FORM 10-KSB

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
(Mark One)
[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934 For the fiscal year ended June 30, 2001

                                       OR

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

                         Commission file number 0-17449

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

                Colorado                                        59-3280822
                --------                                        ----------
     (State or other jurisdiction of                         (I.R.S. Employer
     incorporation or organization)                       Identification Number)

    1150 Cleveland Street, Suite 410
          Clearwater, Florida                                      33755
          -------------------                                      -----
(Address of principal executive offices)                         (Zip Code)

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

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

State Issuers revenues for its most recent fiscal year: $1,146,799

     The aggregate market value of the 3,545,138 shares of Common Stock held by
     non-affiliates was $939,462 on October 8, 2001 based on the average bid and
     asked price of $.265 on such date. As of October 8, 2001, 7,861,338 shares
     of the issuers Common Stock were outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE:

The information required by Part III of this annual report is incorporated by
reference to the registrants' definitive proxy statement if filed with the
Commission on or before October 28, 2001. If such proxy statement is not filed
by such date, the information required by Part III of this annual report will be
filed with the Commission as an amendment to this Form 10-KSB under cover of
Form 10-KSB/A, not later than October 28, 2001.

Transitional Small Business Disclosure Format: Yes ___  No X

<PAGE>


                                      INDEX


Title                                                                       Page


ITEM  1.  DESCRIPTION OF BUSINESS...........................................  3

ITEM  2.  DESCRIPTION OF PROPERTY...........................................  7

ITEM  3.  LEGAL PROCEEDINGS.................................................  7

ITEM  4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...............  7

ITEM  5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
          MATTERS...........................................................  7

ITEM  6.  MANAGEMENTS DISCUSSION AND ANALYSIS
          OR PLAN OF OPERATION..............................................  9

ITEM  7.  FINANCIAL STATEMENTS.............................................. 11

ITEM  8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
          ACCOUNTING AND FINANCIAL DISCLOSURE............................... 12

ITEM  9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
          PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
          ACT .............................................................. 12

ITEM 10.  EXECUTIVE COMPENSATION............................................ 12

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          MANAGEMENT........................................................ 12
ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................... 12

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


                                       2
<PAGE>


                                     Part I

ITEM 1. BUSINESS

History and Organization

     Procyon Corporation (the "Company"), a Colorado corporation, was
incorporated on March 19, 1987 and was deemed a development stage company until
May 1996 when it acquired Amerx Health Care Corp. ("Amerx"), a corporation based
in Clearwater, Florida, which was wholly owned by John C. Anderson. Amerx
develops and markets proprietary medical products used in the treatment of
pressure ulcers, dermatitis, inflammation, and other skin problems. Sirius
Medical Supply ("Sirius"), a Florida corporation was formed in 2000 to operate
as a full service mail order medical supply company selling primarily to
Medicare and Medicaid customers. Historically, the Amerx's products have been
sold through distributors to health care institutions, such as 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 the
consumer.

Products

     Amerx's products currently consist of Amerigel(R) Ointment Wound Dressing
with another recently upgraded 510k approval, classifying the product as a
hydrogel wound dressing, Amerigel(R) Preventive Care Lotion, Amerigel(R)
Preventive Barrier Lotion, and its latest product Amerigel Wound Wash. The
Amerigel(R) Ointment Wound Dressing is now formulated to be used as a wound
dressing to manage pressure ulcers stages I-IV, stasis ulcers, diabetic skin
ulcers, post surgical incisions, cuts, abrasions, and skin irritations. The
Amerigel(R) Preventive Care Lotion has emollients, which restore moisture to
fragile skin, protect the skin against tears and chafing, and assist in
prevention of chronic pressure ulcers. The Amerigel(R) Barrier Lotion provides
barrier protection to reduce the harmful effects of urine and feces in
incontinent patients. The Amerigel Wound Wash was introduced as a 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 be potentially
harmful to a chronic wound. The Company also expects to introduce new products
in fiscal 2002, provided the funds necessary to manufacture and advertise these
new products become available. One of proposed products consists of two-inch and
four-inch square gauze sponges saturated with the Amerigel(R) Ointment Wound
Dressing. The sponges have been developed for packing deep wounds, and are
expected to improve healing. Other currently proposed new products include an
acne cream and a facial scrub. The Company is still in the process of
development and testing with these products.

                                       3
<PAGE>


     Management believes that each Amerx product is based on proprietary
formulations which the Company has attempted to protect as trade secret
information. Each product is registered with the Food and Drug Administration
and receives a National Drug Code. In September 1998, the Company was granted a
Medicare Part B HCPCS Reimbursement Code ("Reimbursement Code") for its
Amerigel(R) Ointment Wound Dressing, which allows it to qualify for Medicare
reimbursements. The Amerigel(R) Preventive Care Lotion and the Amerigel(R)
Barrier Lotion are not eligible for Medicare Part B reimbursement as they are
formulated for preventive maintenance care and as skin protectants. Amerigel(R)
Ointment Wound Dressing currently represents approximately 78% of net sales by
the Company, while Amerigel(R) Preventive Care Lotion, Amerigel(R) Preventive
Barrier Lotion, and Amerigel Wound Wash represent 17% , 4%, and 1% respectively.

