UNITEDSTATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C.20549

FORM 10-Q

(MARKONE)

    QUARTERLY REPORT PURSUANT TOSECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30,2004

OR

    TRANSITION REPORTPURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934

For the transition period from                   to              

Commission file number: 000-22839

Globecomm Systems Inc.

(Exact name of Registrant as specified in itscharter)

|                                                                     |  |                                              |  |  |  |  |
|---------------------------------------------------------------------|--|----------------------------------------------|--|--|--|--|
| Delaware(Stateor other jurisdiction ofincorporation ororganization) |  | 11-3225567(I.R.S.EmployerIdentification No.) |
| 45 OserAvenue,Hauppauge, NY(Address of principal executiveoffices)  |  | 11788(ZipCode)                               |
|                                                                     |

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

Indicate by check mark whether the registrant (1) has filedall reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or forsuch shorter period that the Registrant was required to file suchreports), and (2) has been subject to such filing requirements for thepast 90 days. Yes      No  

Indicate by check mark whether the Registrant is anaccelerated filer (as defined in Rule 12b-2 of the Act).Yes      No  

As of November10, 2004, there were 14,403,222 shares of the Registrant's commonstock, $0.001 par value,outstanding.

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GLOBECOMM SYSTEMSINC.

Index to the September 30, 2004 Form 10-Q

Part I— Financial Information

|                                     |  |                                                                                                                                                   |  |        |    |        |  |  |  |  |
|-------------------------------------|--|---------------------------------------------------------------------------------------------------------------------------------------------------|--|--------|----|--------|--|--|--|--|
|                                |  |                                                                                                                                              |  | Page   |
| Item1.                              |  | FinancialStatements                                                                                                                               |  |   | 3  |   |
|                                |  | ConsolidatedBalance Sheets — As of September 30, 2004 (unaudited) and    June 30, 2004                                  |  |   | 3  |   |
|                                |  | Consolidated Statements ofOperations (unaudited) — For the three months     endedSeptember 30, 2004 and 2003            |  |   | 4  |   |
|                                |  | Consolidated Statement ofChanges in Stockholders' Equity (unaudited) — For    the three months ended September 30, 2004 |  |   | 5  |   |
|                                |  | Consolidated Statements ofCash Flows (unaudited) — For the three months     endedSeptember 30, 2004 and2003             |  |   | 6  |   |
|                                |  | Notesto Consolidated Financial Statements (unaudited)                                                                                             |  |   | 7  |   |
| Item2.                              |  | Management's Discussion and Analysis of FinancialCondition and Results of     Operations                                      |  |   | 13 |   |
| Item 3.                             |  | Quantitative andQualitative Disclosures about MarketRisk                                                                                          |  |   | 26 |   |
| Item4.                              |  | Controls andProcedures                                                                                                                            |  |   | 26 |   |
| **PartII — OtherInformation** |
| Item1.                              |  | LegalProceedings                                                                                                                                  |  |   | 26 |   |
| Item2.                              |  | Unregistered Sales of Equity Securities and Use ofProceeds                                                                                        |  |   | 26 |   |
| Item3.                              |  | Defaults Upon Senior Securities                                                                                                                   |  |   | 26 |   |
| Item 4.                             |  | Submission of Mattersto a Vote of Security Holders                                                                                                |  |   | 27 |   |
| Item 5.                             |  | OtherInformation                                                                                                                                  |  |   | 27 |   |
| Item6.                              |  | Exhibits                                                                                                                                          |  |   | 27 |   |
|                                |  | Signatures                                                                                                                                        |  |   | 28 |   |
|                                     |

2

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PART I — FINANCIALINFORMATION

Item 1. Financial Statements

GLOBECOMMSYSTEMS INC. CONSOLIDATED BALANCE SHEETS (In thousands,except sharedata)

|                                                                                                                                           |  |                  |         |              |  |        |         |         |  |  |  |  |  |  |  |  |  |  |
|-------------------------------------------------------------------------------------------------------------------------------------------|--|------------------|---------|--------------|--|--------|---------|---------|--|--|--|--|--|--|--|--|--|--|
|                                                                                                                                      |  | September30,2004 |         | June 30,2004 |  |
|                                                                                                                                      |  | (Unaudited)      |         |
| **Assets**                                                                                                                                |  |
| Currentassets:                                                                                                                            |  |             |    |         |  |   |    |    |  |
| Cash and cashequivalents                                                                                                                  |  | $                | 17,242  |         |  | $      | 28,252  |    |  |
| Restrictedcash                                                                                                                            |  |             | 11,888  |         |  |   | 1,903   |    |  |
| Accountsreceivable,net                                                                                                                    |  |             | 20,357  |         |  |   | 14,318  |    |  |
| Inventories                                                                                                                               |  |             | 7,589   |         |  |   | 3,904   |    |  |
| Prepaidexpenses and other currentassets                                                                                                   |  |             | 569     |         |  |   | 1,274   |    |  |
| Deferredincometaxes                                                                                                                       |  |             | 83      |         |  |   | 83      |    |  |
| Totalcurrent assets                                                                                                                       |  |             | 57,728  |         |  |   | 49,734  |    |  |
| Fixedassets,net                                                                                                                           |  |             | 15,323  |         |  |   | 15,441  |    |  |
| Goodwill                                                                                                                                  |  |             | 7,204   |         |  |   | 7,204   |    |  |
| Otherassets                                                                                                                               |  |             | 1,106   |         |  |   | 1,096   |    |  |
| Totalassets                                                                                                                               |  | $                | 81,361  |         |  | $      | 73,475  |    |  |
| **Liabilitiesand Stockholders' Equity**                                                                                                   |  |
| Currentliabilities:                                                                                                                       |  |
| Accountspayable                                                                                                                           |  | $                | 19,537  |         |  | $      | 15,453  |    |  |
| Deferredrevenues                                                                                                                          |  |             | 1,899   |         |  |   | 1,083   |    |  |
| Accruedpayroll and related fringebenefits                                                                                                 |  |             | 967     |         |  |   | 1,154   |    |  |
| Otheraccruedexpenses                                                                                                                      |  |             | 1,652   |         |  |   | 1,676   |    |  |
| Deferredliabilities                                                                                                                       |  |             | 316     |         |  |   | 316     |    |  |
| Totalcurrentliabilities                                                                                                                   |  |             | 24,371  |         |  |   | 19,682  |    |  |
| Deferredliabilities, less currentportion                                                                                                  |  |             | 908     |         |  |   | 987     |    |  |
| Commitmentsandcontingencies                                                                                                               |  |
| Stockholders'equity:                                                                                                                      |  |
| Series A Junior Participating, sharesauthorized, issued and outstanding: none at September 30, 2004 and June30,2004                       |  |             | — |         |  |   | — |    |  |
| Commonstock, $.001 par value, 22,000,000 shares authorized, shares issued:14,838,274 at September 30, 2004 and 14,628,574 at June 30,2004 |  |             | 15      |         |  |   | 15      |    |  |
| Additional paid-incapital                                                                                                                 |  |             | 131,619 |         |  |   | 130,503 |    |  |
| Accumulateddeficit                                                                                                                        |  |             | (73,017 | )       |  |   | (75,198 | )  |  |
| Accumulatedother comprehensiveincome                                                                                                      |  |             | 246     |         |  |   | 267     |    |  |
| Treasurystock, at cost, 465,351 shares at September 30, 2004 and June 30,2004                                                             |  |             | (2,781  | )       |  |   | (2,781  | )  |  |
| Totalstockholders'equity                                                                                                                  |  |             | 56,082  |         |  |   | 52,806  |    |  |
| Totalliabilities and stockholders'equity                                                                                                  |  | $                | 81,361  |         |  | $      | 73,475  |    |  |
|                                                                                                                                           |

Seeaccompanying notes.

3

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

|                                                                                            |  |                   |         |                   |  |        |        |         |  |  |
|--------------------------------------------------------------------------------------------|--|-------------------|---------|-------------------|--|--------|--------|---------|--|--|
|                                                                                       |  | ThreeMonths Ended |
|                                                                                       |  | September30,2004  |         | September 30,2003 |
| Revenuesfrom ground segment systems, networks and enterprisesolutions                      |  | $                 | 21,586  |              |  | $      | 17,031 |    |
| Revenuesfrom data communicationsservices                                                   |  |              | 3,873   |              |  |   | 3,430  |    |
| Totalrevenues                                                                              |  |              | 25,459  |              |  |   | 20,461 |    |
| Costsand operating expenses:                                                               |  |
| Costs from groundsegment systems, networks and enterprisesolutions                         |  |              | 18,062  |              |  |   | 15,304 |    |
| Costsfrom data communicationsservices                                                      |  |              | 3,194   |              |  |   | 3,218  |    |
| Sellingandmarketing                                                                        |  |              | 1,169   |              |  |   | 1,116  |    |
| Researchanddevelopment                                                                     |  |              | 298     |              |  |   | 475    |    |
| Generalandadministrative                                                                   |  |              | 628     |              |  |   | 893    |    |
| Totalcosts and operatingexpenses                                                           |  |              | 23,351  |              |  |   | 21,006 |    |
| Income(loss) fromoperations                                                                |  |              | 2,108   |              |  |   | (545   | )  |
| Otherincome (expense):                                                                     |  |
| Interestincome                                                                             |  |              | 73      |              |  |   | 62     |    |
| Interestexpense                                                                            |  |              | — |              |  |   | (1     | )  |
| Netincome(loss)                                                                            |  | $                 | 2,181   |              |  | $      | (484   | )  |
| Basicand diluted net income (loss) per commonshare                                         |  | $                 | 0.15    |              |  | $      | (0.04  | )  |
| Weighted-averageshares used in the calculation of basic net income (loss) percommonshare   |  |              | 14,180  |              |  |   | 12,576 |    |
| Weighted-averageshares used in the calculation of diluted net income (loss) percommonshare |  |              | 14,705  |              |  |   | 12,576 |    |
|                                                                                            |

Seeaccompanying notes .

