10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

[X] Quarterly report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2019

or

[ x]	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 Identification No.)
Incorporation or Organization)
289 Great Road
Acton, MA	01720
(Address of Principal Executive Offices)	(Zip Code)

Registrant's telephone number including area code:     (978) 206-8220

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 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____

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes X     No____

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐
Accelerated filer	☒
Non–accelerated filer	☐
Smaller reporting company	☒
Emerging growth company	☐

If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ☐  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes ____ No X

The number of shares of Common Stock of the Registrant, par value $0.005 per share, outstanding at April 19, 2019 was 5,507,262.

1

PSYCHEMEDICS CORPORATION

FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2019

INDEX

		Page
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
	Condensed Consolidated Balance Sheets as of March 31, 2019 and December 31, 2018	3
	Condensed Consolidated Statements of Income and Comprehensive Income for the Three months ended March 31, 2019 and 2018	4
	Condensed Consolidated Statements of Shareholders’ Equity as of March 31, 2019 and 2018	5
	Condensed Consolidated Statements of Cash Flows for the Three months ended March 31, 2019 and 2018	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations
	Overview	16
	Results of Operations	16
	Liquidity and Capital Resources	17
Item 4 - Controls and Procedures		18
PART II - OTHER INFORMATION
Item 1A -Risk Factors		19
Item 2 -Unregistered Sales of Equity Securities and Use of Proceeds		19
Item 6 - Exhibits		19
Signatures		19
Exhibit Index		20

2

PSYCHEMEDICS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par value)

(UNAUDITED)

	March 31, 2019			December 31, 2018
ASSETS
Current Assets:
Cash and cash equivalents	$	3,226		$	4,069
Marketable securities		3,912			3,905
Accounts receivable, net of allowance for doubtful accounts of $60 in 2019 and $67 in 2018		5,131			4,829
Prepaid expenses and other current assets		1,204			1,067
Total Current Assets		13,473			13,870
Fixed assets, net of accumulated amortization and depreciation of $14,094 in 2019 and $13,341 in 2018		9,556			10,177
Other assets		901			927
Operating lease right-of-use assets		1,599			-
Total Assets	$	25,529		$	24,974
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	378		$	682
Accrued expenses		2,627			2,962
Current portion of long-term debt		416			416
Current portion of operating lease liabilities		950			-
Total Current Liabilities		4,371			4,060
Long-term debt		1,109			1,212
Deferred tax liabilities, long-term		907			955
Operating lease liabilities, long-term		649
Total Liabilities		7,036			6,227
Commitments and Contingencies (Note 7)
Shareholders' Equity:
Preferred stock, $0.005 par value, 873 shares authorized, no shares issued or outstanding		--			--
Common stock, $0.005 par value; 50,000 shares authorized 6,175 shares issued and outstanding in 2019 and 2018		31			31
Additional paid-in capital		31,681			31,523
Accumulated deficit		(1,690	)		(1,326	)
Less - Treasury stock, at cost, 668 shares		(10,082	)		(10,082	)
Accumulated other comprehensive loss		(1,447	)		(1,399	)
Total Shareholders' Equity		18,493			18,747
Total Liabilities and Shareholders' Equity	$	25,529		$	24,974

See accompanying notes to condensed consolidated financial statements

3

PSYCHEMEDICS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(in thousands, except per share amounts)

(UNAUDITED)

	Three Months Ended March 31,
	2019			2018
Revenues	$	9,822		$	10,935
Cost of revenues		5,414			5,580
Gross profit		4,408			5,355
Operating Expenses:
General & administrative		1,915			1,851
Marketing & selling		1,129			1,239
Research & development		420			359
Total Operating Expenses		3,464			3,449
Operating income		944			1,906
Other income, net		26			32
Net income before provision for income taxes		970			1,938
Provision for income taxes		343			687
Net income	$	627		$	1,251
Other Comprehensive Income (Loss):
Foreign currency translation		(48	)		(12	)
Total Comprehensive Income	$	579		$	1,239
Basic net income per share	$	0.11		$	0.23
Diluted net income per share	$	0.11		$	0.23
Dividends declared per share	$	0.18		$	0.18

See accompanying notes to condensed consolidated financial statements

4

PSYCHEMEDICS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands, except per share amounts)

(UNAUDITED)

	Common Stock						Treasury Stock
	Shares		$0.005 par Value		Paid-In Capital		Shares		Cost			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total
BALANCE, December 31, 2018		6,175	$	31	$	31,523		668	$	(10,082	)	$	(1,326	)	$	(1,399	)	$	18,747
Stock compensation expense		-		-		158		-		-			-			-			158
Cash dividends ($0.18 per share)		-		-		-		-		-			(991	)		-			(991	)
Net income		-		-		-		-		-			627			-			627
Other comprehensive loss		-		-		-		-		-			-			(48	)		(48	)
BALANCE, March 31, 2019		6,175	$	31	$	31,681		668	$	(10,082	)	$	(1,690	)	$	(1,447	)	$	18,493
BALANCE, December 31, 2017		6,160	$	31	$	31,022		668	$	(10,082	)	$	(2,113	)	$	(238	)	$	18,620
Stock compensation expense		-		-		135		-		-			-			-			135
Cash dividends ($0.15 per share)		-		-		-		-		-			(824	)		-			(824	)
Net income		-		-		-		-		-			1,251			-			1,251
Other comprehensive loss		-		-		-		-		-			-			(12	)		(12	)
BALANCE, March 31, 2018		6,160	$	31	$	31,157		668	$	(10,082	)	$	(1,686	)	$	(250	)	$	19,171

See accompanying notes to condensed consolidated financial statements

5

PSYCHEMEDICS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(UNAUDITED)

	Three Months Ended March 31,
	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	627		$	1,251
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		764			753
Deferred income taxes		(48	)		(38	)
Non-cash interest income		(55	)		-
Stock-based compensation		158			135
Changes in assets and liabilities:
Accounts receivable		(302	)		(1,575	)
Other current assets		(137	)		15
Accounts payable		(306	)		(116	)
Accrued expenses and accrued income taxes		(333	)		981
Net cash provided by operating activities		368			1,406
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment and leasehold improvements		(21	)		(144	)
Cost of internally developed software		(107	)		-
Other assets		16			(74	)
Net cash used in investing activities		(112	)		(218	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of equipment financing		(104	)		(239	)
Cash dividends paid		(991	)		(824	)
Net cash used in financing activities		(1,095	)		(1,063	)
Effect of exchange rate changes on cash and cash equivalents		(4	)		(6	)
Net (decrease) increase in cash and cash equivalents		(843	)		119
Cash and cash equivalents, beginning of period		4,069			8,165
Cash and cash equivalents, end of period	$	3,226		$	8,284
Supplemental Disclosures of Cash Flow Information:
Cash paid for income taxes	$	432		$	370
Cash paid for interest	$	17		$	28
Cash paid for operating leases	$	260		$	245
Right-of-use assets acquired through operating leases	$	1,855		$	-
Purchases of equipment through accounts payable and accrued liabilities	$	4		$	25

See accompanying notes to condensed consolidated financial statements

6

PSYCHEMEDICS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. Basis of Presentation

The interim condensed consolidated financial statements of Psychemedics Corporation (the “Company”) presented herein, have been prepared pursuant to the rules of the Securities and Exchange Commission for quarterly reports on Form 10-Q and do not include all the information and note disclosures required by accounting principles generally accepted in the United States of America. These statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2018, included in the Company's 2018 Annual Report on Form 10-K, as filed with the Securities and Exchange Commission.

