**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 June 30, 2007**

[   ]   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            |
|                                                                       |       |                                              |
| **1401 N. Tustin    Ave, Ste. 230****, Santa Ana, California  92705** | ** ** | ** (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 150,270,913 shares of the Registrant's commonstock outstanding as of July 31, 2007 

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

----

 

**VillageEDOCS**

** Index**

| ** ** | ** **                              | Page No. |
|------------|-----------------------------------------|----------|
| ** ** | **PART****I.****FINANCIAL INFORMATION** |          |  |
|            |                                         |          |  |  |  |
|            | Item 1.                                 |          |  Condensed Consolidated Financial  Statements |  |  |
|            |                                         |          |  Condensed Consolidated Balance  Sheet as of June 30, 2007 (Unaudited) |  | 1 |
|            |                                         |          |  Condensed Consolidated Statements  of Operations for the three and six  months ended  June 30, 2007 and 2006  (Unaudited) |  | 2 |
|            |                                         |          |  Condensed Consolidated Statements  of Cash Flows for the six months  ended  June 30, 2007 and 2006  (Unaudited) |  | 3 |
|            |                                         |          |  Notes to Unaudited Condensed Consolidated  Financial Statements |  | 5 |
|            | Item 2.                                 |          |  Management's Discussion and  Analysis or Plan of Operation |  | 21 |
|            | Item 3.                                 |          |  Controls and Procedures |  | 40 |
|            |                                         |          |  |  |  |
| ** ** | **PART II. OTHER  INFORMATION**         |          |  |
|            |                                         |          |  |  |  |
|            | Item 1.                                 |          |  Legal Proceedings |  | 41 |
|            | Item 2.                                 |          |  Unregistered Sales of Equity Securities and Use of  Proceeds |  | 41 |
|            | Item 3.                                 |          |  Defaults Upon Senior Securities |  | 42 |
|            | Item 4.                                 |          |  Submission of Matters to a Vote of Security Holders |  | 42 |
|            | Item 5.                                 |          |  Other Information |  | 42 |
|            | Item 6.                                 |          |  Exhibits |  | 43 |
|            |                                         |          |  Signatures |  | 49 |
|            |                                         |          |  |  |  |
|            |                                         |          |  |  |  |

----

 

| **VillageEDOCS and subsidiaries**                                                             |  |                                                                                                                            |
|-----------------------------------------------------------------------------------------------|--|----------------------------------------------------------------------------------------------------------------------------|
| **Condensed Consolidated  Balance Sheet**                                                     |  |                                                                                                                            |
| **(Unaudited)**                                                                               |  |                                                                                                                            |
|                                                                                               |  | **June 30,**                                                                                                               |
|                                                                                               |  | **2007**                                                                                                                   |
| ** **                                                                                    |  |                                                                                                                            |
| **ASSETS**                                                                                    |  |                                                                                                                            |
| Current assets:                                                                               |  |                                                                                                                            |
| Cash                                                                                          |  | $                 476,899        |
| Accounts  receivable, net of allowance for doubtful                                           |  |                                                                                                                            |
| accounts  of approximately $70,000                                                            |  | 1,012,357                                                                                                             |
| Inventories                                                                                   |  | 176,260                                                                                                               |
| Prepaid  expenses and other current assets                                                    |  | 113,313                                                                                                               |
| Total  current assets                                                                         |  | 1,778,829                                                                                                             |
|                                                                                               |  |                                                                                                                            |
| Property and equipment, net                                                                   |  | 477,871                                                                                                               |
| Other assets                                                                                  |  | 48,610                                                                                                                |
| Goodwill                                                                                      |  | 8,784,883                                                                                                             |
| Other intangibles, net                                                                        |  | 3,782,516                                                                                                             |
|                                                                                               |  | $            14,872,709                                   |
|                                                                                               |  |                                                                                                                            |
|                                                                                               |  |                                                                                                                            |
| **LIABILITIES AND  STOCKHOLDERS' EQUITY**                                                     |  |                                                                                                                            |
| Current liabilities:                                                                          |  |                                                                                                                            |
| Accounts  payable                                                                             |  | $                  634,526  |
| Accrued  expenses                                                                             |  | 2,279,733                                                                                                             |
| Deferred  revenue                                                                             |  | 903,170                                                                                                               |
| Capital  lease obligation, current                                                            |  | 18,356                                                                                                                |
|     Lines  of credit                                                      |  | 1,187,206                                                                                                             |
|     Convertible  note and accrued interest payable to                     |  |                                                                                                                            |
|     related  party, net of unamortized debt discount of $4,895            |  | 163,724                                                                                                               |
|         Total current  liabilities                         |  | 5,186,715                                                                                                             |
|                                                                                               |  |                                                                                                                            |
| Capital lease obligation,  net of current portion                                             |  | 33,626                                                                                                                |
| Long term liability                                                                           |  | 90,000                                                                                                                |
|         Total liabilities                                  |  | 5,310,341                                                                                                             |
|                                                                                               |  |                                                                                                                            |
| Commitments and  contingencies                                                                |  |                                                                                                                            |
|                                                                                               |  |                                                                                                                            |
| Stockholders' equity:                                                                         |  |                                                                                                                            |
| Series  A Preferred stock, par value $0.001 per share:                                        |  |                                                                                                                            |
| Authorized   -- 48,000,000 shares                                                        |  |                                                                                                                            |
|         Issued and outstanding  --  33,500,000 shares |  | 33,500                                                                                                                |
| (liquidation  preference of $1,675,000)                                                       |  |                                                                                                                            |
| Common  stock, no par value:                                                                  |  |                                                                                                                            |
| Authorized  -- 500,000,000 shares                                                             |  |                                                                                                                            |
|         Issued and  outstanding -- 150,270,913 shares      |  | 18,048,744                                                                                                            |
| Additional paid-in capital                                                                    |  | 14,229,184                                                                                                            |
| Accumulated deficit                                                                           |  | (22,749,060)                                                                                                               |
| Total  stockholders' equity                                                                   |  | 9,562,368                                                                                                             |
|                                                                                               |  | $            14,872,709                                   |
| See accompanying notes to condensed  consolidated financial statements.                       |  |                                                                                                                            |

----

 

| **VillageEDOCS  and subsidiaries**                                      | ** ** | ** **                                                                                                     | ** ** | ** **                                                                                               | ** ** |                                                         |            |                                                               |
|-------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------|------------|---------------------------------------------------------------|
| **Condensed Consolidated  Statements of    Operations**  | ** ** | ** **                                                                                                     | ** ** | ** **                                                                                               |            |                                                         |            |
| **(Unaudited)**                                                         | ** ** | ** **                                                                                                     | ** ** | ** **                                                                                               | ** ** |                                                         |            |                                                               |
| ** **                                                              | ** ** | **Three Months Ended June 30,**                                                                                | ** ** | **Six Months Ended June 30,**                                                                            |
|                                                                         |            | **2007**                                                                                                       | ** ** | **2006**                                                                                                 |            | **2007**                                                | ** ** | **2006**                                                      |
| Net sales                                                               |            | $     3,812,925                                                                  |            | $     3,034,092                                                            |            | $     7,633,135           |            | $    5,101,931                       |
| Cost of sales                                                           |            | 1,382,649                                                                                                 |            | 1,112,791                                                                                           |            |  2,796,626                                    |            | 1,816,903                                                |
| Gross  profit                                                           |            | 2,430,276                                                                                                 |            | 1,921,301                                                                                           |            | 4,836,509                                          |            | 3,285,028                                                |
| Operating expenses:                                                     |            |                                                                                                                |            |                                                                                                          |            |                                                         |            |                                                               |
| Product  and technology                                                 |            |                                                                                                                |            |                                                                                                          |            |                                                         |            |                                                               |
| development                                                             |            | 474,700                                                                                                   |            | 536,578                                                                                             |            | 983,926                                            |            | 798,698                                                  |
| Sales  and marketing                                                    |            | 621,356                                                                                                   |            | 409,333                                                                                             |            | 1,165,547                                          |            | 733,097                                                  |
| General  and administrative                                             |            | 1,461,691                                                                                                 |            | 1,151,339                                                                                           |            | 3,055,750                                          |            | 2,093,094                                                |
| Depreciation  and amortization                                          |            | 236,114                                                                                                   |            | 129,828                                                                                             |            | 472,605                                            |            | 212,589                                                  |
| Total  operating expenses                                               |            | 2,793,861                                                                                                 |            | 2,227,078                                                                                           |            | 5,677,828                                          |            | 3,837,478                                                |
| Loss  from operations                                                   |            | (363,585)                                                                                                      |            | (305,777)                                                                                                |            | (841,319)                                               |            |  (552,450)                                               |
|                                                                         |            |                                                                                                                |            |                                                                                                          |            |                                                         |            |                                                               |
| Interest expense, net of  interest income                          |            | (29,768)                                                                                                       |            | (26,359)                                                                                                 |            |  (58,107)                                          |            | (49,667)                                                      |
| Other expense, net                                                      |            | (61,760)                                                                                                       |            |  (24,557)                                                                                           |            | (54,339)                                                |            | (23,965)                                                      |
| Loss  before provision for                                              |            |                                                                                                                |            |                                                                                                          |            |                                                         |            |                                                               |
| income  taxes                                                           |            | (455,113)                                                                                                      |            | (356,693)                                                                                                |            | (953,765)                                               |            |  (626,082)                                               |
|                                                                         |            |                                                                                                                |            |                                                                                                          |            |                                                         |            |                                                               |
| Provision for income taxes                                              |            | 21,962                                                                                                    |            |  -                                                                                        |            | 26,072                                             |            | 4,000                                                    |
| Net  loss                                                               |            | $    (477,075)                                                                             |            | $    (356,693)                                                                       |            | $      (979,837)          |            | $     (630,082)                      |
|                                                                         |            |                                                                                                                |            |                                                                                                          |            |                                                         |            |                                                               |
| Basic and diluted loss  available to                                    |            |                                                                                                                |            |                                                                                                          |            |                                                         |            |                                                               |
| common  stockholders per common                                         |            |                                                                                                                |            |                                                                                                          |            |                                                         |            |                                                               |
| share                                                                   |            | $                  - |            | $              -    |            | $        (0.01) |            | $         (0.01) |
|                                                                         |            |                                                                                                                |            |                                                                                                          |            |                                                         |            |                                                               |
| Weighted average shares  outstanding -                                  |            |                                                                                                                |            |                                                                                                          |            |                                                         |            |                                                               |
|  basic and diluted                                                 |            | 149,309,799                                                                                               |            | 146,535,158                                                                                         |            | 148,444,518                                        |            | 15,707,360                                               |
|                                                                         |            |                                                                                                                |            |                                                                                                          |            |                                                         |            |                                                               |
|                                                                         |            |                                                                                                                |            |                                                                                                          |            |                                                         |            |                                                               |
| See accompanying notes to condensed  consolidated financial statements. |            |                                                                                                                |            |                                                                                                          |            |                                                         |

** **

----

** **

| **VillageEDOCS and  subsidiaries**                          |  |                                                                                             |            |                                                                                                  |
|-------------------------------------------------------------|--|---------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------|
| **Condensed Consolidated  Statements of Cash Flows**        |  |                                                                                             |            |                                                                                                  |
| **(Unaudited)**                                             |  |                                                                                             |            |                                                                                                  |
| ** **                                                  |  | **Six Months Ended June 30, **                                                         |
|                                                             |  | **2007**                                                                                    | ** ** | **2006**                                                                                         |
| Cash Flows from Operating  Activities:                      |  |                                                                                             |            |                                                                                                  |
| Net  loss                                                   |  | $        (979,837)                                  |            | $         (630,082)                                 |
| Adjustments  to reconcile net loss to net cash              |  |                                                                                             |            |                                                                                                  |
| (used  in) provided by operating activities:                |  |                                                                                             |            |                                                                                                  |
| Depreciation  and amortization                              |  | 472,605                                                                                |            | 212,589                                                                                     |
| Provision  for doubtful accounts receivable                 |  | 15,009                                                                                 |            | 24,879                                                                                      |
| Estimated  fair value of stock options issued to            |  |                                                                                             |            |                                                                                                  |
| employees  for services rendered                            |  | 454,486                                                                                |            | 244,591                                                                                     |
| Common  stock issued to employees and non-employees         |  |                                                                                             |            |                                                                                                  |
| for  services rendered                                      |  | 46,211                                                                                 |            | 29,761                                                                                      |
| Amortization  of debt discount                              |  | 7,338                                                                                  |            | 7,338                                                                                       |
| Changes  in operating assets and liabilities:               |  |                                                                                             |            |                                                                                                  |
| Accounts  receivable                                        |  | (64,389)                                                                                    |            | 111,416                                                                                     |
| Inventories                                                 |  | 14,188                                                                                 |            | 8,291                                                                                       |
| Prepaid  expenses and other current assets                  |  | 24,493                                                                                 |            | (47,726)                                                                                         |
| Other  assets                                               |  | (11,068)                                                                                    |            | (3,295)                                                                                          |
| Accounts  payable                                           |  | (22,873)                                                                                    |            | 108,351                                                                                     |
| Accrued  expenses and interest                              |  | 132,883                                                                                |            | (1,060,269)                                                                                      |
| Deferred  revenue                                           |  | (173,738)                                                                                   |            | 1,173,797                                                                                   |
| Net  cash (used in) provided by operating activities        |  | (84,692)                                                                                    |            | 179,641                                                                                     |
| Cash Flows from Investing  Activities:                      |  |                                                                                             |            |                                                                                                  |
| Purchases  of property and equipment                        |  | (112,408)                                                                                   |            | (22,437)                                                                                         |
| Cash  acquired in acquisition of GSI, net of cash paid      |  | -                                                                                      |            | 234,535                                                                                     |
| Costs  incurred for purchase of GSI                         |  | -                                                                                      |            | (130,054)                                                                                        |
| Additions  to capitalized software development              |  | -                                                                                      |            | (16,144)                                                                                         |
| Net  cash (used in) provided by investing activities        |  | (112,408)                                                                                   |            | 65,900                                                                                      |
| Cash Flows from Financing  Activities:                      |  |                                                                                             |            |                                                                                                  |
| Proceeds  from lines of credit, net                         |  | 347,206                                                                                |            | -                                                                                           |
| Proceeds  from notes payable                                |  | -                                                                                      |            | 10,000                                                                                      |
| Payments  on capital lease obligation                       |  | (12,026)                                                                                    |            | -                                                                                           |
| Principal  payments on notes payable                        |  | -                                                                                      |            | (108,281)                                                                                        |
| Principal  payments on notes payable to related parties     |  | (30,000)                                                                                    |            | (70,000)                                                                                         |
| Principal  payments on convertible notes to related parties |  | (200,000)                                                                                   |            | (200,000)                                                                                        |
| Net  cash provided by (used in) financing activities        |  | 105,180                                                                                |            | (368,281)                                                                                        |
| Net  change in cash                                         |  | (91,920)                                                                                    |            | (122,740)                                                                                        |
|                                                             |  |                                                                                             |            |                                                                                                  |
| Cash,  beginning of period                                  |  | 568,819                                                                                |            | 762,051                                                                                          |
| Cash,  end of period                                        |  | $           476,899             |            | $          639,311                        |
| Supplemental disclosure of  cash flow information -         |  |                                                                                             |            |                                                                                                  |
| Cash  paid during the period for:                           |  |                                                                                             |            |                                                                                                  |
| Interest                                                    |  | $             47,853  |            | $            37,342             |
| Income  taxes                                               |  | $             26,072  |            | $              4,000  |
| continued.                                                  |  |                                                                                             |            |                                                                                                  |

