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

FORM 10-K[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934

For the fiscal year ended June 30,2005 OR [    ] TRANSITION REPORT PURSUANT TOSECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934Commission File Number 000-22839

GLOBECOMM SYSTEMSINC.

(exact name of registrant as specified in itscharter)

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|---------------------------------------------------------------|--|-------------------------------------|--|--|--|--|
| Delaware                                                      |  | 11-3225567                          |
| (State or other jurisdiction of incorporation ororganization) |  | (I.R.S. EMPLOYER IdentificationNo.) |
| 45 OserAvenue, Hauppauge,NY                                   |  | 11788                               |
| (Address of principal executive offices)                      |  | (ZipCode)                           |
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Registrant's telephone number,including area code: (631) 231-9800

Securities registeredpursuant to Section 12(b) of the Act:

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| Titleof each class |  | Name of each exchange on whichregistered |
| None               |  | None                                     |
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Securitiesregistered pursuant to Section 12(g) of the Act:Common Stock,$.001 par value(Title of class)

Indicate by check mark whether the registrant: (1) has filed allreports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for suchshorter period that the registrant was required to file such reports),and (2) has been subject to such filing requirements for the past 90days. Yes **[X]**No **[    ]**

Indicate by a check mark if disclosure of delinquent filers pursuantto Item 405 of Regulation S-K is not contained herein, and will not becontained, to the best of registrant's knowledge, in definitiveproxy or information statements incorporated by reference in Part IIIof this Form 10-K or any amendment to this Form 10-K. **[X]**

Indicate by check mark whether the registrant is anaccelerated filer (as defined in Rule 12b-2 of the Securities ExchangeAct of 1934. Yes **[X]** No **[    ]**

Indicate by check mark whether the registrant is a shell company (asdefined by Rule  12b-2 of the Exchange Act). Yes**[    ]** No**[X]**

Based upon theclosing sale price on the Nasdaq National Market on December 31, 2004,the last business day of the registrant's most recently completedsecond fiscal quarter, the aggregate market value of theregistrant's common stock, $0.001 par value per share (the"Common Stock") held by non-affiliates of theregistrant on such date was approximately $87.2 million. For purposesof this calculation, only executive officers and directors are deemedto be the affiliates of the registrant.

As of September 7, 2005,there were 14,722,111 shares of the registrant's Common Stockoutstanding. 

DOCUMENTS INCORPORATED BY REFERENCE

TheProxy Statement of Globecomm Systems Inc. relative to the 2005 AnnualMeeting of Stockholders to be held on November 17, 2005, isincorporated by reference into Part III of this Annual Report on Form10-K.

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PARTI

Item 1. Business

Overview

Globecomm SystemsInc., or Globecomm, was incorporated in Delaware in August 1994. Weprovide end-to-end value-added satellite-based communication solutionsby leveraging our core satellite ground segment systems and networkcapabilities, with the satellite communication services capabilitiesthat are provided by our wholly-owned subsidiary, Globecomm NetworkServices Corp. ("GNSC"), formerly namedNetSat Express, Inc., or NetSat.

The solutions we offer include:satellite-based "next generation" networks,militarized commercial off the shelf products and services, voice overInternet protocol (or VoIP), video broadcast, business recovery,satellite-based terrestrial restoral, content delivery and othernetworks on a global basis. To provide these solutions, we engineer allthe necessary satellite and terrestrial facilities as well as providethe integration services required to implement those facilities. Wealso operate and maintain these communications services on an ongoingbasis. Our customers generally have network service requirements thatinclude point-to-point or point-to-multipoint connections via a hybridnetwork of satellite and terrestrial facilities. These customers arecommunications service providers, commercial enterprises, InternetService Providers, or ISPs, content providers and government andgovernment related entities. Our business is global, with much of ourrevenue derived from developing and third world countries.

Oursolutions business is built on the foundation of our core business as asupplier of ground segment systems and networks for satellite-basedcommunications. We provide these ground segment systems and networks ona contract basis. These implementations include the necessary hardwareand software to support a wide range of network applications usingsatellite, broadcast and terrestrial technologies.

**Solutionsand Products**

Our Ground Segment Systems and Networks

We design, engineer, integrate and install satellite-based groundsegment systems and network solutions for the complex and changingcommunications requirements of our customers. Our satellite groundsegment systems typically consist of earth stations and ancillarysubsystems. An earth station is an integrated system consisting ofantennas, radio signal transmitting and receiving equipment,modulation/demodulation equipment, monitor and control systems andvoice, data and video network interface equipment. Our complexcommunication network solutions may include wireless local loop,microwave links or fiber optic links for the transmission ofcommunications traffic to a central office, video broadcast systems orancillary equipment, such as generators for emergency powerrequirements. Our customizable modular earth stations may be soldseparately as stand-alone ground segment systems or may be used asbuilding blocks to be integrated into a complete ground segment systemor network. We believe that this modular approach allows us to engineerour satellite ground segment systems and networks to serveclient-specific service requirements rapidly, cost-effectively andefficiently with minimal site preparation. All of our earth stationsare configurable to conform to applicable satellite standards. We addvalue to offerings by leveraging our satellite communications systemexpertise to package highly integrated customizable system products andto design highly flexible computer-based satellite network managementsystems. The following describes our customizable system products andnetwork management system products.

Modular Building BlockEarth Station MBB 2001TM. These earth stations providepoint-to-point high-capacity data links and hubs for satellitenetworks. Generally, all electronics are housed in an indoor equipmentenclosure.

Commercial Terminal CTF 2001TM.This family of earth stations encompasses a range of generalpurpose, medium-capacity earth stations, and is principally used bycorporate, common carrier and government networks. Generally, all radiofrequency electronics are housed in weatherproof enclosures mounted onthe antenna. The satellite modem is housed in an indoor equipmentenclosure.

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Compact Earth Station CES2001TM.    We designed this family of digital earthstations to be used principally to provide limited capacity to areaswith limited or no telecommunications infrastructure. These earthstations integrate radio frequency and satellite modem components intoone antenna mounted package.

Auto-Explorer Fly-AwaySatellite Terminals.    We designed this family of fly-awaysatellite terminals for ease of operation by non-satellite personnel byincorporating automatic satellite acquisition technology. These earthterminals include an integrated electronics package designed toincorporate the radio frequency, monitor and control and satellitemodem components into an outdoor mounted package. This family ofsatellite terminals are designed for use in military tacticalenvironments and are tested and qualified for the appropriate militaryenvironmental standards.

MIL-COTS Transportable EarthStations.    We designed this family of militarizedtransportable earth stations primarily for United States andinternational government customers. This transportable system group iscomprised of transportable earth stations designed to be quicklydeployed and operated anywhere in the world in military tacticalenvironments. The latest model is a HMMWV (High-Mobility MultipurposeWheeled Vehicle) mounted satellite terminals that incorporate thelatest commercial off the shelf, or COTS, satellite equipmenttechnology that meet the stringent requirements of military tacticaloperations.

AxxSysTM NetworkManagement Systems.    We design this family of computer-basednetwork management systems for the monitor and control of satellitecommunication equipment and earth terminal networks. AxxSys basedNetwork Management Systems provide status reporting locally or remotelyand provide the ability to manage distributed satellite communicationsnetworks on a global basis. Our focus currently is on developing thenext version of AxxSys based on the ".NET"operating system for release in fiscal 2006. Network management systemsare key to simplifying operations and maintenance of satellite-basednetworks and, therefore, add value to the systems and networks weintegrate.

SpyGlass Carrier MonitoringSystems.    We designed this family of computer-basedcarrier monitoring tools for service providers who need to monitor andmanage their transmissions to ensure service reliability andavailability. Our SpyGlass family of carrier monitoring toolsintegrates with the AxxSys Network Management System to provide ease ofoperation.

Our Communications Services

We tailor ourcommunication services to meet our customers' needs by offeringstandardized services and custom-engineered solutions. Our standardizedservices may be sold separately or may be used as building blocks as apart of a custom-engineered solution. We use our expertise in satellitecommunications, Internet protocol, communications networks andinformation technology in designing our custom-engineeredsolutions.

Globally, telecommunications networks are movingrapidly toward Internet protocol-based networks and services based onthe lower cost of implementation and the flexibility these networksoffer. Satellite-based communications complement this trend as many ofthe regions in the world lack the "nextgeneration" terrestrial networks required to accommodatethe rapid and reliable transmission of the vast amounts of informationunderlying the growth in traffic. We are a network service providerthat offers "next generation" networkservices to communication service providers, ISPs, enterprises,broadcasters and governments and government related entities around theworld. We combine satellite and terrestrial communications networks toprovide customers high-speed access services to the United StatesInternet backbone, their corporate headquarters or government offices,as well as the public switched telephone network. We are a licensedinternational voice carrier and have bilateral agreements with a numberof international telecommunication operators for the origination andtermination of voice traffic. We currently have customers for which weare providing such network services in Africa, the Middle East, Centraland South America, Eastern and Central Europe and the Asia PacificRegion.

Standardized Services

SkyborneSM.    This serviceoffering provides point to multipoint content delivery of multimediacontent. Skyborne is a video, audio and data satellite solution thatserves retailers, enterprises, 

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broadcasters, and government agencies andgovernment related entities. SkyBorne's mission is to providehighly customized and cost-effective broadcast and value-addedsolutions to these market segments. There are a number of market trendsthat may require the SkyBorne solution. Certain retailers areimplementing video promotions within their retail outlets and havedeveloped cost models that are leading them to deploy nationwidedigital signage networks. Corporations are using streaming and storedvideo for training and internal communications and are finding thattheir current terrestrial infrastructures are not able to meet thedemands of video. Retailers desire customization of video and audio intheir outlets and are looking for technologies which allow increasedflexibility and customization. Training has become a more importantfocus for many enterprises, especially retailers, due to increasedrates of turnover and the quickening pace of market and technologychanges.

Access PlusTM.    This serviceoffering provides point to point and point to multipoint Internetconnectivity for ISPs, service providers, broadcast, government andenterprise customers. These services provide asymmetrical forward andreturn links optimized for Internet applications. We offer two waysatellite Internet connectivity as well as one way satellite Internetconnectivity with terrestrial return. Our Internet access services,marketed under the Access PlusTM brand name, providehigh-speed access to the United States Internet backbone. As part ofthis offering we provide the necessary satellite transmission services,terrestrial transit and routing services, earth stations andinstallation services.

VoIP Backhaul.    This serviceoffering provides backbone connectivity services for service providersin order to connect public switched telephone networks to internationallong distance carriers through a VoIP-based satellite link. This allowsservice providers overseas to contract with us to act as their gatewayto a large number of international carriers.

HostedSwitch.    This service offering provides hosted soft switchingservices for service providers in order to allow them to providecellular coverage in locations otherwise not economical to connectusing traditional terrestrial means. This allows service providersoverseas to expand GSM or CDMA networks economically, or to initiateservice in new service areas with a minimal capital outlay. Wecurrently have a patent pending for this service.

VideoBroadcast.    This service offering provides video turnaroundservice for a growing number of ethnic channels in the United Statesfor broadcasting to audiences overseas and for internationally producedchannels for broadcasting to audiences in the United States.

VSAT Services.    This service offers two way very smallaperture terminals, or VSAT, services for Internet access, voiceservices and terrestrial network restoral services. This serviceprovides the backbone to a number of our end-to-end solutions.

Field Services, Preventive Maintenance and HelpDesk.    These services are offered as part of end-to-endsolutions and as standalone services for hardware companies and serviceproviders. When sold to customers on a standalone basis, theseoutsourced services leverage the facilities and operations staff wehave in place to provide our end-to-end solutions.

SolutionOfferings

We have created customizable solutionofferings based on our core satellite ground segment systems andnetwork capabilities and satellite communication services to serve ourcustomers. These customizable solution offerings include:

Managed Satellite–Terrestrial NetworkServices.    These solutions allow customers to outsource entiresatellite-terrestrial based communication networks to us. We arecapable of providing a "one stop shopping"solution including licensing, facilities construction and operation andmaintenance anywhere in the world.

Next GenerationVideo Broadcasts.     We provide video broadcast services tolarge enterprises in the United States as well as to content owners.Our value proposition includes the ability to evolve to"next generation" Internet protocol-basedvideo broadcast services and high quality customer account management.We provide field services for the installation and maintenance of VSATterminals and related facilities at customer locations anywhere in theworld. We have created next 

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generation solutions to allow our customers toevolve their networks to interactive distance learning, merchandizing,corporate communications and video on demand services.

Hybrid Satellite/ Cellular Hosted Switch.    Weare introducing this solution to allow the sharing of the investment inthe mobile switch infrastructure and network operations expenses amongmany service provider customers. This solution is being offered fromour Long Island International Teleport to customers in North and SouthAmerica, Africa, Europe and the Middle East. We will implement basestation infrastructure for our service provider customers and operateand maintain the associated cellular switching center on an outsourcebasis.

VoIP Packet Voice ("ClearPacket").    This solution provides VoIP viasatellite that provides toll quality (i.e., carrier class) voiceservices for locations where terrestrial fiber is not available orwhere it does not meet customer cost or quality requirements. We callthese "Clear Packet" voice solutions becausewe connect at the customer's end to a toll quality local switchedvoice infrastructure and we connect at our end (i.e., United Statestermination/origination point) to toll quality public switchedinfrastructure from United States carriers. We are a licensedinternational carrier and have negotiated agreements to terminate andoriginate international traffic at our Long Island InternationalTeleport.

Disaster Recovery/BusinessRestoral.    We offer call center restoral solutions as asubcontractor to Agility Recovery Solutions in the United States. Thisprovides Agility's customers protection against communication andfacility outages. Once an emergency is declared, we restore theircommunications services within 48 hours. We provide thesatellite-terrestrial network behind Agility's offerings and inother cases provide disaster recovery solutions directly to endcustomers.

Satellite-Based TerrestrialRestoral.    This solution restores communications whenterrestrial-based services are interrupted. It is well suited forcustomers with multiple locations that currently have two terrestrialproviders, one primary and one backup service. In this scenario,customers are finding that the terrestrial backup service is subject tofailure at the same time the primary service fails. We have developedan Internet protocol satellite network solution to backup frame relayand other terrestrial services. This solution automatically routestraffic through the satellite backup network if the terrestrial servicefails at any location in the customer's network.

Hosted Direct to Home Broadcast Center.    Wehave developed a solution that provides all the functionality requiredfor new service providers to enter the direct to home service businesswith a minimal capital investment. We have built this solution at ourLong Island International Teleport. In addition, we provide on-goingmonitoring and operational services for this solution. This facilityincludes television program acquisition (i.e., satellite downlinkacquisition, as well as terrestrial program acquisition), programcoding, program multiplexing and transmission, subscriber managementand conditional access.

Next GenerationSatellite-Based Networks.    We have developed a variety ofcomplex "next generation" satellite-basednetworks for both countrywide intercity communications via satelliteand terrestrial means, and for lower density rural communications VSATnetworks. For example, in Afghanistan we are building complex newcommunication networks to interconnect all the provincial capitals forvoice, data and Internet, as well as providing VSAT service for voiceand data to over 300 small towns and villages around the country. Thesecomplex "next generation" networks useInternet protocol-based network systems and equipment to provideflexibility in service creation and the ability to leverage a commoncommunications infrastructure as the platform for all services. Theseprojects include the engineering, integration and deployment ofcomplete turn-key solutions comprised of Internet protocol-basedmicrowave, cellular, broadband wireless, satellite and fiber opticnetworks along with international gateway access. We also provideongoing operations and maintenance of these networks, Internet servicesand international voice origination and terminations services.

Supervisory, Control and Data Acquisition (SCADA) andSurveillance Networks.    We offer SCADA and surveillanceinfrastructure and service solutions to monitor critical infrastructureor to provide security for facilities and personnel. Thesesatellite-based solutions leverage low cost Internet protocol VSATtechnology to monitor oil/gas pipelines, electrical power generationand distribution 

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facilities and other critical infrastructurespread over large geographic areas, or to provide surveillancecapability using sophisticated video cameras with capability for 360degree viewing remotely. We provide monitoring services for criticalinfrastructure for our customers who want to outsource these servicesor need us to back up their own monitoring center.

Our solutionscontinue to evolve based on changes in markets and technology. Thesesolution sets position us to leverage the value in our offerings byproviding one stop shopping solutions including communicationsinfrastructure, network services and related back office services, asrequired.

**Sales and Marketing**

We market ourproducts and services to communications services providers, commercialenterprises, ISPs, broadcasters and other content providers andgovernment and government related entities. We have structured oursales and marketing approach to respond effectively to theopportunities in the communications services market, as well as thetraditional ground segment systems and networks market. Our marketingactivities are organized regionally, as well as on an industry-specificbasis. We use both direct and indirect sales channels to market ourservices and products. We focus on industry-specific markets, includinggovernment, broadcast and commercial enterprises.

Our corporatesales offices sell and market our communications services and groundsegment systems and networks in the United States and internationally.We have a corporate sales offices in Washington D.C. to service theU.S. Government, in Dubai, United Arab Emirates to service the MiddleEast and East Asia, in Hong Kong to service the Asia Pacific region andChina and in Newcastle, United Kingdom to service the EuropeanCommunity through our Globecomm Systems Europe Limited subsidiary. Thecorporate sales offices work with the regional business teams and/orthe GNSC service team to prepare proposals and negotiate contracts.

Our regional business teams, located in Hauppauge, New York, selland market our communications services and ground segment systems andnetworks internationally in concert with the corporate sales offices.These regional business teams are responsible for orders in the regionsto which they are assigned, as well as for the delivery of our productsand services and for account management of our existing customers.Currently, we have business teams responsible for the Americas, theAsia Pacific region, Africa, the Middle East and Europe. We also have abusiness team dedicated to the government market place.

Theseregional business teams work together with the corporate sales officesto identify, develop and maintain customer relationships through localsales representatives, sales executives and account managers. Together,they develop close and continuing relationships with our customers. Ourlocal sales representatives in these regions provide a local presenceand identify prospective customers for our sales executives. Ouraccount managers may also function as project engineers for networkintegration and service initiation programs for their accounts. As ofJune 30, 2005, we employed 36 persons with sales and marketingresponsibility, of which 14 are full-time sales executives and 22 havedual engineering and sales and marketing responsibilities. We believethis account management focus provides continuity and loyalty betweenour customers and us. We also believe that our approach fosterslong-term relationships that lead to follow-on work and referrals tonew customers. These accounts also provide us with a market for the newproducts and services that we develop. In addition, we obtain salesleads through referrals from industry suppliers.

Our marketingprogram is intended to build national and international awareness ofour brand. We use direct mailings, print advertising to targetedmarkets and trade publications to enhance awareness and acquire leadsfor our direct and indirect sales teams. We create brand awareness byparticipating in industry trade shows sponsored by organizations likethe International Telecommunications Union, the National Association ofBroadcasters and various industry associations. We also providemarketing information on our web site and conduct joint marketingprograms with sales representatives in various regions to reach newcustomers.

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**Customers**

We haveestablished a diversified base of customers in a variety of industries.Our customers include communications services providers, commercialenterprises, multinational corporations, ISPs, broadcasters and othercontent providers and government and government related entities (U.S.and foreign). We typically rely upon a small number of customers for alarge portion of our revenues. We derived 20%, 13% and13% of our revenues in the year ended June 30, 2005 from theMinistry of Communication of the Islamic Transitional State ofAfghanistan, the United Nations and Societatea NationalaRadiocomunicatti S.A. in Romania, respectively. We expect that in thenear term a significant portion of our revenues will continue to bederived from a limited number of customers (the identity of whom mayvary from year to year) as we seek to expand our business and customerbase.

**Backlog**

At June 30, 2005, our backlog wasapproximately $76.3 million compared to approximately $75.4 million atJune 30, 2004. We record an order in backlog when we receive a firmcontract or purchase order, which identifies product quantities, salesprice, service dates and delivery dates. Backlog represents the amountof unrecorded revenue on undelivered orders and services to be providedand a percentage of revenues from sales of products that have beenshipped where installation has not been completed and final acceptancehas not been received from the customer. Our backlog at any given timeis not necessarily indicative of future period revenues. A substantialportion of our backlog is comprised of large orders, the cancellationof any of which could have a material adverse effect on our operatingresults. For example, at June 30, 2005, $43.7 million, or approximately57.2%, of our backlog represented contracts with six customers.We cannot assure you that these contracts or any others in our backlogwill not be cancelled or revised. See the section entitled"Risk Factors."

**CommunicationsInfrastructure**

We built and own the teleport facilitylocated at our headquarters in Hauppauge, New York. We are a member ofthe World Teleport Association (WTA). Our teleport is designed to meetstringent requirements for high-speed data communications. Thisteleport is used to transmit and receive signals from satellitespositioned to serve customers in Latin America, the United States,Canada, Europe, the Middle East and Africa. Our teleport uses redundantcritical systems and uninterruptible power supplies with back-up powergeneration.

We also lease teleport services in Los Angeles totransmit and receive signals from satellites positioned to servecustomers in the Pacific Rim region. Connection to the United StatesInternet backbone in Los Angeles is achieved through leased fiber opticcircuits.

We lease transponder capacity to meet the bandwidthneeds of our customers. We lease multiple, redundant, high-capacityfiber connections to provide reliable Internet data, voice and datatraffic to locations in New York City where it interconnects withtelecommunications service providers and the United States Internetbackbone.

We have built and staff a network operations center,or NOC, to manage customer circuits. The NOC operates twenty-four hoursper day, seven days per week to monitor customer circuits, respond tocustomer inquiries and initiate new services. Customers can purchase orlease from us, as a part of its service, the equipment needed at thecustomers' locations to transmit and receive the satellitesignals. We also offer installation and maintenance services for thisequipment.

**Product Design, Assembly and Testing**

We assign a project team to each contract into which we enter. Eachteam is led by a project engineer who is responsible for execution ofthe project. This includes engineering and design, assembly andtesting, installation and customer acceptance. A project may includeengineers, integration specialists, buyer-planners and an operationsteam. Our standard satellite ground segment systems are manufacturedusing a standard modular production process. Typically, long-termprojects require significant customer-specific engineering, draftingand design efforts. Once the system is designed, the integrationspecialist 

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works with the buyer-planner and theoperations team to assure a smooth transfer from the engineering phaseto the integration phase. The integration phase consists mainly ofintegrating the purchased equipment, components and subsystems into acomplete functioning system. Assembly, integration and test operationsare conducted on both an automated and manual basis.

We providefacilities for complete in-plant testing of all our systems beforedelivery in order to assure all performance specifications will be metduring installation at the customer's site. We employ formaltotal quality management programs and other training programs, and havebeen certified by the International Organization of Standards qualitycertification process for ISO 9001, a standard that enumerates specificrequirements an organization must follow in order to assure consistentquality in the supply of products and services. The certificationprocess qualifies us for access to virtually all domestic andinternational projects, and we believe that this represents acompetitive advantage.

**Research and Development**

We have developed internal research and development resources inInternet protocol networks, content delivery networks, broadcastsystems, network management systems and system products. The costs ofdeveloping new technologies are funded partially by the investmentsmade by us and partially by development funded by specific customerprogram requirements. This approach provides us with a cost-effectivemeans to develop new technology, while minimizing our direct researchand development expenditures. Furthermore, we believe that our researchand development capabilities allow us to offer added value indeveloping solutions for our customers, while at the same time wemaintain the opportunity to develop products through our strategicsupplier relationships. Our internal research and development effortsgenerally focus on the development of products and services notavailable from other suppliers to the industry. Current efforts arefocused on developing content delivery network services for ourenterprise customers, broadcast systems technology for our broadcastcustomers, network management system products for all our earthterminal and network customers and customizable systems for ourgovernment customers. For the years ended June 30, 2005, 2004 and 2003,we have incurred approximately $1.0 million, $1.3 million, and $0.8million, respectively, in internal research and developmentexpenses.

**Competition**

In the satellite groundsegment systems and networks market, we believe that our ability tocompete successfully is based primarily on management'sreputation and the ability to provide a solution that meets thecustomer's requirements, including competitive pricing,performance, on-time delivery, reliability and customer support.

In the communications services market, we believe that our abilityto compete successfully is based primarily on our reputation andproviding prompt delivery and initiation of service, competitivepricing, consistent and reliable connections and high-quality customersupport.

Our primary competitors in the satellite ground segmentsystems and networks market generally fall into two groups: (1) systemintegrators like ITT, Data Path and Global Communication Solutions and(2) equipment manufacturers who also provide integrated systems, likeAndrew Corporation, Viasat, General Dynamics, Alcatel and ND SatcomAG.

In the end-to-end satellite-based enterprise solutions andbroadcast services markets, we compete with other satellitecommunication companies who provide similar services, like Ascent,Globecast, and Convergent Media Systems. In addition, in managednetwork services we may compete with other communications servicesproviders 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. In addition, we anticipate that continuingderegulation worldwide is expected to result in the formation of asignificant number of new competitive service providers over the nextfew years.

