Derycz Scientific Reports Record Revenue for Third Quarter 2012 Results Include $251 Thousand in Third Quarter Income from Operations before Depreciation and Amortization, Stock-Based Compensation, and Impairment Charges

ENCINO, Calif., May 15, 2012 /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 science and other research intensive industries, today reported financial and operating results for the third quarter of its fiscal year 2012 (quarter ended March 31, 2012).

Third Quarter highlights:

  • $251,000 in third quarter income from operations before depreciation and amortization, stock-based compensation, and impairment charges
  • Social, Mobile, and Search tools fully launched, and first sales completed.
  • Total of $2.3M in one-time impairment charges related to the acquisition of TAAG and intellectual property licenses

Third Quarter year-over-year highlights:

  • Gross profit as a percentage of revenue increased to 22.5% from 8.7% in 2011
  • 31% increase in total revenue to $10 million from $7.6 million in 2011 third quarter

Management Commentary

"We've continued to experience positive growth, and are extremely excited about the fact that our main operating company, Reprints Desk, now has positive income from operations before adjustments. Income may be lifted even further as we roll out new high margin Software-as-a-Service (SaaS) offerings, Bibliogo and Article Viewer mobile app as part of our Article Galaxy platform.  Additionally, we've had recent top pharma company wins that should bring an additional ten million dollars in revenues over the next year," said Derycz Scientific President and CEO Peter Derycz.  "In contrast to our Reprints Desk success, we've experienced difficulties in our TAAG operation. We have responded there by instituting a management change that will be bringing a "hands-on" approach to revenue growth and operational efficiencies as well as by taking a one-time impairment charge in regards to that acquisition."

Alan Urban, Chief Financial Officer, added, "As mentioned last quarter, we completed numerous improvements in gross margin and operating expenses and as a result gross margin as a percentage of revenue increased to 22.5% and we achieved $251 thousand of income from operations before depreciation and amortization, stock-based compensation, and impairment charges.  In addition, with the impairment charges related to the acquisition of TAAG and intellectual property licenses behind us, we are well positioned for profitability going forward."

Conference Call

Derycz Scientific management will host an investment-community conference call on Wednesday, May 16, 2012 beginning at 2:00 p.m. Eastern time (11:00 a.m. Pacific time) to discuss these results and answer questions. To participate in the call please dial +1 (866) 516-3002 for domestic callers or +1 (253) 237-1159 for international callers, and enter passcode 82552156 when prompted.

The webcast will also be available from the Company's website at www.deryczscientific.com. Listening to the webcast requires Internet access and the Windows Media Player or other compatible streaming media player. A recorded replay will be available on the deryczscientific.com website for 60 days following the conclusion of the call.

Use of Non-GAAP Measure – Income from Operations before Depreciation and Amortization, Stock-Based Compensation, and Impairment Charges

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 Income from operations before depreciation and amortization, stock-based compensation, and impairment charges. Management believes that this non-GAAP measure provides useful information about the Company's operating results.  The attached tables provide a reconciliation of this non-GAAP financial measure with the most directly comparable GAAP financial measure.

 

Reconciliation of Income from Operations before Depreciation and Amortization, Stock-Based Compensation, and Impairment Charges to Loss from Operations

 

(Table amounts in 000's)

 



US

Operations
Q3 Fiscal Year 2012



TAAG

(France)

Q3 Fiscal Year 2012



Total

Q3 Fiscal
Year 2012












Loss from operations


$

(508)



$

(1,936)



$

(2,444)


Add:













  Depreciation and amortization



110




249




359


Stock-based compensation



45




-




45


Impairment charges



688




1,603




2,291


Income from operations before depreciation and amortization, stock-based compensation, and impairment charges


$

335



$

(84)



$

251


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 May 15, 2012 in its Quarterly Report on Form 10-Q for the period ended March 31, 2012. The Quarterly Report can be viewed at www.sec.gov.

 

 

Derycz Scientific, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

 



March 31,



June 30,




2012



2011




(unaudited)





Assets







Current assets:









Cash and cash equivalents


$

3,245,809



$

2,868,260


Accounts receivable:









Trade receivables, net of allowance of $170,695 and $223,298 , respectively



6,984,122




6,690,662


Due from factor



252,104




356,540


Inventory



637,660




759,507


Prepaid expenses



279,979




298,927


Prepaid royalties



232,063




1,245,872


Other current assets



908




18,320


Total current assets



11,632,645




12,238,088











Property and equipment, net of accumulated depreciation of $1,354,303 and $724,004 , respectively



979,032




1,666,462


Intangible Assets, net of accumulated amortization of $133,076 and $641,698 , respectively



83,578




1,883,660


Goodwill



223,385




1,567,604


Deposits and other assets



277,684




308,721


Total assets


$

13,196,324



$

17,664,535











Liabilities and Stockholders' Equity









Current Liabilities:









Accounts payable and accrued expenses


$

9,440,805



$

7,045,535


Capital lease obligation, current



592,333




663,973


Notes payable, current



56,691




53,252


Due to factor



323,389




312,440


Due to related parties



-




71,902


Line of credit



1,350,000




1,436,233


Deferred revenue



218,362




158,240


Total current liabilities



11,981,580




9,741,575











Notes payable, long term



68,029




110,080


Capital lease obligation, long term



741,651




1,281,600


Liability for estimated earnout



-




359,338


Deferred tax liability



-




350,000


Total liabilities



12,791,260




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, respectively



17,069




16,823


Accumulated other comprehensive income (loss)



12,605




(11,590)


