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UNITEDSTATESSECURITIES AND EXCHANGECOMMISSIONWASHINGTON, D.C.20549

FORM10-Q

(MARKONE)

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

For the quarterly period endedMarch  31,2006

OR

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

For the transition period from__________ to __________

Commission file number:000-22839

Globecomm SystemsInc.

(Exact name of Registrant asspecified in itscharter)

|                                                                       |  |                                               |  |  |  |  |
|-----------------------------------------------------------------------|--|-----------------------------------------------|--|--|--|--|
| Delaware(State or other jurisdiction of incorporation ororganization) |  | 11-3225567 (I.R.S.Employer IdentificationNo.) |
| 45 Oser Avenue,Hauppauge, NY (Address of principal executiveoffices)  |  | 11788 (ZipCode)                               |
|                                                                       |

Registrant’s telephonenumber, including area code: (631) 231-9800

Indicate by checkmark whether the registrant (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months (or for such shorter period that theRegistrant was required to file such reports), and (2) has been subjectto such filing requirements for the past 90 days. Yes [X]      No [    ]

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

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

As ofMay  4,  2006, there were 15,186,373 shares of theRegistrant’s common stock, $0.001 par value,outstanding.

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GLOBECOMM SYSTEMSINC.

Index to the March  31,  2006 Form10-Q

|                                    |  |                                                                                                                                                   |  |        |    |        |  |  |  |  |
|------------------------------------|--|---------------------------------------------------------------------------------------------------------------------------------------------------|--|--------|----|--------|--|--|--|--|
|                               |  |                                                                                                                                              |  | Page   |
| PartI — FinancialInformation |
| Item1.                             |  | FinancialStatements                                                                                                                               |  |   | 3  |   |
|                               |  | Consolidated BalanceSheets — As of March 31, 2006 (unaudited)    and June 30,2005                                       |  |   | 3  |   |
|                               |  | ConsolidatedStatements of Operations (unaudited) —     For the threeand nine months ended March 31, 2006 and2005        |  |   | 4  |   |
|                               |  | ConsolidatedStatement of Changes in Stockholders’ Equity (unaudited)—     For the nine months ended March 31,2006 |  |   | 5  |   |
|                               |  | ConsolidatedStatements of Cash Flows (unaudited) —     For the ninemonths ended March 31, 2006 and2005                  |  |   | 6  |   |
|                               |  | Notes toConsolidated Financial Statements(unaudited)                                                                                              |  |   | 7  |   |
| Item2.                             |  | Management's Discussion and Analysis of FinancialCondition     and Results ofOperations                                       |  |   | 12 |   |
| Item3.                             |  | Quantitative and Qualitative Disclosures about MarketRisk                                                                                         |  |   | 17 |   |
| Item 4.                            |  | ControlsandProcedures                                                                                                                             |  |   | 18 |   |
| PartII — Other Information   |
| Item1.                             |  | LegalProceedings                                                                                                                                  |  |   | 19 |   |
| Item1A.                            |  | Risk Factors                                                                                                                                      |  |   | 19 |   |
| Item2.                             |  | Unregistered Sales of Equity Securities and Use ofProceeds                                                                                        |  |   | 27 |   |
| Item3.                             |  | Defaults Upon SeniorSecurities                                                                                                                    |  |   | 27 |   |
| Item4.                             |  | Submission of Matters to a Vote of SecurityHolders                                                                                                |  |   | 27 |   |
| Item 5.                            |  | OtherInformation                                                                                                                                  |  |   | 27 |   |
| Item6.                             |  | Exhibits                                                                                                                                          |  |   | 27 |   |
|                               |  | Signatures                                                                                                                                        |  |   | 28 |   |
|                                    |

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PART I —FINANCIAL INFORMATION

Item 1. Financial Statements

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

|                                                                                                                                         |  |              |         |             |  |        |         |         |  |  |
|-----------------------------------------------------------------------------------------------------------------------------------------|--|--------------|---------|-------------|--|--------|---------|---------|--|--|
|                                                                                                                                    |  | March31,2006 |         | June30,2005 |
|                                                                                                                                    |  | (Unaudited)  |         |        |
| Assets                                                                                                                                  |  |         |    |        |  |   |    |    |
| Currentassets:                                                                                                                          |  |         |    |        |  |   |    |    |
| Cash and cashequivalents                                                                                                                |  | $            | 25,680  |        |  | $      | 25,609  |    |
| Accountsreceivable,net                                                                                                                  |  |         | 21,779  |        |  |   | 22,700  |    |
| Inventories                                                                                                                             |  |         | 16,872  |        |  |   | 12,886  |    |
| Prepaidexpenses and other currentassets                                                                                                 |  |         | 984     |        |  |   | 858     |    |
| Deferredincometaxes                                                                                                                     |  |         | 38      |        |  |   | 38      |    |
| Totalcurrent assets                                                                                                                     |  |         | 65,353  |        |  |   | 62,091  |    |
| Fixedassets,net                                                                                                                         |  |         | 15,091  |        |  |   | 16,050  |    |
| Goodwill                                                                                                                                |  |         | 7,204   |        |  |   | 7,204   |    |
| Otherassets                                                                                                                             |  |         | 960     |        |  |   | 1,033   |    |
| Totalassets                                                                                                                             |  | $            | 88,608  |        |  | $      | 86,378  |    |
| Liabilitiesand Stockholders'Equity                                                                                                      |  |         |    |        |  |   |    |    |
| Currentliabilities:                                                                                                                     |  |         |    |        |  |   |    |    |
| Accountspayable                                                                                                                         |  | $            | 15,152  |        |  | $      | 15,550  |    |
| Deferredrevenues                                                                                                                        |  |         | 2,966   |        |  |   | 5,563   |    |
| Accruedpayroll and related fringebenefits                                                                                               |  |         | 1,610   |        |  |   | 1,671   |    |
| Otheraccruedexpenses                                                                                                                    |  |         | 2,470   |        |  |   | 2,471   |    |
| Deferredliabilities                                                                                                                     |  |         | 316     |        |  |   | 316     |    |
| Totalcurrentliabilities                                                                                                                 |  |         | 22,514  |        |  |   | 25,571  |    |
| Deferredliabilities, less currentportion                                                                                                |  |         | 432     |        |  |   | 670     |    |
| Commitmentsandcontingencies                                                                                                             |  |         |    |        |  |   |    |    |
| Stockholders’equity:                                                                                                              |  |         |    |        |  |   |    |    |
| Series A JuniorParticipating, shares authorized, issued and outstanding: none atMarch  31,  2006 and June  30,  2005                    |  |         | — |        |  |   | — |    |
| Commonstock, $.001 par value, 50,000,000 shares authorized, shares issued:15,637,824 at March  31,  2006 and 15,103,587 atJune  30,2005 |  |         | 16      |        |  |   | 15      |    |
| Additional paid-incapital                                                                                                               |  |         | 135,543 |        |  |   | 133,003 |    |
| Accumulateddeficit                                                                                                                      |  |         | (67,395 | )      |  |   | (70,384 | )  |
| Accumulatedother comprehensiveincome                                                                                                    |  |         | 279     |        |  |   | 284     |    |
| Treasurystock, at cost, 465,351 shares at March  31,  2006 andJune  30,2005                                                             |  |         | (2,781  | )      |  |   | (2,781  | )  |
| Totalstockholders’equity                                                                                                          |  |         | 65,662  |        |  |   | 60,137  |    |
| Totalliabilities and stockholders'equity                                                                                                |  | $            | 88,608  |        |  | $      | 86,378  |    |
|                                                                                                                                         |

Seeaccompanying notes.

