<PAGE>

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

          [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                      For the Quarter Ended March 31, 1999

                 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
                               OF THE EXCHANGE ACT

                   For the transition period from _________ to _________

                         Commission file number 0-22190

                     ---------------------------------------

                              ELTRAX SYSTEMS, INC.
             (Exact name of Registrant as specified in its charter)

           MINNESOTA                                    41-1484525
  (State or other jurisdiction              (I.R.S. Employer Identification No.)
of incorporation or organization)

                2000 Town Center, Suite 690, Southfield, MI 48075
                    (Address of principal executive offices)

                                 (248) 358-1699
                           (Issuer's telephone number)

                     --------------------------------------

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act 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    .
    ---     ---

Shares of the Registrant's Common Stock, par value $.01 per share, outstanding
as of May 6, 1999: 23,722,608.

<PAGE>

                           PART I-ITEM 1: FINANCIAL STATEMENTS

                                   ELTRAX SYSTEMS, INC.
                          CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                            MARCH 31,         DECEMBER 31,
                                                                              1999              1998 (1)
                                                                           ----------         -------------
<S>                                                                        <C>                <C>

ASSETS:
Current assets:

      Cash and cash equivalents                                            $  1,898,299        $ 7,240,130
      Accounts receivable, net                                               19,544,741         23,216,686
      Inventories, principally finished goods                                 5,040,405          5,060,159
      Other current assets                                                    4,107,012          4,093,846
                                                                           ------------        -----------
         Total current assets                                                30,590,457         39,610,821
                             

Furniture and equipment, net                                                  3,907,359          3,680,287
Capitalized software, net                                                     7,546,253          7,783,169
Intangibles, net                                                             18,320,454         18,906,237
                                                                           ------------        -----------
           Total assets                                                    $ 60,364,523       $ 69,980,514
                                                                           ------------        -----------
                                                                           ------------        -----------

LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
      Line of credit                                                       $          -        $ 3,998,203
      Current portion of long-term debt                                       2,461,782          2,842,072
      Accounts payable                                                        7,806,451          6,417,449
      Accrued compensation                                                    1,190,922          1,326,570
      Accrued expenses                                                        6,680,916          5,165,595
      Unearned revenue and customer deposits                                  9,743,578         11,044,540
      Income taxes payable                                                      441,137            697,778
                                                                           ------------        -----------
         Total current liabilities                                           28,324,786         31,492,207

Long-term debt                                                                2,289,231          2,706,357
                                                                           ------------        -----------
         Total liabilities                                                   30,614,017         34,198,564

Shareholders' equity:

      Common stock, $.01 par value, 50,000,000 shares authorized;
         23,711,608 and 23,834,436 shares issued and outstanding                237,116            238,345
      Additional paid-in capital                                             75,325,663         75,667,193
      Accumulated deficit                                                   (45,306,919)       (39,195,705)
      Treasury stock, at cost, 144,273 shares                                         -           (387,221)
      Accumulated other comprehensive loss                                     (505,354)          (540,662)
                                                                           ------------        -----------
         Total shareholders' equity                                          29,750,506         35,781,950
                                                                           ------------        -----------
           Total liabilities and shareholders' equity                      $ 60,364,523       $ 69,980,514
                                                                           ------------        -----------
                                                                           ------------        -----------
</TABLE>

(1)  Amounts have been restated to reflect pooling-of-interests transactions,
     see Note 3.

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


                                       2
<PAGE>

                              ELTRAX SYSTEMS, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                           FOR THE THREE MONTHS ENDED MARCH 31,
                                                                                1999                1998 (1)
                                                                           -------------          ------------
<S>                                                                        <C>                    <C>
Revenue                                                                     $ 29,689,271          $ 29,581,628

Cost of revenue                                                               18,102,254            19,155,773
                                                                            ------------          ------------
Gross profit                                                                  11,587,017            10,425,855

Operating expenses:
  Selling, general and administrative                                         10,268,046             9,323,200
  Research and development                                                       875,496               503,990
  Amortization of intangibles                                                    585,783               289,779
  Reorganization costs                                                         3,600,000                     -
  Transaction costs                                                            2,288,379                     -
                                                                            ------------          ------------
  Total operating expenses                                                    17,617,704            10,116,969
                                                                            ------------          ------------
  Operating income (loss)                                                     (6,030,687)              308,886

Interest income                                                                   71,792               115,108
Interest expense                                                                (231,838)             (123,695)
                                                                            ------------          ------------
  Income (loss) before income taxes                                           (6,190,733)              300,299

Income tax expense (benefit)                                                     (79,519)               26,977
                                                                            ------------          ------------

  Net income (loss)                                                         $ (6,111,214)         $    273,322
                                                                            ------------          ------------
                                                                            ------------          ------------


Net income (loss) per common share -basic                                   $      (0.26)         $       0.01
                                                                            ------------          ------------
                                                                            ------------          ------------
                                   -fully diluted                                                 $       0.01
                                                                                                  ------------
                                                                                                  ------------

Weighted average shares outstanding -basic                                    23,697,795            21,607,344
                                                                            ------------          ------------
                                                                            ------------          ------------

                                    -fully diluted                                                  22,425,584
                                                                                                  ------------
                                                                                                  ------------
</TABLE>

(1) Amounts have been restated to reflect pooling-of-interests transactions, see
Note 3.

