UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C.20549

**Form 10-QSB/A**

**QUARTERLY REPORTPURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIESEXCHANGE ACT OF 1934**

For the quarterlyperiod ended March 31, 2005

OR

**TRANSITION REPORTPURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIESEXCHANGE ACT OF 1934**

For the transitionperiod from_________, 20__, to________, 20__.

Commission FileNumber: 000-31395----------------------------------------------

**VillageEDOCS--------------------**

| California                                                      | 33-0668917                                       |
|-----------------------------------------------------------------|--------------------------------------------------|
| --------------------------------------------------------        | ------------------------------------------------ |
| (State or Other  Jurisdiction of Incorporation or Organization) | I.R.S. Employer  Identification Number           |
|                                                            |                                             |
| 14471 Chambers  Road, Suite 105, Tustin, California             | 92780                                            |
| ---------------------------------------------------------       | ----------------------------                     |
| (Address of  principal executive offices)                       | (Zip Code)                                       |

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

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

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

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

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

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

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

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

** **

**APPLICABLE ONLY TOCORPORATE ISSUERS**

There were 78,745,213 shares of the Registrant's commonstock outstanding as of April 30, 2005. 

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

----

**VillageEDOCS**

EXPLANATORY NOTE

VillageEDOCS(the "Company") is filing this Amendment No. 1 on Form 10-QSB/A to amend its QuarterlyReport on Form 10-QSB for the three months ended March 31, 2005, as filed withthe Securities and Exchange Commission (the "SEC") on May 16, 2005 (the "OriginalFiling").  The purpose of this Amendment No. 1 is to amend and restate Part I,Item 1 and Item 2 which set forth the accounting for certain of its convertiblenotes payable during 2005.  Previously, the Company had not identified orseparately valued derivative instruments later determined to have been embeddedwithin certain of the notes and has restated its financial statements torecognize the existence of derivatives, to account for a derivative liability,and to record the changes in fair value of the derivatives.  In addition, Part I,Item 1, Item 2, and Item 3 have been amended and restated to reflect changes inthe accounting for certain transactions involving the issuance of its commonstock to employees in connection with the acquisition of Tailored BusinessSystems, Inc.  Accordingly, changes have been made to the applicable line itemsassociated with goodwill, convertible notes payable, derivative liability, additionalpaid-in capital, accumulated deficit, general and administrative expense, changein fair value of derivative liability, interest expense, net loss and net lossper common share.  Finally the certifications attached as Exhibits 31.1, 31.2,32.1 and 32.2 have been updated to reflect the filing date of this amendmentand any interim changes in the regulations applicable to these certifications. Except as described above, no additions or modifications have been made to thisAmendment No. 1 to reflect facts or events occurring subsequent to the date ofthe Original Filing.

# Index

**  **

| ** ** | ** **                         | Page No. |
|------------|------------------------------------|----------|
| ** ** | **PART I. FINANCIAL  INFORMATION** |          |  |
|            |                                    |          |  |  |  |
|            | Item 1.                            |          |  Consolidated Financial Statements (Restated) |  |  |
|            |                                    |          |  Consolidated Balance Sheet as of March 31, 2005  (Unaudited) |  | 1 |
|            |                                    |          |  Consolidated Statements of Operations for the three  months ended March 31, 2005 and 2004 (Unaudited) |  | 2 |
|            |                                    |          |  Consolidated Statements of Cash Flows for the three  months ended March 31, 2005 and 2004 (Unaudited) |  | 3 |
|            |                                    |          |  Notes to Unaudited Consolidated Financial Statements |  | 5 |
|            | Item 2.                            |          |  Management's Discussion and Analysis or Plan of  Operations |  | 19 |
|            | Item 3.                            |          |  Controls and Procedures |  | 26 |
|            |                                    |          |  |  |  |
| ** ** | **PART II. OTHER  INFORMATION**    |          |  |
|            |                                    |          |  |  |  |
|            | Item 1.                            |          |  Legal Proceedings |  | 27 |
|            | Item 2.                            |          |  Unregistered Sales of Equity Securities and Use of  Proceeds |  | 27 |
|            | Item 3.                            |          |  Defaults Upon Senior Securities |  | 27 |
|            | Item 4.                            |          |  Submission of Matters to a Vote of Security Holders |  | 27 |
|            | Item 5.                            |          |  Other Information |  | 27 |
|            | Item 6.                            |          |  Exhibits |  | 27 |
|            |                                    |          |  Signatures |  | 32 |

----

| **VillageEDOCS and subsidiaries**                                                      |  |                  |
|----------------------------------------------------------------------------------------|--|------------------|
| **Consolidated Balance Sheet**                                                         |  |                  |
| ** **                                                                             |  | **March 31,**    |
|                                                                                        |  | **2005**         |
|                                                                                        |  | **(restated)**   |
| ** **                                                                             |  |                  |
| **ASSETS**                                                                             |  |                  |
| Current assets:                                                                        |  |                  |
| Cash                                                                                   |  |  $          | 143,767  |
| Accounts receivable, net of  allowance for doubtful                                    |  |                  |
| accounts of $69,000                                                                    |  | 681,817     |
| Inventories                                                                            |  | 52,559      |
| Other current assets                                                                   |  | 4,920       |
| Total current assets                                                                   |  | 883,063     |
|                                                                                        |  |                  |
| Property and equipment, net                                                            |  | 325,904     |
| Other assets                                                                           |  | 2,647       |
| Other intangibles, net                                                                 |  | 482,500     |
| Goodwill                                                                               |  | 2,379,706   |
|                                                                                        |  |  $          | 4,073,820  |
|                                                                                        |  |                  |
|                                                                                        |  |                  |
| **LIABILITIES AND STOCKHOLDERS' EQUITY**                                               |  |                  |
| Current liabilities:                                                                   |  |                  |
| Accounts payable                                                                       |  |  $          | 182,610  |
| Accrued expenses                                                                       |  | 478,184     |
| Deferred revenue                                                                       |  | 251,986     |
| Capital lease obligations                                                              |  | 2,600       |
| Note payable                                                                           |  | 1,965       |
| Current portion of convertible notes and accrued interest                              |  |                  |
| payable to related parties                                                             |  | 770,851     |
|         Total current liabilities                   |  | 1,688,196   |
|                                                                                        |  |                  |
| Long term convertible notes and accrued interest                                       |  |                  |
| payable to related parties, net  of unamortized                                        |  |                  |
| debt discount of $387,808                                                              |  | 1,073,770   |
|                                                                                        |  |                  |
| Derivative liability                                                                   |  | 1,025,079        |
|         Total  liabilities                     |  | 3,787,045   |
|                                                                                        |  |                  |
| Commitments and contingencies                                                          |  |                  |
|                                                                                        |  |                  |
| Stockholders' equity:                                                                  |  |                  |
| Common stock, no par value:                                                            |  |                  |
| Authorized -- 175,000,000  shares                                                      |  |                  |
|         Issued and outstanding -- 78,745,213 shares |  | 11,479,622  |
| Additional paid-in capital                                                             |  | 2,244,451   |
| Accumulated deficit                                                                    |  | (13,437,298)     |
| Total stockholders' equity                                                             |  | 286,775     |
|                                                                                        |  |  $          | 4,073,820  |
|                                                                                        |  |                  |
| See accompanying notes to consolidated financial  statements.                          |  |

----

** **

| **VillageEDOCS and subsidiaries**                             | ** ** |                                   |                 |                  |
|---------------------------------------------------------------|------------|-----------------------------------|-----------------|------------------|
| **Consolidated Statements of Operations**                     | ** ** |                                   |                 |                  |
|                                                               | ** ** |                                   |                 |                  |
| ** **                                                    | ** ** | **Three Months  Ended March 31,** |
|                                                               |            | **2005**                          | ** **      | **2004**         |
|                                                               |            | **(restated)**                    | ** **      | **(restated)**   |
| Net sales                                                     |            |  $                           | 1,411,982  |                  |  $ | 915,445  |
| Cost of sales                                                 |            | 551,486                      |                 | 344,293     |
| Gross profit                                                  |            | 860,496                      |                 | 571,152     |
| Operating expenses:                                           |            |                                   |                 |                  |
| Product and technology                                        |            |                                   |                 |                  |
| development                                                   |            | 189,958                      |                 | 91,073      |
| Sales and marketing                                           |            | 298,714                      |                 | 167,754     |
| General and administrative                                    |            | 625,401                      |                 | 494,807     |
| Depreciation and amortization                                 |            | 51,560                       |                 | 41,001      |
| Total operating expenses                                      |            | 1,165,633                    |                 | 794,635     |
| Loss from operations                                          |            | (305,137)                         |                 | (223,483)        |
|                                                               |            |                                   |                 |                  |
| Change in fair value of derivative liability                  |            | 5,323                        |                 | (583,265)        |
| Interest expense                                              |            | (391,121)                         |                 | (113,490)        |
| Loss before provision for                                     |            |                                   |                 |                  |
| income taxes                                                  |            | (690,935)                         |                 | (920,238)        |
|                                                               |            |                                   |                 |                  |
| Provision for income taxes                                    |            | 4,200                        |                 | 9,158       |
| Net loss                                                      |            |  $                           | (695,135)       |                  |  $ | (929,396) |
|                                                               |            |                                   |                 |                  |
| Basic and diluted loss available to                           |            |                                   |                 |                  |
| common stockholders per common                                |            |                                   |                 |                  |
| share                                                         |            |  $                           | (0.01)          |                  |  $ | (0.03) |
|                                                               |            |                                   |                 |                  |
| Weighted average shares outstanding -                         |            |                                   |                 |                  |
|  basic and diluted                                       |            | 59,363,429                   |                 | 33,543,178  |
|                                                               |            |                                   |                 |                  |
| See accompanying notes to consolidated financial  statements. |            |                                   |

