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 August 29, 1999


                           Commission File No. 0-3362



                            SI HANDLING SYSTEMS, 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
                                                                ------------






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
August 29, 1999:  3,703,594.
                  ---------



<PAGE>




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


Item 1.   Financial Statements
------    --------------------
SI Handling Systems, Inc.
Balance Sheets (Unaudited)
     (In Thousands, Except Share Data)

<TABLE>
<CAPTION>
                                                       August          February
                                                      29, 1999         28, 1999
                                                     ---------        ---------

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

Current assets:
   Cash and cash equivalents, principally
     time deposits                                    $    105           1,829
                                                        ------          ------

   Receivables:
     Trade                                               6,389           7,603
     Notes and other receivables                            76              51
                                                        ------          ------
       Total receivables                                 6,465           7,654
                                                        ------          ------

   Costs and estimated earnings in excess
     of billings                                         5,753           7,709

   Inventories:
     Raw materials                                         790           1,002
     Finished goods and work-in-process                  1,531           1,613
                                                        ------          ------
       Total inventories                                 2,321           2,615
                                                        ------          ------

   Deferred income tax benefits                            905             600
   Prepaid expenses and other current assets               265             199
                                                        ------          ------
       Total current assets                             15,814          20,606
                                                        ------          ------

Property, plant and equipment, at cost:
   Land                                                     27              27
   Buildings and improvements                            3,485           3,485
   Machinery and equipment                               4,650           4,544
                                                        ------          ------
                                                         8,162           8,056
   Less:  accumulated depreciation                       6,612           6,426
                                                        ------          ------
       Net property, plant and equipment                 1,550           1,630
                                                        ------          ------

Deferred income tax benefits                               276             175
Investments in joint ventures                            1,237           1,041
Other assets, at cost less accumulated
   amortization of $140 in 2000 and $90
   in 1999                                                 542             128
                                                        ------          ------
       Total assets                                   $ 19,419          23,580
                                                        ======          ======
</TABLE>




                 See accompanying notes to financial statements.


                                      - 2 -

<PAGE>




Item 1.   Financial Statements (Continued)
------    --------------------
SI Handling Systems, Inc.
Balance Sheets (Unaudited)
     (In Thousands, Except Share Data)

<TABLE>
<CAPTION>
                                                       August          February
                                                      29, 1999         28, 1999
                                                     ---------        ---------

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

Current liabilities:
   Current installments of long-term debt             $     20               9
   Accounts payable                                      2,230           4,079
   Customers' deposits and billings in excess
     of costs and estimated earnings                     2,887           4,173
   Accrued salaries, wages, and commissions                753             761
   Income taxes payable                                     25             410
   Accrued royalties payable                               232             357
   Accrued product warranties                              672             486
   Accrued pension and retirement savings
     plan liabilities                                      577             556
   Accrued other liabilities                               296             374
                                                        ------          ------

     Total current liabilities                           7,692          11,205
                                                        ------          ------

Long-term liabilities:
   Long-term debt, excluding current installments:
     Mortgage payable                                        -              16
                                                        ------          ------
     Total long-term debt                                    -              16
   Deferred compensation                                   449             212
                                                        ------          ------
       Total long-term liabilities                         449             228
                                                        ------          ------

Stockholders' equity:
   Common stock, $1 par value; authorized
     20,000,000 shares; issued 3,703,594
     shares in 2000 and 3,705,048 shares
     in 1999                                             3,704           3,705
   Additional paid-in capital                            2,798           2,767
   Retained earnings                                     4,776           5,675
                                                        ------          ------

       Total stockholders' equity                       11,278          12,147
                                                        ------          ------

       Total liabilities and stockholders' equity     $ 19,419          23,580
                                                        ======          ======
</TABLE>








                 See accompanying notes to financial statements.

                                      - 3 -

<PAGE>




Item 1.   Financial Statements (Continued)
------    --------------------
SI Handling Systems, Inc.
Statements of Operations (Unaudited)
     (In Thousands, Except Share And Per Share Data)

<TABLE>
<CAPTION>

                                  Three Months Ended        Six Months Ended
                               ------------------------  -----------------------
                                  August       August      August       August
                                 29, 1999     30,1998     29, 1999    30, 1998
                               ------------ -----------  ----------- -----------
                               <S>          <C>          <C>         <C>

                               $(1,111,111) (1,111,111)  (1,111,111) (1,111,111)
Net sales                      $    11,617       9,942       21,569      18,742
Cost of sales                       10,641       7,662       18,756      14,149
                                 ---------   ---------    ---------   ---------
Gross profit on sales                  976       2,280        2,813       4,593
                                 ---------   ---------    ---------   ---------

Selling, general and
   administrative expenses           1,842       1,594        3,456       3,262
Product development costs              107         127          260         246
Interest expense                         8           2           10           4
Interest income                        (17)        (35)         (46)        (80)
Equity in income
   of joint venture                    (71)         (1)         (99)        (11)
Amortization of goodwill                30           -           38           -
Other income, net                      (67)        (38)        (118)        (71)
                                 ---------   ---------    ---------   ---------
                                     1,832       1,649        3,501       3,350
                                 ---------   ---------    ---------   ---------
Earnings (loss) before
   income taxes                       (856)        631         (688)      1,243
Income tax expense
   (benefit)                          (325)        243         (261)        478
                                 ---------   ---------    ---------   ---------
Net earnings (loss)                   (531)        388         (427)        765
                                 =========   =========    =========   =========

Basic earnings (loss)
   per share                   $      (.14)        .10         (.12)        .21
                                 =========   =========    =========   =========
Diluted earnings (loss)
   per share                   $      (.15)        .10         (.12)        .20
                                 =========   =========    =========   =========
Cash dividends
   per share                   $         -           -          .10         .10
                                 =========   =========    =========   =========

Average shares
   outstanding                   3,703,270   3,726,677    3,704,953   3,721,061
Dilutive effect of
   stock options                         -      27,355            -      31,604
Dilutive effect of
   phantom stock units              16,015      10,723       15,075      10,111
                                 ---------   ---------    ---------   ---------
Average shares
   outstanding
   assuming dilution             3,719,285   3,764,755    3,720,028   3,762,776
                                 =========   =========    =========   =========
</TABLE>






                 See accompanying notes to financial statements.