** **

----

** **

| Supplemental Schedule of  Noncash Investing                             |                                                                                        |                                                                                                                                         |                                                                                                                |                                                                          |
|-------------------------------------------------------------------------|----------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------|
|  and Financing Activities:                                         |                                                                                        | **2007**                                                                                                                                | ** **                                                                                                     | **2006**                                                                 |
|                                                                         |                                                                                        |                                                                                                                                         |                                                                                                                |                                                                          |
|                                                                         |                                                                                        |                                                                                                                                         |                                                                                                                |                                                                          |
| Issuance  of common stock as acquisition cost                           |                                                                                        | $             92,400                                              |                                                                                                                | $      254,100                        |
| Issuance  of common stock on conversion of preferred stock              |                                                                                        | $                       - |                                                                                                                | $          2,500  |
| Estimated  fair value of common stock issued in connection              |                                                                                        |                                                                                                                                         |                                                                                                                |                                                                          |
| with  acquisition                                                       |                                                                                        | $                       - |                                                                                                                | $   4,266,388                                             |
| Accrual  for patent license                                             |                                                                                        | $                        -     |                                                                                                                | $      250,000                             |
| Acquisition  of property and equipment through capital lease obligation | $             55,858  |                                                                                                                                    | $                 -  |
|                                                                         |                                                                                        |                                                                                                                                         |                                                                                                                |                                                                          |
| See accompanying notes to condensed  consolidated financial statements. |                                                                                        |                                                                                                                                    | *** ***                                                                                                   |                                                                          |

** **

** **

** **

----

** **

 

**VillageEDOCS**

**Notes to Unaudited Condensed Consolidated FinancialStatements June 30, 2007 and 2006**

** **

**1.          Management'sRepresentation**

The accompanying unaudited condensed consolidated financialstatements have been prepared by VillageEDOCS (the "Company") in accordancewith accounting principles generally accepted in the United States of Americafor interim financial information. These principles are consistent in allmaterial respects with those applied in the Company's condensed consolidated financialstatements contained in the Company's annual report on Form 10-KSB for the yearended December 31, 2006, and pursuant to the instructions to Form 10-QSB andItem 310(b) of Regulation S-B promulgated by the United States Securities andExchange Commission ("SEC"). Interim financial statements do not include all ofthe information and footnotes required by accounting principles generallyaccepted in the United States of America for complete financial statements. Inthe opinion of management, the accompanying unaudited condensed consolidatedfinancial statements contain all adjustments (all of which are of a normalrecurring nature, including the elimination of intercompany accounts) necessaryto present fairly the financial position, results of operations and cash flowsof the Company for the periods indicated. Interim results of operations are notnecessarily indicative of the results to be expected for the full year or anyother interim periods. These unaudited condensed consolidated financialstatements should be read in conjunction with the condensed consolidated financialstatements and footnotes thereto contained in the Company's annual report onForm 10-KSB for the year ended December 31, 2006. 

 

**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 United States and internationally.  On February 17, 2004, the Company acquired TailoredBusiness Systems, Inc. ("TBS").  TBS provides various programming,processing and printing services to governmental entities, including installingsoftware, hardware, printing and mailing of property tax forms.  On June 16,2004, the holders of a majority of the voting capital stock of the Companyvoted to approve a Plan of Restructuring that included the reorganization ofthe Company's electronic document delivery business into a wholly ownedsubsidiary of the Company.  In connection with the reorganization, the Companyformed 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 condensed consolidated financial statementsinclude the accounts of the Company and those of MVI, TBS, Resolutions, and GSI,its wholly-owned subsidiaries, since October 25, 2004, February 17, 2004, April1, 2005, and May 1, 2006, respectively.   All significant inter-companytransactions and balances have been eliminated in consolidation.

 

**3.          GoingConcern**

The accompanying condensed consolidated financial statementshave been prepared assuming that the Company will continue as a going concern.The Company has incurred significant losses since inception, and has a workingcapital deficit ($3,407,886 as of June 30, 2007).  The Company's losses arecontinuing and are expected to continue until such time as the Company is ableto 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 improved during 2006 to a level sufficient to support operatingexpenses, the Company's operations used net cash during the first half of 2007. Should such cash flows decrease for any reason, management plans to obtain debtand equity financing from new and existing stockholders.    There can be noassurance that funding will be available on acceptable terms, if at all, orthat such funds, if raised, would enable the Company to achieve or sustainprofitable operations.

These factors, among others, raise substantial doubt aboutthe Company's ability to continue as a going concern.  The condensedconsolidated financial statements do not include any adjustments to reflect thepossible future effects on the recoverability and classification of assets orthe classification 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 five reportable segments aremanaged separately based on fundamental differences in their operations. At June30, 2007, the Company operated in the following five reportable segments (seeNote 10): 

> 
(a)  Electronic document deliveryservices,(b)  Government accounting solutions,(c)  Electronic forms,(d)  Integrated communications, and(e)  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.  MVI and GSI generally require a valid credit card or ACHdebit account to collateralize credit extended to non-corporate clients. TheCompany evaluates its accounts receivable on a regular basis for collectibilityand provides for an allowance for potential credit losses as deemed necessary. At June 30, 2007, the Company has recorded an allowance for doubtful accountsof approximately $70,000.

Forthe six months ended June 30, 2007 and 2006, independent representatives of oneenterprise accounted for approximately 28% and 15%, respectively, of totalrevenues.  

Nosingle customer accounted for more than 10% of accounts receivable at June 30,2007.

 

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,recoverability of long-lived assets, valuation of stock options, warrants, anddeferred tax assets.   Actual results could differ from those estimates.

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.  Majorbetterments and renewals are capitalized, while routine repairs and maintenanceare charged to expense when incurred.

Revenue Recognition

TheCompany recognizes revenue 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 services have beenperformed, the price is fixed or readily determinable and collectability isprobable.  Sales are recorded net of sales discounts.

TheCompany has adopted Statement of Position ("SOP") 97-2, *Software Revenue Recognition*,as well as SOP 98-9, *Modification of SOP 97-2, Software Revenue Recognitionwith Respect to Certain Transactions.* The SOPs generally require revenueearned on software arrangements involving multiple elements to be allocated toeach element based on the relative fair market values of each of the elements.The fair value of an element must be based on vendor-specific objectiveevidence ("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. 

Revenuefrom subscription agreements consists of fixed monthly fees and usage charges,generally based on per minute rates.  Subscription agreement revenue related toMVI and GSI usage service charges are billed monthly in arrears and theassociated revenues are recognized in the month of service. Recurring chargesfor the GoSoloTM platform are billed in advance on a monthly basis and recordedas deferred revenues. The Company recognizes subscription agreement revenueratably over the service period, which management believes approximates theactual provision of services. Professional service fee revenue consists ofconsulting fees charged to enterprise clients for GoSoloTM platform enhancements.The Company recognizes professional service fee revenue on a time and materialsbasis over the service period, which management believes approximates theactual provision of services.  Wholesale enhanced voicemail services consistsof fees charged to telecommunications providers for use of the GoSoloTM platformto provide their customers with hosted electronic voicemail, billed monthly inarrears and the associated revenues are recognized in the month of service.

Significantmanagement judgments and estimates must be made in connection withdetermination of the revenue to be recognized in any accounting period. If 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 inindustries that are subject to intense competition, government regulation andrapid 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, approximately 1,200,000 and 16,000,000 of potentially dilutiveshares as of June 30, 2007 and 2006, respectively, have been excluded fromdiluted loss per share, as their effect would be anti-dilutive for the periods thenended.

Software DevelopmentCosts

The Company capitalizessoftware development costs pursuant to SFAS No. 86, *Accounting for the Costsof Computer Software to be Sold, Leased or Otherwise Marketed,* aftertechnological feasibility of the software is established, which is generallythe completion of a working prototype and ends upon general release of theproduct to the Company's customers. All costs incurred in the research anddevelopment of new software and costs incurred prior to the establishment oftechnological feasibility are expensed as incurred. Capitalized costs consistof direct costs and allocated overhead associated with the development of thesoftware products.  Amortization of software development costs commences whenthe product becomes available for general release to customers and is computedbased on the straight-line method over the software's estimated economic lifeof approximately three years.  The Company reviews the unamortized softwaredevelopment costs at each balance sheet date and, if necessary, will write downthe balance to net realizable value if the unamortized costs exceed the netrealizable value of the asset.  At June 30, 2007, management determined that noimpairment existed.

Inventories

Inventories consist primarily ofsupplies, forms, envelopes, and software licenses purchased for resale.  Costis determined on a first-in, first-out basis.  The Company periodically reviewsits inventory quantities on hand and adjusts for excess and obsolete inventorybased primarily on historical usage rates and its estimated forecast of productdemand.  Actual demand may differ from the Company's estimates.  Onceestablished, write-downs of inventory are considered permanent adjustments tothe basis of the excess or obsolete inventory.

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 Other IntangibleAssets.* The provisions of SFAS No. 142 require that the Company allocateits goodwill to its various reporting units, determine the carrying value ofthose businesses, and estimate the fair value of the reporting units so that atwo-step goodwill impairment test can be performed.  In the first step ofthe goodwill impairment test, the fair value of each reporting unit is comparedto its carrying value.  Management reviews, on an annual basis, thecarrying value of goodwill in order to determine whether impairment hasoccurred.  Impairment is based on several factors including the Company'sprojection of future discounted operating cash flows. If an impairment of thecarrying value were to be indicated by this review, the Company would performthe second step of the goodwill impairment test in order to determine theamount of goodwill impairment, if any. 

During the six months ended June30, 2007, the carrying amount of the Company's goodwill increased by $92,400due to additional goodwill acquired in connection with the acquisition of TBS(see Note 5).

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 June 30, 2007, 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 June 30, 2007, the Company hadtwo stock-based compensation plans.

On January 1, 2006,the Company adopted SFAS No. 123 (revised 2004), *Share-Based Payment*,("SFAS 123(R)") which establishes standards for the accounting of transactionsin which an entity exchanges its equity instruments for goods or services,primarily focusing on accounting for transactions where an entity obtainsemployee services in share-based payment transactions. SFAS 123(R) requires apublic entity to measure the cost of employee services received in exchange foran award of equity instruments, including stock options, based on thegrant-date fair value of the award and to recognize it as compensation expenseover the period the employee is required to provide service in exchange for theaward, usually the vesting period.  In March 2005, the SEC issued StaffAccounting Bulletin No. 107 ("SAB 107") relating to SFAS 123(R). TheCompany has applied the provisions of SAB 107 in its adoption of SFAS 123(R).

SFAS 123(R)requires companies to estimate the fair value of share-based payment awards onthe date of grant using an option-pricing model. The value of the portion ofthe award that is ultimately expected to vest is recognized as expense over therequisite service periods in the Company's condensed consolidated statements ofoperations.

Stock-basedcompensation expense recognized during the period is based on the value of theportion of share-based payment awards that is ultimately expected to vestduring the period. Stock-based compensation expense recognized in the Company'scondensed consolidated statements of operations for the three and six monthsended June 30, 2007 and 2006 included compensation expense for share-basedpayment awards granted prior to, but not yet vested as of December 31,2005 based on the grant date fair value estimated in accordance with the proforma provisions of SFAS No. 123, *Accounting for Stock-BasedCompensation* ("SFAS 123"), and compensation expense for the share-basedpayment awards granted subsequent to December 31, 2005 based on the grantdate fair value estimated in accordance with the provisions of SFAS 123(R). Asstock-based compensation expense recognized in the condensed consolidatedstatements of operations for the three and six months ended June 30, 2007 and2006 is based on awards ultimately expected to vest, it has been reduced forestimated forfeitures. SFAS 123(R) requires forfeitures to be estimated at thetime of grant and revised, if necessary, in subsequent periods if actualforfeitures differ from those estimates. The estimated average forfeiture ratefor the six months ended June 30, 2007 and 2006, of approximately 10%, and 21%,respectively, was based on historical forfeiture experience and estimatedfuture employee forfeitures. The estimated pricing term of option grants forthe first six months of 2007 and 2006 was five years.