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

|                                                                                      |  |                   |         |                  |  |              |         |               |  |        |         |        |  |        |         |        |  |  |
|--------------------------------------------------------------------------------------|--|-------------------|---------|------------------|--|--------------|---------|---------------|--|--------|---------|--------|--|--------|---------|--------|--|--|
|                                                                                 |  | ThreeMonths Ended |         | Nine MonthsEnded |
|                                                                                 |  | March31,2006      |         | March 31,2005    |  | March31,2006 |         | March 31,2005 |
| Revenuesfrom ground segment systems, networks and enterprisesolutions                |  | $                 | 23,735  |             |  | $            | 23,443  |          |  | $      | 69,358  |   |  | $      | 69,722  |   |
| Revenuesfrom data communicationsservices                                             |  |              | 7,306   |             |  |         | 4,741   |          |  |   | 21,171  |   |  |   | 13,149  |   |
| Totalrevenues                                                                        |  |              | 31,041  |             |  |         | 28,184  |          |  |   | 90,529  |   |  |   | 82,871  |   |
| Costsand operatingexpenses:                                                          |  |              |    |             |  |         |    |          |  |   |    |   |  |   |    |   |
| Costsfrom ground segment systems, networks and enterprisesolutions                   |  |              | 19,616  |             |  |         | 19,520  |          |  |   | 57,842  |   |  |   | 58,595  |   |
| Costsfrom data communicationsservices                                                |  |              | 5,873   |             |  |         | 4,186   |          |  |   | 17,584  |   |  |   | 11,094  |   |
| Sellingandmarketing                                                                  |  |              | 1,871   |             |  |         | 1,476   |          |  |   | 5,000   |   |  |   | 4,028   |   |
| Researchanddevelopment                                                               |  |              | 268     |             |  |         | 231     |          |  |   | 538     |   |  |   | 703     |   |
| Generalandadministrative                                                             |  |              | 2,379   |             |  |         | 2,463   |          |  |   | 7,187   |   |  |   | 5,165   |   |
| Totalcosts and operatingexpenses                                                     |  |              | 30,007  |             |  |         | 27,876  |          |  |   | 88,151  |   |  |   | 79,585  |   |
| Incomefromoperations                                                                 |  |              | 1,034   |             |  |         | 308     |          |  |   | 2,378   |   |  |   | 3,286   |   |
| Interestincome                                                                       |  |              | 247     |             |  |         | 121     |          |  |   | 703     |   |  |   | 286     |   |
| Gainon sale ofinvestment                                                             |  |              | — |             |  |         | — |          |  |   | — |   |  |   | 40      |   |
| Gainon sale of available-for-salesecurities                                          |  |              | — |             |  |         | 132     |          |  |   | — |   |  |   | 132     |   |
| Incomebefore incometaxes                                                             |  |              | 1,281   |             |  |         | 561     |          |  |   | 3,081   |   |  |   | 3,744   |   |
| Provisionfor incometaxes                                                             |  |              | 42      |             |  |         | — |          |  |   | 92      |   |  |   | — |   |
| Netincome                                                                            |  | $                 | 1,239   |             |  | $            | 561     |          |  | $      | 2,989   |   |  | $      | 3,744   |   |
| Basicnet income per commonshare                                                      |  | $                 | 0.08    |             |  | $            | 0.04    |          |  | $      | 0.20    |   |  | $      | 0.26    |   |
| Dilutednet income per commonshare                                                    |  | $                 | 0.08    |             |  | $            | 0.04    |          |  | $      | 0.19    |   |  | $      | 0.25    |   |
| Weighted-averageshares used in the calculation of basic net income per commonshare   |  |              | 15,098  |             |  |         | 14,517  |          |  |   | 14,940  |   |  |   | 14,363  |   |
| Weighted-averageshares used in the calculation of diluted net income per commonshare |  |              | 15,682  |             |  |         | 15,143  |          |  |   | 15,547  |   |  |   | 14,938  |   |
|                                                                                      |

Seeaccompanying notes.

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GLOBECOMM SYSTEMS INC.CONSOLIDATEDSTATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITYFOR THENINE MONTHS ENDED MARCH 31, 2006(Inthousands)(Unaudited)

|                                       |  |                                     |        |                          |  |                    |        |                                           |  |               |         |                          |  |        |         |         |  |        |        |         |  |        |        |        |  |        |        |         |  |        |        |         |  |  |
|---------------------------------------|--|-------------------------------------|--------|--------------------------|--|--------------------|--------|-------------------------------------------|--|---------------|---------|--------------------------|--|--------|---------|---------|--|--------|--------|---------|--|--------|--------|--------|--|--------|--------|---------|--|--------|--------|---------|--|--|
|                                  |  |     CommonStock |        | AdditionalPaid-inCapital |  | AccumulatedDeficit |        | AccumulatedOtherComprehensiveIncome(Loss) |  | TreasuryStock |         | TotalStockholders'Equity |
|                                  |  | Shares                              |        | Amount                   |  | Shares             |        | Amount                                    |
| Balanceat June  30,2005               |  |                                | 15,104 |                     |  | $                  | 15     |                                      |  |          | 133,003 |                     |  | $      | (70,384 | )  |  | $      | 284    |    |  |   | 465    |   |  | $      | (2,781 | )  |  | $      | 60,137 |    |
| Proceedsfrom exercise of stockoptions |  |                                | 454    |                     |  |               | 1      |                                      |  |          | 1,995   |                     |  |   |    |    |  |   |   |    |  |   |   |   |  |   |   |    |  |   | 1,996  |    |
| Proceedsfrom exercise ofwarrants      |  |                                | 80     |                     |  |               |   |                                      |  |          | 440     |                     |  |   |    |    |  |   |   |    |  |   |   |   |  |   |   |    |  |   | 440    |    |
| Issuanceof stockoptions               |  |                                |   |                     |  |               |   |                                      |  |          | 105     |                     |  |   |    |    |  |   |   |    |  |   |   |   |  |   |   |    |  |   | 105    |    |
| Comprehensiveincome:                  |  |                                |   |                     |  |               |   |                                      |  |          |    |                     |  |   |    |    |  |   |   |    |  |   |   |   |  |   |   |    |  |   |   |    |
| Netincome                             |  |                                |   |                     |  |               |   |                                      |  |          |    |                     |  |   | 2,989   |    |  |   |   |    |  |   |   |   |  |   |   |    |  |   | 2,989  |    |
| Lossfrom foreign currencytranslation  |  |                                |   |                     |  |               |   |                                      |  |          |    |                     |  |   |    |    |  |   | (5     | )  |  |   |   |   |  |   |   |    |  |   | (5     | )  |
| Totalcomprehensiveincome              |  |                                |   |                     |  |               |   |                                      |  |          |    |                     |  |   |    |    |  |   |   |    |  |   |   |   |  |   |   |    |  |   | 2,984  |    |
| Balanceat March  31,2006              |  |                                | 15,638 |                     |  | $                  | 16     |                                      |  | $             | 135,543 |                     |  | $      | (67,395 | )  |  | $      | 279    |    |  |   | 465    |   |  | $      | (2,781 | )  |  | $      | 65,662 |    |
|                                       |

Seeaccompanying notes.

