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September 29, 2011

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Reprints Desk Parent Company Derycz Scientific Reports 34% Revenue Increase For Fiscal 2011

Derycz Scientific, Inc.

SANTA MONICA, Calif., Sept. 29, 2011 /PRNewswire/ -- Derycz Scientific, Inc. (OTC Bulletin Board: DYSC), a company that is pioneering a fresh way of facilitating the flow of information from content publishers to enterprise customers and their constituents, today reported financial and operating results for the fiscal year ended June 30, 2011.

Financial highlights include the following:

  • Fiscal 2011 full year revenues increased 34% to $33.5 million from $24.9 million in fiscal 2010.
  • Fiscal 2011 fourth quarter revenues increased 77% to $11.3 million from $6.4 million in the fiscal 2010 fourth quarter.

"The past fiscal year was one of tremendous growth for Derycz Scientific.  We raised revenues by 34% while significantly expanding our customer base and publisher agreements, and adding to our technology solutions through new business relationships," said Peter Derycz, President and CEO of Derycz Scientific.  "Among our notable recent accomplishments, we completed our acquisition of Techniques Appliquees aux Arts Graphiques, S.p.A. (TAAG), which provides the Company with a physical presence in Europe, and provides global customers with a truly global information logistics solution.

"While our loss widened compared with the prior year, due principally to expenses related to warrant and option grants issued to the Company's consultants, directors and employees, in addition to costs associated with the amortization of guaranteed payments required under publisher agreements, and one-time costs associated with the acquisition of TAAG, we foresee the attainment of our profitability goals within a reachable timeframe.  Our optimism is fueled by our development of new, higher-margin products that we intend to sell into our existing customer base.

"As I previously stated at the end of the last quarter, we expect to continue significant revenue growth and improve our bottom line for coming quarters and fiscal 2012," added Mr. Derycz.  "We remain focused on our goals of growing our sales capabilities and enhancing our current line of products."  

Fiscal 2011 Financial Results

For fiscal 2011, revenues increased 34% to $33.5 million from $24.9 million in fiscal 2010.  The Company reported a net loss of $5,407,606 for the year ended June 30, 2011 compared to a net loss of $307,193 for the year ended June 30, 2010. Approximately $1,418,000 of the loss is attributable to expenses related to warrant and option grants issued to the Company's consultants, directors and employees.  Revenues from the Company's wholly owned subsidiary Reprints Desk increased 25% to $27.5 million from $22.0 million in fiscal 2010.  Pools Press contributed $2.2 million for the year and TAAG contributed $3.8 million for the three months ended June 30, 2011.  Gross margin decreased from 15% during the year ended June 30, 2010 to 12% for the year ended June 30, 2011.  The Company expects gross margin percentage to improve as TAAG's higher gross margin sales will contribute to the Company's overall gross margins and as it begins to market some higher gross margin products at Reprints Desk.

General and administrative expenses were $7.9 million for fiscal 2011, compared with $3.6 million in fiscal 2010.  Marketing and advertising expenses were $619,000, compared with $440,000 in the prior year.  For fiscal 2011, the Company reported a net loss of $5,407,606, or $0.36 per share, compared with a net loss of $307,000, or $0.02 per share, for fiscal 2010.

As of June 30, 2011, the Company had cash and cash equivalents of $2.9 million, compared to $1.9 million as of June 30, 2010.  

Fiscal Fourth Quarter Financial Results

For the fiscal 2011 fourth quarter, revenues increased 77% to $11.3 million, from $6.4 million in the fiscal 2010 fourth quarter.  This increase was due primarily to the Company's acquisition of TAAG and sales growth at Reprints Desk. Financial information for the fourth quarter of fiscal 2011 should be read in conjunction with the fiscal 2011 Financial Results set forth above and the Company's Annual Report on Form 10-K, filed today with the Securities and Exchange Commission.

Conference Call

Derycz Scientific management will host an investment-community conference call today beginning at 11:00 a.m. Eastern time (8:00 a.m. Pacific time) to discuss these results and answer questions.  To participate in the call please dial (888) 424-8151 for domestic callers, or +1 (847) 585-4422 for international callers, and enter passcode 7292 723 when prompted.

