UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-K





(Mark
      One):ý
                  ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF 1934For
      the fiscal year ended June 30, 2009ORo
                  TRANSITION
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF 1934For
      the transition period fromto





Commission
File Number 000-53501





DERYCZ
SCIENTIFIC, INC.


(Exact
Name of Registrant as Specified in its Charter)


Nevada
              
              11-3797644(State
      or other jurisdiction
                of
      incorporation or organization)
              
              (I.R.S.
      Employer
                Identification
      No.)





1524
      Cloverfield Blvd., Suite E, Santa Monica, CA
              
              90404(Address
      of principal executive offices)
              
              (Zip
      Code)





Registrant's
telephone number, including area code: (310) 447-0354





Securities
registered pursuant to Section 12(b) of the Act: None





Securities
registered pursuant to Section 12(g) of the Act: common stock, par
value $0.001 per share





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes o    No þ





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes o    No þ





Indicate
by check mark whether the registrant: (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes þ
    No o





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or
any amendments to this Form 10-K. þ





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of "large accelerated filer," "accelerated filer," and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check
one):





Large accelerated filer o
            Accelerated filer oNon-accelerated filer o  (Do not check if a smaller reporting company)
            Smaller reporting company þ





Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes o    No þ





State the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
last sold, or the average bid and asked price of such common equity, as of the
last business day of the registrant’s most recently completed second fiscal
quarter. The registrant’s common stock was not trading publicly as of December
31, 2008, the last business day of the registrant’s most recently completed
second fiscal quarter.





Indicate
the number of shares outstanding of each of the registrant’s classes of common
stock, as of the latest practicable date.  As of September 22, 2009,
there were 12,961,830 shares of the registrant’s common stock
outstanding.





Table of
Contents





PART IItem 1.
                          Business
                          2Item 1A.
                          Risk Factors
                          4Item 1B.
                          Unresolved
      Staff Comments
                          4Item 2.
                          Properties
                          4Item 3.
                          Legal
      Proceedings
                          4Item 4.
                          Submission
      of Matters to a Vote of Security HoldersPART IIItem 5.
                          Market
      for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
                          5Item 6.
                          Selected
      Financial Data
                          5Item 7.
                          Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                          6Item 7A.
                          Quantitative
      and Qualitative Disclosures About Market Risk
                          10Item 8
                          Financial
      Statements and Supplementary Data
                          11Item 9.
                          Changes
      in and Disagreements With Accountants on Accounting and Financial
      Disclosure
                          26Item 9A(T)
                          Controls
      and Procedures
                          26Item 9B.
                          Other
      InformationPART IIIItem 10.
                          Directors,
      Executive Officers and Corporate Governance
                          27Item 11.
                          Executive
      Compensation
                          28Item 12.
                          Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
                          30Item 13.
                          Certain
      Relationships and Related Transactions, and Director
      Independence
                          32Item 14.
                          Principal
      Accounting Fees and Services
                          3232PART IVItem 15.
                          Exhibits,
      Financial Statement Schedules
                          34


i


PART
I





Item
1. Business





Company
Overview




Derycz
Scientific, Inc. (“Derycz,” “Derycz Scientific,” “we” or the “Company”) is
a publicly traded holding company with one wholly owned subsidiary,
Reprints Desk, Inc. (“Reprints” or “Reprints Desk”) and one majority owned
subsidiary, Pools Press, Inc. (“Pools” or “Pools Press”). Derycz, through
Reprints and Pools, provides its customers with copies of published content,
such as articles from published journals, in either electronic or hard copy
form. Our customers use this content for marketing, regulatory or research
purposes. Generally, marketing departments order large quantities of printed
copies that they distribute to their customers. Researchers generally order
single copies of the content. Our service alleviates the need for our customers
to contact any publisher or obtain permissions themselves. In addition, we
ensure that we have obtained the necessary permissions from the owners of the
content’s copyrights so that the reproduction complies with copyright laws. We
also offer a reprints service to publishers, whereby we are responsible for all
aspects of reprint production, from taking orders to final shipment. This
service eliminates the need for the publishers to establish a dedicated reprints
sales force or arrange for delivery of reprinted materials. Pools Press also
offers other commercial printing products, such as the production of business
cards and newsletters.




We
aggregate published materials and charge a fee for copies of them. When
possible, we obtain exclusive licenses and discounts from content producers,
such as publishers. We have a fixed pricing structure for single copy orders and
variable pricing for orders of multiple copies. For single copies of an article
we charge a fee above the cost of the article as well as a shipping fee if the
article is sent in hard copy form. For multiple copies of an article, we
generally obtain a price from the publisher and then add a service fee, which is
dependent on the customer, the size of the order, the complexity of the order
and other considerations. When possible we obtain the right to print the
reprints from the holder of the copyright and we print and ship the reprints
ourselves. However, many publishers have exclusive agreements with particular
printers and we are required to use those printers. By purchasing the reprints
or the rights to print from the publisher we are able to ensure our customers
that they have proper rights under copyright laws to use the content, provided
that they use the content only as specified in the order they placed with
us.




Reprints
Desk’s customer base grew from approximately 80 customers at June 30, 2008 to
over 150 customers on June 30, 2009.  In 2008, our services were
ranked first in all four categories in the 2008 Document Delivery Scorecard, a
customer satisfaction survey conducted by Outsell, an information industry
analyst.  Reprints Desk was also named to KMWorld’s “100 knowledge
management companies that matter” (one of the youngest companies ever to have
achieved that distinction) and it earned a 97% customer satisfaction rating from
the Dun & Bradstreet 2009 Open Ratings evaluation, relative to other
companies with similar classifications.




Our
overall revenue grew 20% during fiscal 2009.  While we had hoped to
increase our revenues by a larger amount, the economic climate has reduced the
marketing and research budgets of many of our customers and as a result their
order volume has decreased.  However, we expect the order volume to
increase as the economy recovers and we continue to add new
customers.




Publishers
typically produce their content in order to generate subscription and
advertising sales. The sale of published content generates additional revenues
at little or no additional cost to the publisher. As an example, if an article
contains a favorable mention of a chemical compound, the manufacturer of that
compound may want to send its customers and potential customers copies of the
article. These copies are called “reprints.” Reprints have traditionally been
used primarily in the pharmaceutical, biotechnology and medical device
industries both for research purposes and for marketing purposes. We expect that
the use of reprints will gain in popularity in other industries due to society’s
increasing sophistication and desire for information. Published articles are
useful marketing and information dissemination tools because they provide a
third party, unbiased endorsement of a company, product or service. Articles can
effectively describe the science behind a product or its effectiveness more
thoroughly than traditional advertising. Published content is also used
effectively for internal corporate training and education, as well as for
research and regulatory needs.




During
fiscal 2009 we entered into agreements with several publishers which gave us the
ability to acquire their content electronically, making it easier and faster for
us to deliver the content to our customers.




The
Industry




The size
of the reprint market is difficult to estimate because it is a small part of the
larger publishing industry and little financial information relating
specifically to the market for reprints is available. As a new business, we
believe we have a small fraction of that market. However, we believe that we are
able to compete with larger providers based on our customer service and our
order processing system. In addition, we have internal printing capability. As a
result, we are often able to substantially reduce the time it takes to deliver
the reprints to our customers.


2




Growth
Strategy




Organic Growth.
  The Company attempts to reach customers through the use of targeted
selling and marketing campaigns consisting of sales calls on potential
customers, supported by aggressive pricing and excellent service.




Publisher Agreements.
  We regularly contact publishers directly and attempt to negotiate
agreements with them under which the publisher would give us access to part or
all of their content and would agree to a price list. Once we have access and a
price list, when we receive an order for a particular article we can access the
article electronically, print the required number of copies and provide it to
the customer within a few days. These agreements eliminate the need to contact
the publisher and obtain the rights for each individual order. Because this step
is eliminated, we attempt to negotiate for discounts on the publisher’s existing
price list. Ideally, we would like to become the exclusive producer of reprints
for a publisher, allowing the publisher to eliminate the need for a reprints
staff internally.




Acquisitions.   The
Company may attempt to acquire companies in the industry that bring revenue,
profitability, growth potential and additional products and/or services to the
Company. The Company has targeted several potential acquisition opportunities.
We intend to implement acquisitions primarily through stock transactions,
supplemented only when necessary with a cash component. While we have entered
into preliminary discussions with three potential targets, we have not entered
into any letter of intent or other agreement relating to any target nor have we
determined the financial terms of any potential acquisition. We are continuing
to evaluate whether or not to pursue any opportunity further.




International Expansion.
  The Company operates primarily in the U.S. market, but has expanded
internationally through sales to companies located abroad, particularly in
Europe, and we hope to continue that growth through partnerships or acquisition
opportunities. We have begun selling reprints to a small number of customers in
Europe, and we are currently in discussions with the owners of a commercial
printer located in France regarding the potential acquisition of their
company.




Our
Products and Services




Reprints, ePrints and Article
Distribution Systems.   The Company has developed services that
provide reprints, ePrints and single copies of articles to its customers. We
accept reprint orders by email or phone, and we have developed an internet-based
ordering system that allows customers to initiate, at any time, orders by
specifying the citation or other identifying information related to the
particular article they need. In some cases, we are able to fulfill the order
without the need for action on the part of our employees. In addition, we have
internal printing capability. Because of this, if we are able to obtain the
right from the publisher to print the reprint ourselves, rather than purchasing
the printed reprints through the publisher, we are generally able to
substantially reduce the time it takes to deliver the reprints to our customers.
However, we are currently only able to obtain such print rights on a small
portion of our orders.




Publisher Outsourced Reprint
Management.   Derycz Scientific helps publishers grow and
manage their reprints business by providing a reprints service whereby we are
responsible for all aspects of reprint production, from taking orders to final
shipment. This service eliminates the need for the publishers to establish a
dedicated reprints sales force or arrange for delivery of reprinted materials.
While we do not charge the publishers for this service, we generate revenue by
selling participating publishers’ reprints to customers.




Print on Demand.
  The Company has begun to provide a print on demand service to some
customers. By using this service, a customer can print one or more hard copies
or send an electronic copy of a frequently used article without having to place
a separate order for each use of the article with the publisher. Uses could
include article reprints, course-packs, custom books, and other content re-use
printing that requires strict adherence to copyright law in the printing
process.




Logistics.   The
Company is developing a service which will allow a customer to print a large
quantity of reprints at one time and store them with us. We will then send them
to the customer as they need them. We also have technology which allows us to
monitor the number of times an electronic copy of an article has been viewed or
printed. This technology allows a customer to order a large quantity of
electronic copies and use them as needed while providing assurance to the
publisher that the customer will not exceed the number of views that were
sold.




Sales
and Marketing




Derycz
identifies target customers and communicates with them directly, offering our
various services through traditional cold-calling efforts. We also attempt to
increase our awareness to the market through attendance at publishing industry
fairs and conferences.


3





Item
1A.  Risk Factors.





Not
required.





Item
1B.  Unresolved Staff Comments.





Not
required.





Item
2.  Properties.




We
currently lease approximately 2,000 square feet of office space at 1524
Cloverfield Blvd., Suite E, Santa Monica, California for $5,200 per
month.  The lease expires in May 2012.  Until May 31, 2009
we sublet approximately 1,000 square feet of office space at 10990 Wilshire
Blvd., Suite 1410, Los Angeles, California from Bristol Capital Advisors, LLC
for $2,740.40 per month. Bristol Capital Advisers, LLC is the investment manager
of Bristol Investment Fund, Ltd., which holds a significant equity stake in the
Company and our Chief Financial Officer is also a director of Bristol Investment
Fund, Ltd. (see section entitled “Certain Relationships and Related
Transactions”).




Our
majority owned subsidiary, Pools Press, leases 13,000 square feet of office
space at 3455-3501 Commercial Avenue, Northbrook, Illinois for $7,750 per month
from an unrelated third party. The lease expires on May 31, 2011. Commencing
June 1, 2010, the rent will increase to $8,000 per month.





Item
3.  Legal Proceedings.




Derycz is
not presently a party to any pending legal proceedings.





Item 4.  Submission of Matters to a Vote of
Security Holders.





No
matters were submitted to a vote of security holders during the fourth quarter
of the fiscal year ended June 30, 2009.


4


PART
II





Item 5. Market for Registrant’s Common
Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities.




Market
Information




Our
common stock is quoted on the Over-the-Counter Bulletin Board ("OTCBB") under
the symbol "DYSC."  The following table sets forth, for the periods
indicated, the reported high and low closing bid quotations for our common stock
as reported on the OTCBB.  The bid prices reflect inter-dealer
quotations, do not include retail markups, markdowns, or commissions, and do not
necessarily reflect actual transactions.
 
 Quarter
      Ended
              
              High
      Bid
              
              
              Low
      BidJune
      30, 2009 *
              
              $
              1.00
              
              
              $
              0.30March
      31, 2009
              
              $
              *
              
              
              $
              *December
      31, 2008
              
              $
              *
              
              
              $
              *September
      30, 2008
              
              $
              *
              
              
              $
              *June
      30, 2008
              
              $
              *
              
              
              $
              *March
      31, 2008
              
              $
              *
              
              
              $
              *December
      31, 2007
              
              $
              *
              
              
              $
              *September
      30, 2007
              
              $
              *
              
              
              $
              *
  
 * Our
common stock had no active trading market until May 11, 2009.
  As of
September 23, 2009, we had a total of 12,961,830 shares of our common stock
outstanding.  As of September 25, 2009, the closing sales price for
shares of our common stock was $0.625 per share on the
OTCBB.




Holders




We
currently have 22 record holders of our common stock.




Dividends




We have
not paid any cash dividends and we currently intend to retain any future
earnings to fund the development and growth of our business. Any future
determination to pay dividends on our common stock will depend upon our results
of operations, financial condition and capital requirements, applicable
restrictions under any credit facilities or other contractual arrangements and
such other factors deemed relevant by our Board of Directors.




Equity
Compensation Plan Information




Information
relating to compensation plans under which our equity securities are authorized
for issuance is set forth in Item 12 of this report under “Security Ownership of
Certain Beneficial Owners and Management and Related Stockholder
Matters.”




