|  |
|--|
|  |
|  |
|  |
|  |

UNITEDSTATESSECURITIES AND EXCHANGECOMMISSIONWASHINGTON, D.C. 20549

FORM 10-Q

(MARK ONE)

|           |                                                                                       |
|-----------|---------------------------------------------------------------------------------------|
| [X]  | QUARTERLY REPORTPURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934 |

For the quarterly period endedDecember  31,  2005

OR

|                                  |                                                                                        |
|----------------------------------|----------------------------------------------------------------------------------------|
| [    ]  | TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934 |

For the transition period from   to____________

Commission file number: 000-22839

Globecomm SystemsInc.

(Exact name of Registrant asspecified in its charter)

|                                                                       |  |                                                |  |  |  |  |
|-----------------------------------------------------------------------|--|------------------------------------------------|--|--|--|--|
| Delaware(State or other jurisdiction of incorporation ororganization) |  | 11-3225567(I.R.S. Employer Identification No.) |
| 45 Oser Avenue, Hauppauge,NY (Address of principal executive offices) |  | 11788(Zip Code)                                |
|                                                                       |

Registrant’stelephone number, including area code: (631) 231-9800

Indicateby check mark whether the registrant (1) has filed all reports requiredto be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period thatthe Registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days. Yes [X]  No [    ]

Indicate by check mark whether theRegistrant is a large accelerated filer, an accelerated filer, or anon-accelerated filer. See definition of ‘‘acceleratedfiler and large accelerated filer’’ in Rule 12b-2 of theExchange Act. Large accelerated filer [    ]    Accelerated filer [X]     Non-accelerated filer[    ]

Indicate by check mark whether the registrantis a shell company (as defined by Rule 12b-2 of the ExchangeAct). Yes [    ]     No [X]

As ofFebruary  3,  2006, there were 15,102,498 shares of theRegistrant’s common stock, $0.001 par value,outstanding.

    

|  |
|--|
|  |
|  |
|  |
|  |

----

GLOBECOMM SYSTEMSINC.

Index to the December  31,  2005 Form10-Q

|                                    |  |                                                                                                                                                      |  |        |    |        |  |  |  |  |
|------------------------------------|--|------------------------------------------------------------------------------------------------------------------------------------------------------|--|--------|----|--------|--|--|--|--|
|                               |  |                                                                                                                                                 |  | Page   |
| PartI — FinancialInformation |
| Item1.                             |  | FinancialStatements                                                                                                                                  |  |   | 3  |   |
|                               |  | Consolidated BalanceSheets — As of December  31,  2005 (unaudited)    and June  30,2005                                    |  |   | 3  |   |
|                               |  | Consolidated Statements ofOperations (unaudited) —     For the three and six monthsended December  31,  2005 and2004       |  |   | 4  |   |
|                               |  | Consolidated Statement ofChanges in Stockholders’ Equity (unaudited) —    For the six months ended December  31,2005 |  |   | 5  |   |
|                               |  | Consolidated Statements ofCash Flows (unaudited) —     For the six months endedDecember  31,  2005 and2004                 |  |   | 6  |   |
|                               |  | Notes to ConsolidatedFinancial Statements (unaudited)                                                                                                |  |   | 7  |   |
| Item2.                             |  | Management's Discussion and Analysis of FinancialCondition     and Results ofOperations                                          |  |   | 13 |   |
| Item 3.                            |  | Quantitativeand Qualitative Disclosures about MarketRisk                                                                                             |  |   | 18 |   |
| Item 4.                            |  | Controls andProcedures                                                                                                                               |  |   | 19 |   |
| PartII — Other Information   |
| Item 1.                            |  | LegalProceedings                                                                                                                                     |  |   | 20 |   |
| Item 1A.                           |  | RiskFactors                                                                                                                                          |  |   | 20 |   |
| Item 2.                            |  | UnregisteredSales of Equity Securities and Use ofProceeds                                                                                            |  |   | 28 |   |
| Item 3.                            |  | Defaults UponSenior Securities                                                                                                                       |  |   | 28 |   |
| Item4.                             |  | Submission of Matters to a Vote of SecurityHolders                                                                                                   |  |   | 28 |   |
| Item 5.                            |  | OtherInformation                                                                                                                                     |  |   | 28 |   |
| Item6.                             |  | Exhibits                                                                                                                                             |  |   | 28 |   |
|                               |  | Signatures                                                                                                                                           |  |   | 29 |   |
|                                    |

2

----

PART I —FINANCIAL INFORMATION

Item 1. Financial Statements

GLOBECOMM SYSTEMS INC.CONSOLIDATED BALANCE SHEETS(Inthousands, except sharedata)

|                                                                                                                                            |  |                 |         |             |  |        |         |         |  |  |
|--------------------------------------------------------------------------------------------------------------------------------------------|--|-----------------|---------|-------------|--|--------|---------|---------|--|--|
|                                                                                                                                       |  | **December31,** |         | **June30,** |
|                                                                                                                                       |  | **2005**        |         | **2005**    |
|                                                                                                                                       |  | **(Unaudited)** |         |        |
| **Assets**                                                                                                                                 |  |            |    |        |  |   |    |    |
| Currentassets:                                                                                                                             |  |            |    |        |  |   |    |    |
| Cash and cashequivalents                                                                                                                   |  | $               | 25,310  |        |  | $      | 25,609  |    |
| Accountsreceivable,net                                                                                                                     |  |            | 26,771  |        |  |   | 22,700  |    |
| Inventories                                                                                                                                |  |            | 17,153  |        |  |   | 12,886  |    |
| Prepaidexpenses and other currentassets                                                                                                    |  |            | 981     |        |  |   | 858     |    |
| Deferredincometaxes                                                                                                                        |  |            | 38      |        |  |   | 38      |    |
| Totalcurrent assets                                                                                                                        |  |            | 70,253  |        |  |   | 62,091  |    |
| Fixedassets,net                                                                                                                            |  |            | 15,506  |        |  |   | 16,050  |    |
| Goodwill                                                                                                                                   |  |            | 7,204   |        |  |   | 7,204   |    |
| Otherassets                                                                                                                                |  |            | 1,017   |        |  |   | 1,033   |    |
| Totalassets                                                                                                                                |  | $               | 93,980  |        |  | $      | 86,378  |    |
| **Liabilitiesand Stockholders'Equity**                                                                                                     |  |            |    |        |  |   |    |    |
| Currentliabilities:                                                                                                                        |  |            |    |        |  |   |    |    |
| Accountspayable                                                                                                                            |  | $               | 21,615  |        |  | $      | 15,550  |    |
| Deferredrevenues                                                                                                                           |  |            | 3,263   |        |  |   | 5,563   |    |
| Accruedpayroll and related fringebenefits                                                                                                  |  |            | 2,220   |        |  |   | 1,671   |    |
| Otheraccruedexpenses                                                                                                                       |  |            | 2,327   |        |  |   | 2,471   |    |
| Deferredliabilities                                                                                                                        |  |            | 316     |        |  |   | 316     |    |
| Totalcurrentliabilities                                                                                                                    |  |            | 29,741  |        |  |   | 25,571  |    |
| Deferredliabilities, less currentportion                                                                                                   |  |            | 512     |        |  |   | 670     |    |
| Commitmentsandcontingencies                                                                                                                |  |            |    |        |  |   |    |    |
| Stockholders’equity:                                                                                                                 |  |            |    |        |  |   |    |    |
| Series A JuniorParticipating, shares authorized, issued and outstanding: none atDecember  31,  2005 and June  30,  2005                    |  |            | — |        |  |   | — |    |
| Commonstock, $.001 par value, 50,000,000 shares authorized, shares issued:15,492,537 at December  31,  2005 and 15,103,587 atJune  30,2005 |  |            | 15      |        |  |   | 15      |    |
| Additional paid-incapital                                                                                                                  |  |            | 134,862 |        |  |   | 133,003 |    |
| Accumulateddeficit                                                                                                                         |  |            | (68,634 | )      |  |   | (70,384 | )  |
| Accumulatedother comprehensiveincome                                                                                                       |  |            | 265     |        |  |   | 284     |    |
| Treasurystock, at cost, 465,351 shares at December  31,  2005 andJune  30,2005                                                             |  |            | (2,781  | )      |  |   | (2,781  | )  |
| Totalstockholders’equity                                                                                                             |  |            | 63,727  |        |  |   | 60,137  |    |
| Totalliabilities and stockholders'equity                                                                                                   |  | $               | 93,980  |        |  | $      | 86,378  |    |
|                                                                                                                                            |

Seeaccompanying notes.

3

----

GLOBECOMM SYSTEMS INC.CONSOLIDATEDSTATEMENTS OF OPERATIONS(In thousands, except per sharedata)(Unaudited)

|                                                                                       |  |                   |         |                  |  |                 |         |                  |  |        |         |        |  |        |         |        |  |  |
|---------------------------------------------------------------------------------------|--|-------------------|---------|------------------|--|-----------------|---------|------------------|--|--------|---------|--------|--|--------|---------|--------|--|--|
|                                                                                  |  | ThreeMonths Ended |         | Six MonthsEnded  |
|                                                                                  |  | December31,2005   |         | December 31,2004 |  | December31,2005 |         | December 31,2004 |
| Revenuesfrom ground segment systems, networks and enterprise solutions                |  | $                 | 22,604  |             |  | $               | 24,693  |             |  | $      | 45,623  |   |  | $      | 46,279  |   |
| Revenuesfrom data communications services                                             |  |              | 7,308   |             |  |            | 4,535   |             |  |   | 13,865  |   |  |   | 8,408   |   |
| Totalrevenues                                                                         |  |              | 29,912  |             |  |            | 29,228  |             |  |   | 59,488  |   |  |   | 54,687  |   |
| Costsand operatingexpenses:                                                           |  |              |    |             |  |            |    |             |  |   |    |   |  |   |    |   |
| Costsfrom ground segment systems, networks and enterprisesolutions                    |  |              | 18,701  |             |  |            | 21,013  |             |  |   | 38,226  |   |  |   | 39,075  |   |
| Costsfrom data communicationsservices                                                 |  |              | 6,143   |             |  |            | 3,714   |             |  |   | 11,711  |   |  |   | 6,908   |   |
| Sellingandmarketing                                                                   |  |              | 1,615   |             |  |            | 1,383   |             |  |   | 3,129   |   |  |   | 2,552   |   |
| Researchanddevelopment                                                                |  |              | 161     |             |  |            | 174     |             |  |   | 270     |   |  |   | 472     |   |
| Generalandadministrative                                                              |  |              | 2,552   |             |  |            | 2,074   |             |  |   | 4,808   |   |  |   | 2,702   |   |
| Totalcosts and operatingexpenses                                                      |  |              | 29,172  |             |  |            | 28,358  |             |  |   | 58,144  |   |  |   | 51,709  |   |
| Incomefromoperations                                                                  |  |              | 740     |             |  |            | 870     |             |  |   | 1,344   |   |  |   | 2,978   |   |
| Interestincome                                                                        |  |              | 227     |             |  |            | 92      |             |  |   | 456     |   |  |   | 165     |   |
| Gainon sale ofinvestment                                                              |  |              | — |             |  |            | 40      |             |  |   | — |   |  |   | 40      |   |
| Incomebefore incometaxes                                                              |  |              | 967     |             |  |            | 1,002   |             |  |   | 1,800   |   |  |   | 3,183   |   |
| Provisionfor incometaxes                                                              |  |              | 30      |             |  |            | — |             |  |   | 50      |   |  |   | — |   |
| Netincome                                                                             |  | $                 | 937     |             |  | $               | 1,002   |             |  | $      | 1,750   |   |  | $      | 3,183   |   |
| Basicnet income per commonshare                                                       |  | $                 | 0.06    |             |  | $               | 0.07    |             |  | $      | 0.12    |   |  | $      | 0.22    |   |
| Dilutednet income per commonshare                                                     |  | $                 | 0.06    |             |  | $               | 0.07    |             |  | $      | 0.11    |   |  | $      | 0.21    |   |
| Weighted-averageshares used in the calculation of basic net income per common share   |  |              | 15,005  |             |  |            | 14,396  |             |  |   | 14,860  |   |  |   | 14,289  |   |
| Weighted-averageshares used in the calculation of diluted net income per common share |  |              | 15,606  |             |  |            | 14,975  |             |  |   | 15,477  |   |  |   | 14,842  |   |
|                                                                                       |

Seeaccompanying notes.

