FORM 10-KSB/A
                                 Amendment No. 1

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                     For the fiscal year ended June 30, 2006
                         Commission file number 0-17449

                               PROCYON CORPORATION
                               -------------------
                 (Name of small business issuer in its charter)

                  Colorado                            59-3280822
                  --------                            ----------
         (State of incorporation)               (I.R.S. Employer ID No.)

              1300 South Highland Avenue, Clearwater, Florida 33756
              -----------------------------------------------------
               (Address of principal executive offices)(Zip Code)

         Issuer's telephone number, including area code: (727) 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 issuer is not required to file reports pursuant to Section 13
or 15(d) of the Exchange Act. [ ]

Check whether the issuer (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 there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B 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. [X]

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

Revenues for the fiscal year ended June 30, 2006: $2,313,345.

The aggregate market value of the 3,726,188 shares of Common Stock held by
non-affiliates was $1,490,475 on September 26, 2006 based on the average bid and
asked price of $.40 on such date. As of September 26, 2006, there were 8,049,588
shares of the issuers Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:
None

Transitional Small Business Disclosure Format: Yes [ ] No [X]

<PAGE>


                                      INDEX


Title                                                                     Page

         Explanatory Note                                                   3

ITEM 1.  DESCRIPTION OF BUSINESS                                            3

ITEM 2.  DESCRIPTION OF PROPERTY                                            8

ITEM 3.  LEGAL PROCEEDINGS                                                  8

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                8

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS           9

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION         11

ITEM 7.  FINANCIAL STATEMENTS                                              17

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
            ACCOUNTING AND FINANCIAL DISCLOSURE                            17

ITEM 8A. CONTROLS AND PROCEDURES                                           17

ITEM 8B. OTHER INFORMATION                                                 18

ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                19

ITEM 10. EXECUTIVE COMPENSATION                                            23

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS,
             MANAGEMENT AND RELATED STOCKHOLDER MATTERS                    26

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                    27

ITEM 13. EXHIBITS                                                          28

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES                            29


                                        2
<PAGE>

                                Explanatory Note
                                ----------------

     This amendment on Form 10-KSB/A to Procyon Corporation's annual report on
Form 10-KSB, amends the original filing. Except as set forth in Part II, Item 8B
and Part III, Items 9, 10, 11 and 12, no other changes are being made to the
original report, which was filed on September 29, 2006.


                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

History and Organization

     Procyon Corporation (the "Company" or "Procyon"), a Colorado corporation,
was incorporated on March 19, 1987 and was deemed a development stage company
until May 1996 when we acquired Amerx Health Care Corp. ("Amerx"), a corporation
based in Clearwater, Florida, which was wholly owned by John C. Anderson, our
now deceased Chief Executive Officer. Amerx develops and markets proprietary
medical products used in the treatment of pressure ulcers, dermatitis,
inflammation and other skin problems. We formed Sirius Medical Supply, Inc.
("Sirius"), a Florida corporation, in 2000 to operate as a full service mail
order medical supply company, selling primarily to Medicare customers. Amerx and
Sirius are wholly owned subsidiaries of Procyon. Historically, Amerx's products
have been sold through distributors to healthcare institutions, such as
physicians, nursing homes and home health care agencies, and to retailers,
including national and regional chain stores and pharmacies, while Sirius's
products are sold directly to Medicare and Medicaid patients.

Products

     Amerx Health Care Corp.

     Amerx's principal products consist of AmeriGel(R) Hydrogel Wound Dressing,
Amerigel(R) Hydrogel Saturated Gauze Dressing, AmeriGel(R) Preventive Care
Lotion, AmeriGel(R) Preventive Barrier Lotion, and AmeriGel(R) Saline Wound
Wash. The AmeriGel(R) Hydrogel Wound Dressing and Amerigel(R) Hydrogel Saturated
Gauze Dressing are formulated to be used as a wound dressing to manage pressure
ulcers in stages I-IV, stasis ulcers, diabetic skin ulcers, post surgical
incisions, cuts, abrasions, first and second degree burns, and skin irritations.
The AmeriGel(R) Preventive Care Lotion is a therapeutic skin conditioner
containing emollients, which restore moisture to fragile skin, protect the skin
against tears and chafing, and assist in prevention of chronic pressure ulcers.
The AmeriGel(R) Barrier Lotion provides barrier protection to shield the skin
from excess moisture and reduce the harmful effects to the skin of urine and
feces in incontinent patients. The AmeriGel(R) Saline Wound Wash was introduced
as a preserved non-sterile wound cleanser that contains saline and Oakin. The
industry standard for wound cleansing has been saline, since tap water has
chemicals and additives that can potentially be harmful to a chronic wound.

                                       -3-
<PAGE>

     Amerx did not introduce any new product to the market in the year ended
June 30, 2006 ("fiscal 2006"). Amerx does, however, plan to introduce a new
product to market in August of 2006, the AmeriGel(R) Post-Op Surgical Kit. The
Amerigel Post-Op Surgical Kit is designed to provide patients with products
needed for post-op surgical care.

     Amerx now holds two Medicare reimbursement codes covering both of our wound
care products. The first reimbursement code is for the Amerigel(R) Hydrogel
Wound Dressing, reimbursed at 3 ounces per month. The second reimbursement code
is for the Amerigel(R) Hydrogel Saturated Gauze Dressing, and is reimbursed on a
per pad or per use basis. Amerx believes that these reimbursement codes are
beneficial to its business, providing the ability for customers to charge
Medicare for the use of the product. Reimbursement codes have aided sales to the
professional market, and we believe will be beneficial in creating sales in new
market segments.

     We did not spend any funds towards research and development efforts over
the past 3 fiscal years, but believe this will change in fiscal 2007, as more
studies are anticipated to develop new markets.

     Each Amerx product is based on proprietary formulations, which we protect
as trade secret information. Each product is also registered with the Food and
Drug Administration and receives a National Drug Code.

     Amerx's increase in sales was primarily due to increased market share and
improved sales across the full AmenGel(R) product line. The AmenGel(R) product
line continues to gain acceptance within the medical community.

Sirius Medical Supply

     Sirius's products consist primarily of diabetic supplies, glucose monitors,
heating pads, lancets, test strips, syringes and wound care products. Sirius
expects to continue to develop successful products for sale in the Medicare
arena to different specialties. The addition of these specialty customers would
help Sirius to reach its goal of becoming a full service mail order medical
supply company. Sirius continues to sustain its customer base with
advertisements and referrals and continually tests new methods for reaching new
customers. Sirius has a website (www.siriusmedical.com) to serve new and
existing customers. Sirius did not spend any funds on research and development
over the past three fiscal years.

Market for Products

     The institutional market for Amerx's skin and wound care treatment products
is primarily comprised of hospitals, nursing homes, home health care agencies
and other health care institutions. We believe that AmeriGel(R)products
represent an inexpensive, yet effective, treatment and prevention program for

                                      -4-
<PAGE>

chronic pressure ulcers and other skin problems, which are treated in health
care institutions. To date we have not realized the market penetration we had
hoped for in the institutional market. However, we will continue to explore
various strategies to pursue this market. We believe a market exists for the
Amerx formulations in dermatological applications.

     The retail market for Amerx's skin care and wound care products is
comprised mainly of national and regional chain stores as well as independent
retail pharmacies that sell such products to individuals. We believe that Amerx
made progress in this market in fiscal 2006, through increased sales to national
distributors, including sales of multiple products in our Amerx line.

     The market for Sirius's products is primarily comprised of diabetic
patients who receive benefits from Medicare or Medicaid, or from their insurance
companies. Sirius attracts these customers through advertising, direct marketing
and referrals.

Distribution and Sales

     Amerx's traditional method of distribution has been through retail and
institutional distributors. We expect to continue increasing our distributor
base, particularly with distributors capable of introducing Amerx's products in
new geographical areas and to new retail chains. Distributors typically purchase
products from Amerx on standard credit terms. Amerx 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.

     Sirius's channel of distribution is direct to consumers by mail order. We
have attracted and retained customers through our marketing efforts which
include trade shows and physician education. Sirius developed a website in 2006,
complete with online shopping cart to help develop other channels of product
sales. The Company believes it has substantial potential for increased sales as
the diabetic market contains over 20.8 million diabetics in the United States,
and is growing, according to the American Diabetes Association.

     We periodically receive inquiries about foreign market distribution. These
inquiries have been generated by our advertising, market presence and web sites
(www.amerxhc.com and www.amerigel.com). We intend to respond to and pursue all
such inquiries.

     In fiscal 2006, Amerx generated gross revenues of apporximately $1,972,000
and Sirius, $341,000, which constituted 85% and 15%, respectively, of our total
gross revenues.

Significant Customers

     Amerx's customer base has become more diversified over the past fiscal
years. We believe that, while any customer loss would have some harmful effect
on our revenues, no single customer accounted for over five percent of our
annual gross sales. Thus, we do not believe that the loss of any single customer

                                       -5-
<PAGE>

would have a material adverse effect on our financial condition or the results
of our operations. The Company has been able to maintain relationships with its
distributors and has been able to establish relationships with a few new
distributors each year. Sirius has no significant customers as it sells only to
end users.

Manufacturing

     During fiscal 2006, manufacturing of all of Amerx's products was completed
by a small family owned manufacturing facility. This company also performed
research and development in the past, and we expect that it will perform
research and development activities for Amerx in the future, when needed. Amerx
does not have a written contract with this manufacturer and there are no minimum
purchase requirements. We believe there are other companies that could
manufacture Amerx's products according to its specifications, if necessary. The
Company's manufacturing and packaging activities are performed at a production
facility owned and operated by a non-affiliated pharmaceutical manufacturer. At
the present time, the manufacturer is the sole source of our wound care
products. The sudden loss or failure of this manufacturer could significantly
impair Amerx's ability to fulfill customer orders on a short-term basis and
therefore, could materially and adversely affect the Company's operations.
However, we have maintained a long-term relationship with this manufacturer and
do not expect a discontinuance of its wound care products from the manufacturer
in the near term.

     Amerx's manufacturing and packaging activities are performed pursuant to
current good manufacturing practices ("CGMP") as defined under the United States
Federal Food, Drug and Cosmetic Act, as amended (the "FFDC Act"), and the
regulations promulgated under the FFDC Act. All manufacturing activities are
required to comply with the product specifications, supplies and test methods
developed by Amerx specifically for its products, as well as the CGMP.

     A single manufacturer furnishes one proprietary ingredient contained in all
of Amerx's products. Amerx does not have a written contract with this supplier
and management believes that, if necessary, an alternative supplier could be
secured within a reasonable period of time. The manufacturer generally provides
other raw materials and ingredients and we believe there are numerous other
sources for these materials and ingredients. However, there can be no assurance
that Amerx would be able to timely secure an alternative supplier and the
failure to replace this supplier in a timely manner could materially harm
Amerx's operations. We believe that we have a good working relationship with
this supplier and do not anticipate any disruption of supplies.

     Sirius purchases its products from several different medical companies
either on a direct basis, or through medical distributors. Sirius carries most
major brands of diabetic testing products as well as some off brand products. We
believe that if Sirius lost one or more of its suppliers, this would not have an
adverse material impact on Sirius's business, as there are other suitable
suppliers, as well as an assortment of products that achieve similar results.

                                      -6-
<PAGE>

Proprietary Rights

     In January 1999, the United States Patent and Trademark Office registered
the Company's AmeriGel(R)trademark. Amerx has made a trademark application for
the principal proprietary ingredient used in all of its currently available
products. Amerx relies on a combination of trademark and trade secret protection
and confidentiality agreements to establish and protect its proprietary rights.

Competition

     The market for skin and wound care treatment products in which Amerx
operates is highly competitive and fragmented. Competition is intense and is
based primarily on product efficacy, brand recognition, loyalty, quality, price
and availability of shelf space in the retail market. Amerx competes against
several large well-capitalized companies offering a broad range of skin
treatment products as well as numerous small competitors having a limited number
of products. Many of these competitors have longer operating histories, better
name recognition and greater financial, marketing and other resources than
Amerx.