Recent
Sales of Unregistered Securities





During
the year ended June 30, 2009, we sold the following equity securities of the
Company that were not registered under the Securities Act of 1933, as amended
(the “Act”), and that were not previously disclosed in a quarterly report on
Form 10-Q or on a current report on Form 8-K:




On May
28, 2009, we granted options to purchase an aggregate of 492,000 shares of
common stock at $1.50 per share to nine employees, which expire on May 28, 2019.
The options were issued in exchange for services rendered. These issuances were
exempt from registration under the Act pursuant to Rule 701 of the
Act.





Item
6. Selected Financial Data





Not
required.


5


Item
7.  Management's Discussion and Analysis of Financial Condition and
Results of Operations




The
following discussion and analysis of our results of operations and financial
condition for the years ended June 30, 2009 and 2008 should be read in
conjunction with our financial statements and the notes to those financial
statements that are included elsewhere in this report. Our discussion includes
forward-looking statements based upon current expectations that involve risks
and uncertainties, such as our plans, objectives, expectations and intentions.
Actual results and the timing of events could differ materially from those
anticipated in these forward-looking statements as a result of a number of
factors, including those set forth under the “Business” section and elsewhere in
this report. We use words such as “anticipate,” “estimate,” “plan,” “project,”
“continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,”
“could,” and similar expressions to identify forward-looking statements. All
forward-looking statements included in this report are based on information
available to us on the date hereof and, except as required by law, we assume no
obligation to update any such forward-looking statements.




Overview




Derycz
Scientific, Inc. (the “Company” or “Derycz”) was incorporated in the State of
Nevada on November 2, 2006. In November 2006 the Company entered into a Share
Exchange Agreement with Reprints Desk, Inc. (“Reprints”). At the closing of the
transaction contemplated by the Share Exchange Agreement, the Company acquired
all of the outstanding shares of Reprints from the shareholders of Reprints and
issued 8,000,003 of its common shares to the shareholders. Following completion
of the exchange transaction, Reprints became a wholly owned subsidiary of the
Company.




On
February 28, 2007, the Company entered into an agreement with Pools Press, Inc.
(“Pools”) of Northbrook, Illinois, a privately held company, pursuant to which
the Company acquired 75% of the issued and outstanding common stock of Pools for
consideration of $616,080. Pools is a commercial printer, specializing in
reprints of copyrighted articles. The results of Pools Press’ operations have
been included in the consolidated financial statements since March 1,
2007.




Derycz,
through Reprints and Pools, provides copies of published content, such as
articles from published journals, in either electronic or hard copy form. Our
customers use this content for marketing or research purposes. Generally,
marketing departments order large quantities of printed copies that they
distribute to their customers. Researchers generally order single copies of the
content. Our service alleviates the need for our customers to contact any
publisher or obtain permissions themselves. In addition, we ensure that we have
obtained the necessary permissions from the owners of the content’s copyrights
so that the reproduction complies with copyright laws. We also offer reprints
service to publishers, whereby we are responsible for all aspects of reprint
production, from taking orders to final shipment. This service eliminates the
need for the publishers to establish a dedicated reprints sales force or arrange
for delivery of reprinted materials. Pools Press also offers other commercial
printing products, such as the production of business cards and
newsletters.




Results
of Operations




Year
Ended June 30, 2009 Compared to the Year Ended June 30, 2008:




Sales
and Cost of Goods Sold




We
achieved revenues of $14,653,374 for the year ended June 30, 2009, compared to
revenue of $12,209,916 for the year ended June 30, 2008, an increase of
20%.  Our revenues for last six fiscal quarters have been $4,205,195,
$3,818,500, $3,426,953, $3,202,726, $4,143,157 and $2,910,183,
respectively.  These revenues have increased each quarter compared to
the prior quarter, with the exception of the quarter ending September 30, 2008
as a result of a very strong 4th quarter
in the 2008 fiscal year.  We expect revenues to continue to increase
during the 2010 fiscal year.
  The
revenue of our main operating company, Reprints, increased from $10,086,255 for
the year ended June 30, 2008, to $13,196,956 for the year ended June 30, 2009,
an increase of 31%. Pools Press contributed the remainder of the
revenue.
  Our cost
of goods sold increased from $10,023,768 for the year ended June 30, 2008, to
$11,413,544 for the year ended June 30, 2009, which represents an increase of
14%, which is lower than the percentage increase in our revenues.
  Our gross
margin increased from 18% during the year ended June 30, 2008 to 22% for the
year ended June 30, 2009.  This has been a result of increased sales
of higher margin products.
  We
anticipate that our sales will increase by at least 20% during the 2010 fiscal
year.  Because our customers are spending cautiously we will have to
rely heavily on new customer acquisition and new products and services to
achieve that growth.  We expect our cost of goods sold to continue to
increase by a lower percentage than our revenues.  This is a result of
efficiencies gained as a result of increased volume as well as changes to our
product mix towards higher margin products and
services.  However,  most of our costs are determined by the
publishers from whom we purchase media for each individual order and they do not
generally grant significant discounts.




6




Operating
Expenses




General
and Administrative




Our
general and administrative expenses increased 77% from $2,268,895 for the year
ended June 30, 2008 to $4,019,065 for the year ended June 30, 2009. These
expenses include Reprints’ salary costs, which were $1,133,710 in the 2008
fiscal year and $1,940,708 in the 2009 fiscal year, an increase of $806,998 or
71%.  During 2009 we added an additional salesperson as well as a
marketing manager and operations staff in order to increase our customer base
and to assist with implementation of and service new accounts.  We
also incurred investor relations expenses totaling $571,445 during the 2009
fiscal year compared to $57,969 in the 2008 period, an increase of $513,476 or
roughly 900%.  These expenses were incurred after our stock was listed
on the Over - the Counter Bulletin Board in an effort to increase the visibility
and ownership of our stock.  We do not expect to incur this level of
investor relations expense in fiscal 2010.  However, we will continue
to incur significant expenses related to investor relations as a result of being
a publicly traded company.  Also included in this figure is the
expense related to stock option grants of $161,271 in the 2009 year and $110,867
in fiscal 2008.  We do not plan to make any additional large option
grants during the 2010 fiscal year.Also included in this figure is the
expense related to stock option grants of $161,271 in the 2009 year and $110,867
in fiscal 2008.  We do not plan to make any additional large option
grants during the 2010 fiscal year.




Marketing
and Advertising




Our
marketing and advertising expenses increased from $40,437 for the year ended
June 30, 2008, to $158,524, an increase of $118,087 or 292%.  We
expanded our marketing efforts during the 2009 fiscal year and we expect our
marketing costs will increase to approximately $250,000 during fiscal
2010.




Depreciation
and Amortization




Our
depreciation expense decreased from $236,724 for the year ended June 30, 2008,
to $235,660 during the year ended June 30, 2009, a decrease of $1,064 or less
than 1%. Pools’ share of these expenses was $37,471 in the 2009 period and
included $36,667 related to the amortization of Pools’ customer list, which has
been fully depreciated as of June 30, 2009.




Unrealized
loss on marketable securities




We
recognized unrealized losses on our short-term investments of $33,660 during the
year ended June 30, 2008 and realized gains of $33,668 during the year ended
June 30, 2009.  These investments consisted of preferred stock auction
rate securities held in an account with UBS Financial Services, Inc., and the
losses were based on valuations by UBS.  In January 2009, we received
cash for the par value of the outstanding auction rate securities.




Realized
loss on sale of fixed assets




We
recognized losses on the sale of fixed assets of $5,367 and $0 during the years
ended June 30, 2008 and 2009, respectively.  We realized the 2008 loss
upon the sale of a vehicle used by the previous owner of Pools
Press.




Interest
Expense




Interest
expense was $32,313 for the year ended June 30, 2008, and $34,993 for the year
ended June 30, 2009, and increase of $2,680 or 8%. This interest expense was
primarily attributable to the interest paid on a credit line with UBS that was
secured by marketable securities.  This credit line was cancelled in
January 2009 when we liquidated our position in the marketable
securities.




Interest
Income




Interest
income was $111,336 for the year ended June 30, 2008, and decreased to $39,528
for the year ended June 30, 2009, a decrease of $71,808 or 64%. This interest
income was primarily attributable to the interest earned on investments in
marketable securities.




Other
Income




The
Company earned $98,605 in other income in during the year ended June 30,
2009.  No such income was earned in fiscal 2008.  This
income represents income we receive from publishers and customers for
miscellaneous services.




Net
Loss




We had a
net loss of $338,321 for the year ended June 30, 2008 compared to a net loss of
$1,066,041 for the year ended June 30, 2009. Investor relations expenses of
$571,445 represented over half of the net loss for 2009. When the
Company was founded, three of the Company's objectives were, a)
to build an experienced and highly capable management team, b) to grow revenues
and acquire customers while developing new products and services for those
customers and c) to become publicly traded.  While we are still in our
early stages of development and have incurred considerable expenses thus far, we
have accomplished those goals. We anticipate that our revenues will continue to
grow, our gross margins will continue to improve and we hope to achieve a modest
profit during the fiscal year ending June 30, 2010.




7




Liquidity
and Capital Resources




Since our
inception, we have funded our operations primarily through private sales of
equity securities. Reprints Desk’s initial investors were Bristol Capital, LLC,
which is owned by Paul Kessler and Diana Derycz-Kessler, Bristol Investment
Fund, Ltd., over which Paul Kessler has investment and voting control, and three
employees of Bristol Capital, LLC, including the current Chief Financial Officer
of Derycz, Richard McKilligan. These initial investors purchased 275,000 shares
of Reprints Desk for a total of $275,000. Their 275,000 shares were converted
into a total of 4,000,003 common shares of Derycz Scientific in November 2006.
Peter Derycz, as the founder of Reprints Desk, paid $275 for his 275,000 shares
of Reprints Desk, which were exchanged for 4,000,000 common shares of Derycz
Scientific. On December 22, 2006, we sold units consisting of 4,500,000 shares
of common stock and warrants to purchase 2,250,000 shares of common stock at an
exercise price of $1.25 per share to 45 accredited investors in a private
transaction. We received $4,500,000 in proceeds from this
transaction.




On July
17, 2008, we sold 400,017 shares of common stock and warrants to purchase
200,009 shares of common stock at an exercise price of $2.00 per share at
anytime prior to July 17, 2011 for an aggregate purchase price of $600,025.
These shares and warrants were sold to a total of 4 investors.




As of
June 30, 2009, we had cash of $1,854,093.




Net cash
provided by operating activities was $233,767 for the year ended June 30, 2009
compared to net cash used in operating activities of $932,306 for the year ended
June 30, 2008. The $1,166,073 increase in cash provided by operating activities
was due primarily to an increase in accounts receivable of $380,690 and an
increase in accounts payable of $1,039,382 which offset the net loss of
$1,066,041.




Net cash
provided by investing activities was $1,478,452 for the year ended June 30, 2009
compared to net cash provided by investing activities of $302,052 for the year
ended June 30, 2008. The $1,176,400 difference in cash flows from investing
activities was due to the proceeds from the sale of our short term investments
of $1,665,298 in the 2009 period.




Net cash
used in financing activities was $707,960 for the year ended June 30, 2009
compared to net cash provided by financing activities of $1,097,501 for the year
ended June 30, 2008. The decrease in cash provided by financing activities was
due primarily to our repayment of our credit line associated with our short term
investments of $1,291,855 during the 2009 period. We made no sales of our common
stock during the year ended June 30, 2009.




We
believe that our current cash resources will be sufficient to sustain our
current operations for at least one year.  We may need to obtain
additional cash resources during the next year if we are able to acquire
complementary businesses or if we add large customers and experience a
corresponding increase in our accounts receivable. The need for cash to finance
acquisitions will depend on the businesses acquired and we cannot predict those
needs with any certainty. In the event such funds are needed, we may engage in
additional sales of debt or equity securities. The sale of additional equity or
convertible debt securities would result in additional dilution to our
shareholders. The issuance of additional debt would result in increased expenses
and could subject us to covenants that may have the effect of restricting our
operations. We have not made arrangements to obtain additional financing and we
can provide no assurance that additional financing will be available in an
amount or on terms acceptable to us, if at all.




Critical
Accounting Policies




Our
discussion and analysis of our financial condition and results of operations are
based upon our consolidated financial statements and accompanying notes, which
have been prepared in accordance with accounting principles generally accepted
in the United States. The preparation of these financial statements requires
management to make estimates and assumptions that affect the reported amounts of
assets, liabilities, revenue and expenses, and related disclosure of contingent
assets and liabilities. When making these estimates and assumptions, we consider
our historical experience, our knowledge of economic and market factors and
various other factors that we believe to be reasonable under the circumstances.
Actual results may differ under different estimates and
assumptions.




The
accounting estimates and assumptions discussed in this section are those that we
consider to be the most critical to an understanding of our financial statements
because they inherently involve significant judgments and
uncertainties.




Use
of Estimates




The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting periods. Actual results could differ from these
estimates.




8




Revenue
Recognition




The
Company applies the provisions of the Securities and Exchange Commission (“SEC”)
Staff Accounting Bulletin (SAB) No. 104, “Revenue Recognition in Financial
Statements,” which provides guidance on the recognition, presentation and
disclosure of revenue in financial statements filed with the SEC. SAB No. 104
outlines the basic criteria that must be met to recognize revenue and provides
guidance for disclosure related to revenue recognition policies. In general, the
Company recognizes revenue when (i) persuasive evidence of an arrangement
exists, (ii) shipment of products has occurred or services have been rendered,
(iii) the sales price charged is fixed or determinable and (iv) collection is
reasonably assured.




The
Company recognizes revenues from printing services when services have been
rendered and accepted by the customer while revenues from the re-use of
published articles and rights management services are recognized upon shipment
or electronic delivery to the customer.




Included
in revenues are fees charged to customers for shipping, handling and delivery
services.




Impairment
of Long-lived Assets




SFAS No.
144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” requires
that long-lived assets to be disposed of by sale, including those of
discontinued operations, be measured at the lower of carrying amount or fair
value less cost to sell, whether reported in continuing operations or in
discontinued operations. SFAS No. 144 broadens the reporting of discontinued
operations to include all components of an entity with operations that can be
distinguished from the rest of the entity and that will be eliminated from the
ongoing operations of the entity in a disposal transaction. SFAS No. 144 also
establishes a `primary-asset` approach to determine the cash flow estimation
period for a group of assets and liabilities that represents the unit of
accounting for a long-lived asset to be held and used. The Company has no
impairment issues to disclose.




