<PAGE>

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   Form 10-QSB

                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                  For the quarterly period ended June 30, 2002

                                       OR

                TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

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

                        Commission File Number: 000-31395
                        ---------------------------------

                                  VillageEDOCS
                                  ------------

          California                                     33-0668917
-------------------------------            -------------------------------------
(State or Other Jurisdiction of            I.R.S. Employer Identification Number
 Incorporation or Organization)



14471 Chambers Road, Suite 105, Tustin, California              92780
--------------------------------------------------           ------------
    (Address of principal executive offices)                  (Zip Code)


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

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

                   X  YES                             NO
                  ---                             ---


There were 29,949,487 shares of the Registrant's common stock outstanding as of
July 31, 2002.

Transitional Small Business Format (check one) Yes     No  X
                                                   ---    ---

<PAGE>


                                  VillageEDOCS
--------------------------------------------------------------------------------


                         PART I - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

         Balance Sheet for June 30, 2002 (Unaudited)                           1

         Statements of Operations for the three and six months ended
           June 30, 2002 and 2001 (Unaudited)                                  2

         Statements of Cash Flows for the three and six months ended
           June 30, 2002 and 2001 (Unaudited)                                  3
..
         Notes to Financial Statements                                         4


<PAGE>


                                  VillageEDOCS
                                  Balance Sheet
                                   (Unaudited)

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


                                                       June 30, 2002
                                                       -------------
ASSETS
Current Assets:
  Cash                                                 $    20,371
  Accounts receivable, net of allowance for doubtful
   accounts of $53,000                                     119,888
  Other current assets                                      12,917
                                                       -----------
    Total current assets                                   153,176

  Property and equipment, net                              240,472
  Web site development costs, net                           73,631
  Other assets                                              22,373
                                                       -----------
                                                       $   489,652
                                                       ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
  Accounts payable                                     $   238,143
  Accrued expenses                                         134,233
  Accrued interest on convertible notes
   payable to related parties                              354,963
  Current portion of capital lease obligations              71,984
                                                       -----------
    Total current liabilities                              799,323

Capital lease obligations, net of current portion           16,213
Convertible notes payable to related parties               677,747
                                                       -----------
    Total liabilities                                    1,493,283
                                                       -----------
Stockholders' Deficit:
  Common stock, no par value:
    Authorized - 90,000,000 shares
     Issued and outstanding - 29,949,487 shares          6,799,550
  Additional paid-in capital                             1,311,324
  Accumulated deficit                                   (9,114,505)
                                                       -----------
      Total stockholders' deficit                       (1,003,631)
                                                       -----------
                                                       $   489,652
                                                       ===========

See accompanying notes to unaudited financial statements

                                       1

<PAGE>


                                  VillageEDOCS
                            Statements of Operations
                                   (Unaudited)

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                         Three Months Ended          Six Months Ended
                                         June 30,     June 30,      June 30,     June 30,
                                             2002         2001          2002         2001
                                      -----------  -----------   -----------  -----------
<S>                                   <C>          <C>           <C>          <C>
Net sales                             $   402,489   $  322,383   $   809,638      625,762
Cost of sales                             219,035      245,215       424,079      450,319
                                      -----------  -----------   -----------  -----------
     Gross profit                         183,454       77,168       385,559      175,443
                                      -----------  -----------   -----------  -----------
Operating expenses:
    Product and technology
     development                           93,906      137,163       187,629      267,993
    Sales and marketing                   138,020      117,825       234,323      248,955
    General and administrative            163,612      140,404       341,619      522,924
    Depreciation and amortization          32,855       22,176        58,672       48,259
                                      -----------  -----------   -----------  -----------
      Total operating expenses            428,393      417,568       822,243    1,088,131
                                      -----------  -----------   -----------  -----------
      Loss from operations               (244,939)    (340,400)     (436,684)    (912,688)

Interest income                                --           --            --           13
Interest expense                          (42,644)     (44,759)     (105,114)     (82,219)
                                      -----------  -----------   -----------  -----------
     Loss before provision for
      income taxes                       (287,583)    (385,159)     (541,798)    (994,894)

Provision for income taxes                    --           800           800          800
                                      -----------  -----------   -----------  -----------
     Net loss                         $  (287,583) $  (385,959)   $ (542,598) $  (995,694)
                                      ===========  ===========   ===========  ===========
Basic and diluted loss available to
 common stockholders per common
 share                                $      (.01) $      (.03)  $      (.03) $      (.07)
                                      ===========  ===========   ===========  ===========

Weighted average shares outstanding    22,313,855   13,897,721    18,243,413   13,853,427
                                      ===========  ===========   ===========  ===========
</TABLE>


See accompanying notes to unaudited financial statements

                                       2

<PAGE>

                                  VillageEDOCS
                            Statements of Cash Flows
                                   (Unaudited)

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

<TABLE>
<CAPTION>
                                                                      Six Months Ended
                                                                  June 30,        June 30,
                                                                      2002            2001
                                                                ----------      ----------
<S>                                                             <C>             <C>