SFAS 123(R)requires the cash flows resulting from the tax benefits resulting from taxdeductions in excess of the compensation cost recognized for those options tobe classified as financing cash flows. Due to the Company's loss position,there were no such tax benefits during the six months ended June 30, 2007 and2006.

***Description of Plans***

The Company's stock option plans provide for grants of options toemployees and directors of the Company to purchase the Company's shares, asdetermined by management and the board of directors, at the fair value of suchshares on the grant date. The options generally vest over a five-year periodbeginning on the grant date and have a seven-year term. As of June 30, 2007,the Company is authorized to issue up to 95,000,000 shares under these plansand has approximately 55,000,000 shares available for future issuances.

***Summary of Assumptions andActivity***

The fair value of stock-basedawards to employees and directors is calculated using the Black-Scholes optionpricing model even though the model was developed to estimate the fair value offreely tradeable, fully transferable options without vesting restrictions,which differ significantly from the Company's stock options. The Black-Scholesmodel also requires subjective assumptions, including future stock pricevolatility and expected time to exercise, which greatly affect the calculatedvalues. The expected term of options granted is derived from historical data onemployee exercises and post-vesting employment termination behavior. Therisk-free rate selected to value any particular grant is based on the U.S.Treasury rate that corresponds to the pricing term of the grant effective as ofthe date of the grant. The expected volatility is based on the historicalvolatility of the Company's stock price. These factors could change in thefuture, affecting the determination of stock-based compensation expense infuture periods.  The fair value of options granted was estimated using thefollowing weighted average assumptions:

|                          |  | Six Months Ended                                                     |
|--------------------------|--|----------------------------------------------------------------------|
|                          |  | June 30,                                                             |
|                          |  | 2007                                                                 |  | 2006 |
| Stock options:           |  |                                                                      |  |  |
| Expected term (in years) |  | 5.0                                                                  |  | 5.0 |
| Expected volatility      |  | 360% - 376%                                                          |  | 311% |
| Risk-free interest rate  |  | 4.86%                                                                |  | 4.63% |
| Expected dividends       |  |           -   |  |           -   |

A summary of option activity as of June 30, 2007 and changes during the sixmonths then ended, is presented below:

|                                                     |  | **June 30, 2007** |
|-----------------------------------------------------|--|-------------------|
|                                                     |  | ** **        | **Weighted-Average** | ** ** |
|                                                     |  | ** **        | ** ** | **Remaining** | **Aggregate** |
|                                                     |  | ** **        | **Exercise** | **Contractual** | **Intrinsic** |
|                                                     |  | **Shares**        | **Price** | **Term (Years)** | **Value** |
| Options outstanding at January 1, 2007              |  | 38,971,557   | $0.19 |  |  |
| Options granted                                     |  | 5,297,392    | $0.18 |  |  |
| Options forfeited                                   |  | (4,532,050)       | $0.19 |  |  |
| Options exercised                                   |  | -            | $     - |  |  |
| Options outstanding at June 30, 2007                |  | 39,736,899   | $0.19 | 6.2 | $          -  |
| Options vested or expected to vest at June 30, 2007 |  | 37,610,598   | $0.19 | 6.2 | $          -  |
| Options exercisable at June 30, 2007                |  | 19,677,459   | $0.27 | 4.1 | $          -  |
|                                                     |  |                   |  |  |  |

Theweighted average grant date fair value of options granted during the six monthsended June 30, 2007 was $0.09 per option.  Upon the exercise of options, theCompany issues new shares from its authorized shares.

As of June 30, 2007, there was approximately $1,100,000 of totalunrecognized compensation cost, net of forfeitures, related to employee anddirector stock option compensation arrangements. That cost is expected to berecognized on a straight-line basis over the next 3.9 weighted average years.The total fair value of shares vested during the six months ended June 30, 2007and 2006 was $454,486 and $244,591, respectively, net of an estimatedforfeiture rate of 10% and 21%, respectively, which was recorded as general andadministrative expense in the accompanying condensed consolidated statements ofoperations.

Beneficial Conversion Feature 

The convertible note provides for arate of conversion that is below market value (see Note 6). Such feature isnormally characterized as a "beneficial conversion feature"("BCF"). Pursuant to Emerging Issues Task Force ("EITF") Issue No.98-5 *Accounting For Convertible Securities with Beneficial ConversionFeatures or Contingently Adjustable Conversion Ratio*and EITF Issue No.00-27,*Application of EITF Issue No. 98-5 To Certain ConvertibleInstruments,* the relative fair values of the BCFs have been recorded as adiscount from the face amount of the respective debt instrument. The Company isamortizing the discount using the effective interest method through maturity ofsuch instruments.

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, Resolution's electronic form software, andGSI's communications services.  Product and technology development costs areexpensed 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 June 30 2007,management of the Company determined that a warranty reserve was notnecessary.  In addition, the charges to expense during the three and six monthsended June 30, 2007 and 2006 were insignificant.

**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.  On May 7, 2007 and pursuant to the TBSacquisition agreement, the Company issued 1,100,000 shares of common stock to eachof Messrs. Garner and Campbell.  The shares were valued at $0.04 per share (theestimated fair value on the date that the shares were issued) and recorded asadditional purchase price.  No additional shares of common stock are due toMessrs. Garner and Campbell pursuant to the TBS acquisition agreement.

On May 7, 2007 and in connectionwith the acquisition of TBS, the Company issued 110,000 shares of itsrestricted common stock to a non-affiliate pursuant to a finder's feeagreement.  The shares were valued at $0.04 per share (the estimated fair valueon the date that the shares were issued) and recorded as additional purchaseprice.

On May 7, 2007 and in connection with theacquisition of TBS, the Company issued 66,000 shares of its restricted commonstock to H. Jay Hill, who is an officer and director of the Company, as afinder's fee.  The shares were valued at $0.04 per share (the estimated fairvalue on the date that the shares were issued) and were recorded ascompensation expense.

*Other Intangible Assets*

On May 12, 2006, the Companyentered into a Patent License Agreement (the "License Agreement") with CatchCurve, Inc. ("Catch Curve").  Pursuant to the License Agreement, Catch Curvegranted the Company a worldwide, non-exclusive, non-divisible, fully paid-uplicense to use certain patented technology in connection with any facsimileproducts or services made or sold by the Company or its subsidiaries.  TheCompany is obligated to make aggregate license payments of $600,000 over aperiod of up to thirty-two months beginning on May 12, 2006, at which time nofurther payments are required under the License Agreement.   License paymentsof $180,000 are due in each of the years ended December 31, 2007 and 2008. TheLicense Agreement stipulates that $350,000 of the total license fee isattributable to sales of products and services prior to the date of the LicenseAgreement.  The remainder of $250,000 is attributable to sales of products andservices subsequent to the date of the License Agreement. Accordingly, on May12, 2006, the Company recorded an intangible asset in the amount of $250,000. The intangible asset is being amortized over 58 months, the current remaininglife of the patents covered by the License Agreement.  During the six monthsended June 30, 2007, the Company made license payments of $90,000 under theLicense Agreement.  At June 30, 2007, the unpaid balance due was $270,000.  Inaccordance with the terms of the License Agreement, the Company has classified$180,000 of the total amount due as a current liability and has classified theremainder of $90,000 as a long-term liability on the accompanying condensedconsolidated balance sheet.

Other intangibles consist of thefollowing as of June 30, 2007: 

|  |                                                                |  | Estimated Useful  Life |   | Gross  Carrying | Accumulated  | Net Carrying  |
|--|----------------------------------------------------------------|--|------------------------|---|-----------------|--------------|---------------|
|  |                                                                |  | (Years)                |   | Amount          | Amortization | Amount        |
|  | Corporate:                                                     |  |                        |   |                 |              |               |
|  |    License  agreement                           |  | Five                   | $ | 250,000    |  $      | (58,187)      |  $ | 191,813  |
|  |                                                                |  |                        |   |                 |              |               |
|  | TBS:                                                           |  |                        |   |                 |              |               |  |  |
|  |  Customer  list        |  | Ten                    | $ | 500,000    |  $      | (168,750)     |  $ | 331,250  |
|  |  Trade name                                               |  | Five                   |   | 50,000     | (33,750)     | 16,250   |
|  |                                                                |  |                        |   | 550,000    | (202,500)    | 347,500  |
|  | Resolutions:                                                   |  |                        |   |                 |              |               |
|  |  Customer relationships                                   |  | Ten                    |   | 570,000    | (130,425)    | 439,575  |
|  |  Software development                                     |  | Five                   |   | 104,170    | (26,742)     | 77,428   |
|  |  Trade name                                               |  | Five                   |   | 50,000     | (22,500)     | 27,500   |
|  |  Covenant not to compete                                  |  | Three                  |   | 26,100     | (17,400)     | 8,700    |
|  |                                                                |  |                        |   | 750,270    |              | (197,067)     |  | 553,203  |
|  | GSI:                                                           |  |                        |   |                 |              |               |  |  |
|  |    Customer relationships                       |  | Ten                    |   | 2,200,000  |              | (256,667)     |  | 1,943,333  |
|  |    Technology                                   |  | Five                   |   | 490,000    |              | (114,333)     |  | 375,667  |
|  |    Trade names and marks                        |  | Ten                    |   | 420,000    |              | (49,000)      |  | 371,000  |
|  |                                                                |  |                        |   | 3,110,000  |              | (420,000)     |  | 2,690,000  |
|  |                                                                |  |                        |   |                 |              |               |  |  |
|  | Total other  intangible assets                                 |  |                        | $ | 4,660,270  |  $      | (877,754)     |  $ | 3,782,516  |
|  |                                                                |  |                        |   |                 |              |               |  |  |  |  |

Amortization of other intangibleassets was $278,637 and $74,316 during the six months ended June 30, 2007 and2006, respectively.  During the six months ended June 30, 2007, the Company didnot acquire or dispose of any intangible assets.

The estimated amortization expensefor the five years ending December 31, 2011 is as follows: 

|  | Years Ending 

December 31, |  |  |
|--|-----------------------------|--|--|
|  |                             |  |  |  
2007

$

566,000

 
2008

562,000

 
2009

549,000

 
2010

539,000

 
2011

419,000

 
$

2,635,000

 
** **

 

**6.           Debt**

** **           Bank Lines of Credit

In connection with the acquisitionof GSI, the Company has a $1,000,000 revolving line of credit (the"Line") with a financial institution and used proceeds to fund arequired payment of $840,000 pursuant to the Settlement Agreements withdissenting shareholders of GSI.  The Line matures on September 12, 2007. Interest on outstanding borrowings is payable monthly at a rate equal to theprime rate (8.25% per annum as of June 30, 2007 and subject to adjustment). The line is collateralized by the assets of GSI and guaranteed by fourshareholders of the Company who were formerly shareholders of GSI.   As of June30, 2007, no principal payments have been made against outstanding borrowingsof $840,000 and the Company was in compliance with all loan covenants.

Effective September 30, 2006,VillageEDOCS obtained a $500,000 revolving line of credit ("RLOC") with afinancial institution.  The RLOC is guaranteed by a shareholder of theCompany.  Interest on outstanding borrowings is payable monthly at an annualrate of interest equal to LIBOR (5.3% at June 30, 2007) plus 2%.  As of June 30,2007, there were outstanding borrowings of $347,206 on the RLOC and the Companywas in compliance with all loan covenants.

Effective November 28, 2005, TBSrenewed a $100,000 revolving line of credit ("TBS RLOC)" with a financialinstitution.  The TBS RLOC is guaranteed by the assets of TBS.   Interest onoutstanding borrowings is payable monthly at a variable annual rate equal tothe financial institution's prime rate in effect.  As of June 30, 2007, therewere no outstanding borrowings under TBS RLOC and the Company was in compliancewith all loan covenants.

Alexander Riess and WilliamFalcon

An aggregate of $30,000 in notespayable to Alexander Riess and William Falcon (related parties) were assumed inthe acquisition of Resolutions.  The notes were non-interest bearing.  Thenotes were paid in full as of March 1, 2007 in accordance with the acquisitionagreement.

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.  The Company is amortizing the discount using the effectiveinterest method through October 31, 2007.

At June 30, 2007, the amount owedby the Company to the Williams pursuant to the unpaid balance of theconvertible promissory note payable was $65,000 in principal and $103,619 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").  Messrs. Campbell and Garner are employees of TBS. Each of the TBS Notes bore interest at 5 percent per annum and was due andpayable in three equal annual installments of $100,000, with the firstinstallment paid in February 2005, the second installment paid in March 2006and the final installment paid in February 2007.
 
**7.           Stockholders'Equity**

a.       Common Stock

On February 22, 2007, the Companyissued an aggregate of 500,000 shares of its restricted common stock to aconsultant in connection with a placement agency agreement.  The 500,000 shareswere valued at $0.085 per share (fair value on the measurement date) and theCompany recorded $42,500 of consulting expense in the accompanying condensedconsolidated statements of operations for the six months ended June 30, 2007 inaccordance with the nature of the services provided.

