |              |               |  |  |
|  |  Customer  list        |  | Ten                    | $ | 500,000    |  $      | (106,250)     |  $ | 393,750  |
|  |  Trade name                                               |  | Five                   |   | 50,000     | (21,250)     | 28,750   |
|  |                                                                |  |                        |   | 550,000    | (127,500)    | 422,500  |
|  | Resolutions:                                                   |  |                        |   |                 |              |               |
|  |  Customer relationships                                   |  | Ten                    |   | 570,000    | (57,000)     | 513,000  |
|  |  Software development                                     |  | Five                   |   | 112,382    | (16,434)     | 95,948   |
|  |  Trade name                                               |  | Five                   |   | 50,000     | (10,000)     | 40,000   |
|  |  Covenant not to compete                                  |  | Three                  |   | 26,100     | (8,700)      | 17,400   |
|  |                                                                |  |                        |   | 758,482    |              | (92,134)      |  | 666,348  |
|  |                                                                |  |                        |   |                 |              |               |  |  |
|  | Total other  intangible assets                                 |  |                        | $ | 1,308,482  |  $      | (219,634)     |  $ | 1,088,848 |
|  |                                                                |  |                        |   |                 |              |               |  |  |  |

Amortization of other intangibleassets was $37,838 and $22,319 during the three months ended March 31, 2006 and2005, respectively.  During the three months ended March 31, 2006, the Companycapitalized $9,401 of other intangible assets, all of which related to softwaredevelopment costs.

** **

** 6.        NotesPayable and Convertible Notes Payable to Related Parties**

Barron Partners, LP

On April 13, 2005, the Companyissued a convertible note payable to Barron Partners, LP ("Barron")in the principal amount of $800,000 (the "Convertible Note") whichwas converted into 16,000,000 shares of the Company's Series A preferred stockon September 30, 2005.

In connection with the ConvertibleNote, the Company issued Barron a warrant ("Warrant A") to purchaseup to 32,000,000 shares of its common stock at $0.10 per share (subject toadjustment, as defined).  In addition, the Company issued Barron a warrant("Warrant B") to purchase up to 8,000,000 shares of its common stockat $0.25 per share (subject to adjustment, as defined).  Warrants A and Bvested upon grant and are exercisable through April 2010.  The warrants containcertain cashless exercise and anti-dilution provisions, as defined.

C. Alan and Joan P. Williams

On February 17, 2004, the Companyborrowed $1,700,000 from C. Alan and Joan P. Williams and issued a convertiblepromissory note, bearing interest at 10 percent per annum.  During 2005, allbut $65,000 of the principal amount due pursuant to this note was convertedinto shares of the Company's common stock.   The note and accrued interest aredue at the earlier of one of three events: 1) October 31, 2007; 2) acquisitionof a controlling interest in the Company by a third party; or 3) the Companyachieves equity financing of a minimum of $3,000,000.  Effective April 14,2005, pursuant to an amendment to the note, the conversion price was fixed at$0.14 per share.  As an incentive for Mr. and Mrs. Williams to provide theloan, the Company issued them a warrant to purchase 5,000,000 shares of theCompany's restricted common stock at $0.10 per share exercisable until February17, 2009.  In connection with the issuance of the note, the Company recorded adebt discount of $730,000, consisting of an embedded put option of $280,000 andthe fair value of the warrant of $450,000, which were recorded as derivativeliabilities upon note issuance and subsequently reclassified to additionalpaid-in capital (see Note 4).  The Company is amortizing the discount using theeffective interest method through October 31, 2007.

At March 31, 2006, the amount owedby the Company to the Williams pursuant to the unpaid balance of theconvertible promissory note payable was $65,000 in principal and $96,034 inunpaid interest.

James L. Campbell and Stephen A.Garner

In connection with the acquisitionof TBS, the Company issued a $300,000 convertible promissory note to Stephen A.Garner and a $300,000 convertible promissory note to James L. Campbell (the"TBS Notes").  Each of the TBS Notes bears interest at 5 percent perannum and is due and payable in three equal annual installments of $100,000,with the first installment paid in February 2005, the second installment paidin March 2006 and one additional installment due on February 17, 2007.  The TBSNotes are secured by a Stock Pledge Agreement and a Security Agreement.  Inaddition, Messrs. Garner and Campbell have the right to convert the balance ofunpaid principal and interest of the TBS Notes into shares of the Company'scommon stock at the rate of 9.8 shares of common stock for each $1.00 ofprincipal and interest to be converted.

Convertible notes payable andaccrued interest payable to related parties consists of the following at March31, 2006:

| Convertible note payable and  accrued interest to Williams (net of debt discount of $23,240) |   |  $       | 137,794  |
|----------------------------------------------------------------------------------------------|--------|---------------|---------------|
| Convertible notes payable to  former TBS shareholders                                        |        | 200,000  |
|                                                                                              |        | 337,794  |
| Less: current portion                                                                        |        | (200,000)     |
|                                                                                              |   |  $       | 137,794  |

Alexander Riess and WilliamFalcon

In connection with the acquisitionof Resolutions, the Company issued promissory notes in the amount of $120,000and $80,000 to Alexander Riess and William Falcon, respectively.  The notes boreinterest at 5% per annum and were paid in full in February 2006.

Also in connection with theacquisition on Resolutions, Messrs. Riess and Falcon have loaned the Company $60,000and $40,000, respectively, as of February 28, 2006.  As of March 31, 2006, theaggregate balance of these shareholder loans was $90,000.  Subject to theacquisition agreement, the Company will repay the principal amount of the loanstogether with accrued interest at a rate of 7.5 percent per annum over aten-month period that began on March 1, 2006.

At March 31, 2006, the balance ofthese related party notes (including the $30,000 in notes payable assumed inthe acquisition of Resolutions) was $120,000.

Interest Expense

Interest expense recognized on allthe notes payable and convertible notes payable to related parties was $23,362and $299,300 during the three months ended March 31, 2006 and 2005,respectively.

 

**7.         Stockholders'Equity**

a.       Preferred Stock

On May 20, 2005, stockholdersholding shares representing 74% of the votes entitled to be cast at a meetingof the Company's stockholders consented in writing to a proposal to amend theCompany's articles of incorporation to create and establish a series ofpreferred stock of the Company in connection with a private placement of theCompany's $800,000 convertible promissory note. The amendment authorized48,000,000 shares of Series A Convertible Preferred Stock, par value $0.001("Series A Preferred Stock").  Each share of Series A Preferred Stockshall be convertible into one share of Common Stock.  Series A Preferred Stockwill be immediately convertible into common stock, however, the Company isprohibited from effecting any conversion of the Series A Preferred Stock, andthe holder shall not have the right to convert any portion of the Series APreferred Stock, to the extent that after giving effect to such conversion, theholder (together with the holder's affiliates) would beneficially own in excessof 4.99% of the number of shares of common stock outstanding immediately aftergiving effect to the conversion.  The foregoing restriction may be waived (a)upon sixty-one days prior notice from the holder to the Company and (b) shallnot apply in the event of a sale of substantially all of the assets orsecurities of the Company, a merger involving the corporation or anunderwritten public offering of the Company's common stock.  No dividends shallbe payable with respect to the Series A Preferred Stock.  The Series APreferred Stock shall have no voting rights, except with respect to changes inthe powers, preferences or rights of the Preferred Stock.   The liquidationpreference of the Series A Preferred Stock is equal to $0.05 per share (the"Liquidation Value").  Upon liquidation of the Company, holders of Series APreferred Shares will be paid the Liquidation Value prior to distribution ofany amounts to holders of our common stock.  

On March 8, 2006, the Companyaccepted a notice from Barron Partners LP of its intent to convert 2,500,000shares of the Company's Series A Preferred Stock into 2,500,000 shares of theCompany's common stock.

b.       CommonStock 

On January 9, 2006, the Companyfiled a Certificate of Amendment of Articles of Incorporation with theSecretary of State of the State of California in order to increase theauthorized number of shares of common stock of the Company from 250,000,000 to400,000,000. The shareholders holding shares representing 70% of the votesentitled to be cast at a meeting of the Company's stockholders consented inwriting to the proposed actions.  The Company's Board of Directors approvedthese actions on December 6, 2005 and recommended that the Articles ofIncorporation and the Incentive Plan be amended to reflect the above action. The Secretary of State accepted the Certificate of Amendment on January 19,2006 with an effective date of January 9, 2006.

c.       Stock Options

During the three months ended March31, 2006, the Company granted to its employees options to purchase shares ofits common stock under the 2002 Plan as follows:  4,000,000 shares at $0.15 pershare and 90,000 shares at $0.18 per share.

d.       Warrants

There was no warrant activityduring the three months ended March 31, 2006.

**8.           Lossper Share**

              Basicand diluted loss per common share is computed as follows:

|  |                                                                                                                     | Three Months Ended |
|--|---------------------------------------------------------------------------------------------------------------------|--------------------|
|  |                                                                                                                     | March 31,          | March 31, |
|  |                                                                                                                     | 2006               | 2005 |
|  |                                                                                                                     |                    | (Restated) |
|  |                                                                                                                     | ===========        | =========== |
|  | Numerator for basic and    diluted loss per     common share:                         |                    |  |
|  |    Net loss available to            common stockholders |  $            | (273,389) |  $ | (695,135) |
|  |                                                                                                                     | ===========        | =========== |
|  |                                                                                                                     |                    |  |
|  | Denominator for basic   and diluted loss per    common share:                                   |                    |  |
|  |                                                                                                                     |                    |
|  |  Weighted average      common  shares      outstanding       | 99,813,513         | 59,363,429 |
|  |                                                                                                                     | ===========        | =========== |
|  | Net loss per common     share available to    common stockholders                     |  $            | --    |  $ |  (0.01)  |
|  |                                                                                                                     | ===========        | =========== |
|  |                                                                                                                     |                    |

 

**9.         Commitmentsand Contingencies**

Leases

The Company leases certain property and equipmentunder operating lease agreements (including a related party lease - see Note 11)which expire on various dates through 2009 and provide for monthly leasepayments ranging from $28 to $7,505. 

Litigation

The Company is, from time to time, involved invarious legal and other proceedings that arise in the ordinary course of operatingits business. In the opinion of management, the amount of ultimate liability,if any, with respect to these actions will not materially affect the consolidatedfinancial position or results of operations of the Company. 

Consulting and Employee Agreements

The Company has entered into a variety ofconsulting and employee agreements for services to be provided to the Companyin the ordinary course of business.  These agreements call for minimum salarylevels and/or option grants and/or common share issuances and various paymentsupon performance of services and/or termination of the agreements (except forcause).