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


                                        3
<PAGE>

                              ELTRAX SYSTEMS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                        FOR THE THREE MONTHS ENDED MARCH 31,
                                                                                         1999                         1998 (1)
                                                                                     -------------                  -------------
<S>                                                                                  <C>                            <C>


OPERATING ACTIVITIES:

      Net income (loss)                                                              $ (6,111,214)                  $   273,220 
      Adjustments to reconcile net loss to net cash provided by                                                                 
         (used for) operating activities:                                                                                       
            Amortization of capitalized software                                          342,114                       337,145 
            Amortization of intangibles                                                   585,783                       289,779 
            Depreciation                                                                  390,465                       302,672 
            Stock and warrants issued for services                                         10,736                        12,000 
            Realized investment gain                                                            -                        (9,000)
            Changes in current operating items:                                                                                 
              Accounts receivable, net                                                  3,671,945                     1,164,561 
              Inventories                                                                  19,754                       323,722 
              Other current assets                                                        (13,166)                     (232,981)
              Accounts payable                                                          1,389,002                     1,152,038 
              Accrued compensation                                                       (135,648)                     (241,715)
              Accrued expenses                                                          1,515,321                      (673,478)
              Unearned revenue and customer deposits                                   (1,300,962)                   (1,029,725)
              Other current liabilities                                                  (256,641)                     (164,342)
                                                                                     ------------                   ------------
            Net cash provided by operating activities:                                    107,489                     1,503,896 
                                                                                     ------------                   ------------
INVESTING ACTIVITIES:                                                                                                           
      Proceeds from sale of securities available for sale                                       -                       259,000 
      Software development costs capitalized, net                                        (105,198)                     (425,000)
      Purchases of furniture and equipment, net                                          (617,537)                     (511,662)
      Other, net                                                                                -                        26,000 
                                                                                     ------------                   ------------
            Net cash used for investing activities:                                      (722,735)                     (651,662)
                                                                                     ------------                   ------------
FINANCING ACTIVITIES:                                                                                                           
      Payments on long-term debt and capital leases                                      (797,416)                     (106,000)
      Payments on credit line, net                                                     (3,998,203)                     (597,897)
      Proceeds from issuances of common stock and warrants, net                            40,627                        36,825 
      Payments issued in lieu of fractional shares                                         (6,901)                            - 
                                                                                     ------------                   ------------
         Net cash used for financing activities:                                       (4,761,893)                     (667,072)
                                                                                     ------------                   ------------
EFFECT OF CHANGES IN CURRENCY EXCHANGE RATE                                                35,308                       (32,000)
                                                                                                                                
         Increase (decrease) in cash and cash equivalents                              (5,341,831)                      153,162 
                                                                                     ------------                   ------------
CASH AND CASH EQUIVALENTS:                                                                                                      
Beginning of period                                                                     7,240,130                     9,260,364 
                                                                                     ------------                   ------------
End of period                                                                         $ 1,898,299                   $ 9,413,526 
                                                                                     ------------                   ------------
                                                                                     ------------                   ------------
</TABLE>

(1) Amounts have been restated to reflect pooling-of-interests transactions, see
    Note 3.

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


                                        4
<PAGE>

                              ELTRAX SYSTEMS, INC.
            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                 March 31, 1999

1.   BASIS OF PRESENTATION

     The accompanying unaudited condensed consolidated financial statements have
     been prepared by Eltrax Systems, Inc. (the "Company" or "Eltrax") in
     accordance with generally accepted accounting principles, pursuant to the
     rules and regulations of the Securities and Exchange Commission. Pursuant
     to such rules and regulations, certain financial information and footnote
     disclosures normally included in the financial statements have been
     condensed or omitted.

     In the opinion of management, the accompanying unaudited condensed
     financial statements contain all necessary adjustments, consisting only of
     those of a recurring nature, and disclosures to present fairly the
     financial position as of March 31, 1999 and the results of operations and
     cash flows for the periods ended March 31, 1999 and 1998. The condensed
     consolidated financial statements include the accounts of Eltrax Systems,
     Inc. and its subsidiaries, including Sulcus Hospitality Technologies Corp.
     and subsidiaries ("Sulcus"), and Windward Technology Group, Inc.
     ("Windward"), which merged with the Company in the first quarter of 1999 in
     transactions accounted for as pooling-of-interests. Prior financial
     statements have been restated to include the results of Sulcus and Windward
     for all periods presented. Significant intercompany transactions have been
     eliminated.

     The year-end condensed consolidated balance sheet was derived primarily 
     from audited consolidated financial statements, but does not include all 
     disclosures required by generally accepted accounting principles. For 
     further information, refer to the consolidated financial statements and 
     footnotes thereto included in the Company's annual report on Form 10-K 
     for the year ended December 31, 1998 and Form 8-Ks dated March 25, 1999 
     and March 31, 1999 describing the acquisitions of Sulcus and Windward.

2.   NET INCOME (LOSS) PER SHARE

     The basic income (loss) per common share is determined by dividing income
     (loss) by the weighted average number of common shares outstanding. Diluted
     income per common share is determined by dividing income by the weighted
     average number of common shares and common stock equivalents outstanding.
     Common stock equivalents of 818,240 in 1998 represent shares issuable upon
     the assumed exercise of dilutive stock options.


