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SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549
F O R M 10-KSBAnnual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

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For the Fiscal Year EndedJuly 31, 2000

Commission File Number 0-12370


SI TECHNOLOGIES, INC.

(Exact name of Registrant as specified in its charter)

Delaware(State or other jurisdiction of
incorporation or organization)

95-3381440(I.R.S. Employer Identification Number)


14192 Franklin Avenue, Tustin, CA 92780(Address of principal executive offices) (Zip Code)

714-505-6483Registrant's telephone number, including area code

Securities
registered pursuant to Section 12 (b) of the Act:

None

Securities registered pursuant to Section 12 (g):

Common Stock, par value $.01 per share(Title of Class)

Check
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      / /

Check
if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B in this form, and no disclosure will be contained, to the best of
registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this
Form 10-KSB. /x/

Issuer's
revenues for most recent fiscal year            $41,329,345

The
number of shares outstanding of each of the issuer's classes of common stock is 3,547,123

The
aggregate market value of the voting stock held by nonaffiliates of the Registrant is $7,537,636 (as of October 5, 2000).

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement for the Annual meeting of Shareholders to be held on January 23, 2000 (the "Proxy Statement") are
incorporated by reference into Part III.

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PART I

ITEM 1.  BUSINESS

General

SI Technologies, Inc. and Subsidiaries ("SI" or the "Company") is a designer, manufacturer and marketer of high-performance industrial
sensors, weighing and factory automation systems, and related products. Recent acquisitions have diversified the Company's revenue base and positioned SI Technologies as an integrator of technologies,
products and companies that are enabling SI to become a leading global provider of devices, equipment and systems that handle, measure and inspect goods and materials. SI products are used throughout
the world in a wide variety of industries, including aerospace, agriculture, aviation, food processing and packaging, forestry, manufacturing, mining, transportation/distribution and waste management.

In
recent years, the Company has been capitalizing on its technology and existing customer relationships through product and market expansion in selected segments of a
$70-billion industrial measurement and automation industry. Driving SI's business expansion are both an aggressive internal product development program and the acquisition of businesses
with technology and revenue synergy.

The
Company was incorporated in California on May 29, 1979 as IDEA, Invention, Design, Engineering Associates, Inc. and was reincorporated in Delaware on
April 20, 1983. In February 1996, the Company changed its name to SI Technologies, Inc. The name SI Technologies serves to preserve a loyal customer following in the Company's
dynamic weighing systems business while at the same time representing the broader technologies and business interests of the Company.

The
Company's principal executive offices and headquarters are located at 14192 Franklin Avenue, Tustin, California. Headquarters communication information is as follows: telephone,
714-505-6483, fax, 714-505-6484, e-mail address, sitech@sitechnologies.com, Web site, www.sitechnologies.com.

Business Strategy

The Company aspires to become a leading provider of manufactured devices, equipment, engineered systems and services used in the niche industrial markets in
which it operates and to expand its markets through acquisition of complementary product and service lines as an industry integrator in the $70-billion industrial measurement and
automation industry. SI Technologies has experienced significant growth from 1994 to 1999 through a combination of internal growth and strategic acquisitions.

Internal Growth

The Company expects to continue generating organic growth through internal product development, entrance into new markets and geographic expansion. In recent
years, internal growth has been hampered by reduced market demand for the Company's onboard scale product line and elimination of several low margin product lines. Current internal growth activities
are focused on the integration of technologies across product lines and business units, expansion and training of distribution channels to effectively cross-sell products to key markets
and a restructuring of sales operations to improve the Company's ability to enter new markets.

Acquisition Strategy

SI Technologies pursues a strategy of acquiring leading providers of complementary manufactured products and services in highly fragmented industrial equipment
markets, with a view to further

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consolidating those markets. In general, the Company pursues the acquisition of businesses that meet the following criteria:



SI
believes its integration strategy will allow it to achieve greater efficiencies in acquired companies through elimination of redundant costs and by leveraging economies of scale in
manufacturing operations, and procurement of materials and services. Past the early stages of assimilating acquired companies, SI expects to capitalize on revenue synergies developed through
cross-selling, joint market development, and sharing and integration of technology across product lines and business units.

The
Company intends to finance acquisitions primarily with debt, relieved subsequently by capital raised through the sale of equity. As the momentum of the growth plan increases, the
Company expects to utilize equity on an increasing basis as currency in acquisition and merger transactions.

Since
1990, SI Technologies has completed eight acquisitions.

Acquired Company

Date Acquired

Primary Products

Industries ServedLodec, Inc.

1990

Dynamic & Static
Weighing Systems

Agriculture, forestry,
governmentAdvanced Recording Instruments, Inc.

1995

Data Recording
Instrumentation

Transportation, distributionLoad Measurement Corporation

1996

Sensors & Dynamic
Weighing Systems

Agriculture, waste managementEvergreen Weigh, Inc.

1996

Dynamic & Static
Weighing Systems

Aviation, mining,
transportationAeroGo, Inc.

1997

Factory Automation
Equipment & Systems

Aviation/aerospace, automotive, manufacturing,
general industryNV Technology, Inc.

1998

Sensors

General industry, food,
transportationAllegany Technology, Inc.

1998

Sensors & Dynamic
Weighing Systems

Aerospace, transportation,
general industryRevere Transducers, Inc.

1998

Sensors & Static
Weighing Equipment

Aviation/aerospace, food,
general industry


Further acquisition detail may be found under theAcquisition Historysection.

Current Acquisition Activities

In pursuit of the Company's growth strategy, management is continuously evaluating acquisition/merger opportunities with numerous companies ranging in size
from $5 million to $50 million in annual revenue. Companies of interest are leading manufacturers, distributors and service providers who compete with technology advantage, are
generating internal growth, and show potential for strong

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synergy with the Company's technology, manufacturing operations and marketing and sales organization.

Products and Services

Industrial Measurement

The Company's industrial sensor and control products consist of a wide range of NTEP and OIML approved, EX, Factory Mutual and IP rated load cells,
transducers, translators and sensors. These devices, representing a core SI technology, are electromechanical components that convert a physical force to an electrical signal. When matched with
microprocessor-controlled digital electronics, they
measure forces such as pressure, weight, mass and torque. Commercially, the products are used for measurement, inspection and control. SI sensor and control products are principally used in electronic
weighing equipment; batching, blending, mixing, fill-by-weight and product inspection operations and, machinery operation and control systems. SI controls/instrumentation is
normally designed as an integral part of a complete weighing system. In recent years, SI instrumentation has been expanded to provide users with the ability to acquire, record in memory and download
to management information systems operational information other than weight information. In this expanded capacity, SI instrumentation becomes a critical link between operations and management
information systems.

SI
designs and manufactures dynamic and static electronic weighing equipment and systems for use in a wide array of industrial applications. As a result of the uniqueness of the
Company's combined sensor, weighing and automation system technologies, SI is one of few manufacturers in the industry who design and manufacture all three of the primary components of an electronic
scale. These components are the load-handling structure, sensors and instrumentation. Many manufacturers of conventional scale systems manufacture only load-handling
structures, outsourcing to industry suppliers their sensor and instrumentation requirements. The Company utilizes its expertise and manufacturing know-how in each of these critical
components to competitive advantage and believes our broad expertise can be exploited through our acquisition/integration growth strategy.

Dynamic
weighing systems are installed on transportation vehicles, material-handling equipment and in manufacturing process systems for weight measurement of goods and materials.
Weight information generated by these systems has broad application including loading, transporting and delivery payload management; manufacturing process, inventory and quality control; and
operations automation. Key products marketed under theAirScale, Allegany,Checkmate, Evergreen Weigh, Structural
Instrumentation, RouteMan, SmartPin, The Logger, Trojan,andTuffertrade names are dynamic
"weigh-in-motion" and mobile on-board vehicle and material-handling equipment scales, pallet weighers, crane scales and engineered system scales. SI systems are
available as standard products for use with most major original equipment manufacturer (OEM) trucks, trailers, forklifts, loaders, cranes and lifting devices. Products are marketed predominately to
the agriculture, construction, forestry, foundry, freight, manufacturing, mining, steel, transportation and waste management industries.

Depending
on application, specific economic benefit is derived from reduced overweight vehicle fines and delays; reduced time loading, checkweighing and adjusting loads to maximum
legal limits; reduced mileage and driving time to checkweighing locations such as commercial in-ground truck scales; immediate measurement and recording of pick-up and delivery
weights; reduced equipment abuse, maintenance downtime and expense; and higher capital equipment capacity utilization. Additionally, the weight information produced by these systems is often the
critical measurement in controlling, batching, blending and mixing operations in the manufacture of materials.

All
systems include force measurement sensors and microprocessor-based electronic instrumentation. The instrumentation supplies power to the sensors, provides all operator interface
and controls, processes sensor electronic signals to determine weights, and displays and records in memory weight information and other inputs from the system and/or the operator. Force measurement
sensors

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employing electronic strain gage technology measure force values. The electrical resistance of force measurement sensors changes proportionally to the force applied; thus the return signal to the
meter varies by load or force.

The
company's static weighing system product line consists of scales designed for numerous industrial and aviation weighing applications. Key products marketed under the trade names Air Guardian, Jet Weigh, Lodec, MTSERIES, Road
Guardian,and Road Runnerare permanent and portable axle
scales, wheel-load weighers, canister load cell systems and heavy-capacity platform scales. Much like dynamic weighing systems, the static weighing systems have broad industrial
application. Key markets in which these products enjoy significant market share include aggregate, aviation, construction, freight terminals, land remediation, mining and weight enforcement. Static
weighing systems utilize the same technology as dynamic weighing systems; however, they are designed to weigh loads in a static or stationary mode.

Industrial Automation

SI's industrial automation products consist of load handling, moving and positioning equipment and systems. These products often utilize highly specialized
air-bearing movement systems to move loads of any weight efficiently and with extreme precision. Air bearings are air-cushion devices that are used to "float" heavy loads on a
thin film of air. Additionally, the Company manufactures systems utilizing water bearings for use in large outdoor applications where water is used as the flotation medium rather than air. These
products, marketed under the trade namesAeroCaster, AeroGo, AeroPallets, AeroPlanksandAirShuttleare
the world leaders in practical and efficient methods of movement, transfer, location, rotation and alignment of materials and products weighing from several hundred pounds to more than 6,000 tons.

The
Company's industrial automation product line comprises two distinct categories. The first is a standard product line of rugged, industrial, off-the-shelf
air-cushion devices that allow a single person to easily and safely move loads weighing from a few hundred pounds to many tons. Standard products routinely move manufacturing fixtures,
printing press bulky paper rolls, jet engines, and other heavy loads. The other category of the product line consists of engineered products. Engineered products and
specialized systems designed and manufactured by the Company in recent years are currently moving 100,000-pound dies, launching ships, moving 4,500-ton stadium sections,
transporting aerospace booster rockets and moving large assemblies in and out of assembly line operations in numerous heavy equipment manufacturing facilities.