Indemnities and Guarantees

During the normal course of business, the Companyhas made certain indemnities and guarantees under which it may be required tomake payments in relation to certain transactions.  The Company indemnifies itsdirectors, officers, employees and agents to the maximum extent permitted underthe laws of the State of California and the State of Georgia.  Theseindemnities include certain agreements with the Company's officers under whichthe Company may be required to indemnify such person for liabilities arisingout of their employment relationship.  In connection with its facility leases,the Company has indemnified its lessors for certain claims arising from the useof the facilities.  In connection with the Company's acquisition of TBS, theparties have agreed to indemnify each other from claims relating to theacquisition agreement to a maximum of $1,500,000 except in the event of fraud,willful misconduct, or breaches of certain representations and warrantiescontained in the agreement.  In connection with the Company's acquisition ofResolutions, the parties have agreed to indemnify each other from claimsrelating to the acquisition agreement.  The duration of these indemnities andguarantees varies and, in certain cases, is indefinite.  The majority of theseindemnities and guarantees do not provide for any limitation of the maximumpotential future payments the Company could be obligated to make. Historically, the Company has not been obligated to make significant paymentsfor these obligations and no liabilities have been recorded for theseindemnities and guarantees in the accompanying consolidated balance sheet.

**10.       SegmentReporting**

The Company's operationsare classified into four principal reportable segments that provide differentproducts or services.  Separate management of each segment is required becauseeach business unit is subject to different marketing, production, andtechnology strategies.  During the three months ended March 31, 2006, theCompany operated in the following four reportable segments: 

> 
(a)  Electronic document delivery services,(b)  Government accounting products and services,(c)  Electronic forms, and(d)  Corporate.

The Company evaluatesperformance and allocates resources based upon operating income.  Theaccounting policies of the reportable segments are the same as those describedin the summary of accounting policies.  Inter-segment sales are eliminated uponconsolidation.

The following tablesummarizes segment asset and operating balances by reportable segment, has beenprepared in accordance with the internal accounting policies, and may not bepresented in accordance with generally accepted accounting principles:

|  |                                             |  |  |                       |                    |         |
|--|---------------------------------------------|--|--|-----------------------|--------------------|---------|
|  |                                             |  |  | Three Months Ended  / | Three Months Ended |         |
|  |                                             |  |  | As of                 | March 31, 2005     |         |
|  |                                             |  |  | March 31, 2006        | (Restated)         |         |
|  |                                             |  |  |                       |                    |         |
|  | Net revenue from external customers:        |  |  |                       |                    |         |
|  |                                             |  |  |                       |                    |         |
|  | Electronic document delivery services       |  |  |  $               | 738,632       |  $ | 773,620  |  |
|  | Government accounting products and services |  |  | 887,771          | 638,362       |         |
|  | Electronic forms                            |  |  | 441,436          | -             |         |
|  | Corporate                                   |  |  | -                | -             |         |
|  | Total net revenue from external  customers  |  |  |  $               | 2,067,839     |  $ | 1,411,982  |  |
|  |                                             |  |  |                       |                    |         |
|  | Operating income (loss):                    |  |  |                       |                    |         |
|  |                                             |  |  |                       |                    |         |
|  | Electronic document delivery services       |  |  |  $               | 182,377       |  $ | 90,691  |  |
|  | Government accounting products and services |  |  | 17,221           | (207,545)          |         |
|  | Electronic forms                            |  |  | (21,802)              | -             |         |
|  | Corporate                                   |  |  | (424,469)             | (188,283)          |         |
|  | Total operating loss                        |  |  |  $               | (246,673)          |  $ | (305,137) |  |
|  |                                             |  |  |                       |                    |         |
|  | Depreciation and amortization:              |  |  |                       |                    |         |
|  |                                             |  |  |                       |                    |         |
|  | Electronic document delivery services       |  |  |  $               | 8,498         |  $ | 29,374  |  |
|  | Government accounting products and services |  |  | 37,345           | 22,186        |         |
|  | Electronic forms                            |  |  | 36,918           | -             |         |
|  | Corporate                                   |  |  | -                | -             |         |
|  | Total depreciation and  amortization        |  |  |  $               | 82,761        |  $ | 51,560  |  |
|  |                                             |  |  |                       |                    |         |
|  | Interest expense, net of interest income:   |  |  |                       |                    |         |
|  |                                             |  |  |                       |                    |         |
|  | Electronic document delivery services       |  |  |  $               | 1,616         |  $ | 7,885  |  |
|  | Government accounting products and services |  |  | -                | 933           |         |
|  | Electronic forms                            |  |  | 347              | -             |         |
|  | Corporate                                   |  |  | 21,345           | 382,303       |         |
|  | Total interest expense, net                 |  |  |  $               | 23,308        |  $ | 391,121  |  |
|  |                                             |  |  |                       |                    |         |
|  | Net income (loss):                          |  |  |                       |                    |         |
|  |                                             |  |  |                       |                    |         |
|  | Electronic document delivery services       |  |  |  $               | 181,353       |  $ | 82,806  |  |
|  | Government accounting products and services |  |  | 17,221           | (208,478)          |         |
|  | Electronic forms                            |  |  | (22,149)              | -             |         |
|  | Corporate                                   |  |  | (449,814)             | (569,463)          |         |
|  | Total net loss                              |  |  |  $               | (273,389)          |  $ | (695,135) |  |
|  |                                             |  |  |                       |                    |         |
|  |                                             |  |  |                       |                    |         |
|  |                                             |  |  |                       |                    |         |
|  | Identifiable assets:                        |  |  |                       |                    |         |
|  |                                             |  |  |                       |                    |         |
|  | Electronic document delivery services       |  |  |  $               | 656,126       |         |  |
|  | Government accounting products and services |  |  | 3,418,588        |                    |         |
|  | Electronic forms                            |  |  | 4,108,119        |                    |         |
|  | Corporate                                   |  |  | 60,005           |                    |         |
|  | Total identifiable assets                   |  |  |  $               | 8,242,838     |         |  |
|  |                                             |  |  |                       |                    |         |
|  | Capital expenditures:                       |  |  |                       |                    |         |
|  |                                             |  |  |                       |                    |         |
|  | Electronic document delivery services       |  |  |  $               | 15,412        |  $ | 3,438  |  |
|  | Government accounting products and services |  |  | -                | 1,240         |         |
|  | Electronic forms                            |  |  | 9,401            | -             |         |
|  | Corporate                                   |  |  | -                | -             |         |
|  | Total capital expenditures                  |  |  |  $               | 24,813        |  $ | 4,678  |  |
|  |                                             |  |  |                       |                    |         |
|  |                                             |  |  |                       |                    |         |

**11.           RelatedParty Transactions**

The Company has borrowed significantly from relatedparties, issued a significant number of options and warrants to relatedparties, and issued a significant number of shares of its common stock torelated parties upon conversion of convertible promissory notes payable asdescribed more fully in Notes 6 and 7.  

TBS has a related party operating lease withPerimeter Center Partners for the rental of the land and building occupied byTBS.  The lease commenced on February 1, 2004 and has a term of five years, withmonthly payments of $6,200.  The Company has executed a Guaranty with respectto the lease.  Perimeter Center Partners is owned by Stephen A. Garner andJames L. Campbell, who are significant employees of the Company and the formerowners of TBS.

 

**12.           SubsequentEvents**

On May 1, 2006 and in connection with theacquisition of TBS, the Company issued, 1,100,000 shares of its restrictedcommon stock to each of James L. Campbell and Stephen A. Garner, who arerelated parties, pursuant to the acquisition agreement.  The additional2,200,000 shares of the Company's stock earned by Messrs. Campbell and Garnerwere valued at $0.11 per share, the closing bid price of the Company's commonstock on May 1, 2006, and will be recorded as additional purchase price.

----

**ITEM 2 - MANAGEMENT'SDISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS**

**IMPORTANT NOTIFICATIONS**

*This Quarterly Report on Form 10-QSB includes forward-lookingstatements within the meaning of Section 21E of the Securities Exchange Act of1934, as amended. All statements that do not directly and exclusively relate tohistorical facts constitute forward-looking statements within the meaning ofthe Private Securities Litigation Reform Act of 1995.  You are cautioned not toput undue reliance on any forward-looking statements.  For these statements, weclaim the protection of the safe harbor for forward-looking statementscontained in Section 21E of the Exchange Act.  For important additional andspecific information regarding these statements, we strongly urge you to referto the caption below entitled "**CAUTIONARY INFORMATION ABOUTFORWARD-LOOKING STATEMENTS" and the caption entitled "CERTAIN FACTORSTHAT MAY AFFECT FUTURE RESULTS" which can be found in Item 6. Management'sDiscussion and Analysis or Plan of Operations of the Annual Report on Form10-KSB filed with the U.S. Securities and Exchange Commission on April 14,2006.*

** **

The Company's Internetwebsite address is www.villageedocs.com.  The Company's annual reports on Form10-KSB, quarterly reports on Form 10-QSB, current reports on 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.

** **

** **

** **

**INTRODUCTION**

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

-        BusinessOverview
-        CriticalAccounting Policies
-        Resultsof Operations
-        Liquidityand Capital Resources
-        CautionaryInformation About Forward-Looking Statements, and
-        RecentAccounting Pronouncements

MD&A is provided as a supplement to, and should be read inconjunction with, the unaudited consolidated balance sheet as of March 31, 2006,and the unaudited consolidated statements of operations for the three monthsended March 31, 2006 and 2005 (restated), the unaudited consolidated statementsof cash flows for the three months ended March 31, 2006 and 2005 (restated),and the related notes thereto as well as the audited consolidated financialstatements of the Company for the years ended December 31, 2005 and 2004(restated), included in the Company's Annual Report on Form 10-KSB filed withthe Securities and Exchange Commission on April 14, 2006.

In MD&A, we use "we," "our," "us,""VillageEDOCS," and "the Company" to refer to VillageEDOCSand its wholly owned subsidiaries, unless the context requires otherwise. Amounts and percents in tables may not total due to rounding.  This discussioncontains forward-looking statements based upon current expectations thatinvolve risks and uncertainties, such as our plans, objectives, expectationsand intentions. The Company cautions readers that important facts and factorsdescribed in MD&A and elsewhere in this document sometimes have affected,and in the future could affect our actual results, and could cause our actualresults during 2006 and beyond to differ materially from those expressed in anyforward-looking statements made by, or on behalf of, the Company. 

