Derycz Scientific Reports Record Revenue for Second Quarter 2012

Results Include $12.1 Million in Second Quarter Revenue; Improvements in Gross Margin and Operating Expenses to Come in the Third Quarter

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Derycz Scientific, Inc.

Feb 15, 2012, 09:00 ET

SANTA MONICA, Calif., Feb. 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 second quarter of its fiscal year 2012 (quarter ended December 31, 2011).

Fiscal year 2012 second quarter total revenue increased 42% to $12.1 million from $8.5 million in the fiscal year 2011 second quarter.
Fiscal year 2012 second quarter revenues from US operations increased 5% to $9 million from $8.5 million in the fiscal year 2011 first quarter.
Fiscal year 2012 second quarter revenues of $3.1 million from French subsidiary TAAG
Strong improvements in gross margin and operating expenses going forward
New, higher margin service offerings launched

Management Commentary

"We are very excited about our continued growth. Our customer list is growing, our core capabilities are improving and our geographic presence is expanding," said Peter Derycz, President and CEO. "Additionally, our product portfolio is also expanding as our new social, mobile and search tools come online. Article Galaxy™ is now live, as is Bibliogo™ which rapidly won the Software & Information Industry Association's "CODiE" award in the category of Best Online Science or Technology Service. The accolades keep coming in. We're honored and humbled, and wake up each day with the satisfaction of knowing that we're a valuable part of our customer's information workflows."

Alan Urban, Chief Financial Officer, added "As mentioned last quarter, we are now focusing on profitability and have already successfully completed numerous improvements in gross margin and operating expenses. We believe these changes will progress us towards profitability going forward."

Conference Call

Derycz Scientific management will host an investment-community conference call on Thursday, February 16, 2012 beginning at 9:00 a.m. Eastern time (6:00 a.m. Pacific time) to discuss these results and answer questions. To participate in the call please dial (866) 516-3002 for domestic callers or +1 (253) 237-1159 for international callers, and enter passcode 53633126 when prompted.

The webcast will also be available from the Company's Web site 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.

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 February 14, 2012 in its Quarterly Report on Form 10-Q for the period ended December 31, 2011. The Quarterly Report can be viewed at www.sec.gov.

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

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. The Company assumes no obligation to update the cautionary information in this release.

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