4

----

GLOBECOMM SYSTEMS INC.CONSOLIDATEDSTATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITYFOR THESIX MONTHS ENDED DECEMBER  31,  2005(Inthousands)(Unaudited)

|                                       |  |                                     |        |                           |  |                    |        |                                           |  |                                       |         |                          |  |        |         |         |  |        |        |         |  |        |        |        |  |        |        |         |  |        |        |         |  |  |
|---------------------------------------|--|-------------------------------------|--------|---------------------------|--|--------------------|--------|-------------------------------------------|--|---------------------------------------|---------|--------------------------|--|--------|---------|---------|--|--------|--------|---------|--|--------|--------|--------|--|--------|--------|---------|--|--------|--------|---------|--|--|
|                                  |  |     CommonStock |        | Additional Paid-inCapital |  | AccumulatedDeficit |        | AccumulatedOtherComprehensiveIncome(Loss) |  |     TreasuryStock |         | TotalStockholders'Equity |
|                                  |  | Shares                              |        | Amount                    |  | Shares             |        | Amount                                    |
| Balanceat June  30,2005               |  |                                | 15,104 |                      |  | $                  | 15     |                                      |  | $                                     | 133,003 |                     |  | $      | (70,384 | )  |  | $      | 284    |    |  |   | 465    |   |  | $      | (2,781 | )  |  | $      | 60,137 |    |
| Proceedsfrom exercise of stockoptions |  |                                | 309    |                      |  |               |   |                                      |  |                                  | 1,316   |                     |  |   |    |    |  |   |   |    |  |   |   |   |  |   |   |    |  |   | 1,316  |    |
| Proceedsfrom exercise ofwarrants      |  |                                | 80     |                      |  |               |   |                                      |  |                                  | 440     |                     |  |   |    |    |  |   |   |    |  |   |   |   |  |   |   |    |  |   | 440    |    |
| Issuanceof stockoptions               |  |                                |   |                      |  |               |   |                                      |  |                                  | 103     |                     |  |   |    |    |  |   |   |    |  |   |   |   |  |   |   |    |  |   | 103    |    |
| Comprehensiveincome:                  |  |                                |   |                      |  |               |   |                                      |  |                                  |    |                     |  |   |    |    |  |   |   |    |  |   |   |   |  |   |   |    |  |   |   |    |
| Netincome                             |  |                                |   |                      |  |               |   |                                      |  |                                  |    |                     |  |   | 1,750   |    |  |   |   |    |  |   |   |   |  |   |   |    |  |   | 1,750  |    |
| Lossfrom foreign currencytranslation  |  |                                |   |                      |  |               |   |                                      |  |                                  |    |                     |  |   |    |    |  |   | (19    | )  |  |   |   |   |  |   |   |    |  |   | (19    | )  |
| Totalcomprehensiveincome              |  |                                |   |                      |  |               |   |                                      |  |                                  |    |                     |  |   |    |    |  |   |   |    |  |   |   |   |  |   |   |    |  |   | 1,731  |    |
| Balanceat December  31,2005           |  |                                | 15,493 |                      |  | $                  | 15     |                                      |  | $                                     | 134,862 |                     |  | $      | (68,634 | )  |  | $      | 265    |    |  |   | 465    |   |  | $      | (2,781 | )  |  | $      | 63,727 |    |
|                                       |

Seeaccompanying notes.

5

----

GLOBECOMM SYSTEMS INC.CONSOLIDATEDSTATEMENTS OF CASH FLOWS(Inthousands)(Unaudited)

|                                                                                  |  |                  |         |                  |  |        |        |         |  |  |
|----------------------------------------------------------------------------------|--|------------------|---------|------------------|--|--------|--------|---------|--|--|
|                                                                             |  | SixMonths Ended  |
|                                                                             |  | December31, 2005 |         | December 31,2004 |
| **Operatingactivities:**                                                         |  |             |    |             |  |   |   |    |
| Net income                                                                       |  | $                | 1,750   |             |  | $      | 3,183  |    |
| Adjustmentsto reconcile net income to net cash used in operatingactivities:      |  |             |    |             |  |   |   |    |
| Depreciationandamortization                                                      |  |             | 1,534   |             |  |   | 1,488  |    |
| Provisionfor (recovery of) doubtfulaccounts                                      |  |             | 281     |             |  |   | (1,510 | )  |
| Changesin deferredliabilities                                                    |  |             | (158    | )           |  |   | (159   | )  |
| Stockcompensation expense                                                        |  |             | 103     |             |  |   | 6      |    |
| Unrealized loss onavailable-for-salesecurities                                   |  |             | — |             |  |   | (3     | )  |
| Changesin operating assets andliabilities:                                       |  |             |    |             |  |   |   |    |
| Accountsreceivable                                                               |  |             | (4,363  | )           |  |   | (4,737 | )  |
| Inventories                                                                      |  |             | (4,271  | )           |  |   | (7,097 | )  |
| Prepaidexpenses and other currentassets                                          |  |             | (123    | )           |  |   | 251    |    |
| Otherassets                                                                      |  |             | 16      |             |  |   | (1     | )  |
| Accountspayable                                                                  |  |             | 6,077   |             |  |   | 5,699  |    |
| Deferredrevenue                                                                  |  |             | (2,294  | )           |  |   | 1,679  |    |
| Accruedpayroll and related fringebenefits                                        |  |             | 549     |             |  |   | 281    |    |
| Otheraccruedexpenses                                                             |  |             | (143    | )           |  |   | 364    |    |
| Netcash used in operatingactivities                                              |  |             | (1,042  | )           |  |   | (556   | )  |
| **Investingactivities:**                                                         |  |             |    |             |  |   |   |    |
| Purchases of fixedassets                                                         |  |             | (993    | )           |  |   | (1,517 | )  |
| Restrictedcash                                                                   |  |             | — |             |  |   | (581   | )  |
| Netcash used in investing activities                                             |  |             | (993    | )           |  |   | (2,098 | )  |
| **Financingactivities:**                                                         |  |             |    |             |  |   |   |    |
| Proceeds fromexercise of stockoptions                                            |  |             | 1,316   |             |  |   | 369    |    |
| Proceeds fromexercise ofwarrants                                                 |  |             | 440     |             |  |   | 962    |    |
| Proceeds from saleof common stock in connection with employee stock purchaseplan |  |             | — |             |  |   | 78     |    |
| Netcash provided by financing activities                                         |  |             | 1,756   |             |  |   | 1,409  |    |
| Effectof foreign currency translation oncash                                     |  |             | (20     | )           |  |   | 33     |    |
| Netdecrease in cash and cashequivalents                                          |  |             | (299    | )           |  |   | (1,212 | )  |
| Cash andcash equivalents at beginning ofperiod                                   |  |             | 25,609  |             |  |   | 28,252 |    |
| Cashand cash equivalents at end ofperiod                                         |  | $                | 25,310  |             |  | $      | 27,040 |    |
|                                                                                  |

Seeaccompanying notes.

6

----

GLOBECOMM SYSTEMSINC.NOTES TO CONSOLIDATED FINANCIALSTATEMENTSDECEMBER 31,2005(Unaudited)

1.     Basis of Presentation

Theaccompanying unaudited consolidated financial statements have beenprepared in accordance with accounting principles generally accepted inthe United States for interim financial information and in accordancewith the instructions to Form 10-Q and Article 10 of Regulation S-X.Accordingly, they do not include all of the information and footnotesrequired by accounting principles generally accepted in the UnitedStates for complete financial statements. In the opinion of management,all material adjustments (consisting of normal recurring adjustments)considered necessary for a fair presentation of the results for suchperiods have been included. The consolidated balance sheet atJune  30,  2005 has been derived from the auditedconsolidated financial statements at that date but does not include allof the information and footnotes required by accounting principlesgenerally accepted in the United States for complete financialstatements. The results of operations for the three and six monthsended December  31,  2005, are not necessarily indicativeof the results that may be expected for the full fiscal year endingJune  30,  2006, or for any future period.

Theaccompanying consolidated financial statements should be read inconjunction with the audited consolidated financial statements of theCompany for the fiscal year ended June  30,  2005 and theaccompanying notes thereto contained in the Company's AnnualReport on Form 10-K, filed with the Securities and Exchange Commissionon September  13,  2005.

Principles ofConsolidation

The consolidated financial statements includethe accounts of the Company and its wholly-owned subsidiaries,Globecomm Network Services Corporation(‘‘GNSC’’), and Globecomm Systems EuropeLimited (collectively, the ‘‘Company’’).All significant intercompany balances and transactions have beeneliminated in consolidation.

Accounting Estimates

The preparation of financial statements in conformity withaccounting principles generally accepted in the United States requiresmanagement to make estimates and assumptions that affect the amountsreported in the consolidated financial statements and accompanyingnotes. Actual results could differ from those estimates.

Revenue Recognition

The Company recognizes revenuein accordance with Staff Accounting Bulletin No. 104(‘‘SAB 104’’), Revenue Recognition, for itsproduction-type contracts that are sold separately as standardsatellite ground segment systems when persuasive evidence of anarrangement exists, the selling price is fixed or determinable,collectibility is reasonably assured, delivery has occurred and thecontractual performance specifications have been met. TheCompany's standard satellite ground segment systems produced inconnection with these contracts are typically short-term (less thantwelve months in term) and manufactured using a standard modularproduction process. Such systems require less engineering, drafting anddesign efforts than the Company's long-term complexproduction-type projects. Revenue is recognized on the Company'sstandard satellite ground segment systems upon shipment and acceptanceof factory performance testing which is when title transfers to thecustomer. The amount of revenues recorded on each standardproduction-type contract is reduced by the customer’scontractual holdback amount, which typically requires 10% to30% of the contract value to be retained by the customer untilinstallation and final acceptance is complete. The customer generallybecomes obligated to pay 70% to 90% of the contract valueupon shipment and acceptance of factory performance testing.Installation is not deemed to be essential to the functionality of thesystem since 

7

----

installation does not require significantchanges to the features or capabilities of the system, does not requirecomplex software integration and interfacing and the Company has notexperienced any difficulties installing such equipment. In addition,the customer or other third party vendors can install the system. Theestimated relative fair value of the installation services isdetermined by management, which is typically less than thecustomer's contractual holdback percentage. If the holdback isless than the fair value of installation, the Company will deferrecognition of revenues, determined on a contract-by-contract basisequal to the fair value of the installation services. Payments receivedin advance by customers are deferred until shipment and are presentedas deferred revenues in the accompanying consolidated balancesheets.