Stock
Based Compensation




The
Company adopted SFAS No. 123 (Revised 2004), “Share Based Payment” (“SFAS No.
123R”). SFAS No. 123R requires companies to measure and recognize the cost of
employee services received in exchange for an award of equity instruments based
on the grant-date fair value. SFAS No. 123R eliminates the ability to account
for the award of these instruments under the intrinsic value method prescribed
by Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock
Issued to Employees,” and allowed under the original provisions of SFAS No. 123.
As of June 30, 2007, the Company had no employee options
outstanding.




Recent
Accounting Pronouncements




In May
2009, the FASB issued SFAS No. 165 “Subsequent Events” (“SFAS 165”). SFAS 165
establishes general standards of accounting for and disclosure of events that
occur after the balance sheet date but before financial statements are issued or
are available to be issued. SFAS 165 sets forth (1) The period after the balance
sheet date during which management of a reporting entity should evaluate events
or transactions that may occur for potential recognition or disclosure in the
financial statements, (2) The circumstances under which an entity should
recognize events or transactions occurring after the balance sheet date in its
financial statements and (3) The disclosures that an entity should make about
events or transactions that occurred after the balance sheet date. SFAS 165 is
effective for interim or annual financial periods ending after June 15, 2009.
The adoption of this statement did not have a material effect on the Company’s
financial statements.
 
 In June
2009, the FASB issued SFAS No. 166 “Accounting for Transfers of Financial
Assets*an amendment of FASB Statement No. 140” (“SFAS 166”). SFAS 166 improves
the relevance, representational faithfulness, and comparability of the
information that a reporting entity provides in its financial statements about a
transfer of financial assets; the effects of a transfer on its financial
position, financial performance, and cash flows; and a transferor’s continuing
involvement, if any, in transferred financial assets. SFAS 166 is effective as
of the beginning of each reporting entity’s first annual reporting period that
begins after November 15, 2009, for interim periods within that first annual
reporting period and for interim and annual reporting periods thereafter. The
Company is evaluating the impact the adoption of SFAS 166 will have on its
financial statements.
 
 In June
2009, the FASB issued SFAS No. 167 “Amendments to FASB Interpretation No. 46(R)”
(“SFAS 167”). SFAS 167 improves financial reporting by enterprises involved with
variable interest entities and to address (1) the effects on certain provisions
of FASB Interpretation No. 46 (revised December 2003), “Consolidation of
Variable Interest Entities”, as a result of the elimination of the qualifying
special-purpose entity concept in SFAS 166 and (2) constituent concerns about
the application of certain key provisions of Interpretation 46(R), including
those in which the accounting and disclosures under the Interpretation do not
always provide timely and useful information about an enterprise’s involvement
in a variable interest entity. SFAS 167 is effective as of the beginning of each
reporting entity’s first annual reporting period that begins after November 15,
2009, for interim periods within that first annual reporting period, and for
interim and annual reporting periods thereafter. The Company is evaluating the
impact the adoption of SFAS 167 will have on its financial
statements.
  In June
2009, the FASB issued SFAS No. 168 “The FASB Accounting Standards Codification
and the Hierarchy of Generally Accepted Accounting Principles*a replacement of
FASB Statement No. 162”. The FASB Accounting Standards Codification
(“Codification”) will be the single source of authoritative nongovernmental U.S.
generally accepted accounting principles. Rules and interpretive releases of the
SEC under authority of federal securities laws are also sources of authoritative
GAAP for SEC registrants. SFAS 168 is effective for interim and annual periods
ending after September 15, 2009. All existing accounting standards are
superseded as described in SFAS 168. All other accounting literature not
included in the Codification is nonauthoritative. The Codification is not
expected to have a significant impact on the Company’s financial
statements.
  In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51”. SFAS No. 160
establishes accounting and reporting standards that require that the ownership
interests in subsidiaries held by parties other than the parent be clearly
identified, labeled, and presented in the consolidated statement of financial
position within equity, but separate from the parent’s equity; the amount of
consolidated net income attributable to the parent and to the noncontrolling
interest be clearly identified and presented on the face of the consolidated
statement of income; and changes in a parent’s ownership interest while the
parent retains its controlling financial interest in its subsidiary be accounted
for consistently. SFAS No. 160 also requires that any retained noncontrolling
equity investment in the former subsidiary be initially measured at fair value
when a subsidiary is deconsolidated. SFAS No. 160 also sets forth the disclosure
requirements to identify and distinguish between the interests of the parent and
the interests of the noncontrolling owners. SFAS No. 160 applies to all entities
that prepare consolidated financial statements, except not-for-profit
organizations, but will affect only those entities that have an outstanding
noncontrolling interest in one or more subsidiaries or that deconsolidate a
subsidiary. SFAS No. 160 is effective for fiscal years, and interim periods
within those fiscal years, beginning on or after December 15, 2008. Earlier
adoption is prohibited. SFAS No. 160 must be applied prospectively as of the
beginning of the fiscal year in which it is initially applied, except for the
presentation and disclosure requirements. The presentation and disclosure
requirements are applied retrospectively for all periods
presented.
  The
Company does not believe that the adoption of the above recent pronouncements
will have a material effect on the Company’s consolidated results of operations,
financial position, or cash flows.
  9




Off-Balance
Sheet Arrangements





At June
30, 2009, we had no obligations that would require disclosure as off-balance
sheet arrangements.





Item
7A. Quantitative and Qualitative Disclosures About Market
Risk.





Not
required.


10


Item
8.  Financial Statements.


REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To
the Board of Directors
 Derycz
Scientific, Inc. and Subsidiaries
 Los
Angeles, California
  We
have audited the consolidated balance sheets of Derycz Scientific, Inc. (the
“Company”) and Subsidiaries as of June 30, 2009 and 2008, and the related
consolidated statements of operations, stockholders’ equity and cash flows for
the years then ended.  These consolidated financial statements are the
responsibility of the Company’s management. Our responsibility is to express an
opinion on these financial statements based on our audits.
  We
conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance whether the consolidated
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
  In
our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Derycz Scientific, Inc and Subsidiaries as of June 30, 2009 and 2008 and the
consolidated results of their operations and their cash flows for the years then
ended in conformity with accounting principles generally accepted in the United
States of America.
  Weinberg
and Company, P.A
  September
15, 2009
 Los
Angeles, California
 
 11
  Derycz
Scientific, Inc.
 Consolidated
Balance Sheets
 
 June
      30,
                                        
                                        
                                        June
      30,2009
                                        
                                        
                                        2008ASSETSCURRENT
      ASSETSCash
      and cash equivalents
                                        
                                        $
                                        1,854,093
                                        
                                        
                                        $
                                        849,834Short
      term investments
                                        
                                        
                                        -
                                        
                                        
                                        
                                        1,736,630Accounts
      receivable, net of allowance of $35,000 and $0,
    respectively
                                        
                                        
                                        3,499,848
                                        
                                        
                                        
                                        3,119,158Inventory
                                        
                                        
                                        10,188
                                        
                                        
                                        
                                        15,956Prepaid
      royalties
                                        
                                        
                                        217,980
                                        
                                        
                                        
                                        326,077Other
      current assets
                                        
                                        
                                        37,890
                                        
                                        
                                        
                                        80,739TOTAL
      CURRENT ASSETS
                                        
                                        
                                        5,619,999
                                        
                                        
                                        
                                        6,128,394PROPERTY
      AND EQUIPMENT, net of accumulated depreciation of $188,266
      and  $89,711
                                        
                                        
                                        340,776
                                        
                                        
                                        
                                        362,807INTANGIBLE
      ASSETSCustomer
      lists, net of accumulated amortization of $43,056
      and  $182,222
                                        
                                        
                                        6,944
                                        
                                        
                                        
                                        92,778Intellectual
      property licenses, net of amortization of $163,209 and
    $64,016
                                        
                                        
                                        600,887
                                        
                                        
                                        
                                        518,959GOODWILL
                                        
                                        
                                        223,385
                                        
                                        
                                        
                                        189,185TOTAL
      ASSETS
                                        
                                        $
                                        6,791,991
                                        
                                        
                                        $
                                        7,292,123LIABILITIES
      AND STOCKHOLDERS' EQUITYCURRENT
      LIABILITIESAccounts
      payable
                                        
                                        $
                                        3,036,615
                                        
                                        
                                        $
                                        1,997,233Capital
      lease obligation, current
                                        
                                        
                                        17,861
                                        
                                        
                                        
                                        16,129Outstanding
      credit line
                                        
                                        
                                        -
                                        
                                        
                                        
                                        1,291,855Income
      tax payable
                                        
                                        
                                        3,659
                                        
                                        
                                        
                                        -Other
      current liabilities
                                        
                                        
                                        116,769
                                        
                                        
                                        
                                        88,430TOTAL
      CURRENT LIABILITIES
                                        
                                        
                                        3,174,904
                                        
                                        
                                        
                                        3,393,647CAPITAL
      LEASE OBLIGATIONS, LONG TERM
                                        
                                        
                                        43,617
                                        
                                        
                                        
                                        61,479MINORITY
      INTEREST
                                        
                                        
                                        47,357
                                        
                                        
                                        
                                        50,102COMMITMENTS
      AND CONTINGENCIESSTOCKHOLDERS'
      EQUITYPreferred
      stock; $0.001 par value; 20,000,000 shares authorized; no shares issued
      and outstandingCommon
      stock; $0.001 par value; 100,000,000 shares authorized; 12,961,830 and
      12,561,813 shares issued and outstanding
                                        
                                        
                                        12,962
                                        
                                        
                                        
                                        12,562Additional
      paid-in capital
                                        
                                        
                                        5,450,223
                                        
                                        
                                        
                                        4,645,364Accumulated
      deficit
                                        
                                        
                                        (1,937,072
                                        )
                                        
                                        
                                        (871,031
                                        )TOTAL
      STOCKHOLDERS' EQUITY
                                        
                                        
                                        3,526,113
                                        
                                        
                                        
                                        3,786,895TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
                                        
                                        $
                                        6,791,991
                                        
                                        
                                        $
                                        7,292,123
 
 See notes
to consolidated financial statements
  12
 
 Derycz
Scientific, Inc.
 Consolidated
Statements of Operations
 
 Years
      endedJune
      30,2009
                                
                                
                                2008NET
      SALES
                                
                                $
                                14,653,374
                                
                                
                                $
                                12,209,916COST
      OF SALES
                                
                                
                                11,413,544
                                
                                
                                
                                10,023,768GROSS
      PROFIT
                                
                                
                                3,239,830
                                
                                
                                
                                2,186,148OPERATING
      EXPENSES:General
      and administrative
                                
                                
                                4,019,065
                                
                                
                                
                                2,276,796Marketing
      and advertising
                                
                                
                                158,524
                                
                                
                                
                                40,437Depreciation
      and amortization
                                
                                
                                235,660
                                
                                
                                
                                236,724TOTAL
      OPERATING EXPENSES
                                
                                
                                4,413,249
                                
                                
                                
                                2,553,957LOSS
      FROM OPERATIONS
                                
                                
                                (1,173,419
                                )
                                
                                
                                (367,809
                                )Realized
      gain (Unrealized loss) on marketable securities
                                
                                
                                33,668
                                
                                
                                
                                (33,660
                                )Loss
      on sale of fixed assets
                                
                                
                                -
                                
                                
                                
                                (5,367
                                )Other
      Income
                                
                                
                                98,605
                                
                                
                                
                                -Interest
      expense
                                
                                
                                (34,993
                                )
                                
                                
                                (32,313
                                )Interest
      income
                                
                                
                                39,527
                                
                                
                                
                                111,336LOSS
      BEFORE INCOME TAXES AND MINORITY INTEREST
                                
                                
                                (1,036,612
                                )
                                
                                
                                (327,813
                                )MINORITY
      INTEREST
                                
                                
                                2,745
                                
                                
                                
                                (10,508
                                )LOSS
      BEFORE INCOME TAXES
                                
                                
                                (1,033,867
                                )
                                
                                
                                (338,321
                                )PROVISION
      FOR INCOME TAXES
                                
                                
                                (32,174
                                )
                                
                                
                                -NET
      LOSS
                                
                                $
                                (1,066,041
                                )
                                
                                $
                                (338,321
                                )NET
      LOSS PER SHARE:BASIC
      AND DILUTED
                                
                                $
                                (0.08
                                )
                                
                                $
                                (0.03
                                )WEIGHTED
      AVERAGE SHARES OUTSTANDING:BASIC
      AND DILUTED
                                
                                
                                12,945,163
                                
                                
                                
                                12,540,226
 
 See notes
to consolidated financial statements
  13


Derycz
Scientific, Inc.
 
 Consolidated
Statement of Stockholders' Equity
 For
the years ended June 30, 2009 and 2008
 
 Additional
                      
                      
                      
                      
                      
                      TotalCommon stock
                      
                      
                      paid-in
                      
                      
                      Accumulated
                      
                      
                      stockholders'Shares
                      
                      
                      Amount
                      
                      
                      capital
                      
                      
                      Deficit
                      
                      
                      equityBalance,
      June 30, 2007
                      
                      
                      12,500,003
                      
                      
                      $
                      12,500
                      
                      
                      $
                      4,484,559
                      
                      
                      $
                      (532,710
                      )
                      
                      $
                      3,964,349Issuance
      of common shares for acquisition of customer list
                      
                      
                      50,000
                      
                      
                      
                      50
                      
                      
                      
                      49,950
                      
                      
                      
                      
                      
                      
                      
                      50,000Fair
      value of vested options issued to employees
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      99,057
                      
                      
                      
                      -
                      
                      
                      
                      99,057Fair
      value of common shares issued as employee bonus
                      
                      
                      11,810
                      
                      
                      
                      12
                      
                      
                      
                      11,798
                      
                      
                      
                      -
                      
                      
                      
                      11,810Net
      loss for the year
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      (338,321
                      )
                      
                      
                      (338,321
                      )Balance,
      June 30, 2008
                      
                      
                      12,561,813
                      
                      
                      
                      12,562
                      
                      
                      
                      4,645,364
                      
                      
                      
                      (871,031
                      )
                      
                      
                      3,786,895Fair
      value of vested options issued to employees
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      161,271
                      
                      
                      
                      -
                      
                      
                      
                      161,271Issuance
      of warrant for services
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      43,963
                      
                      
                      
                      -
                      
                      
                      
                      43,963Issuance
      of common stock for cash
                      
                      
                      400,017
                      
                      
                      
                      400
                      
                      
                      
                      599,625
                      
                      
                      
                      -
                      
                      
                      
                      600,025Net
      loss for the period
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      (1,066,041
                      )
                      
                      
                      (1,066,041
                      )Balance,
      June 30, 2009
                      
                      
                      12,961,830
                      
                      
                      $
                      12,962
                      
                      
                      $
                      5,450,223
                      
                      
                      $
                      (1,937,072
                      )
                      
                      $
                      3,526,113
 
 See notes
to consolidated financial statements
  14
 
 Derycz
Scientific, Inc.
 
