UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.
20549



Form 10-QSB



QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES
EXCHANGE ACT OF 1934



For the quarterly
period ended June 30, 2004



OR



TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition
period from_________, 20__, to________, 20__.



Commission File
Number: 000-31395

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



VillageEDOCS

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



California
  33-0668917--------------------------------------------------------
  ------------------------------------------------(State or Other
  Jurisdiction of Incorporation or Organization)
  I.R.S. Employer
  Identification Number14471 Chambers
  Road, Suite 105, Tustin, California
  92780---------------------------------------------------------
  ----------------------------(Address of
  principal executive offices)
  (Zip Code)






Registrant's telephone number, including area
code:  (714) 734-1030



Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and has been subject to
such filing requirements for the past 90 days.



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





There were 35,911,544  shares of the Registrant's common
stock outstanding as of July 31, 2004.



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



Indicate by
check mark whether the Registrant is an accelerated filer (as defined in Rule
12b-2 of the Act



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



---





VillageEDOCS

# Index





| |                                 | Page No.
| | ------------------------------- | --------
| | PART I. FINANCIAL
  INFORMATION |         
| |                                 |         
| | Item 1.                         |         
| |                                 |         
| |                                 |         
| |                                 |         
| |                                 |         
| | Item 2.                         |         
| | Item 3.                         |         
| |                                 |         
| | PART II. OTHER
  INFORMATION    |         
| |                                 |         
| | Item 1.                         |         
| | Item 2.                         |         
| | Item 3.                         |         
| | Item 4.                         |         
| | Item 5.                         |         
| | Item 6.                         |         
| |                                 |         







---



|VillageEDOCS and subsidiary                                            |                     |                    
|---------------------------------------------------------------------- | ------------------- | -------------------
|Consolidated Balance Sheet                                             |                     |                    
|(Unaudited)                                                            |                     |                    
|                                                                       | June 30,           
|                                                                       | 2004               
|                                                                       | -------------------
|                                                                       |                     |                    
|ASSETS                                                                 |                     |                    
|Current assets:                                                        |                     |                    
|Cash                                                                   |                     | $622,247           
|Accounts receivable, net of allowance for doubtful                     |                     |                    
|accounts of $32,000                                                    |                     | 497,089            
|Inventories                                                            |                     | 19,750             
|                                                                       |                     | -------------------
|Total current assets                                                   |                     | 1,139,086          
|                                                                       |                     |                    
|Property and equipment, net                                            |                     | 352,015            
|Web site development costs, net                                        |                     | 25,264             
|Other assets                                                           |                     | 25,840             
|Goodwill                                                               |                     | 2,547,077          
|                                                                       | -------------------
|                                                                       | $4,089,282         
|                                                                       | ============       
|                                                                       |                    
|                                                                       |                    
|LIABILITIES AND STOCKHOLDERS' DEFICIT                                  |                     |                    
|Current liabilities:                                                   |                     |                    
|Accounts payable                                                       |                     | $174,723           
|Accrued expenses                                                       |                     | 730,948            
|Current portion of notes payable to related parties                    |                     | 140,000            
|Current portion of capital lease obligations                           |                     | 10,666             
|                                                                       |                     | -------------------
|Total current liabilities                                              |                     | 1,056,337          
|                                                                       |                     |                    
|Capital lease obligations, net of current portion                      |                     | 1,625              
|Note payable                                                           |                     | 9,495              
|Convertible notes and accrued interest                                 |                     |                    
|payable to related parties, net of unamortized                         |                     |                    
|debt discount of $441,500                                              |                     | 5,304,178          
|                                                                       |                     | -------------------
|Total liabilities                                                      |                     | 6,371,635          
|                                                                       | -------------------
|Commitments and contingencies                                          |                     |                    
|                                                                       |                    
|Stockholders' deficit:                                                 |                     |                    
|Common stock, no par value:                                            |                     |                    
|Authorized -- 175,000,000 shares                                       |                     |                    
|Issued and outstanding -- 35,911,544 shares                            |                     | 7,447,883          
|Additional paid-in capital                                             |                     | 2,564,805          
|Accumulated deficit                                                    |                     | (12,295,041)       
|                                                                       |                     | -------------------
|Total stockholders' deficit                                            |                     | (2,282,353)        
|                                                                       | -------------------
|                                                                       | $4,089,282         
|                                                                       | ============       
|                                                                       |                    
|See accompanying notes to unaudited consolidated financial statements.
|                                                                       |                     |                    



---



|VillageEDOCS and subsidiary                                            |                        |                             |                               |                           |                              |                               |  | 
|---------------------------------------------------------------------- | ---------------------- | --------------------------- | ----------------------------- | ------------------------- | ---------------------------- | ----------------------------- |  | 
|Consolidated Statements of Operations                                  |                        |                             |                              
|(Unaudited)                                                            |                        |                             |                              
|                                                                       |                        | Three Months Ended June 30, |                               | Six Months Ended June 30, |                             
|                                                                       | 2004                   | 2003                        |                               | 2004                      | 2003                         |                              
|                                                                       | ---------------------- | -----------------------     |                               | ----------------------    | -----------------------      |                              
|Net sales                                                              |                        | $            1,330,346      | $                  479,427    |                           | $             2,245,791      | $                 918,217     | 
|Cost of sales                                                          |                        | 420,019                     | 218,987                       |                           | 764,312                      | 432,185                       | 
|                                                                       |                        | ----------------------      | ----------------------        |                           | ---------------------        | -----------------------       | 
|Gross profit                                                           |                        | 910,327                     | 260,440                       |                           | 1,481,479                    | 486,032                       | 
|                                                                       |                        | ----------------------      | -----------------------       |                           | ----------------------       | -----------------------       | 
|Operating expenses:                                                    |                        |                             |                               |                          
|Product and technology                                                 |                        |                             |                               |                          
|development                                                            |                        | 83,776                      | 131,265                       |                           | 174,849                      | 267,559                       | 
|Sales and marketing                                                    |                        | 139,745                     | 246,069                       |                           | 307,499                      | 448,294                       | 
|General and administrative                                             |                        | 534,230                     | 209,755                       |                           | 953,037                      | 476,013                       | 
|Depreciation and amortization                                          |                        | 53,641                      | 37,991                        |                           | 94,642                       | 71,844                        | 
|                                                                       |                        | ----------------------      | -----------------------       |                           | ----------------------       | -----------------------       | 
|Total operating expenses                                               |                        | 811,392                     | 625,080                       |                           | 1,530,027                    | 1,263,710                     | 
|                                                                       |                        | ----------------------      | -----------------------       |                           | ----------------------       | -----------------------       | 
|Income (loss) from operations                                          | 98,935                 | (364,640)                   |                               | (48,548)                  | (777,678)                    |                              
|                                                                       |                        |                             |                               |                          
|Interest expense                                                       |                        | (169,551)                   | (146,461)                     |                           | (274,827)                    | (440,746)                     | 
|                                                                       |                        | ----------------------      | -----------------------       |                           | ----------------------       | -----------------------       | 
|Loss before provision (benefit) for                                    |                        |                             |                              
|income taxes                                                           |                        | (70,616)                    | (511,101)                     |                           | (323,375)                    | (1,218,424)                   | 
|                                                                       |                        |                             |                               |                          
|Provision (benefit) for income taxes                                   | (8,047)                | -                           |                               | 1,111                     | 800                          |                              
|                                                                       |                        | ----------------------      | -----------------------       |                           | ----------------------       | -----------------------       | 
|Net loss                                                               |                        | $               (62,569)    | $                (511,101)    |                           | $              (324,486)     | $            (1,219,224)      | 
|                                                                       |                        | =============               | =============                 |                           | =============                | =============                 | 
|                                                                       |                        |                            
|Basic and diluted loss available to                                    |                        |                            
|common stockholders per common                                         |                        |                            
|share                                                                  |                        | $                    (0.00) | $                      (0.02) |                           | $                     (0.01) | $                      (0.04) | 
|                                                                       |                        | =============               | =============                 |                           | =============                | =============                 | 
|                                                                       |                        |                             |                               |                          
|Weighted average shares outstanding -                                  |                        |                             |                               |                          
|basic and diluted                                                      |                        | 35,911,544                  | 30,920,702                    |                           | 34,727,364                   | 30,711,988                    | 
|                                                                       | =============          | =============               |                               | =============             | =============                |                              
|                                                                       |                        |                             |                              
|See accompanying notes to unaudited consolidated financial statements. |                        |                            