As reported in the Report of Independent Registered PublicAccounting Firm on our December 31, 2005 consolidated financial statements, theCompany has suffered recurring losses from operations and has a working capitaldeficit that raises substantial doubt about our ability to continue as a goingconcern. 

On March 28, 2006, the Company's Board of Directors determined that theCompany will be required to restate and reissue its annual report for the yearended December 31, 2004, as well as the quarterly reports for the quartersended March 31, 2005, June 30, 2005 and September 30, 2005.  The unauditedconsolidated financial statements included in this quarterly report reflect alladjustments we have made to our audited and unaudited consolidated financialstatements for the aforementioned periods as a result of the restatements. Specifically, we strongly encourage you refer to Note 13, *Restatement ofPreviously Issued Financial Statements,* in the audited consolidatedfinancial statements accompanying our Annual Report for the year ended December31, 2005, and in Note 2 in the accompanying unaudited consolidated financialstatements.  We have used the restated amounts in the comparative discussionsfor the three months ended March 31, 2006 and 2005 that follow.

Effective April 1, 2005, we acquired Resolutions.  This acquisition hascaused our results of operations during the three months ended March 31, 2006to vary significantly from those reported for the 2005 quarter due to theconsolidation of Resolutions during the three months ended March 31, 2006.

Effective May 1, 2006, the Company acquired GoSolutions, Inc. ("GSI"). Accordingly, we expect our results of operations for the second, third, andfourth quarters of 2006 to vary significantly from those reported in therespective 2005 periods.  Please refer to the discussion below under thecaption entitled *Liquidity and Capital Resources*.

**BUSINESS OVERVIEW**

VillageEDOCS is incorporated in the State of California andhas been in business since 1995.  We conduct our business through three whollyowned subsidiaries.  MessageVision operates our Internet based documentdelivery services.  TBS operates our government accounting products andservices business.  Resolutions, which we acquired effective April 1, 2005,operates our e-forms, archiving, imaging, and workflow services.

A core component of our mission is to provide solutions thatfacilitate the movement of business information between business enterprises,using a dynamic and diverse set of delivery methods and content formats.  Ourproducts and services have been designed to help enterprises meet variouscommunications challenges, including the need to:

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

Our target markets include Financial Services, Healthcare,Manufacturing, and Local Government, and we serve approximately 1,600 activeclients.

In 2006, we have made progress toward achieving ourstrategic objectives by:

- acquiring GSI, a company with strategic products and     services;
- increasing first quarter 2006 consolidated net revenue by 46% due to a 39% increase in our TBS subsidiary and due to the consolidation of the net revenue of Resolutions during the first quarter of 2006; and
- reducing net loss for the quarter ended March 31, 2006 by     62% compared to the 2005 quarter.

Our current and future growthstrategy is focused on acquiring intellectual and technology assets thatimprove our ability to take a client's unstructured content and documents anddeliver it to the other party through the method preferred by each party,presenting the content in a manner that surpasses our client's goals.  Inessence, we strive to bring a Business Process Management discipline to theirinformation.  We believe that if we are successful in executing this strategy,our clients will enjoy improved compliance, collaboration, cost containment,and superior continuity of business processes.

Our ultimate vision is to become abusiness process management/workflow service that provides competency andfunctionality in the following areas: Web Content Management, Digital AssetManagement, Email Management,  Records Management, Documentation Management,Information Indexing, Categorization/Taxonomy, Recognition, Document Imaging,Form Processing, Scanning, Collaboration, Repositories, Storage, Long TermArchival, Content Integration, Search and Retrieval, Content Syndication,Localization and Personalization, and Publication (paper or electronic).

We intend to continue our focuson obtaining growth from sales of higher margin products and services at MVI, TBS,and Resolutions and by acquiring companies that consistently generate netincome and positive cash flows.  We believe that this strategy offers thebest opportunity for our operations to continue to generate positive operatingincome and cash flows from operations and to achieve net income. 

Our acquisition strategy isfocused in two areas: service infrastructure and vertical market silo.  Theservice infrastructure area is our focus to acquire enterprises that fulfillour identified strategic technological core competencies.  The vertical marketsilo acquisition strategy is to acquire companies that assist us in penetratingour target market segments of financial services, healthcare, manufacturing,and local government.

We intend to continue ourstrategy of cost containment.  Should additional growth capital becomeavailable during 2006, we intend to direct the capital toward increasing salesand marketing while holding down costs for general and administrative as wellas product and technology expenses.

During the remainder 2006, we will actively seek additionalfinancing by issuing equity or obtaining a combination of equity and debtfinancing from new shareholders and/or lenders.  If the planned financings areobtained, we believe the Company will generate adequate cash to sustainoperations at current levels until it begins to operate profitably on aconsistent, month-over-month basis. We continue to caution that there can be noassurance that funding will be available on acceptable terms, if at all, orthat any such funds we raise would enable us to maintain profitable operations.

**CriticalAccounting Policies**

In preparing our consolidated financial statements, we makeestimates, assumptions and judgments that can have a significant effect on ourrevenues, income/loss from operations, and net income/net loss, as well as onthe value of certain assets on our consolidated 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 number of accounting policies, methods and estimatesaffecting our consolidated financial statements, areas that are particularlysignificant include revenue recognition, stock-based compensation, valuation ofderivative financial instruments, and goodwill and long-lived assets.  Inaddition, please refer to Note 4 to the accompanying consolidated financialstatements for further discussion of our significant accounting policies.

**Revenue Recognition**.  The Company recognizesrevenue in accordance with Staff Accounting Bulletin ("SAB") No. 101,"*Revenue Recognition in Financial Statements*", as revised bySAB No. 104.  As such, the Company recognizes revenue when persuasive evidenceof an arrangement exists, title transfer has occurred, or the services havebeen performed, the price is fixed or readily determinable and collectibilityis probable.  Sales are recorded net of sales discounts.  

The Company has adopted Statement of Position ("SOP") 97-2,"*Software Revenue Recognition*," as well as SOP 98-9, "*Modificationof SOP 97-2, Software Revenue Recognition with Respect to Certain Transactions*." The SOPs generally require revenue earned on software arrangements involvingmultiple elements to be allocated to each element based on the relative fairmarket values of each of the elements. The fair value of an element must bebased on vendor-specific objective evidence ("VSOE") of fair value. Softwarelicense revenue generated by TBS and Resolutions allocated to a softwareproduct is recognized upon delivery of the product, or deferred and recognizedin future periods to the extent that an arrangement includes one or moreelements that are to be delivered at a future date and for which VSOE has notbeen established.  Maintenance and support revenue is recognized ratablyover the maintenance term.  First-year maintenance typically is sold withthe related software license and renewed on an annual basis thereafter.Estimated fair values of ongoing maintenance and support obligations are basedon separate sales of renewals to other customers or upon renewal rates quotedin the contracts. For such arrangements with multiple obligations, the Companyallocates revenue to each component of the arrangement based on the estimatedfair value of the undelivered elements. Fair value of services, such asconsulting or training, is based upon separate sales of these services. TheCompany at times may enter into multiple-customer contracts in which theCompany allocates revenue based on the number of specified users at eachcustomer, and recognizes revenue upon customer acceptance and satisfying theother applicable conditions of the above described accounting policy. 

Services revenue is recognized as the service is performedassuming that sufficient evidence exists to estimate the fair value of theservices.  Consulting and training services are billed based oncontractual hourly rates and revenues are recognized as the services areperformed. Consulting services primarily consist of implementation servicesrelated to the installation of the Company's products which do not requiresignificant customization to or modification of the underlying software code. 

Significant management judgments and estimates must be madein connection with determination of the revenue to be recognized in anyaccounting period. If the Company made different judgments or utilizeddifferent estimates for any period, material differences in the amount andtiming of revenue recognized could result. 

**Stock-Based Compensation**.  On January 1, 2006, we adopted Statement ofFinancial Accounting Standards No. 123 (revised 2004), "*Share-Based Payment*,"("SFAS 123(R)") which requires the measurement and recognition of compensationexpense for all share-based payment awards made to our employees and directorsbased on estimated fair values. We adopted SFAS 123(R) using the modifiedprospective transaction method, which requires the application of theaccounting standard as of January 1, 2006, the first day of our fiscal year2006. Our financial statements as of and for the three months ended March 31,2006 reflect the impact of SFAS 123(R). In accordance with the modifiedprospective transition method, our financial statements for prior periods havenot been restated to reflect, and do not include, the impact of SFAS 123(R).The value of the portion of the award that is ultimately expected to vest isrecognized as an expense over the requisite service periods in our statement ofoperations. Prior to the adoption of SFAS 123(R), we accounted for stock-basedawards to employees and directors using the intrinsic value method inaccordance with APB 25 as allowed under Statement of Financial AccountingStandards No. 123, *Accounting for Stock-Based Compensation* (SFAS 123).As stock-based compensation expense recognized in the statement of operationsfor the first quarter of fiscal 2006 is based on awards ultimately expected tovest, it has been reduced for estimated forfeitures. SFAS 123(R) requiresforfeitures to be estimated at the time of grant and revised, if necessary, insubsequent periods if actual forfeitures differ from those estimated. Weestimated forfeitures to be 21%.

Stock-based compensationexpense recognized under SFAS 123(R) for the three months ended March 31, 2006was $80,200, determined by the Black-Scholes valuation model, and consisting ofstock-based compensation expense related to employee stock options. See Note 4to the unaudited consolidated financial statements for additional information.

**Software Development Costs.**  The Companycapitalizes software development costs pursuant to SFAS No. 86, "*Accountingfor the Costs of Computer Software to be Sold, Leased or Otherwise Marketed*,"after technological feasibility of the software is established, which isgenerally the completion of a working prototype and ends upon general releaseof the product to the Company's customers. All costs incurred in the researchand development of new software and costs incurred prior to the establishmentof technological feasibility are expensed as incurred. Capitalized costsconsist of direct costs and allocated overhead associated with the developmentof the software products.  Amortization of software development costs commenceswhen the product becomes available for general release to customers and iscomputed based on the straight-line method over the software's estimatedeconomic life of approximately three years.  The Company reviews theunamortized software development costs at each balance sheet date and, ifnecessary, will write down the balance to net realizable value if theunamortized costs exceed the net realizable value of the asset.