                                      5
<PAGE>

3.   MERGERS

     SULCUS HOSPITALITY TECHNOLOGIES, CORP.

     On November 11, 1998 the Company announced that it had agreed to merge with
     Sulcus in a pooling-of-interests transaction. The merger was contingent on
     shareholder votes by both the Company and Sulcus. The votes approving the
     merger were completed on March 25, 1999 and the transaction was closed on
     March 26, 1999. Eltrax exchanged 9,296,669 shares in connection with the
     merger as well as $6,900 in cash for 1,577 fractional shares. The combined
     companies have also incurred approximately $2,037,000 in transaction costs
     related to the merger. These transaction costs have been included in
     operating expenses in the first quarter.

     Sulcus develops, sells and services technology products and software
     throughout the world, primarily to the hospitality industry.

     WINDWARD TECHNOLOGIES GROUP, INC.

     On March 31, 1999 the Company merged with Windward. The merger has been
     accounted for as a pooling-of-interests transaction. The prior owners of
     Windward received 1,375,001 shares of the Company's common stock. The
     transaction costs of $251,000 related to the merger have been included in
     operating expenses in the first quarter. Windward develops, sells and
     services data networking and software products.

     The following table summarizes the combined and separate results of the
     Company, Sulcus, and Windward for the first quarter of 1998. The 1998
     results included in the statements of operations have been restated to
     include the results of Sulcus and Windward.


<TABLE>
<CAPTION>
                  Revenue:
                  <S>                                         <C>
                      Eltrax, as previously reported          $14,974,873
                      Sulcus                                   14,465,000
                      Windward                                    141,755
                                                              -----------
                  Total revenue                               $29,581,628
                                                              -----------
                                                              -----------
                  Net income (loss):

                      Eltrax, as previously reported          $  (187,246)
                      Sulcus                                      420,000 
                      Windward                                     40,568 
                                                              ------------
                  Total net income                            $   273,322 
                                                              ------------
                                                              ------------

</TABLE>


                                      6
<PAGE>

4.   REORGANIZATION EXPENSES

     In connection with the Company's merger with Sulcus and Windward and 
     the relocation of Company headquarters to Atlanta, the Company has 
     recorded significant reorganization costs in the first quarter of 1999.
     These charges are based upon Management's plans established in the 
     first quarter of 1999 and consist of the following items:

<TABLE>
<CAPTION>
                                                                       Amounts
                                                                      Accrued at
                                                  Costs              March 31, 1999
         <S>                                     <C>                 <C>
         Severance and related costs             $1,741,000            $1,019,000
         Facility costs                             932,000               932,000
         Program closure costs                      305,000                88,000
         Other costs                                622,000               293,000
                                                 ----------            ----------
                                                 $3,600,000            $2,332,000
                                                 ----------            ----------
                                                 ----------            ----------

</TABLE>

     The severance and related costs are attributable to approximately 30
     employees who have been, or will be, terminated by the Company. These costs
     include $722,000 paid to Leon Harris, the former President of Sulcus, to
     settle obligations under his employment agreement.

     The facility costs represent the costs for leased facilities that will not
     be utilized for their full terms. The leases include the former Sulcus
     corporate headquarters in Greensburg, Pennsylvania and the portion of the
     Wichita, Kansas Sulcus office used for research and development activities.
     These costs will be decreased if the Company is able to sublease this
     space.

     Further, the Company also determined during the first quarter to
     discontinue its efforts to develop certain products, including the Legacy
     products previously being developed at Sulcus. The $305,000 in expenses
     related to this decision include the write-off of $167,000 in software
     costs that had been previously capitalized.

     The $622,000 of other costs includes recruiting and relocation costs
     incurred in the first quarter relating to organizational changes as well as
     other costs related to the Company's change in focus from certain
     activities.

     The Company expects to substantially complete the reorganization by
     December 31, 1999. The Company expects to incur approximately $500,000 in
     additional reorganization costs in the second and third quarters of 1999.
     These costs will be charged to expense as incurred and primarily include
     relocating certain executives to Atlanta and recruiting additional
     executives to fill key positions following the relocation and mergers.


                                      7
<PAGE>

5.   OTHER COMPREHENSIVE INCOME

     The Company has adopted SFAS No. 130, "Reporting Comprehensive Income."
     SFAS No. 130 establishes new rules for the reporting and display of
     comprehensive income and its components; however, the adoption of this
     Statement had no impact on the Company's net income or shareholders'
     equity. SFAS No. 130 requires that the Company's change in foreign currency
     translation adjustments be included in other comprehensive income.

