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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                     FOR THE FISCAL YEAR ENDED JUNE 30, 2003
                                       OR
              [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                        COMMISSION FILE NUMBER 000-22839

                             GLOBECOMM SYSTEMS INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

               DELAWARE                                         11-3225567
   (State or other jurisdiction of                           (I.R.S. Employer
    incorporation or organization)                          Identification No.)

            45 OSER AVENUE,
             HAUPPAUGE, NY                                         11788
(Address of principal executive offices)                         (Zip Code)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (631) 231-9800

           SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

                                                 NAME OF EACH EXCHANGE
            TITLE OF EACH CLASS                   ON WHICH REGISTERED
            -------------------                   -------------------

                 None                                  None


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

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

         Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Securities Exchange Act of 1934. Yes [ ] No [X]

         As of September 26, 2003, there were 12,576,263 shares of the
registrant's common stock, $0.001 par value, outstanding, and the aggregate
market value of the voting stock held by non-affiliates of the registrant was
approximately $39.1 million based on the last reported sale price on the Nasdaq
National Market on that date.

                       DOCUMENTS INCORPORATED BY REFERENCE

         The Proxy Statement of Globecomm Systems Inc. relative to the 2003
Annual Meeting of Stockholders to be held on November 18, 2003, is incorporated
by reference into Part III of this Annual Report on Form 10-K.

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

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                                     PART I

ITEM 1.  BUSINESS

OVERVIEW

         Globecomm Systems Inc., or Globecomm, was incorporated in Delaware in
August 1994. We offer end-to-end, value-added satellite-based communications
infrastructure and services. We do this by leveraging our core satellite ground
segment systems and network capabilities, with the satellite services
capabilities that are generally provided by our wholly-owned subsidiary, NetSat
Express, Inc., or NetSat. The services we offer include wide area network
connectivity, broadband connectivity to end users, Internet connectivity,
content delivery network services, media distribution and other network services
on a global basis. To provide these services, we engineer all the necessary
satellite and terrestrial facilities as well as provide the integration services
required to implement those facilities. We also operate and maintain these
communications services on an ongoing basis. Our customers generally have
network service requirements that require point-to-point or point-to-multipoint
connections via a hybrid network of satellite and terrestrial facilities, and
include communications service providers, commercial enterprises, multinational
corporations, Internet Service Providers, or ISPs, broadcasters and other
content providers and government entities. Our service business is built on the
foundation of our core business as a supplier of ground segment systems and
networks for satellite-based communications. We provide these ground segment
systems and networks on a contract basis. These implementations include the
necessary hardware and software to support a wide range of network applications
using satellite, broadcast and terrestrial technologies.

         We provide end-to-end satellite-based service solutions around the
world. We are able to offer these "one stop shopping" solutions by providing
both systems infrastructure and related network services for our customers.
NetSat provides the network services required for us to offer end to end
solutions to ISPs, commercial enterprises, broadcasters and government customers
for a wide range of network service solutions, including Internet backbone
connectivity, content delivery network applications, back-office capabilities,
communications points of presence, or POP, infrastructure, and network
management services.

SERVICES AND PRODUCTS

OUR GROUND SEGMENT SYSTEMS AND NETWORKS

         We design, engineer, integrate and install satellite-based ground
segment systems and network solutions for the complex and changing
communications requirements of our customers. Our ground segment systems
typically consist of an earth station and ancillary subsystems. An earth station
is an integrated system consisting of antennas, radio signal transmitting and
receiving equipment, modulation/demodulation equipment, monitor and control
systems and voice, data and video network interface equipment. Ancillary
subsystems may include microwave links or fiber optic links for the transmission
of communications traffic to a central office, or generators for emergency power
requirements. Our customizable modular earth stations may be sold separately as
stand-alone ground segment systems or may be used as building blocks to be
integrated into a complete ground segment system or network. We believe that
this modular approach allows us to engineer our ground segment systems and
networks to serve client-specific service requirements rapidly, cost-effectively
and efficiently with minimal site preparation. All of our earth stations are
configurable to conform to applicable satellite standards.

         MODULAR BUILDING BLOCK EARTH STATION MBB 2001(TM) These earth stations
provide point-to-point high-capacity data links and hubs for satellite networks.
Generally, all electronics are housed in an indoor equipment enclosure.

         COMMERCIAL TERMINAL CTF 2001(TM) This family of earth stations
encompasses a range of general purpose, medium-capacity earth stations, and is
principally used by corporate, common carrier and government networks.
Generally, all radio frequency electronics are housed in weatherproof enclosures
mounted on the antenna. The satellite modem is housed in an indoor equipment
enclosure.

         COMPACT EARTH STATION CES 2001(TM) We designed this family of digital
earth stations to be used principally to provide limited capacity to areas with
limited or no telecommunications infrastructure. These earth stations integrate
radio frequency and satellite modem components into one antenna mounted package.


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         EXPLORER C/K TRANSPORTABLE EARTH STATION. We designed this family of
digital earth stations primarily for emergency communications and news
gathering. The group is comprised of portable, modular earth stations designed
to be quickly deployed and operated anywhere in the world. The latest model, the
Explorer Ku, incorporates technology from the Compact Earth Station product line
to minimize cost, size and weight. All components are mounted in separate cases,
which are small enough to be easily transported by commercial carriers,
including airplanes and trucks.

OUR COMMUNICATIONS SERVICES

         We tailor our communication services to meet our customers' needs by
offering standardized services and custom-engineered solutions. Our standardized
services may be sold separately or may be used as building blocks as a part of a
custom-engineered solution. We use our expertise in satellite communications,
Internet Protocol, communications networks and information technology in
designing our custom-engineered solutions.

         Globally, telecommunications networks are moving rapidly toward
Internet Protocol based networks and services based on the lower cost of
implementation and the flexibility these networks offer. Satellite-based
communications complement this trend as many of the regions in the world lack
the next generation terrestrial networks required to accommodate the rapid and
reliable transmission of the vast amounts of information underlying the growth
in traffic. Globecomm is a network service provider that offers next generation
network services to service providers, ISPs, enterprises, broadcasters and
governments around the world. We combine satellite and terrestrial
communications networks to provide customers high-speed access services to the
United States Internet backbone, corporate headquarters, government offices, as
well as the public switched telephone network for private networks. We currently
have customers for which we are providing such network services in Africa, the
Middle East, Central and South America, Eastern and Central Europe and the Asia
Pacific Region.

   STANDARDIZED SERVICES

         SKYBORNE(SM) This service offering provides point to multipoint content
delivery of multimedia content. Skyborne is a video, audio and data satellite
solution that serves retailers, enterprises, broadcasters, and government
agencies. SkyBorne's mission is to provide highly customized and cost-effective
broadcast and value-added solutions to these market segments. There are a number
of market trends that may require the SkyBorne solution. Retailers are beginning
to understand the importance of video promotions within their retail outlets and
have developed cost models that are leading them to deploy nationwide digital
signage networks. Corporations are increasingly using streaming and stored video
for training and internal communications and are finding that their current
terrestrial infrastructures are not able to meet the demands of video. Retailers
are beginning to understand the need for customization of video and audio in
their outlets and are looking for technologies which allow increased flexibility
and customization. Training has become a more important focus for many
enterprises, especially retailers, due to increased rates of turnover and the
quickening pace of market and technology changes.

         ACCESS PLUS(TM) This service offering provides point to point and point
to multipoint Internet connectivity for ISPs, service providers, broadcast,
government and enterprise customers. These services provide asymmetrical forward
and return links optimized for Internet applications. We offer two way satellite
Internet connectivity as well as one way satellite Internet connectivity with
terrestrial return. Our Internet access services, marketed under the Access
PlusTM brand name, provide high-speed access to the United States Internet
backbone. As part of this offering we provide the necessary satellite
transmission services, terrestrial transit and routing services, earth stations
and installation services.

         WIDE AREA NETWORK ANYWHERE(TM) This service offering provides
high-speed networking between major POPs. We are currently providing
point-to-point service to customers who require connections from our Long Island
International Teleport in New York to POPs in Latin America and the Middle East.

         ISDN ANYWHERE(TM) This service offering provides full-time connections
at rates of 64 Kbps and 128 Kbps to geographically dispersed locations. We can
provide these services to organizations needing full-time digital connections
for voice, data and video conferencing in locations around the world where the
terrestrial infrastructure is inadequate or unavailable.

         BANDWIDTH ON DEMAND ANYWHERE(TM) This service offering provides
high-speed data connections for intermittent use through a bandwidth
subscription service. It provides data rates up to 2 Mbps to geographically
dispersed locations. Customers who have high bandwidth requirements use this
service to reduce their costs when they only need intermittent services, like
emergency communications services. We currently offer this service in
cooperation with Agility Recovery Solutions, or Agility, for business restoral
requirements.


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   CUSTOM ENGINEERED SOLUTIONS

         The following is an example of how we provide custom-engineered
communications solutions for one of our customers:

         THE CHALLENGE. We were selected by Agility to design, implement and
operate a business restoral network for its call center restoral customers. The
design of this solution required advanced Internet Protocol network engineering
to build in the flexibility required by the Agility business model.

