FORM 10-KSB

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
(Mark One)
[X]     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
        ACT OF 1934  [FEE REQUIRED]                      
        For the fiscal year ended June 30, 1997

                                       OR

[ ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934  [NO FEE REQUIRED]
        For the transition period from _______________ to __________________

                         Commission file number 0-17449

                               PROCYON CORPORATION
              ----------------------------------------------------
             (Exact name of registrant as specified in its charter)

           Colorado                                              36-0732690
-------------------------------                           ----------------------
(State or other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                           Identification Number)

                        1150 Cleveland Street, Suite 410
                            Clearwater, Florida 34615
           ----------------------------------------------------------
          (Address of principal executive offices, including Zip Code)

          Issuer's telephone number, including area code (813) 447-2998

                 Securities registered pursuant to Section 12(b)
                                   of the Act:

                                      None

                 Securities registered pursuant to section 12(g)
                                  of the Act:

                                  Common Stock


Check  whether  the  registrant  (1) filed all  reports  required to be filed by
Section 13 or 15(d) of the  Securities  Exchange  Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports),  and (2) has been subject to such filing  requirements for the past 90
days.  Yes  X    No
          -----    -----

Check if disclosure  of delinquent  filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure  will be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB [ ]

State Issuer's revenues for its most recent fiscal year: $215,000

As of September 24, 1997, 3,637,920 shares of the registrant's Common Stock were
outstanding.  The aggregate  market value of the 287,920  shares of Common Stock
held by  non-affiliates  was $647,820 on September 24, 1997 based on a bid price
of $2.25 on such date.


                      DOCUMENTS INCORPORATED BY REFERENCE:

The  information  required by Part III of this annual report is  incorporated by
reference  to the  registrant's  definitive  proxy  statement  if filed with the
Commission  on or before  October  28, 1997 or, if such proxy  statement  is not
filed, will be filed with the Commission as an amendment to this Form 10-K under
cover of Form 10-K/A, not later than October 28, 1997.

Transitional Small Business Disclosure Format:    Yes      No  X
                                                     -----   -----



<PAGE>






                                      INDEX
                                      -----


Title                                                                  Page
-----                                                                  ----



ITEM   I   BUSINESS.............................................        3

ITEM   2  PROPERTIES............................................        5

ITEM   3  LEGAL PROCEEDINGS.....................................        5

ITEM   4  SUBMISSION OF MATTERS TO A VOTE OF
             SECURITY HOLDERS...................................        5

ITEM   5  MARKET FOR COMPANY'S COMMON EQUITY AND
             RELATED STOCK MATTERS..............................        6

ITEM   6  MANAGEMENT'S DISCUSSION AND ANALYSIS OR
             PLAN OF OPERATION..................................        6

ITEM   7  FINANCIAL STATEMENTS AND SUPPLEMENTARY
             DATA...............................................        7

ITEM   8  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
             ACCOUNTING AND FINANCIAL DISCLOSURE................        8

ITEM   9  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
              AND CONTROL PERSONS; COMPLIANCE WITH
              SECTION 16(a) OF THE EXCHANGE ACT OF
              THE REGISTRANT....................................        9

ITEM 10  EXECUTIVE COMPENSATION.................................        9

ITEM 11  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
             OWNERS AND MANAGEMENT..............................        9

ITEM 12  CERTAIN RELATIONSHIPS AND RELATED
             TRANSACTIONS.......................................        9

ITEM 13  EXHIBITS AND REPORTS ON FORM 8-K.......................       10




<PAGE>



                                     Part I



ITEM 1. BUSINESS
----------------

History and Organization

     Procyon   Corporation  (the  "Company"),   a  Colorado   corporation,   was
incorporated  on March 19,  1987.  Through  May 9, 1997,  the  Company  had been
considered a development  stage company as it continued to identify and evaluate
merger or  acquisition  candidates  for  purposes of  engaging  in its  business
activity.  As a result of the acquisition of Amerx Health Care Corp.  ("Amerx"),
the Company is no longer considered to be in the development stage.

Acquisition of Amerx

     On January 31, 1996,  the Company  entered  into an  Agreement  and Plan of
Exchange (the  "Agreement") with Amerx Health Care Corp., a corporation based in
Clearwater,  Florida which was wholly-owned by John C. Anderson  ("Amerx").  The
Agreement provided that the Company would acquire Amerx through a share exchange
in which all of the  issued  and  outstanding  Common  Shares of Amerx  would be
acquired by the Company for 3,000,000  (post-split)  shares of Common Stock (the
"Exchange").  The Agreement  provided  that as a condition to the Exchange,  the
Company  would  complete  a  five  for  one  reverse  split  of its  issued  and
outstanding Common Shares. The reverse stock split was approved by the Company's
shareholders  on April 15, 1996. The reverse stock split became  effective as of
May 8, 1996 and the Exchange was completed as of May 9, 1996.

     As a result of completing the Exchange,  the Company's business  operations
are conducted through its wholly-owned subsidiary,  Amerx. Amerx was formed as a
Florida  corporation in 1993 to develop and market proprietary  medical products
which are used in the treatment of pressure  ulcers,  dermatitis,  inflammation,
and  various  other skin  problems.  Such  problems  are most  common  among the
elderly,   particularly   residents  of  long  term  healthcare  facilities  and
diabetics. If not treated promptly and effectively,  such problems can result in
amputations,  particularly  of lower  extremities.  The  Company's  products are
generally  sold  through  distributors,  to health  care  institutions,  such as
nursing  homes,  hospitals  and home health care  providers,  and to  retailers,
including national and regional chain stores and pharmacies.

Products

     Amerx's products currently consist of Amerigel(TM)  Preventive Care Lotion,
Amerigel(TM) Ointment Wound Dressing and Amerigel(TM) Preventive Barrier Lotion.
The  Preventive  Care Lotion has  emollients  which restore  moisture to fragile
skin;  protect the skin against  tears and chafing;  and assist in prevention of
chronic pressure ulcers. The Ointment Wound Dressing is formulated to be used to
manage pressure ulcers stages I-IV,  stasis ulcers,  diabetic skin ulcers,  skin
irritations,  cuts and abrasions. The Barrier Lotion provides barrier protection
to reduce the harmful effects of urine and feces in incontinent patients.

     The Company  expects to introduce a saturated  gauze sponge  product during
the second  quarter of fiscal 1998.  The new product  consists of gauze  sponges
saturated  with the  Amerigel  Ointment  Wound  Dressing.  The sponges have been
developed for packing deep wounds,  and are expected to improve healing and keep
the wound moist and clean. The sponges will be offered in two-inch and four-inch
squares.

