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

February 14, 2011

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

 

Dec. 31, 2010

(unaudited)

Jun. 30,

2010

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 Dec. 31

Six Months Ended Dec. 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.

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