x
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Delaware
|
58-1701987
|
|
(State or Other Jurisdiction of
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(I.R.S. Employer
|
|
Incorporation or Organization)
|
Identification No.)
|
125 Nagog Park
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01720
|
|
Acton, Massachusetts
|
||
(Address of Principal Executive Offices)
|
(Zip Code)
|
Large Accelerated Filer
¨
|
Accelerated Filer
¨
|
Non-Accelerated Filer
¨
|
Smaller Reporting Company
x
|
(Do not check if a smaller reporting company)
|
Page
|
||||
PART I
|
||||
Item 1.
|
Business
|
3
|
||
Item 1A.
|
Risk Factors
|
8
|
||
Item 1B.
|
Unresolved Staff Comments
|
12
|
||
Item 2.
|
Properties
|
12
|
||
Item 3.
|
Legal Proceedings
|
12
|
||
Item 4.
|
Reserved
|
12
|
||
PART II
|
||||
Item 5.
|
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
|
13
|
||
Item 6.
|
Selected Financial Data
|
15
|
||
Item 7.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
15
|
||
Item 7A.
|
Quantitative and Qualitative Disclosures About Market Risk
|
21
|
||
Item 8.
|
Financial Statements and Supplementary Data
|
21
|
||
Item 9.
|
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
|
39
|
||
Item 9A.(T.)
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Controls and Procedures
|
39
|
||
Item 9B.
|
Other Information
|
40
|
||
PART III
|
||||
Item 10.
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Directors, Executive Officers and Corporate Governance
|
41
|
||
Item 11.
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Executive Compensation
|
42
|
||
Item 12.
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|
42
|
||
Item 13.
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Certain Relationships and Related Transactions, and Director Independence
|
42
|
||
Item 14.
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Principal Accounting Fees and Services
|
42
|
||
PART IV
|
||||
Item 15.
|
Exhibits, Financial Statement Schedules
|
43
|
||
OTHER ITEMS
|
||||
Signatures
|
44
|
|||
Power of Attorney
|
44
|
|
•
|
economic conditions in our markets in general;
|
|
•
|
economic conditions affecting our customers and their particular industries;
|
|
•
|
the introduction of new products and product enhancements by us or our competitors; and
|
|
•
|
pricing and other competitive conditions.
|
High
|
Low
|
Dividends
|
||||||||||
Fiscal 2009:
|
||||||||||||
First Quarter
|
$ | 7.32 | $ | 3.03 | $ | 0.170 | ||||||
Second Quarter
|
6.99 | 5.51 | 0.170 | |||||||||
Third Quarter
|
7.05 | 6.00 | 0.120 | |||||||||
Fourth Quarter
|
7.70 | 5.10 | 0.120 | |||||||||
Fiscal 2010:
|
||||||||||||
First Quarter
|
$ | 8.21 | $ | 7.17 | $ | 0.120 | ||||||
Second Quarter
|
9.03 | 7.54 | 0.120 | |||||||||
Third Quarter
|
9.72 | 7.76 | 0.120 | |||||||||
Fourth Quarter
|
9.95 | 6.89 | 0.120 |
Number of Securities to
Be Issued Upon
Exercise of Outstanding
Options, Warrants and
Rights
(a)
|
Weighted Average
Exercise Price of
Outstanding Options,
Warrants and Rights
(b)
|
Number of Securities
That Remained
Available
for Future Issuance
(c)
|
||||||||||
Equity compensation plans approved by security holders
(1)
|
94,700 | $ | 0.00 | 84,450 | ||||||||
Equity compensation plans not approved by security holders
|
— | — | — | |||||||||
Total
|
94,700 | $ | 0.00 | 84,450 |
(1)
|
Consists of the 2006 Equity Incentive Plan.
|
(2)
|
This table does not include information for the Company’s 2000 Stock Option Plan (discontinued on May 11, 2006). As of December 31, 2010, a total of 289,371 shares of common stock were issuable upon the exercise of outstanding options under the foregoing discontinued plan. The weighted average exercise price of outstanding options under such plan is $13.96 per share. No additional options may be granted under the 2000 Stock Option Plan.
|
2005
|
2006
|
2007
|
2008
|
2009
|
2010
|
|||||||||||||||||||
Psychemedics Corporation
|
100.00 | 142.93 | 124.28 | 61.67 | 74.49 | 82.25 | ||||||||||||||||||
Russell 2000 Index
|
100.00 | 121.40 | 106.90 | 74.58 | 88.03 | 107.83 | ||||||||||||||||||
NASDAQ Composite Index
|
100.00 | 109.52 | 120.27 | 71.51 | 102.89 | 120.29 |
*
|
Calculated by the Company using
www.yahoo.com/finance
historical prices
|
(1)
|
The above graph assumes a $100 investment on December 31, 2005, through the end of the 5-year period ended December 31, 2010 in the Company’s Common Stock, the Russell 2000 Index and the NASDAQ Composite Index. The prices all assume the reinvestment of dividends.