The condensed consolidated balance sheet as of March 31, 2019, the condensed consolidated statements of income and comprehensive income for the three-month periods ended March 31, 2019 and 2018, and the condensed consolidated statements of cash flows for the three-month periods ended March 31, 2019 and 2018 are unaudited but, in the opinion of management, include all adjustments necessary for a fair presentation of results for these interim periods. The condensed consolidated balance sheet as of December 31, 2018 has been derived from the Company’s annual financial statements that were audited by an independent registered public accounting firm, but does not include all of the information and footnotes required for complete annual financial statements.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The results of operations for the three months ended March 31, 2019 may not be indicative of the results that may be expected for the year ending December 31, 2019, or any other period.

Unless the context requires otherwise, the terms “we”, “us”, “our”, or “the Company” refer to Psychemedics Corporation and its consolidated subsidiaries.

2. Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of 90 days or less to be cash equivalents. As of March 31, 2019 and December 31, 2018, there were no investments classified as cash equivalents.

3. Marketable Securities

All investments with original maturities of more than 90 days are considered marketable securities. As of March 31, 2019, the company had one held-to-maturity security (a CD with Bank of America in Brazil) with a maturity of 180 days, ending on April 29, 2019. The CD had an original cost of $4.0 million and a current fair value of $3.9 million.

7

PSYCHEMEDICS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

4. Fair Value Measurements

Financial instruments recorded at fair value in the consolidated balance sheets, or disclosed at fair value in the footnotes, are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels defined by ASC 820, Fair Value Measurements and Disclosures, and directly related to the amount of subjectivity associated with inputs to fair valuation of these assets and liabilities, are as follows:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities or other inputs that are observable or can be corroborated by observable market data

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value

The following table presents the fair value for financial instruments:

	Fair Value Measurements Using
	Level 1		Level 2		Level 3
As of March 31, 2019
Marketable securities (CD)	$	-	$	3,912	$	-
As of December 31, 2018
Marketable securities (CD)	$	-	$	3,905	$	-

Fair values of marketable securities approximate cost due to the short period of time to maturity.

8

PSYCHEMEDICS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

5. Stock-Based Compensation

The Company’s 2006 Incentive Plan (“the Plan”) provides for cash-based awards or the grant or issuance of stock-based awards. In January 2019, the Board approved an additional 350 thousand shares available for grant under the Plan, subject to shareholder approval at the 2019 annual meeting. As of March 31, 2019, excluding such additional 350 thousand shares, 77 thousand shares remained available for future grant under the Plan. There were no other changes to the Plan from 2018 as described in the 10-K.

Share-based compensation is measured at the grant date based on the fair value of the award and is recognized as an expense over the requisite service period (generally the vesting period of the equity grant). The compensation cost charged against income is included in cost of revenues and operating expenses as follows (in thousands):

	Three Months Ended March 31,
	2019		2018
Share-based compensation related to:
Stock option grants	$	102	$	58
Restricted Stock Unit awards ("RSUs")		56		77
Total share-based compensation	$	158	$	135

There was no income tax benefit recognized in the condensed consolidated statements of income for share-based compensation arrangements for the three-month periods ended March 31, 2019 and 2018.

A summary of the Company’s stock option activity for the three months ended March 31, 2019 is as follows (in thousands except per share amounts):

	Number of Shares		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value(1)
Outstanding, December 31, 2018		398	$	17.09		8.2	$	493
Granted		-
Exercised		-
Forfeited		-
Outstanding, March 31, 2019		398	$	17.09		7.9	$	203
Exercisable, March 31, 2019		143	$	14.51		7.3	$	123

(1) The aggregate intrinsic value on this table was calculated based on the amount, if any, by which the closing market value of the Company’s stock on March 31, 2019 ($14.03) exceeded the exercise price of the underlying options, multiplied by the number of shares subject to each option.

9

PSYCHEMEDICS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

5. Stock-Based Compensation (cont.)

A summary of the Company’s stock unit award activity for the three months ended March 31, 2019 is as follows (in thousands except per share amounts):

	Number of Shares		Weighted Average Price per Share (2)		Weighted Average Fair Value (2)
Outstanding & Unvested, December 31, 2018		19	$	18.20	$	343
Granted		-
Converted to common stock		-
Cancelled		-
Forfeited		-
Outstanding & Unvested, March 31, 2019		19	$	18.20	$	343

(2) Weighted average price per share is the weighted grant price based on the closing market price of each of the stock grants related to each grant of stock unit awards. The weighted average fair value is the weighted average share price times the number of shares.

As of March 31, 2019, a total of 844 thousand shares of common stock were reserved for issuance under the Plan, subject to shareholder approval at the 2019 annual meeting. As of March 31, 2019, the unamortized fair value of awards relating to outstanding SUAs and options was $1.0 million, which is expected to be amortized over a weighted average period of 2.7 years.

6. Basic and Diluted Net Income 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 is 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 was determined in accordance with the treasury-stock method. Common equivalent shares consisted of common stock issuable upon the exercise of outstanding options and common stock issuable upon the vesting of outstanding, unvested SUAs. Basic and diluted weighted average common shares outstanding for the three months ended March 31, 2019 and 2018 were as follows (in thousands):

	Three Months Ended March 31,
	2019		2018
Weighted average common shares outstanding, basic		5,507		5,492
Dilutive common equivalent shares		31		64
Weighted average common shares outstanding, diluted		5,538		5,556

The computation of diluted earnings per share for the three month period ended March 31, 2019 excludes 274 thousand of stock awards and stock options, because the effect would be antidilutive.

10

PSYCHEMEDICS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

7. Commitments and Contingencies

The Company is subject to legal proceedings and claims which arise in the ordinary course of its business. While the ultimate outcome of individual legal claims is inherently unpredictable, we believe that the final resolution of any pending actions will not have a material adverse effect on our results of operations, financial position, liquidity or capital resources.

8. Operating Leases

The Company currently has six operating leases for office and laboratory space used to conduct business (one of which is for a data center). The exercise of lease renewal options is at our discretion and the majority of renewals to extend the lease terms are not included in our Right-Of-Use (“ROU”) assets and lease liabilities as they are not reasonably certain of exercise. We regularly evaluate the renewal options and when they are reasonably certain of exercise, we include the renewal period in our lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments.

As of March 31, 2019, the Company recognized a Right-Of-Use (“ROU”) asset with a corresponding operating lease liability of $1.6 million based on the present value of the minimum rental payments as a result of adoption of ASC Topic 842. The weighted average discount rate used for leases as of March 31, 2019 is 4.1%. The weighted average lease term as of March 31, 2019 is 2.1 years. The operating lease expense for the three months ended March 31, 2019 was $260 thousand.

Maturities and balance sheet presentation of our lease liabilities for all operating leases as of March 31, 2019 is as follows (in thousands):

2019	$	795
2020		623
2021		130
2022		108
2023		18
Total Lease Payments		1,674
Less Interest:		(75	)
Present value of lease liabilities	$	1,599
Current operating lease liabilities	$	950
Long-term operating lease liabilities		649
Total	$	1,599

11

PSYCHEMEDICS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

9. Debt and Other Financing Arrangements

On March 20, 2014, the Company entered into an equipment financing arrangement (“Loan Agreement”) with Banc of America Leasing & Capital, LLC, which it amended on August 8, 2014, September 15, 2015 and October 30, 2017. The terms of this arrangement are detailed in the 10-K.

The weighted average interest rate for all notes related to the Loan Agreement for the quarter ended March 31, 2019 was 4.2%, and represented $17 thousand of interest expense as compared to a rate of 3.4% and interest expense of $28 thousand for the comparable period in 2018. As of March 31, 2019, the interest rate was 4.2% and there was $1.5 million of outstanding debt related to the loan. The Company was in compliance with all loan covenants as of March 31, 2019.

