<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-KSB
                                   (Mark One)

[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act
    of 1934
For the Fiscal Year Ended June 30, 1999

[ ] Transition report under Section 13 or 15(d) of the Exchange Act of 1934
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)

Securities registered under Section 12(b) of the Exchange Act:

None

Securities registered under Section 12(g) of the Act:

COMMON STOCK, WITHOUT PAR VALUE

         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)

<PAGE>   2

         Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation 405 is not contained 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 amendments to this Form 10-KSB. [ ]

         The issuer's revenues for its most recent fiscal year were $18,310,147.

         The aggregate market value of the voting stock held by non-affiliates
of the registrant at June 30, 1999 was C$48,981,731 (based on the closing sale
price on the Toronto Stock Exchange on June 30, 1999 of C$2.65). This
calculation does not reflect a determination that persons are affiliates for any
other purposes.

         At June 30, 1999, there were 18,483,672 of the registrant's voting
shares issued and outstanding.

         Documents incorporated by reference: None

         Transitional Small Business Disclosure Format (check one):
                                                                Yes [ ]  No  [X]


<PAGE>   3

                          GLOBAL ELECTION SYSTEMS INC.
                                   Form 10-KSB
                     For the Fiscal Year Ended June 30, 1999

                                TABLE OF CONTENTS

<TABLE>
<S>               <C>
PART I

         ITEM 1.  DESCRIPTION OF BUSINESS
         ITEM 2.  DESCRIPTION OF PROPERTY
         ITEM 3.  LEGAL PROCEEDINGS
         ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
PART II

         ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
         ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATION
         ITEM 7.  FINANCIAL STATEMENTS
         ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
                   AND FINANCIAL DISCLOSURE

PART III
         ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
                   COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
         ITEM 10. EXECUTIVE COMPENSATION
         ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
         ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
         ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
         SIGNATURES
</TABLE>

<PAGE>   4


                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

COMPANY OVERVIEW

Global Election Systems Inc. (the "Company") is a leading manufacturer and
distributor, through its wholly owned United States subsidiary, Global Election
Systems, Inc., ("Global USA") of state of the art computerized electronic
election management systems. The Company's signature products are the ES-2000
AccuVote optical scan voting system ("AccuVote - OS"), and the paperless
AccuVote touch screen voting system (AccuVote - TS"), using a special voter
access card ("Smart Card"). The AccuVote - OS voting system and the AccuVote -
TS voting system are stand-alone voting systems. They are both classified as
precinct count and central accumulation systems and have functionality that
permits management control of the voting process from ballot preparation to
verification of results. The AccuVote - TS which is a "paperless DRE" (Direct
Record Equipment), was added to the Company's product line in 1997 when the
Company acquired all of the assets of I-Mark Systems, Inc.

The Company was formed in British Columbia, Canada on November 22, 1991. Global
USA was incorporated in Delaware in 1991. The address of the Company's executive
offices is 1611 Wilmeth Road, McKinney, TX 75069; and its telephone number is
(972) 542-6000. The Company's no par value common stock ("Common Stock") is
traded on the Toronto Exchange under the symbol GSM. Reference in this document
to the "Company" includes its wholly owned subsidiary, Global USA, unless the
context otherwise requires. All funds are reported in U.S. dollars unless
otherwise specified. Canadian funds are designated by "C$".

INDUSTRY OVERVIEW

Elections are held under the auspices of various governmental systems,
especially those in democratic countries. Until the 1960's, almost all elections
were conducted with manually counted paper ballots and lever-activated
mechanical voting machines. Lever machines, which were bulky, heavy and
consisted of over 800 moving parts, required significant maintenance and were
expensive to warehouse. This method of voting and tallying votes, in addition to
being cumbersome and inefficient, was susceptible to inaccuracies, significant
time delays, and other difficulties. In 1964, the Votomatic punch card voting
system was patented. While this system has not been actively manufactured since
the mid -1980's, it remains the most widely used system in North America. In the
early 1980's, optical scan voting systems were introduced and began to penetrate
the election equipment marketplace on a relatively small scale.

In recent years, the election industry has begun to computerize in response to
increased public acceptance and familiarity with using computers. Computers
offer the opportunity to count ballots accurately and quickly. Additionally,
computer technology has created the potential for more convenient methods of
voting and has provided avenues to encourage more voter participation. Service
and support have also become increasingly important components of the newer,
technologically advanced voting systems. Even though technology is being
accepted more readily, many voting systems being marketed continue to lag in the
application of state-of-the-art computer technology, and have lacked durability
and flexible functionality.

<PAGE>   5

GLOBAL ELECTION SYSTEMS' STRATEGY

As previously noted, the Company is a leading manufacturer and distributor of
state-of-the-art computerized electronic voting systems. Only three major
election system companies actively market and sell products in the United States
and Canada, and sales are a matter of public record. The Company capitalizes on
its advanced product design, and customer support to market its election systems
to voting jurisdictions throughout North America. Its objective is to become a
leading supplier of comprehensive voter registration and election systems to
governments in the United States, Canada, and around the world. The Company
believes that the continuing need for accurate, efficient election systems and
the increasingly recognized need for the voting process to be highly voter
accessible and simple to use should provide numerous opportunities for the
Company to expand the scope of its activity.

* Expand Market Penetration Through Internal Growth

The Company has achieved growth in its market and has expanded its market
through continual innovation in and expansion of its product line and aggressive
marketing of its election systems to increasingly populous voting jurisdictions.
The Company has increased its market share by providing its proven voting
systems plus election-related products such as voter registration systems. It
also seeks avenues to apply its standard products to other governmental related
processes such as vehicle registration and welfare systems.

* Compliment Internal Growth Through Acquisition or Selling Arrangements

The Company has developed its business, in part, through acquisition of an
election products company. It has also entered into marketing agreements with
other companies that produce leading edge technology products that compliment
the Company's standard product line. These acquisitions and marketing agreements
have provided opportunities for the Company to expand its customer base into
more populous jurisdictions.

* Continued Technology Innovation and Integration

The Company maintains an active, on-going research and development program to
improve product performance and provide innovative solutions to the needs of the
voting jurisdictions and other governmental applications. For example, while
continually upgrading its existing products, the Company has developed a
comprehensive Windows NTR-based application software program to anchor its
product line. It is currently in the process of adapting biometric authorization
technology to increase voter security and pave the way for Internet voting. The
Company is also pursuing methods of providing unattended voting opportunities in
much the same manner as ATM's provide banking services to the general public.
All of the products offered by the Company are designed to integrate the entire
election process, from voter registration and election management through
tabulation and reporting of election results.

* International Sales

The Company seeks to sell its full line of election-related systems throughout
North America and globally. The Company believes, based on past experience, that
the market for election systems in Central and South America is expanding.

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* Customer Support

Customer support is a significant part of the Company's marketing strategy and
its system sales. The Company intends to continue its commitment to, and to
enhance, its pre-election through post-election assistance to its customers. It
offers service contracts for all aspects of the election process, including
election management training, assistance with the conduct of elections,
programming services plus standard extended warranty and support agreements.

GLOBAL ELECTION SYSTEMS' PRODUCTS

The products currently offered by the Company include optical scan and touch
screen voting systems, plus related voter registration systems supplied through
cooperative marketing agreements with third party companies.

State-of-the-Art Computerized Electronic Voting Systems

The Company's signature product is its patented AccuVote ES-2000 Election
System. The AccuVote system, patented in Canada and the United States, automates
all facets of election administration from initial ballot layout through
certification of results. The ballot-processing unit optically scans marked
voted paper ballots and produces printed precinct level results immediately
after the polls close. Totals are captured on a memory card and transferred to
the counting center or sent from the precinct tabulator directly to the host
computer over a modem using common carrier lines. Designed for security and
integrity, the ballot-processing unit is compact and lightweight and is easily
transported to and from the polling place.

GEMS application software automates the entire election administration cycle
from ballot layout through certification of results. GEMS software is used to
define all election-specific parameters.

Direct Record Voting System. The Company offers additional, technologically
advanced election products with its innovative AccuVote - TS (touch screen)
system. The system is anchored by smart card technology that stores voter
identification information, allowing the automatic selection of any ballot style
for any voter at any polling place. The Voter Access Card can permit the
placement of voting stations in places where people assemble, like shopping
malls, rather than in specific precinct locations.

AccuVote - OS and AccuVote - TS can be used as a blended system, permitting
flexibility in solving the particular problems and requirements of a voting
jurisdiction. For instance, AccuVote - TS can be used for early voting, where
its capacity to store all ballot styles allows early voters from all precincts
to insert Smart Cards into the same unit to select their particular precinct
ballot. AccuVote systems can be used at the precinct level during the election.
The vote tallies from both the AccuVote - OS and AccuVote - TS units are then
sent to a host computer to be combined to determine the election result.

AccuVote - OS and AccuVote - TS units have a list price of approximately $6,500
per unit, to which quantity discounts and additional products may be applied,
depending upon the needs and size of the election district.

<PAGE>   7

Other Product Arrangements. The Company occasionally makes arrangements with
companies producing other products that are complementary to and enhance the
Company's product offering to a particular voting jurisdiction. For instance, in
King County, Washington, the Company is providing, through a license, additional
voter registration software. These arrangements are generally made on a
case-by-case basis, depending on the need and size of a voting jurisdiction.

Backlog. At fiscal year end June 30, 1999, the Company had a backlog of
approximately $2,280,000, of orders for its AccuVote - OS, AccuVote - TS and
Smart Card products. This backlog compared to a backlog of $950,000 on June 30,
1998. Backlogs are principally the result of customer-scheduled shipment dates,
which are usually a period of months after the contract date and which may also
be in installments. The increase in the backlog is attributable primarily to
increased sales and to the timing of delivery schedules. All backlog orders are
expected to be filled during fiscal year 2000.

CUSTOMER SUPPORT SERVICES

The Company emphasizes continuing service support to its customers. These
services begin with initial equipment acceptance and testing and continue
through on-site Election Day and election night support. Some election-specific
services provided by the Company are pre-election consultation, ballot
design/layout programming assistance, precinct worker training, voter education
assistance, system testing and verification, and on-site Election Day and
election night support.

CUSTOMERS

The Company's customers include over 700 voting jurisdictions in the United
States and Canada. Recent contract awards include El Paso County, Colorado,
Fresno County, California and Brevard County, Florida. During the twelve months
ended June 30, 1999, El Paso County, Colorado and Fresno County, California
together, accounted for approximately 20% of Company revenues. During the
fiscal year ended June 30, 1998, King County, Washington accounted for
approximately 20% of the Company's revenues. During the fiscal year ended June
30, 1997 (a short year end), Jefferson County, Kentucky accounted for
approximately 30% of the Company's revenues.

SALES AND MARKETING

The Company markets its products both domestically and internationally to
governments. Because of the close involvement of the Company in the use of its
election systems by customer governments and the Company's desire to maintain a
high level of contact and service, sales are made by salaried, commissioned
salespersons employed by the Company and assigned to various territories.
Salespersons work directly with the election officials in each Territory to
close and implement sales. At June 30, 1999, the Company employed 17 of these
salespersons, who were assigned to specific territories in the United States and
Canada. The Company also has six resellers, which are established in the
election business and have contracts for specific territories. Sales outside the
United States and Canada are supervised by the Company's sales staff. The
Company plans to use in-country representatives in these countries, but
currently has none.

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Payment for sales is typically made in United States and Canadian dollars. As a
result, the Company's actual receipts are subject to fluctuation based upon
currency exchange rates between the United States and Canada and, should the
Company accept payment in another currency, to the fluctuations in that
currency's exchange rate.

The Company, because it sells election products and services, could tend to
operate on a two-year business cycle because in the United States, a
substantially larger number of elections for public office are held in
even-numbered years than in odd-numbered years. As a result, revenues and
underlying production and support activities for a majority of the Company's
Products and services could significantly increase or decrease in accordance
with the election cycle. However, because the Company's fiscal year ends June
30, and because many voting jurisdictions now attempt to purchase election
products and services following an election, the Company believes that it has to
some extent ameliorated the possible effect of the United States' biennial
election cycle. Also, in Canada, elections are conducted on an irregular
schedule, which differs in and among national, provincial and municipal
elections. Thus, the Company's Canadian business may also be expected to
ameliorate any United States cyclically.

RESEARCH AND DEVELOPMENT

The Company expended approximately $857,057, $483,437 and $184,414 for research
and development during the fiscal years ended June 30, 1999, June 30, 1998, and
June 30, 1997, (a short year end) respectively. All of the Company's in-house
research efforts are conducted at its facilities in Vancouver, Canada, and
McKinney, Texas.

COMPETITION

The election system market is defined by the voting needs and specifications of
voting jurisdictions. In that regard, sales, and therefore competition, are
directed to Secretaries of State and election officials in each voting
jurisdiction who issue requests for proposals in which desired specifications
are set forth. Responsive bids are submitted to these officials and other
specified reviewers for their evaluation and the selection of the company
awarded the project. Competitive factors include accuracy, security and speed of
voting and tallying of votes, ease of use of the system, flexibility in ballot
preparation, cost and customer support. Because of its ability to offer a
complete, state of the art, integrated election system which can be tailored to
the customer's needs, the Company believes it is able to compete in all major
areas of the election systems market. See "Risk Factors: Global competes with
larger, well-established companies" for additional information on competitors.

In North America, the Company competes primarily with moderately sized companies
(some of which are affiliates of much larger companies) in the overall election
system market and with some small companies who offer some aspect otherwise
included in the overall system, such as voting equipment. The Company's largest
competitors in the North American election system market are Sequoia Pacific
Systems, Inc. ("Sequoia"), a subsidiary of Jefferson Smurfit, and ES&S ("ESS").
ESS and Sequoia offer local and state election management systems, optical scan
ballot tallying and reporting, and election information management software.
Microvote, Inc., of Indianapolis, offers a direct record voting system. The
Company also competes with a number of companies, including those mentioned
previously, which produce and sell products designed to provide specific
election-related functions.

<PAGE>   9

MANUFACTURING

The Company assembles its AccuVote - OS product at its recently-opened plant in
McKinney, Texas, and contracts for the assembly of its AccuVote - TS system.
With the exception of its visible light optical reader (which it obtains from
another source but could replace with an in-house product) and its ballot box
(for which the Company owns the molds and could obtain an alternate
manufacturer), the Company obtains components for its products largely from
various off-the-shelf vendors of electronic components, any of which could be
replaced by another vendor should the need present itself.

INTELLECTUAL PROPERTY

PATENTS

The Company holds the United States and Canadian patents, the rights to which it
purchased in 1991, on its AccuVote ES-2000 system ("Patent"). The United States
patent expires on April 24, 2006. Except for the Patent, the Company has not
sought patent protection for its technology, even though it believes that some
of its processes and equipment are proprietary to it. The Company has relied
upon industrial know-how, and trade secret laws. The Company cannot assure that
its proprietary processes and equipment will provide it with sufficient
competitive advantage to overcome its lack of patent protection, nor can it
assure that others will not independently develop equivalent or superior
products or technology. Also, the Company cannot assure that it will be able to
establish trade secret protection or those trade secret obligations will be
honored. To the extent that consultants, employees and other parties apply
technological information developed independently by them or others to Company
projects, disputes may arise as to the proprietary rights to that information,
which may not be resolved in favor of the Company. It is also possible that
litigation may be necessary to enforce the Company's proprietary rights, to
protect its trade secrets, to determine the validity and scope of the
intellectual property rights of others or to defend against claims of
infringement. Litigation of that nature could result in substantial costs and
diversion of resources and could have a material adverse effect on the Company's
business, financial condition and results of operation.

