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February 14, 2011

Reprints Desk's Parent Company Derycz Scientific Announces Record Revenues for the Second Quarter

Derycz Scientific, Inc.

SANTA MONICA, Calif., Feb. 14, 2011 /PRNewswire/ -- Derycz Scientific, Inc. (OTC Bulletin Board: DYSC), a company pioneering a fresh way of facilitating the flow of information from content publishers to enterprise customers and their constituents, today reported record revenues for the three months ended December 31, 2010.  Derycz reported revenues of $8.5 million for the three months ended December 31, 2010, an increase of 42% compared with $6.0 million the three months ended September 30, 2010 and an increase of 12% from $7.6 million for the quarter ended December 31, 2009.  

"About 22% of our second quarter revenues were from new customers who were first-time users of our services in fiscal 2010," said Peter Derycz, president and CEO of Derycz Scientific.  "This surge in new customers was driven by our publisher relationships and internet marketing efforts.  We expect continued revenue growth for the remainder of this year through a strategy of customer retention, increased sales to current customers, new customer acquisition, new service offerings and strategic acquisitions."

Derycz added, "We recently expanded our publisher relationships through an agreement that allows Reprints Desk to electronically distribute articles from the New England Journal of Medicine.  With agreements already in place covering the Journal of the American Medical Association (JAMA) and the Lancet from Elsevier, Reprints Deck now electronically distributes articles from the world's top three medical journals in terms of impact.  In mid-December we further expanded our customer base by completing the transition of the nearly 100 customers from research-services provider TDI Library Services to Reprints Desk.

"We also received $2.5 million in cash from the exercise of warrants during the quarter ended December 31, 2010, which strengthened our balance sheet by providing additional working capital for our operations. We believe these exercises reflect the value that these current investors see in our company and our future."

Cost of goods sold increased 22% for the second quarter of fiscal 2011 compared with the prior year period.  Gross margin was 7%, compared with 14% for the second quarter of fiscal 2010.  The decrease in gross margin is primarily due to the accounting method that requires straight line amortization of certain publisher agreements over the life of the contracts, which results in higher amortized costs in early periods of the agreements.

General and administration expenses for the quarter ended December 31, 2010 increased to $1.6 million compared with $791,793 for the quarter ended December 31, 2009.  These costs included consultant fees and expenses associated with warrants, as well as higher expenses from Reprints Desk, including increases in sales and marketing, information technology and accounting personnel.  Marketing and advertising expenses for the second quarter of fiscal 2011 were $135,329 compared with $25,113 for the prior year period, with the increase due to expanded marketing efforts.

Derycz Scientific reported a net loss of $1.3 million, or $0.09 per share, for the three months ended December 31, 2010, compared with net income of $234,734, or $0.02 per diluted share, for the three months ended December 31, 2009.

For the six months ended December 31, 2010, the company reported revenues of $14.5 million, a 17% increase from $12.4 million for the six months ended December 31, 2009.  Operating expenses for the first six months of fiscal 2011 increased to $3.0 million from $1.9 million in the prior year period.  For the six months ended December 31, 2010, the company reported a net loss of $1.7 million, or $0.13 per share, compared with a net loss of $75,957, or $0.01 per share, for the six months ended December 31, 2009.

Derycz had cash and cash equivalents of $3.2 million as of December 31, 2010, compared with $1.9 million as of June 30, 2010.  The increase in cash and cash equivalents reflects the company's receipt of $2.5 million from the exercise in warrants and $1.3 million in advances under its credit line.  

About Derycz Scientific®

Derycz Scientific, Inc. develops companies, products, services and systems that 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.  Its wholly owned subsidiary companies include Reprints Desk and Pools Press.  Reprints Desk offers a one-stop solution for reprints, ePrints and single articles, and has delivered millions of articles worldwide.  Reprints Desk is an innovator in content retrieval and ePrint delivery, and its services are designed to help make effective use of published articles in a copyright-compliant manner.  Pools Press has excelled in the reprint market for more than 30 years. It provides professionally printed articles from medical and technical journals; prints booklets, catalogs, pamphlets, direct mail pieces and newsletters; and works with publishers who wish to outsource a portion of or all of their reprints business.  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; 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. The Company assumes no obligation to update the cautionary information in this release.

Derycz Scientific, Inc.