     The market for diabetic supplies is also highly competitive, and Sirius
competes with several large companies for market share. Sirius can compete on
the same level as these other companies as to product offerings. However, until
Sirius's customer base grows, larger companies will benefit from volume
discounts on purchases from suppliers that Sirius does not yet receive. We
believe Sirius's success will hinge on customer service rather than product
margin.

Order Placement and Backlog

     The Company has not experienced any material backlog in orders placed in
the past two fiscal years. Orders are only shipped when they are 100% complete.

Governmental Approvals and Regulations

     The production and marketing of our products are subject to regulation for
safety, efficacy and quality by numerous governmental authorities in the United
States. Amerx's advertising and sales practices are subject to regulation by the
Federal Trade Commission (the "FTC"), the FDA and state agencies. The FFDC Act,
as amended, the regulations promulgated thereunder, and other federal and state
statutes and regulations govern, among other things, the testing, manufacture,
safety, effectiveness, labeling, storage, record keeping, approval, advertising
and promotion of Amerx's products. The FDA regulates the contents, labeling and
advertising of many of Amerx's products. Amerx may be required to obtain FDA
approval for proposed nonprescription products. This procedure involves
extensive clinical research, and separate FDA approvals are required at various
stages of product development. The approval process requires, among other
things, presentation of substantial evidence to the FDA, based on clinical
studies, as to the safety and efficacy of the proposed product. After approval,
manufacturers must continue to expend time, money and effort in production and
quality control to assure continual compliance with the current Good
Manufacturing Practices regulations.

                                      -7-
<PAGE>

     Certain of Amerx's wound and skin care products are registered with the FDA
as "devices" pursuant to the regulations under Section 510(k) of the FFDC Act. A
device is a product used for a particular medical purpose, such as to cover a
wound, with respect to which no pharmacological claim can be made. A device
which is "substantially equivalent" to another device existing in the market
prior to May 1976 can be registered with the FDA under Section 510(k) and
marketed without further testing. Amerx currently markets two products which
qualify as a medical devices, the Amerigel(R)Hydrogel Wound Dressing, and the
Amerigel(R)Hydrogel Saturated Gauze Dressing.

     Sirius's advertising and sales practices are subject to regulation by the
FTC, Medicare, and state Medicaid agencies. FDA approvals for its products are
obtained by the respective manufacturer. Medicare and Medicaid regulate
advertising, sales pricing, and the guidelines under which Sirius operates.

     We believe that we and our subsidiaries are in compliance with all
applicable laws and regulations relating to our and their operations in all
material respects. We believe that compliance with the various provisions of
national, state and local environmental laws and regulations has not had a
material adverse effect upon the capital expenditures, earnings, financial
position, liquidity or competitive position of the Company.

Employees

     As of September 1, 2006, the Company and its subsidiaries employ a total of
12 full time employees, consisting of 3 management employees, 6 sales-related
employees and 3 administrative employees. Eight employees work under the Amerx
subsidiary, and three employees under Sirius.


ITEM 2.  PROPERTIES

     We currently maintain our offices, and those of Amerx and Sirius, at 1300
South Highland Ave, Clearwater, Florida 33756. Our offices consist of
approximately 3,800 square feet of space. We believe the facility is adequate
for our current needs. The Company leased this building until July 2006, when it
purchased the building, from the lessor for $550,000. In addition, at the same
time, we closed on a loan provided by Bank of America, N.A. in the amount of
$508,000, evidenced by a promissory note. Further, the purchase and loan were
secured by a Mortgage, also dated July 21, 2006, between the Company and Bank of
America. Our Chief Executive Officer personally guaranteed the loan.


ITEM 3.  LEGAL PROCEEDINGS

     The Company and its subsidiaries are not a party to any pending material
legal proceedings nor is our property the subject of a pending legal proceeding.


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

     None.


                                       -8-
<PAGE>

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

     Since October 1996, the Company's Common Stock has been 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 inter-dealer
quotations, without retail markups, markdowns or commissions, and do not
necessarily reflect actual transactions.

Fiscal 2005                                       HIGH               LOW
First Quarter                                   $   .30           $   .15
Second Quarter                                  $   .51           $   .15
Third Quarter                                   $   .85           $   .43
Fourth Quarter                                  $   .50           $   .16

Fiscal 2006
First Quarter                                   $   .42           $   .21
Second Quarter                                  $   .55           $   .25
Third Quarter                                   $   .35           $   .25
Fourth Quarter                                  $   .55           $   .23


     As of September 25, 2006, there were approximately 158 record holders of
the Company's Common Stock. On September 20, 2006, the closing bid price of the
Company's common stock was $.40 and the closing ask price was $.40. On September
26, 2006, the last date on which a sale occurred, the last reported sale price
was $.32.

     Holders of Common Stock are entitled to receive such dividends if declared
by the Company's Board of Directors. The Company has declared no dividends on
the Common Stock.

     Holders of the Series A Cumulative Convertible Preferred Stock (the
"Preferred Stock") are entitled to receive, if declared by the Board of
Directors, quarterly dividends at an annual rate of $.10 per share. Dividends
accrue without interest, from the date of issuance, and are payable in arrears
in cash or common stock, when and if declared by the Board of Directors. No
dividends had been declared or paid at June 30,2006, and dividends, if ever
declared, in arrears at such date total $186,861.

                                      -9-
<PAGE>

     Holders of the Preferred Stock have the right to convert their shares of
Preferred Stock into an equal number of shares of Common Stock of the Company.
In addition, every holder of Preferred Stock is entitled to that number of votes
equal to the number of shares of Common Stock into which the holder's Preferred
Stock is convertible. Such preferred shares will automatically convert into one
share of Common Stock at the close of a public offering of Common Stock by the
Company provided the Company receives gross proceeds of at least $1,000,000, and
the initial offering price of the Common Stock sold in such offering is equal to
or in excess of $1 per share. During fiscal 2006, holders of 10,000 shares of
Preferred Stock voluntarily converted their Preferred shares into 10,000 shares
of Common Stock.

     As reflected in the price quotations above, there have been significant
price fluctuations in the Company's Common Stock. Factors that may have caused
or can cause market prices to fluctuate include the number of shares available
in the public float, any purchase or sale of a significant number of shares
during a relatively short time period, quarterly fluctuations in results of
operations, issuance of additional securities, entrance of such securities into
the public float, market conditions specific to the Company's industry and
market conditions in general, and the willingness of broker-dealers to effect
transactions in low priced securities. In addition, the stock market in general
has experienced significant price and volume fluctuations in recent years. These
fluctuations, which may be unrelated to a Company's operating performance, have
had a substantial effect on the market price for many small capitalization
companies such as the Company. Factors such as those cited above, as well as
other factors that may be unrelated to the operating performance of the Company,
may significantly affect the price of the Common Stock.

Equity Compensation Plan Information

     The following table contains information regarding Procyon's equity
compensation plan as of June 30, 2006. The only equity compensation plan
maintained by Procyon is the company's Omnibus Stock Option plan (the "Option
Plan"). The Option Plan was approved by the shareholders of Procyon in 1998.

<TABLE>
<CAPTION>

Plan Category              Number of Securities       Weighted-average          Number of securities
                           to be issued upon          exercise price of         remaining available for
                           exercise of                outstanding options,      future issuance under
                           outstanding options,       warrants and rights       equity compensation
                           warrants and rights                                  plans (excluding
                                                                                securities reflected in
                                                                                column (a))
                                 ( a )                       ( b )                     ( c )

<S>                            <C>                          <C>                       <C>
Equity compensation
plans approved by                300,000                     $0.20                    603,500
security holders

Equity compensation
plans not approved by                  0                         0                          0
security holders

Total                            300,000                     $0.20                    603,500


                                      -10-
</TABLE>
<PAGE>

1.   The total number of securities to be issued upon exercise of outstanding
     options, warrants and rights consists of options for the purchase of
     Procyon common stock issued pursuant to the Option Plan to employees,
     officers, directors and consultants. The total number of securities to be
     issued upon exercise of the options is stated, regardless of whether the
     options are currently vested.

2.   The outstanding options issued under the Option Plan range in exercise
     price from $0.15 to $0.25 per share.


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

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

     This Report on Form 10-KSB, including Management's Discussion and Analysis
or Plan of Operation, contains forward-looking statements. When used in this
report, the words "may", "will", "expect", "anticipate", "continue", "estimate",
"project", "intend", "hope", "believe" and similar expressions, variations of
these words or the negative of those words, and, any statement regarding
possible or assumed future results of operations of the Company's and its
subsidiaries' business, the markets for its products, anticipated expenditures,
regulatory developments or competition, or other statements regarding matters
that are not historical facts, are intended to identify forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934 regarding events, conditions
and financial trends including, without limitation, business conditions in the
skin and wound care market and the general economy, competitive factors, changes
in product mix, production delays, manufacturing capabilities, and other risks
or uncertainties detailed in other of the Company's Securities and Exchange
Commission filings. Such statements are based on management's current
expectations and are subject to risks, uncertainties and assumptions. Should one
or more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, the Company's actual plan of operations, business
strategy, operating results and financial position could differ materially from
those expressed in, or implied by, such forward-looking statements.

     Our business in general is subject to certain risks including but not
     limited to the following:

     -    we may not be able to produce or obtain, or may have to obtain at
          excessive prices, the raw materials and finished goods we need;
     -    we may not be able to use any tax loss carryforwards before they
          expire;

                                      -11-
<PAGE>

     -    the vendors on whom we rely for manufacturing certain products may go
          out of business, fail to meet demand or provide shipments on an
          untimely basis;
     -    competitive pressures may require us to lower our prices on certain
          products, thereby adversely affecting operational results;
     -    we may not be able to obtain, or obtain at uneconomic expense and
          protracted time, the regulatory approval of new products;
     -    consumers or distributors may not favorably receive our new or
          existing products; we may not be able to obtain adequate financing to
          fund our operations or expansion;
     -    a relatively small group of products may represent a significant
          portion of our net revenues or net earnings from time to time; if the
          volume or pricing of any of these products declines, it could have a
          material adverse effect on our business, financial position and
          results of operations;
     -    we could experience significantly reduced revenues and profits if
          Medicare or other government programs change, delay or deny
          reimbursement claims;
     -    the loss of senior management or other key personnel, or our inability
          to attract and retain additional senior management or other key
          personnel, could adversely affect our ability to execute our business
          plan;
     -    we could fail to comply with regulations applicable to our products,
          which could materially and adversely affect our business, financial
          position and results of operations; and
     -    legislative or regulatory programs that may influence prices of
          prescription drugs could have a material adverse effect on our
          business.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

     Our financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America, which require us
to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and the related disclosures. A summary of
those significant accounting policies can be found in the Notes to the
Consolidated Financial Statements included in this annual report. The estimates
used by management are based upon our historical experiences combined with
management's understanding of current facts and circumstances. Certain of our
accounting policies are considered critical as they are both important to the
portrayal of our financial condition and the results of its operations and
require significant or complex judgments on the part of management. We believe
that the following represent the critical accounting policies of the Company.

Accounts receivable allowance

     Accounts receivable allowance reflects a reserve that reduces our customer
accounts and receivable to the net amount estimated to be collectible. The
valuation of accounts receivable is based upon the credit-worthiness of
customers and third-party payers as well as historical collection experience.
Estimating the credit worthiness of customers and the recoverability of customer
accounts requires us to exercise considerable judgment. Allowances for doubtful

                                      -12-
<PAGE>

accounts are recorded as a selling, general and administrative expense for
estimated amounts expected to be uncollectible from third-party payers and
customers. We base our estimates on our historical collection experience,
current trends, credit policy and on the analysis of accounts by aging category.

Advertising and Marketing

     The Company uses several forms of advertising, including sponsorships to
agencies who represent the professionals in their respective fields. The Company
expenses these sponsorships over the term of the advertising arrangements, on a
straight line basis. Other forms of advertising used by the Company include
professional journal advertisements, and mailing campaigns. These forms of
advertising are expensed when incurred.