         THE SOLUTION. We designed, implemented and continue to operate the
Agility business restoral network including routing, satellite-terrestrial
transmission, twenty-four hours a day, seven days a week network operations and
automatic call distribution. Agility provides communications and information
technology, or IT, restoral solutions in case of service interruption at call
centers and corporate IT facilities. The solutions we provide are based on
Internet Protocol routed networks that provide the flexibility needed to
cover both voice and data traffic, and in order to allow the network to be
reconfigured rapidly to meet the restoral requirements of different customers.
The call center restoral solution includes a mobile recovery trailer with
telephones and computers for call center operators. The mobile recovery trailer
is set up near the facility where the call center operators normally work. When
working in the mobile recovery trailer because of an interruption of service
within the permanent facility, the call center operators are connected to the
public switched telephone network and the appropriate computer data bases via a
satellite connection from the mobile recovery trailer to us. We operate the
restoral network twenty-four hours a day, seven days a week and are prepared to
provide end to end service when a customer of Agility declares a need for
service. We are marketing this capability to the United States Government for
Homeland Security requirements.

[GRAPHIC OMITTED]

SALES AND MARKETING

         We market our products and services to communications services
providers, commercial enterprises, ISPs, broadcasters and other content
providers and government entities. We have structured our sales and marketing
approach to respond effectively to the opportunities in the communications
services market, as well as the traditional ground segment systems and networks
market. Our marketing activities are organized regionally, as well as on an
industry-specific basis. We use both direct and indirect sales channels to
market our services and products. Our direct sales force focuses on
industry-specific markets, including government, broadcast and commercial
enterprises

         Our regional business teams sell and market our communications services
and ground segment systems and networks internationally. These regional business
teams are responsible for orders and programs in the regions to which they are
assigned, as


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well as for the delivery of our products and services and for account management
of our existing customers. Currently, we have business teams responsible for the
Americas, the Asia-Pacific region, Africa, the Middle East and Europe.

         These regional business teams work together to identify, develop and
maintain customer relationships through local sales representatives, sales
executives and account managers. Together, they develop close and continuing
relationships with our customers. Our sales representatives in these regions
provide a local presence and identify prospective customers for our sales
executives. Our account managers may also function as project engineers for
network integration and service initiation programs for their accounts. We
believe this account management focus provides continuity and loyalty between
our customers and us. We also believe that our approach fosters long-term
relationships that lead to follow-on work and referrals to new customers. These
accounts also provide us with a market for the new products and services that we
develop. In addition, we obtain sales leads for new customers through referrals
from industry suppliers.

         We have sales and marketing staff located at our headquarters in
Hauppauge, New York, as well as in Hong Kong, Dubai, and the United Kingdom. Our
office in the United Kingdom is part of our wholly-owned subsidiary, Globecomm
Systems Europe Limited. These offices provide both sales and technical support
in the regions for which they have responsibility. As of June 30, 2003, we
employed 37 persons with sales and marketing responsibility, of which 15 are
full-time sales executives and 22 have dual engineering and sales and marketing
responsibilities.

         Our marketing program is intended to build national and international
awareness of our brand. We use direct mailings, print advertising to targeted
markets and trade publications to enhance awareness and acquire leads for our
direct and indirect sales teams. We create brand awareness by participating in
industry trade shows sponsored by organizations like the International
Telecommunications Union, the National Association of Broadcasters and the
Communications Managers Association. We also provide marketing information on
our web site and conduct joint marketing programs with sales representatives in
various regions to reach new customers.

         NetSat's marketing strategy is carried out primarily through
Globecomm's sales channels including Globecomm's direct sales staff and the
regional business teams, as well as direct sales and marketing through the World
Wide Web.

CUSTOMERS

         We have established a diversified base of customers in a variety of
industries. Our customers include communications services providers, commercial
enterprises, multinational corporations, ISPs, broadcasters and other content
providers and government entities. We typically rely upon a small number of
customers for a large portion of our revenues. We expect that in the near term a
significant portion of our revenues will continue to be derived from a limited
number of customers (the identity of whom may vary from year to year) as we seek
to expand our business and customer base.

BACKLOG

         At June 30, 2003, our backlog was approximately $58.0 million compared
to approximately $80.3 million at June 30, 2002. Our backlog was reduced by
$35.8 million, as a result of customer contracts assigned to vendors, pursuant
to settlement agreements reached in February 2003 and October 2002. We record an
order in backlog when we receive a firm contract or purchase order, which
identifies product quantities, sales price, service dates and delivery dates.
Backlog represents the amount of unrecorded revenue on undelivered orders and
services to be provided and a percentage of revenues from sales of products that
have been shipped where installation has not been completed and final acceptance
has not been received from the customer. Our backlog at any given time is not
necessarily indicative of future period revenues. A substantial portion of our
backlog is comprised of large orders, the cancellation of any of which could
have a material adverse effect on our operating results. For example, at June
30, 2003, $32.8 million, or approximately 56.5%, of our backlog represented
contracts with seven customers. We cannot assure you that these contracts or any
others in our backlog will not be cancelled or revised. See "Risk Factors"
beginning on page 21.

COMMUNICATIONS INFRASTRUCTURE

         We built and own the teleport facility located at our headquarters in
Hauppauge, New York. We are a member of the World Teleport Association (WTA) and
were awarded the Teleport Operator of the Year award from the WTA for the year
2000. Our teleport is designed to meet the most stringent requirements for
high-speed data communications requirements. This teleport is used to transmit
and receive signals from satellites positioned to serve customers in Latin
America, the United States, Canada, Europe, the Middle East and Africa. Our
teleport uses redundant critical systems and uninterruptible power supplies with
back-up power generation.


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         We also lease teleport services in Los Angeles to transmit and receive
signals from satellites positioned to serve customers in the Pacific Rim region.
Connection to the United States Internet backbone in Los Angeles is achieved
through leased fiber optic circuits.

         We lease transponder capacity to meet the bandwidth needs of our
customers. We lease multiple, redundant, high-capacity fiber connections to
provide reliable Internet data, voice and data traffic to locations in New York
City where it interconnects with telecommunications service providers and the
United States Internet backbone.

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

PRODUCT DESIGN, ASSEMBLY AND TESTING

         We assign a project team to each contract into which we enter. Each
team is led by a project engineer who is responsible for execution of the
project. This includes engineering and design, assembly and testing,
installation and customer acceptance. A project may include engineers,
integration specialists, buyer-planners and an operations team. Our standard
satellite ground segment systems are manufactured using a standard modular
production process. Typically, long-term projects require significant
customer-specific engineering, drafting and design efforts. Once the system is
designed, the integration specialist works with the buyer-planner and the
operations team to assure a smooth transfer from the engineering phase to the
integration phase. The integration phase consists mainly of integrating the
purchased equipment, components and subsystems into a complete functioning
system. Assembly, integration and test operations are conducted on both an
automated and manual basis.

         We provide facilities for complete in-plant testing of all our systems
before delivery in order to assure all performance specifications will be met
during installation at the customer's site. We employ formal total quality
management programs and other training programs, and have been certified by the
International Organization of Standards quality certification process for ISO
9001, a standard that enumerates specific requirements an organization must
follow in order to assure consistent quality in the supply of products and
services. The certification process qualifies us for access to virtually all
domestic and international projects, and we believe that this represents a
competitive advantage.

RESEARCH AND DEVELOPMENT

         We have developed internal research and development resources in
Internet Protocol networks, content delivery networks, broadcast systems,
network management systems, and system products. The costs of developing new
technologies are funded partially by the investments made by us and partially by
development funded by specific customer program requirements. This approach
provides us with a cost-effective means to develop new technology, while
minimizing our direct research and development expenditures. Furthermore, we
believe that our research and development capabilities allow us to offer added
value in developing solutions for our customers, while at the same time we
maintain the opportunity to develop products through our strategic supplier
relationships. Our internal research and development efforts generally focus on
the development of products and services not available from other suppliers to
the industry. Current efforts are focused on developing content delivery network
technology for our enterprise customers, broadcast systems technology for our
service provider customers and broadcast customers, network management system
products for all our earth terminal and network customers and customizable
systems for our government customers. For the years ended June 30, 2003, 2002
and 2001, we have incurred approximately $0.8 million, $1.2 million, and $0.9
million, respectively, in internal research and development expenses.

COMPETITION

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

         In the communications services market, we believe that our ability to
compete successfully is based primarily on management's reputation and providing
prompt delivery and initiation of service, competitive pricing, consistent and
reliable connections and high-quality customer support.

         Our primary competitors in the satellite ground segment systems and
networks market generally fall into two groups: (1) system integrators like IDB
Systems, a division of MCI and (2) equipment manufacturers who also provide
integrated systems, like Andrew Corporation and Tripoint Global.


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         In the end-to-end satellite-based communication solutions and
communications services markets, we compete with other satellite communication
companies who provide similar services, like Verestar. In addition, we may
compete with other communications services providers like MCI, and satellite
owners like Panamsat, Loral Skynet, New Skies Satellites N.V. and Intelsat. We
anticipate that our competitors may develop or acquire services that provide
functionality that is similar to that provided by our services and that those
services may be offered at significantly lower prices or bundled with other
services. In addition, we anticipate that continuing deregulation worldwide is
expected to result in the formation of a significant number of new competitive
service providers over the next two or three years.

