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) November 3, 2008

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))

ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION

     On November 3, 2008, Psychemedics Corporation issued a press release announcing preliminary results for the third 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 November 3, 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: November 4, 2008	By:	/s/ Raymond J. Ruddy
		Raymond J. Ruddy
		Vice President and Controller

EXHIBIT INDEX

Exhibit
Number	Description
99.1	Press release dated November 3, 2008 of Psychemedics Corporation announcing its financial results for the quarter ended September 30, 2008.

EX-99.1

Exhibit 99.1

NEWS RELEASE

Contact:	Raymond Ruddy
	Vice President and Controller
	(978) 206-8220
	Raymondr@psychemedics.com

PSYCHEMEDICS CORPORATION ANNOUNCES THIRD QUARTER RESULTS

$0.17 DIVIDEND DECLARED

Acton, Massachusetts, November 3, 2008 — Psychemedics Corporation (NASDAQ:PMD) today announced third quarter financial results for the period ended September 30, 2008. The Company also announced a quarterly dividend of $0.17 per share payable to shareholders of record as of December 3, 2008 to be paid on December 17, 2008. This will be the Company’s 49th consecutive quarterly dividend.

The Company’s third quarter revenue was $6.2 million, down 4% as compared to $6.5 million in the third quarter of 2007. Net income was $0.9 million or $0.17 per diluted share, down 28% from $1.2 million or $0.23 per share for the same period in 2007. The Company’s revenue for the nine months ended September 30, 2008 was $18.1 million, down 3% as compared to $18.7 million for the comparable period of 2007. Net income for the nine months ended September 30, 2008 was $2.8 million or $0.53 per diluted share, a decrease of 22% over the comparable period last year during which the Company earned $3.6 million or $0.67 per diluted share.

Raymond C. Kubacki, Chairman and Chief Executive Officer, said, “We are operating in a tough hiring environment. However, we continued to add new accounts at a healthy pace which has served as a significant offset to the general weakness in hiring.”

Kubacki continued, “We are continuing to make investments in our sales and marketing group to capitalize on significant future growth opportunities. We believe this will continue to pay off with a steady stream of new customer wins. While these are uncertain times, our services save customers a significant cost, which is why we remain confident in our future.”

Kubacki concluded, “We remain a solidly profitable company with a promising outlook. It is important to also note that the Company continues to have a strong balance sheet with no long-term debt and approximately $9.1 million of cash and investments, up 9%

from the third quarter of 2007. Therefore, we are declaring our 49^th consecutive quarterly dividend. This dividend demonstrates our continued commitment to maximizing shareholder returns as we move forward.”

On March 17, 2008, the Company announced the authorization of a 250,000 share stock repurchase program and the Company continued to buy back its own shares in the third quarter.

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

• Revenue for the nine month period of $18.1 million, down 3% from the prior year period

• Pretax income for the third quarter of $1.4 million, down 29% from the prior year quarter

• Pretax income for the nine month period of $4.7 million, down 22% from the prior year period

• Net income for the third quarter of $0.9 million, or $0.17 per diluted share, down 27% from the prior year quarter

• Net income for the nine month period of $2.8 million, or $0.53 per diluted share, down 21% 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
UNAUDITED

	THREE MONTHS				NINE MONTHS
	ENDED SEP 30,				ENDED SEP 30,
	2008		2007		2008		2007
REVENUE	$	6,204,647	$	6,463,516	$	18,124,587	$	18,677,412
DIRECT COSTS	$	2,552,014		2,553,358		7,374,228		7,395,552
Gross profit		3,652,633		3,910,158		10,750,359		11,281,860
EXPENSES:
General and administrative		1,145,486		1,108,625		3,262,804		2,969,680
Marketing and selling		1,013,510		765,145		2,714,882		2,277,075
Research and development		125,039		121,859		362,532		377,481
		2,284,035		1,995,629		6,340,218		5,624,236
OPERATING INCOME		1,368,598		1,914,529		4,410,141		5,657,624
INTEREST INCOME		64,999		104,480		249,961		302,048
NET INCOME BEFORE INCOME TAXES		1,433,597		2,019,009		4,660,102		5,959,672
PROVISION FOR INCOME TAXES		560,042		809,400		1,864,041		2,382,800
NET INCOME	$	873,555	$	1,209,609	$	2,796,061	$	3,576,872
BASIC NET INCOME PER SHARE	$	0.17	$	0.23	$	0.54	$	0.69
DILUTED NET INCOME PER SHARE	$	0.17	$	0.23	$	0.53	$	0.67
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING, BASIC		5,226,237		5,216,386		5,223,581		5,199,876
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING, DILUTED		5,255,301		5,333,341		5,275,311		5,301,756

PSYCHEMEDICS CORPORATION
BALANCE SHEETS
UNAUDITED

	September			DECEMBER
	30, 2008			31, 2007
	UNAUDITED
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	6,910,753		$	6,096,734
Short-term investments		2,150,000			3,875,000
Accounts receivable, net of allowance for doubtful accounts of $235,891 in 2008 and $235,337 in 2007		4,312,292			3,555,342
Prepaid expenses and other current assets		840,290			498,919
Deferred tax asset		531,930			429,472
Total current assets		14,745,265			14,455,467
EQUIPMENT AND LEASEHOLD IMPROVEMENTS		10,879,870			10,792,657
Less-accumulated depreciation and amortization		(10,225,849	)		(9,977,315	)
		654,021			815,342
DEFERRED TAX ASSET		231,346			231,346
OTHER ASSETS — NET		74,375			58,613
	$	15,705,007		$	15,560,768
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	434,213		$	488,640
Accrued expenses		1,166,457			951,242
Deferred revenue		166,261			242,955
Total current liabilities		1,766,931			1,682,837
SHAREHOLDERS’ EQUITY:
Preferred stock, $.005 par value; authorized 872,521 shares; none outstanding
Common stock; $.005 par value; authorized 50,000,000 shares; 5,843,068 shares issued in 2008 and 5,811,982 shares issued in 2007		29,215			29,060
Paid-in capital		27,003,835			26,539,764
Accumulated deficit		(3,293,751	)		(3,527,269	)
Less — Treasury stock, at cost; 626,848 shares in 2008 and 586,197 shares in 2007		(9,801,223	)		(9,163,624	)
Total shareholders’ equity		13,938,076			13,877,931
	$	15,705,007		$	15,560,768