-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ol60SwTHj7RlGhsBpSZpPlxPGAB7N4t+041QuDCwQj4rzHg0/mQEab0O1sDpoafj dYSL7SJ5E07k+vjApphGXQ== 0000950135-99-003684.txt : 19990802 0000950135-99-003684.hdr.sgml : 19990802 ACCESSION NUMBER: 0000950135-99-003684 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990730 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PSYCHEMEDICS CORP CENTRAL INDEX KEY: 0000806517 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MEDICAL LABORATORIES [8071] IRS NUMBER: 581701987 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13738 FILM NUMBER: 99673925 BUSINESS ADDRESS: STREET 1: 1280 MASSACHUSETTS AVENUE STREET 2: SUITE 200 CITY: CAMBRIDGE STATE: MA ZIP: 02138 BUSINESS PHONE: 6178687455 MAIL ADDRESS: STREET 1: 1280 MASSACHUSETTS AVE STREET 2: SUITE 200 CITY: CAMBRIDGE STATE: MA ZIP: 02138 10-Q 1 PSYCHEMEDICS CORP. FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE - --------- SECURITIES EXCHANGE ACT OF 1934 For quarterly period ended JUNE 30, 1999 - --------- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ---------------- ---------------- Commission file number 1-13738 PSYCHEMEDICS CORPORATION (exact name of Issuer as specified in its charter) Delaware 58-1701987 --------------------------------- ------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation of organization) Identification No.) 1280 Massachusetts Ave., Suite 200, Cambridge, MA 02138 - ------------------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Issuer's telephone number, including area code (617-868-7455) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------- ------- Number of shares outstanding of only class of Issuer's Common Stock as of July 28, 1999: Common Stock $.005 par value (21,791,026 shares). Page 1 2 PSYCHEMEDICS CORPORATION
Part I FINANCIAL INFORMATION PAGE NO. -------- Item 1 Financial Statements Condensed Balance Sheets as of June 30, 1999 and December 31, 1998 3 Condensed Statements of Income for the three month periods ended June 30, 1999 and 1998 4 Condensed Statements of Income for the six month periods ended June 30, 1999 and 1998 5 Condensed Statements of Cash Flows for the six month periods ended June 30, 1999 and 1998 6 Notes to Condensed Financial Statements 7-9 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 10-13 Item 3 Quantitative and Qualitative Disclosures about Market Risk 13 Part II OTHER INFORMATION Item 4 Submission of Matters to a Vote of Security Holders 14 Item 6 Exhibits and Reports on Form 8-K 14 SIGNATURES 15
Page 2 3 PSYCHEMEDICS CORPORATION CONDENSED BALANCE SHEETS (UNAUDITED)
JUNE DECEMBER 30, 1999 31, 1998 ------------ ---------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 923,160 $ 724,738 Short-term investments 6,525,861 9,088,436 Accounts receivable 4,532,146 3,075,619 Inventories 470,181 510,016 Prepaid expenses and other current assets 876,670 723,388 ----------- ----------- Total current assets 13,328,018 14,122,197 ----------- ----------- PROPERTY AND EQUIPMENT: Equipment and leasehold improvements, at cost 8,520,596 8,131,365 Less-Accumulated depreciation and amortization (4,594,905) (3,949,128) ----------- ----------- 3,925,691 4,182,237 ----------- ----------- OTHER ASSETS - NET 402,945 434,925 =========== =========== $17,656,654 $18,739,359 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 516,693 $ 675,072 Accrued expenses 1,470,054 745,111 Deferred revenue 1,159,500 1,436,667 ----------- ----------- Total current liabilities 3,146,247 2,856,850 ----------- ----------- SHAREHOLDERS' EQUITY: Preferred stock, $.005 par value; 1,000,000 Shares authorized; none outstanding Common stock; $.005 par value; 50,000,000 shares authorized; issued 22,607,290 shares in 1999 and 1998 113,036 113,036 Paid-in capital 24,403,949 24,403,949 Accumulated deficit (5,813,916) (5,585,453) Less - Treasury stock, at cost; 780,264 and 533,664 shares in 1999 and 1998, respectively (3,786,153) (2,645,232) Less - Receivable from officer (406,509) (403,791) ----------- ---------- Total shareholders' equity 14,510,407 15,882,509 ----------- ---------- $17,656,654 $18,739,359 =========== ==========
