-----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, DaFFE6qu8GvyzSkbloSVQ8FFhsbr5VnhFIJZzRI+zSplKFFYDcxnPUqDJIJXx11M pw2UtMH7xy2XwhmDXt3+Pg== 0000950135-96-004881.txt : 19961115 0000950135-96-004881.hdr.sgml : 19961115 ACCESSION NUMBER: 0000950135-96-004881 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961113 SROS: AMEX 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: 1934 Act SEC FILE NUMBER: 001-13738 FILM NUMBER: 96661776 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 CORPORATION REPORT ON 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 SEPTEMBER 30, 1996 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 registrant 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., Ste. 200, Cambridge, MA 02138 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (617-868-7455) Check whether the registrant (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 November 11, 1996: Common Stock $.005 par value (21,616,498 shares). Page 1 2 PSYCHEMEDICS CORPORATION INDEX Part I FINANCIAL INFORMATION Page No. ------- Item 1 Financial Statements Condensed Balance Sheets as of September 30, 1996 and December 31, 1995 3 Condensed Statements of Income for the three and nine month periods ended September 30, 1996 and 1995 4-5 Condensed Statements of Cash Flows for the nine month periods ended September 30, 1996 and 1995 6 Notes to Condensed Financial Statements 7 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 8-10 Part II OTHER INFORMATION Item 6 Exhibits and Reports on Form 8-K 11 Page 2 3 PSYCHEMEDICS CORPORATION CONDENSED BALANCE SHEETS (UNAUDITED)
SEPTEMBER 30, DECEMBER 31, 1996 1995 ----------- ----------- ASSETS CURRENT ASSETS: Cash and cash equivalents $ 676,535 $ 193,787 Short-term investments 7,814,139 5,279,596 Receivables 2,713,053 1,722,770 Laboratory supplies 254,981 253,216 Prepaid expenses and other current assets 212,216 72,247 ----------- ----------- Total current assets 11,670,924 7,521,616 ----------- ----------- EQUIPMENT AND LEASEHOLD IMPROVEMENTS 4,650,275 4,106,980 Less-accumulated depreciation and amortization 2,316,919 1,864,398 ----------- ----------- 2,333,356 2,242,582 ----------- ----------- OTHER ASSETS - NET 452,833 453,295 ----------- ----------- $14,457,113 $10,217,493 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of obligations under capital leases $ - $ 16,459 Accounts payable 315,658 466,412 Accrued expenses 342,719 250,916 ----------- ----------- Total current liabilities 658,377 733,787 ----------- ----------- SHAREHOLDERS' EQUITY: Preferred stock, $.005 par value; authorized 1,000,000 shares; none outstanding - - Common stock; $.005 par value; authorized 50,000,000 shares; issued 21,615,468 and 20,279,280 shares in 1996 and 1995, respectively 108,093 101,441 Paid-in capital 20,386,767 17,972,819 Accumulated deficit (6,442,061) (8,336,491) Treasury stock, at cost; 66,335 shares in 1996 and 1995 (254,063) (254,063) ----------- ----------- Total shareholders' equity 13,798,736 9,483,706 ----------- ----------- $14,457,113 $10,217,493 =========== ===========
See accompanying notes to financial statements and management's discussion and analysis of financial condition and results of operations Page 3 of 14 4 PSYCHEMEDICS CORPORATION CONDENSED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED SEPTEMBER 30, --------------------------- 1996 1995 ----------- ----------- REVENUE $ 3,146,808 $ 2,667,417 DIRECT COSTS 1,279,929 1,201,607 ----------- ----------- Gross profit 1,866,879 1,465,810 ----------- ----------- EXPENSES: General and administrative 545,324 475,115 Marketing and selling 481,825 508,833 Research and development 101,866 114,306 ----------- ----------- 1,129,015 1,098,254 ----------- ----------- INCOME FROM OPERATIONS 737,864 367,556 OTHER INCOME (EXPENSE) - NET 94,695 92,835 ----------- ----------- INCOME BEFORE PROVISION FOR INCOME TAXES 832,559 460,391 PROVISION FOR INCOME TAXES 100,560 30,000 NET INCOME $ 731,999 $ 430,391 =========== =========== NET INCOME PER COMMON SHARE AND COMMON EQUIVALENT SHARE $ 0.03 $ 0.02 =========== =========== WEIGHTED AVERAGE COMMON AND COMMON SHARE EQUIVALENTS OUTSTANDING 22,720,866 21,637,380 =========== ===========
See accompanying notes to financial statements and management's discussion and analysis of financial condition and results of operations PAGE 4 OF 14 5 PSYCHEMEDICS CORPORATION CONDENSED STATEMENTS OF INCOME (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, --------------------------- 1996 1995 ----------- ----------- REVENUE $ 8,962,785 $ 7,735,816 DIRECT COSTS 3,686,773 3,446,607 ----------- ----------- Gross profit 5,276,012 4,289,209 ----------- ----------- EXPENSES: General and administrative 1,637,725 1,388,205 Marketing and selling 1,486,929 1,254,695 Research and development 304,991 325,965 ----------- ----------- 3,429,645 2,968,865 ----------- ----------- INCOME FROM OPERATIONS 1,846,367 1,320,344 OTHER INCOME (EXPENSE) - NET 244,975 268,866 ----------- ----------- INCOME BEFORE PROVISION FOR INCOME TAXES 2,091,342 1,589,210 PROVISION FOR INCOME TAXES 193,593 104,300 ----------- ----------- NET INCOME $ 1,897,749 $ 1,484,910 =========== =========== NET INCOME PER COMMON SHARE AND COMMON EQUIVALENT SHARE $ 0.09 $ 0.07 =========== =========== WEIGHTED AVERAGE COMMON AND COMMON SHARE EQUIVALENTS OUTSTANDING 22,204,630 20,860,213 =========== ===========