On May 7, 2007 and pursuant to theTBS acquisition agreement, the Company issued 1,100,000 shares of common stockto each of Messrs. Garner and Campbell.  The shares were valued at $0.04 pershare (the estimated fair value on the measurement date) and recorded asadditional purchase price.  No additional shares of common stock are due toMessrs. Garner and Campbell pursuant to the TBS acquisition agreement.

On May 7, 2007 and in connectionwith the acquisition of TBS, the Company issued 110,000 shares of itsrestricted common stock to a non-affiliate pursuant to a finder's feeagreement.  The shares were valued at $0.04 per share (the estimated fair valueon the measurement date) and recorded as additional purchase price.

On May 7, 2007 and in connection with theacquisition of TBS, the Company issued 66,000 shares of its restricted commonstock to H. Jay Hill, who is an officer and director of the Company, as afinder's fee.  The shares were valued at $0.04 per share (the estimated fairvalue on the measurement date) and were recorded as compensation expense.

On May 7, 2007, the Company issued 26,786 shares ofits restricted common stock to a non-affiliate independent contractor forproject management services rendered.  The shares were valued at $0.04 pershare (the estimated fair value on the measurement date) and were recorded asconsulting expense during the three months ended June 30, 2007.

During the quarter ended June 30,2007, a majority of the Company's stockholders approved a proposal to increasethe authorized shares of the Company to 500,000,000 from 400,000,000.

b.       StockOptions

During the six months ended June 30,2007, the Company granted to its employees options to purchase shares of itscommon stock under the 2002 Plan as follows:  4,242,392 shares at $0.19 pershare and 1,055,000 shares at $0.15.  All options were issued at or above fairvalue on the dates of grant and vest on various dates from the dates of grantthrough June 2012.  During the six months ended June 30, 2007, options topurchase 4,532,050 were forfeited due to their expiration.

**8.           Commitmentsand Contingencies**

Leases

The Company leases certain property and equipmentunder operating lease agreements (including three related party leases - seeNote 10) which expire on various dates through 2012 and provide for monthlylease payments ranging from $28 to $12,653.

On April 23, 2007, the Company obtained an executedcommercial real estate lease agreement from an unrelated third party for officespace from which the Company will conduct the operations of its corporateheadquarters and those of its wholly-owned subsidiary, MVI, for a term of fiveyears commencing on June 1, 2007.  Pursuant to the lease agreement, the Companyand MVI will occupy approximately 5,750 square feet at a cost of $10,063,$10,064, $10,675, $10,996, and $11,325 per month for each of the twelve monthperiods ended June 30, 2008, 2009, 2010, 2011, and 2012, respectively.

The Company also leases equipment under a capitallease agreement which expires in August 2007 and provides for a monthly leasepayment of $1,019.

Litigation

The Company is, from time to time, involved invarious legal and other proceedings which arise in the ordinary course ofoperating its business. 

In connection with the acquisition of GSI theCompany is entitled to certain rights of indemnification from GoSolutionsEquity, LLC, which is a former shareholder of GSI that became a shareholder ofthe Company as a result of our acquisition of GSI.  The Company made a claim ofindemnification from this entity in connection with the bankruptcy of one ofGSI's significant customers - Vartec Telecom, Inc. - and the facts andcircumstances relating to the procurement and maintenance of the Primerica LifeInsurance account and related Citigroup affiliates.  GoSolutions Equity, LLChas indicated that it does not believe that we have a valid basis for makingsuch indemnification claims.

The Company has not engaged in meaningfuldiscussions with GoSolutions Equity, LLC as it relates to the indemnificationclaims notice and their response to such claims notice.  Accordingly, theCompany is unable to advise whether it will be successful in theindemnification claims against GoSolutions Equity, LLC.  Pursuant to theagreement with GSI, if the Company is successful, GoSolutions Equity, LLC wouldonly be required to return up to approximately 4.4 million of our shares issuedto that entity to satisfy such indemnification claims.  GoSolutions Equity, LLCis not required to contribute cash to satisfy any indemnification claims.

In the opinion of management, the amount ofultimate liability, if any, with respect to these actions will not materiallyaffect the consolidated financial position or results of operations of theCompany.

In March 2007, GSI was served by the Trustee forVartec Telecom, Inc. ("Trustee") in the United States Bankruptcy Court for theNorthern District of Texas, Dallas Division ("Bankruptcy Court"), Case No.04-81694-hdh-7.  The complaint sought recovery of approximately $400,000 foralleged preferential transfers made in 2004.  On July 19, 2007, the BankruptcyCourt issued an order approving a compromise and settlement between the Trusteeand GSI pursuant to which the claims of the Trustee and the counterclaims ofGSI were settled in consideration for GSI's payment of $65,000 over a four monthperiod that began on July 1, 2007.  Accordingly, the Company has recorded otherexpense of $65,000 in the accompanying condensed consolidated statement ofoperations and classified the total amount due as a current liability in theaccompanying condensed consolidated balance sheet.

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 Company hasmade certain indemnities and guarantees under which it may be required to makepayments in relation to certain transactions.  The Company indemnifies itsdirectors, officers, employees and agents to the maximum extent permitted underthe laws of the States of California, Florida, and Georgia.  These indemnitiesinclude certain agreements with the Company's officers under which the Companymay be required to indemnify such person for liabilities arising out of theiremployment relationship.  In connection with its facility leases, the Companyhas indemnified its lessors for certain claims arising from the use of thefacilities.  In connection with the Company's acquisition of TBS, the partieshave agreed to indemnify each other from claims relating to the acquisitionagreement to a maximum of $1,500,000 except in the event of fraud, willfulmisconduct, or breaches of certain representations and warranties contained inthe agreement.  In connection with the Company's acquisitions of Resolutionsand GSI, the parties have agreed to indemnify each other from claims relatingto the acquisition agreement.  The duration of these indemnities and guaranteesvaries and, in certain cases, is indefinite.  The majority of these indemnitiesand guarantees do not provide for any limitation of the maximum potentialfuture payments the Company could be obligated to make.  Historically, theCompany has not been obligated to make significant payments for theseobligations and no liabilities have been recorded for these indemnities andguarantees in the accompanying condensed consolidated balance sheet.

**9.           SegmentReporting**

The Company's operationsare classified into five 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.  The Company operates in the following five reportablesegments: 

(a)  Electronic document delivery services,(b)  Government accounting solutions,(c)  Electronic forms,(d)  Integrated communications, and(e)  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 accounting principles generally accepted in the United States of America:

**Quarter ended /**

** **

**Quarter**

** **

**SixMonths**

** **

**Six Months**

(1)

**As of**

** **

**ended**

** **

**ended / As of**

** **

**ended**

**June 30,**

** **

**June 30,**

** **

**June 30,**

** **

**June 30,**

**2007**

** **

**2006**

** **

**2007**

** **

**2006**

Net revenue from external  customers:

Electronic document delivery

$         773,762 

$      770,490 

$         1,547,010 

$    1,509,122 

Government accounting  solutions

961,411 

746,928 

2,027,838 

1,634,699 

Electronic forms

477,490 

520,597 

1,039,151 

962,033 

Integrated communications

1,600,262 

996,077 

3,019,136 

996,077 

Corporate

- 

- 

- 

 - 

Total  net revenue from 

     external customers:

$     3,812,925 

$   3,034,092 

$         7,633,135 

$   5,101,931 

Operating income (loss):

Electronic document delivery

$        100,200 

$      300,621 

$           232,964 

$       482,998 

Government accounting  solutions

(36,253)

(186,927)

107,545 

(169,706)

Electronic forms

89,808 

(32,877)

187,010 

(54,679)

Integrated communications

194,744 

145,530 

253,206 

145,530 

Corporate

(712,084)

(532,124)

(1,622,044)

(956,593)

Total  operating loss:

$      (363,585)

$     (305,777)

$          (841,319)

$    (552,450)

Depreciation and  amortization:

Electronic document delivery

$         15,478 

$        13,311 

$              28,481 

$        21,809 

Government accounting  solutions

27,909 

35,912 

55,980 

73,257 

Electronic forms

33,919 

20,855 

67,839 

57,773 

Integrated communications

145,878 

52,262 

294,445 

52,262 

Corporate

12,930 

7,488 

25,860 

7,488 

Total  depreciation and amortization:

$       236,114 

$      129,828 

$           472,605 

$      212,589 

Interest expense, net of  interest income:

Electronic document delivery

$                   - 

$                 - 

$                     - 

$           1,616 

Government accounting  solutions

258 

- 

258 

- 

Electronic forms

334 

2,867 

838 

3,214 

Integrated communications

(182)

2,178 

(334)

2,178 

Corporate

29,358 

21,314 

57,345 

42,659 

Total  interest expense, net of interest income:

$          29,768 

$        26,359 

$            58,107 

$       49,667 

**Quarter ended /**

** **

**Quarter**

** **

**Six Months**

** **

**Six Months**

(1)

**As of**

** **

**ended**

** **

**ended / As of**

** **

**ended**

**June 30,**

** **

**June 30,**

** **

**June 30,**

** **

**June 30,**

**2007**

** **

**2006**

** **

**2007**

** **

**2006**

Net income (loss):

Electronic document delivery

$         100,703 

$      301,064 

$       233,467 

$       482,417 

Government accounting  solutions

(36,511)

(186,927)

113,587 

(169,706)

Electronic forms

89,474 

(35,744)

186,172 

(57,893)

Integrated communications

110,734 

143,352 

169,685 

143,352 

Corporate

(741,475)

(578,438)

(1,682,748)

(1,028,252)

Total  net loss:

$        (477,075)

$    (356,693)

$     (979,837)

$     (630,082)

Identifiable assets:

Electronic document delivery

$         959,883 

$       959,883 

Government accounting  solutions

4,595,818 

4,595,818 

Electronic forms

3,485,668 

3,485,668 

Integrated communications

5,410,312 

5,410,312 

Corporate

421,028 

421,028 

Total  identifiable assets:

$    14,872,709 

$  14,872,709 

Capital expenditures:

Electronic document delivery

$          31,153 

$         7,025 

$        52,217 

$       22,437 

Government accounting  solutions

50,909 

- 

63,175 

- 

Electronic forms

- 

6,743 

973 

16,144 

Integrated communications

35,452 

- 

46,113 

- 

Corporate

5,788 

- 

5,788 

- 

Total capital expenditures:

$        123,302 

$        13,768 

$     168,266 

$       38,581 

(1) 2006 period results and  balances for the Integrated communications segment are reported as of and for  the period 

   from May 1, 2006 (date of  acquisition) through June 30, 2006

 

** **

** **

**10.           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 Note 6.  

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,with monthly payments of $6,200.  In addition, TBS has an equipment lease withPerimeter Center Partners for certain equipment used in its operations.  Thelease commenced May 19, 2007 and has a term of approximately thirty-twoand one-half months, with monthly payments of $1,746.  The Company has executeda Guaranty with respect to each lease.  Perimeter Center Partners is owned byStephen A. Garner and James L. Campbell, who are significant employees of theCompany and the former owners of TBS.

GSI leases the St. Petersburg office space pursuantto a noncancelable operating lease agreement expiring on April 30, 2011 at acost of $12,653, $13,232, $13,841, $14,485, and $15,164 per month for each ofthe twelve month periods ended April 2007, 2008, 2009, 2010, and 2011,respectively.  The building in which the office space is located is owned by anentity in which a member of GoSolutions Equity, LLC (a related party) owns aninterest.  

** **

 

**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 ABOUT FORWARD-LOOKINGSTATEMENTS" and the caption entitled "CERTAIN FACTORS THAT MAY AFFECTFUTURE RESULTS" which can be found in Item 6. Management's Discussion andAnalysis or Plan of Operation of the Annual Report on Form 10-KSB filed withthe U.S. Securities and Exchange Commission ("SEC") on April 2, 2007.*

** **

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 and Estimates

-       Resultsof Operations

-       Liquidityand Capital Resources

-       CautionaryInformation About Forward-Looking Statements, and

-       RecentAccounting Standards and Pronouncements

MD&A is provided as a supplement to, and should be read inconjunction with, the unaudited condensed consolidated balance sheet as of June30, 2007, and the unaudited condensed consolidated statements of operations forthe three and six months ended June 30, 2007 and 2006, the unaudited condensedconsolidated statements of cash flows for the six months ended June 30, 2007and 2006, and the related notes thereto as well as the audited consolidated financialstatements of the Company for the year ended December 31, 2006 included in theCompany's Annual Report on Form 10-KSB filed with the Securities and ExchangeCommission on April 2, 2007.

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 for the remainder of 2007 and beyond to differ materially from thoseexpressed in any forward-looking statements made by, or on behalf of, theCompany. 

Our Internet web site address is www.villageedocs.com.  Our annualreports on Form 10-KSB, quarterly reports on Form 10-QSB, and current reportsof Form 8-K, and all amendments thereto, are available free of charge on ourwebsite as soon as reasonably practical after such reports are electronicallyfiled with, or furnished to, the U.S. Securities and Exchange Commission.  Theinformation on our web site is not incorporated by reference in this quarterlyreport on Form 10-QSB.

As reported in the Report of Independent Registered Public AccountingFirm on our December 31, 2006 consolidated financial statements, we havesuffered recurring losses from operations and have a working capital deficitthat raises substantial doubt about our ability to continue as a going concern.

Effective May 1, 2006, we acquired GoSolutions.  The acquisition ofGoSolutions has caused our results of operations during 2007 to varysignificantly from those reported for 2006 due to the acquisition.  However themajority of such effect is limited to the Integrated communications segment(see further discussion in "Results of Operations" below).