Patent applications in the United States are not disclosed until the patents
issue; therefore, patent applications could have been filed which relate to the
Company's processes and equipment. The Company does not believe that it
infringes any patents of which it is aware; however, it cannot assure that
patent infringement claims will not be asserted against the Company. These
claims, if asserted, could have a material adverse effect on the Company's
business, financial condition or results of operation. If infringement or
invalidity claims were to be asserted against the Company, litigation could
become necessary to defend the Company against those claims. In certain
circumstances, the Company might choose to seek to obtain a license under the
third party's intellectual property rights, which the Company cannot assure
would be available, if at all, on terms acceptable to the Company.

<PAGE>   10

TRADEMARKS AND TRADENAMES

The Company has no registered trademarks or trade names, but claims proprietary
rights to AccuVote and Global Election Systems. Trademark registration
applications have been filed for AccuVote and Global Election Systems in the
United States, but no assurance can be given that these trademarks will issue.

GOVERNMENT REGULATION

The Company's products are sold almost exclusively to governmental units. The
Company's AccuVote - OS and AccuVote - TS election products meet or exceed
United States Federal Election Commission ("FEC") standards and are required to
be, and are, tested to FEC standards by Wylie Labs, the industry's designated
Independent Testing Authority. In the United States, election systems must also
be certified in each State where they are used. Currently, one or the other or
both of the Company's systems are certified in 35 States. Canada does not
require testing and certification.

Each governmental unit to which the Company markets its products specifies its
own particular requirements for system operation. Without exception, the
Company's customers seek, and require, tamper-proof, efficient, confidential and
expeditious election equipment and systems. These requirements and others
typically are embodied in the customer's Request for Proposal ("RFP"), issued to
solicit bids from the Company and others. Because the Company must be able to
respond with complying bids to RFP's, the Company must continually monitor,
adapt to, anticipate and design for changes in specifications and in the
expectations that governmental units have for efficient systems. For example, in
the United States, promoting and increasing voter participation is a concern of
many jurisdictions. As a result, enhancing convenience and opportunity to vote
are increasingly important. The Company's products are a direct response to
these changing needs. To the extent that the Company is or becomes unable to
anticipate or respond to the concerns of jurisdictions, its ability to submit
responsive bids to RFP's will be impeded.

Because the Company is incorporated and does business in British Columbia and
its subsidiary, Global USA, is incorporated in the State of Delaware and does
business in the United States and internationally, the Company as a whole is
subject to both Canadian and United States tax laws. Additionally, the Company
must comply with the taxation, export and import, currency, and other laws of
each country in which it sells products or otherwise does Business. These laws
can be burdensome. To the extent that the Company is unable or unwilling to
comply, its business in a particular country may be expected to be materially
adversely affected.

WARRANTIES

Key to all elections is the reliability of the system, including the voting
equipment, accuracy of voting results, and accuracy of tallying of results. The
Company's equipment is designed to optimize this reliability. The Company
warrants its election systems for a period of one year from purchase, unless
another period is specified by the RFP from a voting jurisdiction. The Company
self-insures against warranty claims. The Company has never been the subject of
any material warranty claims and has generally repaired or replaced
malfunctioning equipment in the pre-election stage; however, if a claim were to
be made and to prevail, a lack or insufficiency of insurance coverage could have
a material adverse effect on the Company. However, all contracts with customers
require insurance to be in place before execution of the contract.

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ENVIRONMENTAL COMPLIANCE

The Company operates a manufacturing plant in McKinney, Texas. Although its
manufacturing consists largely of parts assembly, the Company is required to
comply with United States and Texas environmental and Occupational Safety and
Health Act requirements applicable to electronics manufacturing operations in
general, including, for example, storage, marking, and disposal of various
products used for cleaning parts to be assembled. Although the Company takes
appropriate measures to comply with these requirements, violations can occur.
The New York Department of Environmental Conservation cited the Company once for
alleged violation of certain storage and marking, and disposal requirements
applicable to two of these substances used at its former New York manufacturing
facility. The Company responded immediately to correct the situation. The
Company believes that its compliance programs are adequate, but cannot assure
that no problems will arise in the future, some of which could have a material
adverse impact on the Company and its business.

EMPLOYEES

As of June 30, 1999, the Company had approximately 72 employees, of whom all
were full-time, at its three locations in Canada and the United States. Of the
full-time employees, 11 were in executive and administrative positions, 17 were
in sales, marketing and customer relations, 9 were in research and development,
21 were in manufacturing, and 14 were in field customer support.

RISK FACTORS

In addition to the matters set forth in the foregoing discussion of the
Company's business, the operations and financial performance of the Company are
subject to the risks, among others, described below.

FLUCTUATIONS IN OPERATING RESULTS MAY AFFECT REVENUES IN NON-ELECTION YEARS.
Sales of election products and services tend to occur on a two-year business
cycle because in the United States a substantially larger number of elections
for public office are held in even-numbered years. As a result, revenues and
underlying production and support activities for a majority of Global's products
and services could significantly increase or decrease in accordance with these
cycles. Some of the reasons for these fluctuations, many of which are beyond
Global's control, include:
         The timing of customer orders;
         Delays in shipment due to component shortages or defects, which must be
         remedied;
         Production problems;
         Cancellation of orders; and
         Regulatory changes.

For additional reasons for certain fluctuations see "Description of Business
Sales and Marketing".

<PAGE>   12

GLOBAL'S MANAGEMENT AND FINANCIAL CONTROLS, PERSONNEL AND OTHER CORPORATE
SUPPORT SYSTEMS MAY NOT BE ADEQUATE TO INTEGRATE FULLY ACQUIRED BUSINESSES AND
DISTRIBUTORSHIPS. One of the Company's strategies is to increase its scope of
business and the product lines it offers by acquiring other election businesses
and products or entering into distributorship or similar arrangements with other
producers. The company cannot assure that its management and financial controls,
personnel, and other corporate support systems will be adequate to manage the
increase in the size and diversity of scope of the Company's operations as a
result of any such acquisition or distributorship. Also, the Company cannot
assure that the acquisition or distributorship arrangement will be accretive to
earnings. By its nature, a distributorship does not give the Company complete
control over the distributed products' manufacturing, shipment or quality, all
of which are the responsibility of the manufacturer. Problems in any of these
areas should they occur, could materially adversely affect the Company and its
business.

If and when appropriate acquisition opportunities, some of which could be
material, arise, the Company intends to pursue them actively. No assurance can
be given that any acquisition by the Company will or will not occur, that if
such an acquisition does occur that it will not, despite the Company's efforts,
materially and adversely affect the Company, or that any such acquisition will
be successful in enhancing the Company's business.

GLOBAL'S PRODUCTS ARE DEPENDENT UPON SATISFACTORY TESTING AND CERTIFICATION
BEFORE SALES MAY BE MADE IN A VOTING JURISDICTION. In the United States, the
Company's ability to respond to RFP's from voting jurisdictions and to make
sales to those jurisdictions is dependent upon satisfactory completion of
testing of the AccuVote - OS and AccuVote - TS (and similar future products or
variations) by Wyle Labs, the industry's designated Independent Testing
Authority and upon certification by each State. If for some reason not now known
or anticipated, a product did not test satisfactorily, the Company's business
could be materially adversely affected to the extent it was unable to offer and
sell that product. Similarly, the failure of a product to be certified in a
State would prevent the sale of the product in that State and the voting
jurisdictions in that State.

Because the Company deals with governmental authorities in making offers and
sales of its products, it can also be adversely affected by changes in those
authorities, revisions to or promulgation of new requirements and standards in a
State, and unanticipated or unforeseen impediments in the bidding, award and
implementation process.

POTENTIAL YEAR 2000 PROBLEMS COULD MATERIALLY ADVERSELY AFFECT GLOBAL AND ITS
BUSINESS. The Year 2000 ("Y2K") issue refers to the inability of certain
date-sensitive computer chips, software, and systems to recognize a two-digit
date field as belonging to the 21st century.

<PAGE>   13

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, or 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. Failure of
the Company or third parties' computer systems could have a material adverse
impact on the Company's ability to conduct its business. See "Management's
Discussion and Analysis: Year 2000 Issue" for more information.


INTERNATIONAL SALES MAY SUBJECT THE COMPANY TO CERTAIN POLITICAL, ECONOMIC AND
OTHER UNCERTAINTIES. The Company sells its election systems primarily in the
United States and Canada, but intends to market actively to other countries
throughout the world, particularly in Latin America. Sales of the Company's
election systems will subject it to various governmental regulations, exports
controls, and the normal risks involved in international sales. Sales of
products and services in Latin America and elsewhere are subject to political,
economic and other uncertainties, including, among others, risk of war,
revolution, expropriation, renegotiation or modification of existing contracts,
election laws and regulations, standards and tariffs, and taxation policies, as
well as international monetary fluctuations which may make payment in United
States dollars more expensive for foreign customers, and other uncertainties and
trade barriers.

DECLINES IN THE VALUE OF OTHER CURRENCIES AGAINST THE U.S. DOLLAR WILL DECREASE
EARNINGS FROM SALES IN THOSE CURRENCIES WHEN STATED IN U.S. DOLLARS.
Substantially all of the Company's revenues to date have been received in United
States and Canadian dollars; however, some sales in the future may be in other
currencies. Any decline in the value of other currencies in which the Company
makes sales against the United States dollar will have the effect of decreasing
the Company's earnings when stated in United States dollars. The Company does
not engage in any hedging transactions that might have the effect of minimizing
the consequences of currency fluctuations (which are not currently material) and
does not intend to do so in the immediate future.

GLOBAL AND GLOBAL USA MAY BE SUBJECT TO VARIOUS TAX PENALTIES BECAUSE OF
TRANSFER PRICE ARRANGEMENTS. The Company and Global USA have entered into
various agreements between themselves with respect to the transfer of
technology, services and manufactured product. Because the Company is generally
subject only to Canadian taxation and Global USA is generally subject only to
U.S. taxation, issues of transfer pricing arise. Both the Canadian and U.S. tax
authorities generally require that pricing arrangements between the Company and
Global USA be entered into on a fair market basis. Further, Canada now requires
that contemporaneous documentation be completed evidencing the arrangements.
While the Company is attempting to meet its obligations in this regard, the
Company could be subject to various penalties, and increased tax, if the taxing
authorities take issue with the transfer pricing arrangements reached between
the Company and Global USA. Because appropriate transfer prices cannot be
arrived at with certainty, there is no assurance that the taxing authorities
would agree with the Company's transfer pricing arrangements.

<PAGE>   14

POLITICAL INSTABILITY COULD MATERIALLY ADVERSELY AFFECT GLOBAL'S INTERNATIONAL
BUSINESS. The political and economic instability in some countries in Latin
America and elsewhere could result in the adoption of new trade policies or lead
to trade disputes, which could materially adversely affect the Company and its
business. The Company has no insurance against political instability.

GLOBAL COMPETES WITH LARGER, WELL-ESTABLISHED COMPANIES. These companies have
financial, and could develop technological and marketing, resources that are
significantly greater than the Company's and may have established relationships
with customers or potential customers that afford them a competitive advantage.
The Company cannot assure that it will be able to compete effectively in its
future markets or that competitive pressures will not adversely affect its
business, financial condition or results of operations. Please
see "--Competition" above for more information.


GLOBAL DOES NOT HAVE PATENT PROTECTION FOR ITS PROPRIETARY INTELLECTUAL PROPERTY
OTHER THAN THE ACCUVOTE - OS, AND, THEREFORE, DISPUTES COULD ARISE AS TO ITS
OWNERSHIP OF AND THE SCOPE OF ITS RIGHTS TO THAT INTELLECTUAL PROPERTY. These
disputes, as well as any that might arise as to the patented technology, may not
be resolved in the Company's favor and could be very expensive to resolve.
Please see "--Intellectual Property" above for more information.

THE SUCCESS OF THE COMPANY IS DEPENDENT UPON THE SERVICES OF ITS PRESIDENT, MR.
VAN PELT, ITS VICE PRESIDENT OF OPERATIONS, MR. ENSMINGER, AND ITS VICE
PRESIDENT OF SALES / MARKETING / BUSINESS DEVELOPMENT, MR. UROSEVICH. The
Company has employment agreements with Mr. Van Pelt and Mr. Urosevich, but not
Mr. Ensminger. The Company has no key man insurance with respect to any of these
persons. The loss of the services of any one of them for any reason could
materially impede the Company's marketing effort and strategic planning.

EXERCISE OF OUTSTANDING WARRANTS AND OPTIONS COULD DILUTE EARNINGS. As of June
30, 1999, the Company had 1,473,768 options and 166,667 warrants for Common
Stock outstanding. To the extent that any outstanding options and warrants for
Common Stock are exercised, there will be additional dilution in excess of that
resulting from use of common and common equivalent shares in earnings
calculations.

GLOBAL HAS NO ACTIVE MARKET FOR ITS COMMON STOCK IN THE UNITED STATES AND ONE
MAY NOT DEVELOP. THE MARKET PRICE MAY ALSO BE VOLATILE. The Company's Common
Stock is traded on the Toronto (Canada) Exchange and is expected to trade on the
Nasdaq electronic bulletin board. While a public market for the Company's Common
Stock currently exists in Canada, no such market exists in the United States as
yet, even though the Common Stock has been registered under Section 12(g) of the
Securities Exchange Act of 1934, and the Company cannot assure that any market
for the Common Stock will develop in the United States. The number of freely
traded shares in the Canadian market is 12,187,637, and the number of shares
expected to be in the United States market is 6,259,294, about 33.9 % of the
18,483,672 shares of Common Stock outstanding at June 30, 1999. However, trading
volume in the four weeks ended June 30, 1999 in Canada averaged 15,871 shares
traded per day. Thus, even though a substantial percentage of the Company's
outstanding shares could be traded, trading of relatively small blocks of stock
can

<PAGE>   15

have a significant impact on the price at which the stock is traded. In
addition, the Nasdaq electronic bulletin board has experienced, and is likely to
experience in the future, significant price and volume fluctuations, which could
adversely affect the market price of he Common Stock without regard to the
operating performance of the Company. The Company believes that factors such as
quarterly and annual fluctuations in financial results, announcements by
competitors, or changes in securities analysts' recommendations may cause the
market price to fluctuate, perhaps substantially. These fluctuations, as well as
general economic conditions, such as recessions or high interest rates, may
adversely affect the market price of the Common Stock. Please see "Part II. Item
5. "Market For Common Equity and Related Stockholder Matters" for more
information.

FUTURE SALES BY EXISTING SHAREHOLDERS COULD ADVERSELY AFFECT THE PREVAILING
MARKET PRICE OF THE COMMON STOCK. At June 30, 1999, the Company had 18,483,672
shares of Common Stock outstanding, of which 1,473,768 shares issued or to be
issued under an employee option plan will be eligible for sale.


In addition, the authorized capital of the Company includes 20,000,000 shares of
Preferred Stock, none of which had been issued as of June 30, 1999. However, the
Board of Directors may determine at any time and from time to time to set the
terms and preferences of the Preferred Stock, or a series of it, and to issue
it, subject to approval of the Toronto Stock Exchange.

GLOBAL HAS NEVER PAID CASH DIVIDENDS ON ITS COMMON STOCK AND DOES NOT EXPECT TO
DO SO FOR THE FORESEEABLE FUTURE. The Company intends to retain future earnings,
if any, to provide funds for business operations and, accordingly, does not
anticipate paying any cash dividends on its Common Stock in the foreseeable
future.