Current and potential participants in the markets inwhich we compete have established or may establish cooperativerelationships among themselves or with third parties. These cooperativerelationships may increase the ability of their products and servicesto address the needs of our current and 

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prospective customers. Accordingly, it ispossible that new competitors or alliances among competitors may emergethat will enable them to acquire significant market share rapidly. Webelieve that increased competition is likely to result in pricereductions, reduced gross profit margins and loss of market share, anyof which would have a material adverse effect on our business, resultsof operations and financial condition.

**IntellectualProperty**

We rely heavily on the technological and creativeskills of our personnel, new product developments, computer programsand designs, frequent product enhancements, reliable product supportand proprietary technological expertise in maintaining our competitiveposition. We have secured patent protection on some of our products,and have secured trademarks and service marks to protect some of ourproducts and services.

We currently have been granted threepatents in the United States, one for remote access to the Internetusing satellites, another for satellite communication with automaticfrequency control and 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 additional patents on our technology, if appropriate. Wehave received trademark registration for Globecomm Systems Inc. in theUnited States, the European Community, Russia and the People'sRepublic of China; for GSI in the United States and Russia; and forNetSat Express in the United States, the European Community, Russia,Singapore and Brazil. We have also received trademark registrations inthe United States for Wide Area Network Anywhere, MBB2001, CTF 2001,CES 2001 and Axxsys, which relate to our customizable modular earthstations; for Impact, which relates to our customizable ISP solutions;and for the GSI and NetSat logos. We have other trademarks and servicemarks pending and intend to seek registration of other trademarks andservice marks in the future.

**Government Regulations**

Operations and Use of Satellites

We are subject tovarious federal laws and regulations, which may have negative effectson our business. We operate Federal Communications Commission, or FCC,licensed earth stations in Hauppauge, New York, subject to theCommunications Act of 1934, as amended, or the FCC Act, and the rulesand regulations of the FCC. Pursuant to the FCC Act and FCC rules andregulations, we have obtained and are required to maintain radiotransmission 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 additional licenses willbe granted by the FCC when our existing licenses expire, nor can weassure you 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 are also required to comply with FCC regulations regarding theexposure of humans to radio frequency radiation from our earthstations. These regulations, as well as local land use regulations,restrict our freedom to choose where to locate our earth stations.

The licenses and authorizations held by Globecomm extend to GNSC andGNSC currently provides services in accordance with the requirements ofthe Globecomm licenses and authorizations. GNSC may in the future seekto obtain licenses and/or authorizations to provide services in its ownname, however, we cannot guarantee that such additional licenses andauthorizations will be granted by the FCC.

Common CarrierRegulation

We currently provide services to our customers on aprivate carrier and on a common carrier basis. Our operations as acommon carrier require us to comply with the FCC's requirementsfor common 

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carriers. These requirements include, but arenot limited to, providing our rates and service terms, being forbiddenfrom unjust and unreasonable discrimination among customers, notifyingthe FCC before discontinuing service and complying with FCC equalemployment opportunity regulations and reporting requirements.

We do not currently provide telecommunications services betweenpoints in the same state and so are exempt from state regulation of ourservices. However, we could become subject to state telecommunicationsregulations if we do provide intrastate telecommunicationsservices.

Foreign Ownership

The FCC Act and FCCregulations impose restrictions on foreign ownership of our earthstations. These requirements generally forbid more than 20%ownership or control of an FCC licensee by non-United States citizensand more than 25% ownership of a licensee's parent bynon-United States citizens. The FCC may authorize foreign ownership inthe licensee's parent in excess of these percentages. Undercurrent policies, the FCC has granted these authorizations where theapplicant does not control monopoly or bottleneck facilities and theforeign owners are citizens of countries that are members of the WorldTrade Organization or provide equivalent competitive opportunities toUnited States citizens.

We may, in the future, be required toseek FCC approval if foreign ownership of our stock exceeds thethresholds mentioned above. Failure to comply with these policies couldresult in an order to divest the offending foreign ownership, fines,denial of license renewal and/or license revocation proceedings againstthe licensee by the FCC. We have no knowledge of any present foreignownership which would result in a violation of the FCC rules andregulations.

Foreign Regulations

Regulatoryschemes in countries in which we may seek to provide oursatellite-delivered data communications services may impose impedimentson our operations. Some countries in which we operate or 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 salesrepresentatives typically must obtain authorization for each country inwhich we provide our satellite-delivered data communications services.Although we believe that we or our local sales representatives will beable to obtain the requisite licenses and approvals from the countriesin which we intend to provide products and services, the regulatoryschemes in each country are different, and thus there may be instancesof noncompliance of which we are not aware. Although we believe theseregulatory schemes will not prevent us from pursuing our business plan,we cannot assure you that our licenses and approvals are or will remainsufficient in the view of foreign regulatory authorities. In addition,we cannot assure you that necessary licenses and approvals will begranted on a timely basis, or at all, in all jurisdictions in which wewish to offer our products and services or that the applicablerestrictions will not be unduly burdensome.

Regulation ofthe Internet

Our Internet operations (other than the operationof a teleport) are not currently subject to direct governmentregulation in the United States or most other countries, and there arecurrently few laws or regulations directly applicable to access to orcommerce on the Internet. However, due to the increasing popularity anduse of the Internet it is possible that a number of laws andregulations may be adopted at the local, national or internationallevels with respect to the Internet, covering issues like user privacyand expression, pricing of products and services, taxation,advertising, intellectual property rights, information security or theconvergence of traditional communication services with Internetcommunications.

We anticipate that a substantial portion of ourInternet operations will be carried out in countries which may imposegreater regulation of the content of information coming into theircountry than that which is generally applicable in the United States.Examples of this include privacy regulations in Europe and contentrestrictions in countries, such as the People's Republic ofChina. To the extent that we provide content as a part of our Internetservices, it will be subject to laws regulating content. Moreover, the

9

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adoption of laws or regulations may decreasethe growth of the Internet, which could in turn decrease the demand forour Internet services, or increase our cost of doing business orotherwise negatively affect our business. In addition, theapplicability to the Internet of existing laws governing issuesincluding property ownership, copyrights and other intellectualproperty issues, taxation, libel and personal privacy is uncertain. Thevast majority of these laws were adopted prior to the advent of theInternet and related technologies and, as a result, do not contemplateor address the unique issues of the Internet and related technologies.Changes to these laws intended to address these issues, including somerecently proposed changes, could create uncertainty in the marketplace.These changes could reduce demand for our products and services orcould increase our cost of doing business as a result of costs oflitigation or increased product development costs.

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. 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 in the future, to eliminatethis exemption. If these access charges are imposed on telephone linesused to reach ISPs and/or if flat rate telephone services for Internetaccess are eliminated or curtailed, the cost to customers who accessour satellite facilities using telephone company-provided facilitiescould increase to an extent that could discourage the demand for ourservices. Likewise, the demand for our services in other countries maybe affected by the availability and cost of local telephone or othertelecommunications facilities to reach our facilities or the facilitiesof our customers.

Export of TelecommunicationsEquipment

The sale of our ground segment systems, networks, andcommunications service solutions outside the United States is subjectto compliance with the regulations of the United States ExportAdministration and, in certain instances, with International Traffic inArms regulations. The absence of comparable restrictions on competitorsin other countries may adversely affect our competitive position. Inaddition, in order to ship our products into or implement our servicesin some countries, these products or services must satisfy thetechnical requirements of the particular country. If we were unable tocomply with these requirements with respect to a significant quantityof our products, our sales in those countries could be restricted,which could have a material adverse effect on our business, financialcondition and results of operations.

**Employees**

As of June 30, 2005, we had 163 full-time employees, including 77 inengineering and program management, 42 in the manufacturing, operationssupport and network operations, 14 in sales and marketing and 30 inmanagement and administration. Our employees are not covered by anycollective-bargaining agreements. We believe that our relations withour employees are good.

Available information

Wemaintain an Internet website at www.globecommsystems.com whereour Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, CurrentReports on Form 8-K, any amendments to these reports and all other SECdocuments are available without charge, as soon as reasonablypracticable following the time that they are filed with or furnished tothe SEC. Information contained on our website does not constitute apart of this Annual Report on Form 10-K.

**Item 2.Properties**

We own a facility containing approximately122,000 square feet of space on approximately seven acres located at 45Oser Avenue, Hauppauge, New York. This facility houses our principaloffices, teleport 

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facility and production facilities, as wellas the offices and network operations center of GNSC. We lease officespace at a monthly fee of approximately $5,300 for office andoperations facilities for our wholly-owned subsidiary, GlobecommSystems Europe Limited, in the United Kingdom. In addition, we have alease for office space in Hong Kong at a monthly rental fee ofapproximately $1,300, a lease for office space in Dubai at a monthlyrental fee of approximately $1,600 and another lease for office spacein Washington D.C. at a monthly rental fee of approximately $1,400.

Item 3. Legal proceedings

None.

Item 4. Submissionof Matters to a Vote of Security Holders

None.

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PART II

Item 5.    Market for Registrant's CommonStock and Related Stockholder Matters

Our common stock isquoted on the Nasdaq National Market under the symbol"GCOM." The fiscal 2005 and 2004 high and lowsales prices are as follows:

|                                |  |        |        |        |  |        |        |        |  |  |
|--------------------------------|--|--------|--------|--------|--|--------|--------|--------|--|--|
|                           |  | High   |        | Low    |
| **2005**                       |  |   |   |   |  |   |   |   |
| Quarterended September 30,2004 |  | $      | 7.58   |   |  | $      | 4.81   |   |
| Quarter endedDecember 31, 2004 |  |   | 6.80   |   |  |   | 5.08   |   |
| Quarterended March 31,2005     |  |   | 7.23   |   |  |   | 5.31   |   |
| Quarter ended June30,2005      |  |   | 6.34   |   |  |   | 5.09   |   |
|                           |  |   |   |   |  |   |   |   |
| **2004**                       |  |   |   |   |  |   |   |   |
| Quarterended September 30,2003 |  | $      | 5.00   |   |  | $      | 3.05   |   |
| Quarter endedDecember 31, 2003 |  |   | 7.29   |   |  |   | 3.75   |   |
| Quarterended March 31,2004     |  |   | 7.00   |   |  |   | 4.36   |   |
| Quarter ended June30, 2004     |  |   | 6.90   |   |  |   | 4.67   |   |
|                                |

At September 7,2005, there were approximately 3,800 stockholders of record of ourcommon stock, as shown in the records of our transfer agent.

Atthe close of the Nasdaq National Market on September 7, 2005, ourmarket price per share was $6.38.

As of June 30, 2005, we hadnot declared or paid dividends on our common stock since inception andwe do not expect to pay dividends in the foreseeable future.

Thetable below sets forth securities we have authorized for issuance underour equity compensation plans.

Equity Compensation PlanInformation as of June 30,2005

|                                                          |  |                                                                                      |           |                                                                        |  |                                                                                                                                 |      |        |  |        |           |        |  |  |
|----------------------------------------------------------|--|--------------------------------------------------------------------------------------|-----------|------------------------------------------------------------------------|--|---------------------------------------------------------------------------------------------------------------------------------|------|--------|--|--------|-----------|--------|--|--|
| PLANCATEGORY                                             |  | NUMBER OFSECURITIES TO BEISSUED UPONEXERCISEOF OUTSTANDINGOPTIONS, WARRANTSANDRIGHTS |           | WEIGHTED-AVERAGEEXERCISE PRICEOFOUTSTANDINGOPTIONS, WARRANTSAND RIGHTS |  | NUMBER OFSECURITIESREMAINING AVAILABLEFOR FUTUREISSUANCEUNDEREQUITY COMPENSATIONPLANS (EXCLUDINGSECURITIESREFLECTEDIN COLUMN(A) |
|                                                     |  | (A)                                                                                  |           | (B)                                                                    |  | (C)                                                                                                                             |
| Equitycompensation plan approved by securityholders      |  |                                                                                 | 3,258,295 |                                                                   |  | $                                                                                                                               | 7.16 |   |  |   | 1,314,524 |   |
| Equitycompensation plans not approved by securityholders |  |                                                                                 | 55,825    |                                                                   |  | $                                                                                                                               | 8.07 |   |  |   | —   |   |
| Total                                                    |  |                                                                                 | 3,314,120 |                                                                   |  | $                                                                                                                               | 7.18 |   |  |   | 1,314,524 |   |
|                                                          |

Theequity compensation plans that were adopted without the approval of thesecurity holders relate to outstanding warrants. During November 1996,we issued ten-year warrants to five consultants to purchase anaggregate of 64,125 shares of common stock at a price per share of$8.07 in consideration for services rendered.

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Item 6.    SelectedFinancial Data

Our selected consolidated financial data as ofand for each of the five years in the periods ended June 30, have beenderived from our audited consolidated financial statements. EBITDArepresents net income (loss) before minority interests in operations ofour consolidated subsidiary, interest income, interest expense,provision for income taxes, depreciation and amortization expense, again on sale of investment and a gain on sale of available-for-salesecurities. EBITDA does not represent cash flows defined by accountingprinciples generally accepted in the United States and does notnecessarily indicate that our cash flows are sufficient to fund all ofour cash needs. We disclose EBITDA since it is a financial measurecommonly used in our industry. EBITDA is not meant to be considered asubstitute or replacement for net income (loss) as prepared inaccordance with accounting principles generally accepted in the UnitedStates. EBITDA may not be comparable to other similarly titled measuresof other companies. We record an order in backlog when we receive afirm contract or purchase order, which identifies product quantities,sales price, service dates and delivery dates. Backlog represents theamount of unrecorded revenue on undelivered orders and services to beprovided and a percentage of revenues from sales of products that havebeen shipped where installation has not been completed and finalacceptance has not been received from the customer. Our backlog at anygiven time is not necessarily indicative of future periodrevenues.

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Selected Financial Data (Inthousands, except per sharedata)

|                                                                                                                       |  |                    |         |        |  |        |         |         |  |        |         |         |  |        |         |         |  |        |         |         |  |  |
|-----------------------------------------------------------------------------------------------------------------------|--|--------------------|---------|--------|--|--------|---------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                                                                                                  |  | YearsEnded June30, |
|                                                                                                                  |  | 2005               |         | 2004   |  | 2003   |         | 2002    |  | 2001   |
| **Statementsof OperationsData:**                                                                                      |  |               |    |   |  |   |    |    |  |   |    |    |  |   |    |    |  |   |    |    |
| Revenuesfrom ground segment systems, networks and enterprisesolutions                                                 |  | $                  | 90,656  |   |  | $      | 73,305  |    |  | $      | 40,125  |    |  | $      | 64,101  |    |  | $      | 78,744  |    |
| Revenuesfrom data communicationsservices                                                                              |  |               | 18,928  |   |  |   | 13,931  |    |  |   | 13,903  |    |  |   | 22,478  |    |  |   | 24,170  |    |
| Totalrevenues                                                                                                         |  |               | 109,584 |   |  |   | 87,236  |    |  |   | 54,028  |    |  |   | 86,579  |    |  |   | 102,914 |    |
| Costsand operatingexpenses:                                                                                           |  |               |    |   |  |   |    |    |  |   |    |    |  |   |    |    |  |   |    |    |
| Costsfrom ground segment systems, networks and enterprisesolutions                                                    |  |               | 75,357  |   |  |   | 63,282  |    |  |   | 39,447  |    |  |   | 57,083  |    |  |   | 70,907  |    |
| Costsfrom data communicationsservices                                                                                 |  |               | 15,527  |   |  |   | 12,992  |    |  |   | 17,796  |    |  |   | 26,705  |    |  |   | 22,661  |    |
| Sellingandmarketing                                                                                                   |  |               | 5,821   |   |  |   | 4,808   |    |  |   | 6,042   |    |  |   | 6,735   |    |  |   | 7,235   |    |
| Researchanddevelopment                                                                                                |  |               | 1,021   |   |  |   | 1,328   |    |  |   | 800     |    |  |   | 1,185   |    |  |   | 850     |    |
| Generalandadministrative                                                                                              |  |               | 7,596   |   |  |   | 6,529   |    |  |   | 9,423   |    |  |   | 11,970  |    |  |   | 9,822   |    |
| Assetimpairmentcharge                                                                                                 |  |               | — |   |  |   | — |    |  |   | — |    |  |   | 237     |    |  |   | 2,857   |    |
| Restructuringcharge                                                                                                   |  |               | — |   |  |   | — |    |  |   | — |    |  |   | — |    |  |   | 1,950   |    |
| Totalcosts and operatingexpenses                                                                                      |  |               | 105,322 |   |  |   | 88,939  |    |  |   | 73,508  |    |  |   | 103,915 |    |  |   | 116,282 |    |
| Income(loss) fromoperations                                                                                           |  |               | 4,262   |   |  |   | (1,703  | )  |  |   | (19,480 | )  |  |   | (17,336 | )  |  |   | (13,368 | )  |
| Otherincome (expense):                                                                                                |  |               |    |   |  |   |    |    |  |   |    |    |  |   |    |    |  |   |    |    |
| Interestincome                                                                                                        |  |               | 444     |   |  |   | 271     |    |  |   | 422     |    |  |   | 1,030   |    |  |   | 3,194   |    |
| Interestexpense                                                                                                       |  |               | — |   |  |   | — |    |  |   | (539    | )  |  |   | (957    | )  |  |   | (6,579  | )  |
| Gainon sale of available-for-salesecurities                                                                           |  |               | 132     |   |  |   | 91      |    |  |   | — |    |  |   | — |    |  |   | — |    |
| Gainon sale ofinvestment                                                                                              |  |               | 40      |   |  |   | — |    |  |   | — |    |  |   | — |    |  |   | 304     |    |
| Income(loss) before income taxes and minority interests in operations ofconsolidatedsubsidiary                        |  |               | 4,878   |   |  |   | (1,341  | )  |  |   | (19,597 | )  |  |   | (17,263 | )  |  |   | (16,449 | )  |
| Provisionfor incometaxes                                                                                              |  |               | 64      |   |  |   | — |    |  |   | — |    |  |   | — |    |  |   | 1,600   |    |
| Income(loss) before minority interests in operations of consolidatedsubsidiary                                        |  |               | 4,814   |   |  |   | (1,341  | )  |  |   | (19,597 | )  |  |   | (17,263 | )  |  |   | (18,049 | )  |
| Minorityinterests in operations of consolidatedsubsidiary                                                             |  |               | — |   |  |   | — |    |  |   | — |    |  |   | — |    |  |   | (650    | )  |
| Netincome (loss) from continuingoperations                                                                            |  | $                  | 4,814   |   |  | $      | (1,341  | )  |  | $      | (19,597 | )  |  | $      | (17,263 | )  |  | $      | (18,699 | )  |
| Basicnet income (loss) from continuing operations per commonshare                                                     |  | $                  | 0.33    |   |  | $      | (0.10   | )  |  | $      | (1.56   | )  |  | $      | (1.36   | )  |  | $      | (1.55   | )  |
| Dilutednet income (loss) from continuing operations per commonshare                                                   |  | $                  | 0.32    |   |  | $      | (0.10   | )  |  | $      | (1.56   | )  |  | $      | (1.36   | )  |  | $      | (1.55   | )  |
| Weighted-averageshares used in the calculation of basic net income (loss) fromcontinuing operations per commonshare   |  |               | 14,422  |   |  |   | 13,346  |    |  |   | 12,565  |    |  |   | 12,707  |    |  |   | 12,060  |    |
| Weighted-averageshares used in the calculation of diluted net income (loss) fromcontinuing operations per commonshare |  |               | 14,966  |   |  |   | 13,346  |    |  |   | 12,565  |    |  |   | 12,707  |    |  |   | 12,060  |    |
|                                                                                                                       |

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|                                                                |  |                    |         |         |  |        |         |         |  |        |         |         |  |        |         |         |  |        |         |         |  |  |
|----------------------------------------------------------------|--|--------------------|---------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                                           |  | YearsEnded June30, |
|                                                           |  | 2005               |         | 2004    |  | 2003   |         | 2002    |  | 2001   |
| **OtherOperating Data:**                                       |  |               |    |    |  |   |    |    |  |   |    |    |  |   |    |    |  |   |    |    |
| Net income(loss)                                               |  | $                  | 4,814   |    |  | $      | (1,341  | )  |  | $      | (19,597 | )  |  | $      | (17,263 | )  |  | $      | (18,699 | )  |
| Otherincome (expense),net                                      |  |               | 616     |    |  |   | 362     |    |  |   | (117    | )  |  |   | 73      |    |  |   | (3,081  | )  |
| Minorityinterest in operations of consolidatedsubsidiary       |  |               | — |    |  |   | — |    |  |   | — |    |  |   | — |    |  |   | 650     |    |
| Provisionfor incometaxes                                       |  |               | 64      |    |  |   | — |    |  |   | — |    |  |   | — |    |  |   | 1,600   |    |
| Depreciationandamortization                                    |  |               | 2,695   |    |  |   | 3,097   |    |  |   | 3,532   |    |  |   | 3,661   |    |  |   | 7,229   |    |
| EBITDA                                                         |  | $                  | 6,957   |    |  | $      | 1,394   |    |  | $      | (15,948 | )  |  | $      | (13,675 | )  |  | $      | (6,139  | )  |
| Cashflows (used in) provided by operatingactivities            |  | $                  | (4,357  | )  |  | $      | 1,613   |    |  | $      | (14,714 | )  |  | $      | (2,942  | )  |  | $      | (11,823 | )  |
| Cashflows used in investingactivities                          |  |               | (639    | )  |  |   | (1,871  | )  |  |   | (1,712  | )  |  |   | (2,387  | )  |  |   | (7,446  | )  |
| Cashflows provided by (used in) financingactivities            |  |               | 2,347   |    |  |   | 6,421   |    |  |   | (310    | )  |  |   | (1,018  | )  |  |   | (982    | )  |
| Capitalexpenditures, net of non-cash capital leaseexpenditures |  |               | 2,872   |    |  |   | 1,267   |    |  |   | 1,732   |    |  |   | 1,687   |    |  |   | 5,350   |    |
| Backlogat end ofyear                                           |  |               | 76,268  |    |  |   | 75,444  |    |  |   | 58,006  |    |  |   | 80,269  |    |  |   | 101,013 |    |
|                                                                |

|                          |  |         |        |        |  |        |        |        |  |        |        |        |  |        |         |        |  |        |         |        |  |  |
|--------------------------|--|---------|--------|--------|--|--------|--------|--------|--|--------|--------|--------|--|--------|---------|--------|--|--------|---------|--------|--|--|
|                     |  | June30, |
|                     |  | 2005    |        | 2004   |  | 2003   |        | 2002   |  | 2001   |
| **BalanceSheet Data:**   |  |    |   |   |  |   |   |   |  |   |   |   |  |   |    |   |  |   |    |   |
| Cash and cashequivalents |  | $       | 25,609 |   |  | $      | 28,252 |   |  | $      | 22,016 |   |  | $      | 38,708  |   |  | $      | 45,038  |   |
| Workingcapital           |  |    | 36,951 |   |  |   | 30,052 |   |  |   | 22,040 |   |  |   | 43,702  |   |  |   | 60,399  |   |
| Totalassets              |  |    | 86,378 |   |  |   | 73,475 |   |  |   | 70,344 |   |  |   | 100,297 |   |  |   | 124,999 |   |
| Long-termliabilities     |  |    | 670    |   |  |   | 987    |   |  |   | 1,303  |   |  |   | 12,693  |   |  |   | 13,446  |   |
| Totalstockholders'equity |  |    | 60,137 |   |  |   | 52,806 |   |  |   | 47,437 |   |  |   | 67,040  |   |  |   | 85,141  |   |
|                          |

Item7.    Management's Discussion and Analysis of FinancialCondition and Results of Operations

You should read thefollowing discussion of our financial condition and results ofoperations with the consolidated financial statements and related notesincluded elsewhere in this Annual Report on Form 10-K. This discussioncontains, in addition to historical information, forward-lookingstatements, within the meaning of the Private Securities LitigationReform Act of 1995, based on our current expectations, assumptions,estimates and projections. These forward-looking statements involverisks and uncertainties. Our actual results could differ materiallyfrom those anticipated in these forward-looking statements as a resultof certain factors, such as, among others, our dependence on a limitednumber of contracts for a high percentage of our revenues, uncertaindemand for our services and products due to economic andindustry-specific conditions and the risks associated with operating ininternational markets. These risks and others are more fully describedin the "Risk Factors" section and elsewherein this Annual Report on Form 10-K. We undertake no obligation toupdate publicly any forward-looking statements for any reason, even ifnew information becomes available or other events occur in thefuture.

