**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**


**FORM
      10-Q**


(Mark
                One)þ
            
            **QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934**


**For
      the quarterly period ended: September 30, 2008**


o
            
            **TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934**


**For
      the transition period from _____________ to _____________**





**Commission
      File No. 333-148392**


**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.)**10990
                Wilshire Blvd., Suite 1410, Los Angeles,
                California**
            
            **90024**(Address
                of principal executive offices)
            
            (Zip
                Code)





**(310)
      477-0354**


(Registrant’s
      telephone number, including area code)





(Former
      name, former address and former fiscal year, if changed since last
      report)





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 whether the registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a smaller reporting company.
      See
      the definitions of “large accelerated filer,” “accelerated filer” and “smaller
      reporting company” in Rule 12b-2 of the Exchange Act.





Large
                accelerated filero
            
            Accelerated
                fileroNon-accelerated filero(Do not check if a smaller reporting company)
            
            Smaller reporting companyþ





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





APPLICABLE
      ONLY TO CORPORATE ISSUERS:





Indicate
      the number of shares outstanding of each of the issuer’s classes of common stock
      as of the latest practicable date: As of November 11, 2008, there were
      12,961,830 shares of common stock outstanding.





**TABLE
      OF CONTENTS**





PART
                I — FINANCIAL INFORMATION
            
            
            1Item 1.
                Financial Statements
            
            
            1Item 2.
                Management’s Discussion and Analysis of Financial Condition and Results of
                Operations
            
            
            12Item 3.
                Quantitative and Qualitative Disclosures About Market Risk
            
            
            16Item 4T.
                Controls and Procedures
            
            
            16PART
                II — OTHER INFORMATION
            
            
            16Item 1.
                Legal Proceedings
            
            
            16Item 1A.
                Risk Factors
            
            
            17Item 2.
                Unregistered Sales of Equity Securities and Use of
                Proceeds
            
            
            17Item 3.
                Defaults Upon Senior Securities
            
            
            17Item 4.
                Submission of Matters to a Vote of Security Holders
            
            
            17Item 5.
                Other Information
            
            
            17Item 6.
                Exhibits
            
            
            17SIGNATURES
            
            
            18







**PART
      1 — FINANCIAL INFORMATION**





**Item
      1. Financial Statements**




**Derycz
      Scientific, Inc.**


**Condensed
        Consolidated Balance Sheets**
 
 **September 30,**
              
              **June 30,****2008**
              
              **2008****(unaudited)****ASSETS**CURRENT
                  ASSETSCash
                  and cash equivalents
              
              $
              1,597,679
              
              $
              849,834Short
                  term investments
              
              
              1,731,961
              
              
              1,736,630Accounts
                  receivable
              
              
              2,338,115
              
              
              3,119,158Inventory
              
              
              11,326
              
              
              15,956Prepaid
                  royalties
              
              
              254,236
              
              
              326,077Other
                  current assets
              
              
              121,478
              
              
              80,739TOTAL
                  CURRENT ASSETS
              
              
              6,054,795
              
              
              6,128,394PROPERTY
                  AND EQUIPMENT, net of accumulated depreciation of $113,956 and
                  $89,711
              
              
              382,297
              
              
              362,807LONG-TERM
                DEFERRED TAX ASSET
              
              
              853
              
              
              -INTANGIBLE
                  ASSETSCustomer
                  lists, net of accumulated amortization of $213,889 and
                  $182,222
              
              
              61,111
              
              
              92,778Other
                  intellectual property, net of amortization of $85,859 and
                  $64,016
              
              
              584,566
              
              
              518,959Goodwill
              
              
              284,143
              
              
              189,185TOTAL
                  ASSETS
              
              $
              7,367,765
              
              $
              7,292,123**LIABILITIES
                  AND STOCKHOLDERS' EQUITY**CURRENT
                  LIABILITIESAccounts
                  payable
              
              $
              1,571,096
              
              $
              1,997,233Capital
                  lease obligation, current
              
              
              16,546
              
              
              16,129Outstanding
                  credit line
              
              
              1,305,138
              
              
              1,291,855Income
                  taxes payable
              
              
              14,195
              
              
              -Other
                  current liabilities
              
              
              54,477
              
              
              88,430TOTAL
                  CURRENT LIABILITIES
              
              
              2,961,452
              
              
              3,393,647CAPITAL
                  LEASE OBLIGATIONS
              
              
              57,183
              
              
              61,479LONG-TERM
                  DEFERRED TAX LIABILITY
              
              
              121,832
              
              
              -MINORITY
                  INTEREST
              
              
              22,609
              
              
              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
              
              
              5,295,424
              
              
              4,645,364Accumulated
                  deficit
              
              
              (1,103,697
              )
              