         Current and potential participants in the markets in which we compete
have established or may establish cooperative relationships among themselves or
with third parties. These cooperative relationships may increase the ability of
their products and services to address the needs of our current and prospective
customers. Accordingly, it is possible that new competitors or alliances among
competitors may emerge that will enable them to acquire significant market share
rapidly. We believe that increased competition is likely to result in price
reductions, reduced gross profit margins and loss of market share, any of which
would have a material adverse effect on our business, results of operations and
financial condition.

INTELLECTUAL PROPERTY

         We rely heavily on the technological and creative skills of our
personnel, new product developments, computer programs and designs, frequent
product enhancements, reliable product support and proprietary technological
expertise in maintaining our competitive position. We have secured patent
protection on some of our products, and have secured trademarks and service
marks to protect some of our products and services.

         We currently have been granted three patents in the United States, one
for remote access to the Internet using satellites, another for satellite
communication with automatic frequency control and most recently, we have been
granted a patent concerning a monitor and control system for satellite
communications networks and the like. We have two other patents pending in the
United States, one for implementing facsimile and data communications using
Internet protocols and another for a distributed satellite-based cellular
network. We currently have one Patent Cooperation Treaty patent application
pending for implementing facsimile and data communications using Internet
protocols. We also intend to seek additional patents on our technology, if
appropriate. We have filed applications for trademark registration of Globecomm
Systems Inc., Globecomm and GSI in the United States and various other
countries. NetSat has received trademark registration for NetSat in the United
States, the European Community, Russia and Brazil. We have also received
trademark registrations in the United States for MBB2001TM, CTF2001TM, CES2001TM
and AXXSYSTM, which relate to our customizable modular earth stations, and for
Impact TM, which relates to our customizable ISP solutions. We have other
trademarks and service marks pending and intend to seek registration of other
trademarks and service marks in the future.

GOVERNMENT REGULATIONS

   OPERATIONS AND USE OF SATELLITES

         We are subject to various federal laws and regulations, which may have
negative effects on our business. We operate Federal Communications Commission,
or FCC, licensed earth stations in Hauppauge, New York, subject to the
Communications Act of 1934, as amended, or the FCC Act, and the rules and
regulations of the FCC. Pursuant to the FCC Act and FCC rules and regulations,
we have obtained and are required to maintain radio transmission licenses from
the FCC for both domestic and foreign operations of our earth stations. We have
also obtained and are required to maintain authorization issued under Section
214 of the FCC Act to act as a telecommunications carrier, which authorization
also extends to NetSat. These licenses should be renewed by the FCC in the
normal course as long as we remain in compliance with FCC rules and regulations.
However, we cannot guarantee that additional licenses will be granted by the FCC
when our existing licenses expire, nor can we assure you that the FCC will not
adopt new or modified technical requirements that will require us to incur
expenditures to modify or upgrade our equipment as a condition of retaining our
licenses.

         We are also required to comply with FCC regulations regarding the
exposure of humans to radio frequency radiation from our earth stations. These
regulations, as well as local land use regulations, restrict our freedom to
choose where to locate our earth stations.

         NetSat does not currently hold any FCC licenses, permits, or
authorizations independent of those held by us, nor does it currently provide
any FCC regulated services. Therefore, it is not subject to the FCC Act or FCC
rules and regulations. However, NetSat may hold such licenses, permits, or
authorizations, or provide these services in the future, and would then be
required to comply with the FCC requirements.


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   COMMON CARRIER REGULATION

         We currently provide services to our customers on a private carrier and
on a common carrier basis. Our operations as a common carrier require us to
comply with the FCC's requirements for common carriers. These requirements
include, but are not limited to, providing our rates and service terms, being
forbidden from unjust and unreasonable discrimination among customers, notifying
the FCC before discontinuing service, and complying with FCC equal employment
opportunity regulations and reporting requirements.

         We do not currently provide telecommunications services between points
in the same state and so are exempt from state regulation of our services.
However, we could become subject to state telecommunications regulations if we
did provide intrastate telecommunications services.

   FOREIGN OWNERSHIP

         The FCC Act and FCC regulations impose restrictions on foreign
ownership of our earth stations. These requirements generally forbid more than
20% ownership or control of an FCC licensee by non-United States citizens and
more than 25% ownership of a licensee's parent by non-United States citizens.
The FCC may authorize foreign ownership in the licensee's parent in excess of
these percentages. Under current policies, the FCC has granted these
authorizations where the applicant does not control monopoly or bottleneck
facilities and the foreign owners are citizens of countries that are members of
the World Trade Organization or provide equivalent competitive opportunities to
United States citizens.

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

   FOREIGN REGULATIONS

         Regulatory schemes in countries in which we may seek to provide our
satellite-delivered data communications services may impose impediments on our
operations. Some countries in which we operate or intend to operate have
telecommunications laws and regulations that do not currently contemplate
technical advances in telecommunications technology like Internet/intranet
transmission by satellite. We cannot assure you that the present regulatory
environment in any of those countries will not be changed in a manner, which may
have a material adverse impact on our business. Either we or our local sales
representatives typically must obtain authorization for each country in which we
provide our satellite-delivered data communications services. Although we
believe that we or our local sales representatives will be able to obtain the
requisite licenses and approvals from the countries in which we intend to
provide products and services, the regulatory schemes in each country are
different, and thus there may be instances of noncompliance of which we are not
aware. Although we believe these regulatory schemes will not prevent us from
pursuing our business plan, we cannot assure you that our licenses and approvals
are or will remain sufficient in the view of foreign regulatory authorities. In
addition, we cannot assure you that necessary licenses and approvals will be
granted on a timely basis, or at all, in all jurisdictions in which we wish to
offer our products and services or that the applicable restrictions will not be
unduly burdensome.

   REGULATION OF THE INTERNET

         Our Internet operations (other than the operation of a teleport) are
not currently subject to direct government regulation in the United States or
most other countries, and there are currently few laws or regulations directly
applicable to access to or commerce on the Internet. However, due to the
increasing popularity and use of the Internet it is possible that a number of
laws and regulations may be adopted at the local, national or international
levels with respect to the Internet, covering issues like user privacy and
expression, pricing of products and services, taxation, advertising,
intellectual property rights, information security, or the convergence of
traditional communication services with Internet communications.

         We anticipate that a substantial portion of our, or NetSat's, Internet
operations will be carried out in countries which may impose greater regulation
of the content of information coming into their country than that which is
generally applicable in the United States. Examples of this include privacy
regulations in Europe and content restrictions in countries, such as the
Republic of China. To the extent that we provide content as a part of our
Internet services, it will be subject to laws regulating content. Moreover, the
adoption of laws or regulations may decrease the growth of the Internet, which
could in turn decrease the demand for our Internet services, or increase our
cost of doing business or otherwise negatively affect our business. In addition,
the applicability to the Internet of existing laws governing issues including
property ownership, copyrights and other intellectual property issues, taxation,
libel and personal privacy is uncertain. The vast majority of these laws were
adopted prior to the advent of the Internet and related technologies and, as a
result, do not contemplate or address the unique issues of the Internet and
related technologies. Changes to these laws


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intended to address these issues, including some recently proposed changes,
could create uncertainty in the marketplace. These changes could reduce demand
for our products and services or could increase our cost of doing business as a
result of costs of litigation or increased product development costs.

   TELECOMMUNICATIONS TAXATION, SUPPORT REQUIREMENTS, AND ACCESS CHARGES

         All telecommunications carriers providing domestic services in the
United States are required to contribute a portion of their gross revenues for
the support of universal telecommunications services. Some telecommunications
services are subject to special taxation and to contribution requirements to
support services to special groups, like persons with disabilities. At present,
Globecomm is subject to the requirements for support of such special groups;
NetSat's operations are presently deemed not subject to such requirements. Our
services may be subject to new or increased taxes and contribution requirements
that could affect our profitability, particularly if we are not able to pass
them through to customers for either competitive or regulatory reasons.

         Internet services are currently exempt from charges that long distance
telephone companies pay for access to the networks of local telephone companies
in the United States. Efforts have been made from time to time, and may be made
in the future, to eliminate this exemption. If these access charges are imposed
on telephone lines used to reach ISPs, and/or if flat rate telephone services
for Internet access are eliminated or curtailed, the cost to customers who
access our satellite facilities using telephone company-provided facilities
could increase to an extent that could discourage the demand for our services.
Likewise, the demand for our services in other countries may be affected by the
availability and cost of local telephone or other telecommunications facilities
to reach our facilities or the facilities of our customers.

   EXPORT OF TELECOMMUNICATIONS EQUIPMENT

         The sale of our ground segment systems, networks, and communications
service solutions outside the United States is subject to compliance with the
regulations of the United States Export Administration Regulations. The absence
of comparable restrictions on competitors in other countries may adversely
affect our competitive position. In addition, in order to ship our products or
implement our services into some countries, these products or services must
satisfy the technical requirements of the particular country. If we were unable
to comply with these requirements with respect to a significant quantity of our
products, our sales in those countries could be restricted, which could have a
material adverse effect on our business, financial condition and results of
operations.