|
(2)
|
The Russell 2000 Index is composed of the smallest 2,000 companies in the Russell 3,000 Index. The Company has been unable to identify a peer group of companies that engage in testing of drugs of abuse, except for large pharmaceutical companies where such business is insignificant to such companies’ other lines of businesses. The Company therefore uses in its proxy statements a peer index based on market capitalization.
|
(3)
|
The NASDAQ Composite Index includes companies whose shares are traded on the NASDAQ Stock Exchange Market. In September 2008, Psychemedics moved its listing to the NASDAQ Stock Exchange Market from the AMEX Stock Exchange Market.
|
As of and for the Years Ended
December 31,
|
||||||||||||||||||||
|
2010
|
2009
|
2008
|
2007
|
2006
|
|||||||||||||||
|
(In Thousands, Except for per Share Data)
|
|||||||||||||||||||
Revenue
|
$ | 20,109 | $ | 16,955 | $ | 22,949 | $ | 24,569 | $ | 23,425 | ||||||||||
Gross profit
|
12,042 | 9,610 | 13,350 | 14,677 | 14,056 | |||||||||||||||
Income from operations
|
4,414 | 2,584 | 4,707 | 7,139 | 7,563 | |||||||||||||||
Net income
|
2,614 | 1,527 | 2,969 | 4,484 | 4,902 | |||||||||||||||
Basic net income per share
|
0.50 | 0.29 | 0.57 | 0.86 | 0.95 | |||||||||||||||
Diluted net income per share
|
0.50 | 0.29 | 0.57 | 0.85 | 0.94 | |||||||||||||||
Total assets
|
11,766 | 10,602 | 12,628 | 15,561 | 13,261 | |||||||||||||||
Working capital
|
8,566 | 8,471 | 9,516 | 12,773 | 10,534 | |||||||||||||||
Shareholders’ equity
|
9,748 | 9,294 | 10,560 | 13,878 | 11,504 | |||||||||||||||
Cash dividends declared per common share
|
0.480 | 0.530 | 1.160 | 0.575 | 0.475 |
Year Ended December 31,
|
||||||||||||
|
2010
|
2009
|
2008
|
|||||||||
Revenue
|
100.0 | % | 100.0 | % | 100.0 | % | ||||||
Cost of revenue
|
40.1 | % | 43.3 | % | 41.8 | % | ||||||
Gross profit
|
59.9 | % | 56.7 | % | 58.2 | % | ||||||
Operating expenses:
|
||||||||||||
General and administrative
|
20.9 | % | 21.2 | % | 19.7 | % | ||||||
Marketing and selling
|
14.6 | % | 17.5 | % | 15.9 | % | ||||||
Research and development
|
2.4 | % | 2.8 | % | 2.1 | % | ||||||
Total operating expenses
|
37.9 | % | 41.5 | % | 37.7 | % | ||||||
Operating income
|
22.0 | % | 15.2 | % | 20.5 | % | ||||||
Other income
|
||||||||||||
Interest income
|
0.1 | % | 0.3 | % | 1.3 | % | ||||||
Other income
|
— | — | — | |||||||||
Total other income
|
0.1 | % | 0.3 | % | 1.3 | % | ||||||
Income before taxes
|
22.1 | % | 15.5 | % | 21.8 | % | ||||||
Provision for income taxes
|
9.1 | % | 6.5 | % | 8.9 | % | ||||||
Net income
|
13.0 | % | 9.0 | % | 12.9 | % |
Payments Due by Period
|
||||||||||||||||||||
Less
|
Greater
|
|
||||||||||||||||||
Than 1
|
1 – 3
|
3 – 5
|
Than 5
|
|||||||||||||||||
Contractual Obligation
|
Year
|
Years
|
Years
|
Years
|
Total
|
|||||||||||||||
|
(Amounts in Thousands)
|
|||||||||||||||||||
Operating leases
|
$ | 546 | $ | 738 | $ | 54 | $ | — | $ | 1,338 | ||||||||||
Purchase commitment
|
569 | — | — | — | 569 | |||||||||||||||
Total
|
$ | 1,155 | $ | 738 | $ | 54 | $ | — | $ | 1,907 |
Page
|
||
Report of Independent Registered Public Accounting Firm
|
22
|
|
Balance Sheets as of December 31, 2010 and 2009
|
23
|
|
Statements of Income for the Years Ended December 31, 2010, 2009 and 2008
|
24
|
|
Statements of Shareholders’ Equity for the Years Ended December 31, 2010, 2009 and 2008
|
25
|
|
Statements of Cash Flows for the Years Ended December 31, 2010, 2009 and 2008
|