 Consolidated
Statements of Cash Flows
 
 Yearsended June 30,2009
                                  
                                  
                                  2008CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss
                                  
                                  $
                                  (1,066,041
                                  )
                                  
                                  $
                                  (338,321
                                  )Adjustment
      to reconcile net loss to net cash provided by (used in) operating
      activities:Depreciation
      and amortization
                                  
                                  
                                  283,583
                                  
                                  
                                  
                                  278,485Fair
      value of vested stock options
                                  
                                  
                                  161,271
                                  
                                  
                                  
                                  99,057Fair
      value of common stock warrant issued for services
                                  
                                  
                                  43,963
                                  
                                  
                                  
                                  11,810(Realized
      gain) unrealized loss on investment
                                  
                                  
                                  (33,668
                                  )
                                  
                                  
                                  33,660Realized
      loss on fixed asset
                                  
                                  
                                  -
                                  
                                  
                                  
                                  5,367Minority
      share of earnings in subsidiary
                                  
                                  
                                  (2,745
                                  )
                                  
                                  
                                  10,508Changes
      in assets and liabilities:Accounts
      receivable
                                  
                                  
                                  (380,690
                                  )
                                  
                                  
                                  (1,780,754
                                  )Accounts
      payable and accrued expenses
                                  
                                  
                                  1,039,382
                                  
                                  
                                  
                                  727,012Inventory
                                  
                                  
                                  5,768
                                  
                                  
                                  
                                  (1,071
                                  )Prepaid
      royalties
                                  
                                  
                                  108,097
                                  
                                  
                                  
                                  (13,552
                                  )Other
      current assets
                                  
                                  
                                  42,850
                                  
                                  
                                  
                                  (52,937
                                  )Other
      current liabilities
                                  
                                  
                                  28,338
                                  
                                  
                                  
                                  88,430Income
      taxes payable
                                  
                                  
                                  3,659
                                  
                                  
                                  
                                  -Net
      cash provided by (used in) operating activities
                                  
                                  
                                  233,767
                                  
                                  
                                  
                                  (932,306
                                  )CASH
      FLOWS FROM INVESTING ACTIVITIES:Purchase
      of furniture and equipment
                                  
                                  
                                  (76,524
                                  )
                                  
                                  
                                  (110,118
                                  )Purchase
      of Intellectual Property licenses
                                  
                                  
                                  (181,122
                                  )
                                  
                                  
                                  (417,450
                                  )Additional
      investment in Pools Press
                                  
                                  
                                  (34,200
                                  )
                                  
                                  
                                  -Proceeds
      from sale of short term investments
                                  
                                  
                                  1,770,298
                                  
                                  
                                  
                                  819,120Proceeds
      from sale of fixed assets
                                  
                                  
                                  -
                                  
                                  
                                  
                                  10,500Net
      cash provided by investing activities
                                  
                                  
                                  1,478,452
                                  
                                  
                                  
                                  302,052CASH
      FLOWS FROM FINANCING ACTIVITIES:Proceeds
      from the issuance of common stock
                                  
                                  
                                  600,025
                                  
                                  
                                  
                                  -Capital
      lease obligation
                                  
                                  
                                  (16,130
                                  )
                                  
                                  
                                  (14,184
                                  )Payments
      on notes on Pools Press
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (162,392
                                  )Advances
      under (payments on) line of credit
                                  
                                  
                                  (1,291,855
                                  )
                                  
                                  
                                  1,285,611Distribution
      of minority earnings
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (11,534
                                  )Net
      cash provided by (used in) financing activities
                                  
                                  
                                  (707,960
                                  )
                                  
                                  
                                  1,097,501NET
      INCREASE IN CASH AND CASH EQUIVALENTS
                                  
                                  
                                  1,004,259
                                  
                                  
                                  
                                  467,247CASH
      AND CASH EQUIVALENTS, Beginning of period
                                  
                                  
                                  849,834
                                  
                                  
                                  
                                  382,587CASH
      AND CASH EQUIVALENTS, End of period
                                  
                                  $
                                  1,854,093
                                  
                                  
                                  $
                                  849,834SUPPLEMENTAL
      DISCLOSURES OF CASH FLOW INFORMATION:Taxes
      paid
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  -Interest
      paid
                                  
                                  $
                                  34,500
                                  
                                  
                                  $
                                  32,313SUPPLEMENTAL
      DISCLOSURES OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:Issuance
      of common stock for customer list
                                  
                                  $
                                  -
                                  
                                  
                                  
                                  50,000Capital
      lease obligation
                                  
                                  $
                                  -
                                  
                                  
                                  
                                  91,792
 15
 DERYCZ
SCIENTIFIC, INC.
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 For
the Years Ended June 30, 2009 and 2008
 
 Note
1 — Organization, Nature of Business and Basis of
Presentation
 
 (a)
Organization
 
 Derycz
Scientific, Inc. was incorporated in the State of Nevada on November 2, 2006. On
November 2, 2006 the Company entered into a Share Exchange Agreement with
Reprints Desk, Inc., a Delaware corporation formed on January 6, 2006. Derycz
was formed to facilitate a holding company structure. At the closing of the
transaction contemplated by the Share Exchange Agreement, the Company acquired
all of the 550,000 outstanding shares of Reprints from the shareholders of
Reprints and issued 8,000,003 of its common shares to the shareholders of
Reprints. As the intention behind forming Derycz was the creation of a holding
company structure and Derycz had no appreciable assets prior to the acquisition
of Reprints, the exchange ratio was determined arbitrarily and was not based on
any determination of the value of shares of Derycz common stock as compared to
Reprints shares acquired. As each former Reprints shareholder acquired a
percentage interest in Derycz equal to the percentage interest such shareholder
held in Reprints immediately prior to the transaction, there was no dilution of
the interest of any former Reprints shareholder. Following completion of the
exchange transaction, Reprints became a wholly owned subsidiary of the Company.
The transaction was accounted as a statutory merger of companies under common
control. As such, the historical financial statements of the Company are
combined with the operations of Reprints since its inception, and the merger
shares are accounted for as a stock split as of the inception of Reprints for
financial reporting purposes.
 
 (b)
Nature of business
  For
certain of the Company's financial instruments, including cash and cash
equivalents, accounts receivable,  accounts payable and accrued
expenses,  the carrying amounts approximate fair value due to their
short maturities. The estimated fair value of the capital lease and line of
credit obligations is based on borrowing rates currently available to the
Company for loans with similar terms and maturities.
 
 Reprints
is a content repurposing and rights management company, with a focus on content
re-use services and products. The Company operates within the periodicals
publishing industry which is a large and growing market. The Company has
developed products in the following areas:
 
 •
                Reprints, ePrints and Article
      Distribution Systems
 •
                Commercial Printing
      Services
 •
                Publisher Outsourced Reprint
      Management
 •
                Print-on-Demand Services for
      copyright and regulatory sensitive
  documents
 
 (c) Basis
of Presentation
 
 The
accompanying financial statements are consolidated and include the accounts of
the Company and its wholly and majority owned subsidiaries. The consolidated
accounts include 100% of assets and liabilities of our majority owned
subsidiary, and the ownership interests of minority investors are recorded as a
minority interest. Intercompany balances and transactions have been eliminated
in consolidation.
 
 Note
2 — Summary of Significant Accounting Policies
 
 (a) Use
of estimates
 
 The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting periods. Actual results could differ from these
estimates.
 
 (b) Fair
value of financial instruments
  For
certain of the Company's financial instruments, including cash and cash
equivalents, accounts receivable,  accounts payable and accrued
expenses,  the carrying amounts approximate fair value due to their
short maturities. The estimated fair value of the capital lease and line of
credit obligations is based on borrowing rates currently available to the
Company for loans with similar terms and maturities.
 The
Company partially adopted SFAS 157, “Fair Value of Financial Instruments,” on
January 1, 2008, delaying application for non-financial assets and non-financial
liabilities as permitted. This statement establishes a framework for measuring
fair value, and expands disclosures about fair value measurements. SFAS 157
establishes a fair value hierarchy that prioritizes the inputs to valuation
techniques used to measure fair value into three levels as follows:
 
 Level 1:
quoted prices (unadjusted) in active markets for identical asset or liabilities
that the Company has the ability to access as of the measurement date. Financial
assets and liabilities utilizing Level 1 inputs include active exchange-traded
securities and exchange-based derivatives.
 
 Level 2:
inputs other than quoted prices included within Level 1 that are directly
observable for the asset or liability or indirectly observable through
corroboration with observable market data. Financial assets and liabilities
utilizing Level 2 inputs include fixed income securities, non-exchange-based
derivatives, mutual funds, and fair-value hedges.
 
 Level 3:
unobservable inputs for the asset or liability only used when there is little,
if any, market activity for the asset or liability at the measurement date.
Financial assets and liabilities utilizing Level 3 inputs include
infrequently-traded, non-exchange-based derivatives and commingled investment
funds and are measured using present value pricing models.
 
 The
following table represents certain financial instruments of the Company measured
and recorded at fair value on the Company’s consolidated balance sheets on a
recurring basis and their level within the fair value hierarchy as of June 30,
2009 and 2008:
  Year Ended June 30, 2009:
                
                Level
      1
                
                
                Level
      2
                
                
                Level
      3
                
                
                TotalAssets:Investments
      at fair value
                
                $
                -
                
                
                $
                -
                
                
                $
                -
                
                
                $
                -Year Ended June 30, 2008:Assets:Investments
      at fair value
                
                $
                -
                
                
                $
                1,736,630
                
                
                $
                -
                
                
                $
                1,736,630
 (c) Short
term investments
 
 Our short
term investments at June 30, 2008 consisted of corporate and municipal debt and
preferred stock auction rate securities held in an account with UBS Financial
Services, Inc.  In January 2009, we received cash for the par value of the
outstanding auction rate securities.  The proceeds received in January
2009 exceeded the book value of the investment resulting in a realized gain of
$33,668 that was recorded during the year ended June 30,
2009.
  16
  (d) Cash
and cash equivalents
 
 For
purposes of the statements of cash flows, the Company defines cash equivalents
as all highly liquid debt instruments purchased with a maturity of three months
or less.
 
 (e)
Allowance for Doubtful Accounts
 
 The
Company regularly reviews the accounts receivable aging and applying various
expected loss percentages to certain accounts receivable categories based upon
historical bad debt experience in order to determine whether an allowance for
doubtful accounts resulting from the inability, failure or refusal of customers
to make required payments, is appropriate The Company established an allowance
for doubtful accounts of $35,000 as of June 30, 2009.  The Company
determined that no allowance was necessary at June 30, 2008.
 
 (f)
Concentration of credit risk
 
 Financial
instruments, which potentially subject the Company to concentrations of credit
risk, consist of cash and cash equivalents and accounts receivables. The Company
places its cash with high quality financial institutions and at times may exceed
the FDIC $250,000 insurance limit. The Company does not anticipate incurring any
losses related to these credit risks. The Company extends credit based on an
evaluation of the customer's financial condition, generally without collateral.
Exposure to losses on receivables is principally dependent on each customer's
financial condition. The Company monitors its exposure for credit losses and
intends to maintain allowances for anticipated losses, as required.
 
 One
customer accounted for 16% of the revenues for the year ended June 30, 2009 and
two customers accounted for 14% and 12% of the revenue for the year ended June
30, 2008.
 
 As of
June 30, 2009, two customers accounted for 15% and 14% of accounts receivable,
and one customer accounted for 38% of accounts receivable at June 30,
2008.
 
 (g)
Property and equipment
 
 Property
and equipment are stated at cost and are depreciated using the straight-line
method over their estimated useful lives of 3-5 years. Expenditures for
maintenance and repairs are charged to operations as incurred while renewals and
betterments are capitalized. Gains and losses on disposals are included in the
results of operations.
 
 (h)
Intellectual Property Licenses
 
 The
Company has purchased licenses to use certain intellectual property. These
licenses are amortized on the straight-line method over their estimated useful
lives of 7 years.
 
 (i)
Customer Lists
 
 From time
to time, the Company purchases customer lists. These lists are amortized using
an accelerated method that management presently estimates matches the
utilization of those lists over an estimated useful life of 2
years.
 
 (j)
Revenue recognition
 
 The
Company applies the provisions of the Securities and Exchange Commission (SEC)
Staff Accounting Bulletin (SAB) No. 104, “Revenue Recognition in Financial
Statements,” which provides guidance on the recognition, presentation and
disclosure of revenue in financial statements filed with the SEC. SAB No. 104
outlines the basic criteria that must be met to recognize revenue and provides
guidance for disclosure related to revenue recognition policies. In general, the
Company recognizes revenue when (i) persuasive evidence of an arrangement
exists, (ii) shipment of products has occurred or services have been rendered,
(iii) the sales price charged is fixed or determinable and (iv) collection is
reasonably assured.
 
 The
Company recognizes revenues from printing services when services have been
rendered and accepted by the customer while revenues from the re-use of
published articles and rights management services are recognized upon shipment
or electronic delivery to the customer.
 