     Sirius's products at this time consist solely of diabetic supplies,
primarily glucose monitors, test strips, lancets, and syringes. Sirius is
building its customer base on these products with plans to expand into the
future with a broader product line to achieve its goal of becoming a full
service mail order medical supply company.

Market for Products

     The institutional market for skin treatment products is comprised of
hospitals, nursing homes, home health care agencies and other health care
institutions which provide wound care to a large number of patients. Management
believes that Amerigel(R) products represent an inexpensive, yet effective,
treatment and prevention program for chronic pressure ulcers and other skin
problems which are treated in health care institutions. Management believes that
obtaining the Reimbursement Code, even though it does not specify the amount to
be reimbursed and requires case-by-case approval, enhances the offering of
Amerigel(R) Ointment Wound Dressing to institutional entities such as nursing
homes and home health care agencies. Management intends to continue, however, to
upgrade the reimbursement status.

     The retail market for skin care products is comprised mainly of mass
merchandise stores and pharmacies that sell such products to individuals for
personal use outside of health care facilities. The Company's products are
presently sold retail in independent pharmacies. The Company initiated a direct
response program and is now making direct retail sales to individual consumers
nationally.

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


                                       4
<PAGE>


Sales and Marketing

     The Company's traditional channel of distribution has been through retail
distributors. The Company's principal distributors to the institutional market
in fiscal 2001 included Bindley Western Drug, and Gulf South. The Company's
principal retail distributors during fiscal 2001 were McKesson Drug,
Amerisource, Cardinal Health and Bergen Brunswig. During fiscal 2001, retail and
institutional sales represented approximately 85% and 4%, respectively, of total
net sales as compared to 95% and 5%, respectively, during fiscal 2000.
Management expects that retail sales will continue to account for a significant
percentage of total net sales. However, Management's decision to target doctors
directly has accounted for significant growth, accounting for 11% of sales in
its first year of the program. Management will continue to attempt to increase
its distributor base, particularly with distributors with an ability to
introduce the Company's products in new geographical areas and to new retail
chains. Management will also increase its focus on the Doctor Direct division as
it is a young division demonstrating commercial potential.

     Distributors purchase products from the Company on standard credit terms.
Product returns by distributors are generally permitted only on dated products
based upon a two-year expiration date. The Company supports its distributors
through product literature, advertising and limited participation at industry
trade shows. All existing distributors sell Amerx products on a non-exclusive
basis.

     Sirius's channel of distribution is by mail-order direct to consumers. The
Company has attracted and retained customers through marketing efforts. Sirius's
customer base is currently small. However, the Company believes it has
substantial potential, as there are over 16 million diabetics in the United
States, according to the American Diabetes Association.

     The Company periodically has received inquiries about foreign market
distribution. These inquiries have been generated by the Company's advertising,
market presence and web sites (www.amerxhc.com and www.amerigel.com). The
Company intends to respond to and pursue all such inquiries.

Significant Customers

     During fiscal 2001, 63% of the Company's net sales were directly attributed
to marketing efforts, while 11% of net sales were accounted for by the Doctor
Direct program. In fiscal 2000, 64% of the Company's sales were directly
attributed to marketing efforts. 14% of sales were accounted for by Eckerd Drug
Corp. The Company expects that certain of its principal distributors, such as
McKesson Drug, may continue to account for a significant portion of net sales,
so the loss of any significant distributor or customer could have an adverse
effect on the Company's future operating results and financial condition. 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.

                                       5
<PAGE>


Manufacturing

     All 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 "Act"), and the regulations
promulgated under the 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 which apply to all activities
conducted by the manufacturer in the facility.

     During fiscal 2001, manufacturing was completed by a small regional
company, which has in the past performed, and will in the future perform,
research and development activities for the Company. The Company does not have a
written contract with this manufacturer and there are no minimum purchase
agreements. Management believes there are other companies which could
manufacture the Company's products current standard, if necessary.

     One proprietary ingredient contained in all of the Company's products is
purchased and shipped to the manufacturing facility by the Company. The Company
does not have a written contract with the supplier of this ingredient and
management believes that an alternative supplier could be secured. Other raw
materials and ingredients are generally provided by the manufacturer and the
Company believes there are multiple suppliers of these materials and
ingredients.