<TABLE>
<CAPTION>
                                                         1999                  1998
                                                     ------------          ----------
        <S>                                           <C>                  <C>
        Net income (loss)                             $(6,111,214)         $  273,322
        Other comprehensive income:
            Foreign currency translation                   62,817             (41,000)
                                                     ------------          ----------
        Comprehensive income                          $(6,048,397)         $  232,322
                                                     ------------          ----------
                                                     ------------          ----------

</TABLE>

6.   HALLACY EMPLOYMENT AGREEMENT

     In March 1999, the Company entered into an employment agreement with Don G.
     Hallacy whereby Mr. Hallacy became President and Chief Executive Officer of
     the Company in April 1999. Under Mr. Hallacy's employment agreement, the
     Company granted Mr. Hallacy 500,000 stock options which vest over four
     years. To compensate for the unvested appreciation of options that Mr.
     Hallacy had at his previous employer, the Company has guaranteed that the
     Eltrax options shall be worth at least $1,305,000 by March 31, 2003.
     Should the options not be worth at least $1,305,000, the Company will pay 
     Mr. Hallacy the shortfall. The cost of this guarantee may be offset by 
     changes in the price of the Company's common stock and will be charged to 
     earnings ratably over the vesting period.

7.   SEGMENT INFORMATION

     Taking into account the merger of Sulcus and Windward late in the first
     quarter of 1999, the Company is reporting information for two segments, the
     Network Solutions Group and the Applications and Support Group. Due to the
     recent mergers and the reorganization of the Company, the Company is
     currently reviewing its management reporting structure and accordingly may
     report using different segments in the future.

        Network Solutions: The Network Solutions Group is comprised of several
        regional offices that provide networking services and equipment to
        customers throughout North America. The Network Group also encompasses
        the Company's Network Operations Center.

        Applications and Support: The Applications and Support Group provides
        software, proprietary hardware and related services, primarily to the
        hospitality industry.


                                      8
<PAGE>

     The accounting policies of the reportable segments are the same as those
     described in the Notes to Consolidated Financial Statements in the
     Company's 1998 Form 10-K. Management evaluates the business unit
     performance based on income before income taxes, intangibles amortization,
     interest income and expense and corporate expenses. Intersegment sales and
     transfers are not significant.

     Summarized financial information concerning the Company's reportable
     segments is shown in the following table (in thousands):


<TABLE>
<CAPTION>
                                                        Three Months Ended March 31, 1999
                                               -----------------------------------------------------
                                                                
                                                   Network      Applications and 
                                                  Solutions          Support             Total
                                               ---------------- ------------------ -----------------
          <S>                                  <C>               <C>               <C>
          Revenue                                  $ 11,383          $ 18,306          $ 29,689
          Segment profit                                 37             1,841             1,878
          Total assets                               16,416            43,666            60,082
</TABLE>


<TABLE>
<CAPTION>
                                                        Three Months Ended March 31, 1998
                                               -----------------------------------------------------
                                                                
                                                   Network      Applications and 
                                                  Solutions          Support            Total
                                               ---------------- ------------------ -----------------
          <S>                                  <C>               <C>               <C>
          Revenue                                   $ 15,116         $ 14,465        $ 29,581
          Segment profit                                 506            1,683           2,189
</TABLE>

     The following table reconciles the net segment profit above loss to the
     pretax income (loss) (in thousands):


<TABLE>
<CAPTION>
                                                                          Three Months Ended March 31,
                                                                       ----------------------------------
                                                                            1999              1998
                                                                       ---------------- -----------------
          <S>                                                          <C>              <C>              
          Segments, above                                                  $  1,878          $ 2,189     
          Corporate expenses                                                 (1,435)          (1,581)    
          Interest, net                                                        (160)             (18)    
          Amortization (excluding acquired software)                           (586)            (290)    
          Transaction and reorganization costs                               (5,888)               -     
                                                                           ---------       ---------     
          Pretax income (loss)                                            $  (6,191)       $     300     
                                                                          =========        =========      
</TABLE>

8.   LITIGATION

     The Company is involved in several legal proceedings arising from its
     normal business operations. In management's opinion, the ultimate outcome
     of these proceedings will not have a material impact on the Company's
     future financial position or results of operations.


                                      9
<PAGE>

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

Certain statements in this Form 10-Q and in future filings by the Company 
with the Securities and Exchange Commission and in the Company's written and 
oral statements made by or with the approval of an authorized executive 
officer constitute "forward-looking statements" within the meaning of the 
Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, 
as amended, and the Company intends that such forward-looking statements be 
subject to the safe harbors created thereby. The words "believe", "expect" 
and "anticipate" and similar expressions identify forward-looking statements. 
These forward-looking statements reflect the Company's current views with 
respect to future events and financial performance, but are subject to many 
uncertainties and factors relating to the Company's operations and business 
environment which may cause the actual results of the Company to be 
materially different from any future results expressed or implied by such 
forward-looking statements. Examples of such uncertainties include, but are 
not limited to, changes in customer demand and requirements, new product 
announcements, interest rate fluctuations, changes in federal income tax laws 
and regulations, competition, industry specific factors and world wide 
economic and business conditions. For a more comprehensive list of 
uncertainties, see the section entitled "Important Factors to Consider" in 
the Company's Report on Form 10-K for the year ended December 31, 1998. The 
Company undertakes no obligation to publicly update or revise any 
forward-looking statements whether as a result of new information, future 
events or otherwise.

                                  INTRODUCTION

Eltrax is an international provider of network solutions and application and
support services. The Company grew through a number of network solutions
acquisitions prior to 1998. During the third quarter of 1998 the Company
acquired Encore Systems, Inc. ("Encore"), which is engaged in providing
application and support services as well as software to the hospitality
industry.

