UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2010

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

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

Commission File Number: 000-31395

VillageEDOCS, Inc.

(Exact name of Registrant as specified in its charter)

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

1401 N. Tustin Ave, Ste. 230, Santa Ana, California 92705		(714) 734-1030
(Address of principal executive offices)		(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One):

Large Accelerated Filer ¨		Accelerated Filer ¨		Non-accelerated filer ¨		Smaller reporting company x
				(Do not check if a smaller reporting company)

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

YES

There were 226,546,613 shares of the Registrant’s common stock outstanding as of April 30, 2010.

VillageEDOCS

Index

		Page No.
PART I. FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements
	Condensed Consolidated Balance Sheets as of March 31, 2010 (Unaudited) and December 31, 2009 (Audited)	3
	Condensed Consolidated Statements of Operations for the three months ended March 31, 2010 and 2009 (Unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2010 and 2009 (Unaudited)	5
	Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations.	28
Item 4T.	Controls and Procedures	40

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 3.	Defaults Upon Senior Securities	41
Item 4.	Submission of Matters to a Vote of Security Holders	42
Item 5.	Other Information	42
Item 6.	Exhibits	43
	Signatures	49

VillageEDOCS, Inc. and subsidiaries

Condensed Consolidated Balance Sheets

	March 31,			December 31,
	2010			2009
	(unaudited)			(audited)
ASSETS
Current assets:
Cash and cash equivalents	$	382,553		$	1,307,834
Accounts receivable, net of allowance for doubtful accounts of approximately $65,000 and $52,000, respectively		425,631			405,000
Prepaid expenses and other current assets		167,425			86,925
Total current assets		975,609			1,799,759

Property and equipment, net		247,707			217,368
Other assets		25,014			25,014
Goodwill		4,523,527			4,523,527
Other intangibles, net		2,769,579			2,929,508

	$	8,541,436		$	9,495,176

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	441,894		$	403,265
Current portion of accrued expenses and other liabilities		361,526			500,591
Deferred revenue		430,433			705,314
Capital lease obligations, current		10,792			-
Lines of credit		-			130,592
Current portion of notes payable to related parties, net of unamortized debt discount of $47,808 and $47,808, respectively		292,192			264,309

Total current liabilities		1,536,837			2,004,071

Accrued expenses and other liabilities, net of current portion		711,210			806,045
Capital lease obligations, net of current portion		35,377			-
Notes payable to related parties, net of current portion and unamortized debt discount of $15,932 and $27,883, respectively		324,068			340,000
Derivative liability		4,650			4,650

Total liabilities		2,612,142			3,154,766

Commitments and contingencies

Stockholders' equity:
Series A Preferred stock, par value $0.001 per share:
Authorized — 48,000,000 shares
Issued and outstanding — 0 shares, respectively (liquidation preference of $0, respectively)		-			-
Common stock, par value $0.0001 per share:
Authorized — 500,000,000 shares
Issued and outstanding — 226,546,613 shares		22,655			22,655
Additional paid-in capital		34,062,182			34,022,485
Accumulated deficit		(28,155,543	)		(27,704,730	)
Total stockholders' equity		5,929,294			6,340,410
	$	8,541,436		$	9,495,176

See accompanying notes to unaudited condensed consolidated financial statements.

VillageEDOCS, Inc. and subsidiaries

Condensed Consolidated Statements of Operations

(unaudited)

	Three Months Ended March 31,
	2010			2009
Net revenues	$	2,159,113		$	2,801,449
Cost of revenues		645,450			813,818
Gross profit		1,513,663			1,987,631
Operating expenses:
Product and technology development		438,273			468,068
Sales and marketing		402,290			564,693
General and administrative		910,291			1,177,160
Depreciation and amortization		196,960			220,098
Total operating expenses		1,947,814			2,430,019
Loss from continuing operations		(434,151	)		(442,388	)

Change in fair value of derivative liability		-			3,100
Interest expense, net of interest income		(19,410	)		(41,065	)
Other income, net		2,748			15,585
Loss from continuing operations before provision for income taxes		(450,813	)		(464,768	)

Provision for income taxes		-			4,000
Loss from continuing operations		(450,813	)		(468,768	)

Income from discontinued operations		-			48,025
Net loss	$	(450,813	)	$	(420,743	)

Net loss available to common shareholders
Basic	$	(450,813	)	$	(420,743	)
Diluted	$	(450,813	)	$	(420,743	)

Basic earnings (loss) per share:
Loss from continuing operations	$	-		$	-
Income from discontinued operations	$	-		$	-
Net loss per share, basic	$	-		$	-

Diluted earnings (loss) per share:
Loss from continuing operations	$	-		$	-
Income from discontinued operations	$	-		$	-
Net loss per share, diluted	$	-		$	-

Weighted average shares outstanding -
Basic		226,546,613			180,270,913
Diluted		226,546,613			215,658,064

See accompanying notes to unaudited condensed consolidated financial statements.

VillageEDOCS, Inc. and subsidiaries

Condensed Consolidated Statements of Cash Flows

(unaudited)

	Three Months Ended March 31,
	2010			2009
Cash Flows from Operating Activities:
Net loss	$	(450,813	)	$	(420,743	)
Adjustments to reconcile net loss to net cash (used in ) provided by operating activities:
Depreciation and amortization		196,960			242,999
Provision for (recovery of) doubtful accounts receivable		12,229			(22,401	)
Estimated fair value of stock options issued to employees for services rendered		39,697			82,413
Estimated fair value of warrants issued to consultants		-			23,194
Change in fair value of derivative liability		-			(3,100	)
Amortization of debt discount and debt issuance costs		11,951			29,834
Changes in operating assets and liabilities:
Accounts receivable		(32,860	)		308,308
Inventories		-			6,990
Prepaid expenses and other current assets		(88,235	)		67,790
Other assets		-			2,647
Accounts payable		38,629			65,281
Accrued expenses, other liabilities and interest		(233,900	)		(119,037	)
Deferred revenue		(274,881	)		(200,723	)
Net cash (used in) provided by operating activities		(781,223	)		63,452
Cash Flows from Investing Activities:
Purchases of property and equipment		(9,435	)		(29,088	)
Net cash used in investing activities		(9,435	)		(29,088	)
Cash Flows from Financing Activities:
Payments on lines of credit, net		(130,592	)		(60,067	)
Payments on notes payable to related parties		-			(151,490	)
Payments on capital lease obligations		(4,031	)		(4,932	)
Net cash used in financing activities		(134,623	)		(216,489	)
Net change in cash and cash equivalents		(925,281	)		(182,125	)

Cash and cash equivalents, beginning of period		1,307,834			567,447
Cash and cash equivalents, end of period	$	382,553		$	385,322
Supplemental disclosure of cash flow information -
Cash paid during the period for:
Interest	$	7,460		$	14,336
Income taxes	$	145,760		$	30,486

continued…

	Three Months Ended March 31
	2010		2009

Supplemental Schedule of Noncash Investing
and Financing Activities:
Cumulative effect of accounting change to accumulated deficit for derivative liabilities	$	-	$	2,610
Cumulative effect of accounting change to additional paid-in capital for derivative liabilities	$	-	$	6,200
Acquisition of property and equipment through capital lease obligations	$	50,200	$	-
Repayment of line of credit with issuance of related party debt	$	-	$	430,000

See accompanying notes to unaudited condensed consolidated financial statements.

VillageEDOCS, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2010 and 2009

1.	Management’s Representation

The accompanying unaudited condensed consolidated financial statements have been prepared by VillageEDOCS, Inc. (the “Company” or “VillageEDOCS”) in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information, and pursuant to the instructions to Form 10-Q and Article 8 of Regulation S-X promulgated by the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statement presentation. In the opinion of management, all adjustments (consisting primarily of normal recurring accruals) considered necessary for a fair presentation have been included. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2009, contained in the Company’s Annual Report on Form 10-K, as filed with the SEC.

The Company has evaluated subsequent events through the filing date of its Quarterly Report on Form 10-Q, and determined that no subsequent events have occurred that would require recognition in the condensed consolidated financial statements or disclosure in the notes thereto other than as disclosed in the accompanying notes.

2.	Background, Organization and Basis of Presentation

The Company was incorporated in 1995 in Delaware, reincorporated in California in 1997, and reincorporated in Delaware in September 2007. The Company has historically operated an electronic document delivery service marketed to organizations throughout the United States and internationally. On June 16, 2004, the holders of a majority of the voting capital stock of the Company voted to approve a Plan of Restructuring that included the reorganization of the Company's electronic document delivery business into a wholly owned subsidiary of the Company. In connection with the reorganization, the Company formed MessageVision, Inc. ("MVI") on October 25, 2004. Effective May 1, 2006, the Company acquired GoSolutions, Inc. ("GSI"). GSI provides enhanced voice and data communications services including speech-driven messaging, unified communications, and audio conferencing applications. Effective August 1, 2008, the Company acquired Decision Management Company, Inc. dba Questys Solutions (“QSI” or “Questys”). QSI provides products and services for document and content management, automated data capture, electronic agenda management, and business process workflow. On February 17, 2004, the Company acquired Tailored Business Systems, Inc. ("TBS"), which it subsequently sold effective December 1, 2009. Effective April 1, 2005, the Company acquired Phoenix Forms, Inc. dba Resolutions ("PFI" or "Resolutions"), which it subsequently sold effective December 1, 2007. The unaudited condensed consolidated financial statements include the accounts of the Company and those of MVI, TBS, Resolutions, GSI, and QSI, its wholly owned subsidiaries, since October 25, 2004, February 17, 2004, April 1, 2005, May 1, 2006, and August 1, 2008, respectively. See Note 5 for additional information regarding the Company’s accounting for TBS as a discontinued operation. All significant inter-company transactions and balances have been eliminated in consolidation.

3.	Going Concern

The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred significant losses since inception and has a working capital deficit ($561,228 at March 31, 2010). The Company’s losses are continuing and are expected to continue until such time as the Company is able to sufficiently expand its existing businesses or is able to consummate business combination transactions with other businesses whose profits are sufficient to offset any ongoing losses from operating the holding company that owns QSI, GSI, and MVI.

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

The Company believes it will have adequate cash to maintain operations until it achieves sustained profitability. However, until the Company has a history of maintaining revenue levels sufficient to support its operations and repay its working capital deficit, the Company may require additional financing. Sources of financing could include capital infusions, additional equity financing or debt offerings. The Company does not expect to generate positive operating cash flows again until at least the fourth quarter of 2010. Should anticipated cash flows decrease for any reason, management plans to obtain debt and/or equity financing from new and existing stockholders. 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 or sustain profitable operations.

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

4.	Summary of Significant Accounting Policies

Segments of an Enterprise and Related Information

The Company reports information about segments of its business in its annual financial statements and reports selected segment information in its quarterly reports issued to stockholders. The Company also reports on its entity-wide disclosures about the products and services that it provides, the material countries in which it holds assets and reports revenues and its major customers. The Company's four reportable segments are managed separately based on fundamental differences in their operations. At March 31, 2010 the Company operated in the following four reportable segments (see Note 11):

(a) Electronic document delivery services,

(b) Electronic content management solutions,

(d) Corporate.

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

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. MVI and GSI generally require a valid credit card or ACH debit account to collateralize credit extended to non-corporate clients. 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 March 31, 2010 and December 31, 2009, the Company has recorded an allowance for doubtful accounts of approximately $65,000 and $52,000, respectively.

For the three months ended March 31, 2010 and 2009, independent representatives of one enterprise accounted for approximately 30% and 19% of total revenues from continuing operations, respectively.

For the three months ended March 31, 2010 and 2009, independent representatives of another enterprise accounted for approximately 4% and 17% of total revenues from continuing operations, respectively.

One customer accounted for 14% and 23%, respectively, of accounts receivable at March 31, 2010 and December 31, 2009.

At times, deposits held with financial institutions may exceed the amount of insurance provided on such deposits by the Federal Deposit Insurance Corporation (“FDIC”) which provides deposit coverage with limits up to $250,000 per owner through December 31, 2013. As of March 31, 2010, the Company had no amounts in excess of the FDIC limit. As of December 31, 2009, the Company had a balance of approximately $805,000 in excess of the FDIC limit.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with GAAP 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 consolidated 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, recoverability of long-lived assets, and valuation of derivative liabilities, stock options, warrants, and deferred taxes. Actual results could differ from those estimates.

Property and Equipment

Property and equipment are stated at cost and are depreciated using the straight-line method over the estimated useful lives of the assets, ranging from three to seven years. Equipment under capital lease obligations is depreciated over the shorter of the estimated useful life or the term of the lease. Major betterments and renewals are capitalized, while routine repairs and maintenance are charged to expense when incurred.