26
|
|
Notes to Financial Statements
|
27
|
Unaudited Supplementary Quarterly Financial Information
|
38
|
December 31,
|
||||||||
2010
|
2009 | |||||||
|
|
|||||||
Current assets:
|
|
|
||||||
Cash and cash equivalents
|
$
|
3,720,488
|
$
|
4,840,367
|
||||
Short-term investments
|
2,018,452
|
1,006,436
|
||||||
Accounts receivable, net of allowance of $119,295 in 2010
and $134,282 in 2009
|
3,905,821
|
3,016,084
|
||||||
Prepaid expenses and other current assets
|
700,822
|
663,433
|
||||||
Deferred tax assets
|
239,831
|
253,221
|
||||||
Total current assets
|
10,585,414
|
9,779,541
|
||||||
Property and equipment, net;
|
|
|
||||||
Computer software
|
1,290,255
|
1,205,840
|
||||||
Office furniture and equipment
|
2,032,406
|
1,967,701
|
||||||
Laboratory equipment
|
7,493,190
|
6,830,750
|
||||||
Leasehold improvements
|
915,015
|
908,615
|
||||||
|
11,730,866
|
10,912,906
|
||||||
Less – accumulated depreciation and amortization
|
(10,663,996
|
)
|
(10,381,599
|
)
|
||||
|
1,066,870
|
531,307
|
||||||
Deferred tax assets, net of current portion
|
—
|
204,764
|
||||||
Other assets
|
114,037
|
86,814
|
||||||
Total assets
|
$
|
11,766,321
|
$
|
10,602,426
|
||||
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
||||||
Current liabilities:
|
|
|
||||||
Accounts payable
|
$
|
699,833
|
$
|
180,784
|
||||
Accrued expenses
|
1,302,370
|
1,090,898
|
||||||
Deferred revenue
|
16,605
|
36,360
|
||||||
Total current liabilities
|
2,018,808
|
1,308,042
|
||||||
Commitments and contingencies (Note 10)
|
|
|
||||||
Shareholders’ equity:
|
|
|
||||||
Preferred stock, $0.005 par value; 872,521 shares authorized, no shares issued or outstanding
|
—
|
—
|
||||||
Common stock, $0.005 par value; 50,000,000 shares authorized, 5,877,358 shares issued in 2010 and 5,861,872 shares issued in 2009
|
29,387
|
29,309
|
||||||
Additional paid-in capital
|
27,764,992
|
27,419,359
|
||||||
Treasury stock, at cost (665,345 shares in 2010 and 664,523 shares in 2009)
|
(10,059,398
|
)
|
(10,053,364
|
)
|
||||
Accumulated deficit
|
(7,987,468
|
)
|
(8,100,920
|
)
|
||||
Total shareholders’ equity
|
9,747,513
|
9,294,384
|
||||||
Total liabilities and shareholders’ equity
|
$
|
11,766,321
|
$
|
10,602,426
|
Year Ended December 31,
|
||||||||||||
2010
|
2009
|
2008
|
||||||||||
Revenues
|
$ | 20,108,862 | $ | 16,954,994 | $ | 22,948,604 | ||||||
Cost of revenues
|
8,067,229 | 7,345,016 | 9,598,515 | |||||||||
Gross profit
|
12,041,633 | 9,609,978 | 13,350,089 | |||||||||
Operating expenses:
|
||||||||||||
General and administrative
|
4,195,998 | 3,596,774 | 4,520,074 | |||||||||
Marketing and selling
|
2,949,739 | 2,961,477 | 3,648,584 | |||||||||
Research and development
|
481,433 | 467,435 | 474,622 | |||||||||
Total operating expenses
|
7,627,170 | 7,025,686 | 8,643,280 | |||||||||
Income from operations
|
4,414,463 | 2,584,292 | 4,706,809 | |||||||||
Interest income
|
23,091 | 45,320 | 308,034 | |||||||||
Income before taxes
|
4,437,554 | 2,629,612 | 5,014,843 | |||||||||
Provision for income taxes
|
1,823,834 | 1,102,317 | 2,046,054 | |||||||||
Net income
|
$ | 2,613,720 | $ | 1,527,295 | $ | 2,968,789 | ||||||
Basic net income per share
|
$ | 0.50 | $ | 0.29 | $ | 0.57 | ||||||
Diluted income per share
|
$ | 0.50 | $ | 0.29 | $ | 0.57 | ||||||
Dividends declared per share
|
$ | 0.48 | $ | 0.53 | $ | 0.66 | ||||||
Special dividends declared per share
|
$ | 0.00 | $ | 0.00 | $ | 0.50 | ||||||