                                      - 4 -

<PAGE>




Item 1.   Financial Statements (Continued)
------    --------------------
SI Handling Systems, Inc.
Statements of Cash Flows (Unaudited)
     (In Thousands, Except Share Data)

<TABLE>
<CAPTION>
                                                           Six Months Ended
                                                     --------------------------
                                                       August           August
                                                      29, 1999         30, 1998
                                                     ---------        ---------

<S>                                                   <C>              <C>
Cash flows from operating activities:
   Net earnings (loss)                               $   (427)             765
   Adjustments to reconcile net earnings (loss)
     to net cash provided (used)
     by operating activities:
       Depreciation of plant and equipment                186              201
       Amortization of intangibles                         50                5
       Gain on disposition of equipment                    (3)               -
       Equity in income of joint venture                  (99)             (11)
       Change in operating assets and liabilities,
         net of effects of the acquisition of
         Modular Automation Corp.:
           Receivables                                  1,235            3,672
           Costs and estimated earnings in
              excess of billings                        2,305            1,263
           Inventories                                    463             (123)
           Deferred income tax benefits                  (292)               -
           Prepaid expenses and other current assets      (66)             (41)
           Other noncurrent assets                         39                -
           Accounts payable                            (1,849)          (1,062)
           Customers' deposits and billings in excess
              of costs and estimated earnings          (1,286)              15
           Accrued salaries, wages, and
              commissions                                  (8)            (824)
           Income taxes payable                          (385)             (74)
           Accrued royalties payable                     (125)            (217)
           Accrued pension and retirement
              savings plan liabilities                     21             (139)
           Accrued product warranties                     186              346
           Accrued other liabilities                      (78)             (79)
           Deferred compensation                          (17)              19
                                                       ------          -------
   Net cash provided (used) by operating activities      (150)           3,716
                                                       ------          -------

Cash flows from investing activities:
   Investment in joint venture                            (97)               -
   Proceeds from the disposition of equipment               3                -
   Acquisition of Modular Automation Corp.,
     net of cash acquired                                (928)               -
   Additions to property, plant and equipment            (105)            (238)
                                                       ------          -------
   Net cash used by investing activities               (1,127)            (238)
                                                       ------          -------
</TABLE>

                 See accompanying notes to financial statements.

                                      - 5 -

<PAGE>




Item 1.   Financial Statements (Continued)
------    --------------------
SI Handling Systems, Inc.
Statements of Cash Flows (Unaudited) (Continued)
     (In Thousands, Except Share Data)

<TABLE>
<CAPTION>
                                                           Six Months Ended
                                                     --------------------------
                                                       August           August
                                                      29, 1999         30, 1998
                                                     ---------        ---------

<S>                                                   <C>              <C>
Cash flows from financing activities:
   Sale of common shares in connection
     with employee incentive stock
     option plan                                           34               45
   Repayment of long-term debt                             (5)              (4)
   Dividends paid on common stock                        (371)            (372)
   Repurchase and retirement of common stock             (105)               -
   Repayment of revolving credit
     loan payable to bank                                   -           (1,000)
                                                       ------           ------
     Net cash used by
       financing activities                              (447)          (1,331)
                                                       ------           ------

   Increase (decrease) in cash and
     cash equivalents                                  (1,724)           2,147
   Cash and cash equivalents, beginning
     of period                                          1,829              752
                                                       ------           ------
   Cash and cash equivalents, end of period          $    105            2,899
                                                       ======           ======

   Supplemental disclosures of cash flow information:
     Cash paid during the period for:
       Interest                                      $      1                4
                                                       ======           ======
       Income taxes                                  $    417              553
                                                       ======           ======

   Supplemental disclosures of noncash
   financing activities:
     Issuance of 2,850 common shares in
       exchange for 1,493 common shares
       delivered to the Company by an officer
       in connection with the employee
       incentive stock option.                       $     15                -
                                                       ======           ======

     Issuance of 14,886 common shares in
       exchange for 5,978 common shares
       delivered to the Company by officers
       in connection with the employee
       incentive stock option plan                   $      -               84
                                                       ======           ======
</TABLE>






                 See accompanying notes to financial statements.

                                      - 6 -

<PAGE>




Item 1.   Financial Statements (Continued)
------    --------------------
SI Handling Systems, Inc.
Notes To Financial Statements
Six Months Ended August 29, 1999 and August 30, 1998

(1)  The  information  contained in this 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 which are necessary to a fair statement of results for the interim
     periods  presented.   Results  for  interim  periods  are  not  necessarily
     indicative of results  expected for the fiscal year. Refer to the Company's
     10-K for the year  ended  February  28,  1999 for more  complete  financial
     information.

