UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-Q


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


                For The Quarterly Period Ended September 30, 2000


                           Commission File No. 1-15729




                           PARAGON TECHNOLOGIES, INC.
--------------------------------------------------------------------------------
             (Exact Name Of Registrant As Specified In Its Charter)



         Pennsylvania                                            22-1643428
-------------------------------                              -------------------
(State Or Other Jurisdiction Of                               (I.R.S. Employer
 Incorporation Or Organization)                              Identification No.)



     600 Kuebler Road, Easton, PA                                   18040
----------------------------------------                        -------------
(Address Of Principal Executive Offices)                          (Zip Code)



Registrant's Telephone Number, Including Area Code:              610-252-7321
                                                                 ------------




                            SI HANDLING SYSTEMS, INC.
--------------------------------------------------------------------------------
                           (Former Name of Registrant)



Indicate by checkmark  whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 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
                                                                  ---        ---


Number of shares of common stock,  par value $1.00 per share,  outstanding as of
September 30, 2000: 4,194,869.
                    ---------

<PAGE>


                         PART I - FINANCIAL INFORMATION
                         ------------------------------


Item 1.   Financial Statements
          --------------------
Paragon Technologies, Inc. and Subsidiary
Consolidated Balance Sheets
September 30, 2000 (Unaudited) and December 31, 1999
(In Thousands, Except Share Data)

<TABLE>
<CAPTION>
                                                                   September        December
                                                                   30, 2000         31, 1999
                                                                --------------     ----------

<S>                                                                <C>                 <C>
Assets
------

Current assets:
   Cash and cash equivalents, principally
     time deposits                                                 $  7,058             6,242
                                                                     ------            ------

   Receivables:
     Trade (net of allowance for doubtful
       accounts of $78 as of September 30, 2000
       and $54 as of December 31, 1999)                               7,277             6,824
     Notes and other receivables                                        378               952
                                                                     ------            ------
         Total receivables                                            7,655             7,776
                                                                     ------            ------

   Costs and estimated earnings in excess
     of billings                                                      1,160             1,864
                                                                     ------            ------

   Inventories:
     Raw materials                                                    2,322             1,819
     Work-in-process                                                    217               343
     Finished goods                                                     636             1,243
                                                                     ------            ------
         Total inventories                                            3,175             3,405
                                                                     ------            ------

   Deferred income tax benefits                                       1,684             1,684
   Prepaid expenses and other current assets                            518               715
                                                                     ------            ------
         Total current assets                                        21,250            21,686
                                                                     ------            ------

   Property, plant and equipment, at cost:
     Land                                                               257               327
     Buildings and improvements                                       3,717             3,717
     Machinery and equipment                                          6,326             6,078
                                                                     ------            ------
                                                                     10,300            10,122
     Less:  accumulated depreciation                                  7,240             6,788
                                                                     ------            ------
         Net property, plant and equipment                            3,060             3,334
                                                                     ------            ------

   Deferred income tax benefits                                         260               260
   Investments in joint ventures                                      1,621             1,399
   Excess of cost over fair value of net assets
     acquired, less amortization of $468 as of
     September 30, 2000 and $116 as of
     December 31, 1999                                               18,242            18,524
   Other assets, at cost less accumulated
     amortization of $170 as of September 30, 2000
     and $121 as of December 31, 1999                                   152               203
                                                                     ------            ------
         Total assets                                              $ 44,585            45,406
                                                                     ======            ======
</TABLE>

          See accompanying notes to consolidated financial statements.

                                     - 2 -
<PAGE>


Item 1.   Financial Statements (Continued)
          --------------------
Paragon Technologies, Inc. and Subsidiary
Consolidated Balance Sheets
September 30, 2000 (Unaudited) and December 31, 1999
(In Thousands, Except Share Data)

<TABLE>
<CAPTION>
                                                                   September        December
                                                                   30, 2000         31, 1999
                                                                --------------     ----------

<S>                                                                <C>                 <C>
Liabilities and Stockholders' Equity
------------------------------------

Current liabilities:
   Current installments of long-term debt                          $  1,252             1,578
   Accounts payable                                                   4,771             5,169
   Customers' deposits and billings in excess
     of costs and estimated earnings                                  4,363             5,154
   Accrued salaries, wages, and commissions                           1,594             1,356
   Income taxes payable                                                 979                49
   Accrued royalties payable                                            223               284
   Accrued product warranties                                           939               903
   Accrued pension and retirement
     savings plan liabilities                                           622               463
   Accrued other liabilities                                            465             1,355
                                                                     ------            ------

       Total current liabilities                                     15,208            16,311
                                                                     ------            ------

Long-term liabilities:
   Long-term debt, excluding current installments:
     Term loan                                                       10,350            12,438
     Subordinated notes payable                                       3,000             3,000
     Other                                                               13                13
                                                                     ------            ------
       Total long-term debt                                          13,363            15,451
   Deferred compensation                                                109               219
                                                                     ------            ------
       Total long-term liabilities                                   13,472            15,670
                                                                     ------            ------

Stockholders' equity:
   Common stock, $1 par value; authorized
     20,000,000 shares; issued and outstanding
     4,194,869 shares as of September 30, 2000
     and 4,184,878 shares as of
     December 31, 1999                                                4,195             4,185
   Additional paid-in capital                                         6,882             6,817
   Retained earnings                                                  4,828             2,423
                                                                     ------            ------

       Total stockholders' equity                                    15,905            13,425
                                                                     ------            ------

       Total liabilities and stockholders' equity                $   44,585            45,406
                                                                     ======            ======
</TABLE>

          See accompanying notes to consolidated financial statements.

                                     - 3 -
<PAGE>


Item 1.   Financial Statements (Continued)
          --------------------
Paragon Technologies, Inc. and Subsidiary
Consolidated Statements of Operations (Unaudited)
For the Nine Months Ended September 30, 2000 and September 30, 1999
(In Thousands, Except Share And Per Share Data)

<TABLE>
<CAPTION>
                                        Three Months Ended               Nine Months Ended
                                   ---------------------------     ----------------------------
                                     September      September        September       September
                                     30, 2000       30, 1999         30, 2000        30, 1999
                                   ------------   ------------     ------------    ------------
<S>                                 <C>             <C>              <C>             <C>
Net sales                           $  13,473          10,709           48,506          32,381
Cost of sales                           9,286           9,948           35,371          27,200
                                       ------          ------           ------          ------
Gross profit on sales                   4,187             761           13,135           5,181
                                       ------          ------           ------          ------

Selling, general and
   administrative expenses              2,506           1,707            7,764           4,981
Product development costs                  28              57              137             305
Amortization of goodwill                  119              30              352              44
Employee severance and
   termination benefits                     -               -              337               -
Interest expense                          400               8            1,237              23
Interest income                          (126)            (15)            (262)            (85)
Equity in income of joint
   ventures                               (45)            (71)            (116)           (120)
Other income, net                         (81)            (65)            (290)           (157)
                                       ------           ------          ------          ------
                                        2,801            1,651           9,159           4,991
                                       ------           ------          ------          ------

Earnings (loss) before
   income taxes                         1,386             (890)          3,976             190
Income tax expense (benefit)              538             (357)          1,571              62
                                       ------           ------          ------          ------
Net earnings (loss)                 $     848             (533)          2,405             128
                                       ======           ======          ======          ======

Basic earnings (loss)
   per share                        $      .20            (.14)            .57             .03
                                       =======          ======          ======          ======

Diluted earnings (loss)
   per share                        $      .20            (.14)            .56             .02
                                       =======          ======          ======          ======

Weighted average shares
   outstanding                       4,194,869       3,705,084       4,188,208       3,704,836
Dilutive effect of stock
   options                               1,649          15,646           1,626          13,214
Dilutive effect of phantom
   stock units                          14,673          14,223          15,587          15,023
                                     ---------       ---------       ---------       ----------
Weighted average shares
   outstanding assuming
   dilution                          4,211,191       3,734,953       4,205,421       3,733,073
                                     =========       =========       =========       =========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                     - 4 -
<PAGE>