Weighted average common shares outstanding, basic
|
5,207,244 | 5,193,329 | 5,219,141 | |||||||||
Weighted average common shares outstanding, diluted
|
5,226,454 | 5,204,767 | 5,245,713 |
Common Stock
|
Treasury Stock
|
|||||||||||||||||||||||||||
|
Shares
|
$0.005
par Value
|
Paid-In
Capital
|
Shares
|
Cost
|
Accumulated
Deficit
|
Total
|
|||||||||||||||||||||
BALANCE, December 31, 2007
|
5,811,982 | $ | 29,060 | $ | 26,539,764 | 586,197 | $ | (9,163,624 | ) | $ | (3,527,269 | ) | $ | 13,877,931 | ||||||||||||||
Exercise of stock options
|
17,931 | 90 | 199,114 | — | — | — | 199,204 | |||||||||||||||||||||
Shares issued – vested
|
13,155 | 66 | (66 | ) | — | — | — | — | ||||||||||||||||||||
Stock compensation expense
|
— | — | 379,931 | 379,931 | ||||||||||||||||||||||||
Acquisition of treasury stock
|
— | — | — | 61,107 | (810,333 | ) | — | (810,333 | ) | |||||||||||||||||||
Cash dividends declared ($1.16 per share)
|
— | — | — | — | — | (6,055,634 | ) | (6,055,634 | ) | |||||||||||||||||||
Net income
|
— | — | — | — | — | 2,968,789 | 2,968,789 | |||||||||||||||||||||
BALANCE, December 31, 2008
|
5,843,068 | 29,216 | 27,118,743 | 647,304 | (9,973,957 | ) | (6,614,114 | ) | 10,559,888 | |||||||||||||||||||
Shares issued – vested
|
18,804 | 93 | (93 | ) | — | — | — | — | ||||||||||||||||||||
Tax withholding related to vested shares from employee stock plans
|
— | — | (39,381 | ) | — | — | — | (39,381 | ) | |||||||||||||||||||
Stock compensation expense
|
— | — | 394,498 | 394,498 | ||||||||||||||||||||||||
Change in excess tax benefit on equity awards
|
— | — | (54,408 | ) | — | — | — | (54,408 | ) | |||||||||||||||||||
Acquisition of treasury stock
|
— | — | — | 17,219 | (79,407 | ) | — | (79,407 | ) | |||||||||||||||||||
Cash dividends declared ($0.53 per share)
|
— | — | — | — | — | (3,014,101 | ) | (3,014,101 | ) | |||||||||||||||||||
Net income
|
— | — | — | — | — | 1,527,295 | 1,527,295 | |||||||||||||||||||||
BALANCE, December 31, 2009
|
5,861,872 | 29,309 | 27,419,359 | 664,523 | (10,053,364 | ) | (8,100,920 | ) | 9,294,384 | |||||||||||||||||||
Shares issued – vested
|
15,486 | 78 | (78 | ) | — | — | — | — | ||||||||||||||||||||
Tax withholding related to vested shares from employee stock plans
|
— | — | (49,261 | ) | — | — | — | (49,261 | ) | |||||||||||||||||||
Stock compensation expense
|
— | — | 394,972 | — | — | — | 394,972 | |||||||||||||||||||||
Acquisition of treasury stock
|
— | — | — | 822 | (6,034 | ) | — | (6,034 | ) | |||||||||||||||||||
Cash dividends declared ($0.48 per share)
|
— | — | — | — | — | (2,500,268 | ) | (2,500,268 | ) | |||||||||||||||||||
Net income
|
— | — | — | — | — | 2,613,720 | 2,613,720 | |||||||||||||||||||||
BALANCE, December 31, 2010
|
5,877,358 | $ | 29,387 | $ | 27,764,992 | 665,345 | $ | (10,059,398 | ) | $ | (7,987,468 | ) | $ | 9,747,513 |
Year Ended December 31,
|
||||||||||||
2010
|
2009
|
2008
|
||||||||||
Cash flows from operating activities:
|
||||||||||||
Net income
|
$ | 2,613,720 | $ | 1,527,295 | $ | 2,968,789 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||||||
Depreciation and amortization
|
284,911 | 336,795 | 331,393 | |||||||||
Deferred income taxes
|
218,154 | 130,434 | (72,399 | ) | ||||||||
Change in excess tax benefit on equity awards
|
— | (54,408 | ) | — | ||||||||
Stock compensation expense
|
394,972 | 394,498 | 379,931 | |||||||||
Changes in operating assets and liabilities:
|
||||||||||||
Accounts receivable
|