EMPLOYEES

         As of June 30, 2003, we had 176 full-time employees, including 82 in
engineering and program management, 46 in the manufacturing, operations support,
and network operations, 15 in sales and marketing, and 33 in management and
administration. Our employees are not covered by any collective-bargaining
agreements. We believe that our relations with our employees are good.

ITEM 2. PROPERTIES

         We own a facility containing approximately 122,000 square feet of space
on approximately seven acres located at 45 Oser Avenue, Hauppauge, New York.
This facility houses our principal offices and production facilities, as well as
the offices and the network operations center of NetSat. We are in the fourth
year of a five-year lease at a base monthly rent of approximately $3,800 for
office and operations facilities for our wholly-owned subsidiary, Globecomm
Systems Europe Limited, in the United Kingdom. In addition, we have a lease for
office space in Hong Kong at a monthly rental fee of approximately $1,900 and
another lease for office space in Dubai at a monthly rental fee of approximately
$1,600.

ITEM 3. LEGAL PROCEEDINGS

         On August 6, 2002, we issued a notice of termination to a major
customer in the Middle East for failure to pay for services rendered, and
included a demand for full payment of the past due balance and specified
liquidated damages for early termination. The customer responded by issuing its
own notice of termination claiming certain breaches of the contract by NetSat,
which claims we denied. The contract required settlement of disputes by
arbitration to be held in New York and we initiated the arbitration process in
December 2002. After an arbitrator was appointed and a proposed schedule for the
arbitration was set, NetSat and the customer entered into a confidential
settlement agreement. The customer has paid NetSat $2.0 million under the
settlement ($1.0 million in both June and July 2003) and the arbitration
proceeding was dismissed.

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

         None


                                       9
<PAGE>

                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

         Our common stock is quoted on the Nasdaq National Market under the
symbol "GCOM." The fiscal 2003 and 2002 high and low sales prices are as
follows:

<TABLE>
<CAPTION>
                                                           HIGH        LOW
                                                           ----        ---
<S>                                                     <C>         <C>
     2003
     Quarter ended September 30, 2002.................     $5.70       $2.40
     Quarter ended December 31, 2002..................      4.75        2.60
     Quarter ended March 31, 2003.....................      3.99        2.34
     Quarter ended June 30, 2003......................      4.25        2.45

     2002
     Quarter ended September 30, 2001.................      7.34        4.90
     Quarter ended December 31, 2001..................      6.49        3.81
     Quarter ended March 31, 2002.....................      8.40        4.85
     Quarter ended June 30, 2002......................      7.15        3.16
</TABLE>

         At September 26, 2003, there were approximately 3,300 stockholders of
record of our common stock, as shown in the records of our transfer agent.

         At the close of the Nasdaq National Market on September 26, 2003, our
market price per share was $3.35.

         As of June 30, 2003, we had not declared or paid dividends on our
common stock since inception and we do not expect to pay dividends in the
foreseeable future.

         The table below sets forth securities we have authorized for issuance
under our equity compensation plans.

EQUITY COMPENSATION PLAN INFORMATION AS OF JUNE 30, 2003

<TABLE>
<CAPTION>
                                                                                                         NUMBER OF SECURITIES
                                                                                                          REMAINING AVAILABLE
                                                    NUMBER OF                                                 FOR FUTURE
                                                 SECURITIES TO BE            WEIGHTED-AVERAGE               ISSUANCE UNDER
                                               ISSUED UPON EXERCISE           EXERCISE PRICE              EQUITY COMPENSATION
                                                  OF OUTSTANDING              OF OUTSTANDING               PLANS (EXCLUDING
                                                OPTIONS, WARRANTS           OPTIONS, WARRANTS            SECURITIES REFLECTED
      PLAN CATEGORY                                 AND RIGHTS                  AND RIGHTS                   IN COLUMN (A)
                                                       (A)                         (B)                            (C)
<S>                                                  <C>                         <C>                            <C>
     Equity compensation plan approved
        by security holders..........                3,127,432                   $  7.51                        470,569
     Equity compensation plans not
        approved by security holders.                  863,468                   $ 11.16                             --
                                                     ---------                                                  -------

           Total.....................                3,990,900                   $  8.30                        470,569
                                                     =========                   =======                        =======
</TABLE>

         The equity compensation plans, authorized for issuance that were
adopted without the approval of the security holders, relate to outstanding
warrants. During November 1996, we issued ten-year warrants, to five consultants
to purchase an aggregate of 64,125 shares of common stock at a price per share
of $8.07, in consideration for services rendered. During the fiscal year ended
June 30, 2001, we issued five-year warrants, in connection with the purchase of
minority interests in NetSat, to purchase an aggregate of 807,643 shares of
common stock at a price per share of $11.375.


                                       10
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

         Our selected consolidated financial data as of and for each of the five
years in the periods ended June 30, have been derived from our audited
consolidated financial statements. EBITDA represents loss before minority
interests in operations of our consolidated subsidiary, interest income,
interest expense, provision for income taxes, depreciation and amortization
expense, a gain on the sale of consolidated subsidiary's common stock and a gain
on sale of investment. EBITDA does not represent cash flows defined by
accounting principles generally accepted in the United States and does not
necessarily indicate that our cash flows are sufficient to fund all of our cash
needs. We disclose EBITDA since it is a financial measure commonly used in our
industry. EBITDA is not meant to be considered a substitute or replacement for
net loss as prepared in accordance with accounting principles generally accepted
in the United States. EBITDA may not be comparable to other similarly titled
measures of other companies. We record an order in backlog when we receive a
firm contract or purchase order, which identifies product quantities, sales
price, service dates and delivery dates. Backlog represents the amount of
unrecorded revenue on undelivered orders and services to be provided and a
percentage of revenues from sales of products that have been shipped where
installation has not been completed and final acceptance has not been received
from the customer. Our backlog at any given time is not necessarily indicative
of future period revenues. Certain balances in the prior years have been
reclassified to conform to the current year presentation.


                                       11
<PAGE>

                             SELECTED FINANCIAL DATA
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                                YEARS ENDED JUNE 30,
                                                          ------------------------------------------------------------------
                                                           2003             2002           2001            2000           1999
                                                          ------           ------         ------          ------         ------
<S>                                                     <C>            <C>              <C>            <C>             <C>
STATEMENTS OF OPERATIONS DATA:
Revenues from ground segment systems,
  networks and enterprise solutions..............       $ 40,125       $    64,101      $  78,744      $   69,584      $  46,397
Revenues from data communications
  services.......................................         13,903            22,478         24,170           8,987          2,661
                                                        -----------    -------------    -----------    ------------    -----------

Total revenues...................................         54,028            86,579        102,914          78,571         49,058
                                                        -----------    -------------    -----------    ------------    -----------

Costs and operating expenses:
  Costs from ground segment systems,
    networks and enterprise solutions............         39,447            57,083         70,907          60,634         41,235
  Costs from data communications
    services.....................................         17,796            26,705         22,661          10,101          2,894
  Selling and marketing..........................          6,042             6,735          7,235           6,139          5,183
  Research and development.......................            800             1,185            850             784          1,325
  General and administrative.....................          9,423            11,970          9,822           8,797          5,941
  Terminated acquisition costs...................             --                --             --              --            972
  Asset impairment charge........................             --               237          2,857              --            679
  Restructuring charge...........................             --                --          1,950              --             --
                                                        -----------    -------------    -----------    ------------    -----------

Total costs and operating expenses...............         73,508           103,915        116,282          86,455         58,229
                                                        -----------    -------------    -----------    ------------    -----------

Loss from operations.............................        (19,480)          (17,336)       (13,368)         (7,884)        (9,171)
Other income (expense):
  Interest income................................            422             1,030          3,194           1,727            980
  Interest expense...............................           (539)             (957)        (6,579)         (2,522)            (1)
  Gain on sale of consolidated
    subsidiary's common stock....................             --                --             --           2,353             --
  Gain on sale of investment.....................             --                --            304              --             --
                                                        -----------    -------------    -----------    ------------    -----------

Loss before income taxes and minority
  interests in operations of consolidated
  subsidiary.....................................        (19,597)          (17,263)       (16,449)         (6,326)        (8,192)
Provision for income taxes.......................             --                --         (1,600)             --             --
                                                        -----------    -------------    -----------    ------------    -----------

Loss before minority interests in
  operations of consolidated subsidiary..........        (19,597)          (17,263)       (18,049)         (6,326)        (8,192)
Minority interests in operations of
  consolidated subsidiary........................             --                --           (650)          2,745             --
                                                        -----------    -------------    -----------    ------------    -----------

Net loss.........................................       $(19,597)      $   (17,263)     $ (18,699)     $   (3,581)     $  (8,192)
                                                        ===========    =============    ===========    ============    ===========

Basic and diluted net loss per common
  share..........................................       $  (1.56)      $     (1.36)     $   (1.55)     $    (0.36)     $   (0.90)
                                                        ===========    =============    ===========    ============    ===========


Weighted-average shares used in the
  calculation of basic and diluted net
  loss per common share..........................         12,565            12,707         12,060          10,016          9,109
                                                        ===========    =============    ===========    ============    ===========
</TABLE>