Effective March 25, 1999, the Company completed its merger with Sulcus
Hospitality Technologies Corp. ("Sulcus"). Sulcus, with 1998 annual sales of
approximately $60 million, is a leading provider of application and support
services to the hospitality industry. Sulcus develops, manufactures, markets and
installs computerized systems designed to automate the handling, storage and
retrieval of information and documents including the Squirrel point-of-sale
system. Sulcus distributes its products and services throughout the world
utilizing a network of distributors and company owned and operated locations.

Effective March 31, 1999 the Company completed its merger with Windward
Technology Group, Inc. ("Windward"). Windward develops, sells and services data
networking and software products. Revenue in 1998 totaled approximately $3.7
million.

The Sulcus and Windward mergers were accounted for as pooling of interests and,
accordingly, all financial information has been restated to give effect to the
mergers as if they occurred as of the beginning of the earliest period
presented.

During 1998 the Company focused on increasing its mix of value added services
and has discontinued the majority of its sales to distribution customers
including the Company's Datatech operation which was closed in the first quarter
of 1998.


                                      10
<PAGE>

                         SUMMARY RESULTS OF OPERATIONS

Consolidated Results of Operations

THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31, 1998

<TABLE>
<CAPTION>
                                                                     THREE MONTHS ENDED
                                                                          MARCH 31,
                                                            -----------------------------------
         DOLLARS IN THOUSANDS                                     1999            1998
         -------------------------------------------------- ----------------- -----------------
         <S>                                                <C>               <C>
         Revenue                                                 29,689          29,582
         Gross profit                                            11,587          10,426
         Gross profit margin                                       39.0%           35.2%
         Net income (loss)                                      $(6,111)           $273

         Operating expenses (1)                                  11,729          10,117
         Operating income (loss) (1)                               (142)            309
         EBITDA (1) (2)                                            1,176          1,238
         -------------------------------------------------- ----------------- -----------------
</TABLE>

          (1)  EXCLUDES ONE-TIME MERGER RELATED AND REORGANIZATION CHARGES OF
               $5,888 IN 1999

          (2)  EARNINGS BEFORE INTEREST, INCOME TAXES, DEPRECIATION AND 
               AMORTIZATION OF INTANGIBLES AND SOFTWARE

For the first quarter of 1999, Eltrax's net loss totaled $6.1 million, or $.26
per diluted share, compared with net income of $273 thousand and $.01 per
diluted share, for the same period of 1998. The current quarter's results
included one-time merger-related and restructuring charges totaling
approximately $5.9 million. Excluding these costs, the net loss for the first
quarter of 1999 totaled $223 thousand.

Consolidated revenue totaled $29.7 million in the first quarter of 1999,
reflecting a slight increase in the quarter-to-quarter comparison with 1998. The
comparability of revenue was affected by the inclusion in 1999 of Encore's
results and a full quarter of Windward's operations (Windward commenced
operations in February 1998). The favorable impact of these transactions was
offset by reduced distribution sales, including the closure of the Datatech
subsidiary. The gross profit increased by $1.2 million in 1999 and as a percent
of revenue was 39.0% in the first quarter of 1999 compared with 35.2% in the
year-earlier period. The increased gross profit and margins were attributable to
the reduction in sales to distribution customers and improved margins at the
Squirrel point-of-sale operations.

Excluding $5.9 million of non-recurring merger-related and restructuring
charges, total operating expenses for the first quarter of 1999 totaled $11.7
million, an increase of $1.6 million in the quarter-to-quarter comparison. The
inclusion of Encore's results since its acquisition in the third quarter of 1998
was the primary reason for the increase. Amortization of intangibles related to
the Encore transaction increased operating expenses by approximately $320,000.
As a percent of revenue, operating expenses were 39.5% in the first quarter of
1999 and 34.2% in the same period of 1998.

The reorganization and transaction costs of $5.9 million incurred in the first
quarter consisted primarily of costs related to facilities that will not be
utilized fully in the future and severance for employees terminated or to
be terminated. The Company expects to incur additional reorganization costs of
approximately $.5 million in the second and third quarters of 1999 related to
the recruitment and relocation of management to Atlanta.


                                      11
<PAGE>

         BUSINESS UNIT PERFORMANCE

<TABLE>
<CAPTION>
                                                          APPLICATIONS
   Dollars in thousands                 NETWORK                AND
                                       SOLUTIONS             SUPPORT           CONSOLIDATED
                                   ------------------- ------------------- ------------------
   FOR THE THREE MONTHS ENDED
       MARCH 31,                      1999      1998      1999      1998      1999      1998 
   ------------------------------- --------- --------- --------- --------- --------- --------
   <S>                             <C>       <C>         <C>       <C>      <C>       <C>    
   Revenue                         $11,384   $15,116     $18,305   $14,466  $29,689   $29,582
   Gross profit                      3,049     3,446       8,538     6,980   11,587    10,426
   Operating expenses                3,012     2,940       6,697     5,297    9,709     8,237
                                   --------- --------- --------- --------- --------- --------
   Earnings before interest,
      taxes and amortization            37       506       1,841     1,683   1,878     2,189
   Unallocated items
     Corporate expenses                                                      1,436     1,581
     Amortization expense (1)                                                  585       290
     Transaction costs                                                       2,288         -
     Reorganization costs                                                    3,600         -
                                                                           --------- --------
       Operating income (loss)                                              (6,031)      318