(889,737 | ) | 382,371 | 156,887 | ||||||||
Prepaid expenses and other current assets
|
(37,389 | ) | 442,453 | (606,967 | ) | |||||||
Accounts payable
|
519,049 | (464,110 | ) | 156,254 | ||||||||
Accrued expenses
|
211,472 | (178,026 | ) | 317,682 | ||||||||
Deferred revenue
|
(19,755 | ) | (117,720 | ) | (88,875 | ) | ||||||
Net cash provided by operating activities
|
3,295,397 | 2,399,582 | 3,687,493 | |||||||||
Cash flows from investing activities:
|
||||||||||||
Maturities of short-term investments
|
— | — | 3,875,000 | |||||||||
Purchases of short-term investments
|
(1,012,016 | ) | (1,006,436 | ) | — | |||||||
Increase in other long-term assets
|
(29,737 | ) | (14,582 | ) | (17,811 | ) | ||||||
Purchases of property and equipment
|
(817,960 | ) | (35,427 | ) | (344,534 | ) | ||||||
Net cash provided by (used in) investing activities
|
(1,859,713 | ) | (1,056,445 | ) | 3,512,655 | |||||||
Cash flows from financing activities:
|
||||||||||||
Dividends paid
|
(2,500,268 | ) | (3,014,101 | ) | (6,055,634 | ) | ||||||
Proceeds from employee stock plans and stock option exercises, net of tax withholding
|
(49,261 | ) | (39,381 | ) | 189,891 | |||||||
Acquisition of treasury stock
|
(6,034 | ) | (79,407 | ) | (810,333 | ) | ||||||
Tax benefit associated with exercise of options
|
— | — | 9,313 | |||||||||
Net cash used in financing activities
|
(2,555,563 | ) | (3,132,889 | ) | (6,666,763 | ) | ||||||
Net increase (decrease) in cash and cash equivalents
|
(1,119,879 | ) | (1,789,752 | ) | 533,385 | |||||||
Cash and cash equivalents, beginning of year
|
4,840,367 | 6,630,119 | 6,096,734 | |||||||||
Cash and cash equivalents, end of year
|
$ | 3,720,488 | $ | 4,840,367 | $ | 6,630,119 | ||||||
Supplemental disclosures of cash flow information:
|
||||||||||||
Cash paid for income taxes
|
$ | 2,009,694 | $ | 112,449 | $ | 2,553,537 | ||||||
Non-cash investing and financing activities:
|
||||||||||||
Issuance of restricted stock awards
|
$ | 78 | $ | 93 | $ | 66 |
Computer software
|
3 to 5 years
|
|||
Office furniture and equipment
|
3 to 7 years
|
|||
Laboratory equipment
|
5 to 7 years
|
|||
Leasehold improvements
|
Lesser of term of lease or estimated useful life
|
2010
|
2009
|
2008
|
|||||||
Weighted average common shares outstanding
|
5,207,244
|
5,193,329
|
5,219,141
|
||||||
Dilutive common equivalent shares
|
19,210
|
11,438
|
26,572
|
||||||
Weighted average common shares outstanding, assuming dilution
|
5,226,454
|
5,204,767
|
5,245,713
|
2010
|
2009
|
|||||||
Balance, beginning of period
|
$
|
134,282
|
$
|
246,462
|
||||
Provision for (recoveries of) doubtful accounts
|
10,302
|
|
(89,378
|
)
|
||||
Write-offs
|
(25,289
|
)
|
(22,802
|
)
|
||||
Balance, end of period
|
$
|
119,295
|
$
|
134,282
|
2010
|
2009
|
|||||||
Accrued payroll and employee benefits
|
$
|
607,248
|
$
|
392,558
|
||||
Accrued income taxes
|
—
|
331,831
|
||||||
Accrued hair collection expense
|
117,727
|
79,480
|
||||||
Accrued audit and tax consulting
|
151,817
|
98,481
|
||||||
Other accrued expenses
|
425,578
|
188,548
|
||||||
|
$
|
1,302,370
|
$
|
1,090,898
|
2010
|
2009
|
2008
|
||||||||||
Current –
|
|
|
|
|||||||||
Federal
|
$
|
1.261,670
|
$
|
810,538
|
$
|
1,549,593
|
||||||
State
|
344,010
|
215,753
|
424,062
|
|||||||||
|
1,605,680
|
1,026,291
|
1,973,655
|
|||||||||
Deferred –
|
|
|
|
|||||||||
Federal
|
171,848
|
71,540
|
56,819
|
|
||||||||
State
|
46,306
|
4,486
|
15,580
|
|
||||||||
|
218,154
|