A telephone replay will be available for 30 days following the conclusion of the call by dialing (888) 843-7419 for domestic callers, or +1 (630) 652-3042 for international callers, and entering reservation code 7292 723 when prompted.

Derycz Scientific, Inc.

Consolidated Balance Sheets

 
   

June 30,

   

June 30,

   
   

2011

   

2010

   
               

ASSETS

             
               

CURRENT ASSETS

             

Cash and cash equivalents

 

$

2,868,260

   

$

1,852,231

   

Accounts receivable:

                 

    Trade receivables, net of allowance of $223,298 and $59,061, respectively

   

6,690,662

     

4,448,269

   

    Due from factor

   

356,540

     

-

   

Inventory

   

759,507

     

6,628

   

Prepaid expenses

   

298,927

     

-

   

Prepaid royalties

   

1,245,872

     

714,287

   

Other current assets

   

18,320

     

84,470

   
                   

TOTAL CURRENT ASSETS

   

12,238,088

     

7,105,885

   
                   

PROPERTY AND EQUIPMENT, net of accumulated depreciation of $724,004 and $317,629, respectively

   

1,666,462

     

372,868

   
                   

INTANGIBLE ASSETS

                 

Customer lists, net of accumulated amortization of $112,085 and $50,000

   

663,830

     

-

   

Covenant not to compete, net of accumulated amortization of $71,791 and $0

   

502,533

     

-

   

Intellectual property licenses, net of accumulated amortization of $457,822 and $297,887

   

717,297

     

674,779

   
                   

GOODWILL

   

1,567,604

     

223,385

   
                   

 DEPOSITS AND OTHER ASSETS

   

308,721

     

-

   

TOTAL ASSETS

 

$

17,664,535

   

$

8,376,917

   
                   

LIABILITIES AND STOCKHOLDERS' EQUITY

                 
                   

CURRENT LIABILITIES

                 

Accounts payable

 

$

6,296,566

   

$

4,887,636

   

Capital lease obligation, current

   

663,973

     

33,682

   

Accrued expenses and other current liabilities

   

748,969

     

97,824

   

Notes payable, current

   

53,252

     

-

   

Due to factor

   

312,440

     

-

   

Due to related parties

   

71,902

     

-

   

Line of credit

   

1,436,233

     

-

   

Deferred revenue

   

158,240

     

-

   

TOTAL CURRENT LIABILITIES

   

9,741,575

     

5,019,142

   
                   

Notes payable , long term

   

110,080

     

-

   

Capital lease obligation, long term

   

1,281,600

     

43,514

   

Liability for estimated earnout

   

359,338

     

-

   

Deferred tax liability

   

350,000

     

-

   
                   

TOTAL LIABILITIES

   

11,842,593

     

5,062,656

   
                   

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; 16,822,509 and 13,001,830 shares issued and outstanding

   

16,823

     

13,002

   

Accumulated other comprehensive loss

   

(11,590)

     

-

   

Additional paid-in capital

   

13,468,580

     

5,510,620

   

Accumulated deficit

   

(7,651,871)

     

(2,244,265)

   
                   

TOTAL STOCKHOLDERS' EQUITY

   

5,821,942

     

3,279,357

   
                   

NONCONTROLLING INTEREST

   

-

     

34,904

   
                   

TOTAL EQUITY

   

5,821,942

     

3,314,261

   
                   

TOTAL LIABILITIES AND EQUITY

 

$

17,664,535

   

$

8,376,917

   
   
                   

 

Derycz Scientific, Inc.