Cash Flows from Operating Activities:
  Net loss                                                      $ (542,598)      $(995,694)
  Adjustments to reconcile net loss to net cash
   used in operating activities:
     Depreciation and amortization                                  58,672          48,259
     Provision for loss on doubtful accounts receivable             35,363          (2,448)
     Estimated fair market value of stock options issued to
      non-employees for services rendered                           22,000         170,331
     Changes in operating assets and liabilities:
       Accounts receivable                                         (72,689)        (22,866)
       Other current assets                                         (6,584)         (7,989)
       Accounts payable                                              8,794         (18,962)
       Accrued expenses and other                                  123,810          98,258
                                                                ----------       ---------

        Net cash used in operating activities                     (373,232)       (731,111)
                                                                ----------       ---------
  Cash Flows from Investing Activities:
    Purchases of property and equipment                            (39,005)         (2,730)
    Web site development costs                                     (84,230)             --
                                                                ----------       ---------
        Net cash used in investing activities                     (123,235)         (2,730)
                                                                ----------       ---------
  Cash Flows from Financing Activities:
    Proceeds from convertible notes payable to related parties     530,000         740,000
    Principal payments under capital leases                        (54,612)        (56,277)
    Proceeds from the exercise of warrants                           2,129           1,051
                                                                ----------       ---------
        Net cash provided by financing activities                  477,517         684,774
                                                                ----------       ---------
    Net decrease in cash                                           (18,950)        (49,067)

    Cash, beginning of period                                       39,321          82,266
                                                                ----------       ---------
    Cash, end of period                                         $   20,371       $  33,199
                                                                ==========       =========
Supplemental disclosure of cash flow information -
  Cash paid during the period for:

          Interest                                              $    3,023       $  12,962
                                                                ==========       =========
          Income taxes                                          $       --       $      --
                                                                ==========       =========
</TABLE>

See accompanying notes to unaudited financial statements

                                       3

<PAGE>


                                  VillageEDOCS
             Notes to Unaudited Financial Statements - June 30, 2002

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


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1.   Management's Representation

The management of VillageEDOCS (the "Company") without audit has prepared the
financial statements included herein. The accompanying unaudited financial
statements have been prepared in accordance with accounting principles generally
accepted in the United States of America for interim financial information.
Certain information and note disclosure normally included in the financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been omitted. In the opinion of the
management of the Company, all adjustments considered necessary for fair
presentation of the financial statements have been included and were of a normal
recurring nature, and the accompanying financial statements present fairly the
financial position as of June 30, 2002, and the results of operations and cash
flows for the three and six months ended June 30, 2002 and 2001.

It is suggested that these unaudited financial statements be read in conjunction
with the audited financial statements and notes thereto for the year ended
December 31, 2001, included in the Company's Annual Report on Form 10-KSB filed
with the Securities and Exchange Commission on March 29, 2002. The interim
results are not necessarily indicative of the results for a full year.

2.   Background and Organization

VillageEDOCS was incorporated in 1995 in Delaware and reincorporated in
California in 1997. The Company develops and markets internet-enabled fax
services to organizations throughout the United States and internationally.

3.   Going Concern

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

The Company's success is dependent upon numerous items, certain of which are the
successful implementation and marketing of its internet-enabled fax services,
its ability to obtain new customers in order to achieve levels of revenues
adequate to support the Company's current and future cost structure, and its
success in obtaining financing for equipment and operations, for which there is
no assurance. Unanticipated problems, expenses, and delays are frequently
encountered in establishing a new business. These include, but are not limited
to, competition, the need to develop customer support capabilities and market
expertise, setbacks in product development, technical difficulties, market
acceptance and sales and marketing. The failure of the Company to meet any of
these conditions could have a materially adverse effect upon the Company and may
force the Company to reduce or curtail operations. No assurance can be given
that the Company can or will ever operate profitably.

Until sufficient revenue levels are achieved, the Company will require
additional financing to support its operations. Such sources of financing could
include capital infusions, additional equity financing or debt offerings.
Management plans to obtain convertible debt and equity financing from existing
shareholders and equity financing from new shareholders during the remainder of
2002. Management is actively pursuing both of these financing arrangements. If
the planned financings are obtained, the Company believes it will have adequate
cash to sustain operations until it becomes profitable. There can be no
assurance that funding will be available on acceptable terms, if at all, or that
such funds, if raised, would enable the Company to achieve and maintain
profitable operations.

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

                                       4

<PAGE>

4.   Summary of Significant Accounting Policies

     Concentration of Credit Risk

     The Company extends credit to its customers and performs ongoing credit
     evaluations of such customers. The Company does not obtain collateral to
     secure its accounts receivable. The Company evaluates its accounts
     receivable on a regular basis for collectibility and provides for an
     allowance for potential credit losses as deemed necessary. At June 30,
     2002, the Company has recorded an allowance for doubtful accounts of
     $53,000. One customer accounted for approximately 17% and 11% of accounts
     receivable at June 30, 2002 and 2001, respectively.

     Use of Estimates in the Preparation of Financial Statements

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

     Revenue Recognition

     The Company provides internet-enabled fax services to businesses and
     charges for these services on either a per page faxed or per minute used
     basis. Service revenues are recognized when the services are performed.