76,026
|
72,399
|
|
||||||||
|
$
|
1,823,834
|
$
|
1,102,317
|
$
|
2,046,054
|
2010
|
2009
|
2008
|
||||||||||
Federal statutory rate
|
34.0
|
%
|
34.0
|
%
|
34.0
|
%
|
||||||
State income taxes, net of federal benefit
|
5.6
|
5.7
|
5.8
|
|||||||||
Permanent differences
|
(0.2
|
)
|
0.4
|
1.0
|
||||||||
Stock based compensation
|
1.7
|
1.8
|
—
|
|||||||||
Effective tax rate
|
41.1
|
%
|
41.9
|
%
|
40.8
|
%
|
2010
|
2009
|
|||||||
Deferred tax assets:
|
|
|
||||||
Deferred revenue
|
$
|
6,566
|
$
|
14,382
|
||||
Stock-based compensation
|
146,812
|
136,976
|
||||||
Allowance for doubtful accounts
|
47,171
|
53,114
|
||||||
Excess of book over tax depreciation and amortization
|
—
|
204,764
|
||||||
Accrued expenses
|
133,960
|
66,719
|
||||||
|
334,509
|
475,955
|
||||||
Deferred tax liabilities:
|
|
|||||||
Prepaid expenses
|
(17,790
|
)
|
(17,970
|
)
|
||||
Excess of tax over book depreciation and amortization
|
(76,888
|
)
|
—
|
|||||
(94,678
|
)
|
(17,970
|
)
|
|||||
|
$
|
239,831
|
$
|
457,985
|
Number
of Shares
|
Weighted
Average
Exercise Price
per Share
|
Weighted
Average
Remaining
Contractual
Life
|
Aggregate
Intrinsic
Value
(1)
|
||||||||||
Outstanding, December 31, 2007
|
450,034
|
$
|
15.63
|
|
|
||||||||
Granted
|
—
|
—
|
|
|
|||||||||
Exercised
|
(18,139
|
)
|
13.93
|
|
|
||||||||
Terminated
|
(39,785
|
)
|
20.51
|
||||||||||
Outstanding, December 31, 2008
|
392,110
|
15.22
|
|
|
|||||||||
Granted
|
—
|
—
|
|
|
|||||||||
Exercised
|
—
|
|
—
|
|
|
||||||||
Terminated
|
(55,189
|
)
|
17.75
|
||||||||||
Outstanding, December 31, 2009
|
336,921
|
14.80
|
|
|
|||||||||
Granted
|
—
|
—
|
|
|
|||||||||
Exercised
|
—
|
—
|
|
|
|||||||||
Terminated
|
(47,550
|
)
|
19.93
|
||||||||||
Outstanding, December 31, 2010
|
289,371
|
$
|
13.96
|
3.7 years
|
—
|
(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 December 31, 2010 ($8.20) exceeded the exercise price of the underlying options, multiplied by the number of shares subject to each option. The total intrinsic value of stock options exercised, calculated based on the amount by which the market value of the Company’s stock at the time of exercise exceeded the exercise price, was $0, $0, and $65,060 for the years 2010, 2009 and 2008, respectively.
|
Number
of Shares
|
Weighted
Average
Remaining
Contractual Life
|
Aggregate
Intrinsic
Value
(2)
|
||||||
Outstanding & Unvested, December 31, 2007
|
51,550
|
|
|
|||||
Granted
|
34,400
|
|
||||||
Converted to common stock
|
(17,150
|
)
|
|
282,975
|
||||
Terminated
|
(1,200
|
)
|
||||||
Outstanding & Unvested, December 31, 2008
|
67,600
|
|
|
|||||
Granted
|
—
|
|
|
|||||
Converted to common stock**
|
(25,000
|
)
|
|
156,022
|
||||
Terminated
|
—
|
|
||||||
Outstanding & Unvested, December 31, 2009
|
42,600
|
|
|
|||||
Granted
|
94,000
|
|
|
|||||
Converted to common stock**
|
(21,550
|
)
|
|
179,801
|
||||
Terminated
|
(20,350
|
)
|
||||||
Outstanding & Unvested, December 31, 2010
|
94,700
|
3.0 years
|
$
|
776,540
|
||||
Available for grant, December 31, 2010
|
84,450
|
(2)
|
The aggregate intrinsic value on this table was calculated based on the closing market price of the Company’s stock on December 31, 2010 ($8.20). For
value on the grants converted to common stock, the price used is the price on the grant date.
|
*
|
Total stock based compensation expense for 2010 was $394,972.
|
**
|
Figure includes 6,064 shares in 2010 and 6,196 shares in 2009 withheld to cover federal income taxes.
