-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LqUmEVAp6oPStCdB7JmrZLsnrXkn5J/ZwWUARnKZk0kyqoZ6NPrCUiM+X6AzJHPW Ns9GyCHc5sDdOchZi7A7lA== 0000950135-96-003678.txt : 19960816 0000950135-96-003678.hdr.sgml : 19960816 ACCESSION NUMBER: 0000950135-96-003678 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: PSYCHEMEDICS CORP CENTRAL INDEX KEY: 0000806517 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MEDICAL LABORATORIES [8071] IRS NUMBER: 581701987 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-13738 FILM NUMBER: 96614486 BUSINESS ADDRESS: STREET 1: 1280 MASSACHUSETTS AVENUE STREET 2: SUITE 200 CITY: CAMBRIDGE STATE: MA ZIP: 02138 BUSINESS PHONE: 6178687455 MAIL ADDRESS: STREET 1: 1280 MASSACHUSETTS AVE STREET 2: SUITE 200 CITY: CAMBRIDGE STATE: MA ZIP: 02138 10-Q 1 PSYCHMEDICS CORPORATION FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) X QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE --- SECURITIES EXCHANGE ACT OF 1934 For quarterly period ended JUNE 30, 1996 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF --- THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to --------------- ---------------- Commission file number 1-13738 PSYCHEMEDICS CORPORATION (exact name of Issuer as specified in its charter) Delaware 58-1701987 (State or other jurisdiction of (I.R.S. Employer incorporation of organization) Identification No.) 1280 Massachusetts Ave., Ste. 200, Cambridge, MA 02138 (Address of principal executive offices) (Zip Code) Issuer's telephone number, including area code (617-868-7455) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act during the past 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 X No ------ ------ Number of shares outstanding of only class of Issuer's Common Stock as of June 30, 1996: Common Stock $.005 par value (21,526,462 shares). Page 1 2 PSYCHEMEDICS CORPORATION INDEX PART I FINANCIAL INFORMATION PAGE NO. ------- Item 1 Financial Statements Condensed Balance Sheets as of June 30, 1996 and December 31, 1995 3 Condensed Statements of Income for the three and six month periods ended June 30, 1996 and 1995 4-5 Condensed Statements of Cash Flows for the six month periods ended June 30, 1996 and 1995 6 Notes to Condensed Financial Statements 7 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 8-9 PART II OTHER INFORMATION Item 4 Submission of Matters to a Vote of Security Holders 10 Item 6 Exhibits and Reports on Form 8-K 13 Page 2 of 14 3 PSYCHEMEDICS CORPORATION CONDENSED BALANCE SHEETS (UNAUDITED)
JUNE 30, DECEMBER 31, 1996 1995 -------- ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents $ 1,258,256 $ 193,787 Short-term investments 6,509,634 5,279,596 Receivables 2,689,664 1,722,770 Laboratory supplies 209,348 253,216 Prepaid expenses and other current assets 274,911 72,247 ----------- ----------- Total current assets 10,941,813 7,521,616 ----------- ----------- EQUIPMENT AND LEASEHOLD IMPROVEMENTS 4,366,149 4,106,980 Less-accumulated depreciation and amortization 2,167,908 1,864,398 ----------- ----------- 2,198,241 2,242,582 ----------- ----------- OTHER ASSETS - NET 454,135 453,295 ----------- ----------- $13,594,189 $10,217,493 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of obligations under capital leases $ 46 $ 16,459 Accounts payable 211,514 466,412 Accrued expenses 373,935 250,916 ----------- ----------- Total current liabilities 585,495 733,787 ----------- ----------- SHAREHOLDERS' EQUITY: Preferred stock, $.005 par value; authorized 1,000,000 shares; none outstanding -- -- Common stock; $.005 par value; authorized 50,000,000 shares; issued 21,592,797 and 20,288,280 shares in 1996 and 1995, respectively 107,964 101,441 Paid-in capital 20,325,533 17,972,819 Accumulated deficit (7,170,740) (8,336,491) Treasury stock, at cost; 66,335 shares in 1996 and 1995 (254,063) (254,063) ----------- ----------- Total shareholders' equity 13,008,694 9,483,706 ----------- ----------- $13,594,189 $10,217,493 =========== ===========
See accompanying notes to financial statements and management's discussion and analysis of financial condition and results of operations Page 3 of 14 4 PSYCHEMEDICS CORPORATION CONDENSED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED JUNE 30, ---------------------------- 1996 1995 ---- ---- REVENUE $ 3,141,313 $ 2,747,242 DIRECT COSTS 1,222,835 1,172,357 ----------- ----------- Gross profit 1,918,478 1,574,885 ----------- ----------- EXPENSES: General and administrative 559,140 453,183 Marketing and selling 525,962 399,883 Research and development 113,259 107,650 ----------- ----------- 1,198,361 960,716 ----------- ----------- INCOME FROM OPERATIONS 720,117 614,169 OTHER INCOME (EXPENSE) - NET 84,781 84,671 ----------- ----------- INCOME BEFORE PROVISION FOR INCOME TAXES 804,898 698,840 PROVISION FOR INCOME TAXES 88,433 48,300 ----------- ----------- NET INCOME $ 716,465 $ 650,540 =========== =========== NET INCOME PER COMMON SHARE AND COMMON EQUIVALENT SHARE $ 0.03 $ 0.03 =========== =========== WEIGHTED AVERAGE COMMON AND COMMON SHARE EQUIVALENTS OUTSTANDING 22,514,614 20,169,317 =========== ===========