Additional
examples of engineered products include: automated guided vehicle systems, transporters, assembly line turntable systems, precision handling and positioning fixtures, quick
die/mold changing carts, caisson manufacturing and moving systems, and aircraft inspection turntables.

SI
industrial automation products commonly represent significant economic benefit in comparison to conventional material handling equipment through lower capital investment in
manufacturing site construction, preparation and system installation, and greater operating efficiencies based on system versatility (not limited to following rails or tracks, as typically required
with cranes and conveyors). These systems often represent the most viable means for handling extreme material handling applications involving very heavy loads, precision movement and positioning, and
high efficiency assembly line automation.

Marketing and Sales

The Company's products are marketed throughout the world primarily through 400 distributors and manufacturer representatives, each operating in a specific
trade area and serving industrial customers, engineering firms and various government agencies. In addition to headquarters marketing and sales personnel, and subsidiary business unit marketing and
sales operations, the Company

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maintains North American regional sales offices in California, Illinois, Maryland, Michigan, North Carolina, Oregon, Washington and British Columbia and Alberta, Canada; and European regional sales
offices in France, Germany, the United Kingdom and the Netherlands. Company regional sales personnel assist distributors and representatives, make direct sales calls on potential customers in areas
not covered by distribution, and support the Company's direct major accounts.

The
Company generates leads through a full complement of marketing practices, including advertisement in industry publications, direct-mail advertising,
direct-fax advertising, trade show participation and telemarketing. Headquarters and subsidiary personnel initiate the Company's sales process on all inquiries by providing the inquirer
with information on Company products and services
and qualifying the lead. After qualification, inquiries are either maintained in sales for follow-up by Company sales personnel and distribution, or dispatched to engineering for design,
cost estimating and preparation of price quotations or bid packages.

Due
to the Company's mix of standard off-the-shelf products and custom-engineered products, the time period between initial inquiry, purchase order receipt and
shipment varies widely. Standard product orders are normally shipped within one to three days of purchase order receipt at published prices and with trade terms of FOB factory and 30 days net.
Engineered products and projects are subject to specific contract terms negotiated between the Company and customer. Typically, contract terms provide for progress payments, provision for change
orders and, on longer-term projects, provision for inflation-based price adjustment. On certain projects, the Company provides complete site preparation, system installation,
start-up and customer training services. In this capacity, from time to time, the company serves as a contractor on a time and material basis.

Market Conditions and Competition

Market Conditions

Worldwide capital expenditures for industrial measurement and automation equipment and systems have averaged about $70 billion in recent years, with
domestic spending accounting for approximately 30% of the total. Overall industry growth approximates inflation. Although the overall industry is mature, the Company believes our unique products,
diversity of markets and worldwide geographic presence present significant opportunities for internal growth within the industry. Additionally, the high fragmentation of the industry provides similar
opportunities for execution of the Company's acquisition strategy.

Product
uniqueness (niche products) is a competitive advantage for SI. Manufacturers of conventional mature products competing for market share with non-differentiated
products normally compete primarily on product price and availability. SI's unique products such as dynamic weighing and air-bearing load-handling and factory automation
systems frequently compete within the industry as substitute products or as an alternative means for meeting the customers' needs. As a result of this high level of product differentiation and the
application versatility of SI's unique products, the Company believes demand for SI products is more elastic than demand for conventional products within the industry.

Market
diversity is a growing competitive advantage for SI. Over the past few years, SI has been redirecting its focus to new markets in an effort to mitigate a sharp capital spending
downturn in the Company's traditionally strong forestry and waste management markets. Since the 1996 acquisition of Evergreen Weigh and Load Measurement Corporation, cross-selling of products and
integration of Company sales organizations have steadily increased revenues in the aggregate, agriculture, aviation, construction and mining industries. With the acquisition of AeroGo late in fiscal
1997, and the acquisitions of NV Technology, Allegany Technology and Revere Transducers in fiscal 1998, the Company has further expanded its market diversity and potential for revenue synergies. The
Company

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intends to capitalize on its growing market diversity, worldwide presence and cross-selling opportunities with an expanding product line to create internal growth.

SI
maintains inventories of raw materials, work-in-process and finished goods. To supply products with competitive availability, the Company carries
approximately 35% of inventory in finished goods. While the Company manufacturers the majority of its value-added components, certain components, manufacturing processes and sub-assemblies
are outsourced. Outsourced items are normally purchased on fixed price contracts on a just-in-time basis. Should the need arise, the Company believes that any supplier and/or
subcontractor could be replaced without significant disruption to its business.

Competition

Competition in the industrial measurement and automation equipment and system industry is extremely fragmented with approximately 6,000 manufacturers and a
greater number of distributors and service companies. To the Company's knowledge, there are no competitors with the same product mix as SI. Direct competitors (competing
head-to-head with similar products) normally compete on a single product line and are smaller and have less financial resources than SI. General industry-wide
competitors (competing with alternative conventional products) range from very small, local companies to large, international companies with greater financial resources than SI.

In
the dynamic and static weighing systems product line, direct competitors are all smaller, privately held companies. Occasionally and on specific applications, the weighing systems
product line competes as an alternative product with larger companies that manufacture conventional weighing systems. These companies include Cardinal Scale Manufacturing Company, Fairbanks Scale
Company, Mettler-Toledo Holding, Inc. and Weigh-Tronix, Inc. Competition among larger manufacturers of conventional weighing
systems, due to lack of product differentiation, is principally based on price, local dealer trade-area presence and relationships, and product availability.

Competition
in the industrial sensor and control product line varies widely depending on customer type and application. Industry standard sensors sold directly to large industrial
scale manufacturers compete primarily on price, quality and service. Standard and custom sensors sold to OEMs of other types of products and equipment, and to user customers in process
industries, primarily compete on the supplier's ability to provide engineering expertise and assistance, quality, and on-going customer support and service. Competitors range from small,
local companies to large, international companies.

Competition
in load handling and factory automation products is similar to weighing system products. In the air and water bearing product line, all competitors are smaller, privately
held companies with less financial resources than the Company. Direct competitors include Airfloat, Hovair, and Aircaster. In custom-engineered products and projects, the Company normally competes as
a substitute or alternative product versus conventional material-handling equipment manufactured by companies ranging in size from much smaller to significantly larger than the Company.

International
markets vary widely in competitive issues. In some countries, price competition is more intense than in North America, while in others prior relationships and product
quality receive more customer emphasis than do marginal pricing differentials, thus price competition is less intensive. As a result of product uniqueness, innovative design solutions, quality of
product and dependability, SI products and services are frequently sold in situations where the Company is not the low bidder.

Significant Customers

Historically the Company's primary customers have been transportation, agriculture, forestry, manufacturing, waste management and general industrial companies.
Over the past few years, as a result of the Company's growth strategy, the customer base has expanded to include the aviation/ aerospace, automotive, food processing, construction and maritime
industries. Significant customers in

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recent years include Boeing, Caterpillar, Carrier, Chrysler, Ford, Hyundai, Kraft Foods, Lockheed, Michelin, Mitsubishi, NASA, Siemens, and Thiokol.

While
a significant portion of the Company's annual revenues represent repeat business from its customers, no individual customer represents 10% or more of the Company's revenues.

Acquisition History

Acquisition of Lodec, Inc.

In March 1990, the Company acquired Lodec, Inc., a Washington corporation. As a manufacturer of dynamic and static weighing systems, Lodec was a
direct competitor of the Company at the time of acquisition. Lodec's primary product at the time of acquisition was an on-board weighing system. The acquisition of Lodec increased the
Company's market share in on-board weighing systems, expanded the product line through the addition of Lodec portable axle scales, and brought the Company an international dealer
organization in Latin America, Europe and Asia.

Asset Purchase from Advanced Recording Instruments, Inc.

In October 1995, the Company purchased the assets of Advanced Recording Instruments, Inc. (ARI). The asset purchase included the ARI
on-board data recorder and operations information system product lines, all related technology, trade names, inventory and fixed assets. Acquisition of the ARI product line strengthened
the Company's ability to serve a growing customer demand for operations information useful for improving the performance of material-handling and transportation operations.

Acquisition of Evergreen Weigh, Inc.

In April 1996, the Company acquired Evergreen Weigh, Inc. (Evergreen), a Washington corporation. Evergreen is a manufacturer of dynamic and
static weighing systems. Evergreen's primary products include weigh-in-motion on-board scales for material-handling equipment, axle scales and
wheel-load weighers. Key markets served by Evergreen products include the aviation, heavy construction, mining, quarry and transportation industries. The acquisition of Evergreen expanded
the Company's product
line and increased the number of markets in which the Company sells products. SI and Evergreen sales organizations merged into one integrated sales organization shortly after the acquisition.

Asset Purchase from Load Measurement Corporation

In June 1996, the Company purchased the assets of Load Measurement Corporation (LMC). The asset purchase included the LMC on-board weighing
system product lines, all related technology, trade names and inventory. LMC products are designed for and marketed primarily to the agriculture industry.

Acquisition of AeroGo, Inc.

In July 1997 the Company acquired AeroGo, Inc., a Washington corporation. AeroGo is a world leader in the design and manufacture of
load-handling, moving, positioning and factory automation equipment and systems. AeroGo products, utilizing both standard and highly specialized air bearing movement systems, are marketed
chiefly to aviation/aerospace, automotive, construction, manufacturing, maritime and general industry. AeroGo's factory automation expertise lies in the design and manufacturing of heavy load moving
equipment, die carts, automated guided vehicle systems, transport skates, sideloaders, step conveyors and flexible manufacturing systems.

The
acquisition of AeroGo provided the Company with an entrance to the industrial automation industry where additional acquisitions of complementary products and businesses will be
pursued.

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Acquisition of NV Technology, Inc.

In February 1998, the Company acquired NV Technology, Inc. (NV), a Nevada corporation. The transaction, which was a tax-free merger,
was accounted for as a pooling-of-interest. NV is a manufacturer of high-performance, stainless steel sensors. The addition of NV's National Institute of
Science & Technology (NIST) certified products expanded the Company's business in legal-for-trade, weighing and process control applications.

Acquisition of Allegany Technology, Inc.

In July 1998, the Company acquired Allegany Technology, Inc. (Allegany), a Delaware corporation. Allegany is a leading designer and manufacturer
of specialty sensors, industrial crane, and lift truck scales, along with billet weighing systems. Allegany's unique billet weighing systems increase productivity and profitability in the steel and
heavy metals industries. Other major markets for Allegany products include aerospace, distribution, manufacturing, transportation and warehousing. Allegany products expanded the Company's strong
position as a manufacturer of weighing products for niche markets.