Revenue Recognition

The Company recognizes revenue when persuasive evidence of an arrangement exists, title transfer has occurred, or services have been performed, the price is fixed or readily determinable and collectibility is probable. Sales are recorded net of sales discounts.

The Company recognizes revenue earned on software arrangements involving multiple elements to be allocated to each element based on the selling price of each of the elements. The fair value of an element must be based on vendor-specific objective evidence (“VSOE”) of the estimated selling price. Software license revenue generated by QSI, allocated to a software product is recognized upon delivery of the product, or deferred and recognized in future periods to the extent that an arrangement includes one or more elements that are to be delivered at a future date and for which VSOE has not been established. Maintenance and support revenue is recognized ratably over the maintenance term. First-year maintenance typically is sold with the related software license and renewed on an annual basis thereafter. Estimated fair values of ongoing maintenance and support obligations are based on separate sales of renewals to other customers or upon renewal rates quoted in the contracts. For such arrangements with multiple obligations, the Company allocates revenue to each component of the arrangement based on the estimated selling price of the undelivered elements. Fair value of services, such as consulting or training, is based upon separate sales of these services. The Company at times may enter into multiple-customer contracts in which the Company allocates revenue based on the number of specified users at each customer, and recognizes revenue upon customer acceptance and satisfying the other applicable conditions of the above described accounting policy.

Services revenue is recognized as the service is performed assuming that sufficient evidence exists to estimate the fair value of the services. Consulting and training services are billed based on contractual hourly rates and revenues are recognized as the services are performed. Consulting services primarily consist of implementation services related to the installation of the Company’s products which do not require significant customization to or modification of the underlying software code.

Revenue from subscription agreements consists of fixed monthly fees and usage charges, generally based on per minute rates. Subscription agreement revenue related to QSI, MVI and GSI usage service charges are billed monthly in arrears and the associated revenues are recognized in the month of service. Recurring charges for the GoSolo (TM) platform are billed in advance on a monthly basis and recorded as deferred revenues. The Company recognizes subscription agreement revenue ratably over the service period, which management believes approximates the actual provision of services. Professional service fee revenue consists of consulting fees charged to enterprise clients for GoSolo(TM) platform enhancements. The Company recognizes professional service fee revenue on a time and materials basis over the service period, which management believes approximates the actual provision of services. Wholesale enhanced voicemail services consists of fees charged to telecommunications providers for use of the GoSolo(TM) platform to provide their customers with hosted electronic voicemail, billed monthly in arrears and the associated revenues are recognized in the month of service.

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

Product and Technology Development

Product and technology development expense includes personnel costs relating to developing the features, content and functionality of QSI’s electronic content management solutions, MVI's internet-enabled fax services and web site, and GSI's communications services. Product and technology development costs are expensed as incurred.

Risks and Uncertainties

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

Earnings (Loss) per Share

Basic earnings (loss) per share is computed by dividing the net loss available to common stockholders by the weighted average number of common shares assumed to be outstanding during the period of computation. Diluted earnings (loss) per share is computed similar to basic earnings (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, approximately 48,000 and 35,387,000 of potentially dilutive shares for the three months ended March 31, 2010 and 2009, respectively, have been excluded from diluted loss per share, as their effect would be anti-dilutive for the periods then ended.

Stock-Based Compensation

At March 31, 2010 the Company had two stock-based compensation plans.

All share-based payments to employees, including grants of employee stock options and restricted stock grants, are recognized in the consolidated financial statements based upon their fair values. The Company uses the Black-Scholes option pricing model to estimate the grant-date fair value of share-based awards. Fair value is determined at the date of grant. The consolidated financial statement effect of forfeitures is estimated at the time of grant and revised, if necessary, if the actual effect differs from those estimates. The estimated weighted average forfeiture rate for the three months ended March 31, 2010 and 2009, of approximately 16% and 17%, respectively, was based on historical forfeiture experience and estimated future employee forfeitures.

The cash flows resulting from the tax benefits resulting from tax deductions in excess of the compensation cost recognized for those options to be classified as financing cash flows. Due to the Company’s loss position, there were no such tax benefits during the three months ended March 31, 2010 and 2009.

Description of Plans

The Company’s equity incentive plans provide for awards of common stock and grants of options to employees and directors of the Company to purchase the Company’s shares, as determined by management and the board of directors, at or above the fair value of such shares on the grant date. The options generally vest over a five-year period beginning on the grant date and have a seven-year term. As of March 31, 2010, the Company is authorized to issue up to 95,000,000 shares under these plans and has approximately 48,000,000 shares available for future issuances.

Summary of Assumptions and Activity

The fair value of stock-based awards to employees and directors is calculated using the Black-Scholes option pricing model even though the model was developed to estimate the fair value of freely tradeable, fully transferable options without vesting restrictions, which differ significantly from the Company’s stock options. The Black-Scholes model also requires subjective assumptions, including future stock price volatility and expected time to exercise, which greatly affect the calculated values. The expected term of options granted is derived from historical data on employee exercises and post-vesting employment termination behavior. The risk-free rate selected to value any particular grant is based on the U.S. Treasury rate that corresponds to the pricing term of the grant effective as of the date of the grant. The expected volatility is based on the historical volatility of the Company’s stock price. These factors could change in the future, affecting the determination of stock-based compensation expense in future periods.

The fair value of options granted was estimated using the following weighted average assumptions:

	Three Months Ended
	March 31,
	2010			2009
Stock options:
Expected term (in years)		6.0			6.0
Expected volatility		195	%		182	%
Risk-free interest rate		2.78	%		1.85	%
Expected dividends		-			-

A summary of option activity as of March 31, 2010 and changes during the three months then ended, is presented below:

	March 31, 2010
				Weighted-Average
						Remaining		Aggregate
				Exercise		Contractual		Intrinsic
	Shares			Price		Term (Years)		Value
Options outstanding at January 1, 2010		40,370,976		$	0.15
Options granted		1,075,000		$	0.01
Options forfeited/cancelled		(1,777,000	)	$	0.06
Options expired		(20,000	)	$	0.18
Options exercised		-		$	-
Options outstanding at March 31, 2010		39,648,976		$	0.15		4.2	$	-
Options vested or expected to vest at March 31, 2010		38,008,286		$	0.15		4.1	$	-
Options exercisable at March 31, 2010		28,167,976		$	0.19		3.5	$	-

The weighted average grant date fair value of options granted during the three months ended March 31, 2010 and 2009 was $0.01 and $0.03 per option, respectively. Upon the exercise of options, the Company issues new shares from its authorized shares.

As of March 31, 2010, there was approximately $298,000 of total unrecognized compensation cost, net of forfeitures, related to employee and director stock option compensation arrangements. That cost is expected to be recognized on a straight-line basis over the next 2.4 weighted average years. The total fair value of vested options issued to employees and directors during the three months ended March 31, 2010 and 2009 was $39,697 and $63,240, respectively, net of estimated forfeitures, for continuing operations, and $19,173 during the three months ended March 31, 2009 for discontinued operations.

The expense was recorded in the accompanying unaudited condensed consolidated statements of operations as follows:

	Three Months Ended March 31,
	2010			2009
Cost of sales	$	8,480		$	6,623
General and administrative		36,647			48,200
Sales and marketing		(5,906	)		4,458
Product and technology development		476			3,959
	$	39,697		$	63,240

The measurement date for the fair value of the equity instruments issued to consultants and vendors in exchange for goods and services is determined at the earlier of (i) the date at which a commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant or vendor’s performance is complete. In the case of equity instruments issued to consultants, the fair value of the equity instrument is recognized over the term of the consulting agreement.

All issuances of the Company's stock to non-employees as non-cash consideration are valued at the market value of the shares issued or the value of consideration received whichever is more readily determinable. The majority of the non-cash consideration received pertains to services rendered by consultants and others and has been valued at the market value of the shares issued.

Goodwill and Other Intangible Assets

Goodwill represents the excess of acquisition cost over the net assets acquired in a business combination and is not amortized. The Company allocates its goodwill to its various reporting units, determines the carrying value of those businesses, and estimates the fair value of the reporting units so that a two-step goodwill impairment test can be performed. In the first step of the goodwill impairment test, the fair value of each reporting unit is compared to its carrying value. Management reviews, on an annual basis, the carrying value of goodwill in order to determine whether impairment has occurred. Impairment is based on several factors including the Company's projection of future discounted operating cash flows. If an impairment of the carrying value were to be indicated by this review, the Company would perform the second step of the goodwill impairment test in order to determine the amount of goodwill impairment, if any.

The Company performed an impairment test on goodwill as of December 31, 2009. Based on its analysis as of December 31, 2009 and review at March 31, 2010, the Company’s management believes there is no impairment of its goodwill. There can be no assurance, however, that market conditions will not change or demand for the Company’s products or services will continue, which could result in impairment of goodwill in the future.

Identifiable intangibles acquired in connection with business acquisitions are recorded at their respective fair values (see Note 5). Deferred income taxes have been recorded to the extent of differences between the fair value and the tax basis of the assets acquired and liabilities assumed.

Long-Lived Assets

In the event that facts and circumstances indicate that equipment or other long-lived assets may be impaired, an evaluation of recoverability would be performed. If an evaluation is required, the estimated future undiscounted cash flows associated with the asset are compared to the asset's carrying amount to determine if an impairment charge is necessary. The amount of long-lived asset impairment, if any, is charged to operations in the period in which long-lived asset impairment is determined. At March 31, 2010, management believes there is no impairment of its long-lived assets. There can be no assurance, however, that market conditions will not change or demand for the Company's products or services will continue, which could result in impairment of long-lived assets in the future.

Warranty Costs

The Company provides a limited 90 day warranty on certain products sold. Estimated future warranty obligations related to certain products and services are provided by charges to operations in the period in which the related revenue is recognized. As of March 31, 2010 and December 31, 2009, management of the Company determined that a warranty reserve was not necessary. In addition, the charges to expense during the three months ended March 31, 2010 and 2009 were insignificant.

Derivative Liability

Effective January 1, 2009, the Company adopted the provisions of an accounting pronouncement which applies to any freestanding financial instruments or embedded features that have the characteristics of a derivative, and to any freestanding financial instruments that are potentially settled in an entity’s own common stock. As a result of adopting this pronouncement, 310,000 of issued and outstanding common stock purchase warrants previously treated as equity pursuant to the derivative treatment exemption were no longer afforded equity treatment. These warrants have an exercise price of $0.01, as amended, and expire in February 2018. As such, effective January 1, 2009, the Company reclassified the fair value of these common stock purchase warrants, which have exercise price reset features, from equity to liability status as if these warrants were treated as a derivative liability since their date of issue in 2008. On January 1, 2009, the Company reclassified from additional paid-in capital, as a cumulative effect adjustment, $2,610 to beginning retained earnings and $6,200 to a long-term warrant liability to recognize the fair value of such warrants on such date. During the three months ended March 31, 2009, the Company issued an additional 155,000 warrants valued at $1,550 using the Black-Scholes option pricing model and recorded as general and administrative expense and as a derivative liability. The fair value of the 465,000 common stock purchase warrants was $4,650 as of March 31, 2010. As such, the Company recognized no change in fair value of these warrants for the three months ended March 31, 2010.

These common stock purchase warrants were initially issued in connection with a line of credit with a financial institution. The common stock purchase warrants were not issued with the intent of effectively hedging any future cash flow, fair value of any asset, liability or any net investment in a foreign operation. The warrants do not qualify for hedge accounting, and as such, all future changes in the fair value of these warrants will be recognized currently in earnings until such time as the warrants are exercised or expire. These common stock purchase warrants do not trade in an active securities market, and as such, the Company estimates the fair value of these warrants using the Black-Scholes option pricing model using the following weighted average assumptions:

	March 31,			December 31,
	2010			2009
Annual dividend yield		—			—
Expected life (years)		7.86			8.11
Risk-free interest rate		3.28	%		3.62	%
Expected volatility		185	%		186	%

The expected life is based on the remaining term of the warrants. The risk-free interest rate is based on the U.S. Treasury rate that corresponds to the pricing term. Expected volatility is based primarily on historical volatility. Historical volatility was computed using daily pricing observations for recent periods that correspond to the expected term. The Company believes this method produces an estimate that is representative of expectations of future volatility over the expected term of these warrants. The Company currently has no reason to believe future volatility over the expected remaining life of these warrants is likely to differ materially from historical volatility.

Fair Value Measurement

In September 2006, the Financial Accounting Standards Board (“FASB”) issued a pronouncement which defines fair value, establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements. This pronouncement does not require any new fair value measurements, but provides guidance on how to measure fair value by providing a fair value hierarchy used to classify the source of the information. The carrying values of cash, accounts receivable, accounts payable, accrued expenses, capital lease obligations, and debt instruments approximate their respective fair values due to the short-term nature of these instruments.