The Company recognizes revenue using thepercentage-of-completion method of accounting upon the achievement ofcertain contractual milestones in accordance with Statement of Position81-1, Accounting for Performance of Construction-Type and CertainProduction-Type Contracts, for its non-standard, complexproduction-type contracts for the production of satellite groundsegment systems and equipment that are generally integrated into thecustomer’s satellite ground segment network. The equipment andsystems produced in connection with these contracts are typicallylong-term (in excess of twelve months in term) and require significantcustomer-specific engineering, drafting and design effort in order toeffectively integrate all of the customizable earth station equipmentinto the customer’s ground segment network. These contractsgenerally have larger contract values, greater economic risks andsubstantive specific contractual performance requirements due to theengineering and design complexity of such systems and relatedequipment. Progress payments received in advance by customers arenetted against the inventory balances in the accompanying consolidatedbalance sheets.

Contract costs generally include purchasedmaterial, direct labor, overhead and other direct costs. Anticipatedcontracted losses are recognized, as they become known.

Revenuesfrom data communications services are derived primarily from satellitecommunication services. These revenues are recognized ratably over theperiod in which services are provided. Payments received in advance ofproviding services are deferred until the period such services areprovided and are presented as deferred revenues in the accompanyingconsolidated balance sheets.

Costs from Ground SegmentSystems, Networks and Enterprise Solutions

Costs from groundsegment systems, networks and enterprise solutions consist primarily ofthe costs of purchased materials (including shipping and handlingcosts), direct labor and related overhead expenses, project-relatedtravel and living costs and subcontractor salaries.

Costsfrom Data Communications Services

Costs from datacommunications services relating to satellite communication servicesconsist primarily of satellite space segment charges, Internetconnectivity fees, voice termination costs and network operationsexpenses. Satellite space segment charges consist of the costsassociated with obtaining satellite bandwidth (the measure of capacity)used in the transmission of services to and from the satellites leasedfrom operators. Network operations expenses consist primarily of costsassociated with the operation of the Network Operation Center, on atwenty-four hour a day, seven-day a week basis, including personnel andrelated costs and depreciation.

Research andDevelopment

Research and development expenditures areexpensed as incurred.

Stock-Based Compensation

InDecember  2004, the Financial Accounting Standards Board (FASB)issued SFAS No. 123R (revised 2004), Share-Based Payment, which is arevision of SFAS 123 (‘‘SFAS 123R’’). SFAS123R eliminates the ability to account for share-based compensationunder the intrinsic value method 

8

----

permitted by Accounting Principles BoardOpinion No. 25 (‘‘APB 25’’), Accounting forStock Issued to Employees. This requires the Company to adopt the fairvalue model for recognizing compensation expense for employee stockoptions, and has the effect of reducing the Company’s reportednet income and net income per share.

On July  1,2005, the Company adopted SFAS 123R using a modified prospectiveapplication, as permitted under SFAS 123R. Accordingly, priorperiod amounts have not been restated. Under this application,the Company is required to record compensation expense for all awardsgranted after the date of adoption and for the unvested portion ofpreviously granted awards that remain outstanding at the date ofadoption. Before the adoption of SFAS 123R, the Company applied APB 25to account for its stock-based awards. Under APB 25, the Companywas not required to recognize compensation expense for the cost ofstock options. 

The following table details theeffect on net income and earnings per share had stock-basedcompensation expense for the stock options been recorded in the threeand six months ended December  31,  2004 based on thefair-value method under SFAS 123. The reported and pro forma netincome and earnings per share for the three and six months endedDecember  31,  2005 in the table below are the same sincestock-based compensation expense is calculated under the provisions ofSFAS 123R. These amounts for the three and six months endedDecember  31,  2005 are included in the table below only toprovide details for a comparative presentation to the three and sixmonths ended December  31,2004.

|                                                             |  |                                      |         |                  |  |                 |       |                 |  |        |         |        |  |        |       |         |  |  |
|-------------------------------------------------------------|--|--------------------------------------|---------|------------------|--|-----------------|-------|-----------------|--|--------|---------|--------|--|--------|-------|---------|--|--|
|                                                        |  | ThreeMonths Ended                    |         | Six MonthsEnded  |
|                                                        |  | December31, 2005                     |         | December 31,2004 |  | December31,2005 |       | December31,2004 |
|                                                        |  | (Unaudited)                          |
|                                                        |  | (Inthousands, except per share data) |
| Reported netincome                                          |  | $                                    | 937     |             |  | $               | 1,002 |            |  | $      | 1,750   |   |  | $      | 3,183 |    |
| Stockcompensation expense determined under fair valuemethod |  |                                 | — |             |  |            | (352  | )          |  |   | — |   |  |   | (775  | )  |
| Pro-formanet income                                         |  | $                                    | 937     |             |  | $               | 650   |            |  | $      | 1,750   |   |  | $      | 2,408 |    |
| Reportedbasic net income per commonshare                    |  | $                                    | 0.06    |             |  | $               | 0.07  |            |  | $      | 0.12    |   |  | $      | 0.22  |    |
| Reporteddiluted net income per commonshare                  |  | $                                    | 0.06    |             |  | $               | 0.07  |            |  | $      | 0.11    |   |  | $      | 0.21  |    |
| Pro-formabasic net income per commonshare                   |  | $                                    | 0.06    |             |  | $               | 0.05  |            |  | $      | 0.12    |   |  | $      | 0.17  |    |
| Pro-formadiluted net income per commonshare                 |  | $                                    | 0.06    |             |  | $               | 0.04  |            |  | $      | 0.11    |   |  | $      | 0.16  |    |
|                                                             |

Goodwilland Other Intangible Assets

Goodwill represents the excessof the purchase price of businesses over the fair value of theidentifiable net assets acquired. In accordance with SFAS No. 142,Goodwill and Other Intangible Assets, goodwill and other indefinitelife intangible assets are no longer amortized, but instead tested forimpairment at least annually. The impairment test for goodwill uses atwo-step approach, which is performed at the reporting unit level. Stepone compares the fair value of the reporting unit (calculated using adiscounted cash flow method) to its carrying value. If the carryingvalue exceeds the fair value, there is a potential impairment and steptwo must be performed. Step two compares the carrying value of thereporting unit’s goodwill to its implied fair value (i.e., fairvalue of the reporting unit less the fair value of the unit’sassets and liabilities, including identifiable intangible assets). Ifthe carrying value of goodwill exceeds its implied fair value, theexcess is required to be recorded as an impairment. There have been noevents during the six months ended December  31,  2005 thatwould result in any goodwillimpairment.

9

----

Comprehensive Income

Comprehensive income for the three and six months endedDecember  31,  2005 of approximately $927,000 and$1,731,000, respectively, includes a foreign currency translation lossof approximately $10,000 and $19,000, respectively. Comprehensiveincome for the three and six months ended December  31,2004 of approximately $1,104,000 and $3,264,000, respectively, includesa foreign currency translation gain of approximately $105,000 and$84,000 and an unrealized loss on available-for-sale securities ofapproximately $3,000.

Income Taxes

In assessingthe realizability of deferred tax assets, management considers whetherit is more likely than not that some portion or all of the deferred taxassets will be realized. The ultimate realization of the net deferredtax assets is dependent upon the generation of future taxable incomeprior to the expiration of any net operating loss carryforwards. Forthe six months ended December  31,  2005 and the year endedJune  30,  2005, due to the uncertainty regarding theCompany’s ability to utilize its net operating losses in thefuture, the Company provided a valuation allowance against itspreviously recorded deferred tax assets except for approximately$38,000, representing state investment tax credit carryforwards thatwill be utilized to offset state capital taxes on the Company’scombined state tax return.

Product Warranties

TheCompany offers warranties on its contracts, the specific terms andconditions of which vary depending upon the contract and workperformed. Generally, a basic limited warranty, including parts andlabor, is provided to customers for one year. The Company can recoupcertain of these costs through product warranties it holds with itsoriginal equipment manufacturers, which typically are one year in term.Historically, warranty expense has been minimal, however, managementperiodically assesses the need for any additional warrantyreserve.

Reclassifications

Certain prior periodamounts have been reclassified to conform with the current yearpresentation.

2.     Basic and Diluted Net Income Per CommonShare

The Company computes net income per share inaccordance with the provisions of SFAS No. 128, Earnings Per Share.Basic net income per common share is computed by dividing the netincome for the period by the weighted-average number of common sharesoutstanding for the period. For diluted earnings per share the weightedaverage shares include the incremental common shares issuable upon theexercise of stock options and warrants (using the treasury stockmethod). The incremental common shares for stock options and warrantsare excluded from the calculation of diluted net income per share, iftheir effect is anti-dilutive. Diluted net income per share for thethree months ended December  31,  2005 and 2004, excludesthe effect of approximately 2,189,000, and 2,483,000 stock options andwarrants in the calculation of the incremental common shares,respectively, as their effect would have been anti-dilutive. Dilutednet income per share for the six months ended December31,  2005 and 2004, excludes the effect of approximately2,207,000, and 2,530,000 stock options and warrants in the calculationof the incremental common shares, respectively, as their effect wouldhave been anti-dilutive.

10

----

3.     Inventories

Inventoriesconsist of thefollowing:

|                                  |  |                              |        |             |  |        |        |        |  |  |
|----------------------------------|--|------------------------------|--------|-------------|--|--------|--------|--------|--|--|
|                             |  | December31, 2005 (Unaudited) |        | June30,2005 |
|                             |  | (Inthousands)                |
| Raw materials and componentparts |  | $                            | 114    |        |  | $      | 111    |   |
| Work-in-progress                 |  |                         | 18,846 |        |  |   | 15,485 |   |
|                             |  |                         | 18,960 |        |  |   | 15,596 |   |
| Lessprogresspayments             |  |                         | 1,807  |        |  |   | 2,710  |   |
|                             |  | $                            | 17,153 |        |  | $      | 12,886 |   |
|                                  |

4.    Segment Information

The Company operates through two businesssegments. Its ground segment systems, networks and enterprise solutionssegment, through Globecomm Systems Inc. and Globecomm Systems EuropeLimited, is engaged in the design, assembly and installation of groundsegment systems and networks. Its data communications services segment,through GNSC, provides satellite communication servicescapabilities.

The Company's reportable segments arebusiness units that offer different products and services. Thereportable segments are each managed separately because they providedistinct products and services.