                                       12
<PAGE>

<TABLE>
<CAPTION>
                                                                               YEARS ENDED JUNE 30,
                                                          ------------------------------------------------------------------
                                                           2003             2002           2001            2000          1999
                                                          ------           ------         ------          ------        ------
<S>                                                      <C>            <C>             <C>            <C>             <C>
OTHER OPERATING DATA:
Net loss ........................................        $(19,597)      $  (17,263)     $ (18,699)     $   (3,581)     $  (8,192)
Other expense (income)...........................             117              (73)         3,081          (1,558)          (979)
Minority interest in operations of consolidated
  subsidiary.....................................              --               --            650          (2,745)            --
Provision for income taxes.......................              --               --          1,600              --             --
Depreciation and amortization....................           3,532            3,661          7,229           3,347          1,267
                                                         -----------    ------------    -----------    ------------    -----------
EBITDA   ........................................        $(15,948)      $  (13,675)     $  (6,139)     $   (4,537)     $  (7,904)
                                                         ===========    ============    ===========    ============    ===========

Cash flows used in operating activities..........         (14,714)          (2,942)       (11,823)         (8,925)        (4,408)
Cash flows used in investing activities..........          (1,712)          (2,387)        (7,446)           (361)        (4,435)
Cash flows (used in) provided by
  financing activities...........................            (310)          (1,018)          (982)         62,614           (555)
Capital expenditures, net of non-cash
  capital lease expenditures.....................           1,732            1,687          5,350           6,926          3,818
Backlog at end of year...........................          58,006           80,269        101,013         100,139         63,746
</TABLE>

<TABLE>
<CAPTION>
                                                                                         JUNE 30,
                                                          ------------------------------------------------------------------
                                                            2003              2002          2001           2000          1999
                                                           ------            ------        ------         ------        ------
<S>                                                      <C>            <C>              <C>            <C>            <C>
BALANCE SHEET DATA:
Cash and cash equivalents........................        $ 22,016       $     38,708     $  45,038      $   65,289     $  11,944
Working capital..................................          22,040             43,702        60,399          74,531        19,450
Total assets.....................................          70,344            100,297       124,999         222,754        61,653
Long-term liabilities............................           1,303             12,693        13,446          96,355            --
Minority interests in consolidated
  subsidiary.....................................              --                 --            --             126            --
Series A participating preferred stock of
  consolidated subsidiary........................              --                 --            --           5,000            --
Total stockholders' equity.......................          47,437             67,040        85,141          90,524        36,257
</TABLE>


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

         You should read the following discussion of our financial condition and
results of operations with the consolidated financial statements and related
notes included elsewhere in this Annual Report on Form 10-K. This discussion
contains, in addition to historical information, forward-looking statements,
within the meaning of the Private Securities Litigation Reform Act of 1995,
based on our current expectations, assumptions, estimates and projections. These
forward-looking statements involve risks and uncertainties. Our actual results
could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, such as, among others, uncertain
demand for our services and products due to economic and industry-specific
conditions, the risks associated with operating in international markets and our
dependence on a limited number of contracts for a high percentage of our
revenues. These risks and others are more fully described in the "Risk Factors"
section and elsewhere in this Annual Report on Form 10-K. We undertake no
obligation to update publicly any forward-looking statements for any reason,
even if new information becomes available or other events occur in the future.

OVERVIEW

         Since our inception, a majority of our revenues have been generated by
ground segment systems, networks and enterprise solutions business. Contracts
for these ground segment systems and networks and communications services have
been fixed-price contracts in a majority of cases. Profitability of such
contracts is subject to inherent uncertainties as to the cost of performance. In
addition to possible errors or omissions in making initial estimates, cost
overruns may be incurred as a result of unforeseen obstacles, including both
physical conditions and unexpected problems encountered in engineering design
and testing. Since our business is frequently concentrated in a limited number
of large contracts, a significant cost overrun on any contract could have a
material adverse effect on our business, financial condition and results of
operations.


                                       13
<PAGE>

         Contract costs generally include purchased 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 solutions consist primarily of the costs of purchased materials
(including shipping and handling costs), direct labor and related overhead
expenses, project-related travel and living costs and subcontractor salaries.
Costs from data communications services consist primarily of satellite space
segment charges, Internet connectivity fees and network operations expenses.
Satellite space segment charges consist of the costs associated with obtaining
satellite bandwidth (the measure of capacity) used in the transmission of
services to and from the satellite leased from operators. Network operations
expenses consist primarily of costs associated with the operation of the network
operations center on a twenty-four hour a day, seven day a week basis, including
personnel and related costs and depreciation. Selling and marketing expenses
consist primarily of salaries, travel and living costs for sales and marketing
personnel. Research and development expenses consist primarily of salaries and
related overhead expenses. General and administrative expenses consist of
expenses associated with our management, finance, contract and administrative
functions.

         Our business has been adversely affected by the current global economic
slowdown and, in particular, the significant challenges facing the
telecommunications industry worldwide. These challenges include excess bandwidth
resulting from weak consumer and business demand, which has fallen far short of
expectations, and the attendant financial distress facing both traditional
telecommunication carriers and the new generation of competitive local exchange
carriers. Moreover, as a result of the uncertainties facing the economy,
corporations have seriously restricted their capital expenditures. The reduction
in demand has been accompanied by significant pricing pressures and intensifying
competition, while the financial difficulties of industry participants and
customers have created risks associated with collectibility of accounts
receivable. During fiscal 2003, we experienced a decline in bookings of contract
orders as customers and prospects delayed projects. These negative trends may
continue to impact our business and prospects in the future.

CRITICAL ACCOUNTING POLICIES

         Certain of our accounting policies require judgment by management in
selecting the appropriate assumptions for calculating financial estimates. By
their nature, these judgments are subject to an inherent degree of uncertainty.
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 from other outside sources, as appropriate.
Actual results may differ from these judgments under different assumptions or
conditions. Our accounting policies that require management to apply significant
judgment include:

   REVENUE RECOGNITION

         We recognize revenue in accordance with Staff Accounting Bulletin No.
101 ("SAB 101"), Revenue Recognition in Financial Statements, for our
production-type contracts that are sold separately as standard satellite ground
segment systems when persuasive evidence of an arrangement exists, the selling
price is fixed or determinable, collectibility is reasonably assured, delivery
has occurred and the contractual performance specifications have been met. Our
standard satellite ground segment systems produced in connection with these
contracts is typically short-term (less than twelve months in term) and
manufactured using a standard modular production process. Such systems require
less engineering, drafting and design efforts than our long-term complex
production-type projects. Revenue is recognized on our standard satellite ground
segment systems upon shipment and acceptance of factory performance testing
which is when title transfers to the customer. The amount of revenues recorded
on each standard production-type contract is reduced by the customer's
contractual holdback amount, which typically requires 10% to 30% of the contract
value to be retained by the customer until installation and final acceptance is
complete. The customer generally becomes obligated to pay 70% to 90% of the
contract value upon shipment and acceptance of factory performance testing.
Installation is not deemed to be essential to the functionality of the system
since installation does not require significant changes to the features or
capabilities of the equipment, does not require complex software integration and
interfacing and we have not experienced any difficulties installing such
equipment. In addition, the customer or other third party vendors can install
the equipment. The estimated relative fair value of the installation services is
determined by management, which is typically less than the customer's
contractual holdback percentage. If the holdback is less than the fair value of
installation, we will defer recognition of revenues, determined on a
contract-by-contract basis equal to the fair value of the installation services.
Payments received in advance by customers are deferred until shipment and are
presented as deferred revenues.

         We recognize revenue using the percentage-of-completion method of
accounting upon the achievement of certain contractual milestones in accordance
with Statement of Position 81-1, Accounting for Performance of Construction-Type
and Certain Production-Type Contracts, for our non-standard, complex
production-type contracts for the production of satellite ground segment systems
and equipment that are generally integrated into the customers' satellite ground
segment network. The equipment and systems produced in connection with these
contracts are typically long-term (in excess of twelve months in term) and
require significant customer-specific engineering, drafting and design effort in
order to effectively integrate all of the customizable earth station equipment
into the customers' ground segment network. These contracts generally have
larger contract values, greater economic risks and substantive


                                       14
<PAGE>

specific contractual performance requirements due to the engineering and design
complexity of such systems and related equipment. Progress payments received in
advance by customers are netted against the inventories balance.

         Revenues from data communications services are derived primarily from
Internet access service fees. Service revenues from Internet access are
recognized ratably over the period in which services are provided. Payments
received in advance of providing Internet access services are deferred until the
period such services are provided and are presented as deferred revenues.

   COSTS FROM 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 total expected
contract costs. We use reasonable, dependable estimates of the costs applicable
to various elements. Since these contract costs depend on estimates, which are
assessed continually during the term of these contracts, costs are subject to
revisions as the contract progresses to completion. Revision in cost estimates
are reflected in the period in which they become known. In the event an estimate
indicates that a loss will be incurred at completion, we record the costs in the
period identified.