Item 1.   Financial Statements (Continued)
          --------------------
Paragon Technologies, Inc. and Subsidiary
Consolidated Statements of Cash Flows (Unaudited)
For the Nine Months Ended September 30, 2000 and September 30, 1999
(In Thousands, Except Share Data)

<TABLE>
<CAPTION>
                                                                          Nine Months Ended
                                                                   -------------------------------
                                                                     September        September
                                                                      30, 2000        30, 1999
                                                                   -------------    -------------
<S>                                                                  <C>                <C>
Cash flows from operating activities:
   Net earnings                                                      $  2,405              128
   Adjustments to reconcile net earnings
     to net cash provided (used)
     by operating activities:
       Depreciation of plant and equipment                                452              201
       Amortization of intangibles                                        401               35
       Gain on disposition of equipment                                    (2)              (3)
       Equity in income of joint ventures                                (116)            (120)
       Issuance of 9,991 common shares as
         non-cash interest payment on
         subordinated notes                                                75                -
       Change in operating assets and liabilities,
         net of effects of the acquisition of
         Modular Automation Corp. and
         Ermanco Incorporated:
           Receivables                                                    121           (7,939)
           Costs and estimated earnings in
              excess of billings                                          704            6,300
           Inventories                                                    230              872
           Deferred income tax benefits                                     -             (531)
           Prepaid expenses and other current assets                      197               (6)
           Other noncurrent assets                                          2             (335)
           Accounts payable                                              (398)          (1,436)
           Customers' deposits and billings in excess
              of costs and estimated earnings                            (791)            (808)
           Accrued salaries, wages, and commissions                       238               56
           Income taxes payable                                           930              148
           Accrued royalties payable                                      (61)             (97)
           Accrued pension and retirement
              savings plan liabilities                                    159               96
           Accrued product warranties                                      36              341
           Accrued other liabilities                                     (659)             370
           Deferred compensation                                         (110)             (20)
                                                                       ------           ------
Net cash provided (used) by operating activities                        3,813           (2,748)
                                                                       ------           ------

Cash flows from investing activities:
   Proceeds from the disposition of equipment                               2                3
   Investment in SI-Egemin joint venture                                 (106)             (97)
   Additional consideration paid in connection
     with Ermanco acquisition                                            (231)               -
   Acquisition of Modular Automation Corp.,
     net of cash acquired                                                   -             (928)
   Acquisition of Ermanco Incorporated, net
     of cash acquired                                                       -           (1,980)
   Additions to property, plant and equipment                            (248)            (312)
                                                                       ------           ------
Net cash used by investing activities                                    (583)          (3,314)
                                                                       ------           ------
</TABLE>

          See accompanying notes to consolidated financial statements.

                                     - 5 -
<PAGE>


Item 1.   Financial Statements (Continued)
          --------------------
Paragon Technologies, Inc. and Subsidiary
Consolidated Statements of Cash Flows (Unaudited) (Continued)
For the Nine Months Ended September 30, 2000 and September 30, 1999
(In Thousands, Except Share Data)

<TABLE>
<CAPTION>
                                                                          Nine Months Ended
                                                                   -------------------------------
                                                                     September       September
                                                                     30, 2000       30, 1999
                                                                   ------------   --------------
<S>                                                                 <C>                <C>
Cash flows from financing activities:
   Advance of revolving credit loan
     payable to bank                                                       -            2,153
   Sale of common shares in connection
     with employee incentive stock option plan                             -               48
   Repayment of long-term debt                                        (2,414)             (27)
   Dividends paid on common stock                                          -             (371)
   Repurchase and retirement of common stock                               -             (348)
                                                                      ------           ------
   Net cash provided (used) by financing activities                   (2,414)           1,455
                                                                      ------           ------

   Increase (decrease) in cash and cash equivalents                      816           (4,607)
   Cash and cash equivalents, beginning
     of period                                                         6,242            4,785
                                                                      ------           ------
   Cash and cash equivalents, end of period                         $  7,058              178
                                                                      ======           ======

Supplemental disclosures of cash flow information:
   Cash paid during the period for:
     Interest                                                       $  1,474                3
                                                                      ======           ======
     Income taxes                                                   $    619              431
                                                                      ======           ======

Supplemental disclosures of noncash
investing and financing activities:
   Adjustment to excess of cost
     over fair value of net assets acquired
     due to a change in the estimated
     fair value of land acquired                                    $     70                -
                                                                      ======           ======

   Issuance of 8,861 common shares in
     exchange for 3,743 common shares delivered
     to the Company by officers
     in connection with the employees'
     incentive stock option                                         $      -               43
                                                                      ======           ======

   Issuance of 481,284 common shares
     for Ermanco acquisition                                        $      -            4,500
                                                                      ======           ======

   Issuance of $14,000 of term debt for
     Ermanco acquisition                                            $      -           14,000
                                                                      ======           ======

   Issuance of subordinated notes payable
     for Ermanco acquisition                                        $      -            3,000
                                                                      ======          =======
</TABLE>

          See accompanying notes to consolidated financial statements.

                                     - 6 -
<PAGE>


Item 1.   Financial Statements (Continued)
          --------------------
Paragon Technologies, Inc. and Subsidiary
Notes To Consolidated Financial Statements
Nine Months Ended September 30, 2000 and September 30, 1999


(1)  The  information  contained  in this Form 10-Q report is  unaudited  and is
     subject to  year-end  adjustments  and audit.  However,  in the  opinion of
     management,   the  interim  financial   statements  furnished  reflect  all
     adjustments  and accruals that are necessary to a fair statement of results
     for the interim periods  presented.  The financial  statements  include the
     accounts  of the Company and  Ermanco  Incorporated  ("Ermanco"),  a wholly
     owned subsidiary  company,  after elimination of intercompany  balances and
     transactions. Results for interim periods are not necessarily indicative of
     results  expected for the fiscal year. Refer to the Company's Form 10-K for
     the ten  months  ended  December  31,  1999  for  more  complete  financial
     information.

     On September  30, 1999,  the Board of Directors of the Company  approved an
     amendment to Article I, Section 1.03 of the Company's  Bylaws to change the
     fiscal year end of the Company  from the Sunday  nearest to the last day of
     February to December  31. The  Company  filed a Form 10-K for the  10-month
     period ending December 31, 1999 to cover the transition  period.  The prior
     year  comparative  financial  information in this Form 10-Q report reflects
     the  months of July,  August,  and  September  1999,  and  January  through
     September 1999, respectively.

     On  February 9, 2000,  the Board of  Directors  of the Company  approved an
     amendment to Article 1 of the Company's Articles of Incorporation to change
     the  name  of the  Company  from  SI  Handling  Systems,  Inc.  to  Paragon
     Technologies,  Inc.  ("Paragon"  or the  "Company").  Paragon  will  be the
     corporate  entity currently  consisting of two separate brands:  SI Systems
     (formerly referred to as "SI Easton") and Ermanco Incorporated ("Ermanco").
     This amendment became effective on April 5, 2000.

     On March 9, 2000, the Company's  common stock began trading on the American
     Stock  Exchange  (Amex)  under the symbol  "PTG."  Prior to this date,  the
     Company's  common  stock was traded on The Nasdaq  Stock  Market  under the
     symbol "SIHS."

(2)  SI/BAKER, INC.
     --------------
     Paragon Technologies, Inc., (formerly, "SI Handling Systems, Inc.") and
     McKesson Automated Prescription Systems, Inc.("McKesson APS"), formerly
     known as Automated Prescription Systems, Inc., are co-venturers in a joint
     venture named SI/BAKER, INC. ("SI/BAKER" or the "joint venture"). On
     September 29, 1998, McKesson Corporation [NYSE: MCK], a healthcare supply
     management company, announced the completion of its acquisition of
     Automated Prescriptions Systems, Inc.  Automated Prescription Systems, Inc.
     was renamed McKesson Automated Prescription Systems, Inc. The SI/BAKER
     joint venture draws upon the automated materials handling systems
     experience of SI Systems and the automated pill counting and dispensing
     products of McKesson APS to provide automated pharmacy systems.  Each
     member company contributed $100,000 in capital to fund the joint venture.

