<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
[x] Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended December 31, 1999
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from _____ to _____
SEC File Number 0-24725
GLOBAL ELECTION SYSTEMS INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
British Columbia, Canada 85-0394190
(State or Province of Incorporation) (IRS Employer Identification No.)
1611 Wilmeth Road, McKinney, TX, 75069
(Address of Principal Executive Offices)
972-542-6000
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes[x] No [ ]
(issuer not subject to filing requirements for past 90 days)
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: As of February 3, 2000 the
issuer had 18,583,672 shares of its common stock outstanding.
Transitional Small Business Disclosure Form (check one): Yes [ ] No [x]
<PAGE> 2
TABLE OF CONTENTS
Part 1. FINANCIAL INFORMATION
Item 1. Financial Statements.
Item 2. Management's Discussion and Analysis.
Part 2. OTHER INFORMATION
Item 1. Legal proceedings.
Item 2. Changes in Securities.
Item 3. Defaults Upon Senior Securities.
Item 4. Submission of Matters to a Vote of Security Holders.
Item 5. Other Information.
Item 6. Exhibits and Reports on Form 8-K
<PAGE> 3
Part 1. FINANCIAL INFORMATION
Item 1: FINANCIAL STATEMENTS
GLOBAL ELECTION SYSTEMS INC.
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED
31 DECEMBER 1999 AND 1998
PREPARED WITHOUT AUDIT IN U.S. FUNDS
<PAGE> 4
GLOBAL ELECTION SYSTEMS INC. Statement 1
INTERIM CONSOLIDATED BALANCE SHEET -----------
AS AT 31 DECEMBER
Prepared without audit in U.S. Funds
<TABLE>
<CAPTION>
ASSETS 1999 1998
- --------------------------------------------------------------------- ------------ ------------
<S> <C> <C>
CURRENT
Cash and short term deposits $ 1,490,447 $ 503,282
Accounts receivable 5,486,464 2,505,009
Contracts receivable 7,803,460 5,073,102
Deposits and prepaid expenses 357,886 228,505
Inventory 5,573,512 6,861,627
Current portion of agreements receivable 239,976 291,794
------------ ------------
20,951,745 15,463,319
AGREEMENTS RECEIVABLE 10,901 351,900
CAPITAL ASSETS 364,495 415,526
OTHER ASSETS 663,000 889,516
------------ ------------
$ 21,990,141 $ 17,120,261
LIABILITIES
CURRENT
Accounts payable and accrued liabilities $ 4,248,626 $ 2,401,388
Deferred revenue 513,487 25,427
Current portion of loans payable 4,867,063 4,588,578
------------ ------------
9,629,176 7,015,393
------------ ------------
LOANS PAYABLE -- 36,757
------------ ------------
9,629,176 7,052,150
SHAREHOLDERS' EQUITY
SHARE CAPITAL
Authorized:
100,000,000 common voting shares, without par value
20,000,000 convertible voting preferred shares, without par value
Issued and fully paid:
18,583,672 common shares (1998 - 18,483,672) 10,217,262 10,126,865
RETAINED EARNINGS - STATEMENT 2 2,143,703 (58,754)
------------ ------------
12,360,965 10,068,111
------------ ------------
$ 21,990,141 $ 17,120,261
</TABLE>
ON BEHALF OF THE BOARD:
SIGNED: "HOWARD T. VAN PELT"
- -------------------------------------------
HOWARD T. VAN PELT, DIRECTOR
SIGNED: "CLINTON H. RICKARDS"
- -------------------------------------------
CLINTON H. RICKARDS, DIRECTOR
<PAGE> 5
GLOBAL ELECTION SYSTEMS INC. Statement 2
INTERIM CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY -----------
FOR THE PERIOD ENDED 31 DECEMBER
Prepared without audit in U.S. Funds
<TABLE>
<CAPTION>
Common Shares Retained Total
Shares Amount Earnings
(Deficit)