See accompanying notes to financial statements and management's discussion and analysis of financial condition and results of operations. Page 3 4 PSYCHEMEDICS CORPORATION CONDENSED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED JUNE 30, -------------------------------- 1999 1998 ----------- ----------- REVENUE $ 5,854,999 $ 4,834,720 DIRECT COSTS 2,287,059 1,910,326 ----------- ----------- Gross profit 3,567,940 2,924,394 ----------- ----------- EXPENSES: General and administrative 822,506 768,892 Marketing and selling 1,080,360 865,737 Research and development 129,338 113,854 ----------- ----------- 2,032,204 1,748,483 ----------- ----------- OPERATING INCOME 1,535,736 1,175,911 OTHER INCOME 92,798 141,872 ----------- ----------- NET INCOME BEFORE INCOME TAXES 1,628,534 1,317,783 PROVISION FOR INCOME TAXES 667,690 535,597 ----------- ----------- NET INCOME $ 960,844 $ 782,186 =========== =========== BASIC NET INCOME PER SHARE $ 0.04 $ 0.04 =========== =========== DILUTED NET INCOME PER SHARE $ 0.04 $ 0.03 =========== =========== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 21,925,614 22,231,158 =========== =========== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING, ASSUMING DILUTION 22,155,948 22,676,094 =========== ===========
See accompanying notes to financial statements and management's discussion and analysis of financial condition and results of operations. Page 4 5 PSYCHEMEDICS CORPORATION CONDENSED STATEMENTS OF INCOME (UNAUDITED)
SIX MONTHS ENDED JUNE 30, ------------------------------ 1999 1998 ----------- ----------- REVENUE $10,535,256 $ 8,956,623 DIRECT COSTS 4,230,158 3,605,214 ----------- ----------- Gross profit 6,305,098 5,351,409 ----------- ----------- EXPENSES: General and administrative 1,582,265 1,376,858 Marketing and selling 2,071,934 1,633,759 Research and development 270,399 220,847 ----------- ----------- 3,924,598 3,231,464 ----------- ----------- OPERATING INCOME 2,380,500 2,119,945 OTHER INCOME 209,453 278,256 ----------- ----------- NET INCOME BEFORE INCOME TAXES 2,589,953 2,398,201 PROVISION FOR INCOME TAXES 1,061,870 974,737 ----------- ----------- NET INCOME $ 1,528,083 $ 1,423,464 =========== =========== BASIC NET INCOME PER SHARE $ 0.07 $ 0.06 =========== =========== DILUTED NET INCOME PER SHARE $ 0.07 $ 0.06 =========== =========== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 21,986,321 22,220,804 =========== =========== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING, ASSUMING DILUTION 22,217,651 22,686,146 =========== ===========
See accompanying notes to financial statements and management's discussion and analysis of financial condition and results of operations. Page 5 6 PSYCHEMEDICS CORPORATION CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED ENDED JUNE 30, -------------------------- 1998 1998 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 1,528,083 $ 1,423,464 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 677,759 460,453 Changes in assets and liabilities: Receivables (1,459,245) (252,421) Inventories 39,835 117,980 Prepaid expenses and other current assets (153,282) (315,032) Accounts payable (158,381) (56,154) Accrued expenses 724,943 548,671 Deferred revenue (277,167) 136,494 ----------- ----------- Net cash provided by operating activities 922,545 2,063,455 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Maturities (purchases) of short-term investments - net 2,562,575 (243,094) Purchases of property and equipment (389,231) (1,199,520) Increase in other assets - net -- (44,512) ----------- ----------- Net cash provided by (used in) investing activities 2,173,344 (1,487,126) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from the issuance of common stock -- 319,696 Cash dividends paid (1,756,546) (1,113,573) Acquisition of treasury stock (1,140,921) (340,011) ----------- ----------- Net cash used in financing activities (2,897,467) (1,133,888) ----------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 198,422 (557,559) CASH AND CASH EQUIVALENTS, beginning of period 724,738 585,142 ----------- ----------- CASH AND CASH EQUIVALENTS, end of period $ 923,160 $ 27,583 =========== ===========
See accompanying notes to financial statements and management's discussion and analysis of financial condition and results of operations. Page 6 7 PSYCHEMEDICS CORPORATION NOTES TO FINANCIAL STATEMENTS June 30, 1999 1. Interim Financial Statements The accompanying unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission for reporting on Form 10-Q. Accordingly, certain information and footnote disclosure required for complete financial statements are not included herein. It is recommended that these financial statements be read in conjunction with the financial statements and related notes of Psychemedics Corporation (the "Company") as reported in the Company's Annual Report on Form 10-K for the year ended December 31, 1998. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of financial position, results of operations, and cash flows at the dates and for the periods presented have been included. The balance sheet presented as of December 31, 1998 has been derived from the financial statements that have been audited by the Company's independent public accountants. The results of operations for the three months and the six months ended June 30, 1999 may not be indicative of the results that may be expected for the year ending December 31, 1999, or any other period. 