** **

** **

----

| **VillageEDOCS and subsidiaries**                           |         |                |               |                 |
|-------------------------------------------------------------|---------|----------------|---------------|-----------------|
| **Consolidated Statements of Cash Flows**                   |         |                |               |                 |
| **For the Three Months Ended March 31, 2005 and 2004**      |         |                |               |                 |
| ** **                                                  |         | **2005**       |               | **2004**        |
|                                                             |         | **(restated)** | ** **    | **(restated)**  |
| Cash Flows from Operating Activities:                       |         |                |               |                 |
| Net loss                                                    |         |  $        | (695,135)     |                 |  $ | (929,396) |
| Adjustments to reconcile net  loss to net cash              |         |                |               |                 |
| used in operating activities:                               |         |                |               |                 |
| Depreciation and amortization                               |         | 51,560    |               | 41,001     |
| Provision for doubtful accounts  receivable                 |         | 69,000    |               | -          |
| Estimated fair value of stock  options issued               |         |                |               |                 |
| to employees and non-employees  for services rendered       | -  |                | 5,310    |
| Common stock issued to  employees and                       |         |                |               |                 |
|    non-employees  for services rendered      |         | 9,240     |               | 13,200     |
| Amortization of beneficial  conversion feature and          |         |                |               |                 |
|    warrant issued with  convertible notes         |         | 306,546   |               | 22,075     |
| Change in fair value of  derivative liability               |         | (5,323)        |               | 583,265    |
| Changes in operating assets and  liabilities, net of        |         |                |               |                 |
| acquisition:                                                |         |                |               |                 |
| Accounts receivable                                         |         | (43,328)       |               | 130,587    |
| Inventories                                                 |         | 1,595     |               | 9,657      |
| Other current assets                                        |         | 617       |               | (57,052)        |
| Other assets                                                |         | 4,666     |               | -          |
| Accounts payable                                            |         | (18,371)       |               | (1,223)         |
| Accrued expenses and accrued  interest                      |         | 121,160   |               | 171,282    |
| Deferred revenue                                            |         | 97,062    |               | -          |
| Net cash used in operating  activities                      |         | (100,711)      |               | (11,294)        |
| Cash Flows from Investing Activities:                       |         |                |               |                 |
| Purchases of property and  equipment                        |         | (4,678)        |               | (4,608)         |
| Cash paid for acquisition of  TBS, net of cash acquired     |         | -         |               | (1,429,369)     |
| Costs incurred for purchase of  TBS                         |         | (5,000)        |               | (136,029)       |
| Net cash used in investing  activities                      |         | (9,678)        |               | (1,570,006)     |
| Cash Flows from Financing Activities:                       |         |                |               |                 |
| Proceeds from convertible notes  payable to related parties |         | -         |               | 1,895,000  |
| Principal payments under  capital leases                    |         | (2,363)        |               | (2,551)         |
| Payments on notes payable                                   |         | (1,490)        |               | (789)           |
| Payments on notes payable to  related parties               |         | (200,000)      |               | -          |
| Proceeds from exercise of  warrants                         |         | -         |               | 240        |
| Net cash (used in) provided by  financing activities        |         | (203,853)      |               | 1,891,900  |
| Net change in cash                                          |         | (314,242)      |               | 310,600    |
|                                                             |         |                |               |                 |
| Cash, beginning of period                                   |         | 458,009   |               | 64,702     |
| Cash, end of period                                         |         |  $        | 143,767  |                 |  $ | 375,302  |
| Supplemental disclosure of cash flow information -          |         |                |               |                 |
| Cash paid during the period  for:                           |         |                |               |                 |
| Interest                                                    |         |  $        | 9,345    |                 |  $ | 1,546  |
| Income taxes                                                |         |  $        | 2,400    |                 |  $  |  800  |
| continued.                                                  |         |                |               |                 |

** **

|                                                               |  | 2005 (restated) |                 | 2004 (restated) |
|---------------------------------------------------------------|--|-----------------|-----------------|-----------------|
| Supplemental Schedule of Noncash Investing                    |  |                 |
|     and Financing Activities:             |  |                 |                 |                 |
|                                                               |  |                 |                 |                 |  |  |
| Issuance of common stock as  acquisition cost                 |  |  $         | 32,400     |                 |  $ | 22,000  |
| Issuance of notes payable in  acquisition                     |  |  $         | -          |                 |  $ | 2,100,000  |
| 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                                              |  |  $         | -          |                 |  $ | 427,524  |
| Issuance of common stock for no  consideration                |  |  $         | 240        |                 |  $ | -  |
| Issuance of common stock on  conversion of debt               |  |                 |                 |                 |
| and accrued interest                                          |  |  $         | 3,682,609  |                 |  $ | -  |
|                                                               |  |                 |                 |                 |
| See accompanying notes to consolidated financial  statements. |  | *** ***    | *** ***    |                 |

----

**VillageEDOCSNotes to Unaudited Consolidated Financial Statements -March 31, 2005 and 2004**

 

**1.          Management'sRepresentation**

The management of VillageEDOCS (the "Company") without audithas prepared the consolidated financial statements included herein.  Theaccompanying unaudited consolidated financial statements have been prepared inaccordance with accounting principles generally accepted in the United Statesof America for interim financial information.  Certain information and notedisclosures normally included in the consolidated financial statements preparedin accordance with accounting principles generally accepted in the UnitedStates of America have been omitted.  In the opinion of the management of theCompany, all adjustments considered necessary for fair presentation of the consolidatedfinancial statements have been included and were of a normal recurring nature,and the accompanying consolidated financial statements present fairly the consolidatedfinancial position as of March 31, 2005, and the results of operations for thethree months ended March 31, 2005 and 2004.

It is suggested that these unaudited consolidated financialstatements be read in conjunction with the audited financial statements andnotes thereto for the year ended December 31, 2004, included in the Company'sAnnual Report on Form 10-KSB filed with the Securities and Exchange Commissionon March 31, 2005.  The interim results are not necessarily indicative of theresults for a full year.

 

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

VillageEDOCS was incorporated in 1995 in Delaware andreincorporated in California in 1997. The Company has historically operated an electronicdocument delivery service marketed to organizations throughout the UnitedStates and internationally.  On February 17, 2004, the Company acquiredTailored Business Systems, Inc. ("TBS").  TBS provides variousprogramming, processing and printing services to governmental entities,including installing software, hardware, printing and mailing of property taxforms.  On June 16, 2004, the holders of a majority of the voting capital stockof the Company voted to approve a Plan of Restructuring that included thereorganization of the Company's electronic document delivery business into awholly owned subsidiary of the Company.  In connection with the reorganization,the Company formed MessageVision, Inc. ("MVI") on October 25, 2004.  EffectiveApril 1, 2005, the Company acquired Phoenix Forms, Inc. dba Resolutions("PFI", "Resolutions").  Resolutions provides productsfor document management,archiving, document imaging, imaging software, document scanning, e-mail archiving,document imaging software, electronic forms, document archiving, and e-mail archiving.  Theunaudited consolidated financial statements include the accounts of the Companyand those of MVI and TBS, its wholly owned subsidiaries, since October 25, 2004and February 17, 2004, respectively.   All significant inter-companytransactions and balances have been eliminated in consolidation.

*Restatement of Previously Issued Financial Statements*

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

During the year ended December 31, 2005, the Company alsodetermined that certain transactions involving the issuance of its common stock,warrants, and cash to employees in connection with the acquisitions of TBS andResolutions during 2005 and 2004 were not recorded in accordance with SFAS No.141 *"Business Combinations."*

The following tables present asummary of the effects of the restatement adjustments on the Company'sconsolidated balance sheet at March 31, 2005 and the statements of operationsfor the three months ended March 31, 2005 and 2004.

Consolidated balance sheet atMarch 31, 2005:

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

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

(76,000)                                        | (1)

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

(1,030,402)                                       | (3)

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

189,617                                        | (5)

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

245,031

59,364

9,240

76,000

(5,323)

91,081 | (7)

(8)

(9)

(1)

(2)

(3)

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

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

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

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

Consolidated statement of operations for the three monthsended March 31, 2004:

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

Balance |
|                                               |  |   |                            |            |            |                             |            |            |                         |
| Operating  expenses                           |  | $ | 418,807               |            | $          | 76,000                      | (11)       | $          | 494,807                 |
|                                               |  |   |                            |            |            |                             |            |            |                         |
| Change in  fair value of derivative liability |  | $ | -                          |            | $          | 583,265                     | (12)       | $          | 583,265                 |
|                                               |  |   |                            |            |            |                             |            |            |                         |
| Interest  expense                             |  | $ | 105,276                    |            | $          | 8,214                       | (13)       | $          | 113,490                 |
|                                               |  |   |                            |            |            |                             |            |            |                         |
| Net loss                                      |  | $ | 261,917                    |            | $          | 667,479                     | (14)       | $          | 929,396                 |
|                                               |  |   |                            |            |            |                             |            |            |                         |
| Loss per  common share - basic and diluted    |  | $ | (0.01)                     |            | $          | (0.02)                      |            | $          | (0.03)                  |
|                                               |  |   |                            |            |            |                             |            |            |                         |

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

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

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

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

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

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

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

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

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

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

11)  To record thereclassification of compensation paid to an employee in connection with theacquisition of TBS which was allocated to the purchase price to compensationexpense.

12)  To record thechange in fair value of the liability during the three months ended March 31,2004.

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

14)  To record thenet effects of (11), (12) and (13) noted above.

**3.          GoingConcern**

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

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

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

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

**4.           Summaryof Significant Accounting Policies**

> 
    Segments of an Enterprise andRelated Information 

TheCompany has adopted SFAS No. 131, "*Disclosures about Segments of anEnterprise and Related Information*." SFAS No. 131 requires the Companyto report information about segments of its business in annual financialstatements and requires it to report selected segment information in itsquarterly reports issued to shareholders. SFAS No. 131 also requiresentity-wide disclosures about the products and services an entity provides, thematerial countries in which it holds assets and reports revenues and its majorcustomers. The Company's two reportable segments are managed separately basedon fundamental differences in their operations. Since February 17, 2004, theCompany has operated in the following three reportable segments (see Note 10): 

(a)  Electronic document deliveryservices; (b)  Government accounting products and services;and(c)   Corporate. 

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

Concentration of Credit Risk

TheCompany extends credit to its customers and performs ongoing credit evaluationsof such customers.  The Company does not obtain collateral to secure itsaccounts receivable.  The Company evaluates its accounts receivable on aregular basis for collectibility and provides for an allowance for potentialcredit losses as deemed necessary.  At March 31, 2005, the Company hasrecorded an allowance for doubtful accounts of $69,000.  One customeraccounted for 14% of accounts receivable at March 31, 2005.  No singlecustomer accounted for more than 10% of total sales for the three months endedMarch 31, 2005 and 2004.