The annual principal repayment requirements for debt obligations as of March 31, 2019 were as follows (in thousands):

2019	$	312
2020		416
2021		416
2022		381
Total long-term debt		1,525
Less current portion of long-term debt		(416	)
Total long-term debt, net of current portion	$	1,109

10. Revenue

The table below disaggregates our external revenue by major source (in thousands).  For additional revenue detail relating to geographic breakdown of sales, see Note 11 – “Business Segment Reporting”.

	Three Months Ended March 31,
	2019		2018
Testing	$	9,023	$	9,997
Shipping/Collection (hair)		735		824
Other		64		114
Total Revenue	$	9,822	$	10,935

12

PSYCHEMEDICS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

11. Business Segment Reporting

The Company manages 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. All Brazil sales are through one independent distributor, which is the only customer greater than 10% of sales. The Company’s revenues by geographic region are as follows (in thousands):

	Three Months Ended March 31,
	2019		2018
Consolidated Revenue:
United States	$	7,060	$	7,295
Brazil		2,642		3,526
Other		120		114
Total Revenue	$	9,822	$	10,935

12. Significant Customers

The Company had one customer that represented 27% of revenue for the three months ended March 31, 2019 and 32% of revenue for the three months ended March 31, 2018. The Company had two customers that represented 15% and 11% of the total accounts receivable balance as of March 31, 2019 and one customer which represented 20% of the total accounts receivable balance as of December 31, 2018.

13. Recently Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases, which was subsequently amended by ASU 2018-10, ASU 2018-11, ASU 2018-20 and ASU 2019-01 (collectively, Topic 842). which introduced the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous guidance. The new standard established a right-of-use ("ROU") model that requires a lessee to record a lease asset and liability on the balance sheet for all leases with terms longer than 12 months. The standard became effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. The Company adopted Topic 842 as of January 1, 2019 (see Note 8 – Operating Leases).

In August 2018, the SEC issued Release No. 33-10532 that amends and clarifies certain financial reporting requirements. The principal change to our financial reporting will be the inclusion of the annual disclosure requirement of changes in stockholders’ equity to interim periods. We adopted this rule for the quarter ended March 31, 2019.

13

PSYCHEMEDICS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

14. Accounting Pronouncements Issued But Not Yet Effective

In February 2018, the FASB issued ASU 2018-02, “Income Statement – Reporting Comprehensive Income” (Topic 220) Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which will allow a reclassification from accumulated other comprehensive income to retained earnings for the tax effects resulting from the Tax Cuts and Jobs Act (Tax Reform Act) that are stranded in accumulated other comprehensive income. This standard also requires certain disclosures about stranded tax effects. ASU 2018-02, however, does not change the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations. ASU 2018-02 will be effective for the Company’s fiscal year 2020, with the option to early adopt prior to the effective date. It must be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Reform Act is recognized. The Company is currently evaluating the impacts the adoption of this accounting guidance will have on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, “Intangibles—Goodwill and Other—Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract”. The FASB issued ASU 2018-15 to align the requirements for capitalizing implementation costs in a cloud computing arrangement service contract with the requirements for capitalizing implementation costs incurred for an internal-use software license. ASU 2018-15 will be effective for the Company’s fiscal year 2020, with the option to early adopt prior to the effective date. The Company is currently evaluating the impact that this updated standard will have on its consolidated financial statements.

15. Subsequent Events

On April 23, 2019, the Company declared a quarterly dividend of $0.18 per share for a total of $991 thousand, which will be paid on May 17, 2019 to shareholders of record on May 7, 2019.

14

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 earnings, earnings per share, revenues, operating cash flows, profitability, margins, pricing, dividends, future business, growth opportunities, new accounts, customer base, test volume, sales and marketing strategy, business strategy, general and administrative expenses, marketing and selling expenses, research and development expenses, anticipated operating results, foreign drug testing laws and regulations and the enforcement of such laws and regulations, including effective dates of such laws and regulations, required investments in plant, property and equipment, strategies with respect to governmental agencies and regulations, cost savings, capital expenditures, liquidity of investments 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 employee hiring practices of the Company’s principal customers, development of markets for new products and services offered by the Company, costs associated with capacity expansion, government regulation (including, but not limited to, Food and Drug Administration regulations and foreign government regulation including Brazilian commercial drivers license drug test laws and regulations), risks associated with the delay in the implementation of new regulations, risks associated with foreign currency fluctuations, R&D spending, competition (including, without limitation, competition from other companies pursuing the same growth opportunities), the Company’s ability to maintain its reputation and brand image, the ability of the Company to achieve its business plans, cost controls, leveraging of its global operating platform, risks of information technology system failures and data security breaches, the uncertain global economy, the Company’s ability to attract, develop and retain executives and other qualified employees and independent contractors, including distributors, the Company’s ability to obtain and protect intellectual property rights, litigation risks, and general economic conditions. With respect to the continued payment of cash dividends, factors include, but are not limited to, available surplus, cash flow, capital expenditure reserves required, debt service obligations, and other factors that the Board of Directors of the Company may take into account.

Given these uncertainties, you should not place undue reliance on these forward-looking statements. Forward-looking statements represent the Company’s estimates and assumptions only as of the filing date of this Report. The Company expressly disclaim any duty to provide updates to forward-looking statements, and the estimates and assumptions associated with them, after the filing date of this Report, in order to reflect changes in circumstances or expectations, or the occurrence of unanticipated events, except to the extent required by applicable securities laws. All of the forward-looking statements are qualified in their entirety by reference to the factors discussed above and under “Risk Factors” set forth in Part I Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, as well as the risks and uncertainties discussed elsewhere in this Report. The Company qualifies all of its forward-looking statements by these cautionary statements. The Company cautions you that these risks are not exhaustive. The Company operates in a continually changing business environment and new risks emerge from time to time.

15

OVERVIEW

Revenue for the first quarter of 2019 was $9.8 million compared to $10.9 million in 2018, a decrease of 10%. The Company reported net income of $0.6 million, or $0.11 per diluted share for the three months ended March 31, 2019 versus $1.3 million, or $0.23 per diluted share for the same period in 2018, a decrease of 50%. Earnings decrease was primarily attributed to a reduction of international revenue, including the impact of change in exchange rate. The Company distributed $0.9 million or $0.18 per share of cash dividends to its shareholders in the three months ended March 31, 2019. The Company has paid 90 consecutive quarterly cash dividends.

RESULTS OF OPERATIONS

Revenue decline of 10% noted above consisted of 4% negative impact from foreign currency exchange, 4% decrease in volume (in part due to one less day for the quarter) and 2% impact from decrease of average revenue per sample, primarily as a result of business mix. The domestic business decreased 3%. The international business decreased 24%. The international revenue decrease was driven by foreign currency exchange and lower volume.

Gross profit was $4.4 million for the three months ended March 31, 2019, compared to $5.4 million for the same period in 2018, a decrease of $1.0 million, or 18%. Direct costs decreased by $0.2 million or 3% for the three months ended March 31, 2019 compared to the same period in 2018. The gross profit margin was 45% for the three months ended March 31, 2019 and 49% for the comparable period of 2018. The margin was adversely impacted by foreign currency exchange and lower sales volume as noted above.

General and administrative (“G&A”) expenses were $1.9 million for the three months ended March 31, 2019 and 2018. As a percentage of revenue, G&A expenses were 19% for the three months ended March 31, 2019 and 17% for the same period in 2018.

Marketing and selling expenses for the three months ended March 31, 2019 were $1.1 million compared to $1.2 million for the comparable period of 2018. Total marketing and selling expenses represented 11% of revenue for the three months ended March 31, 2019 and 2018.