The fair value hierarchy distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs). The hierarchy consists of three levels:

Level one — Quoted market prices in active markets for identical assets or liabilities;

Level two — Inputs other than level one inputs that are either directly or indirectly observable; and

Level three — Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use.

Determining which category an asset or liability falls within the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures each quarter. Liabilities measured at fair value on a recurring basis are summarized as follows (unaudited):

							March 31,
	Level 1		Level 2		Level 3		2010
Fair value of warrants		—		—	$	4,650	$	4,650
Total	$	—	$	—	$	4,650	$	4,650

The Company has no assets that are measured at fair value on a recurring basis. There were no assets or liabilities measured at fair value on a non-recurring basis during the three months ended March 31, 2010.

New Accounting Pronouncements

In September 2009, the FASB issued an update to its accounting guidance regarding multiple-deliverable revenue arrangements. The guidance addresses how to measure and allocate consideration to one or more units of accounting. Specifically, the guidance requires that consideration be allocated among multiple deliverables based on relative selling prices. The guidance establishes a selling price hierarchy of (1) vendor-specific objective evidence, (2) third-party evidence and (3) estimated selling price. This guidance is effective for annual periods beginning on or after June 15, 2010 but may be early adopted as of the beginning of an annual period. The Company adopted this guidance on January 1, 2010 and has concluded that this guidance did not have a material impact on its consolidated financial position and results of operations as of and for the three months ended March 31, 2010.

In October 2009, the FASB issued an update to its accounting guidance regarding software revenue recognition. The guidance changes the accounting model for revenue arrangements that include both tangible products and software elements. Under this guidance, tangible products containing software components and non-software components that function together to deliver the tangible product’s essential functionality are excluded from the software revenue guidance in FASB ASC Topic 985, “Software.” In addition, hardware components of a tangible product containing software components are always excluded from the software revenue guidance. This guidance is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010 but may be early adopted. The Company adopted this guidance on January 1, 2010 and has concluded that this guidance did not have a material impact on its consolidated financial position and results of operations as of and for the three months ended March 31, 2010.

In January 2010, the FASB issued an update to its accounting guidance regarding fair value measurement and disclosure. The guidance affects the disclosures made about recurring and non-recurring fair value measurements. This guidance is effective for annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010. Early adoption is permitted. The Company is currently evaluating the impact that this guidance will have on its consolidated financial position and results of operations.

Other recent accounting pronouncements issued by the FASB (including the Emerging Issues Task Force) and the American Institute of Certified Public Accountants did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.

5. Acquisitions, Discontinued Operations, Dispositions, and Intangible Assets

Discontinued Operations and Disposition of TBS

On December 4, 2009, the Company sold TBS to N. Harris Computer Corporation and its affiliate for approximately $2.3 million in cash plus up to $0.7 million in additional future payments subject to certain earn-out provisions as set forth in an Intellectual Property Purchase Agreement (the “IPPA”) and a Share Purchase Agreement (the “SPA” and, together with the IPPA, the “Sale Agreements”).

The Company’s Board of Directors approved the sale of the assets on December 2, 2009 as part of a strategy to reduce debt and focus on growth at the remaining business units and growth by acquisition.

For the three months ended March 31, 2009, the operations associated with this transaction and the loss on the sale have been classified as income from discontinued operations in the accompanying condensed consolidated statement of operations. Prior to reclassification, the operations associated with this transaction were classified into the Company’s Government accounting solutions segment.

Discontinued operations’ results were as follows:

	Three Months
	Ended
	March 31, 2009
Results of discontinued operations
Net revenues	$	1,056,500
Income from discontinued operations before income taxes	$	48,025
Provision for income taxes		-
Income from discontinued operations	$	48,025

Other Intangible Assets

On May 12, 2006, the Company entered into a Patent License Agreement (the “License Agreement”) with Catch Curve, Inc. (“Catch Curve”). Pursuant to the License Agreement, Catch Curve granted the Company a worldwide, non-exclusive, non-divisible, fully paid-up license to use certain patented technology in connection with any facsimile products or services made or sold by the Company or its subsidiaries. The Company made aggregate license payments of $600,000 over the thirty-two month period that began on May 12, 2006 and ended December 31, 2008. The License Agreement stipulates that $350,000 of the total license fee was attributable to sales of products and services prior to the date of the License Agreement. The remainder of $250,000 is attributable to sales of products and services subsequent to the date of the License Agreement. Accordingly, on May 12, 2006, the Company recorded an intangible asset in the amount of $250,000. The intangible asset is being amortized over 58 months, the estimated life of the patents covered by the License Agreement.

Other intangibles consist of the following as of March 31, 2010:

	Estimated Useful	Gross					Net
	Life	Carrying		Accumulated			Carrying
	(Years)	Amount		Amortization			Amount
Corporate:
License agreement	Five	$	250,000	$	(200,421	)	$	49,579

QSI:
Customer relationships	Ten	$	730,000	$	(121,667	)	$	608,333
Technology	Five		390,000		(130,000	)		260,000
Trade name	Five		210,000		(70,000	)		140,000
Covenant not to compete	Two		70,000		(58,333	)		11,667
		$	1,400,000	$	(380,000	)	$	1,020,000
GSI:
Customer relationships	Ten	$	2,200,000	$	(861,667	)	$	1,338,333
Technology	Five		490,000		(383,833	)		106,167
Trade names and marks	Ten		420,000		(164,500	)		255,500
		$	3,110,000	$	(1,410,000	)	$	1,700,000

		$	4,760,000	$	(1,990,421	)	$	2,769,579

Amortization of other intangible assets was $159,929 and $159,932, respectively, during the three months ended March 31, 2010 and 2009 for continuing operations, and $13,750 during the three months ended March 31, 2009 for discontinued operations. During the three months ended March 31, 2010, the Company did not acquire or dispose of any intangible assets.

Other intangible assets consist of the following as of December 31, 2009:

	Estimated Useful	Gross					Net
	Life	Carrying		Accumulated			Carrying
	(Years)	Amount		Amortization			Amount
Corporate:
License agreement	Five	$	250,000	$	(187,492	)	$	62,508

QSI:
Customer relationships	Ten	$	730,000	$	(103,417	)	$	626,583
Technology	Five		390,000		(110,500	)		279,500
Trade name	Five		210,000		(59,500	)		150,500
Covenant not to compete	Two		70,000		(49,583	)		20,417
		$	1,400,000	$	(323,000	)	$	1,077,000
GSI:
Customer relationships	Ten	$	2,200,000	$	(806,667	)	$	1,393,333
Technology	Five		490,000		(359,333	)		130,667
Trade names and marks	Ten		420,000		(154,000	)		266,000
		$	3,110,000	$	(1,320,000	)	$	1,790,000

		$	4,760,000	$	(1,830,492	)	$	2,929,508

6. Debt

Bank Lines of Credit

On February 6, 2008, the Company and The Private Bank of The Peninsula (“Bank”) entered into an agreement for an asset based line of credit (the “Line”). On March 5, 2009, the Company received a fully executed agreement between it and the Bank to amend the agreement for the Line (the "Amendment"). The effective date of the Amendment was February 24, 2009. Pursuant to the Amendment, the Bank renewed the Line and modified the terms to include an interest rate that was floating and was calculated at Wall Street Journal prime plus five percent (5%) on the cash borrowed provided that the minimum rate was eight and one half percent (8.5%) and minimum interest was $7,000 per three month period. Interest on outstanding borrowings was payable monthly. In addition, the Company was required to pay an amendment fee of $10,000 and, upon each advance, a fee equal to one quarter of one percent (0.25%) of the advance, and was subject to covenants as to minimum quarterly income and cash flow. The Bank’s maximum commitment amount for the Line, as amended, was $1.0 million. Advances were generally limited to 80% of eligible domestic accounts receivable. Outstanding advances under the Line were secured by a first lien position on all of the Company’s accounts receivable, contract rights, chattel paper, documents, and payment and by a second lien on its inventory, intellectual property, and equipment. The Line matured on February 24, 2010 and, pursuant to an extension granted by the Bank, the Company repaid all outstanding advances in February and March 2010.

During 2008, the Company paid a facility fee of $15,000 to the Bank in connection with the Line and paid a finder’s fee in the amount of $50,000 to Dragonfly Capital Partners LLC (“Dragonfly”). In addition, the Company issued the Bank and Dragonfly warrants to purchase shares of its common stock (see Note 7). The Company recorded the finders’ fees and warrants as debt issuance costs in the accompanying condensed consolidated balance sheet at December 31, 2009 and amortized $5,417 of the cash fees to interest expense during the three months ended March 31, 2009. Effective January 1, 2009, the Company issued an additional 235,000 warrants to the Bank (see Note 7) and the Company reclassified the Bank’s warrants from additional paid-in capital to a derivative liability in connection with the adoption of an accounting pronouncement and the reset features of the Bank’s warrant agreement. The warrants were valued using the Black-Scholes option pricing model at $4,310.

Effective September 30, 2006, VillageEDOCS obtained a $500,000 revolving line of credit (“RLOC”) with a financial institution. The RLOC was guaranteed by a stockholder of the Company. Interest on outstanding borrowings was payable monthly at an annual rate of interest equal to LIBOR plus 2%. On May 8, 2009, the Company retired the RLOC using the proceeds of the Williams May 2009 Note (see below). The terms of the note payable financing were deemed more favorable to the Company than the renewal terms offered by the financial institution.

QSI had an unsecured line of credit agreement with a financial institution for borrowings up to the maximum of $100,000 with no maturity date (“QSI RLOC”). Borrowings bore interest at the prime rate, plus 2.775%. On August 3, 2009, as stipulated by the QSI acquisition agreements, the Company repaid the outstanding borrowings of $100,000 in full and closed the line of credit using the proceeds of the Williams July 2009 Note (see below).

Vojin Hadzi-Pavlovic and Gloria Hadzi-Pavlovic

Effective August 1, 2008 and in connection with the acquisition of Questys, the Company issued a secured promissory note to the Pavlovics (the “Pavlovic Note”) in the amount of $900,000. The Pavlovics are a related party as a result of the common stock issued to them by the Company in connection with the acquisition of Questys. The Pavlovic Note is non-interest bearing and may be prepaid in whole or in part at any time without penalty and is due on August 1, 2011. Principal payments are due in three equal annual installments of $300,000 each on August 1, 2009, August 1, 2010, and August 1, 2011. On August 1, 2009, the Company paid the first installment of $300,000 using the proceeds of the Williams July 2009 Note (see below). The Pavlovic Note is secured by certain assets of Questys as defined in a Security Agreement dated as of August 1, 2008.

In connection with the issuance of the Pavlovic Note, the Company recorded a debt discount of $126,871 as a result of imputed interest. The Company is amortizing the discount using the effective interest method through August 1, 2011. During each of the three months ended March 31, 2010 and 2009, $10,573 of interest expense was recognized in each of the respective periods in connection with the amortization of debt discount related to this note.

Prior to August 1, 2008 (effective date of acquisition of Questys), the Pavlovics made aggregate advances to Questys in the amount of $115,000, which were assumed in the acquisition (the “Pavlovic Shareholder Debt”). The Pavlovic Shareholder Debt is non-interest bearing and the Company and the Pavlovics have agreed to the repayment of the outstanding balance as follows: (i) $35,000 on or before August 4, 2009, (ii) $40,000 on or before August 4, 2010, and (iii) $40,000 on or before the August 4, 2011. On August 3, 2009, the Company paid the first installment of $35,000 using the proceeds of the Williams July 2009 Note (see below).

In connection with the acquisition of the Pavlovic Shareholder Debt, the Company recorded a debt discount of $16,546 as a result of imputed interest. The Company is amortizing the discount using the effective interest method through August 1, 2011. During each of the three months ended March 31, 2010 and 2009, $1,378 of interest expense was recognized in each of the respective periods in connection with the amortization of debt discount related to this note.

C. Alan and Joan P. Williams

On May 6, 2009 the Company arranged for an unsecured promissory note financing with C. Alan Williams and Joan P. Williams in the amount of $430,000 (the “Williams May 2009 Note”). The Williams May 2009 Note bore a per annum interest rate equal to the most favorable rate paid by the Williams plus two percent (2%). The Company’s interest rate in effect through December 15, 2009 (date of repayment) with respect to the Williams May 2009 Note was 4.87%. The interest rate was subject to adjustment once per month. The term of the Williams May 2009 Note was thirty-six (36) months, with monthly installments paid by the Company consisting of principal and interest on the first of each month, beginning on August 1, 2009. Payment obligations under the Williams May 2009 Note were subordinate in certain respects to the rights of the Private Bank of the Peninsula.

