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) July 28, 2008

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

Ex-99.1 Press release dated July 28, 2008

ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION

     On July 28, 2008, Psychemedics Corporation issued a press release announcing preliminary results for the second quarter of 2008. 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 July 28, 2008.

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: July 30, 2008
	By:	/s/ Jennifer Chmieleski
		Jennifer Chmieleski
		Vice President and Controller

EXHIBIT INDEX

Exhibit
Number	Description
99.1	Press release dated July 28, 2008 of Psychemedics Corporation announcing its financial results for the quarter ended June 30, 2008.

EX-99.1

Exhibit 99.1

NEWS RELEASE

Contact:	Jennifer Chmieleski
	Vice President and Controller
	(978) 206-8220
	Jenniferc@psychemedics.com

PSYCHEMEDICS CORPORATION ANNOUNCES SECOND QUARTER RESULTS

$0.17 DIVIDEND DECLARED

Acton, Massachusetts, July 28, 2008 — Psychemedics Corporation (AMEX:PMD) today announced second quarter financial results for the period ended June 30, 2008. The Company also announced a quarterly dividend of $0.17 per share payable to shareholders of record as of September 5, 2008 to be paid on September 19, 2008. This will be the Company’s 48th consecutive quarterly dividend.

The Company’s second quarter revenue was $6.2 million, down 4% as compared to $6.5 million in the second quarter of 2007. Net income was $1.0 million or $0.20 per diluted share, down 23% from $1.3 million or $0.25 per share for the same period in 2007. The Company’s revenue for the six months ended June 30, 2008 was $11.9 million, down 2% as compared to $12.2 million for the comparable period of 2007. Net income for the six months ended June 30, 2008 was $1.9 million or $0.36 per diluted share, a decrease of 19% over the comparable period last year during which the Company earned $2.4 million or $0.45 per share.

Raymond C. Kubacki, Chairman and Chief Executive Officer, said, “The jobs market remains a challenge, as the economy continues to see significant job losses through June — in fact, six months of declines in a row. However, our revenues were off only slightly due to the fact that we continue to add new clients, thereby offsetting the weakness in hiring.”

Kubacki continued, “We continue to make the investments in our sales and marketing in order to capitalize on significant future growth opportunities. This increased expense, as well as an increase in our legal expenses as compared to the same period last year, have caused our net income to be below our historic levels. However, despite these investments, we continue to report strong margins and strong earnings in a tough economic environment.”

Kubacki concluded, “The Company continues to have a strong balance sheet with approximately $9.5 million of cash and investments and no long-term debt. We continue to stay focused and we remain confident in our future growth. Therefore, we are declaring our 48^th consecutive quarterly dividend. This dividend demonstrates our Directors’ confidence in the future and continued commitment to rewarding shareholders as we move forward.”

On March 17, 2008, the Company announced the authorization of a 250,000 share stock repurchase program.

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 second quarter of $6.2 million, down 4% from the prior year quarter

• Revenue for the six month period of $11.9 million, down 2% from the prior year period

• Pretax income for the second quarter of $1.7 million, down 22% from the prior year quarter

• Pretax income for the six month period of $3.2 million, down 18% from the prior year period

• Net income for the second quarter of $1.0 million, or $0.20 per diluted share, down 23% from the prior year quarter

• Net income for the six month period of $1.9 million, or $0.36 per diluted share, down 19% 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 earnings, earnings per share, revenues, dividends, future business, growth opportunities, 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 team, 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
(in thousands, except per share amounts)
UNAUDITED

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2008		2007		2008		2007
Revenue	$	6,211	$	6,497	$	11,920	$	12,214
Cost of revenue		2,435		2,387		4,822		4,842
Gross profit		3,776		4,110		7,098		7,372
Expenses:
General and administrative		1,095		1,029		2,117		1,861
Marketing and selling		902		807		1,701		1,512
Research and development		120		161		238		256
		2,117		1,997		4,056		3,629
Operating income		1,659		2,113		3,042		3,743
Interest income		73		101		185		197
Income before income taxes		1,732		2,214		3,227		3,940
Provision for income taxes		699		882		1,304		1,573
Net income	$	1,033	$	1,332	$	1,923	$	2,367
Basic net income per share	$	0.20	$	0.26	$	0.37	$	0.46
Diluted net income per share	$	0.20	$	0.25	$	0.36	$	0.45
Dividends declared per share	$	0.17	$	0.15	$	0.32	$	0.275
Weighted average common shares outstanding, basic		5,224		5,172		5,222		5,191
Weighted average common shares outstanding, diluted		5,279		5,237		5,277		5,260

PSYCHEMEDICS CORPORATION
BALANCE SHEETS
(in thousands, except per share amounts)

	June 30,			December 31,
	2008			2007
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	7,118		$	6,097
Short-term investments		200			3,875
Accounts receivable, net of allowance for doubtful accounts of $238 in 2008 and $235 in 2007		3,876			3,555
Prepaid expenses and other current assets		955			499
Deferred tax assets		491			429
Total current assets		12,640			14,455
Property and equipment
Equipment and leasehold improvements, at cost		10,838			10,793
Less — Accumulated depreciation and amortization		(10,143	)		(9,977	)
		695			816
Deferred tax asset		231			231
Long-term investments		2,200			—
Other assets		77			59
Total assets	$	15,843		$	15,561
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	583		$	489
Accrued expenses		965			951
Deferred revenue		193			243
Total current liabilities		1,741			1,683
Shareholders’ equity:
Preferred stock, $0.005 par value; 873 shares authorized, no shares issued or outstanding		—			—
Common stock, $0.005 par value; 50,000 shares authorized, 5,843 shares issued in 2008 and 5,812 shares issued in 2007		29			29
Paid-in capital		26,897			26,540
Less — Treasury stock, at cost, 610 shares in 2008 and 586 shares in 2007		(9,545	)		(9,164	)
Accumulated deficit		(3,279	)		(3,527	)
Total shareholders’ equity		14,102			13,878
Total liabilities and shareholders’ equity	$	15,843		$	15,561