Research and development (“R&D”) expenses were $0.4 million for the three months ended March 31, 2019 and 2018. R&D expenses represented 4% of revenue for the three months ended March 31, 2019 and 3% for the same period in 2018.

Provision for income taxes Our provision for income taxes consists primarily of federal and state income taxes in the United Sates and income taxes in Brazil. We estimate income taxes in each of the jurisdictions in which we operate. During the three months ended March 31, 2019 and 2018, the Company recorded tax provisions of $343 thousand and $687 thousand, respectively. These provisions represented effective tax rates of 35% for the three months ended March 31, 2019 and 2018. The Company currently expects the year-end tax rate to be to be approximately 35%. This rate can fluctuate significantly based on the mix of business and pre-tax income, as Brazil taxes are based on revenue.

16

LIQUIDITY AND CAPITAL RESOURCES

At March 31, 2019, the Company had approximately $3.2 million of cash and $9.1 million of working capital. The Company's operating activities generated net cash of $0.4 million for the three months ended March 31, 2019. Investing activities used $0.1 million of cash while financing activities used $1.1 million of cash during the first three months of 2019.

Cash provided by operating activities of $0.4 million reflected net income of $0.6 million adjusted for depreciation and amortization of $765 thousand, stock-based compensation of $158 thousand, a decrease of deferred income taxes of $48 thousand and non-cash interest income of $55 thousand. This was affected by an increase in current assets of $0.4 million and a decrease in current liabilities of $0.6 million.

Cash used in investing activities of $0.1 million consisted primarily of costs related to internally developed software. We anticipate spending $0.5 million to $2.0 million in additional capital purchases for the remainder of 2019.

Cash used by financing activities of $1.1 million included cash dividends to shareholders of $1.0 million and $0.1 million from payments on long term debt. On April 23, 2019, the Company declared a quarterly dividend of $0.18 per share for an estimated total of $991 thousand, which will be paid on May 17, 2019 to shareholders of record on May 7, 2019.

Contractual obligations and other commercial commitments as of March 31, 2019 include operating lease commitments and outstanding debt, described in Notes 8 and 9, respectively of the Notes to Condensed Consolidated Financial Statements.

At March 31, 2019, the Company's principal sources of liquidity included an aggregate of approximately $3.2 million of cash and $3.9 of marketable securities (bank CD).  The Company had $9.1 million and $9.8 million of working capital as of March 31, 2019 and December 31, 2018, respectively. The new lease accounting standard negatively impacted the working capital amount by $1.0 million. Management currently believes that such funds should be adequate to fund anticipated working capital and capital equipment requirements for the next 12 months.   Depending upon the Company's results of operations and capital needs, the Company may use various financing sources to raise additional funds. 

Brazilian Distributor Risks and Uncertainties

As the Company has previously disclosed, there are greater challenges and uncertainties in a new, large and developing market, such as Brazil. Psychemedics Brasil, our independent distributor in Brazil, has had 55% of its shares acquired by Instituto Hermes Pardini S.A., a provider of medical and diagnostic services in Brazil, including reference laboratory services. We are continuing our discussions with our distributor and its acquirer about the future of our distribution agreement (which either party may terminate upon prior written notice following July 2019), including whether it will be extended, terminated or replaced by a transition agreement for us to continue to sell our drug tests to our current distributor for a period of time. The outcome of these discussions is not certain, and any significant decrease in sales to our distributor would have a materially adverse impact on our business. However, we believe that the overall market demand for drug testing services in Brazil will continue to grow, and it remains uncertain whether the acquirer will have the capacity to supply our distributor with the volume of drug tests that we currently provide, at least in the near term. At the same time, we have also been exploring additional options in Brazil.

17

Item 4. Controls and Procedures

As of the end of the period covered by this report (the “evaluation date”) the Company’s management under the supervision and with the participation of the Company’s Chief Executive Officer and Vice President of Finance, performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act. Based upon that evaluation, the Chief Executive Officer and Vice President - Finance concluded as of the evaluation date, that the Company’s disclosure controls and procedures were effective for ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that its disclosure controls and procedures were also effective to ensure that information required to be disclosed in the reports that it files or submits under the Exchange Act is accumulated and communicated to management, including the Company’s principal executive and principal financial officers, to allow timely decisions regarding required disclosure.

There has been no significant change in the Company’s internal control over financial reporting during the most recent fiscal quarter that has materially affected or is reasonably likely to materially affect the Company’s internal control over financial reporting.

18

PART II OTHER INFORMATION

Item 1A. Risk Factors

There have been no material changes in our risk factors from those disclosed in our 2018 Annual Report on Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

There were no purchases of treasury stock in the first three months of 2019.

Item 6. Exhibits

See Exhibit Index included in this Report

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:   April 25, 2019	By:	/s/ Raymond C. Kubacki
		Raymond C. Kubacki
		Chairman and Chief Executive Officer
		(principal executive officer)
Date:   April 25, 2019	By:	/s/ Neil L. Lerner
		Neil L. Lerner
		Vice President - Finance
		(principal accounting officer)

19

PSYCHEMEDICS CORPORATION

FORM 10-Q

March 31, 2019

EXHIBIT INDEX

31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Principal Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Principal Accounting Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation Linkbase
101.LAB	XBRL Taxonomy Extension Label Linkbase
101.PRE	XBRL Taxonomy Extension Presentation Linkbase
101.DEF	XBRL Taxonomy Extension Definition Linkbase

20

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Raymond C. Kubacki, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Psychemedics Corporation (“the registrant”);

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined by Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:   April 25, 2019	/s/ Raymond C. Kubacki
	Raymond C. Kubacki
	Chairman and Chief Executive Officer
	(principal executive officer)

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Neil Lerner, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Psychemedics Corporation (“the registrant”);

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined by Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:   April 25, 2019	/s/ Neil Lerner
	Neil Lerner
	Vice President - Finance
	(principal accounting officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Raymond C. Kubacki, Chairman and Chief Executive Officer of Psychemedics Corporation (the “Company”), certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as the principal executive officer of the Company, that:

(1) The Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2019, as filed with the Securities and Exchange Commission on April 25, 2019 (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:   April 25, 2019	/s/ Raymond C. Kubacki
	Raymond C. Kubacki
	Chairman and Chief Executive Officer
	(principal executive officer)

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Neil Lerner, Vice President - Finance of Psychemedics Corporation (the “Company”), certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as the principal accounting officer of the Company, that:

(1) The Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2019, as filed with the Securities and Exchange Commission on April 25, 2019 (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:   April 25, 2019	/s/ Neil Lerner
	Neil Lerner
	Vice President - Finance
	(principal accounting officer)

XML

Document And Entity Information - shares	3 Months Ended
	Mar. 31, 2019	Apr. 19, 2019
Document Information [Line Items]
Entity Registrant Name	PSYCHEMEDICS CORP
Entity Central Index Key	0000806517
Trading Symbol	pmd
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Current Reporting Status	Yes
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Common Stock, Shares Outstanding (in shares)		5,507,262
Document Type	10-Q
Document Period End Date	Mar. 31, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q1
Amendment Flag	false