     Management  believes  that  each  Amerx  product  is based  on  proprietary
formulations which the Company attempts to protect as trade secret  information.
Each product is registered  with the Food and Drug  Administration  and has been
granted a National Drug Code. The Company is currently seeking a Medicare Part B
HCPCS Reimbursement Code ("Reimbursement  Code") for the Amerigel Ointment Wound
Dressing and saturated gauze sponges.  Products which carry a Reimbursement Code
qualify  for  Medicare   payments  in  an  amount  generally  equal  to  an  80%
reimbursement  amount. The Company believes that the Reimbursement Code provides
a significant sales opportunity with respect to product sales made to hospitals,
nursing homes and health care  institutions.  The applications for Reimbursement
Codes are pending on the Amerigel  Ointment  Wound  Dressing  and the  saturated
gauze sponge product. Management is not able to predict when or if the Codes may
be granted.  The Amerigel Preventive Care Lotion and the Amerigel Barrier Lotion
are not eligible for Medicare Part B reimbursement.

                                       -3-

<PAGE>




Market for Skin Treatment Products

     Amerx products are generally sold to an  institutional  market and a retail
market. The institutional  market is comprised of hospitals,  nursing homes, and
other health care  institutions  which  provide  wound care to a large number of
patients. For example, management believes that based on a study of the clinical
and  economic  impact of diabetic  neuropathy  published  by the Health  Science
Institute,  approximately  one out of five  nursing home  patients  suffers from
chronic pressure ulcers,  and that an estimated 5,000  amputations per month are
performed  due to chronic  skin  wounds.  The  Company  believes  that the Amerx
products  represent an  inexpensive,  yet  effective,  treatment and  prevention
program for chronic pressure ulcers and other skin problems which are treated in
health care institutions. The retail market for Amerx's products is comprised of
mass  merchandise  stores and  pharmacies  which sell  wound  care  products  to
individuals for their own personal use outside of health care facilities.

Sales and Marketing

     During fiscal 1997, Amerx  implemented  certain changes to its distribution
and marketing  strategy.  Prior to fiscal 1997,  Amerx relied primarily on small
distributors  which  were  granted  the  exclusive  right  to sell  products  in
specified  territories.  Such distributors  focused largely on the institutional
market.  For various  reasons,  including the lack of a  Reimbursement  Code for
Amerx products,  the exclusive  distributors  were not able to achieve the sales
levels desired by Amerx.  During fiscal 1997,  Amerx terminated its relationship
with  substantially  all of such  distributors and shifted its focus to national
and regional  distributors  which are capable of selling to the retail market as
well as the institutional market.

     The Company's principal distributors to the retail market currently include
McKesson Drug,  Amerisource and Bergen Brunswig.  To date, product  distribution
has been achieved  primarily in the Southeastern  United States.  In particular,
the  Company's  products are  presently  carried in certain  Wal-Mart  stores in
Florida and Kroger Stores in the Atlanta area, as well as independent pharmacies
throughout the Southeast.  The Company is currently  engaged in discussions with
other  distributors  in order to expand  distribution  into other  national  and
regional retail chains.

     The Company's principal  distributors to the institutional market currently
include Gulf South,  General Medical,  Owen Minor and Southland  Medical Supply.
Although  sales  to  the  institutional   market  depend  more  heavily  on  the
availability  of a  Reimbursement  Code than do sales to the retail market,  the
Company's  products are currently  used in nursing  homes,  hospitals,  and home
health care organizations located primarily in the Southeastern United States.

     Distributors purchase products from Amerx on standard credit terms. Product
returns by  distributors  are generally  permitted  only on dated products based
upon a two year expiration date.  During fiscal 1997,  retail and  institutional
sales represented  approximately 54% and 44%, respectively,  of total net sales.
Until  Reimbursement  Codes are granted  with  respect to one or more of Amerx's
products,  management  expects that retail sales will account for an  increasing
percentage of total net sales.

     The  Company   supports  its  distributors   through  product   literature,
advertising  and limited  participation  at industry  trade shows.  All existing
distributors sell Amerx products on a non-exclusive basis. The Company has seven
employees who engage in direct selling activities as well as support the efforts
of distributors.

Significant Customers

     During fiscal 1997,  McKesson  Drug,  Gulf South and DMC accounted for 14%,
13% and 40%,  respectively,  of Amerx's net sales.  McKesson Drug and Gulf South
are  current  Amerx   distributors  and  DMC  was  an  Amerx   distributor  from
approximately December 1996 through April 1997. The Company expects that certain
of its principal distributors,  such as McKesson and Gulf South, may continue to
account for a significant portion of net sales. The loss of any such distributor
could have an adverse  affect on the  Company's  future  operating  results  and
financial  condition.  The Company  will attempt to reduce its  dependence  on a
limited number of  distributors by  establishing  relationships  with additional
distributors  who are capable of  introducing  and selling Amerx products in new
geographic markets and to additional retail chains.

                                       -4-

<PAGE>



Manufacturing

     All manufacturing and packaging  activities are performed  pursuant to Good
Manufacturing Practices ("GMPs") at an FDA approved production facility operated
by an unrelated pharmaceuticals  manufacturer located near Clearwater,  Florida.
All  manufacturing  activities  are  required to comply  with the  manufacturing
practices developed by Amerx specifically for its products,  as well as the GMPs
which apply to all activities conducted by the manufacturer in the facility.  An
independent  lab performs tests on product  samples in order to confirm  quality
and performance of the products.

     Except for certain mixing kettles owned by the Company,  substantially  all
manufacturing  equipment  used to  produce  Amerx's  products  is  owned  by the
manufacturer.  An Amerx employee oversees quality control and ensures compliance
with Amerx's manufacturing  practices,  while all other manufacturing  personnel
are provided by the  manufacturer.  Raw  materials  are  purchased by Amerx from
various sources and are maintained at the manufacturing facility. Amerx does not
have a written production contract with its manufacturing  contractor or written
purchase contracts with the suppliers of raw materials. Management believes that
alternative manufacturers and suppliers could be secured if necessary.