     The  joint  venture  designs  and  installs  computer   controlled,   fully
     automated,  integrated  systems for managed care pharmacy  operations.  The
     joint venture's  systems are viewed as labor saving devices,  which address
     the issues of  improved  productivity  and cost  reduction.  Systems can be
     expanded as customers'  operations  grow and they may be integrated  with a
     wide variety of components to meet specific customer needs.

     Schedule  A  contains  the  SI/BAKER,   INC.  financial   statements.   The
     information  contained  in  the  SI/BAKER,  INC.  financial  statements  is
     unaudited and is subject to year-end adjustments and audit. However, in the
     opinion of management,  the interim financial  statements furnished reflect
     all  adjustments  and accruals  that are  necessary to a fair  statement of
     results for the interim periods presented.


                                     - 7 -
<PAGE>


Item 1.   Financial Statements (Continued)
          --------------------
Paragon Technologies, Inc. and Subsidiary
Notes To Consolidated Financial Statements
Nine Months Ended September 30, 2000 and September 30, 1999


     On  November  4, 1999,  the Board of  Directors  of  SI/BAKER  approved  an
     amendment to Article VII, Section 5 of the Bylaws to change the fiscal year
     end of the Company from the last day of February to December 31. SI/BAKER's
     financial  statements for the 10-month period ending December 31, 1999 were
     included  in the  Company's  report  on Form 10-K for the  10-month  period
     ending December 31, 1999. The prior year comparative  financial information
     in this Form 10-Q report reflects the months of July, August, and September
     1999, and January through September 1999, respectively.

(3)  Modular Automation Corp.
     -----------------------
     On April 13, 1999, the Company acquired all of the outstanding common stock
     of Modular Automation Corp. ("MAC") of Greene, New York for $1,957,000. The
     acquisition  required a net cash outlay of $928,000.  The purchase price of
     the  acquisition  was allocated to the assets  acquired based on fair value
     with the remainder  representing  goodwill.  The acquired  Automated Guided
     Vehicle ("AGV")  products and personnel were integrated into the SI Systems
     operation.  As of December 31, 1999, the AGV product line  associated  with
     the MAC  acquisition  was  abandoned.  The write-off of certain  long-lived
     assets,  including  goodwill,  totaling  $561,000  was  recognized  in  the
     Consolidated  Statement of Operations for the ten months ended December 31,
     1999 in accordance with the criteria set forth by SFAS No. 121.

     On the basis of a pro forma consolidation of the result of operations as if
     the  acquisition  of MAC had taken  place on January  1,  1999,  management
     believes that the  acquisition  would not have had a material effect on the
     reported amounts.

(4)  Ermanco Incorporated
     --------------------
     On September 30, 1999, the Company  acquired all of the outstanding  common
     stock of  Ermanco  Incorporated.  Ermanco,  headquartered  in Spring  Lake,
     Michigan,  designs and installs  complete conveyor systems for a variety of
     manufacturing  and  warehousing  applications.  Under  terms  of the  Stock
     Purchase  Agreement and based on the definitive  closing balance sheet, the
     Company  acquired  all of the  outstanding  common  stock of Ermanco  for a
     purchase price of  $22,801,000  consisting of $15,301,000 in cash, of which
     $1,551,000  is held in escrow  ($801,000  was  released  in January  2000),
     $3,000,000 in promissory notes payable to fourteen stockholders of Ermanco,
     and 481,284 shares of the Company's common stock with a value of $4,500,000
     based on the average  closing price of $9.35 of the Company's  common stock
     for the five  trading  days  immediately  preceding  the date of the  Stock
     Purchase Agreement, August 6, 1999. The Company financed $14,000,000 of the
     acquisition  through term debt. The acquisition  required a net cash outlay
     of $2,264,000.

     The  acquisition was accounted for as a purchase in accordance with APB No.
     16 and, accordingly,  the acquired assets and assumed liabilities have been
     recorded  at their  estimated  fair value at the date of  acquisition.  The
     amount of goodwill  associated  with the acquisition was $18,710,000 and is
     being amortized over a period of 40 years.

     On the basis of a pro forma  consolidation  of the results of operations of
     Ermanco,  as if the  acquisition  had taken  place on January 1, 1999,  the
     following pro forma  financial  results for the nine months ended September
     30, 1999 are as follows (in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                                    For the Nine Months Ended
                                                                        September 30, 1999
                                                                 ------------------------------
     <S>                                                                   <C>
     Net sales                                                               $ 56,384
                                                                               ======
     Net earnings                                                            $  1,403
                                                                               ======
     Basic earnings per share                                                $    .34
                                                                               ======
     Diluted earnings per share                                              $    .32
                                                                               ======
</TABLE>
                                   - 8 -
<PAGE>


Item 1.   Financial Statements (Continued)
          --------------------
Paragon Technologies, Inc. and Subsidiary
Notes To Consolidated Financial Statements
Nine Months Ended September 30, 2000 and September 30, 1999


(5)  Major Segments of Business
     --------------------------
     Operating  segments are defined as  components  of an  enterprise  in which
     separate financial  information is available and evaluated regularly by the
     chief operating decision maker in deciding how to allocate resources and in
     assessing  performance.  The Company identified such segments based on both
     management responsibility and types of products offered for sale.

     On September 30, 1999, Paragon Technologies, Inc. (formerly, "SI Handling
     Systems, Inc.") ("the Company") concluded the acquisition of all of the
     outstanding common stock of Ermanco Incorporated ("Ermanco").  Ermanco
     operates as a wholly-owned subsidiary of the Company.

     The Company's Easton, Pennsylvania operations (hereafter referred to as "SI
     Systems") is a systems integrator  supplying  automated  materials handling
     systems to manufacturing, order selection, and distribution operations. The
     systems are designed,  sold,  manufactured,  installed, and serviced by its
     own staff or by others  for SI  Systems,  at its  direction,  generally  as
     labor-saving  devices to improve productivity and reduce costs. SI Systems'
     products are utilized to automate the movement or selection of products and
     are often integrated with other automated equipment,  such as conveyors and
     robots. SI Systems'  products involve both standard and specially  designed
     components and include  integration of  non-proprietary  automated handling
     technologies so as to provide solutions for its customers' unique materials
     handling  needs.  SI Systems' staff develops and designs  computer  control
     programs required for the efficient operation of the systems.

     Although SI Systems is not  dependent on any single  customer,  much of its
     revenue is derived  from  contracts  to design,  manufacture,  and  install
     large-scale   materials   handling   systems  for  major   North   American
     corporations and the federal government.

     Ermanco is a  manufacturer  of light to medium duty unit handling  conveyor
     products,  serving the material handling industry through local independent
     distributors  in North  America.  Ermanco also provides  complete  conveyor
     systems  for  a  variety  of  applications,   including  distribution,  and
     manufacture of computers and electronic  products,  utilizing primarily its
     own manufactured  conveyor products,  engineering services by its own staff
     or subcontracted,  and  subcontracted  installation  services.  The systems
     product line of Ermanco accounts for  approximately  40% of Ermanco's total
     revenues, and the balance is from distribution (resale).

     SI Systems' products are sold on a fixed price basis.  Generally,  contract
     terms provide for progress  payments and a portion of the purchase price is
     withheld  by the  buyer  until  the  system  has been  accepted.  Ermanco's
     products  and  services  are also sold on a fixed price  basis.  Generally,
     contract terms are net 30 days for product sales, with progressive payments
     for system-type projects.

                                     - 9 -
<PAGE>


Item 1.   Financial Statements (Continued)
          --------------------
Paragon Technologies, Inc. and Subsidiary
Notes To Consolidated Financial Statements
Nine Months Ended September 30, 2000 and September 30, 1999


Prior to the acquisition, the Company operated in one major market segment. With
the  addition of the Ermanco  operations,  the Company now operates in two major
market segments, and products are sold worldwide as follows:

<TABLE>
<CAPTION>

For the nine months ended                        Automated Material     Conveyor
September 30, 2000 (in thousands):                 Handling Systems      Systems        Total
--------------------------------                 -------------------    ---------     ---------
<S>                                                  <C>                  <C>           <C>
Sales                                                $  23,163             25,343       48,506
Earnings before interest expense,
   interest income, equity in
   income of joint ventures, and
   income taxes                                          2,646              2,189        4,835
Total assets                                            14,774             29,811       44,585
Capital expenditures                                        83                165          248
Depreciation and amortization
   expense                                                 303                550          853
</TABLE>

Geographic segment information was as follows (in thousands):
<TABLE>
<CAPTION>
For the nine months ended
September 30, 2000 (in thousands):       Domestic     Europe and Asia      Canada         Total
--------------------------------         --------     ---------------      ------       ---------
<S>                                      <C>               <C>               <C>          <C>
Sales                                    $ 45,037          2,609             860          48,506
Earnings before interest
   expense, interest
   income, equity in income
   of joint ventures,
   and income taxes                         4,835              -               -           4,835
Total assets                               44,585              -               -          44,585
Capital expenditures                          248              -               -             248
Depreciation and
   amortization expense                       853              -               -             853
</TABLE>

Inter-segment  sales  for the nine  months  ended  September  30,  2000  totaled
$108,000.