Acquisition of Revere Transducers

In July 1998, the Company acquired Revere Transducers, Inc. and Revere Transducers Europe B.V. (Revere) from Harnischfeger Industries
(NYSE-HPH). Revere is headquartered in Tustin, California, with operations in Tustin and Breda, the Netherlands. Revere is one of the four largest manufacturers of electronic weighing load
cells, sensors and related devices in the industry, with world wide market share estimated at 8%. In addition to a highly recognized brand name, the acquisition of Revere brought the Company new
technology and manufacturing capability in the design and manufacture of proprietary strain gages and a manufacturing facility and marketing organization in Europe.

2000 Business Combination and Facility Consolidation

In 2000 the Company completed the internal consolidation plan announced in the third quarter of fiscal 1999. At that time, the Company announced plans to
combine four business units and to restructure manufacturing operations resulting in the closure of one manufacturing facility. In recognition of the expenses associated with this restructuring, the
Company established an $850,000 reserve in the third quarter of 1999 to cover expenses related to implementation of the plan. Upon announcement of the plan, the Company estimated future savings of
approximately $1.3 million annually due to lower manufacturing overhead and operating expenses as a result of the restructuring.

Under
the Plan, Allegany Technology of Cumberland, Maryland and the Weighing Systems Division, of Seattle, Washington were combined to form SI/Allegany. SI/Allegany now operates from
a Cumberland, Maryland headquarters, with it's western US markets served from a Seattle based Sales & Service
Center. Additionally, the Company combined its two sensor businesses, Revere Transducers, of Tustin, California and NV Technology, of Seattle, Washington. The newly formed sensor business unit
operates from a Tustin, California headquarters and has retain the name Revere Transducers.

Backlog

At July 31, 2000, the Company's backlog was $6,502,133, compared with $8,433,983 on July 31, 1999. The Company's backlog consists of written
orders and commitments believed to be firm and shippable in fiscal 2000. Purchase orders and contracts for products and services are from time to time modified and/or canceled by mutual consent
between the Company and the customer. Therefore, the backlog on any specific date may not be indicative of the Company's future performance.

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Employees

At July 31, 2000, the Company employed 404 full time employees.

Sources of Supply

The materials and components used by the Company to manufacture its products are available from a variety of sources. The Company believes that it is not
dependent at this time on any particular supplier for either its materials or components and has experienced no difficulty in obtaining supplies.

Patents and Trademarks

The Company holds numerous patents on various force measurement devices and weighing system design applications. The patents have expiration dates ranging from
2000 to 2016. The company also has patent license agreements to build force measurement devices under patents held by others. The license agreements are fully paid up and irrevocable for the lifetime
of these patents. The Company has
no reason to believe its patents are not valid. However, if the patents were successfully contested, management does not believe it would have a material adverse impact on the Company.

Financial Information about Foreign Operations and Export Sales

Foreign Operations

Included in the consolidated balance sheet at July 31, 2000 are the identifiable assets of the Company's subsidiary, Revere Transducers Europe B.V.,
which total approximately $4,368,800. Revere Transducers Europe, located in the Netherlands, was acquired by the Company at July 1, 1998.

Export Sales

The Company sells its products throughout the world. Net export sales by foreign geographic area are as follows:

2000

1999

1998Americas

$
4,154,250

$
4,369,700

$
2,477,000Asia/Pacific


1,602,475


2,011,500


2,316,000Europe/Africa


1,132,485


1,467,400


969,000$
6,889,210

$
7,848,600

$
5,762,000


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ITEM 2.  PROPERTIES

|Location               |  | Segment                |  | Utilization                                                                   |  | Square
Footage |  | Leased or
Owned |  | Lease
Termination
|---------------------- |  | ---------------------- |  | ----------------------------------------------------------------------------- |  | -------------- |  | --------------- |  | -----------------
|UNITED STATES          |  |                        |  |                                                                               |  |                |  |                 |  |                  
|Tukwila, WA            |  | Industrial Measurement |  | Former Corporate offices and Weighing Systems Division operations             |  | 30,000         |  | Leased          |  | April 2004       
|Tustin, CA             |  | Industrial Measurement |  | Corporate offices and Headquarters and U.S. operations for Revere Transducers |  | 93,000         |  | Leased          |  | November 2004    
|Tukwila, WA            |  | Industrial Automation  |  | Headquarters and operations for AeroGo                                        |  | 55,000         |  | Leased          |  | April 2004       
|Cumberland, MD         |  | Industrial Measurement |  | Headquarters and operations for SI/Allegany Technology                        |  | 33,000         |  | Leased          |  | May 2006         
|Cumberland, MD         |  | Industrial Measurement |  | Aircraft hanger                                                               |  | 4,200          |  | Owned           |  |                  
|INTERNATIONAL          |  |                        |  |                                                                               |  |                |  |                 |  |                  
|Breda, the Netherlands |  | Industrial Measurement |  | European operations for Revere Transducers                                    |  | 22,000         |  | Leased          |  | June 2007        
|Kelowna, B.C., Canada  |  | Industrial Measurement |  | Canadian Sales & Service Center                                               |  | 3,000          |  | Leased          |  | May 2001         

The
Company believes that its properties have been adequately maintained, are in generally good condition and are suitable for the Company's business as presently conducted. The
Company believes its existing facilities provide sufficient production capacity for its present needs and for its anticipated needs in the foreseeable future. The Company also believes that upon the
expiration of its current leases, it either will be able to secure renewal terms or enter into leases for alternative locations at market terms.

ITEM 3.  LEGAL PROCEEDINGS

The Company is engaged in various legal actions. In the opinion of management, based upon the advice of counsel, the ultimate outcome of these actions will not
have a material impact on the Company's consolidated financial statements.

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

No matters were submitted to a vote of Security Holders during the quarter ended July 31, 2000.

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PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED  STOCKHOLDER MATTERS

As of October 5, 2000, there were 205 shareholders of record. Management believes this represents approximately 600 beneficial owners of SI common
stock. SI's common stock is traded on the over-the-counter market on the NASDAQ system under the symbol "SISI." The Company has not declared nor paid any dividends since its
inception. The following chart describes the price range of Common Shares of SI, as quoted by NASDAQ, by quarter for fiscal 2000 and fiscal 1999:

Price Range of Common Shares

2000

1999HIGH

LOW

HIGH

LOW1st Quarter

3.75

2.125

7

42nd Quarter

3.625

2

4.682

3.3103rd Quarter

6

1.75

4.5

2.8754th Quarter

2.75

1.5

3.875

2.75


Dividend Policy

The Company has never declared nor paid cash dividends on the Common Stock. The Company intends to retain all future earnings for reinvestment in its business
and does not plan to pay dividends in the foreseeable future. Furthermore, the Company is prohibited from declaring and/or paying cash dividends on its capital stock under the terms of certain
indebtedness.

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SI TECHNOLOGIES, INC.  Selected Consolidated Financial Data  Year ended July 31:

|                                      |  | 2000 |            | 1999 |   | 1998       |   | 1997(1) |            | 1996(1)
|------------------------------------- |  | ---- | ---------- | ---- | - | ---------- | - | ------- | ---------- | -------
|Net sales                             |  | $    | 41,329,345 |      | $ | 44,688,775 |   | $       | 23,829,033 |        
|Net earnings (loss)                   |  |      | 351,190    |      |   | (229,715   | ) |         | 830,379    |        
|Net earnings (loss) per share basic   |  |      | .10        |      |   | (.07       | ) |         | 0.30       |        
|Net earnings (loss) per share diluted |  |      | .09        |      |   | (.07       | ) |         | 0.28       |        
|Total assets                          |  |      | 33,017,669 |      |   | 37,667,762 |   |         | 39,997,005 |        
|Long-term debt, less current portion  |  |      | 10,809,300 |      |   | 11,418,485 |   |         | 12,134,989 |        
|Other long-term obligations           |  |      | 976,253    |      |   | 1,422,865  |   |         | 1,773,475  |        

---

13

---



ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

As an aid to understanding the Company's operating results, the following table indicates the percentage of revenues that each income statement item represents
and the percentage increase or decrease in such items for the years indicated.Since 1990, the Company has acquired eight businesses.

|                                          |  |       |   |       |   |       |   | Percent
Increase/(Decrease) |   
|----------------------------------------- |  | ----- | - | ----- | - | ----- | - | --------------------------- | --
|
|
|
|Net sales                                 |  | 100.0 | % | 100.0 | % | 100.0 | % | (7.5                        | )%
|Cost of sales                             |  | 64.7  |   | 61.7  |   | 57.4  |   | (3.1                        | ) 
|                                          |  |       |   |       |   |       |   |                             |   
|Gross profit                              |  | 35.3  |   | 38.3  |   | 42.6  |   | (14.6                       | ) 
|Selling, general and administrative       |  | 23.6  |   | 25.4  |   | 26.1  |   | (14.3                       | ) 
|Research, development and engineering     |  | 4.6   |   | 6.4   |   | 5.2   |   | (34.0                       | ) 
|Amortization of intangibles               |  | 1.1   |   | 1.0   |   | 1.4   |   | 5.9                         |   
|Restructuring charges                     |  |      |   | 1.9   |   |      |   | (100.0                      | ) 
|                                          |  |       |   |       |   |       |   |                             |   
|Operating expenses                        |  | 29.3  |   | 34.7  |   | 32.7  |   | (22.0                       | ) 
|                                          |  |       |   |       |   |       |   |                             |   
|Operating profit                          |  | 6.0   |   | 3.5   |   | 9.9   |   | 58.0                        |   
|Interest expense                          |  | (4.5  | ) | (3.7  | ) | (4.0  | ) | 12.3                        |   
|Other income                              |  | 0.1   |   | 0.1   |   |      |   |                            |   
|                                          |  |       |   |       |   |       |   |                             |   
|Earnings (loss) before income tax expense |  | 1.7   |   | (0.1  | ) | 5.9   |   |                            |   
|Income tax expense                        |  | (0.8  | ) | (0.4  | ) | (2.4  | ) | 89.7                        |   
|                                          |  |       |   |       |   |       |   |                             |   
|Net earnings (loss)                       |  | 0.9   |   | (0.5  | ) | 3.5   |   |                            |   
|                                          |  |       |   |       |   |       |   |                             |   

14

---

RESULTS OF OPERATIONS

In 2000 the Company focused on completing the internal consolidation announced in late 1999. Sales declined due to product line rationalization and strategic
eliminations, the strong US dollar and temporary production problems experienced in newly consolidated manufacturing facilities. Cash flow, as measured by EBITDA, remained strong allowing the Company
to make substantial reductions in debt and accrued liabilities. Due to the magnitude of recent acquisitions, and the integration of the acquired operations with the Company's existing businesses,
results of operations for prior periods are not necessarily comparable with or indicative of results of operations for current or future periods.