Proprietary Rights

     In January 1999, the United States Patent and Trademark Office registered
the Company's Amerigel(R) trademark. The Company has applied for a trademark
application for the principal proprietary ingredient used in all of its
currently available products. The Company 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 treatment products 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. The Company 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 the Company. Because of the intense
competition and the Company's financial condition, there can be no assurance
that it will be able to increase its market share. The market for diabetic
supplies is also highly competitive, and Sirius will compete with other large
companies for market share.

                                       6
<PAGE>


Employees

     As of September 30, 2001, the Company had twelve full-time employees,
consisting of four management employees, six sales-related employees and two
administrative employees.

ITEM 2. PROPERTIES

     The Company currently maintains its offices at 1150 Cleveland Street, Suite
410, Clearwater, Florida 33755. The Company's offices consist of approximately
3,536 square feet of space which is leased from an unrelated party. The annually
renewable office lease requires monthly payments of approximately $3,907.
Management believes the facility is adequate for the Company's current needs.

ITEM 3. LEGAL PROCEEDINGS

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

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

     No matter was submitted to a vote of security holders during the quarter
ended June 30, 2001.

                                     Part II

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

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

     Fiscal 2000
     -----------
     First Quarter......................................   $  .6875    $  .2500
     Second Quarter.....................................      .5000       .1875
     Third Quarter......................................     4.5000       .2500
     Fourth Quarter.....................................     4.5000       .6250

     Fiscal 2001
     -----------
     First Quarter......................................   $ 1.0000    $  .5625
     Second Quarter.....................................      .6875       .1875
     Third Quarter......................................      .9375       .1875
     Fourth Quarter.....................................      .6250       .2000


                                       7
<PAGE>


     As of October 8, 2001, there were approximately 147 record holders of the
Company's Common Stock. On October 8, 2001, the closing bid price of the
Company's common stock was $.10 and the closing ask price was $.43. On October
1, 2001, the last date on which a sale occurred, the last reported sale price
was $.15.

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

     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, in recent years the stock
market in general has experienced significant price and volume fluctuations.
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 adversely affect the price of the Common Stock.

Recent Sales of Unregistered Securities

     The Company relied on Section 4(2) of the Securities Act of 1933, as
amended (the 1933 Act) for exemption from the registration requirements of
the1933 Act. All of the foregoing sales were made to officers and directors, or
to individuals or entities which had access to information enabling them to
evaluate the merits and risks of the investment by virtue of their relationship
to officers and directors of the Company or their economic bargaining power.
Each investor was furnished with information concerning the operations of the
Company and each had the opportunity to verify the information supplied.
Additionally, the Company obtained a signed representation from each of the
foregoing persons or entities of his or its intent to acquire the shares for the
purpose of investment only, and not with a view toward the subsequent
distribution thereof.

     Holders of 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, are cumulative 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, 2001 and
dividends in arrears at such date total approximately $118,791.

                                       8
<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.
Such shares will mandatorily 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 2001, holders of 79,533 shares of Preferred Stock converted
their shares to Common Stock.

ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

General

     The continuing operations and revenues of the Company consist of the
operations of and revenues generated by Amerx and Sirius, the Company's 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 of those who suffer from wound
and skin care problems. Sirius markets and distributes diabetic supplies via
mail order.

     The Company 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. 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, the Company's products must be in the distributor's
warehouse in order for the Company to compete with other manufacturers. Amerx
reaches the retail consumer primarily through distributors, but, in some cases,
through direct sales to a retail store chain. As of June 30, 2001, the Company's
skin care products were being distributed to institutions and to retail stores
through McKesson Drug, Bergen Brunswig, Cardinal Health, Amerisource, Gulf
South, Bindley Western Drug and a number of smaller local and regional
distributors.

Results of Operations

     Comparison of Fiscal 2001 & 2000. Net sales during fiscal 2001 were
approximately $1,147,000 as compared to approximately $703,000 in fiscal 2000,
an increase of approximately $444,000, or 63%.

     Cost of sales increased significantly, to approximately $265,000 in 2001 as
compared to approximately $134,000 in 2000. The principal reasons for the
increase in cost of sales was the increase in sales, and marketing, as well as
higher cost for products sold by Sirius.

                                       9
<PAGE>


     Gross profit increased to approximately $882,000 during fiscal 2001 as
compared to approximately $569,000 during fiscal 2000, an increase of about
$313,000, or 55%. As a percentage of sales, gross profit was 77% in fiscal 2001,
as compared to 81% in fiscal 2000.

     Operating expenses during fiscal 2001 were approximately $1,574,000,
consisting of approximately $443,000 in salaries and benefits, $1,131,000 in
selling, general and administrative expenses. This represents a increase in
expenses of approximately $696,000 as compared to expenses in fiscal 2000. As a
percentage of net sales, operating expenses during fiscal 2000 increased to
137%, as compared to 125% during fiscal 2000.