Income Tax

     We account for income taxes under Statement of Financial Accounting
Standards No. 109, "Accounting for Income taxes" ("SAS 109"). SAS 109 requires
the recognition of deferred tax assets and liabilities for the expected future
tax consequences of events that have been included in the financial statements
or tax returns. Under this method, deferred tax assets and liabilities are
determined based on the differences between the financial statement and the tax
basis of assets and liabilities using enacted tax provisions currently in effect
and rates applicable to the periods in which the differences are expected to
affect taxable income.

Revenue Recognition

     We recognize revenue related to product sales upon the shipment of such
orders to customers, provided that the risk of loss has passed to the customer
and we have received and verified any written documentation required to bill
Medicare, other third-party payers and customers. We record revenue at the
amounts expected to be collected from Medicare, other third-party payers and
directly from customers. We delay recognizing revenue for shipments where the
Company has not received the required documentation, until the period when such
documentation is received.

     Medicare reimbursements are based upon government-established reimbursement
prices. The reimbursements that Medicare pays us is subject to review by
government regulators. Medicare reimburses at 80% of the government-determined
reimbursement prices and we bill the remaining balance to either third-party
payers, such as insurance companies, or directly to the customers.

Stock Based Compensation

     In December 2004, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123(R) ("SFAS 123R"), "Share-Based
Payment," which is a revision of Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation." SFAS 123R is effective for small

                                      -13-
<PAGE>

business publicly traded companies, for interim or annual periods beginning
after December 15, 2005. It supersedes Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees," and amends Statement of
Financial Accounting Standards No. 95, "Statement of Cash Flows." SFAS 123R
requires all share-based payments to employees, including grants of employee
stock options, to be recognized in the statement of operations based upon their
fair values and rescinds the acceptance of pro forma disclosure. SFAS 123R
permits two methods of adoption, a "modified prospective" method and a "modified
retrospective" method. Under the modified prospective method, stock-based
compensation cost is recognized, beginning with the effective date, based on the
requirements of SFAS 123R for all share-based payments granted after the
effective date and for all awards granted prior to the effective date that
remain unvested on the effective date. The modified retrospective method
includes the requirements of the modified prospective method and also permits
restatement of prior periods based on amounts previously reported in pro forma
disclosures pursuant to SFAS 123 for either all periods presented or for only
prior interim periods of the year of adoption. We adopted the modified
prospective method prescribed in SFAS 123R, effective January 1, 2006.

General

     Our continuing operations and revenues consist of the operations of and
revenues generated by Amerx and Sirius, our two wholly owned subsidiaries.
Amerx's wound care and skin care products, marketed under the trademark
AmeriGel(R), are formulated to enhance the quality of skin and wound care and to
lower the treatment cost for those who suffer from various skin conditions and
wounds. Sirius markets and distributes diabetic supplies via mail order
primarily to Medicare patients.

     Amerx markets AmeriGel(R) products to institutional customers such as
nursing homes, hospitals and home health agencies and to retail customers.
Institutional sales are made either directly to the end user or through medical
supply distributors or physicians. Many institutional customers will not
purchase directly from the manufacturer; they will purchase products only
through a national distributor who warehouses the products and supplies the
products directly to the customer. Accordingly, Amerx must supply its
distributors with adequate inventory in order to successfully compete with other
manufacturers.

     Amerx reaches the retail consumer primarily through distributors, but in
some cases, through sales to retail store chains. Amerx's skin care products are
distributed to institutions and to retail stores through McKesson Drug,
AmeriSource/Bergen Brunswig, Cardinal Health, Bindley Western Drug and a number
of smaller local and regional distributors. In fiscal 2006, Amerx increased its
distribution channels by providing products to national distributor Henry
Schien.

Future Developments

     Amerx expects to further penetrate the podiatric market through its
participation in industry trade shows, advertisements in trade journals,
development of additional distributor relationships, opening new geographical

                                      -14-
<PAGE>

territories (including foreign markets), and coordinating with physicians and
educational institutions to provide training to the wound care and podiatric
professional. Amerx management seeks to develop new products for the podiatric
market as new needs become known through its association with health care
professionals.

     Amerx intends to pursue potential product developments in other medical
disciplines including dermatology, veterinary care and other wound care
applications. Preliminary investigations of these markets are ongoing.
Management anticipates further pursuing increased marketing efforts in its
primary institutional wound care market as a result of the Amerigel Saturated
Gauze Dressing being granted a Medicare HCPCS Reimbursement Code in 2004.

     Sirius intends to aggressively attempt to add to its current customer base
through the use of advertising, direct physician contact, referrals and possible
acquisition of similar business entities. We believe that product lines will
increase as customer needs dictate and economics allow.

Results of Operations

Comparison of Fiscal 2006 and 2005.

     Net sales during fiscal 2006 were approximately $2,313,000 as compared to
approximately $2,198,000 in fiscal 2005, an increase of approximately $115,000,
or 5%. We believe that this increase is primarily attributable to our continuing
marketing efforts and growth of our customer base. Sales growth in Sirius slowed
to a 0.2% reduction in sales, while Amerx increased sales by 6%, respectively,
over the previous year. Amerx is encouraged by the sales increase since its
emphasis shifted to the physician market. Amerx hopes to capture more of the
physician market in fiscal 2007, as well as penetrate new markets, such as
government contracts and dermatology. Sirius's customer base is expanding with
marketing efforts, and the Company continues such expansion with marketing
efforts as well as product line expansion.

     Cost of sales decreased to approximately $520,000 in fiscal 2006 as
compared to approximately $532,000 in fiscal 2005, or approximately 2%. Cost of
sales in fiscal 2006, as a percentage of net sales, decreased by approximately
2% over the previous year. Sirius has realized the benefit of some volume
discounts in fiscal 2005 and 2006, and hopes to lower its costs by continuing
that trend in 2007. Amerx's costs have remained relatively consistent over the
past year with only a slight decrease in some of its packaging cost.

     Gross profit increased to approximately $1,793,000 during fiscal 2006 as
compared to approximately$1,667,000 during fiscal 2005, an increase of about
$126,000, or 8%. As a percentage of net sales, gross profit was 78% in fiscal
2006, as compared to 76% in fiscal 2005.

     Operating expenses during fiscal 2006 were approximately $1,435,000,
consisting of approximately$681,000 in salaries and benefits and $754,000 in
selling, general and administrative expenses. This represents an increase in
expenses of approximately $19,000 in fiscal 2006 as compared to expenses in

                                      -15-
<PAGE>

fiscal 2005. Operating expenses in fiscal 2005 consisted of $695,000 in salaries
and benefits and $722,000 in selling, general and administrative expenses.
During fiscal 2006, the substantial decrease in salaries and benefits was caused
primarily by missing two months of compensation for the position of C.E.O.,
vacated by the passing of the former C.E.O., John C Anderson. Selling, general
and administrative expenses was increased across numerous areas in general. As a
percentage of net sales, operating expenses during fiscal 2006 decreased to 62%,
as compared to 64% during fiscal 2005, as net sales increased $115,000 for the
year on an $19,000 increase in expenses.

     Profit from operations increased to approximately $358,000 in 2006, as
compared to approximately $250,000 in fiscal 2005. Net Profit (after dividend
requirements for Preferred Shares) was approximately $321,000 during fiscal
2006, compared to a net profit of approximately $302,000 during fiscal 2005. The
Company also recorded approximately $16,000 of income tax expense in arriving at
net income available to common shares.

     As of June 30, 2006, the Company had deferred tax asset of $133,245,
consisting primarily of the tax benefit of net operating loss carryforward, and
$9,063 of deferred tax liability, consisting primarily of the difference between
book and tax basis of fixed assets. The valuation allowance decreased by
$118,968. The decrease in the valuation allowance is due to an increase in
expected utilization of net operating loss carry-forwards. A valuation allowance
of approximately $1,373,000 has been provided to reduce the asset to the net
amount of tax benefit management believes it will more likely than not realize.
As time passes, management will be able to better assess the amount of tax
benefit it will realize from using the carry forwards.

Liquidity and Capital Resources

     Historically, we have financed our operations through a combination of
revenues from operations, shareholder loans, and the public sales of equity. As
of June 30, 2006, our principal sources of liquidity included inventories of
approximately $151,000, net accounts receivable of approximately $146,000, and
cash of approximately $288,000. We had working capital of approximately $632,000
at June 30, 2006.

     Operating activities provided cash of approximately $363,000 during fiscal
2006 and approximately $212,000 during fiscal 2005, consisting primarily of net
profit of approximately $342,000 in fiscal 2006 and $315,000 in 2005. Cash used
in investing activities during fiscal 2006 and 2005 was approximately $9,000 and
$10,000, respectively. Cash used by financing activities during fiscal 2006 was
approximately $92,000, and $190,000 during fiscal 2005.

     During fiscal 2006, holders of 10,000 shares of Preferred Stock converted
their shares to Common Stock.

                                      -16-
<PAGE>

Off-Balance Sheet Arrangements

     During fiscal years 2006 and 2005, we did not have any relationships or
arrangements with unconsolidated entities or financial partnerships, such as
entities often referred to as structured finance or special purpose entities,
which would have been established for the purpose of facilitating off-balance
sheet arrangements or other contractually narrow or limited purposes

Commitments of Capital Expenditures

     At June 30, 2006 the Company had no commitments for capital expenditures.


ITEM 7.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     Consolidated financial statements as of June 30, 2006, and 2005 were
audited by Ferlita, Walsh & Gonzalez P.A., the Company's independent auditors,
as indicated in their report included appearing at page F-1.


                          INDEX TO FINANCIAL STATEMENTS


                                                                         Page
                                                                         ----

Report of Independent Registered Public Accounting Firm                  F-1

Consolidated Balance Sheet June 30, 2006                                 F-2

Consolidated Statements of Operations For the Years
    Ended June 30, 2006 and 2005                                         F-3

Consolidated Statements of Stockholders' Equity For
    the Years Ended June 30, 2006 and 2005                               F-4

Consolidated Statements of Cash Flows For the Years
    Ended June 30, 2006 and 2005                                         F-5

Notes to Consolidated Financial Statements                               F-6


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

         None.


ITEM 8A. CONTROLS AND PROCEDURES.

     Management of the Company, with the participation of the President and
acting Principal Executive, Financial and Accounting Officer, has conducted an
evaluation of the effectiveness of the Company's disclosure controls and

                                      -17-
<PAGE>

procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934 as
of the end of the period covered by this report. Based on that evaluation,
management, including the President and acting Principal Executive, Financial
and Accounting Officer, concluded that, as of the date of this report, the
Company's disclosure controls and procedures were effective in ensuring that all
material information relating to the Company required to be disclosed in this
report has been made known to management in a timely manner and ensuring that
this information is recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and regulations.

     During the last quarter of fiscal 2006, the Company did not institute any
significant changes in its internal control over financial reporting that
materially affected or is reasonably likely to materially affect, the Company's
internal control over financial reporting.


ITEM 8B.  OTHER INFORMATION.

     On August 27, 2005, John C. Anderson, the Company's President, Chief
Executive Officer, Chairman of the Board and Director, passed away after a
battle with cancer.

     On September 22, 2005, the Board of Directors voted to fill the board
vacancy and Chairman of the Board vacancy caused by the death of John C.
Anderson, by appointing Regina W. Anderson, our former Chairman and Chief
Executive Officer's wife, to these positions. Further, the Board of Directors
voted to fill the vacancy in the Chief Executive Officer position by appointing
Ms. Anderson to fill that position, but to commence on November 1, 2005. As of
September 22, 2005 through November 1, 2005, the Board of Directors appointed
James B. Anderson, our Chief Financial Officer, to act as Interim Chief
Executive Officer until Ms. Anderson commences her duties on November 1, 2005.