     Risks and Uncertainties

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

     Loss per Share

     Basic loss per share is computed by dividing loss available to common
     shareholders by the weighted average number of common shares assumed to be
     outstanding during the period of computation. Diluted loss per share is
     computed similar to basic loss per share except that the denominator is
     increased to include the number of additional common shares that would have
     been outstanding if the potential shares had been issued and if the
     additional common shares were dilutive. All potentially dilutive shares, 0
     and 2,506,305 as of June 30, 2002 and 2001, respectively, have been
     excluded from dilutive loss per share, as their effect would be
     anti-dilutive for the periods ended June 30, 2002 and 2001.

     Segment Information

     The Company views its operations and manages its business as principally
     one segment.

     Comprehensive Income

     The Company has no items of comprehensive income.

     Stock-Based Compensation

     The Company accounts for non-employee stock-based compensation under
     Statement of Financial Accounting Standards No. 123 ("SFAS 123"),
     "Accounting For Stock-Based Compensation." SFAS 123 defines a fair value
     based method of accounting for stock-based compensation. However, SFAS 123
     allows an entity to continue to measure compensation cost related to stock
     and stock options issued to employees using the intrinsic method of
     accounting prescribed by Accounting Principles Board Opinion No. 25 ("APB
     25"), "Accounting for Stock Issued to Employees." Under APB 25,
     compensation cost, if any, is recognized over the respective vesting period
     based on the difference, on the date of grant, between the fair value of
     the Company's common stock and the grant price. Entities electing to remain
     with the accounting method of APB 25 must make pro forma disclosures of net
     income and earnings per share, as if the fair value method of accounting
     defined in SFAS 123 had been applied. The Company has elected to account
     for its stock-based compensation to employees under APB 25 (see Note 6).

                                       5

<PAGE>

     In March 2000, the FASB issued Interpretation No. 44 ("FIN 44"),
     "Accounting for Certain Transactions Involving Stock Compensation, an
     Interpretation of APB 25." FIN 44 clarifies the application of APB 25 for
     (a) the definition of employee for purposes of applying APB 25, (b) the
     criteria for determining whether a plan qualifies as a non-compensatory
     plan, (c) the accounting consequence for various modifications to the terms
     of a previously fixed stock option or award, and (d) the accounting for an
     exchange of stock compensation awards in a business combination. The
     adoption of FIN 44 did not have a material effect on the Company's
     financial statements.

     Web Site Development Costs

     During the six months ended June 30, 2002, the Company capitalized $73,631,
     net of $10,599 of accumulated amortization, related to the web site in
     accordance with the Emerging Issues Task Force Issue No. 00-2, "Accounting
     for Web Site Development Costs."

5.   Convertible Notes Payable

During the six months ended June 30, 2002, the Company borrowed $530,000 from C.
Alan Williams and issued convertible promissory notes bearing interest at 10
percent per annum. The notes and accrued interest are due at the earlier of one
of three events: 1) October 31, 2005; 2) acquisition of controlling interest in
the Company by a third party; or 3) the Company achieves equity financing of a
minimum of $3,000,000. If the Company is acquired, the principal and accrued
interest on the Notes, as modified, are convertible into shares of the Company's
common stock at the lower of $2.50 per share or the price paid per share by the
acquirer. In addition, the principal and accrued interest on the Notes, as
modified, are convertible into shares of the Company's common stock at a
conversion price equal to the lower of $2.50 per share or the average of the
Company's common stock closing bid price on the OTCBB, NASDAQ or other
established securities exchange or market for the ten (10) consecutive trading
days prior to the date Mr. Williams delivers written notice of his conversion
election to the Company.

Total interest expense recognized on all the convertible notes payable was
$97,344 and $82,219 during the six months ended June 30, 2002 and 2001,
respectively. Total interest accrued and not paid on the convertible notes
payable to related parties as of June 30, 2002 totaled $354,963 and is included
in the accompanying balance sheet.

As an inducement for the extension of the due date with respect to $2,039,245 in
convertible promissory notes issued through April 10, 2002 and due between June
2002 and October 2003 (the "Notes") and as inducement for receipt of up to
$610,000 in debt financing during 2002, the Company entered into two agreements
dated May 9, 2002 with Mr. Williams, a Promissory Note Modification Agreement
and a Security Agreement (the "May 9, 2002 Agreements"). Pursuant to the May 9,
2002 Agreements, the Notes were modified and now include the following terms:
the Notes, as modified, are secured by a security interest in all of the
Company's assets. The principal and accrued interest on the Notes, as modified,
are due at the earlier of one of three events: 1) October 31, 2005; 2)
acquisition of controlling interest in the Company by a third party; or 3) the
Company achieves equity financing of a minimum of $3,000,000. If the Company is
acquired, the principal and accrued interest on the Notes, as modified, are
convertible into shares of the Company's common stock at the lower of $2.50 per
share or the price paid per share by the acquirer. In addition, the principal
and accrued interest on the Notes, as modified, are convertible at any time into
shares of the Company's common stock at a conversion price equal to the lower of
$2.50 per share or the average of the Company's common stock closing bid price
on the OTCBB, NASDAQ or other established securities exchange or market for the
ten (10) consecutive trading days prior to the date Mr. Williams delivers
written notice of his conversion election to the Company. In addition, the May
9, 2002 Agreements grant to Mr. Williams piggyback registration rights with
respect to all previously unregistered shares of the Company's common stock held
by him, whether issued for cash or for conversion of the Notes, as modified. As
there was no beneficial conversion feature related to these modifications, no
interest expense was recorded during the periods ended June 30, 2002.