|
Amount
|
||||
Years Ending December 31:
|
|
|||
2011
|
546,000
|
|||
2012
|
534,000
|
|||
2013
|
101,000
|
|||
2014
|
103,000
|
|||
2015
|
45,000
|
|||
Thereafter
|
9,000
|
|||
|
$
|
1,338,000
|
Quarter Ended (000’s Except per Share Amounts)
|
||||||||||||
|
March 31,
2010
|
June 30,
2010
|
September 30,
2010
|
December 31,
2010
|
||||||||
Revenues
|
$
|
4,464
|
$
|
5,422
|
$
|
5,106
|
$
|
5,117
|
||||
Gross profit
|
2,554
|
3,380
|
3,026
|
3,082
|
||||||||
Income from operations
|
836
|
1,564
|
1,336
|
678
|
||||||||
Net income
|
506
|
873
|
817
|
418
|
||||||||
Basic net income per share
|
0.09
|
0.17
|
0.16
|
0.08
|
||||||||
Diluted net income per share
|
0.09
|
0.17
|
0.16
|
0.08
|
Quarter Ended (000’s Except per Share Amounts)
|
||||||||||||
|
March 31,
2009
|
June 30,
2009
|
September 30,
2009
|
December 31,
2009
|
||||||||
Revenues
|
$
|
4,078
|
$
|
3,934
|
$
|
4,670
|
$
|
4,271
|
||||
Gross profit
|
2,092
|
2,106
|
2,890
|
2,522
|
||||||||
Income from operations
|
53
|
298
|
1,273
|
960
|
||||||||
Net income
|
39
|
174
|
768
|
546
|
||||||||
Basic net income per share
|
0.01
|
0.03
|
0.15
|
0.11
|
||||||||
Diluted net income per share
|
0.01
|
0.03
|
0.15
|
0.10
|
|
(a)
|
Up to 10% of Base Salary based on the Company’s achievement of pre-determined revenue and net income goals for 2011
|
|
(b)
|
Up to 10% of Base Salary based on the employee’s achievement of pre-determined individual goals for 2011
|
|
(c)
|
Up to 5% of Base Salary based on the Company’s achievement of pre-determined customer service goals for 2011
|
Name
|
Age
|
Position
|
||
Raymond C. Kubacki
|
66
|
Chairman, Chief Executive Officer, President, Director
|
||
Neil Lerner
James Dyke
|
43
46
|
Vice President, Controller
Corporate Vice President, Sales & Marketing
|
||
Michael I. Schaffer, Ph.D.
|
66
|
Vice President, Laboratory Operations
|
||
Harry Connick
|
85
|
Director, Audit Committee member, Compensation Committee Member, Nominating Committee member
|
||
Walter S. Tomenson, Jr.
|
64
|
Director, Audit Committee member, Compensation Committee Member, Nominating Committee member
|
||
Fred J. Weinert
|
63
|
Director, Audit Committee member, Compensation Committee Member, Nominating Committee member
|
PSYCHEMEDICS CORPORATION
|
|||
Date: March 25, 2011
|
By:
|
/s/ Raymond C. Kubacki
|
|
Raymond C. Kubacki
|
|||
Chairman, President and Chief Executive Officer
|
/s/ Raymond C. Kubacki
|
Chairman, President and Chief Executive Officer,
|
March 25, 2011
|
||
Raymond C. Kubacki
|
Director
|
|||
|
(Principal Executive Officer)
|
|||
/s/ Neil Lerner
|
Vice President, Controller
|
March 25, 2011
|
||
Neil Lerner
|
(Principal Financial and Accounting Officer)
|
|||
|
||||
/s/ Harry Connick
|
Director
|
March 25, 2011
|
||
Harry Connick
|
||||
/s/ Walter S. Tomenson, Jr.
|
Director
|
March 25, 2011
|
||
Walter S. Tomenson, Jr.
|
||||
/s/ Fred J. Weinert
|
Director
|
March 25, 2011
|
||
Fred J. Weinert
|
Exhibit
Number
|
Description
|
|
3.1
|
Amended and Restated Certificate of Incorporation filed on August 1, 2002 — (Incorporated by reference from the Registrant’s Quarterly Report on Form 10-Q for the Quarter ended September 30, 2002).
|
|
3.2
|
By-Laws of the Company — (Incorporated by reference from the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001).
|
|
4.1
|
Specimen Stock Certificate — (Incorporated by reference from the Registrant’s Registration Statement on Form 8-A filed on July 31, 2002).
|
|
10.1
|
License Agreement with Werner Baumgartner, Ph.D. and Annette Baumgartner dated January 17, 1987 — (Incorporated by reference from the Registrant’s Registration Statement on Form S-18, File No. 33-10186 LA).
|
|
10.2.1
|
Lease dated October 6, 1992 with Mitchell H. Hersch, et. al with respect to premises in Culver City, California — (Incorporated by reference from the Registrant’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 1992).
|
|
10.2.2
|
Security Agreement dated October 6, 1992 with Mitchell H. Hersch et. al — (Incorporated by reference from the Registrant’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 1992).
|
|
10.2.3
|
First Amendment to Lease dated with Mitchell H. Hersch, et.al California — (Incorporated by reference from the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1997).
|
|
10.2.4
|
Second Amendment to Lease dated with Mitchell H. Hersch, et.al. California — (Incorporated by reference from the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1997).
|
|
10.2.5
|
Third Amendment to Lease dated December 31, 1997 with Mitchell H. Hersch, et.al. California — (Incorporated by reference from the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1997).
|
|
10.2.6
|
Fourth Amendment to Lease dated May 24, 2005 with Mitchell H. Hersch, et.al. California — (Incorporated by reference from the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005).
|
|
10.2.7
|
First Amendment to Lease dated December 10, 1999 with Isabelle Greenspan, et.al. California 5840 Uplander Way
|
|
10.3*
|
2000 Stock Option Plan, — (Incorporated by reference from the Registrant’s Quarterly Report on Form 10-Q for the Quarter ended September 30, 2002).