              (871,031
              )TOTAL
                  STOCKHOLDERS' EQUITY
              
              
              4,204,689
              
              
              3,786,895TOTAL
                  LIABILITIES AND STOCKHOLDERS' EQUITY
              
              $
              7,367,765
              
              $
              7,292,123
  See
        notes
        to condensed consolidated financial statements
  1
 
 **Derycz
        Scientific, Inc.**
 **Condensed
        Consolidated Statements of Operations**
 **(unaudited)**
 
 **Three
                  Months Ended****September
                  30,****2008**
              
              **2007**NET
                  SALES
              
              $
              3,202,726
              
              $
              2,251,086COST
                  OF SALES
              
              
              2,556,829
              
              
              1,811,571GROSS
                  PROFIT
              
              
              645,897
              
              
              439,515OPERATING
                  EXPENSES:General
                  and administrative
              
              
              771,623
              
              
              417,931Marketing
                  and advertising
              
              
              14,163
              
              
              3,770Depreciation
                  and amortization
              
              
              65,073
              
              
              41,284Other
                  expenses
              
              
              1,049
              
              
              -TOTAL
                  OPERATING EXPENSES
              
              
              851,908
              
              
              462,985LOSS
                  FROM OPERATIONS
              
              
              (206,011
              )
              
              (23,470
              )Unrealized
                  loss on marketable securities
              
              
              (18,150
              )
              
              -Interest
                  expense
              
              
              (15,240
              )
              
              (4,605
              )Interest
                  income
              
              
              19,458
              
              
              33,802INCOME
                  (LOSS) BEFORE TAXES AND MINORITY INTEREST
              
              
              (219,943
              )
              
              5,727MINORITY
                  INTEREST
              
              
              (4,160
              )
              
              (2,052
              )INCOME
                  (LOSS) BEFORE TAXES
              
              
              (224,103
              )
              
              3,675PROVISION
                  FOR INCOME TAXES
              
              
              8,563
              
              
              -NET
                  INCOME (LOSS)
              
              $
              (232,666
              )
              $
              3,675NET
                  LOSS PER SHARE:BASIC
                  AND DILUTED
              
              $
              (0.02
              )
              $
              0.00WEIGHTED
                  AVERAGE SHARES OUTSTANDING:BASIC
                  AND DILUTED
              
              
              12,895,161
              
              
              12,500,003
 
 See
        notes
        to condensed consolidated financial statements
  2
 
 **Derycz
        Scientific, Inc.**
 **Condensed
        Consolidated Statement of Stockholders' Equity**
 **For
        the three months ended September 30, 2008**
 **(unaudited)**
 
 **Additional**
              
              
              
              **Total****Common stock**
              
              **paid-in**
              
              **Accumulated**
              
              **stockholders'****Shares**
              
              **Amount**
              
              **capital**
              
              **Deficit**
              
              **equity**Balance,
                  July 1, 2008
              
              
              12,561,813
              
              $
              12,562
              
              $
              4,645,364
              
              $
              (871,031
              )
              $
              3,786,895Fair
                  value of vested options issued to employees
              
              
              -
              
              
              -
              
              
              6,472
              
              
              -
              
              
              6,472Issuance
                  of warrant for services
              
              
              
              
              
              
              
              
              43,963
              
              
              -
              
              
              43,963Issuance
                  of common stock for cash
              
              
              400,017
              
              
              400
              
              
              599,625
              
              
              -
              
              
              600,025Net
                  loss for the period
              
              
              
              
              
              
              
              
              
              
              
              (232,666
              )
              
              (232,666
              )Balance,
                  September 30, 2008
              
              
              12,961,830
              
              $
              12,962
              
              $
              5,295,424
              
              $
              (1,103,697
              )
              $
              4,204,689
 
 See
        notes
        to condensed consolidated financial statements
  3
 
 **Derycz
        Scientific, Inc.**
 
 **Condensed
        Consolidated Statements of Cash Flows**
 
 **Three months****ended September 30,****2008**
              
              **2007****(unaudited)**CASH
                  FLOWS FROM OPERATING ACTIVITIES:Net
                  income (loss)
              
              $
              (232,666
              )
              $
              3,675Adjustment
                  to reconcile net loss to net cash used in operating
                  activities:Depreciation
                  and amortization
              
              
              77,755
              
              
              50,833Fair
                  value of vested stock options
              
              
              6,472
              
              
              -Fair
                  value of common stock warant issued for services
              
              
              43,963
              
              
              -Unrealized
                  loss on investment
              
              
              18,150
              
              
              -Changes
                  in assets and liabilities:Accounts
                  receivable
              
              
              781,043
              
              
              (242,231
              )Accounts
                  payable and accrued expenses
              
              
              (426,137
              )
              
              (171,086
              )Inventory
              
              
              4,630
              
              
              2,369Prepaid
                  royalties
              
              
              71,841
              
              
              44,491Other
                  current assets
              
              
              (40,739
              )
              