See accompanying notes to financial statements and management's discussion and analysis of financial condition and results of operations Page 4 of 14 5 PSYCHEMEDICS CORPORATION CONDENSED STATEMENTS OF INCOME (UNAUDITED)
SIX MONTHS ENDED JUNE 30, -------------------------- 1996 1995 ---- ---- REVENUE $ 5,815,977 $ 5,068,399 DIRECT COSTS 2,406,843 2,245,001 ----------- ----------- Gross profit 3,409,134 2,823,398 ----------- ----------- EXPENSES: General and administrative 1,092,401 913,088 Marketing and selling 1,005,103 745,862 Research and development 203,128 211,660 ----------- ----------- 2,300,632 1,870,610 ----------- ----------- INCOME FROM OPERATIONS 1,108,502 952,788 OTHER INCOME (EXPENSE) - NET 150,280 176,032 ----------- ----------- INCOME BEFORE PROVISION FOR INCOME TAXES 1,258,782 1,128,820 PROVISION FOR INCOME TAXES 93,033 74,800 ----------- ----------- NET INCOME $ 1,165,749 $ 1,054,020 ----------- ----------- NET INCOME PER COMMON SHARE AND COMMON EQUIVALENT SHARE $ 0.05 $ 0.05 =========== =========== WEIGHTED AVERAGE COMMON AND COMMON SHARE EQUIVALENTS OUTSTANDING 21,964,568 20,247,488 =========== ===========
See accompanying notes to financial statements and management's discussion and analysis of financial condition and results of operations Page 5 of 14 6 PSYCHEMEDICS CORPORATION CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, -------------------------- 1996 1995 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 1,165,749 $ 1,054,520 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 318,510 276,600 Changes in assets and liabilities: Receivables (966,894) (193,980) Laboratory supplies 43,868 60,608 Prepaid expenses and other current assets (202,664) (124,762) Accounts payable (254,898) 22,720 Accrued expenses 123,019 126,930 ----------- ----------- Net cash provided by operating activities 226,690 1,222,636 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of short-term investments - net (1,230,036) (4,048) Purchases of equipment and leasehold improvements (259,169) (520,339) Increase in other assets - net (15,840) (37,778) ----------- ----------- Net cash used in investing activities (1,505,045) (562,165) CASH FLOWS FROM FINANCING ACTIVITIES: Net principal payments on obligations under capital leases (16,413) (75,119) Net proceeds from the issuance of common stock 2,359,237 738,127 Net cash used to repurchase common stock -- (1,198,265) ----------- ----------- Net cash (used in) provided by financing activities 2,342,824 (535,257) NET INCREASE IN CASH AND CASH EQUIVALENTS 1,064,469 125,214 CASH AND CASH EQUIVALENTS, beginning of period 193,787 544,776 ----------- ----------- CASH AND CASH EQUIVALENTS, end of period $ 1,258,256 $ 669,990 =========== =========== SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES: Accrued dividend payable - 3% stock dividend $ 4,668,200 $ -- =========== ===========
See accompanying notes to financial statements and management's discussion and analysis of financial condition and results of operations Page 6 of 14 7 PSYCHEMEDICS CORPORATION NOTES TO CONDENSED FINANCIAL STATEMENTS June 30, 1996 1. The financial information furnished herein is unaudited; however, in the opinion of management, it reflects all adjustments which are necessary to fairly state the Company's financial position at June 30, 1996 and the results of its operations and cash flows for the period ended June 30, 1996. The financial statements have been prepared in conformity with generally accepted accounting principles appropriate in the circumstances, and included in the financial statements are certain amounts based on management's estimates and judgments. The financial information herein is not necessarily representative of a full year's operations because levels of sales, capital additions and other factors fluctuate throughout the year. These same considerations apply to all year to year comparisons. See the Company's Annual Report on Form 10-KSB for the year ended December 31, 1995 for additional information not required by this report (Form 10-Q). 2. Net income per common and common share equivalents is based upon the weighted average number of common shares and common share equivalents outstanding as computed using the treasury stock method. 