11

----

The following is the Company’sbusiness segment information for the three and six months endedDecember  31,  2005 and 2004 and as of December31,  2005 and June  30,2005:

|                                                         |  |                   |         |                  |  |                 |        |                 |  |        |         |         |  |        |        |         |  |  |
|---------------------------------------------------------|--|-------------------|---------|------------------|--|-----------------|--------|-----------------|--|--------|---------|---------|--|--------|--------|---------|--|--|
|                                                    |  | ThreeMonths Ended |         | Six MonthsEnded  |
|                                                    |  | December31, 2005  |         | December 31,2004 |  | December31,2005 |        | December31,2004 |
|                                                    |  | (Unaudited)       |
|                                                    |  | (In thousands)    |
| Revenues:                                               |  |              |    |             |  |            |   |            |  |   |    |    |  |   |   |    |
| Groundsegment systems, networks and enterprisesolutions |  | $                 | 22,602  |             |  | $               | 24,929 |            |  | $      | 46,085  |    |  | $      | 46,635 |    |
| Datacommunicationsservices                              |  |              | 7,421   |             |  |            | 5,408  |            |  |   | 14,325  |    |  |   | 10,163 |    |
| Intercompanyeliminations                                |  |              | (111    | )           |  |            | (1,109 | )          |  |   | (922    | )  |  |   | (2,111 | )  |
| Totalrevenues                                           |  | $                 | 29,912  |             |  | $               | 29,228 |            |  | $      | 59,488  |    |  | $      | 54,687 |    |
| Incomefromoperations:                                   |  |              |    |             |  |            |   |            |  |   |    |    |  |   |   |    |
| Groundsegment systems, networks and enterprisesolutions |  | $                 | 518     |             |  | $               | 781    |            |  | $      | 921     |    |  | $      | 3,002  |    |
| Datacommunicationsservices                              |  |              | 204     |             |  |            | 85     |            |  |   | 315     |    |  |   | (32    | )  |
| Interestincome                                          |  |              | 227     |             |  |            | 92     |            |  |   | 456     |    |  |   | 165    |    |
| Gainon sale ofinvestment                                |  |              | — |             |  |            | 40     |            |  |   | — |    |  |   | 40     |    |
| Intercompanyeliminations                                |  |              | 18      |             |  |            | 4      |            |  |   | 108     |    |  |   | 8      |    |
| Incomebefore incometaxes                                |  | $                 | 967     |             |  | $               | 1,002  |            |  | $      | 1,800   |    |  | $      | 3,183  |    |
| Depreciationandamortization:                            |  |              |    |             |  |            |   |            |  |   |    |    |  |   |   |    |
| Groundsegment systems, networks and enterprisesolutions |  | $                 | 292     |             |  | $               | 304    |            |  | $      | 584     |    |  | $      | 607    |    |
| Datacommunicationsservices                              |  |              | 493     |             |  |            | 444    |            |  |   | 986     |    |  |   | 889    |    |
| Intercompanyeliminations                                |  |              | (18     | )           |  |            | (4     | )          |  |   | (36     | )  |  |   | (8     | )  |
| Totaldepreciation andamortization                       |  | $                 | 767     |             |  | $               | 744    |            |  | $      | 1,534   |    |  | $      | 1,488  |    |
| Expendituresfor long-livedassets:                       |  |              |    |             |  |            |   |            |  |   |    |    |  |   |   |    |
| Groundsegment systems, networks and enterprisesolutions |  | $                 | 208     |             |  | $               | 160    |            |  | $      | 379     |    |  | $      | 193    |    |
| Datacommunicationsservices                              |  |              | 137     |             |  |            | 730    |            |  |   | 614     |    |  |   | 1,324  |    |
| Totalexpenditures for long-livedassets                  |  | $                 | 345     |             |  | $               | 890    |            |  | $      | 993     |    |  | $      | 1,517  |    |
|                                                         |

|                                                         |  |                            |         |             |  |        |         |         |  |  |
|---------------------------------------------------------|--|----------------------------|---------|-------------|--|--------|---------|---------|--|--|
|                                                    |  | December31,2005(Unaudited) |         | June30,2005 |
|                                                    |  | (Inthousands)              |
| Assets:                                                 |  |                       |    |        |  |   |    |    |
| Groundsegment systems, networks and enterprisesolutions |  | $                          | 146,685 |        |  | $      | 139,117 |    |
| Datacommunicationsservices                              |  |                       | 15,407  |        |  |   | 13,712  |    |
| Intercompanyeliminations                                |  |                       | (68,112 | )      |  |   | (66,451 | )  |
| Totalassets                                             |  | $                          | 93,980  |        |  | $      | 86,378  |    |
|                                                         |

12

----

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

Youshould read the following discussion of our financial condition andresults of operations with the consolidated financial statements andrelated notes included elsewhere in this Quarterly Report on Form 10-Q.This discussion contains, in addition to historical information,forward-looking statements within the meaning of the Private SecuritiesLitigation Reform Act of 1995, based on our current expectations,assumptions, estimates and projections. These forward-lookingstatements involve risks and uncertainties. Our actual results coulddiffer materially from those anticipated in these forward-lookingstatements as a result of certain factors, such as, among others,uncertain demand for our services and products due to economic andindustry-specific conditions, the risks associated with operating ininternational markets and our dependence on a limited number ofcontracts for a high percentage of our revenues. These risks and othersare more fully described in the ‘‘RiskFactors’’ section of this Quarterly Report and in ourother filings with the Securities and Exchange Commission, includingour Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Weundertake no obligation to update publicly any forward-lookingstatements for any reason, even if new information becomes available orother events occur in the future.

Overview

Our businessis global and subject to technological and business trends in thetelecommunications marketplace. It is also affected by geopoliticaldevelopments involving areas of the world in which our customers arelocated, particularly in developing countries and areas of the worldinvolved in armed conflicts.

Our business had been adverselyaffected by the global economic slowdown from 2000 – 2004 and, inparticular, the significant challenges which faced thetelecommunications industry worldwide. We continue to see improvementin the segments we serve, in particular within the U.S. Government andgovernment related entities marketplace. However, some of the adverseconsequences of the downturn continue to impact our business based uponthe inability of some of our government and non-governmental customersand prospects to raise capital to fund projects, particularly, indeveloping countries.

We currently have two significantcontracts with the Ministry of Communication of the IslamicTransitional State of Afghanistan. Also, we conduct a substantialportion of our business in developing countries. Hostilities inAfghanistan, or in connection with any armed conflict affecting areaswhere our customers are located, may impact our performance on thesecontracts, and consequently our results of operations.

Revenuesrelated to contracts for ground segment systems, networks andenterprise solutions and data communications services have beenfixed-price contracts in a majority of cases. Profitability of suchcontracts is subject to inherent uncertainties as to the cost ofperformance. In addition to possible errors or omissions in makinginitial estimates, cost overruns may be incurred as a result ofunforeseen obstacles, including both physical conditions and unexpectedproblems encountered in engineering design and testing. Since ourbusiness is frequently concentrated in a limited number of largecontracts, a significant cost overrun on any contract could have amaterial adverse effect on our business, financial condition andresults of operations.

Contract costs generally includepurchased material, direct labor, overhead and other direct costs.Anticipated contract losses are recognized, as they become known. Costsfrom ground segment systems, networks and enterprise solutions consistprimarily of the costs of purchased materials (including shipping andhandling costs), direct labor and related overhead expenses,project-related travel and living costs and subcontractor salaries.Costs from data communications services consist primarily of satellitespace segment charges, Internet connectivity fees, voice terminationcosts and network operations expenses. Satellite space segment chargesconsist of the costs associated with obtaining satellite bandwidth (themeasure of capacity) used in the transmission of services to and fromthe satellites leased from operators. Network operations expensesconsist primarily of costs associated with the operation of the networkoperations center on a twenty-four hour a day, seven day a week basis,including personnel and related costs and depreciation. Selling andmarketing expenses 

13

----

consist primarily of salaries, travel andliving costs for sales and marketing personnel. Research anddevelopment expenses consist primarily of salaries and related overheadexpenses. General and administrative expenses consist of expensesassociated with our management, finance, contract and administrativefunctions.

Critical Accounting Policies

Certain of ouraccounting policies require judgment by management in selecting theappropriate assumptions for calculating financial estimates. By theirnature, these judgments are subject to an inherent degree ofuncertainty. These judgments are based on our historical experience,the terms of existing contracts, our observance of trends in theindustry, information provided by our customers, and informationavailable from other outside sources, as appropriate. Actual resultsmay differ from these judgments under different assumptions orconditions. Our accounting policies that require management to applysignificant judgment include:

Revenue Recognition

We recognize revenue in accordance with Staff AccountingBulletin No. 104 (‘‘SAB 104’’), RevenueRecognition, for our production-type contracts that are sold separatelyas standard satellite ground segment systems when persuasive evidenceof an arrangement exists, the selling price is fixed or determinable,collectibility is reasonably assured, delivery has occurred and thecontractual performance specifications have been met. Our standardsatellite ground segment systems produced in connection with thesecontracts are typically short-term (less than twelve months in term)and manufactured using a standard modular production process. Suchsystems require less engineering, drafting and design efforts than ourlong-term complex production-type projects. Revenue is recognized onour standard satellite ground segment systems upon shipment andacceptance of factory performance testing which is when title transfersto the customer. The amount of revenues recorded on each standardproduction-type contract is reduced by the customer's contractualholdback amount, which typically requires 10% to 30% ofthe contract value to be retained by the customer until installationand final acceptance is complete. The customer generally becomesobligated to pay 70% to 90% of the contract value uponshipment and acceptance of factory performance testing. Installation isnot deemed to be essential to the functionality of the system sinceinstallation does not require significant changes to the features orcapabilities of the equipment, does not require complex softwareintegration and interfacing and we have not experienced anydifficulties installing such equipment. In addition, the customer orother third party vendors can install the equipment. The estimatedrelative fair value of the installation services is determined bymanagement, which is typically less than the customer'scontractual holdback percentage. If the holdback is less than the fairvalue of installation, we will defer recognition of revenues,determined on a contract-by-contract basis equal to the fair value ofthe installation services. Payments received in advance by customersare deferred until shipment and are presented as deferred revenues.

We recognize revenue using the percentage-of-completion method ofaccounting upon the achievement of certain contractual milestones inaccordance with Statement of Position 81-1, Accounting for Performanceof Construction-Type and Certain Production-Type Contracts, for ournon-standard, complex production-type contracts for the production ofsatellite ground segment systems and equipment that are generallyintegrated into the customer’s satellite ground segment network.The equipment and systems produced in connection with these contractsare typically long-term (in excess of twelve months in term) andrequire significant customer-specific engineering, drafting and designeffort in order to effectively integrate all of the customizable earthstation equipment into the customer’s ground segment network.These contracts generally have larger contract values, greater economicrisks and substantive specific contractual performance requirements dueto the engineering and design complexity of such systems and relatedequipment. Progress payments received in advance by customers arenetted against the inventories balance.

The timing of our revenuerecognition is primarily driven by achieving shipment, final acceptanceor other contractual milestones. Project risks including projectcomplexity, political and economic instability in certain regions inwhich we operate, export restrictions, tariffs, licenses and othertrade 

14

----

barriers which may result in the delay of theachievement of revenue milestones. A delay in achieving a revenuemilestone may negatively impact our results ofoperations.

Costs from Ground Segment Systems, Networks andEnterprise Solutions 

Costs related to our production-typecontracts and our non-standard, complex production-type contracts relyon estimates based on total expected contract costs. Typically, thesecontracts are fixed price projects. We use estimates of the costsapplicable to various elements which we believe are reasonable. Ourestimates, are assessed continually during the term of these contractsand costs are subject to revisions as the contract progresses tocompletion. These estimates are subjective based on managementassessment of project risk. These risks may include project complexityand political and economic instability in certain regions in which weoperate. Revision in cost estimates are reflected in the period inwhich they become known. A significant revision in an estimate maynegatively impact our results of operation. In the event an estimateindicates that a loss will be incurred at completion, we record theloss as it becomes known.