NET SALES

Net sales for the year ended July 31, 2000 declined to $41,329,345 or 7.5% from $44,688,775 for the year ended July 31, 1999. The decrease in
sales is primarily attributable to product line rationalization and strategic eliminations, lower export sales resulting from the strong US dollar, including currency exchange devaluation in the
Company's European operations, and temporary production problems experienced in newly consolidated manufacturing facilities.

Net
sales for 1999 increased by $20,859,772 or 87.5% over the 1998 net sales of $23,829,003. The increase in sales is primarily attributable to the added product lines resulting from
the acquisitions of AeroGo, Inc., Allegany Technology, Inc., NV Technology, Inc. and Revere Transducers.

GROSS PROFIT

Gross profit for the year ended July 31, 2000 decreased $2,504,348 or 14.6% to $14,603,471 from $17,107,819 for the year ended July 31, 1999. The
decrease in gross profit is primarily attributable to lower sales volume and product mix. The new measurement products and markets entered as a result of the sales growth generated by companies
acquired in recent years compete in lower gross margin industries. The corresponding gross margins for the periods were 35.3% and 38.3%, respectively. The year over year decrease in gross margin is
the result of the changing mix of products resulting from product lines acquired in 1998. Gross margin was also negatively impacted by excess capacity in the industrial measurement industry and
increased pricing pressure from competitors manufacturing products in off-shore low cost labor markets.

Gross
profit for the year ended July 31, 1999 increased $6,951,165 to $17,107,819 from $10,156,654 for the year ended July 31, 1998. This increase in gross profit is
directly attributable to higher sales volume resulting from acquisitions completed in later fiscal 1997, and in fiscal 1998. The corresponding gross margins for the periods were 38.3% and 42.2%,
respectively.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses for the years ended July 31, 2000 and 1999 were $9,740,242 and $11,364,869, respectively. This is a
decrease of $1,624,627 or 14.3%. The decrease results from the business combinations and facility consolidation implemented during the year. Selling, general and administrative expenses as a
percentage of sales were 23.6% in 2000 as compared to 25.4% in 1999.

Selling,
general and administrative expenses for the years ended July 31, 1999 and 1998 were $11,364,869 and $6,212,443, respectively. This is an increase of $5,152,426 or 83%.
The increase is primarily related to the acquisitions made in 1998.

15

---

RESEARCH, DEVELOPMENT AND ENGINEERING EXPENSES

Research, development and engineering expenses for the years ended July 31, 2000 and 1999 were $1,892,656 and $2,866,494, respectively. This is a
decrease of $973,838 or 34%. The decrease in dollar amount is attributable to the business unit combinations and facility consolidation implemented during the year.

Research,
development and engineering expenses for the years ended July 31, 1999 and 1998 were $2,866,494 and $1,242,533, respectively. This is an increase of $1,623,961 or
131%. The increase in dollar amount is attributable to the acquisitions noted earlier.

AMORTIZATION EXPENSES

Intangible amortization expenses amounted to $471,368 in 2000 as compared to $444,889 in 1999. This is an increase of $26,479 or 6%. In 1998 intangible
amortization was $339,114. The increases in amortization in both years were the results of increases in the costs in excess of assets acquired recorded for the acquisitions completed during prior
years.

RESTRUCTURING CHARGES

In 2000 the Company completed the internal restructuring plan announced in late 1999. In 1999 the Company recorded restructuring charges totaling $850,000 in
connection with a plan to combine four business units and to restructure manufacturing operations resulting in the closure of one manufacturing facility. The charges related to severance and other
related benefits and costs of exiting the facility to be closed, including lease termination costs, and write-down of existing assets to their expected net realizable value. As of
July 31, 2000, the balance of the restructuring reserve had been depleted.

INTEREST AND OTHER INCOME

Interest expense for 2000 increased $203,579 or 12.3%, to $1,860,131 from $1,656,552 in 1999. Interest expense in 1998 was $950,601. These increases in
interest expense reflect the rising interest rates on the Company's debt required for financing the AeroGo, Allegany Technology and Revere Transducers acquisitions in 1999 and 1998. Other income was
$55,724 in 2000 as compared to $26,366 in 1998. In 1998 other income was $5,414.

INCOME TAXES

Income tax expense for the years ended July 31, 2000 and 1999 was $343,608 and $181,096, respectively. The Company's effective tax rate (income tax
expense as a percentage of pretax income) was 49.5% in 2000. An effective tax rate is not calculable in 1999 due to the recording of a loss before income taxes. The effective tax rate exceeds the U.S.
federal corporate income tax rate due primarily to the amortization of intangible assets that are not deductible for income tax purposes and due to state income taxes.

INFLATION

Historically, the impact of inflation has been negligible, as the Company has been able to offset the effects through efficiency and price adjustments.

16

---

LIQUIDITY AND CAPITAL RESOURCES

At July 31, 2000 the Company's cash position was $112,286 compared to $32,042 at July 31, 1999. Cash available in excess of that required for
general corporate purposes is used to reduce borrowings under the Company's line of credit. Working capital increased to $8,223,710 from $7,407,338 at July 31, 2000.

The
Company's existing capital resources consist of cash balances, cash provided by operating activities and funds available under its line of credit. Cash provided by operations in
2000 was $2,995,161. During 1999, cash provided by operations was $937,902.

The
Company's cash requirements consist of its general working capital needs, capital expenditures, obligations under its leases, notes payable and capital required for future
acquisitions. Working capital requirements include the salary costs of employees and related overhead and the purchase of material and components. The Company anticipates capital expenditures of
approximately $400,000 in 2001 as compared to $484,529 in 2000. Excluding payments under the Company's lines of credit, principal payments made under notes payable and long-term debt
totaled approximately $1,226,580 for the year ended July 31, 2000. In 2001, approximately $3,804,968 in principal and long-term debt will be due on notes payable and debt
obligations.

Subsequent
to July 31, 2000, and retroactive to July 31, 2000, the Company amended its principal credit agreement with its bank, extending the $8,000,000 line of credit
to November of 2001, thus the line of credit has been recorded as long term debt. As of July 31, 2000, the Company had borrowings of $6,408,500 under the line of credit. In April of 2000, the
maturity date of the Company's one-year note of $3,000,000 was extended, and its terms were modified to include monthly principal payments of $62,500, plus interest. The current maturity
date of the note is May 2001 and as of July 31, 2000, its principal balance was $2,812,500.

In
addition to its principal credit agreement, the Company maintains a second line of credit to support the working capital requirements of its European operations. This line of
credit amounts to $3,250,000. As of July 31, 2000, the Company had borrowings of $729,374 under the line of credit. This line of credit expires November 2002 and has been recorded as long term
debt.

The
Company believes that cash flow from operations and funds available under its bank facilities will be sufficient to meet the Company's working capital needs and principal payments
on long term debt. Repayment of the $2,812,500 note due May 2001 will require capital from an equity financing or negotiation of revised terms with the bank. The Company believes that it could
obtain the capital necessary to make additional acquisitions primarily through either issuances of common or preferred stock or debt. No assurance can be given with respect to whether such financing
would be available when required or whether such financing can be obtained on terms acceptable to the Company.

YEAR 2000 INITIATIVES

The Company experienced no meaningful disruption of business activity as a result of Y2K related issues in either its own operations or the operations of its
vendors and customers.

INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-KSB includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933
and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical facts included in the preceding discussion regarding the

17

---

Company's financial position, business strategy and plans of management for future operations are forward-looking statements. Although the Company believes that the expectations reflected in such
forward-looking statements are reasonable; it can give no assurance that such expectations will prove to be correct.

ITEM 7.  FINANCIAL STATEMENTS

|                                                                        |  | (Form 10-KSB)Pages(s)
|----------------------------------------------------------------------- |  | ---------------------
|                                                                        |  |                      
|Report of Independent Certified Public Accountants                      |  | 19                   
|Consolidated Balance Sheets                                             |  | 20                   
|Consolidated Statements of Operations                                   |  | 21                   
|Consolidated Statement of Stockholders' Equity and Comprehensive Income |  | 22                   
|Consolidated Statements of Cash Flows                                   |  | 23                   
|Notes to Consolidated Financial Statements                              |  | 24-39                
|                                                                        |  |                      

18

---

## 

Report of Independent Certified Public Accountants

Board
of Directors
SI Technologies, Inc. and Subsidiaries

We
have audited the accompanying consolidated balance sheets of SI Technologies, Inc. and Subsidiaries as of July 31, 2000 and 1999, and the related consolidated
statements of operations, stockholders' equity and comprehensive income, and cash flows for each of the three years in the period ended July 31, 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We
conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In
our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of SI Technologies, Inc. and
Subsidiaries as of July 31, 2000 and 1999, and the consolidated results of their operations and their consolidated cash flows for each of the three years in the period ended July 31,
2000, in conformity with accounting principles generally accepted in the United States of America.

/s/
Grant Thornton LLP

Irvine,
California
October 20, 2000

19

---

## 

SI Technologies, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
July 31,

ASSETS

|                                                                         |                                                                                                            | 2000 |            | 1999                
|------------------------------------------------------------------------ | ---------------------------------------------------------------------------------------------------------- | ---- | ---------- | --------------------
|CURRENT ASSETS                                                           |                                                                                                            |      |            |                     
|                                                                         | Cash                                                                                                       |      | $          | 112,286             
|                                                                         | Trade accounts receivable, less allowance for doubtful accounts of
  $221,000 in 2000 and $340,000 in 1999 |      |            | 7,157,160           
|                                                                         | Unbilled revenues                                                                                          |      |            |                    
|                                                                         | Inventories, net                                                                                           |      |            | 8,866,766           
|                                                                         | Deferred tax asset                                                                                         |      |            | 970,360             
|                                                                         | Income taxes receivable                                                                                    |      |            |                    
|                                                                         | Other current assets                                                                                       |      |            | 657,059             
|                                                                         |                                                                                                            |      |            |                     
|                                                                         |                                                                                                            |      |            | Total current assets
|PROPERTY AND EQUIPMENT, less accumulated depreciation and
  amortization |                                                                                                            |      | 5,648,963  |                     
|OTHER ASSETS                                                             |                                                                                                            |      |            |                     
|                                                                         | Intangible assets, net                                                                                     |      |            | 9,279,751           
|                                                                         | Other                                                                                                      |      |            | 325,324             
|                                                                         |                                                                                                            |      |            |                     
|                                                                         |                                                                                                            | $    | 33,017,669 |                     
|                                                                         |                                                                                                            |      |            |                     