     Amerx is currently  negotiating a new  manufacturing  contract with a large
capacity,   nationally-recognized  manufacturer.  Amerx  expects  that  a  final
agreement  will be reached with the  manufacturer  during the second  quarter of
fiscal 1998, and that the new  manufacturing  arrangements  will provide greater
assurance of product  availability,  enhance  quality  control,  and  eventually
reduce  production  costs.  Management does not expect that the costs associated
with the proposed change will be significant or that a material  interruption in
production  will  occur.  There  can  be no  assurance  that  the  proposed  new
manufacturing agreement will be finalized. In the absence of a new manufacturing
arrangement, Amerx will continue to utilize its existing contractor.

Employees

     As  of  September  15,  1997,  the  Company  had  13  full-time  employees,
consisting of seven sales  representatives,  four management employees,  and two
administrative employees.


ITEM 2. PROPERTIES
------------------

     The Company currently maintains its offices at 1150 Cleveland Street, Suite
410,  Clearwater,  Florida 34615. The Company's offices consist of approximately
2,400  square  feet of space  which is  leased  from an  unrelated  party and is
renewable annually.  The office lease requires monthly payments of approximately
$2,100.  Management  believes the facility is adequate for the Company's current
needs.


ITEM 3. LEGAL PROCEEDINGS
-------------------------

     No  material  legal  proceedings  to which the Company is party or to which
property of the Company is subject is pending and no such material proceeding is
known by management of the Company to be contemplated.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
------------------------------------------------------------

     No matter was  submitted to a vote of security  holders  during the quarter
ended June 30, 1997.

                                       -5-

<PAGE>



                                     Part II


ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCK MATTERS.
---------------------------------------------------------------------

     The Company's  securities  were traded in the  over-the-counter  market and
were listed in the "pink  sheets"  published  by the National  Quotation  Bureau
Incorporated ("NQB") following the Company's public offering in December,  1988.
However,  from  approximately  June 1990  through  September  1996,  NQB did not
publish a quotation for the Company's securities and to the Company's knowledge,
there was extremely limited, if any, public trading in its securities.

     Since  October  1996,  the  Company's  Common  Stock has  traded on the OTC
Bulletin Board, an electronic  quotation  system used by members of the National
Association of Securities Dealers,  Inc. The following table sets forth for each
period  indicated the high and low closing bid prices for the Common  Stock,  as
reported by National Quotation Bureau,  LLC. Bid quotations reflect  interdealer
quotations,  without  retail  markups,  markdowns  or  commissions,  and  do not
necessarily reflect actual transactions.

         Fiscal 1997                             High             Low
         -----------                             ----             ---

         Second Quarter...................    $    2.25        $    2.25
         Third Quarter....................    $    2.50        $     .75
         Fourth Quarter...................    $    3.50        $    1.88

     As of September 24, 1997 there were  approximately 52 record holders of the
Company's Common Shares. The closing bid price of the Common Shares on September
24, 1997 was $2.25.

     Holders of Common  Shares are entitled to receive such  dividends as may be
declared by the Company's Board of Directors.  No dividends on the Common Shares
have been paid by the Company,  nor does the Company  anticipate  that dividends
will be paid in the foreseeable future.


ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
------------------------------------------------------------------

General

     From 1990  through May 1996,  the Company  had minimal  operations  and was
considered  to be a development  stage  company.  During such time,  the Company
incurred  nominal  expenses  and its  revenues  consisted  entirely  of interest
income.  In May 1996,  the  Company  completed  its  acquisition  of Amerx.  The
acquisition was accounted for in a manner similar to a pooling-of-interest since
both  companies  were under  common  control  and,  accordingly,  the  Company's
financial   statements  include  the  Amerx  operating  results  as  though  the
acquisition  was completed on July 1, 1994. The Company's  financial  statements
for fiscal  years 1996 and 1997  therefore  reflect  the  operating  results and
financial condition of Amerx.

Liquidity and Capital Resources

     As of June 30, 1997, the Company's  principal sources of liquidity included
cash and cash equivalents of approximately $335,000,  inventories of $72,000 and
net  accounts  receivable  of $56,000.  Also at June 30,  1997,  the Company had
subscription  receivables  of  $41,000,  which have since been  received  by the
Company.  The Company had net working  capital of $410,000 and no long term debt
at June 30, 1997.

     During fiscal 1997 and 1996, cash and cash  equivalents  increased  $45,000
and decreased $24,000, respectively.  Operating activities used cash of $647,000
during fiscal 1997 and $484,000 during fiscal 1996,  consisting primarily of net
losses of $697,000 and $519,000, respectively. Cash used in investing activities
during fiscal 1997 and 1996 was $24,000 and $14,000, respectively. Cash provided
by financing  activities  during fiscal 1997 and 1996 was $716,000 and $473,000,
respectively,  consisting  of $716,000 and $471,000,  respectively,  in proceeds
from the sale of Preferred Stock.

     At June 30, 1997 the Company had no commitments for capital expenditures.

                                       -6-

<PAGE>




     The Company's  financial  statements  have been prepared  assuming that the
Company will continue as a going concern.  The Company has incurred losses since
its  inception  and has been  dependent  upon equity  financing  to fund working
capital needs.  These  conditions  raise  substantial  doubt about the Company's
ability  to  continue  as a going  concern.  Management's  plans for  increasing
revenues and reducing  losses  include  securing  new  distributors  in order to
aggressively  sell products into the retail market,  develop  complementary  new
products,  and continue to pursue a Reimbursement Code for certain products. The
accompanying  financial  statements  do not include any  adjustments  that might
result from the outcome of this uncertainty.  Subsequent to June 30, 1997, Amerx
has  established  relationships  with  several  large  distributors,  and  Amerx
products are now carried in  approximately  300 retail  locations as compared to
approximately  40 locations at June 30, 1996. There can be no assurance that the
Company will be able to increase  its revenues or achieve a profitable  level of
operations.

Results of Operations

     Comparison  of Fiscal  1997 and 1996.  Net sales  during  fiscal  1997 were
$216,000 as compared to $309,000 in fiscal 1996, a decrease of $93,000,  or 30%.
The  decrease in net sales  reflects  significant  changes in Amerx's  sales and
distribution  strategies.  During  fiscal 1995 and 1996,  the Company  relied on
small  distributors  who were granted an exclusive  right to sell Amerx products
within a specified  territory.  Such distributors focused their sales efforts on
the  institutional  market.  Although the exclusive  distributors were generally
required to make certain  minimum  purchases,  they were largely  ineffective in
selling product through to their targeted  market.  In early fiscal 1997,  Amerx
terminated its relationship with most of its exclusive  distributors,  and began
to implement a retail sales and marketing  strategy through large,  nonexclusive
distributors.  This  change in  strategy  caused net sales  during the first six
months of fiscal  1997 to decline to just  $75,000.  However,  during the second
half of fiscal 1997, the Company had net sales of $141,000, consisting primarily
of sales made by new distributors to the retail market.