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Balance - 31 December 1995 14,189,440 $ 9,138,775 $ (3,714,708) $ 5,424,067
Issuance of shares on exercise of options ($0.47 per share) 500,000 235,422 -- 235,422
Loss for the year -- -- (1,736,657) (1,736,657)
---------- --------- ---------- ---------
Balance - 31 December 1996 14,689,440 9,374,197 (5,451,365) 3,922,832
Net income for the period -- -- 2,053,512 2,053,512
---------- --------- ---------- ---------
Balance - 30 June 1997 14,689,440 9,374,197 (3,397,853) 5,976,344
Issuance of shares for name and operating assets of
I-Mark Systems, Inc. ($0.55 per share) 1,000,000 536,038 -- 536,038
Net loss for the period -- -- 1,555,878 1,555,878
---------- --------- ---------- ---------
Balance - 31 December 1997 15,689,440 9,910,235 (1,841,975) 8,068,260
Issuance of performance shares from escrow ($0.06 per share) 2,738,000 167,672 -- 167,672
Issuance of shares on exercise of options ($0.89 per share) 30,000 26,632 -- 26,632
Issuance of shares on exercise of options ($0.85 per share) 25,000 21,328 -- 21,328
Net income for the period -- -- 2,481,668 2,481,668
---------- --------- ---------- ---------
Balance - 30 June 1998 18,482,440 10,125,867 639,693 10,765,560
Issuance of shares on exercise of options ($0.81 per share) 1,232 998 -- 998
Net loss for the period -- -- (698,447) (698,447)
---------- --------- ---------- ---------
Balance - 31 December 1998 18,483,672 10,126,865 (58,754) 10,068,111
Net income for the period -- -- 1,414,492 1,414,492
---------- --------- ---------- ---------
Balance - 30 June 1999 18,483,672 10,126,865 1,355,738 11,482,603
Issuance of shares on exercise of options ($0.90 per share) 100,000 90,397 -- 90,397
Net income for the period -- -- 787,965 787,965
---------- --------- ---------- ---------
Balance - 31 December 1999 18,583,672 $ 10,217,262 $ 2,143,703 $ 12,360,965
---------- --------- ---------- ---------
</TABLE>
<PAGE> 6
GLOBAL ELECTION SYSTEMS INC.
INTERIM CONSOLIDATED STATEMENT OF INCOME (LOSS) Statement 3
FOR THE SIX MONTHS ENDED 31 DECEMBER -----------
Prepared without audit in U.S. Funds
<TABLE>
<CAPTION>
For the Quarter Ended For the Six Months Ended
31 December 31 December
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUE
Sales and operating income $ 5,028,476 $ 2,373,729 $ 11,279,157 $ 6,646,192
Other income 17,704 76,006 22,357 85,031
------------ ------------ ------------ ------------
5,046,180 2,449,735 11,301,514 6,731,223
COSTS AND EXPENSES
Cost of sales and operating expenses 2,590,852 1,369,130 5,950,042 3,204,569
Selling, administrative and general expenses 1,813,154 1,514,702 3,494,174 3,037,037
Research and development expenses 162,372 234,299 303,090 609,270
Interest 137,343 74,068 284,141 110,199
Amortization 62,635 80,714 170,856 206,245
------------ ------------ ------------ ------------
4,766,356 3,272,913 10,202,303 7,167,320
INCOME (LOSS) BEFORE THE UNDERNOTED 279,824 (823,178) 1,099,211 (436,097)
Revaluation of used equipment (131,175) (131,175) (262,350) (262,350)
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES 148,649 (954,353) 836,861 (698,447)
Provision for income taxes (28,501) -- (48,896) --
------------ ------------ ------------ ------------
NET INCOME (LOSS) FOR THE PERIOD $ 120,148 $ (954,353) $ 787,965 $ (698,447)
------------ ------------ ------------ ------------
EARNINGS (LOSS) PER SHARE - U. S. FUNDS
Basic $ 0.01 $ (0.05) $ 0.04 $ (0.04)
Fully Diluted $ 0.01 $ N/A $ 0.04 $ N/A