The Company used the proceeds from the Williams May 2009 Note, to retire the RLOC on May 8, 2009 (see above). The terms of the Williams May 2009 Note were deemed more favorable to the Company than the renewal terms offered by the financial institution.

On July 30, 2009 the Company arranged for an unsecured promissory note financing with C. Alan Williams and Joan P. Williams in the amount of $435,000 (the “Williams July 2009 Note”). The Williams July 2009 Note bore interest at ten percent (10%) per annum. The term of the Williams July 2009 Note was twelve (12) months, with monthly installments paid by the Company at the end of each month consisting of principal and interest, beginning on July 31, 2009. Payment obligations under the Williams July 2009 Note were subordinate in certain respects to the rights of the Private Bank of the Peninsula.

The Company used the proceeds from the Williams July 2009 Note, to retire a line of credit with a financial institution on August 4, 2009 and to make installment payments to Vojin and Gloria Hadzi-Pavlovic pursuant to the agreement for the Company’s purchase of QSI dated as of August 1, 2008.

On February 17, 2004, the Company borrowed $1,700,000 from C. Alan and Joan P. Williams and issued a convertible promissory note, which bore interest at ten percent (10%) per annum (the “Williams Convertible Note”). During 2005, all but $65,000 of the principal amount due pursuant to this note was converted into shares of the Company's common stock. In October 2009, the Williams agreed to extend the due date of the note to October 31, 2011. The note and accrued interest were due at the earlier of one of three events: 1) October 31, 2011; 2) acquisition of a controlling interest in the Company by a third party; or 3) the Company achieved equity financing of a minimum of $3,000,000. Effective April 14, 2005, pursuant to an amendment to the note, the conversion price was fixed at $0.14 per share. As an incentive for Mr. and Mrs. Williams to provide the loan, the Company issued them a warrant to purchase 5,000,000 shares of the Company's restricted common stock at $0.10 per share exercisable until February 17, 2009. Effective February 17, 2009, the Company and the Williams agreed to extend the expiration date of the warrant to February 16, 2012 in exchange for the Williams’ agreement to extend their guaranty of the RLOC through December 31, 2010. The extension of the warrants did not have a material effect on the condensed consolidated financial statements.

During the three months ended March 31, 2009, $1,625 of interest expense was recognized in connection with these notes.

On December 15, 2009, the Company paid $927,917 to C. Alan and Joan P. Williams in full satisfaction of all outstanding principal and interest owed to the Williams pursuant to the Williams Convertible Note, the Williams May 2009 Note, and the Williams July 2009 Note.

Interest Expense

Interest expense recognized on all capital lease obligations, lines of credit and notes payable was $19,410 and $41,065, respectively, during the three months ended March 31, 2010 and 2009 for continuing operations, and $4,730 during the three months ended March 31, 2009 for discontinued operations.

Interest expense noted above included non-cash charges (related to amortization of debt discount and debt issuance costs) of $11,951 and $29,834, respectively, during the 2010 and 2009 quarters.

7. Stockholders’ Equity

Common and Preferred Stock

The Company did not issue any shares of its common or preferred stock during the three months ended March 31, 2010.

Stock Options

During the three months ended March 31, 2010, the Company granted to its employees options to purchase 1,075,000 shares of its common stock under the 2002 Plan at a weighted average exercise price of $0.01 per share. All options were issued at or above fair value on the dates of grant and vest on various dates from the dates of grant through February 2017. During the three months ended March 31, 2010, options to purchase 1,797,000 shares were forfeited due to their expiration or cancellation.

Warrants

From time to time, the Company issues warrants pursuant to various consulting and third party agreements.

In February 2010, a warrant issued to a leasing company to purchase 16,000 shares of the Company’s common stock at $0.18 per share expired unexercised.

In December 2008, and in connection with a retainer agreement dated September 15, 2007 that was cancelled by the Company effective February 28, 2009, the Company issued a warrant to purchase 1,304,074 shares of its common stock at $0.023 per share (fair value on the measurement date) to a consultant in consideration for public relations services. The warrant vested immediately and is exercisable over a five year period from date of grant. The warrant was valued using the Black-Scholes option pricing model, was valued at $26,001, was recorded as prepaid consulting expense, and was amortized to general and administrative expense in the accompanying unaudited condensed consolidated statement of operations over the three month service period that began on December 1, 2008. During the three months ended March 31, 2010 and 2009, the Company recorded $0 and $17,334, respectively, of consulting expense in connection with this warrant.

In consideration for the Line, (see Note 6) the Company issued the Bank an immediately exercisable warrant to purchase 75,000 shares of its restricted common stock at an exercise price of $0.062 per share through February 6, 2018. The warrants were valued using the Black-Scholes option pricing model at $4,500 and were recorded as debt issuance cost. The Company amortized such cost over the one-year life of the related debt instrument. During the three months ended March 31, 2010 and 2009, the Company recorded $0 and $375, respectively, of interest expense in the accompanying unaudited condensed consolidated statements of operations. Effective January 1, 2009, the Company reclassified the fair value of these warrants, which have exercise price reset features, from equity to liability status as if these warrants were treated as a derivative liability since their date of issue in February 2008 and issued an additional 390,000 warrants to the Bank pursuant to the terms of the warrant agreement valued at $5,860 using the Black-Scholes option pricing model (see the heading “Derivative Liability” under Note 4), which was expensed during the three months ended March 31, 2009.

As a finder’s fee for the Line (see Note 6), the Company issued Dragonfly an immediately exercisable warrant to purchase 2,419,355 shares of its restricted common stock at an exercise price of $0.062 per share through February 6, 2013. The warrants were valued using the Black-Scholes option pricing model at $145,161 and were recorded as debt issuance cost. The Company amortized such cost over the one-year life of the related debt instrument. During the three months ended March 31, 2010 and 2009, the Company recorded $0 and $12,091, respectively, of interest expense in the accompanying unaudited condensed consolidated statements of operations.

8.	Loss Per Share

The following table reconciles basic earnings per share and diluted earnings per share and the related weighted average number of shares outstanding for the three months ended March 31, 2009:

	Numerator			Denominator		Per Share
	(Loss)			(Shares)		Amount
Basic earnings per share:
Net loss	$	(420,743	)		-	$	-
Loss available to commons shareholders		(420,743	)		180,270,913		-

Effect of dilutive securities
Options and warrants		-			601,472		-
Convertible note payable to related party		-			1,285,679		-
Convertible preferred stock		-			33,500,000		-

Diluted earnings per share:
Loss available to common shareholders plus assumed exercises	$	(420,743	)		215,658,064	$	-

9.	Commitments and Contingencies

Leases

The Company leases certain property and equipment under operating lease agreements (including three related party leases – see Note 10) which expire on various dates through 2013 and provide for monthly lease payments ranging from $108 to $13,747.

The Company also leases equipment under capital lease agreements which expire in February 2014 and provides for monthly lease payments ranging from $675 to $776.

Rent expense for the three months ended March 31, 2010 and 2009 was $71,378 (including $38,888 of related party rent) and $110,098 (including $40,977 of related party rent), respectively, for continuing operations and $0, and $22,200 of related party rent, respectively, for discontinued operations.

Legal Proceedings and Claim

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

In connection with the acquisition of GSI the Company is entitled to certain rights of indemnification from GoSolutions Equity, LLC, which is a former shareholder of GSI that became a shareholder of the Company as a result of our acquisition of GSI. The Company made a claim of indemnification from this entity in connection with the bankruptcy of one of GSI’s significant customers – Vartec Telecom, Inc. – and the facts and circumstances relating to the procurement and maintenance of the Primerica Life Insurance account and related Citigroup affiliates. GoSolutions Equity, LLC has indicated that it does not believe that we have a valid basis for making such indemnification claims.

The Company has engaged in limited discussions with GoSolutions Equity, LLC as it relates to the indemnification claims notice and their response to such claims notice. However, the Company is unable to advise whether it will be successful in the indemnification claims against GoSolutions Equity, LLC. Pursuant to the agreement with GSI, if the Company is successful, GoSolutions Equity, LLC would only be required to return up to approximately 4.4 million of our shares issued to that entity to satisfy such indemnification claims. GoSolutions Equity, LLC is not required to contribute cash to satisfy any indemnification claims.

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

Consulting and Employee Agreements

The Company has entered into a variety of consulting and employee agreements for services to be provided to the Company in the ordinary course of business. These agreements call for minimum salary levels and/or option grants and/or common share issuances and various payments upon performance of services and/or termination of the agreements (except for cause).

Indemnities and Guarantees

During the normal course of business, the Company has made certain indemnities and guarantees under which it may be required to make payments in relation to certain transactions. The Company indemnifies its directors, officers, employees and agents to the maximum extent permitted under the laws of the States of Delaware, California, and Florida. These indemnities include certain agreements with the Company’s officers under which the Company may be required to indemnify such person for liabilities arising out of their employment relationship. In connection with its facility leases, the Company has indemnified its lessors for certain claims arising from the use of the facilities. In connection with the Company's acquisition of both QSI and GSI, the parties have agreed to indemnify each other from claims relating to the acquisition agreement. The duration of these indemnities and guarantees varies and, in certain cases, is indefinite. The majority of these indemnities and guarantees do not provide for any limitation of the maximum potential future payments the Company could be obligated to make. Historically, the Company has not been obligated to make significant payments for these obligations and no liabilities have been recorded for these indemnities and guarantees in the accompanying unaudited condensed consolidated balance sheets, respectively.

10.	Related Party Transactions

The Company has borrowed significantly from related parties, issued a significant number of options and warrants to related parties, and may in the future issue a significant number of shares of its common stock to related parties upon conversion of convertible promissory notes payable as described more fully in Note 6.

GSI leases the St. Petersburg office space pursuant to a noncancelable operating lease agreement expiring on April 30, 2011 at a cost of $13,841, $14,485, and $15,164 per month for each of the twelve month periods ended April, 2009, 2010, and 2011, respectively. The building in which the office space is located is owned by an entity in which a member of GoSolutions Equity, LLC (a related party) owns an interest.

11.	Segment Reporting

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

(a) Electronic document delivery services,

(b) Electronic content management solutions,

(d) Corporate.

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

	Three Months			Three Months
	ended / As of			ended
	March 31,			March 31,
	2010			2009

Net revenue from external customers:

Electronic document delivery services	$	589,287		$	669,417
Electronic content management solutions		585,391			527,668
Integrated communications		984,435			1,604,364
Corporate		-			-
Total net revenue from
external customers:	$	2,159,113		$	2,801,449

Operating income (loss) from continuing
operations:

Electronic document delivery services	$	145,538		$	114,661
Electronic content management solutions		(113,053	)		(239,840	)
Integrated communications		(30,567	)		257,326
Corporate		(436,069	)		(574,535	)
Total operating loss from continuing operations:	$	(434,151	)	$	(442,388	)

Depreciation and amortization from
continuing operations:

Electronic document delivery services	$	16,109		$	21,663
Electronic content management solutions		64,642			67,016
Integrated communications		103,279			118,487
Corporate		12,930			12,932
Total depreciation and amortization:	$	196,960		$	220,098

Interest expense, net of interest income:

Electronic document delivery services	$	3,858		$	3,177
Electronic content management solutions		4,981			2,927
Integrated communications		-			-
Corporate		10,571			34,961
Total interest expense, net of interest income:	$	19,410		$	41,065
continued…

	Three Months			Three Months
	ended / As of			ended
	March 31,			March 31,
	2010			2009
Income (loss) from continuing operations:

Electronic document delivery services	$	140,812		$	106,944
Electronic content management solutions		(117,816	)		(232,603	)
Integrated communications		(27,169	)		255,859
Corporate		(446,640	)		(598,968	)
Total loss from continuing operations:	$	(450,813	)	$	(468,768	)

Total assets:

Electronic document delivery services	$	538,366
Electronic content management solutions		2,211,807
Integrated communications		5,585,973
Corporate		205,290
Total assets:	$	8,541,436

Capital expenditures:

Electronic document delivery services	$	27,475		$	19,668
Electronic content management solutions		-			3,674
Integrated communications		32,160			4,394
Discontinued operations		-			1,352
Corporate		-			-
Total capital expenditures:	$	59,635		$	29,088

12. Subsequent Events

On May 20, 2010, the Company issued a convertible promissory note to C. Alan Williams in the amount of $200,000. The note bears interest at ten percent (10%) per annum from April 6, 2010. The principal and interest accrued thereon are due at the earlier of one of three events: 1) October 31, 2011; 2) acquisition of a controlling interest in the Company by a third party; or 3) the Company obtains equity financing of a minimum of $5,000,000.