     Gross profit during fiscal 1997 was $119,000 as compared to $213,000 during
fiscal 1996, a decrease of $94,000, or 213%. As a percentage of net sales, gross
profit was 55% in fiscal 1997 as compared to 71% in fiscal  1996.  The  decrease
reflects  returns  and write  offs of  expired  inventories  and  write  offs of
accounts receivable.

     Operating expenses during fiscal 1997 were $820,000, consisting of $457,000
in salaries and benefits  and  $363,000 in selling,  general and  administrative
expenses.  This compares to operating  expenses  during fiscal 1996 of $736,000,
consisting of $315,000 in salaries and benefits and $420,000 in selling, general
and administrative  expenses. The decline in selling, general and administrative
expenses  reflects,  among  other  things,  a reduction  in sales and  marketing
expenses  during  the first half of fiscal  1997  while the change in  marketing
strategy  was being  implemented.  The  increase in salaries  and  benefits is a
direct result of the increase in the number of employees. As a percentage of net
sales,  operating  expenses  during  fiscal  1997 were 380% as  compared to 240%
during  fiscal 1996.  The increase is primarily due to the decrease in net sales
and the inability to reduce certain fixed or minimum operating expenses.

     The Company  incurred a loss from  operations of $523,000 in fiscal 1996 as
compared  to  $701,000  in fiscal  1997.  The  increase  in  operating  loss was
primarily due to the significant  decline in net sales. Net loss (after dividend
requirements  for Preferred  Shares) was $590,000 during fiscal 1996 as compared
to $841,000 during fiscal 1997.

     As of June 30, 1997, the Company had a deferred tax asset of  approximately
$560,000  consisting  primarily of net operating losses.  The Company recorded a
valuation  allowance  equal to 100  percent  of the  deferred  tax  asset as the
Company  was  unable  to  determine  that it is more  likely  than  not that the
deferred  tax  asset  will  be  realized.   The  valuation  allowance  increased
approximately $237,000 from fiscal 1996 to 1997.

Recent Accounting Pronouncements

     Please  refer to the Summary of  Accounting  Policies  in the  accompanying
financial statements.



ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
---------------------------------------------------

     Consolidated  Financial  Statements  as of June 30,  1997 and for the years
ended June 30, 1997 and 1996 appear at page F-1.

                                       -7-

<PAGE>



ITEM  8.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
          FINANCIAL DISCLOSURE.
--------------------------------------------------------------------------------

     The Company had a change of its  independent  auditors  during the two most
recent  fiscal  years or  subsequent  interim  period.  On January 1, 1996,  the
Company's auditors,  Mitchell (Diamond) Finley and Company, P.C., combined their
practice  with BDO  Seidman,  LLP.  Thereafter,  BDO  Seidman,  LLP  became  the
Company's  independent  auditors.  The Company has not reported any disagreement
with its  auditors  on any  matter of  accounting  principles  or  practices  or
financial statement disclosure.



                                       -8-

<PAGE>



                                    PART III


ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
        WITH SECTION 16(a) OF THE EXCHANGE ACT OF THE REGISTRANT.
--------------------------------------------------------------------------------

ITEM 10. EXECUTIVE COMPENSATION.
--------------------------------


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
------------------------------------------------------------------------


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
--------------------------------------------------------

     The Company will file a definitive  Proxy Statement  pursuant to Regulation
14A for its annual meeting of shareholders.  The information called for by Items
9 through 12 above will be included in such definitive Proxy Statement, which is
incorporated  herein by reference.  If such  definitive  Proxy  Statement is not
filed with the  Commission  within  120 days  after the end of the  fiscal  year
covered by this  report,  then the  information  required  by such items will be
filed as an amendment to this report before the end of such 120-day period.


ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
------------------------------------------

(a)  Exhibits
     --------

     1. The  financial  statements  filed  herewith  are  listed in the Index to
Financial Statements included in Item 7.

     2. The Financial Data Schedule is filed herewith.  The remaining  documents
set forth below have been  included as  exhibits  to previous  filings  with the
Securities  and  Exchange   Commission  and  are  incorporated  herein  by  this
reference:

                                                                        Reg. S-K
Exhibit No.             Document                                        Item No.
-----------             --------                                        --------


  *   3.1      Articles of Incorporation                                   3

  +   3.1.1    Articles of Amendment to Articles of Incorporation          3

  *   3.2      Bylaws                                                      3

  +   4.1      Designation of Series A Preferred Stock                     4

  *   10.1     Incentive Stock Option Plan, authorizing 1,000,000
               Common Shares for issuance pursuant to the Plan             10

 **   10.2     Agreement and Plan of Merger, dated July 19, 1989,
               by and between the Company and Dental Health of
               America, Inc. ("DHA").                                      10

 **   10.3     Promissory Note, Guarantee and Stock Pledge Agreement, 
               dated July 19, 1989, by and between the Company, DHA
               and certain affiliates of DHA.                              10

  +   10.4     Loan and Security Agreement, dated as of January 1,
               1995, by and between the Company and Amerx Health Care 
               Corp., including Promissory Notes issued thereunder.        10

                                       -9-

<PAGE>




   o   10.4     Agreement and Plan of Exchange, dated January 31, 
                1996, by and between the Company and Amerx.                10

       27.1     Financial Data Schedule                                    27

----------
*    Incorporated by reference to the Company's  Registration  Statement on Form
     S-1, S.E.C. File No. 33-13273.

**   Incorporated  by reference to the Company's Form 10-KSB for the fiscal year
     ended June 30, 1989.

+    Incorporated  by reference to the Company's Form 10-KSB for the fiscal year
     ended June 30, 1995.

o    Incorporated  by  reference  to the  Company's  Form 8-K  filed on or about
     February 2, 1996.
----------

(b)  Reports on Form 8-K
     -------------------

     The Company  did not file any reports on Form 8-K during the quarter  ended
June 30, 1997.

                                      -10-

<PAGE>




                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) 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.

                               PROCYON CORPORATION


                             By:   /s/ John C. Anderson
                                ------------------------------------------------
                                John C. Anderson, President and acting Principal
                                Executive, Financial and Accounting Officer

Date: October 13, 1997

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities and on the dates indicated.