3. For comparative purposes certain prior year expenses have been reclassified from selling and marketing expenses to general and administrative expenses to conform with current year presentation. 4. On June 11, 1996, the Company declared a 3% stock dividend payable on July 3, 1996 to holders of record at the close of business on June 21, 1996. The effect of this transaction has been reflected in all periods presented in this Form 10-Q. Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS --------------------- REVENUE Revenue for the second quarter of 1996 was $3,141,313, an increase of 14% over the $2,747,242 reported for the second quarter of 1995. Revenue for the six month period ended June 30, 1996 was $5,815,977 an increase of 15% over the $5,068,399 reported for the comparable period of 1995. The revenue increases result primarily from the addition of new customers and expanding volume from the Company's existing customer base. Page 7 of 14 8 DIRECT COSTS AND EXPENSES The following table sets forth the direct costs of revenue, general and administrative expenses, marketing and selling expenses and research and development expenses as a percentage of revenue.
Three Months Six Months Ended June 30, Ended June 30, -------------- -------------- 1996 1995 1996 1995 ---- ---- ---- ---- Direct costs 39% 43% 41% 44% General and administrative 18% 16% 19% 18% Marketing and selling 17% 15% 17% 15% Research and development 4% 4% 4% 4%
Direct Costs Direct costs were $1,222,835, $1,172,357, $2,406,843 and $2,245,001 for the three and six month periods ended June 30, 1996 and 1995, respectively. The decrease in direct costs as a percentage of revenues for both the three and six month periods ended June 30, 1996 versus 1995 is attributable to increased volume during the periods coupled with efficiencies derived in both labor and other laboratory costs associated with the increase in sales volume. General and Administrative Expenses General and Administrative expenses were $559,140, $453,183, $1,092,401, and $913,088 for the three and six month periods ended June 30, 1996 and 1995, respectively. The increase in general and administrative expenses in the 1996 periods as compared to the same periods in 1995 is primarily due to higher expenses incurred as a result of increased personnel, legal and bad debt expenses. Marketing and Selling Expenses Marketing and selling expenses were $525,962, $399,883, $1,005,103, and $745,862 for the three and six month periods ended June 30, 1996 and 1995, respectively. Marketing and selling expenses increased in each period in 1996 as compared to 1995 due primarily to the Company's addition of marketing and sales personnel and the increased marketing efforts for both the corporate market and in conjunction with the Company's home testing service, PDT-90, which was introduced in July 1995. Other Income (Expense) - Net Other income for the three month periods ended June 30, 1996 and 1995 was flat due to slightly higher average cash balances in 1996 offset by lower yield on investments. Other income for the six month periods ended June 30, 1996 as compared to the comparable period in 1995 was lower due to both lower average cash balances and lower yields on investments. Page 8 of 14 9 LIQUIDITY AND CAPITAL RESOURCES ------------------------------- The Company's cash and investment balances at June 30, 1996 amounted to $7,760,890. Cash generated from operations in the first six months of 1996 was $226,690. The Company also received $2,359,237 of net proceeds from the exercise of warrants and stock options in 1996. Management believes that cash generated from operations, together with proceeds from such private placements, should be adequate to fund anticipated working capital requirements. Depending upon the Company's results of operations, its future capital needs and available marketing opportunities, the Company may use various financing sources to raise additional capital. Working capital at June 30, 1996 amounted to $10,536,318 as compared to $6,787,829 at December 31, 1995. The increase primarily resulted from the exercise of warrants and stock options, and cash generated from operations. The Company's capital expenditures were $529,169 for the first six months of 1996. Capital expenditures for the remainder of 1996 are expected to be approximately $300,000 and are expected to be funded through cash generated from operations and from existing cash reserves. In December 1994, the Company's Board of Directors authorized the repurchase of up to one million shares