 (k)
Impairment of long-lived assets
 
 SFAS No.
144, “Accounting for the Impairment or Disposal of Long-Lived Assets” requires
that long-lived assets to be disposed of by sale, including those of
discontinued operations, be measured at the lower of carrying amount or fair
value less cost to sell, whether reported in continuing operations or in
discontinued operations. SFAS No. 144 also establishes a “primary-asset”
approach to determine the cash flow estimation period for a group of assets and
liabilities that represents the unit of accounting for a long-lived asset to be
held and used. Management regularly reviews property, equipment and other
long-lived assets for possible impairment in accordance with SFAS No. 144 and
based upon this review believes there are no indications of impairment at June
30, 2009 or 2008.
  17
  (l) Stock
based compensation
 
 The
Company periodically issues stock options and warrants to employees and
non-employees in capital raising transactions, for services and for financing
costs. The Company adopted SFAS No. 123R effective January 1, 2006, and is using
the modified prospective method in which compensation cost is recognized
beginning with the effective date (a) based on the requirements of SFAS No. 123R
for all share-based payments granted after the effective date and (b) based on
the requirements of SFAS No. 123R for all awards granted to employees prior to
the effective date of SFAS No. 123R that remain unvested on the effective
date.
 
 The
Company accounts for stock option and warrant grants issued and vesting to
non-employees in accordance with EITF No. 96-18: “Accounting for Equity
Instruments that are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services” and EITF No. 00-18 “Accounting
Recognition for Certain Transactions involving Equity Instruments Granted to
Other Than Employees” whereas the value of the stock compensation is based upon
the measurement date as determined at either a) the date at which a performance
commitment is reached, or b) at the date at which the necessary performance to
earn the equity instruments is complete.
 
 (m)
Goodwill and Intangible Assets
 
 As
required by Statement of Financial Accounting Standards (“SFAS”) No. 142,
management performs impairment tests of goodwill and indefinite-lived intangible
assets whenever an event occurs or circumstances change that indicate impairment
has more likely than not occurred. Also, as required by SFAS No. 142, management
performs impairment testing of goodwill and indefinite-lived intangible assets
at least annually.
 
 In
accordance with SFAS No. 142, management tests goodwill for impairment at the
reporting unit level.  The Company has only one reporting
unit.  At the time of goodwill impairment testing, management
determines fair value through the use of a discounted cash flow valuation model
incorporating discount rates commensurate with the risks involved its reporting
unit. If the calculated fair value is less than the current carrying value,
impairment of the Company may exist. The use of a discounted cash flow valuation
model to determine estimated fair value is common practice in impairment testing
in the absence of available domestic and international transactional market
evidence to determine the fair value. The key assumptions used in the discounted
cash flow valuation model for impairment testing include discount rates, growth
rates, cash flow projections and terminal value rates.
 
 In
accordance with SFAS No. 144, “Accounting for the Impairment and Disposal of
Long-Lived Assets,” the Company reviews intangible assets subject to
amortization at least annually to determine if any adverse conditions exist or a
change in circumstances has occurred that would indicate impairment or a change
in the remaining useful life.  If the carrying value of an asset
exceeds its undiscounted cash flows, the Company writes down the carrying value
of the intangible asset to its fair value in the period
identified.  If the carrying value of assets is determined not to be
recoverable, the Company records an impairment loss equal to the excess of the
carrying value over the fair value of the assets.  The Company’s
estimate of fair value is based on the best information available, in the
absence of quoted market prices.  The Company generally calculates
fair value as the present value of estimated future cash flows that the Company
expects to generate from the asset using a discounted cash flow income approach
as described above.  If the estimate of an intangible asset’s
remaining useful life is changed, the Company amortizes the remaining carrying
value of the intangible asset prospectively over the revised remaining useful
life.
 
 (n)
Shipping and handling costs
 
 The
Company accounts for shipping and handling fees and costs in accordance with
EITF 00-10. As such, the Company includes shipping and handling charges billed
to its customers in its revenues, and classifies shipping and handling costs of
the sale of its products as a component of cost of sales. Those costs were
approximately $151,544 and $155,161, respectively, for the years ended June 30,
2009 and 2008.
 
 (o)
Income taxes
 
 The
Company accounts for income taxes in accordance with SFAS No. 109, “Accounting
for Income Taxes.” Deferred taxes are provided on the liability method whereby
deferred tax assets are recognized for deductible temporary differences, and
deferred tax liabilities are recognized for taxable temporary differences.
Temporary differences are the differences between the reported amounts of assets
and liabilities and their tax bases. Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, it is more likely than
not that some portion or all of the deferred tax assets will be realized.
Deferred tax assets and liabilities are adjusted for the effects of changes in
tax laws and rates on the date of enactment.
  18
  (p) Net
Income (Loss) per share
 
 The
Company reports net income (loss) per share in accordance with SFAS No. 128,
“Earnings per Share.” Basic net income (loss) per share is computed by dividing
the net income (loss) by the weighted average number of common shares available.
Weighted average number of shares outstanding reflects the equivalent number of
shares received as a result of the exchange transaction as if these shares had
been outstanding as of the beginning of the earliest period presented. Diluted
income (loss) per share is computed similar to basic income (loss) per share
except that the denominator is increased to include the number of additional
common shares that would have been outstanding if the potential common shares
had been issued and if the additional common shares were dilutive. Warrants to
purchase 2,800,009 and 2,450,000 shares of common stock have been excluded from
the calculation of diluted net loss per share for the years ended June 30, 2009
and 2008, respectively, and options to purchase 1,022,000 and 530,000 shares of
common stock outstanding as of June 30, 2009 and June 30, 2008,
respectively,  have been excluded from the calculation as the effect
would have been anti-dilutive.
 
 (q)
Marketing and Advertising expenses
 
 Marketing
and Advertising expenses are expensed as incurred and consist primarily of
various forms of media purchased from Internet-based marketers and search
engines. Marketing and advertising expense amounted to $158,524 and $40,437 for
the years ended June 30, 2009 and 2008, respectively.
 
 (r)
Recently issued accounting pronouncements
  In May
2009, the FASB issued SFAS No. 165 “Subsequent Events” (“SFAS 165”). SFAS 165
establishes general standards of accounting for and disclosure of events that
occur after the balance sheet date but before financial statements are issued or
are available to be issued. SFAS 165 sets forth (1) The period after the balance
sheet date during which management of a reporting entity should evaluate events
or transactions that may occur for potential recognition or disclosure in the
financial statements, (2) The circumstances under which an entity should
recognize events or transactions occurring after the balance sheet date in its
financial statements and (3) The disclosures that an entity should make about
events or transactions that occurred after the balance sheet date. SFAS 165 is
effective for interim or annual financial periods ending after June 15, 2009.
The adoption of this statement did not have a material effect on the Company’s
financial statements.
 
 In June
2009, the FASB issued SFAS No. 166 “Accounting for Transfers of Financial
Assets*an amendment of FASB Statement No. 140” (“SFAS 166”). SFAS 166 improves
the relevance, representational faithfulness, and comparability of the
information that a reporting entity provides in its financial statements about a
transfer of financial assets; the effects of a transfer on its financial
position, financial performance, and cash flows; and a transferor’s continuing
involvement, if any, in transferred financial assets. SFAS 166 is effective as
of the beginning of each reporting entity’s first annual reporting period that
begins after November 15, 2009, for interim periods within that first annual
reporting period and for interim and annual reporting periods thereafter. The
Company is evaluating the impact the adoption of SFAS 166 will have on its
financial statements.
 
 In June
2009, the FASB issued SFAS No. 167 “Amendments to FASB Interpretation No. 46(R)”
(“SFAS 167”). SFAS 167 improves financial reporting by enterprises involved with
variable interest entities and to address (1) the effects on certain provisions
of FASB Interpretation No. 46 (revised December 2003), “Consolidation of
Variable Interest Entities”, as a result of the elimination of the qualifying
special-purpose entity concept in SFAS 166 and (2) constituent concerns about
the application of certain key provisions of Interpretation 46(R), including
those in which the accounting and disclosures under the Interpretation do not
always provide timely and useful information about an enterprise’s involvement
in a variable interest entity. SFAS 167 is effective as of the beginning of each
reporting entity’s first annual reporting period that begins after November 15,
2009, for interim periods within that first annual reporting period, and for
interim and annual reporting periods thereafter. The Company is evaluating the
impact the adoption of SFAS 167 will have on its financial
statements.
  19
  In June
2009, the FASB issued SFAS No. 168 “The FASB Accounting Standards Codification
and the Hierarchy of Generally Accepted Accounting Principles*a replacement of
FASB Statement No. 162”. The FASB Accounting Standards Codification
(“Codification”) will be the single source of authoritative nongovernmental U.S.
generally accepted accounting principles. Rules and interpretive releases of the
SEC under authority of federal securities laws are also sources of authoritative
GAAP for SEC registrants. SFAS 168 is effective for interim and annual periods
ending after September 15, 2009. All existing accounting standards are
superseded as described in SFAS 168. All other accounting literature not
included in the Codification is nonauthoritative. The Codification is not
expected to have a significant impact on the Company’s financial
statements.
  In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51”. SFAS No. 160
establishes accounting and reporting standards that require that the ownership
interests in subsidiaries held by parties other than the parent be clearly
identified, labeled, and presented in the consolidated statement of financial
position within equity, but separate from the parent’s equity; the amount of
consolidated net income attributable to the parent and to the noncontrolling
interest be clearly identified and presented on the face of the consolidated
statement of income; and changes in a parent’s ownership interest while the
parent retains its controlling financial interest in its subsidiary be accounted
for consistently. SFAS No. 160 also requires that any retained noncontrolling
equity investment in the former subsidiary be initially measured at fair value
when a subsidiary is deconsolidated. SFAS No. 160 also sets forth the disclosure
requirements to identify and distinguish between the interests of the parent and
the interests of the noncontrolling owners. SFAS No. 160 applies to all entities
that prepare consolidated financial statements, except not-for-profit
organizations, but will affect only those entities that have an outstanding
noncontrolling interest in one or more subsidiaries or that deconsolidate a
subsidiary. SFAS No. 160 is effective for fiscal years, and interim periods
within those fiscal years, beginning on or after December 15, 2008. Earlier
adoption is prohibited. SFAS No. 160 must be applied prospectively as of the
beginning of the fiscal year in which it is initially applied, except for the
presentation and disclosure requirements. The presentation and disclosure
requirements are applied retrospectively for all periods
presented.
  The
Company does not believe that the adoption of the above recent pronouncements
will have a material effect on the Company’s consolidated results of operations,
financial position, or cash flows.
 
 Note
3 — Property and Equipment
 
 Property
and equipment consists of the following as of June 30, 2009 and
2008:
 
 June 30, 2009
                                      
                                      
                                      June 30,
                                        2008Computer
      equipment
                                      
                                      $
                                      68,640
                                      
                                      
                                      $
                                      32,344Software
                                      
                                      
                                      112,570
                                      
                                      
                                      
                                      95,045Printing
      equipment
                                      
                                      
                                      286,452
                                      
                                      
                                      
                                      286,452Furniture
      and fixtures
                                      
                                      
                                      57,380
                                      
                                      
                                      
                                      34,677Autos
      and vans
                                      
                                      
                                      4,000
                                      
                                      
                                      
                                      4,000529,042
                                      
                                      
                                      
                                      452,518Less
      accumulated depreciation
                                      
                                      
                                      (188,266
                                      )
                                      
                                      
                                      (89,711
                                      )$
                                      340,776
                                      
                                      
                                      $
                                      362,807
  Printing
equipment includes $91,792 of equipment under capital lease and related
accumulated depreciation of $35,187 and $16,829 as of June 30, 2009 and June 30,
2008, respectively.
 
 Depreciation
expense for the years ended June 30, 2009 and 2008 was $98,555 and $92,102,
respectively.
 
 Note
4 — Intangible Assets
 
 Intangible
assets consist of the following at June 30, 2009 and 2008:
 
 June
      30,
                                      2009
                                    
                                    
                                    June
      30,
                                      2008Customer
      list
                                    
                                    $
                                    50,000
                                    
                                    
                                    $
                                    275,000Intellectual
      property licenses
                                    
                                    
                                    764,096
                                    
                                    
                                    
                                    582,975Accumulated
      amortization
                                    
                                    
                                    (206,265
                                    )
                                    
                                    
                                    (246,238
                                    )$
                                    607,831
                                    
                                    
                                    $
                                    611,737
  Customer
lists are amortized using an accelerated method that management presently
estimates matches the utilization of those lists over an estimated useful life
of 2 years.
 
 The
Company has purchased licenses to use certain intellectual property, including
computer software. These licenses are depreciated using the straight-line method
over their estimated useful lives of 7 years.
 
 Future
annual amortization under these intangible assets at June 30, 2009 is as
follows:
  Year  ending
      June 30,
                                    
                                    Amount2010
                                    
                                    $
                                    129,4082011
                                    
                                    
                                    122,4632012
                                    
                                    
                                    122,4632013
                                    
                                    
                                    122,463Thereafter
                                    
                                    
                                    111,034$
                                    607,831
  20
  Note
5 — Leases
 
 The
Company leases space in Northbrook, Illinois in accordance with the terms of a
non cancelable operating lease agreement. The lease requires monthly payments
between $7,750 and $8,000 through May 2011 and is being accounted for by the
Company on a straight-line basis over the term of the lease. In addition to
monthly rentals, the lease requires the payment of real estate taxes and
maintenance. Rent, including real estate taxes, for the years ended June 30,
2009 and 2008 was $143,727 and $140,912, respectively.
 
 The
Company leases space in Santa Monica, California in accordance with the terms of
a non cancelable operating lease agreement. The lease requires monthly payments
between $5,200 and $5,517 through May 2012 and is being accounted for by the
Company on a straight-line basis over the term of the lease. In addition to
monthly rentals, after June 1, 2010, the lease requires the payment of any
increases in real estate taxes. Rent, including real estate taxes, for the year
ended June 30, 2009 was $5,200.
 