Signature                      Title                           Date
---------                      -----                           ----


                               President and Acting
                               Principal Executive, Financial
  /s/ John C. Anderson         and Accounting Officer          October 13, 1997
----------------------------
John C. Anderson


  /s/ Chester L. Wallack       Director                        October 13, 1997
----------------------------
Chester L. Wallack


  /s/ Fred W. Suggs, Jr.       Director                        October 13, 1997
----------------------------
Fred W. Suggs, Jr.


                               Director                        
----------------------------
Alan B. Crane







                                      -11-

<PAGE>







                                                    Procyon Corporation
                                                         and Subsidiary

                                                               Contents
================================================================================




Report of Independent Certified Public Accountants                  F-2

Consolidated Balance Sheet                                    F-3 - F-4

Consolidated Statements of Operations                               F-5

Consolidated Statements of Stockholders' Equity                     F-6

Consolidated Statements of Cash Flows                               F-7

Summary of Accounting Policies                               F-8 - F-11

Notes to Consolidated Financial Statements                  F-12 - F-15




                                                                             F-1

<PAGE>

Report of Independent Certified Public Accountants


To the Board of Directors and Stockholders
Procyon Corporation
Clearwater, Florida

We  have  audited  the  accompanying   consolidated  balance  sheet  of  Procyon
Corporation  and subsidiary (the "Company") as of June 30, 1997, and the related
consolidated  statements of operations,  stockholders' equity and cash flows for
each of the two years in the period then ended.  These financial  statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the financial position of Procyon Corporation
and subsidiary at June 30, 1997,  and the results of their  operations and their
cash flows for each of the two years in the period then ended in conformity with
generally accepted accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company will continue as a going concern. As more fully described in Note 1, the
Company has incurred  significant  operating losses and is dependent upon equity
financing to fund working  capital needs.  These  conditions  raise  substantial
doubt about the Company's  ability to continue as a going concern.  Management's
plans in  regard  to  these  matters  are  described  in Note 1.  The  financial
statements do not include any adjustments  that might result from the outcome of
this uncertainty.


                                                   BDO Seidman, LLP


Denver, Colorado
September 11, 1997

                                                                             F-2

<PAGE>
                                                        Procyon Corporation
                                                             and Subsidiary 

                                                 Consolidated Balance Sheet


================================================================================

June 30,                                                               1997
-----------------------------------------------------------------------------


Assets

Current:
  Cash and cash equivalents                                 $       335,121
  Accounts receivable, less allowance
    of $24,000 for doubtful accounts                                 55,555
  Inventories (Note 3)                                               72,357
  Subscriptions receivable (Note 6)                                  41,000
  Prepaid expenses                                                    4,378
-----------------------------------------------------------------------------


Total current assets                                                508,411
-----------------------------------------------------------------------------


Machinery and equipment, less accumulated
  depreciation of $19,669                                            31,168
-----------------------------------------------------------------------------


Other assets:
  Deposits                                                            1,267
  Employee advances                                                  34,500
-----------------------------------------------------------------------------


Total other assets                                                   35,767
-----------------------------------------------------------------------------
                                                            $       575,346
=============================================================================


             See accompanying report of independent certified public
             accountants, summary of accounting policies and notes to
             consolidated financial statements.





                                                                             F-3

<PAGE>


                                                    Procyon Corporation
                                                         and Subsidiary

                                             Consolidated Balance Sheet
                                                            (continued)

================================================================================



June 30,                                                           1997
-----------------------------------------------------------------------------


Liabilities and Stockholders' Equity

Current liabilities:
  Accounts payable, trade                           $            60,293
  Accrued expenses                                               38,472
-----------------------------------------------------------------------------


Total current liabilities                                 $      98,765
-----------------------------------------------------------------------------


Commitments and contingencies (Notes 1 and 5)

Stockholders' equity (Notes 2 and 6):
  Preferred stock, 496,000,000 shares authorized;
    none issued
  Series A  Cumulative  Convertible  Preferred  stock, 
    no par value;  4,000,000 shares authorized; 
    2,065,000 shares issued and outstanding                   1,997,850
  Common stock, no par value, 80,000,000 shares
    authorized; 3,637,920 shares issued and outstanding         724,196
  Accumulated deficit                                        (2,245,465)
-----------------------------------------------------------------------------


Total stockholders' equity                                      476,581
-----------------------------------------------------------------------------


                                                          $     575,346
=============================================================================


             See accompanying report of independent certified public
             accountants, summary of accounting policies and notes to
             consolidated financial statements.

                                                                             F-4

<PAGE>


                                                          Procyon Corporation
                                                               and Subsidiary

                                        Consolidated Statements of Operations

================================================================================



Years Ended June 30,                                1997                 1996
-------------------------------------------------------------------------------


Net sales (Note 8)                         $      215,561       $     308,668
Cost of sales                                      96,951              95,439
-------------------------------------------------------------------------------


Gross profit                                      118,610             213,229
-------------------------------------------------------------------------------


Operating expenses:
  Salaries and benefits                           457,084             315,415
  Selling, general and administrative             362,804             420,369
-------------------------------------------------------------------------------


Total operating expenses                          819,888             735,784
-------------------------------------------------------------------------------


Loss from operations                             (701,278)           (522,555)
-------------------------------------------------------------------------------


Other income (expense):
  Interest expense                                 (4,434)             (3,469)
  Interest income                                   8,401               6,631
-------------------------------------------------------------------------------


Total other income (expense)                        3,967               3,162
-------------------------------------------------------------------------------


Net loss                                         (697,311)           (519,393)
Dividend requirements on preferred stock          144,009              70,746
-------------------------------------------------------------------------------


Loss applicable to common stock            $     (841,320)      $    (590,139)
================================================================================


Net loss per common share                  $         (.23)      $        (.16)
================================================================================


Weighted average number of
  common shares outstanding                     3,637,920           3,637,920
================================================================================



             See accompanying report of independent certified public
             accountants, summary of accounting policies and notes to
             consolidated financial statements.