<TABLE>
<CAPTION>

For the three months ended                       Automated Material     Conveyor
September 30, 2000 (in thousands):                Handling Systems       Systems        Total
--------------------------------                 ------------------     ---------     ---------
<S>                                                    <C>                <C>           <C>
Sales                                                  $ 7,942             5,531        13,473
Earnings before interest expense,
   interest income, equity in
   income of joint ventures, and
   income taxes                                          1,602                13         1,615
Total assets                                            14,774            29,811        44,585
Capital expenditures                                         6                24            30
Depreciation and amortization
   expense                                                 101               185           286
</TABLE>

                                     - 10 -
<PAGE>


Item 1.   Financial Statements (Continued)
          --------------------
Paragon Technologies, Inc. and Subsidiary
Notes To Consolidated Financial Statements
Nine Months Ended September 30, 2000 and September 30, 1999


Geographic segment information was as follows:

<TABLE>
<CAPTION>
For the three months ended
September 30, 2000 (in thousands):       Domestic    Europe and Asia     Canada      Total
--------------------------------         --------    ---------------    --------   --------
<S>                                      <C>                <C>            <C>      <C>
Sales                                    $ 12,450           658            365      13,473
Earnings before interest
     expense, interest
     income, equity in income
     of joint ventures,
     and income taxes                       1,615             -              -       1,615
Total assets                               44,585             -              -      44,585
Capital expenditures                           30             -              -          30
Depreciation and
     amortization expense                     286             -              -         286
</TABLE>

Inter-segment  sales for the three  months  ended  September  30,  2000  totaled
$20,000.

(6)  Long-Term Debt
     -------------
     On March 30, 2000, the Company  received a waiver of certain loan covenants
     as well as an  amendment  to the term  loan and line of  credit  agreements
     relative to future  covenant  requirements,  a variable  term loan interest
     rate  increase  to LIBOR plus 3%, and  limitations  on the cash  payment of
     interest on  subordinated  debt.  The  limitations  on the cash  payment of
     interest on subordinated debt were eliminated on August 22, 2000.


Item 2.   Management's Discussion and Analysis of Financial Condition and
------    ---------------------------------------------------------------
          Results of Operations
          ---------------------

Liquidity and Capital Resources
-------------------------------
     The  Company's  cash  and  cash  equivalents  increased  to  $7,058,000  at
September 30, 2000 from  $6,242,000 at December 31, 1999. The increase  resulted
from cash  provided  by  operating  activities  totaling  $3,813,000.  Partially
offsetting  the increase in cash and cash  equivalents  from this source was the
repayment of long-term  debt of  $2,414,000,  purchases of capital  equipment of
$248,000,  an  investment  of  $106,000  in the  SI-Egemin  joint  venture,  and
additional  consideration  and costs of  $231,000  paid in  connection  with the
Ermanco  acquisition.  Funds used by operating activities during the nine months
ended September 30, 1999 were $2,748,000.
     On April 13, 1999, the Company acquired all of the outstanding common stock
of Modular  Automation  Corp.  ("MAC") of Greene,  New York for $1,957,000.  The
acquisition  required a net cash outlay of $928,000.  The purchase  price of the
acquisition  was allocated to the assets  acquired  based on fair value with the
remainder  representing  goodwill. The acquired Automated Guided Vehicle ("AGV")
products and personnel were integrated into the SI Systems  operation.  However,
as of  December  31,  1999,  the  AGV  product  line  associated  with  the  MAC
acquisition was abandoned. The write-off of certain long-lived assets, including
goodwill,  totaling  $561,000 was  recognized in the  Consolidated  Statement of
Operations  for the ten months ended  December 31, 1999 in  accordance  with the
criteria  set forth by SFAS No. 121.  The Company is in the process of assessing
strategic alternatives for the AGV product line.

                                     - 11 -
<PAGE>


Item 2.   Management's Discussion and Analysis of Financial Condition and
------    ---------------------------------------------------------------
          Results of Operations
          ---------------------

Liquidity and Capital Resources (Continued)
-------------------------------
     On September 30, 1999,  the Company  completed the  acquisition  of all the
outstanding  common  stock  of  Ermanco   Incorporated   ("Ermanco").   Ermanco,
headquartered in Spring Lake, Michigan,  designs and installs complete conveying
systems for a variety of manufacturing and warehousing  applications.  Under the
terms  of  the  Stock  Purchase  Agreement,  the  Company  acquired  all  of the
outstanding  common  stock  of  Ermanco  for a  purchase  price  of  $22,801,000
consisting  of  $15,301,000  in cash,  of  which  $1,551,000  is held in  escrow
($801,000 was released in January 2000),  $3,000,000 in promissory notes payable
to the fourteen  stockholders  of Ermanco,  and 481,284  shares of the Company's
common stock with a value of  $4,500,000  based on the average  closing price of
$9.35 of the  Company's  common  stock  for the five  trading  days  immediately
preceding the date of the Stock Purchase Agreement,  August 6, 1999. The Company
financed  $14,000,000  of the  acquisition  through term debt.  The  acquisition
required a net cash outlay of  $2,264,000.  The  remaining  escrow of  $750,000,
including any earnings thereon, shall be distributed to the selling shareholders
eighteen months after the September 30, 1999 closing date of the acquisition.
     The  acquisition was accounted for as a purchase in accordance with APB No.
16 and,  accordingly,  the  acquired  assets and assumed  liabilities  have been
recorded at their estimated fair value at the date of acquisition. The amount of
goodwill  associated with the acquisition was $18,710,000 and is being amortized
over a period of 40 years.
     On the closing date of the acquisition, the Company entered into employment
agreements  with four  employees.  Leon C.  Kirschner and Steven  Shulman,  both
principal stockholders of Ermanco, joined the Board of Directors of the Company.
     In  order  to  complete  the  Ermanco  acquisition,  the  Company  obtained
financing  from its principal  bank.  The Company  entered into a new three-year
line of credit  facility  which may not exceed the  lesser of  $6,000,000  or an
amount  based  on  a  borrowing  base  formula  tied   principally  to  accounts
receivable,  inventory,  fair market value of the Company's  property and plant,
and  liquidation  value of equipment,  plus an amount equal to $2,500,000.  This
amount will be reduced by $625,000  every six months  during the first two years
of the line of credit facility until such amount reaches zero,  minus the unpaid
principal  balance of the term loan described below. The line of credit facility
is to be used primarily for working capital purposes.  As of September 30, 2000,
the Company did not have any borrowings under the line of credit facility.
     The Company  financed  $14,000,000 of the acquisition  through a seven-year
term loan  from its bank.  During  the  first  two years of the term  loan,  the
Company will repay equal quarterly  payments of $312,500 plus accrued  interest.
After the second anniversary of the September 30, 1999 closing date, the Company
will make equal quarterly payments of $575,000, plus interest. The interest rate
on  $7,000,000  of the term loan is variable at a rate equal to the  three-month
LIBOR Market Index Rate,  plus three percent  (9.66%).  The Company also entered
into an interest rate swap agreement for fifty percent of the term loan to hedge
the floating interest rate. The seven-year interest rate swap for $7,000,000 was
at a fixed  rate of  9.38%.  On July 27,  2000,  the  Company  prepaid,  without
penalty,  $1,150,000  of the term  loan with the  variable  interest  rate.  The
prepayment  consisted of two  quarterly  payments of $575,000  pertaining to the
final year of the term loan.
     To obtain the line of credit and term loan, the Company  granted the bank a
security interest in all personal property,  including,  without limitation, all
accounts, deposits, documents,  equipment, fixtures, general intangibles, goods,
instruments,  inventory,  letters  of  credit,  money,  securities,  and a first
mortgage on all real estate.  The line of credit  facility and term loan contain
various  restrictive  covenants  relating  to  additional  indebtedness,   asset
acquisitions or dispositions, investments, guarantees, payment of dividends, and
maintenance of certain financial ratios.  The Company was in compliance with all
covenants, as amended, as of September 30, 2000.