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 18,550,795 18,483,264
</TABLE>
<PAGE> 7
GLOBAL ELECTION SYSTEMS INC. Statement 4
INTERIM CONSOLIDATED STATEMENT OF CASH FLOW -----------
FOR THE SIX MONTHS ENDED 31 DECEMBER
Prepared without audit in U.S. Funds
<TABLE>
<CAPTION>
For the Quarter Ended For the Six Months Ended
31 December 31 December
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income for the period $ 120,148 $ (954,353) $ 787,965 $ (698,447)
Items not affecting cash
Amortization 62,635 80,714 170,856 206,245
Revaluation of used equipment 131,175 131,175 262,350 262,350
----------- ----------- ----------- -----------
313,958 (742,464) 1,221,171 (229,852)
Changes in non-cash working capital
Accounts receivable (1,138,219) 1,217,748 (1,145,061) (192,146)
Contracts receivable 3,227,950 (174,452) 2,478,262 2,905,505
Deposits and prepaid expenses (147,431) (16,198) (66,588) 18,584
Inventory (664,087) (1,270,814) (1,228,939) (3,456,103)
Accounts payable and accrued liabilities 433,831 (1,649,759) 1,961,159 (2,305,814)
Deferred revenue (171,871) (102,867) (514,231) (179,373)
----------- ----------- ----------- -----------
1,854,131 (2,738,806) 2,705,773 (3,439,199)
----------- ----------- ----------- -----------
INVESTING ACTIVITIES
Capital assets acquired (39,170) (827) (46,020) (52,574)
Agreements receivable 46,395 266,481 240,627 310,071
----------- ----------- ----------- -----------
7,225 265,654 194,607 257,497
----------- ----------- ----------- -----------
FINANCING ACTIVITIES
Loans payable (1,764,180) 2,912,998 (2,121,550) 3,344,361
Common shares issued 90,397 998 90,397 998
----------- ----------- ----------- -----------
(1,673,783) 2,913,996 (2,031,153) 3,345,359
----------- ----------- ----------- -----------
NET INCREASE IN CASH 187,573 440,844 869,227 163,657
Cash position - Beginning of period 1,302,874 62,438 621,220 339,625
----------- ----------- ----------- -----------
CASH POSITION - END OF PERIOD $ 1,490,447 $ 503,282 $ 1,490,447 $ 503,282
----------- ----------- ----------- -----------
</TABLE>
<PAGE> 8
Summary of Significant Accounting Policies:
The accounting policies as set forth in Global Election Systems Inc.'s
Form 10-KSB, filed on February 3, 2000 have been adhered to in preparing the
accompanying interim consolidated financial statements. These statements are
unaudited, but include all adjustments, consisting of normal recurring
adjustments, that the Company considers necessary for a fair presentation of the
results for the interim period. Results for an interim period are not
necessarily indicative of results for a full year.
a) Foreign Currency Transactions
The accounts of the Company are prepared in U. S. funds and the
Company's Canadian operations are translated into U.S. dollars as follows:
Monetary assets and liabilities at quarter-end rates
All other assets and liabilities at historical rates
Revenue and expense items at the average rate of exchange prevailing
during the quarter.
Exchange gains and losses arising from these transactions are
reflected in income or expense in the period.
b) Inventory
Inventory of finished goods and work-in-progress is valued at the
lower of cost and net realizable value as estimated by management. Raw
materials, which consist of parts and components, are valued at average cost
less any allowances for obsolescence. Inventory of goods taken in trade is
valued at the lesser of trade-in value and net realizable value as estimated by
management.