ITEM 2.  DESCRIPTION OF PROPERTY

The Company leases office and manufacturing facilities in McKinney, Texas, in
Omaha, Nebraska and Vancouver, British Columbia. The Company's standard practice
is to lease its facilities, and to insure the facilities and their contents
under an insurance plan.

The McKinney, Texas, leased facility consists of about 13,050 square feet in a
stand-alone, one-story building. This facility includes the Company's
manufacturing operations and its United States corporate headquarters. The
current capacity utilization of the manufacturing area is about 100%. Management
anticipates that this facility may be expanded at some time during the next
fiscal year. The lease term commenced on August 1, 1997 and continues for a
period of five years, with two five-year options to renew.

The Vancouver, British Columbia leased facility consists of about 2,785 square
feet in an office building. This facility houses the Company's Canadian
corporate headquarters and most of its research and development activities. The
lease term commenced on January 1, 1998 and continues for a period of five
years, with a five-year option to renew at an annual rent to be negotiated.

<PAGE>   16

The Omaha, Nebraska leased facility consists of approximately 610 square feet.
The facility is used for field support. The lease term has been extended
commencing on September 1, 1999 and continues for a period of two years.

ITEM 3.  LEGAL PROCEEDINGS

At June 30, 1999, the end of the last fiscal year, the Company was not a party
to any material pending legal proceedings and knew of no proceedings
contemplated by any governmental authority.

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

The Company did not submit any matter to a vote of security holders during the
fourth quarter of the fiscal year covered by this report.


                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET PRICE OF THE REGISTRANT'S COMMON EQUITY

The Company's Common Stock is traded on the Toronto Stock Exchange under the
symbol "GSM". The Company's Common Stock is not traded on an established public
trading market in the United States. The following table sets forth for the
periods indicated the high and low closing prices of the Company's Common Stock
as reported by the Toronto Stock Exchange, in Canadian funds.

<TABLE>
<CAPTION>
                                            HIGH     LOW
                                            ----     ---
<S>                                        <C>     <C>
Fiscal Year 1998
       Quarter ended September 30, 1997     1.50    0.45
       Quarter ended December 31, 1997      2.15    1.38
       Quarter ended March 31, 1998         2.05    1.35
       Quarter ended June 30, 1998          3.65    1.68
Fiscal year 1999
       Quarter ended September 30, 1998     3.90    2.01
       Quarter ended December 31, 1998      3.48    1.93
       Quarter ended March 31, 1999         3.50    2.10
       Quarter ended June 30, 1999          2.85    2.00
</TABLE>

<PAGE>   17

The last sale price of the Company's Common Stock on September 14, 1999 as
reported on the Toronto [Canada] Stock Exchange was C$2.65 per share. As of June
30, 1999, there were approximately 692 holders of record of the Company's Common
Stock, of whom approximately 53.8 % were in the United States. At that date,
approximately 33.9 % of the outstanding 18,483,672 shares of Common Stock were
held in the United States. The Company has no issued and outstanding Preferred
Stock.

ABSENCE OF DIVIDENDS

Since its inception, the Company has not paid cash dividends on it Common Stock.
The Company intends to retain future earnings, if any, to provide funds for
business operations and, accordingly, does not anticipate paying any cash
dividends on its Common Stock in the foreseeable future. The Company is not
subject to any restrictions (not imposed by law on corporations generally) that
limit its ability to pay dividends on its Common Stock.


RECENT SALES OF UNREGISTERED SECURITIES

From July 1, 1998 to June 30, 1999, the Registrant issued the following
securities without registration under the Securities Act of 1933, pursuant to
exemptions from registration under that Act:

<TABLE>
<CAPTION>
DATE                          ISSUANCE                             EXEMPTION
                                                                  RELIED UPON
<S>          <C>                                                <C>
10/15/98     Options for 205,000 shares issued to 5 employees   Section 4 (2):
                                                                Employees had
                                                                All information
                                                                required to make an
                                                                informed investment
                                                                decision.
</TABLE>


ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATION

The discussion and analysis of the operating results and the financial position
of the Company should be read in conjunction with the Company's Consolidated
Financial Statements and the notes to them. See "Consolidated Financial
Statements". The financial statements have been prepared in United States
dollars in accordance with Canadian GAAP. See Note 17 of the Notes

<PAGE>   18

to Consolidated Financial Statements for an explanation of differences between
Canadian GAAP and United States 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

Fiscal 1999 Compared with 1998

YEAR ENDED JUNE 30, 1999 COMPARED TO YEAR ENDED JUNE 30, 1998

SALES AND OPERATING INCOME

Sales and other income for the year ended June 30, 1999 decreased 10.3 % or
$2,111,000, to $18,310,000 from $20,421,000 for the year ended June 30, 1998.
The sales decrease was largely attributable to a shorter U. S. selling season in
a general election year. The U.S. market comprises, and has comprised, 95 % or
more of the Company's sales. During a general election year, new voting systems
generally are not installed for several months prior to a general election and
usually for several months after a general election; therefore, the selling
season is shorter during general election years.

COST OF SALES AND OPERATING EXPENSES

Cost of sales and operating expenses for fiscal year 1999 decreased 5.7 %, or
$547,000, to $8,998,000 from $9,545,000 for fiscal year 1998. In fiscal year
1999, cost of sales and operating expense as a percentage of gross revenues
increased to 49.1 % from 46.7 % in fiscal year 1998. This increase resulted
primarily from higher product cost for the AccuVote - TS system whose
contribution to sales was greater in fiscal year 1999 than in fiscal year 1998.


SELLING, ADMINISTRATIVE AND GENERAL EXPENSES

Selling, administrative and general expenses for fiscal year 1999 increased 17.5
%, or $912,000, to $6,130,000 from $5,218,000 for fiscal year 1998. The increase
was due largely to election support provided in the second quarter and an
increase in manpower and associated costs in the sales, field support and
administrative areas. In addition, expenses relating to the I-Mark asset
acquisition were incurred for the whole 1999 fiscal period, whereas in the 1998
fiscal period expenses were incurred for only eleven months.

<PAGE>   19

RESEARCH AND DEVELOPMENT EXPENSES

Research and development expenses for fiscal year 1999 increased by 77.3 %, or
$374,000, to $857,000 from $483,000 for fiscal year 1998. The increase was due
to developing enhancements to software for the AccuVote - TS system. The Company
continues to fund research and development in order to offer leading edge
products to the market place.

AMORTIZATION

Amortization for fiscal year 1999 increased 40.6 %, or $112,000, to $388,000
from $276,000 in fiscal year 1998. This increase was due primarily to
amortization associated with the acquisition of I-Mark in 1997. During the 1999
fiscal year Lynro Manufacturing Corporation goodwill was fully written off.

INTEREST

Interest expense for fiscal year 1999 increased 110.1 %, or $171,000, to
$326,000 from $155,000 in fiscal year 1998. The increase was within the
Company's operating plan of funding current accounts receivable and resulted
from interest on increased U.S. bank loans used to finance operations.

REVALUATION OF USED EQUIPMENT

Trade-in inventory write off for fiscal year 1999 increased to $873,000 from
$706,000 in fiscal year 1998 as a result of management writing down trade-in
inventory. The trade-in inventory write down will continue for the next four
consecutive quarters. At that time the value of the trade-in inventory is
anticipated to be $0.

EARNINGS PER SHARE

The Company's earnings for fiscal year 1999 were $1,611,000 or $0.09 per share
before a write down of $873,000 for trade-in inventory. The after tax earnings
for fiscal year 1999 after the trade-in inventory write down was $716,000 or
$0.04 per share compared to a profit of $4,038,000 or $0.24 per share for the
same period for fiscal year 1998. The decrease in earnings per share for the
1999 fiscal period as compared to the 1998 fiscal period was due to a decrease
in sales, and increases in selling, administrative and general expense, research
and development expense, amortization and interest expense, along with the write
down of the trade-in inventory.

<PAGE>   20

Fiscal 1998 Compared with 1996

YEAR ENDED JUNE 30, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1996.

GENERAL NOTE: The reader must be aware Fiscal year end June 30, 1998 is being
compared to fiscal year end December 31, 1996 in order to compare consistent
twelve month periods.

SALES AND OPERATING INCOME

Sales and other income for the year ended June 30, 1998 increased 234.4 % or
$14,313,000, to $20,421,000 from $6,108,000 for the year ended December 31,
1996. The sales increase was largely attributable to marketing to larger
customers.

COST OF SALES AND OPERATING EXPENSES

Cost of sales and operating expenses for year ended June 30, 1998 increased
126.4 %, or $5,328,000, to $9,545,000 from $4,217,000 for the year ended
December 31, 1996. In year ended June 30, 1998, cost of sales and operating
expense as a percentage of gross revenues decreased to 46.7 % from 69.0 % in the
year ended December 31, 1996. This decrease resulted primarily from lower
product cost for the AccuVote - OS system and cost reductions in manufacturing.


SELLING, ADMINISTRATIVE AND GENERAL EXPENSES

Selling, administrative and general expenses for year ended June 30, 1998
increased 75.7 %, or $2,248,000, to $5,218,000 from $2,970,000 for the year
ended December 31,1996. The increase was due largely to an increase in manpower
and associated costs in the sales, field support and administrative areas. In
addition, expenses relating to the I-Mark asset acquisition were incurred for
eleven months in the 1998 fiscal period, whereas in the 1996 period no expenses
were incurred.

RESEARCH AND DEVELOPMENT EXPENSES

Research and development expenses for year ended June 30, 1998 increased by 7.2
%, or $32,000, to $483,000 from $451,000 for the year ended December 31, 1996.
The increase was due to developing enhancements to software for the AccuVote -
TS system. The Company continued to fund research and development in order to
offer leading edge products to the market place.

AMORTIZATION

Amortization for year ended June 30, 1998 increased 104.4 %, or $141,000, to
$276,000 from $135,000 for the year ended December 31,1996. This increase was
due primarily to amortization associated with the acquisition of I-Mark in 1997.

INTEREST

Interest expense for year ended June 30, 1998 increased 118.3%, or $84,000, to
$155,000 from $71,000 for the year ended December 31, 1996. The increase was
within the Company's operating plan of funding current accounts receivable and
resulted from interest on increased U.S. bank loans used to finance operations.

<PAGE>   21

REVALUATION OF USED EQUIPMENT

Trade-in inventory write off for year ended June 30, 1998 increased to $706,000
from $ nil for the year ended December 31, 1996 as a result of management
revaluing trade-in inventory.

EARNINGS (LOSS) PER SHARE

The Company's earnings for year ended June 30, 1998 were $4,743,000 or $0.28 per
share before a write down of $706,000 for trade-in inventory. The earnings for
year ended June 30, 1998 after the trade-in inventory write down was $4,038,000
or $0.24 per share compared to a loss of $1,737,000 or $(0.12) per share for the
year ended December 31, 1996. The increase in earnings per share for year ended
June 30, 1998 as compared to the year ended December 31, 1996 was due primarily
to increased sales.

LIQUIDITY AND CAPITAL RESOURCES

The Company used a combination of internally generated funds and bank borrowings
to finance its acquisitions, working capital requirements, capital expenses and
operations.

During the period ended June 30, 1999, the Company generated most of its funding
through cash flow.

At June 30, 1999, the Company's cash totaled $621,220, an increase of $281,595
from June 30, 1998. Accounts and contracts receivable increased to $14,623,000
at June 30, 1999 from $10,291,000 at June 30, 1998. Due to the nature of the
Company's business, the timing of payments on large contracts may vary
significantly, and cause 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 June 30, 1999, inventory amounted to $4,607,000, an increase
of $939,000 from June 30, 1998. Inventory has increased due to the addition of
the AccuVote - TS system.

The Company has contractual arrangements with customers whereby credit terms may
be extended for the amounts due for voting systems. At June 30, 1999, agreements
receivable less current portion amounted to $206,000, a decrease of $198,000
from June 30, 1998. These agreements 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 agreements due from
customers. The Company currently has five loans outstanding, three with Western
Bank, Albuquerque, New Mexico, one loan with Hibernia National Bank of Texas,
McKinney, Texas and one loan from a private individual. One loan in the amount
of $250,113 is secured by an agreement receivable amounting to $267,364. This
loan bears interest at Western Bank of Albuquerque Prime Rate plus 1 % and is
due November 15, 2000. A second loan in the amount of $1,508,500 is secured by a
specific Global USA contract in the amount of $2,155,312. This loan bears
interest at Western Bank of Albuquerque Prime Rate plus 1 % and is due January
31, 2000. A third loan in the amount of $1,330,000 is secured by a specific
Global USA contract in the amount of $1,795,968. This loan bears interest at
Western Bank of Albuquerque Prime

<PAGE>   22
Rate plus 1% and is due May 27, 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
October 12, 1999. The final loan in the amount of $300,000 is with a private
individual and is not secured, and bears interest at 10% per annum and is due
August 11, 1999. The loans are used for working capital. See "Item 12: "Certain
relationships and related transactions" for more information on this loan.

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.

         The following table sets out the exchange rates, based on the noon
buying rates in Toronto, Ontario, Canada, for cable transfers in foreign
currencies as certified for customs purposes by the Bank of Canada, for the
conversion of Canadian dollars into United States dollars in effect at the end
of the following periods, and the average exchange rates (based on the average
of the exchange rates on the last day of each month in those periods) and the
Range of high and low exchange rates for those periods.

<TABLE>
<CAPTION>
                          YEAR         YEAR         YEAR
                          END          END          END
                        JUNE 30      JUNE 30      JUNE 30
                          1999         1998         1997
<S>                      <C>          <C>          <C>
END OF PERIOD            1.4630       1.4678       1.3805

AVERAGE FOR PERIOD       1.5103       1.4177       1.3724

HIGH FOR PERIOD          1.5685       1.4678       1.3976

LOW FOR PERIOD           1.4570       1.3783       1.3470
</TABLE>

On June 30, 1999, the noon rate of exchange as reported by the Bank of Canada
for the conversion of United States dollars into Canadian dollars was $0.68352
(US$1.00=C$1.4630).

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.

<PAGE>   23

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 has been formulating 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 either will be Y2K ready. As best the Company can determine, all
systems are Y2K ready.

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.

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 AccuVote - 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.

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.

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

<PAGE>   24

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.

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.

ITEM 7.  FINANCIAL STATEMENTS


                          GLOBAL ELECTION SYSTEMS INC.

                        CONSOLIDATED FINANCIAL STATEMENTS

                              30 JUNE 1999 AND 1998

                                   U.S. FUNDS

<PAGE>   25

                         STALEY, OKADA, CHANDLER & SCOTT

                              Chartered Accountants

<PAGE>   26


MANAGEMENT'S RESPONSIBILITY FOR THE CONSOLIDATED FINANCIAL STATEMENTS

The accompanying consolidated financial statements and all information in the
annual report are the responsibility of management. The consolidated financial
statements have been prepared by management in accordance with the accounting
policies outlined in the notes to the consolidated financial statements. Where
necessary, management has made informed judgements and estimates in accounting
for transactions which were not complete at the balance sheet date. In the
opinion of management, the consolidated financial statements have been prepared
within acceptable limits of materiality and are in accordance with Canadian
generally accepted accounting principles. The financial information contained
elsewhere in the annual report has been reviewed to ensure consistency with that
in the consolidated financial statements.