---



|Consolidated Statements of Cash Flows                      |                         |                          |                             
|---------------------------------------------------------- | ----------------------- | ------------------------ | ----------------------------
|For the Six Months Ended June 30, 2004 and 2003            |                         |                          |                             
|(Unaudited)                                                |                         |                          |                             
|                                                           | 2004                    | 2003                    
|                                                           |                         | -----------------------  | -----------------------     
|Cash Flows from Operating Activities:                      |                         |                          |                             
|Net loss                                                   |                         | $          (324,486)     | $           (1,219,224)     
|Adjustments to reconcile net loss to net cash              |                         |                          |                             
|provided by (used in) operating activities:                |                         |                          |                             
|Depreciation and amortization                              |                         | 94,642                   | 71,844                      
|Estimated fair market value of stock options issued        |                         |                          |                             
|to employees and non-employees for services rendered       | 5,310                   | 8,301                   
|Common stock issued to employees and                       |                         |                          |                             
|non-employees for services rendered                        |                         | -                        | 116,217                     
|Imputed interest expense on convertible debentures         |                         | 61,024                   | 358,964                     
|Common stock issued for settlement of debt                 |                         | -                        | 24,000                      
|Changes in operating assets and liabilities, net of        |                         |                          |                             
|acquisition:                                               |                         |                          |                             
|Accounts receivable                                        |                         | 6,892                    | (40,794)                    
|Inventories                                                |                         | (1,204)                  | -                           
|Other assets                                               |                         | (18,770)                 | (3,673)                     
|Accounts payable                                           |                         | (45,901)                 | 22,595                      
|Accrued expenses and other                                 |                         | 410,446                  | 170,872                     
|                                                           |                         | -----------------------  | -----------------------     
|Net cash provided by (used in) operating activities        |                         | 187,953                  | (490,898)                   
|                                                           |                         | -----------------------  | -----------------------     
|                                                           |                         |                          |                             
|Cash Flows from Investing Activities:                      |                         |                          |                             
|Purchases of property and equipment                        |                         | (26,716)                 | (62,580)                    
|Cash paid for acquisition of TBS                           |                         | (1,500,000)              | -                           
|Cash acquired from acquisition of TBS                      |                         | 70,631                   | -                           
|Costs incurred for purchase of TBS                         |                         | (136,029)                | -                           
|                                                           |                         | -----------------------  | -----------------------     
|                                                           |                         |                          |                             
|Net cash used in investing activities                      |                         | (1,592,114)              | (62,580)                    
|                                                           |                         | -----------------------  | -----------------------     
|Cash Flows from Financing Activities:                      |                         |                          |                             
|Proceeds from convertible notes payable to related parties |                         | 1,970,000                | 572,000                     
|Principal payments under capital leases                    |                         | (6,727)                  | (34,322)                    
|                                                           |                         |                          |                             
|Payments on notes payable                                  |                         | (1,807)                  | -                           
|Proceeds from exercise of
    warrants                     |                         | 240                      | -                           
|                                                           |                         | -----------------------  | -----------------------     
|Net cash provided by financing activities                  |                         | 1,961,706                | 537,678                     
|                                                           | ----------------------- | ----------------------- 
|Net change in cash                                         |                         | 557,545                  | (15,800)                    
|                                                           |                         |                          |                             
|                                                           |                         |                          |                             
|Cash, beginning of period                                  |                         | 64,702                   | 53,327                      
|                                                           |                         | -----------------------  | -----------------------     
|Cash, end of period                                        |                         | $            622,247     | $                  37,527   
|                                                           |                         | ==============           | ==============              
|                                                          
|Supplemental disclosure of cash flow information -         |                         |                          |                             
|Cash paid during the period for:                           |                         |                          |                             
|Interest                                                   |                         | $              11,402    | $                    3,827  
|                                                           |                         | ==============           | ==============              
|Income taxes                                               |                         | $                    800 | $                        800
|                                                           | ==============          | ==============          
|continued.                                                 |                         |                         



---



|Supplemental Schedule of Noncash Investing and Financing Activities:   |                             
|---------------------------------------------------------------------- | ----------------------------
|                                                                       |                             
|Issuance of common stock as acquisition cost                           | $                     35,200
|                                                                       | ================            
|Issuance of notes payable in acquisition                               | $                2,100,000  
|                                                                       | ================            
|Goodwill generated in acquisition                                      | $                2,547,077  
|                                                                       | ================            
|Issuance of common stock in acquisition                                | $                   440,000 
|                                                                       | ================            
|Debt assumed in acquisition                                            | $                   151,302 
|                                                                       | ================            
|Debt discount in issuance of convertible notes                         |                             
|payable to related party                                               | $                   502,524 
|                                                                       | ================            
|                                                                       |                             
|See accompanying notes to unaudited consolidated financial statements. |                             



---



VillageEDOCS

Notes to Unaudited Consolidated Financial Statements -
June 30, 2004 and 2003





NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



1.          Management's
Representation



The management of VillageEDOCS (the "Company") without audit
has prepared the consolidated financial statements included herein.  The
accompanying unaudited consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States
of America for interim financial information.  Certain information and note
disclosures normally included in the consolidated financial statements prepared
in accordance with accounting principles generally accepted in the United
States of America have been omitted.  In the opinion of the management of the
Company, all adjustments considered necessary for fair presentation of the consolidated
financial statements have been included and were of a normal recurring nature,
and the accompanying consolidated financial statements present fairly the consolidated
financial position as of June 30, 2004, and the results of operations and cash
flows for the three and six months ended June 30, 2004 and 2003.



It is suggested that these unaudited consolidated financial
statements be read in conjunction with the audited financial statements and
notes thereto for the year ended December 31, 2003, included in the Company's
Annual Report on Form 10-KSB filed with the Securities and Exchange Commission
on March 29, 2004.  The interim results are not necessarily indicative of the
results for a full year.





2.Background,
Organization and Basis of Presentation



VillageEDOCS was incorporated in 1995 in Delaware and
reincorporated in California in 1997. The Company operates an electronic
document delivery service marketed to organizations throughout the United
States and internationally.  On February 17, 2004, the Company acquired
Tailored Business Systems, Inc. ("TBS").  TBS provides various
programming, processing and printing services to governmental entities,
including installing software, hardware, printing and mailing of property tax
forms.  On June 16, 2004, the holders of a majority of the voting capital stock
of the Company voted to approve a Plan of Restruction that includes the
reorganization of the Company's electronic document delivery business into a
wholly owned subsidiary of the Company to be formed for the purpose of the
reorganization.  The unaudited consolidated financial statements include the
accounts of the Company and TBS, its wholly owned subsidiary, since February
17, 2004.   All significant inter-company transactions and balances have been
eliminated in consolidation.





# 3.Going
Concern

The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going concern. The
Company has a working capital deficit and has incurred significant losses from
operations in each year since inception.  The Company's losses are continuing
and are expected to continue until such time as the Company is able to
sufficiently expand both its internet-enabled fax service business and its
government billing and accounting hardware, software and services business.



The Company's success is dependent upon numerous items,
certain of which are the successful growth of revenues from its products and
services, its ability to obtain new customers in order to achieve levels of
revenues adequate to support the Company's current and future cost structure,
and its success in obtaining financing for equipment and operations, for which
there is no assurance. Unanticipated problems, expenses, and delays are
frequently encountered in establishing and maintaining profitable operations. 
These include, but are not limited to, competition, the need to develop
customer support capabilities and market expertise, setbacks in product
development, technical difficulties, market acceptance and sales and
marketing.  The failure of the Company to meet any of these conditions could
have a materially adverse effect upon the Company and may force the Company to
reduce or curtail operations. Although management strongly believes that its
operations will begin generating profits during 2004, no assurance can be given
that the Company can achieve or maintain profitable operations.



Until sufficient revenue levels are achieved, the Company
will require additional financing to support its operations. Such sources of
financing could include capital infusions, additional equity financing or debt
offerings. Management plans to obtain convertible debt and equity financing
from existing shareholders and equity financing from new shareholders during
the remainder of 2004.  Management is actively pursuing both of these financing
arrangements.  If the planned financings are obtained, the Company believes it
will have adequate cash to sustain operations until it achieves sustained
profitability.  There can be no assurance that funding will be available on
acceptable terms, if at all, or that such funds, if raised, would enable the
Company to achieve and maintain profitable operations.



These factors, among others, raise substantial doubt about
the Company's ability to continue as a going concern.  The financial statements
do not include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the classification of
liabilities that might result from the outcome of these uncertainties.





4.Summary
of Significant Accounting Policies



Segments of an Enterprise and
Related Information



The
Company 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 its business in annual financial statements and requires it
to report selected segment information in its quarterly reports issued to
shareholders. SFAS No. 131 also requires entity-wide disclosures about the
products and services an entity provides, the material countries in which it
holds assets and reports revenues and its major customers. The Company's two
reportable segments are managed separately based on fundamental differences in
their operations. Since February 17, 2004, the Company has operated in the
following two reportable segments:



(a)
 Electronic document delivery services.



(b)
 Government accounting products and services.



The
Company evaluates performance and allocates resources based upon operating
income. The accounting policies of the reportable segments are the same as
those described in this summary of significant accounting policies (see Note 11).



Concentration of Credit Risk



The
Company extends credit to its customers and performs ongoing credit evaluations
of such customers.  The Company does not obtain collateral to secure its
accounts receivable.  The Company evaluates its accounts receivable on a
regular basis for collectibility and provides for an allowance for potential
credit losses as deemed necessary.  At June 30, 2004, the Company has recorded
an allowance for doubtful accounts of approximately $32,000.  No single customer
accounted for more than 10% of accounts receivable at June 30, 2004.  No single
customer accounted for more than 10% of total sales for the six months ended June
30, 2004 and 2003.



Use of Estimates in the Preparation of Financial
Statements



The preparation of financial
statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Significant estimates made by management are, among others, the realizability
of accounts receivable, property and equipment and goodwill, and valuation of
deferred tax assets.   Actual results could differ from those estimates.



Revenue Recognition



The Company's electronic document
delivery service provides internet-enabled fax services to businesses and
charges for these services on either a per-page delivered or per-minute used
basis. Service revenues are recognized when the services are performed.   Government
accounting products and services revenues are recognized at the time the
product is shipped or the time the service is performed.  Revenue from prepaid annual
maintenance contracts is recognized on a monthly basis throughout the term of each
contract.





Risks and
Uncertainties



The Company operates in
highly competitive industries that are subject to intense competition,
government regulation and rapid technological change.  The Company's operations
are subject to significant risks and uncertainties including financial,
operational, technological, regulatory and other risks associated with an
expanding business, including the potential risk of business failure.



Loss per Share



Basic loss per share is
computed by dividing loss available to common shareholders by the weighted
average number of common shares assumed to be outstanding during the period of
computation. Diluted loss per share is computed similar to basic loss per share
except that the denominator is increased to include the number of additional
common shares that would have been outstanding if the potential shares had been
issued and if the additional common shares were dilutive.  All potentially
dilutive shares, 54,844,553 and 11,743,017 as of June 30, 2004 and 2003,
respectively, have been excluded from diluted loss per share, as their effect
would be anti-dilutive for the periods ended June 30, 2004 and 2003.



Inventory



Inventory consists primarily of
supplies, forms and envelopes and is stated at the lower of cost (using
first-in, first-out method) or market.



Goodwill and Other Intangible
Assets



The Company has adopted SFAS No. 142
"Goodwill and Other Intangible Assets."  Under SFAS No.
142, goodwill associated with acquisitions consummated after June 30, 2001 is
not to be amortized, and effective January 1, 2002, goodwill and other
intangible assets with indefinite lives are no longer subject to periodic
amortization but are instead reviewed annually for impairment, or more
frequently if impairment indicators arise.  As of June 30, 2004, the
Company has not yet determined the valuation date to perform an impairment test
on goodwill.