<PAGE> 9
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS
The discussion and analysis of the operating results and the financial
position of the Company should be read in conjunction with the Company's Interim
Financial Statements and the notes to them. See "Interim Consolidated Financial
Statements". The financial statements have been prepared in United States
dollars in accordance with Canadian GAAP. Certain of the information discussed
in this report contains forward-looking statements regarding future events or
the future financial performance of the Company, and is subject to a number of
risks and other factors which could cause the actual results to differ
materially from those contained in any forward-looking statements. Among those
factors are: general business and economic conditions: customer acceptance and
demand for the company's products; the Company's overall ability to design, test
and introduce new products on a timely basis; the nature of the markets
addressed by the Company's products; the interaction with governmental entities
in the United States and world-wide which purchase the Company's products; the
unknown and unforeseen effects of potential "Year 2000" problems encountered by
the Company, its suppliers, customers and others; and other risk factors listed
from time to time in documents filed by the Company with the Securities and
Exchange Commission.
RESULTS OF OPERATIONS
QUARTER ENDED DECEMBER 31, 1999 COMPARED TO QUARTER ENDED DECEMBER 31, 1998.
SALES AND OPERATING INCOME.
Sales and other income increased 106.0%, or $2,596,000, to $5,046,000
in the second quarter ended December 31, 1999 from $2,450,000 in the second
quarter ended December 31, 1998. The increase in sales is due to new account
sales and the continued expansion of the customer base.
COST OF SALES AND OPERATING EXPENSES.
Cost of sales and operating expenses increased 89.2%, or $1,222,000,
to $2,591,000 in the second quarter of fiscal 2000 from $1,369,000 in the second
quarter of fiscal 1999. In fiscal 2000, cost of sales and operating expense as a
percentage of gross revenues decreased to 51.3% from 55.9% in fiscal 1999 due to
more efficient utilization of labor.
SELLING, ADMINISTRATIVE AND GENERAL EXPENSES.
In the second quarter ended December 31, 1999 selling, administrative
and general expenses increased 19.7%, or $298,000, to $1,813,000, from
$1,515,000 in the second quarter ended December 31, 1998. The increase is
attributable to increased sales effort which resulted in increased sales;
however, expenses were below plan.
<PAGE> 10
RESEARCH AND DEVELOPMENT EXPENSES.
Research and development expenses decreased 30.7%, or $72,000, to
$162,000 in the second quarter of fiscal 2000 from $234,000 in fiscal 1999. In
the second quarter of fiscal 1999 extensive development was being performed on
the Accu Touch software; this was not occurring in the second quarter of fiscal
2000. The decrease in research and development expense in the 2000 period was
within the Company's operating plan.
INTEREST.
Interest expense increased 85.4%, or $63,000, to $137,000, in the
second quarter of fiscal 2000 from $74,000 in the second quarter of fiscal 1999.
The increase was within the Company's operating plan and resulted from interest
on U.S. bank loans.
AMORTIZATION.
Amortization decreased 22.4%, or $18,000, to $63,000 in the second
quarter of fiscal 2000, from $81,000 in the second quarter of fiscal 1999
period. The decrease was anticipated as Lynro Manufacturing goodwill is now
fully written off.
REVALUATION OF TRADE-IN EQUIPMENT.
The trade-in inventory write off amounted to $131,000 in the second
quarter of fiscal 2000, which is equal to the same amount that was written off
in the second quarter of fiscal 1999. The trade-in inventory write down will
continue for the next two consecutive quarters.
EARNINGS (LOSS) PER SHARE.
The Company's earnings for the second quarter ended December 31, 1999
were $280,000 or $0.02 per share before a write down of $131,000 for trade-in
inventory and provision for income taxes of $29,000. The earnings for the second
quarter ended December 31, 1999 after the trade-in inventory write down and
provision for income taxes was $120,000 or $0.01 per share compared to a loss of
$954,000, or $(0.05) per share for the same period for fiscal 1999. The increase
in earnings per share for the 2000 fiscal period as compared to the 1999 fiscal
period was attributable to increases in revenue from sales of products, offset
by increases in cost of sales and operating expenses, selling, administrative
and general expense, and interest expense and enhanced by decreases in research
and development and amortization.