**Goodwill and Other Intangible Assets**.  Inaccordance with SFAS No. 141, "*Business Combinations*," we record theassets acquired and liabilities assumed in business combinations at theirrespective fair values at the date of acquisition, with any excess purchaseprice recorded as goodwill. Because of the expertise required to valueintangible assets, we typically engage independent valuation specialists toassist us in determining those values. Valuation of intangible assets entailssignificant estimates and assumptions including, but not limited to, estimatingfuture cash flows from product sales, developing appropriate discount rates,continuation of customer relationships and renewal of customer contracts, andapproximating the useful lives of the intangible assets acquired. To the extentactual results differ from these estimates, our future results of operationsmay be affected. The Company has adopted SFAS No. 142 "*Goodwill andOther Intangible Assets.*"  Under SFAS No. 142, goodwill and otherintangible assets with indefinite lives are no longer subject to periodicamortization but are instead reviewed annually for impairment, or morefrequently if impairment indicators arise.

We believe that the accounting estimates related toimpairment of goodwill and other intangible assets are "criticalaccounting estimates" because (1) they are highly susceptible to changefrom period to period because they requires company management to makeassumptions about future sales and cost of sales, and (2) the impact thatrecognizing an impairment would have on the assets reported on our balancesheet as well as our net loss would be material.  Management's assumptionsabout future sales prices and future sales volumes have fluctuated in the pastand are expected to continue to do so.

In estimating future sales, we use our internal budgets.  Wedevelop our budgets based on recent sales data for existing products andservices, planned timing of new product and service launches, and customercommitments related to existing and newly developed products and services.

In each of the last two years, we have used the services ofindependent valuation firms to assist us with identifying and valuingintangible assets and testing the reported carrying value of our goodwill andintangible assets.  In each year we determined that, based on our assumptionsas well as the impairment analysis conducted by the valuation firm, that thesum of the expected future discounted cash flows exceeded the reported carryingvalue and therefore we did not recognize an impairment loss.

If we had been required to recognize an impairment loss onour goodwill and intangible assets, it would likely not have materiallyaffected our liquidity and capital resources because we are not subject to anyrestrictive covenants related to the net income we report in our financialstatements.

**Long-Lived Assets**.  The Company's managementassesses the recoverability of its long-lived assets by determining whether thedepreciation and amortization of long-lived assets over their remaining livescan be recovered through projected undiscounted future cash flows.  Theamount of long-lived asset impairment, if any, is measured based on fair valueand is charged to operations in the period in which long-lived asset impairmentis determined by management. 

**Beneficial Conversion Feature**.  Theconvertible feature of certain of our convertible notes provides for a rate ofconversion that is below market value. Such feature is normally characterizedas a "beneficial conversion feature" ("BCF"). Pursuant toEmerging Issues Task Force Issue No. 98-5 ("EITF 98-5"), "*AccountingFor Convertible Securities with Beneficial Conversion Features or ContingentlyAdjustable Conversion Ratio*" and Emerging Issues Task Force Issue No.00-27,"*Application of EITF Issue No. 98-5 To Certain ConvertibleInstruments,*" the relative fair values of the BCFs have been recordedas a discount from the face amount of the respective debt instrument. TheCompany is amortizing the discount using the effective interest method throughmaturity of such instruments. The Company will record the correspondingunamortized debt discount related to the BCF and warrants as interest expensewhen the related instrument is converted into the Company's common stock.

** **

**RESULTS OF OPERATIONS**

##### Three Months Ended March 31, 2006 Compared to Three Months Ended March 31,2005 (restated)

Net revenue from external customers forthe three months ended March 31, 2006 was $2,067,839, a 46% increase over net revenuefor the prior year quarter of $1,411,982.

For the three months ended March 31, 2006, TBS generated 43%of the Company's net revenue, MVI generated 36% of the Company's net revenue, andResolutions generated 21% of the Company's net revenue.  During the threemonths ended March 31, 2005, TBS and MVI generated 45% and 55% of the Company'snet revenue, respectively.  Resolutions was acquired effective April 1, 2005and, accordingly, did not contribute to the Company's net revenue for the firstquarter of 2005.

 

The following is a comparison of the components ofconsolidated net revenue from external customers:

|                                             |  | Three Months   | Three Months    |               |                 |
|---------------------------------------------|--|----------------|-----------------|---------------|-----------------|
|                                             |  | Ended          | Ended           | Variance      |
|                                             |  | March 31, 2006 | March 31, 2005  | Amount        | Percent         |
|                                             |  |                |                 |               |                 |
| Net revenue from external customers:        |  |                |                 |               |                 |
|                                             |  |                |                 |               |                 |
| Electronic document delivery services       |  |  $        | 738,632    |  $       | 773,620    |  $ | (34,988) | (5%) |
| Government accounting products and services |  | 887,771   | 638,362    | 249,409  | 39%             |
| Electronic forms                            |  | 441,436   | -          | 441,436  | 100%            |
| Corporate                                   |  | -         | -          | -        | -               |
| Total net revenue from external  customers  |  |  $        | 2,067,839  |  $       | 1,411,982  |  $ | 655,857  | 46% |

The increase of $655,857 in the 2006 quarter resulted froman increase of $249,409 (39%) in revenue from TBS that resulted from newprinting opportunities as well as the addition of $441,436 in sales fromResolutions, as offset by a $34,988 (5%) decrease in revenue from MVI thatresulted from a decrease in sales staff and related expenses.

Cost of Sales

Cost of sales for the three months ended March 31, 2006 was$704,112 as compared to the $551,486 reported for the three months ended March31, 2005.  The overall increase in the 2006 quarter of $152,626 resulted from adecrease of $31,794 from MVI, an increase of $53,999 from TBS, and the additionof $130,421 from Resolutions.  Total cost of sales during the 2006 quarterrepresented 34% of net sales.  Cost of sales for MVI during the 2006 quarterrepresented 30% of net sales as compared with 33% of net sales in the 2005quarter.  Cost of sales for TBS during the 2006 quarter represented 39% of net salesas compared with 46% of net sales in the 2005 quarter.  The increased costsreflect a change in revenue mix where sales of lower margin, third-partyservices were more prominent during the 2006 quarter.  Cost of sales forResolutions during the 2006 quarter represented 15% of net sales, which isconsistent with prior quarters.

Gross Profit

Gross profit for the three months ended March 31, 2006increased 59% to $1,363,727 as compared to $860,496 for the prior yearquarter.  The increase in the 2006 quarter of $503,231 resulted from a decreaseof $3,194 from MVI, an increase of $195,410 from TBS, and the addition of $311,015from Resolutions.  Gross profit margin for the 2006 quarter was 66% as comparedto 61% for the 2005 quarter.

Operating Expenses

Operating expenses for the three months ended March 31, 2006increased by 38% to $1,610,400 from the $1,165,633 reported in the three monthsended March 31, 2005.  Of the total increase of $444,767, $155,986 isattributable to an increase in operating expenses of corporate.  This increasewas offset by decreases of $14,680 and $29,356 from MVI and TBS, respectively. In addition, Resolutions incurred $332,817 of operating expenses during the 2006quarter.  

During the three months ended March 31, 2006, corporateincurred $424,469 in operating expenses, an increase of $236,186 from the $188,283reported in the 2005 quarter as a result of increased compensation and legaland accounting expenses, including $80,200 in compensation expense as a resultof the adoption of SFAS No. 123(R).

During the three months ended March 31, 2006, MVI incurred $332,698in operating expenses, a decrease of 22% from the $427,578 reported in the 2005quarter.  Product and technology development increased $1,132 to $95,388 fromthe $94,256 reported in the prior year quarter as a result of compensationexpenses.  Sales and marketing decreased by $63,821 to $123,785 from the $187,606reported in the prior year quarter as a result of staff reductions.  Generaland administrative decreased by $11,315 to $105,027 from the $116,342 reportedin the prior year quarter due to decreased compensation costs.  Depreciationand amortization expense decreased $20,876 as a result of an increase in fullydepreciated computer equipment.

During the three months ended March 31, 2006, TBS incurred $520,416in operating expenses, a decrease of 5% as compared to the $549,772 reported inthe 2005 quarter.  Product and technology development increased $30,493 to $126,195as compared to $95,702 reported in the 2005 quarter due to consultingexpenses.  Sales and marketing decreased $2,305 to $108,803 from the $111,108reported in the 2005 quarter.  General and administrative decreased $72,703 to$248,073 from the $320,776 reported in the 2005 quarter due to staffrestructuring.  Depreciation and amortization expenses increased to $37,345from the $22,186 reported in the 2005 quarter due to amortization of intangibleassets.

During the three months ended March 31, 2006, Resolutionsincurred $332,817 in operating expenses.  Sales and marketing, product andtechnology, general and administrative, and depreciation and amortizationexpenses were $91,176, $40,537, $164,186, and $36,918, respectively.

Operating Income (Loss)

As a result of the foregoing, the Company reported anoperating loss for the three months ended March 31, 2006 of $246,673, comparedto an operating loss of $305,137 for the three months ended March 31, 2005.  

The following is a comparison of the components ofconsolidated income (loss) from operations:

|                                             |  | Three Months   | Three Months   |               |              |
|---------------------------------------------|--|----------------|----------------|---------------|--------------|
|                                             |  | Ended          | Ended          | Variance      |
|                                             |  | March 31, 2006 | March 31, 2005 | Amount        | Percent      |
|                                             |  |                |                |               |              |
| Operating income (loss):                    |  |                |                |               |              |
|                                             |  |                |                |               |              |
| Electronic document delivery services       |  |  $        | 182,377   |  $       | 91,686  |  $ | 90,691  | 99% |
| Government accounting products and services |  | 17,221    | (207,545)      | 224,766  | (108%)       |
| Electronic forms                            |  | (21,802)       | -         | (21,802)      | (100%)       |
| Corporate                                   |  | (424,469)      | (188,283)      | (236,186)     | (125%)       |
| Total operating loss                        |  |  $        | (246,673)      |  $       | (304,142)    |  $ | 57,467  | (19%) |

 

Change in Fair Value of Derivative Liability

During the three months ended March 31, 2005, we recognizedother income of $5,323 related to recording the derivative liability at fairvalue.  At March 31, 2006, there are no derivative liabilities since thevariable debt instruments were settled in full in fiscal 2005. 

Interest Expense

Interest expense for the quarter ended March 31, 2006decreased by 94% to $23,308 from the $391,121 reported in the 2005 quarter.  Interestcharges incurred pursuant to the terms of convertible promissory notesdecreased significantly as a result of the conversion to equity ofapproximately $5 million in debt during 2005.