                                      -18-
<PAGE>

     In July 2006, we closed on the purchase of our previously leased office
property located at 1300 S. Highland Ave., Clearwater, FL 33756, from G.E.A.P.
Corporation, in the amount of $550,000, pursuant to a Lease Agreement, which
contains a purchase option. In addition, at the same time, we closed on a loan
provided by Bank of America, N.A., evidenced by a promissory note, in the amount
of $508,000. Further, the purchase and loan were secured by a Mortgage, between
the Company and Bank of America. Regina W. Anderson, our Chairman and Chief
Executive Officer, personally guaranteed the loan we secured from Bank of
America, N.A.

     On October 17, 2006, the Board of Directors approved a resolution to
increase the number of board members to eight.

     On October 19, 2006, Richard T. Thompson, who had served as a director
since 1998, died.

     On October 26, 2006, the Board of Directors nominated James B. Anderson,
Justice W. Anderson and Michael T. Foley to stand for election as directors in
the upcoming annual shareholders meeting. If Mr. Foley is elected, the Board of
Directors intends to nominate him to act as sole member and Chair of the Audit
Committee.


                                    PART III

ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

Directors and Executive Officers

                                Capacities in                           Director
NAME                     Age    Which Served                             Since
----                     ---    ------------                             -----

Regina W. Anderson       59     Chief Executive Officer, and             2005
                                Chairman of the Board
Chester L. Wallack       65     Director                                 1995
Fred W. Suggs, Jr.       60     Director                                 1995
Alan B. Crane            56     Director                                 1995
Jeffery S. Slowgrove     49     Director                                 1999
Richard T. Thompson      56     Director (deceased)                      1998
James B. Anderson        36     Chief Financial Officer; President,
                                Sirius Medical Supply, Inc.                --
Justice W. Anderson      29     Vice President - Sales and Marketing;
                                President, Amerx Health Care Corp.         --

     Regina Anderson. Ms. Anderson has served as Chairman of the Board of
Directors since September 2005, and as our Chief Executive Officer since
November 2005. Ms. Anderson has 25 years experience in the medical field and 19
years of management experience. Ms. Anderson worked at HealthSouth
Rehabilitation Hospital for ten years as Outpatient Director, in charge of the

                                      -19-

<PAGE>

main outpatient center plus four satellite offices. As Outpatient Director, she
was responsible for budgets involving over thirty thousand outpatient visits per
year; marketing of multiple outpatient specialty programs; and staffing with
thirty employees reporting directly to her. Prior to her work at HealthSouth,
she worked as the lead clinician at Clearwater Rehabilitation Center. Regina was
Vice-President of Operations at Stuffit Direct Marketing Company from 1980
through 1989. She was in charge of franchise sales and training; coupon
processing/production as well as coordination among thirteen franchise offices.
Regina was co-owner and President of Foxy's T-Shirt Shops and Le Shirt Company
from 1978-1980. Foxy's had five locations. She worked as a Speech Language
Pathologist with Morton Plant Hospital from 1970 through 1976. Regina received
her Masters Degree from Kansas State University in 1970.

     Chester L. Wallack. Mr. Wallack has served as a director since 1995. He has
served as Chief Executive Officer of Felton West, Inc., a real estate
development and construction company in Dover, Delaware, since 1990. Mr. Wallack
is a retired United States Air Force officer having served as a pilot and in
various management capacities. He graduated from the University of Kansas with a
B.S. degree in Industrial Management and from Southern Illinois University with
an M.B.A. degree in Finance.

     Fred W. Suggs, Jr. Mr. Suggs has served on our Board of Directors since
1995. He has been a practicing attorney since 1975. He is a partner in the
Greenville, South Carolina office of Ogletree, Deakins, Nash, Smoak & Stewart,
specializing in labor and employment law. He has been certified as a specialist
in labor and unemployment law by the South Carolina Supreme Court and is a
frequent lecturer on labor and employment law issues. Mr. Suggs graduated from
Kansas State University with a B.S. degree and he received his J.D. degree from
the University of Alabama.

     Alan B. Crane. Mr. Crane has served on our board since 1995 and is a
partner in Crane Farms, a farming partnership in Larned, Kansas. In 1994, Mr.
Crane was appointed by the governor of Kansas to the Kansas Water Authority to
oversee project expenditures. He received a B.S. degree from Kansas State
University.

     Jeffery Slowgrove. Mr Slowgrove has served as a director since 1999. Since
1998, Mr. Slowgrove has been the President of JSS Management Consulting, Inc., a
consulting firm in Palm Harbor, Florida, providing funding for start up
organizations and advice on the business and management issues facing companies
during early rapid growth and expansion phases. He co- founded IMR Global Corp.
in 1988 and has served as a director since its inception. From 1988 to 1998, he
also served as Treasurer of IMR Global Corp., which is a public company
providing applications software-outsourcing solutions for the information
technology departments of large businesses. He received a B.B.A. from the
University of Michigan.

     Richard T. Thompson. Mr. Thompson died on October 19, 2006. Since 1989, Mr.
Thompson had been a principal of Sunproof Corporation of Florida, which markets
and installs products, such as window film and solar shades, to reduce heat and
glare in automobiles, residences and commercial offices. From 1986 to 1988, he

                                      -20-
<PAGE>

was an officer and owner of American Industries, an injection molding
enterprise. From 1979 through 1984, Mr. Thompson was the president and owner of
Pinellas Millwork Company. In 1970, he purchased an office furniture and supply
company, which was subsequently merged with another office products store to
create one of the largest office products store in the Midwest. Mr. Thompson
continued to serve as an officer and part owner until 1979.

     James B. Anderson. Mr. Anderson has served as our Chief Financial Officer
since June 2005. In addition, from September 22, 2005, until that position was
filled by Regina Anderson on November 1,2005, Mr. Anderson served as Interim
Chief Executive Officer. On June 28, 2005, Mr. Anderson was appointed to serve
as the President of Sirius Medical Supply, Inc. Since 1993, Mr. Anderson has
been involved with Amerx Health Care Corporation as its Chief Information
Officer. In 1996, Mr. Anderson became involved with Procyon Corporation after
its merger and has since performed the duties of Vice President of Operations.
Prior to Mr. Anderson's work with the Company, he was involved with importing
and exporting to Russia and Direct Mail Marketing. He received a B.S. from the
University of South Florida. Mr. Anderson is the son of John C. Anderson, our
late President, Chief Executive Officer and Chairman of the Board, the son of
Regina Anderson, the Company's Chairman of the Board and Chief Executive
Officer, and the brother of Justice W. Anderson, our Vice President of Sales &
Marketing and the President of Amerx Health Care Corporation. Mr Anderson is the
son-in-law of our deceased former director, Richard T. Thompson.

     Justice W. Anderson. Since June 28, 2005, Mr. Anderson has served as our
Vice President of Sales and Marketing and the President of Amerx Health Care
Corporation. Since January of 2001, Mr. Anderson has been Vice President of
Sales for Amerx Health Care Corp. He also serves on the board of the American
Academy of Podiatric Practice Management. From August 2000 to January 2001 he
served as Senior Sales Representative, and as a sales representative from May
2000 to August 2000. He received a B.A. degree from the University of Florida.
Mr. Anderson is the son of John C. Anderson, our late President, Chief Executive
Officer and Chairman of the Board, the son of Regina Anderson, the Company's
Chairman of the Board and Chief Executive Officer and the brother of James B.
Anderson, our Chief Financial Officer and the President of Sirius Medical
Supply, Inc.

Compliance with Section 16(a) of the Exchange Act

     Under the securities laws of the United States, our directors, executive
officers, and any persons holding more than ten percent of our Common Stock are
required to report their initial ownership of the Company's Common Stock and any
subsequent changes in that ownership to the Securities and Exchange Commission
and the Company. Specific due dates for these reports have been established and
we are required to disclose any failure to file, or late filing, of such
reports. Based solely on our review of the reports and amendments thereto
furnished to the Company and written representations that no other reports were
required to be filed in fiscal 2006, our officers, directors and beneficial
owners of more than ten percent of its Common Stock complied with all Section
16(a) filing requirements, except that the Form 3 filings of Regina Anderson,
James B. Anderson and Justice W. Anderson were inadvertently filed late.

                                      -21-
<PAGE>

Committees of the Board

     The Board of Directors has delegated certain of its authority to a
Compensation Committee. The Compensation Committee is composed of Messrs.
Wallack, Suggs and Crane. Mr. Slowgrove resigned from the Compensation Committee
effective March 31, 2006. No member of the Compensation Committee is a former or
current officer or employee of the Company.

     The primary function of the Compensation Committee is to review and make
recommendations to the Board with respect to the compensation, including
bonuses, of the Company's officers and to administer the Company's Option Plan.

     The Company formed an Audit Committee in July 2004, composed solely of Mr.
Slowgrove. Richard T. Thompson joined the Audit Committee as its Chairman in
March, 2006. Mr. Slowgrove resigned from the Audit Committee effective March 31,
2006. In October 2006, we determined that our remaining Audit Committee member,
Mr. Thompson, did not meet the definition of independence for purposes of audit
committee service as contained in the applicable rules of The Nasdaq Stock
Market, Inc. ("Nasdaq"). In addition, Mr. Thompson had been unable to serve on
the Audit Committee because of health-related concerns. On October 19, 2006, Mr.
Thompson died. In October 2006, the entire board of directors voted to act as
the Company's Audit Committee on an interim basis. We believe that all but two
members of the present Board of Directors (Regina Anderson and Mr. Slowgrove)
and all but two of the nominees (James B. Anderson and Justice W. Anderson) meet
the definition of independence under applicable Nasdaq rules. Under those Rules,
Regina Anderson, James B. Anderson and Justice W. Anderson are not independent
because they are executive officers. Mr. Slowgrove is not believed to be
independent under the Nasdaq rules because he has acted as a consultant to the
Company and received fees in connection therewith. The Board nominated Michael
T. Foley as director and Audit Committee member and Chair. The Board believes
that Mr. Foley is independent pursuant to Nasdaq rules and also meets the
requirements of an audit committee financial expert. The function of the Audit
Committee is to review and approve the scope of audit procedures employed and to
review and approve the audit reports rendered by the Company's independent
auditors and to approve the audit fees charged by the independent auditors. In
addition, pursuant to the Sarbanes-Oxley Act of 2002 and rules promulgated
thereunder, the Audit Committee is responsible for, among other things,
pre-approving all audit and non-audit services performed by the independent
auditors, approving the engagement of the auditors and receiving certain reports
from the independent auditors prior to the filing of the audit report. The Audit
Committee reports to the Board of Directors with respect to such matters and
recommends the selection of independent auditors. The Audit Committee adopted a
charter in October 2006.

Audit Committee Report

In October, 2006, the Board of Directors, acting in the capacity of the interim
Audit Committee, submitted the following report:

     I/we have reviewed and discussed with management the Company's audited
financial statements for the year ended June 30, 2006 (the "Fiscal Year 2006
Financial Statements").

                                      -22-
<PAGE>

     I/we have discussed with the independent auditors the matters required to
be discussed by Statement on Auditing Standards No. 61, Communication with Audit
Committees, as amended, by the Auditing Standards Board of the American
Institute of Certified Public Accountants.

     I/we have received and reviewed the written disclosures and the letter from
the independent auditors required by Independence Standard No. 1, Independence
Discussions with Audit Committees, as amended, by the Independence Standards
Board, and have discussed with the auditors the auditors' independence.

     Based upon the reviews and discussions referred to above, I/we recommended
to the Board of Directors that the Fiscal Year 2006 Financial Statements be
included in the Company's Form 10-KSB and 10-KSB/A for the year ended June 30,
2006.

     This Audit Committee Report shall not be deemed incorporated by reference
in any document previously or subsequently filed with the Securities and
Exchange Commission that incorporates by reference all or any portion of the
proxy statement, in connection with the annual meeting, except to the extent
that the Company specifically requests that this Report be specifically
incorporated by reference.

     Date: September 29, 2006                  The Board of Directors

Board and Committee Attendance

     In fiscal 2006, the Board of Directors held three formal meetings. A
majority of directors attended each meeting in person or by telephone. The
Compensation Committee held no meetings during fiscal 2006. The Audit Committee
held three meetings during fiscal 2006.