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

At June 30, 2002, the outstanding principal balance of notes payable to Mr.
Williams was $170,000.

On July 15, 2002, the Company entered into a Promissory Note Modification
Agreement with James Townsend with respect to $507,747 in convertible promissory
notes issued through January 12, 2001 and due between June 2002 and October 2003
(the "Townsend Notes"). Pursuant to this agreement, the Townsend Notes were
modified and now include the following terms: the principal and accrued interest
on the Notes, as modified, are due at the earlier of one of three events: 1)
October 31, 2005; 2) acquisition of controlling interest in the Company by a
third party; or 3) the Company achieves equity financing of a minimum of
$3,000,000. If the Company is acquired, the principal and accrued interest on
the Notes, as modified, are convertible into shares of the Company's common
stock at the lower of $2.50 per share or the price paid per share by the
acquirer. In addition, the principal and accrued interest on the

                                       6

<PAGE>

Notes, as modified, are convertible at any time into shares of the Company's
common stock at a conversion price equal to the lower of $0.10 per share or the
average of the Company's common stock closing bid price on the OTCBB, NASDAQ or
other established securities exchange or market for the ten (10) consecutive
trading days prior to the date Mr. Townsend delivers written notice of his
conversion election to the Company. In addition, the agreement grants to Mr.
Townsend piggyback registration rights with respect to all previously
unregistered shares of the Company's common stock held by him, whether issued
for cash or for conversion of the Notes, as modified. As there was no beneficial
conversion feature related to these modifications, no interest expense was
recorded during the periods ended June 30, 2002.

On July 30, 2002, the Company granted Mr. Williams a full ratchet anti-dilution
right to receive additional shares of the Company's common stock in the event
that James Townsend converts some or all of his outstanding promissory notes to
the Company's common stock at any price lower than $0.13 per share such that Mr.
William's conversion price shall be equivalent to Mr. Townsend's conversion
price with respect to the same number of shares.

6.   Stockholders' Equity (Deficit)

     a.   Common Stock

     During the quarter ended June 30, 2002, the Company increased the number of
     authorized shares of its common stock from 40,000,000 to 90,000,000.

     During the six months ended June 30, 2002, the Company issued 212,839
     shares of restricted common stock for $2,129 in cash in connection with the
     exercise of warrants.

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

     b.   Stock Options

     Effective January 30, 2002, the Board of Directors of the Company adopted
     an equity incentive plan (the "2002 Plan") that authorizes the issuance of
     options to acquire up to 6,226,258 shares of common stock to employees and
     certain outside consultants. The 2002 Plan allows for the issuance of
     either non-qualified or, subject to stockholder approval, incentive stock
     options pursuant to Section 422 of the Internal Revenue Code. Options vest
     at the discretion of the Board of Directors as determined at the grant
     date, but not longer than a ten-year term. Under the 2002 Plan, the
     exercise price of each option shall not be less than fair market value on
     the date the option is granted.

     Options to purchase 6,123,530 shares of the Company's common stock under
     the 2002 Plan at prices ranging from $0.17 to $0.21 (the fair market value
     on the date of grant) were issued to employees during the six months ended
     June 30, 2002, vesting on various dates from the date of grant through
     April, 2007. 53,750 options under the 2002 or 1997 Plan were cancelled
     during the six months ended June 30, 2002 due to the termination of
     employment.

     Options to purchase 555,555 shares of the Company's common stock under the
     2002 Plan at $0.18 (which was below the fair market value on the date of
     grant), vesting immediately, were issued to a non-employee in consideration
     for legal services during the six months ended June 30, 2002.

     Pursuant to APB 25 and SFAS 123 the Company recorded legal expense and
     prepaid expense of $15,416 and $6,584, respectively, during the six months
     ended June 30, 2002, for options issued to non-employee consultants. The
     Company recorded compensation expense of $170,331 during the six months
     ended June 30, 2001 for options and warrants issued to non-employee
     consultants.