     Loss from operations increased to approximately $692,000 in 2001, as
compared to approximately $309,000 in fiscal 2000. Net loss (after dividend
requirements for Preferred Shares) was approximately $805,000 during fiscal
2001, compared to approximately $424,000 during fiscal 2000.

     As of June 30, 2001, the Company had a deferred tax asset of approximately
$1,784,000, consisting primarily of net operating losses. The Company recorded a
valuation allowance equal to 100 percent of the deferred tax asset as the
Company was unable to determine that it was more likely than not the deferred
tax asset will be realized. The valuation allowance increased approximately
$321,000 from fiscal 2000 to 2001.

Liquidity and Capital Resources

     As of June 30, 2001, the Company's principal sources of liquidity included
unrestricted cash and cash equivalents of approximately $19,000, inventories of
approximately $45,000, and net accounts receivable of approximately $70,000. The
Company had negative working capital of approximately $233,000 and no long-term
debt at June 30, 2001.

     Operating activities used cash of approximately $485,000 during fiscal 2001
and approximately $381,000 during fiscal 2000, consisting primarily of net
losses of approximately $687,000 and $318,000, respectively. Cash used in
investing activities during fiscal 2001 and 2000 was approximately $50,000 and
$16,000, respectively. Cash provided by financing activities during fiscal 2001
and 2000 was approximately $75,000 and $786,000, respectively. There were no
sales of Preferred Stock in fiscal 2001 or 2000.

     At June 30, 2001 the Company had no commitments for capital expenditures.

     During fiscal 2001, holders of 79,533 shares of Preferred Stock converted
their shares to Common Stock.

                                       10
<PAGE>


     The Company's financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has incurred losses since
its inception and has been dependent upon equity financing and shareholder loans
to fund working capital needs. These conditions raise doubt about the Company's
ability to continue as a going concern. The accompanying financial statements do
not include any adjustments that might result from the determination of this
uncertainty. Management's plans for increasing revenues have been described
elsewhere in this Report on Form 10-KSB, but there can be no assurance that the
Company will be able to increase its revenues or achieve a profitable level of
operations.

The 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," "believe" and similar expressions, variations of these
words or the negative of those word 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.

ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     Consolidated Financial Statements as of June 30, 2001 and 2000 and for the
years ended June 30, 1999 were audited by Giunta, Ferlita & Walsh, P.A., the
Company's independent auditors, as indicated in their report included appearing
at page F-1.


                                       11
<PAGE>


                          INDEX TO FINANCIAL STATEMENTS
                             -----------------------
                                                                            Page
                                                                            ----

Report of Independent Certified Public Accountants.......................   F-1

Consolidated Balance Sheet June 30, 2001.................................   F-2

Consolidated Statements of Operations
        For the Years Ended June 30, 2001 and 2000.......................   F-3

Consolidated Statements of Stockholder's Deficiency
        For the Years Ended June 30, 2001 and 2000.......................   F-4

Consolidated Statements of Cash Flows
        For the Years Ended June 30, 2001 and 2000.......................   F-5

Notes to Financial Statements............................................   F-6


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

     The Company has not reported any disagreement with its auditors on any
matter of accounting principles or practices or financial statement disclosure.

                                    PART III

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

ITEM 10. EXECUTIVE COMPENSATION.

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

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

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

                                       12
<PAGE>


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

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

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

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

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

 *   3.1       Articles of Incorporation                                    3
 +   3.1.1     Articles of Amendment to Articles of Incorporation           3
 *   3.2       Bylaws                                                       3
 +   4.1       Designation of Series A Preferred Stock                      4
 +   10.4      Loan and Security Agreement, dated as of January 1, 1995,
               by and between the Company and Amerx Health Care Corp.,
               including Promissory Notes issued thereunder.               10
 o   10.4      Agreement and Plan of Exchange, dated January 31, 1996,
               by and between the Company and Amerx.                       10

----------
*    Incorporated by reference to the Company's Registration Statement on Form
     S-1, S.E.C. File No. 33-13273.
**   Incorporated by reference to the Company's Form 10-KSB for the fiscal year
     ended June 30, 1989.
+    Incorporated by reference to the Company's Form 10-KSB for the fiscal year
     ended June 30, 1995.
o    Incorporated by reference to the Company's Form 8-K filed on or about
     February 2, 1996.
#    Incorporated by reference to the Company's Form 10-KSB for the fiscal year
     ended June 30, 1998


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

     A report on Form 8-K was filed on April 4, 2000 reporting the sale of 1.6
     million restricted shares of the Company's Common Stock under Item 5 of
     such Form.

