NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business Activity

Procyon Corporation has

two

wholly-owned subsidiaries, AMERX Health Care Corp. (AMERX) and Sirius Medical Supply, Inc. (Sirius). AMERX manufactures and markets wound and skin care products primarily in the United States whereas Sirius previously marketed diabetic supplies primarily to Medicare patients in the United States. As previously reported, in

July 2009,

we sold substantially all of the assets of Sirius to a

third

party, such that, as of

July 31, 2009,

Sirius

longer has any material operations. Management is considering various options for the future direction of Sirius.

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.

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

The Company maintains its cash at various financial institutions. All noninterest-bearing transaction accounts are fully insured by the Federal Deposit Insurance Corporation, regardless of the balance of the account, at all insured institutions. At

June 30, 2018

and

2017,

our uninsured cash balance was

$0.

Revenue Recognition

The Company recognizes revenue in accordance with the Financial Accounting Standards Board's (FASB) release of Accounting Standards Update (ASU)

2014

09,

Revenue from Contracts with Customers (Topic

606

) which requires that

five

basic criteria must be met before revenue can be recognized: (

) identify the contract with

customer; (

) identify the performance obligations in the contract; (

) determine the transaction price; (

) allocate the transaction price to the performance obligations in the contract, and (

) recognize revenue when (or as) the entity satisfies a performance obligation.

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

days. AMERX has 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

2/10

net

days.

The valuation of accounts receivable is based upon the credit-worthiness of customers 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, 2018

and

2017,

accounts receivable allowance was approximately

$2,800

and

$1,000,

or less than

and

respectively of gross accounts receivable.

Inventories

Inventories are valued at the lower of average cost or market determined by the

first

-in,

first

-out method. A portion of inventory is included in non-current inventory. The non-current balance represents product that will most likely

not

be used within the next

months. A majority of this inventory comes from minimum economic level orders necessary to produce product at a reasonable cost.

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.

Deferred Income Taxes

Deferred income taxes are recognized for the expected tax consequences in future years for differences between the tax bases of assets and liabilities and their financial reporting amounts, based upon exacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. The Company accounts for income taxes under Topic

740

- Income Tax in the Accounting Standards Codification. A valuation allowance is used to reduce deferred tax assets to the net amount expected to be recovered in future periods. The estimates for deferred tax assets and the corresponding valuation allowance require us to exercise complex judgments. We periodically review and adjust those estimates based upon the most current information available. We did

not

have a valuation allowance as of

June 30, 2017.

We had a valuation allowance of

$133,867

as of

June 30, 2018.

Fair Value of Financial Instruments

The carrying value of cash, accounts receivable, prepaid expenses, deposits, inventory, accounts payable and accrued expenses approximate fair value.

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.

Shipping and Handling Costs

Shipping and handling costs incurred were approximately

$102,000

and

$93,000

for the years ended

June 30, 2018,

and

2017,

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, 2018

and

2017,

approximately

$608,000

and

$478,000,

of advertising and marketing costs were included in selling, general and administrative expenses for each respective year.

Stock Based Compensation

The Company maintains the Procyon Corporation

2009

Stock Option Plan (the

"2009

Option Plan"). The

2009

Option Plan was approved by the Company's shareholders on

December 8, 2009

and will expire on

December 8, 2019.

The

2009

Option Plan provides for the granting of incentive stock options, non-qualified stock options, and stock appreciation rights ("SARs") to eligible officers, directors, employees and consultants of the Company and its subsidiaries. The

2009

Option Plan is administered by the Compensation Committee. The Board of Directors has authorized the issuance of

500,000

shares of common stock to underlie the granting of incentive stock options and

500,000

shares of common stock to underlie the granting of non-qualified stock options and SARs under the

2009

Option Plan. The Board issued

250,000

shares of common stock to underlie Non-Qualified Stock Options, on

September 27, 2016,

effective

June 30, 2016.

However,

40,000

Options to purchase common stock were awarded to Justice Anderson pursuant to his employment agreement effective

July 1, 2016

and

25,000

Options to purchase common stock were awarded to Justice Anderson pursuant to his employment agreement effective

July 1, 2017.

As of

June 30, 2018,

other stock options or other awards have been granted under the

2009

Option Plan. The

1,000,000

shares of common stock that have been reserved for the

2009

Option Plan (

250,000

recently issued for Non-Qualified Stock Options) have

not

been registered under the Securities Act of

1933.

Eligible participants under the

2009

Option Plan must be such full or part-time officers and other employees, non-employee directors and key persons (including consultants and prospective employees) of the Company and its Subsidiaries as are selected from time to time by the Compensation Committee in its sole discretion. Only employees

may

receive incentive stock options. Employees, non-employee directors and consultants

may

receive non-qualified stock options or SARs.

stock options or SARs have been granted under the

2009

Option Plan.

Non-Qualified Stock Options granted under the

2009

Option Plan many have a term of

not

more than

ten

years from the date of grant. The exercise price must be

not

less than

100%

of the fair market value of the underlying common stock on the date of grant. Incentive Stock Options can be granted under the

2009

Option Plan for a term

not

exceeding

ten

years, except for Ten Percent Owners of our common stock, as defined in the Plan, for whom the maximum option term is

five

years. Incentive Stock Options are granted with an exercise price of

not

less than

100%

of the fair market value of the underlying common stock on the date of grant. However, for Incentive Stock Options owned by Ten Percent Owners, the exercise price must be

110%

of the Fair Market Value of the underlying stock on the date of grant.

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

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.

Agreements to grant

40,000

and

25,000

Options to purchase common stock were executed and delivered to Justice Anderson, pursuant to his executive employment agreements, on

September 27, 2016

and

August 23, 2017,

respectively, but with grant dates of

June 30, 2016

and

June 30, 2017,

respectively. Equity instruments issued to non-employees in exchange for goods, fees and services are accounted for under the fair value-based method of Accounting Standards Codification Topic

718

- Compensation - Stock Compensation (“Topic

718"

Additional information with respect to stock option activity is as follows:

	Number of Shares		Weighted Average Exercise Price
Outstanding at June 30, 2016		40,000	$	0.15
Granted		25,000	$	0.19
Exercised		-	$	-
Cancelled		-	$	-
Outstanding at June 30, 2017		65,000	$	0.15
Granted		-	$	-
Exercised		-	$	-
Cancelled		-	$	-
Outstanding at June 30, 2018		65,000	$	0.15
Options exercisable at June 30, 2017		65,000	$	0.17
Options exercisable at June 30, 2018		65,000	$	0.17

Net Income Per Common Share

The Company computes net income per share in accordance with Accounting Standards Codification Topic

260

- Earnings per Share (Topic

260

). Topic

260

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.

Subsequent Events

We have evaluated subsequent events through

September 21, 2018,

which is the date the financial statements were available to be issued.