2. Basic and Diluted Net Income Per Share In accordance with Statement of Financial Accounting Standard ("SFAS") No. 128, Earnings Per Share, basic net income per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted net income per share was computed by dividing net income by the weighted average number of common and dilutive common equivalent shares outstanding during the period. The number of dilutive common equivalent shares outstanding during the period has been determined in accordance with the treasury-stock method. Common equivalent shares consist of common stock issuable upon the exercise of outstanding options. Basic and diluted weighted average common shares outstanding are as follows:
Three Months Ended Six Months Ended -------------------------- -------------------------- June 30, June 30, June 30, June 30, 1999 1998 1999 1998 ---------- ---------- -------------------------- Weighted average common shares 21,925,614 22,231,158 21,986,321 22,220,804 Dilutive common stock options 230,334 444,936 231,330 465,342 ---------- ---------- ---------- ---------- Weighted average common shares outstanding, assuming dilution 22,155,948 22,676,094 22,217,651 22,686,146
For the three months ended June 30, 1999 and 1998, options to purchase 832,406 and 558,316 common shares, respectively, were outstanding but not included in the diluted Page 7 8 weighted average common share calculation as the effect would have been antidilutive. For the six months ended June 30, 1999 and 1998, options to purchase 832,406 and 542,866 common shares, respectively, were outstanding but not included in the diluted weighted average common share calculation as the effect would have been antidilutive. 3. Revenue Recognition Except as provided below, revenues from the Company's services are recognized upon reporting of drug test results to the customer. Revenues related to sample collection kits not returned for processing by customers are recognized when the likelihood of the Company performing any service obligation is deemed remote. At June 30, 1999 and December 31, 1998, the Company had deferred revenue balances of approximately $1,160,000 and $1,437,000, respectively, reflecting payments for its personal drug testing service received prior to the performance of the related test. 4. Comprehensive Income The Company's comprehensive income for the three month periods and the six month periods ended June 30, 1999 and 1998 was the same as reported net income. 5. Segment Reporting The Company adopted SFAS No. 131, Disclosures About Segments of an Enterprise and Related Information, in the fiscal year ended December 31, 1998. SFAS No. 131 establishes standards for reporting information regarding operating segments in annual financial statements and requires selected information for those segments to be presented in interim financial reports issued to stockholders. SFAS No. 131 also establishes standards for related disclosures about products and services and geographic areas. To date, the Company has managed its operations as one segment, drug testing services. As a result, the financial information disclosed herein materially represents all of the financial information related to the Company's principal operating segment. Substantially all of the Company's revenues are generated in the United States. All of the Company's assets are located in the United States. 6. New Accounting Pronouncements In March 1998, the American Institute of Certified Public Accountants (AICPA) issued Statement of Position (SOP) 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. SOP 98-1 requires computer software costs associated with internal use software to be charged to operations as incurred until certain capitalization criteria have been met. The Company adopted SOP 98-1 beginning January 1, 1998. SOP 98-1 had no effect upon adoption. As of June 30, 1999 and December 31, 1998, approximately $1,206,000 of software development costs had been capitalized. During the three month periods ended June 30, 1999 and 1998, approximately $60,000 and $10,000, respectively, of related amortization was charged to operations. During the six month periods ended June 30, 1999 and 1998, approximately $120,000 and $14,000, respectively, of related amortization was charged to operations. In April 1998, the AICPA issued SOP 98-5, Reporting on the Costs of Start-Up Activities, which requires that all nongovernmental entities charge to operations the costs of start-up activities, including organizational costs, as those