Management maintains appropriate systems of internal control. Policies and
procedures are designed to give reasonable assurances that transactions are
appropriately authorized, assets are safeguarded and financial records are
properly maintained to provide reliable information for the preparation of
financial statements.

Staley, Okada, Chandler & Scott, an independent firm of chartered accountants,
has been engaged, as approved by a vote of the shareholders at the company's
most recent annual general meeting, to examine the consolidated financial
statements in accordance with generally accepted auditing standards in Canada
and provide an independent professional opinion.

The audit committee has met with the auditors and management in order to
determine that management has fulfilled its responsibilities in the preparation
of the consolidated financial statements. The audit committee has reported its
findings to the Board of Directors who have approved the consolidated financial
statements.


Howard T. Van Pelt                                           Maurice E. Sokulski
President                                                              Treasurer

<PAGE>   27

AUDITORS' REPORT


TO THE SHAREHOLDERS OF GLOBAL ELECTION SYSTEMS INC.:

We have audited the consolidated balance sheet of Global Election Systems Inc.
as at 30 June 1999 and 1998 and the consolidated statements of changes in
shareholders' equity, income (loss) and cash flow for the periods ended 30 June
1999, 1998, 1997 and 31 December 1996. 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 audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform an audit to obtain reasonable
assurance 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.

In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the company as at 30 June 1999 and
1998 and the results of its operations and its cash flow for the periods ended
30 June 1999, 1998, 1997 and 31 December 1996 in accordance with generally
accepted accounting principles. As required by the Company Act of British
Columbia, we report that, in our opinion, these principles have been applied on
a basis consistent with that of the preceding period.


Burnaby, B.C.                                    STALEY, OKADA, CHANDLER & SCOTT
25 August 1999                                             CHARTERED ACCOUNTANTS


<PAGE>   28

GLOBAL ELECTION SYSTEMS INC.                                         Statement 1
CONSOLIDATED BALANCE SHEET
AS AT 30 JUNE
U.S. Funds

<TABLE>
<CAPTION>
                                 ASSETS                                       1999          1998
                                                                          -----------   -----------
CURRENT
<S>                                                                       <C>           <C>
   Cash and short term deposits                                           $   621,220   $   339,625
   Accounts receivable                                                      4,341,403     2,312,863
   Contracts receivable                                                    10,281,722     7,978,607
   Deposits and prepaid expenses                                              291,298       247,089
   Inventory (Note 3)                                                       4,606,923     3,667,874
   Current portion of agreements receivable                                   285,965       549,807
                                                                          -----------   -----------
                                                                           20,428,531    15,095,865
AGREEMENTS RECEIVABLE (Note 4)                                                205,539       403,958
CAPITAL ASSETS (Note 5)                                                       376,081       430,867
OTHER ASSETS (Note 6)                                                         776,250     1,027,846
                                                                          -----------   -----------
                                                                          $21,786,401   $16,958,536
                                                                          ===========   ===========
LIABILITIES

CURRENT
   Accounts payable and accrued liabilities                               $ 2,287,467   $ 4,707,202
   Deferred revenue                                                         1,027,718       204,800
   Current portion of loans payable                                         6,738,500     1,225,839
                                                                          -----------   -----------
                                                                           10,053,685     6,137,841
LOANS PAYABLE (Note 7)                                                        250,113        55,135
                                                                          -----------   -----------
                                                                           10,303,798     6,192,976
                                                                          -----------   -----------
COMMITMENTS (Note 10)
CONTINGENCY (Note 11)

SHAREHOLDERS' EQUITY

SHARE CAPITAL (Note 8)
   Authorized:
     100,000,000 common voting shares, without par value
      20,000,000 convertible voting preferred shares, without par value
   Issued and fully paid:
      18,483,672  (18,482,440) common shares                               10,126,865    10,125,867
RETAINED EARNINGS - Statement 2                                             1,355,738       639,693
                                                                          -----------   -----------
                                                                           11,482,603    10,765,560
                                                                          -----------   -----------
                                                                          $21,786,401   $16,958,536
                                                                          ===========   ===========
</TABLE>

ON BEHALF OF THE BOARD:

______________________, Director

______________________, Director


                           - See Accompanying Notes -

<PAGE>   29



GLOBAL ELECTION SYSTEMS INC.                                         Statement 2
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
U.S. Funds


<TABLE>
<CAPTION>
                                                                                                Retained
                                                                         Common Shares          Earnings
                                                                      Shares      Amount        (Deficit)       Total
                                                                    ----------  ------------   -----------   ------------
<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 - Statement 3                                           --            --    (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 - Statement 3                                   --            --     2,053,512      2,053,512
                                                                    ----------  ------------   -----------   ------------
Balance - 30 June 1997 (Note 1a)                                    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       548,148            --        548,148
  Issuance of performance shares from escrow ($0.06 per share)       2,738,000       155,562            --        155,562
  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 year - Statement 3                                     --            --     4,037,546      4,037,546
                                                                    ----------  ------------   -----------   ------------
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 income for the year - Statement 3                                     --            --       716,045        716,045
                                                                    ----------  ------------   -----------   ------------
Balance - 30 June 1999                                              18,483,672  $ 10,126,865   $ 1,355,738   $ 11,482,603
                                                                    ==========  ============   ===========   ============
</TABLE>


                           - See Accompanying Notes -

<PAGE>   30




GLOBAL ELECTION SYSTEMS INC.                                         Statement 3
CONSOLIDATED STATEMENT OF INCOME (LOSS)
U.S. Funds

<TABLE>
<CAPTION>
                                                            YEAR          Year    Six Months           Year
                                                           ENDED         Ended         Ended          Ended
                                                         30 JUNE       30 June       30 June    31 December
                                                            1999          1998          1997           1996
                                                    ------------   -----------   -----------   ------------
                                                                                  (Note 1a)
<S>                                                 <C>            <C>           <C>           <C>
REVENUE
   Sales and operating income (Note 14)             $ 18,198,041   $ 20,320,155  $ 6,758,954   $  6,041,173
   Other income                                          112,106        101,123       51,496         66,606
                                                    ------------   ------------  -----------   ------------
                                                      18,310,147     20,421,278    6,810,450      6,107,779
                                                    ------------   ------------  -----------   ------------
              COSTS AND EXPENSES
   Cost of sales and operating expenses                8,997,955      9,544,781    2,815,680      4,216,805
   Selling, administrative and general expenses        6,129,777      5,218,472    1,658,527      2,970,212
   Research and development expenses                     857,057        483,437      184,414        451,113
   Amortization                                          388,400        276,294       70,472        135,140
   Interest                                              325,748        155,041       27,845         71,166
                                                    ------------   ------------  -----------   ------------
                                                      16,698,937     15,678,025    4,756,938      7,844,436
                                                    ------------   ------------  -----------   ------------

      INCOME (LOSS) BEFORE THE UNDERNOTED              1,611,210      4,743,253    2,053,512     (1,736,657)
    Revaluation of used equipment (Note 15)             (873,101)      (705,707)          --             --
                                                    ------------   ------------  -----------   ------------
       INCOME (LOSS) BEFORE INCOME TAXES                 738,109      4,037,546    2,053,512     (1,736,657)
    Provision for income taxes (Note 9a)                 (22,064)            --           --             --
                                                    ------------   ------------  -----------   ------------
       NET INCOME (LOSS) FOR THE PERIOD             $    716,045   $  4,037,546  $ 2,053,512   $ (1,736,657)
                                                    ============   ============  ===========   ============


    EARNINGS (LOSS) PER SHARE - U.S. FUNDS
   Basic                                            $       0.04   $       0.24  $      0.14   $      (0.12)
   Fully diluted                                    $       0.04   $       0.22  $      0.12   $        N/A
                                                    ============   ============  ===========   ============


WEIGHTED AVERAGE NUMBER OF COMMON SHARES
    OUTSTANDING                                       18,483,264     16,773,928   14,689,440     14,242,865
                                                    ============   ============  ===========   ============
</TABLE>


                           - See Accompanying Notes -

<PAGE>   31

GLOBAL ELECTION SYSTEMS INC.                                         Statement 4
CONSOLIDATED STATEMENT OF CASH FLOW
U.S. Funds


<TABLE>
<CAPTION>
                                                       YEAR          Year      Six Months           Year
                                                      ENDED         Ended           Ended          Ended
                                                    30 JUNE       30 June         30 June    31 December
                                                       1999          1998            1997           1996
                                                -----------    -----------    -----------    -----------
                                                                               (Note 1a)
<S>                                             <C>            <C>            <C>            <C>
OPERATING ACTIVITIES
   Net income (loss) for the period             $   716,045    $ 4,037,546    $ 2,053,512    $(1,736,657)
   Items not affecting cash
     Amortization                                   388,400        276,294         70,472        135,140
     Revaluation of used equipment                  873,101        705,707             --             --
                                                -----------    -----------    -----------    -----------
                                                  1,977,546      5,019,547      2,123,984     (1,601,517)
    Changes in non-cash working capital
     Accounts receivable                         (2,028,540)      (209,527)      (882,704)     2,365,499
     Contracts receivable                        (2,303,115)    (5,319,524)    (2,659,083)            --
     Deposits and prepaid expenses                  (44,209)      (192,180)        18,052         51,966
     Inventory                                   (1,812,150)    (2,741,214)       285,382       (406,063)
     Accounts payable and accrued liabilities    (2,419,735)     3,543,644        224,395        (98,063)
     Customer deposits                                   --        (36,219)       (74,526)       110,745
     Deferred revenue                               822,918       (120,122)       295,137        (34,438)
                                                -----------    -----------    -----------    -----------
                                                 (5,807,285)       (55,595)      (669,363)       388,129
                                                -----------    -----------    -----------    -----------
             INVESTING ACTIVITIES
   Capital assets acquired                          (82,018)      (414,961)        (8,032)       (22,247)
   Other assets acquired                                 --       (514,104)            --             --
   Proceeds on sale of capital assets                    --         62,685            194             --
   Agreements receivable                            462,261        357,664         71,748       (466,465)
                                                -----------    -----------    -----------    -----------
                                                    380,243       (508,716)        63,910       (488,712)
                                                -----------    -----------    -----------    -----------
             FINANCING ACTIVITIES
   Loans payable                                  5,707,639        622,584        203,287         35,184
   Common shares issued                                 998        203,522             --        235,422
                                                -----------    -----------    -----------    -----------
                                                  5,708,637        826,106        203,287        270,606
                                                -----------    -----------    -----------    -----------

        NET INCREASE (DECREASE) IN CASH             281,595        261,795       (402,166)       170,023
   Cash position - Beginning of period              339,625         77,830        479,996        309,973
                                                -----------    -----------    -----------    -----------
         CASH POSITION - END OF PERIOD          $   621,220    $   339,625    $    77,830    $   479,996
                                                ===========    ===========    ===========    ===========

 SCHEDULE OF NON-CASH INVESTING AND FINANCING
                    ACTIVITIES
      Issuance of shares for name and
        operating assets of I-Mark Systems,
        Inc.                                    $        --    $   548,148    $        --    $        --
                                                ===========    ===========    ===========    ===========
</TABLE>


                           - See Accompanying Notes -


<PAGE>   32


GLOBAL ELECTION SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
30 JUNE 1999 AND 1998
U.S. Funds

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

1.   SIGNIFICANT ACCOUNTING POLICIES

     These consolidated financial statements have been prepared using generally
     accepted accounting principles of Canada as follows:

     a)   PERIOD OF OPERATIONS

          During 1997, the company adopted a new year-end of 30 June which
          resulted in a six month period of operations for the period ended 30
          June 1997.

     b)   NATURE OF OPERATIONS

          The company markets a complete electronic voting system which includes
          vote tally and voter registration software.

     c)   CONSOLIDATION

          These consolidated financial statements include the accounts of the
          company and its wholly-owned subsidiary, Global Election Systems,
          Inc., a company incorporated in Delaware and operating in Texas,
          U.S.A. The purchase method of accounting has been applied to this
          acquisition.

     d)   FOREIGN CURRENCY TRANSLATION

          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:

          o    Monetary assets and liabilities at year-end rates,
          o    All other assets and liabilities at historical rates, and
          o    Revenue and expense items at the average rate of exchange
               prevailing during the year.

          Exchange gains and losses arising from these transactions are
          reflected in income or expense in the year.

     e)   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 in prior years, was valued at the lesser of trade-in
          value and net realizable value as estimated by management (Note 15).

          Commencing 1 July 1998, goods taken in trade are treated as additional
          discounts granted to complete sales agreements and no value is
          recognized in inventory.

     f)   AMORTIZATION

          Capital assets are recorded at cost and the company provides for
          amortization on the following basis:

          Demonstration and computer equipment - 20% to 30% declining balance
          method
          Manufacturing equipment - 20% declining balance method
          Furniture and equipment - 20% declining balance method
          Leasehold improvements - straight-line over 5 years

          One-half of the rate is applied in the year of acquisition and
          disposition.

<PAGE>   33


GLOBAL ELECTION SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
30 JUNE 1999 AND 1998
U.S. Funds

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

1.   SIGNIFICANT ACCOUNTING POLICIES - Continued

     g)   PATENTS

          Patents are recorded at cost and the company provides for amortization
          on a straight-line basis over 10 years.

     h)   GOODWILL

          Goodwill is recorded at cost and the company provides for amortization
          on a straight-line basis over 5 years.

     i)   REVENUE RECOGNITION

          Revenue from sales of products and supplies is recognized at the time
          of shipment of products and supplies to customers. Revenue from sales
          of services is recognized on completion of the related services. The
          company defers a portion of revenue received related to contracted
          future services to match against management's estimate of the future
          costs of providing these services to customers.

     j)   WARRANTY RESERVE

          Provisions for future estimated warranty costs are recorded in the
          accounts based upon historical maintenance records. Management
          periodically reviews the warranty reserve to determine the adequacy of
          the provision.

     k)   RESEARCH AND DEVELOPMENT TAX CREDITS

          Research and development tax credits are applied against research and
          development expenses in the period in which the tax credit is
          received.

     l)  EARNINGS PER SHARE

         Basic earnings per share computations are based on the weighted average
         number of shares outstanding during the period. Fully diluted earnings
         per share are based on the actual number of shares outstanding at the
         end of the period plus performance shares, and share purchase options
         and warrants as if they had been issued as at the beginning of the
         period.

     m)   MANAGEMENT'S ESTIMATES

          The preparation of financial statements in conformity with generally
          accepted accounting principles requires management to make estimates
          and assumptions that affect the reported amounts of assets and
          liabilities and disclosure of contingent assets and liabilities at the
          dates of the financial statements and the reported amounts of revenues
          and expenses during the reported periods. Actual results could differ
          from those estimates.

<PAGE>   34


GLOBAL ELECTION SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
30 JUNE 1999 AND 1998
U.S. Funds


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

2.   FAIR VALUE OF FINANCIAL INSTRUMENTS

     The carrying value of cash and short term deposits, accounts receivable,
     contracts receivable, deposits, agreements receivable, accounts payable and
     accrued liabilities approximates their fair value due to their short term
     maturity or capacity of prompt liquidation.

     Concentration of credit risk may arise from exposure to a single debtor or
     to a group of debtors having similar characteristics such that their
     ability to meet their obligations to the company is expected to be affected
     similarly by changes in economic or other conditions.

     The company's counterparty concentration is with its authorized resellers
     and state, county, city and municipal election customers in the United
     States and Canada and arises in the normal course of the company's
     business.

     Included in the 30 June 1999 current accounts receivable of $4,341,403, are
     two authorized resellers which together account for $2,537,756 or 58.5% of
     this balance. To 25 August 1999, the company has collected $50,000 from
     these two resellers and the balance is due on specific terms.