See accompanying notes to financial statements and management's discussion and analysis of financial condition and results of operations Page 5 of 14 6 PSYCHEMEDICS CORPORATION CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, ---------------------------- 1996 1995 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 1,893,749 $ 1,484,910 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 472,521 411,916 Changes in assets and liabilities: Receivables (990,283) (284,328) Laboratory supplies (1,765) (93,020) Prepaid expenses and other current assets (139,969) (74,897) Accounts payable (150,754) 48,408 Accrued expenses 92,487 61,966 ----------- ----------- Net cash provided by operating activities 1,175,986 1,554,955 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of short-term investments - net (2,534,543) (89,538) Purchases of equipment and leasehold improvements (543,295) (813,945) Increase in other assets - net (19,538) (44,473) ----------- ----------- Net cash used in investing activities (3,097,376) (947,956) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Net principal payments on obligations under capital leases (16,459) (113,616) Net proceeds from the issuance of common stock 2,420,596 1,005,198 Net cash used to repurchase common stock - (1,634,179) ----------- ----------- Net cash (used in) provided by financing activities 2,404,137 (742,597) ----------- ----------- NET INCREASE IN CASH AND CASH EQUIVALENTS 482,747 (135,598) CASH AND CASH EQUIVALENTS, beginning of period 193,787 544,776 ----------- ----------- CASH AND CASH EQUIVALENTS, end of period $ 676,534 $ 409,178 =========== ===========
See accompanying notes to financial statements and management's discussion and analysis of financial condition and results of operations Page 6 of 14 7 PSYCHEMEDICS CORPORATION NOTES TO CONDENSED FINANCIAL STATEMENTS September 30, 1996 1. The financial information furnished herein is unaudited; however, in the opinion of management, it reflects all adjustments which are necessary to fairly state the Company's financial position at September 30, 1996 and the results of its operations and cash flows for the periods ended September 30, 1996 and 1995. The financial statements have been prepared in conformity with generally accepted accounting principles appropriate in the circumstances, and included in the financial statements are certain amounts based on management's estimates and judgments. The financial information herein is not necessarily representative of a full year's operations because levels of sales, capital additions and other factors fluctuate throughout the year. These same considerations apply to all year to year comparisons. See the Company's Annual Report on Form 10-KSB for the year ended December 31, 1995 for additional information not required by this report (Form 10-Q). 2. Net income per common and common equivalent shares is based upon the weighted average number of common and common equivalent shares outstanding as computed using the treasury stock method. 3. For comparative purposes certain prior year expenses have been reclassified between direct costs, general and administrative expenses, and selling and marketing expenses to conform with current year presentation. 4. On June 11, 1996, the Company declared a 3 % stock dividend distributed to shareholders on July 3, 1996. The effect of this transaction has been reflected in all periods presented on this Form 10-Q. Page 7 8 Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS --------------------- REVENUE Revenue for the third quarter of 1996 was $3,146,808, an increase of 18% over the $2,667,417 reported for the third quarter of 1995. Revenue for the nine month period ended September 30, 1996 was $8,962,785 an increase of 16% over the $7,735,816 reported for the comparable period of 1995. The revenue increases result primarily from the addition of new customers and expanding volume from the Company's existing customer base. DIRECT COSTS AND EXPENSES The following table sets forth the direct costs of revenue, general and administrative expenses, marketing and selling expenses and research and development expenses as a percentage of revenue. Three Months Nine Months Ended September 30, Ended September 30, ------------------- ------------------- 1996 1995 1996 1995 ---- ---- ---- ---- Direct costs 41% 45% 41% 45% General and administrative 17% 18% 18% 18% Marketing and selling 15% 19% 17% 16% Research and development 3% 4% 3% 4%