Code of Ethics for Senior Financial Officers

     The Company has adopted a Code of Ethics for Senior Financial Officers. The
Code of Ethics applies to all senior financial officers of the Company,
including the Chief Executive Officer, the Chief Financial Officer, the
Treasurer and any other person performing similar functions. A copy of the Code
of Ethics may be obtained, free of charge, by requesting the same from the
Company by contacting the Company by telephone, at the telephone number shown on
the cover of this report, or by writing to James B. Anderson, Chief Financial
Officer, Procyon Corporation, 1300 S. Highland Avenue, Clearwater, Florida
33756.

ITEM 10. EXECUTIVE COMPENSATION.

     Summary Compensation Table. The following table sets forth the annual and
long-term compensation for services in all capacities to the Company for the
three fiscal years ended June 30, 2006, 2005 and 2004 of the Company's Chief

                                      -23-
<PAGE>
<TABLE>
<CAPTION>

Executive Officer (the "Named Officer"). One officer of the Company received
total annual salary and bonus in excess of $100,000 during the fiscal year ended
June 30, 2006 ("Fiscal 2006").

                                                                      Long Term Compensation Awards
                               Fiscal   Annual    Compensation   Securities Underlying      All Other
Name and Principal Position    Year    Salary($)    Bonus($)        Options/SARs(#)      Compensation($)
---------------------------    ----    ---------    --------        ---------------      ---------------
<S>                            <C>     <C>          <C>                  <C>                   <C>
John C. Anderson,              2006    $  24,000       -0-                                    $-0-
 deceased                      2005    $ 144,000       -0-                                     -0-
                               2004       99,000       -0-                                     -0-
Regina W. Anderson,            2006    $ 104,000    $1,000                --                   -0-
  President, Chief Executive   2005          -0-       -0-                --                   -0-
  Officer and Director         2004          -0-       -0-                --                   -0-
Justice W. Anderson,           2006    $  38,000    $1,000                --               $ 91,452(1)
  Vice President of Sales
  & Marketing

     (1) Consists solely of commission on sales from Amerx Health Care Corp.

     Option Grants Table. No grants of stock options were made to the named
officer during fiscal 2006.

     Aggregated Option Exercises in Last Fiscal Year and Year-End Option Values
Table. The following table sets forth information on the number of securities
and value underlying exercisable and unexercisable options for the Named
Officers for the year ended June 30, 2006.

                                            Number of Securities Under-    Value of Unexercised In-
                  Shares                    lying Unexercised Options/     the-Money(1) Options/SARs
                  Acquired      Value       SARs at Fiscal Year-End        at Fiscal Year-End($)(2)
 Name             on Exercise   Realized   Exercisable    Unexercisable   Exercisable   Unexercisable
 ----             -----------   --------   -----------    -------------   -----------   -------------

Regina W. Anderson       -0-        -0-       60,000           -0-          $8,781            $0
Justice W. Anderson      -0-        -0-        -0-             -0-          $0                $0

(1)  Options are "in the money" if the fair market value of the underlying
     securities exceeds the exercise or base price of the option.

(2)  The dollar values are calculated be determining the difference between the
     fair market value of the securities underlying the options at fiscal year
     end and the exercise or base price of the options. The closing bid price
     for the Common Stock was $0.35 on June 29, 2006, the last trading date for
     the end of the 2006 fiscal year.
</TABLE>

Stock Option Plan

     The Company's 1998 Omnibus Stock Option Plan (the "1998 Plan") is designed
as a comprehensive benefit plan that gives the Company the ability to offer a
variety of equity based incentives and awards to persons who are key to the
Company's growth, development and financial success. The 1998 Plan permits the
grant of awards to directors, employees and consultants of the Company and its

                                      -24-

<PAGE>

subsidiaries. The 1998 Plan provides for the grant of incentive stock options
("Incentive Stock Options") within the meaning of the Code, non-qualified stock
options, restricted shares, performance units, performance shares, dividend
equivalent, share appreciation rights ("SARs") and other forms of awards,
including deferrals of earned awards, (collectively, the "Awards"). Employees
and non-employees to whom an offer of employment has been extended, directors
and consultants of the Company are all eligible participants for all Awards,
except that Incentive Stock Options may be granted only to employees.

     The 1998 Plan is administered by the Compensation Committee of the Board of
Directors, which construes and interprets the 1998 Plan, determines the terms
and conditions of the Awards granted under the 1998 Plan, including the
individuals who are to granted Awards, the exercise price, if any, the number of
shares subject to an Award and the vesting and duration of Awards, subject to
any restrictions contained in the 1998 Plan.

     The maximum number of shares of Common Stock reserved and available for
Awards under the 1998 Plan is 1,000,000 and the Compensation Committee may limit
the number of shares that may be awarded in the form of restricted stock Awards.

     The exercise price of Incentive Stock Options granted under the 1998 Plan
must be at least equal to the fair market value of the Common Stock of the
Company on the date of grant, and must be 110% of fair market value when granted
to an employee who owns shares representing more than 10% of the voting power of
all classes of stock of the Company. The exercise price of non-qualified stock
options granted under the 1998 Plan can not be less than 85% of the fair market
value of the Common Stock on the date of grant. The term of all options granted
under the 1998 Plan may not exceed ten years, except the term of Incentive Stock
Options granted to a 10% or more stockholder, may not exceed five years. The
1998 Plan may be amended or terminated by the Board of Directors, but no such
action may impair the rights of a participant under a previously granted option.

     The 1998 Plan provides for the award of SARs and Performance Units and
Performance Shares. A SAR is an incentive Award that permits the holder to
receive (per share covered thereby) the amount by which the fair market value of
a share of Common Stock on the date of exercise exceeds the fair market value of
such share on the date the SAR was granted or at such date as the Compensation
Committee designates. The Compensation Committee may grant SARs independently,
in addition to, or in tandem (such that the exercise of the SAR or related stock
option will result in forfeiture of the right to exercise the related stock
option or SAR for an equivalent number of shares) with a stock option Award. A
Performance Unit or Performance Share is an incentive Award whereby the Company
commits to make a distribution depending on the attainment of a performance
objective and condition established by the Committee and the base value of the
Performance Unit or Performance Share.

                                      -25-
<PAGE>

     Upon termination of services of a non-employee director or consultant, all
options issuable, but not yet granted, to such persons for services rendered
shall be granted and all options shall remain exercisable for the original
option term. Options granted to an employee are exercisable for specified
periods of time ranging from one month to one year following an employee's
termination depending on the circumstances of the termination, except that
options granted to an employee terminated for cause shall not be exercisable to
any extent after termination. An unexercised option is exercisable only to the
extent that it was exercisable on the date of termination.

     The 1998 Plan provides that, in the event the Company enters into an
agreement providing for the merger of the Company into another corporation, an
exchange of shares with another corporation, the reorganization of the Company
or the sale of substantially all of the Company's assets, unvested stock options
become immediately vested and exercisable. Upon the consummation of the merger,
exchange, reorganization or sale of assets, the successor corporation must
assume all Awards or substitute another Award on substantially identical terms
to the outstanding Award.

Compensation of Directors

     No employee of the Company receives any additional compensation for his
services as a director. No non-employee director receives any compensation for
his service; however, the Board of Directors has authorized payment of
reasonable travel or other out-of-pocket expenses incurred by non-management
directors in attending meetings of the Board of Directors. The Board of
Directors may consider alternative director compensation arrangements from time
to time.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
         RELATED STOCKHOLDER MATTERS.

     The following table sets forth certain information regarding beneficial
ownership of Common Stock as of October 17, 2006 by (i) each person known by the
Company to own beneficially more than 5% of the outstanding Common Stock, (ii)
each director or director nominee, and (iii) all executive officers and
directors as a group. Each person has sole voting and sole investment or
dispositive power with respect to the shares shown except as noted. As to the
Company's preferred stock, as of October 17, 2006, no officer or director of the
company owned any preferred shares. In addition, no individual shareholder
beneficially owned more than 5% of the Company's preferred shares.

                                                  Common Shareholdings on
                                                  October 17, 2006

                                                  Number of           Percent of
Name and Address(6)                               Shares              Class
-------------------                               ------              -----

Regina W. Anderson(6)                             3,483,000(3)            43.3
Chester L. Wallack (l)                              120,000(3)             1.5
Fred W. Suggs (l)                                   160,000(3)             2.0

                                      -26-

<PAGE>

                                                  Common Shareholdings on
                                                  October 17, 2006

                                                  Number of           Percent of
Name and Address(6)                               Shares              Class
-------------------                               ------              -----

Alan B. Crane (1)                                    80,000(3)             1.0
Jeffery S. Slowgrove (2)                            716,200(4)             8.9
Richard T. Thompson(2)                               65,000(8)              *
James B. Anderson                                   111,000(7)             1.4
Justice W. Anderson                                  73,000                 *
All directors and officers
as a group (eight persons)                        4,748,200               59.0%
RMS Limited Partnership, 50 W. Liberty St,        1,600,000               19.9%
Suite 650, Reno, NV 89501

*Less than 1%
(1)  Member of the Compensation Committee. Mr. Slowgrove resigned from the
     Compensation Committee effective March 31,2006.
(2)  Member of the Audit Committee. Mr. Slowgrove resigned from the Audit
     Committee effective March 31, 2006. Mr. Thompson died on October 19, 2006.
(3)  Includes 60,000 shares subject to currently exercisable options or options
     which will become exercisable within 60 days.
(4)  Includes 10,000 shares of subject to currently exercisable options or
     options which will become exercisable within 60 days.
(5)  Except as noted above, the address for all persons listed is 1300 S.
     Highland Ave, Clearwater, Florida 33756
(6)  Ms. Anderson beneficially owns 3,350,000 shares of common stock and 60,000
     currently exercisable options to purchase shares of common stock as
     Administrator for the Estate of John C. Anderson in accordance with Mr.
     Anderson's will. She previously owned 72,500 shares of common stock.
(7)  Includes 30,000 shares subject to currently exercisable options and 10,000
     shares in joint name with his wife.
(8)  Includes 20,000 shares subject to currently exercisable options or options
     which will become exercisable within 60 days, and 15,000 shares in joint
     name with his wife.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     Messrs. Wallack, Suggs, Crane and Thompson, have purchased a total of
261,000 shares of Preferred Stock at a price of $1 per share. Such purchases
were made on terms and conditions, which were identical to the purchases made by
all other private investors who purchased Preferred Stock. Regina W. Anderson,
our Chairman and Chief Executive Officer, personally guaranteed the loan we
secured from Bank of America, N.A., in the amount of $508,000, to purchase our
office building in July 2006. Mr. Slowgrove, a director, acted as a consultant
to the Company for portions of fiscal 2006, at a total compensation to him of
approximately $11,250.

                                      -27-
<PAGE>

ITEM 13. EXHIBITS.

(a)  Exhibits

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

         Exhibit No.       Document
         -----------       --------

         * 3.1             Articles of Incorporation
         + 3.1.1           Articles of Amendment to Articles of Incorporation
         * 3.2             Bylaws
         + 4.1             Designation of Series A Preferred Stock
         # 10.1            1998 Omnibus Stock Option Plan
         - 10.1            Office Lease dated September 23, 2003
         / 10.2            Promissory Note dated July 21, 2006
         / 10.3            Mortgage dated July 21, 2006
         + 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
                           there under.
         o 10.5            Agreement and Plan of Exchange, dated January 31,
                           1996, by and between the Company and Amerx.
         x 31.1            Certification of Regina W. Anderson pursuant to
                           Exchange Act Rule 13a-14(a)/15d-14(a)
         x 31.2            Certification of James B. Anderson pursuant to
                           Exchange Act Rule 13a-14(a)/15d-14(a)
         x 32.1            Certification Pursuant to 18 U.S.C. ss. 1350, as
                           Adopted Pursuant to Section906 of the Sarbanes-Oxley
                           Act Of 2002
         *                 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, 1995.
         o                 Incorporated by reference to the Company's Form 8-K
                           filed on or about February 2, 1996.
         #                 Incorporated by reference to the Company's
                           Schedule 14A filed on or about November 17, 1998.
         /                 Incorporated by reference to the Company's Form 8-K
                           filed on or about August 8, 2006
         -                 Incorporated by reference to the Company's Form
                           10-QSB for the period ending September 30, 2003
         x                 Filed herewith.