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Current Assets:
Cash and cash equivalents	$ 3,226	$ 4,069
Marketable securities	3,912	3,905
Accounts receivable, net of allowance for doubtful accounts of $60 in 2019 and $67 in 2018	5,131	4,829
Prepaid expenses and other current assets	1,204	1,067
Total Current Assets	13,473	13,870
Fixed assets, net of accumulated amortization and depreciation of $14,094 in 2019 and $13,341 in 2018	9,556	10,177
Other assets	901	927
Operating lease right-of-use assets	1,599
Total Assets	25,529	24,974
Current Liabilities:
Accounts payable	378	682
Accrued expenses	2,627	2,962
Current portion of long-term debt	416	416
Current operating lease liabilities	950
Total Current Liabilities	4,371	4,060
Long-term debt	1,109	1,212
Deferred tax liabilities, long-term	907	955
Long-term operating lease liabilities	649
Total Liabilities	7,036	6,227
Commitments and Contingencies (Note 7)
Shareholders' Equity:
Preferred stock, $0.005 par value, 873 shares authorized, no shares issued or outstanding
Common stock, $0.005 par value; 50,000 shares authorized 6,175 shares issued and outstanding in 2019 and 2018	31	31
Additional paid-in capital	31,681	31,523
Accumulated deficit	(1,690)	(1,326)
Less - Treasury stock, at cost, 668 shares	(10,082)	(10,082)
Accumulated other comprehensive loss	(1,447)	(1,399)
Total Shareholders' Equity	18,493	18,747
Total Liabilities and Shareholders' Equity	$ 25,529	$ 24,974

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($) shares in Thousands, $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Allowance for doubtful accounts	$ 60	$ 67
Accumulated amortization and depreciation	$ 14,094	$ 13,341
Preferred stock, par value (in dollars per share)	$ 0.005	$ 0.005
Preferred stock, shares authorized (in shares)	873	873
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.005	$ 0.005
Common stock, shares authorized (in shares)	50,000	50,000
Common stock, shares issued (in shares)	6,175	6,175
Common stock, shares outstanding (in shares)	6,175	6,175
Treasury stock, shares (in shares)	668	668

XML

Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Revenues	$ 9,822	$ 10,935
Cost of revenues	5,414	5,580
Gross profit	4,408	5,355
Operating Expenses:
General & administrative	1,915	1,851
Marketing & selling	1,129	1,239
Research & development	420	359
Total Operating Expenses	3,464	3,449
Operating income	944	1,906
Other income, net	26	32
Net income before provision for income taxes	970	1,938
Provision for income taxes	343	687
Net income	627	1,251
Other Comprehensive Income (Loss):
Foreign currency translation	(48)	(12)
Total Comprehensive Income	$ 579	$ 1,239
Basic net income per share (in dollars per share)	$ 0.11	$ 0.23
Diluted net income per share (in dollars per share)	0.11	0.23
Dividends declared per share (in dollars per share)	$ 0.18	$ 0.15

XML

Condensed Consolidated Statements of Shareholders' Equity (Unaudited) - USD ($) shares in Thousands, $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	Treasury Stock [Member]	Retained Earnings [Member]	AOCI Attributable to Parent [Member]	Total
Balance	$ 31	$ 31,022	$ (10,082)	$ (2,113)	$ (238)	$ 18,620
Balance (in shares) at Dec. 31, 2017	6,160		668
Balance at Dec. 31, 2017	$ 31	31,022	$ (10,082)	(2,113)	(238)	18,620
Stock compensation expense		135				135
Cash dividends declared				(824)		(824)
Net income				1,251		1,251
Other comprehensive loss					(12)	(12)
Balance (in shares) at Mar. 31, 2018	6,160		668
Balance at Mar. 31, 2018	$ 31	31,157	$ (10,082)	(1,686)	(250)	19,171
Balance	31	31,022	(10,082)	(2,113)	(238)	18,620
Balance	31	31,157	(10,082)	(1,686)	(250)	19,171
Balance	$ 31	31,523	$ (10,082)	(1,326)	(1,399)	18,747
Balance (in shares) at Dec. 31, 2018	6,175		668
Balance at Dec. 31, 2018	$ 31	31,523	$ (10,082)	(1,326)	(1,399)	18,747
Stock compensation expense		158				158
Cash dividends declared				(991)		(991)
Net income				627		627
Other comprehensive loss					(48)	(48)
Balance (in shares) at Mar. 31, 2019	6,175		668
Balance at Mar. 31, 2019	$ 31	31,681	$ (10,082)	(1,690)	(1,447)	18,493
Balance	31	31,523	(10,082)	(1,326)	(1,399)	18,747
Balance	$ 31	$ 31,681	$ (10,082)	$ (1,690)	$ (1,447)	$ 18,493

XML

Condensed Consolidated Statements of Shareholders' Equity (Unaudited) (Parentheticals) - $ / shares	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Dividends declared per share (in dollars per share)	$ 0.18	$ 0.15

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 627	$ 1,251
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	764	753
Deferred income taxes	(48)	(38)
Non-cash interest income	(55)
Stock-based compensation	158	135
Changes in assets and liabilities:
Accounts receivable	(302)	(1,575)
Other current assets	(137)	15
Accounts payable	(306)	(116)
Accrued expenses and accrued income taxes	(333)	981
Net cash provided by operating activities	368	1,406
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment and leasehold improvements	(21)	(144)
Cost of internally developed software	(107)
Other assets	16	(74)
Net cash used in investing activities	(112)	(218)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of equipment financing	(104)	(239)
Cash dividends paid	(991)	(824)
Net cash used in financing activities	(1,095)	(1,063)
Effect of exchange rate changes on cash and cash equivalents	(4)	(6)
Net (decrease) increase in cash and cash equivalents	(843)	119
Cash and cash equivalents, beginning of period	4,069	8,165
Cash and cash equivalents, end of period	3,226	8,284
Supplemental Disclosures of Cash Flow Information:
Cash paid for income taxes	432	370
Cash paid for interest	17	28
Cash paid for operating leases	260	245
Right-of-use assets acquired through operating leases	1,855
Purchases of equipment through accounts payable and accrued liabilities	$ 4	$ 25

XML

Note 1 - Basis of Presentation

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

1. Basis of Presentation

The interim condensed consolidated financial statements of Psychemedics Corporation (the “Company”) presented herein, have been prepared pursuant to the rules of the Securities and Exchange Commission for quarterly reports on Form

10

-Q and do

not

include all the information and note disclosures required by accounting principles generally accepted in the United States of America. These statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended

December 31, 2018,

included in the Company's

2018

Annual Report on Form

10

-K, as filed with the Securities and Exchange Commission.

The condensed consolidated balance sheet as of

March 31, 2019,

the condensed consolidated statements of income and comprehensive income for the

three

-month periods ended

March 31, 2019

and

2018,

and the condensed consolidated statements of cash flows for the

three

-month periods ended

March 31, 2019

and

2018

are unaudited but, in the opinion of management, include all adjustments necessary for a fair presentation of results for these interim periods. The condensed consolidated balance sheet as of

December 31, 2018

has been derived from the Company’s annual financial statements that were audited by an independent registered public accounting firm, but does

not

include all of the information and footnotes required for complete annual financial statements.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The results of operations for the

three

months ended

March 31, 2019

may

not

be indicative of the results that

may

be expected for the year ending

December 31, 2019,

or any other period.

Unless the context requires otherwise, the terms “we”, “us”, “our”, or “the Company” refer to Psychemedics Corporation and its consolidated subsidiaries.

XML

Note 2 - Cash and Cash Equivalents

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Cash and Cash Equivalents Disclosure [Text Block]

2. Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of

90

days or less to be cash equivalents. As of

March 31, 2019

and

December 31, 2018,

there were

no

investments classified as cash equivalents.

XML

Note 3 - Marketable Securities

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

3. Marketable Securities

All investments with original maturities of more than

90

days are considered marketable securities. As of

March 31, 2019,

the company had

one

held-to-maturity security (a CD with Bank of America in Brazil) with a maturity of

180

days, ending on

April 29, 2019.

The CD had an original cost of

$4.0

million and a current fair value of

$3.9

million.