                                       13
<PAGE>


                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                PROCYON CORPORATION


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

Date: October 8, 2001

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

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


/s/ John C. Anderson         President and Acting               October 12, 2001
--------------------         Principal Executive, Financial
John C. Anderson             and Accounting Officer



/s/ Chester L. Wallack       Director                           October 12, 2001
----------------------
Chester L. Wallack


/s/ Fred W. Suggs, Jr.       Director                           October 12, 2001
----------------------
Fred W. Suggs, Jr.


/s/ Alan B. Crane            Director                           October 12, 2001
-----------------
Alan B. Crane


/s/ Richard T. Thompson      Director                           October 12, 2001
-----------------------
Richard T. Thompson


/s/ Jeffery S. Slowgrove     Director                           October 12, 2001
------------------------
Jeffery S. Slowgrove


                                       14
<PAGE>


                                  EXHIBIT INDEX
                                  -------------


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

 *   3.1       Articles of Incorporation                                    3

 +   3.1.1     Articles of Amendment to Articles of Incorporation           3

 *   3.2       Bylaws                                                       3

 +   4.1       Designation of Series A Preferred Stock                      4

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

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

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

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

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

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

#    Incorporated by reference to the Company's Form 10-KSB for the fiscal year
     ended June 30, 1998


                                       15
<PAGE>





                      PROCYON CORPORATION AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS

                       Years Ended June 30, 2001 and 2000

<PAGE>


TABLE OF CONTENTS


                                                                        Page No.

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS.......................  F-1



FINANCIAL STATEMENTS


  Consolidated Balance Sheet.............................................  F-2

  Consolidated Statements of Operations..................................  F-3

  Consolidated Statements of Stockholders' Deficiency....................  F-4

  Consolidated Statements of Cash Flows..................................  F-5

  Notes to Financial Statements..........................................  F-6


<PAGE>






               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



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, 2001 and the related statements of
operations, stockholders' deficiency, and cash flows for the years ended June
30, 2001 and 2000. 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 auditing standards generally accepted
in the 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, 2001 and the results of its operations and its cash
flows for the years ended June 30, 2001 and 2000, in conformity with accounting
principles generally accepted in the United States of America.




/s/ GIUNTA, FERLITA & WALSH, P.A.
---------------------------------
GIUNTA, FERLITA & WALSH, P.A.
Certified Public Accountants

September 5, 2001


<PAGE>


PROCYON CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
June 30, 2001

ASSETS

CURRENT ASSETS
  Cash                                                              $    19,099
  Certificates of deposit
    plus accrued interest, restricted                                    17,573
  Accounts receivable, less allowance
    of $500 for doubtful accounts                                        69,815
  Prepaid expense                                                        19,141
  Inventories                                                            44,733
                                                                    -----------

                                       TOTAL CURRENT ASSETS             170,361

PROPERTY AND EQUIPMENT
  Office equipment                                                       52,782
  Furniture and fixtures                                                 14,666
  Production equipment                                                   14,236
                                                                    -----------
                                                                         81,684
  Accumulated depreciation                                              (36,185)
                                                                    -----------

                                                                         45,499

OTHER ASSETS                                                              1,520
                                                                    -----------

                                                                    $   217,380
                                                                    ===========

LIABILITIES AND STOCKHOLDERS' DEFICIENCY

CURRENT LIABILITIES
  Accounts payable                                                  $   255,466
  Accrued expenses                                                       72,672
  Note payable to stockholder                                            75,000
                                                                    -----------

                                  TOTAL CURRENT LIABILITIES             403,138

STOCKHOLDERS' DEFICIENCY
  Preferred stock, 496,000,000 shares authorized;
    none issued                                                               0
  Series A cumulative convertible preferred stock
    no par value; 4,000,000 shares authorized;
    288,600 shares issued and outstanding                               244,450
  Common stock, no par value, 80,000,000 shares
    authorized; 7,840,338 shares issued and outstanding               4,262,414
  Accumulated deficit                                                (4,692,622)
                                                                    -----------

                                                                       (185,758)
                                                                    -----------

                                                                    $   217,380
                                                                    ===========


The accompanying notes are an integral part of these financial statements.

                                       F-2
<PAGE>


PROCYON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended June 30, 2001 and 2000

                                                       2001             2000
                                                   -----------      -----------

NET SALES                                          $ 1,146,799      $   702,855

COST OF SALES                                          265,061          134,026
                                                   -----------      -----------

GROSS PROFIT                                           881,738          568,829

OPERATING EXPENSES
  Salaries and benefits                                442,986          188,762
  Selling, general and administrative                1,130,695          652,462
  Research and development                                   0           36,625
                                                   -----------      -----------
                                                     1,573,681          877,849
                                                   -----------      -----------

LOSS FROM OPERATIONS                                  (691,943)        (309,020)

OTHER INCOME (EXPENSE)
  Interest income                                        9,161            6,947
  Interest expense                                      (3,904)         (15,932)
                                                   -----------      -----------
                                                         5,257           (8,985)
                                                   -----------      -----------

NET LOSS                                              (686,686)        (318,005)

Dividend requirements on preferred stock              (118,791)        (105,588)
                                                   -----------      -----------

Loss applicable to common stock                    $  (805,477)     $  (423,593)
                                                   ===========      ===========

Net loss per common share                          $     (0.10)     $     (0.08)
                                                   ===========      ===========

Weighted average number of common
  shares outstanding                                 7,815,973        5,593,351
                                                   ===========      ===========




The accompanying notes are an integral part of these financial statements.