   GOODWILL

         Goodwill represents the excess of the purchase price over the fair
value of the net assets acquired primarily from the buyback of the minority
interests of NetSat. Beginning in the fiscal year ended June 30, 2002 with our
adoption of SFAS No. 142, Goodwill and Other Intangible Assets, goodwill and
other indefinite life intangible assets are no longer being amortized, but
instead tested for impairment at least annually.

         In assessing goodwill, we must make assumptions regarding the estimated
future cash flows and other factors to determine the fair value of our reporting
units. Future events could cause us to conclude that impairment indicators exist
and that the goodwill associated with NetSat is impaired. Any resulting
impairment could have a material adverse effect on our financial condition and
results of operations.

   ALLOWANCES FOR DOUBTFUL ACCOUNTS

         We maintain allowances for doubtful accounts for estimated losses
resulting from the inability of our customers to make required payments. We
assess the customer's ability to pay based on a number of factors, including our
past transaction history with the customer and the credit worthiness of the
customer. An assessment of the inherent risks in conducting our business with
foreign customers is also made since a significant portion of our revenues is
international. Management specifically analyzes accounts receivable, historical
bad debts, customer concentrations, customer credit-worthiness and current
economic trends. If the financial condition of our customers were to deteriorate
in the future, resulting in an impairment of their ability to make payments,
additional allowances may be required.

   INVENTORIES

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

   STOCK-BASED COMPENSATION

         We currently measure compensation expense for stock option grants using
the intrinsic value method prescribed in Accounting Principles Board Opinion No.
25, Accounting for Stock Issued to Employees. Under this method, we do not
record compensation expense when stock options are granted as long as the
exercise price is not less than the fair market value of the stock when the
option is granted. In accordance with SFAS No. 123, Accounting for Stock-Based
Compensation, and SFAS No. 148, Accounting for Stock-Based Compensation -
Transition and Disclosure, we disclose our pro-forma net loss and pro-forma net
loss per common share as if the fair value-based method had been applied in
measuring compensation expense for our stock option grants.


                                       15
<PAGE>

RESULTS OF OPERATIONS

FISCAL YEARS ENDED JUNE 30, 2003 AND 2002

         Revenues from Ground Segment Systems, Networks and Enterprise
Solutions. Revenues from ground segment systems, networks and enterprise
solutions decreased by $24.0 million, or 37.4% to $40.1 million for the fiscal
year ended June 30, 2003 from $64.1 million for the fiscal year ended June 30,
2002. The decrease related to a decrease in shipment and/or completion of
contracts as a result of a decline in bookings of contract orders due to the
continued uncertainty surrounding the global economic slowdown in the
telecommunications industry, resulting in customers and prospects continuing to
delay projects.

         Revenues from Data Communications Services. Revenues from data
communications services decreased by $8.6 million, or 38.1% to $13.9 million for
the fiscal year ended June 30, 2003 from $22.5 million for the fiscal year ended
June 30, 2002. The decrease reflected changes in market conditions, including
the global economic slowdown in the telecommunications industry, pricing
pressures in the marketplace and penetration of fiber into areas where we have
traditionally provided services, coupled with the termination of services from
our largest Middle East customer in August 2002. During February 2003 and
October 2002, pursuant to agreements reached with two of our vendors, we
assigned contracts with future revenues of $35.8 million, which reduced our
monthly recurring revenues by approximately $0.4 million.

         Costs from Ground Segment Systems, Networks and Enterprise Solutions.
Costs from ground segment systems, networks and enterprise solutions decreased
by $17.6 million, or 30.9%, to $39.4 million for the fiscal year ended June 30,
2003 from $57.1 million for the fiscal year ended June 30, 2002. The decrease is
attributable to a lower revenue base. Costs as a percentage of related revenues
increased to 98.3% for the fiscal year ended June 30, 2003 from 89.1% for the
fiscal year ended June 30, 2002. The increase was mainly attributable to
competitive margin pressure and a $4.4 million charge, principally in the fourth
quarter, related to a major customer for costs to complete certain contracts.

         Costs from Data Communications Services. Costs from data communications
services decreased by $8.9 million, or 33.4%, to $17.8 million for the fiscal
year ended June 30, 2003 from $26.7 million for the fiscal year ended June 30,
2002. Costs as a percentage of related revenues increased to 128.0% for the
fiscal year ended June 30, 2003 from 118.8% for the fiscal year ended June 30,
2002. The decrease in costs was primarily due to agreements reached with two of
our vendors during February 2003 and October 2002, in which we significantly
reduced our space segment transponder costs and obligations. These agreements
will continue to reduce our future monthly space segment costs. The increase as
a percentage of related revenue was due to a lower revenue base resulting from
the termination of services from our largest Middle East customer in August
2002, the assignment of $35.8 million in contract revenues, plus payments of
$4.1 million for termination fees related to our agreements to reduce our space
segment transponder obligations.

         Selling and Marketing. Selling and marketing expenses decreased by $0.7
million, or 10.3%, to $6.0 million for the fiscal year ended June 30, 2003 from
$6.7 million for the fiscal year ended June 30, 2002. The decrease was primarily
due to reduced salary and salary related expenses, offset by severance costs
associated with reductions in sales and marketing personnel.

         Research and Development. Research and development expenses decreased
by $0.4 million, or 32.5%, to $0.8 million for the fiscal year ended June 30,
2003 from $1.2 million for the fiscal year ended June 30, 2002. The decrease was
attributable to reduced internal development of monitoring and control
technologies and the non-recurrence of costs associated with the development of
various initial subsystems for solutions provided to a new customer in fiscal
year 2002.

         General and Administrative. General and administrative expenses
decreased by $2.5 million, or 21.3%, to $9.4 million for the fiscal year ended
June 30, 2003 from $12.0 million for the fiscal year ended June 30, 2002.
General and administrative expenses as a percentage of revenues increased to
17.4% for the fiscal year ended June 30, 2003 from 13.8% for the fiscal year
ended June 30, 2002 primarily due to the decrease in revenues. The decrease in
general and administrative expenses for the fiscal year ended June 30, 2003
primarily resulted from the non-recurrence of a $3.2 million allowance for
uncollectible accounts receivable from our largest Middle East customer in the
fiscal year ended June 30, 2002 (of which $1.0 million was recovered during the
fourth quarter of fiscal year ended June 30, 2003), offset by the recording of a
$1.5 million expense provision related to the risk of non-collection of a
receivable from a major customer and an increase in insurance premiums.

         Asset Impairment Charge. The asset impairment charge of $0.2 million
for the fiscal year ended June 30, 2002, related to a write-down of the net
carrying value of goodwill relating to the acquisition of a wireless local loop
telephone network solutions business during the fiscal year ended June 30, 1999.


                                       16
<PAGE>

         Interest Income. Interest income decreased by $0.6 million, or 59.0%,
to $0.4 million for the fiscal year ended June 30, 2003 from $1.0 million for
the fiscal year ended June 30, 2002. The decrease was primarily due to a
significant decline in cash and cash equivalents due to cash used in operations
during the fiscal year ended June 30, 2003.

         Interest Expense. Interest expense decreased by $0.4 million, or 43.7%,
to $0.5 million for the fiscal year ended June 30, 2003 from $1.0 million for
the fiscal year ended June 30, 2002. The decrease was the result of less
interest paid on a capital lease obligation, which was terminated in February
2003.

FISCAL YEARS ENDED JUNE 30, 2002 AND 2001

         Revenues from Ground Segment Systems, Networks and Enterprise
Solutions. Revenues from ground segment systems, networks and enterprise
solutions decreased by $14.6 million, or 18.6% to $64.1 million for the fiscal
year ended June 30, 2002 from $78.7 million for the fiscal year ended June 30,
2001. The decrease related to the decrease in the shipment and/or completion of
contracts as a result of a decline in bookings of contract orders due to the
continued uncertainty surrounding the global economic slowdown in the
telecommunications industry, resulting in customers and prospects continuing to
delay projects.

         Revenues from Data Communications Services. Revenues from data
communications services decreased by $1.7 million, or 7.0% to $22.5 million for
the fiscal year ended June 30, 2002 from $24.2 million for the fiscal year ended
June 30, 2001. The decrease reflected changes in market conditions including the
global economic slowdown in the telecommunications industry, pricing pressures
in the marketplace and penetration of fiber into areas we have traditionally
provided services.

         Costs from Ground Segment Systems, Networks and Enterprise Solutions.
Costs from ground segment systems, networks and enterprise solutions decreased
by $13.8 million, or 19.5%, to $57.1 million for the fiscal year ended June 30,
2002 from $70.9 million for the fiscal year ended June 30, 2001. The decrease is
attributable to a lower revenue base. Costs as a percentage of related revenues
decreased to 89.1% for the fiscal year ended June 30, 2002 from 90.0% for the
fiscal year ended June 30, 2001. The decrease was mainly attributable to a
change in contract mix.

         Costs from Data Communications Services. Costs from data communications
services increased by $4.0 million, or 17.8%, to $26.7 million for the fiscal
year ended June 30, 2002 from $22.7 million for the fiscal year ended June 30,
2001. Costs as a percentage of related revenues increased to 118.8% for the
fiscal year ended June 30, 2002 from 93.8% for the fiscal year ended June 30,
2001. The increase was primarily due to an increase in transponder costs due to
the reclassification of certain satellite transponders from capital to operating
leases based on the renegotiation of certain long-term lease agreements during
the fiscal quarter ended June 30, 2001. The corresponding decrease was in
interest expense during the fiscal year ended June 30, 2002.