              (17,988
              )Other
                  current liabilities
              
              
              (33,953
              )
              
              32,373Minority
                  share of earnings
              
              
              4,160
              
              
              2,052Income
                  taxes payable
              
              
              8,563
              
              
              -Net
                  cash provided by (used in) operating activities
              
              
              283,082
              
              
              (295,512
              )CASH
                  FLOWS FROM INVESTING ACTIVITIES:Purchase
                  of furniture and equipment
              
              
              (43,735
              )
              
              (116,990
              )Purchase
                  of Intellectual Property
              
              
              (87,450
              )
              
              -Proceeds
                  from sale of (investment in) short term investments
              
              
              (13,481
              )
              
              433,960Net
                  cash provided by (used in) investing activities
              
              
              (144,666
              )
              
              316,970CASH
                  FLOWS FROM FINANCING ACTIVITIES:Proceeds
                  from the issuance of common stock
              
              
              600,025
              
              
              -Capital
                  lease obligation
              
              
              (3,879
              )
              
              107,509Payments
                  on notes on Pools Press
              
              
              -
              
              
              (3,423
              )Advances
                  under (payments on) line of credit
              
              
              13,283
              
              
              (6,244
              )Net
                  cash provided by financing activities
              
              
              609,429
              
              
              97,842NET
                    INCREASE IN CASH AND CASH EQUIVALENTS
              
              
              747,845
              
              
              119,300CASH
                  AND CASH EQUIVALENTS, Beginning of period
              
              
              849,834
              
              
              382,587CASH
                  AND CASH EQUIVALENTS, End of period
              
              $
              1,597,679
              
              $
              501,887SUPPLEMENTAL
                  DISCLOSURES OF CASH FLOW INFORMATION:Taxes
                  paid
              
              $
              -
              
              $
              -Interest
                  paid
              
              $
              32,313
              
              $
              33,802SUPPLEMENTAL
                  DISCLOSURES OF NON-CASH INVESTING AND FINANCING
                  ACTIVITIES:Capital
                  lease obligation
              
              $
              73,729
              
              $
              107,509Adjustment
                  to Goodwill to reflect deferred tax assets and liabilities
              
              $
              121,832
              
              $
              -Adjustment
                  to Goodwill to reflect minority interest of deferred tax
                  liability
              
              $
              26,874
              
              $
              -
 
 See
        notes
        to condensed consolidated financial statements
  4




**DERYCZ
        SCIENTIFIC, INC.**
 ****
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **For
        the Three Months Ended September 30, 2008 and 2007
        (Unaudited)**
  **Note
        1 — Organization, Nature of Business and Basis of
        Presentation**
 