LIABILITIES AND STOCKHOLDERS' EQUITY

|                                        |                                                                                                    | 2000 |            | 1999                      |  
|--------------------------------------- | -------------------------------------------------------------------------------------------------- | ---- | ---------- | ------------------------- | -
|CURRENT LIABILITIES                     |                                                                                                    |      |            |                           |  
|                                        | Current maturities of long-term debt                                                               |      | $          | 3,804,968                 |  
|                                        | Accounts payable                                                                                   |      |            | 3,324,559                 |  
|                                        | Customer advances                                                                                  |      |            | 352,974                   |  
|                                        | Accrued liabilities                                                                                |      |            | 2,057,420                 |  
|                                        |                                                                                                    |      |            |                           |  
|                                        |                                                                                                    |      |            | Total current liabilities |  
|LONG-TERM DEBT, less current maturities |                                                                                                    |      | 10,809,300 |                           |  
|OTHER LIABILITIES                       |                                                                                                    |      | 816,355    |                           |  
|DEFERRED TAXES                          |                                                                                                    |      | 159,898    |                           |  
|STOCKHOLDERS' EQUITY                    |                                                                                                    |      |            |                           |  
|                                        | Preferred stock, par value $.01 per share; authorized, 2,000,000
  shares; none outstanding        |      |            |                          |  
|                                        | Common stock, par value $.01 per share; authorized, 10,000,000;
  issued and outstanding 3,547,123 |      |            | 35,471                    |  
|                                        | Additional paid-in capital                                                                         |      |            | 10,326,711                |  
|                                        | Retained earnings                                                                                  |      |            | 1,459,827                 |  
|                                        | Accumulated other comprehensive income                                                             |      |            | (129,814                  | )
|                                        |                                                                                                    |      |            |                           |  
|                                        |                                                                                                    |      | 11,692,195 |                           |  
|                                        |                                                                                                    |      |            |                           |  
|                                        |                                                                                                    | $    | 33,017,669 |                           | $
|                                        |                                                                                                    |      |            |                           |  

The
accompanying notes are an integral part of these statements.

20

---

SI Technologies, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended July 31,

|                                                    |                                       | 2000                                          |            | 1999      |            | 1998       |           
|--------------------------------------------------- | ------------------------------------- | --------------------------------------------- | ---------- | --------- | ---------- | ---------- | ----------
|Net sales                                           |                                       | $                                             | 41,329,345 |           | $          | 44,688,775 |           
|Cost of sales                                       |                                       |                                               | 26,725,874 |           |            | 27,580,956 |           
|                                                    |                                       |                                               |            |           |            |            |           
|                                                    |                                       | Gross profit                                  |            |           | 14,603,471 |            |           
|                                                    |                                       |                                               |            |           |            |            |           
|Operating expenses:                                 |                                       |                                               |            |           |            |            |           
|                                                    | Selling, general and administrative   |                                               |            | 9,740,242 |            |            | 11,364,869
|                                                    | Research, development and engineering |                                               |            | 1,892,656 |            |            | 2,866,494 
|                                                    | Amortization of intangibles           |                                               |            | 471,368   |            |            | 444,889   
|                                                    | Restructuring charges                 |                                               |            |          |            |            | 850,000   
|                                                    |                                       |                                               |            |           |            |            |           
|                                                    |                                       |                                               | 12,104,266 |           |            | 15,526,252 |           
|                                                    |                                       | Earnings from operations                      |            |           | 2,499,205  |            |           
|Interest expense                                    |                                       |                                               | (1,860,131 | )         |            | (1,656,552 | )         
|Other income, net                                   |                                       |                                               | 55,724     |           |            | 26,366     |           
|                                                    |                                       |                                               |            |           |            |            |           
|                                                    |                                       | Net earnings (loss) before income tax expense |            |           | 694,798    |            |           
|Income tax expense                                  |                                       |                                               | (343,608   | )         |            | (181,096   | )         
|                                                    |                                       |                                               |            |           |            |            |           
|                                                    |                                       | NET EARNINGS (LOSS)                           |            | $         | 351,190    |            | $         
|                                                    |                                       |                                               |            |           |            |            |           
|Earnings (loss) per common share                    |                                       | $                                             | .10        |           | $          | (.07       | )         
|                                                    |                                       |                                               |            |           |            |            |           
|Earnings (loss) per common share, assuming dilution |                                       | $                                             | .09        |           | $          | (.07       | )         
|                                                    |                                       |                                               |            |           |            |            |           

The
accompanying notes are an integral part of these statements.

21

---

SI Technologies, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
AND COMPREHENSIVE INCOME
Three years ended July 31, 2000

|                                                          |  | Common Stock |  |   |        |  |   | Accumulated
other
comprehensive
income |   |   |           |   |  
|--------------------------------------------------------- |  | ------------ |  | - | ------ |  | - | -------------------------------------- | - | - | --------- | - | -
|
|
|Balance, July 31, 1997                                    |  | 2,547,240    |  | $ | 25,472 |  | $ | 5,391,256                              |   | $ | 507,973   |   | $
|Expiration of put option obligations                      |  |             |  |   |       |  |   | 385,000                                |   |   |          |   |  
|Compensation associated with stock bonus                  |  |             |  |   |       |  |   | 72,000                                 |   |   |          |   |  
|Proceeds from exercise of stock options                   |  | 18,000       |  |   | 180    |  |   | 29,632                                 |   |   |          |   |  
|Proceeds from sale of common stock, net of issuance costs |  | 839,664      |  |   | 8,397  |  |   | 3,644,303                              |   |   |          |   |  
|Issuance of common stock related to acquisition           |  | 142,219      |  |   | 1,422  |  |   | 798,574                                |   |   |          |   |  
|Foreign currency translation adjustment                   |  |             |  |   |       |  |   |                                       |   |   |          |   |  
|Net earnings                                              |  |             |  |   |       |  |   |                                       |   |   | 830,379   |   |  
|                                                          |  |              |  |   |        |  |   |                                        |   |   |           |   |  
|Comprehensive income                                      |  |              |  |   |        |  |   |                                        |   |   |           |   |  
|                                                          |  |              |  |   |        |  |   |                                        |   |   |           |   |  
|Balance, July 31, 1998                                    |  | 3,547,123    |  |   | 35,471 |  |   | 10,320,765                             |   |   | 1,338,352 |   |  
|Cost associated with equity financing                     |  |             |  |   |       |  |   | (26,694                                | ) |   |          |   |  
|Foreign currency translation adjustment                   |  |             |  |   |       |  |   |                                       |   |   |          |   |  
|Net loss                                                  |  |             |  |   |       |  |   |                                       |   |   | (229,715  | ) |  
|                                                          |  |              |  |   |        |  |   |                                        |   |   |           |   |  
|Comprehensive loss                                        |  |              |  |   |        |  |   |                                        |   |   |           |   |  
|                                                          |  |              |  |   |        |  |   |                                        |   |   |           |   |  
|Balance, July 31, 1999                                    |  | 3,547,123    |  |   | 35,471 |  |   | 10,294,071                             |   |   | 1,108,637 |   |  
|Issuance of stock options for services                    |  |              |  |   |        |  |   | 32,640                                 |   |   |           |   |  
|Foreign currency translation adjustment                   |  |              |  |   |        |  |   |                                        |   |   |           |   |  
|Net earnings                                              |  |             |  |   |       |  |   |                                       |   |   | 351,190   |   |  
|                                                          |  |              |  |   |        |  |   |                                        |   |   |           |   |  
|Comprehensive income                                      |  |              |  |   |        |  |   |                                        |   |   |           |   |  
|                                                          |  |              |  |   |        |  |   |                                        |   |   |           |   |  
|Balance, July 31, 2000                                    |  | 3,547,123    |  | $ | 35,471 |  | $ | 10,326,711                             |   | $ | 1,459,827 |   | $
|                                                          |  |              |  |   |        |  |   |                                        |   |   |           |   |  

The accompanying notes are an integral part of this statement.

22

---

SI Technologies, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended July 31,

|                                        |                                                                                                  | 2000 |                                              | 1999                                            |                                                  | 1998      |           
|--------------------------------------- | ------------------------------------------------------------------------------------------------ | ---- | -------------------------------------------- | ----------------------------------------------- | ------------------------------------------------ | --------- | ----------
|Increase (Decrease) in Cash             |                                                                                                  |      |                                              |                                                 |                                                  |           |           
|Cash flows from operating activities:   |                                                                                                  |      |                                              |                                                 |                                                  |           |           
|                                        | Net earnings (loss)                                                                              |      | $                                            | 351,190                                         |                                                  | $         | (229,715  
|                                        | Adjustments to reconcile net earnings (net loss) to net
  cash provided by operating activities: |      |                                              |                                                 |                                                  |           |           
|                                        |                                                                                                  |      | Depreciation and amortization                |                                                 |                                                  | 1,860,021 |           
|                                        |                                                                                                  |      | Deferred lease costs                         |                                                 |                                                  | (204,910  | )         
|                                        |                                                                                                  |      | Deferred income taxes                        |                                                 |                                                  | 211,838   |           
|                                        |                                                                                                  |      | Stock options issued for services            |                                                 |                                                  | 32,640    |           
|                                        |                                                                                                  |      | Changes in operating assets and liabilities: |                                                 |                                                  |           |           
|                                        |                                                                                                  |      |                                              | Trade accounts receivable and unbilled revenues |                                                  |           | 1,605,394 
|                                        |                                                                                                  |      |                                              | Inventories                                     |                                                  |           | 1,220,359 
|                                        |                                                                                                  |      |                                              | Income taxes receivable/payable                 |                                                  |           | 145,196   
|                                        |                                                                                                  |      |                                              | Other current assets                            |                                                  |           | (215,601  
|                                        |                                                                                                  |      |                                              | Accounts payable                                |                                                  |           | (235,211  
|                                        |                                                                                                  |      |                                              | Accrued liabilities and customer advances       |                                                  |           | (1,775,755
|                                        |                                                                                                  |      |                                              |                                                 |                                                  |           |           
|                                        |                                                                                                  |      |                                              |                                                 | Net cash provided by operating activities        |           |           
|Cash flows from investing activities:   |                                                                                                  |      |                                              |                                                 |                                                  |           |           
|                                        | Other assets                                                                                     |      |                                              | 115,273                                         |                                                  |           | (475,221  
|                                        | Purchase of property and equipment                                                               |      |                                              | (484,529                                        | )                                                |           | (531,859  
|                                        | Proceeds from the disposition of property and equipment                                          |      |                                              |                                                |                                                  |           | 898,020   
|                                        | Acquisition of subsidiaries                                                                      |      |                                              |                                                |                                                  |           |          
|                                        |                                                                                                  |      |                                              |                                                 |                                                  |           |           
|                                        |                                                                                                  |      |                                              |                                                 | Net cash used in investing activities            |           |           
|Cash flows from financing activities:   |                                                                                                  |      |                                              |                                                 |                                                  |           |           
|                                        | Borrowings on notes payable                                                                      |      |                                              |                                                |                                                  |           |          
|                                        | Net Borrowings (Payments) on line of credit                                                      |      |                                              | (1,141,655                                      | )                                                |           | 843,520   
|                                        | Proceeds from long-term debt                                                                     |      |                                              |                                                |                                                  |           |          
|                                        | Proceeds from sale of common stock                                                               |      |                                              |                                                |                                                  |           |          
|                                        | Payments on long-term debt                                                                       |      |                                              | (1,226,580                                      | )                                                |           | (2,133,730
|                                        | Costs associated with equity financing                                                           |      |                                              |                                                |                                                  |           | (26,694   
|                                        | Other                                                                                            |      |                                              |                                                |                                                  |           |          
|                                        |                                                                                                  |      |                                              |                                                 |                                                  |           |           
|                                        |                                                                                                  |      |                                              |                                                 | Net cash provided (used) by financing activities |           |           
|Foreign currency translation adjustment |                                                                                                  |      | (177,426                                     | )                                               |                                                  | (53,759   | )         
|                                        |                                                                                                  |      |                                              |                                                 |                                                  |           |           
|Net increase (decrease) in cash         |                                                                                                  |      | 80,244                                       |                                                 |                                                  | (541,821  | )         
|Cash at beginning of year               |                                                                                                  |      | 32,042                                       |                                                 |                                                  | 573,863   |           
|                                        |                                                                                                  |      |                                              |                                                 |                                                  |           |           
|Cash at end of year                     |                                                                                                  | $    | 112,286                                      |                                                 | $                                                | 32,042    |           
|                                        |                                                                                                  |      |                                              |                                                 |                                                  |           |           
|Cash paid during the year for:          |                                                                                                  |      |                                              |                                                 |                                                  |           |           
|                                        | Interest                                                                                         |      | $                                            | 1,822,652                                       |                                                  | $         | 1,707,642 
|                                        | Income taxes                                                                                     |      | $                                            |                                                |                                                  | $         | 736,934   