Identifiable assets and liabilities
acquired in connection with business acquisitions accounted for under the
purchase method are recorded at their respective fair values.  Deferred
income taxes have been recorded to the extent of differences between the fair
value and the tax basis of the assets acquired and liabilities assumed.



Long-Lived Assets



In the event that facts and
circumstances indicate that equipment or other long-lived assets may be
impaired, an evaluation of recoverability would be performed.  If an
evaluation is required, the estimated future discounted cash flows associated
with the asset are compared to the asset's carrying amount to determine if an
impairment charge is necessary.  The amount of long-lived asset
impairment, if any, is charged to operations in the period in which long-lived
asset impairment is determined.  At June 30, 2004, there is no impairment
of the long-lived assets.  There can be no assurance, however, that market
conditions will not change or demand for the Company's services will continue,
which could result in impairment of long-lived assets in the future.



Comprehensive Income



The Company has no items of
comprehensive income.



Stock-Based Compensation



The Company accounts for
non-employee stock-based compensation under SFAS No. 123  "Accounting For
Stock-Based Compensation."  SFAS No. 123 defines a fair value based method
of accounting for stock-based compensation.  However, SFAS No. 123 allows an
entity to continue to measure compensation cost related to stock and stock
options issued to employees using the intrinsic method of accounting prescribed
by Accounting Principles Board Opinion No. 25 ("APB 25"), "Accounting
for Stock Issued to Employees." Under APB 25, compensation cost, if any, is
recognized over the respective vesting period based on the difference, on the
date of grant, between the fair value of the Company's common stock and the
grant price. Entities electing to remain with the accounting method of APB 25
must make pro forma disclosures of net income and earnings per share, as if the
fair value method of accounting defined in SFAS No. 123 had been applied.



At June 30, 2004, the Company has two stock-based
employee compensation plans.  The Company accounts for those plans under the
recognition and measurement principles of APB 25, and related interpretations
(see Note 8).  During the six months ended June 30, 2004 and 2003, no
stock-based employee compensation cost is reflected in the accompanying
unaudited statements of operations, as all options granted under those plans
had exercise prices equal to or greater than the market value of the underlying
common stock on the date of grant.  The following table illustrates the effect
on net loss and loss per share if the Company had applied the fair value
recognition provisions of SFAS No. 123 to stock-based employee compensation:





| |                                                                                                                                       | Three Months
  Ended June 30, | Six Months Ended
  June 30,
| | ------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------- | ---------------------------
| |                                                                                                                                       | 2004                          | 2003                       
| |                                                                                                                                       |                               |                            
| | Net loss as reported                                                                                                                  | $ (62,569)                    | $ (511,101)                
| |                                                                                                                                       |                               |                            
| | Add:  Total stock-based employee compensation expense under
  APB 25                                                                  |                               |                            
| | --                                                                                                                                    | --                            | --                         
| |                                                                                                                                       |                               |                            
| | Deduct:  Total stock-based employee compensation expense
  under fair value
  based method for all awards, net of related tax effects |                               |                            
| |                                                                                                                                       |                               |                            
| |                                                                                                                                       |                               |                            
| | --                                                                                                                                    | --                            | (309,058)                  
| |                                                                                                                                       | ------------------            | ----------------           
| |                                                                                                                                       |                               |                            
| | Pro forma net loss                                                                                                                    | $ (62,569)                    | $ (511,101)                
| |                                                                                                                                       | ==========                    | ==========                 
| | Basic and diluted loss per share - as reported                                                                                        |                               |                            
| | $          (0.00)                                                                                                                     | $          (0.02)             | $          (0.01)          
| |                                                                                                                                       | ==========                    | ==========                 
| | Basic and diluted loss per share - pro forma                                                                                          |                               |                            
| | $          (0.00)                                                                                                                     | $          (0.02)             | $          (0.02)          
| |                                                                                                                                       | ==========                    | ==========                 
| |                                                                                                                                       |                               |                            







Web Site Development Costs



During the six months ended June 30,
2004, the Company did not capitalize any costs related to the web site in
accordance with the Emerging Issues Task Force Issue No. 00-2, "Accounting
for Web Site Development Costs." During the six months ended June 30,
2004 and 2003, the Company recorded amortization of web site development costs
of $17,944 and $17,945, respectively.



Advertising



The Company expenses all advertising
costs as incurred.  Advertising costs were $29,641 and $72,863 for the six months
ended June 30, 2004 and 2003, respectively.



Warranty Costs



Government accounting products and
services offers a one year and a 90-day warranty period for customers after
installation for certain services.  Management has determined that warranty
claims are not material to the financial statements as of June 30, 2004.





5.            Acquisition of TBS



On February 17, 2004, the Company purchased 100% of the
issued and outstanding capital stock of TBS from Stephen A. Garner and James L.
Campbell.



The Company purchased TBS with $1.5 million in cash,
convertible secured promissory notes totaling $600,000, and 11 million
restricted shares of the Company's common stock.   Payment of 4,400,000 (or
40%) of the shares were made at the closing, and payment of 6,600,000 (or 60%)
of the shares is contingent upon TBS meeting certain net revenue goals in each
of the first three fiscal years following the closing and, therefore, will take
place over a three-year period.   The Company's common stock was valued at
$0.10 per share, the average closing bid price of the Company's common stock
for the thirty-day period ended February 16, 2004.



The acquisition has been accounted for using the purchase
method of accounting. The Company funded the cash portion of the purchase price
of TBS with the proceeds of a $1.7 million convertible secured promissory note
offering subscribed to by Mr. and Mrs. Williams (see Note 7).



The terms of the purchase were the result of arms-length
negotiations.  Neither of the TBS shareholders was previously affiliated with
VillageEDOCS.



The Company, in connection with the acquisition of TBS, has
incurred approximately $60,000 in consulting expenses to an unrelated third party
(paid during February 2004 in a combination of cash and 220,000 shares of
common stock issued in March 2004 valued at $0.10 per share), $76,000 in
compensation to an employee (paid, pursuant to his employment agreement and
incremental to his base salary, during February 2004 in a combination of cash
and 132,000 shares of common stock issued in March 2004 valued at $0.10 per
share) and $53,143 in other acquisition-related costs including, but not
limited to, expenses incurred for legal, accounting, and travel.



The purchase price has been determined as follows:





| | Cash                                         | $          1,500,000
| | -------------------------------------------- | --------------------
| | Convertible secured promissory notes         | 600,000             
| | Common stock (4,400,000 shares)              | 440,000             
| | Acquisition costs (including 352,000 shares) | 189,143             
| |                                              | --------------------
| | Net assets                                   | $         2,729,143 
| |                                              | ============        
| |                                              |                     





The following represents an allocation of the purchase price
over the historical net book value of the acquired assets and liabilities of
TBS as of February 17, 2004, the acquisition date:



| | Cash                                  | $          70,631
| | ------------------------------------- | -----------------
| | Accounts receivable                   | 305,533          
| | Inventories                           | 18,546           
| | Property and equipment                | 254,287          
| | Accounts payable and accrued expenses | (315,629)        
| | Notes payable                         | (151,302)        
| |                                       | -----------------
| | Net assets                            | 182,066          
| |                                       |                  
| | Goodwill and other intangible assets  | 2,547,077        
| |                                       | -----------------
| |                                       | $     2,729,143  
| |                                       | ==========       
| |                                       |                  



This allocation is preliminary and may be subject to change
upon evaluation of the fair value of TBS's acquired assets and liabilities as
of the acquisition date as well as the potential identification of certain
intangible assets.  The Company is in the process of analyzing the components
of the intangible assets it acquired and will determine the final purchase
price allocation during 2004.  The goodwill from the acquisition of TBS was
allocated one hundred percent to the government accounting products and
services segment.



The unaudited pro forma combined historical results, as if
TBS had been acquired January 1, 2003, are estimated as follows:



| |                         |                          |                                   |               |                                  
| | ----------------------- | ------------------------ | --------------------------------- | ------------- | ---------------------------------
| |                         | For the Six Months Ended
| |                         | June 30, 2004            |                                   | June 30, 2003
| |                         |                          | ------------------------          |               | ----------------------           
| | Net sales               |                          | $                  2,807,077      |               | $                  2,651,258     
| | Net loss                |                          | $                   (395,112)     |               | $                (1,186,235)     
| | Weighted average common |                          |                                  
| | shares outstanding:     |                          |                                  
| | Basic and diluted       |                          | 35,911,544                        |               | 35,115,255                       
| | Loss per share:         |                          |                                  
| | Basic and diluted       |                          | $                          (0.01) |               | $                          (0.03)
| |                        







Prior to the date of acquisition, TBS's fiscal year ended on
October 31.  Accordingly, the unaudited pro forma information for the 2003
period has been prepared by combining the results of VillageEDOCS for the six months
ended June 30, 2003 and the results of TBS for the six months ended April 30,
2003.



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



6.Note
Payable



In connection with the acquisition of TBS, the Company
assumed a promissory note in connection with a vehicle purchase.  This
note is payable in monthly installments of $550, including interest, bears
interest at 5.4%, is collateralized by a vehicle, and is due in November
2005.  The outstanding principal balance of this note as of June 30, 2004
was $9,495.



7.Notes
Payable and Convertible Notes Payable to Related Parties



During the six months ended June 30, 2004, the Company
borrowed $270,000 from C. Alan and Joan P. Williams and issued convertible
promissory notes bearing interest at 10 percent per annum (the "Notes").  
The Notes are secured by a security interest in all of the Company's assets.  The
notes and accrued interest are due at the earlier of one of three events: 1)
October 31, 2005; 2) acquisition of controlling interest in the Company by a
third party; or 3) the Company achieves equity financing of a minimum of
$3,000,000.  If the Company is acquired, the principal and accrued interest on
the Notes, as modified, are convertible into shares of the Company's common
stock at the lower of $2.50 per share or the price paid per share by the
acquirer.  In addition, the principal and accrued interest on the Notes, as
modified, are convertible into shares of the Company's common stock at a
conversion price equal to the lower of $0.07 per share or the average of the
Company's common stock closing bid price on the OTCBB, NASDAQ or other
established securities exchange or market for the ten (10) consecutive trading
days prior to the date Mr. Williams delivers written notice of his conversion
election to the Company.  The beneficial conversion feature resulted in a
charge to interest expense in the accompanying statement of operations of $28,931
during the six months ended June 30, 2004.