|
|
10.4*
|
Amended and restated change in Control Severance Agreement with Raymond C. Kubacki dated July 10, 2008 — (Incorporated by reference from the Registrant’s current report on form 8-k, filed on July 14, 2008.)
|
|
10.5*
|
2006 Equity Incentive Plan — (Incorporated by reference from the Registrant’s Current Report on Form 8-K filed on May 17, 2006).
|
Exhibit
Number
|
Description
|
|
10.6*
|
Form of Stock Unit Award used with employees and consultants under the 2006 Equity Incentive Plan — (Incorporated by reference from the Registrant’s Current Report on Form 8-K filed on May 17, 2006).
|
|
10.7*
|
Form of Stock Unit Award used with non-employee directors under the 2006 Equity Incentive Plan — (Incorporated by reference from the Registrant’s Current Report on Form 8-K filed on May 17, 2006).
|
|
10.8*
|
Change in control severance agreement with Michael Schaffer PhD dated July 10, 2008 (Incorporated by reference from the registrant’s current report on Form 8-k filed on July 14, 2008)
|
|
10.9*
|
Amendment dated November 3, 2008 to change in control severance agreement with Ray Kubacki. (Incorporated by reference from the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008).
|
|
10.10*
|
Amendment dated November 3, 2008 to change in control severance agreement with Michael Schaffer. (Incorporated by reference from the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008).
|
|
10.11*
|
Employment offer letter dated April 7, 2010 with James Dyke (incorporated by reference from Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010)
|
|
10.12*
|
Change in Control Severance Agreement with James V Dyke dated April 7,2010 (Incorporated by reference from Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010)
|
|
10.13*
|
Employment offer letter dated October 25, 2010 with Neil Lerner
|
|
23.1
|
Consent of BDO USA LLP, Independent Registered Public Accounting Firm
|
|
31.1
|
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
31.2
|
Certification of Vice President and Controller 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 Vice President and Controller Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
*
|
Management compensation plan or arrangement
|
●
|
You will be Vice President, Controller and will be responsible for all internal and external financial reporting activities, as well as the financial analysis and planning activities necessary to grow our Company. You will work directly with me and other members of our management team in this process, as well as ensuring that the systems and analyses are in place so that we are able to better determine and control our costs and expenses and maximize our growth. This is a mainstream position which will allow you to use the full range of your financial and people skills.
|
●
|
Base salary will be $130,000 annually.
|
●
|
You will be eligible for our Management Incentive Bonus Program in 2011 which we expect to be 25% of your salary (10% for reaching company objectives, 10% for reaching personal objectives and 5% when both are accomplished). However, this program has not yet been approved for 2011 by the Board of Directors and is, therefore, subject to change.
|
●
|
You will also be eligible for our annual stock grant program in 2011 as a member of our management team.
|
●
|
You will be enrolled in our medical, dental, life and long-term disability insurance programs.
|
●
|
You will be eligible to participate in our 401K program.
|
●
|
You will be provided 3 weeks vacation.
|
/s/ BDO USA, LLP
|
Boston, Massachusetts
|
March 25, 2011
|
1.
|
I have reviewed this annual report on Form 10-K of Psychemedics Corporation (the “registrant”);
|
2.
|
Based on my knowledge, this annual 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 annual report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual report;
|
4.
|
The registrant's other certifying officer and I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we 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 annual 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 (the registrant’s fourth fiscal quarter in the case of an annual report) 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 (or persons performing the equivalent functions):
|
|
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: March 25, 2011
|
|
|
|
By:
|
/s/ Raymond C. Kubacki
|
Raymond C. Kubacki
|
|
President and Chief Executive Officer
|
|
(principal executive officer)
|
1.
|
I have reviewed this annual report on Form 10-K of Psychemedics Corporation (the “registrant”);
|
2.
|
Based on my knowledge, this annual 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 annual report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual report;
|
4.
|
The registrant's other certifying officer and I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we 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 annual 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 (the registrant’s fourth fiscal quarter in the case of an annual report) 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 (or persons performing the equivalent functions):
|
|
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: March 25, 2011
|
|
|
|
By:
|
/s/ Neil Lerner
|
Neil Lerner
|
|
Vice President, Controller
|
|
(principal financial and accounting officer)
|
|
(1)
|
The Company’s Annual Report on Form 10-K for the year ended December 31, 2010, as filed with the Securities and Exchange Commission on March 25, 2011 (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 operation of the Company.
|
Date: March 25, 2011
|
|
|
|
By:
|
/s/ Raymond C. Kubacki
|
Raymond C. Kubacki
|
|
President and Chief Executive Officer
|
|
(principal executive officer)
|
|
(1)
|
The Company’s Annual Report on Form 10-K for the year ended December 31, 2010, as filed with the Securities and Exchange Commission on March 25, 2011 (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.
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Date: March 25, 2011
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By:
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/s/ Neil Lerner
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Neil Lerner
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Vice President, Controller
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(principal financial and accounting officer)
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