YEAR TO DATE DECEMBER 31, 1999 COMPARED TO YEAR TO DATE DECEMBER 31, 1998.
SALES AND OPERATING INCOME.
Year to date sales and other income for the six months ended December
31, 1999 increased 67.9% or $4,570,000, to $11,302,000 from $6,732,000 for the
six months ended December 31, 1998. The increase in sales was due to new account
sales and the continued expansion of the customer base.
<PAGE> 11
COST OF SALES AND OPERATING EXPENSES.
Year to date cost of sales and operating expenses for fiscal period
2000 increased 85.7% or $2,745,000, to $5,950,000 from $3,205,000 for fiscal
1999. In fiscal 2000, year to date cost of sales and operating expense as a
percentage of gross revenues increased to 52.6% from 47.6% in fiscal 1999. This
increase is due to lower gross margin on the voter registration product, offset
by more efficient utilization of labor.
SELLING, ADMINISTRATIVE AND GENERAL EXPENSES.
Year to date selling, administrative and general expenses for fiscal
2000 increased 15.1% or $457,000, to $3,494,000 from $3,037,000 for fiscal 1999.
The increase was due largely to increased sales efforts and an increase in
manpower and associated costs thereon in the sales, field support and
administrative areas.
RESEARCH AND DEVELOPMENT EXPENSES.
Year to date research and development expenses for fiscal 2000
decreased by 50.3%, or $306,000, to $303,000 from $609,000 for fiscal 1999. In
fiscal 1999 extensive development was being performed on the Accu Touch
software; this is not occurring in fiscal 2000. The decrease in research and
development expense in the 2000 period was within the Company's operating plan.
The Company continues to fund research and development in order to offer leading
edge products to the market place.
INTEREST.
Year to date interest expense for fiscal 2000 increased 157.8% or
$174,000, to $284,000 from $110,000 in fiscal 1999. The increase was within the
Company's operating plan and resulted from interest on U.S. increased bank
loans.
AMORTIZATION.
Year to date amortization for fiscal 2000 decreased 17.2%, or $35,000,
to $171,000 from $206,000 in fiscal 1999. The decrease was anticipated as Lynro
Manufacturing goodwill is now fully written off.
REVALUATION OF USED EQUIPMENT.
Year to date trade-in inventory write off for fiscal 2000 was
$262,000, the same as in fiscal 1999. The trade-in inventory write down will
continue for the next two consecutive quarters. At that time the value of the
trade-in inventory is anticipated to be nil.
<PAGE> 12
EARNINGS (LOSS) PER SHARE.
The Company's year to date earnings for fiscal 2000 were $1,099,000 or
$0.06 per share before a write down of $262,000 for trade-in inventory and
provision for income taxes of $49,000. The year to date earnings for fiscal 2000
after the trade-in inventory write down and provision for income taxes was
$788,000 or $0.04 per share compared to a loss of $698,000 or $(0.05) per share
for the same period for fiscal 1999. The increase in earnings per share for the
2000 fiscal period as compared to the 1999 fiscal period was attributable to
increases in revenue from sales of products, offset by increases in cost of
sales and operating expenses, selling, administrative and general expense, and
interest expense and enhanced by decreases in research and development and
amortization.
LIQUIDITY AND CAPITAL RESOURCES.
The Company uses a combination of internally generated funds and bank
borrowings to finance its working capital requirements, capital expenses and
operations. During the period ended December 31, 1999, the Company generated
most of its funding through cash flow.
