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) February 23, 2010

PSYCHEMEDICS CORPORATION

(Exact Name of Registrant As Specified In Its Charter)

Delaware

(State or Other Jurisdiction of Incorporation)

1-13738 (Commission File Number) 125 Nagog Park, Acton, Massachusetts 01720 (Address of Principal Executive Offices) (Zip Code)		58-1701987 (I.R.S. Employer Identification No.)
	(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):

¨Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨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 February 23, 2010, Psychemedics Corporation issued a press release announcing preliminary results for the fourth quarter of 2009. 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 February 23, 2010.

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: February 23, 2010	PSYCHEMEDICS CORPORATION
	By:	/s/ Raymond J. Ruddy
	Raymond J. Ruddy
	Vice President and Controller

EX-99.1

Psychemedics Corporation Announces 2009 Year End Profits

Declares Quarterly Dividend

ACTON, Mass., Feb. 23 /PRNewswire-FirstCall/ -- Psychemedics Corporation (Nasdaq: PMD) today announced fourth quarter and year-end financial results for the period ended December 31, 2009.  The Company also announced a quarterly dividend of $0.12 per share payable to shareholders of record as of March 5, 2010 to be paid on March 19, 2010.  This will be the Company's 54th consecutive quarterly dividend.

The Company's revenue for the year ended December 31, 2009 was $16,954,994, a decrease of 26% as compared to $22,948,604 for 2008.  Net income for the year ended December 31, 2009 was $1,527,295 or $0.29 per share, a decrease of 49% from 2008 during which the Company earned $2,968,789 or $0.57 per share.  Revenue for the fourth quarter was $4,271,340, a decrease of 11% as compared to $4,824,016 in the fourth quarter of 2008.  Net income was $546,083 or $0.10 per share, up 216% from $172,728 or $0.03 per share for the same period of 2008.

Raymond C. Kubacki, Chairman and Chief Executive Officer, said, "Stating the obvious: this was a very tough year for everyone.  And so for us as well.  On the bright side, we continued to add new clients as more and more companies see our patented hair testing method as a significant cost savings tool.  However, the facts are that in 2009 most companies were laying off and not hiring.  Therefore, new business was unable to match the significant fall off in hiring across our entire client base."

Kubacki continued: "Nonetheless, again on the bright side, we remained profitable for the year 2009 – and not just marginally profitable – and we continued our unbroken string of profitability since 1993.  We were able to achieve this level of profitability because we took significant cost reduction/control actions early, and did them logically and methodically.  These included reductions in force, changes in certain benefits such as elimination of bonuses, stock grants, and 401K match for 2009.  We also implemented a reduction in base salaries for all personnel in 2009.  We were determined to remain profitable."

Kubacki concluded, "Once again, we demonstrated that Psychemedics is able to successfully weather any downturn.  The Company's balance sheet remains strong with approximately $5.8 million in cash and short-term investments and no long-term debt.  Our directors share our confidence in the future of Psychemedics and remain committed to rewarding shareholders and sharing the financial success of the Company with them as we grow.  Therefore, we are pleased to declare our fifty-fourth consecutive quarterly dividend."

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.

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

Statements of Income

Unaudited

	Three Months Ended December 31,				Twelve Months Ended December 31,
	2009		2008		2009		2008
Revenues	$	4,271,340	$	4,824,016	$	16,954,994	$	22,948,604
Cost of revenues		1,749,276		2,224,289		7,345,016		9,598,515
Gross profit		2,522,064		2,599,727		9,609,978		13,350,089
General & administrative		812,395		1,257,268		3,596,774		4,520,074
Marketing & selling		635,939		933,699		2,961,477		3,648,584
Research & development		113,470		112,092		467,435		474,622
Total operating expenses		1,561,804		2,303,059		7,025,686		8,643,280
Operating income		960,260		296,668		2,584,292		4,706,809
Interest income		11,154		58,073		45,320		308,034
Net income before provision
for income taxes		971,414		354,741		2,629,612		5,014,843
Provision for income taxes		425,331		182,013		1,102,317		2,046,054
Net income	$	546,083	$	172,728	$	1,527,295	$	2,968,789
Basic net income per share	$	0.11	$	0.03	$	0.29	$	0.57
Diluted net income per share	$	0.10	$	0.03	$	0.29	$	0.57
Dividends declared per share	$	0.12	$	0.17	$	0.53	$	0.66
Special dividends declared
per share	$	0.00	$	0.50	$	0.00	$	0.50
Weighted average common
shares outstanding, basic		5,197,232		5,206,158		5,193,329		5,219,141
Weighted average common
shares outstanding, diluted		5,204,611		5,215,743		5,204,767		5,245,713

Psychemedics Corporation

Consolidated Balance Sheets

	December 31,			December 31,
	2009			2008
ASSETS
Current Assets:
Cash and cash equivalents	$	4,840,367		$	6,630,119
Short-term investments		1,006,436			--
Accounts receivable, net of allowance for
doubtful accounts of $134,282 in 2009 and
$246,462 in 2008		3,016,084			3,398,455
Prepaid expenses and other current assets		663,433			1,105,886
Deferred tax assets		253,221			449,398
Total Current Assets		9,779,541			11,583,858
Fixed Assets:
Equipment & leasehold improvements		10,912,906			10,877,479
Less accumulated depreciation		(10,381,599	)		(10,047,755	)
Net Fixed Assets		531,307			829,724
Deferred tax assets, long term		204,764			139,021
Other assets		86,814			75,183
Total Assets	$	10,602,426		$	12,627,786
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Current Liabilities:
Accounts payable	$	180,784		$	644,894
Accrued expenses		1,090,898			1,268,924
Deferred revenue		36,360			154,080
Total Current Liabilities		1,308,042			2,067,898
Commitments and Contingencies
Shareholders' Equity:
Preferred-stock, $0.005 par value, 872,521
shares authorized, no shares issued or
outstanding		--			--
Common stock, $0.005 par value; 50,000,000
shares authorized 5,861,872 shares issued in
2009 and 5,843,068 shares issued in 2008		29,309			29,216
Paid-in capital		27,419,359			27,118,743
Accumulated deficit		(8,100,920	)		(6,614,114	)
Less - Treasury stock, at cost, 664,523
shares in 2009 and 647,304 shares in 2008		(10,053,364	)		(9,973,957	)
Total Shareholders' Equity		9,294,384			10,559,888
Total Liabilities and Shareholders' Equity	$	10,602,426		$	12,627,786

Raymond Ruddy

Vice President and Controller

(978) 206-8220

raymondr@psychemedics.com

CONTACT:  Raymond Ruddy, Vice President and Controller, Psychemedics Corporation, +1-978-206-8220, raymondr@psychemedics.com