Overview

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

Our business had been adverselyaffected by the global economic slowdown from 2000–2004 and, inparticular, the significant challenges facing the telecommunicationsindustry worldwide. We have seen improvement in the segments we serve,in particular within the U.S. Government and government relatedentities marketplace. However, some of the adverse consequences of thedownturn continue to impact our business based upon the inability ofsome of our customers and prospects to raise capital to fund projects,particularly, in developing countries.

We currently have twosignificant contracts with the Ministry of Communication of the IslamicTransitional State of Afghanistan, and derived 20% of ourrevenues in the year ended June 30, 2005 from 

15

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this customer. Further hostilities inAfghanistan, or in connection with any armed conflict affecting areaswhere our customers are located, may impact our performance on thesecontracts, and consequently our results of operations.

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

Contract costs generally includepurchased material, direct labor, overhead and other direct costs.Anticipated contract losses are recognized in the period identified.Costs from ground segment 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 and networkoperations expenses. Satellite space segment charges consist of thecosts associated with obtaining satellite bandwidth (the measure ofcapacity) used in the transmission of services to and from thesatellite leased from operators. Network operations expenses consistprimarily of costs associated with the operation of the networkoperations center on a twenty-four hour a day, seven day a week basis,including personnel and related costs and depreciation. Selling andmarketing expenses consist primarily of salaries, travel and livingcosts for sales and marketing personnel. Research and developmentexpenses consist primarily of salaries and related overhead expenses.General and administrative expenses consist of expenses associated withour management, finance, contract and administrative functions.

Critical Accounting Policies

Certain of ouraccounting policies require judgment by management in selecting theappropriate assumptions for calculating financial estimates. By theirnature, these judgments are subject to an inherent degree ofuncertainty. These judgments are based on our historical experience,terms of existing contracts, our observance of trends in the industry,information provided by our customers, and information available fromother outside sources, as appropriate. Actual results may differ fromthese judgments under different assumptions or conditions. Ouraccounting policies that require management to apply significantjudgment include:

Revenue Recognition

Werecognize revenue in accordance with Staff Accounting Bulletin No. 104("SAB 104"), Revenue Recognition, for ourproduction-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. 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 

16

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any difficulties installing such equipment.In addition, the customer or other third party vendors can install theequipment. The estimated relative fair value of the installationservices is determined by management, which is typically less than thecustomer's contractual holdback percentage. If the holdback isless than the fair value of installation, we will defer recognition ofrevenues, determined on a contract-by-contract basis equal to the fairvalue of the installation services. Payments received in advance bycustomers are deferred until shipment and are presented as deferredrevenues.

We recognize revenue using thepercentage-of-completion method of accounting upon the achievement ofcertain contractual milestones in accordance with Statement of Position81-1, Accounting for Performance of Construction-Type and CertainProduction-Type Contracts, for our non-standard, complexproduction-type contracts for the production of satellite groundsegment systems and equipment that are generally integrated into thecustomers' 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 customers' 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 inventories balance.

Costsfrom Ground Segment Systems, Networks and Enterprise Solutions

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

GoodwillImpairment

Goodwill represents the excess of the purchase priceof businesses over the fair value of the identifiable net assetsacquired. In accordance with SFAS No. 142, Goodwill and OtherIntangible Assets, goodwill and other indefinite life intangible assetsare no longer amortized, but instead tested for impairment at leastannually. The impairment test for goodwill uses a two-step approach,which is performed at the reporting unit level. Step one compares thefair value of the reporting unit (calculated using a discounted cashflow method) to its carrying value. If the carrying value exceeds thefair value, there is a potential impairment and step two must beperformed. Step two compares the carrying value of the reportingunit's goodwill to its implied fair value (i.e., fair value ofthe reporting unit less the fair value of the unit's assets andliabilities, including identifiable intangible assets). If the carryingvalue of goodwill exceeds its implied fair value, the excess isrequired to be recorded as an impairment charge. The impairment test isdependent upon estimated future cash flows of the data communicationservices segment. Our impairment test as of April 1, 2005 indicatedthat no impairment existed.

Allowances forDoubtful Accounts

We maintain allowances for doubtful accountsfor estimated losses resulting from the inability of our customers tomake required payments. We assess the customer's ability to paybased on a number of factors, including our past transaction historywith the customer and the creditworthiness of the customer. Anassessment of the inherent risks in conducting our business withforeign customers is also made since a significant portion of ourrevenues is international. Management specifically analyzes accountsreceivable, historical bad debts, customer concentrations, customercreditworthiness and current economic trends. If the financialcondition of our customers were to deteriorate in the future, resultingin an impairment of their ability to make payments, additionalallowances may be required.

The allowance for doubtful accountsat June 30, 2005 and June 30, 2004 was $0.8 million and $2.6 million,respectively. The decrease in the allowance primarily related to a baddebt recovery of approximately $1.5 million under a settlement reachedwith a major customer in July 2004.

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Inventories

Inventories consist primarily of work-in-progress from costsincurred in connection with specific customer contracts, which arestated at the lower of cost or market value. In assessing therealizability of inventories, we are required to make estimates of thetotal contract costs based on the various elements of thework-in-progress. It is possible that changes to these estimates couldcause a reduction in the net realizable value of our inventories.

Results of Operations

FiscalYears Ended June 30, 2005 and 2004

Revenues from GroundSegment Systems, Networks and Enterprise Solutions.    Revenuesfrom ground segment systems, networks and enterprise solutionsincreased by $17.3 million, or 23.7%, to $90.7 million for thefiscal year ended June 30, 2005 from $73.3 million for the fiscal yearended June 30, 2004. The increase in revenues was primarily the resultof increased infrastructure sales in the U.S. Government and governmentrelated entities marketplace, primarily driven by sales to Ministry ofCommunication of the Islamic Transitional State of Afghanistan, coupledwith increased sales due to an overall improvement in thetelecommunications industry segments we serve and the achievement ofshipment milestones associated with projects currently in progressoffset by a decrease in sales at Globecomm Systems Europe Limited.

Revenues from Data Communications Services.    Revenuesfrom data communications services increased by $5.0 million, or35.9%, to $18.9 million for the fiscal year ended June 30, 2005from $13.9 million for the fiscal year ended June 30, 2004. Theincrease was due to the increase in video broadcast and VoIP serviceofferings.

Costs from Ground Segment Systems, Networks andEnterprise Solutions.    Costs from ground segment systems,networks and enterprise solutions increased by $12.1 million, or19.1%, to $75.4 million for the fiscal year ended June 30, 2005from $63.3 million for the fiscal year ended June 30, 2004. Theincrease is attributable to a higher revenue base. Costs as apercentage of related revenues decreased to 83.1% for the fiscalyear ended June 30, 2005 from 86.3% for the fiscal year endedJune 30, 2004. The decrease was mainly attributable to a non-recurringcost recovery related to a settlement with a large customer of $0.9million for the year ended June 30, 2005 and increased margin onrevenues related to the U.S. Government and government related entitiesprojects in fiscal 2005.

Costs from Data CommunicationsServices. Costs from data communications services increased by $2.5million, or 19.5%, to $15.5 million for the fiscal year endedJune 30, 2005 from $13.0 million for the fiscal year ended June 30,2004. The increase is a result of additional space segment costsrequired for the video broadcast service and the voice terminationcosts for the VoIP service.

Selling andMarketing.    Selling and marketing expenses increased by $1.0million, or 21.1%, to $5.8 million for the fiscal year endedJune 30, 2005 from $4.8 million for the fiscal year ended June 30,2004. The increase in selling and marketing costs is a result ofincreased salary and salary related expenses, increased internationaltravel related to marketing efforts primarily in the Middle East, andconsulting fees related to the Hosted Switch service offering.

Research and Development.    Research and developmentexpenses decreased by $0.3 million, or 23.1%, to $1.0 millionfor the fiscal year ended June 30, 2005 from $1.3 million for thefiscal year ended June 30, 2004. The decrease was principally due tonon-recurrence of costs associated with product research anddevelopment associated with projects in process in the fiscal yearended June 30, 2004.

General andAdministrative.    General and administrative expenses increasedby $1.1 million, or 16.3%, to $7.6 million for the fiscal yearended June 30, 2005 from $6.5 million for the fiscal year ended June30, 2004. The increase in general and administrative expenses for thefiscal year ended June 30, 2005 was primarily due to a collectiveincrease of $1.6 million for increased salary and salary relatedexpenses, an increase in fees related to the implementation of Section404 of the Sarbanes-Oxley Act of 2002, increase in the accountsreceivable allowance at our data communication services business, and

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termination costs. The increase of $1.6million was offset by $0.5 million net bad debt recovery which consistsof a $1.5 million settlement reached with a customer in the fiscal yearended June 30, 2005 compared to a $1.0 million recovery in the fiscalyear ended June 30, 2004.

Gain on Sale of Available-for-SaleSecurities.    The gain on sale of available-for-sale securitiesof $0.1 million for the fiscal years ended June 30, 2005 and 2004related to the sale of investments that resulted in proceeds of $0.3million and $0.4 million in the fiscal years ended June 30, 2005 and2004, respectively.

Interest Income.    Interest incomeincreased by $0.2 million, or 63.8%, to $0.4 million for thefiscal year ended June 30, 2005 from $0.3 million for the fiscal yearended June 30, 2004, as a result of increased interest rates coupledwith an increase in the balance of cash and cash equivalents.

Fiscal Years Ended June 30, 2004 and 2003

Revenues from Ground Segment Systems, Networks and EnterpriseSolutions.    Revenues from ground segment systems, networks andenterprise solutions increased by $33.2 million, or 82.7%, to$73.3 million for the fiscal year ended June 30, 2004 from $40.1million for the fiscal year ended June 30, 2003. The increase inrevenues was primarily the result of increased infrastructure sales inthe U.S. Government and government related entities marketplace,coupled with increased sales due to a general overall improvement inthe telecommunications industry segments we serve and the achievementof shipment milestones associated with projects currently inprogress.

Revenues from Data CommunicationsServices.    Revenues from data communications services wereconsistent at $13.9 million for the fiscal years ended June 30, 2004and 2003. A significant portion of these revenues was derived fromsales of our Access PlusTM service.

Costsfrom Ground Segment Systems, Networks and EnterpriseSolutions.    Costs from ground segment systems, networks andenterprise solutions increased by $23.8 million, or 60.4%, to$63.3 million for the fiscal year ended June 30, 2004 from $39.4million for the fiscal year ended June 30, 2003. The increase isattributable to a higher revenue base. Costs as a percentage of relatedrevenues decreased to 86.3% for the fiscal year ended June 30,2004 from 98.3% for the fiscal year ended June 30, 2003. Thedecrease was mainly attributable to cost overruns incurred on a majorproject during the year ended June 30, 2003 and increased margin onrevenues related to U.S. Government and government related entitiesprojects during the year ended June 30, 2004.

Costs from DataCommunications Services.    Costs from data communicationsservices decreased by $4.8 million, or 27.0%, to $13.0 millionfor the fiscal year ended June 30, 2004 from $17.8 million for thefiscal year ended June 30, 2003. Costs as a percentage of relatedrevenues decreased to 93.3% for the fiscal year ended June 30,2004 from 128.0% for the fiscal year ended June 30, 2003. Thedecrease in costs was primarily due to agreements reached with two ofour vendors during February 2003 and October 2002, in which wesignificantly reduced our space segment transponder costs andobligations.

Selling and Marketing.    Selling andmarketing expenses decreased by $1.2 million, or 20.4%, to $4.8million for the fiscal year ended June 30, 2004 from $6.0 million forthe fiscal year ended June 30, 2003. The decrease was primarily due toreduced salary, salary related expenses, and travel and living costsfor sales and marketing personnel as part of our cost-cuttinginitiatives.

Research and Development. Research anddevelopment expenses increased by $0.5 million, or 66.0%, to$1.3 million for the fiscal year ended June 30, 2004 from $0.8 millionfor the fiscal year ended June 30, 2003. The increase was due toproduct research and development initiatives associated with projectscurrently in progress, research efforts in remote video monitoringsystems and internal development of new monitoring and controltechnologies.

General and Administrative. General andadministrative expenses decreased by $2.9 million, or 30.7%, to$6.5 million for the fiscal year ended June 30, 2004 from $9.4 millionfor the fiscal year ended June 30, 2003. As a percentage of revenues,general and administrative expenses decreased to 7.5% for thefiscal year ended June 30, 2004 from 17.4% for the fiscal yearended June 30, 2003 primarily due to the increase in revenues. On anabsolute basis, the decrease in general and administrative expenses forthe fiscal year ended June 30, 2004 is primarily due to thenon-recurrence of a $1.5 million allowance for 

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uncollectible accounts receivable from amajor customer recorded in the fiscal year ended June 30, 2003, areduction in legal expenses related to a settlement reached with acustomer in the Middle East, along with reduction in salaries due toour cost cutting initiatives.

Interest Income. Interestincome decreased by $0.2 million, or 35.8%, to $0.3 million forthe fiscal year ended June 30, 2004 from $0.4 million for the fiscalyear ended June 30, 2003. The decrease was due the reduction of theaverage balance of cash and cash equivalents due to the cash used inour operations during the fiscal year ended June 30, 2003 along with areduction in the interest rates.

Interest Expense.Interest expense decreased by $0.5 million to zero for the fiscal yearended June 30, 2004 from $0.5 million for the fiscal year ended June30, 2003. The decrease was due to the termination of our capital leaseobligation in February 2003.

Gain on Sale ofAvailable-for-Sale Securities. The gain on sale ofavailable-for-sale securities of $0.1 million for the fiscal year endedJune 30, 2004, related to the sale of an investment that resulted inproceeds of $0.4 million in the year ended June 30, 2004.

Quarterly Results

The following tables setforth unaudited consolidated financial information for each of theeight fiscal quarters in the period ended June 30, 2005. We believethat this information has been presented on the same basis as theaudited consolidated financial statements appearing elsewhere in theAnnual Report on Form 10-K, and we believe all necessary adjustments,consisting only of normal recurring adjustments, have been included inthe amounts stated below to present fairly the unaudited quarterlyresults of operations when read in conjunction with our auditedconsolidated financial statements and related notes included elsewherein this Annual Report on Form 10-K. The operating results for anyquarter are not necessarily indicative of the operating results for anyfuture period.

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|                                                                                             |  |                                      |         |              |  |             |         |               |  |             |         |              |  |             |         |              |  |        |         |        |  |        |         |         |  |        |         |         |  |        |         |         |  |  |
|---------------------------------------------------------------------------------------------|--|--------------------------------------|---------|--------------|--|-------------|---------|---------------|--|-------------|---------|--------------|--|-------------|---------|--------------|--|--------|---------|--------|--|--------|---------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                                                                        |  | ThreeMonths Ended,                   |
|                                                                                        |  | June30,2005                          |         | Mar. 31,2005 |  | Dec.31,2004 |         | Sept. 30,2004 |  | June30,2004 |         | Mar. 31,2004 |  | Dec.31,2003 |         | Sept.30,2003 |
|                                                                                        |  | (In thousands, exceptper share data) |
| **Consolidated Statementof OperationsData:**                                                |  |                                 |    |         |  |        |    |          |  |        |    |         |  |        |    |         |  |   |    |   |  |   |    |    |  |   |    |    |  |   |    |    |
| Revenuesfrom ground segment systems, networks and enterprisesolutions                       |  | $                                    | 20,934  |         |  | $           | 23,443  |          |  | $           | 24,693  |         |  | $           | 21,586  |         |  | $      | 17,427  |   |  | $      | 18,956  |    |  | $      | 19,891  |    |  | $      | 17,031  |    |
| Revenuesfrom data communicationsservices                                                    |  |                                 | 5,779   |         |  |        | 4,741   |          |  |        | 4,535   |         |  |        | 3,873   |         |  |   | 3,387   |   |  |   | 3,305   |    |  |   | 3,809   |    |  |   | 3,430   |    |
| Totalrevenues                                                                               |  |                                 | 26,713  |         |  |        | 28,184  |          |  |        | 29,228  |         |  |        | 25,459  |         |  |   | 20,814  |   |  |   | 22,261  |    |  |   | 23,700  |    |  |   | 20,461  |    |
| Costsand operating expenses:                                                                |  |                                 |    |         |  |        |    |          |  |        |    |         |  |        |    |         |  |   |    |   |  |   |    |    |  |   |    |    |  |   |    |    |
| Costs from ground segmentsystems, networks and enterprisesolutions                          |  |                                 | 16,762  |         |  |        | 19,520  |          |  |        | 21,013  |         |  |        | 18,062  |         |  |   | 14,000  |   |  |   | 16,180  |    |  |   | 17,798  |    |  |   | 15,304  |    |
| Costsfrom data communicationsservices                                                       |  |                                 | 4,433   |         |  |        | 4,186   |          |  |        | 3,714   |         |  |        | 3,194   |         |  |   | 3,381   |   |  |   | 3,138   |    |  |   | 3,255   |    |  |   | 3,218   |    |
| Sellingandmarketing                                                                         |  |                                 | 1,793   |         |  |        | 1,476   |          |  |        | 1,383   |         |  |        | 1,169   |         |  |   | 1,347   |   |  |   | 1,219   |    |  |   | 1,126   |    |  |   | 1,116   |    |
| Researchanddevelopment                                                                      |  |                                 | 318     |         |  |        | 231     |          |  |        | 174     |         |  |        | 298     |         |  |   | 375     |   |  |   | 242     |    |  |   | 236     |    |  |   | 475     |    |
| Generalandadministrative                                                                    |  |                                 | 2,431   |         |  |        | 2,463   |          |  |        | 2,074   |         |  |        | 628     |         |  |   | 1,414   |   |  |   | 2,118   |    |  |   | 2,103   |    |  |   | 894     |    |
| Totalcosts and operatingexpenses                                                            |  |                                 | 25,737  |         |  |        | 27,876  |          |  |        | 28,358  |         |  |        | 23,351  |         |  |   | 20,517  |   |  |   | 22,897  |    |  |   | 24,518  |    |  |   | 21,007  |    |
| Income(loss) fromoperations                                                                 |  |                                 | 976     |         |  |        | 308     |          |  |        | 870     |         |  |        | 2,108   |         |  |   | 297     |   |  |   | (636    | )  |  |   | (818    | )  |  |   | (546    | )  |
| Otherincome (expense):                                                                      |  |                                 |    |         |  |        |    |          |  |        |    |         |  |        |    |         |  |   |    |   |  |   |    |    |  |   |    |    |  |   |    |    |
| Interestincome                                                                              |  |                                 | 158     |         |  |        | 121     |          |  |        | 92      |         |  |        | 73      |         |  |   | 80      |   |  |   | 63      |    |  |   | 66      |    |  |   | 62      |    |
| Gainon sale ofinvestment                                                                    |  |                                 | — |         |  |        | — |          |  |        | 40      |         |  |        | — |         |  |   | — |   |  |   | — |    |  |   | — |    |  |   | — |    |
| Gainon sale of available-for- sale securities                                               |  |                                 | — |         |  |        | 132     |          |  |        | — |         |  |        | — |         |  |   | — |   |  |   | — |    |  |   | 91      |    |  |   | — |    |
| Income(loss) before incometaxes                                                             |  |                                 | 1,134   |         |  |        | 561     |          |  |        | 1,002   |         |  |        | 2,181   |         |  |   | 377     |   |  |   | (573    | )  |  |   | (661    | )  |  |   | (484    | )  |
| Provisionfor incometaxes                                                                    |  |                                 | 64      |         |  |        | — |          |  |        | — |         |  |        | — |         |  |   | — |   |  |   | — |    |  |   | — |    |  |   | — |    |
| Netincome(loss)                                                                             |  | $                                    | 1,070   |         |  | $           | 561     |          |  | $           | 1,002   |         |  | $           | 2,181   |         |  | $      | 377     |   |  | $      | (573    | )  |  | $      | (661    | )  |  | $      | (484    | )  |
| Basicand diluted net income (loss) per commonshare                                          |  | $                                    | 0.07    |         |  | $           | 0.04    |          |  | $           | 0.07    |         |  | $           | 0.15    |         |  | $      | 0.03    |   |  | $      | (0.04   | )  |  | $      | (0.05   | )  |  | $      | (0.04   | )  |
| Weighted-averageshares used in the calculation of basic net income (loss) per commonshare   |  |                                 | 14,593  |         |  |        | 14,517  |          |  |        | 14,396  |         |  |        | 14,180  |         |  |   | 14,141  |   |  |   | 14,100  |    |  |   | 12,575  |    |  |   | 12,576  |    |
| Weighted-averageshares used in the calculation of diluted net income (loss) per commonshare |  |                                 | 15,048  |         |  |        | 15,143  |          |  |        | 14,975  |         |  |        | 14,705  |         |  |   | 14,593  |   |  |   | 14,100  |    |  |   | 12,575  |    |  |   | 12,576  |    |
|                                                                                             |

Netincome for the Company's fiscal 2005 fourth quarter ofapproximately $1.1 million included a net non-recurring gain ofapproximately $0.3 million, which represents a $0.4 million gainincluded in costs from data communications services related to thereversal of previously recorded fixed asset depreciation, offset by a$0.1 million charge for the accelerated vesting of options.

Wemay experience significant quarter-to-quarter fluctuations in ourconsolidated results of operations, which may result in volatility inthe price of our common stock. See section entitled "RiskFactors."

Liquidity and CapitalResources

At June 30, 2005, we had working capital of $37.0million, including cash and cash equivalents of $25.6 million, netaccounts receivable of $22.7 million, inventories of $13.3 million andprepaid expenses and other current assets of $0.9 million, offset by$15.6 million in accounts payable, $5.6 million in deferred revenue and$4.5 million in accrued expenses and other current liabilities.

Net cash used in operating activities during the fiscal year endedJune 30, 2005 was $4.4 million, which primarily related to an increasein inventories of $9.6 million due to the timing of shipments oncertain 

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jobs, an increase in accounts receivable of$8.5 million due to the increase in revenues offset by net income of$4.8 million, an increase in deferred revenues of $4.5 million due totiming differences between project billings and revenue recognitionmilestones resulting from specific customer contracts and a non-cashitem representing depreciation and amortization expense of $2.7 millionprimarily related to the network operations center and satellite earthstation equipment. Included in our operating cash flows was a $4.0million receipt related to a settlement reached in July 2004 with amajor customer.

Net cash used in investing activities duringfiscal year ended June 30, 2005 was $0.6 million, which related to thepurchase of $2.9 million of fixed assets primarily for our networkoperations center in order to support our existing service base anddevelop new service offerings, offset by a decrease in restricted cashof $1.9 million based on certificates of deposit issued as collateralfor specific projects and proceeds received of $0.3 million from thesale of available-for-sale securities.

Net cash provided byfinancing activities during fiscal year ended June 30, 2005 was $2.3million which related to $1.3 million of proceeds from the exercise ofwarrants, $0.9 million of proceeds from the exercise of stock optionsand $0.2 million of proceeds from the sale of common stock inconnection with the employee stock purchase plan.

We have acredit agreement in place which provides for a working capital creditfacility of up to $16.5 million, which expires in October 2005. We maybe advanced up to 80% of eligible accounts receivable and100% of unrestricted cash and cash equivalents at the bank. Theline of credit bears interest at 7.5% per annum or the primerate plus 1.5% per annum, and is collateralized by a firstsecurity interest on all of our personal property. The credit agreementallows us to borrow and apply letters of credit against theavailability under the line of credit. In addition, the creditagreement contains certain financial and other covenants, depositrequirements, monthly reporting provisions and other requirements, asdefined in the credit agreement, with which we were in compliance atJune 30, 2005. As of June 30, 2005, no borrowings were outstandingunder this credit facility, however, there were standby letters ofcredit of approximately $14.1 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 fiscal 2009. Future minimum lease payments due on these leasesthrough June 30, 2006 are approximately $8.8 million.

We expectthat our cash and working capital requirements for operating activitieswill increase as we continue to implement our business strategy.Management anticipates additional working capital requirements for workin progress for orders as obtained and that we may experience negativecash flows due to quarter to quarter operating performance.

GNSChas had, and we expect it will continue to have, working capital andadditional capital expenditure requirements, which have, and maycontinue to put increased pressure on our capital resources.

Ourfuture capital requirements will depend upon many factors, includingthe success of our marketing efforts in the ground segment systems,networks and data communications services business, the nature andtiming of customer orders and the level of capital requirements relatedto the expansion of our service offerings. Based on current plans, webelieve that our existing capital resources will be sufficient to meetworking capital requirements at least through June 30, 2006. However,we cannot assure you that there will be no unforeseen events orcircumstances that would consume available resources significantlybefore that time. For example, future events occurring in response tothe hostilities in Iraq and Afghanistan, or in connection with anyarmed conflict, including, without limitation, future terrorist attacksagainst the United States or its allies or military or trade or traveldisruptions impacting our ability to sell and market our products andservices in the United States and internationally may impact ourresults of operations. In particular, we currently have two significantcontracts with the Ministry of Communication of the IslamicTransitional State of Afghanistan. Unexpected events negativelyimpacting international commerce, including additional conflicts in theMiddle East, could defer our ability to close contracts withinternational customers. Additional funds may not be available whenneeded and, even if available, additional funds may be raised throughfinancing arrangements and/or the issuance of preferred or common stockor convertible securities on terms and prices significantly morefavorable than those of 

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the currently outstanding common stock,which could have the effect of diluting or adversely affecting theholdings or rights of our existing stockholders. If adequate funds areunavailable, we may be required to delay, scale back or eliminate someof our operating activities, including, without limitation, the timingand extent of our marketing programs, capital expenditures and researchand development activities and we may be required to reduce headcount.We cannot assure you that additional financing will be available to uson acceptable terms, or at all.

