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) May 2, 2006
 

PSYCHEMEDICS CORPORATION

(Exact Name of Registrant As Specified In Its Charter)

Delaware

(State or Other Jurisdiction of Incorporation)

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

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

EX-99.1 Press Release dated, May 2, 2006

ITEM 2.02      RESULTS OF OPERATIONS AND FINANCIAL CONDITION

     On May 2, 2006, Psychemedics Corporation issued a press release announcing preliminary results for the quarter ended March 31, 2006. 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.

(d)	Exhibits
	The following exhibits are filed herewith:
	99.1     Press Release dated May 2, 2006.

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.

Dated: May 3, 2006	PSYCHEMEDICS CORPORATION
	By:	/s/ Peter C. Monson
		Peter C. Monson, Vice President and
		Chief Financial Officer

EXHIBIT INDEX

Exhibit
Number	Description
99.1	Press release dated May 2, 2006 of Psychemedics Corporation announcing its financial results for the quarter ended March 31, 2006.

EX-99.1

EXHIBIT 99.1
 

NEWS RELEASE

Contact: Peter Monson
Chief Financial Officer
(978) 206-8220
Peterm@psychemedics.com

PSYCHEMEDICS CORPORATION ANNOUNCES
1^st QUARTER RESULTS
INCREASES QUARTERLY DIVIDEND BY 25%
 

Acton, Massachusetts, May 2, 2006 — Psychemedics Corporation (AMEX: PMD) today announced first quarter results for the period ending March 31, 2006. The Company also announced a quarterly dividend of $.125 per share, an increase of $.025 per share or 25% over the Company’s previous quarterly dividend. This will be the Company’s 39th consecutive quarterly dividend and will be paid on June 23, 2006 to shareholders of record on June 9, 2006.

The Company’s first quarter revenue was $5,066,730, down 5% compared to $5,337,750 in the first quarter of 2005. Net income was $922,165 or $0.18 per share, down 3% from $948,140 or $0.18 per share for the same period in 2005.

Raymond C. Kubacki, Chairman and Chief Executive Officer, said, “It is important to note that last year’s first quarter registered a 28% increase in revenue when compared to the prior year — the highest quarterly increase for 2005 — making this quarter a very difficult comparison. The 28% increase during last year’s first quarter was aided by the addition of a new client, Wynn Las Vegas, which undertook a major start-up hiring effort for their spectacular new casino/hotel in Las Vegas that resulted in over 11,000 tests during the first quarter of 2005. We are pleased to report that we continue to perform all ongoing testing for this client. Excluding the effect of this initial start-up hiring effort, we would have been slightly ahead of last year’s first quarter revenues.”

Kubacki continued, “We continue to add new accounts at a brisk pace and to demonstrate our ability to produce strong profit 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 $5.3 million of cash and short-term investments, no long-term debt and approximately $8.3 million of working capital. The dividend increase from $.10 to $.125 demonstrates the 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.  

Financial Summary:

• Revenue for the first quarter decreased 5% from the prior year quarter to $5,066,730

• Net Income for the first quarter of $922,165, or $0.18 per diluted share, versus net income of $0.18 per diluted share for the first quarter of 2005

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 earnings, 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
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
 

	THREE MONTHS
	ENDED MARCH 31,
	2006		2005
REVENUE	$	5,066,730	$	5,337,750
COST OF REVENUE		2,116,149		2,164,830
Gross profit		2,950,581		3,172,920
EXPENSES:
General and administrative		763,981		872,638
Marketing and selling		665,567		729,081
Research and development		112,578		71,947
		1,542,126		1,673,666
OPERATING INCOME		1,408,455		1,499,254
INTEREST INCOME		58,710		12,636
OTHER INCOME		—		1,250
		58,710		13,886
NET INCOME BEFORE INCOME TAXES		1,467,165		1,513,140
PROVISION FOR INCOME TAXES		545,000		565,000
NET INCOME	$	922,165	$	948,140
BASIC NET INCOME PER SHARE	$	0.18	$	0.18
DILUTED NET INCOME PER SHARE	$	0.18	$	0.18
DIVIDENDS DECLARED PER SHARE	$	0.10	$	0.08
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING, BASIC		5,167,097		5,128,508
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING, DILUTED		5,209,456		5,141,527

PSYCHEMEDICS CORPORATION
CONDENSED BALANCE SHEETS
 

	MARCH 31,			DECEMBER 31,
	2006			2005
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	2,254,890		$	3,352,519
Short-term investments		3,050,000			2,550,000
Accounts receivable, net of allowance for doubtful accounts of $431,282 in 2006 and $483,230 in 2005		3,380,455			3,272,278
Prepaid expenses and other current assets		706,504			387,426
Deferred tax assets		520,152			520,152
Total current assets		9,912,001			10,082,375
PROPERTY AND EQUIPMENT:
Equipment and leasehold improvements, at cost		10,135,839			10,119,679
Less-accumulated depreciation and amortization		(9,421,270	)		(9,342,747	)
		714,569			776,932
DEFERRED TAX ASSETS		245,889			245,889
OTHER ASSETS, NET		39,830			39,830
	$	10,912,289		$	11,145,026
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	262,113		$	367,535
Accrued expenses		739,667			1,292,257
Deferred revenue		602,846			590,670
Total current liabilities		1,604,626			2,250,462
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 issued in 2006 and 2005		28,754			28,754
Paid-in capital		25,454,425			25,446,781
Accumulated deficit		(7,052,825	)		(7,458,280	)
Less — Treasury stock, at cost; 583,797 shares		(9,122,691	)		(9,122,691	)
Total shareholders’ equity		9,307,663			8,894,564
	$	10,912,289		$	11,145,026