 The
Company also has a non-cancelable lease for machinery and equipment that is
accounted for as a capital lease that requires monthly payment of $1,945
including interest at a rate of 10.25% per annum through July 2012. Annual
future minimum rentals under operating and capital leases as of June 30, 2009
are as follows:
 
 Fiscal Year
                                                              
                                                              Operating Leases
                                                              
                                                              
                                                              Capital
                                                                Leases2010
                                                              
                                                              $
                                                              155,806
                                                              
                                                              
                                                              $
                                                              23,3402011
                                                              
                                                              
                                                              152,433
                                                              
                                                              
                                                              
                                                              23,3402012
                                                              
                                                              
                                                              60,687
                                                              
                                                              
                                                              
                                                              25,285Total
      minimum lease payments
                                                              
                                                              $
                                                              368,926
                                                              
                                                              
                                                              $
                                                              71,965Amounts
      representing interest
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              (10,487
                                                              )Total
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              61,478Less
      current portion
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              (17,861
                                                              )Long
      term
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              $
                                                              43,617
  Note
6 — Line of Credit
 
 The
Company entered into a credit agreement with UBS Financial Services Inc. on
March 1, 2007. The credit facility was secured by the Company’s marketable
securities, described in Note 2(c), above, which were held by UBS. The Company
was able to borrow up to 80% of the value of the securities held in that
account. There was no stated maturity on the credit facility. The
interest rate was 30 Day LIBOR plus 150 basis points.  The balance of
the credit facility on June 30, 2008 was $1,291,855.  The credit line was
repaid to UBS upon the sale of the marketable securities to UBS during January
2009.
 
 Note
7 — Stockholders’ Equity
 
 Common
Stock
 
 The
Company has authorized 120,000,000 shares of $0.001 par value stock. 100,000,000
have been authorized as common stock and 20,000,000 have been authorized as
preferred stock.
 
 During
the year ending June 30, 2007, the Company sold units to acquire 4,500,000
shares of its common stock and warrants to purchase 2,250,000 shares of its
common stock for gross proceeds of $4,500,000 that resulted in net proceeds to
the Company of $4,211,784 after commissions and offering costs. The Company also
issued 200,000 warrants to the placement agent. Each warrant is exercisable for
a period of 3 years with an exercise price of $1.25 per share of common stock.
In the event a public market develops, and the closing price of the Company's
common stock for 10 of any of 25 consecutive days is greater than $3.00 per
share, the Company may elect at that time to compel the holders of the Warrants
to exercise the Warrants at the exercise price. If any investor fails to
exercise the Warrant within 10 days of such notice of redemption, then the
Warrants shall be redeemed by the Company at a redemption price of $0.01 per
warrant.
  21
  On
November 30, 2007, the Company issued 50,000 shares of common stock valued at
$1.00 per share to Pinpoint Documents, LLC as payment for a customer list. We
relied upon the exemption from registration as set forth in Section 4(2) of the
Securities Act for the issuance of these shares. The investor took its shares
for investment purposes without a view to distribution and had access to
information concerning Derycz and our business prospects, as required by the
Securities Act. In addition, there was no general solicitation or advertising
for the purchase of our shares.
 
 On
December 21, 2007, the Company issued 11,810 shares of common stock, valued at
$1.00 per share, to Scott Ahlberg, an employee of Reprints Desk and a director
of the Company, as a discretionary bonus. We relied upon the exemption from
registration as set forth in Section 4(2) of the Securities Act for the issuance
of these shares. Mr. Ahlberg took his shares for investment purposes without a
view to distribution and had access to information concerning Derycz and our
business prospects, as required by the Securities Act. In addition, there was no
general solicitation or advertising for the purchase of our shares.
 
 On July
17, 2008, the Company sold 400,017 shares of common stock and warrants to
purchase 200,009 shares of Common Stock at an exercise price of $2.00 per share
at anytime prior to July 17, 2011, for an aggregate purchase price of
$600,025.  The common stock and warrants were sold to a total of 4
investors.
 
 Stock
Options
 
 On
December 21, 2007, the Company established the 2007 Equity Compensation Plan
(the “Plan”). The Plan was approved by our Board of Directors and security
holders holding a majority of the shares of our common stock outstanding. The
total amount of shares subject to the Plan is 1,500,000 shares. On December 21,
2007, we granted options to purchase 530,000 shares of common stock at $1.50 per
share to eight employees and one consultant, which expire on December 21, 2017.
The options were valued at $112,000 using a Black-Scholes valuation model and
will be amortized over the vesting period.  The exercise price for the
options was $1.50 per share and was based on the fair value of the shares on the
date of issuance. For the Black - Scholes calculation, the Company assumed no
dividend yield, a risk free interest rate of 4.18 %, expected volatility of 25 %
and an expected term for the options of 7 years.
  On May
28, 2009, we granted options to purchase 492,000 shares of common stock at $1.00
per share to nine employees, which expire on May 28, 2019. The options were
valued at $148,327 using a Black-Scholes valuation model and were expensed on
the grant date as the options all vested immediately. The exercise price for the
options was $1.00 per share and was based on the fair value of the shares on the
date of issuance. For the Black - Scholes calculation, the Company assumed no
dividend yield, a risk free interest rate of 3.67 %, expected volatility of 83 %
and an expected term for the options of 10 years.
 
 Stock
based compensation expense of $161,271 and $99,057 was recognized during the
years ended June 30, 2009 and 2008, respectively, relating to the vesting of
such options. No future compensation expense related to these options
remains as of June 30, 2009.  As of June 30, 2009, these options have
no intrinsic value.
 
 At June
30, 2009 options outstanding are as follows:
 
 Number of Options
                                
                                
                                Weighted Average
                                  Exercise PriceBalance
      at July 1, 2007
                                
                                
                                —
                                
                                
                                $
                                0.00Granted
                                
                                
                                530,000
                                
                                
                                $
                                1.50Exercised
                                
                                
                                —
                                
                                
                                
                                —Cancelled
                                
                                
                                —
                                
                                
                                $
                                —Balance
      at June 30, 2008
                                
                                
                                530,000
                                
                                
                                $
                                1.50Granted
                                
                                
                                492,000
                                
                                
                                $
                                1.00Exercised
                                
                                
                                —
                                
                                
                                
                                —Cancelled
                                
                                
                                —
                                
                                
                                $
                                —Balance
      at June 30, 2009
                                
                                
                                1,022,000
                                
                                
                                $
                                1.26
  22
  Additional
information regarding options outstanding as of June 30, 2009 is as
follows:
  Options Outstanding
                                    
                                    
                                    Options
                                      ExercisableWeighted Average Exercise
                                      Price
                                    
                                    
                                    Number
                                      Outstanding
                                    
                                    
                                    Weighted Average
                                      Remaining Contractual Life
                                      (Years)
                                    
                                    
                                    Weighted
                                      Average
                                      Exercise Price
                                    
                                    
                                    Number
                                      Exercisable$
                                    1.26
                                    
                                    
                                    
                                    1,022,000
                                    
                                    
                                    
                                    9
                                    
                                    
                                    $
                                    1.26
                                    
                                    
                                    
                                    1,022,000
  Warrants
 
 At June
30, 2009 warrants outstanding are as follows:
 
 Number
      of
                        Warrants
                      
                      
                      Weighted
                        Average
                        Exercise
      PriceBalance
      at July 1, 2007
                      
                      
                      2,450,000
                      
                      
                      $
                      1.25Granted
                      
                      
                      —Exercised
                      
                      
                      —Cancelled
                      
                      
                      —Balance,
      June 30, 2008
                      
                      
                      2,450,000
                      
                      
                      $
                      1.25Granted
                      
                      
                      350,009
                      
                      
                      $
                      2.00Exercised
                      
                      
                      -Balance
      at June 30, 2009
                      
                      
                      2,800,009
                      
                      
                      $
                      1.34
  On July
1, 2008, the Company issued warrants to acquire 150,000 shares of our stock at
an exercise price of $2.00 per share and a life of five years to a
consultant.  The warrants were valued at $43,693 using a Black-Scholes
pricing model with the following assumptions; no dividend yield, risk free
interest rate of 4.5%, expected volatility of 25%, and an expected term of the
warrants of five years.
  The above
warrants are fully vested and have a five year contractual
life.  There was no intrinsic value to these warrants as of June 30,
2009 and June 30, 2008.
 
 Note
8 — Related Party Transactions
 
 The
Company leased furniture and office space on a month to month basis from a
stockholder of the Company until May 31, 2009. The total rent expense paid to
the stockholder for the years ended June 30, 2009 and 2008 were $27,404 and
$27,404, respectively.
 
 Note
9 — Income Taxes
 
 The
provision for income taxes consists of the following for the years ended June
30:
 
 June 30, 2009
                                            
                                            
                                            June 30, 2008CurrentFederal
                                            
                                            $
                                            21,007
                                            
                                            
                                            $
                                            -State
                                            
                                            
                                            11,167
                                            
                                            
                                            
                                            -DeferredFederalState
                                            
                                            
                                            —
                                            
                                            
                                            
                                            —Provision
      for income tax expense
                                            
                                            $
                                            32,174
                                            
                                            
                                            $
                                            -
  23
  The
reconciliation of the effective income tax rate to the federal statutory rate is
as follows:
 
 Years Ended June 30,2009
                                          
                                          
                                          2008Federal
      income tax rate
                                          
                                          
                                          (34.00
                                          )%
                                          
                                          
                                          (34.00
                                          )%State
      tax, net of federal benefit
                                          
                                          
                                          (3.00
                                          )%
                                          
                                          
                                          (6.00
                                          )%Permanent
      differences
                                          
                                          
                                          5.53
                                          %
                                          
                                          
                                          10.00
                                          %Change
      in valuation allowance
                                          
                                          
                                          33.98
                                          %
                                          
                                          
                                          30.00
                                          %Other
                                          
                                          
                                          0.59
                                          %
                                          
                                          
                                          0.00
                                          %Effective
      income tax rate
                                          
                                          
                                          3.10
                                          %
                                          
                                          
                                          0.00
                                          %
  Deferred income taxes reflect the net
tax effects of temporary differences between the carrying amounts of assets and
liabilities for financial statement purposes and the amounts used for income tax
purposes. Significant components of the Company's deferred tax assets and
liabilities at June 30, 2009 and 2008 are as follows:
  June
      30, 2009
                                                          
                                                          
                                                          June
      30, 2008Deferred
      tax assets:Federal
      net operating loss
                                                          
                                                          $
                                                          458,540
                                                          
                                                          
                                                          $
                                                          224,236State
      net operating loss
                                                          
                                                          
                                                          45,139
                                                          
                                                          
                                                          
                                                          22,292Intangibles
                                                          
                                                          
                                                          79,976
                                                          
                                                          
                                                          
                                                          16,510Stock
      based compensation
                                                          
                                                          
                                                          16,345
                                                          
                                                          
                                                          
                                                          0Unrealized
      loss on Investments
                                                          
                                                          
                                                          0
                                                          
                                                          
                                                          
                                                          13,127Other
                                                          
                                                          
                                                          845
                                                          
                                                          
                                                          
                                                          0Total
      deferred tax assets
                                                          
                                                          
                                                          600,845
                                                          
                                                          
                                                          
                                                          276,165Deferred
      tax liabilityFixed
      asset depreciation
                                                          
                                                          
                                                          (91,778
                                                          )
                                                          
                                                          
                                                          (105,492
                                                          )Net
      deferred tax assets
                                                          
                                                          
                                                          509,067
                                                          
                                                          
                                                          
                                                          170,673Less
      valuation allowance
                                                          
                                                          
                                                          (509,067
                                                          )
                                                          
                                                          
                                                          (170,673
                                                          )$
                                                          —
                                                          
                                                          
                                                          $
                                                          —
 The
Company has provided a full valuation allowance on the deferred tax assets at
June 30, 2009 and 2008 to reduce such asset to zero, since there is no assurance
that the Company will generate future taxable income to utilize such asset.
Management will review this valuation allowance requirement periodically and
make adjustments as warranted.  The net change in the valuation
allowance for the year ended June 30, 2009 was an increase of
$338,394.  This amount is net of a decrease in the valuation allowance
of $13,801 related to the acquisition of an additional interest in an existing
subsidiary.
 Effective
January 1, 2007, the Company adopted Financial Accounting Standards Board
Interpretation No. 48, “Accounting for Uncertainty in Income Taxes (“FIN 48”)
— an
interpretation of FASB Statement No. 109, Accounting for Income Taxes . ” The Interpretation
addresses the determination of whether tax benefits claimed or expected to be
claimed on a tax return should be recorded in the financial statements. Under
FIN 48, we may recognize the tax benefit from an uncertain tax position only if
it is more likely than not that the tax position will be sustained on
examination by the taxing authorities, based on the technical merits of the
position. The tax benefits recognized in the financial statements from such a
position should be measured based on the largest benefit that has a greater than
fifty percent likelihood of being realized upon ultimate settlement. FIN 48 also
provides guidance on derecognition, classification, interest and penalties on
income taxes, accounting in interim periods and requires increased disclosures.
At the date of adoption, and as of June 30, 2009 and 2008, the Company did not
have a liability for unrecognized tax benefits, and no adjustment was required
at adoption.
  24
  The
Company files income tax returns in the U.S. federal jurisdiction and various
states. The Company is subject to U.S. federal or state income tax examinations
by tax authorities for years after 2006.
 
 The
Company’s policy is to record interest and penalties on uncertain tax provisions
as income tax expense. As of June 30, 2009 and 2008, the Company has no accrued
interest or penalties related to uncertain tax positions. Additionally, tax
years 2006 through 2009 remain open to examination by the major taxing
jurisdictions to which the Company is subject.


25


Item
9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.




There
were no changes in or disagreements with our accountants on accounting and
financial disclosure during the last two fiscal years.





Item
9A(T).  Controls and Procedures.





Evaluation
of Disclosure Controls and Procedures





The
Company’s management, with the participation of its Chief Executive Officer and
Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure
controls and procedures as of the end of the period covered by this Annual
Report on Form 10-K. For purposes of this section, the term disclosure controls and
procedures means controls and other procedures of an issuer that are
designed to ensure that information required to be disclosed by the issuer in
the reports that it files or submits under the Securities Exchange Act of 1934,
as amended (the “Exchange Act”), is recorded, processed, summarized and reported
within the time periods specified in the SEC’s rules and forms. Disclosure
controls and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed by an issuer in the
reports that it files or submits under the Exchange Act is accumulated and
communicated to the issuer's management, including its principal executive and
principal financial officers, or persons performing similar functions, as
appropriate to allow timely decisions regarding required
disclosure.





