<PAGE> 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).
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PSYCHEMEDICS CORPORATION
<TABLE>
<CAPTION>
Part I FINANCIAL INFORMATION PAGE NO.
--------
<S> <C> <C>
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
</TABLE>
Page 2
<PAGE> 3
PSYCHEMEDICS CORPORATION
CONDENSED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE DECEMBER
30, 1999 31, 1998
------------ ----------
<S> <C> <C>
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
=========== ==========
</TABLE>
See accompanying notes to financial statements and management's discussion and
analysis of financial condition and results of operations.
Page 3
<PAGE> 4
PSYCHEMEDICS CORPORATION
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED JUNE 30,
--------------------------------
1999 1998
----------- -----------
<S> <C> <C>
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
=========== ===========
</TABLE>
See accompanying notes to financial statements and management's discussion and
analysis of financial condition and results of operations.
Page 4
<PAGE> 5
PSYCHEMEDICS CORPORATION
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
------------------------------
1999 1998
----------- -----------
<S> <C> <C>
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
=========== ===========
</TABLE>
See accompanying notes to financial statements and management's discussion and
analysis of financial condition and results of operations.
Page 5
<PAGE> 6
PSYCHEMEDICS CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
ENDED JUNE 30,
--------------------------
1998 1998
----------- -----------
<S> <C> <C>
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
=========== ===========
</TABLE>
See accompanying notes to financial statements and management's discussion and
analysis of financial condition and results of operations.
Page 6
<PAGE> 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:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
-------------------------- --------------------------
June 30, June 30, June 30, June 30,
1999 1998 1999 1998
---------- ---------- --------------------------
<S> <C> <C> <C> <C>
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
</TABLE>
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
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<PAGE> 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.
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<PAGE> 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.
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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
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<PAGE> 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.
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<PAGE> 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
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<PAGE> 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.
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<PAGE> 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.
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<PAGE> 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)
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<PAGE> 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.
<TABLE>
<CAPTION>
NUMBER OF SHARES
----------------
FOR ABSTAIN
--- -------
<S> <C> <C>
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
</TABLE>
Selection of Arthur Andersen LLP as auditors of the Company.
<TABLE>
<CAPTION>
NUMBER OF SHARES
----------------
<S> <C>
For 18,151,930
Against 470,526
Abstain 24,279
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 923,160
<SECURITIES> 6,525,861
<RECEIVABLES> 4,532,146
<ALLOWANCES> 0
<INVENTORY> 470,181
<CURRENT-ASSETS> 13,328,018
<PP&E> 8,520,596
<DEPRECIATION> 4,594,905
<TOTAL-ASSETS> 17,656,654
<CURRENT-LIABILITIES> 3,146,247
<BONDS> 0
0
0
<COMMON> 113,036
<OTHER-SE> 14,397,371
<TOTAL-LIABILITY-AND-EQUITY> 17,656,654
<SALES> 10,535,256
<TOTAL-REVENUES> 10,535,256
<CGS> 4,230,158
<TOTAL-COSTS> 4,230,158
<OTHER-EXPENSES> 3,924,598
<LOSS-PROVISION> 0
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<INCOME-TAX> 1,061,870
<INCOME-CONTINUING> 1,528,083
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<NET-INCOME> 1,528,083
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</TABLE>