ContractualObligations and Commercial Commitments

At June 30, 2005, we hadcontractual obligations and commercial commitments as follows (inthousands):

|                                  |  |        |        |                      |  |           |        |           |  |             |        |        |  |        |        |        |  |        |                                             |        |  |  |
|----------------------------------|--|--------|--------|----------------------|--|-----------|--------|-----------|--|-------------|--------|--------|--|--------|--------|--------|--|--------|---------------------------------------------|--------|--|--|
|                             |  |   |        | PaymentsDue byPeriod |
|                             |  | Total  |        | Lessthan 1year       |  | 1-3 years |        | 4-5 years |  | After5years |
| **ContractualObligations**       |  |   |   |                 |  |      |   |      |  |        |   |   |  |   |   |   |  |   |                                        |   |
| Operatingleases                  |  | $      | 16,732 |                 |  | $         | 8,839  |      |  | $           | 7,230  |   |  | $      | 663    |   |  | $      |       — |   |
| Totalcontractual cashobligations |  | $      | 16,732 |                 |  | $         | 8,839  |      |  | $           | 7,230  |   |  | $      | 663    |   |  | $      | —                                     |   |
|                                  |

|                                 |  |                        |        |                                          |  |          |        |           |  |            |        |        |  |        |         |        |  |        |         |        |  |  |
|---------------------------------|--|------------------------|--------|------------------------------------------|--|----------|--------|-----------|--|------------|--------|--------|--|--------|---------|--------|--|--------|---------|--------|--|--|
|                            |  |                   |        | Amountof Commitment Expiration PerPeriod |
|                            |  | TotalAmounts Committed |        | Less than 1year                          |  | 1-3years |        | 4-5 years |  | Over5years |
| **OtherCommercial Commitments** |  |                   |   |                                     |  |     |   |      |  |       |   |   |  |   |    |   |  |   |    |   |
| Standby letters ofcredit        |  | $                      | 14,143 |                                     |  | $        | 7,456  |      |  | $          | 6,687  |   |  | $      | — |   |  | $      | — |   |
| Totalcommercialcommitments      |  | $                      | 14,143 |                                     |  | $        | 7,456  |      |  | $          | 6,687  |   |  | $      | — |   |  | $      | — |   |
|                                 |

RelatedParty Transactions

During January 2003, pursuant to a letteragreement, we combined the then outstanding loan and advancesreceivable from an individual who is a former executive officer and acurrent employee into a $0.3 million promissory note. Under the termsof the letter agreement we will forgive the outstanding principal andinterest amounts due on the promissory note in five annual installmentsbeginning in January 2004 so long as the former executive officerremains an employee, subject to the terms of the letter agreement. InMarch 2005, the Company forgave the second installment under thepromissory note.

During fiscal 2002, we advanced $0.3 million toan officer of the Company. On November 12, 2003, the officer soldapproximately 61,000 shares of the Company's common stock at afair market value to the Company in connection with its stockrepurchase program. On November 12, 2003, the officer paidapproximately $0.3 million to the Company to satisfy all amountsoutstanding on the promissory note, together with accrued interestthereon.

Risk Factors

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

Werely on a small number of customer contracts for a large portion of ourrevenue. Specifically, we have agreements with six customers to provideequipment and services, from which we expect to generate a significantportion of our revenues. We derived 20%, 13% and13% of our revenues in the year ended June 30, 2005 from theMinistry of Communication of the Islamic Transitional State ofAfghanistan, the United Nations and Societatea NationalaRadiocomunicatti S.A. in Romania, respectively. All of these projectsare in developing countries or areas currently involved in militaryconflicts. If any key customer is unable to implement its businessplan, the market for these customers' services declines,political or military conditions make performance impossible or if allor any of the customers modifies or terminates its agreement with us,and we are unable to replace these contracts, our results ofoperations, business and financial condition would be materiallyharmed.

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Risks associated withoperating in international markets could restrict our ability to expandglobally and harm our business and prospects.

We market andsell our products and services in the United States andinternationally. We anticipate that international sales will continueto account for a significant portion of our total revenues for theforeseeable 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 of operations; |

|              |                                                                                                                 |
|--------------|-----------------------------------------------------------------------------------------------------------------|
| •  | changes in regulatory requirements couldrestrict our ability to deliver services to our internationalcustomers; |

|              |                                                                                                                                  |
|--------------|----------------------------------------------------------------------------------------------------------------------------------|
| •  | export restrictions,tariffs, licenses and other trade barriers could prevent us fromadequately 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 could affect ourresults of operations. |

These and other risks could impedeour ability to manage our international operations effectively, limitthe future growth of our business, increase our costs and requiresignificant management attention.

If GNSC doesnot execute its business strategy or if the market for its servicesfails to develop or develops more slowly than we expect, our results ofoperations will be harmed.

GNSC's future revenues andresults of operations are dependent on its execution of its businessstrategy and development of the market for its current and futureservices. Despite the settlement agreements which modified and reducedour satellite bandwidth obligations, we cannot assure you that thetransponder space will be efficiently and substantially utilized orthat an increase in orders will be realized. GNSC has had, and weexpect will continue to have, cash requirements, which have and willdecrease our cash resources. If GNSC does not efficiently andsubstantially utilize its transponder space capacity and increase itslevel of orders, 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 acatastrophic loss affecting our operations in Hauppauge, New York ourresults of operations would be harmed.

GNSC revenues andresults of operations are dependant on the infrastructure of theNetwork Operations Center and the International Teleport at ourheadquarters in Hauppauge, New York. A 

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catastrophic event to this facility or tothe infrastructure 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 effect our business, results of operations and financialcondition.

Our markets are highly competitive andwe have many established competitors, and we may lose market share as aresult.

The markets in which we operate are highly competitiveand this 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, andGlobal Communication Services, and (2) equipment manufacturers whichalso provide integrated systems, like 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.

If our productsand services are not accepted in developing countries with emergingmarkets, our revenues will be impaired.

We anticipate that asubstantial portion of the growth in the demand for our products andservices will come from customers in developing countries due to a lackof basic communications infrastructure in these countries. However, wecannot guarantee an increase in the demand for our products andservices in developing countries or that customers in these countrieswill accept our products and services at all. Our ability to penetrateemerging markets in developing countries is dependent upon variousfactors including:

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

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

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

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

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We have had a history ofoperating losses and negative cash flow. Our negative cash flows mayincrease as we pursue our business plan and our losses may reoccur,which may strain our capital resources.

Although recently wehave had profitable quarters, we have incurred significant net lossessince we began operating in August 1994. We incurred net losses of $1.3million during the fiscal year ended June 30, 2004, and $19.6 millionduring the fiscal year ended June 30, 2003. As of June 30, 2005 ouraccumulated deficit was $70.4 million. Our ability to maintainprofitability will depend upon our ability to generate significantrevenues through new profitable customer contracts and the expansion ofour existing products and services, including our data communicationsservices. We cannot assure you that we will be able to obtain newprofitable customer contracts or generate significant additionalrevenues from those contracts or any new products or services that weintroduce. We may not be able to sustain or increase our profits on aquarterly or annual basis in the future and the need to finance thegrowth of our business, either of which will negatively impact ouroperating cash flows.

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 of ourrevenues from fixed-price projects. We assume greater financial riskson a fixed-price project than on a time-and-expense based project. Ifwe miscalculate the resources or time we need for these fixed-priceprojects, the costs of completing these projects may exceed ouroriginal estimates, which would negatively impact our results ofoperations.

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

We derive, and expect tocontinue to derive, a significant amount of revenues from the sale ofsatellite ground segment systems and networks. If the long-term growthin demand for communications networks does not continue to return fromrecent depressed levels, the demand for our satellite ground segmentsystems and networks may decline or grow more slowly than we expect. Asa result, we may not be able to grow our business, our revenues maydecline from current levels and our results of operations may beharmed. The demand for communications networks and the products used inthese networks is affected by various factors, many of which are beyondour control. For example, the uncertain general economic conditionshave affected the overall rate of capital spending by many of ourcustomers. Also, many companies have found it difficult to raisecapital to finish building their communications networks and,therefore, have placed fewer orders. The economic slowdown resulted ina softening of demand from our customers. We cannot predict the extentto which demand will increase. Further, increased competition amongsatellite ground segment systems and networks manufacturers hasincreased pricing pressures. We have seen improvement in the segmentswe serve, in particular within the U.S. Government and governmentrelated entities marketplace, but a future reduction in opportunitiesfrom U.S. Government and government related agencies will negativelyimpact our results of operations.

We depend uponcertain key personnel and may not be able to retain these employees. Ifwe lose the services of these individuals or cannot hire additionalqualified personnel, our business will be harmed.

Our successalso depends to a substantial degree on our ability to attract,motivate and retain other highly-qualified personnel. There isconsiderable competition for the services of highly-qualified technicaland engineering personnel. We may not be able either to retain ourcurrent personnel or hire additional qualified personnel if and whenneeded.

Our future performance depends on the continued serviceof our key technical, managerial and marketing personnel; inparticular, David Hershberg and Kenneth Miller based upon theirindividual knowledge of the markets in which we operate. The employmentof any of our key personnel could cease at any time.

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

In the delivery of our data communicationsservices, we lease space segment from various satellite transpondervendors. The damage or loss of any of the satellites used by us, or thetemporary or 

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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 oursuppliers, some of which are our sole or a limited source of supply,and the loss of these suppliers could materially adversely affect ourbusiness, results of operations and financial condition.

Wecurrently obtain most of our critical components and services fromsingle or limited sources and generally do not maintain significantinventories or have long-term or exclusive supply contracts with ourvendors. We have from time to time experienced delays in receivingproducts from vendors due to lack of availability, quality control ormanufacturing problems, shortages of materials or components or productdesign difficulties. We may experience delays in the future andreplacement services or products may not be available when needed, orat all, or at commercially reasonable rates or prices. If we were tochange some of our vendors, we would have to perform additional testingprocedures on the service or product supplied by the new vendors, whichwould prevent or delay the availability of our products and services.Furthermore, our costs could increase significantly if we need tochange vendors. If we do not receive timely deliveries of qualityproducts and services, or if there are significant increases in theprices of these products or services, it could have a material adverseeffect on our business, results of operations and financialcondition.

Our network may experience securitybreaches, which could disrupt our services.

Our networkinfrastructure may be vulnerable to computer viruses, break-ins, denialof service attacks and similar disruptive problems caused by ourcustomers or other Internet users. Computer viruses, break-ins, denialof service attacks or other problems caused by third parties could leadto interruptions, delays or cessation in service to our customers.There currently is no existing technology that provides absolutesecurity. We may face liability to customers for such securitybreaches. Furthermore, these incidents could deter potential customersand adversely affect existing customer relationships.

If the satellite communications industry fails tocontinue to develop or new technology makes it obsolete, our businessand financial condition will be harmed.

Our business isdependent on the continued success and development of satellitecommunications technology, which competes with terrestrialcommunications transport technologies like terrestrial microwave,coaxial cable and fiber optic communications systems. Fiber opticcommunications systems have penetrated areas in which we havetraditionally provided services. If the satellite 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 may not be able to keep pace with technologicalchanges, which would make our products and services becomenon-competitive and obsolete.

The telecommunications industry,including satellite-based communications services, is characterized byrapidly changing technologies, frequent new product and serviceintroductions and evolving industry standards. If we are unable, fortechnological or other reasons, to develop and introduce new productsand services or enhancements to existing products and services in atimely manner or in response to changing market conditions or customerrequirements, our products and services would become non-competitiveand obsolete, which would harm our business, results of operations andfinancial condition.

We may be unable to raiseadditional funds to meet our capital requirements in the future.

We believe that our available cash resources will be sufficient tomeet our working capital and capital expenditure requirements throughat least June 30, 2006. 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 

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may need to raise additional funds in orderto meet additional working capital requirements and to supportadditional capital expenditures. Should this need arise, additionalfunds may not be available when needed and, even if additional fundsare available, we may not find the terms favorable or commerciallyreasonable. If adequate funds are unavailable, we may be required todelay, reduce or eliminate some of our operating activities, includingmarketing programs and research and development programs. 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.

Unauthorized use of our intellectual property bythird parties may damage our business.

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

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

We havefiled applications for trademark registration of Globecomm SystemsInc., Globecomm and GSI in the United States and various othercountries, and have been granted registrations for some of these termsin the United States, Europe and Russia. We have various othertrademarks and service marks registered or pending for registration inthe United States and in other countries and may seek registration ofother trademarks and service marks in the future. We cannot assure youthat registrations will be granted from any of our pending or futureapplications, or that any registrations that are granted will preventothers from using similar trademarks in connection with related goodsand services.

Defending against intellectualproperty infringement claims could be time consuming and expensive, andif we are not successful, could cause substantial expenses and disruptour business.

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

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Risks Related to the Securities Marketsand Ownership of Our Common Stock

Our stock price isvolatile.

From July 1, 2004 through June 30, 2005, our stockprice ranged from a low of $4.81 per share to a high of $7.58 pershare. The market price of our common stock, like that of thesecurities of many telecommunications and high technology industrycompanies, could be subject to significant fluctuations and is likelyto remain volatile based on many factors, including thefollowing:

|              |                                           |
|--------------|-------------------------------------------|
| •  | quarterly variations inoperating results; |

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

|              |                                                                          |
|--------------|--------------------------------------------------------------------------|
| •  | changes in financial estimates orrecommendations 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 marketsfor telecommunications 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.

Becauseour common stock is thinly traded, it may be difficult to sell sharesof our common stock into the markets without experiencing significantprice volatility.

Our common stock is currently traded on theNASDAQ 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-takeoverprovisions.

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

Wehave not paid dividends in the past and do not expect to pay dividendsin the future, and any return on investment may be limited to the valueof our stock.

We have never paid cash dividends on our commonstock and do not anticipate paying cash dividends on our common stockin the foreseeable future. The payment of dividends on our common stockwill depend on our future earnings, capital requirements, financialcondition, future prospects and other factors as the board of directorsmight deem relevant. If we do not pay dividends our stock may be lessvaluable because a return on your investment will only occur if ourstock price appreciates.

Risks Related to GovernmentApprovals

We are subject to many governmentregulations, and failure to comply with them will harm ourbusiness.

Operations and Use of Satellites

Weare subject to various federal laws and regulations, which may havenegative effects on our business. We operate FCC licensed earthstations in Hauppauge, New York, subject to the Communications Act of1934, as amended (the "FCC Act"), and therules and regulations of FCC. Pursuant to the 

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FCC Act and rules, we have obtained and arerequired to maintain radio transmission licenses from the FCC for bothdomestic and foreign operations of our earth stations. We have alsoobtained and are required to maintain authorization issued underSection 214 of the FCC Act to act as a telecommunications carrier,which authorization also extends to GNSC. These licenses should berenewed by the FCC in the normal course as long as we remain incompliance with FCC rules and regulations. However, we cannot guaranteethat the FCC will grant additional licenses when our existing licensesexpire, nor are we assured that the FCC will not adopt new or modifiedtechnical requirements that will require us to incur expenditures tomodify or upgrade our equipment as a condition of retaining ourlicenses. We are also required to comply with FCC regulations regardingthe exposure of humans to radio frequency radiation from our earthstations. These regulations, as well as local land use regulations,restrict our freedom to choose where to locate our earth stations. Inaddition, prior to a third party acquisition of us, we would need toseek approval from the FCC to transfer the radio transmission licenseswe have 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.

ForeignRegulations

Regulatory schemes in countries in which we mayseek to provide our satellite-delivered data communications servicesmay impose impediments on our operations. Some countries in which weintend to operate have telecommunications laws and regulations that donot currently 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.

Regulation of the Internet

Due to the increasingpopularity and use of the Internet, it is possible that a number oflaws and regulations may be adopted at the local, national orinternational levels with respect to the Internet, covering issuesincluding user privacy and expression, pricing of products andservices, taxation, advertising, intellectual property rights,information security or the convergence of traditional communicationservices with Internet communications. It is anticipated that asubstantial portion of our Internet operations will be carried out incountries 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.

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Telecommunications Taxation,Support Requirements, and Access Charges

All telecommunicationscarriers providing domestic services in the United States are requiredto contribute a portion of their gross revenues for the support ofuniversal telecommunications services. Also, some telecommunicationsservices are subject to special taxation and to contributionrequirements to support services to special groups, like persons withdisabilities. Our services may be subject to new or increased taxes andcontribution requirements that could affect our profitability,particularly if we are not able to pass them through to customers foreither competitive or regulatory reasons.

Internet services arecurrently exempt from charges that long distance telephone companiespay for access to the networks of local telephone companies in theUnited States. Efforts have been made from time to time, and may bemade again in the future, to eliminate this exemption. If these accesscharges are imposed on telephone lines used to reach Internet serviceproviders and/or if flat rate telephone services for Internet accessare eliminated or curtailed, the cost to customers who access oursatellite facilities using telephone company-provided facilities couldincrease to an extent that could discourage the demand for ourservices. Likewise, the demand for our services in other countries maybe affected by the availability and cost of local telephone or othertelecommunications facilities to reach our facilities.

Export of Telecommunications Equipment

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

Foreign Ownership

We may, in thefuture, be required to seek FCC approval if foreign ownership of ourstock exceeds the specified criteria. Failure to comply with thesepolicies could result in an order to divest the offending foreignownership, fines, denial of license renewal and/or license revocationproceedings against the licensee by the FCC.

Item7A.    Quantitative and Qualitative Disclosures About MarketRisk

We are subject to a variety of risks, including foreigncurrency exchange rate fluctuations relating to certain purchases fromforeign vendors and our wholly-owned subsidiary, Globecomm SystemsEurope Limited, which primarily deals in British Pounds Sterling. Inthe normal course of business, we assess these risks and haveestablished policies and procedures to manage our exposure tofluctuations in foreign currency values.

Our objective inmanaging our exposure to foreign currency exchange rate fluctuations isto reduce the impact of adverse fluctuations in earnings and cash flowsassociated with foreign currency exchange rates. Accordingly, we mayutilize from time to time foreign currency forward contracts to hedgeour exposure on firm commitments denominated in foreign currency. AtJune 30, 2005 and 2004 we had no outstanding foreign exchangecontracts.

Our results of operations and cash flows are subjectto fluctuations due to changes in interest rates primarily from ourinvestment of available cash balances in money market funds withportfolios of investment grade corporate and government securities.Under our current positions, we do not use interest rate derivativeinstruments to manage exposure to interest rate changes.

Item 8.    Financial Statements and SupplementaryData

The information required by this item is incorporated byreference to the Consolidated Financial Statements listed in Item 15(a)of Part IV of this Annual Report on Form 10-K.

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Item 9.    Changes in andDisagreements with Accountants on Accounting and FinancialDisclosure

None

Item 9A.    Controls andProcedures

Our management is responsible for establishing andmaintaining adequate internal control over financial reporting.Internal control over financial reporting is defined in Rule 13a-15(f)and 15d-15(f) under the Securities Exchange Act of 1934, as amended, asa process designed by, or under the supervision of, the company'sprincipal executive and principal financial officers and effected bythe company's board of directors, management and other personnel,to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principlesand includes those policies and proceduresthat:

|              |                                                                                                                                                              |
|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | pertain to the maintenance ofrecords that, in reasonable detail, accurately and fairly reflect thetransactions and dispositions of the assets of thecompany; |

|              |                                                                                                                                                                                                                                                                                                                                        |
|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | provide reasonable assurancethat transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accountingprinciples, and that receipts and expenditures of the company are beingmade only in accordance with authorizations of management and directorsof the company; and |

|              |                                                                                                                                                                                                           |
|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | provide reasonableassurance regarding prevention or timely detection of unauthorizedacquisition, use or disposition of the company's assets thatcould have a material effect on the financial statements. |

Because of its inherent limitation, internal control over financialreporting may not prevent or detect misstatements. Also, projections ofany evaluation of effectiveness to future periods are subject to therisk that controls may become inadequate because of changes inconditions, or that the degree of compliance with the policies orprocedures may deteriorate.

Management has assessed theeffectiveness of our internal control over financial reporting as ofJune 30, 2005. In making this assessment, management used the criteriaset forth by the Committee of Sponsoring Organizations of the TreadwayCommission (COSO) in Internal Control-Integrated Framework.

Based on its assessment, management believes that, as of June 30,2005, our internal control over financial reporting is effective.

Our independent auditors have issued an attestation report on ourassessment of the Company's internal control over financialreporting. This report appears on page F-2.

Item9B.    OtherInformation

None

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PARTIII

Item 10.    Directorsand Executive Officers of the Registrant

Certain information inresponse to this item is incorporated herein by reference to"Election of Directors" and"Executive Officers" in Globecomm SystemsInc.'s Proxy Statement to be filed with the Securities andExchange Commission (the "SEC"). Informationon compliance with Section 16(a) of the Exchange Act is incorporatedherein by reference to "Section 16(a) Beneficial OwnershipReporting Compliance" in the Registrant's ProxyStatement to be filed with the SEC.

Item11.    Executive Compensation

Information in response to thisitem is incorporated herein by reference to "ExecutiveCompensation and Other Information" in theRegistrant's Proxy Statement to be filed with the SEC.

Item 12.    Security Ownership of Certain BeneficialOwners and Management

Information in response to this item isincorporated herein by reference to "Security Ownership ofCertain Beneficial Owners and Management" in theRegistrant's Proxy Statement to be filed with the SEC.

Item 13.    Certain Relationships and RelatedTransactions

Information in response to this item isincorporated herein by reference to "CertainTransactions" in the Registrant's Proxy Statement tobe filed with the SEC.

Item 14.    PrincipalAccounting Fees and Services

Information in response to thisitem is incorporated herein by reference to "Report of theAudit Committee of the Board of Directors" in theRegistrant's Proxy Statement to be filed with theSEC.

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PARTIV

Item 15.    Exhibits,Financial Statement Schedules

(A) (1)   Index toConsolidated Financial Statements

|                                                                                                           |  |        |     |        |  |  |
|-----------------------------------------------------------------------------------------------------------|--|--------|-----|--------|--|--|
| Reportsof Independent Registered Public AccountingFirm                                                    |  |   | F-1 |   |
| Consolidated Balance Sheets as ofJune 30, 2005 and 2004                                                   |  |   | F-3 |   |
| ConsolidatedStatements of Operations for the years ended June 30, 2005, 2004and 2003                      |  |   | F-4 |   |
| Consolidated Statements ofChanges in Stockholders' Equity for the years ended June 30,2005, 2004 and 2003 |  |   | F-5 |   |
| ConsolidatedStatements of Cash Flows for the years ended June 30, 2005, 2004 and2003                      |  |   | F-6 |   |
| Notes to Consolidated FinancialStatements                                                                 |  |   | F-7 |   |
|                                                                                                           |

       (2)   Indexto Consolidated Financial Statement Schedule

|                                                      |  |        |     |        |  |  |
|------------------------------------------------------|--|--------|-----|--------|--|--|
| ScheduleII — Valuation and Qualifying Accounts |  |   | S-1 |   |
|                                                      |

All other schedules for whichprovision is made in the applicable accounting regulation from the SECare not required under the related instructions or are inapplicable andtherefore have been omitted.