Effective May 24, 2010, the Company and Silicon Valley Bank (“SVB”) entered into a two-year agreement for a revolving credit facility (the “SVB Line”). The terms of the SVB Line include an interest rate that is floating and is calculated at Wall Street Journal prime plus four and one quarter percent (4.25%) on the cash borrowed provided that the minimum rate is eight and one quarter percent (8.25%) and minimum interest is $4,000 per three month period. Interest on outstanding borrowings is payable monthly. In addition, the Company is required to pay a loan fee of four payments of $12,500 (initial payment due at closing and then each six month anniversary thereafter), a monthly collateral handling fee of $1,000, and is subject to covenants as to minimum rolling three-month EBITDA (as defined in the SVB Line), and minimum liquidity. SVB’s maximum commitment amount for the SVB Line is $1.0 million. Advances are generally limited to the Company’s prior month’s credit card collections plus an advance rate of 80% of eligible domestic accounts receivable. Outstanding advances under the SVB Line are secured by a first lien position on all of the Company’s assets other than certain permitted liens as set forth in the SVB Line.

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

IMPORTANT NOTIFICATIONS

The Company's Internet website address is www.villageedocs.com. The Company's annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments thereto, are available free of charge on the Company's website as soon as reasonably practical after such reports are electronically filed with, or furnished to, the U.S. Securities and Exchange Commission.

INTRODUCTION

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

Business Overview

Critical Accounting Policies and Estimates

Results of Operations

Liquidity and Capital Resources

Cautionary Information About Forward-Looking Statements, and

Recent Accounting Standards and Pronouncements

MD&A is provided as a supplement to, and should be read in conjunction with, the unaudited condensed consolidated balance sheet as of March 31, 2010, and the unaudited condensed consolidated statements of operations for the three months ended March 31, 2010 and 2009, the unaudited condensed consolidated statements of cash flows for the three months ended March 31, 2010 and 2009, and the related notes thereto as well as the audited consolidated financial statements of the Company for the year ended December 31, 2009 included in the Company’s Annual Report on Form 10-K filed with the SEC on April 15, 2010.

In MD&A, we use "we," "our," "us," "VillageEDOCS," and "the Company" to refer to VillageEDOCS, Inc. and its wholly-owned subsidiaries, unless the context requires otherwise. Amounts and percents in tables may not total due to rounding. 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 MD&A and elsewhere in this document sometimes have affected, and in the future could affect our actual results, and could cause our actual results for the remainder of 2010 and beyond to differ materially from those expressed in any forward-looking statements made by, or on behalf of, the Company.

Our Internet web site address is www.villageedocs.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports of Form 8-K, and all amendments thereto, are available free of charge on our website as soon as reasonably practical after such reports are electronically filed with, or furnished to, the U.S. Securities and Exchange Commission. The information on our web site is not incorporated by reference in this quarterly report on Form 10-Q.

As reported in the Report of Independent Registered Public Accounting Firm on our December 31, 2009 consolidated financial statements, we have suffered recurring losses from operations that raise substantial doubt about our ability to continue as a going concern.

Effective December 4, 2009, we sold Tailored Business Systems (“TBS”). Our Board of Directors approved the disposal of the assets and liabilities on December 2, 2009 as part of a strategy to reduce debt and focus on growth at the remaining business units and growth by acquisition. See Note 5 to our unaudited condensed consolidated financial statements contained elsewhere in this report for additional information regarding the accounting for this segment as discontinued operations. Please refer to the discussion below under the caption entitled Liquidity and Capital Resources.

Our business and results of operations are affected by a wide variety of factors, as we discussed under the caption “Certain Factors That May Affect Future Results” in Item 6. Management's Discussion and Analysis or Plan of Operations of our Annual Report on Form 10-K filed with the SEC on April 15, 2010 and elsewhere in this report, which could materially and adversely affect us and our actual results. As a result of these factors, we may experience material fluctuations in future operating results on a quarterly or annual basis, which could materially and adversely affect our business, financial condition, operating results and stock price.

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

BUSINESS OVERVIEW

General

We have been in business since 1995. From inception until September 7, 2007, we were a California corporation. As the result of a merger into our wholly-owned Delaware subsidiary, we became a Delaware corporation.

We conduct our business through three wholly-owned subsidiaries. QSI, our most recent acquisition, provides electronic content management and workflow software and services. GSI provides enhanced voice and data communications services. MVI operates our Internet based document delivery services. From February 2004 through December 2009, TBS operated our government accounting products and services business.

We generate revenue, operating income, and cash flows from:

subscription agreements for enhanced voice, data, and conferencing services;

usage charges for delivery, management, and other services involving electronic documents;

recurring fixed monthly service fees for access to voice, data, or application services;

fees for professional service;

wholesale enhanced voicemail services;

the sale of licenses for proprietary software and third party software;

fees for maintenance and support agreements;

installation services;

sales of third party computer hardware; and

fees for training.

Our Objective

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

communicate with an ever-expanding number of trading partners, customers, and enterprises;

increase the control, management, speed, accuracy and security of the information delivered;

manage an increasing set of methods used to communicate (print/mail, email, web, fax, XML, and wireless);

cost-effectively implement a solution that will allow the enterprise to endure the slow acceptance of a common set of delivery methods;

meet the communications challenges with a service that is more robust than available commercial grade proprietary technologies; and

mitigate the negative impact of delivery methods on workflow, business process and security requirements.

Our target markets include Financial Services, Healthcare, Manufacturing, and Local Government, and we serve over 600 active clients with approximately 23,000 users.

While we do have some sources of non-recurring revenue, such as hardware sales and third party software, we focus on developing and maintaining sources of monthly recurring revenue, such as providing subscribers with solutions for their critical day to day business processes for the movement, processing, and storage of business information.

Areas of Focus

Growth Strategy

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

Our ultimate vision is to become a business process management/workflow service that provides competency and functionality in the following areas:

Web Content Management;

Digital Asset Management;

Email Management;

Records Management;

Documentation Management;

Information Indexing;

Categorization/Taxonomy;

Recognition;

Document Imaging;

Form Processing;

Scanning;

Collaboration;

Repositories;

Storage;

Long Term Archival;

Content Integration;

Search and Retrieval;

Content Syndication;

Localization and Personalization; and

Publication (paper or electronic).

We intend to continue our focus on obtaining growth from sales of higher margin products and services at Questys, GSI, and MVI and by acquiring companies that consistently generate net income and positive cash flows. We believe that this strategy offers the best opportunity for our operations to generate positive operating income and cash flows from operations and to achieve net income.

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

Capital Formation

During the remainder of 2010, we are actively seeking additional financing by issuing equity or obtaining a combination of equity and debt financing from new shareholders and/or lenders. Although we believe we will generate adequate cash to sustain operations at current levels, we will require additional funding should we wish to complete acquisitions or to accelerate revenue growth from existing lines of business. In addition, should we be required to repay certain of our debt instruments prior to maturity, we will require additional funding. We continue to caution that there can be no assurance that funding will be available on acceptable terms, if at all, or that any such funds we raise would enable us to achieve or maintain profitable operations.

In spite of the impact of new laws, regulations, and accounting pronouncements that have significantly increased our cost of operating as a public company, we intend to contain general and administrative costs where possible. However, we expect to incur significant costs during 2010 related to compliance with Section 404 of the Sarbanes-Oxley Act of 2002 if we are not able to effect the deregistration process that was approved by a majority of our stockholders in the first quarter of 2010. These costs would include new infrastructure required to remediate certain material weaknesses we have identified in our internal controls over financial reporting. Should additional growth capital become available during 2010, we intend to direct the capital toward increasing sales and marketing while holding down costs for non-essential general and administrative as well as product and technology expenses to the extent possible.

Organizational Enhancements

Our goal is to drive efficiency and effectiveness throughout our group of companies. We are working to align each business unit around shared goals and performance targets. In addition, we are striving to streamline corporate overhead and maximize cross-selling activities. We are devoting strategic product management and technical resources both to strengthening the integration of our existing products and services and to developing new products and services that will allow us to offer our clients powerful new solutions comprised of the best that each of our business units has to offer.

Challenges and Risks

Looking forward, management has identified certain challenges and risks that demand our attention. Of these, three key challenges and risks are discussed below.

Weakness in the financial markets and the economy in general

Weakness in the financial markets and in the economy as a whole has adversely affected and may continue to adversely affect segments of our customers, which has resulted and may continue to result in decreased usage levels, customer acquisitions and customer retention rates and, in turn, could lead to a decrease in our revenues or rate of revenue growth. Certain segments of our customers - those whose business activity is tied to the health of the credit markets and the broader economy, such as banks, brokerage firms and those in the real estate industry - have been and may continue to be adversely affected by the current turmoil in the credit markets and weakness in the general economy. To the extent our customers’ businesses have been adversely affected by these economic factors, we have and may continue to experience a decrease in usage-based revenue and sales of our software products. In addition, continued weakness in the economy has adversely affected and may continue to adversely affect our customer retention rates and the number of our new customer acquisitions. These factors have adversely impacted, and may continue to adversely impact, our revenues and our ability to achieve cash flow growth during 2010. However, we believe increased value to our shareholders can still be achieved through a combination of a focus on innovation to support productivity and disciplined expense control, while we continue to invest prudently in sales and marketing and product development to support long-term profitable growth.

Increased Competition and Capabilities in the Marketplace

We face strong competition from well-established national and global companies as well as from relatively new companies. We must continue to selectively expand into other profitable segments of our markets and offer powerful product and service offerings in order to increase our share of the marketplace. The introduction of new technologies could render our existing products and services obsolete or unmarketable or require us to invest in research and development at much higher rates with no assurance of developing competitive products. Changes in technologies or customer requirements also may cause the development cycle for our new products and services to be lengthy and result in significant development costs. Competitive pressures may impair our ability to achieve profitability.

Capital Resources

We believe that current and future available capital resources, including the net proceeds from sale of our products and services, will be sufficient to fund our operations at current levels for the foreseeable future, but will be insufficient to allow us to repay our debt in full. The exact amount of funds that we will require will depend upon many factors, and it is likely that we will require additional financing. Such sources of financing could include capital infusions, additional equity financing, or debt offerings. In addition, since our revenues and cash flows have historically been subject to seasonality, we believe that it is important to secure greater access to short term borrowing facilities, such as operating lines of credit. There can be no assurance that additional funding or borrowing facilities will be available to us on acceptable terms, if at all. There can be no assurance that additional funds, if raised, would enable us to achieve or maintain profitable operations. The inability to secure new sources of working capital during the remainder of 2010 or 2011 could have a material adverse effect on our business, financial condition and results of operations.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

In preparing our consolidated financial statements, we make estimates, assumptions and judgments that can have a significant effect on our revenues, income/loss from operations, and net income/net loss, as well as on the value of certain assets on our consolidated balance sheet.

Effective January 1, 2009, we adopted the provisions of an accounting pronouncement which applies to any freestanding financial instruments or embedded features that have the characteristics of a derivative and to any freestanding financial instruments that are potentially settled in an entity’s own common stock. As a result of adopting this pronouncement, certain of our issued and outstanding common stock purchase warrants previously treated as equity pursuant to the derivative treatment exemption were no longer afforded equity treatment as more fully described in Note 4 to the accompanying unaudited condensed consolidated financial statements.

In September 2006, the FASB issued a pronouncement which defines fair value, establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements. This pronouncement does not require any new fair value measurements, but provides guidance on how to measure fair value by providing a fair value hierarchy used to classify the source of the information. The book values of cash, accounts receivable, accounts payable, accrued expenses, capital lease obligations, and debt instruments approximate their respective fair values due to the short-term nature of these instruments.

There were no other significant changes in critical accounting policies or estimates from those at December 31, 2009.

RESULTS OF OPERATIONS

The following discussion of our performance is organized by reportable operating segments, which is consistent with the way we manage our business. Effective December 4, 2009, we sold TBS and reclassified the revenues and expenses of TBS to discontinued operations for 2009.

Three Months Ended March 31, 2010 Compared to Three Months Ended March 31, 2009

Net Revenue from External Customers

Net revenue from external customers for the three months ended March 31, 2010 was $2,159,113, a 23% decrease compared to net revenue of $2,801,449 for the three months ended March 31, 2009.

During the three months ended March 31, 2010, GSI, QSI, and MVI generated 46%, 27%, and 27% of our consolidated net revenue, respectively. During the 2009 quarter, GSI, QSI, and MVI generated 57%, 19%, and 24% of our consolidated net revenue, respectively.