                                                                             F-5

<PAGE>
<TABLE>
<CAPTION>


                                                                                                               Procyon Corporation
                                                                                                                    and Subsidiary

                                                                                   Consolidated Statements of Stockholders' Equity


====================================================================================================================================


                                           Preferred Stock                     Common Stock
Years Ended June 30,               -------------------------------   -------------------------------  Accumulated
1997 and 1996                          Shares           Amount            Shares         Amount         Deficit            Total
------------------------------------------------------------------------------------------------------------------------------------


<S>                                   <C>         <C>                  <C>          <C>             <C>               <C>         
Balance, July 1, 1995                 755,000     $    755,000         3,637,920    $   724,196     $  (1,028,761)    $    450,435

  Stock issued in connection with
    private placements, net of
    stock issuance costs              594,000          567,700                 -              -                 -          567,700

  Stock issued for services             6,000            6,000                 -              -                 -            6,000

  Net loss                                  -                -                 -              -          (519,393)        (519,393)
------------------------------------------------------------------------------------------------------------------------------------

Balance, June 30, 1996              1,355,000        1,328,700         3,637,920        724,196        (1,548,154)         504,742

  Stock issued in connection with
    private placements, net of
    stock issuance costs              701,000          660,150                 -              -                 -          660,150

  Stock issued for services             9,000            9,000                 -              -                 -            9,000

  Net loss                                  -                -                 -              -          (697,311)        (697,311)
------------------------------------------------------------------------------------------------------------------------------------

Balance, June 30, 1997              2,065,000     $  1,997,850         3,637,920    $   724,196     $  (2,245,465)    $    476,581
====================================================================================================================================

               See accompanying report of independent certified public accountants, summary of accounting policies and
               notes to consolidated financial statements.

                                                                                                                                 F-6
</TABLE>

<PAGE>



                                                           Procyon Corporation
                                                                and Subsidiary

                                         Consolidated Statements of Cash Flows

================================================================================

Increase (Decrease) in Cash and Cash Equivalents

Years Ended June 30,                                    1997              1996
--------------------------------------------------------------------------------


Operating activities:
  Net loss                                      $   (697,311)     $   (519,393)
  Adjustments to reconcile net loss to
    cash used in operating activities:
      Depreciation                                     9,620             9,399
      Stock issued for services                        9,000             6,000
      Write-off of stockholder and
        employee advances                                  -            16,614
      Gain on sale of equipment                       (1,500)                -
  Changes in operating assets and liabilities:
    Accounts receivable, trade                       (37,665)            9,475
    Inventories                                       36,290           (17,092)
    Prepaid expenses                                  (4,378)            5,000
    Accounts payable, trade                            1,819            14,697
    Accrued expenses                                  37,337            (8,230)
--------------------------------------------------------------------------------

Cash used in operating activities                   (646,788)         (483,530)
--------------------------------------------------------------------------------


Investing activities:
  Purchase of machinery and equipment                 (5,948)           (1,764)
  Advances to employees and stockholder              (18,000)          (18,328)
  Repayments of advances to employees                      -             6,714
  Payment for deposit                                      -              (833)
--------------------------------------------------------------------------------

Cash used in investing activities                    (23,948)          (14,211)
--------------------------------------------------------------------------------


Financing activities:
  Proceeds from issuance of preferred stock          715,850           471,000
  Liquidation of certificate of deposit                    -           232,255
  Repayment of advances
    from stockholder                                       -          (229,862)
--------------------------------------------------------------------------------

Cash provided by financing activities                715,850           473,393
--------------------------------------------------------------------------------


Net increase (decrease) in cash and
  cash equivalents                                    45,114           (24,348)

Cash and cash equivalents, beginning of year         290,007           314,355
--------------------------------------------------------------------------------

Cash and cash equivalents, end of year          $    335,121      $    290,007
================================================================================


             See accompanying report of independent certified public
             accountants, summary of accounting policies and notes to
             consolidated financial statements.

                                                                             F-7

<PAGE>


                                                             Procyon Corporation
                                                                  and Subsidiary

                                                  Summary of Accounting Policies

================================================================================


Organization
and Business        Procyon Corporation (the "Company"), a Colorado corporation,
                    was incorporated on March 19, 1987. Through May 9, 1996, the
                    Company had been  considered a development  stage company as
                    it continued to identify and evaluate  merger or acquisition
                    candidates   for   purposes  of  engaging  in  its  business
                    activity.  As a result of the  acquisition  of Amerx  Health
                    Care Corp.  ("Amerx") discussed in Note 2, the Company is no
                    longer considered to be in the development stage.

                    As described in Note 2,  effective May 9, 1996,  the Company
                    acquired  100 percent of the issued and  outstanding  common
                    stock  of  Amerx,   a   commonly-controlled   company.   The
                    acquisition  was  accounted  for in a  manner  similar  to a
                    pooling-of-interest   and,   accordingly,    the   Company's
                    financial  statements  have been  presented  to include  the
                    results of Amerx as though the  acquisition  occurred  as of
                    July 1, 1994.

                    The Company  manufacturers  and markets  wound care and skin
                    care products primarily in the United States and is actively
                    seeking foreign market distribution.


Basis of
Presentation and
Principles of
Consolidation       The consolidated  financial  statements include the accounts
                    of  Procyon  Corporation  and its wholly  owned  subsidiary,
                    Amerx,  acquired  during  1996 as  discussed  in Note 2. All
                    material   intercompany   accounts  and   transactions   are
                    eliminated.

                    Effective May 9, 1996,  the Company  effected a five for one
                    reverse  split of its then  issued  and  outstanding  common
                    stock in anticipation of its acquisition of Amerx. All share
                    and per  share  information  in the  accompanying  financial
                    statements  has been  retroactively  restated to reflect the
                    reverse stock split.


                                                                             F-8

<PAGE>




                                                             Procyon Corporation
                                                                  and Subsidiary

                                                  Summary of Accounting Policies

================================================================================

Use of Estimates    The  preparation of financial  statements in conformity with
                    generally accepted accounting principles requires management
                    to make estimates and  assumptions  that affect the reported
                    amounts  of  assets  and  liabilities,   the  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.  Actual  results
                    could differ from those estimates.

Concentrations of
Credit Risk         Financial  instruments which potentially subject the Company
                    to  concentrations of credit risk consist primarily of cash,
                    cash equivalents and accounts receivable. The Company places
                    its cash and cash  equivalents  in what it  considers  to be
                    highly-rated  financial institutions and while at times such
                    amounts may exceed federally insured limits, the Company has
                    not experienced any losses from such amounts. Concentrations
                    of credit  risk with  respect  to  accounts  receivable  are
                    limited due to a broad  customer  base and  generally  short
                    payment terms.

Cash Equivalents    For the purpose of the Statements of Cash Flows, the Company
                    considers cash-on-hand,  demand deposits in banks and highly
                    liquid  investments  purchased with an original  maturity of
                    three months or less to be cash equivalents.