34

----

(3)    Indexof Exhibits

|                                                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |  |  |  |
|------------------------------------------------|--|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| ExhibitNo.       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 3.1                                            |  | Amendedand Restated Certificate of Incorporation (incorporated by reference toExhibit 3.1 of the Registrant's Annual Report on Form 10-K forthe fiscal year ended June 30,1998).                                                                                                                                                                                                                                                                                              |
| 3.2                                            |  | Amended and Restated By-laws ofthe Registrant (incorporated by reference to Exhibit 3.2 of theRegistrant's Annual Report on Form 10-K for the fiscal year endedJune 30, 1998).                                                                                                                                                                                                                                                                                                |
| 4.2                                            |  | See Exhibits 3.1 and 3.2for provisions of the Amended and Restated Certificate of Incorporationand Amended and Restated By-laws of the Registrant defining rights ofholders of Common Stock of the Registrant (incorporated by reference toExhibit 4.2 of the Registrant's Registration Statement on FormS-1, File No. 333-22425 (the "RegistrationStatement")).                                                                                                              |
| 10.1                                           |  | EmploymentAgreement dated as of October 9, 2001 by and between the Registrant andDavid E. Hershberg (incorporated by reference to Exhibit 10.9 of theRegistrant's Quarterly Report on Form 10-Q, for the quarter endedSeptember 30, 2001).                                                                                                                                                                                                                                    |
| 10.2                                           |  | EmploymentAgreement dated as of October 9, 2001 by and between the Registrant andKenneth A. Miller (incorporated by reference to Exhibit 10.10 of theRegistrant's Quarterly Report on Form 10-Q, for the quarter endedSeptember 30, 2001).                                                                                                                                                                                                                                    |
| 10.3                                           |  | The Amended andRestated 1997 Stock Incentive Plan (incorporated by reference toExhibit 99 of the Registrant's Registration Statement on Form S-8Registration, File No.333-112351).                                                                                                                                                                                                                                                                                            |
| 10.4                                           |  | 1999 Employee StockPurchase Plan (incorporated by reference to Exhibit 99.8 of theRegistrant's Registration Statement on Form S-8, File No.333-70527).                                                                                                                                                                                                                                                                                                                        |
| 10.5                                           |  | Rights Agreement, dated asof December 3, 1998, between the Registrant and American Stock Transferand Trust Company, which includes the form of Certificate ofDesignation for the Series A Junior Participating Preferred Stock asExhibit A, the form of Rights Certificate as Exhibit B and the Summaryof Rights to Purchase Series A Preferred Shares as Exhibit C(incorporated by reference to Exhibit 4 of Registrant's CurrentReport on Form 8-K, dated December 3,1998). |
| 10.6                                           |  | Negotiable Promissory Note,dated April 1, 2001, between the Registrant and Donald Woodring(incorporated by reference to Exhibit 10.19 of the Registrant'sAnnual Report on Form 10-K for the year ended June 30,2001).                                                                                                                                                                                                                                                         |
| 10.7                                           |  | Employment Agreement, dated asof October 9, 2001, by and between Stephen C. Yablonski and theRegistrant (incorporated by reference to Exhibit 10.20 of theRegistrant's Quarterly Report on Form 10-Q, for the quarter endedSeptember 30, 2001).                                                                                                                                                                                                                               |
| 10.8                                           |  | EmploymentAgreement, dated as of October 9, 2001, by and between Andrew C. Melfiand the Registrant (incorporated by reference to Exhibit 10.21 of theRegistrant's Quarterly Report on Form 10-Q, for the quarter endedSeptember 30, 2001).                                                                                                                                                                                                                                    |
| 10.9                                           |  | EmploymentAgreement, dated as of October 9, 2001, by and between Donald G.Woodring and the Registrant (incorporated by reference to Exhibit 10.22of the Registrant's Quarterly Report on Form 10-Q, for thequarter ended September 30, 2001).                                                                                                                                                                                                                                 |
|                                                |

35

----

|                                                |  |                                                                                                                                                                                                                                                                                     |  |  |  |  |
|------------------------------------------------|--|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| ExhibitNo.       |  |                                                                                                                                                                                                                                                                                |
| 10.10                                          |  | Employment Agreement,dated as of October 9, 2001, by and between Paul J. Johnson and theRegistrant (incorporated by reference to Exhibit 10.23 of theRegistrant's Quarterly Report on Form 10-Q, for the quarter endedSeptember 30, 2001).                                          |
| 10.11                                          |  | EmploymentAgreement, dated as of October 9, 2001, by and between Paul Eterno andthe Registrant (incorporated by reference to Exhibit 10.24 of theRegistrant's Quarterly Report on Form 10-Q, for the quarter endedSeptember 30, 2001).                                              |
| 10.12                                          |  | Promissory NoteSecured By Stock Pledge Agreement, dated September 4, 2001, by andbetween Kenneth A. Miller and the Registrant (incorporated by referenceto Exhibit 10.26 of the Registrant's Quarterly Report on Form10-Q, for the quarter ended September 30,2001).                |
| 10.13*                                         |  | Settlement Agreement, dated asof October 1, 2002, by and between Loral Skynet(, a division of LoralSpaceCom Corporation and the Registrant (incorporated by reference toExhibit 10.28 of the Registrant's Quarterly Report on Form 10-Q,for the quarter ended September 30,2002).   |
| 10.14                                          |  | Separation Agreement andGeneral Release, dated as of January 22, 2003, by and between G.Patrick Flemming and the Registrant (incorporated by reference toExhibit 10.29 of the Registrant's Quarterly Report on Form 10-Q,for the quarter ended December 31,2002).                   |
| 10.15                                          |  | Letter Agreement, dated as ofJanuary 31, 2003, by and between Donald G. Woodring and the Registrant(incorporated by reference to Exhibit 10.30 of the Registrant'sQuarterly Report on Form 10-Q, for the quarter ended December 31,2002).                                           |
| 10.16                                          |  | Loan and Security Agreement,dated as of September 15, 2003, by and between Silicon Valley Bank andthe Registrant (incorporated by reference to Exhibit 10.31 of theRegistrant's Annual Report on Form 10-K for the year ended June30, 2003).                                        |
| 10.17                                          |  | Loan ModificationAgreement, dated as of October 8, 2003, by and between Silicon ValleyBank and the Registrant (incorporated by reference to Exhibit 10.17 ofthe Registrant's Annual Report on Form 10-K for the year endedJune 30, 2004).                                           |
| 10.18                                          |  | Second LoanModification Agreement, dated as of March 2, 2004, by and betweenSilicon Valley Bank and the Registrant (incorporated by reference toExhibit 10.18 of the Registrant's Annual Report on Form 10-K forthe year ended June 30, 2004).                                      |
| 10.19                                          |  | ThirdLoan Modification Agreement, dated as of June 2, 2004, by and betweenSilicon Valley Bank and the Registrant (incorporated by reference toExhibit 10.19 of the Registrant's Annual Report on Form 10-K forthe year ended June 30, 2004).                                        |
| 10.20                                          |  | FourthLoan Modification Agreement, dated as of September 24, 2004, by andbetween Silicon Valley Bank and the Registrant (incorporated byreference to Exhibit 10.20 of the Registrant's Annual Report onForm 10-K for the year ended June 30,2004).                                  |
| 10.21                                          |  | Fifth Loan ModificationAgreement, dated as of October 29, 2004, by and between Silicon ValleyBank and the Registrant (incorporated by reference to Exhibit 10.1 ofthe Registrant's Registration Statement on Form 8-K, File No.000-22839).                                          |
| 10.22                                          |  | Form of SecuritiesPurchase Agreement, dated as of December 31, 2003, by and between theRegistrant and each of the purchasers listed on Exhibit A thereto(incorporated herein by reference to Exhibit 4.5 of theRegistrant's Registration Statement on Form S-3, File No.333-112024. |
|                                                |

36

----

|                                                |  |                                                                                                                                                                                                                                                                |  |  |  |  |
|------------------------------------------------|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| ExhibitNo.       |  |                                                                                                                                                                                                                                                           |
| 10.23                                          |  | Form of Warrant, datedas of December 31, 2003, by and between the Registrant and each of thepurchasers listed on Exhibit A thereto (incorporated herein byreference to Exhibit 4.5 of the Registrant's RegistrationStatement on Form S-3, File No.333-112024). |
| 14                                             |  | Registrant's Code ofEthics and Business Conduct (incorporated by reference to Exhibit 14 ofthe Registrant's Annual Report on Form 10-K for the year endedJune 30, 2004).                                                                                       |
| 21                                             |  | Subsidiaries of theRegistrant (filed herewith).                                                                                                                                                                                                                |
| 23                                             |  | Consent ofIndependent Registered Public Accounting Firm (filedherewith).                                                                                                                                                                                       |
| 31.1                                           |  | Chief Executive OfficerCertification required by Rules 13a-14 and 15d-14 under the SecuritiesExchange Act of 1934, as amended (filedherewith).                                                                                                                 |
| 31.2                                           |  | Chief Financial OfficerCertification required by Rules 13a- 14 and 15d- 14 under theSecurities Exchange Act of 1934, as amended (filedherewith).                                                                                                               |
| 32                                             |  | Certification Pursuant to 18U.S.C. Section 1350, as adopted pursuant to Section 906 of SarbanesOxley Act of 2002 (filedherewith).                                                                                                                              |
|                                           |  |                                                                                                                                                                                                                                                           |
|                                                |

|  |
|--|
|  |  |
|  |

|  |                                                                      |
|--|----------------------------------------------------------------------|
|  | * Confidentialtreatment granted for portions of this agreement. |

(B)    Exhibits

The response to thisportion of Item 15 is submitted as a separate section of thisreport.

(C)    Financial StatementSchedules

The response to this portion of Item 15 is submittedas a separate section of thisreport.

37

----

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of theSecurities Exchange Act of 1934, the registrant has duly caused thisreport to be signed on its behalf by the undersigned, thereunto dulyauthorized.

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

|        |  |                         |  |        |  |                                                                    |  |  |  |  |  |  |  |  |
|--------|--|-------------------------|--|--------|--|--------------------------------------------------------------------|--|--|--|--|--|--|--|--|
|   |  | Date:September 13, 2005 |  | By:    |  | /s/ DAVIDE. HERSHBERG                                              |
|   |  |                    |  |   |  | David E.Hershberg,Chairman of the Board and Chief ExecutiveOfficer |
|        |

Pursuant to the requirements of theSecurities Exchange Act of 1934, this report has been signed below bythe following persons on behalf of the registrant and in the capacitiesand on the datesindicated.

|                            |  |                                                                                                  |  |         |
|----------------------------|--|--------------------------------------------------------------------------------------------------|--|---------|
| SIGNATURE                  |  | TITLE                                                                                            |  | DATE    |
|                            |
| /s/DAVID E. HERSHBERG      |  | Chairman of the Board and ChiefExecutive Officer (Principal ExecutiveOfficer)                    |  | 9/13/05 |
|                            |
| David E.Hershberg          |
|                            |
| /s/ ANDREW C.MELFI         |  | Vice President,Chief Financial Officer and Treasurer (Principal Financial andAccounting Officer) |  | 9/13/05 |
|                            |
| Andrew C. Melfi            |
|                            |
| /s/KENNETH A. MILLER       |  | President andDirector                                                                            |  | 9/13/05 |
|                            |
| Kenneth A.Miller           |
|                            |
| /s/ RICHARD E.CARUSO       |  | Director                                                                                         |  | 9/13/05 |
|                            |
| Richard E.Caruso           |
|                            |
| /s/HARRY L. HUTCHERSON Jr. |  | Director                                                                                         |  | 9/13/05 |
|                            |
| Harry L. HutchersonJr.     |
|                            |
| /s/BRIAN T. MALONEY        |  | Director                                                                                         |  | 9/13/05 |
|                            |
| Brian T.Maloney            |
|                            |
| /s/JACK A. SHAW            |  | Director                                                                                         |  | 9/13/05 |
|                            |
| Jack A.Shaw                |
|                            |
| /s/A. ROBERT TOWBIN        |  | Director                                                                                         |  | 9/13/05 |
|                            |
| A. RobertTowbin            |
|                            |
| /s/C.J. WAYLAN             |  | Director                                                                                         |  | 9/13/05 |
|                            |
| C.J.Waylan                 |
|                            |

----

REPORT OFINDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Tothe Board of Directors and Stockholders of Globecomm SystemsInc.

We have audited the accompanying consolidated balancesheets of Globecomm Systems Inc. (the"Company") as of June 30, 2005 and 2004 andthe related consolidated statements of operations, changes instockholders' equity and cash flows for each of the three yearsin the period ended June 30, 2005. Our audits also included thefinancial statement schedule listed in the index at Item 15(a). Theseconsolidated financial statements and schedule are the responsibilityof the Company's management. Our responsibility is to express anopinion on these consolidated financial statements and schedule basedon our audits.

We conducted our audits in accordance with thestandards of the Public Company Accounting Oversight Board (UnitedStates). Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financial statements arefree of material misstatement. An audit includes examining, on a testbasis, evidence supporting the amounts and disclosures in the financialstatements. An audit also includes assessing the accounting principlesused and significant estimates made by management, as well asevaluating the overall financial statement presentation. We believethat our audits provide a reasonable basis for our opinion.

Inour opinion, the consolidated financial statements referred to abovepresent fairly, in all material respects, the financial position ofGlobecomm Systems Inc. at June 30, 2005 and 2004, and the consolidatedresults of its operations and its cash flows for each of the threeyears in the period ended June 30, 2005, in conformity with U.S.generally accepted accounting principles. Also, in our opinion, therelated financial statement schedule, when considered in relation tothe basic financial statements taken as a whole, presents fairly, inall material respects, the information set forth therein.

Wealso have audited, in accordance with the standards of the PublicCompany Accounting Oversight Board (United States), the effectivenessof Globecomm Systems Inc.'s internal control over financialreporting as of June 30, 2005, based on criteria established inInternal Control-Integrated Framework issued by the Committee ofSponsoring Organizations of the Treadway Commission and our reportdated September 9, 2005 expressed an unqualified opinion thereon.

|  | /s/   ERNST & YOUNG LLP |
|--|--------------------------------------------|

New York, NewYorkSeptember 9, 2005

F-1

----

REPORT OF INDEPENDENT REGISTERED PUBLICACCOUNTING FIRM

To the Board of Directors andStockholders of Globecomm Systems Inc.

We have auditedmanagement's assessment, included in the accompanyingManagement's Report on Internal Controls that Globecomm SystemsInc. maintained effective internal control over financial reporting asof June 30, 2005, based on criteria established in Internal Control– Integrated Framework issued by the Committee of SponsoringOrganizations of the Treadway Commission (COSO). Globecomm SystemsInc.'s management is responsible for maintaining effectiveinternal control over financial reporting and for its assessment of theeffectiveness of internal control over financial reporting. Ourresponsibility is to express an opinion on management'sassessment and an opinion on the effectiveness of the Company'sinternal control over financial reporting based on our audit.

Weconducted our audit in accordance with the standards of the PublicCompany Accounting Oversight Board (United States). Those standardsrequire that we plan and perform the audit to obtain reasonableassurance about whether effective internal control over financialreporting was maintained in all material respects. Our audit includedobtaining an understanding of internal control over financialreporting, evaluating management's assessment, testing andevaluating the design and operating effectiveness of internal control,and performing such other procedures as we considered necessary in thecircumstances. We believe that our audit provides a reasonable basisfor our opinion.

A company's internal control overfinancial reporting is a process designed to provide reasonableassurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company'sinternal control over financial reporting includes those policies andprocedures that (1) pertain to the maintenance of records that, inreasonable detail, accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonableassurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generallyaccepted accounting principles, and that receipts and expenditures ofthe company are being made only in accordance with authorizations ofmanagement and directors of the company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorizedacquisition, use, or disposition of the company's assets thatcould have a material effect on the financial statements. Because ofits inherent limitations, internal control over financial reporting maynot prevent or detect misstatements. Also, projections of anyevaluation of effectiveness to future periods are subject to the riskthat controls may become inadequate because of changes in conditions,or that the degree of compliance with the policies or procedures maydeteriorate.

In our opinion, management's assessment thatGlobecomm Systems Inc. maintained effective internal control overfinancial reporting as of June 30, 2005, is fairly stated, in allmaterial respects, based on criteria established in Internal Control— Integrated Framework issued by the Committee of SponsoringOrganizations of the Treadway Commission (COSO). Also, in our opinion,Globecomm Systems Inc. maintained, in all material respects, effectiveinternal control over financial reporting as of June 30, 2005, based onInternal Control — Integrated Framework issued by the Committeeof Sponsoring Organizations of the Treadway Commission (COSO).

Wehave also audited, in accordance with the standards of the PublicCompany Accounting Oversight Board (United States), the consolidatedbalance sheets of consolidated balance sheets of Globecomm Systems Inc.(the "Company") as of June 30, 2005 and 2004and the related consolidated statements of operations, changes instockholders' equity and cash flows for each of the three yearsin the period ended June 30, 2005 and our report dated September 9,2005 expressed an unqualified opinion.

|  | /s/   ERNST& YOUNG LLP |
|--|-------------------------------------------|

New York, New YorkSeptember 9,2005

F-2

----

GLOBECOMM SYSTEMS INC. CONSOLIDATEDBALANCE SHEETS (In thousands, except sharedata)

|                                                                                                                                                                        |  |             |         |             |  |        |         |         |  |  |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|-------------|---------|-------------|--|--------|---------|---------|--|--|
|                                                                                                                                                                   |  | June30,2005 |         | June30,2004 |
| **Assets**                                                                                                                                                             |  |        |    |        |  |   |    |    |
| Currentassets:                                                                                                                                                         |  |        |    |        |  |   |    |    |
| Cash andcashequivalents                                                                                                                                                |  | $           | 25,609  |        |  | $      | 28,252  |    |
| Restrictedcash                                                                                                                                                         |  |        | — |        |  |   | 1,903   |    |
| Accountsreceivable,net                                                                                                                                                 |  |        | 22,700  |        |  |   | 14,318  |    |
| Inventories                                                                                                                                                            |  |        | 13,317  |        |  |   | 3,904   |    |
| Prepaidexpenses and other currentassets                                                                                                                                |  |        | 858     |        |  |   | 1,274   |    |
| Deferred incometaxes                                                                                                                                                   |  |        | 38      |        |  |   | 83      |    |
| Totalcurrentassets                                                                                                                                                     |  |        | 62,522  |        |  |   | 49,734  |    |
| Fixedassets,net                                                                                                                                                        |  |        | 15,619  |        |  |   | 15,441  |    |
| Goodwill                                                                                                                                                               |  |        | 7,204   |        |  |   | 7,204   |    |
| Otherassets                                                                                                                                                            |  |        | 1,033   |        |  |   | 1,096   |    |
| Totalassets                                                                                                                                                            |  | $           | 86,378  |        |  | $      | 73,475  |    |
|                                                                                                                                                                   |  |        |    |        |  |   |    |    |
| **Liabilitiesand Stockholders'Equity**                                                                                                                                 |  |        |    |        |  |   |    |    |
| Currentliabilities:                                                                                                                                                    |  |        |    |        |  |   |    |    |
| Accountspayable                                                                                                                                                        |  | $           | 15,550  |        |  | $      | 15,453  |    |
| Deferredrevenues                                                                                                                                                       |  |        | 5,563   |        |  |   | 1,083   |    |
| Accrued payrolland related fringebenefits                                                                                                                              |  |        | 1,671   |        |  |   | 1,154   |    |
| Other accruedexpenses                                                                                                                                                  |  |        | 2,471   |        |  |   | 1,676   |    |
| Deferredliabilities                                                                                                                                                    |  |        | 316     |        |  |   | 316     |    |
| Totalcurrentliabilities                                                                                                                                                |  |        | 25,571  |        |  |   | 19,682  |    |
| Deferredliabilities, less currentportion                                                                                                                               |  |        | 670     |        |  |   | 987     |    |
|                                                                                                                                                                   |  |        |    |        |  |   |    |    |
| Commitmentsandcontingencies                                                                                                                                            |  |        |    |        |  |   |    |    |
|                                                                                                                                                                   |  |        |    |        |  |   |    |    |
| Stockholders'equity:                                                                                                                                                   |  |        |    |        |  |   |    |    |
| Series A JuniorParticipating, shares authorized, shares issued and outstanding: nonein 2005 and2004                                                                    |  |        | — |        |  |   | — |    |
| Common stock,$.001 par value, shares authorized: 50,000,000 at June  30, 2005and 22,000,000 and June 30, 2004; shares issued: 15,103,587 in 2005 and14,628,574 in 2004 |  |        | 15      |        |  |   | 15      |    |
| Additionalpaid-incapital                                                                                                                                               |  |        | 133,003 |        |  |   | 130,503 |    |
| Accumulateddeficit                                                                                                                                                     |  |        | (70,384 | )      |  |   | (75,198 | )  |
| Accumulatedother comprehensiveincome                                                                                                                                   |  |        | 284     |        |  |   | 267     |    |
| Treasury stock, atcost, 465,351 shares in 2005 and2004                                                                                                                 |  |        | (2,781  | )      |  |   | (2,781  | )  |
| Totalstockholders'equity                                                                                                                                               |  |        | 60,137  |        |  |   | 52,806  |    |
| Totalliabilities and stockholders'equity                                                                                                                               |  | $           | 86,378  |        |  | $      | 73,475  |    |
|                                                                                                                                                                        |

Seeaccompanying notes.

F-3

----

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

|                                                                                             |  |                    |         |        |  |        |         |         |  |        |         |         |  |  |
|---------------------------------------------------------------------------------------------|--|--------------------|---------|--------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                                                                        |  | YearsEnded June30, |
|                                                                                        |  | 2005               |         | 2004   |  | 2003   |
|                                                                                        |  |               |    |   |  |   |    |    |  |   |    |    |
| Revenuesfrom ground segment systems, networks and enterprisesolutions                       |  | $                  | 90,656  |   |  | $      | 73,305  |    |  | $      | 40,125  |    |
| Revenuesfrom data communicationsservices                                                    |  |               | 18,928  |   |  |   | 13,931  |    |  |   | 13,903  |    |
|                                                                                        |  |               |    |   |  |   |    |    |  |   |    |    |
| Totalrevenues                                                                               |  |               | 109,584 |   |  |   | 87,236  |    |  |   | 54,028  |    |
|                                                                                        |  |               |    |   |  |   |    |    |  |   |    |    |
| Costsand operatingexpenses:                                                                 |  |               |    |   |  |   |    |    |  |   |    |    |
| Costsfrom ground segment systems, networks and enterprisesolutions                          |  |               | 75,357  |   |  |   | 63,282  |    |  |   | 39,447  |    |
| Costsfrom data communicationsservices                                                       |  |               | 15,527  |   |  |   | 12,992  |    |  |   | 17,796  |    |
| Sellingandmarketing                                                                         |  |               | 5,821   |   |  |   | 4,808   |    |  |   | 6,042   |    |
| Researchanddevelopment                                                                      |  |               | 1,021   |   |  |   | 1,328   |    |  |   | 800     |    |
| Generalandadministrative                                                                    |  |               | 7,596   |   |  |   | 6,529   |    |  |   | 9,423   |    |
|                                                                                        |  |               |    |   |  |   |    |    |  |   |    |    |
| Totalcosts and operatingexpenses                                                            |  |               | 105,322 |   |  |   | 88,939  |    |  |   | 73,508  |    |
|                                                                                        |  |               |    |   |  |   |    |    |  |   |    |    |
| Income(loss) fromoperations                                                                 |  |               | 4,262   |   |  |   | (1,703  | )  |  |   | (19,480 | )  |
|                                                                                        |  |               |    |   |  |   |    |    |  |   |    |    |
| Otherincome(expense):                                                                       |  |               |    |   |  |   |    |    |  |   |    |    |
| Interestincome                                                                              |  |               | 444     |   |  |   | 271     |    |  |   | 422     |    |
| Interestexpense                                                                             |  |               | — |   |  |   | — |    |  |   | (539    | )  |
| Gainon sale of available-for-salesecurities                                                 |  |               | 132     |   |  |   | 91      |    |  |   | — |    |
| Gainon sale ofinvestment                                                                    |  |               | 40      |   |  |   | — |    |  |   | — |    |
|                                                                                        |  |               |    |   |  |   |    |    |  |   |    |    |
| Income(loss) before incometaxes                                                             |  |               | 4,878   |   |  |   | (1,341  | )  |  |   | (19,597 | )  |
|                                                                                        |  |               |    |   |  |   |    |    |  |   |    |    |
| Provisionfor incometaxes                                                                    |  |               | 64      |   |  |   | — |    |  |   | — |    |
|                                                                                        |  |               |    |   |  |   |    |    |  |   |    |    |
| Netincome(loss)                                                                             |  | $                  | 4,814   |   |  | $      | (1,341  | )  |  | $      | (19,597 | )  |
|                                                                                        |  |               |    |   |  |   |    |    |  |   |    |    |
| Basicnet income (loss) per commonshare                                                      |  | $                  | 0.33    |   |  | $      | (0.10   | )  |  | $      | (1.56   | )  |
|                                                                                        |  |               |    |   |  |   |    |    |  |   |    |    |
| Dilutednet income (loss) per commonshare                                                    |  | $                  | 0.32    |   |  | $      | (0.10   | )  |  | $      | (1.56   | )  |
|                                                                                        |  |               |    |   |  |   |    |    |  |   |    |    |
| Weighted-averageshares used in the calculation of basic net income (loss) per commonshare   |  |               | 14,422  |   |  |   | 13,346  |    |  |   | 12,565  |    |
|                                                                                        |  |               |    |   |  |   |    |    |  |   |    |    |
| Weighted-averageshares used in the calculation of diluted net income (loss) per commonshare |  |               | 14,966  |   |  |   | 13,346  |    |  |   | 12,565  |    |
|                                                                                             |

Seeaccompanying notes.

