8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

Current Report
Pursuant To Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 3, 2005

PSYCHEMEDICS CORPORATION

( Exact Name of Registrant As Specified In Its Charter )

Delaware

( State or Other Jurisdiction of Incorporation )

1-13738
(Commission File Number) 58-1701987
(I.R.S. Employer Identification No.)

125 Nagog Park, Acton, Massachusetts
(Address of Principal Executive Offices) 01720
(Zip Code)

(978) 206-8220

(Registrant’s Telephone Number, Including Area Code)

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

	ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
	ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
	SIGNATURE
	EXHIBIT INDEX
Ex-99.1 Press Release dated August 3, 2005

ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION

     On August 3, 2005, Psychemedics Corporation issued a press release announcing preliminary results for the quarter ended June 30, 2005. A copy of the press release is attached hereto as Exhibit 99.1 and incorporated by reference herein.

     Limitation on Incorporation by Reference. The information in this Form 8-K and the Exhibit attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, regardless of any general incorporation language in such filing.

     Cautionary Note Regarding Forward-Looking Statements. Except for historical information contained in the press release attached as an exhibit hereto, the press release contains forward-looking statements which involve certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied by these statements. Please refer to the cautionary note in the press release regarding these forward-looking statements.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.

          (c) Exhibits

          The following exhibits are filed herewith:

          99.1 Press Release dated August 3, 2005.

SIGNATURE

     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 hereunto duly authorized.

PSYCHEMEDICS CORPORATION

Dated: August 3, 2005

By:	/s/ Peter C. Monson
	Peter C. Monson, Vice President and
	Chief Financial Officer

EXHIBIT INDEX

Exhibit
No.	Description
99.1	Press release dated August 3, 2005 of Psychemedics Corporation announcing its financial results for the quarter ended June 30, 2005.

EX-99.1

Exhibit 99.1

NEWS RELEASE

Contact:                                                                             Peter Monson

Chief Financial Officer

(978) 206-8220

Peterm@psychemedics.com

PSYCHEMEDICS CORPORATION ANNOUNCES
RECORD NET INCOME AND 2nd QUARTER RESULTS,
INCREASES DIVIDEND BY 25%

Acton, Massachusetts, August 3, 2005 — Psychemedics Corporation (AMEX: PMD) today announced second quarter results for the period ending June 30, 2005. The Company also announced a quarterly dividend of $.10 per share, an increase of $.02 per share or 25% over the Company’s previous quarterly dividend. This will be the Company’s 36^th consecutive quarterly dividend and will be paid on September 23, 2005 to shareholders of record on September 9, 2005.

The Company’s second quarter revenue was $5,615,329, up 5% as compared to $5,347,049 in the second quarter of 2004. Net income was $1,200,846 or $.23 per share, up 25% from $964,040 or $.19 per share for the same period in 2004.

Raymond C. Kubacki, Chairman and Chief Executive Officer, said, “We are pleased to be able to report substantial net income growth despite a spotty and lackluster employment market that resulted in a narrow increase in revenue. In addition, last year’s second quarter registered a 25% increase in revenue — the highest for the year — making this a more difficult comparison. However, we are very pleased that our net income for the second quarter represented a major record — it was the highest net income for any quarter since the Company’s inception. We continue to demonstrate that we can make money in what has proven to be a challenging employment environment.”

Kubacki continued, “We added new accounts at a healthy pace during the quarter and remain optimistic that we are well-positioned to record significant growth as our

patented and FDA cleared hair test for drugs of abuse continues to gain recognition as the “gold standard” in the industry.”

Kubacki concluded, “Regarding our dividend announcement, we have been and continue to be a dividend-paying company that believes in rewarding our shareholders as the Company grows. The dividend increase from $.08 to $.10 demonstrates the Directors’ continued commitment to rewarding shareholders and sharing the financial success of the Company with them. The Company’s balance sheet remains strong with over $4.4 million of cash and short-term investments, no long-term debt and approximately $7.0 million of working capital.”

Psychemedics is the world’s largest provider of hair testing for drugs of abuse with thousands of corporations relying on the patented Psychemedics drug testing services. Psychemedics’ clients include over 10% of the Fortune 500, some of the largest police departments in America and six Federal Reserve Banks. Psychemedics is the only company that has received FDA clearance for a five-drug panel test of hair samples for drugs of abuse.

