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 3, 2007

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 MAY 3, 2007

ITEM 2.02    RESULTS OF OPERATIONS AND FINANCIAL CONDITION

     On May 3, 2007, Psychemedics Corporation issued a press release announcing preliminary results for the first quarter ended March 31, 2007. 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 3, 2007.

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: May 7, 2007
	By:	/s/ Raymond C. Kubacki, Jr.
		Raymond C. Kubacki, Jr.,
		Chief Executive Officer and President

EXHIBIT INDEX

Exhibit Number	Description
99.1	Press release dated May 3, 2007 of Psychemedics Corporation announcing its financial results for the quarter ended March 31, 2007.

EX-99.1

EXHIBIT 99.1   

NEWS RELEASE

Contact:	Raymond C. Kubacki
	Chairman, President and CEO
	(978) 206-8220

PSYCHEMEDICS CORPORATION ANNOUNCES RECORD
1^st QUARTER REVENUE AND NET INCOME
QUARTERLY DIVIDEND INCREASED BY 20%

Acton, Massachusetts, May 3, 2007 — Psychemedics Corporation (AMEX: PMD) today announced first quarter results for the period ending March 31, 2007. The Company also announced a quarterly dividend of $.15 per share, an increase of $.025 per share or 20% over the Company’s previous quarterly dividend. This will be the Company’s 43rd consecutive quarterly dividend and will be paid on June 22, 2007 to shareholders of record on June 8, 2007.

The Company’s first quarter revenue was $5,716,606, up 13% compared to $5,066,730 in the first quarter of 2006. Net income was $1,034,909 or $0.20 per share, up 12% from $922,165 or $0.18 per share for the same period in 2006.

Raymond C. Kubacki, Chairman and Chief Executive Officer, said, “We are very pleased to be able to report record results for the first quarter of 2007 — our revenue and net income for the first quarter were the highest for any first quarter since the Company’s inception. With a job market that continues to be somewhat challenging, we still recorded a considerable increase of 13% in our revenue for the first quarter. Our pre-tax income increased by 18%, and our net income, despite an increase in our effective tax rate, also set a new record for the first quarter.

Kubacki continued, “Our growth over the years has been a result of the increasingly broad acceptance of our patented hair testing technology. We produce the most accurate and cost effective test for drugs of abuse available anywhere. 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 $7.5 million of cash and short-term investments, no long-term debt and approximately $11.2 million of working capital. The dividend increase from $.125 to $.15 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:

• Record revenue for the first quarter; an increase of 13% from the prior year quarter to $5,716,606

• Record pretax income for the first quarter of $1,726,509; up 18% from the prior year quarter

• Record net income for the first quarter of $1,034,909, or $0.20 per diluted share, versus net income of $0.18 per diluted share for the first quarter of 2006

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,
	2007		2006
REVENUE	$	5,716,606	$	5,066,730
COST OF REVENUE		2,454,481		2,116,149
Gross profit		3,262,125		2,950,581
EXPENSES:
General and administrative		832,453		763,981
Marketing and selling		704,644		665,567
Research and development		94,923		112,578
		1,632,020		1,542,126
OPERATING INCOME		1,630,105		1,408,455
INTEREST INCOME		96,404		58,710
INCOME BEFORE INCOME TAXES		1,726,509		1,467,165
PROVISION FOR INCOME TAXES		691,600		545,000
NET INCOME	$	1,034,909	$	922,165
BASIC NET INCOME PER SHARE	$	0.20	$	0.18
DILUTED NET INCOME PER SHARE	$	0.20	$	0.18
DIVIDENDS DECLARED PER SHARE	$	0.125	$	0.10
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING, BASIC		5,179,250		5,167,097
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING, DILUTED		5,264,708		5,209,456

PSYCHEMEDICS CORPORATION
CONDENSED BALANCE SHEETS

	MARCH 31,			DECEMBER 31,
	2007			2006
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	3,787,983		$	4,180,235
Short-term investments		3,716,505			3,683,192
Accounts receivable, net of allowance for doubtful accounts of $283,281 in 2007 and $333,281 in 2006		3,462,224			3,196,384
Prepaid expenses and other current assets		1,141,793			818,693
Deferred tax assets		423,728			412,486
Total current assets		12,532,233			12,290,990
PROPERTY AND EQUIPMENT:
Equipment and leasehold improvements, at cost		10,547,749			10,376,718
Less-accumulated depreciation and amortization		(9,715,831	)		(9,630,190	)
		831,918			746,528
DEFERRED TAX ASSETS		183,555			183,555
OTHER ASSETS, NET		39,830			39,830
	$	13,587,536		$	13,260,903
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	228,406		$	499,420
Accrued expenses		721,174			865,575
Deferred revenue		360,630			392,403
Total current liabilities		1,310,210			1,757,398
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; 5,779,844 shares and 5,756,044 shares issued in 2007 and 2006, respectively		28,899			28,780
Paid-in capital		25,996,730			25,609,800
Accumulated deficit		(4,625,612	)		(5,012,384	)
Less — Treasury stock, at cost; 583,797 shares		(9,122,691	)		(9,122,691	)
Total shareholders’ equity		12,277,326			11,503,505
	$	13,587,536		$	13,260,903