F-4

----

GLOBECOMM SYSTEMS INC. CONSOLIDATEDSTATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY YEARS ENDEDJUNE 30, 2005, 2004 AND 2003 (In thousands)

|                                                                                                          |  |                                                             |         |                          |  |                    |         |                                            |  |                |         |                          |  |        |         |         |  |        |         |         |  |        |         |        |  |        |         |         |  |        |         |         |  |  |
|----------------------------------------------------------------------------------------------------------|--|-------------------------------------------------------------|---------|--------------------------|--|--------------------|---------|--------------------------------------------|--|----------------|---------|--------------------------|--|--------|---------|---------|--|--------|---------|---------|--|--------|---------|--------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                                                                                     |  |         CommonStock |         | AdditionalPaid-inCapital |  | AccumulatedDeficit |         | AccumulatedOtherComprehensiveIncome (Loss) |  | Treasury Stock |         | TotalStockholders'Equity |
|                                                                                                     |  | Shares                                                      |         | Amount                   |  | Shares             |         | Amount                                     |  |           |         |                     |  |   |         |    |
| Balanceat June 30, 2002                                                                                  |  |                                                        | 12,933  |                     |  | $                  | 13      |                                       |  | $              | 123,598 |                     |  | $      | (54,260 | )  |  | $      | (44     | )  |  |   | 350     |   |  | $      | (2,267  | )  |  | $      | 67,040  |    |
| Issuance of common stock in connectionwith employee stock purchase plan                                  |  |                                                        | 47      |                     |  |               | — |                                       |  |           | 141     |                     |  |   | — |    |  |   | — |    |  |   | — |   |  |   | — |    |  |   | 141     |    |
| Purchases of treasury stock                                                                              |  |                                                        | — |                     |  |               | — |                                       |  |           | — |                     |  |   | — |    |  |   | — |    |  |   | 54      |   |  |   | (181    | )  |  |   | (181    | )  |
| Comprehensiveloss:                                                                                       |  |                                                        |    |                     |  |               |    |                                       |  |           |    |                     |  |   |    |    |  |   |    |    |  |   |    |   |  |   |    |    |  |   |    |    |
| Net loss                                                                                                 |  |                                                        | — |                     |  |               | — |                                       |  |           | — |                     |  |   | (19,597 | )  |  |   | — |    |  |   | — |   |  |   | — |    |  |   | (19,597 | )  |
| Gain from foreign currencytranslation                                                                    |  |                                                        | — |                     |  |               | — |                                       |  |           | — |                     |  |   | — |    |  |   | 96      |    |  |   | — |   |  |   | — |    |  |   | 96      |    |
| Loss from available-for-salesecurities                                                                   |  |                                                        | — |                     |  |               | — |                                       |  |           | — |                     |  |   | — |    |  |   | (62     | )  |  |   | — |   |  |   | — |    |  |   | (62     | )  |
| Total comprehensive loss                                                                                 |  |                                                        | — |                     |  |               | — |                                       |  |           | — |                     |  |   | — |    |  |   | — |    |  |   | — |   |  |   | — |    |  |   | (19,563 | )  |
| Balance at June30, 2003                                                                                  |  |                                                        | 12,980  |                     |  |               | 13      |                                       |  |           | 123,739 |                     |  |   | (73,857 | )  |  |   | (10     | )  |  |   | 404     |   |  |   | (2,448  | )  |  |   | 47,437  |    |
| Proceeds from exercise of stock options                                                                  |  |                                                        | 111     |                     |  |               | — |                                       |  |           | 464     |                     |  |   | — |    |  |   | — |    |  |   | — |   |  |   | — |    |  |   | 464     |    |
| Issuance of common stock in connection withemployee stock purchase plan                                  |  |                                                        | 38      |                     |  |               | — |                                       |  |           | 123     |                     |  |   | — |    |  |   | — |    |  |   | — |   |  |   | — |    |  |   | 123     |    |
| Purchases of treasury stock                                                                              |  |                                                        | — |                     |  |               | — |                                       |  |           | — |                     |  |   | — |    |  |   | — |    |  |   | 61      |   |  |   | (333    | )  |  |   | (333    | )  |
| Issuance of stock options for services                                                                   |  |                                                        | — |                     |  |               | — |                                       |  |           | 12      |                     |  |   | — |    |  |   | — |    |  |   | — |   |  |   | — |    |  |   | 12      |    |
| Issuance of common stock and warrants inconnection with private placement, net of issuance costs of $583 |  |                                                        | 1,500   |                     |  |               | 2       |                                       |  |           | 6,165   |                     |  |   | — |    |  |   | — |    |  |   | — |   |  |   | — |    |  |   | 6,167   |    |
| Comprehensiveloss:                                                                                       |  |                                                        |    |                     |  |               |    |                                       |  |           |    |                     |  |   |    |    |  |   |    |    |  |   |    |   |  |   |    |    |  |   |    |    |
| Net loss                                                                                                 |  |                                                        | — |                     |  |               | — |                                       |  |           | — |                     |  |   | (1,341  | )  |  |   | — |    |  |   | — |   |  |   | — |    |  |   | (1,341  | )  |
| Gain from foreign currencytranslation                                                                    |  |                                                        | — |                     |  |               | — |                                       |  |           | — |                     |  |   | — |    |  |   | 81      |    |  |   | — |   |  |   | — |    |  |   | 81      |    |
| Gain from availabe-for-sale securities                                                                   |  |                                                        | — |                     |  |               | — |                                       |  |           | — |                     |  |   | — |    |  |   | 196     |    |  |   | — |   |  |   | — |    |  |   | 196     |    |
| Total comprehensive loss                                                                                 |  |                                                        | — |                     |  |               | — |                                       |  |           | — |                     |  |   | — |    |  |   | — |    |  |   | — |   |  |   | — |    |  |   | (1,064  | )  |
| Balance at June30, 2004                                                                                  |  |                                                        | 14,629  |                     |  |               | 15      |                                       |  |           | 130,503 |                     |  |   | (75,198 | )  |  |   | 267     |    |  |   | 465     |   |  |   | (2,781  | )  |  |   | 52,806  |    |
| Proceeds from exercise of stock options                                                                  |  |                                                        | 200     |                     |  |               | — |                                       |  |           | 863     |                     |  |   | — |    |  |   | — |    |  |   | — |   |  |   | — |    |  |   | 863     |    |
| Issuance of common stock in connection withemployee stock purchase plan                                  |  |                                                        | 38      |                     |  |               | — |                                       |  |           | 178     |                     |  |   | — |    |  |   | — |    |  |   | — |   |  |   | — |    |  |   | 178     |    |
| Issuance of stock optionsfor services                                                                    |  |                                                        | — |                     |  |               | — |                                       |  |           | 6       |                     |  |   | — |    |  |   | — |    |  |   | — |   |  |   | — |    |  |   | 6       |    |
| Stock option acceleration                                                                                |  |                                                        | — |                     |  |               | — |                                       |  |           | 147     |                     |  |   | — |    |  |   | — |    |  |   | — |   |  |   | — |    |  |   | 147     |    |
| Proceeds from exercise of warrants                                                                       |  |                                                        | 237     |                     |  |               | — |                                       |  |           | 1,306   |                     |  |   | — |    |  |   | — |    |  |   | — |   |  |   | — |    |  |   | 1,306   |    |
| Comprehensiveincome:                                                                                     |  |                                                        |    |                     |  |               |    |                                       |  |           |    |                     |  |   |    |    |  |   |    |    |  |   |    |   |  |   |    |    |  |   |    |    |
| Net income                                                                                               |  |                                                        | — |                     |  |               | — |                                       |  |           | — |                     |  |   | 4,814   |    |  |   | — |    |  |   | — |   |  |   | — |    |  |   | 4,814   |    |
| Gain from foreign currencytranslation                                                                    |  |                                                        | — |                     |  |               | — |                                       |  |           | — |                     |  |   | — |    |  |   | 17      |    |  |   | — |   |  |   | — |    |  |   | 17      |    |
| Total comprehensive income                                                                               |  |                                                        | — |                     |  |               | — |                                       |  |           | — |                     |  |   | — |    |  |   | — |    |  |   | — |   |  |   | — |    |  |   | 4,831   |    |
| Balance at June 30, 2005                                                                                 |  |                                                        | 15,104  |                     |  | $                  | 15      |                                       |  | $              | 133,003 |                     |  | $      | (70,384 | )  |  | $      | 284     |    |  |   | 465     |   |  | $      | (2,781  | )  |  | $      | 60,137  |    |
|                                                                                                          |

See accompanyingnotes.

F-5

----

GLOBECOMM SYSTEMS INC. CONSOLIDATEDSTATEMENTS OF CASH FLOWS (Inthousands)

|                                                                                                 |  |                    |         |         |  |        |         |         |  |        |         |         |  |  |
|-------------------------------------------------------------------------------------------------|--|--------------------|---------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                                                                            |  | YearsEnded June30, |
|                                                                                            |  | 2005               |         | 2004    |  | 2003   |
| **OPERATINGACTIVITIES:**                                                                        |  |               |    |    |  |   |    |    |  |   |    |    |
| Netincome(loss)                                                                                 |  | $                  | 4,814   |    |  | $      | (1,341  | )  |  | $      | (19,597 | )  |
| Adjustmentsto reconcile net income (loss) to net cash (used in) provided byoperatingactivities: |  |               |    |    |  |   |    |    |  |   |    |    |
| Depreciationandamortization                                                                     |  |               | 2,695   |    |  |   | 3,097   |    |  |   | 3,532   |    |
| Changein deferredliabilities                                                                    |  |               | (317    | )  |  |   | (523    | )  |  |   | (1,834  | )  |
| Gainon termination of capitallease                                                              |  |               | — |    |  |   | — |    |  |   | (959    | )  |
| Provision(benefit) for doubtfulaccounts                                                         |  |               | 104     |    |  |   | (966    | )  |  |   | 683     |    |
| Deferredincome taxes                                                                            |  |               | 45      |    |  |   | 42      |    |  |   | 13      |    |
| Stockcompensationexpense                                                                        |  |               | 153     |    |  |   | 12      |    |  |   | — |    |
| Gainon sale of available-for-salesecurities                                                     |  |               | (132    | )  |  |   | (91     | )  |  |   | — |    |
| Gainon sale ofinvestment                                                                        |  |               | (40     | )  |  |   | — |    |  |   | — |    |
| Changesin operating assets andliabilities:                                                      |  |               |    |    |  |   |    |    |  |   |    |    |
| Accountsreceivable                                                                              |  |               | (8,464  | )  |  |   | (5,412  | )  |  |   | 6,533   |    |
| Inventories                                                                                     |  |               | (9,550  | )  |  |   | 7,465   |    |  |   | (2,338  | )  |
| Prepaidexpenses and other currentassets                                                         |  |               | 416     |    |  |   | 671     |    |  |   | (896    | )  |
| Otherassets                                                                                     |  |               | 63      |    |  |   | 564     |    |  |   | (1,617  | )  |
| Accountspayable                                                                                 |  |               | 63      |    |  |   | 4,656   |    |  |   | (2,394  | )  |
| Deferredrevenues                                                                                |  |               | 4,482   |    |  |   | (6,585  | )  |  |   | 4,125   |    |
| Accruedpayroll and related fringebenefits                                                       |  |               | 518     |    |  |   | 37      |    |  |   | 155     |    |
| Otheraccruedexpenses                                                                            |  |               | 793     |    |  |   | (13     | )  |  |   | (120    | )  |
| Netcash (used in) provided by operatingactivities                                               |  |               | (4,357  | )  |  |   | 1,613   |    |  |   | (14,714 | )  |
| **INVESTINGACTIVITIES:**                                                                        |  |               |    |    |  |   |    |    |  |   |    |    |
| Purchasesof fixedassets                                                                         |  |               | (2,872  | )  |  |   | (1,267  | )  |  |   | (1,732  | )  |
| Repaymentof promissory note from a relatedparty                                                 |  |               | — |    |  |   | 300     |    |  |   | 40      |    |
| Restrictedcash                                                                                  |  |               | 1,903   |    |  |   | (1,295  | )  |  |   | (20     | )  |
| Proceedsfrom the sale of available-for-salesecurities                                           |  |               | 330     |    |  |   | 391     |    |  |   | — |    |
| Netcash used in investingactivities                                                             |  |               | (639    | )  |  |   | (1,871  | )  |  |   | (1,712  | )  |
| **FINANCINGACTIVITIES:**                                                                        |  |               |    |    |  |   |    |    |  |   |    |    |
| Proceedsfrom exercise of stockoptions                                                           |  |               | 863     |    |  |   | 464     |    |  |   | — |    |
| Proceedsfrom exercise ofwarrants                                                                |  |               | 1,306   |    |  |   | — |    |  |   | — |    |
| Proceedsfrom privateplacement                                                                   |  |               | — |    |  |   | 6,167   |    |  |   | — |    |
| Proceedsfrom sale of common stock in connection with employee stock purchaseplan                |  |               | 178     |    |  |   | 123     |    |  |   | 141     |    |
| Purchasesof treasurystock                                                                       |  |               | — |    |  |   | (333    | )  |  |   | (181    | )  |
| Paymentsunder capitalleases                                                                     |  |               | — |    |  |   | — |    |  |   | (270    | )  |
| Netcash provided by (used in) financingactivities                                               |  |               | 2,347   |    |  |   | 6,421   |    |  |   | (310    | )  |
| Effectof foreign currency translation oncash                                                    |  |               | 6       |    |  |   | 73      |    |  |   | 44      |    |
| Net(decrease) increase in cash and cashequivalents                                              |  |               | (2,643  | )  |  |   | 6,236   |    |  |   | (16,692 | )  |
| Cashand cash equivalents at beginning ofyear                                                    |  |               | 28,252  |    |  |   | 22,016  |    |  |   | 38,708  |    |
| Cashand cash equivalents at end ofyear                                                          |  | $                  | 25,609  |    |  | $      | 28,252  |    |  | $      | 22,016  |    |
| SUPPLEMENTALDISCLOSURE OF CASH FLOWINFORMATION:                                                 |  |               |    |    |  |   |    |    |
| Cash paid forinterest                                                                           |  | $                  | — |    |  | $      | — |    |  | $      | 539     |    |
|                                                                                                 |

Seeaccompanying notes.

F-6

----

GLOBECOMMSYSTEMS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June30, 2005

1.    Organizationand Description of Business

Globecomm Systems Inc.("Globecomm") was incorporated in the Stateof Delaware on August 17, 1994. The Company's core businessprovides end-to-end, value-added satellite-based communicationssolutions. This business supplies ground segment systems and networksfor satellite-based communications including hardware and software tosupport a wide range of satellite systems. The Company'swholly-owned subsidiary, Globecomm Network Services Corporation("GNSC"), formerly named NetSat Express, Inc.provides satellite communication services capabilities.

2.    Significant Accounting Policies

    Principles of Consolidation

Theconsolidated financial statements include the accounts of the Companyand its wholly-owned subsidiaries, GNSC and Globecomm Systems EuropeLimited (collectively, the "Company"). Allsignificant intercompany balances and transactions have been eliminatedin 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 Companyrecognizes revenue in 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 customers' 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 system, does not require complex softwareintegration and interfacing and the Company has not experienced anydifficulties installing such equipment. In addition, the customer orother third party vendors can install the system. 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, the Company 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 inthe accompanying consolidated balance sheets.

F-7

----

GLOBECOMMSYSTEMS INC. NOTES TO CONSOLIDATED FINANCIALSTATEMENTS(Continued)  

2.    SignificantAccounting Policies (continued)

The Company recognizes revenueusing the percentage-of-completion method of accounting upon theachievement of certain contractual milestones in accordance withStatement of Position 81-1, Accounting for Performance ofConstruction-Type and Certain Production-Type Contracts, for itsnon-standard, complex production-type contracts for the production ofsatellite ground segment systems and equipment that are generallyintegrated into the customers' satellite ground segment network.The equipment and systems produced in connection with these contractsare typically long-term (in excess of twelve months in term) andrequire significant customer-specific engineering, drafting and designeffort in order to effectively integrate all of the customizable earthstation equipment into the customers' ground segment network.These contracts generally have larger contract values, greater economicrisks and substantive specific contractual performance requirements dueto the engineering and design complexity of such systems and relatedequipment. Progress payments received in advance by customers arenetted against the inventory balances in the accompanying consolidatedbalance sheets.

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

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

    Costs from Ground Segment Systems,Networks and Enterprise Solutions

Costs from ground segmentsystems, networks and enterprise solutions consist primarily of thecosts of purchased materials (including shipping and handling costs),direct labor and related overhead expenses, project-related travel andliving costs and subcontractor salaries.

    Costsfrom Data Communications Services

Costs from datacommunications services relating to Internet-based services consistprimarily of satellite space segment charges, Internet connectivityfees, voice termination costs and network operations expenses.Satellite space segment charges consist of the costs associated withobtaining satellite bandwidth (the measure of capacity) used in thetransmission of services to and from the satellite leased fromoperators. Network operations expenses consist primarily of costsassociated with the operation of the Network Operation Center (the"NOC"), on a twenty-four hour a day,seven-day a week basis, including personnel and related costs anddepreciation.

    Research and Development

Research and development expenditures are expensed as incurred.

    Inventories

Inventories, which consistprimarily of work-in-progress from costs incurred in connection withspecific customer contracts, are stated at the lower of cost (using thefirst-in, first-out method of accounting) or market value. Progresspayments received under long-term contracts are netted againstinventories.

    Cash Equivalents

TheCompany classifies highly liquid financial instruments with a maturity,at the purchase date, of three months or less as cashequivalents.

F-8

----

GLOBECOMMSYSTEMS INC. NOTES TO CONSOLIDATED FINANCIALSTATEMENTS(Continued)  

2.    Significant AccountingPolicies (continued)

    Restricted Cash

Restricted cash includes certificates of deposit used as cashcollateral for bid proposals and contract performance guarantees.

    Fixed Assets

Fixed assets are stated atcost less accumulated depreciation and amortization. Major improvementsare capitalized and repairs and maintenance costs are expensed asincurred. Depreciation is calculated using the straight-line methodover the estimated useful lives of the assets ranging from three totwenty-five years. Amortization of satellite space segment transpondersheld under capital lease is calculated using the straight-line methodover the estimated useful life of the satellite transponder.Amortization of leasehold improvements and leased equipment iscalculated using the straight-line method over the shorter of the leaseterm or estimated useful life of the asset.

    FairValue of Financial Instruments

The recorded amounts of theCompany's cash and cash equivalents, accounts receivable,accounts payable, and accrued liabilities approximate their fair valuesprincipally because of the short-term nature of these items.

    Stock-Based Compensation

The Companyaccounts for stock option grants using the intrinsic value methodprescribed in Accounting Principles Board Opinion No. 25, Accountingfor Stock Issued to Employees, and complies with the disclosureprovisions of Statement of Financial Accounting Standards("SFAS") No. 123, Accounting for Stock-BasedCompensation ("SFAS No. 123"), as amended bySFAS No. 148, Accounting for Stock-Based Compensation-Transition andDisclosure ("SFAS No. 148").

Pro-formainformation regarding net income (loss) and net income (loss) percommon share is required by SFAS No. 123 and SFAS No. 148, which alsorequires that the information be determined as if the Company hasaccounted for its stock options granted subsequent to July 1, 1995under the fair value method. The fair value of options granted underthe Company's 1997 Plan was estimated at date of grant using aBlack-Scholes option pricing model with the following assumptions forthe years ended June 30, 2005, 2004 and 2003: risk-free interest rateof 3.6% (2005), 3.2% (2004) and 3.0% (2003),volatility factor of the expected market price of the Company'scommon stock of .41 (2005), .79 (2004) and .79 (2003), aweighted-average expected life of the option of five years and nodividend yields.

The Black-Scholes option valuation model wasdeveloped for use in estimating the fair value of traded options, whichhave no vesting restrictions and are fully transferable. In addition,option valuation models require the input of highly subjectiveassumptions, including the expected stock price volatility. Because theCompany's stock options have characteristics significantlydifferent from those of traded options, and because changes in thesubjective input assumptions can materially affect the fair valueestimate, in management's opinion, the existing models do notnecessarily provide a reliable single measure of the fair value of itsstock options under the Black-Scholes option valuationmodel.

F-9

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GLOBECOMMSYSTEMS INC. NOTES TO CONSOLIDATED FINANCIALSTATEMENTS(Continued)  

2.    Significant AccountingPolicies (continued)

For purposes of pro-forma disclosures, theestimated fair value of the options is amortized to expense over theoptions' vesting period. The Company's pro-formainformation is as follows:

|                                                                 |  |                                      |        |         |  |        |        |         |  |        |         |         |  |  |
|-----------------------------------------------------------------|--|--------------------------------------|--------|---------|--|--------|--------|---------|--|--------|---------|---------|--|--|
|                                                            |  | YearsEnded June30,                   |
|                                                            |  | 2005                                 |        | 2004    |  | 2003   |
|                                                            |  | (inthousands, except per share data) |
| Reported netincome(loss)                                        |  | $                                    | 4,814  |    |  | $      | (1,341 | )  |  | $      | (19,597 | )  |
| Stockcompensation expense included in reported net income(loss) |  |                                 | 153    |    |  |   | 12     |    |  |   | — |    |
| Pro-formastock compensationexpense                              |  |                                 | (2,909 | )  |  |   | (2,216 | )  |  |   | (2,707  | )  |
| Pro-formanet income(loss)                                       |  | $                                    | 2,058  |    |  | $      | (3,545 | )  |  | $      | (22,304 | )  |
| Reportedbasic net income (loss) per commonshare                 |  | $                                    | 0.33   |    |  | $      | (0.10  | )  |  | $      | (1.56   | )  |
| Reporteddiluted net income (loss) per commonshare               |  | $                                    | 0.32   |    |  | $      | (0.10  | )  |  | $      | (1.56   | )  |
| Pro-formabasic and diluted net income (loss) per commonshare    |  | $                                    | 0.14   |    |  | $      | (0.27  | )  |  | $      | (1.78   | )  |
|                                                                 |

InDecember 2004, the Financial Accounting Standards Board (FASB) issuedSFAS No. 123 (revised 2004), Share-Based Payment, which is a revisionof SFAS 123 ("SFAS 123R"). SFAS 123Reliminates the ability to account for share-based compensation underthe intrinsic value method permitted by APB 25. This will require theCompany to adopt the fair value model for recognizing compensationexpense for employee stock options, and would have the effect ofreducing the Company's reported net income and net income pershare. SFAS 123R is required to be adopted by the Company as of July 1,2005. In May 2005, in response to FAS 123R, the Board of Directors ofthe Company, upon recommendation of its Compensation Committee,approved an acceleration of all unvested options granted to employeesand directors under the Company's Amended and Restated 1997 StockIncentive Plan. As a result of the acceleration, options to acquire863,165 shares of the Company's common stock became immediatelyexercisable. In order to prevent unintended personal benefit todirectors and executive officers, the Board of Directors, uponrecommendation of its Compensation Committee, imposed restrictions onany shares received through the exercise of accelerated options held bythose individuals. These restrictions prevent their sale of stockobtained through exercise of an accelerated option prior to the earlierof the original vesting date or the individual's termination ofemployment. The restrictions apply to 306,220 options. A one-timenon-cash compensation charge of approximately $147,000 was recorded inthe fourth quarter of 2005 as a result of the acceleration.

    Goodwill and Other Intangible Assets

Goodwill represents the excess of the purchase price ofbusinesses over the fair value of the identifiable net assets acquired.In accordance with SFAS No. 142, Goodwill and Other Intangible Assets,goodwill and other indefinite life intangible assets are no longeramortized, but instead tested for impairment at least annually. Theimpairment test for goodwill uses a two-step approach, which isperformed at the reporting unit level. Step one compares the fair valueof the reporting unit (calculated using a discounted cash flow method)to its carrying value. If the carrying value exceeds the fair value,there is a potential impairment and step two must be performed. Steptwo compares the carrying value of the reporting unit's goodwillto its implied fair value (i.e., fair value of the reporting unit lessthe fair value of the unit's assets and liabilities, includingidentifiable intangible assets). If the carrying value of goodwillexceeds its implied fair value, the excess is required to be recordedas an impairment.

F-10

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GLOBECOMMSYSTEMS INC. NOTES TO CONSOLIDATED FINANCIALSTATEMENTS(Continued)  

2.    Significant AccountingPolicies (continued)

The net carrying value of goodwill isapproximately $7,204,000 at June 30, 2005 and 2004, which relates tothe data communications services reporting unit. The Company performedthe goodwill impairment test annually in the fourth quarter. Noimpairment was noted at June 30, 2005.

