Derycz Scientific Reports First Quarter Fiscal Year 2012 Results

First Quarter Total Revenue Grows 64% Year-over-Year

First Quarter Revenue From US Operations Grows 13% Year-over-Year

New, Higher Margin, Service Offerings to Come Next Quarter

SANTA MONICA, Calif., Nov. 15, 2011 /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 Sciences and other research intensive industries, today reported financial and operating results for the first quarter of its fiscal year 2012 (quarter ended September 30, 2011).

Fiscal year 2012 first quarter total revenue increased 64% to $9.9 million from $6.0 million in the fiscal year 2011 first quarter.
Fiscal year 2012 first quarter revenues of $3.1 million from the Company's recently acquired French subsidiary.
Fiscal year 2012 first quarter revenues from US operations increased 13% to $6.8 million from $6.0 million in the fiscal year 2011 first quarter.
New, higher margin, service offerings are anticipated to come next quarter

Management Commentary

"We continued to grow and are very excited about the new customers that have joined us. Our new social, mobile and search tools will start coming on line in the second quarter. These new, higher margin, offerings are tools that we expect will be well received by our existing customer base, and we expect they will also help us find new customers," said Peter Derycz, President and CEO. He continues: "Acquiring customers and delighting them with best-in-class information logistics solutions is what we are all about."

Newly appointed CFO Alan Urban said, "We posted solid revenue gains despite an environment of continued economic weakness, particularly in Europe, where revenue from our recently acquired French subsidiary did not meet expectations. While top line growth has been our priority, we now have to focus on profitability," added Mr. Urban. "We plan on instituting expense reduction measures and reviewing the financial terms of our relationships with significant vendors and customers to reduce our losses and get on a path to profitability."

Quarterly Results at a Glance (Table amounts in 000's except per share amounts)
	Q1 Fiscal Year 2012		Q1 Fiscal Year 2011		% Change

Revenue	$	9,861	$	6,017		64%
Gross profit		1,472		817		80%
Loss from operations		(1,641)		(391)		(320)%
Net loss		(1,692)		(405)		(318)%
Net loss per diluted share		(0.10)		(0.03)		(233)%
Adjusted EBITDA		(1,233)		(276)		(347)%

Cash flow from operations		822		(1,086)		176%

Revenue by segment:
US operations		6,807		6,017		13%
France		3,054		-		-

Gross profit by segment:
US operations		807		817		1%
France		1,086		-		-

Gross profit percentage by segment:						-
US operations		6%		14%		(57)%
France		36%		-		-
Total		15%		14%		7%

Both the Company's net income and Adjusted EBITDA were negatively affected in the amount of $710,749 by a GAAP accounting method which requires the Company to amortize Certain Publisher Guaranteed Payments ("CPGPs") on a straight-line basis over the life of the contracts, instead of accounting for them as a percentage of the revenue generated under the contracts. This accounting treatment results in higher amortized costs in the early periods of the agreements. For the three months ended September 30, 2011, we recorded approximately $697,465 in revenue under the CPGPs while amortizing approximately $1,303,594 of costs, which caused our cost of goods sold to increase significantly relative to the revenue levels and therefore significantly reducing our gross margin.

Use of Non-GAAP Measures – Adjusted EBITDA

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 Adjusted EBITDA. Management believes that this non-GAAP measure provides useful information about the Company's operating results. The attached tables provide a reconciliation of these non-GAAP financial measures with the most directly comparable GAAP financial measures.

Adjusted EBITDA is defined as net income (loss) from continuing operations before interest, income taxes, depreciation and amortization expenses, excluding stock-based compensation, and amounts included in other non-operating income or expense.

Adjusted EBITDA is not intended to replace operating income (loss), net income (loss) and other measures of financial performance reported in accordance with GAAP. Rather, Adjusted EBITDA is a measure of operating performance that may be considered in addition to those measures.

Reconciliation of Adjusted EBITDA to Loss from Operations (Table amounts in 000's)
	Q1 Fiscal Year 2012		Q1 Fiscal Year 2011

Loss from operations	$	(1,641)	$	(391)
Add:
Depreciation and amortization		505		76
Stock-based compensation	(97)		38
Adjusted EBITDA	$	(1,233)	$	(276)

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 November 14, 2011 in its Quarterly Report on Form 10-Q for the period ended September 30, 2011. The Quarterly Report can be viewed at www.sec.gov.

