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.