Derycz Scientific Reports First Quarter Fiscal Year 2012 Results

First Quarter Total Revenue Grows 64% Year-over-Year

First Quarter Revenue From US Operations Grows 13% Year-over-Year

New, Higher Margin, Service Offerings to Come Next Quarter

News provided by

Derycz Scientific, Inc.

Nov 15, 2011, 09:22 ET

SANTA MONICA, Calif., Nov. 15, 2011 /PRNewswire/ --  Derycz Scientific, Inc. (OTCBB: DYSC), a leader in information logistics solutions and a pioneer in facilitating the flow of information from content publishers to enterprise customers in Life Sciences and other research intensive industries, today reported financial and operating results for the first quarter of its fiscal year 2012 (quarter ended September 30, 2011).

  • Fiscal year 2012 first quarter total revenue increased 64% to $9.9 million from $6.0 million in the fiscal year 2011 first quarter.  
  • Fiscal year 2012 first quarter revenues of $3.1 million from the Company's recently acquired French subsidiary.
  • Fiscal year 2012 first quarter revenues from US operations increased 13% to $6.8 million from $6.0 million in the fiscal year 2011 first quarter.
  • New, higher margin, service offerings are anticipated to come next quarter

Management Commentary

"We continued to grow and are very excited about the new customers that have joined us.  Our new social, mobile and search tools will start coming on line in the second quarter.  These new, higher margin, offerings are tools that we expect will be well received by our existing customer base, and we expect they will also help us find new customers," said Peter Derycz, President and CEO.  He continues: "Acquiring customers and delighting them with best-in-class information logistics solutions is what we are all about."

Newly appointed CFO Alan Urban said, "We posted solid revenue gains despite an environment of continued economic weakness, particularly in Europe, where revenue from our recently acquired French subsidiary did not meet expectations.  While top line growth has been our priority, we now have to focus on profitability," added Mr. Urban.  "We plan on instituting expense reduction measures and reviewing the financial terms of our relationships with significant vendors and customers to reduce our losses and get on a path to profitability."

Quarterly Results at a Glance


(Table amounts in 000's except per share amounts)




Q1 Fiscal Year
2012

Q1 Fiscal Year
2011

% Change














Revenue

$

9,861

$

6,017


64%


Gross profit

1,472


817


80%


Loss from operations

(1,641)


(391)


(320)%


Net loss

(1,692)


(405)


(318)%


Net loss per diluted share

(0.10)


(0.03)


(233)%


Adjusted EBITDA

(1,233)


(276)


(347)%

















Cash flow from operations



822


(1,086)


176%

















Revenue by segment:













US operations

6,807


6,017


13%


France

3,054


-


-

















Gross profit by segment:













US operations

807


817


1%


France

1,086


-


-

















Gross profit percentage by segment:









-


US operations

6%


14%


(57)%


France

36%


-


-


Total

15%


14%


7%













Both the Company's net income and Adjusted EBITDA were negatively affected in the amount of $710,749 by a GAAP accounting method which requires the Company to amortize Certain Publisher Guaranteed Payments ("CPGPs") on a straight-line basis over the life of the contracts, instead of accounting for them as a percentage of the revenue generated under the contracts. This accounting treatment results in higher amortized costs in the early periods of the agreements. For the three months ended September 30, 2011, we recorded approximately $697,465 in revenue under the CPGPs while amortizing approximately $1,303,594 of costs, which caused our cost of goods sold to increase significantly relative to the revenue levels and therefore significantly reducing our gross margin.

Use of Non-GAAP Measures – Adjusted EBITDA

Derycz Scientific management evaluates and makes operating decisions using various financial metrics. In addition to the Company's GAAP results, management also considers the non-GAAP measure of Adjusted EBITDA. Management believes that this non-GAAP measure provides useful information about the Company's operating results.  The attached tables provide a reconciliation of these non-GAAP financial measures with the most directly comparable GAAP financial measures.

Adjusted EBITDA is defined as net income (loss) from continuing operations before interest, income taxes, depreciation and amortization expenses, excluding stock-based compensation, and amounts included in other non-operating income or expense.

Adjusted EBITDA is not intended to replace operating income (loss), net income (loss) and other measures of financial performance reported in accordance with GAAP. Rather, Adjusted EBITDA is a measure of operating performance that may be considered in addition to those measures.