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

|                                                                                  |  |                  |         |               |  |        |        |         |  |  |
|----------------------------------------------------------------------------------|--|------------------|---------|---------------|--|--------|--------|---------|--|--|
|                                                                             |  | NineMonths Ended |
|                                                                             |  | March31, 2006    |         | March 31,2005 |
| Operatingactivities:                                                             |  |             |    |          |  |   |   |    |
| Netincome                                                                        |  | $                | 2,989   |          |  | $      | 3,744  |    |
| Adjustmentsto reconcile net income to net cash used in operatingactivities:      |  |             |    |          |  |   |   |    |
| Depreciationandamortization                                                      |  |             | 2,287   |          |  |   | 2,257  |    |
| Provisionfor (recovery of) doubtfulaccounts                                      |  |             | 379     |          |  |   | (1,413 | )  |
| Changesin deferredliabilities                                                    |  |             | (238    | )        |  |   | (238   | )  |
| Stockcompensationexpense                                                         |  |             | 105     |          |  |   | 6      |    |
| Gain on sale ofavailable-for-salesecurities                                      |  |             | — |          |  |   | (132   | )  |
| Gainon sale ofinvestment                                                         |  |             | — |          |  |   | (40    | )  |
| Changesin operating assets andliabilities:                                       |  |             |    |          |  |   |   |    |
| Accountsreceivable                                                               |  |             | 526     |          |  |   | (7,664 | )  |
| Inventories                                                                      |  |             | (3,991  | )        |  |   | (5,473 | )  |
| Prepaidexpenses and other currentassets                                          |  |             | (126    | )        |  |   | 385    |    |
| Otherassets                                                                      |  |             | 73      |          |  |   | 71     |    |
| Accountspayable                                                                  |  |             | (368    | )        |  |   | 2,517  |    |
| Deferredrevenue                                                                  |  |             | (2,586  | )        |  |   | 1,343  |    |
| Accruedpayroll and related fringebenefits                                        |  |             | (61     | )        |  |   | 179    |    |
| Otheraccruedexpenses                                                             |  |             | — |          |  |   | 439    |    |
| Netcash used in operatingactivities                                              |  |             | (1,011  | )        |  |   | (4,019 | )  |
| Investingactivities:                                                             |  |             |    |          |  |   |   |    |
| Purchases of fixedassets                                                         |  |             | (1,332  | )        |  |   | (2,256 | )  |
| Restrictedcash                                                                   |  |             | — |          |  |   | (1,953 | )  |
| Proceeds fromsale of available-for-salesecurities                                |  |             | — |          |  |   | 330    |    |
| Netcash used in investing activities                                             |  |             | (1,332  | )        |  |   | (3,879 | )  |
| Financingactivities:                                                             |  |             |    |          |  |   |   |    |
| Proceeds fromexercise of stockoptions                                            |  |             | 1,996   |          |  |   | 676    |    |
| Proceeds fromexercise ofwarrants                                                 |  |             | 440     |          |  |   | 1,306  |    |
| Proceeds fromsale of common stock in connection with employee stock purchaseplan |  |             | — |          |  |   | 78     |    |
| Netcash provided by financing activities                                         |  |             | 2,436   |          |  |   | 2,060  |    |
| Effectof foreign currency translation oncash                                     |  |             | (22     | )        |  |   | 19     |    |
| Netincrease (decrease) in cash and cashequivalents                               |  |             | 71      |          |  |   | (5,819 | )  |
| Cash and cashequivalents at beginning ofperiod                                   |  |             | 25,609  |          |  |   | 28,252 |    |
| Cashand cash equivalents at end ofperiod                                         |  | $                | 25,680  |          |  | $      | 22,433 |    |
|                                                                                  |

Seeaccompanying notes.

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GLOBECOMM SYSTEMSINC.NOTES TO CONSOLIDATED FINANCIALSTATEMENTSMARCH  31,2006(Unaudited)

1.     Basis ofPresentation

The accompanying unaudited consolidated financialstatements have been prepared in accordance with accounting principlesgenerally accepted in the United States for interim financialinformation and in accordance with the instructions to Form 10-Q andArticle 10 of Regulation S-X. Accordingly, they do not include all ofthe information and footnotes required by accounting principlesgenerally accepted in the United States for complete financialstatements. In the opinion of management, all material adjustments(consisting of normal recurring adjustments) considered necessary for afair presentation of the results for such periods have been included.The consolidated balance sheet at June  30,  2005 has beenderived from the audited consolidated financial statements at that datebut does not include all of the information and footnotes required byaccounting principles generally accepted in the United States forcomplete financial statements. The results of operations for the threeand nine months ended March  31,  2006, are not necessarilyindicative of the results that may be expected for the full fiscal yearending June  30,  2006, or for any future period.

The accompanying consolidated financial statements should be read inconjunction with the audited consolidated financial statements of theCompany (as defined below) for the fiscal year ended June30,  2005 and the accompanying notes thereto contained in theCompany's Annual Report on Form 10-K, filed with the Securitiesand Exchange Commission on September  13,  2005.

Principles of Consolidation

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

Accounting Estimates

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

Revenue Recognition

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

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

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

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

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

Costs from Ground SegmentSystems, Networks and Enterprise Solutions

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

Costsfrom Data Communications Services

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

Research andDevelopment

Research and development expenditures areexpensed as incurred.

Stock-Based Compensation

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

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

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

The following table details theeffect on net income and earnings per share had stock-basedcompensation expense for the stock options been recorded in the threeand nine months ended March  31,  2005 based on thefair-value method under SFAS123.

|                                                             |  |                                |      |                               |  |        |        |         |  |  |
|-------------------------------------------------------------|--|--------------------------------|------|-------------------------------|--|--------|--------|---------|--|--|
|                                                        |  | ThreeMonthsEndedMarch 31, 2005 |      | NineMonthsEndedMarch 31, 2005 |
| Reported netincome                                          |  | $                              | 561  |                          |  |   | 3,744  |    |
| Stockcompensation expense determined under fair valuemethod |  |                           | (536 | )                        |  |   | (1,312 | )  |
| Pro-formanet income                                         |  | $                              | 25   |                          |  |   | 2,432  |    |
| Reportedbasic net income per commonshare                    |  | $                              | 0.04 |                          |  |   | 0.26   |    |
| Reporteddiluted net income per commonshare                  |  | $                              | 0.04 |                          |  |   | 0.25   |    |
| Pro-formabasic net income per commonshare                   |  | $                              | 0.00 |                          |  |   | 0.17   |    |
| Pro-formadiluted net income per commonshare                 |  | $                              | 0.00 |                          |  |   | 0.16   |    |
|                                                             |

Asof March  31,  2006, there was approximately $112,000 ofunrecognized compensation cost related to non-vested stock-basedcompensation. The cost is expected to be recognized over aweighted-average period of 3.9 years.

Goodwill and OtherIntangible Assets

Goodwill represents the excess of thepurchase price of businesses over the fair value of the identifiablenet assets acquired. In accordance with SFAS No. 142, Goodwill andOther Intangible Assets, goodwill and other indefinite life intangibleassets are no longer amortized, but instead tested for impairment atleast annually. The impairment test for goodwill uses a two-stepapproach, which is performed at the reporting unit level. Step onecompares the fair value of the reporting unit (calculated using adiscounted cash flow method) to its carrying value. If the carryingvalue exceeds the fair value, there is a potential impairment and steptwo must be performed. Step two compares the carrying value of thereporting unit’s goodwill to its implied fair value (i.e., fairvalue of the reporting unit less the fair value of the unit’sassets and liabilities, including identifiable intangible assets). Ifthe carrying value of goodwill exceeds its implied fair value, theexcess is required to be recorded as an impairment. There have been noevents during the nine months ended March  31,  2006 thatwould result in any goodwill impairment.

ComprehensiveIncome

Comprehensive income for the three and nine monthsended March  31,  2006 of approximately $1,253,000 and$2,984,000, respectively, includes a foreign currency translation gain(loss) of approximately $14,000 and ($5,000), respectively.Comprehensive income for the three and nine months ended March31,  2005 of approximately $490,000 and $3,754,000, respectively,includes a foreign currency translation (loss) gain of approximately($74,000) and $10,000, respectively, and the reversal of an unrealizedloss on available-for-sale securities of approximately $3,000 in thethree months ended March  31,  2005.