       Interest expense, net                                                   160        18
                                                                            --------- --------
         Pre tax income                                                    $(6,191)     $300
                                                                            --------- --------

    Gross margin                      26.8%     22.8%       46.6%     48.3%   39.0%     35.2%
</TABLE>

     (1)  EXCLUDING AMORTIZATION OF SOFTWARE WHICH IS CHARGED TO GROSS
          PROFIT

Eltrax currently operates in the following two business segments:

     NETWORK SOLUTIONS GROUP - This group designs and installs networking
     systems for a diverse corporate and government customer base. The Network
     Solutions Group also provides monitoring, management, and maintenance
     services to support enterprise networks.

     APPLICATIONS AND SUPPORT GROUP - This group provides software, proprietary
     hardware and related services primarily to the hospitality industry.

The key factors used to identify reportable business segments are the
organization and alignment of Eltrax's internal operations, the nature of the
products and services and customer type. Management evaluates business unit
performance based on earnings before interest, taxes, and amortization (EBITA).
Items not allocated to business segments include corporate expenses,
amortization of intangibles (excluding amortization on acquisition related
software), one-time merger-related and restructuring costs, and interest income
and expense. The results set forth in this section are not necessarily a measure
determined in accordance with generally accepted accounting principles and may
not be comparable to other companies


                                      12
<PAGE>

NETWORK SOLUTIONS GROUP

<TABLE>
<CAPTION>
                                                                       THREE MONTHS
                                                                      ENDED MARCH 31,
                                                                -------------------------
               DOLLARS IN THOUSANDS                                  1999         1998      CHANGE
               ------------------------------------------------ ------------ ------------ ----------
               <S>                                                <C>          <C>         <C>
               Revenue                                            $11,384      $15,116     (24.7)%
               Cost of revenue                                      8,335       11,670     (28.6)
                                                                ------------ ------------ 
               Gross profit                                         3,049        3,446     (11.5)
                  Gross profit margin                                26.8%        22.8%
               Operating expenses                                   3,012        2,940       2.4
                     EBITA                                        $    37       $  506     (92.7)
               ------------------------------------------------ ------------ ------------ ----------
</TABLE>

First quarter 1999 operating results in the Network Services Group reflect the
impact of actions taken in the past year to reposition operations to areas with
higher growth and wider margin potential. Revenues declined due to reduced sales
from the closure of the Datatech subsidiary and Eltrax's distribution
operations, in 1998. This was partially offset by revenue growth within the
recently acquired Windward operations. While sales and gross profit both
declined in the quarter-to-quarter comparison, the gross margin increased to
26.8% reflecting a change in the mix of sales to focus on services and products
with higher margins.

APPLICATIONS AND SUPPORT GROUP

<TABLE>
<CAPTION>
                                                                           THREE MONTHS
                                                                          ENDED MARCH 31,
                                                                     --------------------------
               DOLLARS IN THOUSANDS                                       1999          1998      CHANGE
               ----------------------------------------------------- ------------- ------------ ---------
               <S>                                                    <C>          <C>          <C>      
               Revenue                                                 $18,305       $14,466      26.5%
               Cost of revenue                                           9,767         7,486      30.5
                                                                     ------------- ------------
                  Gross profit                                           8,538         6,980      22.3
                  Gross profit margin                                     46.6%         48.3%
               Operating expenses                                        6,697         5,297      26.4
               EBITA, after amortization of acquired software          $ 1,841       $ 1,683       9.4
               ----------------------------------------------------- ------------- ------------ ---------
</TABLE>

For the first three months of 1999, Applications and Support Group revenue and
gross profit increased $3.8 million and $1.6 million, respectively, primarily
due to the Encore acquisition in September 1998. In addition, sales from the
Senercomm subsidiary, a provider of in-room management systems for the
hospitality industry, increased almost $.5 million. Operating expenses increased
due to the inclusion of Encore's results in the current quarter. Adding back the
amortization of acquired software of $277 thousand would result in EBITA of $2.1
million in 1999.


                                      13
<PAGE>

                         LIQUIDITY AND CAPITAL RESOURCES

The cash and cash equivalents totaled $1.9 million at March 31, 1999 and
compared to $7.2 million at December 31, 1998. The lower cash balances reflect
the items discussed below.

<TABLE>
<CAPTION>
                                                                      THREE MONTHS
                                                                     ENDED MARCH 31
                                                                -------------------------
               DOLLARS IN THOUSANDS                                  1999         1998
               ------------------------------------------------ ------------ ------------
               <S>                                              <C>          <C>
               Cash provided (used) by
                  Operating activities                             $   107      $  1,504
                  Investing activities                                (723)         (652)
                  Financing activities                              (4,761)         (667)
                                                                   -------      --------
                                                                   $(5,377)     $    185
                                                                   ========     ========
</TABLE>

Cash used for operations in the first quarter of 1999 totaled $.1 million 
compared with $1.5 million in the first quarter of 1998. The net loss in 1999 
of $6.1 million was offset by non-cash charges for depreciation and 
amortization of software and intangibles of $1.3 million and a reduction in 
accounts receivable of $3.7 million. The reduction in accounts receivables is 
primarily attributable to certain annual maintenance billings made late in 
the fourth quarter that were collected in the first quarter.