                                       F-3
<PAGE>
<TABLE>
<CAPTION>


PROCYON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
Years Ended June 30, 2001 and 2000

                                          Preferred Stock               Common Stock
                                    --------------------------    -------------------------   Accumulated
                                       Shares        Amount         Shares         Amount       Deficit         Total
                                    -----------    -----------    -----------   -----------   -----------    -----------
<S>                                 <C>            <C>            <C>           <C>           <C>            <C>
Balance, June 30, 1999                  811,283    $   767,133      5,001,455   $ 2,087,731   $(3,687,931)   $  (833,067)

  Stock issued in connection with
    private placements, net of
    stock issuance costs                      0              0      2,306,200     1,642,000             0      1,642,000

  Stock issued for services                   0              0         10,000        10,000             0         10,000

  Conversion of preferred stock
    to common stock                    (443,150)      (443,150)       443,150       443,150             0              0

  Net loss                                    0              0              0             0      (318,005)      (318,005)
                                    -----------    -----------    -----------   -----------   -----------    -----------

Balance, June 30, 2000                  368,133        323,983      7,760,805     4,182,881    (4,005,936)       500,928

  Conversion of preferred stock
    to common stock                     (79,533)       (79,533)        79,533        79,533             0              0

  Net loss                                    0              0              0             0      (686,686)      (686,686)
                                    -----------    -----------    -----------   -----------   -----------    -----------

Balance, June 30, 2001                  288,600    $   244,450      7,840,338   $ 4,262,414   $(4,692,622)   $  (185,758)
                                    ===========    ===========    ===========   ===========   ===========    ===========




The accompanying notes are an integral part of these financial statements.

                                                           F-4
<PAGE>


PROCYON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended June 30, 2001 and 2000

                                                                 2001           2000
                                                              -----------    -----------
CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss                                                    $  (686,686)   $  (318,005)
  Adjustments to reconcile net loss to
    net cash used by operating activities:

    Depreciation                                                    9,862          6,107
    Stock issued for services                                           0         10,000
    Decrease (increase) in:
      Accounts receivable                                         (53,126)       (14,070)
      Accrued interest on certificates of deposit                    (573)             0
      Inventory                                                    14,333          5,348
      Prepaid expenses                                              2,432        (21,574)
      Other assets                                                  9,653         (8,107)
    Increase (decrease) in:
      Accounts payable                                            193,212         22,477
      Accrued expenses                                             25,313        (63,171)
                                                              -----------    -----------
                                           NET CASH USED BY
                                       OPERATING ACTIVITIES      (485,580)      (380,995)

CASH FLOWS FROM INVESTING ACTIVITIES
  Purchase of certificates of deposit                             (17,000)             0
  Purchase of property and equipment                              (32,655)       (15,694)
                                                              -----------    -----------
                                           NET CASH USED BY
                                       INVESTING ACTIVITIES       (49,655)       (15,694)

CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from issuance of common stock                                0      1,000,000
  Proceeds from loan from stockholders                             75,000        251,000
  Repayment of loan from stockholders                                   0       (465,127)
                                                              -----------    -----------
                                       NET CASH PROVIDED BY
                                       FINANCING ACTIVITIES        75,000        785,873
                                                              -----------    -----------

                            NET INCREASE (DECREASE) IN CASH      (460,235)       389,184

CASH AT BEGINNING OF PERIOD                                       479,334         90,150
                                                              -----------    -----------

                                      CASH AT END OF PERIOD   $    19,099    $   479,334
                                                              ===========    ===========


SUPPLEMENTAL DISCLOSURES

Taxes Paid                                                    $         0    $         0

Interest Paid                                                 $     3,904    $    15,932

NONCASH TRANSACTIONS DISCLOSURE:

Common stock issued for services                              $         0    $    10,000
Conversion of Series A preferred stock to common stock        $    79,533    $   443,150
Advance deposit converted into common stock                   $         0    $   642,000



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 and its wholly owned subsidiary, Amerx Health Care Corp.
("Amerx") manufacture and market wound care and skin care products primarily in
the United States. The Company also established a new wholly owned subsidiary,
Sirius Medical Supply, Inc. to market its diabetic supplies in the United
States.