Our business and results of operations are affected by a wide variety offactors, as we discussed under the caption "*Certain Factors That May AffectFuture Results*" in Item 6. Management's Discussion and Analysis or Plan ofOperation of our Annual Report on Form 10-KSB filed with the SEC on April 2,2007 and elsewhere in this report, which could materially and adversely affectus and our actual results.  As a result of these factors, we may experiencematerial fluctuations in future operating results on a quarterly or annualbasis, which could materially and adversely affect our business, financialcondition, operating results and stock price.

Any forward-looking statements herein speak only as of the date hereof.Except as required by applicable law, we undertake no obligation to publiclyrelease the results of any revisions to these forward-looking statements thatmay be made to reflect events or circumstances after the date hereof or toreflect the occurrence of unanticipated events.  Please refer to the discussionbelow under the caption entitled *Liquidity and Capital Resources*.

**BUSINESS OVERVIEW**

***General***

We are incorporated in the State of California and have beenin business since 1995.  We conduct our business through four wholly-ownedsubsidiaries.  GSI, our most recent acquisition, provides enhanced voice anddata communications services.  MVI operates our Internet-based documentdelivery services.  TBS operates our government accounting products andservices business.  Resolutions sells and operates our e-forms, archiving,imaging, and workflow products and services.

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

***Our Objective***

A core component of our mission is to provide solutions thatfacilitate the movement of business information between business enterprisesusing 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 1,200 activeclients.

While we do have some sources of non-recurring revenue, suchas hardware sales and third party software, we focus on developing andmaintaining sources of monthly recurring revenue, such as providing subscriberswith solutions for their critical day to day business processes for themovement of business information.

***Key Items in First Half of 2007***
- Consolidated net revenue for the first half of 2007 increased     by 50% over the 2006 period due to a 24% increase from TBS, an 8% increase     from Resolutions, a 3% increase from MVI, and the consolidation of $3,019,136     of net revenue of GSI (acquired May 1, 2006);
- Although operating expenses increased during the first half     of 2007 compared to the 2006 period, the most significant factor in the     overall increase was the addition of $1,592,147 in operating expenses of     GSI (six months in the 2007 period compared to two months in the 2006     period).  Consolidated operating expenses during the 2007 period were 74%     of sales compared to 75% of sales in the 2006 period;
- Operating expenses decreased at TBS (-36%) and Resolutions     (-29%).  These decreases were offset by increases at MVI (+31%) and Corporate     (+70%);
- Net income increased significantly at TBS to $113,587     compared to a net loss for the first half of 2006;
- Resolutions reported net income of $186,172 for the first half     of 2007 compared to a net loss for the first half of 2006;
- GSI contributed $169,685 of net income for the first half     of 2007.

***Areas of Focus***

*Growth Strategy*

Our current and future growth strategy is focused onacquiring intellectual and technology assets that improve our ability to take aclient's unstructured content and documents and deliver it to the other partythrough the method preferred by each party, presenting the content in a mannerthat surpasses our client's goals.  In essence, we strive to bring a BusinessProcess Management discipline to their information.  We believe that if we aresuccessful in executing this strategy, our clients will enjoy improvedcompliance, collaboration, cost containment, and superior continuity ofbusiness processes.
 
Our ultimate vision is to become a business processmanagement/workflow service that provides competency and functionality in thefollowing areas: 
- Web Content Management;
- Digital Asset Management;
- Email Management;
- Records Management;
- Documentation Management;
- Information Indexing;
- Categorization/Taxonomy;
- Recognition;
- Document Imaging;
- Form Processing;
- Scanning;
- Collaboration
- Repositories, Storage;
- Long Term Archival;
- Content Integration,;
- Search and Retrieval;
- Content Syndication;
- Localization and     Personalization; and
- Publication (paper or     electronic).

We intend to continue our focus on obtaining growth from salesof higher margin products and services at GSI, MVI, TBS, and Resolutions and byacquiring companies that consistently generate net income and positive cashflows.  We believe that this strategy offers the best opportunity for ouroperations to continue to generate positive operating income and cash flowsfrom operations and to achieve net income. 

Our acquisition strategy is focused in two areas: serviceinfrastructure and vertical market silo.  The service infrastructure area isour focus to acquire enterprises that fulfill our identified strategictechnological core competencies.  The vertical market silo acquisition strategyis to acquire companies that assist us in penetrating our target marketsegments of financial services, healthcare, manufacturing, and local government.

*Capital Formation*

During the remainder of 2007, we are actively seekingadditional financing by issuing equity or obtaining a combination of equity anddebt financing from new shareholders and/or lenders.  Although we believe theCompany may generate adequate cash to sustain operations at current levelsbased on our forecasts for the remainder of 2007, we may require additionalfunding to invest in resources that will enable us to operate profitably on aconsistent, month-over-month basis.  In addition, we may be required to repaycertain of our debt instruments in which case we will require additionalfunding.  We continue to caution that there can be no assurance that fundingwill be available on acceptable terms, if at all, or that any such funds weraise would enable us to maintain profitable operations. 

In spite of the impact of new laws, regulations, andaccounting pronouncements that have significantly increased our cost ofoperating as a public company, we intend to contain general and administrativecosts where possible.  However, we expect to incur significant costs during theremainder of 2007 and in 2008 related to compliance with Section 404 of theSarbanes-Oxley Act of 2002.  Should additional growth capital becomeavailable, we intend to direct the capital toward increasing sales andmarketing while holding down costs for general and administrative as well as productand technology expenses to the extent possible.

*Organizational Enhancements*

Our goal is to drive efficiency and effectiveness throughoutour group of companies.  We are working to align each business unit aroundshared goals and performance targets.  In addition, we are striving to maximizecross-selling activities and we are devoting strategic product management and technicalresources both to strengthening the integration of our existing products andservices and to developing new products and services that will allow us tooffer our clients powerful new solutions comprised of the best that each of ourbusiness units has to offer.
 
***Challenges and Risks***

Looking forward, management has identified certainchallenges and risks that demand our attention.  Of these, two key challengesand risks are discussed below.

*Increased Competition and Capabilities in the Marketplace*

We face strong competition from well-established nationaland global companies as well as from relatively new companies. We must continueto selectively expand into other profitable segments of our markets and offerpowerful product and service offerings in order to increase our share of themarketplace.  The introduction of new technologies could render our existingproducts and services obsolete or unmarketable or require us to invest inresearch and development at much higher rates with no assurance of developingcompetitive products. Changes in technologies or customer requirements also maycause the development cycle for our new products and services to be lengthy andresult in significant development costs.  Competitive pressures may impair ourability to achieve profitability.

*Capital Resources*

We believe that current and futureavailable capital resources, including the net proceeds from sale of ourproducts and services, will be sufficient to fund our operations at currentlevels for the foreseeable future, but will be insufficient to allow us to repayour debt.  The exact amount of funds that we will require will depend upon manyfactors, and it is likely that we will require additional financing.  Suchsources of financing could include capital infusions, additional equityfinancing, or debt offerings. There can be no assurance that additional fundingwill be available on acceptable terms, if at all, or that such funds if raised,would enable the Company to achieve and maintain profitable operations.  The inability to obtain such financing could have amaterial adverse effect on our business, financial condition and results ofoperations.

**CriticalAccounting Policies and estimates **

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 andestimates affecting our condensed consolidated financial statements, areas thatare particularly significant include:
- revenue recognition;
- stock-based compensation;
- software development costs;
- goodwill and other intangible assets;
- long-lived assets;
- beneficial conversion features;
- income taxes; and
- contingencies.

In addition, please refer to Note 4 to the accompanying unauditedcondensed consolidated financial statements for further discussion of oursignificant accounting policies.

**Revenue Recognition. **We recognize revenue inaccordance with Staff Accounting Bulletin ("SAB") No. 101, *RevenueRecognition in Financial Statements*, as revised by SAB No. 104.  As such,we recognize revenue when persuasive evidence of an arrangement exists, titletransfer has occurred, or the services have been performed, the price is fixedor readily determinable and collectibility is probable.  Sales are recorded netof sales discounts.  

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

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 on contractualhourly rates and revenues are recognized as the services are performed.Consulting services primarily consist of implementation services related to theinstallation of our products which do not require significant customization toor modification of the underlying software code. 

Revenue from subscription agreements consists of fixedmonthly fees and usage charges, generally based on per minute rates. Subscription agreement revenue related to MVI and GSI usage service charges arebilled monthly in arrears and the associated revenues are recognized in themonth of service. Recurring charges for the GoSoloTM platform are billed inadvance on a monthly basis and recorded as deferred revenues.  We recognizesubscription agreement revenue ratably over the service period, whichmanagement believes approximates the actual provision of services. Professionalservice fee revenue consists of consulting fees charged to enterprise clientsfor GoSoloTM platform enhancements.  We recognize professional service feerevenue on a time and materials basis over the service period, which managementbelieves approximates the actual provision of services.  Wholesale enhancedvoicemail services consists of fees charged to telecommunications providers foruse of the GoSoloTM platform to provide their customers with hosted electronicvoicemail, billed monthly in arrears and the associated revenues are recognizedin the month of service.

Significant management judgments and estimates must be madein connection with determination of the revenue to be recognized in any accountingperiod. If we made different judgments or utilized different estimates for anyperiod, material differences in the amount and timing of revenue recognizedcould result. 

 

**Stock-Based Compensation. **On January 1, 2006,we adopted Statement of Financial Accounting Standards ("SFAS") No. 123(revised 2004), *Share-Based Payment*, ("SFAS 123(R)") which requires themeasurement and recognition of compensation expense for all share-based paymentawards made to our employees and directors based on estimated fair values. Thevalue of the portion of the award that is ultimately expected to vest isrecognized as an expense over the requisite service periods in our condensedconsolidated statement of operations. As stock-based compensation expenserecognized in the condensed consolidated statement of operations for 2007 isbased on awards ultimately expected to vest, it has been reduced for estimatedforfeitures. SFAS 123(R) requires forfeitures to be estimated at the time ofgrant and revised, if necessary, in subsequent periods if actual forfeituresdiffer from those estimated.  The estimated average forfeiture rate for the sixmonths ended June 30, 2007, of approximately 10% was based on historicalforfeiture experience and estimated future employee forfeitures.

Stock-based compensation expense recognized as operatingexpense under SFAS 123(R) for the six months ended June 30, 2007 was $454,486,determined by the Black-Scholes valuation model, and consisting of stock-basedcompensation expense related to employee stock options.  As of June 30, 2007,there was approximately $1,100,000 of total unrecognized compensation cost, netof forfeitures, related to employee and director stock option compensationarrangements.  That cost is expected to be recognized on a straight-line basisover the next 3.9 weighted average years.  See Note 4 to the accompanyingunaudited condensed consolidated financial statements for additionalinformation.

**Software Development Costs**.  We capitalizesoftware development costs pursuant to SFAS No. 86, *Accounting for the Costsof Computer Software to be Sold, Leased or Otherwise Marketed*, aftertechnological feasibility of the software is established, which is generallythe completion of a working prototype and ends upon general release of theproduct to our customers. All costs incurred in the research and development ofnew software and costs incurred prior to the establishment of technologicalfeasibility are expensed as incurred. Capitalized costs consist of direct costsand allocated overhead associated with the development of the softwareproducts.  Amortization of software development costs commences when theproduct becomes available for general release to customers and is computedbased on the straight-line method over the software's estimated economic lifeof approximately five years.  We review the unamortized software development costsat each balance sheet date and, if necessary, will write down the balance tonet realizable value if the unamortized costs exceed the net realizable valueof 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 value intangibleassets, we typically engage independent valuation specialists to assist us indetermining those values. Valuation of intangible assets entails significantestimates and assumptions including, but not limited to, estimating future cashflows from product sales, developing appropriate discount rates, continuationof customer relationships and renewal of customer contracts, and approximatingthe useful lives of the intangible assets acquired. To the extent actualresults differ from these estimates, our future results of operations may beaffected. The Company has adopted SFAS No. 142 *Goodwill and Other IntangibleAssets*.  Under SFAS No. 142, goodwill and other intangible assets withindefinite lives are no longer subject to periodic amortization but are insteadreviewed annually for impairment, or more frequently if impairment indicatorsarise.

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 require 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 condensedconsolidated balance sheet as well as our net loss would be material. Management's assumptions about future sales prices and future sales volumeshave fluctuated in the past and 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 assumptions,as 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 condensedconsolidated financial statements.

**Long-Lived Assets.**We assess therecoverability of our long-lived assets by determining whether the depreciationand amortization of long-lived assets over their remaining lives can berecovered through projected undiscounted future cash flows.  The amount oflong-lived asset impairment, if any, is measured based on fair value and ischarged to operations in the period in which long-lived asset impairment isdetermined by management.****

**Beneficial Conversion Feature. **Ourconvertible note provides for a rate of conversion that is below market value.Such feature is normally characterized as a "beneficial conversionfeature" ("BCF"). Pursuant to Emerging Issues Task Force IssueNo. 98-5 ("EITF 98-5"), *Accounting For Convertible Securities withBeneficial Conversion Features or Contingently Adjustable Conversion Ratio*and Emerging Issues Task Force Issue No. 00-2, *Application of EITF Issue No.98-5 To Certain Convertible Instruments*, the relative fair values of theBCFs have been recorded as a discount from the face amount of the respectivedebt instrument. We are amortizing the discount using the effective interestmethod through maturity of such instruments.  We will record the correspondingunamortized debt discount related to the BCF and warrants as interest expensewhen the related instrument is converted into our common stock.