    Long-Lived Assets

For other than goodwilland indefinite life intangibles, when impairment indicators arepresent, the Company reviews the carrying value of its assets indetermining the ultimate recoverability of their unamortized valuesusing future undiscounted cash flows expected to be generated by theassets in accordance with the provisions of SFAS No. 144, Accountingfor the Impairment or Disposal of Long-Lived Assets. If such assets areconsidered impaired, the impairment recognized is measured by theamount by which the carrying amount of the asset exceeds the futurediscounted cash flows. Assets to be disposed of are reported at thelower of the carrying amount or fair value, less cost to sell.

The Company evaluates the periods of amortization in determiningwhether later events and circumstances warrant revised estimates ofuseful lives. If estimates are changed, the unamortized cost will beallocated to the increased or decreased number of remaining periods inthe revised lives.

    Comprehensive Loss

Comprehensive income (loss) for the years ended June 30, 2005, 2004and 2003 of approximately $4,831,000, ($1,064,000) and ($19,563,000),respectively, includes a foreign currency translation gain ofapproximately $17,000, $81,000 and $96,000, respectively, and anunrealized gain (loss) on available-for-sale securities ofapproximately $0, $196,000, and ($62,000), respectively.

    Product Warranties

The Company offerswarranties on its contracts, the specific terms and conditions of whichvary depending upon the contract and work performed. Generally, a basiclimited warranty, including parts and labor, is provided to customersfor one year. The Company can recoup certain of these costs throughproduct warranties it holds with its original equipment manufacturers,which typically are one year in term. Historically, warranty expensehas been minimal, however, management periodically assesses the needfor any additional warranty reserve.

    Reclassifications

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

3.    Accounts Receivable

Accounts receivable include amounts billed but not paid by customerspursuant to retainage provisions in connection with ground segmentsystems, networks and enterprise solutions contracts. At June 30, 2005and 2004, there was approximately $460,000 and $0, respectively, billedbut not paid by customers under retainage provisions in connection withlong-term contracts. Such balances are included in accounts receivablein the accompanying consolidated balance sheets. Based on theCompany's experience with similar contracts in recent years,billed receivables relating to long-term contracts are expected to becollected within one year.

F-11

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GLOBECOMMSYSTEMS INC. NOTES TO CONSOLIDATED FINANCIALSTATEMENTS(Continued)  

4.    Inventories

Inventories consist of the following:

|                                  |  |               |        |             |  |        |       |        |  |  |
|----------------------------------|--|---------------|--------|-------------|--|--------|-------|--------|--|--|
|                             |  | June30,2005   |        | June30,2004 |
|                             |  | (Inthousands) |
| Raw materials and componentparts |  | $             | 111    |        |  | $      | 163   |   |
| Work-in-progress                 |  |          | 15,916 |        |  |   | 7,362 |   |
|                             |  |          | 16,027 |        |  |   | 7,525 |   |
| Lessprogress payments            |  |          | 2,710  |        |  |   | 3,621 |   |
|                             |  | $             | 13,317 |        |  | $      | 3,904 |   |
|                                  |

5.    FixedAssets

Fixed assets consist of the following:

|                                              |  |               |        |             |  |        |        |        |  |  |
|----------------------------------------------|--|---------------|--------|-------------|--|--------|--------|--------|--|--|
|                                         |  | June30,2005   |        | June30,2004 |
|                                         |  | (Inthousands) |
| Land                                         |  | $             | 1,750  |        |  | $      | 1,750  |   |
| Buildingandimprovements                      |  |          | 6,310  |        |  |   | 6,081  |   |
| Computerequipment                            |  |          | 3,260  |        |  |   | 3,116  |   |
| Machinery andequipment                       |  |          | 2,630  |        |  |   | 2,548  |   |
| NetworkOperationsCenter                      |  |          | 9,779  |        |  |   | 7,703  |   |
| Satellite earthstationequipment              |  |          | 8,180  |        |  |   | 7,869  |   |
| Furniture andfixtures                        |  |          | 1,361  |        |  |   | 1,344  |   |
|                                         |  |          | 33,270 |        |  |   | 30,411 |   |
| Lessaccumulated depreciation andamortization |  |          | 17,651 |        |  |   | 14,970 |   |
|                                         |  | $             | 15,619 |        |  | $      | 15,441 |   |
|                                              |

6.    CommonStock

    Warrants Issued to Consultants

During November 1996, the Company issued a ten-year warrant to fiveconsultants for services to purchase an aggregate of 64,125 shares ofcommon stock at a price per share of $8.07, equal to the fair marketvalue of the shares at the date of issuance. At June 30, 2005, warrantsto purchase 55,825 shares of the Company's common stock notedabove are outstanding and exercisable.

    TreasuryStock

In June 2005, the Company terminated its stockrepurchase program. Pursuant to this plan, the Company repurchasedapproximately 61,000 and 54,100 shares in fiscal 2004 and 2003 at anaggregate cost of approximately $333,000 and $181,000, respectively.Included in the fiscal 2004 repurchases were 61,000 shares acquiredfrom the Company's President at a fair market price of $5.41 pershare (see Note 10). The repurchase program allowed for purchases to bemade intermittently, through open market and privately negotiatedtransactions. Timing, price, quantity and manner of purchases are atthe discretion of the Company's management, depending on marketconditions and other factors, subject to compliance with the applicablesecurities laws.

F-12

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GLOBECOMMSYSTEMS INC. NOTES TO CONSOLIDATED FINANCIALSTATEMENTS(Continued)  

6.    CommonStock (continued)

    Private Placement

On December 31, 2003, the Company completed a private placementtransaction of equity securities and issued 1,500,000 shares of commonstock at a price of $4.50 per share for an aggregate price of$6,750,000 and issued warrants to purchase up to 750,000 shares ofcommon stock at an exercise price of $5.50 per share. The warrantsbecame exercisable on July 1, 2004 and will expire on December 31,2008. The Company incurred total expenses of approximately $583,000, ofwhich approximately $456,000 represented placement agent commissionsand approximately $127,000 represented other expenses. After deductingtotal expenses, the net proceeds received by the Company in January2004 were approximately $6,167,000. At June 30, 2005, warrants topurchase 512,500 shares of the Company's common stock noted aboveare outstanding and exercisable.

7.    StockOption and Stock Purchase Plans

On February 26, 1997, theCompany's Board of Directors authorized, and the stockholderssubsequently approved, the 1997 Stock Incentive Plan("1997 Plan"), which authorized the grantingto employees, directors and consultants of the Company options topurchase an aggregate of 2,280,000 shares of the Company's commonstock. In November 2000 and 2001, the Company's stockholdersapproved amendments to the 1997 Plan whereby the number of sharesauthorized for issuance under the 1997 Plan increased by 800,000 sharesin fiscal 2001 and 2002. In November 2004, the Company'sstockholders approved amendments to the 1997 Plan whereby the number ofshares authorized for issuance under the 1997 Plan increased by1,000,000 shares.

Options granted under the 1997 Plan may beeither incentive or non-qualified stock options. The exercise price ofan option shall be determined by the Company's Board of Directorsor compensation committee of the board at the time of grant, however,in the case of an incentive stock option the exercise price may not beless than 100% of the fair market value of such stock at thetime of the grant, or less than 110% of such fair market valuein the case of options granted to a 10% owner of theCompany's stock.

Employee options generally vest annuallyin equal installments over a four-year period and expire on the tenthanniversary of the date of grant. Director options granted upon initialelection to the Board of Directors generally vest one third on thegrant date and an additional one third on each of the next twosucceeding anniversaries of the date of grant. Each additional annualgrant vests immediately. All Director options expire the earlier of tenyears from the date of grant or one year from concluding service as adirector of the Company. In May 2005 (as discussed in Note 2), inresponse to FAS 123R, the Board of Directors of the Company approved anacceleration of all unvested options granted to employees and directorsunder the 1997 Plan.

The 1997 Plan provides for an automaticincrease to the number of options authorized for grant by an amountequal to 1% of the shares of common stock outstanding on thelast trading day of each calendar year. During fiscal 2005, 2004 and2003, the Company increased the number of options authorized for grantunder the 1997 Plan pursuant to the automatic 1% provision by144,390, 140,763, and 125,644, respectively. At June 30, 2005, thenumber of remaining options available for grant under the 1997 Plan was1,314,524.

On September 23, 1998, the Board of Directorsadopted, and the stockholders subsequently approved, the 1999 EmployeeStock Purchase Plan ("1999 Plan"). Pursuantto the 1999 Plan, 400,000 shares of the Company's common stockwill be reserved for issuance. The 1999 Plan is intended to provideeligible employees of the Company, and its participating affiliates,the opportunity to acquire an interest in the Company at the lesser of85% of fair market value at date of grant or date of purchasethrough participation in the payroll-deduction based employee stockpurchase plan. During the years ended June 30, 2005, 2004 and 2003, theCompany issued 37,961, 37,684 and 47,046 shares of its common stock to

F-13

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GLOBECOMMSYSTEMS INC. NOTES TO CONSOLIDATED FINANCIALSTATEMENTS(Continued)  

7.    StockOption and Stock Purchase Plans (continued)

participating employees in connection withthe 1999 Plan. At June 30, 2005, the number of remaining sharesavailable for issuance under the 1999 Plan was 121,321. The Board ofDirectors suspended the 1999 Plan effective July 1, 2005 to provide theCompany time to evaluate the impact of SFAS 123R on the Company'soperating results.

The following table summarizes activity inthe Company's stock option plan (in thousands, except per shareamounts):

|                                                              |  |                    |        |                               |  |                   |      |                               |  |                   |        |                               |  |        |      |        |  |        |         |         |  |        |         |        |  |  |
|--------------------------------------------------------------|--|--------------------|--------|-------------------------------|--|-------------------|------|-------------------------------|--|-------------------|--------|-------------------------------|--|--------|------|--------|--|--------|---------|---------|--|--------|---------|--------|--|--|
|                                                         |  | YearsEnded June30, |
|                                                         |  | 2005               |        | 2004                          |  | 2003              |
|                                                         |  | SharesUnderOption  |        | Weighted-AverageExercisePrice |  | SharesUnderOption |      | Weighted-AverageExercisePrice |  | SharesUnderOption |        | Weighted-AverageExercisePrice |
| Balance, beginning ofyear                                    |  |               | 3,359  |                          |  | $                 | 7.05 |                          |  |              | 3,127  |                          |  | $      | 7.51 |   |  |   | 2,914   |    |  | $      | 8.07    |   |
| Grants                                                       |  |               | 206    |                          |  |              | 6.34 |                          |  |              | 470    |                          |  |   | 3.55 |   |  |   | 449     |    |  |   | 3.70    |   |
| Exercised                                                    |  |               | (200   | )                        |  |              | 4.31 |                          |  |              | (111   | )                        |  |   | 4.19 |   |  |   | — |    |  |   | — |   |
| Canceled                                                     |  |               | (107   | )                        |  |              | 7.20 |                          |  |              | (127   | )                        |  |   | 8.09 |   |  |   | (236    | )  |  |   | 7.11    |   |
| Balance,end ofyear                                           |  |               | 3,258  |                          |  |              | 7.16 |                          |  |              | 3,359  |                          |  |   | 7.05 |   |  |   | 3,127   |    |  |   | 7.51    |   |
| Exercisable,end ofyear                                       |  |               | 3,258  |                          |  | $                 | 7.16 |                          |  |              | 2,149  |                          |  | $      | 8.51 |   |  |   | 1,821   |    |  | $      | 8.69    |   |
| Weighted-averagefair value of options granted during theyear |  |               |   |                          |  | $                 | 4.16 |                          |  |              |   |                          |  | $      | 2.35 |   |  |   |    |    |  | $      | 2.40    |   |
|                                                              |

Thefollowing table summarizes information about stock options outstandingat June 30, 2005 (in thousands, except per share amounts):

|                                                                      |  |                                    |       |                                                 |  |                               |     |        |  |   |       |        |  |  |
|----------------------------------------------------------------------|--|------------------------------------|-------|-------------------------------------------------|--|-------------------------------|-----|--------|--|---|-------|--------|--|--|
|                                                                 |  | OptionsOutstanding and Exercisable |
| RangeofExercise    Price     |  | NumberOutstanding                  |       | Weighted-AverageRemainingContractualLife(Years) |  | Weighted-AverageExercisePrice |
| $  1.47 -$  1.47                                 |  |                               | 2     |                                            |  |                          | 8.5 |   |  | $ | 1.47  |   |
| $  3.10-$  4.42                                  |  |                               | 1,064 |                                            |  |                          | 7.4 |   |  | $ | 3.80  |   |
| $  4.68-$  7.02                                  |  |                               | 833   |                                            |  |                          | 5.5 |   |  | $ | 5.74  |   |
| $  7.09-$10.63                                             |  |                               | 909   |                                            |  |                          | 3.9 |   |  | $ | 7.90  |   |
| $10.69-$15.75                                                        |  |                               | 280   |                                            |  |                          | 3.8 |   |  | $ | 12.85 |   |
| $17.13-$25.25                                                        |  |                               | 152   |                                            |  |                          | 4.4 |   |  | $ | 21.22 |   |
| $28.00-$28.00                                                        |  |                               | 18    |                                            |  |                          | 4.6 |   |  | $ | 28.00 |   |
|                                                                 |  |                               | 3,258 |                                            |  |                          | 5.5 |   |  | $ | 7.16  |   |
|                                                                      |

TheCompany has reserved approximately 5,949,000 shares of its common stockfor issuance upon exercise of all available and outstanding options andwarrants at June 30, 2005.

F-14

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GLOBECOMMSYSTEMS INC.NOTES TO CONSOLIDATED FINANCIALSTATEMENTS(Continued)

8.    Basicand Diluted Net Income (Loss) Per Common Share

The Companycomputes net income (loss) per share in accordance with the provisionsof SFAS No. 128, Earnings Per Share. Basic and diluted net income(loss) per common share is computed by dividing the net income (loss)for the period by the weighted-average number of common sharesoutstanding for the period. The weighted-average shares include theincremental common shares issuable upon the exercise of stock optionsand warrants (using the treasury stock method). The incremental commonshares for stock options and warrants are excluded from the calculationof diluted net income (loss) per share, if their effect isanti-dilutive. Diluted net income (loss) per share for the years endedJune 30, 2005, 2004 and 2003, excludes the effect of approximately2,577,000, 4,972,000, and 3,991,000 stock options and warrants in thecalculation of the incremental common shares, respectively, as theireffect would have been anti-dilutive.

9.    RetirementPlan

The Company maintains a 401(k) plan, which coverssubstantially all employees of the Company. Participants may elect tocontribute from 1% to 75% of their pre-tax compensation,subject to elective deferral limitations under Section 403 of theInternal Revenue Code. The plan allows for a matching contributionequal to the discretionary percentage of a participating employee notto exceed 4% of their compensation by the Company. The Companycontributed approximately $236,000, $0 and $460,000 to the 401(k) planduring the years ended June 30, 2005, 2004 and 2003, respectively. TheBoard of Directors did not authorize a matching contribution for theyear ended June 30, 2004 as part of the Company's cost cuttinginitiatives. Effective January 1, 2005, the Board of Directorsreinstated the matching contribution. As of June 30, 2005, the Companyhas accrued $236,000 included in accrued payroll and related fringebenefits in the accompanying balance sheet. In addition, the plan alsoprovides for discretionary profit sharing contributions by the Company.There were no discretionary profit sharing contributions made by theCompany during the years ended June 30, 2005, 2004 and 2003.

10.    RelatedParty Transactions

During fiscal 2001, the Company advanced$200,000 to a former executive officer of the Company. The Companyreceived a promissory note payable on December 31, 2002 for thisadvance, which bore interest at an annual rate of 5.0% payablequarterly. During fiscal 2002, the Company increased the $200,000 loanto $300,000 and amended the promissory note accordingly. During fiscal2003, this former executive officer resigned from the board ofdirectors and pursuant to a letter agreement (the"agreement") the Company consolidated thethen outstanding loan and advances receivable from this formerexecutive officer and current employee of the Company into a $321,000promissory note. Under the terms of the letter agreement the Companywill forgive the outstanding principal and interest amounts due on thepromissory note in five annual installments beginning in January 2004so long as the former executive officer remains an employee of theCompany, subject to the terms of the agreement. At June 30, 2005 and2004, the annual installment to be forgiven within one year along withaccrued interest outstanding under this promissory note was included inother current assets in the accompanying consolidated balance sheet. AtJune 30, 2005 and 2004, the remaining principal amounts ofapproximately $195,000 and $261,000, respectively, are included inother assets in the accompanying consolidated balance sheet.

During fiscal 2002, the Company advanced $300,000 to an officer ofthe Company. The Company received a promissory note payable onSeptember 30, 2004, which bears interest at an annual rate of5.0% payable quarterly, and is secured by a stock pledgeagreement. On November 12, 2003, the officer sold approximately 61,000shares of the Company's common stock at a fair market price of$5.41 per share to the Company in connection with its stock repurchaseprogram. On November 12, 2003, the officer paid approximately $333,000to the Company to satisfy all amounts outstanding on the promissorynote, together with accrued interest thereon.

F-15

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GLOBECOMMSYSTEMS INC.NOTES TO CONSOLIDATED FINANCIALSTATEMENTS(Continued)

10.    RelatedParty Transactions (continued)

During fiscal 2001, the Company advanced$40,000 to an officer of the Company. The Company received a promissorynote payable on December 31, 2002 for this advance, which bore interestat an annual rate of 5.0% payable quarterly. During fiscal 2003,the officer repaid the principal and accrued interest outstanding infull and satisfied the promissory note.

11.    IncomeTaxes

The Company computes income taxes using the liabilitymethod. Accordingly, deferred tax assets and liabilities are recognizedfor estimated future tax consequences attributable to the differencesbetween the carrying amount of the assets and liabilities for financialstatement and income tax purposes. The deferred tax assets andliabilities are determined by using enacted tax laws and rates ineffect when the differences are expected to reverse. Net deferred taxassets are recorded when it is more likely than not that such taxbenefits will be realized.

During fiscal 2005 and 2004, theCompany recorded a tax provision of approximately $180,000 and $45,000of which $116,000 and $45,000 was recorded in general andadministrative expenses.

Significant components of theCompany's deferred tax assets (liabilities) are as follows:

|                                           |  |               |         |               |  |        |         |         |  |  |
|-------------------------------------------|--|---------------|---------|---------------|--|--------|---------|---------|--|--|
|                                      |  | June30, 2005  |         | June 30, 2004 |
|                                      |  | (Inthousands) |
| Deferred taxassets:                       |  |          |    |          |  |   |    |    |
| Netoperating losscarryforwards            |  | $             | 28,709  |          |  | $      | 30,491  |    |
| Accrualsand reserves                      |  |          | 1,273   |          |  |   | 1,964   |    |
| Write-downof investments                  |  |          | 426     |          |  |   | 1,034   |    |
| Stateinvestment tax creditcarryforwards   |  |          | 38      |          |  |   | 83      |    |
| AMT taxcredit                             |  |          | 82      |          |  |   | — |    |
| Capital losscarryforwards                 |  |          | 920     |          |  |   | 380     |    |
| Projects inprogress                       |  |          | 279     |          |  |   | — |    |
|                                      |  |          | 31,727  |          |  |   | 33,952  |    |
| Valuationallowance for deferred taxassets |  |          | (30,743 | )        |  |   | (32,813 | )  |
|                                      |  |          | 984     |          |  |   | 1,139   |    |
| Deferredtax liabilities:                  |  |          |    |          |  |   |    |    |
| Depreciation andamortization              |  |          | (946    | )        |  |   | (984    | )  |
| Projects inprogress                       |  |          | — |          |  |   | (72     | )  |
|                                      |  |          | (946    | )        |  |   | (1,056  | )  |
|                                      |  |          |    |          |  |   |    |    |
| Netdeferred taxassets                     |  | $             | 38      |          |  | $      | 83      |    |
|                                           |

Inassessing the realizability of deferred tax assets, managementconsiders whether it is more likely than not that some portion or allof the deferred tax assets will be realized. The ultimate realizationof deferred tax assets is dependent upon the generation of futuretaxable income prior to the expiration of any net operating losscarryforwards. Due to the uncertainty regarding the Company'sability to utilize its net operating losses in the future, the Companyhas provided a valuation allowance against its operating losses andtemporary differences except for approximately $38,000 representingstate investment tax credit carryforwards that will be utilized tooffset state capital taxes on the Company's state tax return.

For the years ended June 30, 2005, 2004 and 2003, the valuationallowance (decreased) increased approximately $(2,070,000), $5,239,000and $4,417,000, respectively. Approximately $3,886,000 of the deferredtax asset, if recognized, will be allocated directly tostockholders' equity relating to non-qualified dispositions ofstock option exercises.

F-16

----

GLOBECOMMSYSTEMS INC.NOTES TO CONSOLIDATED FINANCIALSTATEMENTS(Continued)

11.    IncomeTaxes (continued)

At June 30, 2005, the Company has federalnet operating loss carryforwards of approximately $71,400,000. The netoperating carryforwards will expire at various dates beginning in 2010through 2024, if not utilized. Utilization of the net operating losscarryforwards may be subject to an annual limitation pursuant to theownership change limitations provided by the Internal Revenue Code andsimilar state provisions.

At June 30, 2005, the Company also hadfederal alternative minimum tax credit carryforwards of approximately$82,000, which may be carried forward indefinitely. At June 30, 2005,the Company also had foreign net operating loss carryforwards ofapproximately $870,000 that may be carried forward indefinitely.

The reconciliations of tax provision (benefit) computed at the U.S.federal statutory tax rates to the effective income tax rates onpre-tax losses are as follows:

|                                  |  |                    |     |         |  |        |         |          |  |        |         |          |  |  |
|----------------------------------|--|--------------------|-----|---------|--|--------|---------|----------|--|--------|---------|----------|--|--|
|                             |  | YearsEnded June30, |
|                             |  | 2005               |     | 2004    |  | 2003   |
| Taxat U.S. Federal statutoryrate |  |               | 34  | %  |  |   | (34     | )%  |  |   | (34     | )%  |
| ForeignIncome at varyingrates    |  |               | 7   |    |  |   | — |     |  |   | — |     |
| Changein valuationallowance      |  |               | (40 | )  |  |   | 34      |     |  |   | 34      |     |
|                             |  |               | 1   | %  |  |   | — | %   |  |   | — | %   |
|                                  |

12.    SegmentInformation

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

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

F-17

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GLOBECOMMSYSTEMS INC.NOTES TO CONSOLIDATED FINANCIALSTATEMENTS(Continued)

12.    SegmentInformation (continued)

The following is the Company'sbusiness segment information as of and for the years ended June 30,2005, 2004 and 2003:

|                                                         |  |                    |         |         |  |        |         |         |  |        |         |         |  |  |
|---------------------------------------------------------|--|--------------------|---------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                                    |  | YearsEnded June30, |
|                                                    |  | 2005               |         | 2004    |  | 2003   |
|                                                    |  | (Inthousands)      |
| Revenues:                                               |  |               |    |    |  |   |    |    |  |   |    |    |
| Groundsegment systems, networks and enterprisesolutions |  | $                  | 91,613  |    |  | $      | 75,908  |    |  | $      | 43,334  |    |
| Datacommunicationsservices                              |  |               | 21,875  |    |  |   | 16,196  |    |  |   | 15,906  |    |
| Intercompanyeliminations                                |  |               | (3,904  | )  |  |   | (4,868  | )  |  |   | (5,212  | )  |
| Totalrevenues                                           |  | $                  | 109,584 |    |  | $      | 87,236  |    |  | $      | 54,028  |    |
|                                                    |  |               |    |    |  |   |    |    |  |   |    |    |
| Income(loss) fromoperations:                            |  |               |    |    |  |   |    |    |  |   |    |    |
| Groundsegment systems, networks and enterprisesolutions |  | $                  | 4,229   |    |  | $      | (870    | )  |  | $      | (12,548 | )  |
| Datacommunicationsservices                              |  |               | (296    | )  |  |   | (849    | )  |  |   | (6,946  | )  |
| Interestincome                                          |  |               | 444     |    |  |   | 271     |    |  |   | 422     |    |
| Interestexpense                                         |  |               | — |    |  |   | — |    |  |   | (539    | )  |
| Gainon sale ofinvestment                                |  |               | 40      |    |  |   | — |    |  |   | — |    |
| Gainon sale of available-for-salesecurities             |  |               | 132     |    |  |   | 91      |    |  |   | — |    |
| Intercompanyeliminations                                |  |               | 329     |    |  |   | 16      |    |  |   | 14      |    |
| Income(loss) before incometaxes                         |  | $                  | 4,878   |    |  | $      | (1,341  | )  |  | $      | (19,597 | )  |
|                                                    |  |               |    |    |  |   |    |    |  |   |    |    |
| Depreciationandamortization:                            |  |               |    |    |  |   |    |    |  |   |    |    |
| Groundsegment systems, networks and enterprisesolutions |  | $                  | 1,153   |    |  | $      | 1,402   |    |  | $      | 1,595   |    |
| Datacommunicationsservices                              |  |               | 1,871   |    |  |   | 1,711   |    |  |   | 1,951   |    |
| Intercompanyeliminations                                |  |               | (329    | )  |  |   | (16     | )  |  |   | (14     | )  |
|                                                    |  |               |    |    |  |   |    |    |  |   |    |    |
| Totaldepreciation andamortization                       |  | $                  | 2,695   |    |  | $      | 3,097   |    |  | $      | 3,532   |    |
| Expendituresfor long-lived assets:                      |  |               |    |    |  |   |    |    |  |   |    |    |
| Ground segmentsystems, networks and enterprisesolutions |  | $                  | 456     |    |  | $      | 354     |    |  | $      | 187     |    |
| Datacommunicationsservices                              |  |               | 2,458   |    |  |   | 915     |    |  |   | 1,585   |    |
| Intercompanyeliminations                                |  |               | (42     | )  |  |   | (2      | )  |  |   | (40     | )  |
| Totalexpenditures for long-livedassets                  |  | $                  | 2,872   |    |  | $      | 1,267   |    |  | $      | 1,732   |    |
|                                                         |

F-18

----

GLOBECOMMSYSTEMS INC.NOTES TO CONSOLIDATED FINANCIALSTATEMENTS(Continued)

12.    SegmentInformation (continued)

|                                                         |  |               |         |              |  |             |         |         |  |        |         |         |  |  |
|---------------------------------------------------------|--|---------------|---------|--------------|--|-------------|---------|---------|--|--------|---------|---------|--|--|
|                                                    |  | June30,2005   |         | June 30,2004 |  | June30,2003 |
|                                                    |  | (Inthousands) |
| Assets:                                                 |  |          |    |         |  |        |    |    |  |   |    |    |
| Groundsegment systems, networks and enterprisesolutions |  | $             | 139,117 |         |  | $           | 125,534 |    |  | $      | 118,180 |    |
| Datacommunicationsservices                              |  |          | 13,712  |         |  |        | 11,501  |    |  |   | 10,405  |    |
| Intercompanyeliminations                                |  |          | (66,451 | )       |  |        | (63,560 | )  |  |   | (58,241 | )  |
| Totalassets                                             |  | $             | 86,378  |         |  | $           | 73,475  |    |  | $      | 70,344  |    |
|                                                         |

AtJune 30, 2005, 2004 and 2003, the Company had total assets ofapproximately $1,137,000, $2,547,000 and $3,177,000, and long-livedassets of approximately $80,000, $100,000 and $56,000, respectively,located in the United Kingdom, associated with its wholly-ownedsubsidiary, Globecomm Systems Europe Limited.