costs are incurred. Page 8 9 The Company has historically recorded all such costs as charges to operations in the period incurred. In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133 is effective for all periods beginning after June 15, 1999 and establishes methods of accounting for derivative financial instruments and hedging activities related to those instruments as well as other hedging activities. Adoption of SFAS No. 133 is not expected to have a material impact on the Company's financial position or results of operations. Page 9 10 Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FACTORS THAT MAY AFFECT FUTURE RESULTS From time to time, information provided by the Company or statements made by its employees may contain "forward-looking" information which involves risks and uncertainties. In particular, statements contained in this report which are not historical facts (including but not limited to the Company's expectations regarding revenues, business strategy, anticipated operating results, cash dividends and anticipated cash requirements) may be "forward looking" statements. The Company's 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 continued expansion of the Company's sales and marketing network, development of markets for new products and services offered by the Company, the economic health of principal customers of the Company, financial and operational risks associated with possible expansion of testing facilities used by the Company, government regulation (including, but not limited to, Food and Drug Administration regulations), competition and general economic conditions. OVERVIEW Psychemedics Corporation was incorporated in 1986. The Company utilizes a patented hair analysis method involving radioimmunoassay technology to analyze human hair to detect abused substances. The founder of the Company has granted to the Company an exclusive license to all his rights in this hair analysis technology, including his rights to the drug extraction method. RESULTS OF OPERATIONS Revenue was $5,854,999 in the second quarter of 1999 as compared to $4,834,720 in the second quarter of 1998, representing an increase of 21%. Revenue for the six month period ended June 30, 1999 was $10,535,256, an increase of 18% over the $8,956,623 of revenue reported for the comparable period of 1998. The revenue increase was due primarily to increases in volume from both new and existing clients. Gross margin was 61% of sales in the second quarter of 1999, as compared to 60% in the year earlier period. Gross margin for the six months ended June 30, 1999 and the six months ended June 30, 1998 was 60%. The recent improvement in gross margin is due largely to increased sample volume during the second quarter of 1999 being handled by production capacity that was added by the Company during the latter part of 1998. General and administrative ("G&A") expenses were $822,506 for the three months ended June 30, 1999 as compared to $768,892 for the three months ended June 30, 1998, representing an increase of 7%. G&A expenses were $1,582,265 for the six months ended June 30, 1999 as compared to $1,376,858 for the year earlier period, representing an increase of 15%. As a percentage of revenue, G&A expenses Page 10 11 decreased to 14% in the second quarter of 1999 from 16% in the second quarter of 1998 and remained at 15% for the six months ended June 30, 1999 and the comparable year earlier period. The increases in G&A expenses were due primarily to greater personnel costs from additions to staff and 401(k) retirement plan expenses, and increased professional fees for legal and accounting services. Costs related to the implementation of a new billing system and increased facilities expenses (rent, taxes) also contributed to the increase. Marketing and selling expenses for the three month period ended June 30, 1999 increased $214,623 from the comparable period of the prior year to $1,080,360, an increase of 25%. Marketing and selling expenses were $2,071,934 for the six months ended June 30, 1999 as compared to $1,633,759 for the year earlier period, representing an increase of 27%. This increase was primarily due to greater customer service costs resulting from the Company's growth and expanded marketing activities related to the corporate market. Total marketing and selling expenses increased as a percentage of revenue to 19% in the second quarter of 1999 from 18% in the second quarter of 1998, and increased as a percentage of revenue to 20% for the six months ended June 30, 1999 from 18% for the six months ended June 30, 1998. The Company expects to continue to aggressively promote its drug testing services during the remainder of 1999 and in