                                      -28-
<PAGE>

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

     Audit Fees. In fiscal 2006, the Company paid to its independent accountants
$31,549 in fees related directly to the audit and review of the Company's
financial statements. In fiscal 2005, the Company paid to its independent
accountants $30,730 in fees related directly to the audit and review of the
Company's financial statements.

     Audit-Related Fees. The Company's independent accountants performed no
other audit-related services for the Company during fiscal 2005 and 2006 other
than the audit services described above.

     Tax Fees: In fiscal 2006, the Company paid to its independent accountants
$1,000 in fees related directly to tax preparations. In fiscal 2005, the Company
paid to its independent accountants $1,000 in fees related directly to tax
preparations.

     All Other Fees: The Company's independent accountants performed no other
services for the Company during fiscal 2005 and 2006 other than the audit and
tax services described above.


                                   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, there unto duly authorized.

                                     PROCYON CORPORATION

                                     By: /s/ Regina W. Anderson
                                         --------------------------------------
                                     Regina W. Anderson, Chief Executive Officer

Date: September 29, 2006


                                      -29-

<PAGE>


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

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

/s/ Regina W. Anderson     Chief Executive Officer,           September 29, 2006
Regina W. Anderson         President


/s/ Chester L. Wallack     Director                           September 29, 2006
 Chester L. Wallack


/s/ Fred W. Suggs, Jr.     Director                           September 29, 2006
Fred W. Suggs, Jr.


/s/ Jeffery S. Slowgrove   Director                           September 29, 2006
Jeffery S. Slowgrove


                                      -30-

<PAGE>

                                  EXHIBIT INDEX

<TABLE>
<CAPTION>

Exhibit No.                                          Document                                 Item No.
-----------                                          --------                                 --------

<S>        <C>                                                                                   <C>
         * 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            1998 Omnibus Stock Option Plan
         - 10.1            Office Lease dated September 23, 2003
         - 10.2            Promissory Note dated July 21, 2006
         - 10.3            Mortgage dated July 21, 2006
         + 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 there under.                        10
         o 10.5            Agreement and Plan of Exchange, dated January 31, 1996, by
                           and between the Company and Amerx.
         x 31.1            Certification of Regina W. Anderson pursuant to Exchange Act
                           Rule 13a-14(a)/15d-14(a)                                              31
         x 31.2            Certification of James B. Anderson pursuant to
                           Exchange Act Rule 13a-14(a)/15d-14(a)
         x 32.1            Certification Pursuant to 18 U.S.C. ss. 1350, as Adopted Pursuant
                           to Section 906 of the Sarbanes-Oxley Act Of 2002                      32
</TABLE>

* 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, 1995.

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

# Incorporated by reference to the Company's Schedule 14A filed on or about
November 17, 1998.

- Incorporated by reference to the Company's Form 8-K filed on or about August
8, 2006

- Incorporated by reference to the Company's Form 10-QSB for the period ending
September 30, 2003

x Filed herewith.


<PAGE>







                      PROCYON CORPORATION AND SUBSIDIARIES
                        CONSOLIDATED FINANCIAL STATEMENTS
                       Years Ended June 30, 2006 and 2005






<PAGE>


                               TABLE OF CONTENTS


                                                                        Page No.
                                                                        --------


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                   F-1

FINANCIAL STATEMENTS

Consolidated Balance Sheet                                                F-2

Consolidated Statements of Operations                                     F-3

Consolidated Statements of Stockholders' Equity                           F-4

Consolidated Statements of Cash Flows                                     F-5

Notes to Financial Statements                                             F-6




<PAGE>


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


Board of Directors
Procyon Corporation and Subsidiaries
Clearwater, Florida


We have audited the accompanying consolidated balance sheet of Procyon
Corporation and Subsidiaries as of June 30, 2006 and the related statements of
operations, stockholders' equity, and cash flows for the years ended June 30,
2006 and 2005. 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 the standards of the Public Company
Accounting Oversight Board (United States of America). 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 financial statements referred to above present fairly, in
all material respects, the financial position of Procyon Corporation and
Subsidiaries as of June 30, 2006 and the results of its operations and its cash
flows for the years ended June 30, 2006 and 2005, in conformity with accounting
principles generally accepted in the United States of America.


/s/ Ferlita, Walsh & Gonzalez, P.A.
FERLITA, WALSH & GONZALEZ, P.A.
Certified Public Accountants
Tampa, Florida

August 25, 2006


                                      F-1
<PAGE>

PROCYON CORPORATION & SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 2006


ASSETS

CURRENT ASSETS

         Cash                                                       $   288,377
         Accounts receivable, less allowance of $2,500                  146,446
                for doubtful accounts
         Prepaid expenses                                               120,516
         Inventories                                                    150,865
         Deferred tax asset                                             133,245
                                                                    -----------
                TOTAL CURRENT ASSETS                                    839,449

PROPERTY AND EQUIPMENT, NET                                              62,962

OTHER ASSETS
         Deposits                                                         8,748
                                                                    -----------

TOTAL ASSETS                                                        $   911,159
                                                                    ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

         Accounts payable                                           $   125,648
         Accrued expenses                                                82,220
                                                                    -----------
                TOTAL CURRENT LIABILITIES                               207,868

LONG-TERM LIABILITY
         Deferred tax liability                                           9,063


STOCKHOLDERS' EQUITY
         Preferred stock, 496,000,000 shares
                authorized; none issued
         Series A Cumulative Convertible Preferred stock,
                no par value; 4,000,000 shares authorized;
                204,900 shares issued and outstanding                   160,750
         Common stock, no par value, 80,000,000 shares
                authorized; 8,046,588 shares issued and
                outstanding                                           4,410,876
         Paid-in capital                                                  6,000
         Accumulated deficit                                         (3,883,398)
                                                                    -----------
                TOTAL STOCKHOLDERS' EQUITY                              694,228
                                                                    -----------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                          $   911,159
                                                                    ===========


    The accompanying notes are an integral part of these financial statements

                                       F-2

<PAGE>

PROCYON CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended June 30, 2006 and 2005

<TABLE>
<CAPTION>

                                                             2006                       2005
                                                      -----------                -----------

<S>                                                   <C>                        <C>
NET SALES                                             $ 2,313,345                $ 2,198,261

COST OF SALES                                             519,889                    531,500
                                                      -----------                -----------

GROSS PROFIT                                            1,793,456                  1,666,761

OPERATING EXPENSES
        Salaries and Benefits                             681,422                    694,770
        Selling, General and Administrative               753,940                    721,674
                                                      -----------                -----------
                                                        1,435,362                  1,416,444

INCOME FROM OPERATIONS                                    358,094                    250,317

OTHER INCOME (EXPENSE)
        Interest Expense                                   (3,283)                   (13,394)
        Interest Income                                     2,892                        299
        Other Income                                          530                        431
                                                      -----------                -----------
                                                              139                    (12,664)
                                                      -----------                -----------

INCOME BEFORE INCOME TAXES                                358,233                    237,653

INCOME TAX BENEFIT (EXPENSE)                              (16,004)                    77,186
                                                      -----------                -----------

NET INCOME                                                342,229                    314,839

Dividend requirements on preferred stock                  (21,240)                   (12,950)
                                                      -----------                -----------

Basic net income available to common shares           $   320,989                $   301,889
                                                      ===========                ===========

Basic net income per common share                     $      0.04                $      0.04
                                                      ===========                ===========

Weighted average number of common
        shares outstanding                              8,043,928                  8,047,667
                                                      ===========                ===========

Diluted net income per common share                   $      0.04                $      0.04
                                                      ===========                ===========

Weighted average number of common
        shares outstanding, diluted                     8,363,578                  8,356,792
                                                      ===========                ===========


The accompanying notes are an integral part of these financial statements

                                     F - 3

<PAGE>


PROCYON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended June 30, 2006 and 2005


                                        Preferred Stock                Common Stock
                                   -------------------------      -----------------------     Paid-in     Accumulated
                                      Shares       Amount          Shares       Amount        Capital       Deficit        Total
                                   -----------   -----------      ---------   -----------   -----------   -----------    -----------

Balance, June 30, 2004                227,100    $   182,950      8,024,388   $ 4,388,676   $     6,000   $(4,540,466)   $    37,160

     Conversion of preferred
       stock to common stock          (12,200)       (12,200)        12,200        12,200          --            --             --

     Net Income                          --             --             --            --            --         314,839        314,839
                                  -----------    -----------    -----------   -----------   -----------   -----------    -----------

Balance, June 30, 2005                214,900        170,750      8,036,588     4,400,876         6,000    (4,225,627)       351,999

     Conversion of preferred
       stock to common stock          (10,000)       (10,000)        10,000        10,000          --            --             --

     Net Income                          --             --             --            --            --         342,229        342,229
                                  -----------    -----------    -----------   -----------   -----------   -----------    -----------

Balance, June 30, 2006                204,900    $   160,750      8,046,588   $ 4,410,876   $     6,000   $(3,883,398)   $   694,228
                                  ===========    ===========    ===========   ===========   ===========   ===========    ===========


The accompanying notes are an integral part of these financial statements


                                                                  F-4

<PAGE>


PROCYON CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended June 30, 2006 and 2005

                                                                                            2006             2005
                                                                                         ----------        ---------
CASH FLOWS FROM OPERATING ACTIVITIES


Net Income                                                                                $ 342,229        $ 314,839
Adjustments to reconcile net income to net cash used in operating activities:
       Depreciation                                                                          23,589           27,617
       Allowance for doubtful accounts                                                            0           (6,500)
       Deferred Income Taxes                                                                 16,004          (77,186)
       Decrease (increase) in :
              Accounts Receivable                                                              (473)          15,175
              Inventory                                                                      (4,542)         (41,599)
              Prepaid expenses                                                              (65,910)         (17,942)
              Other assets                                                                   17,701           (4,121)
       Increase (decrease) in:
              Accounts payable                                                               25,149            1,678
              Accrued expenses                                                                9,462               37
                                                                                          ---------        ---------

                           NET CASH PROVIDED BY OPERATING ACTIVITIES                        363,209          211,998

CASH FLOWS FROM INVESTING ACTIVITIES

       Purchase of property & equipment                                                      (9,052)          (9,718)
                                                                                          ---------        ---------

                           NET CASH USED BY INVESTING ACTIVITIES                             (9,052)          (9,718)

CASH FLOWS FROM FINANCING ACTIVITIES

       Payments on note payable related party                                               (90,000)        (191,506)
       Borrowings on note payable related party                                                   0           20,000
       Payment of capital lease obligations                                                  (2,360)          (8,046)
       Payments on long term note payable - trade                                                 0          (10,756)
                                                                                          ---------        ---------

                           NET CASH USED BY FINANCING ACTIVITIES                            (92,360)        (190,308)

                           NET CHANGE IN CASH                                               261,797           11,972

CASH AT BEGINNING OF PERIOD                                                                  26,580           14,608
                                                                                          ---------        ---------

                           CASH AT END OF PERIOD                                          $ 288,377        $  26,580
                                                                                          =========        =========


SUPPLEMENTAL DISCLOSURES
       Interest Paid                                                                      $   3,283        $  13,394
       Taxes Paid                                                                         $    --          $    --

NONCASH TRANSACTION DISCLOSURE
       Conversion of Series A cumulative convertible
         preferred stock to common stock                                                  $  10,000        $  12,200

The accompanying notes are an integral part of these financial statements

                                                            F - 5

</TABLE>






<PAGE>


PROCYON CORPORATION AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business Activity

Procyon Corporation has two wholly-owned subsidiaries, Amerx Health Care Corp.
(Amerx) and Sirius Medical Supplies, Inc. (Sirius). Amerx manufactures and
markets wound and skin care products primarily in the United States whereas
Sirius markets diabetic supplies primarily to Medicare patients in the United
States.