 (a)
        Organization
  Derycz
        Scientific, Inc. (“Derycz” or the “Company”) 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 (“Reprints”). 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 for
        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
  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 interim financial statements for the three months ended September
        30, 2008 and 2007 are unaudited, but in the opinion of management, contain
        all
        adjustments, which include normal recurring adjustments necessary to present
        fairly the financial position at September 30, 2008 and the results of
        operations and cash flows for the three
        months ended September 30, 2008 and 2007. The results of operations for the
        three months ended September 30, 2008 are not necessarily indicative of the
        results of operations to be expected for the full fiscal year ending June
        30,
        2009.
  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 the 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
  Effective
        August 1, 2008, the Company adopted Statement of Financial Accounting Standards
        (SFAS) No. 157, Fair Value Measurements. This Statement defines fair value
        for
        certain financial and nonfinancial assets and liabilities that are recorded
        at
        fair value, establishes a framework for measuring fair value, and expands
        disclosures about fair value measurements. This guidance applies to other
        accounting pronouncements that require or permit fair value measurements.
        On
        February 12, 2008, the FASB finalized FASB Staff Position (FSP) No.157-2,
        Effective Date of FASB Statement No. 157. This Staff Position delays the
        effective date of SFAS No. 157 for nonfinancial assets and liabilities to
        fiscal
        years beginning after November 15, 2008 and interim periods within those
        fiscal
        years, except for those items that are recognized or disclosed at fair value
        in
        the financial statements on a recurring basis (at least annually). The adoption
        of SFAS No. 157 had no effect on the Company’s consolidated financial position
        or results of operations.
  5
  (c)
        Short
        term investments
  Our
        short
        term investments consist of corporate and municipal debt and preferred stock
        auction rate securities held in an account with UBS. Recently, several auctions
        have failed as a result of illiquidity and imbalance in order flow for auction
        rate securities. A failed auction is not an indication of an increased credit
        risk or a reduction in the underlying collateral, however, parties wishing
        to
        sell securities could not do so. Based on current market conditions, it is
        not
        known when or if the capital markets will come back into balance to achieve
        successful auctions for these securities. If these auctions continue to fail,
        it
        could result in our holding securities beyond their next scheduled auction
        reset
        dates and will limit the short-term liquidity of these investments. We currently
        believe these securities are not significantly impaired, primarily due to
        the
        collateral underlying these securities and/or the creditworthiness of the
        issuer.  Furthermore, on September 8, 2008, the Massachusetts Secretary of
        State announced that UBS has pledged to buy back almost $40 billion worth
        of
        bonds that their retail clients have been unable to sell.  As part of the
        settlement, UBS customers with less than $1 million in auction rate securities
        will get their money back by October 31, while others will get their refund
        by
        January 1, 2009. In accordance with Statement of Financial Accounting Standards
        No. 115, the Company determined that these investments should be accounted
        for
        as trading securities and recorded on the Company’s consolidated financial
        statements at fair market value, with the unrealized losses amounting to
        $18,150
        at September 30, 2008 reflected as a charge in our statement of operations.
        The
        Company does not anticipate incurring any further losses related to these
        credit
        risks.  Based on our expected operating cash flows, and our other sources
        and uses of cash, we do not anticipate that the temporary lack of liquidity
        on
        these investments will affect our ability to execute our current business
        plan.   Our short term investments are collateral for borrowings under
        our line of credit agreement with UBS (see Note 6).
  As
        the
        Company has adopted FAS 157, it has determined that this investment should
        be
        measured using Level 2 criteria of FAS 157.  Level 2 use 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.
  (d)
        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 28% of the revenues for the three months ended September
        30, 2008 and two customers accounted for 13% and 13% of the revenues for
        the
        three months ended September 30, 2007.
  As
        of
        September 30, 2008, two customers accounted for 11% and 10% of accounts
        receivable and one customer accounted for 38% of accounts receivable at June
        30,
        2008.
  (e)
        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.
  6
  (f)
        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” whereby 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.
  (g)
        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 $43,091 and $22,735, respectively, for the three months ended
        September 30, 2008 and 2007.
  (h)
        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
        outstanding. 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 2,450,000 shares of common stock have been excluded
        from
        the calculation of diluted net loss per share for the three months ended
        September 30, 2007 and options and warrants to purchase 3,207,509 shares
        of
        common stock outstanding as of September 30, 2008 have been excluded from
        the
        calculation as the effect would have been anti-dilutive.
  (i)
        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 $14,163 and $3,770
        for
        the three months ended September 30, 2008 and 2007,
        respectively.
  (j)
        Recently issued accounting pronouncements
  In
        December 2007, the FASB issued FASB Statement No. 141 (R), “Business
        Combinations” (“FAS 141(R)”), which establishes accounting principles and
        disclosure requirements for all transactions in which a company obtains control
        over another business. FAS 141 (R) applies prospectively to business
        combinations for which the acquisition date is on or after the beginning
        of the
        first annual reporting period beginning on or after December 15, 2008. Earlier
        adoption is prohibited.
  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.
  7
  In
        March
        2008, the FASB issued SFAS No. 161 (FAS 161), “Disclosures About Derivative
        Instruments and Hedging Activities * an amendment of FAS 133.” FAS 161 requires
        qualitative disclosures about objectives and strategies for using derivatives,
        quantitative disclosures about fair value amounts of gains and losses on
        derivative instruments, and disclosures
        about credit-risk-related contingent features in derivative agreements. FAS
        161
        is effective for fiscal years beginning after November 15, 2008. The Company
        does not expect the implementation of FAS 161 to have a material impact on
        its
        consolidated financial statements.
  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 September 30, 2008 and June
        30,
        2008:
 
 **September 30, 2008**
              
              **June 30, 2008******
              
              (unaudited)
              
              ****Computer
                  equipment
              
              $
              64,646
              
              $
              32,344Software
              
              
              106,478
              
              
              95,045Printing
                  equipment
              
              
              286,452
              
              
              286,452Furniture
                  and fixtures
              
              
              34,677
              
              
              34,677Autos
                  and vans
              
              
              4,000
              
              
              4,000496,253
              
              
              452,518Less
                  accumulated depreciation
              
              
              (113,956
              )
              
              (89,711
              )$
              382,297
              
              $
              362,807
  Printing
        equipment includes $91,792 of equipment under capital lease and related
        accumulated amortization of $21,418 and $16,829 as of September 30, 2008
        and
        June 30, 2008, respectively.
  Depreciation
        expense for the three months ended September 30, 2008 and 2007 was $24,245
        and
        $13,274, respectively.
  **Note
        4 — Intangible Assets**
  Intangible
        assets consist of the following at September 30, 2008 and June 30,
        2008:
 
 **September 30,**
                **2008**
              
              **June 30,**
                **2008******
              
              (unaudited)
              
              ****Customer
                  list
              
              $
              275,000
              
              $
              275,000Other
                  intellectual property
              
              
              670,425
              
              
              582,975Accumulated
                  amortization
              
              
              (299,748
              )
              