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

	Three Months Ended		Three Months Ended		Variance
	March 31, 2010		March 31, 2009		Amount			Percent

Net revenue from external customers:

Electronic document delivery services (MVI)	$	589,287	$	669,417	$	(80,130	)		-12	%
Electronic content management (QSI)		585,391		527,668		57,723			11	%
Integrated communications (GSI)		984,435		1,604,364		(619,929	)		-39	%
Corporate		-		-		-			*
Total net revenue from external customers	$	2,159,113	$	2,801,449	$	(642,336	)		-23	%

* calculation is not meaningful

Revenue decreased 39% at GSI due to decreases in user subscription fees that were partially offset by improvements in text messaging service revenue and professional services revenue.

Revenue decreased 12% at MVI due to a decrease in outbound revenue as a result of customer attrition and reduced usage volumes.

Revenue increased 11% at QSI due to increased software sales, professional services, and support fees compared to the prior year quarter.

Cost of Sales

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

	Three Months Ended		Three Months Ended		Variance
	March 31, 2010		March 31, 2009		Amount			Percent

Cost of sales:

Electronic document delivery services (MVI)	$	219,131	$	287,054	$	(67,923	)		-24	%
Electronic content management (QSI)		156,326		240,830		(84,504	)		-35	%
Integrated communications (GSI)		269,993		285,934		(15,941	)		-6	%
Corporate		-		-		-			*
Total cost of sales:	$	645,450	$	813,818	$	(168,368	)		-21	%

* calculation is not meaningful

Total cost of sales represented 30% and 29% of net sales during the 2010 and 2009 quarters, respectively.

Cost of sales for MVI for the 2010 quarter represented 37% of MVI’s net sales as compared with 43% in the 2009 quarter as a result of reduced telecommunications expenses.

Cost of sales for GSI for the 2010 quarter represented 27% of GSI’s net sales as compared with 18% in the 2009 quarter because fixed cost of sales were not subject to reduction as revenue declined.

Cost of sales for QSI for the 2010 quarter represented 27% of QSI’s net sales as compared with 46% in the 2009 quarter because fixed cost of sales did not increase materially as revenue improved.

On a consolidated basis, cost of sales in the 2010 quarter included $8,480 in compensation expense related to the vesting of stock options, compared to $6,623 in the 2009 quarter.

Gross Profit

Gross profit for the three months ended March 31, 2010 decreased 24% to $1,513,663 as compared to $1,987,631 for the 2009 quarter. The decrease in the 2010 quarter of $473,968 resulted from decreases of $12,207 (-3%) and $603,988 (-46%) from MVI and GSI, respectively, which were partially offset by an increase of $142,227 (+50%) from QSI. Gross profit margin for the 2010 and 2009 quarters was 70% and 71%, respectively.

Operating Expenses

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

	Three Months Ended		Three Months Ended		Variance
	March 31, 2010		March 31, 2009		Amount			Percent

Operating expenses

Electronic document delivery services (MVI)	$	224,618	$	267,702	$	(43,084	)		-16	%
Electronic content management (QSI)		542,118		526,678		15,440			3	%
Integrated communications (GSI)		745,009		1,061,104		(316,095	)		-30	%
Corporate		436,069		574,535		(138,466	)		-24	%
Total operating expenses:	$	1,947,814	$	2,430,019	$	(482,205	)		-20	%

During the three months ended March 31, 2010, the operating expenses of Corporate decreased 24% as a result of decreased compensation, accounting fees, insurance, payroll tax, and consulting expenses. These decreases were partially offset by increases in filing fees, travel, legal fees, and director fees.

During the three months ended March 31, 2010, MVI’s operating expenses decreased 16% compared to the 2009 quarter. Product and technology development decreased by $54,873 (-56%) due to staff changes. Sales and marketing increased by $13,577 (+29%) as a result of increased marketing staff. General and administrative increased by $3,766 (+4%) due to facilities and insurance expenses. Depreciation and amortization expense decreased by $5,554 (-26%).

During the three months ended March 31, 2010, GSI’s operating expenses decreased 30% compared to the 2009 quarter. Product and technology development decreased by $8,319 (-4%) due to staff changes. Sales and marketing decreased by $178,230 (-44%) due to lower bonus and reseller commission payments as offset by increased travel, trade show expense. General and administrative decreased by $114,338 (-34%) due to decreased staffing and lower bank fees resulting from lower transaction volume and reduced processing fees. Depreciation and amortization expenses decreased by $15,208 (-13%).

During the three months ended March 31, 2010, QSI’s operating expenses increased 3% compared to the 2009 quarter. Product and technology development increased by $33,397 (+20%) due to higher staffing costs. Sales and marketing increased by $36,009 (+39%) on increased staffing and marketing consultant expenses. General and administrative decreased by $51,592 (-26%) on decreased rent, telephone and insurance expenses which were partially offset by increased vacation pay and bad debt expense. Depreciation and amortization expenses decreased by $2,374 (-4%).

On a consolidated basis, operating expenses in the 2010 quarter included $31,217 in compensation expense related to the vesting of stock options, compared to $56,617 in the 2009 quarter.

Operating Income (Loss):

As a result of the foregoing, the Company reported an operating loss for the three months ended March 31, 2010 of $434,151, compared to an operating loss of $442,388 for the three months ended March 31, 2009.

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

	Three Months Ended			Three Months Ended			Variance
	March 31, 2010			March 31, 2009			Amount			Percent

Operating income (loss):

Electronic document delivery services (MVI)	$	145,538		$	114,661		$	30,877			27	%
Electronic content management (QSI)		(113,053	)		(239,840	)		126,787			53	%
Integrated communications (GSI)		(30,567	)		257,326			(287,893	)		-112	%
Corporate		(436,069	)		(574,535	)		138,466			24	%
Total operating loss, net	$	(434,151	)	$	(442,388	)	$	8,237			2	%

* calculation is not meaningful

MVI reported higher operating income compared to the prior year quarter and GSI swung from an operating income to an operating loss. These changes were partially offset by lower operating losses from QSI and Corporate.

Interest Expense, net

Interest expense, net for the three months ended March 31, 2010 decreased by $21,655 (-53%) to $19,410 from the $41,065 reported in the 2009 quarter as a result of a reduction in the amortization of debt issue costs and lower interest charges incurred in connection with our borrowings due to repaying borrowings pursuant to our line of credit.

Other Income, net

Other income, net for the three months ended March 31, 2010 was $2,748 compared to other income, net of $15,585 reported in the 2009 quarter. In each of the quarters, we recorded other income and expense related to settlement of liabilities related to prior years.

Net Income (Loss)

As a result of the foregoing, net loss for the three months ended March 31, 2010 was $450,813, compared to a net loss of $420,743, for the 2009 quarter.

Basic and diluted loss per share for the three months ended March 31, 2010 was $0.00 and $0.00 per share, respectively, based on weighted average shares of 226,546,613.

Basic and diluted net income per share for the three months ended March 31, 2009 was $0.00 and $0.00 per share, respectively, based on weighted average shares of 180,270,913 and 215,658,064, respectively.

The following is a comparison of the components of consolidated net income (loss):

	Three Months Ended			Three Months Ended			Variance
	March 31, 2010			March 31, 2009			Amount			Percent

Net income (loss):

Electronic document delivery services (MVI)	$	140,812		$	106,944		$	33,868			32	%
Electronic content management (QSI)		(117,816	)		(232,603	)		114,787			49	%
Integrated communications (GSI)		(27,169	)		255,859			(283,028	)		-111	%
Corporate		(446,640	)		(598,968	)		152,328			25	%
Discontinued operations		-			48,025			(48,025	)		-100	%
Total net loss	$	(450,813	)	$	(420,743	)	$	(30,070	)		-7	%

* calculation is not meaningful

LIQUIDITY AND CAPITAL RESOURCES

During the three months ended March 31, 2010 our net cash position decreased by $925,281 to $382,553. Our operating, investing and financing activities used net cash of $781,223, $9,435 and $134,623, respectively.

On May 20, 2010, we issued a convertible promissory note to C. Alan Williams in the amount of $200,000. The note bears interest at ten percent (10%) per annum from April 6, 2010. The principal and interest accrued thereon are due at the earlier of one of three events: 1) October 31, 2011; 2) acquisition of a controlling interest in us by a third party; or 3) we obtain equity financing of a minimum of $5,000,000.

Effective May 24, 2010, we and Silicon Valley Bank (“SVB”) entered into a two-year agreement for a revolving credit facility (the “SVB Line”). The terms of the SVB Line include an interest rate that is floating and is calculated at Wall Street Journal prime plus four and one quarter percent (4.25%) on the cash borrowed provided that the minimum rate is eight and one quarter percent (8.25%) and minimum interest is $4,000 per three month period. Interest on outstanding borrowings is payable monthly. In addition, we are required to pay a loan fee of four payments of $12,500 (initial payment due at closing and then each six month anniversary thereafter), a monthly collateral handling fee of $1,000, and are subject to covenants as to minimum rolling three-month EBITDA (as defined in the SVB Line), and minimum liquidity. SVB’s maximum commitment amount for the SVB Line is $1.0 million. Advances are generally limited to our prior month’s credit card collections plus an advance rate of 80% of eligible domestic accounts receivable. Outstanding advances under the SVB Line are secured by a first lien position on all of our assets other than certain permitted liens as set forth in the SVB Line.

On December 4, 2009, we sold TBS to N. Harris Computer Corporation and its affiliate for approximately $2.3 million in cash plus up to $0.7 million in additional future payments subject to certain earn-out provisions. Our Board of Directors approved the disposal of TBS on December 2, 2009 as part of a strategy to reduce debt and focus on growth at the remaining business units and growth by acquisition. We used $169,817 of the proceeds from the asset sale to pay outstanding amounts pursuant to the Line (see below) on December 4, 2009 and the remainder of the proceeds between January 2010 and April 2010 to fund operating shortfalls and income taxes payable as a result of the sale transaction.

Our sources of capital include cash flow from operations, available credit facilities, and the issuance of debt and equity securities. During the first quarter of 2010, we relied heavily on our cash reserves to fund the negative cash flows we experienced from operating shortfalls and due to the retirement of our line of credit with the Private Bank of the Peninsula. We expect to experience negative operating cash flows through at least the fourth quarter of 2010, and we expect to make use of available borrowing capability under new sources of debt financing to offset such negative cash flows.

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

On February 6, 2008, we entered into an agreement with The Private Bank of The Peninsula (“Bank”) for an asset based line of credit (the “Line”). Pursuant to an amendment, the Bank renewed the Line and modified the terms to include an interest rate that was floating and was calculated at Wall Street Journal prime plus five percent (5%) on the cash borrowed provided that the minimum rate was eight and one half percent (8.5%) and minimum interest was $7,000 per three month period. Interest on outstanding borrowings was payable monthly. In addition, we were required to pay an amendment fee of $10,000 and, upon each advance, a fee equal to one quarter of one percent (0.25%) of the advance, and is subject to covenants as to minimum quarterly income and cash flow. The Bank’s maximum commitment amount for the Line, as amended, was $1.0 million. Advances were generally limited to 80% of eligible domestic accounts receivable. Outstanding advances under the Line were secured by a first lien position on all of our accounts receivable, contract rights, chattel paper, documents, and payment and by a second lien on our inventory, intellectual property, and equipment. The Line matured on February 24, 2010 and, pursuant to an extension granted by the Bank, we repaid all outstanding advances in February and March 2010.

Effective August 1, 2008 and in connection with the acquisition of Questys, we issued a secured promissory note to the Pavlovics (the “Pavlovic Note”) in the amount of $900,000. The Pavlovics are a related party as a result of the common stock issued to them by us in connection with the acquisition of Questys. The Pavlovic Note is non-interest bearing and may be prepaid in whole or in part at any time without penalty and is due on August 1, 2011. Principal payments are due in three equal annual installments of $300,000 each on August 1, 2009, August 1, 2010, and August 1, 2011. On August 1, 2009, we paid the first installment of $300,000. The Pavlovic Note is secured by certain assets of Questys as defined in a Security Agreement dated as of August 1, 2008.

Prior to August 1, 2008 (effective date of acquisition of Questys), the Pavlovics made aggregate advances to Questys in the amount of $115,000, which were assumed in the acquisition (the “Pavlovic Shareholder Debt”). The Pavlovic Shareholder Debt is non-interest bearing and we and the Pavlovics have agreed to the repayment of the outstanding balance as follows: (i) $35,000 on or before August 1, 2009, (ii) $40,000 on or before August 1, 2010, and (iii) $40,000 on or before the August 1, 2011. On August 3, 2009, we paid the first installment of $35,000.

Our inability to repay outstanding borrowings when due would have a material adverse effect on us.