Net Loss

As a result of the foregoing, net loss for the three monthsended March 31, 2006 was $273,389, or $0.00 per share, compared to a net lossof $695,135, or $0.01 per share for the three months ended March 31, 2005 onweighted average shares of 99,813,513 and 59,363,429, respectively.

The following is a comparison of the components ofconsolidated net loss:

|                                             |  | Three Months   | Three Months   |               |              |
|---------------------------------------------|--|----------------|----------------|---------------|--------------|
|                                             |  | Ended          | Ended          | Variance      |
|                                             |  | March 31, 2006 | March 31, 2005 | Amount        | Percent      |
|                                             |  |                |                |               |              |
| Net income (loss):                          |  |                |                |               |              |
|                                             |  |                |                |               |              |
| Electronic document delivery services       |  |  $        | 181,353   |  $       | 82,806  |  $ | 98,547  | 119% |
| Government accounting products and services |  | 17,221    | (208,478)      | 225,699  | 108%         |
| Electronic forms                            |  | (22,149)       | -         | (22,149)      | (100%)       |
| Corporate                                   |  | (449,814)      | (569,463)      | 119,649  | 21%          |
| Total net loss                              |  |  $        | (273,389)      |  $       | (695,135)    |  $ | 421,746  | 61% |

 

**LIQUIDITY****AND****CAPITAL RESOURCES**

During the three months ended March 31, 2006, the Company'snet cash position decreased by $377,518 to $384,533. The Company's operating, financing,and investing activities used net cash of $122,705, $24,813, and $230,000,respectively.

Net cash used in operating activities for the three monthsended March 31, 2006 was $122,705, an increase of $21,994 from the $100,711used in operating activities for the 2005 quarter, due to decreases in accruedexpenses and deferred revenue. 

The Company's investing activities consisted of the purchaseof computer equipment and additions to capitalized software development costs.Net cash used in investing activities increased $15,135 to $24,813 from the $9,678reported for the 2005 quarter.

Net cash used in financing activities for the three monthsended March 31, 2006 was $230,000, and included $10,000 of proceeds from notespayable to related parties as offset by $240,000 of payments on notes relatedto the TBS and Resolutions acquisitions.  Net cash used in financing activitiesfor the three months ended March 31, 2005 was $203,853, which included $200,000of payments on notes related to the TBS acquisition. 

Effective May 1, 2006, the Companyacquired GSI.   After taking into account a settlement agreement with a formerGSI stockholder who had dissented to the Merger (the "Zant SettlementAgreement") and remaining GSI dissenting shareholders, VillageEDOCS willissue approximately 42,613,811 shares of its common stock as Mergerconsideration.  Approximately 15,820,754 common shares of VillageEDOCSotherwise issuable in the Merger were simultaneously redeemed as part of theZant Settlement Agreement.  GSI shareholders, who would otherwise be entitledto approximately 1,565,435 shares of VillageEDOCS common shares in connectionwith the Merger, have exercised dissenters' rights, and accordingly theseshares have not been issued as part of the Merger.  Such dissentingshareholders represent approximately 2.6% of the total Merger considerationotherwise issuable to the GSI shareholders.  VillageEDOCS and GSI are in thepreliminary stages of evaluating the merits of the dissenting shareholdersposition, and intend to comply with all legal requirements under Florida law inconnection with dissenting shareholders.  VillageEDOCS believes that the termsand conditions of the Merger with GSI were fair and reasonable.  Furthermore,given that the total number of dissenting shares was relatively immaterial(approximately 2.6%), VillageEDOCS does not believe that the ultimateresolution of this matter will have a material adverse effect on its financialposition.

GoSolutions' 2005 (unaudited)income from operations was $714,996 on net revenue of $6,996,534. VillageEDOCS' 2005 income from operations was $125,186 on net revenue of$8,768,446.  Had the acquisition been in effect throughout all of 2005, theunaudited net revenue of VillageEDOCS and GoSolutions would have been$15,764,980.  Accordingly, we expect the acquisition of GoSolutions to have asignificant and positive effect on our results for the second, third and fourthquarters of 2006.

The Company does notcurrently have any material commitments for capital expenditures other thanthose expenditures incurred in the ordinary course of business. 

Due to a deficit in net tangible assets, the Company hashistorically been unable to obtain operating lines of credit from traditionalbanking institutions.  During 2005, TBS secured a $100,000 operating line ofcredit which it has not utilized as of the date of this report.

Substantial risk exists that a decrease in demand for ourproducts and services would reduce the availability of cash from this sourcesince our operating cash flows are derived from products and services that aresubject to rapid technological change.

Since our inception, our operating and investing activitieshave used substantially more cash than they have generated. We believe that wehave made considerable progress toward achieving profitable operations byincreasing revenues from electronic document delivery services and through ouracquisition of TBS, Resolutions, and GSI.  In addition, we are actively seekingopportunities to acquire or otherwise combine with businesses that areoperating profitably and generating positive cash flows.  However, at presentand for the foreseeable future, we believe that we will continue to needworking capital to fund the growth of our businesses and to absorb theincreasing costs associated with operating as a fully reporting company in theprevailing regulatory environment.    Accordingly, we may experience negativeoperating and investing cash flows during certain months during the remainderof 2006 until MVI, TBS, Resolutions, and GSI consistently generate net cashflows sufficient to offset the anticipated expenses of operating the holdingcompany.  While we believe that our available cash resources combined with ourcurrent revenue streams will be sufficient to meet our anticipated workingcapital requirements for the next twelve months, we will require additionalfinancing to fund capital expenditure requirements in the ordinary course ofbusiness for 2006.  Should our current revenue streams or margins be subjectedto even minor decreases, our funding requirements could be greater.

We believe that sustainable profitability is achievable;however, we have a history of losses.  While each of MVI, TBS, and Resolutionshave alternately reported both monthly operating incomes and monthly operatinglosses during 2006, operating incomes have been insufficient to offsetoperating losses, interest expense and corporate overhead.  If we are notsuccessful in sustaining and increasing operating profits from our threereporting segments (and from GSI), or reducing expenses of the holding company,we may never achieve profitability for the Company as a whole.  Should weachieve overall profitability in any period, we cannot be certain that we willsustain or increase such profitability on a quarterly or annual basis.

Between November 2000 and at least December 2004, our operatingshortfalls were funded by one shareholder, an affiliate, to whom we owe $65,000in principal and approximately $96,000 in interest as of March 31, 2006. Thisshareholder has no obligation to continue to fund any future operatingshortfalls.  We may be required to alter the terms of the convertiblepromissory note held by this shareholder to induce this shareholder or othersuch potential lenders to provide additional loans, which could result in thisshareholder or other such potential lenders obtaining rights, preferences orprivileges senior to those of other creditors or our stockholders.

This estimate is a forward-looking statement that involvesrisks and uncertainties. The actual time period may differ materially from thatindicated as a result of a number of factors so that we cannot assure you thatour cash resources will be sufficient for anticipated or unanticipated workingcapital and capital expenditure requirements for this period. We have advisedthat we will need to raise additional capital in the future to meet ouroperating and investing cash requirements. Such sources of financing couldinclude capital infusions, additional equity financing, or debt offerings.There can be no assurance that additional funding will be available on acceptableterms, if at all, or that such funds if raised, would enable the Company toachieve and maintain profitable operations. If we are not able to obtainsufficient additional funds from investors, we may be unable to sustain all orpart of our operations.  If we raise additional funds through the issuance ofsecurities, these securities may have rights, preferences or privileges seniorto those of our common stock, and our stockholders may experience additionaldilution to their equity ownership. 

The Report of Independent Registered Public Accounting Firmon our December 31, 2005 consolidated financial statements includes anexplanatory paragraph stating that the recurring losses incurred fromoperations and a working capital deficiency raise substantial doubt about ourability to continue as a going concern. The financial statements do not includeany adjustments that might result from the outcome of this uncertainty.

**CAUTIONARY INFORMATION ABOUT FORWARD-LOOKING STATEMENTS**

This Quarterly Report on Form 10-QSB includesforward-looking statements within the meaning of Section 21E of the SecuritiesExchange Act of 1934, as amended. All statements that do not directly andexclusively relate to historical facts constitute forward-looking statementswithin the meaning of the Private Securities Litigation Reform Act of 1995. Our forward-looking statements are based on our plans, intentions, expectation,and belief and are subject to certain risks and uncertainties that could causeactual results to differ materially from those projected or expressed herein.You can identify these statements by forward-looking words such as"may", "will", "expect", "intend","anticipate", "believe", "expect","plan", "seek", "estimate", "project", "could", and "continue" or similar words. You should read statements thatcontain these words carefully because they discuss our expectations about ourfuture performance, contain projections of our future operating results or ofour future financial condition, or state other "forward-looking"information. These statements include, among others, information regardingfuture operations, future capital expenditures, and future net cash flow. Suchstatements reflect the Company's current views with respect to future eventsand financial performance and involves risks and uncertainties, including,without limitation, general economic and business conditions, changes inforeign, political, social and economic conditions, regulatory initiatives andcompliance with governmental regulations, the ability to achieve further marketpenetration and additional customers, and various other matters, many of whichare beyond the Company's control, including, without limitation, the risksdescribed under the caption "*Certain Factors That May Affect FutureResults"* in Item 6 of the Company's Annual Report on Form 10-KSB filedwith the Commission on April 14, 2006. Our future results and stockholdervalues may differ materially from those expressed in these forward- lookingstatements. Many of the factors that will determine these results and valuesare beyond our ability to control or predict. We assume no obligation to updateany forward-looking statements.  Investors are cautioned not to put unduereliance on any forward-looking statements, which speak only as of the date ofthis Quarterly Report on Form 10-QSB.  Readers should also consult thecautionary statements and risk factors listed from time to time in our Reports,and all amendments thereto, on Forms 10-KSB, 10-QSB, 8-K, and other SEC filings. For these statements, we claim the protection of the safe harbor forforward-looking statements contained in Section 21E of the Exchange Act.

Forward looking statements in this Quarterly Report on Form10-QSB include, without limitation:

The statements in MD&A under the captions *Introduction*and *Business Overview*of our strategies, beliefs, plans,expectations, anticipations and hopes with respect to (1) our expectationsabout the completion of the merger transaction with GoSolutions, (2) our beliefthat we have improved our corporate governance, (3) our current and futuregrowth strategy to acquire intellectual and technology assets and ourexpectations about the benefits we may derive, (4) our beliefs about our visionto become a business process management/workflow service and the benefits weexpect to derive, (5) our acquisition strategy, and (6) our belief thatobtaining planned financings will allow us to generate adequate cash flows tosustain operations at current levels until we being to operate profitably on aconsistent, month-over month basis, which statements are subject to variousrisks and uncertainties, including, without limitation, our limited operatinghistory, risks that we may not be able to obtain any additional financing atterms acceptable to us, or at all, risks that we may not successfully implementour acquisition program, risks associated with assimilating acquired personneland technology into the Company, and the risk that we will not be able tocompete effectively because our market place is highly competitive and has lowbarriers to entry. 