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Income Taxes

In assessingthe realizability of deferred tax assets, management considers whetherit is more likely than not that some portion or all of the deferred taxassets will be realized. The ultimate realization of the net deferredtax assets is dependent upon the generation of future taxable incomeprior to the expiration of any net operating loss carryforwards. Forthe nine months ended March  31,  2006 and the year endedJune  30,  2005, due to the uncertainty regarding theCompany’s ability to utilize its net operating losses in thefuture, the Company provided a valuation allowance against itspreviously recorded deferred tax assets except for approximately$38,000, representing state investment tax credit carryforwards thatwill be utilized to offset state capital taxes on the Company’scombined state tax return.

Product Warranties

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

Reclassifications

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

2.     Basic and Diluted Net Income Per CommonShare

The Company computes net income per share inaccordance with the provisions of SFAS No. 128, Earnings Per Share.Basic net income per common share is computed by dividing the netincome for the period by the weighted-average number of common sharesoutstanding for the period. For diluted earnings per share the weightedaverage shares include the incremental common shares issuable upon theexercise of stock options and warrants (using the treasury stockmethod). The incremental common shares for stock options and warrantsare excluded from the calculation of diluted net income per share, iftheir effect is anti-dilutive. Diluted net income per share for thethree months ended March  31,  2006 and 2005, excludes theeffect of approximately 1,945,000, and 2,580,000 stock options andwarrants in the calculation of the incremental common shares,respectively, as their effect would have been anti-dilutive. Dilutednet income per share for the nine months ended March  31,2006 and 2005, excludes the effect of approximately 1,948,000, and2,618,000 stock options and warrants in the calculation of theincremental common shares, respectively, as their effect would havebeen anti-dilutive.

3.     Inventories

Inventoriesconsist of thefollowing:

|                                  |
|----------------------------------|
|                                  |  |  |  |  |  |  |  |  |  |  |
|                             |  | March31,2006(Unaudited) |  | June30,2005 |
|                             |  | (Inthousands) |
| Raw materials and componentparts |  | $ | 128 |   |  | $ | 111 |   |
| Work-in-progress                 |  |   | 18,907 |   |  |   | 15,485 |   |
|                             |  |   | 19,035 |   |  |   | 15,596 |   |
| Lessprogresspayments             |  |   | (2,163 | )  |  |   | (2,710 | )  |
|                             |  | $ | 16,872 |   |  | $ | 12,886 |   |
|                                  |

4.    Segment Information

The Company operates through two businesssegments. Its ground segment systems, networks and enterprise solutionssegment, through Globecomm Systems Inc. and Globecomm Systems Europe

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Limited, is engaged in the design, assemblyand installation of ground segment systems and networks. Its datacommunications services segment, through GNSC, provides satellitecommunication services capabilities.

The Company'sreportable segments are business units that offer different productsand services. The reportable segments are each managed separatelybecause they provide distinct products and services.

Thefollowing is the Company’s business segment information for thethree and nine months ended March  31,  2006 and 2005 andas of March  31,  2006 and June  30,2005:

|                                                         |  |                   |         |                  |  |              |         |              |  |        |         |         |  |        |        |         |  |  |
|---------------------------------------------------------|--|-------------------|---------|------------------|--|--------------|---------|--------------|--|--------|---------|---------|--|--------|--------|---------|--|--|
|                                                    |  | ThreeMonths Ended |         | Nine MonthsEnded |
|                                                    |  | March31,2006      |         | March 31,2005    |  | March31,2006 |         | March31,2005 |
|                                                    |  | (Unaudited)       |
|                                                    |  | (Inthousands)     |
| Revenues:                                               |  |              |    |             |  |         |    |         |  |   |    |    |  |   |   |    |
| Groundsegment systems, networks and enterprisesolutions |  | $                 | 23,825  |             |  | $            | 24,011  |         |  | $      | 69,910  |    |  | $      | 70,646 |    |
| Datacommunicationsservices                              |  |              | 7,844   |             |  |         | 5,376   |         |  |   | 22,169  |    |  |   | 15,539 |    |
| Intercompanyeliminations                                |  |              | (628    | )           |  |         | (1,203  | )       |  |   | (1,550  | )  |  |   | (3,314 | )  |
| Totalrevenues                                           |  | $                 | 31,041  |             |  | $            | 28,184  |         |  | $      | 90,529  |    |  | $      | 82,871 |    |
| Income(loss) fromoperations:                            |  |              |    |             |  |         |    |         |  |   |    |    |  |   |   |    |
| Groundsegment systems, networks and enterprisesolutions |  | $                 | 528     |             |  | $            | 577     |         |  | $      | 1,449   |    |  | $      | 3,579  |    |
| Datacommunicationsservices                              |  |              | 488     |             |  |         | (275    | )       |  |   | 803     |    |  |   | (307   | )  |
| Interestincome                                          |  |              | 247     |             |  |         | 121     |         |  |   | 703     |    |  |   | 286    |    |
| Gainon sale ofinvestment                                |  |              | — |             |  |         | — |         |  |   | — |    |  |   | 40     |    |
| Gainon sale of available-for-saleSecurities             |  |              | — |             |  |         | 132     |         |  |   | — |    |  |   | 132    |    |
| Intercompanyeliminations                                |  |              | 18      |             |  |         | 6       |         |  |   | 126     |    |  |   | 14     |    |
| Incomebefore incometaxes                                |  | $                 | 1,281   |             |  | $            | 561     |         |  | $      | 3,081   |    |  | $      | 3,744  |    |
| Depreciationand amortization:                           |  |              |    |             |  |         |    |         |  |   |    |    |  |   |   |    |
| Ground segment systems,networks and enterprisesolutions |  | $                 | 313     |             |  | $            | 271     |         |  | $      | 896     |    |  | $      | 879    |    |
| Datacommunicationsservices                              |  |              | 458     |             |  |         | 503     |         |  |   | 1,445   |    |  |   | 1,392  |    |
| Intercompanyeliminations                                |  |              | (18     | )           |  |         | (6      | )       |  |   | (54     | )  |  |   | (14    | )  |
| Totaldepreciation andamortization                       |  | $                 | 753     |             |  | $            | 768     |         |  | $      | 2,287   |    |  | $      | 2,257  |    |
| Expendituresfor long-livedassets:                       |  |              |    |             |  |         |    |         |  |   |    |    |  |   |   |    |
| Groundsegment systems, networks and enterprisesolutions |  | $                 | 139     |             |  | $            | 86      |         |  | $      | 519     |    |  | $      | 279    |    |
| Datacommunicationsservices                              |  |              | 199     |             |  |         | 693     |         |  |   | 813     |    |  |   | 2,019  |    |
| Intercompanyeliminations                                |  |              | — |             |  |         | (42     | )       |  |   | — |    |  |   | (42    | )  |
| Totalexpenditures for long-livedassets                  |  | $                 | 338     |             |  | $            | 737     |         |  | $      | 1,332   |    |  | $      | 2,256  |    |
|                                                         |

|                                                         |  |                         |         |             |  |        |         |         |  |  |
|---------------------------------------------------------|--|-------------------------|---------|-------------|--|--------|---------|---------|--|--|
|                                                    |  | March31,2006(Unaudited) |         | June30,2005 |
|                                                    |  | (Inthousands)           |
| Assets:                                                 |  |                    |    |        |  |   |    |    |
| Groundsegment systems, networks and enterprisesolutions |  | $                       | 142,644 |        |  | $      | 139,117 |    |
| Datacommunicationsservices                              |  |                    | 13,943  |        |  |   | 13,712  |    |
| Intercompanyeliminations                                |  |                    | (67,979 | )      |  |   | (66,451 | )  |
| Totalassets                                             |  | $                       | 88,608  |        |  | $      | 86,378  |    |
|                                                         |

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5.     Related PartyTransaction

In January  2003, the Company entered into aletter agreement with an individual who is a former executive officerand current employee of the Company, pursuant to which the Companyconsolidated the then outstanding loans and advances receivable fromsuch individual into a promissory note of approximately $321,000. Underthe terms of the letter agreement the Company agreed to forgive theoutstanding principal and interest amounts due on the promissory notein five annual installments, so long as the former executive officerremains an employee. In March  2006, the Company forgave thethird installment of approximately $71,000. The remaining balance atMarch  31,  2006 was approximately $129,000.