The
accompanying notes are an integral part of these statements.

23

---

## 

SI Technologies, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2000 and 1999

NOTE ASUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SI Technologies, Inc. designs, manufactures and markets high performance industrial sensors, weighing and factory automation equipment, and related
products. SI products incorporate devices, equipment and systems for the handling, inspection and measurement of goods and materials. Key markets served by SI include aerospace/aviation, food,
forestry, manufacturing, mining, transportation/distribution and waste management. Sales are made to customers throughout the world. A summary of significant accounting policies consistently applied
in the preparation of the accompanying consolidated financial statements follow.

1.Principles of Consolidation

The
consolidated financial statements include the accounts of SI Technologies, Inc. (SI or Company) and its subsidiaries; AeroGo, Inc., Allegany Technology, Inc.,
Evergreen Weigh, Inc., NV Technology, Inc., Revere Transducers, Inc., Revere Transducers Europe B.V., AeroGo Export, Inc., and IDEAutomation
International, Inc. All significant intercompany accounts and transactions have been eliminated in consolidation.

2.Inventories

Inventories
are stated at the lower of cost or market. Cost is determined using the first-in, first-out method. Uncompleted contracts are included in inventory
at the accumulated cost of each contract not in excess of realizable value.

3.Property and Equipment

Property
and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are provided in amounts sufficient to relate the cost of
depreciable assets to operations over their estimated service lives, principally on a straight-line basis. Leasehold improvements are amortized over the lives of the respective leases or
the service lives of the improvements, whichever is shorter. Estimated service lives of property and equipment are as follows:

Machinery and equipment

2 to 10 yearsBuildings

35 yearsLeasehold improvements

2 to 10 years


The
straight-line method of depreciation is followed for substantially all assets for financial reporting purposes, while accelerated methods are used for tax purposes.

4.Intangible Assets

Intangible
assets represent the excess costs of acquiring subsidiaries over the fair value of net assets acquired at the date of acquisition, which are amortized using the
straight-line method primarily over periods of 25 to 40 years. The Company periodically reviews goodwill to assess recoverability. Impairment is recognized in operating results if
expected future operating undiscounted cash flows of the acquired business are less than the carrying value of goodwill. Accumulated amortization totaled $2,175,496 and $1,748,600 at July 31,
2000 and 1999, respectively.

5.Product Warranty

Product
warranty costs are estimated and accrued at the time sales are recorded.

24

---

6.Revenue Recognition

Sales
are recorded at the time of shipment for equipment and for special orders with relatively short production time requirements. On long-term contracts, sales are
recorded based on the percentage that incurred costs bear to the total estimated costs at completion. Estimated losses are recorded in total when they become evident. Such billings are generally made
and collected in the subsequent year.

7.Comprehensive Income

Foreign
currency assets and liabilities are translated into their U.S. dollar equivalents based on year end exchange rates. Revenue and expense accounts are translated at average
exchange rates for the appropriate fiscal year. Aggregate exchange gains and losses arising from the translation of foreign assets and liabilities are included in stockholders' equity. Transaction
gains and losses are included in income and have not been significant in amount.

8.Use of Estimates

In
preparing the Company's financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those
estimates.

9.Reclassifications

Certain
reclassifications have been made to the 1999 consolidated financial statements to conform with the 2000 presentation.

NOTE BBUSINESS COMBINATIONS

1.NV Technology, Inc.

Effective
February 1998, the Company completed a merger with NV Technology, Inc. (NV) by exchanging 200,000 shares of its common stock for all of the common stock of NV.
NV is engaged in the manufacture of industrial sensors. The merger constituted a tax-free reorganization and has been accounted for as a pooling of interests. Accordingly, all prior period
consolidated financial statements presented have been restated to include the combined results of operations, financial position and cash flows as though NV had always been a part of the Company.

Prior
to the merger, NV's fiscal year ended on December 31. In recording the business combination, NV's prior period financial statements have been restated to a year ended
July 31, to conform to the Company's year end. There were no transactions between the Company and NV prior to the combination, and adjustments were recorded to conform NV's accounting policies.
Certain reclassifications were made to the NV financial statements to conform to the Company's presentation.

2.Revere Transducers

Effective
July 1, 1998, the Company purchased 100% of the common stock of Revere Transducers, Inc. and Revere Transducers Europe B.V. (jointlyRevere) for
$8,282,000 in cash. Revere is engaged in the manufacture of industrial sensors and weighing equipment. The combination is

25

---

accounted for under the purchase method of accounting. The fair value of net assets acquired exceeded the acquisition cost by $249,930, which was adjusted in 1999 from $552,297 for additional
acquisition costs. This amount has been applied to reduce the fair value of recorded property and equipment. The results of operations of Revere have been included in the accompanying consolidated
statements of operations from the acquisition date, July 1, 1998. The purchase of Revere was funded by the issuance of notes payable to a bank as described in Note F.

3.Allegany Technology, Inc.

Effective
July 1, 1998, the Company purchased 100% of the common stock of Allegany Technology, Inc. (Allegany) for $2,888,290 in cash and SI common stock. Allegany is
engaged in the manufacture of industrial sensors and weighing equipment and systems. The combination is accounted for under the purchase method of accounting. The excess of the total acquisition cost
over the fair value of net assets acquired in the amount of $2,999,686, which was adjusted in 1999 from $2,810,537 for adjustments to the fair value of assets, is being amortized on a
straight-line basis over twenty-five years. The results of operations of Allegany have been included in the accompanying consolidated statements of operations from the
acquisition date, July 1, 1998. The purchase of Allegany was funded by borrowings under the Company's line of credit and from the issuance of 142,219 shares of common stock.

4.AeroGo, Inc.

Effective
July 1, 1997, the Company purchased 100% of the common stock of AeroGo, Inc. (AeroGo) for $6,000,000 in cash. AeroGo is engaged in the manufacture of load
handling and factory automation equipment and systems. The combination is accounted for under the purchase method of accounting. The excess of the total acquisition cost over the fair value of net
assets acquired in the amount of $4,347,468 is being amortized on a straight-line basis over twenty-five years.

NOTE CINVENTORIES

Inventories
consist of the following at July 31:

2000

1999Raw materials

$
4,049,595

$
4,987,726Work in process


1,235,102


1,536,066Finished goods


3,582,069


3,563,333Net inventory

$
8,866,766

$
10,087,125


Inventory
reserves for excess and obsolete inventory were $1,303,000 in 2000 and $1,573,000 in 1999.

26

---

NOTE DPROPERTY AND EQUIPMENT

Property and equipment consists of the following at July 31:

2000

1999Machinery and equipment

$
9,024,163

$
8,602,915Buildings


83,600


83,600Leasehold improvements


1,351,274


1,369,82010,459,037


10,056,335Less accumulated depreciation and amortization


4,810,074


3,539,501$
5,648,963

$
6,516,834


NOTE EACCRUED LIABILITIES

Accrued liabilities consist of the following at July 31:

2000

1999Accrued salaries, wages and other compensation

$
963,632

$
1,770,293Warranty reserve


347,632


386,566Distributor commissions


39,676


Legal and settlement costs


55,980


367,502Restructuring costs





749,322Deferred lease and rent costcurrent


204,907


204,907Acquisition purchase price contingency





242,128Other


445,593


471,989$
2,057,420

$
4,192,707


27

---

NOTE FDEBT

Debt consists of the following at July 31:

2000

19991)  Revolving line of credit with a bank for up to $8,000,000 plus interest at the prime rate plus 0.75% or LIBOR plus 3.25% (11% at July 31, 2000). Secured by the Company's trade accounts receivable, inventories and certain equipment.
Principal and interest due November 2001. Utilized for U.S. Operations.

$
6,408,500

$
6,754,5292)  Revolving line of credit with a bank for up to $3,250,000 plus interest at the rate of 6.5%. Secured by certain of the Company's trade accounts receivable, inventories and equipment. Principal and interest due November 2002. Utilized
for European operations.


729,374


1,525,0003)  Note payable to bank in monthly installments of $62,500 plus interest at 12.75% and quarterly fees. This note is due in May 2001 and is secured by substantially all of the Company's assets.


2,812,500


3,000,0004)  Other unsecured notes payable, at interest rates ranging from 5% to 8%. The notes are due in 2001.


6,752


60,1175)  Note payable to bank in monthly installments of $59,524 plus interest at the prime rate plus 1.625%, 1.1875%, 0.875% or 0.50% or at LIBOR plus 3.875%, 3.50%, 3.125% or 2.875% depending on certain financial ratios of the Company (11% at
July 31, 2000). The note is secured by substanially all of the Company's assets. Due July 2005.


3,571,428


4,285,7146)  Note payable to bank in monthly installments of $22,619 plus interest at the prime rate plus 1.625%, 1.1875%, 0.875% or 0.50% or at LIBOR plus 3.875%, 3.50%, 3.125% or 2.875%, depending on certain financial ratios of the Company (11% at
July 31, 2000). The note is secured by substanially all of the Company's assets. Due July 2004.