Based on
this evaluation, the Company’s Chief Executive Officer and Chief Financial
Officer have concluded that as of June 30, 2009, the Company’s disclosure
controls and procedures were effective to ensure that information it is required
to disclose in reports that it files or submits under the Exchange Act is
accumulated and communicated to the Company’s management, including its
principal executive and principal financial officers, as appropriate to allow
timely decisions regarding required disclosure, and that such information is
recorded, processed, summarized and reported within the time periods specified
in SEC rules and forms.





Management’s
Report on Internal Control over Financial Reporting





This
annual report does not include a report of management's assessment regarding
internal control over financial reporting or an attestation report of the
Company's registered public accounting firm due to a transition period
established by rules of the SEC for newly public companies.





Changes
in Internal Controls Over Financial Reporting





There was
no change in the Company’s internal control over financial reporting that
occurred during the Company’s last fiscal quarter that has materially affected,
or is reasonably likely to materially affect, its internal control over
financial reporting.





Item
9B.  Other Information.





None.


26


PART
III





Item
10.  Directors, Executive Officers and Corporate
Governance




The
following table identifies our current executive officers and directors, their
respective offices and positions, and their respective dates of election or
appointment:





Name
              
              Age
              
              Position
              
              Date
      of AppointmentPeter
      Derycz
              
              47
              
              Chief
      Executive Officer and Chairman of the Board
              
              January
      6, 2006Richard
      McKilligan
              
              46
              
              Chief
      Financial Officer, Secretary and General Counsel
              
              January
      1, 2007Scott
      Ahlberg
              
              46
              
              Director,
      Head of Corporate Services of Reprints Desk
              
              February
      6, 2006Jan
      Peterson
              
              61
              
              Director,
      Head of Publisher Relations of Reprints Desk
              
              July
      1, 2006




All
directors hold office until the next annual meeting of stockholders and the
election and qualification of their successors. Officers are elected annually by
the Board of Directors and serve at the discretion of the Board.




Business
Experience Descriptions




Peter
Derycz – Chief Executive Officer, President and Chairman




Peter
Derycz founded Reprints as its President in 2006. Mr. Derycz was a founder of
Infotrieve, Inc. in 1989 and served as its President from February 2003 until
September 2003. He served as the Chief Executive Officer of Puerto Luperon, Ltd.
(Bahamas) from January 2004 until December 2005. In January 2006, he was
appointed to, and currently serves as a member of, the board of directors of
Insignia Systems, Inc. Mr. Derycz received a B.A. in Psychology from the
University of California at Los Angeles.




Richard
McKilligan – Chief Financial Officer




Richard
McKilligan earned his law degree from Cornell Law School, his MBA from the
University of Chicago and his undergraduate degree in Accountancy from the
University of Illinois at Urbana-Champaign. He joined Derycz in January 2007.
Mr. McKilligan is also a director of Bristol Investment Fund, Ltd., which holds
a significant equity stake in the Company, and Chief Financial Officer of
Percipio Biotherapeutics, Inc., of which Bristol Investment Fund, Ltd. also
holds a significant equity stake. He was an associate with Morgan, Lewis &
Bockius, LLP in their New York and London offices from 2000 until January 2006.
He is a member of the State Bar of California, the New York State Bar
Association and the Florida Bar.




Scott
Ahlberg – Head of Corporate Services of Reprints Desk




Scott
Ahlberg has degrees from Stanford University (BA, 1984) and the University of
London (MA, 1990). Mr. Ahlberg was Vice President of Infotrieve, Inc. from 1991
until 2001 and Executive Vice President from 2001 until May 2005. From May 2005
until February 2006, Mr. Ahlberg provided consulting services to ventures in
professional networking and medical podcasting. He joined Reprints Desk in
2006.




Jan
Peterson – Head of Publisher Relations of Reprints Desk




Jan
Peterson was Vice President for Content Development at Infotrieve, Inc. from
2000 to 2006 and Vice President for Publisher Relations and Content Development
at RoweCom, formerly Faxon/Dawson, from 1997 to 2000. Ms. Peterson was at
Academic Press (now Elsevier) for 14 years, where her last position was
Fulfillment Director. Ms. Peterson is Past Chair of the Board of Directors for
the National Information Standards Organization (NISO), and she is the past
chair of the International Committee for EDI in Serials (ICEDIS). She has a
degree in History from Whittier College and an M.A. in Asian Studies from
California State College, San Diego. She joined Reprints in 2006.




Family
Relationships




There are
no family relationships among any of our executive officers or
directors.




Involvement
in Certain Legal Proceedings




None of
the directors or executive officers have, during the past five
years:


27





·
            Had any petition under the
      federal bankruptcy laws or any state insolvency law filed by or against,
      or had a receiver, fiscal agent, or similar officer appointed by a court
      for the business or property of such person, or any partnership in which
      he was a general partner at or within two years before the time of such
      filing, or any corporation or business association of which he was an
      executive officer at or within two years before the time of such
      filing;





·
            Been convicted in a criminal
      proceeding or a named subject of a pending criminal proceeding (excluding
      traffic violations and other minor
  offenses);





·
            Been the subject of any order,
      judgment, or decree, not subsequently reversed, suspended, or vacated, of
      any court of competent jurisdiction, permanently or temporarily enjoining
      him from, or otherwise limiting, the following
      activities:





(i)
            Acting as a futures commission
      merchant, introducing broker, commodity trading advisor, commodity pool
      operator, floor broker, leverage transaction merchant, any other person
      regulated by the Commodity Futures Trading Commission, or an associated
      person of any of the foregoing, or as an investment adviser, underwriter,
      broker or dealer in securities, or as an affiliated person, director or
      employee of any investment company, bank, savings and loan association or
      insurance company, or engaging in or continuing any conduct or practice in
      connection with such
activity;





(ii)
            Engaging in any type of business
      practice; or





(iii)
            Engaging in any activity in
      connection with the purchase or sale of any security or commodity or in
      connection with any violation of federal or state securities laws or
      federal commodities laws;





·
            Been the subject of any order,
      judgment, or decree, not subsequently reversed, suspended, or vacated, of
      any federal or state authority barring, suspending, or otherwise limiting
      for more than 60 days the right of such person to engage in any activity
      described in (i) above, or to be associated with persons engaged in any
      such activity;





·
            Been found by a court of
      competent jurisdiction in a civil action or by the SEC to have violated
      any federal or state securities law, where the judgment in such civil
      action or finding by the SEC has not been subsequently reversed,
      suspended, or vacated ; or





·
            Been found by a court of
      competent jurisdiction in a civil action or by the Commodity Futures
      Trading Commission to have violated any federal commodities law, where the
      judgment in such civil action or finding by the Commodity Futures Trading
      Commission has not been subsequently reversed, suspended, or
      vacated.




Code
of Ethics




We have
not yet adopted a written code of ethics that applies to our Chief Executive
Officer, Chief Financial Officer, principal accounting officer or persons
performing similar functions. We currently are considering the terms of such a
code and expect to adopt a code of ethics during the current fiscal
year.





Item
11.  Executive Compensation.




Executive
Compensation




The
following table summarizes all compensation for the last three fiscal years
awarded to, earned by or paid to (i) our Chief Executive Officer (principal
executive officer), (ii) our Chief Financial Officer (principal financial
officer), (iii) the three most highly compensated executive officers other than
our CEO and CFO who were serving as executive officers at the end of our last
completed fiscal year, whose total compensation exceeded $100,000 during such
fiscal year ends, and (iv) up to two additional individuals for whom disclosure
would have been provided but for the fact that the individual was not serving as
an executive officer at the end of our last completed fiscal year, whose total
compensation exceeded $100,000 during such fiscal year ends.


28




SUMMARY
COMPENSATION TABLE





Name and principle
                                              position
                                            
                                            Year
                                            
                                            Salary
                                              ($)
                                            
                                            
                                            Bonus
                                              ($)
                                            
                                            
                                            Stock
                                              awards
                                              ($)
                                            
                                            
                                            Option
                                              awards
                                              ($)
                                            
                                            
                                            Non-equity
                                              incentive
                                              plan
                                              compensation
                                              ($)
                                            
                                            
                                            Nonqualified
                                              deferred
                                              compensation
                                              earnings
                                              ($)
                                            
                                            
                                            All other
                                              compensation
                                              ($)
                                            
                                            
                                            Total
                                              ($)(a)
                                            
                                            (b)
                                            
                                            (c)
                                            
                                            
                                            (d)
                                            
                                            
                                            (e)
                                            
                                            
                                            (f)
                                            
                                            
                                            (g)
                                            
                                            
                                            (h)
                                            
                                            
                                            (i)
                                            
                                            
                                            (j)2009
                                            
                                            
                                            240,000
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            240,000Peter
      Derycz
                                            
                                            2008
                                            
                                            
                                            120,000
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            120,000Chief
      Executive Officer
                                            
                                            2007
                                            
                                            
                                            110,000
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            110,0002009
                                            
                                            
                                            111,000
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            27,133
                                            (1)
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            138,133Richard
      McKilligan
                                            
                                            2008
                                            
                                            
                                            81,250
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            17,064
                                            (2)
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            98,314Chief
      Financial Officer
                                            
                                            2007
                                            
                                            
                                            70,000
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            70,000





(1)
            Represents
      a grant made on December 21, 2007, of options to purchase 66,500 common
      shares which vest immediately and options to purchase 28,500 common shares
      which will vest on December 21,
      2008.




(2)
            Represents a grant made onMay 28,
      2009, of options to
      purchase90,000common shares which vest
      immediately.





The
following table sets forth, at June 30, 2009, information regarding unexercised
options for each named executive officer.  There were no stock awards
outstanding at June 30, 2009.





OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END





Name
                                
                                Number of
                                  securities
                                  underlying
                                  unexercised
                                  options
                                  (#)
                                  exercisable
                                
                                
                                Number of
                                  securities
                                  underlying
                                  unexercised
                                  options
                                  (#)
                                  unexercisable
                                
                                
                                Equity incentive
                                  plan awards:
                                  Number of
                                  securities
                                  underlying
                                  unexercised
                                  unearned options
                                  (#)
                                
                                
                                Option
                                  exercise price
                                  ($)
                                
                                
                                Option
                                  expiration
                                  date(a)
                                
                                (b)
                                
                                
                                (c)
                                
                                
                                (d)
                                
                                
                                (e)
                                
                                
                                (f)Peter
      Derycz
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                -
                                -
                                
                                
                                -Richard
                                
                                
                                95,000
                                (1)
                                
                                
                                -
                                
                                
                                
                                
                                
                                
                                $
                                1.50
                                
                                
                                12/21/17McKilligan
                                
                                
                                90,000
                                (2)
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                1.00
                                
                                
                                5/28/19





(1)
            Options vested immediately upon
      grant on December 21,
  2007.


(2)
            Optionsvested immediately upon grantonMay 28, 2009.


29





The
following table sets forth, for the year ended June 30, 2009, the
compensation earned by our directors for the services rendered by them to the
Company in all capacities.





DIRECTOR
COMPENSATION





Name
                                  
                                  Fees
                                    earned
                                    or paid
                                    in cash
                                    ($)
                                  
                                  
                                  Stock
                                    awards
                                    ($)
                                  
                                  
                                  Option
                                    awards
                                    ($)
                                  
                                  
                                  Non-equity
                                    incentive plan
                                    compensation
                                    ($)
                                  
                                  
                                  Nonqualified
                                    deferred
                                    compensation
                                    earnings
                                    ($)
                                  
                                  
                                  All other
                                    compensation
                                    ($)
                                  
                                  
                                  Total
                                    ($)(a)
                                  
                                  (b)
                                  
                                  
                                  (c)
                                  
                                  
                                  (d)
                                  
                                  
                                  (e)
                                  
                                  
                                  (f)
                                  
                                  
                                  (g)
                                  
                                  
                                  (h)Scott
      Ahlberg
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  122,611
                                  (1)
                                  
                                  
                                  122,611Janice
      Peterson
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  119,559
                                  (2)
                                  
                                  
                                  119,559





(1)
            Mr. Ahlberg
      received no compensation for his services as a director of the Company.
      Other compensation represents the following amounts paid to Mr. Ahlberg
      for his services as anemployeeof the Company: salary in
      the amount of $60,000, a cash bonus in the amount of $40,000, and an
      option award valued at $22,611.OnMay 28, 2009, the Company granted Mr. Ahlberg
      options to purchase75,000shares of the Company’s
      common stock, which vested immediately upon
      grant.


(2)
            Ms. Peterson
      received no compensation for her services as a director of the Company.
      Other compensation represents the following amounts paid to Ms. Peterson
      for her services as anemployeeof the Company: salary in
      the amount of $68,500, a cash bonus in the amount of
      $28,448, and an option award valued at
      $22,611. OnMay 28, 2009, the Company granted Ms.
      Peterson options to purchase75,000shares of the Company’s
      common stock, which vested immediately upon
      grant.




Employment
Agreements




Peter
Derycz




Mr.
Derycz's employment contract as Chief Executive Officer and as a director of the
Company has a three year term beginning July 1, 2007. The contract provides an
annual salary of $240,000.  No part of Mr. Derycz's salary is
allocated to his duties as a director of the Company. The contract contains no
incentive bonus structure.




Richard
McKilligan




Mr.
McKilligan's employment contract as Chief Financial Officer and General Counsel
has a three year term beginning July 1, 2007. The contract provides an annual
salary of $150,000.  The contract contains no incentive bonus
structure.




Scott
Ahlberg




Mr.
Ahlberg's employment contract as Head of Corporate Services of Reprints Desk and
as a director of the Company has a three year term beginning July 1, 2007. The
contract provides an annual base salary of $60,000 and an annual guaranteed
bonus of $40,000. The contract sets out bonuses of between $20,000 and $220,000
available to Mr. Ahlberg if the Company achieves certain levels of revenues from
its document delivery product from $1,000,000 to in excess of $20,000,000. No
part of Mr. Ahlberg's salary is allocated to his duties as a director of the
Company. The contract contains no other incentive bonus structure.