Item 2.Management's Discussion and Analysis of Financial Condition andResults of Operations.

You should read the following discussionof our financial condition and results of operations with theconsolidated financial statements and related notes included elsewherein this Quarterly Report on Form 10-Q. This discussion contains, inaddition to historical information, forward-looking statements withinthe meaning of the Private Securities Litigation Reform Act of 1995,based on our current expectations, assumptions, estimates andprojections. These forward-looking statements involve risks anduncertainties. Our actual results could differ materially from thoseanticipated in these forward-looking statements as a result of certainfactors, such as, among others, uncertain demand for our services andproducts due to economic and industry-specific conditions, the risksassociated with operating in international markets and our dependenceon a limited number of contracts for a high percentage of our revenues.These risks and others are more fully described in the‘‘Risk Factors’’ section of this QuarterlyReport and in our other filings with the Securities and ExchangeCommission, including our Annual Report on Form 10-K and QuarterlyReports on Form 10-Q. We undertake no obligation to update publicly anyforward-looking statements for any reason, even if new informationbecomes available or other events occur in thefuture.

Overview

Our business is global and subject totechnological and business trends in the telecommunicationsmarketplace. It is also affected by geopolitical developments involvingareas of the world in which our customers are located, particularly indeveloping countries and areas of the world involved in armedconflicts.

Our business had been adversely affected by the globaleconomic slowdown from 2000 – 2004 and, in particular, thesignificant challenges which faced the telecommunications industryworldwide. We continue to see improvement in the segments we serve, inparticular within the U.S. Government and government related entitiesmarketplace.

Since our products and services are often sold intoareas of the world which do not have fiber optic land-based networks, asubstantial portion of our revenues are derived from, and are expectedto continue to be derived from, developing countries. These countriescarry with them more enhanced risks of doing business than in developedareas of the world, including the possibility of armed conflicts or therisk that more advanced land-based telecommunications will beimplemented over time.

Revenues related to contracts for groundsegment systems, networks and enterprise solutions and datacommunications services have been fixed-price contracts in a majorityof cases. Profitability of such contracts is subject to inherentuncertainties as to the cost of performance. In addition to possibleerrors or omissions in making initial estimates, cost overruns may beincurred as a result of unforeseen obstacles, including both physicalconditions and unexpected problems encountered in engineering designand testing. Since our business is frequently concentrated in a limitednumber of large contracts, a significant cost overrun on any contractcould have a material adverse effect on our business, financialcondition and results of operations.

Contract costs generallyinclude purchased material, direct labor, overhead and other directcosts. Anticipated contract losses are recognized, as they becomeknown. Costs from ground segment 

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systems, networks and enterprise solutionsconsist primarily of the costs of purchased materials (includingshipping and handling costs), direct labor and related overheadexpenses, project-related travel and living costs and subcontractorsalaries. Costs from data communications services consist primarily ofsatellite space segment charges, Internet connectivity fees, voicetermination costs and network operations expenses. Satellite spacesegment charges consist of the costs associated with obtainingsatellite bandwidth (the measure of capacity) used in the transmissionof services to and from the satellites leased from operators. Networkoperations expenses consist primarily of costs associated with theoperation of the Network Operations Center on a twenty-four hour a day,seven day a week basis, including personnel and related costs anddepreciation. Selling and marketing expenses consist primarily ofsalaries, travel and living costs for sales and marketing personnel.Research and development expenses consist primarily of salaries andrelated overhead expenses. General and administrative expenses consistof expenses associated with our management, finance, contract andadministrative functions.

Critical Accounting Policies

Certain of our accounting policies require judgment by management inselecting the appropriate assumptions for calculating financialestimates. By their nature, these judgments are subject to an inherentdegree of uncertainty. These judgments are based on our historicalexperience, the terms of existing contracts, our observance of trendsin the industry, information provided by our customers, and informationavailable from other outside sources, as appropriate. Actual resultsmay differ from these judgments under different assumptions orconditions. Our accounting policies that require management to applysignificant judgment include:

Revenue Recognition

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

We recognize revenue using the percentage-of-completion method ofaccounting upon the achievement of certain contractual milestones inaccordance with Statement of Position 81-1, Accounting for Performanceof Construction-Type and Certain Production-Type Contracts, for ournon-standard, complex production-type contracts for the production ofsatellite ground segment systems and equipment that are generallyintegrated into the customer’s satellite ground segment network.The equipment and systems produced in connection with these contractsare typically 

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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 customer’s 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.

The timingof our revenue recognition is primarily driven by achieving shipment,final acceptance or other contractual milestones. Project risksincluding project complexity, political and economic instability incertain regions in which we operate, export restrictions, tariffs,licenses and other trade barriers which may result in the delay of theachievement of revenue milestones. A delay in achieving a revenuemilestone may negatively impact our results ofoperations.

Costs from Ground Segment Systems,Networks and Enterprise Solutions 

Costs related to ourproduction-type contracts and our non-standard, complex production-typecontracts rely on estimates based on total expected contract costs.Typically, these contracts are fixed price projects. We use estimatesof the costs applicable to various elements which we believe arereasonable. Our estimates, are assessed continually during the term ofthese contracts and costs are subject to revisions as the contractprogresses to completion. These estimates are subjective based onmanagement assessment of project risk. These risks may include projectcomplexity and political and economic instability in certain regions inwhich we operate. Revisions in cost estimates are reflected in theperiod in which they become known. A significant revision in anestimate may negatively impact our results of operations. In the eventan estimate indicates that a loss will be incurred at completion, werecord the loss as it becomes known.

GoodwillImpairment 

In accordance with SFAS No. 142, Goodwill andOther Intangible Assets, goodwill and other indefinite life intangibleassets are no longer amortized, but instead are tested for impairmentat least annually. The impairment test for goodwill uses a two-stepapproach, which is performed at the reporting unit level. Step onecompares the fair value of the reporting unit (calculated using adiscounted cash flow method) to its carrying value. If the carryingvalue exceeds the fair value, there is a potential impairment and steptwo must be performed. Step two compares the carrying value of thereporting unit’s goodwill to its implied fair value (i.e., fairvalue of the reporting unit less the fair value of the unit’sassets and liabilities, including identifiable intangible assets). Ifthe carrying value of goodwill exceeds its implied fair value, theexcess is required to be recorded as an impairment charge. Theimpairment test is dependent upon estimated future cash flows basedupon management estimates of the data communication services segment.There have been no events during the nine months ended March31,  2006 that would result in any goodwillimpairment.

Allowances for Doubtful Accounts

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

Inventories 

Inventories consist primarilyof work-in-progress from costs incurred in connection with specificcustomer contracts, which are stated at the lower of cost or marketvalue. In assessing the realizability 

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of inventories, we are required to makeestimates of the total contract costs based on the various elements ofthe work-in-progress. It is possible that changes to these estimatescould cause a reduction in the net realizable value of ourinventories.