**Income Taxes.**  We account for income taxesusing the asset and liability method under which deferred tax assets orliabilities are calculated at the balance sheet date using current tax laws andrates in effect for the year in which the differences are expected to affecttaxable income. Valuation allowances are established, when necessary, to reducedeferred tax assets to the amounts expected to be realized.

**Contingencies.** From time to time we are ormay be subject to various claims and contingencies, sometimes related to legalproceedings.  Due to their nature, such legal proceedings involve inherentuncertainties including, but not limited to, court rulings, negotiationsbetween affected parties, and governmental actions.  Management assesses theprobability of loss for such contingencies and accrues a liability and/ordiscloses the relevant circumstances, as appropriate.

** **

**RESULTS OF OPERATIONS**
**Three Months Ended June 30, 2007 Compared to Three Months Ended June 30, 2006**
Net Revenue from External Customers

Net revenue fromexternal customers for the three months ended June 30, 2007 was $3,812,925, a 26%increase over net revenue for the prior year quarter of $3,034,092.

For the three months ended June 30, 2007, TBS generated 25%of our net revenue, MVI generated 20% of our net revenue, GSI generated 42% of ournet revenue, and Resolutions generated 13% of our net revenue.  During thethree months ended June 30, 2006, TBS generated 25% of our net revenue, MVIgenerated 25% of our net revenue, GSI generated 33% of our net revenue, andResolutions generated 17% of our net revenue.

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

Three Months 

Three Months 

Ended

Ended

Variance

June 30, 2007

June 30, 2006

Amount

Percent

Net revenue from external customers:

Electronic document delivery services

 $

773,762 

 $

770,490 

 $

3,272 

0%

Government accounting solutions

961,411 

746,928 

214,483 

29%

Electronic forms

477,490 

520,597 

(43,107)

-8%

Integrated communications

1,600,262 

996,077 

604,185 

61%

Corporate

- 

- 

- 

Total net revenue from external  customers

 $

3,812,925 

 $

3,034,092 

 $

778,833 

26%

The increase of $778,833 in the 2007 quarter resulted from a61% increase in revenue from GSI, a 29% increase from TBS, and an 8% decreasefrom Resolutions.

As anticipated, the most significant factor in the increasein consolidated revenue during the second quarter of 2007 was the consolidationof a full three months of revenue of GSI compared to two months during 2006(acquired May 1, 2006).

Revenue increased 29% at TBS due to increases in revenuefrom printing, maintenance agreements, online services, and software thatresulted from pursuing a strategy to expand our sales of printing business intonew areas, building upon the property tax form processing which hashistorically produced the largest share of our overall printing revenue typicallyin the second half of each calendar year.  These increases were partiallyoffset by decreases in hardware sales and installation which resulted in partfrom our strategy to promote online, usage-based services rather than singleunit product sales.

Revenue decreased 8% at Resolutions due to decreases insales of maintenance agreements for certain third party software products thatresulted from the expiration of certain of our contracts with third party softwarecompanies.

Revenue increased only nominally at MVI due to a smallincrease in revenue from monthly fixed charges. 

Cost of Sales

The following is a comparison of the components ofconsolidated cost of sales:

Three Months 

Three Months 

Ended

Ended

Variance

June 30, 2007

June 30, 2006

Amount

Percent

Cost of sales:

Electronic document delivery services

 $

303,404 

 $

239,328 

 $

64,076 

27%

Government accounting solutions

630,052 

379,627 

250,425 

66%

Electronic forms

136,984 

188,322 

(51,338)

-27%

Integrated communications

312,209 

305,514 

6,695 

2%

Corporate

- 

- 

- 

Total cost of sales:

 $

1,382,649 

 $

1,112,791 

 $

269,858 

24%

Cost of sales for the three months ended June 30, 2007 were$1,382,649 as compared to the $1,112,791 reported during the 2006 quarter. Total cost of sales during the 2007 quarter represented 36% and 37% of net salesduring 2007 and 2006 quarters, respectively.

Cost of sales for MVI for the three months ended June 30,2007 represented 39% of MVI's net sales as compared with 31% in the 2006 quarter. This increase is attributable to increased operations staffing costs.

Cost of sales for TBS for the three months ended June 30,2007 represented 66% of TBS' net sales as compared with 51% in the 2006 quarter. The increased costs at TBS were largely attributable to the increase in revenueas well as reallocation of staff resources which increased operations staffcosts and correspondingly reduced administrative staff expenses.  

Cost of sales for Resolutions for the three months ended June30, 2007 represented 29% of Resolutions' net sales as compared with 36% in the2006 quarter.  The decreased costs at Resolutions reflect a change in revenuemix.

Cost of sales for GSI for the three months ended June 30,2007 represented 20% of GSI's net sales as compared with 31% in the 2006quarter.  The reduced cost at GSI reflects a change in revenue mix.

Gross Profit

Gross profit for the three months ended June 30, 2007 increased26% to $2,430,276 as compared to $1,921,301 for the 2006 quarter.  The increasein the 2007 quarter of $508,975 resulted from decreases of $60,804 and $35,942 fromMVI and TBS, respectively, which were offset by increases of $8,231 and$597,490 from Resolutions and GSI, respectively.  The increase at GSI resultedprimarily from the consolidation of three months of activity in the 2007quarter compared to two months in the 2006 quarter.  Gross profit margin for the2007 and 2006 quarters was 64% and 63%, respectively.

Operating Expenses

The following is a comparison of the components ofconsolidated operating expenses:

Three Months 

Three Months 

Ended

Ended

Variance

June 30, 2007

June 30, 2006

Amount

Percent

Operating expenses

Electronic document delivery services

 $

370,158 

 $

230,541 

 $

139,617 

61%

Government accounting solutions

367,612 

554,228 

(186,616)

-34%

Electronic forms

250,698 

365,152 

(114,454)

-31%

Integrated communications

1,093,309 

545,033 

548,276 

101%

Corporate

712,084 

532,124 

179,960 

34%

Total operating expenses:

 $

2,793,861 

 $

2,227,078 

 $

566,783 

25%

Operating expenses for the three months ended June 30, 2007increased by 25% to $2,793,861 from the $2,227,078 reported in the 2006 quarter. Of the total increase of $566,783, $179,960, $548,276 and $139,617 areattributable to increases in operating expenses of Corporate, GSI and MVI, respectively,as offset by decreases of $186,616 and $114,454 from TBS and Resolutions,respectively.  The increase at GSI resulted from additional non-recurringcompensation expense as well as the impact of comparing three full months inthe 2007 quarter to two months in the 2006 quarter (we acquired GSI effectiveMay 1, 2006).  

During the three months ended June, 2007, Corporate incurred$712,084 in operating expenses, an increase of 34% from the $532,124 reportedin the 2006 quarter as a result of amortization of intangible assets and increasedcompensation, legal and accounting expenses, including $227,911 in stock-basedcompensation expense.  During the 2006 quarter, stock-based compensationexpense was $164,391 and there was no amortization expense related tointangible assets.

During the three months ended June 30, 2007, MVI incurred $370,158in operating expenses, an increase of 61% from the $230,541 reported in the 2006quarter.  Product and technology development increased $64,028 to $143,092 fromthe $79,064 reported in the prior year quarter as a result of additionalstaffing.  Sales and marketing increased by $37,708 to $117,890 from the $80,182reported in the prior year quarter as a result of staff additions.  General andadministrative increased by $35,714 to $93,698 from the $57,984 reported in theprior year quarter due to increased facilities and benefits charges. Depreciation and amortization expense increased $2,167.

During the three months ended June 30, 2007, TBS incurred $367,612in operating expenses compared to $554,228 reported in the 2006 quarter, adecrease of 34%.  Product and technology development decreased $75,016 to $54,215as compared to $129,231 reported in the 2006 quarter due to reduced staffing.  Salesand marketing increased $56,384 to $127,067 from the $70,683 reported in the 2006quarter due to the reallocation of staff resources and increased marketingexpenses.  General and administrative decreased $159,981 to $158,421 from the $318,402reported in the 2006 quarter due to reduced telephone and maintenance as wellas staff restructuring.  Depreciation and amortization expenses decreased $8,003.

During the three months ended June 30, 2007, Resolutionsincurred $250,698 in operating expenses, a decrease of 31% as compared to the $365,152reported in the 2006 quarter.  Product and technology development decreased by$36,908 to $32,129 due to a reduction in staff and consultants, sales andmarketing decreased $70,053 to $48,362 due to reallocation of staff resourcesand reduced travel , and general and administrative decreased $20,557 to $136,288due to reduced rent, telephone, and internet expenses.  Depreciation andamortization expenses increased $13,064.

During the three months ended June 30, 2007, GSI incurred $1,093,309of operating expenses.  Sales and marketing, product and technology, generaland administrative, and depreciation and amortization expenses were $323,050, $245,264,$379,117, and $145,878, respectively, and are consistent with prior periodsalthough not directly comparable to the three months ended June 30, 2006 sinceGSI was acquired effective May 1, 2006.

Operating Loss

As a result of the foregoing, the Company reported anoperating loss for the three months ended June 30, 2007 of $363,585, comparedto an operating loss of $305,777 for the three months ended June 30, 2006.  

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

Three Months 

Three Months 

Ended

Ended

Variance

June 30, 2007

June 30, 2006

Amount

Percent

Operating income (loss):

Electronic document delivery services

 $

100,200 

 $

300,621 

 $

(200,421)

-67%

Government accounting solutions

(36,253)

(186,927)

150,674 

81%

Electronic forms

89,808 

(32,877)

122,685 

*

Integrated communications

194,744 

145,530 

49,214 

34%

Corporate

(712,084)

(532,124)

(179,960)

34%

Total operating income (loss)

 $

(363,585)

 $

(305,777)

 $

(57,808)

-19%

* calculation is not meaningful

TBS, Resolutions, and GSI each reported significantimprovements in operating income (loss).  However, these improvements wereoffset by reduced operating income at MVI and increased operating loss of Corporateresulting from increased amortization expense and stock option vesting expenseas compared to the 2006 quarter.

Interest Expense, net

Interest expense, net for the quarter ended June 30, 2007 increasedby $3,409 to $29,768 from the $26,359 reported in the 2006 quarter, which isprimarily attributable to interest on outstanding borrowings from our operatinglines of credit.

Other Expense

Other expense for the quarter ended June 30, 2007 was $61,760compared to other expense of $24,557 reported in the 2006 quarter.  In each ofthe quarters, other expense consisted primarily of charges related tosettlement agreements.

Net Loss

As a result of the foregoing, net loss for the three monthsended June 30, 2007 was $477,075, or $0.00 per share, compared to a net loss of$356,693, or $0.00 per share, for the three months ended June 30, 2006 onweighted average shares of 149,309,799 and 146,535,158, respectively.
The following is a comparison of the components ofconsolidated net loss:
 

Three Months 

Three Months 

Ended

Ended

Variance

June 30, 2007

June 30, 2006

Amount

Percent

Net income (loss):

Electronic document delivery services

 $

100,703 

 $

301,064 

 $

(200,361)

-67%

Government accounting solutions

(36,511)

(186,927)

150,416 

80%

Electronic forms

89,474 

(35,744)

125,218 

*

Integrated communications

110,734 

143,352 

(32,618)

-23%

Corporate

(741,475)

(578,438)

(163,037)

-28%

Total net income (loss)

 $

(477,075)

 $

(356,693)

 $

(120,382)

-34%

* calculation is not meaningful

 
 **Six Months Ended June 30, 2007 Compared to Six Months Ended June 30, 2006**
Net Revenue from External Customers****

Net revenue from external customers for the six months endedJune 30, 2007 was $7,633,135, a 50% increase over net revenue for the prioryear period of $5,101,931.

For the six months ended June 30, 2007, TBS generated 27% ofour net revenue, MVI generated 20% of our net revenue, GSI generated 40% of ournet revenue, and Resolutions generated 14% of our net revenue.  During the sixmonths ended June 30, 2006, TBS generated 32% of our net revenue, MVI generated30% of our net revenue, GSI generated 20% of our net revenue, and Resolutionsgenerated 19% of our net revenue.

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

Six Months Ended

Six Months Ended

Variance

June 30, 2007

June 30, 2006

Amount

Percent

Net revenue from external customers:

Electronic document delivery services

 $

1,547,010 

 $

1,509,122 

 $

37,888 

3%

Government accounting solutions

2,027,838 

1,634,699 

393,139 

24%

Electronic forms

1,039,151 

962,033 

77,118 

8%

Integrated communications

3,019,136 

996,077 

2,023,059 

203%

Corporate

- 

- 

- 

Total net revenue from external  customers

 $

7,633,135 

 $

5,101,931 

 $

2,531,204 

50%

The increase of $2,531,204 in the 2007 period resulted from a203% increase in revenue from GSI, a 24% increase from TBS, a 3% increase fromMVI, and an 8% increase from Resolutions.

As anticipated, the most significant factor in the increasein consolidated revenue during the first half of 2007 was the consolidation ofa full six months of revenue of GSI compared to two months during 2006(acquired May 1, 2006).

Revenue increased 24% at TBS due to increases in revenuefrom printing, maintenance agreements, online services, and software thatresulted from pursuing a strategy to expand our sales of printing business intonew areas, building upon the property tax form processing which hashistorically produced the largest share of our overall printing revenuetypically in the second half of each calendar year.  These increases werepartially offset by decreases in hardware sales and installation which resultedin part from our strategy to promote online, usage-based services rather thansingle unit product sales.