Goodwill Impairment

Goodwill represents the excess of the purchase price ofbusinesses over the fair value of the identifiable net assets acquired.In accordance with SFAS No. 142, Goodwill and Other Intangible Assets,goodwill and other indefinite life intangible assets are no longeramortized, but instead tested for impairment at least annually. Theimpairment test for goodwill uses a two-step approach, which isperformed at the reporting unit level. Step one compares the fair valueof the reporting unit (calculated using a discounted cash flow method)to its carrying value. If the carrying value exceeds the fair value,there is a potential impairment and step two must be performed. Steptwo compares the carrying value of the reporting unit’s goodwillto its implied fair value (i.e., fair value of the reporting unit lessthe fair value of the unit’s assets and liabilities, includingidentifiable intangible assets). If the carrying value of goodwillexceeds its implied fair value, the excess is required to be recordedas an impairment charge. The impairment test is dependent uponestimated future cash flows based upon management estimates of the datacommunication services segment. There have been no events during thesix months ended December  31,  2005 that would result inany goodwill impairment.

Allowances for Doubtful Accounts

We maintain allowances for doubtful accounts for estimatedlosses resulting from the inability of our customers to make requiredpayments. We assess the customer's ability to pay based on anumber of factors, including our past transaction history with thecustomer and the creditworthiness of the customer. An assessment of theinherent risks in conducting our business with foreign customers isalso made since a significant portion of our revenues is international.Management specifically analyzes accounts receivable, historical baddebts, customer concentrations, customer creditworthiness and currenteconomic trends. If the financial condition of our customers were todeteriorate in the future, resulting in an impairment of their abilityto make payments, additional allowances may be required.

Inventories 

Inventories consist primarily ofwork-in-progress from costs incurred in connection with specificcustomer contracts, which are stated at the lower of cost or marketvalue. In assessing the realizability of inventories, we are requiredto make estimates of the total contract costs based on the variouselements of the work-in-progress. It is possible that changes to theseestimates could cause a reduction in the net realizable value of ourinventories.

Results of Operations

Three and SixMonths Ended December  31,  2005 and 2004

Revenues from Ground Segment Systems, Networks and EnterpriseSolutions. Revenues decreased by $2.1  million, or8.5%, to $22.6  million for the three months endedDecember  31,  2005 and decreased by $0.7  million,or 1.4%, to $45.6  million for the six months endedDecember  31,  2005, 

15

----

compared to $24.7  million and$46.3  million for the three and six months ended December31,  2004, respectively. The decrease in revenues was mainly dueto a customer delaying a shipment milestone on a project and areduction in sales at Globecomm Systems EuropeLimited.

Revenues from Data CommunicationServices. Revenues increased by $2.8  million, or61.1%, to $7.3  million for the three months endedDecember  31,  2005 and increased by $5.5  million,or 64.9%, to $13.9  million for the six months endedDecember  31,  2005, compared to $4.5  million and$8.4  million for the three and six months ended December31,  2004, respectively. The increase was primarily due to theincrease in voice over Internet protocol (VoIP), video broadcast, andmanaged network service offerings.

Costs from Ground SegmentSystems, Networks and Enterprise Solutions. Costs fromground segment systems, networks and enterprise solutions decreased by$2.3  million, or 11.0%, to $18.7  million for thethree months ended December  31,  2005 and decreased by$0.8  million, or 2.2% to $38.2  million for the sixmonths ended December  31,  2005, compared to $21.0million and $39.1  million for the three and six months endedDecember  31,  2004, respectively. Costs as a percentage ofrelated revenues decreased to 82.7% and 83.8% for thethree and six months ended December  31,  2005 compared to85.1% and 84.4% for the three and six months endedDecember  31,  2004, respectively. The decrease isprimarily driven by the decrease in revenue offset by a non-recurringcost recovery related to a settlement with a large customer of$0.5  million and $0.9  million for the three and sixmonths ended December  31,  2004. The decrease as apercentage of sales was mainly attributable to the increased margin onrevenues related to the U.S. Government and government related entitiesprojects in six months ended December  31,  2005, partiallyoffset by the non-recurring cost recovery related to a settlement witha large customer of $0.5  million and $0.9  million for thethree and six months ended December  31,  2004.

Costs from Data Communications Services. Costs fromdata communications services increased by $2.4  million, or65.4%, to $6.1  million for the three months endedDecember  31,  2005 and increased by $4.8  million,or 69.5%, to $11.7  million for the six months endedDecember  31,  2005, compared to $3.7  million and$6.9  million for the three and six months ended December31,  2004, respectively. The increase is a result of additionalvoice termination costs for the VoIP service and space segment costsrequired for our video broadcast and managed network service offeringsin connection with the increase in service levels indicated by ourgrowth in revenue.

Selling and Marketing. Sellingand marketing expenses increased by $0.2  million, or16.8%, to $1.6  million for the three months endedDecember  31,  2005 and increased by $0.6  million,or 22.6%, to $3.1  million for the six months endedDecember  31,  2005, compared to $1.4  million and$2.6  million for the three and six months ended December31,  2004, respectively. The increase in selling and marketingcosts is a result of an increase in consulting fees and increasedsalary and salary related expenses for additional marketingpersonnel.

Research and Development. Research anddevelopment expenses remained consistent at $0.2  million for thethree months ended December  31,  2005 and 2004, anddecreased by $0.2  million, or 42.8%, to $0.3million for the six months ended December  31,  2005,compared to $0.5  million for the six months endedDecember  31,  2004. The decrease was principally due tocosts associated with product research efforts in remote videomonitoring systems in the six months ended December  31,2004, which did not reoccur in the 2005 period.

General andAdministrative. General and administrative expensesincreased by $0.5  million, or 23.0%, to $2.6million for the three months ended December  31,  2005 andincreased by $2.1  million, or 77.9%, to $4.8million for the six months ended December  31,  2005,compared to $2.1  million and $2.7  million for the threeand six months ended December  31,  2004, respectively. Inthe three and six months ended December  31,  2005, theincrease in general and administrative expenses was due to an increasein the provision for doubtful accounts due to increased business levelsin data communication services, compensation expense related to theannual automatic director option grant based on the adoption of SFAS123R, and an increase in salary and related fringes due to an increasein headcount and the reinstatement of the 401k match by the Company inJanuary  2005. In addition, for the six months endedDecember  31,  2005, the increase was primarily due to abad debt recovery of 

16

----

$1.5  million related to a settlementagreement reached with a customer in the three months endedSeptember  30,  2004, which did not reoccur in the 2005period.

Interest Income. Interest income increasedby $0.1  million, or 146.7%, to $0.2  million forthe three months ended December  31,  2005 and increased by$0.3  million, or 176.4%, to $0.5  million for thesix months ended December  31,  2005, compared to$0.1  million and $0.2  million for the three and sixmonths ended December  31,  2004, respectively, as a resultof increased interest rates.

Liquidity and CapitalResources

At December  31,  2005, we had workingcapital of $40.5  million, including cash and cash equivalents of$25.3  million, net accounts receivable of $26.8  million,inventories of $17.2  million, prepaid expenses and other currentassets of $1.0  million, offset by $21.6  million inaccounts payable, $3.3  million in deferred revenues and$4.9  million in accrued expenses and other currentliabilities.

Net cash used in operating activities during the sixmonths ended December  31,  2005 was $1.0  million,which primarily related to an increase in accounts receivable of$4.4  million due to an increase in revenue in data communicationservices and the the timing of billings and collections from customers,an increase in inventory of $4.3  million due to timing ofshipments of certain jobs and a reduction in progress payments on longterm contracts, a decrease in deferred revenue of $2.3  milliondue to timing differences between project billings and revenuerecognition milestones resulting from specific customer contracts,offset by an increase in accounts payable of $6.1  millionrelating to the increase in revenues and inventories and the timing ofvendor payments, net income of $1.8  million, a non-cash itemrepresenting depreciation and amortization expense of $1.5million primarily related to the network operations center andsatellite earth station equipment, and an increase in accrued payrolland related fringe benefits of $0.5  million relating to thereinstatement of the 401k match by the Company in January2005.

Net cash used in investing activities during the six monthsended December  31,  2005 was $1.0  million, whichrelated to the purchase of $1.0  million of fixed assets for ournetwork operations center, primarily related to the video broadcast andVoIP service offerings.

Net cash provided by financing activitiesduring the six months ended December  31,  2005 was$1.8  million, which related to $1.3  million of proceedsfrom the exercise of stock options and $0.4  million of proceedsfrom the exercise of warrants.

We have a credit agreement inplace which provides for a working capital credit facility of up to$20.0  million, which expires in November  2006. The lineof credit bears interest at the prime rate, and is collateralized by afirst security interest on all of our personal property. The creditagreement allows us to borrow and apply letters of credit against theavailability under the line of credit. In addition, the creditagreement contains certain financial and other covenants, depositrequirements, monthly reporting provisions and other requirements, asdefined in the credit agreement, with which we were in compliance atDecember  31,  2005. As of December  31,  2005,no borrowings were outstanding under this credit facility, however,there were standby letters of credit of approximately $12.6million, which were applied against and reduced the amounts availableunder this credit facility.

We lease satellite space segmentservices and other equipment under various operating lease agreements,which expire in various years through 2009. Future minimum leasepayments due on these leases through December  31,  2006are approximately $7.0  million.

17

----

At December  31,2005, we had contractual obligations and commercial commitments asfollows (in thousands):

|                             |  |        |                       |                                          |  |                    |       |              |  |              |       |                 |  |   |         |        |  |   |         |        |  |  |
|-----------------------------|--|--------|-----------------------|------------------------------------------|--|--------------------|-------|--------------|--|--------------|-------|-----------------|--|---|---------|--------|--|---|---------|--------|--|--|
|                        |  |   |                       | PaymentsDue by Period                    |
| ContractualObligations      |  | Total  |                       | Less than1year                           |  | 1-3 years          |       | 4-5 years    |  | After5years  |
| Operatingleases             |  | $      | 11,876                |                                     |  | $                  | 7,044 |         |  | $            | 4,825 |            |  | $ | 7       |   |  | $ | — |   |
|                        |  |   |                       | Amountof Commitment Expiration PerPeriod |
| OtherCommercial Commitments |  |   | TotalAmountsCommitted |                                     |  | **Lessthan 1year** |       | **1-3years** |  | **4-5years** |       | **Over5 years** |
| Standby letters ofcredit    |  | $      | 12,620                |                                     |  | $                  | 4,434 |         |  | $            | 8,186 |            |  | $ | — |   |  | $ | — |   |
|                             |

Weexpect that our cash and working capital requirements for operatingactivities will increase as we continue to implement our businessstrategy. Management anticipates additional working capitalrequirements for work in progress for orders as obtained and that wemay experience negative cash flows due to quarter to quarter operatingperformance.

Our future capital requirements will depend uponmany factors, including the success of our marketing efforts in theground segment systems, networks and data communications servicesbusiness, the nature and timing of customer orders and the level ofcapital requirements related to the expansion of our service offerings.Based on current plans, we believe that our existing capital resourceswill be sufficient to meet working capital requirements at leastthrough December  31,  2006. However, we cannot assure youthat there will be no unforeseen events or circumstances that wouldconsume available resources significantly before that time. Forexample, future events occurring in response to the hostilities in Iraqand Afghanistan, or in connection with any armed conflict, including,without limitation, future terrorist attacks against the United Statesor its allies or military or trade or travel disruptions impacting ourability to sell and market our products and services in the UnitedStates and internationally may impact our results of operations. Inparticular, we currently have two significant contracts with theMinistry of Communication of the Islamic Transitional StateofAfghanistan. Unexpected events negatively impacting internationalcommerce, including additional conflicts in the Middle East, coulddefer our ability to close contracts with international customers.Additional funds may not be available when needed and, even ifavailable, additional funds may be raised through financingarrangements and/or the issuance of preferred or common stock orconvertible securities on terms and prices significantly more favorablethan those of the currently outstanding common stock, which could havethe effect of diluting or adversely affecting the holdings or rights ofour existing stockholders. If adequate funds are unavailable, we may berequired to delay, scale back or eliminate some of our operatingactivities, including, without limitation, the timing and extent of ourmarketing programs, capital expenditures and research and developmentactivities and we may be required to reduce headcount. We cannot assureyou that additional financing will be available to us on acceptableterms, or at all.