XML

Note 4 - Fair Value Measurements

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Fair Value Disclosures [Text Block]

4. Fair Value Measurements

Financial instruments recorded at fair value in the consolidated balance sheets, or disclosed at fair value in the footnotes, are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels defined by ASC

820,

Fair Value Measurements and Disclosures, and directly related to the amount of subjectivity associated with inputs to fair valuation of these assets and liabilities, are as follows:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities or other inputs that are observable or can be corroborated by observable market data

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value

The following table presents the fair value for financial instruments:

	Fair Value Measurements Using
	Level 1		Level 2		Level 3
As of March 31, 2019
Marketable securities (CD)	$	-	$	3,912	$	-
As of December 31, 2018
Marketable securities (CD)	$	-	$	3,905	$	-

Fair values of marketable securities approximate cost due to the short period of time to maturity.

XML

Note 5 - Stock-based Compensation

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

5. Stock-Based Compensation

The Company’s

2006

Incentive Plan (“the Plan”) provides for cash-based awards or the grant or issuance of stock-based awards. In

January 2019,

the Board approved an additional

350

thousand shares available for grant under the Plan, subject to shareholder approval at the

2019

annual meeting. As of

March 31, 2019,

excluding such additional

350

thousand shares,

77

thousand shares remained available for future grant under the Plan. There were

no

other changes to the Plan from

2018

as described in the

10

-K.

Share-based compensation is measured at the grant date based on the fair value of the award and is recognized as an expense over the requisite service period (generally the vesting period of the equity grant). The compensation cost charged against income is included in cost of revenues and operating expenses as follows (in thousands):

	Three Months Ended March 31,
	2019		2018
Share-based compensation related to:
Stock option grants	$	102	$	58
Restricted Stock Unit awards ("RSUs")		56		77
Total share-based compensation	$	158	$	135

There was

no

income tax benefit recognized in the condensed consolidated statements of income for share-based compensation arrangements for the

three

-month periods ended

March 31, 2019

and

2018.

A summary of the Company’s stock option activity for the

three

months ended

March 31, 2019

is as follows (in thousands except per share amounts):

	Number of Shares		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value (1)
Outstanding, December 31, 2018		398	$	17.09		8.2	$	493
Granted		-
Exercised		-
Forfeited		-
Outstanding, March 31, 2019		398	$	17.09		7.9	$	203
Exercisable, March 31, 2019		143	$	14.51		7.3	$	123

( 1 ) The aggregate intrinsic value on this table was calculated based on the amount, if any, by which the closing market value of the Company’s stock on March 31, 2019 ( $14.03 ) exceeded the exercise price of the underlying options, multiplied by the number of shares subject to each option.

A summary of the Company’s stock unit award activity for the

three

months ended

March 31, 2019

is as follows (in thousands except per share amounts):

	Number of Shares		Weighted Average Price per Share (2)		Weighted Average Fair Value (2)
Outstanding & Unvested, December 31, 2018		19	$	18.20	$	343
Granted		-
Converted to common stock		-
Cancelled		-
Forfeited		-
Outstanding & Unvested, March 31, 2019		19	$	18.20	$	343

( 2 ) Weighted average price per share is the weighted grant price based on the closing market price of each of the stock grants related to each grant of stock unit awards. The weighted average fair value is the weighted average share price times the number of shares.

As of

March 31, 2019,

a total of

844

thousand shares of common stock were reserved for issuance under the Plan, subject to shareholder approval at the

2019

annual meeting. As of

March 31, 2019,

the unamortized fair value of awards relating to outstanding SUAs and options was

$1.0

million, which is expected to be amortized over a weighted average period of

2.7

years.

XML

Note 6 - Basic and Diluted Net Income Per Share

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Earnings Per Share [Text Block]

6. Basic and Diluted Net Income 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 is 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 was determined in accordance with the treasury-stock method. Common equivalent shares consisted of common stock issuable upon the exercise of outstanding options and common stock issuable upon the vesting of outstanding, unvested SUAs. Basic and diluted weighted average common shares outstanding for the

three

months ended

March 31, 2019

and

2018

were as follows (in thousands):

	Three Months Ended March 31,
	2019		2018
Weighted average common shares outstanding, basic		5,507		5,492
Dilutive common equivalent shares		31		64
Weighted average common shares outstanding, diluted		5,538		5,556

The computation of diluted earnings per share for the

three

month period ended

March 31, 2019

excludes

274

thousand of stock awards and stock options, because the effect would be antidilutive.

XML

Note 7 - Commitments and Contingencies

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

7. Commitments and Contingencies

The Company is subject to legal proceedings and claims which arise in the ordinary course of its business. While the ultimate outcome of individual legal claims is inherently unpredictable, we believe that the final resolution of any pending actions will

not

have a material adverse effect on our results of operations, financial position, liquidity or capital resources.

XML

Note 8 - Operating Leases

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Lessee, Operating Leases [Text Block]

8. Operating Leases

The Company currently has

six

operating leases for office and laboratory space used to conduct business (

one

of which is for a data center). The exercise of lease renewal options is at our discretion and the majority of renewals to extend the lease terms are

not

included in our Right-Of-Use (“ROU”) assets and lease liabilities as they are

not

reasonably certain of exercise. We regularly evaluate the renewal options and when they are reasonably certain of exercise, we include the renewal period in our lease term. As most of our leases do

not

provide an implicit rate, we use our incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments.

As of

March 31, 2019,

the Company recognized a Right-Of-Use (“ROU”) asset with a corresponding operating lease liability of

$1.6

million based on the present value of the minimum rental payments as a result of adoption of ASC Topic

842.

The weighted average discount rate used for leases as of

March 31, 2019

is

4.1%.

The weighted average lease term as of

March 31, 2019

is

2.1

years. The operating lease expense for the

three

months ended

March 31, 2019

was

$260

thousand.

Maturities and balance sheet presentation of our lease liabilities for all operating leases as of

March 31, 2019

is as follows (in thousands):

2019	$	795
2020		623
2021		130
2022		108
2023		18
Total Lease Payments		1,674
Less Interest:		(75	)
Present value of lease liabilities	$	1,599
Current operating lease liabilities	$	950
Long-term operating lease liabilities		649
Total	$	1,599

XML

Note 9 - Debt and Other Financing Arrangements

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Debt Disclosure [Text Block]

9. Debt and Other Financing Arrangements

On

March 20, 2014,

the Company entered into an equipment financing arrangement (“Loan Agreement”) with Banc of America Leasing & Capital, LLC, which it amended on

August 8, 2014,

September 15, 2015

and

October 30, 2017.

The terms of this arrangement are detailed in the

10

-K.

The weighted average interest rate for all notes related to the Loan Agreement for the quarter ended

March 31, 2019

was

4.2%,

and represented

$17

thousand of interest expense as compared to a rate of

3.4%

and interest expense of

$28

thousand for the comparable period in

2018.

As of

March 31, 2019,

the interest rate was

4.2%

and there was

$1.5

million of outstanding debt related to the loan. The Company was in compliance with all loan covenants as of

March 31, 2019.

The annual principal repayment requirements for debt obligations as of

March 31, 2019

were as follows (in thousands):

2019	$	312
2020		416
2021		416
2022		381
Total long-term debt		1,525
Less current portion of long-term debt		(416	)
Total long-term debt, net of current portion	$	1,109

XML

Note 10 - Revenue

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

10. Revenue

The table below disaggregates our external revenue by major source (in thousands).  For additional revenue detail relating to geographic breakdown of sales, see Note

11

– “Business Segment Reporting”.