Condensed Consolidated Balance Sheets

 
 

December 31,

 

June 30,

   
 

2010

 

2010

   
 

(unaudited)

       

ASSETS

         
           

CURRENT ASSETS

         

Cash and cash equivalents

$

3,194,945

 

$

1,852,231

   

Accounts receivable, net of allowance of $59,061 and $59,061

 

5,512,203

   

4,448,269

   

Inventory

 

9,315

   

6,628

   

Prepaid expenses

 

1,296,515

   

714,287

   

Other current assets

 

71,617

   

84,470

   
               

TOTAL CURRENT ASSETS

 

10,084,595

   

7,105,885

   
               

PROPERTY AND EQUIPMENT, net of 

accumulated depreciation of $390,095 and $317,629

 

322,117

   

372,868

   
               

INTANGIBLE ASSETS

             

Intellectual property licenses, net of amortization of $387,310 and $297,887

 

755,604

   

674,779

   
               

GOODWILL

 

223,385

   

223,385

   
               

TOTAL ASSETS

$

11,385,701

 

$

8,376,917

   
               

LIABILITIES AND STOCKHOLDERS' EQUITY

             
               

CURRENT LIABILITIES

             

Accounts payable

$

5,400,681

 

$

4,887,636

   

Payable on Credit Line

 

1,284,987

   

-

   

Capital lease obligation, current

 

35,079

   

33,682

   

Other current liabilities

 

84,931

   

97,824

   

TOTAL CURRENT LIABILITIES

 

6,805,678

   

5,019,142

   
               

CAPITAL LEASE OBLIGATIONS

 

25,253

   

43,514

   
               

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; 15,244,297 and 13,001,830 shares issued and outstanding

 

15,244

   

13,002

   

Additional paid-in capital

 

8,492,504

   

5,510,620

   

Accumulated deficit

 

(3,952,978)

   

(2,244,265)

   
               

TOTAL STOCKHOLDERS' EQUITY

 

4,554,770

   

3,279,357

   
               

NONCONTROLLING INTEREST

 

-

   

34,904

   

TOTAL EQUITY

 

4,554,770

   

3,314,261

   
               

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

11,385,701

 

$

8,376,917

   
   
             

 

Derycz Scientific, Inc.

Condensed Consolidated Statements of Operations

(unaudited)

 
 

Three Months Ended

   

Six Months Ended

   
 

December 31,

   

December 31,

   
 

2010

   

2009

   

2010

   

2009

   
                         

NET SALES

$

8,514,233

   

$

7,590,459

   

$

14,530,890

   

$

12,374,158

   
                                 

COST OF SALES

 

7,944,794

     

6,497,316

     

13,144,602

     

10,564,711

   
                                 

GROSS PROFIT

 

569,439

     

1,093,143

     

1,386,288

     

1,809,447

   
                                 

OPERATING EXPENSES:

                               

General and administrative

 

1,638,793

     

791,793

     

2,672,298

     

1,737,226

   

Marketing and advertising

 

135,329

     

25,113

     

249,855

     

63,566

   

Depreciation and amortization

 

66,375

     

48,921

     

125,925

     

98,494

   
                                 

TOTAL OPERATING EXPENSES

 

1,840,497

     

865,827

     

3,048,078

     

1,899,286

   
                                 

INCOME (LOSS) FROM OPERATIONS

 

(1,271,058)

     

227,316

     

(1,661,790)

     

(80,839)

   
                                 

Other Income

 

-

     

12,191

     

-

     

13,260

   

Interest expense

 

(33,508)

     

(1,604)

     

(48,658)

     

(3,143)

   

Interest income

 

1,124

     

758

     

1,735

     

2,307

   
                                 

INCOME (LOSS) BEFORE NONCONTROLLING INTEREST

 

(1,303,442)

     

238,661

     

(1,708,713)

     

(77,415)

   
                                 

NET LOSS (INCOME) ATTRIBUTABLE TO NONCONTROLLING INTEREST

 

-

     

(3,927)

     

-

     

(1,458)

   
                                 

NET INCOME (LOSS) ATTRIBUTABLE TO DERYCZ SCIENTIFIC, INC.

$

(1,303,442)

   

$

234,734

   

$

(1,708,713)

   

$

(75,957)

   
                                 

NET INCOME (LOSS) PER SHARE:

                               

BASIC AND DILUTED

$

(0.09)

   

$

0.02

   

$

(0.13)

   

$

(0.01)

   
                                 

WEIGHTED AVERAGE SHARES OUTSTANDING:

                               

BASIC AND DILUTED

 

14,157,760

     

12,961,830

     

13,584,643

     

12,961,830

   
   
                               

SOURCE Derycz Scientific, Inc.