Derycz Scientific, Inc. and Subsidiaries Condensed Consolidated Balance Sheets
	September 30,		June 30,
	2011		2011
	(unaudited)
ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	3,045,275	$	2,868,260
Accounts receivable:
Trade receivables, net of allowance of $201,584 and $223,298, respectively		6,854,452		6,690,662
Due from factor		141,238		356,540
Inventory		557,562		759,507
Prepaid expenses		243,614		298,927
Prepaid royalties		721,581		1,245,872
Other current assets		16,309		18,320

TOTAL CURRENT ASSETS		11,580,031		12,238,088

PROPERTY AND EQUIPMENT, net of accumulated depreciation of $987,699 and $724,004, respectively		1,344,531		1,666,462

INTANGIBLE ASSETS, net of accumulated amortization of $858,554 and $641,698, respectively		1,694,640		1,883,660

GOODWILL		1,567,604		1,567,604

DEPOSITS AND OTHER ASSETS		283,577		308,721
TOTAL ASSETS	$	16,470,383	$	17,664,535

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable	$	7,682,944	$	6,296,566
Capital lease obligation, current		476,001		663,973
Accrued expenses and other current liabilities		654,296		748,969
Notes payable, current		57,787		53,252
Due to factor		319,444		312,440
Due to related parties		20,371		71,902
Line of credit		1,082,008		1,436,233
Deferred revenue		111,479		158,240
TOTAL CURRENT LIABILITIES		10,404,330		9,741,575

Notes payable, long term		92,460		110,080
Capital lease obligation, long term		1,211,376		1,281,600
Liability for estimated earnout		359,338		359,338
Deferred tax liability		350,000		350,000

TOTAL LIABILITIES		12,417,504		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		17,069		16,823
Accumulated other comprehensive income (loss)		8,013		(11,590)
Additional paid-in capital		13,371,233		13,468,580
Accumulated deficit		(9,343,436)		(7,651,871)

TOTAL STOCKHOLDERS' EQUITY		4,052,879		5,821,942

TOTAL LIABILITIES AND EQUITY	$	16,470,383	$	17,664,535

Derycz Scientific, Inc. and Subsidiaries Condensed Consolidated Statements of Operations and Other Comprehensive Income (Loss) (Unaudited)
	Three Months ended
	September 30,
	2011		2010

NET SALES	$	9,861,219	$	6,016,656

COST OF SALES		8,388,742		5,199,811

GROSS PROFIT		1,472,477		816,845

OPERATING EXPENSES:
General and administrative		2,439,030		1,033,497
Marketing and advertising		188,414		114,526
Depreciation and amortization		486,001		59,550

TOTAL OPERATING EXPENSES		3,113,445		1,207,573

LOSS FROM OPERATIONS		(1,640,968)		(390,728)

Currency gain (loss)		(1,465)		-
Other Income		2,255		-
Interest expense		(51,694)		(15,150)
Interest income		307		609

NET LOSS		(1,691,565)		(405,269)

OTHER COMPREHENSIVE INCOME (LOSS):
Foreign currency translation		19,603		-

COMPREHENSIVE LOSS	$	(1,671,962)	$	(405,269)

NET LOSS PER SHARE:
BASIC AND DILUTED	$	(0.10)	$	(0.03)

WEIGHTED AVERAGE SHARES OUTSTANDING:
BASIC AND DILUTED		16,977,178		13,011,527

Derycz Scientific, Inc. and Subsidiaries Condensed Consolidated Statement of Stockholders' Equity For the three months ended September 30, 2011 (Unaudited)
					Additional				Other		Total
	Common stock				paid-in		Accumulated		Comprehensive		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		-		-		37,084		-				37,084

Common shares issued upon exercise of warrants		246,928		246		(246)		-				-

Fair value of warrants issued for services		-		-		48,939		-				48,939

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								(1,691,565)				(1,691,565)

Foreign currency translation										19,603		19,603

Balance, September 30, 2011		17,069,437	$	17,069	$	13,371,233	$	(9,343,436)	$	8,013	$	4,052,879

Derycz Scientific, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited)
	Three Months ended
	September 30,
	2011		2010

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(1,691,565)	$	(405,269)
Adjustment to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		505,108		76,467
Fair value of vested stock options		37,084		20,529
Fair value of warrants issued for services		(398,899)		-
Fair value of common shares issued for services		-		17,648
Fair value of warrant extensions		264,714		-

Changes in assets and liabilities:
Accounts receivable		(163,790)		(381,887)
Inventory		201,945		(4,383)
Due from Factor		215,302		-
Prepaid expenses		55,313		22,235
Prepaid royalties		524,291		-
Other current assets		27,155		20,262
Accounts payable and accrued expenses		1,386,378		(394,762)
Other current liabilities		(141,434)		(57,330)

Net cash provided by (used in) operating activities		821,602		(1,086,490)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(30,680)		(15,448)
Purchase of intangible assets		(27,836)		-
Acquisition of remaining interest in Pools Press		-		(120,000)

Net cash used in investing activities		(58,516)		(135,448)

CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of notes payable		(13,085)		-
Due to factor		7,004		-
Payment of capital lease obligation		(258,196)		(8,226)
Payment of related parties		(51,531)		-
Advances (payments) under line of credit		(354,225)		1,375,000

Net cash provided by (used in) financing activities		(670,033)		1,366,774

Effect of exchange rate changes		83,962		-

NET INCREASE IN CASH AND CASH EQUIVALENTS		177,015		144,836

CASH AND CASH EQUIVALENTS, Beginning of period		2,868,260		1,852,231

CASH AND CASH EQUIVALENTS, End of period	$	3,045,275	$	1,997,067

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Taxes paid	$	-	$	-
Interest paid	$	51,694	$	15,150

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., Pools Press, 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.

SOURCE Derycz Scientific, Inc.