     Included in the 30 June 1999 current contracts receivable of $10,281,722
     are two such election customers which together account for $3,948,455 or
     38.4% of this balance. To 25 August 1999, the company has collected
     $859,751 from these two customers and the balance is due at specific dates
     within one year from 30 June 1999.

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

3.   INVENTORY

     Details are as follows:

<TABLE>
<CAPTION>
                       30 JUNE      30 June     30 June    31 December
                         1999        1998         1997         1996
                     ----------   ----------   ----------  -----------
<S>                  <C>          <C>          <C>          <C>
Supplies and parts   $2,061,974   $1,122,725   $  457,707   $  685,308
Work-in-progress             --           --        5,857       52,462
Trade-in goods          524,698    1,049,397      761,380      146,690
Finished goods        2,020,251    1,495,752      407,423    1,033,289
                     ----------   ----------   ----------   ----------
                     $4,606,923   $3,667,874   $1,632,367   $1,917,749
                     ----------   ----------   ----------   ----------
</TABLE>

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

<PAGE>   35

GLOBAL ELECTION SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
30 JUNE 1999 AND 1998
U.S. Funds

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

4.   AGREEMENTS RECEIVABLE

     Details of agreements receivable from customers are as follows:

<TABLE>
<CAPTION>
                                              30 JUNE       30 June       30 June   31 December
                                                 1999          1998          1997          1996
                                           ----------    ----------    ----------   -----------
<S>                                        <C>           <C>           <C>           <C>
Sales agreement receivable with
  interest at per annum, repayable
  in 60 equal monthly payments
  commencing 15 December 1995,
  secured by the underlying goods (i)      $  267,364    $  445,031    $  600,285    $  677,133

Sales agreement receivable with
  interest at 10% per annum                        --        78,020        78,020        77,460

Sales agreement receivable with
  interest at 5% per annum                         --       250,000       500,000       496,414

Sales agreement receivable with
  interest at 9% per annum                         --       111,459       133,124       132,170

Sales agreement receivable with
  interest at 4.4% per annum
  commencing 27 January 1998,
  repayable at $22,455 by 1 July
  1998, $21,759 by 1 July 1999 and
  the balance by 1 July 2000, secured
  by the underlying goods                      44,485        69,255            --            --

Sales agreement receivable with
  interest at 5.4% per annum
  commencing 15 July 1998,
  repayable at $22,738 per annum for
  principal and interest on 15 July
  1998 to 15 July 2001, secured by
  the underlying goods                         63,150            --            --            --

Sales agreement receivable, non-
  interest bearing, repayable at
  $60,000 in July 1999 and the
  balance in July 2000, secured by the
  underlying goods                            116,505            --            --            --
                                           ----------    ----------    ----------    ----------
                                              491,504       953,765     1,311,429     1,383,177
Less: Current portion                        (285,965)     (549,807)     (426,919)     (478,480)
                                           ----------    ----------    ----------    ----------
                                           $  205,539    $  403,958    $  884,510    $  904,697
                                           ----------    ----------    ----------    ----------
</TABLE>

(i)   The sales agreement receivable has been pledged as security for a loan
      payable (Note 7).

Scheduled principal repayments on the sales agreements receivable are as
follows:

<TABLE>
<S>               <C>
2000              $  285,965
2001                 183,539
2002                  22,000
                  ----------
                  $  491,504
                  ----------
</TABLE>

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

<PAGE>   36


GLOBAL ELECTION SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
30 JUNE 1999 AND 1998
U.S. Funds

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

5.   CAPITAL ASSETS

     Details are as follows:
<TABLE>
<CAPTION>
                                                              30 JUNE       30 June     30 June    31 December
                                                                 1999          1998        1997           1996
                                             Accumulated     NET BOOK      Net Book    Net Book       Net Book
                                      Cost  Amortization        VALUE         Value       Value          Value
                               -----------  ------------  -----------    ----------  ----------    -----------
<S>                            <C>          <C>           <C>            <C>         <C>           <C>
    Demonstration and
     computer equipment        $   560,164  $    324,471  $   235,693    $  298,809  $   95,127    $   115,168
    Manufacturing equipment         78,519        56,403       22,116        25,157      56,828         63,619
    Furniture and equipment        262,899       158,683      104,216       103,920      30,598         33,998
    Leasehold improvements          38,084        24,028       14,056         2,981         640          1,742
                               -----------  ------------  -----------    ----------  ----------    -----------
                               $   939,666  $    563,585  $   376,081    $  430,867  $  183,193    $   214,527
                               -----------  ------------  -----------    ----------  ----------    -----------
</TABLE>

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

6.   OTHER ASSETS

     Details are as follows:
<TABLE>
<CAPTION>
                                                              30 JUNE       30 June     30 June    31 December
                                                                 1999          1998        1997           1996
                                             Accumulated     NET BOOK      Net Book    Net Book       Net Book
                                      Cost  Amortization        VALUE         Value       Value          Value
                               -----------  ------------  -----------    ----------  ----------    -----------
<S>                            <C>          <C>           <C>            <C>         <C>           <C>
    Patents                    $   165,000  $    123,750  $    41,250    $   57,750  $   65,079    $    72,311
    Goodwill                     1,300,960       565,960      735,000       970,096      72,207         96,275
                               -----------  ------------  -----------    ----------  ----------    -----------
                               $ 1,465,960  $    689,710  $   776,250    $1,027,846  $  137,286    $   168,586
                               -----------  ------------  -----------    ----------  ----------    -----------
</TABLE>

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

7.   LOANS PAYABLE

     Details are as follows:

<TABLE>
<CAPTION>
                                                 30 JUNE       30 June       30 June   31 December
                                                    1999          1998          1997          1996
                                             -----------    ----------    ----------   -----------
<S>                                          <C>            <C>              <C>       <C>
Line of credit, bearing interest at bank
   prime plus 1% per annum (interest rate
   floor of 9%), interest payments due
   quarterly, due in full by 15 November
   2000, secured by the $267,364 sales
   agreement receivable (Note 4)             $  250,113     $  361,700       290,000   $    89,356

Line of credit, bearing interest at bank
   prime plus 1% per annum (interest rate
   floor of 10%), interest payments due
   quarterly,  due in  full by 31 January
   2000, secured by a contract receivable
   with a balance receivable of $2,152,487
   as at 30 June 1999                         1,508,500             --            --            --

Line of credit, bearing interest at bank
   prime plus 1% per annum (interest rate
   floor of 9%), interest  payments due
   quarterly, due in full by 27 May 2000,
   secured by a contract receivable with a
   balance receivable of $1,795,968 as at
   30 June 1999                               1,330,000             --            --            --
                                             -----------    ----------    ----------   -----------
Balance carried forward                      $3,088,613     $  361,700    $  290,000   $    89,356
                                             -----------    ----------    ----------   -----------
</TABLE>

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

<PAGE>   37


GLOBAL ELECTION SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
30 JUNE 1999 AND 1998
U.S. Funds

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

7.   LOANS PAYABLE - Continued

<TABLE>
<CAPTION>
                                                 30 JUNE       30 June       30 June   31 December
                                                    1999          1998          1997          1996
                                             -----------   -----------    ----------   -----------
<S>                                          <C>            <C>              <C>       <C>
Balance forward                              $ 3,088,613   $   361,700    $  290,000   $    89,356

Line of credit, bearing interest at The
    Wall Street Journal prime rate,
    interest payments due quarterly,
    $600,000 due by 20 July 1999 with the
    balance due in full by 12 October
    1999, secured by a commercial
    security agreement covering all
    assets of the company                      3,600,000            --            --            --

Promissory note payable, due to a
    director of the company, bearing
    interest at 10% per annum payable
    monthly, due in full by 11 August
    1999, unsecured (i)                          300,000            --            --            --

Note payable, bearing interest at bank
    prime                                             --       137,602       275,203       273,228
                                             -----------   -----------    ----------   -----------

Note payable, bearing interest at bank
    prime                                             --        73,772        93,187        92,519
                                             -----------   -----------    ----------   -----------

Note payable, bearing interest at bank
    prime plus 1%                                     --       137,900            --            --

Note payable, bearing interest at bank
    prime plus 1%                                     --       570,000            --            --
                                             -----------   -----------    ----------   -----------
                                               6,988,613     1,280,974       658,390       455,103
Less:  Current portion                        (6,738,500)   (1,225,839)     (446,239)     (244,474)
                                             -----------   -----------    ----------   -----------
                                             $   250,113    $   55,135    $  212,151   $   210,629
                                             -----------    ----------    ----------   -----------
</TABLE>

(i) Subsequent to 30 June 1999, the promissory note was repaid in full.

Scheduled principal repayments on the loans payable are as follows:


<TABLE>
<S>               <C>
    2000          $ 6,738,500
    2001              250,113
                  -----------
                  $ 6,988,613
                  -----------
</TABLE>

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

<PAGE>   38


GLOBAL ELECTION SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
30 JUNE 1999 AND 1998
U.S. Funds

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

8.   SHARE CAPITAL

     a)  The authorized share capital is 120,000,000 shares divided into
         100,000,000 voting common shares without par value and 20,000,000
         convertible voting preferred shares without par value.

         The conversion rights and the other terms and restrictions of the
         preferred shares will be set by the directors of the company at the
         date of issuance.

         The issued and outstanding share capital consists of:

<TABLE>
<CAPTION>
                                                      Common      Unit
                                                      Shares     Value        Amount
                                                 -----------   -------   -----------
<S>                                              <C>           <C>       <C>
Balance - 31 December 1995                        14,189,440             $ 9,138,775
   Options exercised                                 500,000   $  0.47       235,422
                                                 -----------   -------   -----------
Balance - 31 December 1996 and 30 June 1997       14,689,440               9,374,197
   Acquisition of name and operating assets of
     I-Mark Systems, Inc.                          1,000,000   $  0.53       548,148
   Issuance of performance shares                  2,738,000   $  0.06       155,562
   Options exercised                                  55,000   $  0.87        47,960
                                                 -----------   -------   -----------
Balance - 30 June 1998                            18,482,440              10,125,867
   Options exercised                                   1,232   $  0.81           998
                                                 -----------   -------   -----------
Balance - 30 June 1999                            18,483,672             $10,126,865
                                                 -----------   -------   -----------
</TABLE>

     b)  STOCK OPTION PLAN

         The company has a stock option plan which covers its officers and
         directors. The options are granted for varying terms ranging from three
         to five years. Options granted prior to 30 June 1998, were immediately
         vested upon grant. Options granted subsequent to 30 June 1998, vest
         over the term of the option. The following is a schedule of the
         activity pursuant to this stock option plan:

<TABLE>
<CAPTION>
                                                                       Price per
                                               Number of                   Share
                                                  Shares                 (CDN $)    Expiration Date
                                               ---------       -----------------   ----------------
<S>                                              <C>            <C>                <C>
                                                 500,000        $ 0.65             22 November 1996
                                                  30,000        $ 0.75             04 February 1997
                                                 100,000        $ 2.30             22 April 1997
                                                 200,000        $ 0.77             09 February 1998
                                                 200,000        $ 2.40             17 September 1998
                                                 100,000        $ 3.10             15 November 1998
                                                 150,000        $ 1.89             20 September 1999
                                                 100,000        $ 1.33             01 November 1999
                                               ---------       -----------------   ----------------
Balance - 31 December 1994                     1,380,000        $ 0.65 to $ 3.10
    Options exercised                           (100,000)       $ 0.77             09 February 1998
    Options expired                             (100,000)       $ 0.77             09 February 1998
    Options expired                              (80,000)       $ 3.10             15 November 1998
    Options expired                              (20,000)       $ 1.89             20 September 1999
    New options granted                          100,000        $ 1.35             22 February 2000
    New options granted                          100,000        $ 1.00             17 August 2000
                                               ---------       -----------------   ----------------
Balance - 31 December 1995                     1,280,000        $ 0.65 to $ 3.10
    Options exercised                           (500,000)       $ 0.65             22 November 1996
    Options expired                             (200,000)       $ 2.40             17 September 1998
    Options expired                             (100,000)       $ 1.00             17 August 2000
                                               ---------       -----------------   ----------------
Balance - 31 December 1996                       480,000        $ 1.33 to $ 3.10
                                               ---------       -----------------   ----------------
</TABLE>

<PAGE>   39


GLOBAL ELECTION SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
30 JUNE 1999 AND 1998
U.S. Funds

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

8.   SHARE CAPITAL - Continued

     b)  STOCK OPTION PLAN - Continued

<TABLE>
<CAPTION>
                                                                       Price per
                                               Number of                   Share
                                                  Shares                 (CDN $)    Expiration Date
                                               ---------       -----------------   ----------------
<S>                                              <C>            <C>                <C>
Balance - 31 December 1996                       480,000       $ 1.33 to $ 3.10
    Options expired                              (30,000)      $ 0.75              04 February 1997
    Options expired                             (100,000)      $ 2.30              22 April 1997
    Options expired                             (100,000)      $ 1.35              22 February 2000
                                               ---------       -----------------   ----------------
Balance - 30 June 1997                           250,000       $ 1.33 to $ 3.10
    New options granted                        1,075,000       $ 1.25              22 August 2002
    New options granted                           50,000       $ 1.49              17 December 2002
    New options granted                          100,000       $ 1.60              13 February 2003
    Options cancelled                            (20,000)      $ 3.10              15 November 1998
    Options cancelled                           (130,000)      $ 1.89              20 September 1999
    Options exercised                            (55,000)      $ 1.25              22 August 2002
                                               ---------       -----------------   ----------------
Balance - 30 June 1998                         1,270,000       $ 1.25 to $1.80
    New options granted                          205,000       $ 2.05              15 October 2001
    Options exercised                             (1,232)      $ 1.25              22 August 2002
                                               ---------       -----------------   ----------------
Balance - 30 June 1999                         1,473,768       $ 1.25 to $2.05
                                               ---------       -----------------   ----------------
</TABLE>

     c)  STOCK PURCHASE WARRANTS

         The following is a schedule of the activity pursuant to stock purchase
warrants:

<TABLE>
<CAPTION>
                                                                       Price per
                                               Number of                   Share
                                                  Shares                 (CDN $)    Expiration Date
                                               ---------       -----------------   ----------------
<S>                                              <C>            <C>                <C>
                                                 166,667        $ 1.88             31 March 2001
                                               ---------       -----------------   ----------------
</TABLE>

     d)  Share capital issued for non-monetary consideration is recorded at an
         amount based on fair market value reduced by an estimate of transaction
         costs normally incurred when issuing shares for cash, as determined by
         the board of directors of the company.