                                     - 12 -
<PAGE>


Item 2.   Management's Discussion and Analysis of Financial Condition and
------    ---------------------------------------------------------------
          Results of Operations
          ---------------------

Liquidity and Capital Resources (Continued)
-------------------------------
     The promissory notes issued to the fourteen stockholders of Ermanco totaled
$3,000,000,  have a term of seven years,  and bear interest at an annual rate of
ten percent in years one through  three,  twelve percent in years four and five,
and fourteen percent in years six and seven. The weighted average interest rates
on the promissory notes is 11.714% over the term of the notes. Interest shall be
payable quarterly, in cash or under certain conditions,  in the Company's common
stock upon approval of the Company's  Board of Directors.  The promissory  notes
may be prepaid prior to the end of the seven-year term provided that there is no
debt  outstanding  under its line of credit  facility and term loan.  During the
period April 1, 2000 through August 21, 2000,  the Company was  prohibited  from
making any cash payments of subordinated  debt and interest due to covenants set
forth in the Loan Agreement with the Company's  principal bank. On July 1, 2000,
the Company issued 9,991 shares of common stock to the fourteen stockholders for
non-cash interest payments on the subordinated notes.
     On March 4, 1996, SI/BAKER established a $2,500,000 line of credit facility
(the  "facility")  with its principal bank (the "bank").  Under the terms of the
facility, SI/BAKER's parent companies, Paragon Technologies, Inc. (formerly, "SI
Handling Systems, Inc.") and McKesson Automated Prescription Systems, Inc., have
each  provided  a  limited  guarantee  and  surety  in an  amount  not to exceed
$1,000,000  for a combined  guarantee of  $2,000,000 to the bank for the payment
and  performance  of  the  related  note,  including  any  further  renewals  or
modifications  of the facility.  During the fiscal year ended March 1, 1998, the
bank  increased  the  borrowing  availability  to  $3,000,000  and  extended the
expiration  date of the facility.  On September 30, 2000,  SI/BAKER did not have
any borrowings under the facility. The facility has an expiration date of August
31, 2001.
     The Company  anticipates that borrowings  under its credit  facility,  cash
generated from operations,  and term debt will be adequate to satisfy its future
cash  requirements  in the  foreseeable  future.  Due to the  dependence  upon a
limited number of large contracts with certain customers,  sales volume, as well
as cash  liquidity,  may experience  fluctuations.  The foreseeable  future,  as
mentioned in this context,  relates to forecasted  cash flows  analyzed over the
next twelve-month  period.  Due to the  unpredictability  of the future contract
sales,  cash  liquidity  beyond this  twelve-month  period is difficult  for the
Company to forecast with reasonable accuracy.
     The Company,  as part of its focus on its core business and  strategy,  has
decided to sell unused land and is assessing strategic  alternatives for the AGV
and Automated  Storage and Retrieval  Systems  ("ASRS")  product lines.  Shortly
after the end of the third quarter of 2000, the Company  completed the sale of a
vacant parcel of land adjacent to the Ermanco facility in Spring Lake, Michigan.
Net proceeds from the sale of the vacant land were approximately  $230,000,  and
resulted in no gain or loss to the Company.
     The  Company  plans to  consider  expansion  opportunities  as they  arise,
although ongoing  operating  results of the Company,  the restrictive  covenants
associated with the recent financing obtained from the Company's principal bank,
the economics of the expansion,  and the circumstances  justifying the expansion
will be key factors in  determining  the amount of  resources  the Company  will
devote to further  expansion.  The  Company  did not have any  material  capital
commitments as of September 30, 2000.


Results Of Operations
---------------------

(a)  Nine Months Ended September 30, 2000 Versus Nine Months Ended September 30,
     ---------------------------------------------------------------------------
     1999
     ----
     On September  30, 1999,  the Board of Directors of the Company  approved an
amendment to Article I, Section 1.03 of the Bylaws to change the fiscal year end
of the Company  from the Sunday  nearest to the last day of February to December
31. For the year ended  December  31,  1999,  the fiscal year  consisted  of ten
months.  The prior  year  comparative  financial  information  in this Form 10-Q
report  reflects  the months of July,  August and  September  1999,  and January
through September 1999, respectively.

                                     - 13 -
<PAGE>


Item 2.   Management's Discussion and Analysis of Financial Condition and
------    ---------------------------------------------------------------
          Results of Operations
          ---------------------


Results Of Operations (Continued)
---------------------

(a)  Nine Months Ended September 30, 2000 Versus Nine Months Ended September 30,
     ---------------------------------------------------------------------------
     1999 (Continued)
     ----
     On September 30, 1999, the Company  concluded the acquisition of all of the
outstanding common stock of Ermanco  Incorporated.  Ermanco operates as a wholly
owned  subsidiary  of Paragon  Technologies,  Inc.  and the results for the nine
months ended September 30, 2000 include the operations of Ermanco.  However, the
prior  year  comparative  information  in this Form 10-Q  does not  reflect  the
operations of Ermanco.
     The  Company's  net earnings for the nine months ended  September  30, 2000
were  $2,405,000  compared to net earnings of $128,000 for the nine months ended
September 30, 1999. Unfavorably impacting the net earnings of $2,405,000 for the
nine months ended  September  30, 2000 were employee  severance and  termination
benefits of $337,000.
     Net sales of  $48,506,000  for the nine  months  ended  September  30, 2000
increased  49.8% compared to net sales of $32,381,000  for the nine months ended
September 30, 1999.  The sales increase of $16,125,000 is comprised of Ermanco's
contribution to product sales approximating $25,343,000, offset by a decrease in
SI  Systems'  sales  of  approximately  $9,218,000  for the  nine  months  ended
September 30, 2000,  when compared to the nine months ended  September 30, 1999.
The SI Systems' sales  decrease in the nine months ended  September 30, 2000 was
primarily  attributable  to a smaller  backlog of orders at December  31,  1999,
versus a larger backlog of orders at December 31, 1998. SI Systems experienced a
decline in sales across most of their  product  lines,  with the majority of the
decrease  relating to sales of the Order  Selection  product line. SI Systems'
business is  dependent  upon a limited  number of large  contracts  with certain
customers.  This dependence can cause  unexpected  fluctuations in sales volume.
Along with sales recognized on the percentage of completion  accounting  method,
the monthly rate of new orders can also vary substantially, causing fluctuations
in the current backlog of orders. Various external factors affect the customers'
decision-making   on  expanding  or  upgrading   their  current   production  or
distribution  sites. The customers'  timing and placement of new orders is often
affected by factors,  such as the current  economy,  current interest rates, and
future expectations.
     Although SI Systems' sales have declined in the nine months ended September
30, 2000 as compared to the nine months ended  September 30, 1999,  gross profit
on sales for the nine months ended September 30, 2000 has increased  compared to
the nine months ended September 30, 1999.
     Gross profit, as a percentage of sales, was 27.1% for the nine months ended
September  30, 2000  compared to 16.0% for the nine months ended  September  30,
1999.  The  increase in the gross  profit  percentage  for the nine months ended
September 30, 2000 was attributable to effective  business  controls relative to
pricing practices and favorable  performance on several  contracts,  principally
for SI Systems'  higher  margin  proprietary  products,  initiated  in the prior
fiscal year that were  completed  or nearing  completion  during the nine months
ended September 30, 2000. Offsetting the impact of the favorable performances on
several  contracts  was the  recognition  of an  additional  loss in the  second
quarter of fiscal 2000 on a major contract,  which  experienced  additional cost
overruns.  Gross profit on sales for the nine months ended December 31, 1999 was
unfavorably   impacted  by  significant  cost  overruns  on  certain   projects,
competitive  pricing pressures,  as well as to first-time design  inefficiencies
associated with the development of enhanced order fulfillment systems related to
these projects.