(2)  SI Handling  Systems,  Inc. ("SI" or the "Company") 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  Prescription
     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 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  which are necessary to a fair  statement of
     results for the interim periods presented.

(3)  On April 13,  1999,  the Company  acquired all of the  outstanding  capital
     stock of Modular Automation Corp. of Greene,  New York for $1,957,000.  The
     purchase  price of the  acquisition  was  allocated to the assets  acquired
     based on fair value with the remainder  representing  goodwill. The effects
     of the acquisition are immaterial.

(4)  Subsequent to August 29, 1999, the Company acquired Ermanco Incorporated as
     described  in  the   Liquidity  and  Capital   Resources   Section  of  the
     Management's  Discussion and Analysis of Financial Condition and Results of
     Operations.



                                     - 7 -

<PAGE>




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  decreased to $105,000  during the
first six months of fiscal 2000 from  $1,829,000 at the end of fiscal 1999.  The
decrease  resulted  from cash used by operating  activities  totaling  $150,000,
repayment  of  long-term  debt of  $5,000,  purchases  of capital  equipment  of
$105,000,  the acquisition of Modular Automation Corp., net of cash acquired for
$928,000,  the investment of $97,000 in the SI-Egemin joint venture, the payment
of $371,000 in cash  dividends to  stockholders,  and the payment of $105,000 in
connection  with the purchase and  retirement  of the  Company's  common  stock.
Partially  offsetting the decrease in cash and cash  equivalents from these uses
was  proceeds of $34,000 from the sale of common  stock in  connection  with the
employee  incentive  stock option plan.  Funds provided by operating  activities
during the first six months of fiscal 1999 were $3,716,000.
     On April 13,  1999,  the Company  acquired all of the  outstanding  capital
stock of Modular  Automation Corp.  ("MAC") of Greene,  New York for $1,957,000.
The purchase price of the acquisition was allocated to the assets acquired based
on fair value with the remainder representing  goodwill.  Since its formation in
1981, MAC was a respected  supplier of Automated Guided Vehicle ("AGV") Systems.
The acquisition of the AGV technology  complements and expands the Company's AGV
product offerings.  The acquired AGV products and personnel have been integrated
into the Company's existing Easton, Pennsylvania facility.
     In a subsequent  event,  on September 30, 1999,  the Company  completed the
acquisition  of  Ermanco  Incorporated  ("Ermanco")  of Spring  Lake,  Michigan.
Ermanco is a designer and installer of complete  conveying systems for a variety
of  manufacturing  and  warehousing  applications.   Ermanco  also  manufactures
conveyors  and  conveyor  components.  Under  the  terms of the  Stock  Purchase
Agreement,  Ermanco stockholders sold and transferred to the Company, all of the
outstanding  capital stock of Ermanco. In consideration of the sale and transfer
of Ermanco  common stock,  the Company paid the Ermanco  stockholders a purchase
price equal to  $22,615,000.  The  purchase  price of  $22,615,000  consisted of
$15,115,000  in cash,  of which  $1,365,000  is held in  escrow,  $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  acquisition  will be  accounted  for as a  purchase.  The
purchase price of the acquisition will be allocated to the assets acquired based
on fair value with the remainder  representing  goodwill.  Ermanco's  assets are
comprised mainly of cash,  accounts  receivable,  inventories,  and fixed assets
such as  computer  equipment,  office  furniture,  leasehold  improvements,  and
machinery  and  equipment.  Ermanco will continue to use its fixed assets in its
ongoing  operations.  The acquisition of the Ermanco technology  complements and
expands the Company's current product  offerings.  The acquired Ermanco products
and personnel  will continue to be located in Spring Lake,  Michigan and operate
as a  wholly  owned  subsidiary  of the  Company.  On the  closing  date  of the
acquisition,  the Company entered into employment agreements with four employees
of Ermanco, Leon C. Kirschner,  Thomas C. Hubbell, Lee F. Schomberg,  and Gordon
A. Hellberg.
     In order to  complete  the  acquisition  of Ermanco,  the Company  obtained
financing from its principal  bank,  First Union  National Bank (the  "principal
bank" or "First  Union").  The Company  entered  into a new  three-year  line of
credit facility which may

                                      - 8 -

<PAGE>




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

Liquidity And Capital Resources (Continued)
-------------------------------
not exceed the  lesser of  $6,000,000  or an amount  based on a  borrowing  base
formula tied to principally to eighty percent of eligible  accounts  receivable,
forty  percent of eligible  inventory,  and eighty  percent of the current  fair
market  value of the  property  and plant,  one-hundred  percent of the  orderly
liquidation value of equipment, plus an amount equal to $2,500,000, which amount
shall 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  and  closing  costs
associated with the Ermanco acquisition. The interest rate on the line of credit
facility  will be the rate  selected by the Company  from either  First  Union's
Prime Rate or the  one-month  LIBOR Market  Index Rate plus two  percent.  As of
October 6,  1999,  the  Company  did not have any  borrowings  under the line of
credit  facility.  The line of credit  facility  replaced the  Company's  former
$5,000,000 committed revolving credit facility with its principal bank.
     On September 30, 1999, the Company also received $14,000,000 in the form of
a seven-year  term loan from its principal  bank to finance the  acquisition  of
Ermanco. During the first two years of the term loan, the Company will repay its
principal bank equal quarterly payments of $312,500 plus accrued interest. After
the  second   anniversary  of  the  September  30,  1999  closing  date  of  the
acquisition,  the Company will repay its principal bank equal quarterly payments
of $575,000  plus accrued  interest.  The interest  rate on the term loan is the
three-month  LIBOR Market  Index Rate plus two and  three-quarters  percent.  In
order to  partially  hedge  the  term  loan's  floating  interest  expense,  the
Company's  principal  bank  required the Company to enter into an interest  rate
swap for a minimum  of fifty  percent  of the  amount and full term of the loan.
Contemporaneously  with the closing of the term loan, the Company entered into a
seven-year interest rate swap for $7,000,000 of the term loan at a fixed rate of
9.38%.
     In order to obtain the line of credit and term loan,  the  Company  granted
its  principal  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  owned by the Company and
Ermanco,  and an assignment of the Company's  right,  title, and interest in the
SI/BAKER  joint  venture.  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 promissory  notes issued to the fourteen  stockholders of Ermanco total
$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.  Interest on the promissory  notes
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 as long
as the Company has no debt  outstanding  under its line of credit  facility  and
term loan with its principal bank.
     Prior to the acquisition of Ermanco, the Company had a $5,000,000 committed
revolving  credit  facility  which was  secured by a lien  position  on accounts
receivable,  land,  and buildings and contained  various  restrictive  covenants
relating to additional  indebtedness,  asset  acquisitions or dispositions,  and
maintenance of certain financial