              (246,238
              )$
              645,677
              
              $
              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.
  **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 $7,446 and $8,000 through November 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 three months ended
        September 30, 2008 and 2007 was $30,024 and $29,904, respectively.
  8
  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. Annual future minimum rentals
        under operating and capital leases as of September 30, 2008 are as
        follows:
 
 **Fiscal
                  Year**
              
              **Operating Leases**
              
              **Capital Leases**2009
              
              $
              67,318
              
              $
              17,5052010
              
              
              93,250
              
              
              23,3402011
              
              
              88,000
              
              
              23,340Thereafter
              
              
              
              
              
              25,285Total
                  minimum lease payments
              
              $
              248,568
              
              $
              89,470Amounts
                  representing interest
              
              
              
              
              
              15,741Total
              
              
              
              
              
              73,729Less
                  current portion
              
              
              
              
              
              (16,546
              )Long
                  term
              
              
              
              
              $
              57,183
  **Note
        6 —**  **Line
        of Credit**
  The
        Company entered into a credit agreement with UBS Financial Services Inc.
        on
        March 1, 2007. The credit facility is secured by the Company’s marketable
        securities, described in Note 2(c), above, which are held by UBS. The Company
        may borrow up to 80% of the value of the securities held in that account.
        The
        balance of the credit facility on September 30, 2008 and June 30, 2008 was
        $1,305,138 and $1,291,855, respectively. There is no stated maturity on the
        credit facility. The interest rate is 30 Day LIBOR plus 150 basis points.
        The
        interest rate outstanding as of September 30, 2008 was 4.1% per
        annum.
 
 **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.
  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. Stock-based compensation expense
        of
        $6,472 and $0 were recognized during the three months ended September 30,
        2008
        and 2007, respectively, relating to the vesting of such options. As of September
        30, 2008, the unamortized value of these option awards was $6,450 which will
        be
        amortized as stock based compensation cost over the average of approximately
        one
        year as the options vest. As of September 30, 2008, these options have no
        intrinsic value.
  At
        September 30, 2008 options outstanding are as follows:
 
 **Number of Options**
              
              **Weighted Average**
                **Exercise Price**Balance
                  at July 1, 2008
              
              
              530,000
              
              $
              1.50Granted
              
              
              —
              
              $
              —Exercised
              
              
              —
              
              
              —Cancelled
              
              
              —
              
              $
              —Balance
                  at September 30, 2008
              
              
              530,000
              
              $
              1.50
  9
  Additional
        information regarding options outstanding as of September 30, 2008 is as
        follows:
 **Options Outstanding**
                
                **Options**
                  **Exercisable****Exercise Price**
                
                **Number**
                  **Outstanding**
                
                **Weighted Average**
                  **Remaining Contractual Life**
                  **(Years)**
                
                **Weighted**
                  **Average**
                  **Exercise Price**
                
                **Number**
                  **Exercisable**$
                1.50
                
                
                530,000
                
                
                6
                
                $
                1.50
                
                
                407,500
  ***Warrants***
  At
        September 30, 2008 warrants outstanding are as follows:
 
 **Number of**
                **Warrants**
              
              **Weighted**
                **Average**
                **Exercise Price**Balance,
                  July 1, 2008
              
              
              2,450,000
              
              $
              1.25Granted
              
              
              350,009
              
              $
              2.00Exercised
              
              
              -Balance
                  at September 30, 2008
              
              
              2,800,009
              
              $
              1.34
  The
        above
        warrants are fully vested and have a five year contractual life. There was
        no
        intrinsic value to these warrants as of September 30, 2008 and June 30,
        2008.
 During
          the three months ended September 30, 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.  The shares 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.
  **Note
        8 — Related Party Transactions**
  The
        Company leases furniture and office space on a month to month basis from
        a
        stockholder of the Company. The total rent expense paid to the stockholder
        for
        the three months ended September 30, 2008 and 2007 were $5,481 and $8,221,
        respectively.
  **Note
        9 — Income Taxes**
  The
        provision (benefit) for income taxes consists of the
        following for the three months ended September 30, 2008 and 2007:
 
 **Three
                  months ended**
                **September
                  30,
                  2008**
              
              **Three
                    months ended**
                  **September
                    30,
                    2007**Current
                  tax provision - federal
              
              
              11,686
              
              
              0-
                  state
              
              
              2,509
              
              
              0Deferred tax
                  provision - federal
              
              
              (3,093
              )
              
              0-
                  state
              
              
              (2,539
              )
              