                                     - 14 -
<PAGE>


Item 2.   Management's Discussion and Analysis of Financial Condition and
------    ---------------------------------------------------------------
          Results of Operations
          ---------------------

Results Of Operations (Continued)
---------------------

(a)  Nine Months Ended September 30, 2000 Versus Nine Months Ended September 30,
     ---------------------------------------------------------------------------
     1999 (Continued)
     ----
     Estimates relative to loss contracts,  which the Company  experienced to an
unusual  extent in the period  ended  December  31, 1999,  are  inherently  more
difficult to make than those in which the contract  has  proceeded  according to
original expectations. Uncertainty exists with respect to the resources required
to accomplish the contractual  scope or work dealing with the final  integration
of state-of-the-art  automated materials handling systems.  Consequently,  while
the Company  believes the full effect of both  projected and presently  incurred
cost  overruns has been  accrued,  current  estimates  may need to be revised as
additional  information  becomes  available.  As a result of the experience with
cost overruns while integrating new computer technology to its order fulfillment
product  line,  the  Company  has  established   enhanced   business   controls,
estimating,  and  procurement  disciplines  to  attempt  to reduce  future  cost
overruns. Also the backlog of orders of approximately $2,870,000 attributable to
these  contracts will be recognized at no gross profit  throughout the remainder
of this calendar year.
     Selling,  general and administrative  expenses of $7,764,000 were higher by
$2,783,000 for the nine months ended  September 30, 2000 than in the nine months
ended  September  30,  1999.  The  increase of  $2,783,000  is  comprised of the
addition of selling,  general  and administrative  expenses totaling $3,448,000
related to the Ermanco  operation,  offset by a decrease in SI Systems' selling,
general and  administrative  expenses  of  approximately  $665,000  for the nine
months  ended  September  30,  2000,  when  compared  to the nine  months  ended
September  30,  1999.  The  decrease  in  SI  Systems'   selling,   general  and
administrative  expenses was primarily attributable to the prior year comparable
period containing a larger amount of costs associated with product promotion and
sales efforts aimed at expanding the customer base. These expenses were impacted
as a result of the  restructuring  initiative  whereby  employees were separated
from the Company.
     Product  development  costs of $137,000 were lower by $168,000 for the nine
months  ended  September  30, 2000 than in the nine months ended  September  30,
1999.  Development programs in the nine months ended September 30, 2000 included
enhancements to the Company's conveyor  technology,  horizontal  transportation,
sortation,  and order selection product lines.  Development programs in the nine
months  ended  September  30,  1999  included   enhancements  to  the  Company's
horizontal transportation and order selection product lines.
     Amortization of goodwill  represented costs associated with the acquisition
of Ermanco  Incorporated  on  September  30, 1999 and Modular  Automation  Corp.
("MAC") on April 13, 1999.  Goodwill  amortization  expense  associated with the
Ermanco  acquisition  during the nine months  ended  September  30, 2000 totaled
$352,000. There was no goodwill amortization expense associated with the Ermanco
acquisition in the comparable prior year period.  Goodwill  amortization expense
associated with the MAC  acquisition  during the nine months ended September 30,
1999 totaled $44,000.  There was no goodwill  amortization expense pertaining to
the MAC acquisition  included in the nine months ended September 30, 2000 due to
the  write-off,  during the ten  months  ended  December  31,  1999,  of certain
long-lived assets,  primarily  goodwill,  associated with the elimination of the
Automated Guided Vehicle product line related to the acquisition of MAC.
     Employee severance and termination benefits of $337,000 for the nine months
ended  September  30, 2000 was  associated  with a first  quarter  restructuring
initiative, whereby the Company separated approximately sixteen employees.
     Interest expense of $1,237,000 was higher by $1,214,000 for the nine months
ended  September 30, 2000 than in the nine months ended  September 30, 1999. The
increase in interest  expense was  primarily  attributable  to the term debt and
subordinated notes issued in connection with the Ermanco acquisition,  which was
completed on September 30, 1999.

                                     - 15 -
<PAGE>


Item 2.   Management's Discussion and Analysis of Financial Condition and
------    ---------------------------------------------------------------
          Results of Operations
          ---------------------

Results Of Operations (Continued)
---------------------

(a)  Nine Months Ended September 30, 2000 Versus Nine Months Ended September 30,
     ---------------------------------------------------------------------------
     1999 (Continued)
     ----
     Interest  income of  $262,000  was higher by  $177,000  for the nine months
ended  September 30, 2000 compared to the nine months ended  September 30, 1999.
The increase in interest  income was primarily  attributable to the higher level
of funds available for short-term investments.
     Equity in income of joint ventures  represents the Company's  proportionate
share of its  investments  in the SI-Egemin and SI/BAKER joint ventures that are
being  accounted for under the equity method.  The net  unfavorable  variance of
$4,000  in the  equity in income of joint  ventures  for the nine  months  ended
September  30, 2000 as compared to the nine months ended  September 30, 1999 was
comprised of increased  losses of  approximately  $158,000  attributable  to the
SI-Egemin  joint  venture.  Offsetting  the losses of SI-Egemin  was a favorable
variance of increased  earnings of $154,000  attributable  to the SI/BAKER joint
venture.
     The  unfavorable  variance of $158,000 for the nine months ended  September
30, 2000 in the equity in income of the SI-Egemin joint venture was attributable
to start-up costs. The SI-Egemin joint venture was initiated in July 1999.
     The favorable  variance of $154,000 for the nine months ended September 30,
2000 in the equity in income of the SI/BAKER  joint venture was primarily due to
its increased sales of  approximately  $2,385,000 as compared to the nine months
ended  September 30, 1999,  plus a reduction of $127,000 in product  development
expenses,  a  reduction  of  $73,000  in  selling,  general  and  administration
expenses,  an increase of $72,000 in interest  income,  net,  and an increase of
$61,000  in  other  income,  net,  associated  with  royalty  income.  Partially
offsetting  these  favorable  variances  was  SI/BAKER's  increase of $95,000 in
revenue-based royalty costs due to the parent companies.
     The favorable variance in other income,  net was primarily  attributable to
an increase in the  revenue-based  royalty  income related to the SI/BAKER joint
venture and Ermanco license agreements.
     The  Company  incurred  income tax  expense of  $1,571,000  during the nine
months ended  September  30, 2000,  compared to income tax expense of $62,000 in
the comparable prior year period.  Income tax expense was generally  recorded at
statutory federal and state tax rates expected to apply for each fiscal year.
     The total  backlog at  September  30, 2000 was  approximately  $24,800,000.
Backlog  represents  unrealized  revenue believed by the Company to be fulfilled
and  recognized  within the next  twelve-month  period.  During the nine  months
ending  September 30, 2000, the Company  received orders totaling  approximately
$49,600,000.