                                      - 9 -

<PAGE>




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

Liquidity And Capital Resources (Continued)
-------------------------------
ratios.  The Company was in compliance  with all covenants  during the first six
months of fiscal 2000 and prior to the  acquisition of Ermanco.  The Company did
not have any borrowings under the committed revolving credit facility during the
first six months of fiscal 2000. As noted above, this facility was replaced by a
new $6,000,000  three-year line of credit facility with the Company's  principal
bank.
     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,  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 fiscal
1998, the Bank increased the borrowing  availability  to $3,000,000 and extended
the  expiration  date of the Facility.  On March 18, 1999,  SI/BAKER  repaid its
outstanding debt under the Facility of $500,000. As of August 31, 1999, SI/BAKER
did not have any borrowings  under the Facility.  The Facility has an expiration
date of November 30, 1999.
     On  June  7,  1999,  the  Board  of  Directors  of the  Company  authorized
management to purchase up to 10,000 shares of the Company's common stock through
open market  transactions  or  negotiated  transactions  at prices not to exceed
prevailing market prices.  During the second quarter of fiscal 2000, the Company
spent  $105,000 on purchases of 10,000  shares of its common stock  through open
market transactions as part of the stock purchase program.
     On October 14,  1998,  the Board of  Directors  of the  Company  authorized
management to purchase up to $400,000 of the Company's common stock through open
market  transactions  or  negotiated   transactions  at  prices  not  to  exceed
prevailing  market  prices.  During fiscal 1999,  the Company spent  $399,000 on
purchases of its common stock  through open market  transactions  as part of the
stock purchase program.
     The Company believes that its financial resources consisting of its current
assets,  anticipated  cash flow, and the available line of credit  facility will
adequately finance its operating requirements for the foreseeable future.
     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
to complete the acquisition of Ermanco, 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.  At this time,
the Company does not have any material capital commitments.


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

(a)  Six Months Ended August 29, 1999 Versus Six Months Ended August 30, 1998
     ---------------------------------------------------------------------------
     The Company's net loss for the first six months of fiscal 2000 was $427,000
compared to net earnings of $765,000 for the first six months of fiscal 1999.
     Backlog at the end of the first six months of fiscal 2000 was  $21,118,000.
During the first six months of fiscal 2000, the Company received orders totaling
approximately  $22,800,000.  Two  orders,  totaling  approximately  $10,200,000,
engage the Company to modernize  and expand two  distribution  facilities  for a
major

                                     - 10 -

<PAGE>




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

Results of Operations
---------------------
(a)  Six Months Ended August 29, 1999 Versus Six Months Ended August 30, 1998
     ------------------------------------------------------------------------
     (Continued)
government agency. These contracts, won under a competitive bidding process, are
scheduled to be completed by September 2000.
     Net sales of $21,569,000  for the first six months of fiscal 2000 increased
15.1%  compared to net sales of  $18,742,000  for the first six months of fiscal
1999.  The  largest  increases  in sales  occurred  in the Order  Selection  and
Switch-Cart  product  lines.  During the first six months of fiscal 2000,  Order
Selection sales of approximately  $7,875,000 rose approximately  $2,200,000 when
compared to the first six months of fiscal 1999 due  primarily to progress  made
on a systems integration contract aimed at expanding the distribution process at
a major  health and beauty aids  company.  During the first six months of fiscal
2000,   Switch-Cart  sales  of  approximately   $8,825,000  rose   approximately
$3,825,000 when compared to the first six months of fiscal 1999 due primarily to
progress made on contracts with a major government agency.  Partially offsetting
the  increase in Order  Selection  and  Switch-Cart  sales  during the first six
months of fiscal 2000 was a decrease in sales of approximately $3,200,000 across
the Company's other products lines,  with the majority of the decrease  relating
to sales of the  Company's  Cartrac,  Sortation,  and Automated  Guided  Vehicle
product lines.
     Gross profit as a percentage of sales was 13.0% for the first six months of
fiscal  2000  compared  to 24.5% for the first six  months of fiscal  1999.  The
decrease in the gross profit  percentage for the first six months of fiscal 2000
was primarily  attributable  to  competitive  pressures as well as to first-time
inefficiencies  associated with the development of enhanced  products related to
contracts  in process.  The  inefficiencies  associated  with one major  systems
integration contract accounted for a second quarter cost overrun resulting in an
unfavorable  impact on gross profit of approximately  $1,100,000;  however,  the
Company has garnered an  additional  proprietary  capability  to sell to various
marketplaces.  Also  contributing  to the higher gross profit  percentage in the
first  six  months of  fiscal  1999 was the  favorable  performance  on  several
contracts,  principally for the Company's  higher margin  proprietary  products,
initiated  in the prior fiscal year that were  completed  or nearing  completion
during the first half of fiscal 1999.
     Selling,  general and administrative  expenses of $3,456,000 were higher by
$194,000  in the first six months of fiscal 2000 than in the  comparable  fiscal
1999 period. The increase in selling,  general and  administrative  expenses was
primarily attributable to $300,000 in costs associated with the appointment of a
new President and CEO, the addition of corporate  purchasing  resources aimed at
establishing   global   procurement    capabilities   which   develop   supplier
relationships  that  provide a  competitive  advantage,  and  expenses  based on
revenue performance.  Partially offsetting the increase in selling, general, and
administrative expenses was a larger amount of costs during the first six months
of fiscal 1999  associated  with product  promotion  and sales  efforts aimed at
expanding the Company's customer base of business.
     Product  development  costs for the first  six  months of fiscal  2000 were
relatively  the same as such  costs  for the first  six  months of fiscal  1999.
Development   programs  in  the  first  six  months  of  fiscal  2000   included
enhancements to the  Switch-Cart and Order Selection  product lines with efforts
directed   towards  unit  picking   techniques   and  automated   replenishment.
Development   programs  in  the  first  six  months  of  fiscal  1999   included
enhancements to the Company's product controls and features