Principles of Consolidation

The consolidated financial statements include the accounts of Procyon
Corporation and its wholly-owned subsidiaries, Amerx and Sirius. All material
inter-company accounts and transactions are eliminated.

Use of Estimates

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, 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.

Revenue Recognition

The Company recognizes revenue in accordance with Securities and Exchange
Commission Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition
in Financial Statements," as amended by SAB 101A and SAB 101B. SAB 101 requires
that four basic criteria must be met before revenue can be recognized: (1)
persuasive evidence of an arrangement exists; (2) delivery has occurred or
services have been rendered; (3) the fee is determinable and fixed; and (4)
collectibility is reasonably assured.

The Company recognizes revenue related to product sales to customers who have
placed orders upon shipment of such orders, provided that risk of loss has
passed to the customer and the Company has received and verified any written
documentation required to bill Medicare, other third-party payers, and
customers. The Company records revenue at the amounts expected to be collected
from Medicare, other third-party payers, and directly from customers. Revenue
recognition is delayed for product shipments for which the Company has not yet
received the required written forms, until the period in which those documents
are collected and verified.


                                      F-6

<PAGE>


Revenue related to Medicare reimbursement is calculated based on
government-determined reimbursement prices for Medicare-covered items. The
reimbursements that Medicare pays the Company are subject to review by
appropriate government regulators. Medicare reimburses at 80% of the
government-determined reimbursement prices for reimbursable supplies, and the
Company bills the remaining balance to either third-party payers or directly to
customers.


Accounts Receivable and Concentration of Credit Risk

Amerx grants credit to customers most of whom are national pharmaceutical
distributors, drug stores nationwide and physicians. Amerx wholesales its
products to national pharmaceutical distributors and drug stores at a sales term
of 2/10, net 30. Amerx does not have a written return policy with its customers.
Each return request is reviewed by management for approval. Sales to physicians
are at contracted rates and standard payment term is 30 days.

Sirius grants credit to patients who are eligible for Medicare coverage. Sales
are at standard payment term of 30 days.

Accounts receivable are generally due from Medicare, private insurance
companies, and customers. The collection process is time consuming, complex and
typically involves the submission of claims to multiple payers whose payment of
claims may be contingent upon the payment of another payer. In accordance with
applicable regulatory requirements, the Company makes reasonable and appropriate
efforts to collect accounts receivable, including deductible and copayment
amounts, in a consistent manner for all payer classes. The valuation of accounts
receivable is based upon the credit-worthiness of customers and third-party
payers as well as historical collection experience. Estimating the credit
worthiness of customers and recoverability of customer accounts requires us to
exercise considerable judgment. Allowances for doubtful accounts are recorded as
a selling, general and administrative expense for estimated amounts expected to
be uncollectible from third-party payers and customers. The Company bases its
estimates on its historical collection and write-off experience, current trends,
credit policy, and on analysis of accounts receivable by aging category. As of
June 30, 2006, accounts receivable allowance was $2,500, or approximately 2% of
gross accounts receivable.


Inventories

Inventories are valued at the lower of average cost or market determined by the
first-in, first-out method.


Property and Equipment

Property and equipment are stated at cost. Depreciation is computed on a
straight-line basis over their estimated useful lives. Leased equipment is
recorded at it's fair market value at the beginning of the lease term and is
depreciated over the life of the equipment. Depreciation on leased equipment is
included in depreciation expense.


                                      F-7
<PAGE>


Cash and 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.


Concentration of Credit Risk

We maintain our cash in a financial institution. The Federal Deposit Insurance
Corporation insures up to $100,000 per account. At June 30, 2006 our uninsured
cash balance was approximately $151,000.


Shipping and Handling Costs

Shipping and handling costs incurred were approximately $77,000 and $74,000 for
the years ended June 30, 2006 and 2005, respectively, and were included in
selling, general and administrative expenses.


Advertising and Marketing

The company records advertising and marketing expenses in the periods in which
they are incurred. During the years ended June 30, 2006 and 2005, approximately
$288,000 and $291,000, of advertising and marketing costs were included in
selling, general and administrative expenses for each respective year.


Income Taxes

The Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). SFAS 109 requires
the recognition of deferred tax assets and liabilities for the expected future
tax consequences of events that have been included in the financial statements
or tax returns. Under this method, deferred tax assets and liabilities are
determined based on the differences between the financial statement and the tax
basis of assets and liabilities using enacted tax provisions currently in effect
and rates applicable to the periods in which the differences are expected to
affect taxable income.


Net Income Per Share

The Company computes net income per share in accordance with SFAS No. 128,
"Earnings per Share" (SFAS 128). SFAS 128 requires presentation of both basic
and diluted earnings per shares (EPS) on the face of the income statement. Basic
EPS is computed by dividing net income available to common shareholders
(numerator) by the weighted average number of common shares outstanding
(denominator) during the period. Diluted EPS gives effect to all dilutive
potential common shares outstanding during the period including stock options,
using the treasury stock method, and convertible preferred stock, using the
if-converted method. In computing diluted EPS, the average stock price for the
period is used in determining the number of shares assumed to be purchased from
the exercise of stock options. Diluted EPS excludes all dilutive potential
common shares if their effect is anti-dilutive.


                                      F-8

<PAGE>


Fair Value of Financial Instruments

The carrying value of cash, accounts receivable, prepaid expenses, deposits,
inventory, accounts payable, accrued expenses and notes payable approximate fair
value. Note payable to related party is discussed in Note D.

Considerable judgement is required in interpreting market data to develop the
estimates of fair value, and accordingly, the estimates are not necessarily
indicative of the amounts that the Company could realize in a current market
exchange.


Stock Based Compensation

In December 1998, the Company adopted a 1998 Omnibus Stock Option Plan that
provides for the granting of equity-based incentive and other awards to
employees and directors of the Company, its subsidiaries and selected
consultants. The Plan is administered by the Compensation Committee of the Board
of Directors. Any employee, directors who are not employees of the Corporation
or a subsidiary, and consultants who are not employees or directors of the
Corporation are eligible to participate in the Plan. The maximum number of
shares of common stock issuable on exercise of options or other awards granted
under the Plan is 1,000,000. Non-qualified options granted must have an exercise
price not less than 85% of the fair market value of the underlying shares of
common stock. Incentive options must have an exercise price not less than 100%
of the fair market value of the underlying shares of common stock. The term of
the options cannot be more than ten years. Awards may be granted in the form of
restricted stock. Awards can also be granted in the form of stock appreciation
rights. A stock appreciation right entitles the participant to receive from the
Company an amount equal to the positive difference between the fair market value
of common stock on the date of exercise of the stock appreciation right and the
grant price. No stock appreciation rights have been issued to date.

Additional information with respect to the Plan's stock option activity is as
follows:


                                                                   Weighted
                                                    Number of       Average
                                                     Shares      Exercise Price
                                                     ------      --------------

Outstanding at June 30, 2004                         300,000        $   0.20
Granted                                                 --           --
Exercised                                               --           --
Expired                                                 --           --
                                                     -------        --------
Outstanding at June 30, 2005                         300,000        $   0.20
Granted                                                 --           --
Exercised                                               --           --
Expired                                                 --           --
Outstanding at June 30, 2006                         300,000        $   0.20
                                                     =======        ========
Options exercisable at June 30, 2005                 300,000        $   0.20
                                                     =======        ========
Options exercisable at June 30, 2006                 300,000        $   0.20
                                                     =======        ========


                                      F-9

<PAGE>


The following table summarizes information about stock options outstanding at
June 30, 2006:

                                             Stock Options Outstanding
                                             -------------------------

                                           Weighted Average
                         Number of         Remaining              Weighted
 Range of                Shares            Contractual Life       Average
 Exercise Prices         Outstanding       In Years               Exercise Price
 ---------------         -----------       -----------------      --------------

 $0.15 - $0.20             65,000            4.39                      $0.16

 $0.20 - $0.25             235,000           3.51                      $0.21
                           -------
                           300,000           3.70                      $0.20
                           =======


In December 2004, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123(R) ("SFAS 123R"), "Share-Based Payment,"
which is a revision of Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation." SFAS 123R is effective for small
business publicly traded companies, for interim or annual periods beginning
after December 15, 2005. It supersedes Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees," and amends Statement of
Financial Accounting Standards No. 95, "Statement of Cash Flows." SFAS 123R
requires all share-based payments to employees, including grants of employee
stock options, to be recognized in the statement of operations based upon their
fair values and rescinds the acceptance of pro forma disclosure. SFAS 123R
permits two methods of adoption, a "modified prospective" method and a "modified
retrospective" method. Under the modified prospective method, stock-based
compensation cost is recognized, beginning with the effective date, based on the
requirements of SFAS 123R for all share-based payments granted after the
effective date and for all awards granted prior to the effective date that
remain unvested on the effective date. The modified retrospective method
includes the requirements of the modified prospective method and also permits
restatement of prior periods based on amounts previously reported in pro forma
disclosures pursuant to SFAS 123 for either all periods presented or for only
prior interim periods of the year of adoption. We adopted the modified
prospective method prescribed in SFAS 123R, effective January 1, 2006.

On June 30, 2006, there were outstanding options to purchase 300,000 shares of
our common stock at exercise prices ranging from $0.16 to $0.21 per share and
expiration dates between December 2009 and November 2010. These options were
vested at the time of grant. During the year ended June 30, 2006, no options
were granted. Therefore, the adoption of SFAS 123R does not have an impact on
the statement of operations for period ending June 30, 2006.

Previously, we accounted for stock-based compensation using the intrinsic value
method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," and related interpretations and elected to apply the
disclosure-only provisions of Statement of Financial Accounting Standards


                                      F-10

<PAGE>


("SFAS")No. 123, "Accounting for Stock-Based Compensation,"as amended by SFAS
No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure."
Under the intrinsic value method, compensation expense for stock options was
recognized over the vesting period of the grant based on the excess, if any, of
the market price of our common stock at the date of grant over the stock option
exercise price. As governed by the Plan, stock options were generally granted at
or near fair market value on the date of grant.

If we had previously accounted for stock-based compensation in the year ended
June 30, 2005 using the fair value method rather than the intrinsic value
method, the pro forma amounts of our net income and income per common share
would have been reported as follows:


                                                                 Year
                                                                ended
                                                               June 30,
                                                                 2005
                                                               ---------

Net income applicable to common stock:

      As reported                                               $301,889

Pro forma adjustments for compensation                              --
                                                                --------

Pro forma                                                       $301,889
                                                                ========

Income per common share:

Basic - as reported                                             $   0.04

Basic - pro forma                                               $   0.04

Diluted - as reported                                           $   0.04

Diluted - pro forma                                             $   0.04


The fair value of a stock option is determined using the Black-Scholes
option-pricing model, which values options based on the stock price at the grant
date, the expected life of the option, the estimated volatility of the stock,
the expected dividend payments, and the risk-free interest rate over the life of
the option.

The Black-Scholes option valuation model was developed for estimating the fair
value of traded options that have no vesting restrictions and are fully
transferable. Because option valuation models require the use of subjective
assumptions, changes in these assumptions can materially affect the fair value
of the options. Our options do not have the characteristics of traded options,
therefore, the option valuation models do not necessarily provide a reliable
measure of the fair value of our options.


                                      F-11

<PAGE>


There were no options granted during fiscal years ended June 30, 2006 and 2005.
Had there been options issued during the fiscal years ended June 30, 2006 and
2005, the fair value of the options would have been determined using the
Black-Scholes option-pricing model, which values options based on the stock
price at the grant date, the expected dividend payments, and the risk-free
interest rate over the life of the option.

Equity instruments issued to non-employees in exchange for goods, fees and
services were previously accounted for under the fair value-based method of
SFAS No. 123.