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GLOBECOMM SYSTEMSINC. CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS'EQUITY FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2004 (Inthousands)(Unaudited)

|                                       |  |             |        |                          |  |                    |        |                                           |  |               |         |                         |  |        |         |         |  |        |        |         |  |        |        |        |  |        |        |         |  |        |        |         |  |  |
|---------------------------------------|--|-------------|--------|--------------------------|--|--------------------|--------|-------------------------------------------|--|---------------|---------|-------------------------|--|--------|---------|---------|--|--------|--------|---------|--|--------|--------|--------|--|--------|--------|---------|--|--------|--------|---------|--|--|
|                                  |  | CommonStock |        | AdditionalPaid-inCapital |  | AccumulatedDeficit |        | AccumulatedOtherComprehensiveIncome(loss) |  | TreasuryStock |         | TotalStockholdersEquity |
|                                  |  | Shares      |        | Amount                   |  | Shares             |        | Amount                                    |  |
| Balanceat June 30,2004                |  |        | 14,629 |                     |  | $                  | 15     |                                      |  | $             | 130,503 |                    |  | $      | (75,198 | )  |  | $      | 267    |    |  |   | 465    |   |  | $      | (2,781 | )  |  | $      | 52,806 |    |
| Proceedsfrom exercise of stockoptions |  |        | 34     |                     |  |               |   |                                      |  |          | 149     |                    |  |   |    |    |  |   |   |    |  |   |   |   |  |   |   |    |  |   | 149    |    |
| Proceedsfrom exercise ofwarrants      |  |        | 175    |                     |  |               |   |                                      |  |          | 962     |                    |  |   |    |    |  |   |   |    |  |   |   |   |  |   |   |    |  |   | 962    |    |
| Issuanceof stock options forservices  |  |        |   |                     |  |               |   |                                      |  |          | 5       |                    |  |   |    |    |  |   |   |    |  |   |   |   |  |   |   |    |  |   | 5      |    |
| Comprehensiveincome:                  |  |
| Netincome                             |  |        |   |                     |  |               |   |                                      |  |          |    |                    |  |   | 2,181   |    |  |   |   |    |  |   |   |   |  |   |   |    |  |   | 2,181  |    |
| Lossfrom foreigncurrencytranslation   |  |        |   |                     |  |               |   |                                      |  |          |    |                    |  |   |    |    |  |   | (21    | )  |  |   |   |   |  |   |   |    |  |   | (21    | )  |
| Totalcomprehensiveincome              |  |        |   |                     |  |               |   |                                      |  |          |    |                    |  |   |    |    |  |   |   |    |  |   |   |   |  |   |   |    |  |   | 2,160  |    |
| Balanceat September 30,2004           |  |        | 14,838 |                     |  | $                  | 15     |                                      |  | $             | 131,619 |                    |  | $      | (73,017 | )  |  | $      | 246    |    |  |   | 465    |   |  | $      | (2,781 | )  |  | $      | 56,082 |    |
|                                       |

Seeaccompanying notes.

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GLOBECOMM SYSTEMS INC. CONSOLIDATEDSTATEMENTS OF CASH FLOWS (In thousands)(Unaudited)

|                                                                                    |  |                   |         |                   |  |        |         |         |  |  |
|------------------------------------------------------------------------------------|--|-------------------|---------|-------------------|--|--------|---------|---------|--|--|
|                                                                               |  | ThreeMonths Ended |
|                                                                               |  | September30, 2004 |         | September 30,2003 |
| **OPERATINGACTIVITIES:**                                                           |  |
| Net income(loss)                                                                   |  | $                 | 2,181   |              |  | $      | (484    | )  |
| Adjustmentsto reconcile net income (loss) to net cash used in operatingactivities: |  |
| Depreciation andamortization                                                       |  |              | 744     |              |  |   | 799     |    |
| Benefitfor doubtfulaccounts                                                        |  |              | (1,371  | )            |  |   | (975    | )  |
| Changesin deferredliabilities                                                      |  |              | (79     | )            |  |   | (176    | )  |
| Stockcompensationexpense                                                           |  |              | 5       |              |  |   | — |    |
| Changesin operating assets and liabilities:                                        |  |
| Accountsreceivable                                                                 |  |              | (4,678  | )            |  |   | (3,880  | )  |
| Inventories                                                                        |  |              | (3,683  | )            |  |   | 4,326   |    |
| Prepaidexpenses and other currentassets                                            |  |              | 705     |              |  |   | (297    | )  |
| Otherassets                                                                        |  |              | (10     | )            |  |   | 394     |    |
| Accountspayable                                                                    |  |              | 4,071   |              |  |   | 90      |    |
| Deferredrevenue                                                                    |  |              | 819     |              |  |   | (1,920  | )  |
| Accruedpayroll and related fringebenefits                                          |  |              | (186    | )            |  |   | 247     |    |
| Otheraccruedexpenses                                                               |  |              | (26     | )            |  |   | 189     |    |
| Netcash used in operatingactivities                                                |  |              | (1,508  | )            |  |   | (1,687  | )  |
| **INVESTINGACTIVITIES:**                                                           |  |
| Purchases of fixedassets                                                           |  |              | (627    | )            |  |   | (72     | )  |
| Restrictedcash                                                                     |  |              | (9,985  | )            |  |   | (25     | )  |
| Netcash used in investingactivities                                                |  |              | (10,612 | )            |  |   | (97     | )  |
| **FINANCINGACTIVITIES:**                                                           |  |
| Proceeds from exercise of stockoptions                                             |  |              | 149     |              |  |   | — |    |
| Proceeds fromexercise ofwarrants                                                   |  |              | 962     |              |  |   | — |    |
| Netcash provided by financingactivities                                            |  |              | 1,111   |              |  |   | — |    |
| Effectof foreign currency translation oncash                                       |  |              | (1      | )            |  |   | 8       |    |
| Netdecrease in cash and cashequivalents                                            |  |              | (11,010 | )            |  |   | (1,776  | )  |
| Cashand cash equivalents at beginning ofperiod                                     |  |              | 28,252  |              |  |   | 22,016  |    |
| Cashand cash equivalents at end ofperiod                                           |  | $                 | 17,242  |              |  | $      | 20,240  |    |
|                                                                                    |

Seeaccompanying notes.

6

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GLOBECOMM SYSTEMSINC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30,2004 (Unaudited)

1.    Basis of Presentation

The accompanying unaudited consolidated financial statements havebeen prepared in accordance with accounting principles generallyaccepted in the United States for interim financial information and inaccordance with the instructions to Form 10-Q and Article 10 ofRegulation S-X. Accordingly, they do not include all of the informationand footnotes required by accounting principles generally accepted inthe United States for complete financial statements. In the opinion ofmanagement, all material adjustments (consisting of normal recurringadjustments) considered necessary for a fair presentation of theresults for such periods have been included. The consolidated balancesheet at June 30, 2004 has been derived from the audited consolidatedfinancial statements at that date but does not include all of theinformation and footnotes required by accounting principles generallyaccepted in the United States for complete financial statements. Theresults of operations for the three months ended September 30, 2004,are not necessarily indicative of the results that may be expected forthe full fiscal year ending June 30, 2005, or for any futureperiod.

The accompanying consolidated financial statementsshould be read in conjunction with the audited consolidated financialstatements of the Company for the fiscal year ended June 30, 2004 andthe accompanying notes thereto contained in the Company's AnnualReport on Form 10-K, filed with the Securities and Exchange Commissionon September 28, 2004.

Principles of Consolidation

The consolidated financial statements include the accounts of theCompany and its wholly-owned subsidiaries, Globecomm Network ServicesCorporation., (formerly NetSat Express or NetSat), and GlobecommSystems Europe Limited (collectively, the"Company"). All significant intercompanybalances and transactions have been eliminated in consolidation. OnNovember 8, 2004, the Company filed an amendment to NetSat'scertificate of incorporation changing its name to Globecomm NetworkServices Corporation.