         Selling and Marketing. Selling and marketing expenses decreased by $0.5
million, or 6.9%, to $6.7 million for the fiscal year ended June 30, 2002 from
$7.2 million for the fiscal year ended June 30, 2001. The decrease was
attributable to a reduction in work force in the sales and marketing department
of our data communications services business in the fiscal quarter ended June
30, 2001, partially offset by the development of a new direct sales force in the
ground segment systems, networks and enterprise solutions business.

         Research and Development. Research and development expenses increased
by $0.3 million, or 39.4%, to $1.2 million for the fiscal year ended June 30,
2002 from $0.9 million for the fiscal year ended June 30, 2001. The increase was
attributable to internal development of new monitoring and control technologies,
as well as the initial development of various subsystems for solutions we were
providing to a new customer.

         General and Administrative. General and administrative expenses
increased by $2.1 million, or 21.9%, to $12.0 million for the fiscal year ended
June 30, 2002 from $9.8 million for the fiscal year ended June 30, 2001. General
and administrative expenses as a percentage of revenues increased to 13.8% for
the fiscal year ended June 30, 2002 from 9.6% for the fiscal year ended June 30,
2001. The increase in general and administrative expenses for the fiscal year
ended June 30, 2002 primarily resulted from the recording of a $3.2 million
allowance for uncollectible accounts receivable from our largest Middle East
customer, an increase in legal expenses, mainly related to settling a patent
infringement case and an increase in insurance premiums, partially offset by a
reduction in work force, including the reduction of the management team of our
data communications services business, which took place in the fiscal quarter
ended June 30, 2001.

         Asset Impairment Charge. The asset impairment charge of $0.2 million
for the fiscal year ended June 30, 2002, related to a write-down of the net
carrying value of goodwill relating to the acquisition of a wireless local loop
telephone network solutions business during the fiscal year ended June 30, 1999.
The asset impairment charge of $2.9 million for the fiscal year ended June 30,
2001, related to three cost basis investments that were written-down in the
fiscal quarter ended June 30, 2001. Our management


                                       17
<PAGE>

evaluated these investments and believed it would be appropriate to write-down
these investments to zero based on their financial uncertainty.

         Restructuring Charge. The restructuring charge of $2.5 million (of
which $0.5 million was charged to costs from data communications services) for
the fiscal year ended June 30, 2001 related to management's plan to reduce costs
and improve the data communications services business operating efficiencies. As
a result of this restructuring, we terminated 31 employees including executive
management, marketing, administration and operations support personnel. The
major components of the restructuring charge included severance payments to
terminated employees of approximately $0.9 million, fees incurred in connection
with the termination of certain leased satellite transponders of approximately
$0.5 million (charged to costs from data communications services), the write-off
of certain capitalized costs in the amount of approximately $0.6 million
associated with our terminated financing activities and the write-off of the
estimated book value of equipment in the amount of approximately $0.5 million in
connection with our discontinuance of certain product lines. At June 30, 2001,
approximately $0.5 million of the restructuring charge was accrued and included
in other accrued expenses. During the fiscal year ended June 30, 2002, the
restructuring plan was completed whereby $0.3 million was charged against the
restructuring accrual for charges related to space segment cancellation fees,
and $0.2 million was reversed into income (credit to costs from data
communications services) due to the resolution of liabilities for less than
originally estimated.

         Interest Income. Interest income decreased by $2.2 million, or 67.8%,
to $1.0 million for the fiscal year ended June 30, 2002 from $3.2 million for
the fiscal year ended June 30, 2001. The decrease was primarily due to
significant decline in interest rates coupled with a decrease in cash and cash
equivalents due to cash used in operations during the fiscal year ended June 30,
2002.

         Interest Expense. Interest expense decreased by $5.6 million, or 85.5%,
to $1.0 million for the fiscal year ended June 30, 2002 from $6.6 million for
the fiscal year ended June 30, 2001. The decrease was due to the
reclassification of certain satellite leased transponders to operating leases
from capital leases based on the renegotiation of certain long-term lease
agreements during the fiscal quarter ended June 30, 2001. The corresponding
increase was in costs from data communications services during the fiscal year
ended June 30, 2002.

         Gain on Sale of Investment. The gain on sale of investment of $0.3
million for the fiscal year ended June 30, 2001, related to the sale of our
interest in one of our investments, which was accounted for as a cost method
investment, during the fiscal quarter ended December 31, 2000.

QUARTERLY RESULTS

         The following tables set forth unaudited consolidated financial
information for each of the eight fiscal quarters in the period ended June 30,
2003. We believe that this information has been presented on the same basis as
the audited consolidated financial statements appearing elsewhere in the Annual
Report on Form 10-K, and we believe all necessary adjustments, consisting only
of normal recurring adjustments, have been included in the amounts stated below
to present fairly the unaudited quarterly results of operations when read in
conjunction with our audited consolidated financial statements and related notes
included elsewhere in this Annual Report on Form 10-K. The operating results for
any quarter are not necessarily indicative of the operating results for any
future period.


                                       18
<PAGE>

<TABLE>
<CAPTION>
                                                                      THREE MONTHS ENDED,
                                    -----------------------------------------------------------------------------------------
                                     JUNE 30,   MAR. 31,   DEC. 31,  SEPT. 30,   JUNE 30,    MAR. 31,    DEC. 31,   SEPT. 30,
                                       2003      2003       2002       2002       2002        2002        2001       2001
                                    ---------  ---------  ---------  ---------   --------   ----------  ---------  ---------
                                                            (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                  <C>        <C>        <C>        <C>        <C>        <C>         <C>        <C>
    CONSOLIDATED STATEMENT
      OF OPERATIONS DATA:

    Revenues from ground segment
      systems, networks and
      enterprise solutions.....      $ 10,876   $  9,231   $ 11,854   $  8,164   $ 14,008   $15,120     $16,939    $18,034
    Revenues from data
      communications services..         3,170      3,261      3,202      4,270      5,412     5,172       5,708      6,186
                                     ---------  ---------  ---------  ---------  ---------  ----------  ---------  ---------
    Total revenues.............        14,046     12,492     15,056     12,434     19,420    20,292      22,647     24,220

    Costs and operating
    expenses:
    Costs from ground segment
      systems, networks and
      enterprise solutions.....        12,001      8,967     10,787      7,692     12,443    13,166      15,297     16,177
    Costs from data
      communications services..         3,326      3,697      4,484      6,289      6,486     6,698       6,410      7,111
    Selling and marketing......         1,282      1,513      1,615      1,632      1,933     1,581       1,615      1,606
    Research and development...           247        131        157        265        399       366         173        247
    General and administrative.         2,772      2,277      2,418      1,956      5,468     2,179       2,216      2,107
    Asset impairment charge....            --         --         --         --        237        --          --         --
                                     ---------  ---------  ---------  ---------  ---------  ----------  ---------  ---------

    Total costs and operating
      expenses.................        19,628     16,585     19,461     17,834     26,966    23,990      25,711     27,248
                                     ---------  ---------  ---------  ---------  ---------  ----------  ---------  ---------
    Loss from operations.......        (5,582)    (4,093)    (4,405)    (5,400)    (7,546)   (3,698)     (3,064)    (3,028)
    Other income (expense):
      Interest income..........            63         73        116        170        163       190         254        423
      Interest expense.........            --        (76)      (230)      (233)      (236)     (237)       (241)      (243)
                                     ---------  ---------  ---------  ---------  ---------  ----------  ---------  ---------

    Net loss...................      $ (5,519)  $ (4,096)  $ (4,519)  $ (5,463)  $ (7,619)  $(3,745)    $(3,051)   $(2,848)
                                     =========  =========  =========  =========  =========  ==========  =========  =========

    Basic and diluted net loss
    per common share...........      $  (0.44)  $  (0.33)  $  (0.36)  $  (0.43)  $  (0.60)  $ (0.29)    $ (0.24)   $ (0.22)
                                     =========  =========  =========  =========  =========  ==========  =========  =========

    Weighted-average shares used
      in the calculation of basic
      and diluted net loss per
      common share.............        12,555     12,557     12,566     12,583     12,638    12,753      12,719     12,718
                                     =========  =========  =========  =========  =========  ==========  =========  =========
</TABLE>

         We may continue to experience significant quarter-to-quarter
fluctuations in our consolidated results of operations, which may result in
volatility in the price of our common stock. See "Risk Factors" beginning on
page 21.

LIQUIDITY AND CAPITAL RESOURCES

         At June 30, 2003, we had working capital of $22.0 million, including
cash and cash equivalents of $22.0 million, restricted cash of $0.6 million, net
accounts receivable of $7.9 million, inventories of $11.0 million and prepaid
expenses and other current assets of $2.2 million, offset by $10.6 million in
accounts payable, $7.7 million in deferred revenue and $3.3 million in accrued
expenses and other current liabilities.