NOTE B - INVENTORIES

Inventories consisted of the following:


              Finished Goods                $   61,330
              Raw Materials                     89,535
                                            ----------
                                            $  150,865
                                            ==========


                                      F-12
<PAGE>


NOTE C - PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

<TABLE>
<CAPTION>

                                               Owned                    Leased                   Total
                                             -----------------------------------------------------------

<S>                                          <C>                      <C>                      <C>
Office Equipment                             $ 112,867                $  26,928                $ 139,795

Furniture and Fixtures                          20,726                                            20,726

Leasehold improvements                          13,589                                            13,589

Production Equipment                            30,236                                            30,236
                                             ---------                ---------                ---------

                                               177,418                   26,928                  204,346

Less accumulated depreciation                 (117,941)                 (23,443)                (141,384)
                                             ---------                ---------                ---------

                                             $  59,477                $   3,485                $  62,962
                                             =========                =========                =========

</TABLE>


NOTE D - RELATED PARTY TRANSACTIONS

The Company had a note payable with John C. Anderson, at 8% interest per annum.
Shortly after his passing the note was paid in full. Interest expense for the
years ended June 30, 2006 and 2005 were $1,531 and $11,090, respectively. A loan
was secured to purchase the building for the Company. The loan was personally
guaranteed by our Chief Executive Officer. (See Note L - Subsequent Events).


NOTE E - COMMITMENTS AND CONTINGENCIES

Leases

In September 2003, the Company entered into a lease for office space for a term
of three years. Monthly rent is approximately $4,100 plus sales tax. The Company
had the option, but not the obligation, to purchase the building and its
property after the first anniversary from the date of the execution of the
contract at a predetermined price. Rent expense for the years ended June 30,
2006 and 2005 were approximately $53,000 and $49,000, respectively. On July 21,
2006, the Company purchased the office building occupied by the Company. See
Note L - Subsequent Events.

In addition, the Company also leases certain equipment under various operating
leases expiring through year 2011.

The minimum lease payments due under the equipment lease agreements for fiscal
years ended June 30 is as follow:


                           2007             $   11,458
                           2008             $   11,458
                           2009             $   11,458
                           2010             $   11,362
                           2011             $    9,447
                                            ----------
                                            $   55,183
                                            ==========



                                      F-13

<PAGE>


Purchase Commitments
--------------------

Sirius entered into a two-year contract with one of its suppliers in June 2004
to purchase a minimum quantity of various diabetic supplies at a discounted
price each year. In accordance with the terms of the contract, the supplier
could retroactively adjust the purchase price based on actual quantities
purchased. In accordance with the Statement of Position94-6, Disclosure of
Certain Significant Risks and Uncertainties ("SOP 94-6"), Sirius believes that
while there is concentration of products purchased from this vendor, the
concentration did not make the Company vulnerable to the risk of a near-term
severe impact, as defined in SOP 94-6. Sirius also has the ability to purchase
the same product from third-party vendors at a slightly higher price. Further,
management believes that it is not reasonably possible that this event could
cause severe near-term impact to the Company.


NOTE F - LONG-TERM DEBT

The Company had a note payable with John C. Anderson at 8% interest per annum.
Shortly after his passing the note was paid in full. Interest expense for the
years ended June 30, 2006 and 2005 were $1,531 and $11,090, respectively.


NOTE G - STOCKHOLDERS' 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. The
preferred stockholders are entitled to receive, if declared by the board of
directors, quarterly dividends at an annual rate of $.10 per share of Series A
Cumulative Convertible Preferred Stock per annum. Dividends accrue without
interest and are cumulative from the date of issuance of the Series A Cumulative
Convertible Preferred Stock and are payable quarterly in arrears in cash or
publicly traded common stock when and if declared by the board of directors. As
of June 30, 2006, no dividends have been declared. Dividends in arrears on the
outstanding preferred shares total $186,861 or $0.91 per share as of June 30,
2006. The preferred stockholders have the right to convert each share of Series
A Cumulative Convertible Preferred Stock into one share of the Company's common
stock at any time without additional consideration. Each share of Series A
Cumulative Convertible 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 Cumulative
Convertible Preferred Stock have voting rights equal to the common stockholders
based upon the number of shares of common stock into which the Series A
Cumulative Convertible 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 Cumulative Convertible Preferred
stock.


                                      F-14

<PAGE>


NOTE H - EARNINGS PER SHARE

As required by FASB Statement No. 128, the following table sets forth the
computation of basic and diluted earnings per share:
<TABLE>
<CAPTION>

                                                                      Years Ended June 30,
                                                                      -------------------
                                                                2006                        2005
<S>                                                          <C>                       <C>
Numerator:
Net income                                                  $   342,229                $   314,839
Adjustment for basic earnings per share:
Dividend requirements on preferred stock                        (21,240)                   (12,950)
                                                            -----------                -----------
Numerator for basic earnings per share-
Net income available to common
stockholders                                                $   320,989                $   301,889

Effect of dilutive securities:
Numerator for diluted earnings per share-
Net income available to common
stockholder                                                 $   320,989                $   301,889
                                                            -----------                -----------

Denominator:
Denominator for basic earnings per share-
Weighted-average common shares                                8,043,928                  8,047,667
Effect of dilutive securities: Stock options                    104,997                    128,454
Dilutive potential common shares                                214,653                    180,671
                                                            -----------                -----------
Denominator for dilutive earnings per share-
Adjusted weighted-average shares and
assumed conversions                                           8,363,578                  8,356,792
                                                            -----------                -----------

Basic income per share                                      $      0.04                $      0.04
                                                            -----------                -----------
Diluted income per share                                    $      0.04                $      0.04
                                                            -----------                -----------


NOTE I - INCOME TAXES AND AVAILABLE CARRYFORWARD

As of June 30, 2006, the Company had consolidated income tax net operating loss
("NOL") carryforward for federal income tax purposes of approximately
$3,979,000. The NOL will expire in various years ending through the year 2022.

The components of the provision for income taxes (benefits) are attributable to
continuing operations as follows:


                                      F-15

<PAGE>


                                                   2006                   2005
                                                 --------              ---------
Current
Federal                                          $   --                $   --
State                                                --                    --

Deferred
Federal                                            13,665               (69,740)
State                                               2,339                (7,446)
                                                 --------              --------
                                                 $ 16,004              $(77,186)
                                                 ========              =========

Deferred income taxes reflect the net tax effects of the temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities are as follows:


                                                              Current                Non-Current
                                                              -------                -----------

Deferred tax assets:
NOL and contribution carryforwards                         $   132,304                $ 1,373,049
Allowance for doubtful accounts                                    941
                                                           -----------                -----------
                                                               133,245                  1,373,049

Deferred tax (liabilities):
Excess of tax over book depreciation                              --                       (9,063)
                                                           -----------                -----------

                                                               133,245                  1,363,986
Valuation allowance for deferred tax assets                       --                   (1,373,049)
                                                           -----------                -----------

Net deferred tax asset (liability)                             133,245                     (9,063)
Less: current net deferred tax asset (liability)              (133,245)                      --
                                                           -----------                -----------

Net non-current deferred tax asset (liability)             $      --                  $    (9,063)
                                                           ===========                ===========
</TABLE>

The change in the valuation allowance is as follow:

         June 30, 2005                      $ (1,492,017)
         June 30, 2006                        (1,373,049)
                                            ------------

Decrease in valuation allowance             $   (118,968)
                                            ============


The decrease in the valuation allowance is due to the expected utilization of
net operating loss carryforwards. A valuation allowance of approximately
$1,369,000 has been provided to reduce the asset to the net amount


                                      F-16

<PAGE>


of tax benefit management believes it will more likely than not realize. As time
passes, management will be able to better assess the amount of tax benefit it
will realize from using the carryforward.

Income taxes for the years ended June 30, 2006 and 2005 differ from the amounts
computed by applying the effective income tax rates of 37.63% and 37.63%,
respectively, to income before income taxes as a result of the following:

                                                        2006             2005
                                                      ---------       ----------

Expected provision at US statutory rate               $ 121,799       $  80,802
State income tax net of federal benefit                  13,004           8,627
Nondeductibles                                              169           1,547
Change in valuation allowance                          (118,968)       (168,162)
                                                      ---------       ---------

Income tax expense / (benefit)                        $  16,004       $ (77,186)
                                                      =========       ==========


NOTE J - CONCENTRATION OF SUPPLY RISK

The Company's manufacturing and packaging activities are performed at a
production facility owned and operated by a non-affiliated pharmaceutical
manufacturer. At the present time, the manufacturer is the sole source of the
Company's wound care products. The sudden loss or failure of this manufacturer
could significantly impair Amerx's ability to fulfill customer orders on a
short-term basis and therefore, could materially and adversely affect the
Company's operations. However, the Company has maintained a long-term
relationship with this manufacturer and does not expect a discontinuance of its
wound care products from the manufacturer in the near term.

During the year, Sirius purchased approximately 44% of its diabetic supplies
from a non-affiliated supplier. Sirius entered into a contract with this
supplier to purchase a minimum quantity of products at a discount. (See NOTE E -
COMMITMENTS AND CONTINGENCIES for disclosure) The Company does not anticipate
supply from this vendor will be lost in the near future. In the event the
contract is not renewed upon its expiration, the Company could still purchase
such products at a higher cost from this supplier or negotiate with other
suppliers.


NOTE K - SEGMENT INFORMATION

The Company operates in the following two business segments:

1.   Sale of skin and wound care products - Amerx operates in the skin and wound
     care products segment. The marketing of these products is targeted
     primarily to diabetic patients who have difficulties providing proper care
     and treatment of wounds due to their diabetic condition and podiatrists who
     recommend the products to their patients.


                                      F-17

<PAGE>


2.   Sale of diabetic supplies - Sirius provides meters, test strips, monitors,
     syringes, etc. primarily to diabetic patients. The Company is then
     reimbursed by Medicare and/or patients' secondary insurance.

Each separately managed segment offers different products requiring different
marketing and distribution strategies. Segments Information

<TABLE>
<CAPTION>

                                                Wound Care        Diabetic
                                 June 30,       Products          Products       Other            Consolidated
                                 --------       --------          --------       -----            ------------

<S>                                 <C>         <C>               <C>           <C>                <C>
Revenues                            2006        $1,972,381        $340,964      $     -            $2,313,345
                                    2005         1,856,529         341,732            -            2,198,261

Gross Profit                        2006         1,634,721         158,735            -            1,793,456
                                    2005         1,507,334         159,427            -            1,666,761

Identifiable Assets                 2006           388,846          58,665        463,648            911,159
                                    2005           334,167          66,303        228,421            628,891
Property and Equipment
Additions                           2006             9,052             -              -                9,052
                                    2005             9,718             -              -                9,718

Depreciation                        2006            14,718           3,059          5,812             23,589
                                    2005            19,295           6,116          2,204             27,615
</TABLE>


Geographical Information

The Company operates and sells its products to its customers primarily within
the United States. All assets are located within the United States.


NOTE L - SUBSEQUENT EVENTS

On July 21, 2006, the Company exercised its option to purchase the office space
the Company was leasing. The Company purchased the building from the lessor for
$550,000. In addition, at the same time, we closed on a loan provided by Bank of
America, N.A. in the amount of $508,000, evidenced by a promissory note.
Further, the purchase and loan were secured by a Mortgage, also dated July 21,
2006, between the Company and Bank of America. The loan was personally
guaranteed by our Chief Executive Officer.


                                      F-18

<PAGE>


            CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


We hereby consent to the incorporation of our report dated August 25, 2006,
appearing in the Annual Report on page F-1 of Form 10-KSB of Procyon Corporation
and Subsidiaries for the year ended June 30, 2006, in the Company's Registration
Statements on Form S-8, SEC File No. 0-17449.



Ferlita, Walsh & gonzalez, P.A.
Certified Public Accountants
3302 Azeele Street
Tampa, Florida 33609

September 29, 2006