1,085,714


1,357,143Total debt


14,614,268


16,982,503Less current maturities of debt


3,804,968


5,564,018Long term debt

$
10,809,300

$
11,418,485


28

---

Future schedule of debt payments are as follows at July 31, 2000:

Year ending July 31,2001

$
3,804,9682002

$
8,123,5902003

$
985,7162004

$
985,7162005

$
714,278$
14,614,268


The
Company is required to maintain certain levels of working capital, net worth and cash flow ratios and may not pay any cash dividends under terms of its credit agreement as amended
on October 20, 2000.

NOTE GOTHER LIABILITIES

Other liabilities consist of the following at July 31:

2000

1999Deferred lease costs

$
503,930

$
663,065Deferred rent


312,425


358,200$
816,355

$
1,021,265


Deferred
lease costs arising from an acquisition represent the discounted operating lease costs for excess plant capacity acquired at the acquisition date totaling $994,593. The
deferred lease cost is amortized over 52 months, the remaining life of the lease.

NOTE HSTOCKHOLDERS' EQUITY

1.Foreign Exchange Translation Loss

In
2000 the Company incurred a foreign exchange translation loss of $92,412 due to differences in the exchange rate between the US dollar and the Dutch Guilder.

NOTE ICOMMITMENTS AND CONTINGENCIES

1.Leases

The
Company conducts a portion of its operations in leased facilities under noncancelable operating leases expiring at various dates through 2006. A portion of one manufacturing
facility is subleased under a lease, which expires in 2005. Total future minimum sublease rentals amount to $445,500 at July 31, 2000.

29

---

The minimum rental commitments, excluding sublease income, under operating leases are as follows:

Year ending July 31,2001

$
1,227,1002002


1,254,1002003


1,251,3002004


968,000Thereafter


247,900$
4,948,400


Rent
expense under noncancelable operating leases was approximately $1,244,600, $1,110,000, and $510,500 for the years ended July 31, 2000, 1999 and 1998, respectively.
Sublease income was approximately $118,800 for the year ended July 31, 2000.

2.Consulting and Non-compete Agreements

Certain
former executives of companies acquired entered into consulting and non-compete agreements with the Company. The consulting agreements have a term of five years
and the non-compete agreements have terms ranging from two to ten years. The following table summarizes remaining obligations under these agreements:

Year ending July 31,2001

$
287,5002002


62,5002003


62,5002004


62,500Thereafter


104,167$
579,167


The
expense associated with these agreements totaled $122,500, $122,500, and $122,500 for the years ended July 31, 2000, 1999 and 1998, respectively.

3.Litigation

The
Company is engaged in various legal actions. In the opinion of management, based upon advice of counsel, adequate accruals and settlements are provided for in the consolidated
financial statements and the ultimate outcome of these actions will not have a material impact on the Company's consolidated financial statements.

NOTE KINCOME TAXES

The Company accounts for income taxes on the liability method as prescribed by Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes" (SFAS 109).

30

---

Income tax expense consists of the following for the year ended July 31:

2000

1999

1998Current expense

$
131,770

$
505,696

$
462,700Deferred expense (benefit)


211,838


(324,600
)

124,300$
343,608

$
181,096

$
587,000


The
income tax provision reconciled to the tax computed at the statutory federal rate was as follows for the year ended July 31:

2000

1999

1998Tax at statutory rate

$
230,531

$
(16,500
)
$
481,900Nondeductible goodwill


191,266


147,800


108,400State and foreign taxes


(46,581
)

222,100


41,000State tax benefit from restructuring


(41,004
)




Foreign sales corporation





(121,500
)

(13,400
)Credits and net operating losses utilized





(33,000
)

(46,900
)Other


9,396


(17,804
)

16,000$
343,608

$
181,096

$
587,000


The
components of deferred taxes included in the balance sheet are as follows at July 31:

2000

1999Deferred tax asset:Net operating loss carryforwards

$
125,236

$
Accrued vacation and warranty


223,263


262,600Provision for bad debts


68,935


65,900Accrued liabilities not paid


21,123


76,800Inventory reserve and capitalized overhead


530,129


760,600Restructuring accrual





254,800Foreign currency adjustment


1,674


3,200$
970,360

$
1,423,900Deferred tax liability:Excess of tax over book depreciation

$
209,921

$
627,000Deferred lease costs


(68,172
)

(225,400
)Deferred state taxes


18,149


$
159,898

$
401,600


The
Company has recorded a deferred tax asset of $970,360 and $1,423,900 as of July 31, 2000 and 1999, respectively. The Company has not recorded a valuation allowance against
the asset as it believes it is more likely than not that all of the deferred tax assets will be realized through future taxable earnings or implementation of tax planning strategies.

31

---

As of July 31, 2000, the Company has federal and state net operating loss carryforwards of $204,600 and $523,600 which will begin expiring beginning 2002 and 2005,
respectively.

NOTE LSTOCK OPTION PLAN

The Company implemented a new stock option plan in 1995 (the Plan) and has authorized a total of 600,000 shares of common stock to be granted under the Plan.
The Company had 247,500 shares available to grant under the Plan at July 31, 2000. Additionally, options are outstanding under the old stock option plan that expired July 31, 1994. The
vesting period and expiration dates of the stock options are at the discretion of the Board of Directors.

The
Company has adopted only the disclosure provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS 123). In
accounting for its plans the Company applies APB Opinion No. 25, "Accounting for Stock Issued to Employees," which does not require recognition of compensation expense due to options being
granted at fair value on the date of grant. If the Company had elected to recognize compensation expense based upon the fair value at the grant date for awards under these plans consistent with the
methodology prescribed by SFAS 123, the Company's net earnings (loss) and earnings (loss) per share would be adjusted to the pro forma amounts indicated below:

2000

1999

1998Net earnings (loss):As reported

$
351,190

$
(229,715
)
$
830,379Pro forma


224,831


(387,216
)

726,875Earnings per common share:As reportedbasic

$
.10

$
(.07
)
$
.30Pro forma

$
.06

$
(.11
)
$
.26As reporteddiluted

$
.09

$
(.07
)
$
.28Pro forma

$
.06

$
(.11
)
$
.24


These
pro forma amounts may not be representative of future disclosures because they do not take into effect pro forma compensation expense related to grants made before 1996.

The
fair value of these options was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions for the periods ending July 31,
2000, 1999 and 1998, respectively: dividend yields are nil, expected volatility of 61%, 54% and 52% percent; risk-free interest rate of 5.83%, 5.13% and 5.13%; and an expected option life
of 5 years. The weighted-average fair value of options granted during the periods ending July 31, 2000, 1999 and 1998, for which the weighted average exercise price equals the market
price on the grant date was $1.34, $2.20 and $3.23, respectively.

32

---

The following tables summarize information concerning currently outstanding and exercisable stock options:

Stock Options Outstanding

Weighted-Average Exercise PriceBalance, July 31, 1997

346,500

$
2.47Granted

60,000

$
4.75Exercised

(18,000
)
$
1.66Expired/canceled

(12,000
)
$
2.13Balance, July 31, 1998

376,500

$
2.87Granted

52,000

$
3.93Exercised



$
Expired/canceled



$
Balance, July 31, 1999

428,500

$
3.00Granted

70,000

$
2.34Exercised



$
Expired/canceled

(31,000
)
$
3.49Balance, July 31, 2000

467,500

$
2.89


As of July 31, 2000:Range of Exercise Prices

Number of Shares
Outstanding

Weighted-Average
Remaining Contractual
Life in Years

Weighted-Average
Exercise Price$1-$2

190,000

4.8

$
1.69$2-$3

110,000

8.3

$
2.56$3-$4

10,500

7.2

$
3.49$4-$5

157,000

6.4

$
4.53467,500


Range of Exercise Prices

Number of Shares
Exercisable

Weighted-Average
Exercise Price$1-$2

175,000

$
1.67$2-$3

44,000

$
2.88$3-$4

4,400

$
3.48$4-$5

107,800

$
4.52331,200


NOTE MEARNINGS PER SHARE

The Company uses Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per Share" which established standards for computing and
presenting earnings per share (EPS). Earnings per share are based on the average number of shares outstanding during each period and income

33

---

available to common shareholders. Earnings per share assuming dilution is based on the assumption that outstanding stock options and warrants were exercised.

The
table below presents the information used to compute earnings per common share, with and without dilution:

|                                            |               | For the Year Ended July 31, 2000                                           
|------------------------------------------- | ------------- | ---------------------------------------------------------------------------
|
|Earnings available to common stockholders   |               | $                                                                          
|                                            |               |                                                                            
|Effect of dilutive securities               |               |                                                                            
|                                            | Stock options |                                                                            
|Earnings per common share assuming dilution |               |                                                                            
|                                            |               |                                                                            
|                                            |               | Earnings available to common stockholders and effect of assumed conversions
|                                            |               |                                                                            

|                                      |  | For the Year Ended July 31, 1999 |         
|------------------------------------- |  | -------------------------------- | --------
|
|Loss per common share                 |  |                                  |         
|Loss available to common stockholders |  | $                                | (229,715
|                                      |  |                                  |         

The
computation for loss per share assuming dilution for the year ended July 31, 1999 was anti-dilutive.

|                                            |                                                                             | For the Year Ended July 31, 1998
|------------------------------------------- | --------------------------------------------------------------------------- | --------------------------------
|
|Earnings per common share                   |                                                                             |                                 
|Earnings available to common stockholders   |                                                                             | $                               
|                                            |                                                                             |                                 
|Effect of dilutive securities               |                                                                             |                                 
|                                            | Stock options                                                               |                                 
|                                            | Warrants                                                                    |                                 
|                                            |                                                                             |                                 
|Earnings per common share assuming dilution |                                                                             |                                 
|                                            | Earnings available to common stockholders and effect of assumed conversions |                                 
|                                            |                                                                             |                                 

Warrants
to purchase 168,000 shares of common stock at $8.00 per share were not included in the computation of diluted EPS because the exercise prices were greater than the average
market price of the common shares.

34

---

NOTE NINDUSTRY AND GEOGRAPHIC AREA SEGMENT INFORMATION

In fiscal 1999, the Company adopted SFAS No. 131, "Disclosure about Segments of an Enterprise and Related Information." The Company operates in two
reportable business segments(1) industrial measurement, and (2) industrial automation. The Company's reportable segments are strategic business units that offer different products.
They are managed separately based on the fundamental differences in their operations. The accounting policies of the segments are the same as those described in Note ASummary of
Significant Accounting Policies. Segment data includes intersegment revenues.

Included
in the industrial measurement segment are industrial sensors and controls products consisting of a wide range of NTEP and OIML approved, EX, Factory Mutual and IP rated load
cells, transducers, translators and sensors. When matched with microprocessor-controlled digital electronics, they measure forces such as pressure, weight, mass and torque. Weighing Systems' products
constitute the combination of load cells and microprocessor-controlled digital electronics that in combination provide for an integrated system providing weight data in both dynamic and static
industrial weighing applications.