Principles of Consolidation
---------------------------

The consolidated financial statements include the accounts of Procyon
Corporation and its wholly owned subsidiaries, Amerx Health Care Corp and Sirius
Medical Supply, Inc. All material intercompany accounts and transactions are
eliminated.

Use of Estimates
----------------

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

Concentrations of Credit Risk
-----------------------------

Financial instruments which potentially subject the Company to concentrations of
credit risk consist primarily of cash and cash equivalents. The Company places
its cash and cash equivalents in what it considers to be highly-rated financial
institutions and while at times such amounts may exceed federally insured
limits, the Company has not experienced any losses from such amounts. The
Company did not have any uninsured cash and cash equivalents at June 30, 2001.

The Company grants credit to customers most of whom are national pharmaceutical
companies and nationwide drug stores. Sirius Medical Supply grants credit to
patients who are eligible for Medicare coverage and physicians who purchase
diabetic supplies. Management estimates an allowance of doubtful accounts of
$500 is adequate based upon its collection experience and prior years
write-offs.

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.

The Company has classified the certificates of deposits as restricted assets.
These certificates of deposits are collateral on a letter of credit issued by a
financial institution and therefore are not available for operations.

Inventories
-----------

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

Property and Equipment
----------------------

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

Revenue Recognition
-------------------

Revenue is recognized upon the shipment of finished merchandises and products to
customers.

                                       F-6
<PAGE>


PROCYON CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS

Advertising and Marketing
-------------------------

In accordance with Statement of Position 93-7, Reporting on Advertising Costs,
advertising costs are to be expensed except for direct-response advertising (1)
whose primary purpose is to elicit sales to customers who could be shown to have
responded specifically to the advertising and (2) that results in probable
future economic benefits. In order to determine whether such advertisements
generate probable future economic benefits, the Company must establish
historical patterns of responses to the direct-response advertising. Management
believes that there is insufficient history to evaluate the future economic
benefits from direct-response advertising. Therefore, all advertising costs
incurred are expensed. During the years ended June 30, 2001 and 2000,
approximately $ 744,000 and $352,000 of advertising costs are included in
selling, general and administrative expense.

Research and Development
------------------------

Research and development costs consist of expenditures incurred aimed at
discovery of new knowledge which will be useful in developing new products or
enhancing existing products. The Company expenses all research and development
costs as they are incurred. Research and development cost was $0 and $36,625 for
the years ended June 30, 2001 and 2000, respectively.

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 rates currently in effect.

Net Loss Per Share
------------------

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

Fair Value of Financial Instruments
-----------------------------------

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

Considerable judgement is necessarily 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.


NOTE B - GOING CONCERN

As reflected in the accompanying financial statements, the Company has a deficit
in stockholders' equity of $ 185,758 at June 30, 2001 and has incurred net
losses of $686,686 and $318,005 for the years ended June 30, 2001 and 2000,
respectively. In addition, net cash used in operations was $485,580 and $380,995
for the years ended June 30, 2001 and 2000, respectively. Such operating cash
deficiency has been funded through proceeds from private offerings during fiscal
2000 and funds from the Company's line of credit with its major shareholder.

                                       F-7
<PAGE>


PROCYON CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS

Management of the Company has developed and implemented a plan to reduce its
operating expenses. The ability of the Company to continue as a going concern is
dependent upon the availability of funds through its majority stockholder and
its ability to generate sales to cover its operating costs.


NOTE C - INVENTORIES

Inventories consisted of the following:

                                              June 30,
                                                2001
                                              -------
                          Finished Goods      $ 5,073
                          Raw Materials        30,335
                          Diabetic Products     9,325
                                              -------
                                              $44,733
                                              =======


NOTE D - RELATED PARTY TRANSACTIONS

The majority shareholder and President of the Company has a $250,000 line of
credit with a financial institution, collateralized by his personal residence.
The line of credit is renewed annually. The majority shareholder of the Company
extended the line of credit to the Company during the year at 8% interest per
annum. At June 30, 2001, the majority shareholder was owed $75,000 on the line
of credit.


NOTE E - COMMITMENTS AND CONTINGENCIES

Operating Leases
----------------

The Company leases certain equipment under operating lease expiring in year
2006. The minimum lease payment due under this agreement for fiscal years ended
June 30 is as follow:


                                        June 30,
                                       ---------
                           2002        $   5,022
                           2003            5,022
                           2004            5,022
                           2005            5,022
                           2006            5,022
                                       ---------
                                       $  25,110
                                       =========


The Company also leased its warehouse and office on a month-to-month basis. Rent
expense for the years ended June 30, 2000 and 2001 was approximately $33,000 and
$24,000, respectively.

Research Contract
-----------------

In September 1997, the Company entered into a one year contract with a research
laboratory to provide services ranging from revision of existing products to
development of new products. The contract expired in August, 1998 and was
renewed in August, 1999 for one year with monthly payments of $4,000. The
contract was not renewed upon its expiration in August, 2000.