                                       7

<PAGE>

7.   Earnings per Share

     Basic and diluted loss per common share is computed as follows:
<TABLE>
<CAPTION>

                                                                      June 30,      June 30,
                                                                          2002          2001
 <S>                                                               <C>            <C>
     Numerator for basic and diluted loss per common share:         ----------    ----------
       Net loss available to common stockholders                    $ (542,598)   $ (995,694)
                                                                    ==========    ==========

     Denominator for basic and diluted loss per common share:
       Weighted average common shares outstanding                   18,243,413    13,853,427
                                                                    ==========    ==========
     Net loss per common share available to common stockholders

         Net loss per share                                         $    (0.03)   $    (0.07)
                                                                    ==========    ==========
</TABLE>

8.   Litigation

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

                                       8

<PAGE>

                                  VillageEDOCS

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

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

Cautionary Statement Regarding Forward-Looking Information

Investors are cautioned that certain statements contained in this document, and
the Company's Form 10-KSB, as well as some statements in periodic press releases
and some oral statements of VillageEDOCS officials during presentations about
the Company, are "forward-looking" statements within the meaning of the Private
Securities Litigation Reform Act of 1995 (the "Act"). All statements that do not
directly and exclusively relate to historical facts constitute forward-looking
statements within the meaning of the Act. The words "anticipate," "believe,"
"expect," "plan," "intend," "seek," "estimate," "project," "will," "could,"
"may," and similar expressions are intended to identify forward-looking
statements. In addition, any statements concerning future financial performance,
ongoing business strategies or prospects, and possible future Company actions
which may be provided by management, are also forward-looking statements as
defined by the Act. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause the actual results,
performance or achievements of the Company to materially differ from any future
results, performance or achievements expressed or implied by such
forward-looking statements and to vary significantly from reporting period to
reporting period. Such factors include, among others, general economic and
business conditions, changes in foreign, political, social and economic
conditions, regulatory initiatives and compliance with governmental regulations,
the ability to achieve further market penetration and additional customers, and
various other matters, many of which are beyond the Company's control,
including, without limitation, the risks described under the caption
"DESCRIPTION OF BUSINESS - RISK FACTORS" in the Company's Form 10-SB filed with
the Securities and Exchange Commission on December 20, 2000. Although management
believes that the assumptions made and the expectations reflected in the
forward-looking statements are reasonable, there is no assurance that the
underlying assumptions will, in fact, prove to be correct or that actual future
results will not be different from the expectations expressed in this report or
elsewhere by management. The Company has no specific intention to update these
statements.

General Overview

The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the unaudited balance sheet as of
June 30, 2002, and the unaudited statements of operations and cash flows for the
three and six months ended June 30, 2002 and 2001, and the related notes thereto
as well as the audited financial statements of the Company for the years ended
December 31, 2001 and 2000, included in the Company's Annual Report on Form
10-KSB filed with the Securities and Exchange Commission on March 29, 2002. This
discussion contains forward-looking statements based upon current expectations
that involve risks and uncertainties, such as our plans, objectives,
expectations and intentions.

The Company cautions readers that important facts and factors described in this
Management's Discussion and Analysis of Financial Condition and Results of
Operations and elsewhere in this document sometimes have affected, and in the
future could affect, the Company's actual results, and could cause the Company's
actual results during 2002 and beyond to differ materially from those expressed
in any forward-looking statements made by, or on behalf of, the Company.

As reported in the Independent Auditors' Report on our December 31, 2001
financial statements, the Company has suffered recurring losses from operations,
had significant negative cash flows from operations, and had a net capital
deficiency that raised substantial doubt about our ability to continue as a
going concern.

Management is seeking additional financing by issuing convertible debt to
existing shareholders during 2002. In addition, management plans to seek equity
or a combination of equity and debt financing from new shareholders and/or
lenders in the second and third quarters of 2002. Management is actively
pursuing both of these financing arrangements. Between January and June 2002,
one of our shareholders loaned us $530,000 to fund our operating shortfalls in
connection with his offer to provide up to $610,000 in debt financing during
2002; however, he has no

                                       9

<PAGE>

binding obligation to continue providing funds. If the planned financings are
obtained and/or the shareholder continues to cover our operating shortfalls, the
Company believes it will have adequate cash to sustain operations until it
becomes profitable. There can be no assurance that funding will be available on
acceptable terms, if at all, or that such funds, if raised, would enable the
Company to achieve and maintain profitable operations.

Results of Operations

Three Months Ended June 30, 2002 Compared to Three Months Ended June 30, 2001

Net Sales

Net sales for the three months ended June 30, 2002 were $402,489, a 25% increase
over net sales for prior year quarter of $322,383. The increase in the 2002
quarter reflected an improvement in the volume of sales to existing customers
and growth in the number of customers billed.

Cost of Sales

Cost of sales for the three months ended June 30, 2002 were $219,035 as compared
to the $245,215 reported for the three months ended June 30, 2001. Cost of sales
during the 2002 quarter represented 54% of sales as compared with 76% of sales
in the 2001 quarter due to a decrease in variable telecommunications costs.

Gross Profit

Gross profit for the three months ended June 30, 2002 increased 138% to $183,454
as compared to $77,168 for the prior year quarter. The increase of $106,286 is
attributable to both a reduction in variable costs of sales and an increase in
sales volume for the Company's internet-enabled fax services.

Operating Expenses

Operating expenses for the three months ended June 30, 2002 increased by 3% to
$428,393 from the $417,568 reported in the three months ended June 30, 2001, an
increase of $10,825. Product and technology development decreased $43,257 to
$93,906 from the $137,163 reported in the prior year quarter due to
capitalization of certain payroll costs related to web site development. Sales
and marketing increased by $20,195 to $138,020 from the $117,825 reported in the
prior year quarter due to an increase in sales lead generation programs. General
and administrative increased by $23,208 to $163,612 from the $140,404 reported
in the prior year quarter due to increases in legal, rent, and bad debt
expenses. Depreciation and amortization expense increased $10,679 to $32,855
from the $22,176 reported in the 2001 quarter due to an increase in capitalized
web site development costs.