The
industrial automation segment consists of load handling, moving and positioning equipment and systems for applications in manufacturing, construction and other environments in
which heavy bulky materials are being transported and positioned.

Foreign Operations

2000

1999

1998Identifiable Assets:Americas

$
28,648,910

$
32,549,762

$
34,210,005Europe


4,368,759


5,118,000


5,787,000Sales:Americas


31,549,105


34,372,586


22,712,841Europe


9,780,240


10,316,189


1,116,192Operating Profits:Americas


1,897,002


746,685


2,288,833Europe


602,203


834,882


73,731


Export Sales

The Company sells its products throughout the world. Net export sales by foreign geographic area are as follows:

2000

1999

1998Americas

$
4,154,250

$
4,369,700

$
2,477,000Asia/Pacific


1,602,475


2,011,500


2,316,000Europe/Africa


1,132,485


1,467,400


969,000$
6,889,210

$
7,848,600

$
5,762,000


35

---

Segment Information 2000

|                               |  | Industrial
Measurement |            | Industrial
Automation |   | Consolidation
Adjustments |   | SI Consolidated | 
|------------------------------ |  | ---------------------- | ---------- | --------------------- | - | ------------------------- | - | --------------- | 
|Year ended July 31, 2000:      |  |                        |            |                       |   |                           |   |                 | 
|Sales                          |  | $                      | 31,947,010 |                       | $ | 9,382,335                 |   |                 | 
|Cost of goods sold             |  |                        | 21,677,854 |                       |   | 5,048,020                 |   |                 | 
|                               |  |                        |            |                       |   |                           |   |                 | 
|Gross profit                   |  |                        | 10,269,156 |                       |   | 4,334,315                 |   |                 | 
|Gross profit %                 |  |                        | 32         | %                     |   | 46                        | % |                 | 
|Operating expenses             |  |                        | 8,599,375  |                       |   | 3,504,891                 |   |                 | 
|Restructuring charges          |  |                        |           |                       |   |                          |   |                 | 
|                               |  |                        |            |                       |   |                           |   |                 | 
|Total expense                  |  |                        | 8,599,375  |                       |   | 3,504,891                 |   |                 | 
|Operating profit               |  |                        | 1,669,781  |                       |   | 829,424                   |   |                 | 
|Interest expense               |  |                        |            |                       |   |                           |   |                 | 
|Other income, net              |  |                        |            |                       |   |                           |   |                 | 
|                               |  |                        |            |                       |   |                           |   |                 | 
|Net profit before income taxes |  |                        |            |                       |   |                           |   |                 | 
|                               |  |                        |            |                       |   |                           |   |                 | 
|Income tax expense             |  |                        |            |                       |   |                           |   |                 | 
|                               |  |                        |            |                       |   |                           |   |                 | 
|Net profit                     |  |                        |            |                       |   |                           |   |                 | 
|                               |  |                        |            |                       |   |                           |   |                 | 
|Assets                         |  | $                      | 26,862,543 |                       | $ | 6,155,126                 |   |                 | 
|                               |  |                        |            |                       |   |                           |   |                 | 

36

---

Segment Information 1999

|                             |  | Industrial
Measurement |            | Industrial
Automation |   | Consolidation
Adjustments |   | SI Consolidated |         
|---------------------------- |  | ---------------------- | ---------- | --------------------- | - | ------------------------- | - | --------------- | --------
|Year ended July 31, 1999:    |  |                        |            |                       |   |                           |   |                 |         
|Sales                        |  | $                      | 35,377,809 |                       | $ | 9,976,220                 |   | $               | (665,254
|Cost of goods sold           |  |                        | 22,574,612 |                       |   | 5,671,598                 |   |                 | (665,254
|                             |  |                        |            |                       |   |                           |   |                 |         
|Gross profit                 |  |                        | 12,803,197 |                       |   | 4,304,622                 |   |                 |        
|Gross profit %               |  |                        | 36         | %                     |   | 43                        | % |                 |        
|Operating expenses           |  |                        | 11,128,156 |                       |   | 3,548,096                 |   |                 |        
|Restructuring charges        |  |                        | 850,000    |                       |   |                          |   |                 |        
|                             |  |                        |            |                       |   |                           |   |                 |         
|Total expense                |  |                        | 11,978,156 |                       |   | 3,548,096                 |   |                 |        
|                             |  |                        |            |                       |   |                           |   |                 |         
|Operating profit             |  |                        | 825,041    |                       |   | 756,526                   |   |                 |         
|Interest expense             |  |                        |            |                       |   |                           |   |                 |         
|Other income, net            |  |                        |            |                       |   |                           |   |                 |         
|                             |  |                        |            |                       |   |                           |   |                 |         
|Net loss before income taxes |  |                        |            |                       |   |                           |   |                 |         
|Income tax expense           |  |                        |            |                       |   |                           |   |                 |         
|                             |  |                        |            |                       |   |                           |   |                 |         
|Net loss                     |  |                        |            |                       |   |                           |   |                 |         
|                             |  |                        |            |                       |   |                           |   |                 |         
|Assets                       |  | $                      | 29,920,990 |                       | $ | 8,017,925                 |   | $               | (271,153
|                             |  |                        |            |                       |   |                           |   |                 |         

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Segment Information 1998

|                                 |  | Industrial
Measurement |            | Industrial
Automation |   | Consolidation
Adjustments |   | SI Consolidated |        
|-------------------------------- |  | ---------------------- | ---------- | --------------------- | - | ------------------------- | - | --------------- | -------
|Year ended July 31, 1998:        |  |                        |            |                       |   |                           |   |                 |        
|Sales                            |  | $                      | 14,193,335 |                       | $ | 9,635,698                 |   | $               |       
|Cost of goods sold               |  |                        | 8,354,829  |                       |   | 5,317,550                 |   |                 |       
|                                 |  |                        |            |                       |   |                           |   |                 |        
|Gross profit                     |  |                        | 5,838,506  |                       |   | 4,318,148                 |   |                 |       
|Gross profit %                   |  |                        | 41         | %                     |   | 45                        | % |                 |       
|Total expense                    |  |                        | 4,619,672  |                       |   | 3,174,418                 |   |                 |       
|                                 |  |                        |            |                       |   |                           |   |                 |        
|Operating profit                 |  |                        | 1,218,834  |                       |   | 1,143,730                 |   |                 |       
|Interest expense                 |  |                        |            |                       |   |                           |   |                 |        
|Other income, net                |  |                        |            |                       |   |                           |   |                 |        
|                                 |  |                        |            |                       |   |                           |   |                 |        
|Net earnings before income taxes |  |                        |            |                       |   |                           |   |                 |        
|Income tax expense               |  |                        |            |                       |   |                           |   |                 |        
|                                 |  |                        |            |                       |   |                           |   |                 |        
|Net earnings                     |  |                        |            |                       |   |                           |   |                 |        
|                                 |  |                        |            |                       |   |                           |   |                 |        
|Assets                           |  | $                      | 32,868,030 |                       | $ | 7,142,074                 |   | $               | (13,099
|                                 |  |                        |            |                       |   |                           |   |                 |        

NOTE OBENEFIT PLANS

The Company has defined contribution 401(k) plans for each subsidiary. All employees are eligible for participation upon completion of a waiting period. The
contribution expense associated with these plans totaled approximately $141,956, $111,600, and $30,316 for the years ended July 31, 2000, 1999 and 1998, respectively.

NOTE PFAIR VALUE OF FINANCIAL INSTRUMENTS

In accordance with the requirements of Statement of Financial Accounting Standards No. 107"Disclosure About Fair Value of Financial
Instruments", the following methods and assumptions were used to estimate the fair value of each class of financial instruments.

1.Notes Payable

The
carrying amount approximates fair value because of the short maturities of the notes payable and the fact that the term loan and working capital line of credit originated in
July 1998.

2.Long Term Debt

Quoted
market prices for the same or similar issues or the current rates offered to the Company for debt of the same remaining maturities are used to estimate the fair value of the
Company's long-term debt. The estimated fair value approximated the carrying value at July 31, 2000.

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NOTE QRESTRUCTURING RESERVE

In fiscal 2000, the Company completed the internal restructuring plan announced in the third quarter of fiscal 1999. The plan was comprised of the
consolidation of two specialty scale products businesses, the Weighing Systems Division and Allegany Technology and, the consolidation of two load cell/sensor business units, Revere Transducers and NV
Technology and relocation of Company headquarters from Seattle, Washington to Tustin, California. The reorganizations resulted in the closure of the Company's facility that previously housed the
Weighing Systems Division and Company headquarters in Seattle, Washington. In conjunction with this reorganization, the Company established a restructuring reserve of $850,000 in fiscal 1999. The
reserve was composed of $404,500 for lease costs on vacated leased facilities, $228,800 for the write-down of discontinued products, $126,700 for employee severance compensation for 42
employees and $90,000 for the write-down of redundant capital equipment. In fiscal 1999, the Company utilized $100,678 of the reserve. In fiscal 2000 the remaining balance of $749,322 was
utilized.

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## 

PART III

The information required byITEMS 9, 10, 11 and 12will be included in the registrants proxy statement under
the captions "Election of Directors," "Executive Officers," "Compensation," and "Principal Shareholders" and is incorporated herein by reference. Such proxy statement will be filed within
120 days of the registrants' fiscal year end, July 31, 2000.

ITEM 13.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON  FORM 8-K

The following documents are filed herewith for informational purposes, but are not part of this annual report, except as otherwise indicated.

|21.  |  | Subsidiaries of the Registrant                                                                                                       |  | 
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------ |  | 
|22.1 |  | Consent of Grant Thornton to incorporation by reference of financial statements into Registration Statement on Form S-8 and Form S-3 |  | 
|27.  |  | Financial Data Schedule July 31, 2000                                                                                                |  | 

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## 

SIGNATURES

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

|                       |  | SI TECHNOLOGIES, INC.
|---------------------- |  | ---------------------
|DATED:October 27, 2000 |  | By:                  

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed as of October 27, 2000 by the following persons in the capacities indicated:

|/s/RICK A. BEETSRick A. Beets         |  | President, CEO, CFO and Director (Principal Executive Officer, Chief Financial Officer)
|------------------------------------- |  | ---------------------------------------------------------------------------------------
|/s/EDWARD A. ALKIREEdward A. Alkire   |  | Director, Secretary                                                                    
|/s/RALPH E. CRUMPRalph E. Crump       |  | Chairman of the Board, Director, Treasurer                                             
|/s/S. SCOTT CRUMPS. Scott Crump       |  | Director                                                                               
|/s/D. DEAN SPATZD. Dean Spatz         |  | Director                                                                               
|/s/HEINZ ZWEIPFENNIGHeinz Zweipfennig |  | Director                                                                               
|                                      |  |                                                                                        

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