Janice
Peterson




Ms.
Peterson's employment contract as Head of Publisher Relations of Reprints Desk
and as a director of the Company has a three year term beginning July 1, 2007.
The contract provided an annual base salary of $70,000 and an annual guaranteed
bonus of $30,000. The contract sets out additional commissions available to Ms.
Peterson, which vary from 1% to 5% of the discounts or sales that result from
agreements that she negotiates between publishers and either Pools Press or
Reprints Desk. No part of Ms. Peterson's salary is allocated to her duties as a
director of the Company. The contract contains no other incentive bonus
structure.




Director
Compensation




We intend
to compensate non-management directors through stock option and/or restricted
stock granted under our 2007 Equity Compensation Plan. At this time, no
directors receive compensation for their services as directors.





Item
12.  Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters.




The
following table sets forth certain information, as of September 25, 2009, with
respect to the holdings of (1) each person who is the beneficial owner of more
than five percent of our common stock, (2) each of our directors, (3) the CEO
and each named executive officer, and (4) all of our directors and executive
officers as a group.


30




Beneficial
ownership of the common stock is determined in accordance with the rules of the
Securities and Exchange Commission and includes any shares of common stock over
which a person exercises sole or shared voting or investment powers, or of which
a person has a right to acquire ownership at any time within 60 days of
September 25, 2009. Except as otherwise indicated, and subject to applicable
community property laws, the persons named in this table have sole voting and
investment power with respect to all shares of common stock held by them.
Applicable percentage ownership in the following table is based on 12,961,830
shares of common stock outstanding as of September 22, 2009 plus, for each
person, any securities that person has the right to acquire within 60 days of
September 22, 2009.




Unless
otherwise indicated below, the address of each of the principal shareholders is
c/o Derycz Scientific, Inc., 1524 Cloverfield Blvd., Suite E, Santa Monica,
California 90404.





Name and Address
                                
                                Shares
                                  Beneficially
                                  Owned
                                
                                
                                Percentage
                                  of ClassBristol Investment Fund, Ltd. (1)
      (2)
                                
                                
                                2,750,000
                                
                                
                                
                                20.8
                                %Bristol
      Capital, LLC (1)
      (3)
                                
                                
                                1,810,910
                                
                                
                                
                                14.0
                                %Peter
      Derycz
                                
                                
                                4,000,000
                                
                                
                                
                                30.1
                                %Richard
      McKilligan
                                
                                
                                257,728
                                
                                
                                
                                2.0
                                %Scott
      Ahlberg
                                
                                
                                161,810
                                
                                
                                
                                1.2Jan
      Peterson
                                
                                
                                160,000
                                
                                
                                
                                1.2All
      Directors and Executive Officers as a group (4 persons)
                                
                                
                                4,579,538
                                
                                
                                
                                34.5
                                %




(1)
            Paul
      Kessler exercises investment and voting control over the shares held by
      Bristol Investment Fund, Ltd. and Bristol Capital,
  LLC.





(2)
            Includes
      warrants to purchase 250,000 shares of common stock at an exercise price
      of $1.25 per share.





(3)
            Diana
      Derycz-Kessler is a member of Bristol Capital, LLC, the spouse of Paul
      Kessler and the sibling of Peter
Derycz.




Change
of Control




To the
knowledge of management, there are no present arrangements or pledges of
securities of our company that may result in a change in control of the
Company.





Equity
Compensation Plan Information





In
December 2007, we established the 2007 Equity Compensation Plan (the “Plan”).
The Plan was approved by our Board of Directors and security holders holding a
majority of the shares of our common stock outstanding. The purpose of the Plan
is to grant stock and stock options to purchase our common stock to our
employees and key consultants. The total amount of shares subject to the Plan is
1,500,000 shares. As of September 25, 2009, we had granted 1,022,000 options
under the Plan. The following table provides information as of June 30, 2009
with respect to the Plan, which is the only compensation plan under which our
equity securities are authorized for issuance.





Plan category
                        
                        Number of securities to be
                          issued upon exercise of
                          outstanding options,
                          warrants and rights
                        
                        
                        Weighted-average
                          exercise price of
                          outstanding options,
                          warrants and rights
                        
                        
                        Number of securities
                          remaining available
                          for future issuance
                          under equity
                          compensation plans
                          (excluding securities
                          reflected in column (a))(a)
                        
                        
                        (b)
                        
                        
                        (c)Equity
      compensation plans approved by security holders
                        
                        
                        1,500,000
                        
                        
                        $
                        1.26
                        
                        
                        
                        478,000Equity
      compensation plans not approved by security holders
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -Total
                        
                        
                        1,500,000
                        
                        
                        
                        
                        
                        
                        
                        478,000


31





Item
13.  Certain Relationships and Related Transactions, and Director
Independence.




Described
below are certain transactions or series of transactions since July 1, 2006
between us and our subsidiaries and our executive officers, directors and the
beneficial owners of 5% or more of our common stock, on an as converted basis,
and certain persons affiliated with or related to these persons, including
family members, in which they had or will have a direct or indirect material
interest in an amount that exceeds the lesser of $120,000 or one percent of the
average of our total assets at year end for the last two completed fiscal years,
other than compensation arrangements that are otherwise required to be described
under “Executive Compensation.”




Richard
McKilligan, our Chief Financial Officer, is also a director of Bristol
Investment Fund, Ltd., which holds 2,750,000 shares, or 20.8%, of the Company’s
common stock.  Mr. McKilligan is also the Chief Financial Officer and
General Counsel of Percipio Biotherapeutics, Inc., of which Bristol Investment
Fund, Ltd. is a shareholder.




Until May
31, 2009, the Company sublet its office space from Bristol Capital Advisors, LLC
pursuant to a lease agreement. The office space is approximately 1,000 square
feet and the cost is $2,740.40 per month, which rate is equivalent on a per
square foot basis to the amount Bristol Capital Advisors, LLC pays under its
lease agreement and is comparable to the terms of a lease between unaffiliated
parties. The sublease agreement is a month-to-month tenancy which may be
terminated at any time. Bristol Capital Advisors, LLC is the investment manager
of Bristol Investment Fund, Ltd., which holds a significant equity stake in the
Company.




A
familial relationship exists between management and certain equity holders of
the Company. Paul Kessler and Diana Derycz-Kessler are married and are the
owners of Bristol Capital, LLC, which holds 1,810,910 shares, or 14.4%, of the
Company’s common stock. Paul Kessler has investment and voting control over the
shares held by Bristol Investment Fund, Ltd., which holds 2,750,000 shares, or
20.8%, of the Company’s common stock. Diana Derycz-Kessler and Peter Derycz, the
Company’s Chief Executive Officer, are siblings. Diana Derycz-Kessler is a
registered representative of T.R. Winston & Company, LLC, which was the
Placement Agent for the Company’s December 2006 offering of common shares. Our
agreement with the Placement Agent was on terms that would be comparable to the
terms in similar agreements between unaffiliated parties. Although no agreement
exists between the Company and Ms. Derycz-Kessler, she may receive compensation
in connection with that offering through T.R. Winston & Company,
LLC.





Director
Independence




None of
the members of the Company’s Board of Directors are independent directors as
that term is defined by NASDAQ Rule 4200(a)(15). The Company’s currently does
not have an Audit Committee. None of the members of the Company’s Board of
Directors meet the Audit Committee independence requirements of NASDAQ Rule
4350(d)(2).





Item
14.  Principal Accounting Fees and Services.





Summary
of Principal Accounting Fees for Professional Services Rendered





The
following table presents the aggregate fees for professional audit services and
other services rendered by Weinberg & Company, P.A., our independent
registered public accountants in the fiscal years ended June 30, 2009 and
2008.





Year Ended June 30, 2009
                    
                    
                    Year Ended June 30, 2008Audit
      Fees
                    
                    $
                    89,339
                    
                    
                    
                    147,231Audit-Related
      Fees
                    
                    
                    -
                    
                    
                    
                    -Tax
      Fees
                    
                    
                    -
                    
                    
                    
                    -All
      Other Fees
                    
                    
                    -
                    
                    
                    
                    -$
                    89,339
                    
                    
                    
                    147,231


32









Audit Fees consist of fees
billed for the annual audit of our financial statements and other audit services
including the provision of consents and the review of documents filed with the
SEC.




We do not
have an independent audit committee and the full Board of Directors, therefore,
serves as the audit committee for all purposes relating to communication with
our auditors and responsibility for our audit. Our Board of Directors has
considered whether the provision of the services described above for the fiscal
years ended June 30, 2008 and 2009, is compatible with maintaining the auditor’s
independence.




All audit
and non-audit services that may be provided by our principal accountant to us
shall require pre-approval by the Board of Directors. Further, our auditor shall
not provide those services to us specifically prohibited by the SEC, including
bookkeeping or other services related to the accounting records or financial
statements of the audit client; financial information systems design and
implementation; appraisal or valuation services, fairness opinion, or
contribution-in-kind reports; actuarial services; internal audit outsourcing
services; management functions; human resources; broker-dealer, investment
adviser, or investment banking services; legal services and expert services
unrelated to the audit; and any other service that the Public Company Accounting
Oversight Board determines, by regulation, is impermissible.


33


PART
IV





Item
15.  Exhibits, Financial Statements Schedules.





(a)
Documents filed as a part of this report





(1) Financial
Statements





The
financial statements of Derycz Scientific, Inc. and its subsidiaries and
Weinberg & Company, P.A.’s report dated September 15, 2009, are incorporated
by reference to Item 8 of this report.





(2) Financial Statement
Schedules





Not
required.





(b)
Exhibits





Exhibit
                Number
              
              Description2.1
              
              Share
      Exchange Agreement between Derycz and Reprints Desk dated November 13,
      2006 (1)3.1
              
              Articles
      of Incorporation (1)3.2
              
              Bylaws
      (1)4.1
              
              Form
      of Warrant (1)10.1
              
              2007
      Equity Compensation Plan (1)10.2
              
              Lease
      agreement between Pools Press and JJ Properties (1)10.3
              
              Peter
      Derycz employment agreement (1)10.4
              
              Richard
      McKilligan employment agreement (1)10.5
              
              Scott
      Ahlberg employment agreement (1)10.6
              
              Janice
      Peterson employment agreement (1)10.7
              
              Matt
      Sampson employment agreement (1)10.8
              
              CapCas
      License Agreement (1)10.9
              
              Dainippon
      Equipment Purchase Agreement (1)10.10
              
              Form
      of Subscription Agreement (2)21.1
              
              List
      of subsidiaries (1)31.1
              
              Rule
      13a-14(a)/15d-14(a) Certification of Chief Executive Officer (3)31.2
              
              Rule
      13a-14(a)/15d-14(a) Certification of Chief Financial Officer (3)32.1
              
              Section
      1350 Certification of Chief Executive Officer (3)32.2
              
              Section
      1350 Certification of Chief Financial Officer (3)





(1)
            Incorporated
      by reference to the exhibit of the same number to the registrant’s
      Registration Statement on Form SB-2 filed on December 28,
      2007.


(2)
            Incorporated
      by reference to the exhibit of the same number to the registrant’s
      Registration Statement on Form S-1/A (Amendment No. 1) filed on February
      27, 2008.


(3)
            Filed
      herewith.


34


SIGNATURES





Pursuant to the requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.





DERYCZ
      SCIENTIFIC, INC.By:
              /s/
      Peter DeryczPeter
      DeryczDate:
      September 28, 2009
              
              Chief
      Executive Officer (Principal
                Executive
      Officer)By:
              /s/
      Richard McKilliganRichard
      McKilliganDate:
      September 28, 2009
              
              Chief
      Financial Officer (Principal
                Financial
      and Accounting Officer)





Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.





Signature
                    
                    Title
                    
                    Date/s/ Peter DeryczPeter
      Derycz
                    
                    Chief
      Executive Officer (Principal Executive
                      Officer)
      and Chairman of the Board
                    
                    September
      28, 2009/s/ Richard McKilligan
                    
                    Chief
      Financial Officer (Principal FinancialRichard
      McKilligan
                    
                    and
      Accounting Officer), Secretary and
                    
                    September
      28, 2009General
      Counsel/s/ Scott AhlbergScott
      Ahlberg
                    
                    Director
                    
                    September
      28, 2009/s/ Jan PetersonJan
      Peterson
                    
                    Director
                    
                    September
      28,
2009








EXHIBIT
INDEX





Exhibit
                Number
              
              Description2.1
              
              Share
      Exchange Agreement between Derycz and Reprints Desk dated November 13,
      2006 (1)3.1
              
              Articles
      of Incorporation (1)3.2
              
              Bylaws
      (1)4.1
              
              Form
      of Warrant (1)10.1
              
              2007
      Equity Compensation Plan (1)10.2
              
              Lease
      agreement between Pools Press and JJ Properties (1)10.3
              
              Peter
      Derycz employment agreement (1)10.4
              
              Richard
      McKilligan employment agreement (1)10.5
              
              Scott
      Ahlberg employment agreement (1)10.6
              
              Janice
      Peterson employment agreement (1)10.7
              
              Matt
      Sampson employment agreement (1)10.8
              
              CapCas
      License Agreement (1)10.9
              
              Dainippon
      Equipment Purchase Agreement (1)10.10
              
              Form
      of Subscription Agreement (2)21.1
              
              List
      of subsidiaries (1)31.1
              
              Rule
      13a-14(a)/15d-14(a) Certification of Chief Executive Officer (3)31.2
              
              Rule
      13a-14(a)/15d-14(a) Certification of Chief Financial Officer (3)32.1
              
              Section
      1350 Certification of Chief Executive Officer (3)32.2
              
              Section
      1350 Certification of Chief Financial Officer (3)





(1)
            Incorporated
      by reference to the exhibit of the same number to the registrant’s
      Registration Statement on Form SB-2 filed on December 28,
      2007.


(2)
            Incorporated
      by reference to the exhibit of the same number to the registrant’s
      Registration Statement on Form S-1/A (Amendment No. 1) filed on February
      27, 2008.


(3)
            Filed
      herewith.