Interest Expense

Interest expense for the quarter ended June 30, 2002 decreased 5% to $42,644
from the $44,759 reported in the prior year quarter due primarily to the May 15,
2002 conversion to equity of convertible notes payable from a related party as
well as a reduction in interest paid on capital leases.

Net Loss

As a result of the foregoing, net loss for the three months ended June 30, 2002
was $287,583, or $0.01 per share, compared to a net loss of $385,959, or $0.03
per share, for the three months ended June 30, 2001.

Six Months Ended June 30, 2002 Compared to Six Months Ended June 30, 2001

Net Sales

Net sales for the six months ended June 30, 2002 were $809,638, a 29% increase
over net sales for prior year period of $625,762. The increase in the 2002
period reflected an improvement in the volume of sales to existing customers and
growth in the number of customers billed.

Cost of Sales

Cost of sales for the six months ended June 30, 2002 were $424,079 as compared
to the $450,319 reported for the six months ended June 30, 2001. Cost of sales
during the 2002 period represented 52% of sales as compared with 72% of sales in
the 2001 period due to a decrease in variable telecommunications costs.

                                       10

<PAGE>

Gross Profit

Gross profit for the six months ended June 30, 2002 increased 120% to $385,559
as compared to $175,443 for the prior year period. The increase of $210,116 is
attributable to both a reduction in variable costs of sales and an increase in
sales volume for the Company's internet-enabled fax services.

Operating Expenses

Operating expenses for the six months ended June 30, 2002 decreased by 24% to
$822,243 from the $1,088,131 reported in the six months ended June 30, 2001, a
decrease of $265,888. Product and technology development decreased $80,364 to
$187,629 from the $267,993 reported in the prior year period due to
capitalization of certain payroll costs related to web site development. Sales
and marketing decreased by $14,632 to $248,955 from the $234,323 reported in the
prior year period due to a reduction in salaried sales staff which was partially
offset by an increase in sales lead generation programs. General and
administrative decreased by $181,305 to $341,619 from the $522,924 reported in
the prior year period. Of the decrease, $170,331 is attributable to non-cash
compensation charges incurred in connection with the vesting of certain
non-employee stock options taken during the 2001 period. Depreciation and
amortization expense increased $10,413 to $58,672 from the $48,259 reported in
the 2001 period due to an increase in capitalized web site development costs.

Interest Expense

Interest expense for the six months ended June 30, 2002 increased 28% to
$105,114 from the $82,219 reported in the prior year period due primarily to an
increase in debt financing provided by a related party in consideration for
convertible notes payable.

Net Loss

As a result of the foregoing, net loss for the six months ended June 30, 2002
was $542,598, or $0.03 per share, compared to a net loss of $995,694, or $0.07
per share, for the six months ended June 30, 2001.

LIQUIDITY

During the six months ended June 30, 2002, the Company's net cash position
decreased by $18,950 to $20,371. Although the Company generated net cash of
$477,517 from financing activities, the Company's operating and investing
activities used net cash of $373,232 and $123,235, respectively. These
activities contributed to a net working capital deficit as of June 30, 2002 of
$646,147.

Net cash used in operating activities for the six months ended June 30, 2002 was
$373,232, a decrease of $357,879 from the $731,111 used in operating activities
for the six months ended June 30, 2001, mainly due to a reduction in net loss as
described above.

The Company's investing activities consisted of the purchase of computer
software and computer equipment and capitalization of web site development
costs. Net cash used for investment activities increased $120,505 in the six
months ended June 30, 2002 to $123,235 from the $2,730 reported for the six
months ended June 30, 2001 due primarily to the acquisition of computer software
in connection with service enhancements and capitalization of web site
development costs.

The Company's financing activities include proceeds from the exercise of
warrants to purchase common stock, issuance of convertible notes payable, and
principal payments on capital leases.

Net cash provided by financing activities for the six months ended June 30, 2002
was $477,517, and included proceeds of $530,000 and $2,129 from stockholder
loans and warrant exercises, respectively, less principal payments on capital
leases of $54,612.

Net cash provided by financing activities for the six months ended June 30, 2001
was $684,774. The Company received net proceeds from stockholder loans in the
amount of $740,000, and net proceeds from warrant exercises of $1,051, but used
$56,277 in principal payments on capital leases during the 2001 period.

                                       11

<PAGE>

CAPITAL RESOURCES

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

Since our inception, our operating and investing activities have used
substantially more cash than they have generated. Because we will continue to
need working capital to fund the growth of our business, we expect to continue
to experience negative operating and investing cash flows for the remainder of
2002. We currently anticipate that our available cash resources will be
insufficient to meet our anticipated working capital and capital expenditure
requirements through December 31, 2002. Accordingly, we believe we will require
up to approximately $5 million in additional financing to support our operations
and to fund a substantially increased sales and marketing effort until we become
profitable.