Accounting Estimates

Thepreparation of financial statements in conformity with accountingprinciples generally accepted in the United States requires managementto make estimates and assumptions that affect the amounts reported inthe consolidated financial statements and accompanying notes. Actualresults could differ from those estimates.

RevenueRecognition

The Company recognizes revenue in accordancewith Staff Accounting Bulletin No. 104 ("SAB104"), Revenue Recognition, for its production-typecontracts that are sold separately as standard satellite ground segmentsystems when persuasive evidence of an arrangement exists, the sellingprice is fixed or determinable, collectibility is reasonably assured,delivery has occurred and the contractual performance specificationshave been met. The Company's standard satellite ground segmentsystems produced in connection with these contracts are typicallyshort-term (less than twelve months in term) and manufactured using astandard modular production process. Such systems require lessengineering, drafting and design efforts than the Company'slong-term complex production-type projects. Revenue is recognized onthe Company's standard satellite ground segment systems uponshipment and acceptance of factory performance testing which is whentitle transfers to the customer. The amount of revenues recorded oneach standard production-type contract is reduced by thecustomers' contractual holdback amount, which typically requires10% to 30% of the contract value to be retained by thecustomer until installation and final acceptance is complete. Thecustomer generally 

7

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becomes obligated to pay 70% to90% of the contract value upon shipment and acceptance offactory performance testing. Installation is not deemed to be essentialto the functionality of the system since installation does not requiresignificant changes to the features or capabilities of the system, doesnot require complex software integration and interfacing and theCompany has not experienced any difficulties installing such equipment.In addition, the customer or other third party vendors can install thesystem. The estimated relative fair value of the installation servicesis determined 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 ("SOP 81-1"), Accounting for Performanceof Construction-Type and Certain Production-Type Contracts, for itsnon-standard, complex production-type contracts for the production ofsatellite ground segment systems and equipment that are generallyintegrated into the customers' 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 customers' 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 inventory balances in the accompanying consolidatedbalance sheets.

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

Revenuesfrom data communications services are derived primarily from Internetaccess service fees. Service revenues from Internet access arerecognized ratably over the period in which services are provided.Payments received in advance of providing Internet access services aredeferred until the period such services are provided and are presentedas deferred revenues in the accompanying consolidated balancesheets.

Costs from Ground Segment Systems, Networks andEnterprise Solutions

Costs from ground segment systems,networks and enterprise solutions consist primarily of the costs ofpurchased materials (including shipping and handling costs), directlabor and related overhead expenses, project-related travel and livingcosts and subcontractor salaries.

Costs from DataCommunications Services

Costs from data communicationsservices relating to Internet access service fees consist primarily ofsatellite space segment charges, Internet connectivity fees and networkoperations expenses. Satellite space segment charges consist of thecosts associated with obtaining satellite bandwidth (the measure ofcapacity) used in the transmission of services to and from thesatellite leased from operators. Network operations expenses consistprimarily of costs associated with the operation of the NetworkOperation Center, on a twenty-four hour a day, seven-day a week basis,including personnel and related costs and depreciation.

Research and Development

Research and developmentexpenditures are expensed as incurred.

Stock-BasedCompensation

The Company accounts for stock option grantsusing the intrinsic value method prescribed in Accounting PrinciplesBoard Opinion No. 25, Accounting for Stock Issued to Employees, and

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complies with the disclosure provisions ofStatement of Financial Accounting Standards("SFAS") No. 123, Accounting for Stock-BasedCompensation ("SFAS No. 123"), as amended bySFAS No. 148, Accounting for Stock-Based Compensation-Transition andDisclosure ("SFAS No. 148").

Interimpro-forma information regarding net income and net loss per commonshare is required by SFAS No. 148, if the Company accounts for itsstock options granted under the intrinsic value method. The fair valueof options granted under the Company's Amended and Restated 1997Stock Incentive Plan was estimated at the date of grant using aBlack-Scholes option pricing model.

The Black-Scholes optionvaluation model was developed for use in estimating the fair value oftraded options, which have no vesting restrictions and are fullytransferable. In addition, option valuation models require the input ofhighly subjective assumptions, including the expected stock pricevolatility. Because the Company's stock options havecharacteristics significantly different from those of traded options,and because changes in the subjective input assumptions can materiallyaffect the fair value estimate, in management's opinion, theexisting models do not necessarily provide a reliable single measure ofthe fair value of the Company's stock options under theBlack-Scholes option valuation model.

For purposes of pro-formadisclosures, the estimated fair value of the options is amortized toexpense over the options' vesting period. The Company'spro-forma information is as follows:

|                                                              |  |                                     |       |                  |  |        |        |         |  |  |
|--------------------------------------------------------------|--|-------------------------------------|-------|------------------|--|--------|--------|---------|--|--|
|                                                         |  | ThreeMonths Ended                   |
|                                                         |  | September30,2004                    |       | September30,2003 |
|                                                         |  | (Unaudited)                         |
|                                                         |  | (Inthousands, except per sharedata) |
| Reported net income(loss)                                    |  | $                                   | 2,181 |             |  | $      | (484   | )  |
| Pro-forma stockcompensationexpense                           |  |                                | (428  | )           |  |   | (660   | )  |
| Pro-formanet income(loss)                                    |  | $                                   | 1,753 |             |  | $      | (1,144 | )  |
| Reportedbasic and diluted net income (loss) per commonshare  |  | $                                   | 0.15  |             |  | $      | (0.04  | )  |
| Pro-formabasic and diluted net income (loss) per commonshare |  | $                                   | 0.12  |             |  | $      | (0.09  | )  |
|                                                              |

Duringthe three months ended September 30, 2004 and 2003 compensation expenserelated to stock options of $5,000 and $0 was included in the reportednet income (loss), respectively.

Goodwill

Goodwill represents the excess of the purchase price over the fairvalue of the 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.

Comprehensive Income

Comprehensive income for the three months ended September 30, 2004of approximately $2,160,000 includes a foreign currency translationloss of approximately $21,000. Comprehensive loss for the three monthsended September 30, 2003 of approximately $350,000 includes a foreigncurrency translation gain of approximately $34,000 and an unrealizedgain on available-for-sale equity securities of approximately$100,000.

Accounting for Derivative Instruments and HedgingActivities

SFAS No. 133, "Accounting forDerivative Instruments and Hedging Activities," as amendedby SFAS No. 138, "Accounting for Certain DerivativeInstruments and Certain Hedging Activities – an Amendment to SFASNo. 133," requires that all derivative instruments berecognized on the balance sheet at fair value. In addition, thestandard specifies criteria for designation and effectiveness ofhedging relationships and establishes accounting rules for reportingchanges in the fair value of a derivative instrument depending on thedesignated type of hedge.

9

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The Company, at times, enters into foreigncurrency exchange contracts (forward contracts) to manage its exposureto currency rate fluctuations on anticipated sales and purchases. Thesetypes of exchange contracts generally qualify for accounting asdesignated hedges. The realized and unrealized gains and losses onqualified contracts are deferred and included as components of therelated transactions. Any contracts that do not qualify as hedges foraccounting purposes are marked to market with the resulting gains andlosses recognized in other income or expense. At September 30, 2004 andJune 30, 2004, the Company had outstanding foreign exchange contractsin notional amounts of $1,300,000 and $0, respectively. The foreigncurrency forward contract held by the Company at September 30, 2004 wasnot a designated hedge under SFAS 133.

Income Taxes

In assessing the realizability of deferred tax assets, managementconsiders whether it is more likely than not that some portion or allof the deferred tax assets will be realized. The ultimate realizationof the net deferred tax assets is dependent upon the generation offuture taxable income prior to the expiration of any net operating losscarryforwards. For the three months ended September 30, 2004 and theyear ended June 30, 2004, 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$83,000, representing state investment tax credit carryforwards thatwill be utilized to offset state capital taxes on the Company'scombined state tax return.

Product Warranties

The Company offers warranties on its contracts, the specific termsand conditions 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 warranty reserve.

2.    Basic and Diluted Net Income (Loss) Per Common Share

The Company computes net loss per common share in accordance withthe provisions of SFAS No. 128, Earnings Per Share. Basic and dilutednet loss per common share is computed by dividing the net loss for theperiod by the weighted-average number of common equivalent sharesoutstanding for the period. Common equivalent shares consist of theincremental common shares issuable upon the conversion of preferredstock (using an if-converted method) and incremental common sharesissuable upon the exercise of stock options and warrants (using thetreasury stock method). Incremental common equivalent shares wereexcluded from the calculation of diluted net loss per common share forthe three months ended September 30, 2003, as their effect wasanti-dilutive. Diluted net loss per common share for three months endedSeptember 30, 2003 excludes the effect of approximately 40,000 stockoptions as their effect would have been anti-dilutive.

