2014

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

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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