                                       F-8
<PAGE>


PROCYON CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS

NOTE F - STOCKHOLDERS' DEFICIENCY

During January 1995, the Company's Board of Directors authorized the issuance of
up to 4,000,000 shares of Series A Cumulative Convertible Preferred Stock Series
A ("Preferred Stock"). 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 Preferred Stock per annum. Dividends accrue without
interest and are cumulative from the date of issuance of the Series A 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, 2001, no
dividends have been declared. Dividends in arrears on the outstanding preferred
shares total $118,791 as of June 30, 2001. The preferred stockholders have the
right to convert each share of Series A Preferred Stock into one share of the
Company's common stock at any time without additional consideration. Each share
of Series A Preferred Stock is subject to mandatory conversion into one share of
common stock of the Company, effective as of the close of a public offering of
the Company's common stock provided, however, that the offering must provide a
minimum of $1 million in gross proceeds to the Company and the initial offering
price of such common stock must be at least $1 per share. In addition to the
rights described above, the holders of the Series A Preferred Stock have voting
rights equal to the common stockholders based upon the number of shares of
common stock into which the Series A Preferred Stock is convertible. The Company
is obligated to reserve an adequate number of shares of its common stock to
satisfy the conversion of all of the outstanding Series A Preferred Stock.

NOTE G - INCOME TAXES AND AVAILABLE CARRYFORWARDS

The Company's deferred tax asset at June 30, 2001 consists primarily of the tax
benefit of net operating loss carryforwards amounting to approximately
$1,784,000. The Company has recorded a valuation allowance equal to 100 percent
of the deferred tax asset as the Company was unable to determine that it is more
likely than not that the deferred tax asset will be realized. The valuation
allowance increased approximately $321,000 from June 30, 2000 to 2001. At June
30, 2001, for income tax purposes, the Company had net operating loss
carryforwards of approximately $4,746,000 which expire on various dates through
2020.

NOTE H - MAJOR CUSTOMERS AND SUPPLIER

During the year ended June 30, 2001, sales from direct-response advertising
accounted for approximately 63% of the Company's sales, other retail sales
accounted for approximately 12% of total sales and sales from doctors' direct
program accounted for approximately 11% of total sales. During the year ended
June 30, 2000, two individual customers accounted for 44% and 10% of the
Company's sales.

The Company's manufacturing and packaging activities are performed at a
production facility owned and operated by a nonaffiliated pharmaceutical
manufacturer. The Company does not have written contracts with the suppliers of
raw materials.

NOTE J - EMPLOYEE INCENTIVE PLAN

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 pending a
resolution by the Board of Directors on earning requirements.

                                       F-9
<PAGE>


PROCYON CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS

NOTE K - ACCOUNTING PRONOUNCEMENTS

In December 2000, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" (SAB
101), subsequently updated by SAB 101B. SAB 101 and SAB 101B summarize certain
of the Staff's views in applying generally accepted accounting principles to
revenue recognition in financial statements. The Company is required to adopt
SAB 101 no later than the fourth quarter of fiscal year 2001. The effects of
applying this guidance, if any, will be reported as a cumulative effect
adjustment resulting from a change in accounting principle. The adoption of SAB
101 is not expected to have a material impact on its financial position or
results of operations.

In June, 2001, the Financial Accounting Standards Board (FASB) issued Statement
No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"). This Statement
addresses financial accounting and reporting for acquired goodwill and other
intangible assets and supersedes APB Opinion No. 17, "Intangible Assets". It
addresses how intangible assets that are acquired individually or with a group
of other assets (but not those acquired in a business combination) should be
accounted for in financial statements upon their acquisition. This Statement
also addresses how goodwill and other intangible assets should be accounted for
after they have been initially recognized in the financial statements. The
Company has reviewed the Statement and does not expect it will have a material
impact on its financial position and results of operations.

In June, 2001, the Financial Accounting Standards Board (FASB) issued Statement
No. 143, "Accounting for Asset Retirement Obligations" (SFAS 143"). This
Statement addresses financial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and the associated
asset retirement costs. This Statement applies to all entities. It applies to
legal obligations associated with the retirement of long-lived assets that
result from the acquisition, construction, development and (or) the normal
operation of a long-lived asset, except for certain obligations of lessees. As
used in this Statement, a legal obligation is an obligation that a party is
required to settle as a result of an existing or enacted law, statute,
ordinance, or written or oral contract or by legal construction of a contract
under the doctrine of promissory estoppel. This Statement amends FASB Statement
No. 19, "Financial Accounting and Reporting by Oil and Gas Producing Companies".
The Company has reviewed the Statement and does not expect it will have a
material impact on its financial position and results of operations.








                                      F-10