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3.    Inventories

Inventoriesconsist of thefollowing:

|                                  |  |                   |       |              |  |        |       |        |  |  |
|----------------------------------|--|-------------------|-------|--------------|--|--------|-------|--------|--|--|
|                             |  | September30, 2004 |       | June 30,2004 |
|                             |  | (Unaudited)       |       |         |
|                             |  | (Inthousands)     |
| Raw materials and componentparts |  | $                 | 172   |         |  | $      | 163   |   |
| Work-in-progress                 |  |              | 9,224 |         |  |   | 7,362 |   |
|                             |  |              | 9,396 |         |  |   | 7,525 |   |
| Lessprogresspayments             |  |              | 1,807 |         |  |   | 3,621 |   |
|                             |  | $                 | 7,589 |         |  | $      | 3,904 |   |
|                                  |

4.    SegmentInformation

The Company operates through two business segments.Its ground segment systems, networks and enterprise solutions segment,through Globecomm Systems Inc. and Globecomm Systems Europe Limited, isengaged in the design, assembly and installation of ground segmentsystems and networks. Its data communications services segment, throughNetSat, provides satellite communication services capabilities.

The Company's reportable segments are business units thatoffer different products and services. The reportable segments are eachmanaged separately because they provide distinct products andservices.

The following is the Company's business segmentinformation for the three months ended September 30, 2004 and 2003 andas of September 30, 2004 and June 30, 2004:

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|                                                         |  |                   |         |                  |  |        |        |         |  |  |
|---------------------------------------------------------|--|-------------------|---------|------------------|--|--------|--------|---------|--|--|
|                                                    |  | ThreeMonths Ended |
|                                                    |  | September30,2004  |         | September30,2003 |
|                                                    |  | (Unaudited)       |
|                                                    |  | (Inthousands)     |
| Revenues:                                               |  |
| Groundsegment systems, networks and enterprisesolutions |  | $                 | 21,586  |             |  | $      | 17,031 |    |
| Datacommunicationsservices                              |  |              | 3,873   |             |  |   | 3,430  |    |
| Totalrevenues                                           |  | $                 | 25,459  |             |  | $      | 20,461 |    |
| Income(loss) from operations:                           |  |
| Ground segmentsystems, networks and enterprisesolutions |  | $                 | 2,221   |             |  | $      | (1,060 | )  |
| Datacommunicationsservices                              |  |              | (117    | )           |  |   | 511    |    |
| Interestincome                                          |  |              | 73      |             |  |   | 62     |    |
| Interestexpense                                         |  |              | — |             |  |   | (1     | )  |
| Intercompanyeliminations                                |  |              | 4       |             |  |   | 4      |    |
| Netincome(loss)                                         |  | $                 | 2,181   |             |  | $      | (484   | )  |
| Depreciationand amortization:                           |  |
| Ground segment systems,networks and enterprisesolutions |  | $                 | 303     |             |  | $      | 377    |    |
| Datacommunicationsservices                              |  |              | 445     |             |  |   | 426    |    |
| Intercompanyeliminations                                |  |              | (4      | )           |  |   | (4     | )  |
| Totaldepreciation andamortization                       |  | $                 | 744     |             |  | $      | 799    |    |
| Expendituresfor long-lived assets:                      |  |
| Ground segment systems,networks and enterprisesolutions |  | $                 | 33      |             |  | $      | 41     |    |
| Datacommunicationsservices                              |  |              | 594     |             |  |   | 31     |    |
| Totalexpenditures for long-livedassets                  |  | $                 | 627     |             |  | $      | 72     |    |
|                                                         |

|                                                         |  |                  |         |             |  |        |         |         |  |  |
|---------------------------------------------------------|--|------------------|---------|-------------|--|--------|---------|---------|--|--|
|                                                    |  | September30,2004 |         | June30,2004 |
|                                                    |  | (Unaudited)      |         |
|                                                    |  | (Inthousands)    |
| Assets:                                                 |  |
| Groundsegment systems, networks and enterprisesolutions |  | $                | 134,642 |        |  | $      | 125,534 |    |
| Datacommunicationsservices                              |  |             | 13,774  |        |  |   | 11,501  |    |
| Intercompanyeliminations                                |  |             | (67,055 | )      |  |   | (63,560 | )  |
| Totalassets                                             |  | $                | 81,361  |        |  | $      | 73,475  |    |
|                                                         |

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Item2.   Management's Discussion and Analysis of FinancialCondition and Results of Operations.

You should read thefollowing discussion of our financial condition and results ofoperations with the consolidated financial statements and related notesincluded elsewhere in this Quarterly Report on Form 10-Q. Thisdiscussion contains, in addition to historical information,forward-looking statements, within the meaning of the PrivateSecurities Litigation Reform Act of 1995, based on our currentexpectations, assumptions, estimates and projections. Theseforward-looking statements involve risks and uncertainties. Our actualresults could differ materially from those anticipated in theseforward-looking statements as a result of certain factors, such as,among others, uncertain demand for our services and products due toeconomic and industry-specific conditions, the risks associated withoperating in international markets and our dependence on a limitednumber of contracts for a high percentage of our revenues. These risksand others are more fully described in the "RiskFactors" section of this Quarterly Report and in our otherfilings with the Securities and Exchange Commission, including ourAnnual 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

Since ourinception, a majority of our revenues have been generated by our groundsegment systems, networks and enterprise solutions business. Contractsfor the ground segment systems, networks and enterprise solutions anddata communications services have been fixed-price contracts in amajority of cases. Profitability of such contracts is subject toinherent uncertainties as to the cost of performance. In addition topossible errors or omissions in making initial estimates, cost overrunsmay be incurred as a result of unforeseen obstacles, including bothphysical conditions and unexpected problems encountered in engineeringdesign and testing. Since our business is frequently concentrated in alimited number of large contracts, a significant cost overrun on anycontract could have a material adverse effect on our business,financial condition and results of operations.

Contract costsgenerally include purchased material, direct labor, overhead and otherdirect costs. Anticipated contract losses are recognized in the periodidentified. Costs from ground segment systems, networks and enterprisesolutions consist primarily of the costs of purchased materials(including shipping and handling costs), direct labor and relatedoverhead expenses, project-related travel and living costs andsubcontractor salaries. Costs from data communications services consistprimarily of satellite space segment charges, Internet connectivityfees 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 satellite 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 consist primarily of salaries, travel and livingcosts for sales and marketing personnel. Research and developmentexpenses consist primarily of salaries and related overhead expenses.General and administrative expenses consist of expenses associated withour management, finance, contract and administrative functions.

Our business had been adversely affected, and to some extentcontinues to be affected**,** by the recent global economic slowdownand, in particular, the significant challenges facing thetelecommunications industry worldwide. Recently, we have seenimprovement in the segments we serve, in particular within the U.S.Government and government related entities marketplace. However, someof the adverse consequences of the downturn continue to impact pricingand competition and we may experience a decline in bookings of contractorders as customers and prospects delay projects, which wouldnegatively impact our business and prospects in the future. We also maybe negatively impacted in the future by a reduction in opportunitiesfrom U.S. Government and government related agencies.

CriticalAccounting Policies

Certain of our accounting policies requirejudgment by management in selecting the appropriate assumptions forcalculating financial estimates. By their nature, these judgments aresubject to an 

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inherent degree of uncertainty. Thesejudgments are based on our historical experience, terms of existingcontracts, our observance of trends in the industry, informationprovided by our customers, and information available from other outsidesources, as appropriate. Actual results may differ from these judgmentsunder different assumptions or conditions. Our accounting policies thatrequire management to apply significant judgment include:

Revenue Recognition

We recognize revenue in accordance withSAB 104, Revenue Recognition, for our production-type contracts thatare sold separately as standard satellite ground segment systems whenpersuasive evidence of an arrangement exists, the selling price isfixed or determinable, collectibility is reasonably assured, deliveryhas occurred and the contractual performance specifications have beenmet. Our 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 our long-term complex production-type projects.Revenue is recognized on our standard satellite ground segment systemsupon shipment and acceptance of factory performance testing which iswhen title transfers to the customer. The amount of revenues recordedon each standard production-type contract is reduced by thecustomer's contractual holdback amount, which typically requires10% to 30% of the contract value to be retained by thecustomer until installation and final acceptance is complete. Thecustomer generally becomes obligated to pay 70% to 90% ofthe contract value upon shipment and acceptance of factory performancetesting. Installation is not deemed to be essential to thefunctionality of the system since installation does not requiresignificant changes to the features or capabilities of the equipment,does not require complex software integration and interfacing and wehave not experienced any difficulties installing such equipment. Inaddition, the customer or other third party vendors can install theequipment. The estimated relative fair value of the installationservices is determined by management, which is typically less than thecustomer's contractual holdback percentage. If the holdback isless than the fair value of installation, we will defer recognition ofrevenues, determined on a contract-by-contract basis equal to the fairvalue of the installation services. Payments received in advance bycustomers are deferred until shipment and are presented as deferredrevenues.