future years in order to expand its client base. Other income for the three month and the six month periods ended June 30, 1999 represented primarily interest earned on cash equivalents and short-term investments. The decrease in 1999 was primarily due to lower average investment balances coupled with decreased yields on these investments. During the three months ended June 30, 1999 and June 30, 1998, the Company recorded tax provisions of $667,690 and $535,597, respectively. During the six months ended June 30, 1999 and June 30, 1998, the Company recorded tax provisions of $1,061,870 and $974,737, respectively. These tax provisions reflect an effective tax rate of 41%. LIQUIDITY AND CAPITAL RESOURCES At June 30, 1999, the Company had $7.4 million of cash, cash equivalents and short-term investments. The Company's operating activities generated net cash of $922,545 in the six months ended June 30, 1999. Investing activities generated $2,173,344 in the six month period while financing activities used a net amount of $2,897,467 during the period. Operating cash flows decreased $1,140,910 in the first six months of 1999, compared to the year earlier period. This was primarily due to a significant increase in accounts receivable resulting from increased sales during the second quarter along with an increase in prepaid expenses, as well as a decrease in accounts payable and deferred revenue. Increases in net income and accrued expenses and a decrease in inventories offset this to a lesser degree. The non-cash effect of depreciation and amortization in the 1999 and 1998 periods was $677,759 and $460,453, respectively. Page 11 12 Capital expenditures in the first two quarters of 1999 were $389,231. The expenditures primarily consisted of new equipment, including laboratory and computer equipment. The Company believes that within the next two years it may be required to expand its existing laboratory or develop a second laboratory, the cost of which is currently believed to range from $2 million to $4 million. During the six month period ended June 30, 1999, the Company distributed $1,756,546 in cash dividends to its shareholders and repurchased a total of 246,600 shares for treasury at an aggregate cost of $1,140,921. At June 30, 1999, the Company's principal sources of liquidity included an aggregate of $7.4 million of cash, cash equivalents and short-term investments. Management currently believes that such funds, together with cash generated from operations, should be adequate to fund anticipated working capital requirements and capital expenditures in the near term. Depending upon the Company's results of operations, its future capital needs and available marketing opportunities, the Company may use various financing sources to raise additional funds. Such sources could potentially include joint ventures, issuance of common stock or debt financing. At June 30, 1999, the Company had no long-term debt. IMPACT OF YEAR 2000 ISSUE The Year 2000 issue results from computer programs written using two digits rather than four to define the applicable year. Some of the Company's computer programs or hardware and equipment that have date-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices, or engage in similar normal business activities. Over the past two years, the Company has made substantial modifications and improvements to all of its operational and financial software. An integral part of this process has been to ensure that all newly purchased and internally developed software is Year 2000 compliant. The Company has completed a preliminary evaluation of all of the existing software used in its internal systems and operations and now expects that it will be Year 2000 compliant by the middle of the fourth quarter of 1999, and estimates that the cost to bring such software into compliance will not exceed $20,000. The Company is in the final stages of evaluating various hardware and equipment components used in its laboratory operations and also expects to be Year 2000 compliant in this area by mid-fourth quarter 1999, at an additional estimated cost of less than $100,000. The Company believes that although these costs are not material to its business, if these efforts are not completed on time, or if the cost of updating or replacing the Company's information systems greatly exceeds the Company's current estimates, the Year 2000 issue could have a material adverse impact on the Company's business, financial condition or results of operations. The Company also intends to determine the extent to which the Company may be vulnerable to any failures by its major suppliers, customers or service providers to remedy their own Year 2000 issues, and