Item 3. Quantitative and QualitativeDisclosures About Market Risk

We are subject to a variety ofrisks, including foreign currency exchange rate fluctuations relatingto certain purchases from foreign vendors and our wholly-ownedsubsidiary, Globecomm Systems Europe Limited, which primarily deals inBritish Pounds Sterling. In the normal course of business, we assessthese risks and have established policies and procedures to manage ourexposure to fluctuations in foreign currency values.

Ourobjective in managing our exposure to foreign currency exchange ratefluctuations is to reduce the impact of adverse fluctuations inearnings and cash flows associated with foreign currency exchangerates. Accordingly, we may utilize from time to time foreign currencyforward contracts to hedge our exposure on firm commitments denominatedin foreign currency. At December  31,  2005, we had nooutstanding foreign exchange contracts.

Our results of operationsand cash flows are subject to fluctuations due to changes in interestrates primarily from our investment of available cash balances in moneymarket funds with portfolios 

18

----

of investment grade corporate and governmentsecurities. Under our current positions, we do not use interest ratederivative instruments to manage exposure to interest rate changes.

Item 4. Controls and Procedures

Quarterly Evaluation of theCompany's Disclosure Controls and InternalControls.

|  |           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|--|-----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | (a)  | As of the end ofthe period covered by this Quarterly Report on Form 10-Q, an evaluationwas carried out under the supervision and with the participation ofsenior management, including our Chief Executive Officer and ChiefFinancial Officer, of the effectiveness of the design and operation ofour disclosure controls and procedures (as defined in Rules13a- 15(e) and 15d-15(e) under the Securities Exchange Act of1934, as amended**)**. Based upon that evaluation, our ChiefExecutive Officer and Chief Financial Officer concluded that ourdisclosure controls and procedures are effective to ensure thatinformation required to be disclosed in the reports that the Companyfiles or submits under the Exchange Act is accumulated and communicatedto the Company’s management, including our Chief ExecutiveOfficer and Chief Financial Officer, to allow timely decisionsregarding requireddisclosure. |

|  |           |                                                                                                                                                                                                                                                                                                                                                                                                       |
|--|-----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | (b)  | There have been nochanges in the Company’s internal controls over financialreporting (as defined in Exchange Act Rule 13a-15(f) of the SecuritiesExchange Act of 1934, as amended) or in other factors during the fiscalquarter ended December  31,  2005 that materially affected,or are reasonably likely to materially affect, the Company’sinternal controls over financialreporting. |

19

----

Part II —Other Information

|               |                  |
|---------------|------------------|
| Item 1.  | LegalProceedings |

|        |      |
|--------|------|
|   | None |

|               |              |
|---------------|--------------|
| Item1A.  | Risk Factors |

A limited numberof customer contracts account for a significant portion of ourrevenues, and the inability to replace a key customer contract or thefailure of the customer to implement its plans would adversely affectour results of operations, business and financialcondition.

We rely on a small number of customer contractsfor a large portion of our revenue. Specifically, we have agreementswith four customers to provide equipment and services, from which weexpect to generate a significant portion of our future revenues. Wederived 58% of our revenues in the three months endedDecember  31,  2005 from four customers. Also, we conduct asubstantial proportion of our business in developing countries. If anykey customer is unable to implement its business plan, the market forthese customers’ services declines, political or militaryconditions make performance impossible or if all or any of thecustomers modifies or terminates its agreement with us, and we areunable to replace these contracts, our results of operations, businessand financial condition would be materially harmed.

Risksassociated with operating in international markets could restrict ourability to expand globally and harm our business and prospects.

We market and sell our products and services in the UnitedStates and internationally. We anticipate that international sales willcontinue to account for a significant portion of our total revenues forthe foreseeable future with a significant portion of the internationalrevenue coming from developing countries, including countries in areasof conflict like Afghanistan. There are a number of risks inherent inconducting our business internationally, including:

|  |              |                                                                                                                                                                                                                                     |
|--|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | general political and economic instabilityin international markets, including the hostilities in Iraq andAfghanistan, could impede our ability to deliver our products andservices to customers and harm our results of operations; |

|  |              |                                                                                                |
|--|--------------|------------------------------------------------------------------------------------------------|
|  | •  | difficulties in collecting accountsreceivable could adversely affect our results ofoperations; |

|  |              |                                                                                                                 |
|--|--------------|-----------------------------------------------------------------------------------------------------------------|
|  | •  | changes in regulatoryrequirements could restrict our ability to deliver services to ourinternational customers; |

|  |              |                                                                                                                                  |
|--|--------------|----------------------------------------------------------------------------------------------------------------------------------|
|  | •  | exportrestrictions, tariffs, licenses and other trade barriers could preventus from adequately equipping our network facilities; |

|  |              |                                                                                                                                           |
|--|--------------|-------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | differing technology standards acrosscountries may impede our ability to integrate our products and servicesacross international borders; |

|  |              |                                                                                                                                                                                                               |
|--|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | protectionist laws and business practicesfavoring local competition may give unequal bargaining leverage to keyvendors in countries where competition is scarce, significantlyincreasing our operating costs; |

|  |              |                                                                                                               |
|--|--------------|---------------------------------------------------------------------------------------------------------------|
|  | •  | increased expenses associated withmarketing services in foreign countries could affect our ability tocompete; |

|  |              |                                                                                                                                              |
|--|--------------|----------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | relying on localsubcontractors for installation of our products and services couldadversely impact the quality of our products and services; |

|  |              |                                                                                              |
|--|--------------|----------------------------------------------------------------------------------------------|
|  | •  | difficulties in staffing and managingforeign operations could affect our ability to compete; |

|  |              |                                                                          |
|--|--------------|--------------------------------------------------------------------------|
|  | •  | complex foreign laws and treaties couldaffect our ability to compete;and |

|  |              |                                                                  |
|--|--------------|------------------------------------------------------------------|
|  | •  | potentially adverse taxes couldaffect our results of operations. |

These and other risks couldimpede our ability to manage our international operations effectively,limit the future growth of our business, increase our costs and requiresignificant management attention.

20

----

If GNSC does not execute its businessstrategy or if the market for its services fails to develop or developsmore slowly than we expect, our results of operations will be harmed.

GNSC’s future revenues and results of operationsare dependent on its execution of its business strategy and developmentof the market for its current and future services. GNSC has had, and weexpect will continue to have, cash requirements, which have decreasedand will continue to decrease our cash resources. If GNSC does notefficiently and substantially utilize its transponder space capacityand increase its level of orders, its cash requirements may increaseand our results of operations will be harmed. In addition, significantcapital expenditures have been required as we have built our VoIP andvideo broadcast service offerings. If our VoIP and video broadcastservice offerings are not accepted, or if the market fails to grow, wecannot assure you that we will be able to realize an appropriate returnon these capital expenditures.

In the event of acatastrophic loss affecting our operations in Hauppauge, New York ourresults of operations would be harmed.

GNSC revenues andresults of operations are dependant on the infrastructure of theNetwork Operations Center and the International Teleport at ourheadquarters in Hauppauge, New York. A catastrophic event to thisfacility or to the infrastructure of the surrounding area would resultin significant delays in restoring a majority of the datacommunications services capabilities. These capabilities permit us tooffer an integrated suite of products and services and the incapacityof our communications infrastructure would negatively impact ourability to sell our ground segment systems and networks. This wouldresult in the loss of revenues and adversely affect our business,results of operations and financial condition.

Our marketsare highly competitive and we have many established competitors, and wemay lose market share as a result. 

The markets in which weoperate are highly competitive and this competition could harm ourability to sell our products and services on prices and terms favorableto us. Our primary competitors in the satellite ground segment systemsand networks market generally fall into two groups: (1) systemintegrators, like ITT, Data Path, and SED Systems, and (2) equipmentmanufacturers which also provide integrated systems, like GeneralDynamics, Andrew Corporation, Viasat, Alcatel and ND Satcom AG.

In the end-to-end satellite-based enterprise solutions and broadcastservices markets, we compete with other satellite communicationcompanies who provide similar services, like Ascent, Globecast, andConvergent Media Systems. In addition, in managed network services wemay compete with other communications service providers like Segoviaand AT&T, and satellite owners like Panamsat, Loral Skynet, NewSkies Satellites N.V. and Intelsat. We anticipate that our competitorsmay develop or acquire services that provide functionality that issimilar to that provided by our services and that those services may beoffered at significantly lower prices or bundled with other services.These competitors may have the financial resources to withstandsubstantial price competition, may be in a better position to enduredifficult economic conditions in international markets and may be ableto respond more quickly than we can to new or emerging technologies andchanges in customer requirements. Moreover, many of our competitorshave more extensive customer bases, broader customer relationships andbroader industry alliances than we do that they could use to theiradvantage in competitive situations.

The markets in which weoperate have limited barriers to entry, and we expect that we will faceadditional competition from existing competitors and new marketentrants in the future. Moreover, our current and potential competitorshave established or may establish strategic relationships amongthemselves or with third parties to increase the ability of theirproducts and services to address the needs of our current andprospective customers. The potential strategic relationships ofexisting and new competitors may rapidly acquire significant marketshare, which would harm our business and financialcondition.

21

----

If our products and services are notaccepted in developing countries with emerging markets, our revenueswill be impaired. 

We anticipate that a substantial portionof the growth in the demand for our products and services will comefrom customers in developing countries due to a lack of basiccommunications infrastructure in these countries. However, we cannotguarantee an increase in the demand for our products and services indeveloping countries or that customers in these countries will acceptour products and services at all. Our ability to penetrate emergingmarkets in developing countries is dependent upon various factorsincluding:

|  |              |                                                                                                                                                                                              |
|--|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | the speed at whichcommunications infrastructure, including terrestrial microwave, coaxialcable and fiber optic communications systems, which compete withsatellite-based services, is built; |

|  |              |                                                                                                                          |
|--|--------------|--------------------------------------------------------------------------------------------------------------------------|
|  | •  | theeffectiveness of our local resellers and sales representatives inmarketing and selling our products and services; and |

|  |              |                                                          |
|--|--------------|----------------------------------------------------------|
|  | •  | the acceptance of our products and servicesby customers. |

If our products and services are not accepted, orthe market potential we anticipate does not develop, our revenues willbe impaired.

We have had a history of operating lossesand negative cash flow. Our negative cash flows may increase as wepursue our business plan and our losses may reoccur, which may strainour capital resources. 

Although we have recently beenprofitable, we have incurred significant net losses in the past. As ofDecember  31,  2005 our accumulated deficit was$68.6  million. Our ability to maintain profitability will dependupon our ability to generate significant revenues through newprofitable customer contracts and the expansion of our existingproducts and services, including our data communications services. Wecannot assure you that we will be able to obtain new profitablecustomer contracts or generate significant additional revenues fromthose contracts or any new products or services that we introduce. Inthe past, we have incurred significant negative cash flows, which mayreoccur if our business plan is not successful. Also, if we are unableto sustain or increase our profits on a quarterly or annual basis inthe future or if our business undergoes a period of rapid growth, ouroperating cash flows may be negatively impacted.