The statements in MD&A under the caption *CriticalAccounting Policies*regarding calculation of allowances, reserves, andother estimates that are based on historical experience, the judgment ofmanagement, and various other assumptions that are believed to be reasonableunder the circumstances, the results of which for the basis for makingjudgments about the carrying value of assets and liabilities that are notreadily apparent from any other sources, our beliefs about critical accountingpolicies, and the significant judgments and estimates used in the preparationof our consolidated financial statements, which statements are subject tocertain risks, including, among other things, the inaccuracy of our beliefsregarding critical accounting policies and that actual customer reserves orother estimates may be different from our estimates, requiring revisions to ourestimated allowance for doubtful accounts, additional inventory write-downs, impairmentcharges, restructuring charges, litigation, warranty, and other reserves.

The statements in MD&A underthe caption *Results of Operations*of our strategies, beliefs, plans,expectations, anticipations and hopes with respect to Net Revenue, GrossProfit, Operating Expenses, Income from Operations, and Net Loss and ourstrategies, beliefs, plans, expectations, anticipations and hopes with respectto Liquidity and Capital Resources set forth in MD&A under the caption *Liquidityand Capital Resources*, including, without limitation (1) our belief that wehave made considerable progress toward achieving profitable operations byincreasing revenues from electronic document delivery services and through ourrecent acquisition of TBS, Resolutions, and GSI, (2) our strategy of activelyseeking to combine with business that operate profitably and generate positivecash flows, (3) our belief that sustainable profitability is achievable, (4)our expectations about future funding requirements, and (5) our belief thatcurrent cash position, cash generated through operations and equity offeringsand available borrowings will be sufficient to meet our needs through at leastthe next twelve months., which statements are subject to various risks anduncertainties, including, without limitation, our limited operating history,risks that we may not be able to obtain any additional financing at termsacceptable to us, or at all, the risk that we may be unable to sustain all orpart of our operations if we are not able to obtain sufficient additional fundsfrom investors, the risk that our funding requirements could be greater shouldour current revenue streams or margins decrease, risks that we may notsuccessfully implement our acquisition program, risks associated with assimilatingacquired personnel and technology into the Company, and the risk that we willnot be able to compete effectively because our market place is highlycompetitive and has low barriers to entry.

**RECENT ACCOUNTING PRONOUNCEMENTS**

In December 2004, the Financial Accounting StandardsBoard ("FASB") issued Statement of Accounting Standards ("SFAS") No. 123(R), "*Share-BasedPayment*", which replaces SFAS No. 123. SFAS No. 123(R) requires publiccompanies to recognize an expense for share-based payment arrangementsincluding stock options and employee stock purchase plans. The statementeliminates a company's ability to account for share-based compensationtransactions using APB 25, *"Accounting for Stock Issued to Employees,"*and generally requires instead that such transactions be accounted for using afair-value based method. SFAS No. 123(R) requires an entity to measure the costof employee services received in exchange for an award of equity instrumentsbased on the fair value of the award on the date of grant, and to recognize thecost over the period during which the employee is required to provide servicein exchange for the award. SFAS No. 123(R) became effective for us in thequarter ending March 31, 2006. The impact of SFAS No. 123(R) was approximately$80,000 for the three months ended March 31, 2006 and it is likely that theadoption of SFAS No. 123(R) will continue to have a material impact on ourconsolidated financial position and results of operations in the future.

In February 2006, the FASB issued a final FASB StaffPosition ("FSP"), FAS 123(R)-4, *"Classification of Options and SimilarInstruments Issued as Employee Compensation That Allow for Cash Settlement uponthe Occurrence of a Contingent Event"*. The guidance in this FSP FAS123(R)-4 amends paragraphs 32 and A229 of SFAS No. 123(R) to incorporate theconcept articulated in footnote 16 of SFAS No. 123(R). As a result, a cashsettlement feature that can be exercised only upon the occurrence of acontingent event that is outside the employee's control does not meet thecondition in paragraphs 32 and A229 until it becomes probable that the eventwill occur. Originally under SFAS No. 123(R), a provision in a share-basedpayment plan that required an entity to settle outstanding options in cash uponthe occurrence of any contingent event required classification and accountingfor the share based payment as a liability. This caused an issue under certainawards that require or permit, at the holder's election, cash settlement of theoption or similar instrument upon (a) a change in control or other liquidityevent of the entity or (b) death or disability of the holder. With this newFSP, these types of cash settlement features will not require liabilityaccounting so long as the feature can be exercised only upon the occurrence ofa contingent event that is outside the employee's control (such as an initialpublic offering) until it becomes probable that event will occur. The guidancein this FSP shall be applied upon initial adoption of SFAS No. 123(R). We donot anticipate that this new FSP will have any material impact on ourconsolidated financial condition or results of operations. 

In February 2006, the FASB issued SFAS No. 155 *"Accountingfor Certain Hybrid Financial Instruments, an amendment of FASB Statements No.133 and 140"*. SFAS No. 155 amends SFAS No. 133, *"Accounting forDerivative Instruments and Hedging Activities,"* and SFAS No. 140, *"Accountingfor Transfers and Servicing of Financial Assets and Extinguishments ofLiabilities."* This statement resolves issues addressed in SFAS No. 133Implementation Issue No. D1, *"Application of Statement 133 to BeneficialInterests in Securitized Financial Assets."* Among other things, thisstatement permits fair value re-measurement for any hybrid financial instrumentthat contains an embedded derivative that otherwise would require bifurcation.This statement is effective for all financial instruments acquired or issuedafter the beginning of an entity's first fiscal year that begins after September15, 2006. Earlier adoption is permitted as of the beginning of an entity'sfiscal year, provided the entity has not yet issued financial statements,including financial statements for any interim period for that fiscal year.Provisions of this statement may be applied to instruments that an entity holdsat the date of adoption on an instrument-by-instrument basis. We are in theprocess of evaluating the impact of SFAS No. 155.

**ITEM 3 - CONTROLS ANDPROCEDURES**

(a) As of March 31, 2006, anevaluation was carried out under the supervision and with the participation ofthe Company's management, including our Chief Executive Officer and our ChiefFinancial Officer, of the effectiveness of the design and operation of ourdisclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e)under the Securities Exchange Act of 1934).  Based upon that evaluation,the Chief Executive Officer and the Chief Financial Officer concluded that thedesign and operation of these disclosure controls and procedures during thethree months ended March 31, 2006 were effective in timely alerting them to thematerial information relating to the Company (or the Company's consolidatedsubsidiaries) required to be included in the Company's periodic filings withthe SEC, subject to the various limitations on effectiveness set forth belowunder the heading, "LIMITATIONS ON THE EFFECTIVENESS OF INTERNALCONTROLS," such that the information relating to the Company, required tobe disclosed in SEC reports (i) is recorded, processed, summarized and reportedwithin the time periods specified in SEC rules and forms, and (ii) isaccumulated and communicated to the Company's management, including our CEO andCFO, as appropriate to allow timely decisions regarding required disclosure. 

The Company's management hasconcluded that the consolidated financial statements included in this QuarterlyReport on Form 10-QSB fairly present in all material respects the Company'sfinancial condition, results of operations and cash flows for the periodspresented in conformity with accounting principles generally accepted in theUnited States of America.

*Remediation of MaterialWeakness in Internal Control*

As reported in our 2005 Form10-KSB, we determined at the end of 2005 that the Company's policies andprocedures did not provide for adequate management oversight and review of theCompany's accounting for (i) the identification of the variable conversionfeatures embedded within its debt instruments, (ii) stock-based compensationrelated to bonuses issued to certain executives in connection with itsacquisitions, and (iii) stock-based compensation in connection with theamendment and subsequent conversion of certain convertible promissory notes. These deficiencies resulted in the restatement of the Company's consolidatedfinancial statements for the year ended December 31, 2004 and quarterly reportsfor the quarters ended March 31, 2005, June 30, 2005 and September 30, 2005.

The foregoing led our managementto conclude that our disclosure controls and procedures were not effective asof December 31, 2005 because of a material weakness in our internal controlsover financial reporting.  

In the first quarter of 2006, weimplemented additional review procedures to ensure that a complete review isperformed on all terms of our debt instruments and stock-based compensationarrangements, and that supporting accounting documentation is available toensure that our accounting for the previously noted material weaknesses is inaccordance with accounting principles generally accepted in the United Statesof America. These review procedures were in place in connection with thepreparation of our consolidated financial statements for the first quarter of2006. As such, we believe that the remediation initiative outlined above wassufficient to eliminate the material weakness in internal control overfinancial reporting as discussed above. 

(b) Changes in internal controlover financial reporting. Other than as noted above, there were no changes inthe Company's internal control over financial reporting that occurred duringthe quarter ended March 31, 2006 that has materially affected, or are reasonablylikely to materially affect, the Company's internal control over financialreporting. 

**LIMITATIONS ON THE EFFECTIVENESSOF INTERNAL CONTROLS**

The Company's management,including the CEO and CFO, does not expect that our disclosure controls andprocedures or our internal control over financial reporting will necessarilyprevent all fraud and material error. An internal control system, no matter howwell conceived and operated, can provide only reasonable, not absolute,assurance that the objectives of the control system are met. Further, thedesign of the control system must reflect the fact that there are resourceconstraints, and the benefits of controls must be considered relative to theircosts. Because of the inherent limitations in all control systems, noevaluation of controls can provide absolute assurance that all control issuesand instances of fraud, if any, within the Company have been detected. Theseinherent limitations include the realities that judgments in decision-makingcan be faulty, and that breakdowns can occur because of simple error ormistake. Additionally, controls can be circumvented by the individual acts ofsome persons, by collusion of two or more people, or by management override ofthe internal control. The design of any system of controls also is based inpart upon certain assumptions about the likelihood of future events, and there canbe no assurance that any design will succeed in achieving its stated goalsunder all potential future conditions. Over time, control may become inadequatebecause of changes in conditions, and/or the degree of compliance with thepolicies or procedures may deteriorate. 

** **

----

**PART II**

 

**ITEM 1 - LEGAL PROCEEDINGS.**

None.