              0Income
                  tax provision
              
              
              8,563
              
              
              0
  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. At
        September 30, 2008, the Company had federal and state net operating loss
        (“NOL”)
        carryforwards of approximately $660,000 and $463,000, respectively. Federal
        NOLs
        could, if unused, expire in 2026. State NOLs, if unused, could expire in
        2016.
 During
          the quarter ended September 30, 2008, the Company recorded an adjustment
          to its
          75% owned subsidiary for deferred tax of $126,611 that should have been
          recorded
          at the date of acquisition.  This adjustment to the valuation of the net
          assets of the subsidiary affected goodwill by $94,958 and minority interest
          by
          $31,653.
  The
          Company has provided a full valuation allowance on the deferred tax assets
          at
          September 30 and June 30, 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.
  10
  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 September
        30
        and June 30, 2008, the Company did not have a liability for unrecognized
        tax
        benefits, and no adjustment was required at adoption.
  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 positions
        as income tax expense. As of September 30 and June 30, 2008, the Company
        has no
        accrued interest or penalties related to uncertain tax positions. Additionally,
        tax years 2006 through 2008 remain open to examination by the major taxing
        jurisdictions to which the Company is subject.
  The
        reconciliation of the effective income tax rate to the federal statutory
        rate is
        as follows:
 
 **Three Months**
                **Ended September
                  30,**
                **(Unaudited)******
              
              
              
              **2008**
              
              **2007**Federal
                  income tax rate
              
              
              
              
              
              (34.00
              )%
              
              (34.00
              )%Benefit
                  for interim period loss not recorded
              
              
              
              
              
              37.90
              %State
                  tax, net of federal benefit
              
              
              
              
              
              0.00
              %
              
              (6.00
              )%Permanent
                  differences
              
              
              
              
              
              (0.01
              )%
              
              0.00
              %Increase
                  in valuation allowance
              
              
              
              
              
              0.00
              %
              
              40.00
              %Effective
                  income taxrate
              
              
              
              
              
              3.89
              %
              
              0.00
              %
  11
  **Item
        2. Management’s Discussion and Analysis of Financial Condition and Results of
        Operations**