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

9.   INCOME TAXES

     a)  A summary of the taxable income of the company for the year ended 30
         June 1999 is as follows:


<TABLE>
<CAPTION>
                                               Canadian Parent  U.S. Subsidiary       Total
                                               ---------------  ---------------   ---------
<S>                                            <C>              <C>               <C>
Net income before taxes per financial
    statements                                   $  277,605        $   460,504    $ 738,109
Application of losses carried forward                    --           (406,504)    (460,504)
Timing differences on capital assets                (50,093)                --      (50,093)
Application of unclaimed scientific research
    and experimental  development deductions        (89,645)                --      (89,645)
Other timing/permanent differences                   (1,122)                --       (1,122)
                                                 ----------        -----------    ---------
Taxable income                                   $  136,745        $        --    $ 136,745
                                                 ----------        -----------    ---------
</TABLE>

<PAGE>   40


GLOBAL ELECTION SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
30 JUNE 1999 AND 1998
U.S. Funds

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

9.   INCOME TAXES - Continued

     a)  - Continued

<TABLE>
<CAPTION>
                                               Canadian Parent   U.S. Subsidiary    Total
                                               ---------------  ---------------   ---------
<S>                                            <C>              <C>               <C>
Statutory tax rate                                     45.2%               N/A         45.2%
Federal tax credit on application of
    investment tax credits                            (29.1)               N/A        (29.1)
                                                 ----------        -----------    ---------
Adjusted tax rate                                      16.1%               N/A         16.1%
                                                 ----------        -----------    ---------
Tax provision                                    $   22,064        $       N/A    $  22,064
                                                 ----------        -----------    ---------
</TABLE>

     b)  The company has unclaimed investment tax credits, for Canadian tax
         purposes, arising from its research and development activities in the
         amount of $336,000 which may be carried forward to be applied against
         future federal taxes payable. The future tax benefits, if any, of these
         tax credits have not been recognized in the accounts and expire as
         follows:

<TABLE>
<S>                        <C>
         2000              $  118,000
         2002                  35,000
         2003                  64,000
         2004                 119,000
                           ----------
                           $  336,000
                           ----------
</TABLE>

     c)  As at 30 June 1999, the company's subsidiary has tax losses, for U.S.
         tax purposes, of approximately $1,145,000 which may be carried forward
         to be applied against future taxable income. The future benefits, if
         any, of these tax losses have not been recognized in the accounts of
         the company and expire in 2011.

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

10.  COMMITMENTS

     a)  By way of an employment agreement, the company has secured the services
         of a key employee for a three year term expiring 31 July 2000. The
         contract contains fixed annual compensation totaling $180,000 per annum
         plus a bonus of 3% of earnings before taxes not to exceed $200,000 per
         annum.

     b)  By way of an employment agreement, the company has secured the services
         of a key employee for a three year term expiring 31 July 2000. The
         contract contains fixed annual compensation totalling $115,000 per
         annum.

<PAGE>   41


GLOBAL ELECTION SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
30 JUNE 1999 AND 1998
U.S. Funds

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

10.  COMMITMENTS - Continued

     c)  Under the terms of a lease agreement dated 8 December 1998, the company
         is committed to minimum annual lease payments which increased from CDN
         $25,529 in the first year to CDN $35,741 by the final year, plus its
         share of common area costs. The lease is for a five year term to 30
         April 2004 representing a minimum lease commitment of:

<TABLE>
<CAPTION>
                             CDN $
                           ----------
<S>                        <C>
         2000              $   25,954
         2001                  28,508
         2002                  31,060
         2003                  33,614
         2004                  29,784
                           ----------
                           $  148,920
                           ----------
</TABLE>

     d)  By an agreement dated 4 March 1997, the company's United States
         subsidiary has agreed to lease 13,050 square feet of general office and
         warehouse space in McKinney, Texas for five years from 1 July 1997. The
         annual lease amount of $110,272 representing a minimum lease commitment
         of:

<TABLE>
<S>                        <C>
        2000               $  110,272
        2001                  110,272
        2002                  110,272
                           ----------
                           $  330,816
                           ----------
</TABLE>

         The lease may be extended for two additional terms of five years with
         the rate to be the current base rent plus the lesser of a consumer
         price adjustment or a fair rental value adjustment.

     e)  Under the terms of a contract for services dated 22 June 1999, the
         company is committed to payments during the 2000 fiscal year in the
         amount of $110,000.

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

11.  CONTINGENCY

     During the 1999 fiscal year, the company was served with a lawsuit which
     alleged that the direct recording electronic voting machine process
     acquired during the 1998 (Note 13) infringed on the plaintiff's patent. The
     plaintiff had requested treble monetary damages, injunctive relief and
     declaratory judgement of the infringement.

     On 18 June 1999, the United States District Court for the District of
     Nebraska ordered that the plaintiffs' motion to dismiss and strike the case
     be granted.

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

<PAGE>   42


GLOBAL ELECTION SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
30 JUNE 1999 AND 1998
U.S. Funds

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

12.  RELATED PARTY TRANSACTIONS

     In addition to items disclosed elsewhere in these consolidated financial
     statements, the company conducted the following transactions with related
     parties:

     a)  EXPENDITURES

         Details are as follows:

<TABLE>
<CAPTION>

                                               YEAR          Year    Six Months          Year
                                              ENDED         Ended         Ended         Ended
                                            30 JUNE       30 June       30 June   31 December
                                               1999          1998          1997          1996
                                        -----------   -----------   -----------   -----------
<S>                                     <C>           <C>           <C>           <C>
Paid/accrued salaries and fees to
    directors                           $   370,542   $   459,736   $   236,086   $   346,919

Paid rent (at fair market value) to a
    company controlled by a former
    director                                     --        75,000        50,000       100,000
                                        -----------   -----------   -----------   -----------
                                        $   370,542   $   534,736   $   286,086   $   446,919
                                        -----------   -----------   -----------   -----------
</TABLE>

     b)  SHARE CAPITAL

         During 1998, the company granted directors 350,000 share purchase
         options at exercise prices ranging from $1.25 to $1.80 and option
         expiry dates ranging from 22 August 2002 to 7 January 2003.

         During 1996, two directors exercised 500,000 options for cash in the
         amount of $235,422.

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

13.  ACQUISITION

     By an agreement dated 31 July 1997, the company acquired the assets,
     business and the name of I-Mark Systems, Inc., a Nebraska corporation.
     Consideration for the acquisition was $1,000,000 cash (paid) and 1,000,000
     common shares of the company (issued at a deemed amount of $548,148).

     The consideration given was allocated to the net identifiable assets
     acquired as follows:

<TABLE>
<S>                                                                 <C>
    Inventory                                                       $   150,000
    Capital assets      o   Furniture and fixtures                       68,148
                        o   Demonstration and computer equipment        280,000
    Goodwill                                                          1,050,000
                                                                    -----------
                                                                    $ 1,548,148
                                                                    -----------
</TABLE>

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

<PAGE>   43


GLOBAL ELECTION SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
30 JUNE 1999 AND 1998
U.S. Funds

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

14.  SALES AND OPERATING INCOME

     Details of sales and operating income generated from customers which
     individually account for approximately 10% or more of that period's
     consolidated sales and operating income are as follows:


<TABLE>
<CAPTION>

                                                YEAR           Year     Six Months           Year
                                               ENDED          Ended          Ended          Ended
                                             30 JUNE        30 June        30 June    31 December
                                                1999           1998           1997           1996
                                        ------------   ------------   ------------   ------------
<S>                                     <C>            <C>            <C>            <C>
Number of Large Customers                          2              2              1              4
                                        ------------   ------------   ------------   ------------
Amount of Sales to Large Customers      $  3,620,295   $  6,351,000      2,051,000   $  2,737,000
                                        ------------   ------------   ------------   ------------
Total Consolidated Sales and Operating
    Income                              $ 18,198,041   $ 20,320,155      6,759,000   $  6,041,000
                                        ------------   ------------   ------------   ------------
Total Percentage of Consolidated Sales
    and Operating Income Generated from
    Large Customers                             19.9%          31.3%          30.3%          45.3%
                                        ------------   ------------   ------------   ------------
</TABLE>

     Due to the nature of the company's business, large sales to individual
     customers are generated on a non-recurring basis. As a result, the company
     is not dependent on any single customer or small group of customers such
     that the loss of any of these would have a material adverse effect on the
     future results of the company.

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

15.  REVALUATION OF USED EQUIPMENT

     During the year ended 30 June 1999, management re-evaluated the carrying
     value of equipment taken as trade-ins on sales made prior to 1 July 1998
     (Note 1e). A significant write-down in the amount of $873,101 resulted as
     management seeks to carry such inventory on a conservatively priced basis.
     Management periodically reviews market conditions and obtains independent
     valuations in determining if adjustments to the carrying value of used
     equipment is required. Management's estimates of recoverability on the used
     equipment have been based on current conditions. However, it is reasonably
     possible that changes could occur which could adversely affect management's
     estimates and may result in future write-downs.

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

<PAGE>   44

GLOBAL ELECTION SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
30 JUNE 1999 AND 1998
U.S. Funds

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

16.  SEGMENT INFORMATION

     The company operated in only one industry segment in Canada and the
     United States as follows:

<TABLE>
<CAPTION>
                                               Canada                      United States               Elimination
                                      --------------------------   --------------------------   --------------------------
                                          1999          1998            1999         1998          1999           1998
-----------------------------------   -----------    -----------    -----------   -----------   -----------    -----------
<S>                                   <C>            <C>            <C>           <C>           <C>            <C>
Sales to customers                    $   824,232    $   373,092    $17,373,809   $19,947,063   $        --    $        --
Sales between the segments                957,198      1,684,423        550,677     3,202,723    (1,507,875)    (4,887,146)
-----------------------------------   -----------    -----------    -----------   -----------   -----------    -----------
Total sales revenue                   $ 1,781,430    $ 2,057,515    $17,924,486   $23,149,786   $(1,507,875)   $(4,887,146)
-----------------------------------   -----------    -----------    -----------   -----------   -----------    -----------
Operating profits                     $ 1,266,249    $ 1,012,283    $ 8,045,943   $ 9,864,214   $        --    $        --
-----------------------------------   -----------    -----------    -----------   -----------   -----------    -----------
General corporate expenses
Interest
Revaluation of used equipment
Income taxes

Net income (loss)
-----------------------------------   -----------    -----------    -----------   -----------   -----------    -----------
Identifiable assets                   $   518,440    $   327,818    $21,290,568   $16,653,325   $   (22,607)   $   (22,607)
-----------------------------------   -----------    -----------    -----------   -----------   -----------    -----------
Capital expenditures                  $    12,672    $    21,339    $    69,346   $   393,622   $        --    $        --
-----------------------------------   -----------    -----------    -----------   -----------   -----------    -----------
Amortization of capital assets        $    19,912    $    27,011    $   368,488   $    77,591   $        --    $        --
-----------------------------------   -----------    -----------    -----------   -----------   -----------    -----------

<CAPTION>
                                            Consolidation
                                      -------------------------
                                         1999           1998
-----------------------------------   -----------   -----------
<S>                                   <C>           <C>
Sales to customers                    $18,198,041   $20,320,155
Sales between the segments                     --            --
-----------------------------------   -----------   -----------
Total sales revenue                   $18,198,041   $20,320,155
-----------------------------------   -----------   -----------
Operating profits                     $ 9,312,192   $10,876,497
-----------------------------------   -----------   -----------
General corporate expenses             (7,375,234)   (5,978,203)
Interest                                 (325,748)     (155,041)
Revaluation of used equipment            (873,101)     (705,707)
Income taxes                              (22,064)           --
                                      -----------   -----------
Net income (loss)                     $   716,045   $ 4,037,546
-----------------------------------   -----------   -----------
Identifiable assets                   $21,786,401   $16,958,536
-----------------------------------   -----------   -----------
Capital expenditures                  $    82,018   $   414,961
-----------------------------------   -----------   -----------
Amortization of capital assets        $   388,400   $   104,602
-----------------------------------   -----------   -----------
</TABLE>

<PAGE>   45


GLOBAL ELECTION SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
30 JUNE 1999 AND 1998
U.S. Funds

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

17.  DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED
     ACCOUNTING PRINCIPLES

     These consolidated financial statements are prepared in accordance with
     accounting principles generally accepted in Canada. Any differences in
     United States accounting principles as they pertain to the accompanying
     consolidated financial statements are not material except as follows:

     a)  COMPENSATION EXPENSE

         Under accounting principles generally accepted in the United States,
         there is a compensation expense associated with the release of escrowed
         shares of the company, as those shares become eligible for release. No
         compensation expense is applied under accounting principles generally
         accepted in Canada.

     b)  FINANCIAL STATEMENT RECONCILIATION

<TABLE>
<CAPTION>
                                                                               1999            1998
                                                                           ------------    ------------
<S>                                                                        <C>             <C>
         i)   Share capital - Canadian basis                               $ 10,126,865    $ 10,125,867
              Add:  Escrow share compensation expense - prior periods         3,194,621       3,194,621
                                                                           ------------    ------------
              Share capital - U.S. basis                                   $ 13,321,486    $ 13,320,488
                                                                           ------------    ------------
         ii)  Retained earnings - Canadian basis                           $  1,355,738    $    639,693
              Less:  Escrow share compensation expense - prior periods       (3,194,621)     (3,194,621)
                                                                           ------------    ------------
              Deficit - U.S. basis                                         $ (1,838,883)   $ (2,554,928)
                                                                           ------------    ------------
</TABLE>

         iii) U.S. GAAP consolidated statement of shareholders' equity

<TABLE>
<CAPTION>

                                                              Common Shares
                                                          Shares        Amount        Deficit         Total
                                                      ------------  ------------   -----------    ------------
<S>                                                   <C>           <C>            <C>            <C>
        Balance - 31 December 1995 - U.S. basis         14,189,440  $ 12,333,396   $(6,909,329)   $  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 - U.S. basis         14,689,440    12,568,818    (8,645,986)      3,922,832
          Net income for the period                             --            --     2,053,512       2,053,512
                                                      ------------  ------------   -----------    ------------
        Balance - 30 June 1997 - U.S. basis             14,689,440    12,568,818    (6,592,474)      5,976,344
          Issuance of shares for name and  operating
             assets of I-Mark  Systems,  Inc. ($0.55
             per share)                                  1,000,000       548,148            --         548,148
          Issuance of performance shares from
             escrow ($0.06 per share)                    2,738,000       155,562            --         155,562
          Issuance of shares on exercise of options
             ($0.87 per share)                              55,000        47,960            --          47,960
          Net income for the year                               --            --     4,037,546       4,037,546
                                                      ------------  ------------   -----------    ------------
        Balance - 30 June 1998 - U.S. basis             18,482,440    13,320,488    (2,554,928)     10,765,560
          Issuance  of shares on exercise of options
             ($0.81 per share)                               1,232           998            --             998
          Net income for the year                               --            --       716,045         716,045
                                                      ------------  ------------   -----------    ------------
        Balance - 30 June 1999 - U.S. basis             18,483,672  $ 13,321,486   $(1,838,883)   $ 11,482,603
                                                      ------------  ------------   -----------    ------------
</TABLE>


<PAGE>   46


GLOBAL ELECTION SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
30 JUNE 1999 AND 1998
U.S. Funds

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

17.  DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED
     ACCOUNTING PRINCIPLES - Continued

     c)  EARNINGS PER SHARE - BASIC OR PRIMARY

         Under accounting principles generally accepted in the United States,
         stock options and stock warrants are treated as common stock
         equivalents in the determination of basic or primary earnings per share
         if they would have a dilutive effect. Stock options and stock warrants
         are not treated as common stock equivalents in the determination of
         basic or primary earnings per share in Canada.