We recognize revenue using thepercentage-of-completion method of accounting upon the achievement ofcertain contractual milestones in accordance with SOP 81-1, Accountingfor Performance of Construction-Type and Certain Production-TypeContracts, for our non-standard, complex production-type contracts forthe production of satellite ground segment systems and equipment thatare generally integrated into the customers' satellite groundsegment network. The equipment and systems produced in connection withthese contracts are typically long-term (in excess of twelve months interm) and require significant customer-specific engineering, draftingand design effort in order to effectively integrate all of thecustomizable earth station equipment into the customers' groundsegment network. These contracts generally have larger contract values,greater economic risks and substantive specific contractual performancerequirements due to the engineering and design complexity of suchsystems and related equipment. Progress payments received in advance bycustomers are netted against the inventories balance.

Costsfrom Ground Segment Systems, Networks and Enterprise Solutions

Costs related to our production-type contracts and our non-standard,complex production-type contracts rely on estimates based on totalexpected contract costs. We use estimates of the costs applicable tovarious elements which we believe are reasonable. Since these contractcosts depend on estimates, which are assessed continually during theterm of these contracts, costs are subject to revisions as the contractprogresses to completion. Revision in cost estimates are reflected inthe period in which they become known. In the event an estimateindicates that a loss will be incurred at completion, we record thecosts in the period identified.

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Goodwill

Goodwill represents theexcess of the purchase price over the fair value of the net assetsacquired primarily from the buyback of the minority interests ofNetSat. In accordance with SFAS No. 142, Goodwill and Other IntangibleAssets, goodwill and other indefinite life intangible assets are testedfor impairment at least annually.

In assessing goodwill, we mustmake assumptions regarding the estimated future cash flows and otherfactors to determine the fair value of our reporting units. Futureevents could cause us to conclude that impairment indicators exist andthat the goodwill associated with NetSat is impaired. Any resultingimpairment could have a material adverse effect on our financialcondition and results of operations.

Allowances for DoubtfulAccounts

We maintain allowances for doubtful accounts forestimated losses resulting from the inability of our customers to makerequired payments. We assess the customer's ability to pay basedon a number 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 MonthsEnded September 30, 2004 and 2003

Revenues from GroundSegment Systems, Networks and Enterprise Solutions.    Revenuesincreased by $4.6 million, or 26.7%, to $21.6 million for thethree months ended September 30, 2004 compared to $17.0 million for thethree months ended September 30, 2003. The increase in revenues wasprimarily the result of increased infrastructure sales in the U.S.Government and government related entities marketplace, coupled withincreased sales due to a general overall improvement in thetelecommunications industry segments we serve and the achievement ofshipment milestones associated with projects currently in progress.

Revenues from Data Communication Services.    Revenuesincreased by $0.4 million, or 12.9%, to $3.9 million for thethree months ended September 30, 2004 compared to $3.4 million for thethree months ended September 30, 2003. The increase was due to theincrease in Voice Over Internet Protocol (VOIP) minutes and the VideoBroadcast service offerings offset by a significant contract whichexpired in the three months ended September 30, 2003 for teleportservices and Internet access to South America.

Costs fromGround Segment Systems, Networks and EnterpriseSolutions.    Costs from ground segment systems, networks andenterprise solutions increased by $2.8 million, or 18.0%, to$18.1 million for the three months ended September 30, 2004 from $15.3million for the three months ended September 30, 2003. The increase wasattributable to a higher revenue base. Costs as a percentage of relatedrevenues decreased to 83.7% for the three months ended September30, 2004 from 89.9% for 

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the three months ended September 30, 2003.The decrease was mainly attributable to a non-recurring cost recoveryof $0.4 million related to a settlement with a large customer andincreased margin on revenues related to the U.S. Government andgovernment related entities projects in the three months endedSeptember 30, 2004.

Costs from Data CommunicationsServices.    Costs from data communications services wereconsistent at $3.2 million for the three months ended September 30,2004 and September 30, 2003.

Selling andMarketing.    Selling and marketing expenses remained relativelyconsistent increasing by $0.1 million, or 4.7%, to $1.2 millionfor the three months ended September 30, 2004 compared to $1.1 millionfor the three months ended September 30, 2003.

Research andDevelopment.    Research and development expenses decreased by$0.2 million, or 37.3%, to $0.3 million for the three monthsended September 30, 2004 compared to $0.5 million for the three monthsended September 30, 2003. The decrease was principally due to costsassociated with product research and development associated withprojects in process in the three months ended September 30, 2003.

General and Administrative.    General and administrativeexpenses decreased by $0.3 million, or 29.7%, to $0.6 millionfor the three months ended September 30, 2004 from $0.9 million for thethree months ended September 30, 2003. The decrease in general andadministrative expenses was primarily due to a bad debt recovery of$1.5 million in the three months ended September 30, 2004 as comparedto the $1.0 million recovery in the three months ended September 30,2003.

Interest Income.    Interest income wasconsistent at $0.1 million for the three months ended September 30,2004 and September 30, 2003.

Liquidity and CapitalResources

At September 30, 2004, we had working capital of$33.4 million, including cash and cash equivalents of $17.2 million,restricted cash of $11.9 million, net accounts receivable of $20.4million, inventories of $7.6 million, prepaid expenses and othercurrent assets of $0.6 million, offset by $19.5 million in accountspayable, $1.9 million in deferred revenues and $2.9 million in accruedexpenses and other current liabilities.

Net cash used inoperating activities during the three months ended September 30, 2004was $1.5 million, which primarily related to an increase in accountsreceivable of $4.7 million relating to the increase in revenues, anincrease in inventory of $3.7 million due to timing of shipments ofcertain jobs and a reduction in progress payments on long termcontracts, a decrease in the provision for doubtful accounts due to abad debt recovery of $1.5 million, offset by an increase in accountspayable of $4.1 million relating to the increase in revenues and thetiming of vendor payments, net income of $2.2 million, an increase indeferred revenue of $0.8 million due to timing differences betweenproject billings and revenue recognition milestones resulting fromspecific customer contracts, a decrease in prepaid expenses and othercurrent assets of $0.7 million relating to the collection of a leasereceivable, and a non-cash item representing depreciation andamortization expense of $0.7 million primarily related to the networkoperations center and satellite earth station equipment.

Netcash used in investing activities during the three months endedSeptember 30, 2004 was $10.6 million, which primarily related to anincrease in restricted cash of $10.0 million based on certificates ofdeposit issued as collateral for performance and payment guaranteesmainly attributable to two significant contracts with the Ministry ofCommunication of the Islamic Transitional State of Afghanistan and thepurchase of $0.6 million of fixed assets for our network operationscenter.

Net cash provided by financing activities during thethree months ended September 30, 2004 was $1.1 million which related to$1.0 million of proceeds from the exercise of warrants and $0.1 millionof proceeds from the exercise of stock options.

We have a creditagreement in place which provides for a working capital credit facilityof up to $16.5 million, which expires in October 2005. We will beadvanced up to 80% of eligible accounts receivable and100% of unrestricted cash and cash equivalents at the bank. Theline of credit bears 

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interest at the greater of 6.0% or theprime rate plus 1.5% per annum, and is collateralized by a firstsecurity interest on all of our personal property. The credit agreementallows us to borrow and apply letters of credit against theavailability under each 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 atSeptember 30, 2004. As of September 30, 2004, no borrowings wereoutstanding under this credit facility, however, there were standbyletters of credit of approximately $10.5 million, which were appliedagainst and reduced the amounts available under this creditfacility.

We lease satellite space segment services and otherequipment under various operating lease agreements, which expire invarious years through 2009. Future minimum lease payments due on theseleases through September 30, 2005 are approximately $8.1 million.

At September 30, 2004 we had contractual obligations and commercialcommitments as follows (in thousands):

|                                |  |                      |        |                 |  |           |        |           |  |              |        |        |  |        |        |        |  |        |                                                                                 |        |  |  |
|--------------------------------|--|----------------------|--------|-----------------|--|-----------|--------|-----------|--|--------------|--------|--------|--|--------|--------|--------|--|--------|---------------------------------------------------------------------------------|--------|--|--|
|                           |  | PaymentsDue byPeriod |
|                           |  |                 |        |            |  |      |        |      |  |         |
|                           |  | Total                |        | Lessthan 1 year |  | 1-3 years |        | 4-5 years |  | After 5years |
| **ContractualObligations**     |  |                 |   |            |  |      |   |      |  |         |   |   |  |   |   |   |  |   |                                                                            |   |
| Operatingleases                |  | $                    | 21,321 |            |  | $         | 8,061  |      |  | $            | 11,110 |   |  | $      | 2,150  |   |  | $      |       —       |   |
| Totalcontractualobligations    |  | $                    | 21,321 |            |  | $         | 8,061  |      |  | $            | 11,110 |   |  | $      | 2,150  |   |  | $      |       —       |   |
| **OtherCommercialCommitments** |  |                 |   |            |  |      |   |      |  |         |   |   |  |   |   |   |  |   |                                                                            |   |
| Standbyletters ofcredit        |  | $                    | 10,536 |            |  | $         | 2,865  |      |  | $            | 6,205  |   |  | $      | 1,466  |   |  | $      |       —       |   |
| Totalcommercialcommitments     |  | $                    | 10,536 |            |  | $         | 2,865  |      |  | $            | 6,205  |   |  | $      | 1,466  |   |  | $      |       —       |   |
|                                |

OnNovember 7, 2001, the Board of Directors authorized a stock repurchaseprogram whereby we can repurchase up to $2.0 million of our outstandingstock, representing approximately 3.7% of the total sharesoutstanding on that date. Since November 2001, we have repurchased anaggregate of 317,606 shares for approximately $1.7 million. The timing,price, quantity and manner of future purchases will be at thediscretion of management, depending on market conditions and otherfactors, subject to compliance with the applicable securities laws.