Revenue increased 8% at Resolutions due to increases insales of our proprietary products and services and consulting services asoffset by decreases in sales of maintenance agreements for certain third partysoftware products that resulted from the expiration of certain of our contractswith third party software companies.

Revenue increased 3% at MVI by due to an increase in revenuefrom monthly fixed charges and the addition of new clients which offset adecrease in revenue from outbound document delivery services.  MVI intends tocontinue to concentrate sales efforts toward opportunities with largerclients.  While such sales typically involve longer and more complex salescycles, we believe they provide a greater protection from pricing erosion dueto the additional functionality and integration that are elements more oftenassociated with our larger client relationships.

Cost of Sales

The following is a comparison of the components ofconsolidated cost of sales:

Six Months Ended

Six Months Ended

Variance

June 30, 2007

June 30, 2006

Amount

Percent

Cost of sales:

Electronic document delivery services

 $

578,826 

 $

462,885 

 $

115,941 

25%

Government accounting solutions

1,231,495 

729,761 

501,734 

69%

Electronic forms

357,555 

318,743 

38,812 

12%

Integrated communications

628,750 

305,514 

323,236 

106%

Corporate

- 

- 

- 

Total cost of sales:

 $

2,796,626 

 $

1,816,903 

 $

979,723 

54%

Cost of sales for the six months ended June 30, 2007 were $2,796,626as compared to the $1,816,903 reported during the 2006 period.  Total cost ofsales during the 2007 period represented 37% of net sales as compared to 36%during the 2006 period.

Cost of sales for MVI for the six months ended June 30, 2007represented 37% of MVI's net sales as compared with 31% in the 2006 period. This increase is attributable to increased operations staffing costs.

Cost of sales for TBS for the six months ended June 30, 2007represented 61% of TBS' net sales as compared with 45% in the 2006 quarter.  Theincreased costs at TBS were largely attributable to the increase in revenue aswell as reallocation of staff resources which increased operations staff costsand correspondingly reduced administrative staff expenses.  

Cost of sales for Resolutions for the six months ended June30, 2007 represented 34% of Resolutions' net sales as compared with 33% in the2006 period.  The increased costs at Resolutions reflect a change in revenuemix where sales of lower margin products and services were more prominentduring the 2007 period due to the reduction in revenue from maintenanceagreements, which generally provide greater margins.

Cost of sales for GSI for the six months ended June 30, 2007represented 21% of net sales as compared with 31% in the 2006 period as aresult of reductions in operations staff costs, facility rental, carrier fees,and telephony usage fees. 

Gross Profit

Gross profit for the six months ended June 30, 2007increased 47% to $4,836,509 as compared to $3,285,028 for the 2006 period.  Theincrease in the 2007 period of $1,551,481 resulted from decreases of $78,053and $108,595 from MVI and TBS, respectively, which were offset by increases of $38,306and $1,699,823 from Resolutions and GSI, respectively.  Gross profit margin forthe 2007 period on a consolidated basis was 63% as compared to 64% for the 2006period.

Operating Expenses

The following is a comparison of the components ofconsolidated operating expenses:

Six Months Ended

Six Months Ended

Variance

June 30, 2007

June 30, 2006

Amount

Percent

Operating expenses

Electronic document delivery services

 $

735,220 

 $

563,239 

 $

171,981 

31%

Government accounting solutions

688,798 

1,074,644 

(385,846)

-36%

Electronic forms

494,586 

697,969 

(203,383)

-29%

Integrated communications

2,137,180 

545,033 

1,592,147 

292%

Corporate

1,622,044 

956,593 

665,451 

70%

Total operating expenses:

 $

5,677,828 

 $

3,837,478 

 $

1,840,350 

48%

Operating expenses for the six months ended June 30, 2007increased by 48% to $5,667,828 from the $3,837,478 reported in the 2006 period. Of the total increase of $1,840,350, $171,981, $1,592,147 and $665,451 areattributable to increases in operating expenses of MVI, GSI, and Corporate,respectively, as offset by decreases of $385,846 and $203,383 from TBS, andResolutions, respectively.

During the six months ended June 30, 2007, Corporateincurred $1,622,044 in operating expenses, an increase of 70% from the $956,593reported in the 2006 period as a result of amortization of intangible assetsand increased compensation, legal and accounting expenses, including $454,486in stock-based compensation expense.  During the 2006 period, stock-basedcompensation expense was $244,591 and there was no amortization expense relatedto intangible assets.  Accounting expenses increased in the 2007 period as aresult of prevailing market conditions and the acquisition of GSI.

During the six months ended June 30, 2007, MVI incurred $735,220in operating expenses, an increase of 31% compared to the $563,239 reported inthe 2006 period.  Product and technology development increased $128,285 to $302,737from the $174,452 reported in the prior year period as a result of additionalstaffing.  Sales and marketing increased by $23,726 to $227,693 from the $203,967reported in the prior year period as a result of the redirection of sales staff. General and administrative increased by $13,298 to $176,309 from the $163,011reported in the prior year period due to an increase in facilities and benefitsexpense.  Depreciation and amortization expense increased $6,672.

During the six months ended June 30, 2007, TBS incurred $688,798in operating expenses compared to $1,074,644 reported in the 2006 period, adecrease of 36%.  Product and technology development decreased $123,872 to $131,554as compared to $255,426 reported in the 2006 quarter due to reduced staffingcosts.  Sales and marketing increased $8,872 to $188,358 from the $179,486reported in the 2006 period due to a change in the incentive compensationstructure.  General and administrative decreased $253,569 to $312,906 from the$566,475 reported in the 2006 period due to reduced telephone and maintenanceas well as staff restructuring.  Depreciation and amortization expenses decreased$17,277.

During the six months ended June 30, 2007, Resolutionsincurred $494,586 in operating expenses, a decrease of 29% as compared to the $697,969reported in the 2006 period.  Product and technology development decreased by $45,018to $64,556 due to a reduction in staff and consultants, sales and marketing decreased$115,437 to $94,154 due to reallocation of staff resources and reduced travel ,and general and administrative decreased $52,994 to $268,037 due to reduced baddebt expense and rent expense.  Depreciation and amortization expenses increased$10,066.

During the six months ended June 30, 2007, GSI incurred $2,137,180of operating expenses.  Sales and marketing, product and technology, generaland administrative, and depreciation and amortization expenses were $640,666, $485,079,$716,990, and $294,445, respectively, and are consistent with prior periodsalthough not directly comparable to the six months ended June 30, 2006 sinceGSI was acquired effective May 1, 2006.

Operating Loss

As a result of the foregoing, the Company reported anoperating loss for the six months ended June 30, 2007 of $841,319, compared toan operating loss of $552,450 for the six months ended June 30, 2006.  

The following is a comparison of the components of consolidatedincome from operations:

Six Months Ended

Six Months Ended

Variance

June 30, 2007

June 30, 2006

Amount

Percent

Operating income (loss):

Electronic document delivery services

 $

232,964 

 $

482,998 

 $

(250,034)

-52%

Government accounting solutions

107,545 

(169,706)

277,251 

*

Electronic forms

187,010 

(54,679)

241,689 

*

Integrated communications

253,206 

145,530 

107,676 

74%

Corporate

(1,622,044)

(956,593)

(665,451)

70%

Total operating income (loss)

 $

(841,319)

 $

(552,450)

 $

(288,869)

-52%

* calculation is not meaningful

In addition to increases in compensation, legal, andaccounting expenses, two other factors that contributed to the significantchange in operating loss were an increase in depreciation and amortization of $260,016over the 2006 period (due to an increase in intangible assets and relatedamortization expense and the acquisition of GSI) and the impact of stock optionexpenses, which increased by $209,895 over the 2006 period.

Interest Expense

Interest expense for the six months ended June 30, 2007increased by $8,440 to $58,107 from the $49,667 reported in the 2006 period,which is primarily attributable to interest on outstanding borrowings from ouroperating lines of credit.

Other Expense

Other expense for the six months ended June 30, 2007 was $54,339compared to other expense of $23,965 reported in the 2006 period.  In each ofthe quarters, other expense consisted primarily of charges related tosettlement agreements.

Net Loss

As a result of the foregoing, net loss for the six monthsended June 30, 2007 was $979,837, or $0.01 per share, compared to a net loss of$630,082, or $0.01 per share, for the six months ended June 30, 2006 onweighted average shares of 148,444,518 and 115,707,360, respectively.

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

Six Months Ended

Six Months Ended

Variance

June 30, 2007

June 30, 2006

Amount

Percent

Net income (loss):

Electronic document delivery services

 $

233,467 

 $

482,417 

 $

(248.950)

-52%

Government accounting solutions

113,587 

(169,706)

283,293 

*

Electronic forms

186,172 

(57,893)

244,065 

*

Integrated communications

169,685 

143,352 

26,333 

18%

Corporate

(1,682,748)

(1,028,252)

(654,496)

64%

Total net loss

 $

(979,837)

 $

(630,082)

 $

(349,755)

-56%

* calculation is not meaningful

 

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

During the six months ended June 30, 2007, our net cashposition decreased by $91,920 to $476,899.  Our financing activities providednet cash of $105,180; however, our operating and investing activities used netcash of $84,692 and $112,408, respectively.

Net cash used in operating activities for the six monthsended June 30, 2007 was $84,692, a decrease of $264,333 from the $179,641 providedby operating activities during the 2006 period.

Our investing activities during 2007 have consisted of thepurchase of computer equipment. Net cash used in investing activities duringthe 2007 period increased $178,308 to $112,408 from the $65,900 provided by investingactivities during the 2006 period, during which we acquired net cash in theacquisition of GSI.

Net cash provided by financing activities for the six monthsended June 30, 2007 was $105,180, and included $347,206 of proceeds, net ofrepayments, from a line of credit.  These sources of cash were partially offsetby $230,000 of payments on notes and convertible notes related to the TBS andResolutions acquisitions and payments on capital lease obligations of $12,026. Net cash used in financing activities for the 2006 period was $368,281 andincluded proceeds from notes payable to related parties of $10,000, as offset by$378,281 of payments on notes related to the TBS, Resolutions, and GSIacquisitions. 

Effective May 1, 2006, we acquired GSI.  Had the acquisitionbeen in effect throughout all of 2006, the unaudited net revenue ofVillageEDOCS and GoSolutions would have been $7,268,998 for the six monthsended June 30, 2006.  Accordingly, we expect the acquisition of GoSolutions to continueto have a significant effect on our results for 2007 since we will beconsolidating their results for all of 2007 as compared to eight months in2006.

We do not currently have any material commitments forcapital expenditures other than those expenditures incurred in the ordinarycourse of business. 

Due to a deficit in net tangible assets, we havehistorically been unable to obtain operating lines of credit from traditionalbanking institutions.  During 2006, TBS renewed a $100,000 operating line ofcredit which it has not utilized as of the date of this report.  During July2007, VillageEDOCS renewed a $500,000 operating line of credit guaranteed by ashareholder on which it owed approximately $450,000 as of the date of thisreport.  On June 28, 2006, GSI renewed a $1,000,000 operating line of creditguaranteed by four shareholders on which it owed the sum of $840,000 as of thedate of this report.  The $840,000 was used during 2006 in connection with ouracquisition of GSI.

We intend to renew our operating lines of credit during 2007and, where possible, to effect such renewals without shareholder guarantees.  Asof the date of this report, we have successfully renewed our $500,000 line ofcredit.  We have not, however, renewed GSI's $1,000,000 line of credit (whichis secured by the assets of GSI).  Should we be unable to renew our lines ofcredit (including the accompanying shareholder guarantees should such berequired by the lenders) as they reach maturity, we will require significant andimmediate additional funding to repay our borrowings pursuant to these lines ofcredit.  The aggregate outstanding principal balance on our lines of credit wasapproximately $1,290,000 as of the date of this report.  Our inability toeither renew our operating lines of credit or to repay outstanding borrowingswhen due would have a material adverse effect on us.

Substantial risk exists that a decrease in demand for our productsand services would reduce the availability of cash from this source since ouroperating cash flows are derived from products and services that are subject torapid 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 will experience negativeoperating and investing cash flows during certain months until MVI, TBS,Resolutions, and GSI consistently generate net cash flows sufficient to offsetthe anticipated expenses of operating the holding company.  While we believethat our available cash resources combined with our current revenue streams maybe sufficient to meet our anticipated working capital requirements for the nexttwelve months, we will require additional financing during the remainder of 2007to fund capital expenditure requirements in the ordinary course of business andto make required principal payments pursuant to our operating lines of credit. Should our current revenue streams or margins be subjected to even minordecreases, our funding requirements could be greater.

We believe that sustainable profitability is achievable;however, we have a history of losses.  While GSI, MVI, TBS, and Resolutionshave reported net income for the first six months of 2007, this income has beeninsufficient to offset operating losses, interest expense and corporateoverhead.  If we are not successful in sustaining and increasing operatingprofits from our four reporting segments, or reducing expenses of the holdingcompany, we may never achieve profitability for the Company as a whole.

Between November 2000 and at least December 2004, ouroperating shortfalls were funded by one shareholder, an affiliate, to whom weowe $65,000 in principal and approximately $104,000 in interest as of June 30,2007. This shareholder has no obligation to continue to fund any futureoperating shortfalls.  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 onacceptable terms, if at all, or that such funds if raised, would enable theCompany to achieve and maintain profitable operations. If we are not able toobtain sufficient additional funds from investors, we may be unable to sustainall or part of our operations.  If we raise additional funds through theissuance of securities, these securities may have rights, preferences orprivileges senior to those of our common stock, and our stockholders mayexperience additional dilution to their equity ownership. 