         Reconciliation of Canadian to U.S. basis - Basic Earnings per Share

<TABLE>
<CAPTION>
                                                           1999           1998
                                                        -----------   -----------
<S>                                                      <C>           <C>
Weighted average number of common shares outstanding
    - Canadian basis                                     18,483,264    16,773,928
Add:  Dilutive stock options and warrants                 1,640,435     1,436,667
                                                        -----------   -----------
Weighted average number of common shares outstanding
    - U.S. basis                                         20,123,699    18,210,595
                                                        -----------   -----------
Net income for the year                                 $   716,045   $ 4,037,546
                                                        -----------   -----------
Basic earnings per share
    - U.S. basis                                        $      0.04   $      0.22
                                                        -----------   -----------
    - Canadian basis                                    $      0.04   $      0.24
                                                        -----------   -----------
</TABLE>

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

18.  UNCERTAINTY DUE TO THE YEAR 2000 ISSUE

     The Year 2000 Issue arises because many computerized systems use two digits
     rather than four to identify a year. Date-sensitive systems may recognize
     the year 2000 as 1900 or some other date, resulting in errors when
     information using year 2000 dates is processed. In addition, similar
     problems may arise in some systems which use certain dates in 1999 to
     represent something other than a date. The effects of the Year 2000 Issue
     may be experienced before, on, or after 1 January 2000, and, if not
     addressed, the impact on operations and financial reporting may range from
     minor errors to significant systems failure which could affect an entity's
     ability to conduct normal business operations. It is not possible to be
     certain that all aspects of the Year 2000 Issue affecting the company,
     including those related to the efforts of customers, suppliers, or other
     third parties, will be fully resolved.

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


ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

None.

<PAGE>   47

                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

The following persons are Directors of the Company and have also been nominated
for election as Directors at the Company's 1999 annual general meeting of
shareholders. Directors serve for a term of one year and until their successors
are elected and qualified.

DAVID H. BROWN, 69, has served as a Director of the Company since 1991 and
Chairman of the Board since 1993. At his retirement in 1989, Mr. Brown was
Vice-Chairman of the investment firm Burns Fry Limited, located in Toronto,
Ontario, Canada. Mr. Brown holds a Bachelor of Science degree from Concordia
University, and a Masters of Business Administration from Harvard University.

GEORGE B. COBBE, 61, has served as a Director of the Company since 1998. Mr.
Cobbe worked in various marketing and executive capacities for Hewlett-Packard
Company from 1961 to 1998 until his retirement. He was General Manager and
Director of North American Field Operations for Hewlett-Packard Company, and was
elected a Vice-President of that company in 1995, and retired in 1998. Mr. Cobbe
holds a Bachelor of Science degree in electrical engineering from Standford
University.

P. NICHOLAS M. GLASS, 54, has served as a Director of the Company since 1997.
Mr. Glass is a member of the British Columbia Bar, and of England and Wales, and
currently practices in the field of labor relations as a mediator and
arbitrator. He is a Director of Belvedere Resources, a Vancouver Stock Exchange
listed company, which owns mineral rights in Finland. From 1992 to 1996, Mr.
Glass was a Director of Tradepoint Investment Exchange, a public company traded
on AIM in London and the Vancouver Stock Exchange that has started a new
electronic stock exchange based in London. From 1972 to 1990, he was a civil
trial lawyer with Swinton and Company in Vancouver, British Columbia.
Mr. Glass holds a Master of Arts degree from Trinity College, Oxford University.

CLINTON H. RICKARDS, 51, has served as a Director of the Company since 1991.
From 1991 to 1995 he served as President of the Company. From 1993 to present,
Mr. Rickards has been involved in the Company's Canadian sales and shareholder
relations efforts. Mr. Rickards has been involved in the computer industry since
1968. In 1980 he started his own company with partners. In 1983, he bought out
his partners and founded the private computer company, North American
Professional Technologies. This company began the development of ES-2000 in 1986
which subsequently became the Company's signature product.

HOWARD T. VAN PELT, 57, has served as a Director of the Company since 1991. He
has served as its President from April 1995 to the present and was appointed
Chief Executive Officer in 1997. Since 1991, he has served as President of
Global USA. In 1970, he became Regional Marketing Manager for Computer Election
Systems Inc., an election voting machine company, and was Regional Manager,
Southern Division, of that company when it was sold in 1981 to Hale Bros. From
1964 to 1968, Mr. Van Pelt was a marketing representative for IBM Corporation,
and from 1968 to 1970, he was a registered representative for Rauscher Pierce
Securities. Mr. Van Pelt attended the University of New Mexico from 1960 to 1964
and the New York Institute of Finance in 1968.

<PAGE>   48

NAMED EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS:
LARRY G. ENSMINGER
Age: 60
Mr. Ensminger has been employed with the Company since 1991 as Vice-President of
Operations for Global USA. From 1993 to 1997, he was the Manager, Sales and
Operations, and from 1991 to 1993, he was a sales representative for the
Company. Mr. Ensminger holds an Associate of Arts Degree (Education) from Dodge
City Community College and Bachelor and Master of Science (Engineering) degrees
from Kansas State College.

MAURICE E. SOKULSKI
Age: 56
Mr. Sokulski was appointed Treasurer of the Company in 1994. He served as a
Director of the Company from 1996 to 1997 and Controller from 1994 to 1996. From
1993 to 1994, he was Controller of Northcoast Building Products Ltd., a British
Columbia, Canada, a distributor of lumber products. In 1992, he was Controller
for Adagio Enterprises Ltd, a British Columbia, Canada, manufacturer and
distributor of lingerie. He is a Chartered Accountant and holds a Bachelor of
Commerce degree from the University of Alberta.

ROBERT J. UROSEVICH
Age:  51
Mr. Urosevich has been employed with the Company since 1997 as Vice-President,
Sales, Marketing and Business Development of Global USA. From 1995 to 1997, he
was President of I-Mark Systems, Inc., which was acquired by the Company in
1997. From 1994 to 1995, he was President of DATA Duplicating, Inc. Mr.
Urosevich attended Coe College in Cedar Rapids, Iowa from 1966 to 1970.

No Director or Executive Officer of the Company is related to any other by blood
or marriage.

BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the US Securities Exchange Act of 1934 (the "Act"), directors and officers
of public companies are required to report to the Securities and Exchange
Commission all personal transactions involving the Company's common shares.
Based solely upon a review of Forms 3, 4 and 5 filed by Directors and officers
of the Company during the 1999 fiscal year, the Forms 3 for each of the
Directors were filed late. All other reports required by Section 16(a) of the
Act were timely filed.

ITEM 10. EXECUTIVE COMPENSATION

COMPENSATION OF EXECUTIVE OFFICERS

Set out below are particulars of compensation paid to the following persons (the
"Named Executive Officers"):

(a)     the Company's chief executive officer;

<PAGE>   49

(b)     each of the Company's four most highly compensated executive officers
        who were serving as executive officers at the end of the most recently
        completed financial year and whose total salary and bonus exceeds
        C$100,000 per year; and

(c)     any additional individuals for whom disclosure would have been provided
        under (b) but for the fact that the individual was not serving as an
        executive officer of the Company at the end of the most recently
        completed financial year.

Based on the foregoing, during the fiscal year ended June 30, 1999, there were
five Named Executive Officers of the Company, namely:

<TABLE>
<CAPTION>
NAME                    TITLE
------------------      ----------------------------------------------------------------------
<S>                     <C>
HOWARD T. VAN PELT      President, Chief Executive Officer and a Director of the Company
                        President of Global USA

CLINTON H. RICKARDS     Director of the Company

LARRY G. ENSMINGER      Vice-President, Operations of Global USA

MAURICE E. SOKULSKI     Treasurer of the Company

ROBERT J. UROSEVICH     Vice-President, Sales, Marketing and Business Operations of Global USA
</TABLE>

The following table sets forth the compensation awarded, paid to or earned by
the Company's current Named Executive Officers during the fiscal years ended
June 30, 1999 and 1998 and the six months and fiscal year ended June 30, 1997.

<TABLE>
<CAPTION>
                                                SUMMARY COMPENSATION TABLE
-------------------------------------------------------------------------------------------------------------------------
                                      ANNUAL COMPENSATION                      LONG TERM COMPENSATION
                      -------------------------------------------------   -----------------------------------------------
                                                                             AWARDS        PAYOUTS
-----------------------------------------------------------------------   ----------  --------------------   ------------
                                                                                       RESTRICTED
                                                                           SECURITIES  SHARES OR
                                                               OTHER          UNDER    RESTRICTED
 NAME AND PRINCIPAL    YEAR                                    ANNUAL        OPTIONS     SHARE       LTIP       ALL OTHER
      POSITION         ENDED     SALARY (4)       BONUS     COMPENSATION     GRANTED     UNITS     PAY-OUTS   COMPENSATION
                                     ($)           ($)          ($)            (#)        (#)         ($)          ($)
--------------------  -------    ----------    -----------  ------------   ---------- -----------  --------   ------------
<S>                   <C>        <C>           <C>          <C>            <C>        <C>          <C>        <C>
HOWARD T. VAN PELT    1999(1)    $ 180,000     $ 22,143(5)      -0-            -0-        -0-         -0-      $ 1,044
President and CEO     1998(2)    $ 177,500     $126,015         -0-          50,000       -0-         -0-      $ 1,607
of the Company;       1997(3)    $  75,000     $ 63,610         -0-            -0-        -0-         -0-         -0-
President of Global
USA
--------------------- -------    ----------    -----------  ------------   ---------- -----------  --------   ------------
CLINTON H. RICKARDS   1999(1)    C$145,577     C$35,006         -0-            -0-        -0-         -0-      C$1,308
Director              1998(2)    C$136,000     C$33,026         -0-          50,000       -0-         -0-      C$  171
                      1997(3)    C$ 68,000     C$42,155         -0-            -0-        -0-         -0-      C$  150

--------------------- -------    ----------    -----------  ------------   ----------  ----------- --------   ------------
ROBERT J. UROSEVICH   1999(1)    $115,000         -0-           -0-            -0-        -0-         -0-      $   812
VP, Sales,            1998(2)    $105,417      $ 25,000         -0-          120,000      -0-         -0-         -0-
Marketing and         1997(3)        N/A          N/A           -0-            -0-        -0-         -0-         -0-
Business
Development (Global
USA)
--------------------- -------    ----------    -----------  ------------   ----------  ----------- --------   ------------
MAURICE E. SOKULSKI   1999(1)    $ 75,000         -0-           -0-            -0-        -0-         -0-      $   638
Treasurer             1998(2)    $ 75,000      $ 35,000         -0-          100,000      -0-         -0-         -0-
                      1997(3)    $ 27,324         -0-           -0-            -0-        -0-         -0-         -0-
--------------------- -------    ----------    -----------  ------------   ----------  ----------- --------   ------------
LARRY G. ENSMINGER    1999(1)    $ 95,500         -0-           -0-            -0-        -0-         -0-      $   789
VP, Operations        1998(2)    $ 90,000      $ 40,000         -0-          50,000       -0-         -0-      $   916
(Global USA)          1997(3)    $ 45,000         -0-           -0-            -0-        -0-         -0-         -0-
--------------------- -------    ----------    -----------  ------------   ----------  ----------- --------   ------------
</TABLE>

(1)      For the fiscal year ended June 30, 1999.
(2)      For the fiscal year ended June 30, 1998.
(3)      For the six months and fiscal year ended at June 30, 1997.
(4)      Refer to "Management Contracts" for further particulars.
(5)      Accrued but not paid during the fiscal year ended June 30, 1999.



<PAGE>   50

LONG TERM INCENTIVE PLAN AWARDS
Long term incentive plan awards ("LTIP") means any plan providing compensation
intended to serve as an incentive for performance to occur over a period longer
than one financial year whether performance is measured by reference to
financial performance of the Company or an affiliate, or the price of the
Company's shares but does not include option or stock appreciation rights plans
or plans for compensation through restricted shares or units. No LTIPs were
granted to the Named Executive Officers or Directors during the fiscal year
ended June 30, 1999.

STOCK APPRECIATION RIGHTS
Stock appreciation rights ("SAR's") means a right, granted by an issuer or any
of its subsidiaries as compensation for services rendered or in connection with
office or employment, to receive a payment of cash or an issue or transfer of
securities based wholly or in part on changes in the trading price of the
Company's shares. No SARs were granted to or exercised by the Named Executive
Officers or Directors during the fiscal year ended June 30, 1999.

OPTION GRANTS DURING THE FISCAL YEAR ENDED JUNE 30, 1999
No stock options were granted to the Named Executive Officers or Directors
during the fiscal year ended June 30, 1999.

AGGREGATED OPTION EXERCISES DURING THE FISCAL YEAR ENDED JUNE 30, 1999 AND
FISCAL YEAR END OPTION VALUES No stock options were exercised by the Named
Executive Officers or Directors during the fiscal year ended June 30, 1999.


<PAGE>   51

The following table provides the details of stock options exercised during the
fiscal year ended June 30, 1999, and the fiscal year end stock option values for
the Named Executive Officers:

<TABLE>
<CAPTION>
OPTIONEES              SHARES ACQUIRED ON   VALUE REALIZED      NUMBER OF SHARES       VALUE OF UNEXERCISED
                       EXERCISE                                 UNDERLYING             IN-THE-MONEY
                                                                UNEXERCISED OPTIONS,   OPTIONS, ALL OF
                                                                ALL OF WHICH WERE      WHICH WERE
                                                                EXERCISABLE, AT JUNE   EXERCISABLE, AT JUNE
                                                                30, 1999               30, 1999
-------------------    -------------------  ---------------     --------------------   ---------------------
<S>                    <C>                  <C>                 <C>                    <C>
HOWARD T. VAN PELT             Nil                 N/A                 50,000                C$70,000

CLINTON H. RICKARDS            Nil                 N/A                 50,000                C$70,000

LARRY G. ENSMINGER             Nil                 N/A                 50,000                C$70,000

MAURICE E. SOKULSKI            Nil                 N/A                 100,000               C$140,000

ROBERT J. UROSEVICH            Nil                 N/A                 120,000               C$168,000
</TABLE>

DEFINED BENEFIT OR ACTUARIAL PLAN DISCLOSURE
The Company has no Defined Benefit or Actuarial Plan benefits payable upon
retirement of the Named Executive Officers.

TERMINATION OF EMPLOYMENT, CHANGE IN RESPONSIBILITIES AND EMPLOYMENT CONTRACTS
No employment contracts exist between the Company and the Named Executive
Officers, other than set out below under the heading entitled "Employment
Agreements".

COMPENSATION OF DIRECTORS
No cash compensation was paid to any Director of the Company for the Director's
services as a Director during the fiscal year ended June 30, 1999 other than to
Messrs. Glass and Cobbe, who were each paid a total of $20,000. This amount
included Directors' fees for the fiscal years ended June 30, 1999 and 1998 in
the amount of $10,000 per year. The Company has no standard arrangement pursuant
to which the Directors are compensated by the Company for the services in their
capacity as Directors except for the granting from time to time of incentive
stock options in accordance with the policies of The Toronto Stock Exchange. The
Company reimburses Directors for expenses they incur to attend board meetings.

COMPOSITION OF THE COMPENSATION COMMITTEE
The Company's Compensation Committee consists of Howard T. Van Pelt, P. Nicholas
Glass and George B. Cobbe. However, compensation matters may also be reviewed
and approved by the entire Board of Directors. Howard T. Van Pelt was, during
the past fiscal year,

o      the Company's President and Chief Executive Officer;
o      President of Global USA; and
o      an employee of the Company.

<PAGE>   52

EMPLOYMENT AGREEMENTS

HOWARD T. VAN PELT
Pursuant to an Employment Agreement dated August 1, 1997, Global USA employed
Howard T. Van Pelt as its President at an annual salary of $180,000 plus an
annual bonus of 3% of the consolidated pre-tax earnings to a maximum of $200,000
per year. The agreement is for a term of three years expiring July 31, 2000. The
employment agreement also provides that Mr. Van Pelt's employment may be
terminated only for cause and that upon termination for other than criminal
behaviour, Global USA will pay a severance benefit equal to six months base
salary at the time of termination.