Inventories         Inventories are valued at the lower of weighted average cost
                    or market.

Machinery and
Equipment           Machinery and equipment are stated at cost.  Depreciation is
                    computed on a straight-line  basis over the estimated useful
                    lives of the assets of five years.

Revenue
Recognition         Revenue  is   recognized   upon  the  shipment  of  finished
                    merchandise to customers.

Income Taxes        The Company  accounts  for income  taxes under  Statement of
                    Financial  Accounting  Standards  No. 109 ("SFAS No.  109").
                    Temporary  differences are differences between the tax basis
                    of assets and liabilities and their reported  amounts in the
                    financial   statements   that  will  result  in  taxable  or
                    deductible amounts in future years.


                                                                             F-9

<PAGE>




                                                             Procyon Corporation
                                                                  and Subsidiary

                                                  Summary of Accounting Policies

================================================================================

Net Loss
Per Share           Net loss per share is based on the weighted  average  number
                    of  shares   outstanding   during  each  period   presented.
                    Outstanding  stock  rights  are  included  as  common  stock
                    equivalents, when dilutive.

Recent
Accounting
Pronouncements      The Financial  Accounting  Standards Board ("FASB") recently
                    issued Statement of Financial  Accounting  Standards No. 128
                    "Earnings Per Share" ("SFAS 128") and Statement of Financial
                    Accounting  Standards  No. 129  "Disclosure  of  Information
                    About an Entity's Capital  Structure ("SFAS 129").  SFAS 128
                    provides a  different  method of  calculating  earnings  per
                    share than is currently used in accordance  with  Accounting
                    Board Opinion  ("APB") No. 15 "Earnings Per Share." SFAS 128
                    provides  for  the  calculation  of  "Basic"  and  "Diluted"
                    earnings per share.  Basic  earnings  per share  includes no
                    dilution  and is computed by dividing  income  available  to
                    common stockholders by the weighted average number of common
                    shares  outstanding  for the period.  Diluted  earnings  per
                    share  reflects the potential  dilution of  securities  that
                    could share in the  earnings of an entity,  similar to fully
                    diluted earnings per share.  SFAS 129 establishes  standards
                    for  disclosing   information   about  an  entity's  capital
                    structure.  SFAS  No.  128 and SFAS  129 are  effective  for
                    financial   statements   issued  for  periods  ending  after
                    December 15, 1997. Their  implementation  is not expected to
                    have  a  material  effect  on  the  consolidated   financial
                    statements.

                    In June 1997, FASB issued Statement of Financial  Accounting
                    Standard  No. 130  "Reporting  Comprehensive  Income  ("SFAS
                    130") and Statement of Financial Accounting Standard No. 131
                    "Disclosure  about  Segments  of an  Enterprise  and Related
                    Information ("SFAS 131"). SFAS 130 establishes standards for
                    reporting   and  display  of   comprehensive   income,   its
                    components and accumulated balances. Comprehensive income is
                    defined  to  include  all  changes  in equity  except  those
                    resulting from  investments by owners and  distributions  to
                    owners. Among other disclosures,  SFAS 130 requires that all
                    items  that are  required  to be  recognized  under  current
                    accounting  standards as components of comprehensive  income
                    be reported in a financial  statement that displays with the
                    same  prominence  as other  financial  statements.  SFAS 131
                    supersedes Statement of Financial Accounting Standard No. 14
                    "Financial Reporting for Segments of a Business Enterprise."
                    SFAS  131  establishes  standards  of the  way  that  public


                                                                            F-10

<PAGE>

                                                             Procyon Corporation
                                                                  and Subsidiary

                                                  Summary of Accounting Policies

================================================================================


                    companies  report  information  about operating  segments in
                    annual  financial   statements  and  requires  reporting  of
                    selected  information  about  operating  segments in interim
                    financial   statements   issued  to  the  public.   It  also
                    establishes standards for disclosures regarding products and
                    services,  geographic  areas and major  customers.  SFAS 131
                    defines operating  segments as components of a company about
                    which  separate  financial  information is available that is
                    evaluated regularly by the chief operating decision maker in
                    deciding  how  to  allocate   resources   and  in  assessing
                    performance.

                    SFAS 130 and SFAS 131 are effective for financial statements
                    for periods  beginning  after  December 15, 1997 and require
                    comparative  information  for earlier  years to be restated.
                    Because  of  the  recent   issuance   of  these   standards,
                    management has been unable to fully evaluate the impact,  if
                    any, the  standards may have on future  financial  statement
                    disclosures.  Results of operations and financial  position,
                    however,  will be  unaffected  by  implementation  of  these
                    standards.


                                                                            F-11

<PAGE>




                                                             Procyon Corporation
                                                                  and Subsidiary

                                      Notes to Consolidated Financial Statements

================================================================================


1. Going Concern    As reflected in the accompanying  financial statements,  the
                    Company incurred net losses of $697,311 and $519,393 for the
                    years ended June 30, 1997 and 1996.  In  addition,  net cash
                    used in  operations  was $646,788 and $483,530 for the years
                    ended  June  30,  1997  and  1996.  These  conditions  raise
                    substantial doubt about the Company's ability to continue as
                    a going concern.  Such  operating  cash  deficiency has been
                    funded  through   proceeds  from  private   preferred  stock
                    offerings, the continuance of which is uncertain.

                    Management plans to meet its operating cash  requirements by
                    increasing  sales  volume  and  gaining  better   production
                    efficiencies   by  moving   its   manufacturing   to  a  new
                    manufacturer with state of the art manufacturing capability.
                    While the Company has  significant  losses over the past two
                    years, it has met its  obligations and has established  good
                    working  relationships with its vendors.  Additionally,  the
                    Company  intends to file a  registration  statement with the
                    Securities and Exchange  Commission for a public offering of
                    its securities sometime in fiscal 1998. The ultimate results
                    of these efforts cannot be determined at the present time.

2. Acquisition      On January 31, 1996,  the Company  entered into an Agreement
                    and Plan of  Exchange  (the  "Agreement")  with  Amerx.  The
                    Agreement  provides that the Company acquire Amerx through a
                    share  exchange  in which all of the issued and  outstanding
                    common   stock  of  Amerx  was   exchanged   for   3,000,000
                    (post-split)  shares of  common  stock of the  Company  (the
                    "Exchange").  The Agreement provides,  as a condition of the
                    Exchange,  that the Company  complete a five for one reverse
                    split of its issued and outstanding  shares of common stock.
                    The  president and majority  stockholder  of the Company was
                    the sole  stockholder  of Amerx prior to the Exchange  which
                    was completed effective May 9, 1996.

