Unassociated Document

NEWS RELEASE

Contact:

Raymond Ruddy

Vice President and Controller

(978) 206-8220

raymondr@psychemedics.com

PSYCHEMEDICS CORPORATION ANNOUNCES SECOND QUARTER RESULTS

DECLARES 52nd CONSECUTIVE QUARTERLY DIVIDEND

Acton, Massachusetts, August 4, 2009 -- Psychemedics Corporation (NASDAQ:PMD) today announced second quarter financial results for the period ended June 30, 2009. The Company also announced a quarterly dividend of $0.12 per share payable to shareholders of record as of September 4, 2009 to be paid on September 18, 2009. This will be the Company’s 52nd consecutive quarterly dividend.

The Company’s revenue for the quarter ended June 30, 2009 was $3.9 million versus $6.2 million for the quarter ended June 30, 2008. Net income for the quarter ended June 30, 2009 was $174 thousand or $0.03 per share, versus $1.0 million or $.20 per share, for the comparable period last year. The Company's revenue for the six months ended June 30, 2009 was $8.0 million, as compared to $11.9 million for the comparable period of 2008. Net income for the six months ended June 30, 2009 was $213 thousand or $0.04 per diluted share, as compared to last year during which the Company earned $1.9 million or $0.36 per share.

Raymond C. Kubacki, Chairman and Chief Executive Officer, said, "As we all see in the daily news, the jobs market is incredibly tough. The economy continues to shed record numbers of jobs. Corporations are still cutting back costs and employees are facing the most difficult hiring environment in their lives. We are operating in the biggest employment slump of any recession in the last eight decades. Consequently, workplace drug testing is at a low point.”

“However, Psychemedics’ continued profitability and strong financial condition (no debt, $5.0 million in cash) are helping us to successfully navigate these turbulent waters. We are pursuing several potential opportunities in our domestic and international markets, including the previously announced BUPA contract, which we believe will result in future growth. At the same time, we have made necessary adjustments in our cost structure, including a company-wide wage and salary reduction. Our focus continues to be on maintaining our profitability and positioning our company for strong long term growth.”

Kubacki concluded, “Our directors remain confident in the long-term future of Psychemedics and are committed to rewarding shareholders. Therefore, we are pleased to declare our 52nd consecutive quarterly dividend. In order to be conservative due to the uncertain length of this recession, we have made the decision to adjust the quarterly dividend to $0.12/share."

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, 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 Ended				Six Months Ended
	June 30,				June 30,
	2009		2008		2009		2008

Revenue	$	3,934,923	$	6,211,077	$	8,013,760	$	11,919,941
Direct Costs		1,829,097		2,434,913		3,816,008		4,822,215

Gross Profit		2,105,826		3,776,164		4,197,752		7,097,726

General & Administrative expense		879,367		1,095,015		1,921,861		2,117,318
Marketing & Selling expense		810,934		902,726		1,682,399		1,701,371
Research & Development expense		117,517		119,714		242,563		237,494

Total Operating Expenses		1,807,818		2,117,455		3,846,823		4,056,183

Operating Income		298,008		1,658,709		350,929		3,041,543
Interest Income		7,083		73,191		22,589		184,962

Net Income Before Provision for Income Taxes		305,091		1,731,900		373,518		3,226,505

Provision for Income Taxes		130,710		699,000		160,613		1,304,000

Net Income	$	174,381	$	1,032,900	$	212,905	$	1,922,505

Basic net income per share	$	0.03	$	0.20	$	0.04	$	0.37

Diluted net income per share	$	0.03	$	0.20	$	0.04	$	0.36

Dividends declared per share	$	0.12	$	0.17	$	0.29	$	0.32

Weighted average common shares outstanding, basic		5,178,545		5,224,328		5,184,612		5,222,098

Weighted average common shares outstanding, diluted		5,190,632		5,286,408		5,197,487		5,280,577

PSYCHEMEDICS CORPORATION

BALANCE SHEETS

UNAUDITED

	June 30,			December 31,
	2009			2008

ASSETS
Current Assets:
Cash and cash equivalents	$	4,954,122		$	6,630,119
Accounts receivable, net of allowance for doubtful accounts
of $173,116 in 2009 and $246,462 in 2008		2,828,941			3,398,455
Prepaid expenses		851,753			1,023,841
Other current assets		262,079			82,045
Deferred tax assets		531,083			449,398

Total Current Assets		9,427,978			11,583,858

Fixed Assets
Equipment & leasehold improvements		10,907,974			10,877,479
Less accumulated depreciation		(10,230,991	)		(10,047,755	)

Net Fixed Assets		676,983			829,724

Deferred tax assets, long term		139,021			139,021
Other assets		84,567			75,183

Total Assets	$	10,328,549		$	12,627,786

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Current Liabilities:
Accounts payable	$	353,237		$	644,894
Accrued expenses		821,193			1,268,924
Deferred revenue		58,905			154,080

Total Current Liabilities		1,233,335			2,067,898

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
5,861,554 shares issued in 2009 and 5,843,068 shares issued in 2008		29,308			29,216
Paid-in capital		27,287,255			27,118,743
Accumulated deficit		(8,167,985	)		(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		9,095,214			10,559,888

Total Liabilities & Shareholders' Equity	$	10,328,549		$	12,627,786