Cash used for investing activities totaled $.7 million in both the first 
quarter of 1999 and 1998. Capital expenditures totaled $.6 million in the 
current quarter and were in part related to costs for the Company's new 
information systems.

Cash used for financing activities was $4.8 million in 1999 and was primarily 
utilized to pay down the Eltrax and Sulcus short-term credit lines and to 
reduce long-term obligations.

The Company renegotiated its credit facility in September 1998 resulting in 
availability under the credit line of $6.0 million as well as a $4.0 million 
term loan. The revised agreement also modified certain covenants, and 
extended the agreement to September 2001. The availability under the credit 
line is limited to the Company's borrowing base, which is a function of 
certain accounts receivable and inventory. At March 31, 1999, the borrowing 
base was approximately $4.6 million with no borrowings outstanding. The 
Company was not in compliance with certain covenants in early 1999. The bank 
has waived this noncompliance.

During 1999, the Company anticipates renegotiating its banking agreements to 
include certain Sulcus assets in its borrowing base and to modify existing 
covenants. The Company expects that the revised credit facility and cash on 
hand will be sufficient to meet its short-term financing needs and expects to 
meet future covenant requirements. The Company expects to meet certain 
long-term capital requirements such as acquisitions through the issuance of 
equity or debt securities. The Company considers these sources to be adequate 
and anticipates they will continue to be adequate to meet long-term capital 
requirements.


                                      14
<PAGE>

                               YEAR 2000 UPDATE

As a result of certain computer programs being written using two digits rather
than four to determine the applicable year, any computer systems that have date
sensitive software may recognize a date using a "00" as the year 1900 rather
than the year 2000 (the "Year 2000 Issue"). This causes programs that perform
arithmetic operations, comparisons or date sorts to possibly generate erroneous
results when the program is required to process dates from both centuries. This
could result in a system failure, incorrect data or other business disruptions.
Eltrax shareholders should take into account the following risk factors related
to the Year 2000 Issue.

INTERNAL BUSINESS PROCESSING SYSTEMS. The first area of concern is the impact 
of the Year 2000 Issue on internal business processing systems. Due to 
Eltrax's growth through a number of acquisitions, Eltrax currently uses a 
number of different business processing systems. Certain of these systems may 
not be Year 2000 capable. To address the inefficiencies caused by multiple 
systems and the Year 2000 Issue, Eltrax determined in early 1998 to replace 
all existing systems with new uniform Year 2000 capable systems that are 
expected to improve operating efficiency. These systems are also being 
implemented at Windward and at the majority of the domestic Sulcus 
operations. The final software selection was made in late 1998. The 
implementation is expected to occur throughout 1999. The cost of these 
systems, including software, hardware, and implementation costs, is expected 
to be in the range of $600,000 to $750,000. At March 31, 1999, costs of 
approximately $400,000 had been incurred.

CUSTOMERS' NETWORK SYSTEMS. The second area of concern is with network systems
sold and/or installed by Eltrax. Eltrax has instituted a program to review the
systems of all customers who currently purchase ongoing maintenance services
from Eltrax. This program will provide assistance to customers in reviewing
their networks for Year 2000 issues. Customers not utilizing support services
will be notified of their need to review their networks for Year 2000 risks.
This process was substantially complete at the end of 1998. This project has not
resulted in any material incremental cost to Eltrax.

COMPANY PRODUCTS. The third area of concern involves Eltrax hardware and
software products. The Company's current hardware and software products are
believed to be Year 2000 capable. The Company is in the process of upgrading
customers' systems to the Year 2000 compliant version. This process should be
completed in 1999, and any future costs are expected to be minor.

SUPPLIERS. The final area of concern is whether the products and services
procured by Eltrax from its major suppliers will function properly or be
available without interruption in the year 2000. Eltrax intends to request
assurances from its major suppliers that they are addressing the Year 2000 Issue
in a timely fashion. There can be no assurance that all of the Eltrax suppliers
of products and services will successfully address the Year 2000 Issue. It will
be impossible to fully assess the potential consequences if service
interruptions occur from suppliers or in infrastructure areas such as utilities,
communications, transportation, banking and government. As a result, Eltrax also
intends to develop a contingency plan to minimize the impact of such external
events.

While Eltrax's efforts to address these Year 2000 risks will involve additional
costs and the time and effort of a number of employees, Eltrax believes, based
on currently available information, that it will be able to properly manage its
total Year 2000 exposure. However, Eltrax may not be successful in this effort,
which may have a material adverse effect on Eltrax's business, financial
condition or results of operations.


                                      15
<PAGE>

                           PART II - OTHER INFORMATION

Item 1.  LEGAL PROCEEDINGS

         DOCUCORP ROYALTY CLAIM: EZ Power Systems, Inc., a wholly owned
         subsidiary of DocuCorp International, Inc. has asserted a royalty claim
         under a 1997 agreement between EZ Power and the Company's Sulcus
         subsidiary. The EZ Power claim is for $500,000, and if valid, could
         result in an additional royalty obligation of $800,000 during the
         current year. Although DocuCorp has threatened litigation, none has yet
         occurred. The Company has denied any liability under the EZ Power
         agreement. The Company is still investigating the facts and
         circumstances surrounding the relationship between Sulcus and EZ Power.