Use of Estimates in the Preparation of FinancialStatements

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

Revenue Recognition

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

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

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

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

Risks andUncertainties

The Company operates incompetitive industries that are subject to intense competition, governmentregulation and rapid technological change.  The Company's operations aresubject to significant risks and uncertainties including financial,operational, technological, regulatory and other risks associated with anexpanding business, including the potential risk of business failure.

Loss per Share

Basic loss per share iscomputed by dividing loss available to common stockholders by the weightedaverage number of common shares assumed to be outstanding during the period ofcomputation. Diluted loss per share is computed similar to basic loss per shareexcept that the denominator is increased to include the number of additionalcommon shares that would have been outstanding if the potential shares had beenissued and if the additional common shares were dilutive.  All potentiallydilutive shares, 21,500,000 and 20,500,000 as of March 31, 2005 and 2004, respectively, have beenexcluded from diluted loss per share, as their effect would be anti-dilutivefor the periods then ended.

Inventory

Inventory consistsprimarily of software licenses purchased for resale and is stated at the lowerof cost or market.  Cost is determined on a first-in, first-out basis.  TheCompany periodically reviews its inventory quantities on hand and adjusts forexcess and obsolete inventory based primarily on historical usage rates and itsestimated forecast of product demand.  Actual demand may differ from theCompany's estimates.  Once established, write-downs of inventory are consideredpermanent adjustments to the basis of the excess or obsolete inventory.

Goodwill and Other IntangibleAssets

Goodwill represents theexcess of acquisition cost over the net assets acquired in a businesscombination and is not amortized in accordance with SFAS No. 142,"*Goodwill and Other Intangible Assets.*" The provisions of SFAS No.142 require that the Company allocate its goodwill to its various reportingunits, determine the carrying value of those businesses, and estimate the fairvalue of the reporting units so that a two-step goodwill impairment test can beperformed.  In the first step of the goodwill impairment test, the fairvalue of each reporting unit is compared to its carrying value. Management reviews, on an annual basis, the carrying value of goodwill in orderto determine whether impairment has occurred.  Impairment is based onseveral factors including the Company's projection of future discountedoperating cash flows. If an impairment of the carrying value were to beindicated by this review, the Company would perform the second step of thegoodwill impairment test in order to determine the amount of goodwillimpairment, if any. 

Identifiable intangibles acquiredin connection with business acquisitions are recorded at their respective fairvalues.  The Company is amortizing the trade name and customer list overestimated useful lives of 5 and 10 years, respectively.  Deferred income taxeshave been recorded to the extent of differences between the fair value and thetax basis of the assets acquired and liabilities assumed.  

Long-Lived Assets

In the event that facts andcircumstances indicate that equipment or other long-lived assets may beimpaired, an evaluation of recoverability would be performed.  If anevaluation is required, the estimated future discounted cash flows associatedwith the asset are compared to the asset's carrying amount to determine if animpairment charge is necessary.  The amount of long-lived assetimpairment, if any, is charged to operations in the period in which long-livedasset impairment is determined.  At March 31, 2005, management believes thereis 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 productsor services will continue, which could result in impairment of long-livedassets in the future.

Stock-Based Compensation

The Company accounts fornon-employee stock-based compensation under SFAS No. 123 "*Accounting ForStock-Based Compensation*."  SFAS No. 123 defines a fair value based methodof accounting for stock-based compensation.  However, SFAS No. 123 allows anentity to continue to measure compensation cost related to stock and stockoptions issued to employees using the intrinsic method of accounting prescribedby Accounting Principles Board Opinion No. 25 ("APB 25"), "*Accountingfor Stock Issued to Employees*." Under APB 25, compensation cost, if any, isrecognized over the respective vesting period based on the difference, on thedate of grant, between the fair value of the Company's common stock and thegrant price. Entities electing to remain with the accounting method of APB 25must make pro forma disclosures of net income and earnings per share, as if thefair value method of accounting defined in SFAS No. 123 had been applied.

At March 31, 2005, the Company has two stock-basedemployee compensation plans.  The Company accounts for those plans under therecognition and measurement principles of APB 25, and related interpretations(see Note 7).  During the three months ended March 31, 2005 and 2004, nostock-based employee compensation cost is reflected in the accompanyingunaudited consolidated statements of operations, as all options granted underthose plans had exercise prices equal to or greater than the market value ofthe underlying common stock on the date of grant.  The following table illustratesthe effect on net loss and loss per share if the Company had applied the fairvalue recognition provisions of SFAS No. 123 to stock-based employeecompensation:

|  |                                                                                                                                          |   | Three Months Ended March  31, |
|--|------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------|
|  |                                                                                                                                          |   |                          | 2005 | 2004 |
|  |                                                                                                                                          |        |                               | (restated) | (restated) |
|  |                                                                                                                                          |        |                               | ============ | ============ |
|  | Net loss as reported                                                                                                                     |        |                               |  $ | (695,135) |  $ | (929,396) |
|  |                                                                                                                                          |        |                               |  |  |
|  | 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 |        |                               |  |  |
|  |                                                                                                                                          |        |                               |  |
|  |                                                                                                                                          |        |                               |  |
|  |                                                                                                                                          |        | (135,000)                     | (315,537) |
|  |                                                                                                                                          |        |                               | --------------------  | --------------------  |
|  |                                                                                                                                          |        |                               |  |  |
|  | Pro forma net loss                                                                                                                       |        |                               |  $ | (830,135) |  $ | (1,244,933) |
|  |                                                                                                                                          |        |                               | ============ | ============ |
|  | Basic and diluted loss per share - as reported                                                                                           |        |                               |  |  |
|  |                                                                                                                                          |        |  $                       | (0.01) |  $ | (0.03) |
|  |                                                                                                                                          |        |                               | ============ | ============ |
|  | Basic and diluted loss per share - pro forma                                                                                             |        |                               |  |  |
|  |                                                                                                                                          |        |  $                       | (0.01) |  $ | (0.04) |
|  |                                                                                                                                          |        |                               | ============ | ============ |
|  |                                                                                                                                          |        |                               |  |  |

> 
Beneficial Conversion Feature 

The convertible feature ofconvertible notes provides for a rate of conversion that is below market value.Such feature is normally characterized as a "beneficial conversionfeature" ("BCF"). Pursuant to Emerging Issues Task Force IssueNo. 98-5 ("EITF 98-5"), "*Accounting For ConvertibleSecurities with Beneficial Conversion Features or Contingently AdjustableConversion Ratio*" and Emerging Issues Task Force Issue No.00-27,"*Application of EITF Issue No. 98-5 To Certain ConvertibleInstruments,*" the relative fair values of the BCFs have been recordedas a discount from the face amount of the respective debt instrument. TheCompany is amortizing the discount using the effective interest method throughmaturity of such instruments. On February 10, 2005, in connection with theconversion of convertible promissory notes payable, the Company recorded thecorresponding unamortized debt discount related to the BCF as interest expensewhen the related instruments were converted into the Company's common stock.

Web Site Development Costs

During the three months ended March31, 2005, the Company did not capitalize any costs related to the web site inaccordance with the Emerging Issues Task Force Issue No. 00-2, "*Accountingfor Web Site Development Costs.*" During the three months ended March 31,2005 and 2004, the Company recorded amortization of web site development costsof $7,319 and $8,972, respectively.

Advertising

The Company expenses alladvertising costs as incurred.  Advertising costs were $16,450 and $14,641 forthe three months ended March 31, 2005 and 2004, respectively.

Product and Technology Development

Product and technology developmentexpense includes personnel costs relating to developing the features, contentand functionality of MVI's internet-enabled fax services and web site, as wellas TBS's government accounting software.  Product and technology developmentcosts are expensed as incurred.

Warranty Costs

Effective February 17, 2004, theCompany provides a limited 90 day warranty on certain products sold. Estimatedfuture warranty obligations related to certain products and services areprovided by charges to operations in the period in which the related revenue isrecognized. As of March 31, 2005, management of the Company determined that awarranty reserve was not necessary.  In addition, the charges to expense duringthe three months ended March 31, 2005 and 2004 were insignificant.

Derivative Financial Instruments(restated)

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

During the three months ended March31, 2005 and 2004, the Company recognized other income (expense) of $5,323 and$(583,265), respectively, related to recording the derivative liabilities atfair value. At March 31, 2005, the Company had derivative liabilities inconnection with common stock warrants of $1,025,079.   At the settlement date,the remaining derivative liabilities will be reclassified to additional paid-incapital. 

Warrant-related derivatives werevalued using the Black-Scholes Option Pricing Model with the followingassumptions during the three months ended March 31, 2005 and 2004: dividendyield of 0%; average annual volatility of 200% (2005) and 140% (2004);and average risk free interest rates of  3.5% (2005) and 2.1% (2004).

**5.            Acquisitions**

> 
TBS

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

The unaudited pro forma combinedhistorical results, as if TBS had been acquired January 1, 2004 are estimated asfollows: 

|  |                         |  | Three Months Ended |
|--|-------------------------|--|--------------------|
|  |                         |  | March 31, 2004     |
|  | Net sales               |  |  $            | 1,476,731  |
|  | Net loss                |  |  $            | (867,641) |
|  | Weighted average common |  |                    |
|  | shares outstanding:     |  |                    |
|  | Basic and diluted       |  | 35,892,863    |
|  | Loss per share:         |  |                    |
|  | Basic and diluted       |  |  $            | (0.02) |

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

Phoenix Forms, Inc. dbaResolutions

On April 15, 2005, VillageEDOCSpurchased 100% of the issued and outstanding capital stock of Resolutions fromits two shareholders, Alexander Riess and William Falcon (see Note 12).

** **

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

On February 10, 2005, the Company received notice from C.Alan Williams and Joan P. Williams, a related party, of their intent to convert$3,682,609 in convertible secured promissory notes payable and accrued interestthereon to 40,332,669 shares of the Company's restricted common stock.  Per theterms of the convertible secured promissory notes, the conversion price withrespect to $1,939,652 in principal and interest was $0.07 per share.  Theconversion price with respect to $853,091 in principal and interest was $0.1275per common share, which was eighty-five percent of the average of the Company'scommon stock closing bid price on the Over-The-Counter Bulletin Board for theten consecutive trading days prior to February 10, 2005.  The conversion pricewith respect to $889,866 in principal and interest was $0.15 per share, whichwas the average of the Company's common stock closing bid price on theOver-The-Counter Bulletin Board for the ten consecutive trading days prior toFebruary 10, 2005.

