Derycz Scientific Reports Record Revenue for Second Quarter 2012

Derycz Scientific, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets

December 31,

June 30,

2011

2011

(unaudited)

Assets

Current assets:

Cash and cash equivalents

$

3,341,661

$

2,868,260

Accounts receivable:

Trade receivables, net of allowance of $160,493 and $223,298 , respectively

7,475,937

6,690,662

Due from factor

84,354

356,540

Inventory

591,522

759,507

Prepaid expenses

237,533

298,927

Prepaid royalties

459,423

1,245,872

Other current assets

1,007

18,320

Total current assets

12,191,437

12,238,088

Property and equipment, net of accumulated depreciation of $1,228,628 and $724,004, respectively      

1,044,627

1,666,462

Intangible Assets, net of accumulated amortization of $1,084,078 and $641,698 , respectively

1,602,420

1,883,660

Goodwill

1,567,604

1,567,604

Deposits and other assets

265,328

308,721

Total assets

$

16,671,416

$

17,664,535

Liabilities and Stockholders' Equity

Current Liabilities:

Accounts payable and accrued expenses

$

10,537,646

$

7,045,535

Capital lease obligation, current

307,004

663,973

Notes payable, current

44,030

53,252

Due to factor

312,441

312,440

Due to related parties

4,519

71,902

Line of credit

774,464

1,436,233

Deferred revenue

252,240

158,240

Total current liabilities

12,232,344

9,741,575

Notes payable, long term

77,053

110,080

Capital lease obligation, long term

1,153,734

1,281,600

Liability for estimated earnout

359,338

359,338

Deferred tax liability

350,000

350,000

Total liabilities

14,172,469

11,842,593

Commitments and contingencies (Note 8)

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, respectively

17,069

16,823

Accumulated other comprehensive income (loss)

22,350

(11,590)

Additional paid-in capital

13,580,360

13,468,580

Accumulated deficit

(11,120,832)

(7,651,871)

Total stockholders' equity

2,498,947

5,821,942

Total liabilities and stockholders' equity

$

16,671,416

$

17,664,535

Derycz Scientific, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Other Comprehensive Income (Loss)
(Unaudited)

Three Months Ended

Six Months Ended

December 31,

December 31,

2011

2010

2011

2010

Revenue

$

12,089,519

$

8,514,233

$

21,950,738

$

14,530,890

Cost of revenue

10,310,259

7,944,794

18,699,001

13,144,602

Gross profit

1,779,260

569,439

3,251,737

1,386,288

Operating expenses:

Selling, general and administrative

3,003,386

1,774,122

5,630,831

2,922,153

Depreciation and amortization

480,094

66,375

966,095

125,925

Total operating expenses

3,483,480

1,840,497

6,596,926

3,048,078

Loss from operations

(1,704,220)

(1,271,058)

(3,345,189)

(1,661,790)

Currency gain (loss)

(242)

-

(1,707)

-

Other income

16,827

-

19,082

-

Interest expense

(71,319)

(33,508)

(123,013)

(48,658)

Interest income

417

1,124

724

1,735

Other expense

771

-

771

-

Loss before provision for income taxes                    

(1,757,766)

(1,303,442)

(3,449,332)

(1,708,713)

Provision for income taxes

(19,629)

-

(19,629)

-

Net loss

(1,777,395)

(1,303,442)

(3,468,961)

(1,708,713)

Other comprehensive income:

Foreign currency translation

14,337

-

33,940

-

Comprehensive loss

$

(1,763,058)

$

(1,303,442)

$

(3,435,021)

$

(1,708,713)

Net loss per share:

Basic and diluted

$

(0.10)

$

(0.09)

$

(0.20)

$

(0.13)

Weighted average shares outstanding:

Basic and diluted

17,069,437

14,157,760

17,022,467

13,584,643

Derycz Scientific, Inc. and Subsidiaries
Condensed Consolidated Statement of Stockholders' Equity
For the Six Months Ended December 31, 2011
(Unaudited)

Common Stock

Additional
Paid-in

Accumulated

Other
Comprehensive

Total
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

-

-

84,438

-

84,438

Common shares issued upon
    exercise of warrants

246,928

246

(246)

-

-

Fair value of warrants issued for
    services

-

-

210,712

-

210,712

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

(3,468,961)

(3,468,961)

Foreign currency translation

33,940

33,940

Balance, December 31, 2011

17,069,437

$

17,069

$

13,580,360

$

(11,120,832)

$

22,350

$

2,498,947

Derycz Scientific, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)

Six Months ended

December 31,

2011

2010

Cash flow from operating activities:

Net loss

$

(3,468,961)

$

(1,708,713)

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

Depreciation and amortization

1,004,565

161,893

Fair value of vested stock options

84,438

47,475

Fair value of warrants issued for services

(237,126)

448,662

Fair value of common shares issued for services

-

17,648

Fair value of warrant extensions 

264,714

-

Changes in assets and liabilities:

Accounts receivable

(785,273)

(1,063,934)

Inventory

167,985

(2,687)

Due from factor

272,186

-

Prepaid expenses

61,394

(82,228)

Prepaid royalties

786,449

-

Other assets

60,706

12,853

Accounts payable and accrued expenses

3,492,110

13,044

Other current liabilities

94,000

(12,892)

Net cash provided by (used in) operating activities

1,797,187

(2,168,879)

Cash flow from investing activities:

Purchase of property and equipment

(44,607)

(21,719)

Purchase of intangible assets

(161,140)

(98,998)

Acquisition of remaining interest in Pools Press

-

(120,000)

Net cash used in investing activities

(205,747)

(240,717)

Cash flow from financing activities:

Issuance of shares upon exercise of warrants

-

2,484,187

Payment of notes payable

(42,249)

-

Payment of capital lease obligation

(484,835)

(16,864)

Payment of related parties

(67,383)

-

Advances (payments) under line of credit

(661,769)

1,284,987

Net cash provided by (used in) financing activities

(1,256,236)

3,752,310

Effect of exchange rate changes

138,197

-

Net increase in cash and cash equivalents

473,401

1,342,714

Cash and cash equivalents, beginning of period

2,868,260

1,852,231

Cash and cash equivalents, end of period

$

3,341,661

$

3,194,945

Supplemental disclosures of cash flow information:

Cash paid for income taxes

$

19,629

$

-

Cash paid for interest

$

123,014

$

33,508

Supplemental disclosures of non-cash investing and financing activities:

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

$

-

34,904