**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 three months ended September 30, 2008 and 2007 should be
        read
        in conjunction with our financial statements and the notes to those financial
        statements that are included in Item 1 of Part 1 this Quarterly 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. 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
        Quarterly 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***
  **Three
        Months Ended September 30, 2008 Compared to the Three Months Ended September
        30,
        2007:**
  **Sales
        and Cost of Goods Sold**
  Our
        revenues increased significantly from the same period in 2007 and we expect
        that
        trend to continue as we add new customers and as the volume from existing
        customers increases. We achieved revenue of $3,202,726 for the three months
        ended September 30, 2008, compared to revenue of $2,251,086 for the three
        months
        ended September 30, 2007, an increase of 42%.
  The
        revenue of our main operating company, Reprints, increased from $1,801,192
        for
        the three months ended September 30, 2007 to $2,807,466 for the three months
        ended September 30, 2008, an increase of 56%. Pools Press contributed the
        remainder of the revenue. We expect to continue with significant revenue
        growth
        this year. However, the economic climate may significantly slow our sales
        growth
        if our customers reduce their marketing budgets.
  Our
        cost
        of goods sold likewise increased from $1,811,571 for the three months ended
        September 30, 2007 to $2,556,829 for the three months ended September 30,
        2008,
        which represents an increase of 41%. This percentage increase is roughly
        equivalent to the increase in our revenues. At Reprints, we only purchase
        articles when they have been requested by our clients. Gross margins as a
        percentage of sales remained consistent at 20% for each period. We generally
        charge a margin over the actual cost to us. We attempt to negotiate discounts
        with our publishers and have a few such agreements in place. We also have
        prepaid some publishers for articles in exchange for discounts. At September
        30,
        2008, we had prepaid $254,236 for royalties that were not yet used. The
        publishers set the price for each order and do not generally grant significant
        discounts. We expect that our cost of goods sold will keep pace with our
        revenue
        growth, unless additional publisher discounts can be achieved.
  12
  **Operating
        Expenses**
  ***General
        and Administrative***
  Our
        general and administrative expenses increased 85% from $417,931 for the three
        months ended September 30, 2007 to $771,623 for the three months ended September
        30, 2008. Pools’ share of these expenses was approximately $52,000 for the 2008
        period and $57,000 for the 2007 period. These expenses include Reprints’ salary
        costs, which were $405,894 in the 2008 period and $227,197 in the 2007 period,
        an increase of $178,697 or 79%. Our sales and marketing team has increased
        during the past year and we have added additional employees as needed. We
        continue to attempt to contain the expansion of our workforce. However, because
        of the expansion of our sales volume and in order to continue to develop
        our
        computer system, we expect to add a small number of new employees in the
        near
        future. The 2008 figure also includes approximately $93,000 in investor
        relations expenses incurred in preparation for the public trading of our
        common
        stock. The investor relations expense includes $43,963, which is the
        value attributable to the issuance of a warrant to purchase 150,000 shares
        of
        the Company’s common stock.
  ***Marketing
        and Advertising***
  Our
        marketing and advertising expenses increased from $3,770 for the three months
        ended September 30, 2007 to $14,163 for the three months ended September
        30,
        2008. These costs have not been a significant expense for us and have been
        limited to the cost of our participation in publishing industry trade shows
        and
        limited advertising in trade publications and sponsorship of publishing industry
        programs. However, we are planning targeted publishing advertising campaigns
        that will likely cost approximately $120,000 over the next year.
  ***Depreciation
        and Amortization***
  Our
        depreciation and amortization expense increased approximately 58% from $41,284
        for three months ended September 30, 2007 to $65,073 for the three months
        ended
        September 30, 2008. Pools’ share of these expenses in the 2008 period included
        $13,750 related to the amortization of Pools’ customer list. Reprints’
depreciation and amortization expense of $51,122 for the 2008 period was
        primarily attributable to amortization on software and intellectual property
        licenses as well as amortization of two customer lists.
  ***Other
        Expenses***
  Other
        expenses were $0 for the three months ended September 30, 2007 and were $1,049
        for the three months ended September 30, 2008.
  ***Loss
        on marketable securities***
  We
        recognized unrealized losses on our short-term investments of $18,150 and
        $0
        during the three months ended September 30, 2008 and 2007, respectively.
        These
        investments consist of corporate and municipal debt and preferred stock auction
        rate securities held in an account with UBS Financial Services, Inc., and
        the
        losses were based on valuations by UBS. We will continue to monitor the market
        for these securities to determine if they are properly valued and correctly
        classified. Based on our expected operating cash flows, and our other sources
        and uses of cash, we do not anticipate that the potential lack of liquidity
        on
        these investments will affect our ability to execute our current business
        plan.
  **Interest
        Expense**
  Interest
        expense was $4,605 for the three months ended September 30, 2007 and $15,240
        for
        the three months ended September 30, 2008. The 2008 interest expense is
        primarily attributable to the interest paid on a credit line secured by the
        marketable securities owned by the Company.
  **Interest
        Income**
  Interest
        income was $33,802 for the three months ended September 30, 2007 and $19,458
        for
        the three months ended September 30, 2008. This interest income is primarily
        attributable to the interest earned on investments in marketable
        securities.
  13
  **Net
        Loss**
  We
        recorded a net loss of $232,666 for the three months ended September 30,
        2008
        compared to net income of $3,675 in the 2007 period. We hope to be modestly
        profitable in the near future, but as we are still a new business, we do
        not
        expect profits to be significant for the next year.
  **Liquidity
        and Capital Resources**
  As
        of
        September 30, 2008, we had cash and cash equivalents of $1,597,679, compared
        to
        $849,834 as of June 30, 2008. This increase is primarily attributable to
        the
        sale of 400,017 shares of the Company’s common stock and warrants to purchase
        200,009 shares of the Company’s common stock on July 17, 2008 for an aggregate
        purchase price of $600,025.
  Net
        cash
        provided by operating activities was $283,082 for the three months ended
        September 30, 2008 compared to cash used in operating activities of $295,512
        for
        the three months ended September 30, 2007. During the 2007 period, our accounts
        receivable increased by $242,231 and our accounts payable decreased by $171,086,
        compared to decreases of $781,043 and $426,137, respectively, in the 2008
        period. Additionally, during the three months ended September 30, 2008, we
        expensed $77,755 to depreciation and amortization, offset by our use of $71,841
        of prepaid royalties. Also during the 2008 period, we issued a common stock
        warrant for services with a value of $43,963 and we amortized $6,472 for
        stock
        options vesting in December 2008 during the three months ended September
        30,
        2008. No stock options vested in the 2007 period.
  Net
        cash
        used in investing activities was $144,666 for the three months ended September
        30, 2008 compared to net cash provided by investing activities of $316,970
        for
        the three months ended September 30, 2007. This difference was primarily
        due to
        sales of short term investments in the 2007 period and the purchases of
        equipment and intellectual property licenses at Reprints in the 2008
        period.
  Net
        cash
        provided by financing activities was $609,429 for the three months ended
        September 30, 2008 compared to net cash provided by financing activities
        of
        $97,842 for the corresponding period in 2007. The cash provided by financing
        activities for the 2007 period was primarily attributable to a capital lease
        entered into by Pools Press. In the 2008 period, the cash was primarily provided
        by the sale of common stock and warrants in July 2008.
  We
        believe that our current cash resources will be sufficient to sustain our
        current operations for at least one year. While we have not experienced any
        losses from bad debts, we expect our accounts receivable to increase as a
        result
        of significant increases in our sales. We also expect to incur significant
        investor relations expenses in conjunction with the listing of our common
        stock.
        In addition, we may need to obtain additional cash resources during the next
        year in order to acquire complementary businesses. 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.
  Our
        short-term investments consist of corporate and municipal debt and preferred
        stock auction rate securities held in an account with UBS. Recently, several
        auctions have failed as a result of illiquidity and imbalance in order flow
        for
        auction rate securities. A failed auction is not an indication of an increased
        credit risk or a reduction in the underlying collateral, however, parties
        wishing to sell securities could not do so. Based on current market conditions,
        it is not known when or if the capital markets will come back into balance
        to
        achieve successful auctions for these securities. If these auctions continue
        to
        fail, it could result in our holding securities beyond their next scheduled
        auction reset dates and will limit the short-term liquidity of these
        investments. We currently believe these securities are not significantly
        impaired, primarily due to the collateral underlying these securities and/or
        the
        creditworthiness of the issuer. Furthermore, on September 8, 2008, the
        Massachusetts Secretary of State announced that UBS has pledged to buy back
        almost $40 billion worth of bonds that their retail clients have been unable
        to
        sell. As part of the settlement, UBS customers with less than $1 million
        in
        auction rate securities will get their money back by October 31, 2008 while
        others will get their refund by January 1, 2009. The Company does not anticipate
        incurring any further losses related to these credit risks. Based on our
        expected operating cash flows, and our other sources and uses of cash, we
        do not
        anticipate that the temporary lack of liquidity on these investments will
        affect
        our ability to execute our current business plan. Our short term investments
        are
        collateral for borrowings under our line of credit agreement with
        UBS.
  14
  **Off-Balance
        Sheet Arrangements**
  The
        Company does not have any off-balance sheet arrangements.
  15