In consideration for the Williams' conversion, the Companygranted the Williams a full-ratchet anti-dilution right to receive additionalshares of its common stock in the event that any shares of common stock orstock purchase rights are issued by the Company to Mr. Townsend, a shareholderwho beneficially owns approximately 10% of the Company's common stock, in anamount greater than that which is set forth by the terms of the amendedpromissory notes to Mr. Townsend, as of the date of the conversion.  The amountof additional shares issued to the Williams, if any, shall be determined prorata based on the ratio of the Williams' conversion amount to Mr. Townsend'sconversion amount.

As a result of the conversion, the Williams acquired sharedvoting and shared dispositive power over seventy-seven percent (77%), or 59,495,094shares, of the Company's common stock.  

 On February 17, 2004, the Company borrowed $1,700,000 fromC. Alan and Joan P. Williams and issued a convertible promissory note, bearinginterest at 10 percent per annum.  The note and accrued interest are dueat the earlier of one of three events: 1) October 31, 2007; 2) acquisition ofcontrolling interest in the Company by a third party; or 3) the Companyachieves equity financing of a minimum of $3,000,000.  If the Company isacquired, the principal and accrued interest on the note are convertible intoshares of the Company's common stock at the lower of $2.50 per share or theprice paid per share by the acquirer.  In addition, the principal andaccrued interest on the note are convertible into shares of the Company'scommon stock at a conversion price equal to eighty five percent (85%) ofaverage of the Company's common stock closing bid price on the OTCBB, NASDAQ orother established securities exchange or market for the ten (10) consecutivetrading days prior to the date Mr. and Mrs. Williams deliver written notice oftheir conversion election to the Company.  As an incentive for Mr. andMrs. Williams to provide the loan, the Company agreed to issue them a warrantto purchase 5,000,000 shares of the Company's restricted common stock at $0.10per share exercisable until February 17, 2009.  In connection with theissuance of the note, the Company recorded a debt discount of $730,000(restated), consisting of an embedded put option of $280,000 (restated) and thefair value of the warrant of $450,000 (restated), which were recorded asderivative liabilities upon note issuance.  The Company is amortizing thediscount using the effective interest method through October 31, 2007.  OnFebruary 10, 2005, $700,000 in principal and $153,091 in accrued interestrelated to the note were converted into 6,690,913 shares of the Company'scommon stock.  During the three months ended March 31, 2005 and 2004, approximately$259,000 (restated), and $24,000 (restated), respectively, of interest expensewas recognized in the accompanying consolidated statements of operations inconnection with amortization of the debt discount.  Effective April 14, 2005,pursuant to an amendment to the note, the conversion price was fixed at $0.14 pershare.

At March 31, 2005, the amount owed by the Company to theWilliams pursuant to the remaining convertible promissory note payable was$1,000,000 in principal and approximately $62,000 in unpaid interest.

In connection with the acquisition of TBS, the Companyissued a $300,000 convertible promissory note to Stephen A. Garner and a$300,000 convertible promissory note to James L. Campbell (the "TBSNotes").  Each of the TBS Notes bears interest at 5 percent per annum and isdue and payable in three equal annual installments of $100,000, with the firstinstallment paid in full during February 2005 and subsequent installments dueon February 17, 2006 and February 17, 2007.  The TBS Notes are secured by aStock Pledge Agreement and a Security Agreement.  In addition, Messrs. Garnerand Campbell have the right to convert the balance of unpaid principal andinterest of the TBS Notes into shares of the Company's common stock at the rateof 9.8 shares of Common Stock for each $1.00 of principal and interest to beconverted

Total interest expense recognized on all the convertiblenotes payable to related parties was approximately $299,000 and $113,490 duringthe three months ended March 31, 2005 and 2004, respectively.  Total interestaccrued and not paid on the convertible notes payable to related parties as of March31, 2005 totaled $324,682 and is included in the accompanying consolidated balancesheet. 

**7.           Stockholders'Equity**

a.       Common Stock 

During February 2005 and inconnection with the conversion of $3,682,609 in principal and accrued intereston secured promissory notes, the Company agreed to issue an aggregate of 40,332,669shares of its restricted common stock to C. Alan Williams and Joan P. Williams,a related party (see Note 6).

During February 2005 and inconnection with the acquisition of TBS, the Company agreed to issue 1,100,000shares of its restricted common stock to each of James L. Campbell and StephenA. Garner, pursuant to the acquisition agreement.  The shares were valued at $0.14per share (the estimated fair value on the date that the shares were earned).  

During February 2005 and inconnection with the acquisition of TBS, the Company agreed to issue 66,000shares of its restricted common stock to H. Jay Hill, who is an officer anddirector of the Company, as a finder's fee.  The shares were valued at $0.14per share (the estimated fair value on the date that the shares were earned),and recorded as compensation expense in the accompanying statement ofoperations.  

During February 2005 and inconnection with the acquisition of TBS, the Company agreed to issue 110,000shares of its restricted common stock to a non-affiliate pursuant to a finder'sfee agreement.  The shares were valued at $0.14 per share (the estimated fair valueon the date that the shares were earned).  

b.       StockOptions

Effective January 30, 2002, theBoard of Directors of the Company adopted an equity incentive plan (the "2002Plan") that authorized the issuance of options to acquire up to 28,000,000shares of common stock, as amended, to employees and certain outsideconsultants.   On November 27, 2002, the stockholders of the Company approvedthe 2002 Plan and the number of shares reserved for issuance pursuant to the2002 Plan.  The 2002 Plan allows for the issuance of either non-qualified or,subject to stockholder approval, incentive stock options pursuant to Section422 of the Internal Revenue Code. Options vest at the discretion of the Boardof Directors as determined at the grant date, but not longer than a ten-yearterm.  Under the 2002 Plan, the exercise price of each option shall not be lessthan fair market value on the date the option is granted.

During the three months ended March31, 2005, the Company granted to its employees options to purchase shares ofits common stock under the 2002 Plan as follows:  330,000 shares at $0.18 pershare and 100,000 shares at $0.1875 per share.   All options were issued aboveor at the fair market value of the Company's common stock on the dates of grantand vest on various dates from the date ofgrant through February 2010.    

During the three months ended March31, 2005, 770,000 options under the 2002 Plan were cancelled due to theirexpiration following the termination of employment.

**8.           Lossper Share (restated)**

              Basicand diluted loss per common share is computed as follows:

|  |                                                                                                                     |   | Three Months Ended March  31, |
|--|---------------------------------------------------------------------------------------------------------------------|--------|-------------------------------|
|  |                                                                                                                     |   |                          | 2005 | 2004 |
|  |                                                                                                                     |        |                               | ============ | ============ |
|  | Numerator for basic and    diluted loss per     common share:                         |        |                               |  |  |
|  |    Net loss available to            common stockholders |        |                               |  $ | (695,135) |  $ | (929,396) |
|  |                                                                                                                     |        |                               | ============ | ============ |
|  |                                                                                                                     |        |                               |  |  |
|  | Denominator for basic   and diluted loss per    common share:                                   |        |                               |  |  |
|  |                                                                                                                     |        |                               |  |
|  |  Weighted average      common  shares      outstanding       |        |                               | 59,363,429  | 33,543,178  |
|  |                                                                                                                     |        |                               | ============ | ============ |
|  | Net loss per common     share available to    common stockholders                     |        |                               |  $ | (0.01)  |  $ | (0.03)  |
|  |                                                                                                                     |        |                               | ============ | ============ |
|  |                                                                                                                     |        |                               |  |

**9.           Commitmentsand Contingencies**

> 
Leases

The Company is a lessee of certain property andequipment under capital lease agreements that expire on various dates through2005.  Terms of the leases require monthly payments ranging from $248 to $726,including interest ranging up to 15%.  The assets and liabilities under capitalleases are recorded at the lower of the present value of the minimum leasepayments or the fair market value of the related assets.

In addition, the Company leases certain propertyand equipment under operating lease agreements (including a related party lease- see Note 11) which expire on various dates through 2009 and provide formonthly lease payments ranging from $297 to $6,200. 

Litigation

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

Consulting and Employee Agreements

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

Indemnities and Guarantees

During the normal course of business, the Companyhas made certain indemnities and guarantees under which it may be required tomake payments in relation to certain transactions.  The Company indemnifies itsdirectors, officers, employees and agents to the maximum extent permitted underthe laws of the State of California and the State of Georgia.  These indemnitiesinclude certain agreements with the Company's officers under which the Companymay be required to indemnify such person for liabilities arising out of theiremployment relationship.  In connection with its facility leases, the Companyhas indemnified its lessors for certain claims arising from the use of thefacilities.  In connection with the Company's acquisition of TBS, the partieshave agreed to indemnify each other from claims relating to the acquisitionagreement to a maximum of $1,500,000 except in the event of fraud, willfulmisconduct, or breaches of certain representations and warranties contained inthe agreement.  The duration of these indemnities and guarantees varies and, incertain cases, is indefinite.  The majority of these indemnities and guaranteesdo not provide for any limitation of the maximum potential future payments theCompany could be obligated to make.  Historically, the Company has not beenobligated to make significant payments for these obligations and no liabilitieshave been recorded for these indemnities and guarantees in the accompanyingbalance sheet.

**10.           SegmentReporting**

The Company's operationsare classified into two principal reportable segments that provide differentproducts or services.  Separate management of each segment is required becauseeach business unit is subject to different marketing, production, andtechnology strategies.  Since February 17, 2004, the Company has operated inthe following three reportable segments: 

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

The Company evaluatesperformance and allocates resources based upon operating income.  Theaccounting policies of the reportable segments are the same as those describedin the summary of accounting policies.  There are no inter-segment sales.