At December 31, 1999 the Company's cash totaled $1,490,447, an
increase of $187,573 from September 30, 1999. Accounts and contracts receivable
decreased to $13,290,000 at December 31, 1999 from $15,380,000 at September 30,
1999. Due to the nature of the Company's business, timing of payments on large
contracts may vary significantly, causing significant variances from period to
period in the mix of cash, other liquid funds, accounts receivable and contracts
receivable. Inventory figures may vary significantly, depending upon delivery
dates for voting systems. At December 31, 1999, inventory amounted to
$5,574,000, an increase of $533,000 from September 30, 1999. The increase in
inventory is within the Company's operating plan.
The Company has contractual arrangements with customers whereby credit
terms may be extended for the amounts due for voting systems. At December 31,
1999, agreements receivable less current portion amounted to $11,000, a decrease
of $53,000 from September 30, 1999. These loans are repaid at varying terms and
with varying interest rates determined on a case by case basis. Historically,
the Company has not experienced any default in connection with loans due from
customers.
The Company currently has four loans outstanding, three with Western
Bank, Albuquerque, New Mexico and one loan with Hibernia National Bank of Texas,
McKinney, Texas. One loan in the amount of $904,950 is secured by a specific
Global USA contract in the amount of $1,291,465 This loan bears interest at
Western Bank of Albuquerque Prime Rate plus 1% and is due January 31, 2000 and
will be renegotiated. A second loan in the amount of $112,000 is secured by a
specific Global USA contract in the amount of $82,390. This loan bears interest
at Western Bank of Albuquerque Prime Rate plus 1% and is due May 27, 2000. A
third loan in the amount of $250,113 is secured by an agreement receivable
amounting to $175,151. This loan bears interest at Western Bank of Albuquerque
Prime Rate plus 1% and is due November 15, 2000. The loan with Hibernia National
Bank of Texas in the amount of $3,600,000 is secured by a blanket assignment of
accounts receivable, and bears interest at The Wall Street Journal Prime Rate
and is due January 12, 2000. This loan is currently being renegotiated. The
loans are used for working capital.
<PAGE> 13
During the Company's current and two most recently ended fiscal years,
the Company has not experienced any material impact from inflation or changing
prices on its net sales and revenues or on income from continuing operations.
Management believes that financial resources, including internally
generated funds and available bank line of credit and borrowings will be
sufficient to finance the Company's current operations and capital expenditures,
excluding acquisitions, for the next twelve months.
YEAR 2000 ISSUE
DESCRIPTION OF THE ISSUE
The Y2K issue refers to the ability of certain date - sensitive
computer chips, software, and systems to recognize a two - digit data field as
belonging to the 21st century. Mistaking "00" for 1900 or any other incorrect
year could result in a system failure or miscalculations causing disruptions to
operations, including manufacturing, a temporary inability to process
transactions, send invoices, or engage in other normal business activities. This
is a significant issue for most, if not all, companies, with far reaching
implications, some of which cannot be anticipated or predicted with any degree
of certainty. The Y2K issue may create unforeseen risks to the Company from its
internal computer systems as well as from computer systems of third parties with
which it deals. Failures of the Company or third parties' computer systems could
have a material adverse impact on the Company's ability to conduct its business.
YEAR 2000 ASSESSMENT
Management of the Company has been assessing the magnitude of the Y2K
issue with respect to the Company's products, business, suppliers and customers.
In conjunction with the Company's assessment of Y2K issues which might affect
it, the Company formulated plans to address the Y2K issue, including
contingencies to address unforeseen problems.
INTERNAL BUSINESS
Management has reviewed all internal business computer systems to
ensure that these systems will be Y2K ready. As best the Company can determine
all systems are Y2K ready. As of February 3, 2000 no problems with any such
systems had arisen.
<PAGE> 14
SUPPLIERS
The major suppliers to the Company are component parts distributors.
Often the Company sources its products and manufacturing services from multiple,
competing vendors. The Company has contacted all vendors and has made a list of
whether each vendor is Y2K compliant, and, if not, alternate sources of product
have been located. The only sole source supplier's product is not date
sensitive, and the Company has made plans to have a sufficient inventory to
cover any delays that the supplier might have in delivering product. There can
be no assurance that the systems of other companies on which the Company relies
will be Y2K ready on a timely basis and will not have an adverse effect on the
operations of the Company. As of February 3, 2000 no problems with any such
systems had arisen.