Between November 2000 and at least July 2002, our operating shortfalls have
been, and are expected to be, funded by one shareholder, an affiliate, who has
loaned us $2,209,245 through June 30, 2002 for that purpose. Assuming that this
shareholder continues to fund our operations, we will be able to sustain
operations at current levels. On May 9, 2002, we modified the terms of the
convertible promissory notes held by this shareholder to induce this shareholder
to provide additional loans and to extend the due dates of existing loans, which
resulted in this shareholder obtaining rights, preferences and privileges senior
to those of other creditors and our stockholders. On May 15, 2002, this
shareholder exercised his conversion rights with respect to $2,039,245 in
convertible promissory notes payable by the Company in consideration for
15,686,502 shares of the restricted common stock of the Company. This
shareholder has no obligation to continue to fund our operating shortfalls and
could stop doing so at any time. We may be required to provide similar terms to
other existing and potential new investors which could further result in such
investors obtaining rights, preferences or privileges senior to those of other
creditors and our stockholders.

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

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

From inception through June 30, 2002, we generated net sales of only
approximately $2,876,000 and we incurred total expenses of approximately
$11,174,000 during that same period. We have incurred net losses each year since
our inception. As of June 30, 2002, we had an accumulated deficit of $9,114,505.
To date, we have funded our capital requirements and our business operations
primarily with funds provided from the sale of common stock and from shareholder
borrowings, supplemented by revenues from sales of our services. From inception
to June 30, 2002, the Company has received approximately $4,883,000 from the
sale of common stock and convertible notes subsequently converted into common
stock.

The Independent Auditors' Report on our December 31, 2001 financial statements
includes an explanatory paragraph stating that the recurring losses incurred
from operations and a working capital deficiency raise substantial doubt about
our ability to continue as a going concern. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.

                                       12

<PAGE>

                                  VillageEDOCS

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


PART II


ITEM 1 - LEGAL PROCEEDINGS.

The Company is not a party in any lawsuits.

A marketing company has threatened legal action related to its claim that the
Company owes it $48,000 for services rendered. The Company agrees that it owes
$24,000 for such services, which amount is recorded as a liability in the
Company's financial statements. The Company believes the claim for the
additional $24,000 is without merit, and that the outcome of any legal action
will not have a material adverse effect on the Company.

In early 1999, the Company received communications from a company asserting the
ownership of certain United States and Canadian patents and making a licensing
proposal for these patents on unspecified terms. The Company has not accepted
the licensing proposal. If these claims prove accurate and the Company is not
able to enter into a licensing agreement on acceptable terms, it would have a
material adverse effect on the Company.

ITEM 2 - CHANGES IN SECURITIES.

During the six months ended June 30, 2002, the Company issued 212,839 shares of
restricted common stock for $2,129 in cash in connection with the exercise of
warrants.

Effective January 30, 2002, the Board of Directors of the Company adopted an
equity incentive plan (the "2002 Plan") that authorizes the issuance of options
to acquire up to 6,226,258 shares of common stock to employees and certain
outside consultants. The 2002 Plan allows for the issuance of either
non-qualified or, subject to stockholder approval, incentive stock options
pursuant to Section 422 of the Internal Revenue Code. Options vest at the
discretion of the Board of Directors as determined at the grant date, but not
longer than a ten-year term. Under the 2002 Plan, the exercise price of each
option shall not be less than fair market value on the date the option is
granted.

Options to purchase 6,123,530 shares of the Company's common stock under the
2002 Plan at prices ranging from $0.17 to $0.21 (the fair market value on the
date of grant) were issued to employees during the six months ended June 30,
2002, vesting on various dates from the date of grant through April, 2007.
53,750 options under the 2002 or 1997 Plan were cancelled during the six months
ended June 30, 2002 due to the termination of employment.

Options to purchase 555,555 shares of the Company's common stock under the 2002
Plan at $0.18 (which was below the fair market value on the date of grant),
vesting immediately, were issued to a non-employee in consideration for legal
services during the six months ended June 30, 2002.

During the six months ended June 30, 2002, the Company borrowed $530,000 from C.
Alan Williams and issued convertible promissory notes bearing interest at 10
percent per annum.

As an inducement for the extension of the due date with respect to $2,039,245 in
convertible promissory notes issued through April 10, 2002 and due between June
2002 and October 2003 (the "Notes") and as inducement for receipt of up to
$610,000 in debt financing during 2002, the Company entered into two agreements
dated May 9, 2002 with Mr. Williams, a Promissory Note Modification Agreement
and a Security Agreement (the "May 9, 2002 Agreements"). Pursuant to the May 9,
2002 Agreements, the Notes were modified and now include the following terms:
the Notes, as modified, are secured by a security interest in all of the
Company's assets. The principal and accrued interest on the Notes, as modified,
are due at the earlier of one of three events: 1) October 31, 2005; 2)
acquisition of controlling interest in the Company by a third party; or 3) the
Company achieves equity financing of a minimum of $3,000,000. If the Company is
acquired, the principal and accrued interest on the Notes, as modified, are
convertible into shares of the Company's common stock at the lower of $2.50 per
share or the price paid per share by the acquirer. In addition, the principal
and accrued interest on the Notes, as modified, are convertible at

                                       13

<PAGE>

any time into shares of the Company's common stock at a conversion price equal
to the lower of $2.50 per share or the average of the Company's common stock
closing bid price on the OTCBB, NASDAQ or other established securities exchange
or market for the ten (10) consecutive trading days prior to the date Mr.
Williams delivers written notice of his conversion election to the Company. In
addition, the May 9, 2002 Agreements grant to Mr. Williams piggyback
registration rights with respect to all previously unregistered shares of the
Company's common stock held by him, whether issued for cash or for conversion of
the Notes, as modified.