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

|  |                                             |  |  | Quarter ended / As  of                                                                                                                  |  | Period ended / As  of                                                                                                                        |
|--|---------------------------------------------|--|--|-----------------------------------------------------------------------------------------------------------------------------------------|--|----------------------------------------------------------------------------------------------------------------------------------------------|
|  |                                             |  |  | March 31, 2005                                                                                                                          |  | March 31, 2004 (1)                                                                                                                           |
|  |                                             |  |  | (restated)                                                                                                                              |  | (restated)                                                                                                                                   |
|  |                                             |  |  |                                                                                                                                         |  |                                                                                                                                              |
|  | Net revenue from external customers:        |  |  |                                                                                                                                         |  |                                                                                                                                              |
|  |                                             |  |  |                                                                                                                                         |  |                                                                                                                                              |
|  | Electronic document delivery services       |  |  | $                    773,620             |  | $                    602,169                  |
|  | Government accounting products and services |  |  | 638,362                                                                                                                            |  | 313,276                                                                                                                                 |
|  | Corporate                                   |  |  | -                                                                                                                                  |  | -                                                                                                                                       |
|  | Total net revenue from external customers:  |  |  | $                1,411,982                                   |  | $                    915,445                       |
|  |                                             |  |  |                                                                                                                                         |  |                                                                                                                                              |
|  | Operating income (loss):                    |  |  |                                                                                                                                         |  |                                                                                                                                              |
|  |                                             |  |  |                                                                                                                                         |  |                                                                                                                                              |
|  | Electronic document delivery services       |  |  | 90,691                                                                                                                             |  | 21,560                                                                                                                                  |
|  | Government accounting products and services |  |  | (207,545)                                                                                                                               |  | 43,793                                                                                                                                  |
|  | Corporate                                   |  |  | (188,283)                                                                                                                               |  | (288,836)                                                                                                                                    |
|  | Total operating loss:                       |  |  | $                 (305,137)                             |  | $                 (223,483)                                  |
|  |                                             |  |  |                                                                                                                                         |  |                                                                                                                                              |
|  | Depreciation and amortization               |  |  |                                                                                                                                         |  |                                                                                                                                              |
|  |                                             |  |  |                                                                                                                                         |  |                                                                                                                                              |
|  | Electronic document delivery services       |  |  | $                      29,374  |  | $                    29,908              |
|  | Government accounting products and services |  |  | 22,186                                                                                                                             |  |  11,093                                                                                                                            |
|  | Corporate                                   |  |  | -                                                                                                                                  |  | -                                                                                                                                       |
|  | Total depreciation and  amortization:       |  |  | $                      51,560       |  | $                    41,001    |
|  |                                             |  |  |                                                                                                                                         |  |                                                                                                                                              |
|  | Interest expense:                           |  |  |                                                                                                                                         |  |                                                                                                                                              |
|  |                                             |  |  |                                                                                                                                         |  |                                                                                                                                              |
|  | Electronic document delivery services       |  |  | $                      45,667  |  | $                     76,703             |
|  | Government accounting products and services |  |  | 933                                                                                                                                |  |  481                                                                                                                               |
|  | Corporate                                   |  |  | 344,521                                                                                                                            |  | 36,306                                                                                                                                  |
|  | Total interest expense:                     |  |  | $                   391,121                   |  | $                   113,490                   |
|  |                                             |  |  |                                                                                                                                         |  |                                                                                                                                              |
|  | Net income (loss):                          |  |  |                                                                                                                                         |  |                                                                                                                                              |
|  |                                             |  |  |                                                                                                                                         |  |                                                                                                                                              |
|  | Electronic document delivery services       |  |  | $                      82,999  |  | $                    (55,053)                      |
|  | Government accounting products and services |  |  | (208,478)                                                                                                                               |  | 34,064                                                                                                                                       |
|  | Corporate                                   |  |  | (569,656)                                                                                                                               |  | (908,407)                                                                                                                                    |
|  | Total net loss:                             |  |  | $                 (695,135)                             |  | $                 (929,396)                                  |
|  |                                             |  |  |                                                                                                                                         |  |                                                                                                                                              |
|  | Identifiable assets:                        |  |  |                                                                                                                                         |  |                                                                                                                                              |
|  |                                             |  |  |                                                                                                                                         |  |                                                                                                                                              |
|  | Electronic document delivery services       |  |  | $                    507,981             |  |                                                                                                                                              |
|  | Government accounting products and services |  |  | 3,513,817                                                                                                                          |  |                                                                                                                                              |
|  | Corporate                                   |  |  | 52,022                                                                                                                             |  |                                                                                                                                              |
|  | Total identifiable assets:                  |  |  | $                4,073,820                              |  |                                                                                                                                              |
|  |                                             |  |  |                                                                                                                                         |  |                                                                                                                                              |
|  | Continued.                                  |  |  |                                                                                                                                         |  |                                                                                                                                              |

|  |                                             |  |  | Quarter ended / As  of                                                                                                                                                                                          |  | Period ended / As  of                                                                                                                                                                                           |
|--|---------------------------------------------|--|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  |                                             |  |  | March 31, 2005                                                                                                                                                                                                  |  | March 31, 2004 (1)                                                                                                                                                                                              |
|  |                                             |  |  | (restated)                                                                                                                                                                                                      |  | (restated)                                                                                                                                                                                                      |
|  | Capital expenditures:                       |  |  |                                                                                                                                                                                                                 |  |                                                                                                                                                                                                                 |
|  |                                             |  |  |                                                                                                                                                                                                                 |  |                                                                                                                                                                                                                 |
|  | Electronic document delivery services       |  |  | $                        3,438                                                                    |  | $                        4,608                                                                    |
|  | Government accounting products and services |  |  |                             1,240                                             |  |                                   -   |
|  | Corporate                                   |  |  |                                   -   |  |                                   -   |
|  | Total capital expenditures:                 |  |  | $                        4,678                                                                    |  | $                        4,608                                                                    |
|  |                                             |  |  |                                                                                                                                                                                                                 |  |                                                                                                                                                                                                                 |
|  |                                             |  |  |                                                                                                                                                                                                                 |  |                                                                                                                                                                                                                 |

| (1) 2004 period results and balances for the Government  accounting products and services segment are reported as of and for the  period from February 17, 2004 (date of acquisition) through March 31, 2004. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

** **

** **

** 11.           RelatedParty Transactions**

The Company has borrowedsignificantly from related parties and issued a significant number of shares ofits common stock upon conversion of convertible promissory notes payable asdescribed more fully in Notes 6 and 7.  

TBS has a related partyoperating lease with Perimeter Center Partners for the rental of the land andbuilding occupied by TBS.  The lease commenced on February 1, 2004 and has aterm of five years, with monthly payments of $6,200.  The Company has executeda Guaranty with respect to the lease.  Perimeter Center Partners is owned byStephen A. Garner and James L. Campbell, who are significant employees of theCompany and the former owners of TBS.

During February 2005 and inconnection with the acquisition of TBS, the Company agreed to issue 1,100,000 sharesof its restricted common stock to each of James L. Campbell and Stephen A.Garner pursuant to the acquisition agreement (see Note 7).

During February 2005 and inconnection with the acquisition of TBS, the Company agreed to issue 66,000shares of its restricted common stock to H. Jay Hill, who is an officer anddirector of the Company, as a finder's fee (see Note 7). 

** **

**12.           SubsequentEvents**

Financing

On April 13, 2005, the Company issued a convertible notepayable to Barron Partners, LP ("Barron") in the principal amount of$800,000 (the "Convertible Note") which is convertible into16,000,000 shares of common stock, no par value, of the Company until such timeas the Company amends its articles of incorporation so as to authorize anddesignate a class of preferred stock and thereafter will be convertible solelyinto preferred stock.

In connection with the Convertible Note, the Company issuedBarron a warrant ("Warrant A") to purchase up to 32,000,000 shares ofits common stock at $0.10 per share (subject to adjustment, as defined). Pursuant to the warrant agreement, the holder has the right to purchasepreferred shares of the Company for a limited time, as defined.  In addition,the Company issued Barron a warrant ("Warrant B") to purchase up to8,000,000 shares of its common stock at $0.25 per share (subject to adjustment,as defined).  Warrants A and B vested upon grant and are exercisable throughApril 2010.  The warrants contain certain cashless exercise and anti-dilutionprovisions, as defined.

In connection with the issuance of the Convertible Note, theCompany recorded a debt discount of $800,000 and interest expense of $5,600,000(based on accounting treatment proscribed under EITF 00-19 - see Note 4),related to the fair value of the warrants of $6,400,000.

The Company and Barron entered into a Registration RightsAgreement pursuant to which the Company agreed to prepare and file with theSecurities and Exchange Commission a registration statement covering the resaleof the securities underlying the convertible promissory note and the warrantswithin 60 days of April 13, 2005.  The Company satisfied that requirement byfiling a registration statement on Form SB-2 on June 13, 2005.  Theregistration statement, as amended, was declared effective by the U.S.Securities and Exchange Commission on August 10, 2005.

The Convertible Note and Warrants A and B include provisionsprohibiting the holder from converting the Convertible Note or exercising awarrant if, after such conversion or exercise, the holder and its affiliateswould beneficially own more than 4.99% of the outstanding shares of Company'scommon stock.  This restriction (a) may be revoked upon sixty-one (61) daysprior notice from the holder to the Company and (b) shall not apply in theevent of a sale by the Company of substantially all of its assets, or a mergerinvolving the Company or an underwritten public offering of the Company'scommon stock. 

Acquisition of 100% of the Outstanding Stock of PhoenixForms, Inc. dba Resolutions

Effective April 1, 2005, VillageEDOCS purchased 100% of theissued and outstanding capital stock of Resolutions from its two shareholders, AlexanderRiess and William Falcon.  The acquisition closed on April 15, 2005.

VillageEDOCS purchased Resolutions with two promissory notesin the aggregate amount of $200,000, payment in full at closing of an existingthird-party promissory note in the amount of $432,000, and warrants to purchasean aggregate of 10,000,000 shares of VillageEDOCS' common stock at $0.15 pershare.  The warrants were valued at $2,100,000 (estimated based on the BlackScholes option pricing model).

The warrants will vest at various amounts during the third,twelfth, twenty-fourth, and thirty-sixth months following the date of closing.

The acquisition will be accounted for using the purchasemethod of accounting. 

VillageEDOCS funded the requirement to pay the third-partypromissory note from the proceeds of the $800,000 Convertible Note describedabove.

PFI is a Georgia corporation formed in 2004 to acquireResolutions, then a division of Inter-American Data, Inc., that has beenoperating continuously since 1998.  PFI presently does business as Resolutionsand is headquartered in Suwanee, GA, a suburb of Atlanta.  

The terms of the purchase were the result of arms-lengthnegotiations.  Neither of the Resolutions shareholders was previouslyaffiliated with VillageEDOCS, although Resolutions has been a customer forseveral years of the electronic document delivery service now operated byVillageEDOCS' subsidiary, MessageVision, Inc.