(b)  Three Months Ended  September 30, 2000 Versus Three Months Ended September
     --------------------------------------------------------------------------
     30, 1999
     --------
     With the  exception  of the  following  Statement of  Operations  captions,
changes in the third  quarter of calendar  year 2000  compared to the prior year
were consistent with those previously noted above for the nine-month period.
     Net sales of  $13,473,000  for the three  months ended  September  30, 2000
increased  25.8% compared to net sales of $10,709,000 for the three months ended
September 30, 1999.  The sales  increase of $2,764,000 is comprised of Ermanco's
contribution to product sales approximating $5,531,000,  offset by a decrease in
SI  Systems'  sales of  approximately  $2,767,000  for the  three  months  ended
September 30, 2000,  when compared to the three months ended September 30, 1999.
SI Systems' sales decreases were  experienced  across all the Company's  product
lines with the  majority  of the  decrease  relating  to sales of the  Company's
Lo-Tow product line. The decrease of approximately  $1,400,000 in Lo-Tow product
line sales is primarily  attributable  to performance on contracts in accordance
with customer  specifications  for job completion  requirements  during the nine
months ended September 30, 1999.  Although SI Systems sales have declined in the
three months ended

                                     - 16 -
<PAGE>


Item 2.   Management's Discussion and Analysis of Financial Condition and
------    ---------------------------------------------------------------
          Results of Operations
          ---------------------

Results Of Operations (Continued)
---------------------

(b)  Three Months Ended September 30, 2000 Versus Three Months Ended September
     -------------------------------------------------------------------------
     30, 1999 (Continued)
     --------
September  30, 2000 as compared to the nine months  ended  September  30,  1999,
gross  profit  on sales  for the  three  months  ended  September  30,  2000 has
increased compared to the three months ended September 30, 1999.
     Gross profit as a percentage  of sales was 31.1% for the three months ended
September  30, 2000  compared to 7.1% for the three months ended  September  30,
1999.  The  increase in the gross profit  percentage  for the three months ended
September 30, 2000 was attributable to effective  business  controls relative to
pricing practices and favorable  performance on several  contracts,  principally
for SI Systems' higher margin proprietary products.
     Selling,  general and administrative  expenses of $2,506,000 were higher by
$799,000 for the three months ended  September 30, 2000 than in the three months
ended  September 30, 1999. The increase of $799,000 is comprised of the addition
of  selling,   general  and  administrative   expenses  totaling  approximately
$1,080,000 related to the Ermanco operation, offset by a decrease in SI Systems'
selling,  general and administrative  expenses of approximately $281,000 for the
three months ended  September 30, 2000,  when compared to the three months ended
September  30,  1999.  The  decrease  in  SI  Systems'   selling,   general  and
administrative  expenses was primarily attributable to the prior year comparable
period containing a larger amount of costs associated with product promotion and
sales efforts aimed at expanding the customer base. These expenses were impacted
as a result of the  restructuring  initiative  whereby  employees were separated
from the Company.
     The Company incurred income tax expense of $538,000 during the three months
ended September 30, 2000 compared to the recognition of an income tax benefit of
$357,000  during the three months ended  September 30, 1999.  Income tax expense
for the  three  months  ended  September  30,  2000 was  generally  recorded  at
statutory  federal  and  state  tax  rates.  The  income  tax  benefit  that was
recognized  for the three  months  ended  September  30,  1999  represented  the
carry-back of current fiscal quarter losses against prior year income.

Cautionary Statement
--------------------
     Certain  statements  contained  herein are not based on historical fact and
are  "forward-looking  statements"  within the meaning of the Private Securities
Litigation  Reform  Act of 1995 or by the  Securities  and  Exchange  Commission
rules, regulations,  and releases. The Company intends that such forward-looking
statements be subject to the safe harbors created  thereby.  Among other things,
they regard the Company's acquisition activities, earnings, liquidity, financial
condition,  and  certain  operational  matters.  Words or phrases  denoting  the
anticipated  results  of  future  events,   such  as  "anticipate,"   "believe,"
"estimate,"  "expect,"  "may,"  "will," "will  likely," "are expected to," "will
continue," "should," "project," and similar expressions that denote uncertainty,
are intended to identify such forward-looking  statements.  The Company's actual
results,  performance,  or achievements could differ materially from the results
expressed in, or implied by, such "forward-looking  statements": (1) as a result
of risks and uncertainties  identified in connection with those  forward-looking
statements,  including  those factors  identified  herein,  and in the Company's
other  publicly  filed  reports;  (2) as a  result  of risks  and  uncertainties
associated  with the  Ermanco  acquisition,  including  the  failure  to realize
anticipated  benefits  of such  acquisition,  the failure to  integrate  Ermanco
successfully with the Company, and any unforeseen  complications  related to the
Ermanco  acquisition;  (3) as a result of risks  associated  with the  Company's
restructuring,  including the failure to achieve anticipated  operating savings,
and  the  possibility  that  the  restructuring  charges  will be  greater  than
anticipated;  (4) as a result of factors  over which the Company has no control,
including  the  strength  of  domestic  and  foreign  economies,  sales  growth,
competition,  certain costs increases,  and any potential  exposures relating to
Year 2000 matters; or (5) if the factors on which the Company's  conclusions are
based do not conform to the Company's expectations.


                                     - 17 -
<PAGE>


Item 2.   Management's Discussion and Analysis of Financial Condition and
------    ---------------------------------------------------------------
          Results of Operations (Continued)
          ---------------------


Quantitative and Qualitative Disclosures
----------------------------------------
     The  Company's  primary  market risk  exposure is from  changes in interest
rates.  The Company's policy is to manage interest rate exposure through the use
of a combination  of fixed and floating rate debt  instruments,  and in the nine
months ended September 30, 2000, an interest rate swap agreement. Generally, the
Company seeks to match the terms of its debt with its purpose.  The Company uses
a  variable  rate  line of  credit  facility  to  provide  working  capital  for
operations.  On September  30, 1999,  the Company  entered into an interest rate
swap  agreement  for  50% of its  new  term  loan  from  its  principal  bank to
effectively  convert half of the term loan from a variable  rate note to a fixed
rate note. A standard  interest  rate swap  agreement  involves the payment of a
fixed rate times a notional  amount by one party in exchange for a floating rate
times the same notional  amount from another party.  The counterpart to the swap
agreement is the Company's principal bank.
     The Company  does not believe that its  exposures to interest  rate risk or
foreign currency exchange risk, risks from commodity  prices,  equity prices and
other market  changes that affect market risk sensitive  instruments,  including
the interest rate swap agreement, are material to its results of operations.


                           PART II - OTHER INFORMATION
                           ---------------------------

Item 2.   Changes in Securities and Use of Proceeds
------    -----------------------------------------
     On July 1, 2000,  the Company  issued  9,991  shares of common stock to the
fourteen   stockholders  of  Ermanco  for  non-cash  interest  payments  on  the
subordinated notes.



















                                     - 18 -
<PAGE>


                           PART II - OTHER INFORMATION
                           ---------------------------


Item 4.   Submission of Matters to a Vote of Security Holders
------    ---------------------------------------------------
     The Company's  Annual Meeting of  Shareholders  was held on August 24, 2000
with the following items being submitted to a vote of shareholders:

     1.  The election of six directors to the Board of Directors.
     2.  The approval of the proposed amendment to the 1997 Equity  Compensation
         Plan to increase  the number of shares of the  Company's  common  stock
         reserved for grants under the Plan by 300,000.
     3.  The recommendation that the Board of Directors take all necessary steps
         to reincorporate the Company from Pennsylvania to Delaware.
     4.  The approval of the proposed amendment of Section 3.03 of the Bylaws
         of the Company concerning Special Meetings of the Shareholders.

     Details of the proposals  noted above were provided to  shareholders in the
form of a Notice of Annual Meeting and Proxy  Statement dated and mailed on July
14, 2000, with such  solicitation  being in accordance with Regulation 14 of the
Securities and Exchange Act of 1934.
     There was no solicitation in opposition to the management's nominees listed
in the Proxy Statement, and all the management's nominees were elected.
     Proposal  Number 2 for the  approval  of the  amendment  to the 1997 Equity
Compensation  Plan and Proposal  Number 4 for the  approval of the  amendment of
Section  3.03  of  the  Bylaws  of  the  Company  were  duly   approved  by  the
shareholders.  However,  Proposal Number 3 for the recommendation that the Board
of  Directors  take  all  necessary  steps to  reincorporate  the  Company  from
Pennsylvania to Delaware was not approved by the shareholders.
     The  voting  results  on the four  matters  noted  above  are set  forth as
follows:

     1.  Election of Directors:

         Name of Nominee          Votes For      Votes Withheld      Non-Voting
         ---------------          ---------      --------------      ----------
         L. Jack Bradt            2,487,584         1,527,914          169,380
         Elmer D. Gates           2,384,207         1,631,291          169,380
         Michael J. Gausling      2,354,364         1,661,134          169,380
         William R. Johnson       2,389,695         1,625,803          169,380
         Leon C. Kirschner        2,541,780         1,473,718          169,380
         Steven Shulman           2,541,630         1,473,868          169,380

     2.  Approval of the amendment to the 1997 Equity Compensation Plan:

              Votes For       Votes Against       Abstentions       Non-Voting
              ---------       -------------       -----------       ----------
              2,416,354         1,293,313            26,225           448,986

     3.  Recommendation that the Board of Directors take all necessary steps to
         reincorporate from Pennsylvania to Delaware:

              Votes For       Votes Against       Abstentions       Non-Voting
              ---------       -------------       -----------       ----------
              1,853,414          1,858,083           24,395           448,986

     4.  Approval of the amendment to Section 3.03 of the Bylaws of the Company
         concerning Special Meetings:

              Votes For       Votes Against       Abstentions       Non-Voting
              ---------       -------------       -----------       ----------
              2,219,889          1,482,574           33,429           448,986


Item 6.   Exhibits and Reports on Form 8-K
------    --------------------------------

          (a)  Exhibit 27 - Financial Data Schedule.