Direct Costs Direct costs were $1,279,929, $1,201,607, $3,686,773 and $3,446,607 for the three and nine month periods ended September 30, 1996 and 1995, respectively. Direct costs as a percentage of revenue were lower for the three and nine month periods ended September 30, 1996 as compared to the comparable periods in 1995 primarily due to efficiencies realized from increased sales volume. Page 8 9 General and Administrative Expenses General and Administrative expenses were $545,324, $475,115, $1,637,725, and $1,388,204 for the three and nine month periods ended September 30, 1996 and 1995, respectively. The increase in general and administrative expenses in the 1996 periods as compared to the same periods in 1995 is primarily due to expansion of the Company's management staff and increased bad debt expense. Marketing and Selling Expenses Marketing and selling expenses were $481,825, $508,833, $1,486,929, and $1,254,695 for the three and nine month periods ended September 30, 1996 and 1995, respectively. Marketing and selling expenses were relatively flat for the three month periods ended September 30, 1996 and 1995, and increased for the nine month period in 1996 as compared to 1995 due to increased sales staff and customer service support. Other Income (Expense) - Net Other income for the three and nine month periods ended September 30, 1996 and 1995 results primarily from interest income from the Company's invested cash balances. Other income was relatively flat for the three month period ended September 30, 1996, and decreased for the nine month period in 1996 as compared to 1995 as a result of slightly higher invested balances offset by lower yields. LIQUIDITY AND CAPITAL RESOURCES ------------------------------- The Company's cash and investment balances at September 30, 1996 amounted to $8,490,674. Cash generated from operations in the first nine months of 1996 was $1,175,986. The Company also received $61,000 and $2,420,237 of net proceeds from the exercise of warrants and stock options during the three and nine month periods ended September 30, 1996. Management believes that cash generated from operations, together with proceeds from such warrants and option exercises, should be adequate to fund anticipated working capital requirements. 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 capital. Working capital at September 30, 1996 amounted to $11,012,547 as compared to $6,787,829 at December 31, 1995. Page 9 10 The Company's capital expenditures were $543,295 for the first nine months of 1996. Capital expenditures for 1996 are expected to be approximately $650,000 and are expected to be funded through cash generated from operations and from existing cash reserves. In December 1994, the Company's Board of Directors authorized the repurchase of up to one million shares of the Company's common stock. This program is a direct result of the Company's solid financial condition and cash-generating capability, and it was authorized after evaluating various alternatives to enhance long-term shareholder value. The Company had purchased a total of 699,387 shares of common stock for $2,676,793. No treasury shares have been purchased since June 20, 1996. On June 11, 1996, the Company declared a 3% stock dividend distributed to shareholders on July 3, 1996. The shares issued in the stock dividend represented shares which the Company acquired in the stock repurchase program. This transaction resulted in an increase in accumulated deficit of $4,668,200 (632,976 shares distributed at a fair market value of $7.375 per share at June 21, 1996, the record date). Treasury stock was reduced by $2,422,730 as a result of this distribution. As of September 30, 1996, 66,335 shares remain in treasury stock. The effect of this transaction has been reflected in all periods presented in this Form 10-Q. Page 10 11 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. The Exhibits filed as part of this Form 10-Q are listed on the Exhibit Index immediately preceding such Exhibits, which Exhibit Index is incorporated herein by reference. (b) Reports on Form 8-K - None. Page 11 12 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: November 11, 1996 By:/s/Raymond C. Kubacki, Jr. ------------------------------- Raymond C. Kubacki, Jr. President and Chief Executive Officer Date: November 11, 1996 By:/s/Bruce M. Stillwell ------------------------------- Bruce M. Stillwell Vice President, Treasurer & Controller Page 12 13 PSYCHEMEDICS CORPORATION 10-Q EXHIBIT INDEX ------------- Exhibit Number Description - ------ ----------- 11 Calculation of shares used in determining net income per share 27 Financial Data Schedule EX-11 2 COMPUTATION OF EARNINGS PER SHARE 1 EXHIBIT 11 CALCULATION OF SHARES USED IN DETERMINING INCOME PER SHARE
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ---------------------- ----------------------- 1996 1995 1996 1995 ---------------------- ----------------------- WEIGHTED AVERAGE COMMON SHARES OUTSTANDING DURING PERIOD 21,615,468 19,782,101 21,144,176 19,561,651 EFFECT OF COMMON STOCK EQUIVALENTS COMPUTED IN ACCORDANCE WITH THE TREASURY STOCK METHOD 1,105,398 1,855,279 1,060,454 1,298,562 ---------- ---------- ---------- ---------- 22,720,866 21,637,380 22,204,630 20,860,213 ---------- ---------- ---------- ----------
Page 14 of 14 EX-27 3 FINANCIAL DATA SCHEDULE WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 1 U.S. DOLLARS 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 1 676,535 7,814,139 2,713,053 0 254,981 11,670,924 4,650,275 2,316,919 14,457,113 658,377 [BLANK] 108,093 0 0 13,690,643 14,457,113 8,962,785 8,962,785 3,686,773 3,686,773 3,429,645 0 0 0 0 1,846,367 0 0 0 1,897,749 0.09 0.09
-----END PRIVACY-ENHANCED MESSAGE-----