On February 17, 2004, the Company issued a $1,700,000
secured convertible promissory note for cash.  The note was issued to a related
party, C. Alan and Joan P. Williams, and bears interest at 10 percent per
annum.  The note and accrued interest are due at the earlier of one of three
events: 1) October 31, 2007; 2) acquisition of controlling interest in the
Company by a third party; or 3) the Company achieves equity financing of a
minimum of $3,000,000.  If the Company is acquired, the principal and accrued
interest on the note are convertible into shares of the Company's common stock
at the lower of $2.50 per share or the price paid per share by the acquirer. 
In addition, the principal and accrued interest on the note are convertible
into shares of the Company's common stock at a conversion price equal to eighty
five percent of average of the Company's common stock closing bid price on the
OTCBB, NASDAQ or other established securities exchange or market for the ten
(10) consecutive trading days prior to the date Mr. and Mrs. Williams deliver
written notice of their conversion election to the Company.  As an inducement
for Mr. and Mrs. Williams to provide the loan, the Company agreed to issue them
a warrant to purchase 5,000,000 shares of the Company's restricted common stock
at $0.10 per share until February 17, 2009.  There is no beneficial conversion
feature associated with this promissory note.  In connection with the issuance
of the detachable warrant, the Company recorded a debt discount of $323,810. 
The Company will amortize the discount using the effective interest method
through October 31, 2007.  In the event that the related debenture is converted
to shares of the Company's common stock, the Company will immediately eliminate
the corresponding unamortized debt discount against equity.  During the six months
ended June 30, 2004, $32,093 of interest expense was recognized on the
accompanying consolidated statement of operations in connection with amortization
of the debt discount.



In connection with the acquisition of TBS, the Company
issued a $300,000 convertible promissory note to Stephen A. Garner and a
$300,000 convertible promissory note to James L. Campbell (the "TBS
Notes").  Each of the TBS Notes bears interest at 5 percent per annum and is
due and payable in three equal annual installments of  $100,000, with the first
installment due on February 17, 2005 and subsequent installments due on
February 17, 2006 and February 17, 2007.  The TBS Notes are secured by a Stock
Pledge Agreement and a Security Agreement.  In addition, Messrs. Garner and
Campbell have the right to convert the unpaid principal balance of the TBS
Notes into shares of the Company's common stock at the rate of 9.8 shares of
Common Stock for each $1.00 of principal and interest to be converted.  Since
the conversion price was based upon the fair market value of the Company's
common stock on the date of issuance, there is no beneficial conversion feature
associated with the TBS Notes.



In connection with the acquisition of TBS, the Company
assumed promissory notes in the aggregate amount of $140,000 to Stephen A.
Garner and James L. Campbell.  The notes bear interest at 8 percent per annum
and are due and payable on December 31, 2004.



Total interest expense recognized on all the convertible
notes payable (including accrued interest based on the stated interest rate)
was $257,222 and $436,918 during the six months ended June 30, 2004 and 2003,
respectively.  Total interest accrued and not paid on the convertible notes
payable to related parties as of June 30, 2004 totaled $785,932 and is included
in the accompanying consolidated balance sheet.





8.Stockholders'
Deficit



a.
Common Stock



On February 17, 2004, the Company
issued 2,200,000 shares of restricted common stock to each of Stephen A. Garner
and James L. Campbell in partial payment of the total purchase price for 100%
of the common stock of TBS.  All 4,400,000 shares were valued at $0.10 per
share, the fair market value of the Company's common stock on the date of acquisition.

On February 17, 2004 and in
connection with the acquisition of TBS, the Company agreed to issue 132,000
shares of its restricted common stock to H. Jay Hill, who is an officer and
director of the Company, pursuant to Mr. Hill's employment agreement.  The
shares were valued at $0.10 per share, the fair market value on the date of the
acquisition.  The shares were issued on March 11, 2004.

On February 17, 2004 and in
connection with the acquisition of TBS, the Company agreed to issue 220,000
shares of its restricted common stock to a non-affiliate pursuant to a finder's
fee agreement.  The shares were valued at $0.10 per share, the fair market
value on the date of the acquisition.  The shares were issued on March 11,
2004.

On March 11, 2004, the Company
issued 24,019 shares of restricted common stock for $240 in cash in connection
with the exercise of a warrant.

On June 16, 2004, the holders of a
majority of the voting capital stock of the Company acted by written consent in
lieu of a special meeting of shareholders to increase the number of authorized
no par value shares of the common stock of the Company from 90,000,000 to
175,000,000.





b.
Stock Options



Effective January 30, 2002, the
Board of Directors of the Company adopted an equity incentive plan (the "2002
Plan") that authorized the issuance of options to acquire up to 6,226,258
shares of common stock to employees and certain outside consultants.   On
November 25, 2002, the Board of Directors of the Company increased the number
of shares reserved for issuance pursuant to the 2002 Plan to 11,634,584
shares.  On November 27, 2002, the stockholders of the Company approved the
2002 Plan and the number of shares reserved for issuance pursuant to the 2002
Plan.  On June 16, 2004, the stockholders of the Company authorized the
modification of the 2002 Plan to increase the number of shares reserved for
issuance under the plan to 28,000,000.  The 2002 Plan allows for the issuance
of either non-qualified or, subject to stockholder approval, incentive stock
options pursuant to Section 422 of the Internal Revenue Code. Options vest at the
discretion of the Board of Directors as determined at the grant date, but not
longer than a ten-year term.  Under the 2002 Plan, the exercise price of each
option shall not be less than fair market value on the date the option is
granted.  The number of options under the 2002 Plan available for grant at June
30, 2004 was 11,740,282.

During the six months ended June
30, 2004, the Company granted to its employees options to purchase shares of
its common stock under the 2002 Plan as follows:  5,150,000 shares at $0.15 per
share, 150,000 shares at $0.17 per share, 1,700,000 shares at $0.18 per share, 10,000
shares at $0.1875 per share, 25,000 shares at $0.19 per share, 35,000 shares at
$0.20 per share.   All options were issued above or at the fair market value on the dates of grant and vest on various
dates from the date of grant through June 2009.

Options to purchase 50,000 shares
at $0.10 (the fair market value on the date of grant) were granted to a
non-employee consultant during 2003.  These options vested on February 28, 2004
and $5,310 of consulting expense was recognized in the accompanying
consolidated statements of operations in connection with the vesting of these
options.



During the six months ended June
30, 2004, 996,036 options under the 2002 Plan and 95,885 other options were
cancelled due to their expiration or the termination of employment.



c.       
Warrants



During the six months ended June 30,
2004, warrants to purchase 24,019 shares of the Company's common stock were
exercised by a non-affiliate for $240 in cash.

On June 29, 2004, warrants to
purchase 49,256 shares of the Company's common stock expired unexercised.



5,000,000 additional warrants were
issued in connection with convertible debentures payable to related parties
(see Note 7).



9.           Loss
per Share



Basic
and diluted loss per common share is computed as follows:



| |                                                                    | Three Months
  Ended June 30, | Six Months Ended
  June 30,
| | ------------------------------------------------------------------ | ----------------------------- | ---------------------------
| |                                                                    | 2004                          | 2003                       
| |                                                                    |                               |                            
| | Numerator for basic and  diluted loss per

  common share:         |                               |                            
| | Net loss available to    
        common stockholders              | $ (62,569)                    | $ (511,101)                
| |                                                                    | ==========                    | ==========                 
| |                                                                    |                               |                            
| | Denominator for basic   and diluted loss per
    common share:     |                               |                            
| |                                                                    |                               |                            
| | Weighted average      common
  shares      outstanding             | 35,911,544                    | 30,920,702                 
| |                                                                    | ==========                    | ==========                 
| | Net loss per common     share available to
    common stockholders | $          (0.00)             | $          (0.02)          
| |                                                                    | ==========                    | ==========                 
| |                                                                    |                               |                            





10.Commitments
and Contingencies



Litigation



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



Indemnities and Guarantees

During the normal course of business, the Company
has made certain indemnities and guarantees under which it may be required to
make payments in relation to certain transactions.  The Company indemnifies its
directors, officers, employees and agents to the maximum extent permitted under
the laws of the State of California and of the State of Georgia. These
indemnities include certain agreements with the Company's officers, under which
the Company may be required to indemnify such person for liabilities arising
out of their employment relationship.  In connection with its facility leases,
the Company has indemnified its lessor for certain claims arising from the sale
of the facilities. The duration of these indemnities and guarantees varies and,
in certain cases, is indefinite.  The majority of these indemnities and
guarantees do not provide for any limitation of the maximum potential future
payments the Company could be obligated to make.  Historically, the Company has
not been obligated to make significant payments for these obligations and no
liabilities have been recorded for these indemnities and guarantees in the
accompanying balance sheet.



11.Segment
Reporting



The Company's operations
are classified into two principal reportable segments that provide different
products or services.  Separate management of each segment is required because
each business unit is subject to different marketing, production, and
technology strategies.  Since February 17, 2004, the Company has operated in the
following two reportable segments:

> (a)  Electronic document delivery services; and
> 
> (b)  Government accounting products and
> services.

Segment operating income
(loss) is total segment revenue reduced by operating expenses identifiable with
the business segment.  Corporate loss includes general corporate administrative
costs.  Corporate assets include primarily cash.  The Company's underlying
accounting records are maintained on a legal entity basis for government and
public reporting requirements.  Segment disclosures are on a performance basis
consistent with internal management reporting.   The cost of some corporate
functions and the cost of certain employee benefits are allocated to segments at
cost.  Remaining costs, if any, are not allocated to revenue segments.  The
Company evaluates performance and allocates resources based upon operating
income.  The accounting policies of the reportable segments are the same as
those described in the summary of accounting policies.  There are no
inter-segment sales.