** **

**ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USEOF PROCEEDS.**

On March 8, 2006, the Company accepted a notice from BarronPartners LP of its intent to convert an additional 2,500,000 shares of theCompany's Series A Preferred Stock into 2,500,000 shares of the Company'scommon stock.  The shares of common stock were issued on March 8, 2006.

During the three months ended March 31, 2006, the Companygranted to its employees options to purchase shares of its common stock underthe 2002 Plan as follows:  4,000,000 shares at $0.15 per share and 90,000shares at $0.18 per share.   All options were issued above or at the fairmarket value on the dates of grant and vest on various dates from the date ofgrant through March 2011.

All offers and sales of our securities described abovewere made pursuant to Section 4(2) of the Securities Act of 1933 and RegulationD promulgated thereunder.

** **

**ITEM 3 - DEFAULTS UPON SENIOR SECURITIES.**

None.

** **

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

None.

** **

**ITEM 5 - OTHER INFORMATION.**

None.

**ITEM 6 - EXHIBITS.  **

 

|                 | *** ***                                                                                                                                                                                                                                                                                                                             |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **Exhibit No.** | **Description****                                                                                                                                                                                                                                                                                                                        |
| 2.1             | Agreement and Plan of Merger dated January 31, 2004 by and  among VillageEDOCS, VillageEDOCS Merger Sub, Inc., Tailored Business Systems,  Inc., Stephen A. Garner, and James L. Campbell previously filed as Exhibit  2.1 to the Company's Current Report on Form 8-K filed on February 18, 2004  and incorporated herein by reference. |
| 2.2             | Plan of Internal Restructuring previously filed as Exhibit  B to the Company's Schedule 14C Information Statement filed on July 23, 2004  and incorporated herein by reference.                                                                                                                                                          |
| 2.3             | Stock Purchase Agreement dated as of April 1, 2005 and  executed April 15, 2005 by and among VillageEDOCS Acquisition Corp, Phoenix  Forms, Inc., and Its Shareholders.  Previously filed as Exhibit 2.1 to the  Company's Current Report on Form 8-K filed on April 19, 2005.                                                      |
| 2.4             | Merger Agreement, dated as of February 17, 2006, by and  among VillageEDOCS, VEDO Merger Sub, Inc., GoSolutions, Inc. and certain  stockholders of GoSolutions.  Previously filed as Exhibit 2.1 to the  Company's Current Report on Form 8-K filed on February 21, 2006.                                                           |
| 3.1             | Articles of Incorporation, as amended.  Previously filed  with the Company's Form 10-SB filed on August 29, 2000.                                                                                                                                                                                                                   |
| 3.2             | By-laws.  Previously filed with the Company's Form 10-SB  filed on August 29, 2000.                                                                                                                                                                                                                                                 |
| 3.3             | Article of Amendment to Articles of Incorporation to  increase authorized number of common shares.  Previously filed with the  Company's 14C Information Statement filed on July 23, 2004.                                                                                                                                          |
| 3.4             | Article of Amendment to Articles of Incorporation to  increase authorized number of common shares and to create a class of  preferred stock.  Previously filed with the Company's 14C Information  Statement filed on June 7, 2005.                                                                                                 |
| 3.5             | Form of Certificate of Designations of Preferences, Rights  and Limitations of Series A Convertible Preferred Stock.  Previously filed as  Exhibit 4.8 to the Company's Current Report on Form 8-K filed on April 19,  2005.                                                                                                        |
| 3.6             | Certificate of Amendment of Articles of Incorporation to  increase authorized number of common shares.  Previously filed with the Company's  Current Report on Form 8-K filed on January 20, 2006.                                                                                                                                  |
|                 | ** **                                                                                                                                                                                                                                                                                                                               |
| 4.1             | Letter Agreement dated July 30, 2002 by and between the  Company, C. Alan Williams, and Joan P. Williams previously filed as Exhibit  4.1 to the Company's Quarterly Report on Form 10-QSB for the period ended  June 30, 2002 and incorporated herein by reference.                                                                     |
| 4.2             | Promissory Note Modification Agreement dated July 15, 2002  by and between the Registrant and James W. Townsend previously filed as  Exhibit 4.1 to the Company's Current Report on Form 8-K filed on July 2, 2002  and incorporated herein by reference.                                                                                |
| 4.3             | Form of Unsecured Convertible Promissory Note. Previously  filed as Exhibit 4.5 to the Registrant's Quarterly Report on Form 10-QSB  filed with the Securities and Exchange Commission on May 15, 2002 and  incorporated herein by reference.                                                                                            |
| 4.4             | Form of Convertible Secured Promissory Note. Previously  filed as Exhibit 4.6 to the Registrant's Quarterly Report on Form 10-QSB  filed with the Securities and Exchange Commission on May 15, 2002 and  incorporated herein by reference.                                                                                              |
| 4.5             | 2002 Equity Incentive Plan dated as of January 30, 2002.   Previously filed as Exhibit 4.1 to the Registrant's Quarterly Report on Form  10-QSB filed with the Securities and Exchange Commission on May 15, 2002 and  incorporated herein by reference.                                                                            |
| 4.6             | Form of Stock Option Agreement.  Previously filed as  Exhibit 4.2 to the Registrant's Quarterly Report on Form 10-QSB filed with  the Securities and Exchange Commission on May 15, 2002 and incorporated  herein by reference.                                                                                                     |
| 4.7             | Promissory Note Modification Agreement dated May 9, 2002  by and among the Company, Joan P. Williams and C. Alan Williams.  Previously  filed as Exhibit 4.3 to the Registrant's Quarterly Report on Form 10-QSB  filed with the Securities and Exchange Commission on May 15, 2002 and  incorporated herein by reference.          |
| 4.8             | Security Agreement dated May 9, 2002 by and among the  Company, Joan P. Williams and C. Alan Williams.  Previously filed as Exhibit  4.4 to the Registrant's Quarterly Report on Form 10-QSB filed with the  Securities and Exchange Commission on May 15, 2002 and incorporated herein by  reference.                              |
| 4.9             | Promissory Note to Stephen A. Garner dated February 17,  2004 previously filed as Exhibit 4.1 to the Company's Current Report on Form  8-K filed on February 18, 2004 and incorporated herein by reference.                                                                                                                              |
| 4.10            | Promissory Note to James L. Campbell dated February 17,  2004 previously filed as Exhibit 4.2 to the Company's Current Report on Form  8-K filed on February 18, 2004 and incorporated herein by reference.                                                                                                                              |
| 4.11            | Guaranty by Tailored Business Systems, Inc. to Stephen A.  Garner dated February 17, 2004 previously filed as Exhibit 4.3 to the  Company's Current Report on Form 8-K filed on February 18, 2004 and  incorporated herein by reference.                                                                                                 |
| 4.12            | Guaranty by Tailored Business Systems, Inc. to James L.  Campbell dated February 17, 2004 previously filed as Exhibit 4.4 to the  Company's Current Report on Form 8-K filed on February 18, 2004 and  incorporated herein by reference.                                                                                                 |
| 4.13            | Form of Security Agreement dated February 17, 2004 by and  between Tailored Business Systems, Inc. and Stephen A. Garner previously  filed as Exhibit 4.5 to the Company's Current Report on Form 8-K filed on  February 18, 2004 and incorporated herein by reference.                                                                  |
| 4.14            | Form of Security Agreement dated February 17, 2004 by and  between Tailored Business Systems, Inc. and James L. Campbell previously  filed as Exhibit 4.6 to the Company's Current Report on Form 8-K filed on  February 18, 2004 and incorporated herein by reference.                                                                  |
| 4.15            | Registration Rights Agreement dated February 17, 2004 by  and between VillageEDOCS and Stephen A. Garner previously filed as Exhibit  4.7 to the Company's Current Report on Form 8-K filed on February 18, 2004  and incorporated herein by reference.                                                                                  |
| 4.16            | Registration Rights Agreement dated February 17, 2004 by  and between VillageEDOCS and James L. Campbell previously filed as Exhibit  4.8 to the Company's Current Report on Form 8-K filed on February 18, 2004  and incorporated herein by reference.                                                                                  |
| 4.17            | Form of Stock Pledge Agreement dated February 17, 2004 by  and between Tailored Business Systems, Inc. and Stephen A. Garner previously  filed as Exhibit 4.9 to the Company's Current Report on Form 8-K filed on  February 18, 2004 and incorporated herein by reference.                                                              |
| 4.18            | Form of Stock Pledge Agreement dated February 17, 2004 by  and between Tailored Business Systems, Inc. and James L. Campbell previously  filed as Exhibit 4.10 to the Company's Current Report on Form 8-K filed on  February 18, 2004 and incorporated herein by reference.                                                             |
| 4.19            | Notice of Intent to Exercise Conversion Right dated  February 10, 2005 by Joan P. Williams and C. Alan Williams.  Previously filed  as Exhibit 4.5 to the Company's Current Report on Form 8-K filed on February  14, 2005.                                                                                                         |
| 4.20            | Promissory Note to Alexander Riess dated April 15, 2005.   Previously filed as Exhibit 4.1 to the Company's Current Report on Form 8-K  filed on April 19, 2005.                                                                                                                                                                    |
| 4.21            | Promissory Note to William R. Falcon dated April 15, 2005.   Previously filed as Exhibit 4.2 to the Company's Current Report on Form 8-K  filed on April 19, 2005.                                                                                                                                                                  |
| 4.22            | Common Stock Purchase Warrant to Alexander Riess dated as  of April 1, 2005.  Previously filed as Exhibit 4.3 to the Company's Current  Report on Form 8-K filed on April 19, 2005.                                                                                                                                                 |
| 4.23            | Common Stock Purchase Warrant to William R. Falcon dated  as of April 1, 2005.  Previously filed as Exhibit 4.4 to the Company's  Current Report on Form 8-K filed on April 19, 2005.                                                                                                                                               |
| 4.24            | Note Purchase Agreement dated April 13, 2005 by and  between VillageEDOCS and Barron Partners LP.  Previously filed as Exhibit 4.5  to the Company's Current Report on Form 8-K filed on April 19, 2005.                                                                                                                            |
| 4.25            | Convertible Note to Barron Partners LP dated April 13,  2005.  Previously filed as Exhibit 4.6 to the Company's Current Report on  Form 8-K filed on April 19, 2005.                                                                                                                                                                |
| 4.26            | Registration Rights Agreement dated April 13, 2005 by and  between VillageEDOCS and Barron Partners LP.  Previously filed as Exhibit 4.7  to the Company's Current Report on Form 8-K filed on April 19, 2005.                                                                                                                      |
| 4.27            | Form of Certificate of Designations of Preferences, Rights  and Limitations of Series A Convertible Preferred Stock.  Previously filed as  Exhibit 4.8 to the Company's Current Report on Form 8-K filed on April 19,  2005.                                                                                                        |
| 4.28            | Stock Purchase Warrant "A" dated April 13, 2005  to Barron Partners LP.  Previously filed as Exhibit 4.9 to the Company's  Current Report on Form 8-K filed on April 19, 2005.                                                                                                                                            |