Consolidated Statements of Operations and Other Comprehensive Income (Loss)

 
   

Years ended

   
   

June 30,

   
   

2011

   

2010

   
               

NET SALES

 

$

33,500,438

   

$

24,935,473

   
                   

COST OF SALES

   

29,594,012

     

21,019,225

   
                   

GROSS PROFIT

   

3,906,426

     

3,916,248

   
                   

OPERATING EXPENSES:

                 

General and administrative

   

7,870,454

     

3,590,933

   

Marketing and advertising

   

618,976

     

439,877

   

Depreciation and amortization

   

673,881

     

206,616

   
                   

TOTAL OPERATING EXPENSES

   

9,163,311

     

4,237,426

   
                   

LOSS FROM OPERATIONS

   

(5,256,885)

     

(321,178)

   
                   

Currency gain (loss)

   

(23,363)

     

-

   

Other Income

   

13,480

     

5,415

   

Interest expense

   

(144,069)

     

(6,919)

   

Interest income

   

3,231

     

4,169

   
                   

LOSS BEFORE INCOME TAXES AND NONCONTROLLING INTEREST

   

(5,407,606)

     

(318,513)

   
                   

PROVISION FOR INCOME TAXES

   

-

     

(1,133)

   
                   

NET LOSS

   

(5,407,606)

     

(319,646)

   
                   

NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST

   

-

     

12,453

   
                   

NET LOSS ATTRIBUTABLE TO DERYCZ SCIENTIFIC, INC.

   

(5,407,606)

     

(307,193)

   
                   

OTHER COMPREHENSIVE INCOME (LOSS):

                 

Foreign currency translation

   

(11,590)

     

-

   
                   

COMPREHENSIVE LOSS

 

$

(5,419,196)

   

$

(307,193)

   
                   

NET LOSS PER SHARE:

                 

BASIC AND DILUTED

 

$

(0.36)

   

$

(0.02)

   
                   

WEIGHTED AVERAGE SHARES OUTSTANDING:

                 

BASIC AND DILUTED

   

14,964,504

     

12,966,830

   
   
                   

 

Derycz Scientific, Inc.

 

Consolidated Statement of Stockholders' Equity

For the years ended June 30, 2011 and 2010

 
         

Additional
paid-in

                   

Total
stockholders'

   
   

Common stock

       

Accumulated

   

Noncontrolling

   

Other
Comprehensive

     
   

Shares

   

Amount

   

capital

   

Deficit

   

Interest

   

Income

 

Equity

   
                                           

Balance, July 1, 2009

   

12,961,830

   

$

12,962

   

$

5,450,223

   

$

(1,937,072)

   

$

47,357

 

$

-

 

$

3,573,470

   
                                                       

Fair value of shares issued for services

   

40,000

     

40

     

45,960

                         

46,000

   
                                                       

Fair value of warrants issued for services

                   

14,437

                         

14,437

   
                                                       

Net loss for the period

                           

(307,193)

     

(12,453)

         

(319,646)

   
                                                       

Balance, July 1, 2010

   

13,001,830

     

13,002

     

5,510,620

     

(2,244,265)

     

34,904

   

-

   

3,314,261

   
                                                       

Acquisition of remaining interest in Pools Press

   

-

     

-

     

(120,000)

     

-

     

-

         

(120,000)

   
                                                       

Adjustment for noncontrolling interest in Pools Press

   

-

     

-

     

34,904

     

-

     

(34,904)

         

-

   
                                                       

Fair value of common shares issued for services

   

38,565

     

39

     

76,084

     

-

     

-

         

76,123

   
                                                       

Fair value of options issued to employees

   

-

     

-

     

121,643

     

-

     

-

         

121,643

   
                                                       

Common shares issued upon exercise of warrants

   

2,170,193

     

2,170

     

2,482,017

     

-

     

-

         

2,484,187

   
                                                       

Fair value of common shares issued for customer list

   

75,000

     

75

     

71,175

     

-

     

-

         

71,250

   
                                                       

Fair value of warrants issued for services

   

-

     

-

     

1,175,748

     

-

     

-

         

1,175,748

   
                                                       

Fair value of warrants issued to directors for services

   

-

     

-

     

120,978

     

-

     

-

         

120,978

   
                                                       

Common shares issued for cash

   

1,200,000

     

1,200

     

2,782,832

     

-

     

-

         

2,784,032

   
                                                       

Common shares issued for acquisition of TAAG

   

336,921

     

337

     

1,212,579

     

-

     

-

         

1,212,916

   

Net loss for the period

                           

(5,407,606)

     

-

         

(5,407,606)

   
                                                       

Foreign currency translation

                                         

(11,590)

   

(11,590)

   
                                                       

Balance, June 30, 2011

   

16,822,509

   

$

16,823

   

$

13,468,580

   

$

(7,651,871)

   

$

-

 

$

(11,590)

 

$

5,821,942

   
                                                       

 

Derycz Scientific, Inc.