PRODUCTS
The Company completed an assessment of the magnitude of the Y2K issue
with respect to the Company's products. The Company's AccuVote - OS and AcuVote
- - TS systems are designed to be Year 2000 compliant, which is generally a
requirement in requests for proposals for voting systems, and the Company does
not expect any material problems or difficulties to arise out of its systems. As
of February 3, 2000 no problems with any such systems had arisen.
COSTS
The Company does not expect the cost of its Y2K assessment, including
both incremental spending and reallocated resources, to be material. The current
assessment does not include potential costs related to any customer or other
claims or the cost of internal software and hardware being replaced in the
normal course of business. This assessment is subject to change because there is
no uniform definition of "readiness for Y2K". All customer situations cannot be
anticipated, particularly those involving third party products; therefore, the
Company may see claims as a result of the Y2K transition. These claims, if
successful, could have a material adverse impact on future results. As of
February 3, 2000 the Company had no knowledge of any such claims being asserted
against it.
CUSTOMERS
The Company has communicated with its customers to determine the
extent of the Company's vulnerability to the failure of third parties to
premeditate their own Y2K issues. All of the Company's customers are
governmental entities, and, as such, all customers have certified that they are
Y2K compliant. The Company cannot predict the effect of a lack of Y2K compliance
by its customers on the Company. The inability of a governmental unit to
generate data needed in order to conduct elections or to interface with the
Company's voting systems, or other problems, could prevent the customer from
using the Company's systems or could result in disruption of the election
process. The Company is unable to predict the impact this could have on its
business and revenues or the extent of any liability to third parties the
Company might incur, although the impact or liability could be materially
adverse to the Company and its business. As of February 3, 2000 the Company had
no knowledge of any such claims being asserted against it.
<PAGE> 15
COST ESTIMATES
The Company has not been required to incur costs for Y2K remedial work
and has not set aside any contingency fund to deal with any contingencies, which
may arise. The costs for Y2K compliance are based upon management's best
estimates, which were derived from numerous assumptions about future events,
including third-party modification plans and other factors. However, the Company
cannot guarantee that those estimates will be accurate and actual results could
differ materially from those plans. Specific factors that might cause material
differences include, but are not limited to, the availability and cost of
personnel trained in this area and the ability to identify and correct all
relevant computer codes. As of February 3, 2000 no problems with any such
systems had arisen.
RESULTS
The Company did not experience any significant Y2K problems, but,
nevertheless, will continue to monitor and assess this problem for the
foreseeable future.
<PAGE> 16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
No material legal proceeding is pending or, to the knowledge of the
Company, threatened by any governmental agency, against the Company.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
The following items were submitted to a vote and approved at the
Annual General Meeting held on October 28, 1999.
A. Determine the number of the Board of Directors of the
Company at five.
B. Incentive Stock Options
To authorize the directors to adopt a stock option
plan providing for the future grant of stock options
and to ratify and approve options previously granted
to insiders of the Company, and to amend options held
by insiders of the Company during the ensuing year.
C. Appointment of Auditor
Staley, Okada, Chandler & Scott, Chartered
Accountants
D. Election of Directors
1. David H. Brown
2. George B. Cobbe
3. P. Nicholas M. Glass
4. Clinton H. Rickards
5. Howard T. Van Pelt
<PAGE> 17
The following were the results of the vote of the shareholders at the
Annual General Meeting held on October 28, 1999.