The Report of Independent Registered Public Accounting Firmon our December 31, 2006 consolidated financial statements includes anexplanatory paragraph stating that the recurring losses incurred fromoperations and a working capital deficit raise substantial doubt about ourability to continue as a going concern. The condensed consolidated financialstatements do not include any adjustments that might result from the outcome ofthis 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 2, 2007. Our future results and stockholder valuesmay 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 undue relianceon any forward-looking statements, which speak only as of the date of thisQuarterly Report on Form 10-QSB.  Readers should also consult the cautionarystatements and risk factors listed from time to time in our Reports, and allamendments thereto, on Forms 10-KSB, 10-QSB, 8-K, and other SEC filings.  Forthese 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 benefits we may derive from acquisitions, (2) our current and futuregrowth strategy to acquire intellectual and technology assets and ourexpectations about the benefits we may derive, (3) our beliefs about our visionto become a business process management/workflow service and the benefits weexpect to derive, (4) our acquisition strategy, and (5) 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 condensed consolidated financial statements, which statements aresubject to certain risks, including, among other things, the inaccuracy of ourbeliefs regarding critical accounting policies and that actual customerreserves or other estimates may be different from our estimates, requiringrevisions to our estimated allowance for doubtful accounts, additionalinventory write-downs, impairment charges, 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 (Loss) 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 that currentcash position, cash generated through operations and equity offerings andavailable borrowings will be sufficient to meet our needs through at least thenext 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 February 2007, the Financial Accounting StandardsBoard ("FASB") issued SFAS No. 159, *The Fair Value Option for FinancialAssets and Financial Liabilities - Including an Amendment of FASB Statement No.115* ("SFAS No. 159"). SFAS No. 159 permits entities to choose to measure manyfinancial instruments and certain other items at fair value. The objective isto improve financial reporting by providing entities with the opportunity tomitigate volatility in reported earnings caused by measuring related assets andliabilities differently without having to apply complex hedge accountingprovisions. SFAS No. 159 also establishes presentation and disclosurerequirements designed to facilitate comparison between entities that choosedifferent measurement attributes for similar types of assets and liabilities.The Company will adopt SFAS No. 159 in the first quarter of 2008, is stillevaluating the effect, if any, on its consolidated financial position andconsolidated results of operations and has not yet determined its impact.

In July 2006, the FASBissued FASB Interpretation No. 48, *Accounting for Uncertainty in IncomeTaxes--an interpretation of FASB Statement No. 109* ("FIN 48"), whichclarifies the accounting and disclosure for uncertainty in tax positions, asdefined. FIN 48 seeks to reduce the diversity in practice associated withcertain aspects of the recognition and measurement related to accounting forincome taxes. The Company is subject to the provisions of FIN 48 as of January1, 2007.  The Company believes that its income tax filing positions anddeductions will be sustained on audit and does not anticipate any adjustmentsthat will result in a material change to its financial position.  Therefore, noreserves for uncertain income tax positions have been recorded pursuant to FIN48. The cumulative effect, if any, of applying FIN 48 is to be reported as anadjustment to the opening balance of retained earnings in the year ofadoption.  The Company did not record a cumulative effect adjustment related tothe adoption of FIN 48.  Tax years since 1992 remain subject to examination bythe major tax jurisdictions in which the Company is subject to tax.  TheCompany's policy for recording interest and penalties associated withincome-based tax audits is to record such items as a component of income taxes.
 
**ITEM 3 - CONTROLS ANDPROCEDURES**

(a) As of June 30, 2007, an evaluation was carried out underthe supervision and with the participation of the Company's management,including our Chief Executive Officer and our Chief Financial Officer, of theeffectiveness of the design and operation of our disclosure controls andprocedures (as defined in Rule 13a-15(e) and 15d-15(e) under the SecuritiesExchange Act of 1934).  Based upon that evaluation, the Chief Executive Officerand the Chief Financial Officer concluded that the design and operation ofthese disclosure controls and procedures during the six months ended June 30,2007 were effective in timely alerting them to the material informationrelating to the Company (or the Company's consolidated subsidiaries) requiredto be included in the Company's periodic filings with the SEC, subject to thevarious limitations on effectiveness set forth below under the heading,"LIMITATIONS ON THE EFFECTIVENESS OF INTERNAL CONTROLS," such thatthe information relating to the Company, required to be disclosed in SECreports (i) is recorded, processed, summarized and reported within the timeperiods specified in SEC rules and forms, and (ii) is accumulated andcommunicated to the Company's management, including our CEO and CFO, asappropriate to allow timely decisions regarding required disclosure.  

The Company's management has concluded that the condensedconsolidated financial statements included in this Quarterly Report on Form 10-QSBfairly present in all material respects the Company's financial condition,results of operations and cash flows for the periods presented in conformitywith accounting principles generally accepted in the United States of America.

(b) Changes in internal control over financial reporting:There were no changes in the Company's internal control over financialreporting that occurred during the quarter ended June 30, 2007 that havematerially affected, or are reasonably likely to materially affect, theCompany's internal control over financial reporting. 

LIMITATIONS ON THE EFFECTIVENESS OF INTERNAL CONTROLS 

The Company's management, including the CEO and CFO, doesnot expect that our disclosure controls and procedures or our internal controlover financial reporting will necessarily prevent all fraud and material error.An internal control system, no matter how well conceived and operated, canprovide only reasonable, not absolute, assurance that the objectives of thecontrol system are met. Further, the design of the control system must reflectthe fact that there are resource constraints, and the benefits of controls mustbe considered relative to their costs. Because of the inherent limitations inall control systems, no evaluation of controls can provide absolute assurancethat all control issues and instances of fraud, if any, within the Company havebeen detected. These inherent limitations include the realities that judgmentsin decision-making can be faulty, and that breakdowns can occur because ofsimple error or mistake. Additionally, controls can be circumvented by theindividual acts of some persons, by collusion of two or more people, or bymanagement override of the internal control. The design of any system ofcontrols also is based in part upon certain assumptions about the likelihood offuture events, and there can be no assurance that any design will succeed inachieving its stated goals under all potential future conditions. Over time,control may become inadequate because of changes in conditions, and/or thedegree of compliance with the policies or procedures may deteriorate.

** **
****
**PART II**

** **

** ITEM 1 - LEGAL PROCEEDINGS.**

** **

Litigation and Claim

In connection with our acquisition of GSI, we are entitledto certain rights of indemnification from GoSolutions Equity, LLC, which is aformer shareholder of GSI that became a shareholder of the Company as a resultof our acquisition of GSI.  We have made a claim of indemnification from thisentity in connection with the bankruptcy of one of GSI's significant customers- Vartec Telecom, Inc. - and the facts and circumstances relating to theprocurement and maintenance of the Primerica Life Insurance account and relatedCitigroup affiliates.  GoSolutions Equity, LLC has indicated that it does notbelieve that we have a valid basis for making such indemnification claims.

The Company has not engaged in meaningful discussions withGoSolutions Equity, LLC as it relates to the indemnification claims notice andtheir response to such claims notice.  Accordingly, the Company is unable toadvise whether it will be successful in the indemnification claims againstGoSolutions Equity, LLC.  Pursuant to the agreement with GSI, if the Company issuccessful, GoSolutions Equity, LLC would only be required to return up toapproximately 4.4 million of our shares issued to that entity to satisfy suchindemnification claims.  GoSolutions Equity, LLC is not required to contributecash to satisfy any indemnification claims.

In the opinion of management, the amount of ultimateliability, if any, with respect to these actions will not materially affect theconsolidated financial position or results of operations of the Company.

In March 2007, GSI was served by the Trustee for VartecTelecom, Inc. ("Trustee") in the United States Bankruptcy Court for theNorthern District of Texas, Dallas Division ("Bankruptcy Court"), Case No.04-81694-hdh-7.  The complaint sought recovery of approximately $400,000 foralleged preferential transfers made in 2004.  On July 19, 2007, the BankruptcyCourt issued an order approving a compromise and settlement between the Trusteeand GSI pursuant to which the claims of the Trustee and the counterclaims ofGSI were settled in consideration for GSI's payment of $65,000 over a fourmonth period that began on July 1, 2007.  Accordingly, we recorded otherexpense of $65,000 in our condensed consolidated statement of operations forthe three and six months ended June 30, 2007 and classified the total amountdue as a current liability in our condensed consolidated balance sheet as ofJune 30, 2007.

** **

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

On February 22, 2007, the Company issued an aggregate of500,000 shares of its restricted common stock to a consultant in connectionwith a placement agency agreement.  The 500,000 shares were valued at $0.085per share (estimated fair value on the measurement date).

On May 7, 2007 and pursuant to the TBS acquisitionagreement, the Company issued 1,100,000 shares of common stock to each ofMessrs. Garner and Campbell.  The shares were valued at $0.04 per share (theestimated fair value on the measurement date) and recorded as additionalpurchase price.  No additional shares of common stock are due to Messrs. Garnerand Campbell pursuant to the TBS acquisition agreement.

On May 7, 2007 and in connection with the acquisition ofTBS, the Company issued 110,000 shares of its restricted common stock to anon-affiliate pursuant to a finder's fee agreement.  The shares were valued at$0.04 per share (the estimated fair value on the measurement date) and recordedas additional purchase price.

On May 7, 2007 and in connection with the acquisition ofTBS, the Company issued 66,000 shares of its restricted common stock to H. JayHill, who is an officer and director of the Company, as a finder's fee.  Theshares were valued at $0.04 per share (the estimated fair value on the measurementdate) and were recorded as compensation expense.

On May 7, 2007, the Company issued 26,786 shares of itsrestricted common stock to a non-affiliate independent contractor for projectmanagement services rendered.  The shares were valued at $0.04 per share (theestimated fair value on the measurement date) and were recorded as consulting expense.

All offers and sales of our securities described above weremade pursuant to Section 4(2) of the Securities Act of 1933 and Regulation Dpromulgated thereunder.

 

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

None.

** **

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

During the quarter ended June 30, 2007, our shareholdersapproved the following actions.  These approvals were by consentaction of the shareholders.

  

1.           Theelection of J. Thomas Zender, K. Mason Conner, Jerry T. Kendall, H. Jay Hill,and Richard Salas as directors to serve until the 2008 annual meeting ofstockholders and until their successors are elected and qualified; and 

2.           Thereincorporation of the Company from California to Delaware by means of a mergerwith and into a wholly owned Delaware subsidiary;

3.           Inconnection with the reincorporation in Delaware, to increase the number ofshares of common stock we are authorized to issued from four hundred million(400,000,000) to five hundred million (500,000,000); and

4.           Toincrease the number of options that we are authorized to grant pursuant to our2002 Equity Incentive Plan from sixty million (60,000,000) to ninety million(90,000,000). 

** **

**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.

2.5

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

3.1

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

3.2

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

3.3

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

3.4

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

3.5

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

3.6

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

** **

4.1

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

4.2

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

4.3

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

4.4

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

4.5

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

4.6

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

4.7

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

4.8

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

4.9

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

4.10

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

4.11

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

4.12

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

4.13

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

4.14

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

4.15

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

4.16

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

4.17

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

4.18

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

4.19

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

4.20

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

4.21

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

4.22

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

4.23

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

4.24

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

4.25

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

4.26

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

4.27

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

4.28

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

4.29

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

4.30

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

4.31

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

4.32

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

4.33

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

4.34

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

4.35

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

4.36

Notice of conversion by Barron Partners LP dated October  21, 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.

4.38

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

4.39

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

4.40

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

4.41

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

4.42

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

4.43

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

10.1

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

10.2

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

10.3

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

10.4

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

10.5

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

10.6

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

10.7

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

10.8

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

10.9

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

10.10

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

10.11

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

10.12

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

10.13

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

10.14

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

10.15

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

10.16

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

10.17

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

10.18

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

10.19

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

10.20

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

10.21

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

10.22

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

10.23

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

10.24

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

10.25

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

10.26

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

10.27

Office Lease Agreement effective June 1, 2007 by and  between the Company and Tustin Avenue Investors, LLC.  Previously filed as  Exhibit 10.1 to the Company's Current Report on Form 8-K filed on April 25,  2007.

10.28

Placement Agency Agreement effective October 13, 2006 by  and between the Company and Stonegate Securities, Inc.*

10.29

Engagement Agreement effective July 10, 2007 by and  between the Company and GemStone Securities, LLC.*

10.30

Settlement Agreement dated June 6, 2007 by and among  Jeffrey H. Mims, VarTec Telecom, Inc, Excel Telecommunications, Inc., VarTec  Solutions, Inc., and GoSolutions, Inc. *

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 August 14, 2007 by K. Mason Conner, Chief Executive  Officer.*

31.2

Certification Under Section 302 of The Sarbanes-Oxley Act  of 2002 signed and dated August 14, 2007 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 August  14, 2007 by K. Mason Conner, Chief Executive Officer.**

32.2

Certification Pursuant To 18 U.S.C. §1350, As Adopted  Pursuant To Section 906 of the Sarbanes-Oxley Act of 2002 signed and dated August  14, 2007 by Michael A. Richard, Chief Financial Officer.**

*

Filed herewith

**

Furnished herewith
****
**SIGNATURES**

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**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:**

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**VillageEDOCS (Registrant)**

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**Dated:  August 14, 2007**

**By:    /s/ K. Mason Conner**

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**       K. Mason  Conner**

** **

**       Chief  Executive Officer and Director**

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**Dated:  August 14, 2007**

**By:  /s/ Michael A. Richard**

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**      Michael A. Richard**

**      Chief Financial  Officer**

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**      (Principal  Accounting Officer)**

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