                                     - 11 -

<PAGE>




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

Results of Operations
---------------------

(a)  Six Months Ended August 29, 1999 Versus Six Months Ended August 30, 1998
     ------------------------------------------------------------------------
     (Continued)
and improvements  primarily to the Order Selection product line, with particular
emphasis  aimed at the controls  platform for  Dispen-SI-matic  Systems and unit
picking techniques and automated  replenishment.  Interest income of $46,000 was
lower by $34,000 in the first six months of fiscal  2000 than in the  comparable
fiscal 1999 period.  The decrease in interest income was primarily  attributable
to the lower level of funds  available  for  short-term  investments  during the
first six months of fiscal 2000.
     Equity in income of joint venture  represents  the Company's  proportionate
share of its  investment  in  SI/BAKER  which is being  accounted  for under the
equity  method.  The  favorable  variance of $88,000 for the first six months of
fiscal  2000 in the  equity in  income  of joint  venture  was  attributable  to
SI/BAKER's  increase in sales to  approximately  $5,985,000,  as compared to the
comparable  fiscal 1999  period of  approximately  $3,861,000  and growth in the
gross profit  percentage to 21%, as compared to the comparable fiscal 1999 gross
profit  percentage  of 18%.  The sales  increase  in fiscal  2000 was  primarily
attributable to a larger backlog of orders entering fiscal 2000 versus a smaller
backlog of orders at the beginning of fiscal 1999. The favorable variance in the
gross profit percentage was primarily  attributable to the fiscal 1999 first six
months gross profit  percentage  being  unfavorably  impacted by difficulties in
executing and concluding  several contracts as additional costs became necessary
to meet contractual throughput requirements.  Partially offsetting the favorable
variance were SI/BAKER's increases of (1) $85,000 in revenue-based royalty costs
due to the parent  companies,  (2) $85,000 in product  development  expenses for
software and controls  capabilities for various new products addressing changing
market requirements and enhancements to existing technology, and (3) $120,000 in
selling,  general and administrative  expenses. The increase in selling, general
and administrative expenses was primarily attributable to an increase of $57,000
of expenses based on revenue and profit  performance  and an increase of $35,000
in costs  associated  with sales and  administrative  efforts aimed at expanding
SI/BAKER's customer base of business.
     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.
     Amortization of goodwill represented amortization,  using the straight-line
method over a period of five years,  associated  with the recent  acquisition of
Modular Automation Corp.
     The Company  recognized an income tax benefit of $261,000  during the first
six months of fiscal 2000  compared to the  incurrence  of income tax expense of
$478,000 in the comparable fiscal 1999 period. The income tax benefit recognized
for fiscal 2000  represented  the carryback of fiscal 2000 losses  against prior
year  income.  Income tax  expense  for fiscal  1999 was  generally  recorded at
statutory federal and state tax rates expected to apply for that fiscal year.