Additional paid-in capital



13,625,240




13,468,580


Accumulated deficit



(13,249,850)




(7,651,871)


Total stockholders' equity



405,064




5,821,942


Total liabilities and stockholders' equity


$

13,196,324



$

17,664,535



 

 

Derycz Scientific, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations and Other Comprehensive Loss

(Unaudited)

 



Three Months Ended



Nine Months Ended




March 31,



March 31,




2012



2011



2012



2011















Revenue


$

9,986,862



$

7,628,334



$

31,937,600



$

22,156,368


Cost of revenue



7,743,917




6,967,975




26,442,918




20,112,574


Gross profit



2,242,945




660,359




5,494,682




2,043,794



















Operating expenses:

















Selling, general and administrative



2,037,231




2,084,618




7,668,062




5,000,134


Depreciation and amortization



359,220




63,207




1,325,315




189,132


Impairment loss related to the acquisition
     of TAAG



1,602,638




-




1,602,638




-


Impairment loss on intangible assets related to intellectual property licenses



688,138




-




688,138




-


Total operating expenses



4,687,227




2,147,825




11,284,153




5,189,266


Loss from operations



(2,444,282)




(1,487,466)




(5,789,471)




(3,145,472)



















Currency gain (loss)



(690)




(9,313)




(2,397)




(9,313)


Other income



4,050




-




23,903




(3,775)


Interest expense



(38,457)




(24,817)




(161,470)




(73,475)


Interest income



361




949




1,085




2,684


Loss before provision for income taxes



(2,479,018)




(1,520,647)




(5,928,350)




(3,229,351)


Income tax benefit



350,000




-




330,371




-



















Net loss



(2,129,018)




(1,520,647)




(5,597,979)




(3,229,351)


        Other comprehensive income:

                 Foreign currency translation



(9,745)




-




24,195




-


Comprehensive loss


$

(2,138,763)



$

(1,520,647)



$

(5,573,784)



$

(3,229,351)



















Net loss per share:

















Basic and diluted


$

(0.12)



$

(0.10)



$

(0.33)



$

(0.23)



















Weighted average shares outstanding:

















Basic and diluted



17,069,437




15,866,221




17,038,010




14,345,169



 

 

Derycz Scientific, Inc. and Subsidiaries

Condensed Consolidated Statement of Stockholders' Equity

For the Nine Months Ended March 31, 2012

(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



-




-




129,318




-








129,318



























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















(5,597,979)








(5,597,979)



























Foreign currency translation



















24,195




24,195



























Balance, March 31, 2012



17,069,437



$

17,069



$

13,625,240



$

(13,249,850)



$

12,605



$

405,064



 

 

Derycz Scientific, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 



Nine Months ended




March 31,




2012



2011









Cash flow from operating activities:









Net loss


$

(5,597,979)



$

(3,229,351)


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









Depreciation and amortization



1,378,984




244,243


Fair value of vested stock options



129,318




84,559


Fair value of warrants issued for services, net of adjustment



(237,126)




1,067,467


Fair value of common shares issued for services



-




76,123


Fair value of warrant extensions



264,714




-


Impairment loss related to the acquisition of TAAG



1,602,638




-


Impairment loss on intangible assets related to intellectual property licenses



688,138




-


Deferred income tax liability



(350,000)




-











Changes in assets and liabilities:









Accounts receivable



(293,459)




(1,876,631)


Inventory



121,847




(8,779)


Due from factor



104,436




-


Prepaid expenses



18,948




(370,217)


Prepaid royalties



1,013,809




-


Other assets



48,449




15,735


Accounts payable and accrued expenses



2,395,269




(960,559)


Other current liabilities



60,122




102,293


Income taxes payable



-




(600)


Net cash provided by (used in) operating activities



1,348,108




(4,855,717)











Cash flow from investing activities:









Purchase of property and equipment



(60,961)




(83,312)


Purchase of intangible assets



(188,960)




(98,998)


Cash acquired upon acquisition of TAAG



-




645,688


Acquisition of remaining interest in Pools Press



-




(120,000)


Net cash provided by (used in) investing activities



(249,921)




343,378











Cash flow from financing activities:









Issuance of shares upon exercise of warrants



-




2,484,187


Issuance of common shares and warrants



-




2,784,032


Advances (payments) to factor



10,949






Payment of notes payable



(38,612)




-


Payment of capital lease obligation



(611,589)




(25,368)


Payment of related parties



(71,902)




-


Advances (payments) under line of credit



(86,233)




1,171,178


Net cash provided by (used in) financing activities



(797,387)




6,414,029


Effect of exchange rate changes



76,749




-


Net increase in cash and cash equivalents



377,549




1,901,690


Cash and cash equivalents, beginning of period



2,868,260




1,852,231


Cash and cash equivalents, end of period


$

3,245,809



$

3,753,921




 

 

Derycz Scientific, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 



Nine Months ended




March 31,




2012



2011
















Supplemental disclosures of cash flow information:







Cash paid for income taxes


$

19,629



$

-


Cash paid for interest


$

161,470



$

73,475











Supplemental disclosures of non-cash investing and financing activities:









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


$

-



$

34,904


Acquisition of customer list through the issuance of common shares


$

-



$

71,250


Grant of common shares for acquisition


$

-



$

1,212,195


Liability of estimated earnout


$

-



$

621,985


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., 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.  Examples of forward-looking statements in this release include statements related to new products, anticipated revenue and profitability.  The Company assumes no obligation to update the cautionary information in this release.

SOURCE Derycz Scientific, Inc.



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