Results of Operations

Three and Nine Months Ended March  31,  2006and 2005

Revenues from Ground Segment Systems, Networksand Enterprise Solutions.    Revenues increased by $0.3million, or 1.2%, to $23.7  million for the three monthsended March  31,  2006 and decreased by $0.4million, or 0.5%, to $69.4  million for the nine monthsended March  31,  2006, compared to $23.4  millionand $69.7  million for the three and nine months endedMarch  31,  2005, respectively. The decrease in revenuesfor the nine months ended March  31,  2006 was primarilydue to the reduction in sales at Globecomm Systems Europe Limited.

Revenues from Data Communication Services.    Revenuesincreased by $2.6  million, or 54.1%, to $7.3million for the three months ended March  31,  2006 andincreased by $8.0  million, or 61.0%, to $21.2million for the nine months ended March  31,  2006,compared to $4.7  million and $13.1  million for the threeand nine months ended March  31,  2005, respectively. Theincrease was primarily due to the increase in voice over Internetprotocol (VoIP), and managed network service offerings. The increase inrevenue and corresponding increase in gross margin in the datacommunication services segment has been a key driver in the increase inour consolidated revenues. The future relationship between the revenuegrowth of our operating segments will depend on a variety of factors,including the timing of major contracts, which are difficult topredict.

Costs from Ground Segment Systems, Networks andEnterprise Solutions.    Costs from ground segment systems,networks and enterprise solutions increased by $0.1  million, or0.5%, to $19.6  million for the three months endedMarch  31,  2006 and decreased by $0.8  million, or1.3% to $57.8  million for the nine months endedMarch  31,  2006, compared to $19.5  million and$58.6  million for the three and nine months ended March31,  2005, respectively. Costs as a percentage of relatedrevenues decreased to 82.6% and 83.4% for the three andnine months ended March  31,  2006 compared to 83.3%and 84.0% for the three and nine months ended March31,  2005, respectively. The decrease as a percentage of saleswas mainly attributable to the higher margin on revenues related to theU.S. Government and government related entities projects in the ninemonths ended March  31,  2006. The higher margin waspartially offset by the non-recurring cost recovery related to asettlement with a large customer of $0.5  million and $0.9million for the three and nine months ended March  31,2005.

Costs from Data CommunicationsServices.    Costs from data communications services increasedby $1.7  million, or 40.3%, to $5.9  million for thethree months ended March  31,  2006 and increased by$6.5  million, or 58.5%, to $17.6  million for thenine months ended March  31,  2006, compared to $4.2million and $11.1  million for the three and nine months endedMarch  31,  2005, respectively. The increase is a result ofadditional voice termination costs for the VoIP service and spacesegment costs required for our managed network service offerings inconnection with the increase in service levels reflected in our growthin revenues.

Selling and Marketing.    Selling andmarketing expenses increased by $0.4  million, or 26.8%,to $1.9  million for the three months ended March31,  2006 and increased by $1.0  million, or 24.1%,to $5.0  million for the nine months ended March31,  2006, compared to $1.5  million and $4.0million for the three and nine months ended March  31,2005, respectively. The increase in selling and marketing costs is aresult of an increase in consulting fees and increased salary andsalary related expenses for additional marketing personnel related topenetrating existing and new markets.

Research andDevelopment.    Research and development expenses increased by$0.1  million, or 15.8%, to $0.3  million for thethree months ended March  31,  2006 and decreased by$0.2  million, or 23.5%, to $0.5  million for thenine months ended March  31,  2006, compared to $0.2million and $0.7  million for the three and nine months endedMarch  31,  2005, respectively. The decrease wasprincipally due to costs associated with product research efforts inremote video monitoring systems in the nine months ended March31,  2005, which did not reoccur in the 2006 period.

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General andAdministrative.    General and administrative expensesdecreased by $0.1  million, or 3.4%, to $2.4million for the three months ended March  31,  2006 andincreased by $2.0  million, or 39.1%, to $7.2million for the nine months ended March  31,  2006,compared to $2.5  million and $5.2  million for the threeand nine months ended March  31,  2005, respectively. Thedecrease in the three months ended March  31,  2006 wasprimarily due to termination costs incurred in the three months endedMarch  31,  2005 which did not reoccur in the 2006 period.The increase in the nine months ended March  31,  2006 wasprimarily due to a bad debt recovery of $1.5  million related toa settlement agreement reached with a customer in the three monthsended September  30,  2004, which did not reoccur in the2006 period, an increase in the provision for doubtful accounts due toincreased business levels in data communication services, compensationexpense related to the annual automatic director option grant based onthe adoption of SFAS 123R, and an increase in salary and relatedfringes due to an increase in headcount and the reinstatement of the401k match by the Company in January  2005.

InterestIncome.    Interest income increased by $0.1  million, or104.1%, to $0.2  million for the three months endedMarch  31,  2006 and increased by $0.4  million, or145.8%, to $0.7  million for the nine months endedMarch  31,  2006, compared to $0.1  million and$0.3  million for the three and nine months ended March31,  2005, respectively, as a result of increased interestrates.

Gain on Sale of Available-for-SaleSecurities.    The gain on sale of available-for-sale securitiesof $0.1  million for the three and nine months ended March31,  2005, related to the sale of an investment that resulted inproceeds of $0.3  million in the nine months ended March31,  2005.

Liquidity and Capital Resources

At March  31,  2006, we had working capital of$42.8  million, including cash and cash equivalents of$25.7  million, net accounts receivable of $21.8  million,inventories of $16.9  million, prepaid expenses and other currentassets of $1.0  million, offset by $15.2  million inaccounts payable, $3.0  million in deferred revenues and$4.4  million in accrued expenses and other currentliabilities.

Net cash used in operating activities during thenine months ended March  31,  2006 was $1.0  million,which primarily related to an increase in inventory of $4.0million due to timing of shipments of certain projects and a reductionin progress payments on long term contracts, a decrease in deferredrevenue of $2.6  million due to timing differences betweenproject billings and revenue recognition milestones resulting fromspecific customer contracts, offset by net income of $3.0million, a non-cash item representing depreciation and amortizationexpense of $2.3  million primarily related to the NetworkOperations Center and satellite earth station equipment, and a decreasein accounts receivable of $0.5  million due to the timing ofbillings and collections from customers.

Net cash used ininvesting activities during the nine months ended March31,  2006 was $1.3  million, which related to the purchaseof $1.3  million of fixed assets for our Network OperationsCenter, primarily related to the video broadcast and VoIP serviceofferings.

Net cash provided by financing activities during thenine months ended March  31,  2006 was $2.4  million,which related to $2.0  million of proceeds from the exercise ofstock options and $0.4  million of proceeds from the exercise ofwarrants.

We have a credit agreement in place which provides fora working capital credit facility of up to $20.0  million, whichexpires in November  2006. The line of credit bears interest atthe prime rate, and is collateralized by a first security interest onall of our personal property. The credit agreement allows us to borrowand apply letters of credit against the availability under the line ofcredit. In addition, the credit agreement contains certain financialand other covenants, deposit requirements, monthly reporting provisionsand other requirements, as defined in the credit agreement, with whichwe were in compliance at March  31,  2006. As ofMarch  31,  2006, no borrowings were outstanding under thiscredit facility, however, there were standby letters of credit ofapproximately $15.3  million, which were applied against andreduced the amounts available under this credit facility.

Welease satellite space segment services and other equipment undervarious operating lease agreements, which expire in various yearsthrough 2011. Future minimum lease payments due on these leases throughMarch  31,  2007 are approximately $8.5million.