of the Company's common stock. This program is a direct result of the Company's solid financial condition and cash-generating capability, and it was authorized after evaluating various alternatives to enhance long-term shareholder value. As of June 20, 1996, the Company had purchased 699,387 shares of common stock for $2,676,793. On June 11, 1996, the Company declared a 3% stock dividend payable on July 3, 1996 to holders of record at the close of business on June 21, 1996. The shares issued in the stock dividend represented shares which the Company acquired in the stock repurchase program. This transaction resulted in an increase in accumulated deficit of $4,668,200 (632,976 shares distributed at a fair market value of $7.375 per share at June 21, 1996). Treasury stock has been reduced by $2,422,730 as a result of this distribution. This transaction also resulted in a $2,244,786 increase to additional paid-in capital. The effect of this transaction has been reflected in all periods presented in this FORM 10-Q. Page 9 of 14 10 PART II OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders The Annual Meeting of Shareholders of Psychemedics Corporation was held on May 7, 1996 for the purpose of electing a board of directors, approving the appointment of auditors, and approving amendments to the Company's 1989 Employee Stock Option Plan and the 1989 Non-Qualified Stock Option Plan. Proxies for the meeting were solicited pursuant to Section 14(a) of the Securities Exchange Act of 1934 and there was no solicitation in opposition to management's solicitations. All of management's nominees for directors, as listed in the proxy statement, were elected with the following vote:
Number of Shares ---------------- For Withheld Authority --- ------------------ Werner A. Baumgartner, Ph.D. 147,626,467 284,020 Raymond C. Kubacki, Jr. 147,626,467 284,020 A. Clinton Allen 147,626,467 284,020 Donald F. Flynn 147,626,467 284,020 John J. Melk 147,626,467 284,020 Fred J. Weinert 147,625,867 284,020
Amendment of the Company's 1989 Employee Stock Option Plan.
Number of Shares ---------------- For 10,849,174 Against 2,826,502 Abstain 64,433 Delivered - not voted 4,170,378
Amendment of the Company's 1989 Non-Qualified Stock Option Plan.
Number of Shares ---------------- For 11,233,404 Against 2,436,357 Abstain 70,348 Delivered - not voted 4,170,378
Page 10 of 14 11 Selection of Arthur Andersen LLP as auditors of the Company.
Number of Shares ---------------- For 17,841,357 Against 41,870 Abstain 27,350
Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. The Exhibits filed as part of this Form 10-Q are listed on the Exhibits Index immediately preceding such Exhibits, which Exhibit Index is incorporated herein by reference. (b) Reports on Form 8-K - None. Page 11 of 14 12 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. Psychemedics Corporation Date: August 13, 1996 By: /s/ Raymond C. Kubacki, Jr. ------- -------------------------------- Raymond C. Kubacki, Jr. President and Chief Executive Officer Date: August 13, 1996 By: /s/ Bruce M. Stillwell ---------------------------------------- Bruce M. Stillwell Vice President, Treasurer and Controller Page 12 of 14 13 PSYCHEMEDICS CORPORATION 10-Q EXHIBIT INDEX ------------- Exhibit Number Description - ------ ----------- 11 Calculation of shares use in determining net income per share 27 Financial Data Schedule Page 13 of 14 EX-11 2 STATEMENT RE: CALULATION OF INCOME PER SHARE 1 EXHIBIT 11 CALCULATION OF SHARES USED IN DETERMINING INCOME PER SHARE
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ------------------------ ------------------------ 1996 1995 1996 1995 ------------------------ ------------------------ WEIGHTED AVERAGE COMMON SHARES OUTSTANDING DURING PERIOD 21,370,391 19,382,055 20,905,941 19,449,448 EFFECT OF COMMON STOCK EQUIVALENTS COMPUTED IN ACCORDANCE WITH THE TREASURY STOCK METHOD 1,144,223 787,262 1,058,627 798,040 ---------- ---------- ---------- ---------- 22,514,614 20,169,317 21,964,568 20,247,488 ========== ========== ========== ==========
Page 14 of 14 EX-27 3 FINANCIAL DATA SCHEDULE WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS APPEARING ON THE FORM 10Q TO WHICH THIS SCHEDULE IS AN EXHIBIT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) FINANCIAL STATEMENTS. 1 U.S. DOLLARS QUARTER DEC-31-1996 APR-01-1996 JUN-30-1996 1 1,258,256 6,509,634 2,689,664 0 209,348 10,941,813 4,366,149 2,167,908 13,594,189 585,495 0 107,964 0 0 13,486,225 13,594,189 3,141,313 3,141,313 1,222,835 1,222,835 1,198,361 0 0 804,898 88,433 720,117 0 0 0 716,465 0.03 0.03
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