	Three Months Ended March 31,
	2019		2018
Testing	$	9,023	$	9,997
Shipping/Collection (hair)		735		824
Other		64		114
Total Revenue	$	9,822	$	10,935

XML

Note 11 - Business Segment Reporting

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

11. Business Segment Reporting

The Company manages 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. All Brazil sales are through

one

independent distributor, which is the only customer greater than

10%

of sales. The Company’s revenues by geographic region are as follows (in thousands):

	Three Months Ended March 31,
	2019		2018
Consolidated Revenue:
United States	$	7,060	$	7,295
Brazil		2,642		3,526
Other		120		114
Total Revenue	$	9,822	$	10,935

XML

Note 12 - Significant Customers

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Concentration Risk Disclosure [Text Block]

12. Significant Customers

The Company had

one

customer that represented

27%

of revenue for the

three

months ended

March 31, 2019

and

32%

of revenue for the

three

months ended

March 31, 2018.

The Company had

two

customers that represented

15%

and

11%

of the total accounts receivable balance as of

March 31, 2019

and

one

customer which represented

20%

of the total accounts receivable balance as of

December 31, 2018.

XML

Note 13 - Recently Adopted Accounting Pronouncements

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

New Accounting Pronouncements and Changes in Accounting Principles [Text Block]

13. Recently Adopted Accounting Pronouncements

In

February 2016,

the FASB issued ASU

2016

-

02,

Leases

, which was subsequently amended by ASU

2018

-

10,

ASU

2018

-

11,

ASU

2018

-

20

and ASU

2019

-

01

(collectively, Topic

842

). which introduced the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous guidance. The new standard established a right-of-use ("ROU") model that requires a lessee to record a lease asset and liability on the balance sheet for all leases with terms longer than

12

months. The standard became effective for fiscal years beginning after

December 15, 2018

and interim periods within those fiscal years. The Company adopted Topic

842

as of

January 1, 2019 (

see Note

8

– Operating Leases).

In

August 2018,

the SEC issued Release

No.

33

-

10532

that amends and clarifies certain financial reporting requirements. The principal change to our financial reporting will be the inclusion of the annual disclosure requirement of changes in stockholders’ equity to interim periods. We adopted this rule for the quarter ended

March 31, 2019.

XML

Note 14 - Accounting Pronouncements Issued But Not Yet Effective

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Description of New Accounting Pronouncements Not yet Adopted [Text Block]

14. Accounting Pronouncements Issued But Not Yet Effective

In

February 2018,

the FASB issued ASU

2018

-

02,

“Income Statement – Reporting Comprehensive Income” (Topic

220

) Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which will allow a reclassification from accumulated other comprehensive income to retained earnings for the tax effects resulting from the Tax Cuts and Jobs Act (Tax Reform Act) that are stranded in accumulated other comprehensive income. This standard also requires certain disclosures about stranded tax effects. ASU

2018

-

02,

however, does

not

change the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations. ASU

2018

-

02

will be effective for the Company’s fiscal year

2020,

with the option to early adopt prior to the effective date. It must be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Reform Act is recognized. The Company is currently evaluating the impacts the adoption of this accounting guidance will have on its consolidated financial statements.

In

August 2018,

the FASB issued ASU

2018

-

15,

“Intangibles—Goodwill and Other—Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract”. The FASB issued ASU

2018

-

15

to align the requirements for capitalizing implementation costs in a cloud computing arrangement service contract with the requirements for capitalizing implementation costs incurred for an internal-use software license. ASU

2018

-

15

will be effective for the Company’s fiscal year

2020,

with the option to early adopt prior to the effective date. The Company is currently evaluating the impact that this updated standard will have on its consolidated financial statements.

XML

Note 15 - Subsequent Events

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Subsequent Events [Text Block]

15. Subsequent Events

On

April 23, 2019,

the Company declared a quarterly dividend of

$0.18

per share for a total of

$991

thousand, which will be paid on

May 17, 2019

to shareholders of record on

May 7, 2019.

XML

Note 4 - Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2019

Notes Tables

Fair Value, Assets Measured on Recurring Basis [Table Text Block]

	Fair Value Measurements Using
	Level 1		Level 2		Level 3
As of March 31, 2019
Marketable securities (CD)	$	-	$	3,912	$	-
As of December 31, 2018
Marketable securities (CD)	$	-	$	3,905	$	-

XML

Note 5 - Stock-based Compensation (Tables)

3 Months Ended

Mar. 31, 2019

Notes Tables

Schedule of Compensation Cost for Share-based Payment Arrangements, Allocation of Share-based Compensation Costs by Plan [Table Text Block]

	Three Months Ended March 31,
	2019		2018
Share-based compensation related to:
Stock option grants	$	102	$	58
Restricted Stock Unit awards ("RSUs")		56		77
Total share-based compensation	$	158	$	135

Share-based Compensation, Stock Options, Activity [Table Text Block]

	Number of Shares		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value (1)
Outstanding, December 31, 2018		398	$	17.09		8.2	$	493
Granted		-
Exercised		-
Forfeited		-
Outstanding, March 31, 2019		398	$	17.09		7.9	$	203
Exercisable, March 31, 2019		143	$	14.51		7.3	$	123

Schedule of Nonvested Restricted Stock Units Activity [Table Text Block]

	Number of Shares		Weighted Average Price per Share (2)		Weighted Average Fair Value (2)
Outstanding & Unvested, December 31, 2018		19	$	18.20	$	343
Granted		-
Converted to common stock		-
Cancelled		-
Forfeited		-
Outstanding & Unvested, March 31, 2019		19	$	18.20	$	343

XML

Note 6 - Basic and Diluted Net Income Per Share (Tables)

3 Months Ended

Mar. 31, 2019

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three Months Ended March 31,
	2019		2018
Weighted average common shares outstanding, basic		5,507		5,492
Dilutive common equivalent shares		31		64
Weighted average common shares outstanding, diluted		5,538		5,556

XML

Note 8 - Operating Leases (Tables)

3 Months Ended

Mar. 31, 2019

Notes Tables

Lessee, Operating Lease, Liability, Maturity [Table Text Block]

2019	$	795
2020		623
2021		130
2022		108
2023		18
Total Lease Payments		1,674
Less Interest:		(75	)
Present value of lease liabilities	$	1,599
Current operating lease liabilities	$	950
Long-term operating lease liabilities		649
Total	$	1,599

XML

Note 9 - Debt and Other Financing Arrangements (Tables)

3 Months Ended

Mar. 31, 2019

Notes Tables

Schedule of Long-term Debt Instruments [Table Text Block]

2019	$	312
2020		416
2021		416
2022		381
Total long-term debt		1,525
Less current portion of long-term debt		(416	)
Total long-term debt, net of current portion	$	1,109

XML

Note 10 - Revenue (Tables)

3 Months Ended

Mar. 31, 2019

Notes Tables

Disaggregation of Revenue [Table Text Block]

	Three Months Ended March 31,
	2019		2018
Testing	$	9,023	$	9,997
Shipping/Collection (hair)		735		824
Other		64		114
Total Revenue	$	9,822	$	10,935

XML

Note 11 - Business Segment Reporting (Tables)

3 Months Ended

Mar. 31, 2019

Notes Tables

Schedule of Segment Reporting Information, by Segment [Table Text Block]

	Three Months Ended March 31,
	2019		2018
Consolidated Revenue:
United States	$	7,060	$	7,295
Brazil		2,642		3,526
Other		120		114
Total Revenue	$	9,822	$	10,935

XML

Note 3 - Marketable Securities (Details Textual) $ in Millions	Mar. 31, 2019 USD ($)
Debt Securities, Held-to-maturity, Total	$ 4.0
Debt Securities, Held-to-maturity, Fair Value, Total	$ 3.9

