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) October 27, 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 Instructions 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 13e4(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 October 27, 2005

ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION

     On October 27, 2005, Psychemedics Corporation issued a press release announcing preliminary results for the quarter ended September 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 October 27, 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: October 28, 2005	By:	/s/ Peter C. Monson
		Peter C. Monson, Vice President and
		Chief Financial Officer

EXHIBIT INDEX

Exhibit
Number		Description
	99.1	Press release dated October 27, 2005 of Psychemedics Corporation announcing its financial results for the quarter ended September 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
3rd QUARTER REVENUE AND NET INCOME
DECLARES QUARTERLY DIVIDEND

Acton, Massachusetts, October 27, 2005 — Psychemedics Corporation (AMEX: PMD) today announced third quarter results for the period ending September 30, 2005. The Company also announced a quarterly dividend of $.10 per share. This will be the Company’s 37^th consecutive quarterly dividend and will be paid on December 23, 2005 to shareholders of record on December 9, 2005.

The Company’s third quarter revenue was $5,353,168, up 10% as compared to $4,870,218 in the third quarter of 2004. Net income was $982,621 or $.19 per share, up 23% from $801,158 or $.16 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 record results for the third quarter of 2005 — a significant achievement in a less than robust hiring environment. Our revenue, pretax income and net income for the third quarter were the highest for any third quarter since the Company’s inception. With a job market that continues to be challenging, we still recorded a considerable increase of 10% in our revenue for the third quarter. This increase in revenue, along with our continued emphasis on controlling costs enabled us to realize a substantial increase of 29% in our pretax income and 23% in our net income for the third quarter.”

Kubacki continued, “We continue to add new accounts at a brisk pace and to demonstrate our ability to produce strong operating margins. With our patented and FDA-cleared hair test and our large and diverse customer base, we feel we are well-positioned for substantial growth in the future. The Company’s balance sheet remains

strong with over $5.2 million of cash and short-term investments, no long-term debt and approximately $7.5 million of working capital. We are pleased to declare our second consecutive quarterly dividend at the increased rate of $.10 per share, which also represents our 37th consecutive quarterly dividend. This once again demonstrates our Directors’ commitment to rewarding shareholders and sharing the financial success of the Company with them as we grow.”

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:

• Record Revenue for the third quarter increased 10% over the prior year quarter to $5,353,168

• Record Revenue for the nine month period increased 13% over the prior year period to $16,306,247

• Record Pretax Income for the third quarter of $1,563,621, up 29% from the prior year quarter

• Record Pretax Income for the nine month period of $4,986,607, up 43% from the prior year period

• Record Net Income for the third quarter of $982,621, or $0.19 per diluted share, up $0.03 or 23% from the prior year quarter

• Record Net Income for the nine month period of $3,131,607, or $0.61 per diluted share, up $0.18 or 41% 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				Nine Months
	Ended September 30,				Ended September 30,
	2005		2004		2005		2004
Revenue	$	5,353,168	$	4,870,218	$	16,306,247	$	14,373,139
Cost of Revenue		2,267,237		2,105,768		6,656,516		6,362,714
Gross Profit		3,085,931		2,764,450		9,649,731		8,010,425
Expenses:
General and administrative		765,758		803,940		2,394,370		2,416,796
Marketing and selling		703,731		673,724		2,110,980		1,893,877
Research and development		87,090		83,854		232,891		234,192
		1,566,579		1,561,579		4,738,241		4,544,865
Operating Income		1,529,352		1,202,932		4,911,490		3,465,560
Interest Income		34,269		8,476		73,867		23,376
Other Income		—		3,750		1,250		11,250
		34,269		12,226		75,117		34,626
Income before Provision for Income Taxes		1,563,621		1,215,158		4,986,607		3,500,186
Provision for Income Taxes		581,000		414,000		1,855,000		1,282,000
Net Income	$	982,621	$	801,158	$	3,131,607	$	2,218,186
Basic and Diluted Net Income Per Share	$	0.19	$	0.16	$	0.61	$	0.43
Weighted Average Common Shares Outstanding, Basic		5,167,097		5,126,907		5,153,178		5,126,907
Weighted Average Common Shares Outstanding, Diluted		5,179,134		5,132,976		5,165,060		5,131,946

PSYCHEMEDICS CORPORATION
BALANCE SHEETS

	SEPTEMBER 30,			DECEMBER 31,
	2005			2004
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	3,201,837		$	3,260,178
Short-term investments		2,000,000			—
Accounts receivable, net of allowance for doubtful accounts of $464,058 in 2005 and $483,230 in 2004		3,601,562			3,289,863
Prepaid expenses and other current assets		431,902			246,372
Deferred tax assets		529,752			529,752
Total current assets		9,765,053			7,326,165
PROPERTY AND EQUIPMENT:
Equipment and leasehold improvements, at cost		9,994,041			9,960,831
Less-accumulated depreciation and amortization		(9,251,847	)		(9,099,472	)
		742,194			861,359
DEFERRED TAX ASSETS		166,583			166,583
OTHER ASSETS, NET		39,829			79,529
	$	10,713,659		$	8,433,636
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	401,655		$	554,214
Accrued expenses		1,236,196			1,157,740
Deferred revenue		581,440			487,633
Total current liabilities		2,219,291			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		(7,858,476	)		(9,649,853	)
Less — Treasury stock, at cost; 583,797 shares		(9,122,691	)		(9,122,691	)
Total shareholders’ equity		8,494,368			6,234,049
	$	10,713,659		$	8,433,636