has initiated formal communications with these parties. At this time the Company is unable to estimate the nature or extent of any potential adverse impact resulting from the failure of third party suppliers, customers or service providers to achieve Year 2000 compliance, although the Company does not Page 12 13 currently anticipate that it will experience any material shipment delays from its major product suppliers or any material payment delays from its major customers due to Year 2000 issues. However, there can be no assurance that these third parties will not experience Year 2000 problems or that any problems would not have a material effect on the Company's business. Because the cost and timing of Year 2000 compliance by third parties such as suppliers, customers and service providers is not within the Company's control, no assurance can be given with respect to the cost or timing of such efforts or any potential adverse effects on the Company of any failure by these third parties to achieve Year 2000 compliance. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The following discussion about the Company's market risk disclosures involves forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements. The Company is exposed to market risk related to changes in interest rates. The Company does not use derivative financial instruments for speculative or trading purpose. Interest Rate Sensitivity. The Company maintains a short-term investment portfolio consisting principally of securities issued by the U.S. Government with an average maturity of less than six months. These held-to-maturity securities are subject to interest rate risk and will fall in value if market rates increase. If market interest rates were to increase immediately and uniformly by 10 percent from levels at June 30, 1999, the fair value of the portfolio would decline by an immaterial amount. The Company has the ability to hold its fixed income investments until maturity, and therefore the Company would not expect its operating results or cash flows to be affected to any significant degree by the effect of a sudden change in market interest rates on its securities portfolio. Page 13 14 PART II OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders The Annual Meeting of Shareholders of Psychemedics Corporation was held on May 6, 1999 for the purpose of electing a board of directors and approving the appointment of the Company's auditors. Proxies for the meeting were solicited pursuant to Section 14(a) of the Securities Exchange Act of 1934 and there was no solicitation in opposition to management's solicitations. A brief description of each matter voted upon at the meeting and tabulation by the Company's transfer agent of the vote cast with respect to each matter is included as Exhibit 22 to this Form 10-Q. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. 22. Submission of Matters to a Vote of Security Holders 27. Financial Data Schedule (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter for which this report is filed. Page 14 15 SIGNATURES 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, thereunto duly authorized. Psychemedics Corporation Date: July 28, 1999 By: /s/ Raymond C. Kubacki, Jr. ------------------------------------------ Raymond C. Kubacki, Jr. President and Chief Executive Officer Date: July 28, 1999 By: /s/ Peter C. Monson ------------------------------------------ Peter C. Monson Vice President, Treasurer & Controller (principal financial officer) Page 15 EX-22 2 SUBMISSION OF MATTERS TO A VOTE 1 Exhibit 22 Submission of Matters to a Vote of Security Holders Description and tabulation by the Company's transfer agent of each matter voted upon at the Annual Meeting of Shareholders of Psychemedics Corporation held on May 6, 1999. All of management's nominees for directors, as listed in the proxy statement, were elected with the following vote: Election of Directors.
NUMBER OF SHARES ---------------- FOR ABSTAIN --- ------- Werner A Baumgartner, Ph.D. 17,961,466 685,269 Donald F. Flynn 17,961,466 685,269 Raymond C. Kubacki, Jr. 17,961,569 685,166 John J. Melk 17,961,466 685,269 A. Clinton Allen 17,961,466 685,269 Fred J. Weinert 17,961,466 685,269
Selection of Arthur Andersen LLP as auditors of the Company.
NUMBER OF SHARES ---------------- For 18,151,930 Against 470,526 Abstain 24,279
EX-27 3 FINANCIAL DATA SCHEDULE
5 6-MOS DEC-31-1999 JUN-30-1999 923,160 6,525,861 4,532,146 0 470,181 13,328,018 8,520,596 4,594,905 17,656,654 3,146,247 0 0 0 113,036 14,397,371 17,656,654 10,535,256 10,535,256 4,230,158 4,230,158 3,924,598 0 0 2,589,953 1,061,870 1,528,083 0 0 0 1,528,083 0.07 0.07
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