13.    SignificantCustomers and Concentrations of Credit Risk

The Companydesigns, assembles and installs satellite ground segment systems,networks and enterprise solutions for customers in diversifiedgeographic locations. Credit risk with respect to accounts receivableis concentrated due to the limited number of customers. The timing ofcash realization is determined based upon the contract or serviceagreements with the customers. The Company performs ongoing creditevaluations of its customers' financial condition and in mostcases requires a letter of credit or cash in advance for foreigncustomers. The Company evaluates the collectibility of accountsreceivable based on numerous factors, including past transactionhistory with customers and their credit worthiness. The Company'sestimate of its allowance for doubtful accounts is periodicallyadjusted when the Company becomes aware of a specific customer'sinability to meet its financial obligations, or as a result of changesin the overall aging of accounts receivable. Allowances related toaccounts receivable at June 30, 2005, 2004 and 2003, are approximately$815,000, $2,618,000 and $4,805,000, respectively. The decrease in theallowance of approximately $1,803,000 from June 30, 2004 to 2005 isprimarily the result of a bad debt recovery of approximately $1,500,000based on a settlement reached with a customer in July 2005; thisrecovery was recorded as a reduction to general and administrativeexpenses for the year ended June 30, 2005. The decrease in theallowance of approximately $2,187,000 from June 30, 2003 to 2004 isprimarily the result of settlement agreement reached with a formercustomer in the Middle East. Based on this settlement the Companyrecorded a bad debt recovery, included as a reduction to general andadministrative expenses for the year ended June 30, 2004, ofapproximately $1,000,000 and a write off the remaining accountsreceivable allowance balance of approximately $1,200,000.

Threecustomers accounted for 20%, 13% and 13%,respectively, and one major customer accounted for approximately11% of the Company's consolidated revenues for the yearsended June 30, 2005 and 2004, respectively. No major customer accountedfor more than 10% of the Company's consolidated revenuesfor the year ended June 30, 2003.

F-19

----

GLOBECOMMSYSTEMS INC.NOTES TO CONSOLIDATED FINANCIALSTATEMENTS(Continued)

13.    SignificantCustomers and Concentrations of Credit Risk (continued)

Revenues earned from ground segmentsystems, networks and enterprise solutions are attributed to thegeographic location in which the equipment is shipped. Revenues earnedfrom data communications services are attributed to the geographiclocation in which the services are being provided. Revenues fromforeign sales as a percentage of total consolidated revenues are asfollows:

|                       |  |                    |         |         |  |        |         |         |  |        |    |         |  |  |
|-----------------------|--|--------------------|---------|---------|--|--------|---------|---------|--|--------|----|---------|--|--|
|                  |  | YearsEnded June30, |
|                  |  | 2005               |         | 2004    |  | 2003   |
| Africa                |  |               | 8       | %  |  |   | 9       | %  |  |   | 7  | %  |
| Northand SouthAmerica |  |               | 4       | %  |  |   | 3       | %  |  |   | 13 | %  |
| Asia                  |  |               | 4       | %  |  |   | 13      | %  |  |   | 16 | %  |
| Europe                |  |               | 25      | %  |  |   | 18      | %  |  |   | 14 | %  |
| MiddleEast            |  |               | 32      | %  |  |   | 19      | %  |  |   | 12 | %  |
| Australia             |  |               | — |    |  |   | — |    |  |   | 1  | %  |
|                  |  |               | 73      | %  |  |   | 62      | %  |  |   | 63 | %  |
|                       |

Financialinstruments, which potentially subject the Company to concentrations ofcredit risk, consist principally of cash and trade receivables. TheCompany places its cash and cash equivalents with high qualityfinancial institutions. Substantially all cash and cash equivalents areheld in one financial institutions at June 30, 2005 and 2004. Cashequivalents are comprised of short-term debt instruments andcertificates of deposit of direct or guaranteed obligations of theUnited States, which are held to maturity and approximate fair marketvalue. At times, cash may be in excess of Federal Deposit InsuranceCompany insurance limits.

14.    Commitmentsand Contingencies

Line of Credit

At June 30,2005, the Company maintained a $16,500,000 working capital line ofcredit with a bank, which bore interest at 7.5% or the primerate plus 1.5% per annum, and is collateralized by a firstsecurity interest on all personal property of the Company. The creditfacility, which expires in October 2005, contains certain financialcovenants, with which the Company was in compliance at June 30, 2005.As of June 30, 2005, no amounts were outstanding under this creditfacility, however, there were outstanding standby letters of credit,bid proposals and performance guarantees of approximately $14,143,000,which were applied against and reduced the amounts available under theworking capital line of credit. The Company will be advanced up to80% of eligible domestic accounts receivable, 90% ofeligible foreign accounts receivable under the line of credit, and100% of the unrestricted cash held at the bank as defined in theagreement.

The Company provides cash collateral for certainletters of credit. As of June 30, 2005 and 2004, the Company had cashcollateral related to performance guarantees of approximately $0 and$1,903,000, respectively. These amounts are included in restricted cashin the accompanying consolidated balance sheets.

LeaseTransactions

In April 2001, the Company renegotiated a15-year satellite space segment transponder lease entered into by GNSCduring fiscal 2000, which changed the terms and economics of theagreement and resulted in a change in accounting for such lease fromcapital to operating. Accordingly, the change in accounting reduced theCompany's capital lease obligations by approximately $84,261,000with a corresponding reduction in net fixed assets of approximately$80,620,000, resulting in a deferred liability of approximately$3,641,000.

F-20

----

GLOBECOMMSYSTEMS INC.NOTES TO CONSOLIDATED FINANCIALSTATEMENTS(Continued)

14.    Commitmentsand Contingencies (continued)

In June 2002, GNSC amended the lease toreduce the short-term cash commitment under such agreement in exchangefor a twelve-month extension of the lease term. As a result of thismodification, the Company will record the remaining lease commitment ona straight-line basis over the remaining term of the transponder lease.Accordingly, during 2002, the Company recorded a deferred liability of$319,000, to reflect the straight-lining of such lease payments.

In October 2002, the Company reached an agreement related to thelease, which further modified and reduced the Company's satellitebandwidth obligations. Under the terms of this agreement, the Companypaid $7,574,000, which included a one-time termination fee of$3,586,000, and $3,988,000, which primarily related to outstandinginvoices and an additional security deposit, assigned $31,573,000 offuture contract revenues to the vendor and reduced the Company'sfuture space segment obligations by $52,209,000. Accordingly, theCompany recorded a charge to costs from data communications services of$782,000 in the second quarter of fiscal 2003, representing thedifference between the $3,586,000 termination fee and the correspondingreduction in the deferred liability of $2,804,920.

At June 30,2005, the remaining balance in deferred liabilities relating to thislease was $986,000, which will be amortized into income throughDecember 2008.

Lease Commitments

The Companycurrently leases satellite space segment services, office space,teleport services and other equipment under various operating leases,which expire in various years through 2009. As leases expire, it can beexpected that in the normal course of business they will be renewed orreplaced.

Future minimum lease payments under non-cancelableoperating leases for satellite space segment services, Internet accessservices, teleport services, office space and other equipment withterms of one year or more consist of the following at June 30, 2005 (inthousands):

|        |  |        |        |        |  |  |
|--------|--|--------|--------|--------|--|--|
| 2006   |  | $      | 8,839  |   |
| 2007   |  |   | 4,898  |   |
| 2008   |  |   | 2,332  |   |
| 2009   |  |   | 663    |   |
|   |  | $      | 16,732 |   |
|        |

Rentexpense for satellite space segment services, Internet access services,teleport services, office space and other equipment was approximately$7,138,000, $5,343,000 and $8,256,000 for the years ended June 30,2005, 2004 and 2003, respectively.

Employment Agreements

During October 2001, the Company entered into three-year employmentagreements with six officers and one former officer for an aggregateamount of approximately $1,214,000 per year. The Company will havecertain obligations to these individuals if they are terminated. Eachemployment agreement renews automatically for additional terms of oneyear, unless either party provides written notice to the other party ofits intention to terminate the agreement. During fiscal 2005, the Boardof Directors approved increases bringing the aggregate amount toapproximately $1,542,000 per year.

During January 2002, theCompany entered into a three-year employment agreement with an officerfor an amount of $275,000 per year. The Company had certain obligationsto this officer if terminated. The employment agreement provided thatit renewed automatically for additional terms of one year, unlesseither party provided written notice to the other party of itsintention to terminate the agreement. In 

F-21

----

GLOBECOMMSYSTEMS INC.NOTES TO CONSOLIDATED FINANCIALSTATEMENTS(Continued)

14.    Commitmentsand Contingencies (continued)

January 2003, the Company entered into aseparation agreement and general release whereby the employmentrelationship with this officer was terminated. In accordance with theterms of this agreement, the Company agreed to pay the officerseverance of $450,000, consisting of a lump sum payment of $250,000 andan additional $200,000 to be paid in monthly installments forthirty-six months beginning in July 2003, based on certain conditionsdefined in the agreement. During each of the years ended June 30, 2005and 2004, payments of approximately $67,000 weremade.

F-22

----

GLOBECOMMSYSTEMS INC.

SCHEDULE II—VALUATION AND QUALIFYINGACCOUNTS

|                                                      |  |                              |            |                             |  |                         |           |            |  |                       |           |           |  |        |             |           |  |        |            |        |  |  |
|------------------------------------------------------|--|------------------------------|------------|-----------------------------|--|-------------------------|-----------|------------|--|-----------------------|-----------|-----------|--|--------|-------------|-----------|--|--------|------------|--------|--|--|
|                                                 |  |                         |            | Additions                   |  |                    |           |       |
| Description                                          |  | Balanceat Beginning ofPeriod |            | Charged to CostsandExpenses |  | Charged toOtherAccounts |           | Deductions |  | Balance atEndofPeriod |
| Year ended June 30,2005:                             |  |                         |       |                        |  |                    |      |       |  |                  |      |      |  |   |        |      |  |   |       |   |
| Reserves and allowancesdeducted from asset accounts: |  |                         |       |                        |  |                    |      |       |  |                  |      |      |  |   |        |      |  |   |       |   |
| Reserve forestimated doubtful accountsreceivable     |  | $                            | 2,618,000  |                        |  | $                       | 100,000   | (a)   |  | $                     | —   |      |  | $      | (1,903,000) | (c)  |  | $      | 815,000    |   |
| Valuationallowance on deferred taxassets             |  |                         | 32,813,000 |                        |  |                    | —   |       |  |                  | —   |      |  | $      | (2,070,000) | (b)  |  |   | 30,743,000 |   |
|                                                 |  | $                            | 35,431,000 |                        |  | $                       | 100,000   |       |  | $                     | —   |      |  | $      | (3,973,000  | )    |  | $      | 31,558,000 |   |
| Year ended June 30,2004:                             |  |                         |       |                        |  |                    |      |       |  |                  |      |      |  |   |        |      |  |   |       |   |
| Reserves and allowancesdeducted from asset accounts: |  |                         |       |                        |  |                    |      |       |  |                  |      |      |  |   |        |      |  |   |       |   |
| Reserve forestimated doubtful accountsreceivable     |  | $                            | 4,805,000  |                        |  | $                       | (966,000) | (a)   |  | $                     | —   |      |  | $      | (1,221,000) | (c)  |  | $      | 2,618,000  |   |
| Valuationallowance on deferred taxassets             |  |                         | 27,574,000 |                        |  |                    | —   |       |  |                  | 5,239,000 | (b)  |  |   | —     |      |  |   | 32,813,000 |   |
|                                                 |  | $                            | 32,379,000 |                        |  | $                       | (966,000  | )     |  | $                     | 5,239,000 |      |  | $      | (1,221,000  | )    |  | $      | 35,431,000 |   |
| Yearended June 30, 2003:                             |  |                         |       |                        |  |                    |      |       |  |                  |      |      |  |   |        |      |  |   |       |   |
| Reserves andallowances deducted from assetaccounts:  |  |                         |       |                        |  |                    |      |       |  |                  |      |      |  |   |        |      |  |   |       |   |
| Reserve for estimated doubtfulaccountsreceivable     |  | $                            | 4,683,000  |                        |  | $                       | 683,000   |       |  | $                     | —   |      |  | $      | (561,000)   | (c)  |  | $      | 4,805,000  |   |
| Valuationallowance on deferred taxassets             |  |                         | 23,157,000 |                        |  |                    | —   |       |  |                  | 4,417,000 | (b)  |  |   | —     |      |  |   | 27,574,000 |   |
|                                                 |  | $                            | 27,840,000 |                        |  | $                       | 683,000   |       |  | $                     | 4,417,000 |      |  | $      | (561,000    | )    |  | $      | 32,379,000 |   |
|                                                      |

|  |
|--|
|  |  |
|  |

|     |                                                                    |
|-----|--------------------------------------------------------------------|
| (a) | Includesrecovery of accounts receivable balances (net of charges). |

|     |                                                                         |
|-----|-------------------------------------------------------------------------|
| (b) | (Reduction) increase in valuation allowancefor net deferred tax assets. |

|     |                                                                                          |
|-----|------------------------------------------------------------------------------------------|
| (c) | Reduction in allowance due to write-off ofaccounts receivable balances (net ofrecovery). |

S-1

----

Indexof Exhibits

|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |  |  |  |
|------------|--|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| ExhibitNo. |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 3.1        |  | Amended and RestatedCertificate of Incorporation (incorporated by reference to Exhibit 3.1of the Registrant's Annual Report on Form 10-K for the fiscalyear ended June 30, 1998).                                                                                                                                                                                                                                                                                             |
| 3.2        |  | Amended andRestated By-laws of the Registrant (incorporated by reference toExhibit 3.2 of the Registrant's Annual Report on Form 10-K forthe fiscal year ended June 30,1998).                                                                                                                                                                                                                                                                                                 |
| 4.2        |  | See Exhibits 3.1 and 3.2 forprovisions of the Amended and Restated Certificate of Incorporation andAmended and Restated By-laws of the Registrant defining rights ofholders of Common Stock of the Registrant (incorporated by reference toExhibit 4.2 of the Registrant's Registration Statement on FormS-1, File No. 333-22425 (the "RegistrationStatement")).                                                                                                              |
| 10.1       |  | EmploymentAgreement dated as of October 9, 2001 by and between the Registrant andDavid E. Hershberg (incorporated by reference to Exhibit 10.9 of theRegistrant's Quarterly Report on Form 10-Q, for the quarter endedSeptember 30, 2001).                                                                                                                                                                                                                                    |
| 10.2       |  | EmploymentAgreement dated as of October 9, 2001 by and between the Registrant andKenneth A. Miller (incorporated by reference to Exhibit 10.10 of theRegistrant's Quarterly Report on Form 10-Q, for the quarter endedSeptember 30, 2001).                                                                                                                                                                                                                                    |
| 10.3       |  | The Amended andRestated 1997 Stock Incentive Plan (incorporated by reference toExhibit 99 of the Registrant's Registration Statement on Form S-8Registration, File No.333-112351).                                                                                                                                                                                                                                                                                            |
| 10.4       |  | 1999 Employee StockPurchase Plan (incorporated by reference to Exhibit 99.8 of theRegistrant's Registration Statement on Form S-8, File No.333-70527).                                                                                                                                                                                                                                                                                                                        |
| 10.5       |  | Rights Agreement, dated asof December 3, 1998, between the Registrant and American Stock Transferand Trust Company, which includes the form of Certificate ofDesignation for the Series A Junior Participating Preferred Stock asExhibit A, the form of Rights Certificate as Exhibit B and the Summaryof Rights to Purchase Series A Preferred Shares as Exhibit C(incorporated by reference to Exhibit 4 of Registrant's CurrentReport on Form 8-K, dated December 3,1998). |
| 10.6       |  | Negotiable Promissory Note,dated April 1, 2001, between the Registrant and Donald Woodring(incorporated by reference to Exhibit 10.19 of the Registrant'sAnnual Report on Form 10-K for the year ended June 30,2001).                                                                                                                                                                                                                                                         |
| 10.7       |  | Employment Agreement, dated asof October 9, 2001, by and between Stephen C. Yablonski and theRegistrant (incorporated by reference to Exhibit 10.20 of theRegistrant's Quarterly Report on Form 10-Q, for the quarter endedSeptember 30, 2001).                                                                                                                                                                                                                               |
| 10.8       |  | EmploymentAgreement, dated as of October 9, 2001, by and between Andrew C. Melfiand the Registrant (incorporated by reference to Exhibit 10.21 of theRegistrant's Quarterly Report on Form 10-Q, for the quarter endedSeptember 30, 2001).                                                                                                                                                                                                                                    |
| 10.9       |  | EmploymentAgreement, dated as of October 9, 2001, by and between Donald G.Woodring and the Registrant (incorporated by reference to Exhibit 10.22of the Registrant's Quarterly Report on Form 10-Q, for thequarter ended September 30,2001).                                                                                                                                                                                                                                  |
| 10.10      |  | Employment Agreement, dated asof October 9, 2001, by and between Paul J. Johnson and the Registrant(incorporated by reference to Exhibit 10.23 of the Registrant'sQuarterly Report on Form 10-Q, for the quarter ended September 30,2001).                                                                                                                                                                                                                                    |
|            |

----

|            |  |                                                                                                                                                                                                                                                                                     |  |  |  |  |
|------------|--|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| ExhibitNo. |  |                                                                                                                                                                                                                                                                                |
| 10.11      |  | Employment Agreement,dated as of October 9, 2001, by and between Paul Eterno and theRegistrant (incorporated by reference to Exhibit 10.24 of theRegistrant's Quarterly Report on Form 10-Q, for the quarter endedSeptember 30, 2001).                                              |
| 10.12      |  | Promissory NoteSecured By Stock Pledge Agreement, dated September 4, 2001, by andbetween Kenneth A. Miller and the Registrant (incorporated by referenceto Exhibit 10.26 of the Registrant's Quarterly Report on Form10-Q, for the quarter ended September 30,2001).                |
| 10.13*     |  | Settlement Agreement, dated asof October 1, 2002, by and between Loral Skynet(, a division of LoralSpaceCom Corporation and the Registrant (incorporated by reference toExhibit 10.28 of the Registrant's Quarterly Report on Form 10-Q,for the quarter ended September 30,2002).   |
| 10.14      |  | Separation Agreement andGeneral Release, dated as of January 22, 2003, by and between G.Patrick Flemming and the Registrant (incorporated by reference toExhibit 10.29 of the Registrant's Quarterly Report on Form 10-Q,for the quarter ended December 31,2002).                   |
| 10.15      |  | Letter Agreement, dated as ofJanuary 31, 2003, by and between Donald G. Woodring and the Registrant(incorporated by reference to Exhibit 10.30 of the Registrant'sQuarterly Report on Form 10-Q, for the quarter ended December 31,2002).                                           |
| 10.16      |  | Loan and Security Agreement,dated as of September 15, 2003, by and between Silicon Valley Bank andthe Registrant (incorporated by reference to Exhibit 10.31 of theRegistrant's Annual Report on Form 10-K for the year ended June30, 2003).                                        |
| 10.17      |  | Loan ModificationAgreement, dated as of October 8, 2003, by and between Silicon ValleyBank and the Registrant (incorporated by reference to Exhibit 10.17 ofthe Registrant's Annual Report on Form 10-K for the year endedJune 30, 2004).                                           |
| 10.18      |  | Second LoanModification Agreement, dated as of March 2, 2004, by and betweenSilicon Valley Bank and the Registrant (incorporated by reference toExhibit 10.18 of the Registrant's Annual Report on Form 10-K forthe year ended June 30, 2004).                                      |
| 10.19      |  | ThirdLoan Modification Agreement, dated as of June 2, 2004, by and betweenSilicon Valley Bank and the Registrant (incorporated by reference toExhibit 10.19 of the Registrant's Annual Report on Form 10-K forthe year ended June 30, 2004).                                        |
| 10.20      |  | FourthLoan Modification Agreement, dated as of September 24, 2004, by andbetween Silicon Valley Bank and the Registrant (incorporated byreference to Exhibit 10.20 of the Registrant's Annual Report onForm 10-K for the year ended June 30,2004).                                  |
| 10.21      |  | Fifth Loan ModificationAgreement, dated as of October 29, 2004, by and between Silicon ValleyBank and the Registrant (incorporated by reference to Exhibit 10.1 ofthe Registrant's Registration Statement on Form 8-K, File No.000-22839).                                          |
| 10.22      |  | Form of SecuritiesPurchase Agreement, dated as of December 31, 2003, by and between theRegistrant and each of the purchasers listed on Exhibit A thereto(incorporated herein by reference to Exhibit 4.5 of theRegistrant's Registration Statement on Form S-3, File No.333-112024. |
| 10.23      |  | Form of Warrant, dated asof December 31, 2003, by and between the Registrant and each of thepurchasers listed on Exhibit A thereto (incorporated herein byreference to Exhibit 4.5 of the Registrant's RegistrationStatement on Form S-3, File No.333-112024).                      |
| 14         |  | Registrant's Code ofEthics and Business Conduct (incorporated by reference to Exhibit 14 ofthe Registrant's Annual Report on Form 10-K for the year endedJune 30, 2004).                                                                                                            |
|            |

----

|            |  |                                                                                                                                                  |  |  |  |  |
|------------|--|--------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| ExhibitNo. |  |                                                                                                                                             |
| 21         |  | Subsidiaries of theRegistrant (filed herewith).                                                                                                  |
| 23         |  | Consent ofIndependent Registered Public Accounting Firm (filedherewith).                                                                         |
| 31.1       |  | Chief Executive OfficerCertification required by Rules 13a-14 and 15d-14 under the SecuritiesExchange Act of 1934, as amended (filedherewith).   |
| 31.2       |  | Chief Financial OfficerCertification required by Rules 13a- 14 and 15d- 14 under theSecurities Exchange Act of 1934, as amended (filedherewith). |
| 32         |  | Certification Pursuant to 18U.S.C. Section 1350, as adopted pursuant to Section 906 of SarbanesOxley Act of 2002 (filed herewith).               |
|            |

|  |
|--|
|  |  |
|  |

|   |                                                               |
|---|---------------------------------------------------------------|
| * | Confidential treatment granted for portions of thisagreement. |

----