                                     - 12 -

<PAGE>




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

Results of Operations (Continued)
---------------------

(b)  Three  Months  Ended  August 29, 1999 Versus  Three Months Ended August 30,
     ---------------------------------------------------------------------------
     1998
     ----
     With the exception of the level of Order Selection  sales being  relatively
the same and a larger  decline  in the gross  profit  percentage  in the  second
quarter of fiscal 2000 compared to the second quarter of fiscal 1999, changes in
the second  quarter of the current  fiscal year  compared to the prior year were
consistent with those previously noted above for the six month period.
     Although Order Selection sales rose during the first quarter of Fiscal 2000
due to progress  made on a major systems  integration  contract when compared to
the prior year  comparable  period,  the level of Order  Selection sales for the
second  quarter  of fiscal  2000 was  relatively  the same as such sales for the
second quarter of fiscal 1999.
     Gross  profit as a percentage  of sales was 8.4% for the second  quarter of
fiscal 2000 compared to 22.9% for the second  quarter of fiscal 1999. The larger
decrease in the gross profit  percentage  for the second  quarter of fiscal 2000
was primarily  attributable  to  competitive  pressures as well as to first-time
inefficiencies  associated with the development of enhanced  products related to
contracts  in process.  The  inefficiencies  associated  with one major  systems
integration contract accounted for a second quarter cost overrun resulting in an
unfavorable  impact on gross profit of approximately  $1,100,000;  however,  the
Company has garnered an  additional  proprietary  capability  to sell to various
marketplaces.  Also  contributing  to the higher gross profit  percentage in the
second  quarter  of  fiscal  1999  was  the  favorable  performance  on  several
contracts,  principally for the Company's  higher margin  proprietary  products,
initiated  in the prior fiscal year that were  completed  or nearing  completion
during the second quarter of fiscal 1999.


Year 2000
---------
     The  Year  2000  issue   relates  to  the  ability  of  computer   systems,
microprocessors,  and other electronic  devices to deal appropriately with dates
on or after  January  1,  2000 and other  dates  used for  special  programmatic
functions (i.e.  9999).  The effect of the Year 2000 issue may include  computer
failures and business interruption.
     The  Company has  assembled a team of internal  staff to oversee the matter
and is underway in completing its Year 2000 assessment.  Internally, the Company
has upgraded its business system to address the Year 2000 issue. Externally, the
Company has and will continue to survey its suppliers,  financial  institutions,
and other  organizations to ensure that those parties have appropriate  plans to
remediate Year 2000 issues where their systems or business activities may impact
the  Company's  operations.  However,  many  suppliers  have either  declined to
provide  the  requested  Year  2000  assurances  or have  limited  the  scope of
assurances to which they are willing to commit; therefore, based on the response
of its survey to date, the Company cannot  presently  estimate the impact of the
failure of third parties to be Year 2000 compliant.  Also, customers may utilize
the services,  on a fee basis, of the Company's customer support group to assess
and upgrade their materials handling systems purchased from the Company for Year
2000  compliance.  If a significant  number of suppliers  and customers  were to
experience  business  disruptions  as a  result  of  their  lack  of  Year  2000
readiness,  their problems could have a material adverse effect on the financial
position, liquidity, and results of operations of the

                                     - 13 -

<PAGE>




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

Year 2000 (Continued)
---------
Company. In order to address this situation,  the Company continues to formulate
contingency  plans  intended to deal with the impact on the Company of Year 2000
problems that may be experienced by suppliers and customers.  In any event, even
where the Company has  contingency  plans,  there can be no assurance  that such
plans will address all the problems that may arise, or that such plans,  even if
implemented, will be successful.  Notwithstanding the foregoing, the Company has
no reason to believe  that its  exposure to the risks of supplier  and  customer
Year 2000  readiness  is any greater than the exposure to such risk that affects
its  competitors  generally.  Costs  incurred  to date  and  estimated  costs to
complete  the  Company's  Year 2000  compliance  efforts are not  expected to be
material.
     The outline of the general  phases of the Company's Year 2000 project is as
follows:  (1) Year 2000  methodology and compliance  training for key personnel;
(2)  inventorying  Year 2000 items,  internally  and  externally;  (3) assigning
priorities to identified Year 2000 items; (4) assessing the Year 2000 compliance
of items determined to be material to the Company;  (5) remediating or replacing
material items that are determined  not to be Year 2000  compliant;  (6) testing
material  items for Year 2000  compliance;  and (7) designing  and  implementing
contingency plans to the extent deemed necessary.  The Company has substantially
completed  phases (1)  through  (6)  relating  to  existing  internal  hardware,
software,  facilities  and equipment;  however,  testing is ongoing as hardware,
software, and equipment are remediated, upgraded or replaced.  Additionally, the
Company  continues to assess and test newly engaged suppliers and their products
for Year 2000 compliance as part of the Company's  normal  business  operations.
The Company has not completed its external  surveys or contingency  plans in the
case that it is not Year 2000  compliant  by the Year  2000.  The  Company  will
continue  to monitor its Year 2000  compliance  program,  address  any  material
issues  and  develop  contingency  planning  as it deems  appropriate  with full
completion of the Year 2000 issue expected during the fourth quarter of calendar
year 1999.
     The  failure to  identify  or correct a material  Year 2000  problem  could
result in an interruption  in, or a failure of, certain  business  activities or
operations such as the Company's ability to service its customers. Such failures
could  materially  and  adversely  affect the Company's  results of  operations,
liquidity,  and financial condition.  The Company's Year 2000 assessment process
is expected to significantly reduce the Company's level of uncertainty about the
Year 2000  problem  and,  in  particular,  about the Year  2000  compliance  and
readiness of its material suppliers and customers.  However,  due to the general
uncertainty  inherent  in the Year  2000  problem,  resulting  in part  from the
uncertainty of the Year 2000  readiness of suppliers and customers,  the Company
is unable  to  determine  at this time  whether  the  consequences  of Year 2000
failures  will have a material  impact on the Company's  results of  operations,
liquidity, and financial condition.

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

                                     - 14 -

<PAGE>




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

Cautionary Statement (Continued)
--------------------
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 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
(4) if the factors on which the Company's  conclusions  are based do not conform
to the Company's expectations.

Quantitative and Qualitative Disclosures about Market Risk
----------------------------------------------------------
     The Company  does not believe that its  exposures to interest  rate risk or
foreign currency exchange risks, risks from commodity prices,  equity prices and
other market changes that affect market risk sensitive  instruments are material
to its results of operations.