The following table
summarizes segment asset and operating balances by reportable segment, has been
prepared in accordance with the internal accounting policies, and may not be
presented in accordance with generally accepted accounting principles:



| |                                                                                                                                                                                                                                                                                                                                                                    |                         | Three
    months ended |                          | Six months
    ended  | 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ----------------------- | ---------------------- | ------------------------ | --------------------- | 
| |                                                                                                                                                                                                                                                                                                                                                                    | June 30, 2004           |                        | June 30, 2004            | (1)                  
| |                                                                                                                                                                                                                                                                                                                                                                    | ----------------------  |                        | ------------------------ |                      
| |                                                                                                                                                                                                                                                                                                                                                                    |                        
| | Net revenue from external
    customers:                                                                                                                                                                                                                                                                                                                           |                         |                        |                         
| |                                                                                                                                                                                                                                                                                                                                                                    |                         |                       
| | Electronic document delivery
    services                                                                                                                                                                                                                                                                                                                          |                         | $678,214               |                          | 1,280,383             | 
| | Government accounting products and
    services                                                                                                                                                                                                                                                                                                                    |                         | 652,132                |                          | 965,408               | 
| | Corporate                                                                                                                                                                                                                                                                                                                                                          |                         | -                      |                          | -                     | 
| |                                                                                                                                                                                                                                                                                                                                                                    | ----------------------- |                        | -----------------------  |                      
| | Total revenue from external
    customers:                                                                                                                                                                                                                                                                                                                         |                         | $1,330,346             |                          | $      
    2,245,791 | 
| |                                                                                                                                                                                                                                                                                                                                                                    | ==============          |                        | ==============           |                      
| |                                                                                                                                                                                                                                                                                                                                                                    |                         |                        |                          |                      
| | Operating income (loss):                                                                                                                                                                                                                                                                                                                                           |                         |                        |                          |                       | 
| |                                                                                                                                                                                                                                                                                                                                                                    |                         |                        |                          |                      
| | Electronic document delivery
    services                                                                                                                                                                                                                                                                                                                          |                         | $
    63,055           |                          | $84,705               | 
| | Government accounting products and
    services                                                                                                                                                                                                                                                                                                                    |                         | 112,993                |                          | 156,696               | 
| | Corporate                                                                                                                                                                                                                                                                                                                                                          |                         | (77,113)               |                          | (289,949)             | 
| |                                                                                                                                                                                                                                                                                                                                                                    | ----------------------- |                        | -----------------------  |                      
| | Total operating income (loss):                                                                                                                                                                                                                                                                                                                                     |                         | $98,935                |                          | $(48,548)             | 
| |                                                                                                                                                                                                                                                                                                                                                                    | ==============          |                        | ==============           |                      
| |                                                                                                                                                                                                                                                                                                                                                                    |                         |                        |                          |                      
| | Interest expense:                                                                                                                                                                                                                                                                                                                                                  |                         |                        |                          |                       | 
| |                                                                                                                                                                                                                                                                                                                                                                    |                         |                        |                          |                      
| | Electronic document delivery
    services                                                                                                                                                                                                                                                                                                                          |                         | $18,650                |                          | $193,301              | 
| | Government accounting products and
    services                                                                                                                                                                                                                                                                                                                    |                         | 2,952                  |                          | 3,433                 | 
| | Corporate                                                                                                                                                                                                                                                                                                                                                          |                         | 50,001                 |                          | 78,093                | 
| |                                                                                                                                                                                                                                                                                                                                                                    | ----------------------- |                        | -----------------------  |                      
| | Total interest expense:                                                                                                                                                                                                                                                                                                                                            |                         | $71,603                |                          | $274,827              | 
| |                                                                                                                                                                                                                                                                                                                                                                    | ==============          |                        | ==============           |                      
| |                                                                                                                                                                                                                                                                                                                                                                    |                         |                        |                          |                      
| | Net income (loss):                                                                                                                                                                                                                                                                                                                                                 |                         |                        |                          |                       | 
| |                                                                                                                                                                                                                                                                                                                                                                    |                         |                        |                          |                      
| | Electronic document delivery
    services                                                                                                                                                                                                                                                                                                                          |                         | $44,405                |                          | $(108,596)            | 
| | Government accounting products and
    services                                                                                                                                                                                                                                                                                                                    |                         | 118,088                |                          | 152,152               | 
| | Corporate                                                                                                                                                                                                                                                                                                                                                          |                         | (127,114)              |                          | (368,042)             | 
| |                                                                                                                                                                                                                                                                                                                                                                    | ----------------------- |                        | -----------------------  |                      
| | Total net income (loss):                                                                                                                                                                                                                                                                                                                                           |                         | $35,379                |                          | $(324,486)            | 
| |                                                                                                                                                                                                                                                                                                                                                                    | ==============          |                        | ==============           |                      
| |                                                                                                                                                                                                                                                                                                                                                                    |                         |                        |                          |                      
| | Identifiable assets:                                                                                                                                                                                                                                                                                                                                               |                         |                        |                          |                       | 
| |                                                                                                                                                                                                                                                                                                                                                                    |                         |                        |                          |                      
| | Electronic document delivery
    services                                                                                                                                                                                                                                                                                                                          |                         | $523,328               |                          | $523,328              | 
| | Government accounting products and
    services                                                                                                                                                                                                                                                                                                                    |                         | 3,523,362              |                          | 3,523,362             | 
| | Corporate                                                                                                                                                                                                                                                                                                                                                          |                         | 42,592                 |                          | 42,592                | 
| |                                                                                                                                                                                                                                                                                                                                                                    | ----------------------- |                        | -----------------------  |                      
| | Total identifiable assets:                                                                                                                                                                                                                                                                                                                                         |                         | $4,089,282             |                          | $4,089,282            | 
| |                                                                                                                                                                                                                                                                                                                                                                    | ==============          |                        | ==============           |                      
| |                                                                                                                                                                                                                                                                                                                                                                    |                         |                        |                          |                      
| | Capital expenditures:                                                                                                                                                                                                                                                                                                                                              |                         |                        |                          |                       | 
| |                                                                                                                                                                                                                                                                                                                                                                    |                         |                        |                          |                      
| | Electronic document delivery
    services                                                                                                                                                                                                                                                                                                                          |                         | $
    22,108           |                          | $
    26,716          | 
| | Government accounting products and
    services                                                                                                                                                                                                                                                                                                                    |                         |                        |                          | -                     | 
| | Corporate                                                                                                                                                                                                                                                                                                                                                          |                         |                        |                          | -                     | 
| |                                                                                                                                                                                                                                                                                                                                                                    | ----------------------- |                        | -----------------------  |                      
| | Total capital expenditures:                                                                                                                                                                                                                                                                                                                                        |                         | $
    22,108           |                          | $26,716               | 
| |                                                                                                                                                                                                                                                                                                                                                                    | ==============          |                        | ==============           |                      
| |                                                                                                                                                                                                                                                                                                                                                                    |                         |                       
| |                                                                                                                                                                                                                                                                                                                                                                    |                         |                       
| | (1)  Results and balances for Electronic document delivery services and
    Corporate are reported as of and for for the three and six months ended June
    30, 2004.  Results and balances for Government accounting products and
    services are reported as of and for the the periods from February 17, 2004
    (date of acquisition) through June 30, 2004 |                        
| |                                                                                                                                                                                                                                                                                                                                                                    |                         |                       



12.Related
Party Transactions



The Company has borrowed
significantly from related parties as described more fully in Note 7.



TBS has a related party
operating lease with Perimeter Center Partners for the rental of the land and
building occupied by TBS.  The lease commenced on February 1, 2004 and has a
term of five years, with monthly payments of $4,000.  The Company has executed
a Guaranty with respect to the lease.  Perimeter Center Partners is owned by
Stephen A. Garner and James L. Campbell, who are affiliates of the Company.



On February 17, 2004 and in
connection with the acquisition of TBS, the Company agreed to issue 132,000
shares of its restricted common stock to H. Jay Hill, who is an officer and
director of the Company, pursuant to Mr. Hill's employment agreement.  The
shares were valued at $0.10 per share, the fair market value on the date of the
acquisition.  The shares were issued on March 11, 2004.  In addition, in
connection with the acquisition of TBS, we paid Mr. Hill $63,000 in employment
compensation pursuant to his employment agreement and incremental to his base
salary.



13.Subsequent
Events



On July 28, 2004, the
Company borrowed an additional $15,000 from C. Alan and Joan P. Williams and
issued a convertible promissory note with terms identical to those described in
the first paragraph of Note 7 above.  The beneficial conversion feature
contained in this promissory note will result in a debt discount of $15,000
which will be recorded to interest expense over the life of the note.



---



ITEM 2 - MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



FORWARD-LOOKING INFORMATION



This Quarterly
Report on Form 10-QSB includes forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended. All statements
that do not directly and exclusively relate to historical facts constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995.  These statements are based on our plans,
intentions, expectation, and belief and are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
projected or expressed herein. The words "anticipate,"
"believe," "expect," "plan," "intend,"
"seek," "estimate," "project," "will,"
"could," "may," and similar expressions are intended to
identify forward-looking statements. These statements include, among others,
information regarding future operations, future capital expenditures, and
future net cash flow. Such statements reflect the Company's current views with
respect to future events and financial performance and involves risks and
uncertainties, including, without limitation, general economic and business
conditions, changes in foreign, political, social and economic conditions,
regulatory initiatives and compliance with governmental regulations, the
ability to achieve further market penetration and additional customers, and
various other matters, many of which are beyond the Company's control,
including, without limitation, the risks described under the caption
"Factors That May Affect Future Results" in Item 6 of the Company's Annual
Report on Form 10-KSB filed with the Securities and Exchange Commission on
March 29, 2004. Our future results and stockholder values may differ materially
from those expressed in these forward- looking statements. Many of the factors
that will determine these results and values are beyond our ability to control
or predict. Investors are cautioned not to put undue reliance on any
forward-looking statements. For these statements, we claim the protection of
the safe harbor for forward-looking statements contained in Section 21E of the
Exchange Act.



