Seeking Alpha
Profile| Send Message|
( followers)

Derycz Scientific, Inc. (DYSC) has completed its corporate turnaround, as its customer accounts climb. Their most recent report, Q1 2013, showed that they posted adjusted EBITDA of $221,000.

This was a positive swing of $1.5 million from Q1 2012, last year. Other major metrics were:

  • DYSC's gross operating profit increased to 23%, up from 15%.
  • DYSC's reaffirmed guidance for its US Operations of $1 million on estimated annual revenues in excess of $40 million.
  • DYSC's paid down $750,000 of the $1,000,000 in debt in the past
  • quarter from its cash flow. I expect the balance to be zero by the end of this quarter.
  • DYSC said its adding one new corporate customer every business day.
  • They started 2012 at 600, now they are closing in on 1,000.
  • The potential customer base for DYSC's products, according to its CEO Peter Derycz, reaches into the "tens of thousands from all around the world."

DYSC's business model is simple. It aggregates scientific information from publishers, globally, and then resells this information to its customers. An example would be a medical journal publisher who has thousands of volumes of research data and findings. DYSC licenses their journal library, and through use of proprietary tools, resells the information to researchers, regulatory administrators or marketing agents, who may need to use this copyrighted information.

Much like Apple's (NASDAQ:AAPL) iTunes, which creates a library of music, DYSC creates a library of periodicals, journals and research papers. And similar to iTunes, where record companies have taken vast untapped libraries of music for monetization, so too are content publishers in the science and medical space. From the publisher side, DYSC monetizes libraries while protecting copyrights, something others in their space have had a difficult time doing.

Through their main operating arm, Reprints Desk, they have launched award-winning tools such as Bibliogo and Article Galaxy. DYSC's customers rely on them to improve literature processes and spending. Their 24/7 customer service is unparalleled in the space.

DYSC has just shy of 18 million shares outstanding, with 9 million owned by insiders. If DYSC continues to demonstrate growing cash flow and finish next June, its fiscal 2013, with an annual run rate of $2mm in positive cash flow, the current stock price of $0.76 should be a distant memory. DYSC's 52 week high is $1.49. With another good round of earnings due in February and future road shows, it won't be long until DYSC's stock garners the attention it deserves.

Risk factors regarding DYSC stock

Because DYSC is quoted on the OTC Bulletin Board rather than on a national securities exchange, you may find it difficult to either dispose of, or to obtain quotations as to the price. DYSC is thinly traded on the OTC Bulletin Board and under $1.00 a share. As a result, DYSC will most likely constitute a "Penny Stock." Broker-dealer practices in connection with transactions in Penny Stocks are regulated by rules adopted by the Securities and Exchange Commission. Penny Stocks are generally equity securities with a price per share of less than $5.00 (other than securities registered on certain national exchanges).

The Penny Stock rules require a broker-dealer, prior to a transaction in Penny Stocks not exempt from the rules, to deliver a standardized risk disclosure document that provides information about Penny Stocks and the nature and level of risks in the Penny Stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the Penny Stock, the compensation of the broker-dealer and the salesperson in the transaction, and monthly accounting statements showing the market value of each Penny Stock held in the customer's account. In addition, the broker-dealer must make a special written determination that the Penny Stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These requirements may have the effect of reducing the level of trading activity in a Penny Stock, such as DYSC, and investors may find it difficult to sell their shares.

Read additional risk factors, presented by DYSC in their Annual Report.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.