 

Consolidated Statements of Cash Flows

 
   

Years ended

   
   

June 30,

   
   

2011

   

2010

   
               

CASH FLOWS FROM OPERATING ACTIVITIES:

             

Net loss

 

$

(5,407,606)

   

$

(319,646)

   

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

                 

Depreciation and amortization

   

750,190

     

270,981

   

Fair value of vested stock options

   

121,643

     

14,433

   

Fair value of warrants issued for services

   

1,296,726

     

46,000

   

Fair value of common shares issued for services

   

76,123

     

-

   
                   

Changes in assets and liabilities:

                 

Accounts receivable

   

(167,479)

     

(948,421)

   

Inventory

   

130,792

     

3,560

   

Due from Factor

   

(71,932)

     

-

   

Prepaid expenses

   

(68,339)

     

496,307

   

Prepaid royalties

   

(531,585)

     

-

   

Other current assets

   

(2,562)

     

(46,581)

   

Accounts payable and accrued expenses

   

(922,159)

     

1,851,021

   

Other current liabilities

   

(296,233)

     

(19,544)

   

Income taxes payable

   

(600)

     

(3,059)

   
                   

Net cash provided by (used in) operating activities

   

(5,093,021)

     

352,441

   
                   

CASH FLOWS FROM INVESTING ACTIVITIES:

                 

Purchase of furniture and equipment

   

(121,058)

     

(118,811)

   

Purchase of Intellectual Property licenses

   

(245,925)

     

(208,570)

   

Cash acquired upon acquisition of TAAG

   

325,383

     

-

   

Acquisition of remaining interest in Pools Press

   

(120,000)

     

-

   
                   

Net cash used in investing activities

   

(161,600)

     

(327,381)

   
                   

CASH FLOWS FROM FINANCING ACTIVITIES:

                 
                   

Payment of bank loans

   

(277,892)

     

-

   

Payment of capital lease obligation

   

(144,320)

     

(26,922)

   

Issuance of shares upon exercise of warrants for cash

   

2,484,187

     

-

   

Issuance of common shares and warrants for cash

   

2,784,032

     

-

   

Advances under line of credit

   

1,436,233

     

-

   
                   

Net cash provided by (used in) financing activities

   

6,282,240

     

(26,922)

   
                   

Effect of exchange rate changes

   

(11,590)

     

-

   
                   

NET INCREASE IN CASH AND CASH EQUIVALENTS

   

1,016,029

     

(1,862)

   
                   

CASH AND CASH EQUIVALENTS, Beginning of period

   

1,852,231

     

1,854,093

   
                   

CASH AND CASH EQUIVALENTS, End of period

 

$

2,868,260

   

$

1,852,231

   
                   

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

                 
                   

Taxes paid

 

$

-

   

$

32,174

   

Interest paid

 

$

146,206

   

$

6,919

   
                   

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

     

-

   

Capital lease obligation

 

$

-

     

42,640

   

Issuance of common shares for acquisition

 

$

1,212,195

     

-

   

Liability for estimated earnout on acquisition

 

$

359,338

     

-

   

Minority share of losses of subsidiary

 

$

-

     

12,453

   
                   
   

See notes to consolidated financial statements

 
                   

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 subsidiary companies include Reprints Desk, Inc., Pools Press, Inc. and Techniques Appliquees aux Arts Graphiques, S.p.A. (TAAG).  Reprints Desk improves how journal articles and clinical reprints are accessed, procured, and legally used in evidence-based promotions and scientific, technical, and medical (STM) research.  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.  TAAG offers printing, distribution and information logistics services, with core competencies in the professional production and distribution of clinical trial kits and clinical article reprints for the life sciences industry. 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.  The Company assumes no obligation to update the cautionary information in this release.