                           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 July 21, 1999 with
the following item being submitted to a vote by shareholders:

     1.  The election of six directors.

     Details of the proposal  noted above were provided to  shareholders  in the
form of a Notice of Annual Meeting and Proxy  Statement dated and mailed on June
21, 1999, 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 management's nominees were elected.
     The voting results on the election of directors are set forth as follows:

     1.  Election of Directors:

         Name of Nominee             Votes For    Votes Withheld    Non-Voting
         ---------------             ---------    --------------    ----------
         L. Jack Bradt               2,123,822      1,344,668         239,547
         Edward J. Fahey             2,123,822      1,344,668         239,547
         Elmer D. Gates              2,123,822      1,344,668         239,547
         Michael J. Gausling         2,123,822      1,344,668         239,547
         William R. Johnson          2,123,822      1,344,668         239,547
         Leonard S. Yurkovic         2,123,755      1,344,735         239,547

                                     - 15 -

<PAGE>




Item 5.   Other Information
------    -----------------

     Effective  July 21, 1999,  Elmer D. Gates  became  Chairman of the Board of
Directors and William R. Johnson became President and CEO of the Company.

     On  September  8, 1999,  Leonard  S.  Yurkovic  resigned  from the Board of
Directors of the Company due to a combination  of new business  commitments  and
personal considerations.

     On September 30, 1999, Leon C. Kirschner and Steven Shulman were elected to
the Company's Board of Directors.

     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  will file a report on Form 10-K for the
10-month period ending December 31, 1999 to cover the transition period.

Discretionary Proxy Voting Authority/Shareholder Proposals
----------------------------------------------------------
     On May 21, 1998 the Securities and Exchange Commission adopted an
amendment to Rule 14a-4, as promulgated under the Securities and Exchange Act of
1934.  The  amendment  to  Rule  14a-(c)(1)  governs  the  Company's  use of its
discretionary  proxy voting  authority  with respect to a  shareholder  proposal
which  the  shareholder  has  not  sought  to  include  in the  Company's  proxy
statement. The new amendment provides that if a proponent of a proposal fails to
notify the Company at least 45 days prior to the month and day of mailing of the
prior  year's  proxy  statement  (or any date  specified  in an  advance  notice
provision),   then  the  management   proxies  will  be  allowed  to  use  their
discretionary  voting  authority  when the  proposal  is raised at the  meeting,
without any discussion of the matter in the proxy statement. With respect to the
Company's 2000 Annual Meeting of Shareholders, if the
     Company  is not  provided  notice  of a  shareholder  proposal,  which  the
shareholder  has  not  previously  sought  to  include  in the  Company's  proxy
statement, by March 3, 2000, the management proxies will be allowed to use their
discretionary authority as outlined above.


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

(a)  Exhibit 2.1 - Stock Purchase  Agreement dated as of August 6, 1999 among SI
     Handling  Systems,  Inc.,  Ermanco  Incorporated,  and the  Stockholders of
     Ermanco Incorporated.

     Exhibit 27 - Financial Data Schedule

(b)  A Form 8-K was  filed on  August  17,  1999.  The  filing  pertained  to SI
     Handling  Systems'  signing  of a Stock  Purchase  Agreement  with  Ermanco
     Incorporated  and its  stockholders,  to  purchase  all of the  outstanding
     capital stock of Ermanco. Closing of the acquisition,  which was subject to
     various  conditions,  including  due  diligence,  occurred on September 30,
     1999.




                                     - 16 -

<PAGE>




SI Handling Systems, Inc.





                                    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.

                                                 SI HANDLING SYSTEMS, INC.

                                                 /S/ Barry V. Mack

                                                 Barry V. Mack
                                                 Vice President - Finance
                                                   (Principal Financial Officer)

Dated:    October 13, 1999
          ----------------






















                                     - 17 -

<PAGE>




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









                                 SI/BAKER, INC.

                              Financial Statements
                                 August 31, 1999





























                                     - 18 -

<PAGE>




SI/BAKER, INC.
Balance Sheets (Unaudited)
August 31, 1999 and February 28, 1999
  (In Thousands, Except Share Data)

<TABLE>
<CAPTION>
                                                       August          February
                                                      31, 1999         28, 1999
                                                     ---------        ---------

<S>                                                   <C>              <C>

Assets
------

Current assets:
   Cash and cash equivalents, principally
     time deposits                                    $  1,113             154

Receivables:
   Trade                                                 4,417           1,658
   Other receivables                                         6             238
                                                        ------          ------
     Total receivables                                   4,423           1,896
                                                        ------          ------

   Costs and estimated earnings in
     excess of billings                                  1,281           2,516
   Deferred income tax benefits                            276             258
   Prepaid expenses and other current
     assets                                                 52             136
                                                        ------          ------

       Total current assets                              7,145           4,960
                                                        ------          ------

   Machinery and equipment, at cost                        186             176
     Less:  accumulated depreciation                       113              95
                                                        ------          ------
   Net machinery and equipment                              73              81
                                                        ------          ------

   Equipment leased to customer                            487             487
   Less:  accumulated depreciation                         470             370
                                                        ------          ------
     Net equipment leased to customer                       17             117
                                                        ------          ------

   Deferred income tax benefits                             33              51
                                                        ------          ------

   Other assets                                              -              95
                                                        ------          ------

       Total assets                                   $  7,268           5,304
                                                        ======          ======
</TABLE>