XML

Note 4 - Fair Value Measurements - Fair value Recurring Basis (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Marketable securities (CD)	$ 3,900
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member] | Certificates of Deposit [Member]
Marketable securities (CD)
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Certificates of Deposit [Member]
Marketable securities (CD)	3,912	3,905
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | Certificates of Deposit [Member]
Marketable securities (CD)

XML

Note 5 - Stock-based Compensation (Details Textual) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018	Jan. 31, 2019
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Term	7 years 328 days		8 years 73 days
Incentive Plan 2006 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant	77			350
Employee Service Share-based Compensation, Tax Benefit from Compensation Expense	$ 0	$ 0
Share Price	$ 14.03
Common Stock, Capital Shares Reserved for Future Issuance	844
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Stock Options	$ 1,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Term	2 years 255 days

XML

Note 5 - Stock-based Compensation - Compensation Cost (Details) - Selling, General and Administrative Expenses [Member] - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Share-based compensation	$ 158	$ 135
Employee Stock Option [Member]
Share-based compensation	102	58
Restricted Stock Units (RSUs) [Member]
Share-based compensation	$ 56	$ 77

XML

Note 5 - Stock-based Compensation - Stock Option Activity (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands		3 Months Ended	12 Months Ended
		Mar. 31, 2019	Dec. 31, 2018
Outstanding (in shares)		398
Outstanding, weighted average exercise price (in dollars per share)		$ 17.09
Outstanding, weighted average remaining contractual life (Year)		7 years 328 days	8 years 73 days
Outstanding, aggregate intrinsic value	[1]	$ 203	$ 493
Granted (in shares)
Granted, weighted average exercise price (in dollars per share)
Exercised (in shares)
Exercised, weighted average exercise price (in dollars per share)
Forfeited (in shares)
Forfeited, weighted average exercise price (in dollars per share)
Outstanding (in shares)		398	398
Outstanding, weighted average exercise price (in dollars per share)		$ 17.09	$ 17.09
Exercisable (in shares)		143
Exercisable, weighted average exercise price (in dollars per share)		$ 14.51
Exercisable, weighted average remaining contractual life (Year)		7 years 109 days
Exercisable, aggregate intrinsic value	[1]	$ 123

[1] The aggregate intrinsic value on this table was calculated based on the amount, if any, by which the closing market value of the Company's stock on March 31, 2019 ($14.03) exceeded the exercise price of the underlying options, multiplied by the number of shares subject to each option.

XML

Note 5 - Stock-based Compensation - Nonvested Award Activity (Details) - Stock Unit Award [Member] - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands		3 Months Ended
		Mar. 31, 2019	Dec. 31, 2018
Outstanding & Unvested at beginning of period (in shares)		19
Outstanding & Unvested at beginning of period, weighted average price per share (in dollars per share)	[1]	$ 18.20
Outstanding & Unvested at beginning of period, weighted average fair value	[1]	$ 343	$ 343
Granted (in shares)
Granted, weighted average price per share (in dollars per share)	[1]
Granted, weighted average fair value	[1]
Converted to common stock (in shares)
Converted to common stock, weighted average price per share (in dollars per share)
Converted to common stock, weighted average fair value
Cancelled (in shares)
Cancelled, weighted average price per share (in dollars per share)
Cancelled, weighted average fair value
Forfeited (in shares)
Forfeited, weighted average price per share (in dollars per share)
Forfeited, weighted average fair value
Outstanding & Unvested at end of period (in shares)		19
Outstanding & Unvested at end of period, weighted average price per share (in dollars per share)	[1]	$ 18.20

[1] Weighted average price per share is the weighted grant price based on the closing market price of each of the stock grants related to each grant of stock unit awards. The weighted average fair value is the weighted average share price times the number of shares.

XML

Note 6 - Basic and Diluted Net Income Per Share (Details Textual) shares in Thousands	3 Months Ended
	Mar. 31, 2019 shares
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	274

XML

Note 6 - Basic and Diluted Net Income Per Share - Basic and Diluted Weighted Average Common Shares Outstanding (Details) - shares shares in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Weighted average common shares outstanding, basic (in shares)	5,507	5,492
Dilutive common equivalent shares (in shares)	31	64
Weighted average common shares outstanding, diluted (in shares)	5,538	5,556

XML

Note 8 - Operating Leases (Details Textual) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Jan. 01, 2019	Dec. 31, 2018
Operating Lease, Right-of-Use Asset	$ 1,599	$ 1,600
Operating Lease, Weighted Average Discount Rate, Percent	4.10%
Operating Lease, Weighted Average Remaining Lease Term	2 years 36 days
Operating Lease, Expense	$ 260
Operating Lease, Liability, Total	$ 1,599	$ 1,600

XML

Note 8 - Operating Leases - Maturities of Lease Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Jan. 01, 2019	Dec. 31, 2018
2019	$ 795
2020	623
2021	130
2022	108
2023	18
Total Lease Payments	1,674
Less Interest:	(75)
Present value of lease liabilities	1,599	$ 1,600
Current operating lease liabilities	950
Long-term operating lease liabilities	649
Total	$ 1,599	$ 1,600

XML

Note 9 - Debt and Other Financing Arrangements (Details Textual) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Long-term Debt, Weighted Average Interest Rate, over Time	4.20%	3.40%
Interest Expense, Total	$ 17	$ 28
Debt Instrument, Interest Rate, Effective Percentage	4.20%
Long-term Debt, Total	$ 1,525

XML

Note 9 - Debt and Other Financing Arrangements - Schedule of Debt Repayments (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
2019	$ 312
2020	416
2021	416
2022	381
Total long-term debt	1,525
Less current portion of long-term debt	(416)	$ (416)
Total long-term debt, net of current portion	$ 1,109	$ 1,212

XML

Note 10 - Revenue - Revenue by Major Source (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Revenues	$ 9,822	$ 10,935
Testing [Member]
Revenues	9,023	9,997
Shipping/Collection (Hair) [Member]
Revenues	735	824
Other Revenue [Member]
Revenues	$ 64	$ 114

XML

Note 11 - Business Segment Reporting (Details Textual)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Number of Operating Segments	1
Customer Concentration Risk [Member] | Sales Revenue, Net [Member]
Number of Major Customers	1	1
Concentration Risk, Percentage	27.00%	32.00%
Customer Concentration Risk [Member] | Sales Revenue, Net [Member] | BRAZIL
Number of Major Customers	1
Concentration Risk, Percentage	10.00%

XML

Note 11 - Business Segment Reporting Assets By Geographic Segment (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Revenues	$ 9,822	$ 10,935
UNITED STATES
Revenues	7,060	7,295
BRAZIL
Revenues	2,642	3,526
Other Foreign Countries [Member]
Revenues	$ 120	$ 114

XML

Note 12 - Significant Customers (Details Textual) - Customer Concentration Risk [Member]	3 Months Ended		12 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018
Sales Revenue, Net [Member]
Number of Major Customers	1	1
Concentration Risk, Percentage	27.00%	32.00%
Accounts Receivable [Member]
Number of Major Customers	2		1
Concentration Risk, Percentage			20.00%
Accounts Receivable [Member] | Customer One [Member]
Concentration Risk, Percentage	15.00%
Accounts Receivable [Member] | Customer Two [Member]
Concentration Risk, Percentage	11.00%

XML

Note 15 - Subsequent Events (Details Textual) - USD ($) $ / shares in Units, $ in Thousands		3 Months Ended
	Apr. 23, 2019	Mar. 31, 2019	Mar. 31, 2018
Common Stock, Dividends, Per Share, Declared		$ 0.18	$ 0.15
Subsequent Event [Member]
Common Stock, Dividends, Per Share, Declared	$ 0.18
Dividends, Total	$ 991