**Item
      3. Quantitative and Qualitative Disclosures About Market
      Risk**





Not
      required.





**Item
      4T. Controls and Procedures**





**Evaluation
      of Disclosure Controls and Procedures**




We
      maintain a set of disclosure controls and procedures, as defined in Rules
      13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended
      (the
“Exchange Act”), that are designed to ensure that information required to be
      disclosed by us in the reports filed by us under the Exchange Act is recorded,
      processed, summarized and reported within the time periods specified in the
      Securities Exchange Commission’s rules and forms. We carried out an evaluation,
      under the supervision and with the participation of our Chief Executive Officer
      and our Chief Financial Officer, of the effectiveness of the design and
      operation of our disclosure controls and procedures pursuant to Rules 13a-15(b)
      and 15d-15(b) of the Exchange Act. Based on that evaluation, our Chief Executive
      Officer and our Chief Financial Officer concluded that our disclosure controls
      and procedures were effective as of the end of the period covered by this
      report.





Notwithstanding
      the foregoing, there can be no assurance that the Company’s disclosure controls
      and procedures will detect or uncover all failures of persons within the Company
      to disclose material information otherwise required to be set forth in the
      Company’s periodic reports. There are inherent limitations to the effectiveness
      of any system of disclosure controls and procedures, including the possibility
      of human error and the circumvention or overriding of the controls and
      procedures. Accordingly, even effective disclosure controls and procedures
      can
      only provide reasonable, not absolute, assurance of achieving their control
      objectives.





**Changes
      in Internal Control Over Financial Reporting**





An
      evaluation was performed under the supervision of the Company’s management,
      including our Chief Executive Officer and our Chief Financial Officer, as
      required under Exchange Act Rules 13a-15(d) and 15d-15(d) of whether any change
      in the Company’s internal control over financial reporting (as defined in
      Exchange Act Rules 13a-15(f) and 15d-15(f)) occurred during the fiscal quarter
      ended September 30, 2008. Based on that evaluation, the Company’s management,
      including our Chief Executive Officer and our Chief Financial Officer, concluded
      that no change in the Company’s internal control over financial reporting
      occurred during the fiscal quarter ended September 30, 2008 that has materially
      affected, or is reasonably likely to materially affect, the Company’s internal
      control over financial reporting.





**PART
      II — OTHER INFORMATION**





**Item
      1. Legal Proceedings**





Not
      applicable.


16





**Item
      1A. Risk Factors**





Not
      required.





**Item
      2. Unregistered Sales of Equity Securities and Use of
      Proceeds**




Not
      applicable.





**Item
      3. Defaults Upon Senior Securities**





Not
      applicable.





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





Not
      applicable.





**Item
      5. Other Information**





Not
      applicable.





**Item
      6. Exhibits**





2.1
            
            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)4.2
            
            Form
                of Warrant(3)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)10.11
            
            Form
                of Subscription Agreement(3)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.




17


**SIGNATURES**





Pursuant
      to the requirements 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:
                November 19, 2008
            
            Chief
                Executive OfficerBy:
            /s/
                Richard McKilliganRichard
                McKilliganDate:
                November 19, 2008
            
            Chief
                Financial Officer




18


**EXHIBIT
      INDEX**





2.1
            
            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)4.2
            
            Form
                of Warrant(3)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)10.11
            
            Form
                of Subscription Agreement(3)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.