WEBSITE ACCESS TO REPORTS



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





General Overview



The following discussion and analysis of our financial condition and
results of operations should be read in conjunction with the unaudited
consolidated balance sheet as of June 30, 2004, and the unaudited consolidated statements
of operations and cash flows for the three and six months ended June 30, 2004
and 2003, and the related notes thereto as well as the audited financial
statements of the Company for the years ended December 31, 2003 and 2002,
included in the Company's Annual Report on Form 10-KSB filed with the
Securities and Exchange Commission on March 29, 2004.  This discussion contains
forward-looking statements based upon current expectations that involve risks and
uncertainties, such as our plans, objectives, expectations and intentions.



The Company cautions readers that important facts and factors described
in this Management's Discussion and Analysis of Financial Condition and Results
of Operations and elsewhere in this document sometimes have affected, and in
the future could affect, the Company's actual results, and could cause the
Company's actual results during 2004 and beyond to differ materially from those
expressed in any forward-looking statements made by, or on behalf of, the
Company.



On February 17, 2004, the Company acquired Tailored Business Systems,
Inc. ("TBS").  During the fiscal year ended October 31, 2003, TBS's
net revenues were $3,324,059.  During the fiscal year ended December 31, 2003,
the Company's net revenues were $1,882,027.  This acquisition is expected to
cause the Company's results of operations during 2004 to vary significantly
from those reported for 2003 due to the consolidation of TBS during most of
2004.  Accordingly, management believes that the following presentation of
comparative results of operations, while required, may not be meaningful.



As reported in the Independent Auditors' Report on our
December 31, 2003 financial statements, the Company has suffered recurring losses
from operations, had negative cash flows from operations, and had a net capital
deficiency that raises substantial doubt about our ability to continue as a
going concern.



Management is seeking additional financing by issuing
convertible debt to existing shareholders during 2004. In addition, management
plans to seek equity or a combination of equity and debt financing from new
shareholders and/or lenders in the third or fourth quarter of 2004.  Management
is actively pursuing both of these financing arrangements. Between January and July
2004, one of our shareholders loaned us $285,000 to fund our operating
shortfalls; however, he has no binding obligation to continue providing funds.
If the planned financings are obtained and/or the shareholder continues to
cover our operating shortfalls, the Company believes it will have adequate cash
to sustain operations until it becomes profitable. There can be no assurance
that funding will be available on acceptable terms, if at all, or that such
funds, if raised, would enable the Company to achieve and maintain profitable
operations.



Critical
Accounting Policies



In preparing our financial statements, we make estimates,
assumptions and judgments that can have a significant effect on our revenues,
income/loss from operations, and net income/net loss, as well as on the value
of certain assets on our balance sheet.  We believe that there are several
accounting policies that are critical to an understanding of our historical and
future performance as these policies affect the reported amounts of revenues,
expenses, and significant estimates and judgments applied by management.  While
there are a number of accounting policies, methods and estimates affecting our
financial statements, areas that are particularly significant include revenue
recognition, stock-based compensation, and goodwill and long-lived assets.  In
addition, please refer to Note 4 to the accompanying financial statements for
further discussion of our significant accounting policies.



Revenue Recognition.  The Company's electronic
document delivery service provides internet-enabled fax services to businesses
and charges for these services on either a per-page delivered or per-minute
used basis. Service revenues are recognized when the services are performed.   Government
accounting products and services revenues are recognized at the time the
product is shipped or the time the service is performed.  Revenue from prepaid
annual maintenance contracts is recognized on a monthly basis throughout the
term of each contract.



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



Goodwill and Other Intangible Assets.  The Company
has adopted SFAS No. 142 "Goodwill and Other Intangible Assets." 
Under SFAS No. 142, goodwill and other intangible assets with indefinite lives
are no longer subject to periodic amortization but are instead reviewed
annually for impairment, or more frequently if impairment indicators
arise.  As of June 30, 2004, the Company has not yet determined the valuation
date to perform an impairment test on goodwill.



Identifiable assets and liabilities acquired in connection
with business acquisitions accounted for under the purchase method are recorded
at their respective fair values.  Deferred income taxes have been recorded
to the extent of differences between the fair value and the tax basis of the
assets acquired and liabilities assumed.



Long-Lived Assets.  In the event that facts and
circumstances indicate that equipment or other long-lived assets may be impaired,
an evaluation of recoverability would be performed.  If an evaluation is
required, the estimated future discounted cash flows associated with the asset
are compared to the asset's carrying amount to determine if an impairment
charge is necessary.  The amount of long-lived asset impairment, if any,
is charged to operations in the period in which long-lived asset impairment is
determined.





RESULTS OF
OPERATIONS



##### Three Months Ended June 30, 2004 Compared to Three Months Ended June 30,
2003



Net Sales

Net sales for the three months ended June
30, 2004 were $1,330,346, a 177% increase over net sales for prior year quarter
of $479,427.  The increase in the 2004 quarter resulted from an increase of $198,787
in revenue from the Company's electronic document delivery services (which
resulted from growth in the number of clients) as well as the addition of  $652,132
in revenue contributed by TBS.



Cost of Sales

Cost of sales for the three months ended June 30, 2004 were
$420,019 as compared to the $218,987 reported for the three months ended June
30, 2003.  Total cost of sales during the 2004 quarter represented 32% of
sales.  Cost of sales for the Company's electronic document delivery services during
the 2004 quarter represented 19% of sales as compared with 46% of sales in the 2003
quarter reflecting reduced telecommunications and other costs associated with
providing electronic document delivery services despite an improvement in
revenues from those services.



Gross Profit

Gross profit for the three months ended June 30, 2004
increased 249% to $910,327 as compared to $260,440 for the prior year quarter. 
Gross profit margin for the 2004 quarter was 68% as compared with 54% for the
2003 quarter.  Of the overall increase of $649,887, $167,652 is attributable to
improved profits from the Company's electronic document delivery service, and $482,235
is attributable to TBS.



Operating Expenses

Operating expenses for the three months ended June 30, 2004
increased by 30% to $811,392 from the $625,080 reported in the three months
ended June 30, 2003, an increase of $186,312.  Product and technology
development decreased $47,489 to $83,776 from the $131,265 reported in the
prior year quarter because of a reduction in staff.  Sales and marketing decreased
by $106,324 to $139,745 from the $246,069 reported in the prior year quarter
due to a reduction in sales management staff and a small decrease in spending
on sales lead generation programs.  General and administrative increased by $324,475
to $534,230 from the $209,755 reported in the prior year quarter.   The overall
increase was comprised of a $30,860 decrease from the electronic document
delivery service and a $355,335 increase attributable to TBS.  Depreciation and
amortization expense increased $15,650 to $53,641 from the $37,991 reported in
the 2003 quarter.  The overall increase was comprised of a 17% decrease from
electronic document delivery services (due to disposal of certain capitalized
equipment during the fourth quarter of 2003) and the addition of depreciation from
equipment owned by TBS.  During the three months ended June 30, 2004, expenses
related to product and technology development, sales and marketing, general and
administrative, and depreciation and amortization represented 6%, 11%, 40%, and
4% of net sales, respectively.  During the three months ended June 30, 2003,
expenses related to product and technology development, sales and marketing,
general and administrative, and depreciation and amortization represented 27%, 51%,
44%, and 8% of net sales, respectively.



Interest Expense

Interest expense for the quarter ended June 30, 2004 increased
by 16% to $169,551 from $146,461 reported in the prior year quarter because of an
increase in borrowings related to the acquisition of TBS which was partially offset
by a decrease in charges related to the beneficial conversion feature
associated with 2004 borrowings as compared to 2003 borrowings that resulted
from fluctuations in the market price of the Company's common stock.  Interest
expense incurred in connection with capital leases decreased in the 2004
quarter as compared with the 2003 quarter.



Net Loss

As a result of the foregoing, net loss for the three months
ended June 30, 2004 was $62,569, or $0.002 per share, compared to a net loss of
$511,901, or $0.020 per share, for the three months ended June 30, 2003 on
weighted average shares of 35,911,544 and 30,920,702, respectively.





##### Six Months Ended June 30, 2004 Compared to Six Months Ended June 30, 2003



##### Net Sales

Net sales for the six months ended June 30, 2004 were $2,245,791,
a 145% increase over net sales for prior year quarter of $918,217.  The
increase in the 2004 period resulted from an increase of $362,166, or 39%, in
revenue from the Company's electronic document delivery services (which
resulted from growth in the number of clients) as well as the addition of  $965,408
in revenue contributed by TBS.



Cost of Sales

Cost of sales for the six months ended June 30, 2004 were $764,312
as compared to the $432,185 reported for the six months ended June 30, 2003. 
Total cost of sales during the 2004 period represented 34% of sales.  Cost of
sales for the Company's electronic document delivery services during the 2004 period
represented 23% of sales as compared with 47% of sales in the 2003 period
reflecting reduced telecommunications and other costs associated with providing
electronic document delivery services despite an improvement in revenues from
those services.



Gross Profit

Gross profit for the six months ended June 30, 2004
increased 205% to $1,481,479 as compared to $486,032 for the prior year period. 
Gross profit margin for the 2004 period was 66% as compared with 53% for the
2003 period.  Of the overall increase of $995,447, $278,159 is attributable to improved
profits from the Company's electronic document delivery service, and $717,288
is attributable to TBS.