                                     - 19 -

<PAGE>




SI/BAKER, INC.
Balance Sheets (Unaudited)
August 31, 1999 and February 28, 1999
  (In Thousands, Except Share Data)

<TABLE>
<CAPTION>
                                                       August          February
                                                     31, 1999          28, 1999
                                                     ---------        ---------

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

Current liabilities:
   Note payable to bank                               $     -              500
   Accounts payable:
     Trade                                                 941             510
     Affiliated companies                                    8              15
                                                        ------          ------
       Total accounts payable                              949             525
                                                        ------          ------

   Customers' deposits and billings in
     excess of costs and estimated
     earnings                                            2,734           1,104
   Accrued salaries, wages, and
     commissions                                           178              91
   Income taxes payable                                      6               -
   Accrued royalties payable                               372             209
   Accrued product warranties                              733             660
   Accrued other liabilities                                15              10
                                                        ------          ------
       Total current liabilities                         4,987           3,099
                                                        ------          ------

Deferred compensation                                        -             123
                                                        ------          ------

Stockholders' equity:
   Common stock, $1 par value; authorized
     1,000 shares; issued 200 shares                         -               -
   Additional paid-in capital                              200             200
   Retained earnings                                     2,081           1,882
                                                        ------          ------
       Total stockholders' equity                        2,281           2,082
                                                        ------          ------

       Total liabilities and stockholders'
         equity                                       $  7,268           5,304
                                                        ======          ======
</TABLE>


                                     - 20 -

<PAGE>




SI/BAKER, INC.
Statements of Operations (Unaudited)
Six Months Ended August 31, 1999 and 1998
  (In Thousands)

<TABLE>
<CAPTION>
                                      Three Months Ended       Six Months Ended
                                      ------------------      ------------------
                                       August    August        August    August
                                      31, 1999  31, 1998      31, 1999  31, 1998
                                      --------  --------      --------  --------
<S>                                   <C>        <C>           <C>       <C>


Net sales                             $ 3,013     1,787         5,985     3,861
Cost of sales                           2,401     1,416         4,749     3,159
                                        -----     -----         -----     -----

Gross profit on sales                     612       371         1,236       702
                                        -----     -----         -----     -----

Selling, general and
   administrative
   expenses                               246       233           557       437
Product development
   costs                                   60        71           156        71
Royalty expense
   to parent companies                    120        71           239       154
Interest income                           (16)       (3)          (21)       (5)
Interest expense                            -        21             4        35
Other income, net                         (40)      (23)          (42)      (25)
                                        -----     -----         -----     -----
                                          370       370           893       667
                                        -----     -----         -----     -----

Earnings before
   income taxes                           242         1           343        35
Income tax expense                         98         -           144        14
                                        -----     -----         -----     -----

Net earnings                         $    144         1           199        21
                                        =====     =====         =====     =====
</TABLE>



                                     - 21 -

<PAGE>




SI/BAKER, INC.
Statements of Cash Flows (Unaudited)
Six Months Ended August 31, 1999 and 1998
  (In Thousands)

<TABLE>
<CAPTION>
                                                            Six Months Ended
                                                        -----------------------
                                                          August         August
                                                        31, 1999       31, 1998
                                                        --------       --------

<S>                                                     <C>             <C>
Cash flow from operating activities:
   Net earnings                                         $    199             21
   Adjustments to reconcile net earnings to net
     cash provided by operating activities:
       Depreciation of machinery and
         equipment and leased equipment                      118             75
       Changes in operating assets and
         liabilities:
           Receivables                                    (2,527)         1,117
           Costs and estimated earnings
              in excess of billings                        1,235            (58)
           Inventories                                         -            118
           Prepaid expenses and other
              current assets                                  84           (256)
           Other assets                                       95            (29)
           Accounts payable                                  424           (582)
           Customers' deposits and
              billings in excess of costs
              and estimated earnings                       1,630            201
           Accrued salaries, wages, and
              commissions                                     87           (342)
           Income taxes payable                                6            (44)
           Accrued royalties payable                         163             18
           Accrued product warranties                         73            (22)
           Accrued other liabilities                           5            (24)
           Deferred compensation                            (123)             -
                                                          ------         ------
Net cash provided
   by operating activities                                 1,469            193
                                                          ------         ------

Cash flows from investing activities:
   Additions to machinery and equipment                      (10)           (38)
                                                          ------         ------
     Net cash used by investing activities                   (10)           (38)
                                                          ------         ------

Cash flows from financing activities:
   Repayment of note payable to bank                        (500)             -
                                                          ------         ------
     Net cash used by financing activities                  (500)             -
                                                          ------         ------

Increase in cash and cash equivalents                        959            155
Cash and cash equivalents,
  beginning of period                                        154            388
                                                          ------         ------
Cash and cash equivalents, end of period                $  1,113            543
                                                          ======         ======

Supplemental disclosure of cash flow information:
     Cash paid (received) during the period for:
       Income taxes                                     $   (134)           307
                                                          ======         ======
       Interest                                         $      3             46
                                                          ======         ======
</TABLE>


                                     - 22 -

<PAGE>




                            SI HANDLING SYSTEMS, INC.

                                    FORM 10-Q

                                  EXHIBIT INDEX



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

2.1    Stock  Purchase  Agreement  dated as of August 6, 1999 among SI  Handling
       Systems,  Inc.,  Ermanco  Incorporated,  and the  Stockholders of Ermanco
       Incorporated.

27     Financial Data Schedule.

                                     - 23 -