Reconciliation of Adjusted EBITDA to Loss from Operations


(Table amounts in 000's)


Q1 Fiscal Year
2012

Q1 Fiscal Year
2011















Loss from operations

$

(1,641)

$

(391)




Add:











Depreciation and amortization

505


76




Stock-based compensation

(97)

38




Adjusted EBITDA

$

(1,233)

$

(276)





The following financial information should be read in conjunction with the unaudited financial statements and accompanying notes thereto filed by the Company with the Securities and Exchange Commission on November 14, 2011 in its Quarterly Report on Form 10-Q for the period ended September 30, 2011. The Quarterly Report can be viewed at www.sec.gov.

Derycz Scientific, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets


September 30,

June 30,


2011

2011


(unaudited)



ASSETS












CURRENT ASSETS





Cash and cash equivalents

$

3,045,275

$

2,868,260

Accounts receivable:







     Trade receivables, net of allowance of $201,584 and $223,298, respectively

6,854,452


6,690,662

     Due from factor

141,238


356,540

Inventory

557,562


759,507

Prepaid expenses

243,614


298,927

Prepaid royalties

721,581


1,245,872

Other current assets

16,309


18,320









TOTAL CURRENT ASSETS

11,580,031


12,238,088









PROPERTY AND EQUIPMENT, net of accumulated depreciation of $987,699  and $724,004, respectively

1,344,531


1,666,462









INTANGIBLE ASSETS, net of accumulated amortization of $858,554 and $641,698, respectively

1,694,640


1,883,660









GOODWILL

1,567,604


1,567,604









DEPOSITS AND OTHER ASSETS

283,577


308,721

TOTAL ASSETS

$

16,470,383

$

17,664,535









LIABILITIES AND STOCKHOLDERS' EQUITY
















CURRENT LIABILITIES







Accounts payable

$

7,682,944

$

6,296,566

Capital lease obligation, current

476,001


663,973

Accrued expenses and other current liabilities

654,296


748,969

Notes payable, current

57,787


53,252

Due to factor

319,444


312,440

Due to related parties

20,371


71,902

Line of credit

1,082,008


1,436,233

Deferred revenue

111,479


158,240

TOTAL CURRENT LIABILITIES

10,404,330


9,741,575









Notes payable, long term

92,460


110,080

Capital lease obligation, long term

1,211,376


1,281,600

Liability for estimated earnout

359,338


359,338

Deferred tax liability

350,000


350,000









TOTAL LIABILITIES

12,417,504


11,842,593









COMMITMENTS AND CONTINGENCIES
















STOCKHOLDERS' EQUITY







Preferred stock; $0.001 par value; 20,000,000 shares authorized; no shares issued and outstanding

-


-

Common stock; $0.001 par value; 100,000,000 shares authorized; 17,069,437 and 16,822,509 shares issued and outstanding

17,069


16,823

Accumulated other comprehensive income (loss)

8,013


(11,590)

Additional paid-in capital

13,371,233


13,468,580

Accumulated deficit

(9,343,436)


(7,651,871)









TOTAL STOCKHOLDERS' EQUITY

4,052,879


5,821,942









TOTAL LIABILITIES AND EQUITY

$

16,470,383

$

17,664,535

Derycz Scientific, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations and Other Comprehensive Income (Loss)

(Unaudited)


Three Months ended


September 30,


2011

2010







NET SALES

$

9,861,219

$

6,016,656









COST OF SALES

8,388,742


5,199,811









GROSS PROFIT

1,472,477


816,845









OPERATING EXPENSES:







General and administrative

2,439,030


1,033,497

Marketing and advertising

188,414


114,526

Depreciation and amortization

486,001


59,550









TOTAL OPERATING EXPENSES

3,113,445


1,207,573









LOSS FROM OPERATIONS

(1,640,968)


(390,728)









Currency gain (loss)

(1,465)


-

Other Income

2,255


-

Interest expense

(51,694)


(15,150)

Interest income

307


609









NET LOSS

(1,691,565)


(405,269)









OTHER COMPREHENSIVE INCOME (LOSS):







Foreign currency translation

19,603


-









COMPREHENSIVE LOSS

$

(1,671,962)

$

(405,269)









NET LOSS PER SHARE:







BASIC AND DILUTED

$

(0.10)

$

(0.03)









WEIGHTED AVERAGE SHARES OUTSTANDING:







BASIC AND DILUTED

16,977,178


13,011,527

Derycz Scientific, Inc. and Subsidiaries

Condensed Consolidated Statement of Stockholders' Equity

For the three months ended September 30, 2011

(Unaudited)





Additional




Other

Total


Common stock

paid-in

Accumulated

Comprehensive

stockholders'


Shares

Amount

capital

Deficit

Income

Equity



















Balance, July 1, 2011

16,822,509

$

16,823

$

13,468,580

$

(7,651,871)

$

(11,590)

$

5,821,942

























Fair value of options issued to employees

-


-


37,084


-






37,084

























Common shares issued upon exercise of warrants

246,928


246


(246)


-






-

























Fair value of warrants issued for services

-


-


48,939


-






48,939

























Adjustment to fair value of warrants granted to consultants









(447,838)










(447,838)

























Fair value of warrant extensions

-


-


264,714


-






264,714

























Net loss for the period













(1,691,565)






(1,691,565)

























Foreign currency translation

















19,603


19,603

























Balance, September 30, 2011

17,069,437

$

17,069

$

13,371,233

$

(9,343,436)

$

8,013

$

4,052,879

Derycz Scientific, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)


Three Months ended


September 30,


2011

2010







CASH FLOWS FROM OPERATING ACTIVITIES:





Net loss

$

(1,691,565)

$

(405,269)

Adjustment to reconcile net loss to net cash provided by (used in) operating activities:







Depreciation and amortization

505,108


76,467

Fair value of vested stock options

37,084


20,529

Fair value of warrants issued for services

(398,899)


-

Fair value of common shares issued for services

-


17,648

Fair value of warrant extensions 

264,714


-









Changes in assets and liabilities:







Accounts receivable

(163,790)


(381,887)

Inventory

201,945


(4,383)

Due from Factor

215,302


-

Prepaid expenses

55,313


22,235

Prepaid royalties

524,291


-

Other current assets

27,155


20,262

Accounts payable and accrued expenses

1,386,378


(394,762)

Other current liabilities

(141,434)


(57,330)









Net cash provided by (used in) operating activities

821,602


(1,086,490)









CASH FLOWS FROM INVESTING ACTIVITIES:







Purchase of property and equipment

(30,680)


(15,448)

Purchase of intangible assets

(27,836)


-

Acquisition of remaining interest in Pools Press

-


(120,000)









Net cash used in investing activities

(58,516)


(135,448)









CASH FLOWS FROM FINANCING ACTIVITIES:







Payment of notes payable

(13,085)


-

Due to factor

7,004


-

Payment of capital lease obligation

(258,196)


(8,226)

Payment of related parties

(51,531)


-

Advances (payments) under line of credit

(354,225)


1,375,000









Net cash provided by (used in) financing activities

(670,033)


1,366,774









Effect of exchange rate changes

83,962


-









NET INCREASE IN CASH AND CASH EQUIVALENTS

177,015


144,836









CASH AND CASH EQUIVALENTS, Beginning of period

2,868,260


1,852,231









CASH AND CASH EQUIVALENTS, End of period

$

3,045,275

$

1,997,067









SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
















Taxes paid

$

-

$

-

Interest paid

$

51,694

$

15,150









 SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
















Adjustment to additional paid in capital to reflect acquisition of remaining noncontrolling interest

$

-


34,904

About Derycz Scientific®

Derycz Scientific, Inc. is an information logistics company. The company and its subsidiaries develop products, services and systems to facilitate the re-use of published content in a manner that helps organizations achieve their marketing, communication and research goals effectively and in compliance with copyright law and regulatory rules.  Subsidiary companies include Reprints Desk, Inc., Pools Press, Inc. and Techniques Appliquees aux Arts Graphiques, S.p.A. (TAAG).  For more information, please visit www.deryczscientific.com.

Forward-Looking Statements

Certain matters discussed in this press release may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Such matters involve risks and uncertainties that may cause actual results to differ materially, including the following: changes in economic conditions; general competitive factors; acceptance of the Company's products in the market; the Company's success in obtaining new customers; the Company's success in technology and product development; the Company's ability to execute its business model and strategic plans; the Company's success in integrating acquired entities and assets, and all the risks and related information described from time to time in the Company's filings with the Securities and Exchange Commission ("SEC"), including the financial statements and related information contained in the Company's Annual Report on Form 10-K and interim Quarterly Reports on Form 10-Q.  The Company assumes no obligation to update the cautionary information in this release.

SOURCE Derycz Scientific, Inc.

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