| 4.29            | Stock Purchase Warrant "B" dated April 13, 2005  to Barron Partners LP.  Previously filed as Exhibit 4.10 to the Company's  Current Report on Form 8-K filed on April 19, 2005.                                                                                                                                           |
| 4.30            | Form of Note Assignment.  Previously filed as Exhibit 4.1  to the Company's Current Report on Form 8-K filed on July 6, 2005.                                                                                                                                                                                                       |
| 4.31            | Form of Promissory Note Modification Agreement.   Previously filed as Exhibit 4.2 to the Company's Current Report on Form 8-K  filed on July 6, 2005.                                                                                                                                                                               |
| 4.32            | Form of Notice of Intent to Exercise Conversion Right.   Previously filed as Exhibit 4.3 to the Company's Current Report on Form 8-K  filed on July 6, 2005.                                                                                                                                                                        |
| 4.33            | Notice of conversion by Barron Partners LP dated September  30, 2005.  Previously filed as Exhibit 4.6 to the Company's Current Report on  Form 8-K filed on October 5, 2005.                                                                                                                                                       |
| 4.34            | Form of Convertible Secured Promissory Note by and among  C. Alan Williams, Joan P. Williams, and the Company previously filed as  Exhibit 4.19 to the Company's Annual Report on Form 10-KSB filed on April 14,  2006 and incorporated herein by reference.                                                                             |
| 4.35            | Convertible Secured Promissory Note dated February 16,  2004 by and among C. Alan Williams, Joan P. Williams, and the Company  previously filed as Exhibit 4.20 to the Company's Annual Report on Form  10-KSB filed on April 14, 2006 and incorporated herein by reference.                                                             |
| 4.36            | Notice of conversion by Barron Partners LP dated October  21, 200.  Previously filed as Exhibit 4.1 to the Company's Current Report on  Form 8-K filed on October 24, 2005 and incorporated herein by reference.                                                                                                                    |
| 4.37            | Notice of conversion by Barron Partners LP dated March 8,  2006.  Previously filed as Exhibit 4.1 to the Company's Current Report on  Form 8-K filed on March 9, 2006 and incorporated herein by reference.                                                                                                                         |
| 10.1            | Consulting and Other Services agreement dated January 28,  2003 by and between the Company and Paul Allen.  Previously filed as Exhibit  4.8 to the Company's Registration Statement on Form S-8 filed with the  Securities and Exchange Commission on January 29, 2003 and incorporated  herein by reference.                      |
| 10.2            | Employment Offer Letter dated April 23, 2004 by and  between Tailored Business Systems, Inc. and James L. Kolassa.  Previously  filed as Exhibit 10.2 to the Company's Annual Report on Form 10-KSB filed on  March 31, 2005 and incorporated herein by reference.                                                                  |
| 10.3            | Debt settlement agreement dated January 28, 2003 by and  between the Company and James R. Spoerl.  Previously filed as Exhibit 4.9 to  the Company's Registration Statement on Form S-8 filed with the Securities  and Exchange Commission on January 29, 2003 and incorporated herein by  reference.                               |
| 10.4            | Employment Agreement dated February 17, 2004 by and  between Tailored Business Systems, Inc. and Stephen A. Garner previously  filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on  February 18, 2004 and incorporated herein by reference.                                                                       |
| 10.5            | Employment Agreement dated February 17, 2004 by and  between Tailored Business Systems, Inc. and James L. Campbell previously  filed as Exhibit 10.2 to the Company's Current Report on Form 8-K filed on  February 18, 2004 and incorporated herein by reference.                                                                       |
| 10.6            | General Release and Noncompetition Agreement dated  February 17, 2004 by Stephen A. Garner in favor of Tailored Business Systems,  Inc. previously filed as Exhibit 10.3 to the Company's Current Report on Form  8-K filed on February 18, 2004 and incorporated herein by reference.                                                   |
| 10.7            | General Release and Noncompetition Agreement dated  February 17, 2004 by James L. Campbell in favor of Tailored Business Systems,  Inc. previously filed as Exhibit 10.4 to the Company's Current Report on Form  8-K filed on February 18, 2004 and incorporated herein by reference.                                                   |
| 10.8            | Lease Agreement dated February 17, 2004 by and between  Perimeter Center Partners and Tailored Business Systems, Inc. previously  filed as Exhibit 10.5 to the Company's Current Report on Form 8-K filed on  February 18, 2004 and incorporated herein by reference.                                                                    |
| 10.9            | Employment Agreement dated June 10, 2004 by and between  the Company and K. Mason Conner previously filed as Exhibit C to the  Company's Schedule 14C Information Statement filed on July 23, 2004 and  incorporated herein by reference.                                                                                                |
|                 |                                                                                                                                                                                                                                                                                                                                          |
| 10.10           | Employment Agreement dated June 10, 2004 by and between  the Company and H. Jay Hill previously filed as Exhibit D to the Company's  Schedule 14C Information Statement filed on July 23, 2004 and incorporated  herein by reference.                                                                                                    |
| 10.11           | Employment Agreement dated June 10, 2004 by and between  the Company and Michael Richard previously filed as Exhibit E to the  Company's Schedule 14C Information Statement filed on July 23, 2004 and  incorporated herein by reference.                                                                                                |
| 10.12           | Employment Agreement dated as of April 1, 2005 by and  between Phoenix Forms, Inc. and Alexander Riess.  Previously filed as Exhibit  10.1 to the Company's Current Report on Form 8-K filed on April 19, 2005.                                                                                                                     |
| 10.13           | Employment Agreement dated as of April 1, 2005 by and  between Phoenix Forms, Inc. and William R Falcon.  Previously filed as  Exhibit 10.2 to the Company's Current Report on Form 8-K filed on April 19,  2005.                                                                                                                   |
| 10.14           | Release of Claims Agreement dated as of April 1, 2005 by  Alexander Riess in favor of Phoenix Forms, Inc.  Previously filed as Exhibit  10.3 to the Company's Current Report on Form 8-K filed on April 19, 2005.                                                                                                                   |
| 10.15           | Release of Claims Agreement dated as of April 1, 2005 by  William R. Falcon in favor of Phoenix Forms, Inc.  Previously filed as  Exhibit 10.4 to the Company's Current Report on Form 8-K filed on April 19,  2005.                                                                                                                |
| 10.16           | Amendment No. 1 to Executive Employment Agreement dated  April 28, 2005 by and between the Registrant and K. Mason Conner.  Previously  filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on  April 29, 2005.                                                                                                 |
| 10.17           | Amendment No. 1 to Executive Employment Agreement dated  April 28, 2005 by and between the Registrant and H. Jay Hill.  Previously  filed as Exhibit 10.2 to the Company's Current Report on Form 8-K filed on  April 29, 2005.                                                                                                     |
| 10.18           | Amendment No. 1 to Executive Employment Agreement dated  April 28, 2005 by and between the Registrant and Michael A. Richard.   Previously filed as Exhibit 10.3 to the Company's Current Report on Form 8-K  filed on April 29, 2005.                                                                                              |
| 10.19           | Executive Employment Agreement, dates as of March 1, 2006,  by and between the Company and Jerry T. Kendall.  Previously files as Exhibit  10.1 to the Company's Current Report on Form 8-K filed on March 1, 2006.                                                                                                                 |
|                 | ** **                                                                                                                                                                                                                                                                                                                               |
|                 |                                                                                                                                                                                                                                                                                                                                          |
| 14.1            | Code of Ethics.  Previously filed as Exhibit 14.1 to the  Company's Annual Report on Form 10-KSB filed on March 29, 2004 and  incorporated herein by reference.                                                                                                                                                                     |
| 21.1            | Subsidiaries of the Registrant.*                                                                                                                                                                                                                                                                                                         |
| 31.1            | Certification Under Section 302 of The Sarbanes-Oxley Act  of 2002 signed and dated May 22, 2006 by K. Mason Conner, Chief Executive  Officer.*                                                                                                                                                                                          |
| 31.2            | Certification Under Section 302 of The Sarbanes-Oxley Act  of 2002 signed and dated May 22, 2006 by Michael A. Richard, Chief Financial  Officer.*                                                                                                                                                                                       |
| 32.1            | Certification Pursuant To 18 U.S.C. §1350, As Adopted  Pursuant To Section 906 of the Sarbanes-Oxley Act of 2002 signed and dated May  22, 2006 by K. Mason Conner, Chief Executive Officer.**                                                                                                                                      |
| 32.2            | Certification Pursuant To 18 U.S.C. §1350, As Adopted  Pursuant To Section 906 of the Sarbanes-Oxley Act of 2002 signed and dated May  22, 2006 by Michael A. Richard, Chief Financial Officer.**                                                                                                                                   |
| *               | Filed herewith                                                                                                                                                                                                                                                                                                                           |
| **              | Furnished herewith                                                                                                                                                                                                                                                                                                                       |

----

**SIGNATURES**

** **

**Pursuant to the requirementsof the Securities and Exchange Act of 1934, the Registrant has caused thisreport to be signed on its behalf by the undersigned, thereto duly authorized,in the capacities and on the dates indicated:**

** **

** **

| ** **                         | **VillageEDOCS (Registrant)**                                                       |
|------------------------------------|-------------------------------------------------------------------------------------|
| ** **                         | ** **                                                                          |
| ** **                         | ** **                                                                          |
| **Dated:  May 22, 2006** | **By:    /s/ K. Mason Conner**                                       |
| ** **                         | **       K. Mason  Conner**                      |
| ** **                         | **       Chief  Executive Officer and Director** |
| ** **                         | ** **                                                                          |
| ** **                         | ** **                                                                          |
| ** **                         | ** **                                                                          |
| **Dated:  May 22, 2006** | **By:  /s/ Michael A. Richard**                                                |
| ** **                         | **      Michael A. Richard**                          |
|                                    | **      Chief Financial  Officer**                    |
| ** **                         | **      (Principal  Accounting Officer)**             |
| ** **                         | ** **                                                                          |

** **

** **