We expect that our cash and working capital requirements foroperating activities will increase as we continue to implement ourbusiness strategy. 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.

NetSat has had, and we expect it will continue tohave, working capital and additional capital expenditure requirements,which have, and may continue to put increased pressure on our capitalresources.

Our future capital requirements will depend upon manyfactors, including the success of our marketing efforts in the groundsegment systems, networks and data communications services business,the nature and timing of customer orders and the level of capitalrequirements related to the expansion of our service offerings. Basedon current plans, we believe that our existing capital resources willbe sufficient to meet working capital requirements at least throughSeptember 30, 2005. However, we cannot assure you that there will be nounforeseen events or circumstances that would consume availableresources significantly before that time. For example, future eventsoccurring in response to the hostilities in Iraq and Afghanistan, or inconnection with a war, including, without limitation, future terroristattacks against the United States or its allies or military or trade ortravel disruptions impacting our ability to sell and market ourproducts and services in the United States and internationally mayimpact our results of operations. In particular, we currently have twosignificant contracts with the Ministry of Communication of the IslamicTransitional State of Afghanistan. Unexpected events negativelyimpacting international commerce, including additional conflicts in theMiddle East, could defer our ability to close contracts withinternational customers. Additional funds may not be available whenneeded and, even if available, additional funds may be raised throughfinancing arrangements and/or the issuance of preferred or common stockor convertible securities on 

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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, research and developmentactivities and reductions in headcount. We cannot assure you thatadditional financing will be available to us on acceptable terms, or atall.

Risk Factors

We have a history of operatinglosses and negative cash flow and our losses may continue.

Although, recently we have had profitable quarters, we have incurredsignificant net losses since we began operating in August 1994. Weincurred net losses of $1.3 million during the fiscal year ended June30, 2004, $19.6 million during the fiscal year ended June 30, 2003, and$17.3 million during the fiscal year ended June 30, 2002. As ofSeptember 30, 2004 our accumulated deficit was $73.0 million. Weanticipate that we may continue to incur net losses, in any particularquarter, due to the timing of significant projects even if we achieveprofitability in the fiscal year ending June 30, 2005. Our ability toachieve and maintain profitability will depend upon our ability togenerate significant revenues through new profitable customer contractsand the expansion of our existing products and services, including ourdata communications services. We cannot assure you that we will be ableto obtain new profitable customer contracts or generate significantadditional revenues from those contracts or any new products orservices that we introduce. Even if we become profitable, we may notsustain or increase our profits on a quarterly or annual basis in thefuture.

Since sales of satellite communications equipment aredependent on the growth of communications networks, if market demandfor these networks declines, our revenue and profitability are likelyto decline.

We derive, and expect to continue to derive, asignificant amount of revenues from the sale of satellite groundsegment systems and networks. If the long-term growth in demand forcommunications networks does not continue to return from recentdepressed levels, the demand for our satellite ground segment systemsand networks may decline or grow more slowly than we expect. As aresult, we may not be able to grow our business, our revenues maydecline from current levels and our results of operations may beharmed. The demand for communications networks and the products used inthese networks is affected by various factors, many of which are beyondour control. For example, the uncertain general economic conditionshave affected the overall rate of capital spending by many of ourcustomers. Also, many companies have found it difficult to raisecapital to finish building their communications networks and,therefore, have placed fewer orders with our customers. 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.

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 United Statesand 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. We presently conduct ourinternational sales in the following geographic areas: Africa, the AsiaPacific Region, Central and South America, Eastern and Central Europeand the Middle East. There are a number of risks inherent in conductingour 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; |

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|              |                                                                                                                 |
|--------------|-----------------------------------------------------------------------------------------------------------------|
| •  | changes inregulatory requirements could restrict our ability to deliver servicesto our international 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; |

|              |                                                                            |
|--------------|----------------------------------------------------------------------------|
| •  | potentially adverse taxes could adverselyaffect our results of operations; |

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

|              |                                                                                                 |
|--------------|-------------------------------------------------------------------------------------------------|
| •  | difficulties in collecting accountsreceivable could adversely affect our results of operations. |

These and other risks could impede our ability to manage ourinternational operations effectively, limit the future growth of ourbusiness, increase our costs and require significant managementattention.

If NetSat does not execute its businessstrategy or if the market for its services fails to develop or developsmore slowly than it expects, our results of operations will beharmed.

NetSat's future revenues and results ofoperations are dependent on its execution of its business strategy anddevelopment of the market for its current and future services. Despitethe settlement agreements which modified and reduced our satellitebandwidth obligations, we cannot assure you that the transponder spacewill be efficiently and substantially utilized or that an increase inorders will be realized. NetSat has had, and we expect will continue tohave, cash requirements, which have and will decrease our cashresources. If NetSat does not efficiently and substantially utilize itstransponder space capacity and increase its level of orders, its cashrequirements may increase and our results of operations will beharmed.

You should not rely on our quarterly operating resultsas an indication of our future results because they are subject tosignificant fluctuations, and if we fail to meet the expectations ofpublic market analysts or investors, our stock price could declinesignificantly.

Our future revenues and results of operationsmay significantly fluctuate due to a combination of factors,including:

|              |                                                          |
|--------------|----------------------------------------------------------|
| •  | delays and/or a decrease inthe booking of new contracts; |

|              |                                                                                                                         |
|--------------|-------------------------------------------------------------------------------------------------------------------------|
| •  | generalpolitical and economic conditions in the United States and abroad,including hostilities in Iraq and Afghanistan; |

|              |                                                                       |
|--------------|-----------------------------------------------------------------------|
| •  | the length of time needed to initiate andcomplete customer contracts; |

|              |                                                                     |
|--------------|---------------------------------------------------------------------|
| •  | thedemand for and acceptance of our existing products and services; |

|              |                                                                                                                                      |
|--------------|--------------------------------------------------------------------------------------------------------------------------------------|
| •  | the cost of providing our products andservices, including the ability to ship and install our products andservices in hostile areas; |

|              |                                                  |
|--------------|--------------------------------------------------|
| •  | the cost ofperformance on fixed price contracts; |

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|              |                                                |
|--------------|------------------------------------------------|
| •  | marketacceptance of new products and services; |

|              |                                                                                                         |
|--------------|---------------------------------------------------------------------------------------------------------|
| •  | the mix of revenue between our standardproducts, custom-built products and our communications services; |

|              |                                              |
|--------------|----------------------------------------------|
| •  | the timing of significant marketingprograms; |

|              |                                                     |
|--------------|-----------------------------------------------------|
| •  | our ability to hire andretain additional personnel; |

|              |                                    |
|--------------|------------------------------------|
| •  | thecompetition in our markets; and |

|              |                                                                                                                                                                                     |
|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | difficult global economic conditions andthe currency devaluations in international markets, which haveadversely impacted and may continue to adversely impact our quarterlyresults. |

Accordingly, you should not rely on quarter-to-quartercomparisons of our results of operations as an indication of our futureperformance. It is possible that in future periods our results ofoperations may be below expectations, which could cause the tradingprice of our common stock to decline.

Our markets are highlycompetitive and we have many established competitors, and we may losemarket share as a result.

The markets in which we operate arehighly competitive and this competition could harm our ability to sellour products and services on prices and terms favorable to us. Ourprimary competitors in the satellite ground segment systems andnetworks market generally fall into two groups: (1) system integrators,like ITT, Data Path, and Global Communication Services, and (2)equipment manufacturers who also provide integrated systems, likeAndrew Corporation, Tripoint Global, Alcatel and ND Satcom AG.

In the end-to-end satellite-based communication solutions andcommunications services markets, we compete with other satellitecommunication companies who provide similar services, like Verestar andConvergent Media Systems. In addition, we may compete with othercommunications service providers like Echostar and AT&T, andsatellite owners like Panamsat, Loral Skynet, New Skies Satellites N.V.and Intelsat. We anticipate that our competitors may develop or acquireservices that provide functionality that is similar to that provided byour services and that those services may be offered at significantlylower prices or bundled with other services. These competitors may havethe financial resources to withstand substantial price competition andmay be in a better position to endure difficult economic conditions ininternational markets and may be able to respond more quickly than wecan to new or emerging technologies and changes in customerrequirements. Moreover, many of our competitors have more extensivecustomer bases, broader customer relationships and broader industryalliances than we do that they could use to their advantage incompetitive situations.