Resolutions provides products for document management, archiving, documentimaging, imaging software, document scanning, e-mail archiving,document imaging software, electronic forms, document archiving, and e-mail archiving.  Resolutions solutions are intended to help companies manage the entire lifecycle of business critical information, whether it is to be printed,distributed, emailed, faxed, archived, imaged or just retrieved and viewed onscreen. 

Resolutions' suite of products include: R-Forms, forelectronic forms design presentation and distribution;  R-Fax, anenterprise fax solution for production, desktop, and broadcast faxing; R-Checks, a turnkey check printing solution;  R-Output Manager, a reportand multi-page document automation manager that delivers reports and electronicforms to recipients via print, email, fax, post-to-web or archive; and Redmap,a full function imaging and archiving solution.  

In connection with theacquisition of PFI, the Company incurred $47,500 in acquisition-related costsincluding, but not limited to, expenses incurred for legal, accounting andtravel.

The purchase price has been determined as follows:

|  | Cash                                            | $          432,000 |
|--|-------------------------------------------------|-----------------------------------------------------------------|
|  | Promissory notes                                | 200,000                                                         |
|  | Warrants to purchase 10,000,000 shares at $0.15 |                                                                 |
|  |    per share                     | 2,100,000                                                       |
|  | Acquisition costs                               | 47,500                                                          |
|  |                                                 | --------------------                                            |
|  |                                                 | 2,779,500                                                       |
|  |                                                 | ============                                                    |
|  |                                                 |                                                                 |

The following represents an allocation of the purchase priceover the historical net book value of the acquired assets and liabilities of Resolutionsas of April 1, 2005, the effective date of the acquisition:

|  | Cash                                                  |  $                 | 53,811     |
|--|-------------------------------------------------------|-------------------------|-----------------|
|  | Accounts receivable                                   | 297,742            |
|  | Inventories                                           | 180,000            |
|  | Property and equipment                                | 153,040            |
|  | Other                                                 | 29,943             |
|  | Accounts payable and accrued expenses                 | (1,133,562)             |
|  | Notes payable                                         | (30,000)                |
|  |                                                       | -----------------  |
|  | Net tangible liabilities assumed                      | (449,026)          |
|  |                                                       |                         |
|  | Identifiable intangibles:                             |                         |
|  |      Customer relationships  | 570,000            |
|  |      Software development    | 70,000             |
|  |      Trade name              | 50,000             |
|  |      Covenant not to compete | 26,100             |
|  | Deferred tax liability                                | (279,000)               |
|  | Goodwill                                              | 2,791,426          |
|  |                                                       | -----------------  |
|  |                                                       |  $                 | 2,779,500  |
|  |                                                       | =========               |
|  |                                                       |                         |

Following the acquisition, the Company will reportResolutions' results of operations as a new segment, electronic forms.  Thegoodwill from the acquisition of Resolutions will be allocated one hundredpercent to the electronic forms segment. 

----

 

**FORWARD-LOOKING INFORMATION**

*This QuarterlyReport on Form 10-QSB includes forward-looking statements within the meaning ofSection 21E of the Securities Exchange Act of 1934, as amended. All statementsthat do not directly and exclusively relate to historical facts constituteforward-looking statements within the meaning of the Private SecuritiesLitigation Reform Act of 1995.  These statements are based on our plans,intentions, expectation, and belief and are subject to certain risks anduncertainties that could cause actual results to differ materially from thoseprojected or expressed herein. The words "anticipate,""believe," "expect," "plan," "intend,""seek," "estimate," "project," "will,""could," "may," and similar expressions are intended toidentify forward-looking statements. These statements include, among others,information regarding future operations, future capital expenditures, and futurenet cash flow. Such statements reflect the Company's current views with respectto future events and financial performance and involves risks anduncertainties, including, without limitation, general economic and businessconditions, changes in foreign, political, social and economic conditions,regulatory initiatives and compliance with governmental regulations, theability to achieve further market penetration and additional customers, andvarious 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'sAnnual Report on Form 10-KSB filed with the Securities and Exchange Commissionon March 31, 2005. Our future results and stockholder values may differmaterially from those expressed in these forward- looking statements. Many ofthe factors that will determine these results and values are beyond our abilityto control or predict. Investors are cautioned not to put undue reliance on anyforward-looking statements. For these statements, we claim the protection ofthe safe harbor for forward-looking statements contained in Section 21E of theExchange Act.*

** **

**WEBSITE ACCESS TO REPORTS**

Our principal executive offices are currently located at14471 Chambers Road, Suite #105, Tustin, CA  92780.  The Company's Internetwebsite address is www.villageedocs.com.  The Company's annual reports on Form10-KSB, quarterly reports on Form 10-QSB, and current reports of Form 8-K, andall amendments thereto, are available free of charge on the Company's websiteas soon as reasonably practical after such reports are electronically filedwith, or furnished to, the U.S. Securities and Exchange Commission.

**General Overview**

The following discussion and analysis of our financial condition andresults of operations should be read in conjunction with the unauditedconsolidated balance sheet as of March 31, 2005, and the unaudited consolidatedstatements of operations and cash flows for the three months ended March 31,2005 and 2004, and the related notes thereto as well as the audited financialstatements of the Company for the years ended December 31, 2004 and 2003,included in the Company's Annual Report on Form 10-KSB filed with theSecurities and Exchange Commission on March 31, 2005.  This discussion containsforward-looking statements based upon current expectations that involve risksand uncertainties, such as our plans, objectives, expectations and intentions.

 On March 28, 2006, the Company's Board of Directors determinedthat the Company was required to restate and reissue its annual report for theyear ended December 31, 2004, as well as the quarterly reports for the quartersended March 31, 2005, June 30, 2005 and September 30, 2005.  The unauditedconsolidated financial statements included in this quarterly report reflect alladjustments we have made to our unaudited consolidated financial statements forthe three months ended March 31, 2005 and 2004 as a result of therestatements.  Specifically, we strongly encourage you refer to Footnote No. 2 *Restatementof Previously Issued Financial Statements* in the accompanying unauditedconsolidated financial statements.  We have used the restated amounts in thecomparative discussions for 2004 and 2005 that follow. 

The Company cautions readers that important facts and factors describedin this Management's Discussion and Analysis of Financial Condition and Resultsor Plan of Operations and elsewhere in this document sometimes have affected,and in the future could affect, the Company's actual results, and could causethe Company's actual results during 2005 and beyond to differ materially fromthose expressed in any forward-looking statements made by, or on behalf of, theCompany. 

As reported in the Report of Independent Registered PublicAccounting Firm on our December 31, 2004 consolidated financial statements, theCompany has suffered recurring losses from operations, and has a workingcapital deficit that raises substantial doubt about our ability to continue asa going concern. 

On February 17, 2004, the Company acquired TBS.  The results of TBS forthe quarter ended March 31, 2005 are compared with the results of TBS for theperiod from February 17, 2004 through March 31, 2004.  Accordingly, managementbelieves that the following presentation of comparative results of operations,while required, may not be meaningful since the data for the 2004 period presentonly the portion of TBS' operating results reported from the date ofacquisition.

Effective April 1, 2005, the Company purchased 100% of theissued and outstanding capital stock of Phoenix Forms, Inc.  This acquisitionis expected to cause the results of the Company to vary significantly fromthose previously reported during 2005.  See *Recent Developments* below foradditional information.

On April 13, 2005, the Company obtained $800,000 in cashfrom Barron Partners, LP ("Barron") and issued a convertible notepayable along with stock purchase warrants.   See *Recent Developments*below for additional information.

To fund the Company's planned expansion, management isactively seeking additional financing by issuing equity or a combination ofequity and debt financing from new shareholders and/or lenders in 2005. Therecan be no assurance that funding will be available on acceptable terms, if atall, or that such funds, if raised, would enable the Company to maintainprofitable operations or complete additional acquisitions. 

In the event the Company does not succeed in obtainingadditional planned financings during 2005, the Company believes it will be ableto generate adequate cash to sustain operations at current levels for theremainder of 2005.

**CriticalAccounting 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 valueof certain assets on our consolidated balance sheet.  We believe that there areseveral accounting policies that are critical to an understanding of ourhistorical and future performance as these policies affect the reported amountsof revenues, expenses, and significant estimates and judgments applied bymanagement.  While there are a number of accounting policies, methods and estimatesaffecting our consolidated financial statements, areas that are particularlysignificant include revenue recognition, stock-based compensation, and goodwilland long-lived assets.  In addition, please refer to Note 4 to the accompanyingconsolidated financial statements for further discussion of our significantaccounting policies.

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

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

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

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

**Stock-Based Compensation**.  The Companyaccounts for non-employee stock-based compensation under Statement of FinancialAccounting Standards "SFAS" No. 123, "*Accounting For Stock-BasedCompensation*."  SFAS No. 123 defines a fair value based method ofaccounting for stock-based compensation.  However, SFAS No. 123 allows anentity to continue to measure compensation cost related to stock and stockoptions issued to employees using the intrinsic method of accounting prescribedby Accounting Principles Board Opinion "APB" No. 25, as amended,"*Accounting for Stock Issued to Employees*." Under APB No. 25,compensation cost, if any, is recognized over the respective vesting periodbased on the difference, on the date of grant, between the fair value of theCompany's common stock and the grant price. Entities electing to remain withthe accounting method of APB No. 25 must make pro forma disclosures of netincome and earnings per share, as if the fair value method of accountingdefined in SFAS No. 123 had been applied. The Company has elected to accountfor its stock-based compensation to employees under APB No. 25.

In December 2004, the Financial Accounting Standards Board "FASB"issued SFAS No. 123 (revised 2004) ("SFAS 123(R)"), "*Share-BasedPayment,*" to provide investors and other users of financial statementswith more complete and neutral financial information by requiring that thecompensation cost relating to share-based payment transactions be recognized infinancial statements. That cost will be measured based on the fair value of theequity or liability instruments issued. SFAS 123(R) covers a wide range ofshare-based compensation arrangements including share options, restricted shareplans, performance-based awards, share appreciation rights, and employee sharepurchase plans. SFAS 123(R) replaces SFAS No. 123, and supersedes APB 25. SFASNo. 123, as originally issued in 1995, established as preferable afair-value-based method of accounting for share-based payment transactions withemployees. However, that Statement permitted entities the option of continuingto apply the guidance in APB No. 25, as long as the footnotes to financialstatements disclosed what net income would have been had the preferablefair-value-based method been used. Small business issuers will be required toapply SFAS 123(R) as of the first interim or annual reporting period thatbegins after December 15, 2005. The Company is in the process of evaluatingwhether the adoption of SFAS 123(R) will have a significant impact on theCompany's overall results of operations or financial position. 