We derivea substantial portion of our revenues from fixed-price projects, underwhich we assume greater financial risk if we fail to accuratelyestimate the costs of the projects.

We derive a substantialportion of our revenues from fixed-price projects. We assume greaterfinancial risks on a fixed-price project than on a time-and-expensebased project. If we miscalculate the resources or time we need forthese fixed-price projects, the costs of completing these projects mayexceed our original estimates, which would negatively impact ourresults of operations.

Since sales of satellitecommunications equipment are dependent on the growth of communicationsnetworks, if market demand for these networks declines, our revenue andprofitability are likely to decline.

We derive, and expectto continue to derive, a significant amount of revenues from the saleof satellite ground segment systems and networks. If the long-termgrowth in demand for communications networks does not continue toreturn from recent depressed levels, the demand for our satelliteground segment systems and networks may decline or grow more slowlythan we expect. As a result, we may not be able to grow our business,our revenues may decline from current levels and our results ofoperations may be harmed. The demand for communications networks andthe products used in these networks is affected by various factors,many of which are beyond our control. For example, the uncertaingeneral economic conditions have affected the overall rate of capitalspending by many of our customers. Also, many companies have found itdifficult to raise capital to finish building their communicationsnetworks and, therefore, have placed fewer orders. The economicslowdown resulted in a softening of demand from our customers. Wecannot predict the extent to which demand will increase. Further,increased competition among satellite ground segment systems andnetworks manufacturers has increased pricing pressures. We continue tosee improvement in the 

22

----

segments we serve, in particular within theU.S. Government and government related entities marketplace, but afuture reduction in opportunities from U.S. Government and governmentrelated agencies will negatively impact our results ofoperations.

We depend upon certain key personnel andmay not be able to retain these employees. If we lose the services ofthese individuals or cannot hire additional qualified personnel, ourbusiness will be harmed.

Our success also depends to asubstantial degree on our ability to attract, motivate and retainhighly-qualified personnel. There is considerable competition for theservices of highly-qualified technical and engineering personnel. Wemay not be able either to retain our current personnel or hireadditional qualified personnel if and when needed.

Our futureperformance depends on the continued service of our key technical,managerial and marketing personnel; in particular, David Hershberg andKenneth Miller are key to our success based upon their individualknowledge of the markets in which we operate. The employment of any ofour key personnel could cease at any time.

Satellites uponwhich we rely may malfunction or be damaged or lost. 

Inthe delivery of our data communications services, we lease spacesegment from various satellite transponder vendors. The damage or lossof any of the satellites used by us, or the temporary or permanentmalfunction of any of the satellites upon which we rely, would likelyresult in the interruption of our satellite-based communicationsservices. This interruption could have a material adverse effect on ourbusiness, results of operations and financialcondition.

We depend on our suppliers, some of whichare limited sources of supply, and the loss of these suppliers couldmaterially adversely affect our business, results of operations andfinancial condition.

We currently obtain most of ourcritical components and services from limited sources and generally donot maintain significant inventories or have long-term or exclusivesupply contracts with our vendors. We have from time to timeexperienced delays in receiving products from vendors due to lack ofavailability, quality control or manufacturing problems, shortages ofmaterials or components or product design difficulties. We mayexperience delays in the future and replacement services or productsmay not be available when needed, or at all, or at commerciallyreasonable rates or prices. If we were to change some of our vendors,we would have to perform additional testing procedures on the serviceor product supplied by the new vendors, which would prevent or delaythe availability of our products and services. Furthermore, our costscould increase significantly if we need to change vendors. If we do notreceive timely deliveries of quality products and services, or if thereare significant increases in the prices of these products or services,it could have a material adverse effect on our business, results ofoperations and financial condition.

Our network mayexperience security breaches, which could disrupt our services.

Our network infrastructure may be vulnerable to computerviruses, break-ins, denial of service attacks and similar disruptiveproblems caused by our customers or other Internet users. Computerviruses, break-ins, denial of service attacks or other problems causedby third parties could lead to interruptions, delays or cessation inservice to our customers. There currently is no existing technologythat provides absolute security. We may face liability to customers forsuch security breaches. Furthermore, these incidents could deterpotential customers and adversely affect existing customerrelationships.

If the satellite communications industryfails to continue to develop or new technology makes it obsolete, ourbusiness and financial condition will be harmed. 

Ourbusiness is dependent on the continued success and development ofsatellite communications technology, which competes with terrestrialcommunications transport technologies like terrestrial microwave,coaxial cable and fiber optic communications systems. Fiber opticcommunications systems have penetrated areas in which we havetraditionally provided services. If the satellite communications

23

----

industry fails to continue to develop, or ifany technological development significantly improves the cost orefficiency of competing terrestrial systems relative to satellitesystems, then our business and financial condition would be materiallyharmed.

We may not be able to keep pace with technologicalchanges, which would make our products and services becomenon-competitive and obsolete. 

The telecommunicationsindustry, including satellite-based communications services, ischaracterized by rapidly changing technologies, frequent new productand service introductions and evolving industry standards. If we areunable, for technological or other reasons, to develop and introducenew products and services or enhancements to existing products andservices in a timely manner or in response to changing marketconditions or customer requirements, our products and services wouldbecome non-competitive and obsolete, which would harm our business,results of operations and financial condition.

We may beunable to raise additional funds to meet our capital requirements inthe future. 

We believe that our available cash resourceswill be sufficient to meet our working capital and capital expenditurerequirements through at least December  31,  2006. However,our future liquidity and capital requirements are difficult to predict,as they depend on numerous factors, including the success of ourexisting product and service offerings, as well as competingtechnological and market developments. We may need to raise additionalfunds in order to meet additional working capital requirements and tosupport additional capital expenditures or acquisition of assets or abusiness. Should this need arise, additional funds may not be availablewhen needed and, even if additional funds are available, we may notfind the terms favorable or commercially reasonable. If adequate fundsare unavailable, we may be required to delay, scale back or eliminatesome of our operating activities, including, without limitation, thetiming and extent of our marketing programs, capital expenditures andresearch and development activities and we may be required to reduceheadcount. If we raise additional funds by issuing equity securities,our existing stockholders will own a smaller percentage of our capitalstock and new investors may pay less on average for their securitiesthan, and could have rights superior to, existingstockholders.

Unauthorized use of our intellectual propertyby third parties may damage our business.

We regard ourtrademarks, trade secrets and other intellectual property as beneficialto our success. Unauthorized use of our intellectual property by thirdparties may damage our business. We rely on trademark, trade secret andpatent protection and contracts, including confidentiality and licenseagreements with our employees, customers, strategic collaborators,consultants and others, to protect our intellectual property rights.Despite our precautions, it may be possible for third parties to obtainand use our intellectual property without our authorization.

Wecurrently have been granted three patents in the United States, one forremote access to the Internet using satellites, one for satellitecommunication with automatic frequency control, and one for a monitorand control system for satellite communications networks and the like.We have two other patents pending in the United States, one forimplementing facsimile and data communications using Internet protocolsand another for a distributed satellite-based cellular network. Wecurrently have one Patent Cooperation Treaty patent application pendingfor implementing facsimile and data communications using Internetprotocols. We also intend to seek further patents on our technology, ifappropriate. We cannot assure you that patents will be issued for anyof our pending or future patent applications or that any claims allowedfrom such applications will be of sufficient scope, or be issued in allcountries where our products and services can be sold, to providemeaningful protection or any commercial advantage to us. Also, ourcompetitors may be able to design around our patents. The laws of someforeign countries in which our products and services are or may bedeveloped, manufactured or sold may not protect our products andservices or intellectual property rights to the same extent as do thelaws of the United States and thus make the possibility of piracy ofour technology and products and services more likely.

24

----

We have filed applications for trademarkregistration of Globecomm Systems Inc., Globecomm and GSI in the UnitedStates and various other countries, and have been granted registrationsfor some of these terms in the United States, Europe and Russia. Wehave various other trademarks and service marks registered or pendingfor registration in the United States and in other countries and mayseek registration of other trademarks and service marks in the future.We cannot assure you that registrations will be granted from any of ourpending or future applications, or that any registrations that aregranted will prevent others from using similar trademarks in connectionwith related goods and services.

Defending againstintellectual property infringement claims could be time consuming andexpensive, and if we are not successful, could cause substantialexpenses and disrupt our business.

We cannot be sure thatthe products, services, technologies and advertising we employ in ourbusiness do not or will not infringe valid patents, trademarks,copyrights or other intellectual property rights held by third parties.We may be subject to legal proceedings and claims from time to timerelating to the intellectual property of others in the ordinary courseof our business. Prosecuting infringers and defending againstintellectual property infringement claims could be time consuming andexpensive, and regardless of whether we are or are not successful,could cause substantial expenses and disrupt our business. We may incursubstantial expenses in defending against these third party claims,regardless of their merit. Successful infringement claims against usmay result in substantial monetary liability and/or may materiallydisrupt the conduct of, or necessitate the cessation of, segments ofour business.

Risks Related to the Securities Markets andOwnership of Our Common Stock

Our stock price isvolatile.

From January  1,  2005 throughDecember  31,  2005, our stock price ranged from a low of$5.09 per share to a high of $8.44 per share. The market price of ourcommon stock, like that of the securities of many telecommunicationsand high technology industry companies, could be subject to significantfluctuations and is likely to remain volatile based on many factors,including the following:

|  |              |                                          |
|--|--------------|------------------------------------------|
|  | •  | quarterlyvariations in operatingresults; |

|  |              |                                                                                      |
|--|--------------|--------------------------------------------------------------------------------------|
|  | •  | announcements of newtechnology, products or services by us or any of ourcompetitors; |

|  |              |                                                                          |
|--|--------------|--------------------------------------------------------------------------|
|  | •  | changes in financialestimates or recommendations by securities analysts; |

|  |              |                              |
|--|--------------|------------------------------|
|  | •  | general market conditions;or |

|  |              |                                                                          |
|--|--------------|--------------------------------------------------------------------------|
|  | •  | domestic and international economicfactors unrelated to our performance. |

Additionally, numerousfactors relating to our business may cause fluctuations or declines inour stock price.

The stock markets in general and the markets fortelecommunications stocks in particular have experienced extremevolatility that has often been unrelated to the operating performanceof particular companies. These broad market fluctuations may adverselyaffect the trading price of our common stock.

Because ourcommon stock is thinly traded, it may be difficult to sell shares ofour common stock into the markets without experiencing significantprice volatility.

Our common stock is currently traded onthe Nasdaq National Market. Because of the relatively small number ofshares that are traded, it may be difficult for an investor to find apurchaser for shares of our common stock without experiencingsignificant price volatility. We cannot guarantee that an activetrading market will develop, that our common stock will have a highertrading volume than it has historically had or that it will maintainits current market price. This illiquidity could have a materialadverse effect on the market price of our stock.

A thirdparty could be prevented from acquiring shares of our stock at apremium to the market price because of our anti-takeover provisions.

Various provisions with respect to votes in the electionof directors, special meetings of stockholders, and advance noticerequirements for stockholder proposals and director nominations of

25

----

our amended and restated certificate ofincorporation, by-laws and Section 203 of the General Corporation Lawof the State of Delaware could make it more difficult for a third partyto acquire us, even if doing so might be beneficial to ourstockholders. In addition, we have a poison pill in place andemployment provisions with our senior executives that have change ofcontrol provisions that could make an acquisition of us by a thirdparty more difficult.