The markets in which we operate havelimited barriers to entry, and we expect that we will face additionalcompetition from existing competitors and new market entrants in thefuture. Moreover, our current and potential competitors haveestablished or may establish strategic relationships among themselvesor with third parties to increase the ability of their products andservices to address the needs of our current and prospective customers.The potential strategic relationships of existing and new competitorsmay rapidly acquire significant market share, which would harm ourbusiness and financial condition.

If the satellitecommunications industry fails to continue to develop or new technologymakes it obsolete, our business and financial condition will beharmed.

Our business is dependent on the continued success anddevelopment of satellite communications technology, which competes withterrestrial communications transport technologies like terrestrialmicrowave, coaxial cable and fiber optic communications systems. Fiberoptic communications systems have penetrated areas in which we havetraditionally provided services. If the satellite communicationsindustry fails to continue to develop, or if any technologicaldevelopment significantly improves the cost or efficiency of competingterrestrial systems relative to satellite systems, then our businessand financial condition would be materially harmed.

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We may be unable to raise additionalfunds to meet our capital requirements in the future.

Webelieve that our available cash resources will be sufficient to meetour working capital and capital expenditure requirements throughSeptember 30, 2005. However, our future liquidity and capitalrequirements are difficult to predict, as they depend on numerousfactors, including the success of our existing product and serviceofferings, as well as competing technological and market developments.We may need to raise additional funds in order to meet additionalworking capital requirements and to support additional capitalexpenditures. Should this need arise, additional funds may not beavailable when needed and, even if additional funds are available, wemay not find the terms favorable or commercially reasonable. Ifadequate funds are unavailable, we may be required to delay, reduce oreliminate some of our operating activities, including marketingprograms and research and development programs. If we raise additionalfunds by issuing equity securities, our existing stockholders will owna smaller percentage of our capital stock and new investors may payless on average for their securities than, and could have rightssuperior to, existing stockholders.

A limited number ofcustomer contracts account for a significant portion of our revenues,and the inability to replace a key customer contract would adverselyaffect our results of operations, business and financialcondition.

We rely on a small number of customer contracts fora large portion of our revenue. Specifically, we have agreements withfive customers to provide equipment and services, from which we expectto generate a significant portion of our revenues. If any of thesecustomers is unable to implement its business plan, the market forthese customers' services declines, 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.

If ourproducts and services are not accepted in developing countries withemerging markets, our revenues will be impaired.

We anticipatethat a substantial portion of the growth in the demand for our productsand services will come from customers in developing countries due to alack of basic communications infrastructure in these countries.However, we cannot guarantee an increase in the demand for our productsand services in developing countries or that customers in thesecountries will accept our products and services at all. Our ability topenetrate emerging markets in developing countries is dependent uponvarious factors including:

|              |                                                                                                                                                                                              |
|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | the speedat which communications infrastructure, including terrestrialmicrowave, coaxial cable and fiber optic communications systems, whichcompete with satellite-based services, is built; |

|              |                                                                                                                          |
|--------------|--------------------------------------------------------------------------------------------------------------------------|
| •  | the effectiveness of our local resellersand sales representatives in marketing and selling our products andservices; and |

|              |                                                          |
|--------------|----------------------------------------------------------|
| •  | the acceptance of ourproducts and services by customers. |

If our products and servicesare not accepted, or the market potential we anticipate does notdevelop, our revenues will be impaired.

We depend upon certainkey personnel and may not be able to retain these employees.

Our future performance depends on the continued service of our keytechnical, managerial and marketing personnel; in particular, DavidHershberg, Kenneth Miller, Stephen Yablonski and Donald Woodring. Theemployment of any of our key personnel could cease at any time.

Unauthorized use of our intellectual property by third parties maydamage our business.

We regard our trademarks, trade secretsand other intellectual property as beneficial to our success.Unauthorized use of our intellectual property by third parties maydamage our business. We rely on trademark, trade secret and patentprotection and contracts, including confidentiality and 

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license agreements with our employees,customers, strategic collaborators, consultants and others, to protectour intellectual property rights. Despite our precautions, it may bepossible for third parties to obtain and use our intellectual propertywithout our authorization.

We currently have been granted threepatents in the United States, one for remote access to the Internetusing satellites, another for satellite communication with automaticfrequency control, and most recently, we have been granted a patentconcerning a monitor and control system for satellite communicationsnetworks and the like. We have two other patents pending in the UnitedStates, one for implementing facsimile and data communications usingInternet Protocols and another for a distributed satellite-basedcellular network. We currently have one Patent Cooperation Treatypatent application pending for implementing facsimile and datacommunications using Internet Protocols. We also intend to seek furtherpatents on our technology, if appropriate. We cannot assure you thatpatents will be issued for any of our pending or future patentapplications or that any claims allowed from such applications will beof sufficient scope, or be issued in all countries where our productsand services can be sold, to provide meaningful protection or anycommercial advantage to us. Also, our competitors may be able to designaround our patents. The laws of some foreign countries in which ourproducts and services are or may be developed, manufactured or sold maynot protect our products and services or intellectual property rightsto the same extent as do the laws of the United States and thus makethe possibility of piracy of our technology and products and servicesmore likely.

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 received trademark registrations for NetSat in the United States,the European Community, Russia, Singapore and Brazil. We have variousother trademarks and service marks registered or pending forregistration in the United States and in other countries and may seekregistration of other trademarks and service marks in the future. Wecannot 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 against intellectualproperty infringement claims could be time consuming and expensive, andif we are not successful, could cause substantial expenses and disruptour business.

We cannot be sure that the products, services,technologies and advertising we employ in our business do not or willnot infringe valid patents, trademarks, copyrights or otherintellectual property rights held by third parties. We may be subjectto legal proceedings and claims from time to time relating to theintellectual property of others in the ordinary course of our business.Prosecuting infringers and defending against intellectual propertyinfringement claims could be time consuming and expensive, andregardless of whether we are or are not successful, could causesubstantial expenses and disrupt our business. We may incur substantialexpenses in defending against these third party claims, regardless oftheir merit. Successful infringement claims against us may result insubstantial monetary liability and/or may materially disrupt theconduct of, or necessitate the cessation of, our business.

Wemay not be able to keep pace with technological changes, which wouldmake our products and services become non-competitive andobsolete.

The telecommunications industry, includingsatellite-based communications services, is characterized by rapidlychanging technologies, frequent new product and service introductionsand evolving industry standards. If we are unable, for technological orother reasons, to develop and introduce new products and services orenhancements to existing products and services in a timely manner or inresponse to changing market conditions or customer requirements, ourproducts and services would become non-competitive and obsolete, whichwould harm our business, results of operations and financialcondition.

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We depend on our suppliers, some ofwhich are our sole or a limited source of supply, and the loss of thesesuppliers would materially adversely affect our business, results ofoperations and financial condition.

We currently obtain most ofour critical components and services from single or limited sources andgenerally do not maintain significant inventories or have long-term orexclusive supply 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 may experiencesecurity breaches, which could disrupt our services.

Ournetwork infrastructure may be vulnerable to computer viruses,break-ins, denial of service attacks and similar disruptive problemscaused by our customers or other Internet users. Computer viruses,break-ins, denial of service attacks or other problems caused by thirdparties could lead to interruptions, delays or cessation in service toour customers. There currently is no existing technology that providesabsolute security, and the cost of minimizing these security breachescould be prohibitively expensive. We may face liability to customersfor such security breaches. Furthermore, these incidents could deterpotential customers and adversely affect existing customerrelationships.

Satellites upon which we rely may malfunction orbe damaged or lost.

The damage or loss of any of the satellitesused by us, or the temporary or permanent malfunction of any of thesatellites upon which we rely, would likely result in the interruptionof our satellite-based communications services. This interruption wouldhave a material adverse effect on our business, results of operationsand financial condition.

Risks Related to the SecuritiesMarkets and Ownership of Our Common Stock

Our stock price ishighly volatile.

From October 1, 2003 through September 30,2004, our closing stock price ranged from a low of $3.80 per share to ahigh of $7.58 per share. The market price of our common stock, likethat of the securities of many telecommunications and high technologyindustry companies, could be subject to significant fluctuations and islikely to remain volatile based on many factors, including thefollowing:

|              |                                          |
|--------------|------------------------------------------|
| •  | quarterly variationsin operatingresults; |

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

|              |                                                                                                                               |
|--------------|-------------------------------------------------------------------------------------------------------------------------------|
| •  | acceptance of satellite-basedcommunication services and Internet access services in developingcountries and emerging markets; |

|              |                                                                          |
|--------------|--------------------------------------------------------------------------|
| •  | changes in financial estimates orrecommendations by securities analysts; |

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

|              |                                                                          |
|--------------|--------------------------------------------------------------------------|
| •  | domestic and internationaleconomic factors unrelated to our performance. |

Additionally,numerous factors relating to our business may cause fluctuations ordeclines in our stock price.

The stock markets in general andthe markets for telecommunications stocks in particular, haveexperienced extreme volatility that has often been unrelated to theoperating performance of 

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particular companies. These broad marketfluctuations may adversely affect the trading price of our commonstock. Accordingly, we cannot assure you that you will be able toresell the shares of common stock at any particular price, or atall.