ROBERT J. UROSEVICH
Pursuant to an Employment Agreement dated August 1, 1997, Global USA employed
Mr. Urosevich as Vice-President, Sales, Marketing and Business Development at an
annual salary of $115,000, as adjusted from time to time. The agreement is for a
term of three years expiring July 31, 2000. The Employment Agreement also
provides that Mr. Urosevich's employment may be terminated for cause as defined
in the agreement, and that upon termination for other than criminal behaviour,
the Company will pay a severance benefit equal to 12 months base salary at the
time of termination.

CLINTON H. RICKARDS
Pursuant to an Employment Agreement dated October 1, 1996, the Company retained
the services of Clinton H. Rickards, a Director of the Company, at an annual
salary of C$136,000 plus an annul bonus of 3% of Canadian sales and 1% of the
net profits before taxes for all sales, excluding those in Canada, of the
Company during the term of the agreement. The agreement, which was for a term of
two years expired October 1, 1998. Mr. Rickards current remuneration is $100,000
converted to and payable in Canadian dollars.

See Item 12: "Certain relationships and related transactions" below for
additional information.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

To the knowledge of the directors and senior officers of the Company, there are
no individuals or companies who beneficially own, directly or indirectly, or
exercise control or direction over shares carrying more than 10% of the voting
rights attached to all outstanding shares of the Company.

The following table sets forth, as of June 30, 1999, the beneficial ownership of
common shares by each person who is known by the Company to beneficially own
more than 5% of outstanding common shares in the capital of the Company:


<PAGE>   53

<TABLE>
<CAPTION>
   NAME AND ADDRESS OF              AMOUNT AND NATURE OF           PERCENT OF CLASS
    BENEFICIAL OWNER            BENEFICIAL OWNERSHIP (1)(2)(3)    BENEFICIALLY OWNED(2)
----------------------------    ------------------------------    --------------------
<S>                             <C>                               <C>
DAVID H. BROWN                          1,260,067                         6.8%
350 - 1200 West 73rd Avenue
Vancouver, British Columbia
Canada  V6P 6G5

CLINTON H. RICKARDS                     1,019,419(4)                      5.5%
350 - 1200 West 73rd Avenue
Vancouver, British Columbia
Canada  V6P 6G5

HOWARD T. VAN PELT                        968,000(4)                      5.2%
1611 Wilmenth Road
McKinney, Texas
USA  75069
</TABLE>

(1)      Not being within the knowledge of the Company, the ownership
         information disclosed above has been furnished by the respective
         directors individually.

(2)      To the Company's knowledge, except where otherwise noted, each person
         listed above has sole voting power of his shares.

(3)      Free trading shares (subject to Rule 144), except as to option shares.
         See footnote (4) below as to number of stock option shares included in
         the table.

(4)      Includes, as to the named person, the number of shares underlying
         exercisable stock options: Clinton H. Rickards (50,000 shares), Howard
         T. Van Pelt (50,000 shares). Messrs. Rickards and Van Pelt's stock
         options are exercisable at a price of $1.25 per share until August 22,
         2002.


<PAGE>   54


The following table sets forth, as at August 31, 1999, the beneficial ownership
of common shares held by each director and nominee for director (standing for
election at the Company's 1999 Annual General Meeting) of the Company, each
Named Executive Officer, and by all directors and officers as a group:

<TABLE>
<CAPTION>
                                          AMOUNT AND NATURE OF            PERCENT OF CLASS
NAME OF BENEFICIAL OWNER           BENEFICIAL OWNERSHIP (1)(2)(3)(4)     BENEFICIALLY OWNED
------------------------           --------------------------------      ------------------
<S>                                <C>                                   <C>
DAVID H. BROWN                              1,260,067                          6.8%
Director

GEORGE B. COBBE                               100,000                       less than 1%
Director

P. NICHOLAS M. GLASS                           50,000                       less than 1%
Director

CLINTON H. RICKARDS(5)                      1,019,419                          5.5%
Director

HOWARD T. VAN PELT(5)                         968,000                          5.2%
Director

LARRY G. ENSMINGER(5)                         402,835                          2.2%

MAURICE E. SOKULSKI(5)                        276,700                          1.5%

ROBERT J. UROSEVICH(5)                        160,000                       less than 1%

DIRECTORS AND OFFICERS                      4,237,021(6)                      22.9%
AS A GROUP
</TABLE>

(1)      Not being within the knowledge of the Company, the ownership
         information disclosed above has been furnished by the respective
         directors individually.

(2)      A person is deemed, under United States securities law, to be the owner
         of securities that can be acquired by that person within 60 days of the
         date of the table upon exercise of options or warrants. Each beneficial
         owner's percentage ownership is determined by assuming that options or
         warrants that are held by that person and that are exercisable within
         60 days of the date of this table have been exercised. The information
         as to the shares beneficially owned or over which a director exercises
         control or direction been furnished by the respective Directors
         individually and is for the month ended August 31, 1999.

(3)      To the Company's knowledge, except where otherwise noted, each person
         has sole voting and investment power as to the shares.

(4)      Includes, as to the person listed, stock options to purchase shares in
         the capital of the Company as follows: (Cobbe - 100,000 option shares
         exercisable at C$1.60 per share; Glass - 50,000 option shares
         exercisable at C$1.49 per share; Rickards - 50,000 option shares
         exercisable at C$1.25 per share; Van Pelt - 50,000 option shares
         exercisable at C$1.25 per share; Ensminger - 50,000 option shares
         exercisable at C$1.25 per share; Sokulski - 100,000 option shares
         exercisable at C$1.25 per share; and Urosevich - 120,000 option shares
         exercisable at C$1.25 per share).

(5)      Named Executive Officer.

(6)      Includes stock options to purchase a total of 520,000 shares which are
         exercisable at C$1.25 to C$1.60 per share.

<PAGE>   55

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In addition to the employment arrangements discussed under Item 10. Executive
Compensation, the Company employs Larry Ensminger, its Vice President of
Operations, at a salary of $96,000 per year. Until the beginning of the current
fiscal year, the Company paid Mr. Ensminger a salary of $90,000 per year. The
Company employs its Treasurer, Maurice E. Sokulski, at a salary of $75,000 per
year; for the previous fiscal year, the Company paid Mr. Sokulski a salary in
the amount of $75,000.

In May 1999, Mr. Van Pelt loaned the Company US$300,000 on an unsecured
short-term promissory note bearing interest at a rate of 10% per annum. This
loan was repaid in full by the Company in August 1999.

With respect to transactions which were entered into before June 30, 1997, the
following information is provided as a matter of interest. By an agreement dated
November 22, 1991, the Company reserved for issuance 4,150,000 treasury shares
for issuance as restricted "performance shares". These shares were to be issued
upon payment of C$0.08 per share, and, upon issuance, were to be held in escrow
and released to specified employees on the basis of "cumulative cash flow". Two
of the original allotees ceased to be employees of the Company and, therefore,
were no longer eligible for restricted performance shares. Their 270,000 share
allotment was canceled, leaving a balance of 3,880,000 reserved for issuance.
During 1996, the Directors resolved to cancel 1,142,000 of the allotted but
unissued restricted performance shares and to extend the earn-out period on the
remaining 2,738,000 restricted performance shares from January 17, 1997 to
January 17, 2000. The Directors' resolution was subsequently approved by
shareholders and regulatory authorities. On December 6, 1996, the Company
entered into an Amended and Restated Performance Shares Allotment Agreement with
respect to the remaining shares which extended the earn-out time from January
17, 1997 to January 17, 2000, but retained the earn-out requirements of the
earlier agreement. Those requirements provided that performance shares would
have to be earned out on the basis of one performance share for every C$0.7975
cumulative cash flow. The following Directors and Officers were awarded the
following rights to acquire restricted performance shares, subject to the escrow
terms: Howard Van Pelt, 2,187,581 (of which 1,305,492 were intended for other
employees); David H. Brown, 88,208; and Clinton H. Rickards, 282,267. In January
1998, the restrictions on the performance shares lapsed and they were earned,
purchased and released from escrow. Of Mr. Van Pelt's allotment, as intended,
1,305,492 were issued to other employees, leaving him a balance of 882,089
shares.


<PAGE>   56

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

         A. Exhibits
<TABLE>
<CAPTION>
EXHIBIT
  NO.            DESCRIPTION
-------          -----------
<S>     <C>
3(1)    Memorandum and Articles of Incorporation, as amended.

4(1)    Parts 7, 10, 12 and 27 of the Registrant's Memorandum and Articles of
        Incorporation, as amended, set forth in Exhibit 3(1)

10a(1)  Employment Agreement with Howard Van Pelt dated August 1, 1997

10b(1)  Employment Agreement, dated October 1, 1996, with Clinton H. Rickards

10c(1)  Employment Agreement with Robert J. Urosevich dated August 1, 1997

10d(1)  Amended and Restated Performance Share Allotment Agreement dated December
        6, 1996
10e(1)  Lease (Vancouver, British Columbia)

10f(1)  Lease (McKinney, Texas)

10g(1)  Lease (Omaha, Nebraska) filed electronically herewith

10h(1)  Purchase Agreement between the Registrant and I-Mark Systems, Inc. dated
        July 31, 1997

10i(1)  Promissory Notes and associated Accounts Security Agreements and Stock
        Purchase Warrants, all dated March 31, 1998, to each of David Ross and
        Victoria Ross. Termination of each Promissory Note.

10j(1)  Form of Option Agreement with employees

10k(1)  Option Agreement dated August 22, 1997 between the Company and Howard T.
        Van Pelt

10l(1)  Option Agreement dated August 22, 1997 between the Company and Clinton
        H. Rickards

10m(1)  Option Agreement dated August 22, 1997 between the Company and Larry
        Ensminger

10n(1)  Option Agreement dated August 22, 1997 between the Company and Maurice
        E. Sokulski

10o(1)  Option Agreement dated August 22, 1997 between the Company and Robert
        Urosevich

10p(1)  Promissory Note to Western Bank Albuquerque for $770,000.

10q(1)  Promissory Note to Western Bank Albuquerque for $600,000.

10r     Addendum to lease agreement between 405 N. 115th St filed. LLC and the
        Company. electronically herewith

10s     Change in terms agreement for Promissory note dated filed June 8, 1998
        between Western Bank and the Company. electronically herewith

10t     Change in terms agreement for Promissory note dated filed November 25,
        1995 between Western Bank and the Company. electronically herewith

10u     Promissory note dated May 14, 1999 between Howard T. Van Pelt filed and
        the Company. electronically herewith

10v     Promissory note dated May 28, 1999 between Western Bank and filed the
        Company. electronically herewith

11      Computation of per-share income Treasury Stock filed Method of the
        Company. electronically herewith

21      Subsidiaries of the Company filed electronically herewith

23      Consent of Staley, Okada, Chandler & Scott filed Chartered Accountants.
        electronically herewith

24      Power of Attorney filed electronically herewith

27      Financial Data Schedule filed electronically herewith
</TABLE>


(1) Incorporated by reference to the Company's Form 10SB filed with the
Commission on July 31, 1998.
<PAGE>   57

     B.  Reports on Form 8-K

         The Company filed no reports on Form 8-K during the fourth quarter of
Fiscal 1999.

                                        Signature

In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on behalf by the undersigned, hereunto duly
authorized.

Dated:  September 28, 1999
                          GLOBAL ELECTION SYSTEMS INC.

                           By: /s/ Howard T. Van Pelt
                       ----------------------------------
                         Howard T. Van Pelt, President,
                          Chief Executive Officer and
                            Chief Financial Officer


<PAGE>   58
                                POWER OF ATTORNEY

         KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Howard T. Van Pelt with full power to act
as his true and lawful attorney-in-fact, with full power of substitution and
resubstitution for him in his name, place and stead, in any and all capacities
to sign any and all amendments to this Report on Form 10-K, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report or amendment thereto has been signed below by the following persons
in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE                               CAPACITY                    DATE
---------                               --------                    ----
<S>                         <C>                                     <C>
/s/ DAVID H. BROWN          Chairman of the Board and         September 25, 1999
-----------------------     Director
David H. Brown


                            President, Chief Executive
-----------------------     Officer, Chief Financial Officer
Howard T. Van Pelt          and Director


/s/ CLINTON H. RICKARDS     Director                          September 28, 1999
----------------------
Clinton H. Rickards

/s/ GEORGE B. COBBE         Director                          September 25, 1999
-----------------------
George B. Cobbe


                            Director
----------------------
P. Nicholas M. Glass
</TABLE>

<PAGE>   59


                                INDEX TO EXHIBITS


<TABLE>
<CAPTION>
EXHIBIT
  NO.            DESCRIPTION
-------          -----------
<S>     <C>
3(1)    Memorandum and Articles of Incorporation, as amended.

4(1)    Parts 7, 10, 12 and 27 of the Registrant's Memorandum and Articles of
        Incorporation, as amended, set forth in Exhibit 3

10a(1)  Employment Agreement with Howard Van Pelt dated August 1, 1997

10b(1)  Employment Agreement, dated October 1, 1996, with Clinton H. Rickards

10c(1)  Employment Agreement with Robert J. Urosevich dated August 1, 1997

10d(1)  Amended and Restated Performance Share Allotment Agreement dated December
        6, 1996
10e(1)  Lease (Vancouver, British Columbia)

10f(1)  Lease (McKinney, Texas)

10g     Lease (Omaha, Nebraska) filed electronically herewith

10h(1)  Purchase Agreement between the Registrant and I-Mark Systems, Inc. dated
        July 31, 1997

10i(1)  Promissory Notes and associated Accounts Security Agreements and Stock
        Purchase Warrants, all dated March 31, 1998, to each of David Ross and
        Victoria Ross. Termination of each Promissory Note.

10j(1)  Form of Option Agreement with employees

10k(1)  Option Agreement dated August 22, 1997 between the Company and Howard T.
        Van Pelt

10l(1)  Option Agreement dated August 22, 1997 between the Company and Clinton
        H. Rickards

10m(1)  Option Agreement dated August 22, 1997 between the Company and Larry
        Ensminger

10n(1)  Option Agreement dated August 22, 1997 between the Company and Maurice
        E. Sokulski

10o(1)  Option Agreement dated August 22, 1997 between the Company and Robert
        Urosevich

10p(1)  Promissory Note to Western Bank Albuquerque for $770,000.

10q(1)  Promissory Note to Western Bank Albuquerque for $600,000.

10r     Addendum to lease agreement between 405 N. 115th St filed. LLC and the
        Company. electronically herewith

10s     Change in terms agreement for Promissory note dated filed June 8, 1998
        between Western Bank and the Company. electronically herewith

10t     Change in terms agreement for Promissory note dated filed November 25,
        1995 between Western Bank and the Company. electronically herewith

10u     Promissory note dated May 14, 1999 between Howard T. Van Pelt filed and
        the Company. electronically herewith

10v     Promissory note dated May 28, 1999 between Western Bank and filed the
        Company. electronically herewith

11      Computation of per-share income Treasury Stock filed Method of the
        Company. electronically herewith

21      Subsidiaries of the Company filed electronically herewith

23      Consent of Staley, Okada, Chandler & Scott filed Chartered Accountants.
        electronically herewith

24      Power of Attorney filed electronically herewith

27      Financial Data Schedule filed electronically herewith

99(1)   Form F-X
</TABLE>


(1) Incorporated by reference to the Company's Form 10SB filed with the
Commission on July 31, 1998.