<TABLE>
<CAPTION>
FOR AGAINST WITHHELD ABSTAINED NOT VOTED
<S> <C> <C> <C> <C> <C>
Resolution A. 7,253,334 167,002 0 7,564 0
Resolution B. 4,503,334 282,102 0 48,564 2,593,386
Resolution C. 7,344,207 17,102 153,827 12,764 0
Resolution D. 1. 7,281,798 0 143,100 3,002 0
Resolution D. 2. 7,281,798 0 143,100 3,002 0
Resolution D. 3. 7,281,798 0 143,100 3,002 0
Resolution D. 4. 7,269,798 0 155,600 3,002 0
Resolution D. 5. 7,262,498 0 162,400 3,002 0
</TABLE>
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
3 (1) Memorandum and Articles of Incorporation, as amended.
4 (1) Parts 7, 10, 12, and 27 of the Memorandum and Articles
of Incorporation, as amended, set forth in Exhibit 3 (1)
11 (1) Computation of per-share income Treasury Stock Method of
the Company filed electronically herewith.
27 Financial Data Schedule filed electronically herewith.
(1) Incorporated by reference to the Company's Form 10-SB filed with
the commission on July 31, 1998.
<PAGE> 18
B. Reports on Form 8-K
The Company filed no reports on Form 8-K during the second
quarter of Fiscal 2000.
<PAGE> 19
Signature
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on behalf by the undersigned, hereunto duly authorized.
Dated: February 3, 2000
Global Election Systems Inc.
By: /s/ Howard T. Van Pelt
---------------------------
Howard T. Van Pelt, President,
Chief Executive Officer and
Chief Financial Officer
<PAGE> 20
INDEX TO EXHIBITS
3 (1) Memorandum and Articles of Incorporation, as amended.
4 (1) Parts 7, 10, 12, and 27 of the Memorandum and Articles of
Incorporation, as amended, set forth in Exhibit 3 (1)
11.1 Computation of per-share income Treasury Stock Method of
the Company filed electronically herewith.
27 Financial Data Schedule filed electronically herewith.
(1) Incorporated by reference to the Company's Form 10-SB filed with
the commission on July 31, 1998.
<PAGE> 1
EXHIBIT 11.1
GLOBAL ELECTION SYSTEMS INC.
Computation of Per-Share Income
Treasury Stock Method
<TABLE>
<CAPTION>
Period Ended Period Ended
December 31, 1999 December 31, 1998
Six Months Six Months
<S> <C> <C>
Weighted average number of share outstanding 18,550,795 18,483,264
Total common and common equivalent shares 20,134,129 20,123,699
Net Income (Loss) for the period $ 787,965 $ (698,447)
Weighted average number of share outstanding 18,550,795 18,483,264
Earnings per share - basic $ 0.04 $ (0.04)
Net Income for the period $ 787,965 $ (698,447)
Total common and common equivalent shares 20,134,129 20,123,699
Earnings per share - fully diluted $ 0.04 $ N / A
Earnings per share:
</TABLE>
Basic earnings per share is computed by dividing the net income for the period
by the weighted average number of common shares outstanding for the period.
Fully diluted earnings per share is computed by dividing the net income for the
period by the common and common equivalent shares outstanding for the period.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,490,447
<SECURITIES> 0
<RECEIVABLES> 13,289,924
<ALLOWANCES> 0
<INVENTORY> 5,573,512
<CURRENT-ASSETS> 20,951,745
<PP&E> 985,897
<DEPRECIATION> (621,402)
<TOTAL-ASSETS> 21,990,141
<CURRENT-LIABILITIES> 9,629,176
<BONDS> 0
0
0
<COMMON> 10,217,262
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 21,990,141
<SALES> 11,279,157
<TOTAL-REVENUES> 11,301,514
<CGS> 5,950,042
<TOTAL-COSTS> 9,918,162
<OTHER-EXPENSES> 3,797,264
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 284,141
<INCOME-PRETAX> 836,861
<INCOME-TAX> 48,896
<INCOME-CONTINUING> 787,965
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 787,965
<EPS-BASIC> .04
<EPS-DILUTED> .03
</TABLE>