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At March  31,  2006, we hadcontractual obligations and commercial commitments as follows(in  thousands):

|                        |  |        |        |                       |  |           |       |           |  |              |       |        |  |   |     |        |  |   |         |        |  |  |
|------------------------|--|--------|--------|-----------------------|--|-----------|-------|-----------|--|--------------|-------|--------|--|---|-----|--------|--|---|---------|--------|--|--|
|                   |  |   |        | PaymentsDue by Period |
| ContractualObligations |  | Total  |        | Less than 1year       |  | 1-3 years |       | 4-5 years |  | After 5years |
| Operatingleases        |  | $      | 13,849 |                  |  | $         | 8,489 |      |  | $            | 4,913 |   |  | $ | 447 |   |  | $ | — |   |
|                        |

|  |  |
|--|--|

|                             |  |                       |        |                                          |  |          |       |           |  |             |       |        |  |   |         |        |  |   |         |        |  |  |
|-----------------------------|--|-----------------------|--------|------------------------------------------|--|----------|-------|-----------|--|-------------|-------|--------|--|---|---------|--------|--|---|---------|--------|--|--|
|                        |  |                  |        | Amountof Commitment Expiration PerPeriod |
| Other CommercialCommitments |  | TotalAmountsCommitted |        | Less than 1 year                         |  | 1-3years |       | 4-5 years |  | Over 5years |
| Standby letters ofcredit    |  | $                     | 15,337 |                                     |  | $        | 6,775 |      |  | $           | 8,562 |   |  | $ | — |   |  | $ | — |   |
|                             |

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

Our future capital requirements will depend uponmany factors, including the success of our marketing efforts in theground segment systems, networks and data communications servicesbusiness, the nature and timing of customer orders and the level ofcapital requirements related to the expansion of our service offerings.Based on current plans, we believe that our existing capital resourceswill be sufficient to meet working capital requirements at leastthrough March  31,  2007. However, we cannot assure youthat there will be no unforeseen events or circumstances that wouldconsume available resources significantly before that time. Forexample, future events occurring in response to the hostilities in Iraqand Afghanistan, or in connection with any armed conflict, including,without limitation, future terrorist attacks against the United Statesor its allies or military or trade or travel disruptions impacting ourability to sell and market our products and services in the UnitedStates and internationally may impact our results of operations. Inparticular, we currently have two significant contracts with theMinistry of Communication of the Islamic Transitional State ofAfghanistan. Unexpected events negatively impacting internationalcommerce, including additional conflicts in the Middle East, coulddefer our ability to close contracts with internationalcustomers.

Additional funds may not be available when needed and,even if available, additional funds may be raised through financingarrangements and/or the issuance of preferred or common stock orconvertible securities on terms and prices significantly more favorablethan those of the currently outstanding common stock, which could havethe effect of diluting or adversely affecting the holdings or rights ofour existing stockholders. If adequate funds are unavailable, we may berequired to delay, scale back or eliminate some of our operatingactivities, including, without limitation, the timing and extent of ourmarketing programs, capital expenditures and research and developmentactivities and we may be required to reduce headcount. We cannot assureyou that additional financing will be available to us on acceptableterms, or at all.

Item 3. Quantitative and QualitativeDisclosures About Market Risk

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

Ourobjective in managing our exposure to foreign currency exchange ratefluctuations is to reduce the impact of adverse fluctuations inearnings and cash flows associated with foreign currency exchangerates. Accordingly, we may utilize from time to time foreign currencyforward contracts to hedge our exposure on firm commitments denominatedin foreign currency. At March  31,  2006, we had nooutstanding foreign exchange contracts.

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

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

Item 4. Controls and Procedures

Quarterly Evaluation of theCompany's Disclosure Controls and InternalControls.

|  |           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|--|-----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | (a)  | As of the end ofthe period covered by this Quarterly Report on Form 10-Q, an evaluationwas carried out under the supervision and with the participation ofsenior management, including our Chief Executive Officer and ChiefFinancial Officer, of the effectiveness of the design and operation ofour disclosure controls and procedures (as defined in Rules 13a-15(e)and 15d-15(e) under the Securities Exchange Act of 1934, as amended(the ‘‘Exchange Act’’)). Based upon thatevaluation, our Chief Executive Officer and Chief Financial Officerconcluded that our disclosure controls and procedures are effective toensure that information required to be disclosed in the reports thatthe Company files or submits under the Exchange Act is accumulated andcommunicated to the Company’s management, including our ChiefExecutive Officer and Chief Financial Officer, to allow timelydecisions regarding requireddisclosure. |

|  |           |                                                                                                                                                                                                                                                                                                                                                                     |
|--|-----------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | (b)  | There have been nochanges in the Company’s internal controls over financialreporting (as defined in Exchange Act Rule 13a-15(f) of the ExchangeAct) or in other factors during the fiscal quarter ended March31,  2006 that materially affected, or are reasonably likely tomaterially affect, the Company’s internal controls overfinancial reporting. |

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Part II —Other Information

Item 1. LegalProceedings

None

Item 1A. Risk Factors

A limited number of customer contracts account for asignificant portion of our revenues, and the inability to replace a keycustomer contract or the failure of the customer to implement its planswould adversely affect our results of operations, business andfinancial condition.

We rely on a small number of customercontracts for a large portion of our revenue. Specifically, we haveagreements with four customers to provide equipment and services, fromwhich we expect to generate a significant portion of our futurerevenues. We derived 26% of our revenues in the three monthsended March  31,  2006 from two customers. Also, we conducta substantial proportion of our business in developing countries. Ifany key customer is unable to implement its business plan, the marketfor these customers’ services declines, political or militaryconditions make performance impossible or if all or any of thecustomers modifies or terminates its agreement with us, and we areunable to replace these contracts, our results of operations, businessand financial condition would be materially harmed.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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If GNSC does not continue to executeits business strategy or if the market for its services fails todevelop or develops more slowly than we expect, our results ofoperations will be harmed. 

GNSC’s future revenuesand results of operations are dependent on its execution of itsbusiness strategy and development of the market for its current andfuture services. GNSC has had, and we expect will continue to have,cash requirements, which have decreased and will continue to decreaseour cash resources. If GNSC does not efficiently and substantiallyutilize its transponder space capacity and increase its level oforders, its cash requirements may increase and our results ofoperations will be harmed. In addition, significant capitalexpenditures have been required as we have built our VoIP and videobroadcast service offerings. If our VoIP and video broadcast serviceofferings are not accepted, or if the market fails to grow, we cannotassure you that we will be able to realize an appropriate return onthese capital expenditures.

In the event of a catastrophicloss affecting our operations in Hauppauge, New York our results ofoperations would be harmed.

GNSC revenues and results ofoperations are dependant on the infrastructure of the NetworkOperations Center and the International Teleport at our headquarters inHauppauge, New York. A catastrophic event to this facility or to theinfrastructure of the surrounding area would result in significantdelays in restoring a majority of the data communications servicescapabilities. These capabilities permit us to offer an integrated suiteof products and services and the incapacity of our communicationsinfrastructure would negatively impact our ability to sell our groundsegment systems and networks. This would result in the loss of revenuesand adversely affect our business, results of operations and financialcondition.

Our markets are highly competitive and we havemany established competitors, and we may lose market share as a result.

The markets in which we operate are highly competitive andthis competition could harm our ability to sell our products andservices on prices and terms favorable to us. Our primary competitorsin the satellite ground segment systems and networks market generallyfall into two groups: (1) system integrators, like ITT, Data Path, andSED Systems, and (2) equipment manufacturers which also provideintegrated systems, like General Dynamics, Andrew Corporation, Viasat,Alcatel and ND Satcom AG.