                    Considering  the  nature  of the  relationship  between  the
                    Company and Amerx,  the  transaction  is considered to be an
                    exchange  between   enterprises  under  common  control  and
                    accordingly, it has been accounted for at historical cost in
                    a manner similar to that in pooling-of-interests  accounting
                    with the  accompanying  financial  statements  presented  to
                    include the accounts and operations of the acquired  company
                    as though the acquisition had occurred as of July 1, 1994.



                                                                            F-12

<PAGE>

                                                             Procyon Corporation
                                                                  and Subsidiary

                                      Notes to Consolidated Financial Statements

================================================================================

3. Inventories

                    Inventories consisted of the following:

                    June 30,                                1997
                    --------------------------------------------


                    Finished goods                      $ 20,422
                    Raw materials                         51,935
                    --------------------------------------------

                                                        $ 72,357
                    ============================================



4. Related Party
   Transactions     During fiscal 1995, the majority  stockholder of the Company
                    advanced  $348,363  to the  Company  which  was used to fund
                    operations  and an investment  in a certificate  of deposit.
                    Effective July 1, 1995, the stockholder contributed $117,500
                    of the advance plus accrued interest of $15,500 into capital
                    which was accounted for as part of the Exchange discussed in
                    Note 2. The  remainder  of the advances  were repaid  during
                    fiscal 1996.

5. Commitments      Operating Leases
   and
   Contingencies    The Company leases office space and certain  equipment under
                    operating  leases  expiring at various  dates  through 2001.
                    Rent  expense  under  these  agreements  was  approximately 
                    $34,900  and  $32,600  for the years ended June 30, 1997 and
                    1996.  Future minimum rentals under the operating leases are
                    as follows:                                              
                    

                    Year Ending June 30,
                    --------------------------------------------

                    1998                                $ 33,600
                    1999                                   6,800
                    2000                                   4,300
                    2001                                   4,300
                    --------------------------------------------

                                                        $ 49,000
                    ============================================




                                                                            F-13

<PAGE>


                                                             Procyon Corporation
                                                                  and Subsidiary

                                      Notes to Consolidated Financial Statements
                    
================================================================================


                    Product Liability Insurance

                  
6. Stockholder's
   Equity           During  January  1995,  the  Company's  Board  of  Directors
                    authorized the issuance of up to 4,000,000  shares of Series
                    A  Cumulative   Convertible   Preferred   Stock  ("Series  A
                    Preferred Stock"). As of June 30, 1997 and 1996, the Company
                    had  preferred  stock  sales   resulting  in   subscriptions
                    receivable  of $41,000 and $96,700.  Such  receivables  were
                    collected  in  July  of  the  subsequent  fiscal  year.  The
                    preferred  stockholders  are entitled to receive,  as and if
                    declared by the board of directors,  quarterly  dividends at
                    an annual rate of $.10 per share of Series A Preferred Stock
                    per annum.  Dividends will accrue without  interest and will
                    be  cumulative  from the date of  issuance  of the  Series A
                    Preferred Stock and will be payable  quarterly in arrears in
                    cash or publicly traded common stock when and if declared by
                    the board of  directors.  As of June 30, 1997,  no dividends
                    have been declared.  Dividends in arrears on the outstanding
                    preferred  shares total  $214,755 as of June 30,  1997.  The
                    preferred  stockholders have the right to convert each share
                    of Series A Preferred  Stock into one share of the Company's
                    common stock at any time without  additional  consideration.
                    However,  each share of Series A Preferred  Stock is subject
                    to  mandatory  conversion  into one share of common stock of
                    the Company,  effective as of the close of a public offering
                    of the Company's  common stock provided,  however,  that the
                    offering  must  provide a  minimum  of $1  million  in gross
                    proceeds to the Company  and the initial  offering  price of
                    such common stock must be at least $1 per share. In addition
                    to the rights  described  above, the holders of the Series A
                    Preferred  Stock will have equal voting rights as the common
                    stockholders based upon the number of shares of common stock
                    into which the Series A Preferred Stock is convertible.  The
                    Company is obligated to reserve an adequate number of shares
                    of its common stock to satisfy the  conversion of all of the
                    outstanding Series A Preferred Stock.

7. Income Taxes
   and Available
   Carryforwards    The  Company's  deferred tax asset at June 30, 1997 consists
                    primarily of net operating loss  carryforwards  which, after
                    the  tax  effect,  amount  to  approximately  $560,000.  The
                    Company  has  recorded a  valuation  allowance  equal to 100


                                                                            F-14
<PAGE>


                                                             Procyon Corporation
                                                                  and Subsidiary

                                      Notes to Consolidated Financial Statements
                    
================================================================================


                    percent of the  deferred tax asset as the Company was unable
                    to  determine  that it is more  likely  than  not  that  the
                    deferred tax asset will be realized. The valuation allowance
                    increased approximately $237,000 from June 30, 1996 to 1997.

                    At June 30, 1997,  for income tax purposes,  the Company had
                    net operating loss carryforwards of approximately $1,623,000
                    which expire through 2012.

8. Major
   Customers
   and Supplier     During  the year  ended  June  30,  1997,  three  individual
                    customers  accounted  for 42%, 15% and 14% of the  Company's
                    net  sales.  During  the year  ended  June 30,  1996,  three
                    individual  customers  accounted for 16%, 11% and 10% of the
                    Company's net sales.

                    The Company's  manufacturing  and packaging  activities  are
                    performed at a production  facility  owned and operated by a
                    non-affiliated   pharmaceutical   manufacturer   under   the
                    supervision of Company personnel.  The Company does not have
                    written contracts with the manufacturer or with suppliers of
                    raw  materials.  Management is  negotiating a  manufacturing
                    agreement  with  a  large  capacity,  nationally  recognized
                    manufacturer.


9. Supplemental
   Disclosures of
   Cash Flow
   Information      Cash paid for interest for the years ended June 30, 1997 and
                    1996 was $4,434 and $3,469.

                    Non-cash investing and financing activities consisted of the
                    following:

                    Years Ended June 30,                  1997          1996
                    ------------------------------------------------------------


                    Preferred stock issued for
                     subscription receivable           $ 41,000     $   96,700

                    Preferred stock issued for
                     commissions relating to
                     offering                          $      -     $   26,300
                    ============================================================



                                                                            F-15