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

Since our inception, our operating and investing activities have used substantially more cash than they have generated. We believe that we have made considerable progress toward achieving profitable operations by increasing revenues from electronic document delivery services and through our acquisition of QSI and GSI. In addition, we are actively seeking opportunities to acquire or otherwise combine with businesses that are operating profitably and generating positive cash flows. However, at present and for the foreseeable future, we believe that we will continue to need working capital to fund the growth of our businesses and to absorb the increasing costs associated with operating as a fully reporting company in the prevailing regulatory environment. Accordingly, we anticipate negative operating and investing cash flows through at least the end of 2010 and at least until QSI, MVI, and GSI consistently generate net cash flows sufficient to offset the projected expense to operate the holding company.

We expect to use cash flow generated from operations, additional proceeds from the sale of TBS, and potentially other sources, to fund expected negative cash flows during the remainder of 2010.

Our available cash resources combined with our current revenue streams will not be sufficient to meet our anticipated working capital requirements for the next twelve months. We will require new sources of debt or equity financing during the remainder of 2010, particularly if we should be required to expand or significantly upgrade our technology infrastructure through additional capital expenditures. Should our current revenue streams or margins be subjected to even minor decreases, our external funding requirements would be greater.

We believe that sustainable profitability is achievable; however, we have a history of losses. While MVI reported net income for the first quarter of 2010, this income was not sufficient to offset the net losses of GSI and QSI, interest expense and other corporate overhead. If we are not successful in sustaining and increasing operating profits from our three operating segments, or in reducing expenses of the holding company as a percentage of revenue, we may not achieve profitability on a consolidated basis.

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

The Report of Independent Registered Public Accounting Firm on our December 31, 2009 consolidated financial statements includes an explanatory paragraph stating that the recurring losses incurred from operations raises substantial doubt about our ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

CAUTIONARY INFORMATION ABOUT FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. All statements that do not directly and exclusively relate to historical facts constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Our forward-looking statements are based on our plans, intentions, expectation, and belief and are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected or expressed herein. You can identify these statements by forward-looking words such as "may", "will", "expect", "intend", "anticipate", "believe", "expect", "plan", "seek", "estimate", "project", "could", and "continue" or similar words. You should read statements that contain these words carefully because they discuss our expectations about our future performance, contain projections of our future operating results or of our future financial condition, or state other "forward-looking" information. These statements include, among others, information regarding future operations, future capital expenditures, and future net cash flow. Such statements reflect our current views with respect to future events and financial performance and involves risks and uncertainties, including, without limitation, general economic and business conditions, changes in foreign, political, social and economic conditions, regulatory initiatives and compliance with governmental regulations, the ability to achieve further market penetration and additional customers, and various other matters, many of which are beyond our control, including, without limitation, the risks described in Item 1A of our Annual Report on Form 10-K filed with the Commission on April 15, 2010. Our future results and stockholder values may differ materially from those expressed in these forward- looking statements. Many of the factors that will determine these results and values are beyond our ability to control or predict. We assume no obligation to update any forward-looking statements. Investors are cautioned not to put undue reliance on any forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. Readers should also consult the cautionary statements and risk factors listed from time to time in our Reports, and all amendments thereto, on Forms 10-K, 10-KSB, 10-Q, 10-QSB, 8-K, and other SEC filings. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in Section 21E of the Exchange Act.

Forward looking statements in this Quarterly Report on Form 10-Q include, without limitation:

The statements in MD&A under the captions Introduction and Business Overview of our strategies, beliefs, plans, expectations, anticipations and hopes with respect to (1) our expectations about the benefits we may derive from acquisitions, (2) our current and future growth strategy to acquire intellectual and technology assets and our expectations about the benefits we may derive, (3) our beliefs about our vision to become a business process management/workflow service and the benefits we expect to derive, (4) our acquisition strategy, and (5) our belief that obtaining planned financings will allow us to generate adequate cash flows to sustain operations at current levels until we being to operate profitably on a consistent, month-over month basis, which statements are subject to various risks and uncertainties, including, without limitation, our limited operating history, risks that we may not be able to obtain any additional financing at terms acceptable to us, or at all, risks that we may not successfully implement our acquisition program, risks associated with assimilating acquired personnel and technology into the Company, and the risk that we will not be able to compete effectively because our market place is highly competitive and has low barriers to entry.

The statements in MD&A under the caption Results of Operations of our strategies, beliefs, plans, expectations, anticipations and hopes with respect to Net Revenue, Gross Profit, Operating Expenses, Income (Loss) from Operations, and Net Loss and our strategies, beliefs, plans, expectations, anticipations and hopes with respect to Liquidity and Capital Resources set forth in MD&A under the caption Liquidity and Capital Resources, including, without limitation (1) our belief that we have made considerable progress toward achieving profitable operations, (2) our strategy of actively seeking to combine with business that operate profitably and generate positive cash flows, (3) our belief that sustainable profitability is achievable, (4) our expectations about future funding requirements, and (5) our belief that current cash position, cash generated through operations and equity offerings and available borrowings will be sufficient to meet our needs through at least the next twelve months, which statements are subject to various risks and uncertainties, including, without limitation, our limited operating history, risks that we may not be able to obtain any additional financing at terms acceptable to us, or at all, the risk that we may be unable to sustain all or part of our operations if we are not able to obtain sufficient additional funds from investors, the risk that our funding requirements could be greater should our current revenue streams or margins decrease, risks that we may not successfully implement our acquisition program, risks associated with assimilating acquired personnel and technology into the Company, and the risk that we will not be able to compete effectively because our market place is highly competitive and has low barriers to entry.

The statements in Part II under the heading Item 4 Controls and Procedures, of our belief that we are addressing the deficiencies that affected our internal control over financial reporting and the time we estimate we will require before we would be able to conclude that all material weaknesses have been remediated or our belief regarding the potential impact to us, which statements are subject to various risks and uncertainties including, without limitation the risk that for financial or other reasons we will be unable to effect some or all of the changes we believe are required within the time periods estimated, or at all.

RECENT ACCOUNTING PRONOUNCEMENTS

In September 2009, the FASB issued an update to its accounting guidance regarding multiple-deliverable revenue arrangements. The guidance addresses how to measure and allocate consideration to one or more units of accounting. Specifically, the guidance requires that consideration be allocated among multiple deliverables based on relative selling prices. The guidance establishes a selling price hierarchy of (1) vendor-specific objective evidence, (2) third-party evidence and (3) estimated selling price. This guidance is effective for annual periods beginning on or after June 15, 2010 but may be early adopted as of the beginning of an annual period. We adopted this guidance on January 1, 2010 and have concluded that this guidance did not have a material impact on our consolidated financial position and results of operations as of and for the three months ended March 31, 2010.

In October 2009, the FASB issued an update to its accounting guidance regarding software revenue recognition. The guidance changes the accounting model for revenue arrangements that include both tangible products and software elements. Under this guidance, tangible products containing software components and non-software components that function together to deliver the tangible product’s essential functionality are excluded from the software revenue guidance in FASB ASC Topic 985, “Software.” In addition, hardware components of a tangible product containing software components are always excluded from the software revenue guidance. This guidance is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010 but may be early adopted. We adopted this guidance on January 1, 2010 and have concluded that this guidance did not have a material impact on our consolidated financial position and results of operations as of and for the three months ended March 31, 2010.

In January 2010, the FASB issued an update to its accounting guidance regarding fair value measurement and disclosure. The guidance affects the disclosures made about recurring and non-recurring fair value measurements. This guidance is effective for annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010. Early adoption is permitted. We are currently evaluating the impact that this guidance will have on our consolidated financial position and results of operations.

Other recent accounting pronouncements issued by the FASB (including the Emerging Issues Task Force) and the American Institute of Certified Public Accountants did not or are not believed by management to have a material impact on our present or future consolidated financial statements.

ITEM 4T. – CONTROLS AND PROCEDURES

(a) As of March 31, 2010, an evaluation was carried out under the supervision and with the participation of the Company's management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). As a result of this evaluation, we concluded that, although we continue to make progess in executing our plan to remediate significant deficiencies, our disclosure controls and procedures were not effective as of March 31, 2010 and that our internal controls over financial reporting were not effective as of March 31, 2010. For more information regarding the material weaknesses identified and our remediation plans, we encourage you to read Item 9A Controls and Procedures included in the Annual Report on Form 10-K that we filed with the SEC on April 15, 2010.

(b) Changes in internal control over financial reporting: There were no changes in the Company's internal control over financial reporting that occurred during the quarter ended March 31, 2010 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

LIMITATIONS ON THE EFFECTIVENESS OF INTERNAL CONTROLS

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

PART II

ITEM 1 – LEGAL PROCEEDINGS.

Claims

In connection with our acquisition of QSI, we have made a claim of indemnification in connection with the Purchase Agreement. The claim relates primarily to undisclosed material adverse facts and circumstances of which former QSI shareholders and officers may have had prior knowledge. We are in our preliminary stages of evaluating this matter. We have made the required payments under the Purchase Agreement to date. We reserve the right to withhold future payments pending the final results of this matter.

In connection with our acquisition of GSI, we are entitled to certain rights of indemnification from GoSolutions Equity, LLC, which is a former shareholder of GSI that became a shareholder of VillageEDOCS, Inc. as a result of our acquisition of GSI. We have made a claim of indemnification from this entity Pursuant to the agreement with GSI, if we are successful, GoSolutions Equity, LLC would only be required to return up to approximately 4.4 million of our shares issued to that entity to satisfy such indemnification claims. GoSolutions Equity, LLC is not required to contribute cash to satisfy any indemnification claims.

In the opinion of management, the amount of ultimate liability, if any, with respect to these actions will not materially affect our consolidated financial position or results of operations.

ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

During the three months ended March 31, 2010, we granted to our employees options to purchase 1,075,000 shares of our common stock under the 2002 Plan at a weighted average exercise price of $0.01 per share. All options were issued at or above fair value on the dates of grant and vest on various dates from the dates of grant through February 2010.

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

ITEM 3 – DEFAULTS UPON SENIOR SECURITIES.

None.

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

We submitted no matters to a vote of our securities holders during the first quarter of 2010. However, as discussed in more detail elsewhere in our Annual Report on Form 10-K for the fiscal year ended December 31, 2009 filed with the Commission on April 15, 2010, we do intend to solicit our shareholders, through an action by written consent, to approve a reverse split of our common stock, which will have the effect of terminating our status as a reporting company under the 1934 Act, which will have the effect of our shares trading in the pink sheets, as opposed to the OTC bulletin board.

ITEM 5 – OTHER INFORMATION.

None.

ITEM 6 – EXHIBITS.

2.1		Agreement and Plan of Merger dated January 31, 2004 by and among VillageEDOCS, VillageEDOCS Merger Sub, Inc., Tailored Business Systems, Inc., Stephen A. Garner, and James L. Campbell previously filed as Exhibit 2.1 to the Company's Current Report on Form 8-K filed on February 18, 2004 and incorporated herein by reference. **
2.2		Plan of Internal Restructuring previously filed as Exhibit B to the Company's Schedule 14C Information Statement filed on July 23, 2004 and incorporated herein by reference. **
2.3		Stock Purchase Agreement dated as of April 1, 2005 and executed April 15, 2005 by and among VillageEDOCS Acquisition Corp, Phoenix Forms, Inc., and Its Shareholders. Previously filed as Exhibit 2.1 to the Company's Current Report on Form 8-K filed on April 19, 2005. **
2.4		Merger Agreement, dated as of February 17, 2006, by and among VillageEDOCS, VEDO Merger Sub, Inc., GoSolutions, Inc. and certain stockholders of GoSolutions. Previously filed as Exhibit 2.1 to the Company's Current Report on Form 8-K filed on February 21, 2006. **
2.5		Articles of Merger and Plan of Merger. Previously filed as Exhibit 99.2 to the Company's Current Report on Form 8-K filed on May 4, 2006. **
2.6		Assets Purchase Agreement dated December 10, 2007 by and between Phoenix Forms, Inc. and DocPath Corp. Previously filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on December 11, 2007. **
2.7		Assets Purchase Agreement dated December 10, 2007 by and between Phoenix Forms, Inc. and DocPath Corp. Previously filed as Exhibit 2.1 to the Companys’s Current Report on Form 8-K filed on December 11, 2007.**
2.8		Stock Purchase Agreement dated as of August 1, 2008 by and among VillageEDOCS, Inc. and Decision Management Company, Inc. d/b/a Questys Solutions, Inc. and Its Sole Shareholder, Vojin Hadzi-Pavlovic and Gloria Hadzi-Pavlovic, Tenants In Common. Previously filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on August 6, 2008. **

2.9		Intellectual Property Purchase Agreement, dated December 4, 2009, among N. Harris Computer Corporation, Tailored Business Systems, Inc., and VillageEDOCS, Inc. Previously filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on December 7, 2009. **
2.10		Share Purchase Agreement, dated December 4, 2009, between Systems Design, Inc., and VillageEDOCS, Inc. Previously filed as Exhibit 2.2 to the Company’s Current Report on Form 8-K filed on December 7, 2009. **
3.1		Articles of Incorporation, as amended. Previously filed with the Company's Form 10-SB filed on August 29, 2000. **
3.2		By-laws. Previously filed with the Company's Form 10-SB filed on August 29, 2000. **
3.3		Article of Amendment to Articles of Incorporation to increase authorized number of common shares. Previously filed with the Company's 14C Information Statement filed on July 23, 2004. **
3.4		Article of Amendment to Articles of Incorporation to increase authorized number of common shares and to create a class of preferred stock. Previously filed with the Company's 14C Information Statement filed on June 7, 2005. **
3.5		Form of Certificate of Designations of Preferences, Rights and Limitations of Series A Convertible Preferred Stock. Previously filed as Exhibit 4.8 to the Company's Current Report on Form 8-K filed on April 19, 2005. **
3.6		Certificate of Amendment of Articles of Incorporation to increase authorized number of common shares. Previously filed with the Company's Current Report on Form 8-K filed on January 20, 2006. **
3.7		Form of Certificate of Incorporation of VillageEDOCS, Inc. Previously filed with the Company’s Definitive Information Statement on Schedule 14A filed on May 24, 2007.**
3.8		Form of Bylaws of VillageEDOCS, Inc. Previously filed with the Company’s Definitive Information Statement on Schedule 14A filed on May 24, 2007.