                                     - 19 -
<PAGE>


Paragon Technologies, Inc. and Subsidiary





                                    SIGNATURE

Pursuant  to the  requirements  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.

                                        PARAGON TECHNOLOGIES, INC.
                                        (formerly, "SI Handling, Systems, Inc.")


                                        /S/ William R. Johnson
                                        ----------------------------------------
                                        William R. Johnson
                                        President & CEO


Dated:    November 14, 2000
          -----------------





















                                     - 20 -
<PAGE>


                                                                      Schedule A
                                                                      ----------











                                 SI/BAKER, INC.

                              Financial Statements
                               September 30, 2000





















                                     - 21 -
<PAGE>


SI/BAKER, INC.
Balance Sheets
September 30, 2000 (Unaudited) and December 31, 1999
  (In Thousands, Except Share Data)

<TABLE>
<CAPTION>
                                                               September            December
                                                               30, 2000             31, 1999
                                                             ------------         -----------
<S>                                                            <C>                   <C>
Assets
------

Current assets:
   Cash and cash equivalents, principally
     time deposits                                             $  2,745               2,895
                                                                 ------              ------

Receivables:
   Trade                                                          1,846               1,358
   Other receivables                                                107                 129
                                                                 ------              ------
     Total receivables                                            1,953               1,487
                                                                 ------              ------

   Costs and estimated earnings in
     excess of billings                                           1,778               2,159
   Deferred income tax benefits                                     391                 391
   Prepaid expenses and other current
     assets                                                         104                  53
                                                                 ------              ------

       Total current assets                                       6,971               6,985
                                                                 ------              ------

   Machinery and equipment, at cost                                 219                 194
   Less:  accumulated depreciation                                  144                 121
                                                                 ------              ------
     Net machinery and equipment                                     75                  73
                                                                 ------              ------

   Equipment leased to customer                                     487                 487
   Less:  accumulated depreciation                                  487                 467
                                                                 ------              ------
     Net equipment leased to customer                                 -                  20
                                                                 ------              ------

   Deferred income tax benefits                                      22                  22
                                                                 ------              ------

       Total assets                                            $  7,068               7,100
                                                                 ======              ======
</TABLE>

                                     - 22 -
<PAGE>


SI/BAKER, INC.
Balance Sheets
September 30, 2000 (Unaudited) and December 31, 1999
  (In Thousands, Except Share Data)

<TABLE>
<CAPTION>
                                                               September            December
                                                               30, 2000             31, 1999
                                                             ------------         -----------
<S>                                                            <C>                  <C>

Liabilities and Stockholders' Equity
------------------------------------

Current liabilities:

   Accounts payable:
     Trade                                                     $    487                  739
     Affiliated companies                                            33                   64
                                                                 ------               ------
       Total accounts payable                                       520                  803
                                                                 ------               ------

   Customers' deposits and billings in
     excess of costs and estimated
     earnings                                                     1,677                2,114
   Accrued salaries, wages, and
     commissions                                                    174                  247
   Income taxes payable                                              46                  143
   Accrued royalties payable                                        525                  361
   Accrued product warranties                                       993                  842
   Accrued other liabilities                                         73                   77
                                                                 ------               ------
       Total current liabilities                                  4,008                4,587
                                                                 ------               ------

Stockholders' equity:
   Common stock, $1 par value; authorized
     1,000 shares; issued 200 shares                                  -                    -
   Additional paid-in capital                                       200                  200
   Retained earnings                                              2,860                2,313
                                                                 ------               ------
       Total stockholders' equity                                 3,060                2,513
                                                                 ------               ------

       Total liabilities and stockholders'
         equity                                                $  7,068                7,100
                                                                 ======               ======
</TABLE>

                                     - 23 -
<PAGE>


SI/BAKER, INC.
Statements of Operations (Unaudited)
Nine Months Ended September 30, 2000 and September 30, 1999
  (In Thousands)

<TABLE>
<CAPTION>
                                        Three Months Ended              Nine Months Ended
                                     -------------------------     ----------------------------
                                     September      September        September       September
                                     30, 2000       30, 1999         30, 2000        30, 1999
                                   ------------   ------------     ------------    ------------
<S>                                  <C>               <C>             <C>              <C>
Net sales                            $  2,714          2,995           10,732           8,347
Cost of sales                           2,149          2,365            8,817           6,660
                                        -----          -----           ------           -----

Gross profit on sales                     565            630            1,915           1,687
                                        -----          -----           ------           -----

Selling, general and
   administrative
   expenses                               206            265              748             821
Product development
   costs                                   10             55               85             212
Royalty expense to
   parent companies                       109            120              429             334
Interest income                           (24)           (18)             (95)            (35)
Interest expense                            -              -                -              12
Other income, net                         (47)           (27)            (143)            (82)
                                        -----          -----           ------           -----
                                          254            395            1,024           1,262
                                        -----          -----           ------           -----

Earnings before
   income taxes                           311            235              891             425
Income tax expense                        114             94              344             185
                                        -----          -----           ------           -----

Net earnings                         $    197            141              547             240
                                        =====          =====           ======           =====
</TABLE>







                                     - 24 -
<PAGE>


SI/BAKER, INC.
Statements of Cash Flows (Unaudited)
Nine Months Ended September 30, 2000 and September 30, 1999
  (In Thousands)

<TABLE>
<CAPTION>
                                                                          Nine Months Ended
                                                                     --------------------------
                                                                       September      September
                                                                        30, 2000       30, 1999
                                                                     -------------   -----------
<S>                                                                    <C>            <C>
Cash flows from operating activities:
   Net earnings                                                        $   547           240
   Adjustments to reconcile net earnings to net
     cash provided (used) by operating activities:
       Depreciation of machinery and
         equipment and leased equipment                                     43            157
       Changes in operating assets and
         liabilities:
           Receivables                                                    (466)        (1,106)
           Costs and estimated earnings
              in excess of billings                                        381           (581)
           Deferred income tax benefits                                      -             35
           Prepaid expenses and other
              current assets                                               (51)           224
           Accounts payable                                               (283)           400
           Customers' deposits and
              billings in excess of costs
              and estimated earnings                                      (437)         1,987
           Accrued salaries, wages, and
              commissions                                                  (73)            44
           Income taxes payable                                            (97)            (3)
           Accrued royalties payable                                       164            182
           Accrued product warranties                                      151            118
           Accrued other liabilities                                        (4)            (2)
           Deferred compensation                                             -           (111)
                                                                         -----          -----
Net cash provided (used)
   by operating activities                                                (125)         1,584
                                                                         -----          -----

Cash flows from investing activities:
   Additions to machinery and equipment                                    (25)           (17)
                                                                         -----          -----
     Net cash used by investing activities                                 (25)           (17)
                                                                         -----          -----

Increase (decrease) in cash and cash equivalents                          (150)         1,567
Cash and cash equivalents,
   beginning of period                                                   2,895            250
                                                                         -----          -----
Cash and cash equivalents, end of period                               $ 2,745          1,817
                                                                         =====          =====

Supplemental disclosure of cash flow information:
     Cash paid (received) during the period for:
       Income taxes                                                    $    10           (135)
                                                                         =====          =====
       Interest                                                        $     -             21
                                                                         =====          =====
</TABLE>

                                     - 25 -
<PAGE>



                           PARAGON TECHNOLOGIES, INC.

                                    FORM 10-Q

                                  EXHIBIT INDEX



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

27     Financial Data Schedule.





























                                     - 26 -