         HARRIS, WAGER, AND BENESCH FRIEDLANDER LITIGATION: The Company is 
         involved in litigation with Leon Harris, the former Chairman and CEO 
         of the Company's Sulcus subsidiary, Michael Wager, a former director 
         and counsel to Sulcus, and Mr. Wager's firm Benesch, Friedlander, 
         Coplan & Aronoff LLP, which also represented Sulcus. The Company has 
         filed an arbitration claim against Mr. Harris, alleging that Mr. 
         Harris misrepresented certain facts prior to and in connection with 
         the Company's merger with Sulcus. The Company also filed a lawsuit 
         on April 27, 1999 in United States District Court for the Eastern 
         District of Michigan, against Mr. Wager and the Benesch Friedlander 
         firm, alleging misrepresentation, breaches of certain duties to 
         Sulcus, and billing irregularities. The misrepresentation and breach 
         claims relate to certain payments made to Mr. Harris, Mr. Wager, and 
         other Sulcus directors in March 1999, immediately prior to the 
         completion of the Sulcus merger, which payments were not disclosed 
         to the Company. The Company also terminated Mr. Harris' employment 
         and consulting agreement, and Mr. Harris has indicated his intent to 
         file a counterclaim in arbitration. The Company believes that its 
         claims are valid, that the termination of Mr. Harris' employment and 
         consulting agreement was for proper cause, and therefore, that the 
         Company will prevail in this litigation. The Company intends to 
         vigorously pursue its claims against these defendants and is 
         considering additional claims against other individuals, related to 
         these transactions.

         The Company is also involved in other claims and proceedings, which are
         routine and which in the aggregate are not deemed material to the
         Company's business or financial affairs.

Item 2.  CHANGES IN SECURITIES

         On March 31, 1999, 1,375,001 shares of unregistered common stock were
         issued in connection with the merger with Windward Technology Group,
         Inc. The common stock was issued to several individuals and was exempt
         from registration as a "private offering" pursuant to Section 4(2) of
         the Securities Act of 1933.


                                      16
<PAGE>

Item 3.  DEFAULTS UPON SENIOR SECURITIES

         None

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

         On March 19, 1999 the Company held a special meeting to vote on the
         merger with Sulcus Hospitality Technologies, Inc. (Proposal 1) and to
         approve the addition of 1,500,000 shares to the Company's 1998 Stock
         Incentive Plan (Proposal 2). The votes were as follows:

<TABLE>
<CAPTION>
                                                                                  Abstentions or Broker
                                       For           Against or Withheld               Non-Votes
                                       ---           -------------------          ---------------------
         <S>                        <C>              <C>                          <C>
         Proposal 1                 8,757,199               19,450                      15,405
         Proposal 2                 8,744,517               31,432                      16,105
</TABLE>

Item 5.  OTHER INFORMATION

         None.

Item 6.  EXHIBITS AND REPORTS ON FORM 8-K


<TABLE>
<CAPTION>
         (a) Exhibits
         <S>          <C>                                                 <C>
         2.1          Agreement and Plan of Merger dated as of            Incorporated by reference to Exhibit 2.1 to the
                      November 11, 1998, by and among Eltrax,             Company's Registration Statement on Form S-4 dated
                      Sulcus Hospitality Technologies Corp. and           February 16, 1999
                      Sulcus Acquiring Corporation .                      (File No. 333-68699)

         2.2           Agreement and Plan of Merger dated as of           Incorporated by reference to Exhibit 2.1 to 
                       March 31, 1999, by and among                       the Company's Form 8-K dated March 31, 1999.
                       Eltrax, Windward  Acquiring 
                       Corporation, Windward Technology
                       Group, Inc., Ian Bresnahan, David G. Able,
                       Todd A. Cochran, Joshua Shipman, Mike Kulzer,
                       Fred Nix, Tom Loughran, George Lusk, William
                       M. Gillespie and Richard Dotson.

         10.1          Amendment to the Consulting Agreement dated         Filed herewith electronically
                       as of April 1, 1999 by and among the
                       Company, William P. O'Reilly 
                       and Montana Corp.

         10.2          Amendment to the Consulting Agreement dated         Filed herewith electronically
                       as of April 1, 1999 by and among the
                       Company, Clunet R. Lewis and CRL 
                       Enterprises, Inc.
</TABLE>

                                      17
<PAGE>

       27       Financial Data Schedule.

       (b)      Reports on Form 8-K

       The Company filed a Form 8-K dated March 25, 1999 describing the merger
       with Sulcus Hospitality Technologies, Corp., including audited financial
       statements of Sulcus and certain pro forma data.

       The Company filed a Form 8-K dated March 31, 1999 describing the
       merger with Windward Technology Group, Inc.


                                      18
<PAGE>

                                   SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                   Eltrax Systems, Inc.

Date: May 14, 1999             /s/ Nicholas J. Pyett                          
                               ------------------------------------------------
                                   Nicholas J. Pyett

                                   Chief Financial Officer
                                   (Principal Financial and Accounting Officer)




                                    19