**Goodwill and Other Intangible Assets**. The Company has adopted SFAS No. 142 "*Goodwill and Other IntangibleAssets.*"  Under SFAS No. 142, goodwill and other intangibleassets with indefinite lives are no longer subject to periodic amortization butare instead reviewed annually for impairment, or more frequently if impairmentindicators arise.

Identifiable assets and liabilities acquired in connectionwith business acquisitions accounted for under the purchase method are recordedat their respective fair values.  Deferred income taxes have been recordedto the extent of differences between the fair value and the tax basis of the assetsacquired and liabilities assumed.

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

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

**Derivative Financial Instruments.**  Inconnection with the issuance of certain convertible notes payable, the terms ofthe notes payable provided for a conversion of the notes into shares of theCompany's common stock at a rate which was determined to be variable. TheCompany determined that the variable conversion feature was an embeddedderivative instrument pursuant to SFAS No. 133, *"Accounting forDerivative Instruments and Hedging Activities,"* as amended. Theaccounting treatment of derivative financial instruments required that theCompany record the derivatives and related warrants at their fair values as ofthe inception date of the note agreements and at fair value as of eachsubsequent balance sheet date. In addition, under the provisions of EITF IssueNo. 00-19, *"Accounting for Derivative Financial Instruments Indexed to,and Potentially Settled in, a Company's Own Stock,"* as a result ofentering into the note agreements, the Company was required to classify allother non-employee warrants as derivative liabilities and record them at theirfair values at each balance sheet date. Any change in fair value was recordedas non-operating, non-cash income or expense at each balance sheet date. If thefair value of the derivatives was higher at the subsequent balance sheet date,the Company recorded a non-operating, non-cash charge. If the fair value of thederivatives was lower at the subsequent balance sheet date, the Companyrecorded non-operating, non-cash income.

** **

**Results ofOperations**

##### Three Months Ended March 31, 2005 Compared to Three Months Ended March 31, 2004

##### Net Sales

Net sales for the three months ended March31, 2005 were $1,411,982, a 54% increase over net sales for the prior yearquarter of $915,445.  The increase of $496,537 in the 2005 quarter resultedfrom an increase of $171,451 in revenue from MVI (which resulted from growth inthe number of clients) as well as an increase of $325,086 in revenue of TBS(which resulted from reporting a full quarter of revenue from TBS in the 2005period as compared with approximately one and one-half months in the 2004period).

**Cost of Sales**

Cost of sales for the three months ended March 31, 2005 were$551,486 as compared to the $344,293 reported for the three months ended March31, 2005.  The increase in the 2005 quarter of $207,193 resulted from anincrease of $220,543 from TBS as offset by a decrease of $13,350 from MVI.  Totalcost of sales during the 2005 quarter represented 39% of sales.  Cost of sales forMVI during the 2005 quarter represented 33% of sales as compared with 45% ofsales in the 2004 quarter reflecting reduced telecommunications and other costsassociated with providing electronic document delivery services despite animprovement in revenues from those services.  Cost of sales for TBS during the 2005quarter represented 46% of sales as compared with 24% of sales in the 2004quarter (which resulted from reporting a full quarter of expenses from TBS inthe 2005 period as compared with approximately one and one-half months in the2004 period).

**Gross Profit**

Gross profit for the three months ended March 31, 2005increased 51% to $860,496 as compared to $571,152 for the prior year quarter.  Theincrease in the 2005 quarter of $289,344 resulted from increases of $184,801and $104,543 from MVI and TBS, respectively.  Gross profit margin for the 2005quarter was 61% as compared to 62% for the 2004 quarter.

**Operating Expenses (restated)**

Operating expenses for the three months ended March 31, 2005increased by 47% to $1,165,633 from the $794,635 reported in the three monthsended March 31, 2004.  Of the total increase of $370,998, $115,670 and $355,881,are attributable to increases in operating expenses of MVI and TBS,respectively, as offset by a decrease of $100,553 in operating expenses ofcorporate.  

During the three months ended March 31, 2005, corporateincurred $188,283 in operating expenses, a decrease of $100,553 from the $288,836reported in the 2004 quarter as a result of reduced consulting fees andcompensation expenses.

During the three months ended March 31, 2005, MVI incurred$427,578 in operating expenses, an increase of 37% over the $311,908 reportedin the 2004 quarter.  Product and technology development increased $3,183 to $94,256from the $91,073 reported in the prior year quarter.  Sales and marketing increasedby $21,617 to $187,606 from the $165,989 reported in the prior year quarter asa result of staff increases.  General and administrative increased by $91,404to $116,342 from the $24,938 reported in the prior year quarter as a result ofstaff increases.   Depreciation and amortization expense decreased $534 to $29,374from the $29,908 reported in the 2004 quarter.

During the three months ended March 31, 2005, TBS incurred$549,772 in operating expenses, an increase of 183% over the $193,891 reportedin the 2004 period.  The increases in Product and technology development,  Salesand marketing,  General and administrative, and  Depreciation and amortizationexpenses to $95,702, $111,108, 320,776, and $22,186, respectively, areattributable to comparing three full months in the 2005 period to one andone-half months in the 2004 period.

**Operating Income (Loss) (restated)**

As a result of the foregoing, the Company reported anoperating loss for the three months ended March 31, 2005 of $305,137, comparedto an operating loss of $223,483 for the three months ended March 31, 2004. The overall operating loss in the 2005 quarter was comprised of operatinglosses of $188,283 and $207,545 from corporate and TBS, respectively, as offsetby operating income from MVI of $90,691.  The overall operating loss in the2004 quarter was comprised of operating income of $21,560 and $43,793 from MVIand TBS, respectively, as offset by an operating loss from corporate of $288,836.

**Change in Fair Value of Derivative Liability(restated)**

During the three months ended March 31, 2005 and 2004 (restated),we recognized other income (expense) of $5,323 and $(583,265) related torecording derivative liabilities at fair value.  

**Interest Expense (restated)**

Interest expense for the quarter ended March 31, 2005 increasedby 245% to $391,121 from the $113,490 reported in the prior year quarter. Although interest charges incurred pursuant to the terms of convertiblepromissory notes decreased significantly as a result of the February 10, 2005conversion to equity of approximately $3.68 million in debt (see"Liquidity" below), these decreases were offset by $215,465 in chargesrelated to the beneficial conversion feature associated with borrowings fromprior years and the conversion to equity thereof.   

**Net Loss (restated)**

Net loss for the three months ended March 31, 2005 was $695,135,or $0.01 per share, compared to a net loss of $929,396, or $0.03 per share, forthe three months ended March 31, 2004 on weighted average shares of 59,363,429and 33,543,178, respectively.  The overall net loss in the 2005 quarter wascomprised of net losses of $569,656 and $208,478 from corporate and TBS,respectively, as offset by net income from MVI of $82,999.  The overall netloss in the 2004 quarter was comprised of net losses of $908,407 and $55,053from corporate and MVI, respectively, as offset by net income of $34,064 fromTBS.

**LIQUIDITY**

During the three months ended March 31, 2005, the Company'snet cash position decreased by $314,242 to $143,767. The Company's operating,investing, and financing activities used net cash of $100,711, $9,678, and$203,853, respectively.

Net cash used in operating activities for the three monthsended March 31, 2005 was $100,711, an increase of $89,417 from the $11,294 usedin operating activities for prior year quarter. 

The Company's investing activities consisted of additionalTBS acquisition cost and the purchase of computer equipment. Net cash used ininvesting activities decreased  $1,560,328 to $9,678 from the $1,570,006 reportedfor the 2004 quarter, during which most of the cash used in the Company'sinvesting activities was for the acquisition of TBS. 

Net cash used in financing activities for the three monthsended March 31, 2005 was $203,853, and included $200,000 of payments on notesrelated to the TBS acquisition.  Net cash provided by financing activities forthe three months ended March 31, 2005 was $1,891,900, which included proceedsof $1,895,000 from convertible promissory notes to related parties.

On February 10, 2005, the Company received notice from C.Alan Williams and Joan P. Williams of their intent to convert $3,682,609 inconvertible secured promissory notes payable and accrued interest thereon to40,332,669 shares of the Company's restricted common stock.  As a result of theconversion, the Williams acquired shared voting and shared dispositive powerover seventy-seven percent (77%), or 59,495,094 shares, of the Company's commonstock.  As a result of the conversion, the amount owed by the Company to theWilliams pursuant to convertible promissory notes payable was $1,000,000 inprincipal and approximately $62,000 in unpaid interest as of March 31, 2005. As a result of the conversion, the Company will report a reduction in interestexpense in connection with its borrowings from the Williams.  Had theconversion not occurred and assuming all notes remained outstanding during2005, management estimates that interest expense for 2005 would have beenapproximately $661,000.  As a result of the conversion, management estimatesthat interest expense for 2005 on borrowings from the Williams will not exceedapproximately $400,000.

**CAPITAL RESOURCES**

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

Since our inception, our operating and investing activitieshave used substantially more cash than they have generated. We believe that wehave made considerable progress toward achieving profitable operations byincreasing revenues from electronic document delivery services and through ourrecent acquisition of TBS.  In addition, we are actively seeking opportunitiesto acquire or otherwise combine with businesses that are operating profitablyand generating positive cash flows.  However, at present and for theforeseeable future, we believe that we will continue to need working capital tofund the growth of our businesses and to absorb the increasing costs associatedwith operating as a fully reporting company in the prevailing regulatoryenvironment.    Accordingly, we may experience negative operating and investingcash flows through the remainder of 2005 until the electronic document deliverybusiness and TBS consistently generate net cash flows sufficient to offset theanticipated expenses of operating the holding company.  While we believe thatour available cash resources combined with our current revenue streams will besufficient to meet our anticipated working capital requirements, we willrequire addition financing to fund capital expenditure requirements for 2005. Should our current revenue streams or margins be subjected to even minordecreases, our funding requirements could be greater.

We believe that sustainable profitability is achievable;however, we have a history of losses.  While both MVI and TBS have alternatelyreported both monthly operating incomes and monthly operating losses during2004, operating incomes have been insufficient to offset operating losses,interest expense and corporate overhead.  If we are not successful insustaining and increasing operating profits from these two reporting segments,or reducing expenses of the holding company, we may never achieve profitabilityfor the Company as a whole.  Should we achieve overall profitability in anyperiod, we cannot be certain that we will sustain or increase suchprofitability on a quarterly or annual basis.