Operating Expenses

Operating expenses for the six months ended June 30, 2004
increased by 21% to $1,530,027 from the $1,263,710 reported in the six months
ended June 30, 2003, an increase of $266,317.  Product and technology
development decreased $92,710 to $174,849 from the $267,559 reported in the
prior year period because of a reduction in staff.  Sales and marketing
decreased by $140,795 to $307,499 from the $448,294 reported in the prior year period
due to a reduction in sales management staff and a small decrease in spending
on sales lead generation programs.  General and administrative increased by $477,024
to $953,037 from the $476,013 reported in the prior year period.   The overall
increase was comprised of a $60,028 decrease from the electronic document
delivery service and a $537,052 increase attributable to TBS.  Depreciation and
amortization expense increased $22,798 to $94,642 from the $71,844 reported in
the 2003 period.  The overall increase was comprised of a 15% decrease from
electronic document delivery services (due to disposal of certain capitalized
equipment during the fourth quarter of 2003) and the addition of depreciation
from equipment owned by TBS.  During the six months ended June 30, 2004,
expenses related to product and technology development, sales and marketing,
general and administrative, and depreciation and amortization represented 8%, 14%,
42%, and 4% of net sales, respectively.  During the six months ended June 30,
2003, expenses related to product and technology development, sales and
marketing, general and administrative, and depreciation and amortization
represented 29%, 49%, 52%, and 8% of net sales, respectively.



Interest Expense

Interest expense for the six months ended June 30, 2004 decreased
by 38% to $274,827 from $440,746 reported in the prior year period because of a
decrease in charges related to the beneficial conversion feature associated
with 2004 borrowings as compared to 2003 borrowings that resulted from
fluctuations in the market price of the Company's common stock.   Interest
expense incurred in connection with capital leases decreased in the 2004 period
as compared with the 2003 period.



Net Loss

As a result of the foregoing, net loss for the six months
ended June 30, 2004 was $324,486, or $0.01 per share, compared to a net loss of
$1,219,224, or $0.04 per share, for the six months ended June 30, 2003 on
weighted average shares of 34,727,364 and 30,711,988, respectively.





LIQUIDITY



During the six months ended June 30, 2004, the Company's net
cash position increased by $557,545 to $622,247. The Company generated $1,961,706
from financing activities, and $187,953 from operating activities; however, the
Company's investing activities used net cash of  $1,592,114.



Net cash provided by operating activities for the six months
ended June 30, 2004 was $187,953, an increase of $678,851 from the $490,898
used in operating activities for prior year period, mainly due to the decrease
in net loss for the 2004 quarter as well as an increase in customer deposits at
TBS.



The Company's investing activities consisted of the acquisition
of TBS and purchase of computer equipment. Net cash used for investment
activities increased $1,529,534 to $1,592,114 from the $62,580 reported for 2003.



Net cash provided by financing activities for the six months
ended June 30, 2004 was $1,961,706, and included proceeds of  $1,970,000 from
stockholder loans. Net cash provided by financing activities for the six months
ended June 30, 2003 was $537,678, which included proceeds of $572,000 from
stockholder loans and principal payments on capital leases of $34,322.





CAPITAL RESOURCES



The Company does not currently have any material commitments
for capital expenditures other than those expenditures incurred in the ordinary
course of business.



Since our inception, our operating and investing activities
have used substantially more cash than they have generated. We believe that we
have made considerable progress toward achieving profitable operations by
increasing revenues from electronic document delivery services and through our
recent acquisition of TBS.  In addition, we are actively seeking opportunities
to acquire or otherwise combine with businesses that are operating profitably. 
However, at present and for the foreseeable future, we believe that we will
continue to need working capital to fund the growth of our businesses and to
absorb the increasing costs associated with operating as a fully reporting company
in the prevailing regulatory environment.    Accordingly, we may experience
negative operating and investing cash flows through at least the third quarter
of 2004.  We currently anticipate that our available cash resources will be
insufficient to meet our anticipated working capital and capital expenditure
requirements beyond September 30, 2004.  We believe we will require up to $250,000
in new financing during the remainder of 2004 in addition to our current
revenue streams to support our operations until the electronic document
delivery business and TBS consistently generate net cash flows sufficient to
offset the anticipated expenses of operating the corporate segment.  Should our
current revenue streams or margins be subjected to even minor decreases, our funding
requirements could be greater.



While we strongly believe that sustainable profitability is
achievable, we have a history of losses.  While both the electronic document
delivery business and TBS have alternately reported both monthly operating incomes
and monthly operating losses during the first half of 2004, operating incomes
have been insufficient to offset operating losses, interest expense and
corporate overhead.  If we are not successful in sustaining and increasing
operating profits from these two reporting segments, we may never achieve
profitability for the Company as a whole.  Should we achieve profitability in
any period, we cannot be certain that we will sustain or increase such
profitability on a quarterly or annual basis.



Between November 2000 and at least July 2004, our operating
shortfalls have been, and are expected to be, funded by one shareholder, an
affiliate, to whom we owe $3,852,000 in principal and $560,909 in interest as
of June 30, 2004. Assuming that this shareholder continues to fund any future
operating shortfalls, we will be able to sustain operations at current levels.
However, this shareholder has no obligation to continue to fund our operating
shortfalls and could stop doing so at any time.  We may be required to alter
the terms of the convertible promissory notes held by this shareholder to
induce this shareholder or other such potential lenders to provide additional
loans, which could result in this shareholder or other such potential lenders
obtaining rights, preferences or privileges senior to those of other creditors
or our stockholders.



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



From inception through June 30, 2004, we
generated revenue of approximately $7,806,000.  However, we have incurred total
expenses of approximately $18,317,000 during that same period. We have incurred
net losses each year since our inception. As of June 30, 2004, we had an
accumulated deficit of $12,295,041.  To date, we have funded our capital
requirements and our business operations primarily with funds provided from the
sale of common stock and from shareholder borrowings, supplemented by revenues
from sales of our services. From inception to July 31, 2004, the Company has
received approximately $10,238,000 from the sale of common stock and
convertible notes, $2,039,245 of which were converted into shares of common
stock on May 15, 2002.



The Independent Auditors' Report on our December 31, 2003
financial statements includes an explanatory paragraph stating that the
recurring losses incurred from operations and a working capital deficiency
raise substantial doubt about our ability to continue as a going concern. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.



RECENT DEVELOPMENTS



During July 2004, the Company obtained cash of $15,000 in
consideration for a convertible note issued to one stockholder, who is an
affiliate. The note bears interest at 10 percent per annum. The note and
accrued interest are due at the earlier of one of three events: 1) acquisition
of a controlling interest in the Company by a third party; 2) October 31, 2005;
or 3) the receipt by the Company of $3,000,000 or more from an equity
financing. If the Company achieves the equity financing, the stockholders have
the option to convert the note plus accrued interest into common stock at the
lower of $2.50 per share or the price per share of common stock issued in the
equity financing. If the Company is acquired, the stockholders have the option
to convert the note plus accrued interest into common stock at the lower of
$2.50 per share or the price per share paid by the acquirer. The note is
convertible at any time at the option of the holder at a price equal to the
lower of $0.07 per share or the average of the Company's common stock closing
bid price on the OTCBB, NASDAQ, or other established securities exchange or
market for the ten (10) consecutive trading days prior to the date the holder
delivers written notice of conversion election to the Company.





ITEM 3 - CONTROLS AND
PROCEDURES



As required by Rule 13a-15
under the Securities Exchange Act of 1934, within the 90 days prior to the
filing date of this report, the Company carried out an evaluation of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures.  This evaluation was carried out under the supervision and with
the participation of the Company's management, including the Company's Chief
Executive Officer and the Company's Chief Financial Officer, who concluded that
the Company's disclosure controls and procedures are effective.  There have
been no significant changes in the Company's internal control or in other
factors, which could significantly affect internal controls subsequent to the
date the Company carried out its evaluation.



Disclosure controls and
procedures are controls and other procedures that are designed to ensure that
information required to be disclosed in the Company reports filed or submitted
under the Exchange Act is recorded, processed, summarized and reported, within
the time periods specified in the Securities and Exchange Commission's rules
and forms.  Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information required to be
disclosed in Company reports filed under the Exchange Act is accumulated and
communicated to management, including the Company's Chief Executive Officer and
Chief Financial Officer as appropriate, to allow timely decisions regarding
required disclosure.



---



PART II





ITEM 1 - LEGAL PROCEEDINGS.



The Company is not a party in any lawsuits.   There were no
new legal matters to report during the three months ended June 30, 2004.



ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS.



On February 17, 2004, the Company issued 2,200,000 shares of
restricted common stock to each of Stephen A. Garner and James L. Campbell in
partial payment of the total purchase price for 100% of the common stock of
TBS.  All 4,400,000 shares were valued at $0.10 per share, the fair market
value of the Company's common stock on the date of acquisition.



On February 17, 2004 and in connection with the acquisition
of TBS, the Company agreed to issue 132,000 shares of its restricted common
stock to H. Jay Hill, who is an officer and director of the Company, pursuant
to Mr. Hill's employment agreement.  The shares were valued at $0.10 per share,
the fair market value on the date of the acquisition.  The shares were issued
on March 11, 2004.



On February 17, 2004 and in connection with the acquisition
of TBS, the Company agreed to issue 220,000 shares of its restricted common
stock to a non-affiliate pursuant to a finder's fee agreement.  The shares were
valued at $0.10 per share, the fair market value on the date of the
acquisition.  The shares were issued on March 11, 2004.



On March 11, 2004, the Company issued 24,019 shares of
restricted common stock for $240 in cash in connection with the exercise of a
warrant.



During the six months ended June 30, 2004, the Company
borrowed $270,000 from C. Alan and Joan P. Williams and issued convertible
promissory notes bearing interest at 10 percent per annum (the
"Notes").   The Notes are secured by a security interest in all of
the Company's assets.  The notes and accrued interest are due at the earlier of
one of three events: 1) October 31, 2005; 2) acquisition of controlling
interest in the Company by a third party; or 3) the Company achieves equity
financing of a minimum of $3,000,000.  If the Company is acquired, the
principal and accrued interest on the Notes, as modified, are convertible into
shares of the Company's common stock at the lower of $2.50 per share or the
price paid per share by the acquirer.  In addition, the principal and accrued
interest on the Notes, as modified, are convertible into shares of the
Company's common stock at a conversion price equal to the lower of $0.07 per
share or the average of the Company's common stock closing bid price on the
OTCBB, NASDAQ or other established securities exchange or market for the ten
(10) consecutive trading days prior to the date Mr. Williams delivers written
notice of his conversion election to the Company.