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		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. **
4.3		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. **
4.4		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. **
4.5		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. **
4.6		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. **
4.7		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. **
4.8		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. **
4.9		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. **
4.10		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. **

4.11		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. **
4.12		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. **
4.13		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. **
4.14		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. **

4.15		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. **
4.16		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. **
4.17		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. **
4.18		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. **
4.19		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. **
4.20		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. **
4.21		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. **
4.22		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. **
4.24		Form of Note Assignment. Previously filed as Exhibit 4.1 to the Company's Current Report on Form 8-K filed on July 6, 2005. **
4.25		Form of Promissory Note Modification Agreement. Previously filed as Exhibit 4.2 to the Company's Current Report on Form 8-K filed on July 6, 2005. **
4.26		Form of Notice of Intent to Exercise Conversion Right. Previously filed as Exhibit 4.3 to the Company's Current Report on Form 8-K filed on July 6, 2005. **
4.27		Notice of conversion by Barron Partners LP dated September 30, 2005. Previously filed as Exhibit 4.6 to the Company's Current Report on Form 8-K filed on October 5, 2005. **
4.28		Form of Convertible Secured Promissory Note by and among C. Alan Williams, Joan P. Williams, and the Company previously filed as Exhibit 4.19 to the Company's Annual Report on Form 10-KSB filed on April 14, 2006 and incorporated herein by reference. **
4.29		Convertible Secured Promissory Note dated February 16, 2004 by and among C. Alan Williams, Joan P. Williams, and the Company previously filed as Exhibit 4.20 to the Company's Annual Report on Form 10-KSB filed on April 14, 2006 and incorporated herein by reference. **
4.30		Notice of conversion by Barron Partners LP dated October 21, 2005. Previously filed as Exhibit 4.1 to the Company's Current Report on Form 8-K filed on October 24, 2005 and incorporated herein by reference. **

4.31		Notice of conversion by Barron Partners LP dated March 8, 2006. Previously filed as Exhibit 4.1 to the Company's Current Report on Form 8-K filed on March 9, 2006 and incorporated herein by reference. **
4.32		Registration Rights Agreement dated as of April 28, 2006 by and among VillageEDOCS and the principal stockholders of GoSolutions, Inc. Previously filed as Exhibit 99.5 to the Company's Current Report on Form 8-K filed on May 4, 2006. **
4.33		Principal VEDO Stockholders Voting Agreement dated as of April 28, 2006 by and among Barron Partners, LP, C. Alan Williams, Joan P. Williams and GoSolutions, Inc. Previously filed as Exhibit 99.6 to the Company's Current Report on Form 8-K filed on May 4, 2006. **

4.34		Indemnity/Contribution Agreement effective April 30, 2006, by and among VillageEDOCS, GoSolutions Equity, LLC (the "LLC"), and the principals of the LLC identified on the signature page thereto. Previously filed as Exhibit 99.7 to the Company's Current Report on Form 8-K filed on May 4, 2006. **
4.35		Settlement and Release Agreement dated as of April 28, 2006 by and among VillageEDOCS, GoSolutions, Inc., The Zant Group Trust and Louis J. Zant. Previously filed as Exhibit 99.9 to the Company's Current Report on Form 8-K filed on May 4, 2006. **
4.36		Second Extension Agreement dated as of April 28, 2006 by and between The Zant Group Trust and GoSolutions, Inc. Previously filed as Exhibit 99.9 to the Company's Current Report on Form 8-K filed on May 4, 2006. **
4.37		Settlement and Release Agreement dated as of June 30, 2006, by and among VillageEDOCS, GoSolutions, Inc., Bruce H. Bennett and Sandra G. Bennett. Previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 12, 2006. **
4.38		Warrant Exchange Agreement dated as of November 20, 2006 by and between the Company and Barron Partners, LP. Previously filed as Exhibit 10.1 to the Company’s Amended Current Report on Form 8-K/A filed on November 22, 2006.**
4.39		Promissory Note of VillageEDOCS, Inc. dated August 1, 2008 for $900,000 held by Vojin Hadzi-Pavlovic and Gloria Hadzi-Pavlovic, Tenants In Common. Previously filed as Exhibit 99.2 to the Company’s Current Report on Form 8-K filed on August 6, 2008. **
4.40		Security Agreement dated as of August 1, 2008, by and among VillageEDOCS, Inc, Decision Management Company, Inc. d/b/a Questys Solutions, Inc. and Vojin Hadzi-Pavlovic and Gloria Hadzi-Pavlovic, Tenants In Common. Previously filed as Exhibit 99.3 to the Company’s Current Report on Form 8-K filed on August 6, 2008. **
4.41		Subordination Agreement dated as of August 1, 2008 by and between The Private Bank of the Peninsula and Vojin Hadzi-Pavlovic and Gloria Hadzi-Pavlovic, Tenants In Common. Previously filed as Exhibit 99.4 to the Company’s Current Report on Form 8-K filed on August 6, 2008. **
4.42		Form of Promissory Note of VillageEDOCS, Inc. dated August 1, 2008 for $300,000 held by The Silver Lake Group, LLC. Previously filed as Exhibit 99.6 to the Company’s Current Report on Form 8-K filed on August 6, 2008. **
4.43		Form of Security Agreement dated as of August 1, 2008, by and among VillageEDOCS, Inc, GoSolutions, Inc., and The Silver Lake Group LLC. Previously filed as Exhibit 99.7 to the Company’s Current Report on Form 8-K filed on August 6, 2008. **
4.44		Form of Subordination Agreement dated as of August 1, 2008 by and between The Private Bank of the Peninsula and The Silver Lake Group LLC. Previously filed as Exhibit 99.8 to the Company’s Current Report on Form 8-K filed on August 6, 2008. **
4.45		Amendment to Secured Promissory Note dated October 31, 2008 by and between VillageEDOCS, Inc. and The Silver Lake Group, LLC. Previously filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on October 31, 2008.**
4.46		Form of Loan and Security Agreement dated February 6, 2008 by and between The Private Bank of the Peninsula and each of the Registrant, MessageVision, Inc., and Tailored Business Systems, Inc. Previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 11, 2008. **
4.47		First Amendment to Loan and Security Agreement dated as of February 24, 2009 by and between The Private Bank of the Peninsula and the Registrant. Previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 6, 2009. **
4.48		Promissory Note by and between the Registrant and C. Alan Williams and Joan P. Williams dated May 6, 2009. Previously filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on May 11, 2009.**

4.49		Promissory Note by and between the Registrant and C. Alan Williams and Joan P. Williams dated July 30, 2009. Previously filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on August 4, 2009.**

4.50		Third Amendment to Convertible Promissory Note by and between the Registrant and C. Alan Williams and Joan P. Williams dated as of October 22, 2009.**

4.51		Promissory Note by and between the Registrant and C. Alan Williams dated May 20, 2010.*

4.52		Loan and Security Agreement by and between the Registrant and Silicon Valley Bank dated May 24, 2010.*

10.1		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. **
10.2		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. **

10.3		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. **
10.4		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. **
10.5		Release of Claims Agreement dated as of April 1, 2005 by William R. Falcon in favor of Phoenix Forms, Inc. Previously filed as Exhibit 10.4 to the Company's Current Report on Form 8-K filed on April 19, 2005. **
10.6		Executive Employment Agreement, dates as of March 1, 2006, by and between the Company and Jerry T. Kendall. Previously files as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on March 1, 2006. **
10.7		Thor Bendickson Employment Agreement effective as of May 1, 2006. Previously filed as Exhibit 99.14 to the Company's Current Report on Form 8-K filed on May 4, 2006. **
10.8		Patent License Agreement, dated as of May 12, 2006, by and between VillageEDOCS and Catch Curve, Inc.. Previously filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on May 16, 2006. **
10.9		Office Lease Agreement effective June 1, 2007 by and between the Company and Tustin Avenue Investors, LLC. Previously filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on April 25, 2007. **
10.10		Placement Agency Agreement effective October 13, 2006 by and between the Company and Stonegate Securities, Inc. Previously filed as Exhibit 10.28 to the Company’s Quarterly Report on Form 10-QSB filed on August 14, 2007. **
10.11		Engagement Agreement effective July 10, 2007 by and between the Company and GemStone Securities, LLC. Previously filed as Exhibit 10.29 to the Company’s Quarterly Report on Form 10-QSB filed on August 14, 2007. **
10.12		Settlement Agreement dated June 6, 2007 by and among Jeffrey H. Mims, VarTec Telecom, Inc, Excel Telecommunications, Inc., VarTec Solutions, Inc., and GoSolutions, Inc. Previously filed as Exhibit 10.29 to the Company’s Quarterly Report on Form 10-QSB filed on August 14, 2007. **
10.13		Employment Agreement dated as of August 1, 2008 by and between VillageEDOCS, Inc. and Andre Hadzi-Pavlovic. Previously filed as Exhibit 99.5 to the Company’s Current Report on Form 8-K filed on August 6, 2008. **
10.14		Employment Agreement dated November 13, 2008 by and between VillageEDOCS, Inc. and K. Mason Conner. Previously filed as Exhibit 10.15 to the Company’s Quarterly Report on Form 10-Q filed on November 14, 2008. **

10.15		Employment Agreement dated November 13, 2008 by and between VillageEDOCS, Inc. and H. Jay Hill. Previously filed as Exhibit 10.16 to the Company’s Quarterly Report on Form 10-Q filed on November 14, 2008.**
10.16		Employment Agreement dated November 13, 2008 by and between VillageEDOCS, Inc. and Michael A. Richard. Previously filed as Exhibit 10.17 to the Company’s Quarterly Report on Form 10-Q filed on November 14, 2008.**

14.1		Code of Ethics. Previously filed as Exhibit 14.1 to the Company's Annual Report on Form 10-KSB filed on March 29, 2004 and incorporated herein by reference. **

21.1		Subsidiaries of the Registrant.*

31.1		Certification Under Section 302 of The Sarbanes-Oxley Act of 2002 signed and dated May 24, 2010 by K. Mason Conner, Chief Executive Officer.*
31.2		Certification Under Section 302 of The Sarbanes-Oxley Act of 2002 signed and dated May 24, 2010 by Michael A. Richard, Chief Financial Officer.*
32.1		Certification Pursuant To 18 U.S.C. §1350, As Adopted Pursuant To Section 906 of the Sarbanes-Oxley Act of 2002 signed and dated May 24, 2010 by K. Mason Conner, Chief Executive Officer.***
32.2		Certification Pursuant To 18 U.S.C. §1350, As Adopted Pursuant To Section 906 of the Sarbanes-Oxley Act of 2002 signed and dated May 24, 2010 by Michael A. Richard, Chief Financial Officer.***

Filed herewith

Previously filed

***

Furnished herewith

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: May 24, 2010	By	/s/ K. Mason Conner
		K. Mason Conner
		Chief Executive Officer, President, and Director

Dated: May 24, 2010	By:	/s/ Michael A. Richard
		Michael A. Richard
		Chief Financial Officer
		(Principal Accounting Officer)

VILLAGEEDOCS INC 10-Q