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

On July 15, 2002, the Company entered into a Promissory Note Modification
Agreement with James Townsend with respect to $507,747 in convertible promissory
notes issued through January 12, 2001 and due between June 2002 and October 2003
(the "Townsend Notes"). Pursuant to this agreement, the Townsend Notes were
modified and now include the following terms: the principal and accrued interest
on the Notes, as modified, are due at the earlier of one of three events: 1)
October 31, 2005; 2) acquisition of controlling interest in the Company by a
third party; or 3) the Company achieves equity financing of a minimum of
$3,000,000. If the Company is acquired, the principal and accrued interest on
the Notes, as modified, are convertible into shares of the Company's common
stock at the lower of $2.50 per share or the price paid per share by the
acquirer. In addition, the principal and accrued interest on the Notes, as
modified, are convertible at any time into shares of the Company's common stock
at a conversion price equal to the lower of $0.10 per share or the average of
the Company's common stock closing bid price on the OTCBB, NASDAQ or other
established securities exchange or market for the ten (10) consecutive trading
days prior to the date Mr. Townsend delivers written notice of his conversion
election to the Company. In addition, the agreement grants to Mr. Townsend
piggyback registration rights with respect to all previously unregistered shares
of the Company's common stock held by him, whether issued for cash or for
conversion of the Notes, as modified.

On July 30, 2002, the Company granted Mr. Williams a full ratchet anti-dilution
right to receive additional shares of the Company's common stock in the event
that James Townsend converts some or all of his outstanding promissory notes to
the Company's common stock at any price lower than $0.13 per share such that Mr.
William's conversion price shall be equivalent to Mr. Townsend's conversion
price with respect to the same number of shares.

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES.

On July 10, 2002, James Townsend gave the Company a Notice of Default with
respect to two convertible promissory notes in the aggregate principal amount of
$307,747. On July 15, 2002, the Company entered into a Promissory Note
Modification Agreement with James Townsend with respect to the $307,747 in
convertible promissory notes, and an additional $200,000 in convertible
promissory notes, issued through January 12, 2001 and due between June 2002 and
October 2003 (the "Townsend Notes"). Pursuant to this agreement, the Townsend
Notes were modified and now include the following terms. The principal and
accrued interest on the Notes, as modified, are due at the earlier of one of
three events: 1) October 31, 2005; 2) acquisition of controlling interest in the
Company by a third party; or 3) the Company achieves equity financing of a
minimum of $3,000,000. If the Company is acquired, the principal and accrued
interest on the Notes, as modified, are convertible into shares of the Company's
common stock at the lower of $2.50 per share or the price paid per share by the
acquirer. In addition, the principal and accrued interest on the Notes, as
modified, are convertible at any time into shares of the Company's common stock
at a conversion price equal to the lower of $0.10 per share or the average of
the Company's common stock closing bid price on the OTCBB, NASDAQ or other
established securities exchange or market for the ten (10) consecutive trading
days prior to the date Mr. Townsend delivers written notice of his conversion
election to the Company. In addition, the agreement grants to Mr. Townsend
piggyback registration rights with respect to all previously unregistered shares
of the Company's common stock held by him, whether issued for cash or for
conversion of the Notes, as modified.

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

None.


                                       14

<PAGE>




ITEM 5 - OTHER MATTERS.

Not Applicable

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

     (a)  Exhibits

          4.1  Letter Agreement dated July 30, 2002 by and between the Company,
               C. Alan Williams, and Joan P. Williams*

          99.1 Certification Pursuant To 18 U.S.C.ss.1350, As Adopted Pursuant
               To Section 906 of the Sarbanes-Oxley Act of 2002 signed and dated
               August 14, 2002 by K. Mason Conner, Chief Executive Officer*

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


              * Filed herewith

     (b)  Reports on Form 8-K

          Date                Subject
          -------------       --------------------------------------------------

          5/28/2002           Conversion of $2,039,245 in convertible promissory
                              notes payable to shares of the Company's common
                              stock by C. Alan and Joan P. Williams

                                       15

<PAGE>

                                   SIGNATURES

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

                                       VillageEDOCS (Registrant)

Dated: August 14, 2002                 By:   /s/ K. Mason Conner
                                            ------------------------------------
                                                 K. Mason Conner
                                                 Chief Executive Officer and
                                                 Director

Dated: August 14, 2002                 By:   /s/ Michael A. Richard
                                            ------------------------------------
                                                 Michael A. Richard
                                                 Controller
                                                 (Principal Accounting Officer)

                                       16