On February 17, 2004, the Company issued a $1,700,000
secured convertible promissory note for cash.  The note was issued to a related
party, C. Alan and Joan P. Williams, and bears interest at 10 percent per
annum.  The note and accrued interest are due at the earlier of one of three
events: 1) October 31, 2007; 2) acquisition of controlling interest in the
Company by a third party; or 3) the Company achieves equity financing of a
minimum of $3,000,000.  If the Company is acquired, the principal and accrued
interest on the note are convertible into shares of the Company's common stock
at the lower of $2.50 per share or the price paid per share by the acquirer. 
In addition, the principal and accrued interest on the note are convertible
into shares of the Company's common stock at a conversion price equal to eighty
five percent of average of the Company's common stock closing bid price on the
OTCBB, NASDAQ or other established securities exchange or market for the ten
(10) consecutive trading days prior to the date Mr. and Mrs. Williams deliver
written notice of their conversion election to the Company.  As an inducement
for Mr. and Mrs. Williams to provide the loan, the Company agreed to issue them
a warrant to purchase 5,000,000 shares of the Company's restricted common stock
at $0.10 per share until February 17, 2009.



In connection with the acquisition of TBS, the Company
issued a $300,000 convertible promissory note to Stephen A. Garner and a
$300,000 convertible promissory note to James L. Campbell (the "TBS
Notes").  Each of the TBS Notes bears interest at 5 percent per annum and
is due and payable in three equal annual installments of  $100,000, with the
first installment due on February 17, 2005 and subsequent installments due on
February 17, 2006 and February 17, 2007.  The TBS Notes are secured by a Stock
Pledge Agreement and a Security Agreement.  In addition, Messrs. Garner and
Campbell have the right to convert the unpaid principal balance of the TBS
Notes into shares of the Company's common stock at the rate of 9.8 shares of
Common Stock for each $1.00 of principal and interest to be converted.



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





ITEM 3 - DEFAULTS UPON SENIOR SECURITIES.



None.





ITEM 4 - SUBMISSION OF MATTERS TO VOTE OF SECURITY
HOLDERS.



On June 16,
2004, holders of a majority of the voting capital stock of VillageEDOCS, a
California corporation (the "Company"), acted by written consent in
lieu of a special meeting of shareholders to provide for the following:



1.            Amendment
to the Certificate of Incorporation increasing the number of authorized no par
value shares of the Common Stock from                90,000,000 to 175,000,000, with no stated
par value per share.



2.            Approval
of a Plan of Restruction (the "Plan"), which includes the
reorganization of the Company's electronic document delivery                business by
transferring all assets pertaining to the electronic document delivery business
into a wholly-owned subsidiary of the                Company to be formed for the purpose of
the reorganization.



3.            Election
of K. Mason Conner, H. Jay Hill, and J. Thomas Zender as directors.



4.            Modification of the Company's 2002 Equity
Incentive Plan to increase the number of shares reserved for issuance under the
plan    from 11,634,584 to 28,000,000.



5.            Ratification
and approval of Executive Employment Agreements and Equity Incentive
Arrangements with K. Mason Conner, H.                Jay Hill, Michael Richard and J. Thomas
Zender.







ITEM 5 - OTHER MATTERS.



None.



ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K.



(a)    Exhibits



|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.                                                                                                                                         
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.2  | Plan of Internal Restructuring.  Previously filed as
  Exhibit B to the Company's Schedule 14C filed with the Securities and
  Exchange Commission on July 23, 2004 and incorporated herein by reference.                                                                                                                            
|4.1  | 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.                                                                                    
|4.2  | 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.                                                                                                   
|4.3  | 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.                                                                          
|4.4  | Promissory Note to Stephen A. Garner dated February 17,
  2004 previously filed as an exhibit to the Company's current
  report on Form 8-K filed with the Securities and Exchange Commission on
  February 18, 2004 and incorporated herein by reference.                                                                           
|4.5  | Promissory Note to James L. Campbell dated February 17,
  2004 previously filed as an exhibit to the Company's current report on Form
  8-K filed with the Securities and Exchange Commission on February 18, 2004
  and incorporated herein by reference.                                                                           
|4.6  | Guaranty by Tailored Business Systems, Inc. to Stephen A.
  Garner dated February 17, 2004 previously filed as an exhibit to the
  Company's current report on Form 8-K filed with the Securities and Exchange Commission
  on February 18, 2004 and incorporated herein by reference.                                               
|4.7  | Guaranty by Tailored Business Systems, Inc. to James L.
  Campbell dated February 17, 2004 previously filed as an exhibit to the Company's
  current report on Form 8-K filed with the Securities and Exchange Commission
  on February 18, 2004 and incorporated herein by reference.                                               
|4.8  | Form of Security Agreement dated February 17, 2004 by and
  between Tailored Business Systems, Inc. and Stephen A. Garner previously
  filed as an exhibit to the Company's current report on Form 8-K filed with
  the Securities and Exchange Commission on February 18, 2004 and incorporated
  herein by reference.              
|4.9  | Form of Security Agreement dated February 17, 2004 by and
  between Tailored Business Systems, Inc. and James L. Campbell previously
  filed as an exhibit to the Company's current report on Form 8-K filed with
  the Securities and Exchange Commission on February 18, 2004 and incorporated
  herein by reference.              
|4.10 | Registration Rights Agreement dated February 17, 2004 by
  and between VillageEDOCS and Stephen A. Garner previously filed as an exhibit
  to the Company's current report on Form 8-K filed with the Securities and
  Exchange Commission on February 18, 2004 and incorporated herein by
  reference.                              
|4.11 | Registration Rights Agreement dated February 17, 2004 by
  and between VillageEDOCS. and James L. Campbell previously filed as an
  exhibit to the Company's current report on Form 8-K filed with the Securities
  and Exchange Commission on February 18, 2004 and incorporated herein by
  reference.                             
|4.12 | Form of Stock Pledge Agreement dated February 17, 2004 by
  and between Tailored Business Systems, Inc. and Stephen A. Garner previously
  filed as an exhibit to the Company's current report on Form 8-K filed with
  the Securities and Exchange Commission on February 18, 2004 and incorporated
  herein by reference.          
|4.13 | Form of Stock Pledge Agreement dated February 17, 2004 by
  and between Tailored Business Systems, Inc. and James L. Campbell previously
  filed as an exhibit to the Company's current report on Form 8-K filed with
  the Securities and Exchange Commission on February 18, 2004 and incorporated
  herein by reference.          
|10.1 | Employment Agreement dated February 17, 2004 by and
  between Tailored Business Systems, Inc. and Stephen A. Garner previously
  filed as an exhibit to the Company's current report on Form 8-K filed with
  the Securities and Exchange Commission on February 18, 2004 and incorporated
  herein by reference.                    
|10.2 | Employment Agreement dated February 17, 2004 by and
  between Tailored Business Systems, Inc. and James L. Campbell previously
  filed as an exhibit to the Company's current report on Form 8-K filed with
  the Securities and Exchange Commission on February 18, 2004 and incorporated
  herein by reference.                    
|10.3 | General Release and Noncompetition Agreement dated
  February 17, 2004 by Stephen A. Garner in favor of Tailored Business Systems,
  Inc. previously filed as an exhibit to the Company's current report on Form
  8-K filed with the Securities and Exchange Commission on February 18, 2004
  and incorporated herein by reference.
|10.4 | General Release and Noncompetition Agreement dated
  February 17, 2004 by James L. Campbell in favor of Tailored Business Systems,
  Inc. previously filed as an exhibit to the Company's current report on Form
  8-K filed with the Securities and Exchange Commission on February 18, 2004
  and incorporated herein by reference.
|10.5 | Lease Agreement dated February 17, 2004 by and between
  Perimeter Center Partners and Tailored Business Systems, Inc. previously
  filed as an exhibit to the Company's current report on Form 8-K filed with
  the Securities and Exchange Commission on February 18, 2004 and incorporated
  herein by reference.                 
|10.6 | Executive Employment Agreement effective as of May 26,
  2003 by and between the Company and H. Jay Hill.  Previously filed as Exhibit
  10.3 to the Registrant's Quarterly Report on Form 10-QSB filed with the
  Securities and Exchange Commission on May 15, 2003 and incorporated herein by
  reference.                        
|10.7 | Executive Employment Agreement for K. Mason Conner. 
  Previously filed as Exhibit C to the Company's Schedule 14C filed with the
  Securities and Exchange Commission on July 23, 2004 and incorporated herein
  by reference.                                                                                                      
|10.8 | Executive Employment Agreement for H. Jay Hill. 
  Previously filed as Exhibit D to the Company's Schedule 14C filed with the
  Securities and Exchange Commission on July 23, 2004 and incorporated herein
  by reference.                                                                                                          
|10.9 | Executive Employment Agreement for Michael Richard. 
  Previously filed as Exhibit E to the Company's Schedule 14C filed with the
  Securities and Exchange Commission on July 23, 2004 and incorporated herein
  by reference.                                                                                                      
|     |                                                                                                                                                                                                                                                                                                                                      
|31.1 | Certification Under Section 302 of The Sarbanes-Oxley Act
  of 2002 signed and dated August 16, 2004 by K. Mason Conner, Chief Executive
  Officer.*                                                                                                                                                                                 
|31.2 | Certification Under Section 302 of The Sarbanes-Oxley Act
  of 2002 signed and dated August 16, 2004 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
  16, 2004 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
  16, 2004 by Michael A. Richard, Chief Financial Officer.**                                                                                                                               
|*    | Filed herewith                                                                                                                                                                                                                                                                                                                       
|**   | Furnished herewith                                                                                                                                                                                                                                                                                                                   



(b)     Reports
on Form 8-K



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







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SIGNATURES



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





VillageEDOCS (Registrant)Dated:  August 16, 2004
  By:/s/ K. Mason ConnerK. Mason
  ConnerChief
  Executive Officer and DirectorDated:  August 16, 2004
  By:/s/ Michael A. RichardMichael A. RichardChief Financial
  Officer(Principal
  Accounting Officer)






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