Between November 2000 and at least December 2004, ouroperating shortfalls have been funded by one shareholder, an affiliate, to whomwe owe $1,000,000 in principal and approximately $62,000 in interest as of March31, 2005. This shareholder has no obligation to continue to fund any futureoperating shortfalls and could stop doing so at any time.  We may be requiredto alter the terms of the convertible promissory note held by this shareholderto induce this shareholder or other such potential lenders to provideadditional loans, which could result in this shareholder or other suchpotential lenders obtaining rights, preferences or privileges senior to thoseof other creditors or our stockholders.

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

The Report of Independent Registered Public Accounting Firm onour December 31, 2004 financial statements includes an explanatory paragraphstating that the recurring losses incurred from operations and a workingcapital deficiency raise substantial doubt about our ability to continue as agoing concern. The financial statements do not include any adjustments thatmight result from the outcome of this uncertainty.

**RECENT DEVELOPMENTS**

**Financing**

On April 13, 2005, the Company issued a convertible notepayable to Barron Partners, LP ("Barron") in the principal amount of$800,000 (the "Convertible Note") which is convertible into16,000,000 shares of common stock, no par value, of the Company until such timeas the Company amends its articles of incorporation so as to authorize anddesignate a class of preferred stock and thereafter will be convertible solelyinto preferred stock.

In connection with the Convertible Note, the Company issuedBarron a warrant ("Warrant A") to purchase up to 32,000,000 shares ofits common stock at $0.10 per share (subject to adjustment, as defined). Pursuant to the warrant agreement, the holder has the right to purchasepreferred shares of the Company for a limited time, as defined.  In addition,the Company issued Barron a warrant ("Warrant B") to purchase up to8,000,000 shares of its common stock at $0.25 per share (subject to adjustment,as defined).  Warrants A and B vested upon grant and are exercisable throughApril 2010.  The warrants contain certain cashless exercise and anti-dilutionprovisions, as defined.

Finally, the Companyand Barron have entered into a Registration Rights Agreement pursuant to whichthe Company has agreed to prepare and file with the Securities and ExchangeCommission a registration statement covering the resale of the securitiesunderlying the convertible promissory note and the warrants within 60 days ofApril 13, 2005.

**Acquisition**

Effective April 1, 2005, VillageEDOCS purchased 100% of theissued and outstanding capital stock of Phoenix Forms, Inc. dba Resolutions("Resolutions" or "PFI"), from its two shareholders, AlexanderRiess and William Falcon.  The acquisition closed on April 15, 2005.

VillageEDOCS purchased Resolutions for $2,918,877 with twopromissory notes in the aggregate amount of $200,000, payment in full atclosing of an existing third-party promissory note in the amount of $432,000,and warrants to purchase an aggregate of 10,000,000 shares of VillageEDOCS'common stock at $0.15 per share.  The warrants were valued at $2,100,000(estimated based on the Black Scholes option pricing model).  The warrants willvest at various amounts during the third, twelfth, twenty-fourth, andthirty-sixth months following the date of closing.

VillageEDOCS funded the requirement to pay the third-partypromissory note from the proceeds of the $800,000 Convertible Note describedabove.

PFI is a Georgia corporation formed in 2004 to acquireResolutions, then a division of Inter-American Data, Inc., that has beenoperating continuously since 1998.  PFI presently does business as Resolutionsand is headquartered in Suwanee, GA, a suburb of Atlanta.  

The terms of the purchase were the result of arms-lengthnegotiations.  Neither of the Resolutions shareholders was previouslyaffiliated with VillageEDOCS, although Resolutions has been a customer forseveral years of the electronic document delivery service now operated byVillageEDOCS' subsidiary, MessageVision, Inc.

Resolutions provides products for document management, archiving, documentimaging, imaging software, document scanning, e-mail archiving,document imaging software, electronic forms, document archiving, and e-mail archiving.  Resolutions solutions are intended to help companies manage the entire lifecycle of business critical information, whether it is to be printed,distributed, emailed, faxed, archived, imaged or just retrieved and viewed onscreen. 

Resolutions' suite of products include: R-Forms, forelectronic forms design presentation and distribution;  R-Fax, anenterprise fax solution for production, desktop, and broadcast faxing; R-Checks, a turnkey check printing solution;  R-Output Manager, a reportand multi-page document automation manager that delivers reports and electronicforms to recipients via print, email, fax, post-to-web or archive; and Redmap,a full function imaging and archiving solution.  

----

**ITEM 3 - CONTROLS ANDPROCEDURES**

As of March 31, 2005, anevaluation was carried out under the supervision and with the participation ofthe Company's management, including our Chief Executive Officer and our ChiefFinancial Officer, of the effectiveness of the design and operation of ourdisclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e)under the Securities Exchange Act of 1934).  Based upon that evaluation, theChief Executive Officer and the Chief Financial Officer concluded that thedesign and operation of these disclosure controls and procedures wereeffective.  No significant changes were made in our internal controls orin other factors that could significantly affect these controls subsequent toMarch 31, 2005. 

(a) Evaluation of DisclosureControls and Procedures. The Company carried out an evaluation under thesupervision and with the participation of the Company's management, includingthe Company's Chief Executive Officer ("CEO") and Chief FinancialOfficer ("CFO"), of the effectiveness of the Company's disclosurecontrols and procedures. Based upon that evaluation, the CEO and CFO concludedthat as of March 31, 2005 our disclosure controls and procedures were effectivein timely alerting them to the material information relating to the Company (orthe Company's consolidated subsidiaries) required to be included in theCompany's periodic filings with the SEC, subject to the various limitations oneffectiveness set forth below under the heading, "LIMITATIONS ON THEEFFECTIVENESS OF INTERNAL CONTROLS," such that the information relating tothe Company, required to be disclosed in SEC reports (i) is recorded,processed, summarized and reported within the time periods specified in SECrules and forms, and (ii) is accumulated and communicated to the Company'smanagement, including our CEO and CFO, as appropriate to allow timely decisionsregarding required disclosure. 

*Remediation of MaterialWeakness in Internal Control*

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

The foregoing led our managementto conclude that our disclosure controls and procedures were not effective asof March 31, 2005 and 2004 because of a material weakness in our internalcontrols over financial reporting.  

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

(b) Changes in internal controlover financial reporting. Other than as noted above, there were no changes inthe Company's internal control over financial reporting that occurred during thefiscal quarter ended March 31, 2005 that has materially affected, or is reasonablylikely to materially affect, the Company's internal control over financialreporting. 

LIMITATIONS ON THE EFFECTIVENESSOF INTERNAL CONTROLS 

The Company's management,including the CEO and CFO, does not expect that our disclosure controls and proceduresor our internal control over financial reporting will necessarily prevent allfraud and material error. An internal control system, no matter how wellconceived and operated, can provide only reasonable, not absolute, assurancethat the objectives of the control system are met. Further, the design of thecontrol system must reflect the fact that there are resource constraints, andthe benefits of controls must be considered relative to their costs. Because ofthe inherent limitations in all control systems, no evaluation of controls canprovide absolute assurance that all control issues and instances of fraud, ifany, within the Company have been detected. These inherent limitations includethe realities that judgments in decision-making can be faulty, and thatbreakdowns can occur because of simple error or mistake. Additionally, controlscan be circumvented by the individual acts of some persons, by collusion of twoor more people, or by management override of the internal control. The designof any system of controls also is based in part upon certain assumptions aboutthe likelihood of future events, and there can be no assurance that any designwill succeed in achieving its stated goals under all potential futureconditions. Over time, control may become inadequate because of changes inconditions, and/or the degree of compliance with the policies or procedures maydeteriorate. 

----

 

**PART II**

** **

**ITEM 1 - LEGAL PROCEEDINGS.**

The Company is not a party in any lawsuits.   There were nonew legal matters to report during the three months ended March 31, 2005.

** **

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

During February 2005 and in connection with the conversionof $3,682,609 in principal and accrued interest on secured promissory notes,the Company agreed to issue an aggregate of 40,332,669 shares of its restrictedcommon stock to C. Alan Williams and Joan P. Williams, a related party.  As ofMay 15, 2005, these shares were reserved for issuance.

During February 2005 and in connection with the acquisitionof TBS, the Company agreed to issue 1,100,000 shares of its restricted commonstock to each of James L. Campbell and Stephen A. Garner, pursuant to theacquisition agreement.  The shares were valued at $0.14 per share (the estimatedfair value on the date that the shares were earned).  As of May 15, 2005, theseshares were reserved for issuance.

During February 2005 and in connection with the acquisitionof TBS, the Company agreed to issue 66,000 shares of its restricted common stockto H. Jay Hill, who is an officer and director of the Company, as a finder'sfee.  The shares were valued at $0.14 per share (the estimated fair valueon the date that the shares were earned).  As of May 15, 2005, these shareswere reserved for issuance. 

During February 2005 and in connection with the acquisitionof TBS, the Company agreed to issue 110,000 shares of its restricted commonstock to a non-affiliate pursuant to a finder's fee agreement.  The shares werevalued at $0.14 per share (the estimated fair value on the date that the shareswere earned).  As of May 15, 2005, these shares were reserved for issuance.

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

** **

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

None.

** **

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

None.

** **

**ITEM 5 - OTHER INFORMATION.**

None.

 

**ITEM 6 - EXHIBITS.**

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

**SIGNATURES**

** **

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

** **

** **

| ** **                          | **VillageEDOCS (Registrant)**                                                       |
|-------------------------------------|-------------------------------------------------------------------------------------|
| ** **                          | ** **                                                                          |
| ** **                          | ** **                                                                          |
| **Dated:  June 30, 2006** | **By:    /s/ K. Mason Conner**                                       |
| ** **                          | **       K. Mason  Conner**                      |
| ** **                          | **       Chief  Executive Officer and Director** |
| ** **                          | ** **                                                                          |
| ** **                          | ** **                                                                          |
| ** **                          | ** **                                                                          |
| **Dated:  June 30, 2006** | **By:  /s/ Michael A. Richard**                                                |
| ** **                          | **      Michael A. Richard**                          |
|                                     | **      Chief Financial  Officer**                    |
| ** **                          | **      (Principal  Accounting Officer)**             |
| ** **                          | ** **                                                                          |

** **

** **