A third party could be prevented from acquiring shares ofour stock at a premium to the market price because of our anti-takeoverprovisions.

Various provisions with respect to votes in theelection of directors, special meetings of stockholders, and advancenotice requirements for stockholder proposals and director nominationsof our amended and restated certificate of incorporation, bylaws andSection 203 of the General Corporation Law of the State of Delawarecould make it more difficult for a third party to acquire us, even ifdoing so might be beneficial to our stockholders. In addition, we havea poison pill in place and employment provisions with our seniorexecutives that have change of control provisions that could make anacquisition of us by a third party more difficult.

RisksRelated to Government Approvals

We are subject to manygovernment regulations, and failure to comply with them will harm ourbusiness.

Operations and Use of Satellites

We aresubject to various federal laws and regulations, which may havenegative effects on our business. We operate FCC licensed earthstations in Hauppauge, New York, subject to the Communications Act of1934, as amended (the "FCC Act"), and therules and regulations of FCC. Pursuant to the FCC Act and rules, wehave obtained and are required to maintain radio transmission licensesfrom the FCC for both domestic and foreign operations of our earthstations. We have also obtained and are required to maintainauthorization issued under Section 214 of the FCC Act to act as atelecommunications carrier, which authorization also extends to NetSat.These licenses should be renewed by the FCC in the normal course aslong as we remain in compliance with FCC rules and regulations.However, we cannot guarantee that the FCC will grant additionallicenses when our existing licenses expire, nor are we assured that theFCC will not adopt new or modified technical requirements that willrequire us to incur expenditures to modify or upgrade our equipment asa condition of retaining our licenses. We are also required to complywith FCC regulations regarding the exposure of humans to radiofrequency radiation from our earth stations. These regulations, as wellas local land use regulations, restrict our freedom to choose where tolocate our earth stations. In addition, prior to a third partyacquisition of us, we would need to seek approval from the FCC totransfer the radio transmission licenses we have obtained to the thirdparty upon the consummation of the acquisition. However, we cannotassure you that the FCC will permit the transfer of these licenses.These approvals may make it more difficult for a third party to acquireus.

Foreign Ownership

We may, in the future, berequired to seek FCC approval if foreign ownership of our stock exceedsthe specified criteria. Failure to comply with these policies couldresult in an order to divest the offending foreign ownership, fines,denial of license renewal, and/or license revocation proceedingsagainst the licensee by the FCC.

Foreign Regulations

Regulatory schemes in countries in which we may seek to provide oursatellite-delivered data communications services may impose impedimentson our operations. Some countries in which we intend to operate havetelecommunications laws and regulations that do not currentlycontemplate technical advances in telecommunications technology likeInternet/intranet transmission by satellite. We cannot assure you thatthe present regulatory environment in any of those countries will notbe changed in a manner, which may have a material adverse impact on ourbusiness. Either we or our 

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local partners typically must obtainauthorization for each country in which we provide oursatellite-delivered data communications services. The regulatoryschemes in each country are different, and thus there may be instancesof noncompliance of which we are not aware. We cannot assure you thatour licenses and approvals are or will remain sufficient in the view offoreign regulatory authorities, or that necessary licenses andapprovals 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.

Regulation ofthe Internet

Due to the increasing popularity and use of theInternet, it is possible that a number of laws and regulations may beadopted at the local, national or international levels with respect tothe Internet, 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; for example, privacy regulations in 35countries in Europe and content restrictions in countries such as thePeople's Republic of China. To the extent that we provide contentas a part of our Internet services, it will be subject to lawsregulating content. Moreover, the adoption of laws or regulations maydecrease the growth of the Internet, which could in turn decrease thedemand for our Internet services or increase our cost of doing businessor in some other manner have a material adverse effect on our business,operating results and financial condition. In addition, theapplicability of existing laws governing issues including propertyownership, copyrights and other intellectual property issues, taxation,libel, court jurisdiction and personal privacy to the Internet isuncertain. The vast majority of these laws were adopted prior to theadvent of the Internet and related technologies and, as a result, donot contemplate or address the unique issues of the Internet andrelated technologies. Changes to these laws intended to address theseissues, 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; and 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, andcommunications services outside the United States is subject tocompliance with the regulations of the United States Export

25

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Administration and, in certaincircumstances, with International Traffic in Arms regulations. Theabsence of comparable restrictions on competitors in other countriesmay adversely affect our competitive position. In addition, in order toship our products into and implement our services in some countries,the products must satisfy the technical requirements of that particularcountry. If we were unable to comply with such requirements withrespect to a significant quantity of our products, our sales in thosecountries could be restricted, which could have a material adverseeffect on our business, results of operations and financialcondition.

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 to 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. As of September 30, 2004 we had one futurecontract of approximately $1.3 million to purchase Euros.

Ourresults of operations and cash flows are subject to fluctuations due tochanges in interest rates primarily from our investment of availablecash balances in money market funds with portfolios of investment gradecorporate and government securities. Under our current positions, we donot use interest rate derivative instruments to manage exposure tointerest rate changes.

Item 4.   Controls andProcedures

Quarterly Evaluation of the Company'sDisclosure Controls and Internal Controls.

|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|-----------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (a)  | As of the end of the period covered by thisQuarterly Report on Form 10-Q, an evaluation was carried out under thesupervision and with the participation of senior management, includingour Chief Executive Officer and Chief Financial Officer, of theeffectiveness of the design and operation of our disclosure controlsand procedures (as defined in Rules 13a- 14(c) and 15d- 14(c) under theSecurities Exchange Act of 1934, as amended)**.** Based upon thatevaluation, our Chief Executive Officer and Chief Financial Officerconcluded that our disclosure controls and procedures are effective forgathering, analyzing and disclosing the information that the Company isrequired to disclose in reports filed under the Securities Exchange Actof 1934, as amended. |

|           |                                                                                                                                                                                                                                                                                                                                                                                                       |
|-----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b)  | There have been nosignificant changes in the Company's internal controls overfinancial reporting (as defined in Exchange Act Rule 13a-15(f) of theSecurities Exchange Act of 1934, as amended) or in other factors duringthe fiscal quarter ended September 30, 2004 that materially affected,or are reasonably likely to materially affect, the Company'sinternal controls over financial reporting. |

Part II —Other Information

Item 1.    Legal Proceedings

None

Item 2.    Unregistered Sales ofEquity Securities and Use of Proceeds

None

Item 3.    Defaults Upon Senior Securities

None

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Item 4.    Submission of Mattersto a Vote of Security Holders

None

Item5.    Other Information

None

Item6.    Exhibits

Index to Exhibits:

|            |  |                                                                                                                                                  |  |  |  |  |
|------------|--|--------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| ExhibitNo. |  |                                                                                                                                             |
| 31.1       |  | Chief Executive OfficerCertification required by Rules 13a-14 and 15d-14 under the SecuritiesExchange Act of 1934, as amended (filedherewith).   |
| 31.2       |  | Chief Financial OfficerCertification required by Rules 13a- 14 and 15d- 14 under theSecurities Exchange Act of 1934, as amended (filedherewith). |
| 32         |  | Certification Pursuant to 18U.S.C. Section 1350, as adopted pursuant to Section 906 of theSarbanes-Oxley Act of 2002 (filedherewith).            |
|            |

27

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934,the Registrant has duly caused this report to be signed on its behalfby the undersigned thereunto duly authorized.

|                        |  |                                                                                                                                                              |  |                                                                                                                  |  |  |  |  |  |  |
|------------------------|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------|--|------------------------------------------------------------------------------------------------------------------|--|--|--|--|--|--|
|                   |  | **GLOBECOMMSYSTEMSINC.**                    (Registrant) |
| Date: November 15,2004 |  |                                                                                                                                                         |  | /s/  DAVID E.HERSHBERG                                                                                 |
|                   |  |                                                                                                                                                         |  | David E.Hershberg Chairman of the Board and Chief ExecutiveOfficer (Principal Executive Officer)                 |
| Date: November 15,2004 |  |                                                                                                                                                         |  | /s/  ANDREW C. MELFI                                                                                   |
|                   |  |                                                                                                                                                         |  | Andrew C. Melfi Vice President, ChiefFinancial Officer and Treasurer (Principal Financial andAccounting Officer) |
|                        |

28

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Index toExhibits:

|            |  |                                                                                                                                                  |  |  |  |  |
|------------|--|--------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| ExhibitNo. |  |                                                                                                                                             |
| 31.1       |  | ChiefExecutive Officer Certification required by Rules 13a-14 and 15d-14under the Securities Exchange Act of 1934, as amended (filedherewith).   |
| 31.2       |  | Chief Financial OfficerCertification required by Rules 13a- 14 and 15d- 14 under theSecurities Exchange Act of 1934, as amended (filedherewith). |
| 32         |  | Certification Pursuant to 18U.S.C. Section 1350, as adopted pursuant to Section 906 of theSarbanes-Oxley Act of 2002 (filedherewith).            |
|            |

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