Financial Highlights:

• Revenue for the second quarter increased 5% over the prior year quarter to $5,615,329

• Revenue for the six month period increased 15% over the prior year period to $10,953,079

• Record Net Income for the second quarter of $1,200,846, or $0.23 per diluted share, up $0.04 per diluted share from the prior year quarter

• Net Income for the six month period of $2,148,986, or $0.42 per diluted share, up $0.14 per diluted share from the prior year period

The Psychemedics web site is www.drugtestwithhair.com

Cautionary Statement for purposes of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995: From time to time, information provided by Psychemedics may contain forward-looking information that involves risks and uncertainties. In particular, statements contained in this release that are not historical facts (including but not limited to statements concerning growth, earnings, profit margins, earnings per share, revenues, dividends, future business, new accounts, customer base, market share, test volume and sales and marketing strategies) may be “forward looking” statements. Actual results may differ from those stated in any forward-looking statements. Factors that may cause such differences include but are not limited to risks associated with the expansion of the Company’s sales and marketing network, development of markets for new products and services offered, the economic health of principal customers of the Company, government regulation, including but not limited to FDA regulations, competition and general economic conditions and other factors disclosed in the Company’s filings with the Securities and Exchange Commission.

PSYCHEMEDICS CORPORATION
STATEMENTS OF INCOME

	Three Months				Six Months
	2005		2004		2005		2004
Revenue	$	5,615,329	$	5,347,049	$	10,953,079	$	9,502,921
Cost of Revenue		2,224,449		2,252,240		4,389,279		4,256,946
Gross Profit		3,390,880		3,094,809		6,563,800		5,245,975
Expenses:
General and administrative		755,974		869,055		1,628,612		1,612,856
Marketing and selling		678,168		613,624		1,407,249		1,220,153
Research and development		73,854		73,319		145,801		150,338
		1,507,996		1,555,998		3,181,662		2,983,347
Operating Income		1,882,884		1,538,811		3,382,138		2,262,628
Interest Income		26,962		6,979		39,598		14,900
Other Income		—		3,750		1,250		7,500
Income before Provision for Income Taxes		1,909,846		1,549,540		3,422,986		2,285,028
Provision for Income Taxes		709,000		585,500		1,274,000		868,000
Net Income	$	1,200,846	$	964,040	$	2,148,986	$	1,417,028
Basic and Diluted Net Income Per Share	$	0.23	$	0.19	$	0.42	$	0.28
Weighted Average Common Shares Outstanding, Basic		5,163,506		5,126,907		5,146,103		5,126,907
Weighted Average Common Shares Outstanding, Diluted		5,173,941		5,130,138		5,158,159		5,131,470

PSYCHEMEDICS CORPORATION
BALANCE SHEETS

	JUNE 30,			DECEMBER 31,
	2005			2004
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	2,433,196		$	3,260,178
Short-term investments		2,000,000			—
Accounts receivable, net of allowance for doubtful accounts of $483,230 in 2005 and 2004		3,562,190			3,289,863
Prepaid expenses and other current assets		597,351			246,372
Deferred tax assets		529,752			529,752
Total current assets		9,122,489			7,326,165
PROPERTY AND EQUIPMENT:
Equipment and leasehold improvements, at cost		9,939,266			9,960,831
Less-accumulated depreciation and amortization		(9,163,472	)		(9,099,472	)
		775,794			861,359
DEFERRED TAX ASSETS		166,583			166,583
OTHER ASSETS, NET		43,624			79,529
	$	10,108,490		$	8,433,636
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	205,921		$	554,214
Accrued expenses		1,296,559			1,157,740
Deferred revenue		577,553			487,633
Total current liabilities		2,080,033			2,199,587
SHAREHOLDERS’ EQUITY:
Preferred stock, $0.005 par value; 872,521 shares authorized; none issued or outstanding		—			—
Common stock; $0.005 par value; 50,000,000 shares authorized; 5,750,894 shares and 5,710,704 shares issued in 2005 and 2004, respectively		28,754			28,554
Paid-in capital		25,446,781			24,978,039
Accumulated deficit		(8,324,387	)		(9,649,853	)
Less — Treasury stock, at cost; 583,797 shares		(9,122,691	)		(9,122,691	)
Total shareholders’ equity		8,028,457			6,234,049
	$	10,108,490		$	8,433,636