In the end-to-end satellite-basedenterprise solutions and broadcast services markets, we compete withother satellite communication companies who provide similar services,like Ascent, Globecast, and Convergent Media Systems. In addition, inmanaged network services we may compete with other communicationsservice providers like Segovia and AT&T, and satellite owners likePanamsat, Loral Skynet, New Skies Satellites N.V. and Intelsat. Weanticipate that our competitors may develop or acquire services thatprovide functionality that is similar to that provided by our servicesand that those services may be offered at significantly lower prices orbundled with other services. These competitors may have the financialresources to withstand substantial price competition, may be in abetter 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.

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

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

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

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

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

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

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

Although we have recently beenprofitable, we have incurred significant net losses in the past andcontinue to recognize negative cash flows from operations. As ofMarch  31,  2006 our accumulated deficit was $67.3million. Our ability to maintain profitability will depend upon ourability to generate significant revenues through new profitablecustomer contracts and the expansion of our existing products andservices, including our data communications services. We cannot assureyou that we will be able to obtain new profitable customer contracts orgenerate significant additional revenues from those contracts or anynew products or services that we introduce. In the past, we haveincurred significant negative cash flows, which may reoccur if ourbusiness plan is not successful. Also, if we are unable to sustain orincrease our profits on a quarterly or annual basis in the future or ifour business undergoes a period of rapid growth, our operating cashflows may be negatively impacted.

We derive a substantialportion of our revenues from fixed-price projects, under which weassume greater financial risk if we fail to accurately estimate thecosts of the projects.

We derive a substantial portion ofour revenues from fixed-price projects. We assume greater financialrisks on a fixed-price project than on a time-and-expense basedproject. If we miscalculate the resources or time we need for thesefixed-price projects, the costs of completing these projects may exceedour original estimates, which would negatively impact our results ofoperations.

Since sales of satellite communicationsequipment are dependent on the growth of communications networks, ifmarket demand for these networks declines, our revenue andprofitability are likely to decline.

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

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and networks manufacturers has increasedpricing pressures. We continue to see improvement in the segments weserve, in particular within the U.S. Government and government relatedentities marketplace, but a future reduction in opportunities from U.S.Government and government related agencies will negatively impact ourresults of operations.

We depend upon certain keypersonnel and may not be able to retain these employees. If we lose theservices of these individuals or cannot hire additional qualifiedpersonnel, our business will be harmed.

Our success alsodepends to a substantial degree on our ability to attract, motivate andretain highly-qualified personnel. There is considerable competitionfor the services of highly-qualified technical and engineeringpersonnel. We may not be able either to retain our current personnel orhire additional qualified personnel if and when needed.

Ourfuture performance depends on the continued service of our keytechnical, managerial and marketing personnel; in particular, DavidHershberg and Kenneth Miller are key to our success based upon theirindividual knowledge of the markets in which we operate. The employmentof any of our key personnel could cease at anytime.

Satellites upon which we rely may malfunction or bedamaged or lost. 

In the delivery of our datacommunications services, we lease space segment from various satellitetransponder vendors. The damage or loss of any of the satellites usedby 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 couldhave a material adverse effect on our business, results of operationsand financial condition.

We depend on our suppliers,some of which are limited sources of supply, and the loss of thesesuppliers could materially adversely affect our business, results ofoperations and financial condition.

We currently obtain mostof our critical components and services from 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 mayexperience security breaches, which could disrupt our services.

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

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

Ourbusiness is dependent on the continued success and development ofsatellite communications technology, which competes with terrestrialcommunications transport technologies like terrestrial microwave,coaxial cable and fiber optic communications systems. Fiber opticcommunications systems 

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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.

We maynot be able to keep pace with technological changes, which would makeour products and services become non-competitive and obsolete.

The telecommunications industry, including satellite-basedcommunications services, is characterized by rapidly changingtechnologies, frequent new product and service introductions andevolving 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.

We may be unable to raise additional funds tomeet our capital requirements in the future. 

We believethat our available cash resources will be sufficient to meet ourworking capital and capital expenditure requirements through at leastMarch  31,  2007. 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 or acquisition of assets or a business. Should this needarise, additional funds may not be available when needed and, even ifadditional funds are available, we may not find the terms favorable orcommercially reasonable. If adequate funds are unavailable, we may berequired to delay, scale back or eliminate some of our operatingactivities, including, without limitation, the timing and extent of ourmarketing programs, capital expenditures and research and developmentactivities and we may be required to reduce headcount. If we raiseadditional funds by issuing equity securities, our existingstockholders will own a smaller percentage of our capital stock and newinvestors may pay less on average for their securities than, and couldhave rights superior to, existing stockholders.

Unauthorizeduse of our intellectual property by third parties may damage ourbusiness.

We regard our trademarks, trade secrets and otherintellectual property as beneficial to our success. Unauthorized use ofour intellectual property by third parties may damage our business. Werely on trademark, trade secret and patent protection and contracts,including confidentiality and 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, one for satellite communication with automaticfrequency control, and one for a monitor and control system forsatellite communications networks and the like. We have two otherpatents pending in the United States, one for implementing facsimileand data communications using Internet protocols and another for adistributed satellite-based cellular network. We currently have onePatent Cooperation Treaty patent application pending for implementingfacsimile and data communications using Internet protocols. We alsointend to seek further patents on our technology, if appropriate. Wecannot assure you that patents will be issued for any of our pending orfuture patent applications or that any claims allowed from suchapplications will be of sufficient scope, or be issued in all countrieswhere our products and services can be sold, to provide meaningfulprotection or any commercial advantage to us. Also, our competitors maybe able to design around our patents. The laws of some foreigncountries in which our products and services are or may be developed,manufactured or sold may not protect our products and services orintellectual property rights to the same extent as do the laws of theUnited States and thus make the possibility of piracy of our technologyand products and services more likely.

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

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

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

Risks Related to the Securities Markets andOwnership of Our Common Stock

Our stock price isvolatile.

From April  1,  2005 throughMarch  31,  2006, our stock price ranged from a low of$5.09 per share to a high of $8.44 per share. The market price of ourcommon stock, like that of the securities of many telecommunicationsand high technology industry companies, could be subject to significantfluctuations and is likely to remain volatile based on many factors,including the following:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Risks Related to Government Approvals

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

Operations and Use ofSatellites 

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

Foreign Regulations

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

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Regulation of the Internet

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

Telecommunications Taxation, Support Requirements, and AccessCharges 

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

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

Export of TelecommunicationsEquipment 

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

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Foreign Ownership

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

Item 2. UnregisteredSales of Equity Securities and Use ofProceeds

None

Item 3. Defaults Upon SeniorSecurities

None

Item 4. Submission of Mattersto a Vote of Security Holders

None

Item 5.Other Information

None

Item 6.Exhibits

Index toExhibits:

Exhibit No.

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

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

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

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SIGNATURES

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

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

(Registrant)

|                    |  |                       |
|--------------------|--|-----------------------|
| Date:May  10, 2006 |  | /s/ DAVID E.HERSHBERG |
|                    |  |                       |

|  |  |                                                                                                 |
|--|--|-------------------------------------------------------------------------------------------------|
|  |  | David E. HershbergChairman of the Boardand Chief Executive Officer (Principal ExecutiveOfficer) |
|  |  |                                                                                                 |

|                    |  |                     |
|--------------------|--|---------------------|
| Date: May  10,2006 |  | /s/ ANDREW C. MELFI |
|                    |  |                     |

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

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Indexto Exhibits:

Exhibit No.

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

|            |                                                                                                                                                |
|------------|------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.2  | Chief Financial OfficerCertification required by Rules 13a-14 and 15d-14 under the SecuritiesExchange Act of 1934, as amended (filedherewith). |

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

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