We have not paid dividends in thepast and do not expect to pay dividends in the future, and any returnon investment may be limited to the value of our stock.

Wehave never paid cash dividends on our common stock and do notanticipate paying cash dividends on our common stock in the foreseeablefuture. The payment of dividends on our common stock will depend on ourfuture earnings, capital requirements, financial condition, futureprospects and other factors as the board of directors might deemrelevant. If we do not pay dividends our stock may be less valuablebecause a return on your investment will only occur if our stock priceappreciates.

Risks Related to Government Approvals

Weare subject to many government regulations, and failure to comply withthem will harm our business.

Operations and Use ofSatellites 

We are subject to various federal laws andregulations, which may have negative effects on our business. Weoperate FCC licensed earth stations in Hauppauge, New York, subject tothe Communications Act of 1934, as amended (the ‘‘FCCAct’’), and the rules and regulations of FCC. Pursuant tothe FCC Act and rules, we have obtained and are required to maintainradio transmission licenses from the FCC for both domestic and foreignoperations of our earth stations. We have also obtained and arerequired to maintain authorization issued under Section 214 of the FCCAct to act as a telecommunications carrier, which authorization alsoextends to GNSC. These licenses should be renewed by the FCC in thenormal course as long as we remain in compliance with FCC rules andregulations. However, we cannot guarantee that the FCC will grantadditional licenses when our existing licenses expire, nor are weassured that the FCC will not adopt new or modified technicalrequirements that will require us to incur expenditures to modify orupgrade our equipment as a condition of retaining our licenses. We arealso required to comply with FCC regulations regarding the exposure ofhumans to radio frequency radiation from our earth stations. Theseregulations, as well as local land use regulations, restrict ourfreedom to choose where to locate our earth stations. In addition,prior to a third party acquisition of us, we would need to seekapproval from the FCC to transfer the radio transmission licenses wehave obtained to the third party upon the consummation of theacquisition. However, we cannot assure you that the FCC will permit thetransfer of these licenses. These approvals may make it more difficultfor a third party to acquire us.

Foreign Regulations

Regulatory schemes in countries in which we may seek toprovide our satellite-delivered data communications services may imposeimpediments on our operations. Some countries in which we intend tooperate have telecommunications laws and regulations that do notcurrently contemplate technical advances in telecommunicationstechnology like Internet/intranet transmission by satellite. We cannotassure you that the present regulatory environment in any of thosecountries will not be changed in a manner, which may have a materialadverse impact on our business. Either we or our local partnerstypically must obtain authorization from each country in which weprovide our satellite-delivered data communications services. Theregulatory schemes in each country are different, and thus there may beinstances of noncompliance of which we are not aware. We cannot assureyou that our licenses and approvals are or will remain sufficient inthe view of foreign regulatory authorities, or that necessary licensesand approvals will be granted on a timely basis in all jurisdictions inwhich we wish to offer our products and services or that restrictionsapplicable thereto will not be unduly burdensome.

26

----

Regulation of the Internet

Due to the increasing popularity and use of the Internet,it is possible that a number of laws and regulations may be adopted atthe local, national or international levels with respect to theInternet, covering issues including user privacy and expression,pricing of products and services, taxation, advertising, intellectualproperty rights, information security or the convergence of traditionalcommunication services with Internet communications. It is anticipatedthat a substantial portion of our Internet operations will be carriedout in countries that may impose greater regulation of the content ofinformation coming into the country than that which is generallyapplicable in the United States, including but not limited to privacyregulations in numerous European countries and content restrictions incountries such as the People’s Republic of China. To the extentthat we provide content as a part of our Internet services, it will besubject to laws regulating content. Moreover, the adoption of laws orregulations may decrease the growth of the Internet, which could inturn decrease the demand for our Internet services or increase our costof doing business or in some other manner have a material adverseeffect on our business, operating results and financial condition. Inaddition, the applicability of existing laws governing issues includingproperty ownership, copyrights and other intellectual property issues,taxation, libel, court jurisdiction and personal privacy to theInternet is uncertain. The vast majority of these laws were adoptedprior to the advent of the Internet and related technologies and, as aresult, do not contemplate or address the unique issues of the Internetand related technologies. Changes to these laws intended to addressthese issues, including some recently proposed changes, could createuncertainty in the marketplace which could reduce demand for ourproducts and services, could increase our cost of doing business as aresult of costs of litigation or increased product development costs,or could in some other manner have a material adverse effect on ourbusiness, financial condition and results of operations.

Telecommunications Taxation, Support Requirements, and AccessCharges 

All telecommunications carriers providing domesticservices in the United States are required to contribute a portion oftheir gross revenues for the support of universal telecommunicationsservices. Also, some telecommunications services are subject to specialtaxation and to contribution requirements to support services tospecial groups, like persons with disabilities. Our services may besubject to new or increased taxes and contribution requirements thatcould affect our profitability, particularly if we are not able to passthem through to customers for either competitive or regulatoryreasons.

Internet services are currently exempt from chargesthat long distance telephone companies pay for access to the networksof local telephone companies in the United States. Efforts have beenmade from time to time, and may be made again in the future, toeliminate this exemption. If these access charges are imposed ontelephone lines used to reach Internet service providers and/or if flatrate telephone services for Internet access are eliminated orcurtailed, the cost to customers who access our satellite facilitiesusing telephone company-provided facilities could increase to an extentthat could discourage the demand for our services. Likewise, the demandfor our services in other countries may be affected by the availabilityand cost of local telephone or other telecommunications facilities toreach our facilities.

Export of TelecommunicationsEquipment 

The sale of our ground segment systems,networks, and communications services outside the United States issubject to compliance with the regulations of the United States ExportAdministration and, in certain circumstances, with InternationalTraffic in Arms regulations. The absence of comparable restrictions oncompetitors in other countries may adversely affect our competitiveposition. In addition, in order to ship our products into and implementour services in some countries, the products must satisfy the technicalrequirements of that particular country. If we were unable to complywith such requirements with respect to a significant quantity of ourproducts, our sales in those countries could be restricted, which couldhave a material adverse effect on our business, results of operationsand financial condition.

27

----

Foreign Ownership

Wemay, in the future, be required to seek FCC or other governmentapproval if foreign ownership of our stock exceeds the specifiedcriteria. Failure to comply with these policies could result in anorder to divest the offending foreign ownership, fines, denial oflicense renewal and/or license revocation proceedings against thelicensee by the FCC, or denial of certain contracts from other UnitedStates Government Agencies.

|              |                                                            |
|--------------|------------------------------------------------------------|
| Item2.  | Unregistered Sales of Equity Securities and Use ofProceeds |

|        |      |
|--------|------|
|   | None |

|              |                                |
|--------------|--------------------------------|
| Item3.  | Defaults Upon SeniorSecurities |

|        |      |
|--------|------|
|   | None |

|              |                                                    |
|--------------|----------------------------------------------------|
| Item4.  | Submission of Matters to a Vote of SecurityHolders |

|        |                                                                                                                                  |
|--------|----------------------------------------------------------------------------------------------------------------------------------|
|   | Matters voted upon at theAnnual Meeting of stockholders held on November  17,  2005and the results of the voting were asfollows: |

|        |     |                                                                                 |
|--------|-----|---------------------------------------------------------------------------------|
|   | (i) | Thefollowing individuals were elected by the Stockholders to serve asDirectors: |

|                        |  |        |            |          |  |        |         |        |  |  |
|------------------------|--|--------|------------|----------|--|--------|---------|--------|--|--|
| BoardMember            |  | For    |            | Withheld |
| Richard E.Caruso       |  |   | 13,977,449 |     |  |   | 83,030  |   |
| David E.Hershberg      |  |   | 13,977,249 |     |  |   | 83,230  |   |
| Harry L.Hutcherson,Jr. |  |   | 13,977,449 |     |  |   | 83,030  |   |
| Brian T.Maloney        |  |   | 13,951,573 |     |  |   | 108,906 |   |
| KennethA. Miller       |  |   | 13,977,349 |     |  |   | 83,130  |   |
| Jack A.Shaw            |  |   | 13,867,723 |     |  |   | 192,756 |   |
| A. RobertTowbin        |  |   | 13,932,969 |     |  |   | 127,510 |   |
| C.J.Waylan             |  |   | 13,977,449 |     |  |   | 83,030  |   |
|                        |

|        |      |                                                                                                                                                                                                                                        |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | (ii) | Toratify the appointment of Ernst & Young LLP as independent auditorsof the Company for the fiscal year ending June  30,  2006was voted upon as follows: 14,037,342 shares for; 17,803 sharesagainst; and 5,334 shares abstaining. |

|              |                  |
|--------------|------------------|
| Item5.  | OtherInformation |

|        |      |
|--------|------|
|   | None |

|              |          |
|--------------|----------|
| Item6.  | Exhibits |

Index toExhibits:

Exhibit No.

|            |                                                                                                                                                |
|------------|------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.1  | Chief Executive Officer Certificationrequired by Rules 13a-14 and 15d-14 under the Securities Exchange Actof 1934, as amended (filedherewith). |

|            |                                                                                                                                                              |
|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.2  | Chief Financial OfficerCertification required by Rules 13a− 14 and 15d− 14 underthe Securities Exchange Act of 1934, as amended (filedherewith). |

|          |                                                                                                                                       |
|----------|---------------------------------------------------------------------------------------------------------------------------------------|
| 32  | Certification Pursuant to18 U.S.C. Section 1350, as adopted pursuant to Section 906 of theSarbanes-Oxley Act of 2002 (filedherewith). |

28

----

SIGNATURES

Pursuantto the requirements of the Securities Exchange Act of 1934, theRegistrant has duly caused this report to be signed on its behalf bythe undersigned thereunto duly authorized.

|  | GLOBECOMM SYSTEMSINC. |
|--|-----------------------|

(Registrant)                                    

|                         |  |                       |
|-------------------------|--|-----------------------|
| Date:February  9,  2006 |  | /s/ DAVID E.HERSHBERG |
|                         |  |                       |

|  |  |                                                                                                  |
|--|--|--------------------------------------------------------------------------------------------------|
|  |  | David E. Hershberg Chairman of theBoard and Chief Executive Officer (Principal ExecutiveOfficer) |
|  |  |                                                                                                  |

|                        |  |                     |
|------------------------|--|---------------------|
| Date: February  9,2006 |  | /s/ ANDREW C. MELFI |
|                        |  |                     |

|  |  |                                                                                                                 |
|--|--|-----------------------------------------------------------------------------------------------------------------|
|  |  | Andrew C.Melfi Vice President, Chief Financial Officer and Treasurer(Principal Financial and AccountingOfficer) |
|  |  |                                                                                                                 |

29

----

Indexto Exhibits:

Exhibit No.

|            |                                                                                                                                                |
|------------|------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.1  | Chief Executive Officer Certificationrequired by Rules 13a-14 and 15d-14 under the Securities Exchange Actof 1934, as amended (filedherewith). |

|            |                                                                                                                                                              |
|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.2  | Chief Financial OfficerCertification required by Rules 13a− 14 and 15d− 14 underthe Securities Exchange Act of 1934, as amended (filedherewith). |

|          |                                                                                                                                       |
|----------|---------------------------------------------------------------------------------------------------------------------------------------|
| 32  | Certification Pursuant to18 U.S.C. Section 1350, as adopted pursuant to Section 906 of theSarbanes-Oxley Act of 2002 (filedherewith). |

----