         Net cash used in operating activities during the fiscal year ended June
30, 2003 was $14.7 million, which primarily related to the net loss of $19.6
million, a decrease in accounts payable of $2.4 million relating to the
reduction in revenues and the timing of vendor payments, and an increase in
inventories of $2.3 million due to the timing of shipments on certain jobs, an
increase in other assets of $1.6 million based on an equipment lease entered
into with a customer, offset by a decrease in accounts receivable of $6.5
million due to a reduction in revenues and collections on certain contract
billings, an increase in deferred revenues of $4.1 million due to timing
differences between project billings and revenue recognition milestones
resulting from specific customer contracts and non-cash items representing
depreciation and amortization expense of $3.5 million primarily related to the
network operations center, satellite earth station equipment and one satellite
space segment transponder, which was terminated in February 2003.


                                       19
<PAGE>

         Net cash used in investing activities during fiscal year ended June 30,
2003 was $1.7 million, which related to the purchase of fixed assets primarily
for satellite earth station equipment and our network operations center in order
to support our existing service base.

         Net cash used in financing activities during fiscal year ended June 30,
2003 was $0.3 million, which primarily related to $0.3 million of principal
payments on a capital lease for a satellite space segment transponder, which was
terminated in February 2003.

         At June 30, 2003, we maintained a $5.0 million working capital line of
credit with a bank, which bore interest at the prime rate (4.0% at June 30,
2003) and was collateralized by a first security interest on most of our assets.
In May and July 2003, the credit facility was renewed for additional time while
we worked to establish a new bank agreement. The credit facility, which was
extended to September 10, 2003, contained certain financial covenants, with
which we were in compliance with at June 30, 2003. As of June 30, 2003, no
amounts were outstanding under this credit facility, however, there were
outstanding standby letters of credit, bid proposals and performance guarantees
of approximately $4.1 million, which were applied against and reduced the
amounts available under the working capital line of credit.

         In September 2003, we entered into a new one year credit agreement with
the existing bank, which provides for a working capital credit facility of up to
$7.5 million consisting of a $3.8 million secured domestic line of credit and a
$3.8 million Export-Import Bank secured guaranteed line of credit. We will be
advanced up to 80% of eligible domestic accounts receivable and 90% of eligible
foreign accounts receivable under each respective line of credit, as defined in
the agreement. Each line of credit bears interest at the greater of 6.0% or the
prime rate plus 2.0% per annum, and is collateralized by a first security
interest on all of our personal property. The credit agreement allows us to
borrow and apply letters of credit against the availability under each line of
credit. In addition, the new credit agreement contains certain financial and
other covenants, deposit requirements, monthly reporting provisions and other
requirements, as defined.

         We lease satellite space segment services and other equipment under
various operating lease agreements, which expire in various years through 2008.
Future minimum lease payments due on these leases through June 30, 2004 are
approximately $6.1 million.

         On November 7, 2001, the Board of Directors authorized a stock
repurchase program whereby we can repurchase up to $2.0 million of our
outstanding stock, representing approximately 3.7% of the total shares
outstanding on that date. Since November 2001, we repurchased, in aggregate, a
total of 256,100 shares for $1.4 million. The timing, price, quantity and manner
of future purchases will be at the discretion of management, depending on market
conditions and other factors, subject to compliance with the applicable
securities laws.

         We expect that our cash and working capital requirements for operating
activities will increase as we continue to implement our business strategy.
Management anticipates that we will experience negative cash flows due to
continued operating losses and additional working capital requirements for work
in progress for orders as obtained. Our expectation is that the working capital
requirements will ease as shipments are made on new orders, although we cannot
assure you as the timing and amount of new orders.

         NetSat has had, and we expect it will continue to have, working capital
requirements, which have, and will, put increased pressure on our capital
resources. We have implemented strategies to reduce the drain on our resources
caused by NetSat's losses. While we will continue to seek additional means to
reduce NetSat's cost structure, we can only achieve our goal of improving
NetSat's working capital by improving operating performance. We cannot assure
you that we will successfully improve NetSat's operating performance.

         Our future capital requirements will depend upon many factors,
including the success of our marketing efforts in the ground segment systems,
networks, and data communications services business, the nature and timing of
customer orders and the extent to which we must conduct research and development
efforts internally. Based on current plans, we believe that our existing capital
resources will be sufficient to meet working capital requirements through June
30, 2004. However, we cannot assure you that there will be no unforeseen events
or circumstances that would consume available resources significantly before
that time. For example, future events occurring in response to the war with
Iraq, or in connection with a war, including, without limitation, future
terrorist attacks against the United States or its allies or military or trade
or travel disruptions impacting our ability to sell and market our products and
services in the United States and internationally may impact our results of
operations. Unexpected events negatively impacting international commerce,
including additional conflicts in the Middle East, could defer our ability to
close contracts with international customers. Additional funds may not be
available when needed and, even if available, additional funds may be raised
through financing arrangements and/or the issuance of preferred or common stock
or convertible securities on terms and prices significantly more favorable than
those of the currently outstanding common stock, which could have the effect of
diluting or adversely affecting the holdings or rights of our existing
stockholders. If adequate funds are unavailable, we may be required to delay,
scale back or eliminate some of our operating activities, including, without
limitation, the timing and extent of our marketing programs and research and
development activities and further reductions in headcount. We cannot assure you
that additional financing will be available to us on acceptable terms, or at
all.


                                       20
<PAGE>

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

         At June 30, 2003, we had contractual obligations and commercial
commitments as follows (in thousands):

<TABLE>
<CAPTION>
    Contractual Obligations                                                  PAYMENTS DUE BY PERIOD
    -----------------------                    -------------------------------------------------------------------------------------
                                                                                                                         AFTER 5
                                                   TOTAL         LESS THAN 1 YEAR      1-3 YEARS        4-5 YEARS         YEARS
                                               ---------------   ------------------    -----------      -----------    -------------
<S>                                             <C>                  <C>                 <C>                <C>             <C>
    Operating leases....................        $26,275              $6,115              $12,157            $7,357          $646
                                               ---------------   ------------------    -----------      -----------    -------------

    Total contractual cash obligations..        $26,275              $6,115              $12,157            $7,357          $646
                                               ===============   ==================    ===========      ===========    =============

<CAPTION>
                                                                             AMOUNT OF COMMITMENT EXPIRATION PER PERIOD
                                                                --------------------------------------------------------------------
                                              TOTAL AMOUNTS
    Other Commercial Commitments                COMMITTED        LESS THAN 1 YEAR      1-3 YEARS        4-5 YEARS      OVER 5 YEARS
    ----------------------------            ------------------   ------------------    -----------      -----------    -------------
<S>                                             <C>                  <C>                 <C>                <C>             <C>
    Standby letters of credit.........           $4,069            $2,990              $ 1,079              $--              $--
                                               ---------------   ------------------    -----------      -----------    -------------

    Total commercial commitments......           $4,069            $2,990               $1,079              $--              $--
                                               ===============   ==================    ===========      ===========    =============
</TABLE>

         During fiscal 2001, we entered into two thirty-six month operating
lease agreements for satellite space segment transponders on two satellites that
were expected to be launched in late 2002 and operational by March 2003. Future
payments due on such agreements through fiscal 2007 are approximately $6.0
million. Such satellite space segment services are scheduled to begin when the
satellite transponders are commercially operational, as defined in the
agreements. During fiscal 2003, we learned that the vendor has experienced
significant delays in the planned launch and operational dates for the
satellites. As a result of these delays, we maintain that we have a right to
terminate the contracts without cost and have provided notification of such
termination. The vendor has denied our assertion that we have a right to
terminate the contracts without cost. If our position is sustained, total
operating lease commitments would be reduced by approximately $6.0 million.

RELATED PARTY TRANSACTIONS

         During January 2003, pursuant to a letter agreement we consolidated the
then outstanding loan and advances receivable from an individual who is a former
executive officer and a current employee into a $0.3 million promissory note.
Under the terms of the letter agreement we will forgive the outstanding
principal and interest amounts due on the promissory note in five annual
installments beginning in January 2004 so long as the former executive officer
remains an employee, subject to the terms of the letter agreement.

RISK FACTORS

WE HAVE A HISTORY OF OPERATING LOSSES AND NEGATIVE CASH FLOW AND EXPECT OUR
LOSSES TO CONTINUE.

         We have incurred significant net losses since we began operating in
August 1994. We incurred net losses of $19.6 million during the fiscal year
ended June 30, 2003, $17.3 million during the fiscal year ended June 30, 2002
and $18.7 million during the fiscal year ended June 30, 2001. As of June 30,
2003, our accumulated deficit was $73.9 million. We anticipate that we will
continue to incur net losses, although we expect them to be less than those we
incurred in the fiscal year ended June 30, 2003. Our ability to achieve and
maintain profitability will depend upon our ability to generate significant
revenues through new profitable customer contracts and the expansion of our
existing products and services, including our data communications services. We
cannot assure you that we will be able to obtain new profitable customer
contracts or generate significant additional revenues from those contracts or
any new products or services that we introduce. Even if we become profitable, we
may not sustain or increase our profits on a quarterly or annual basis in the
future.

SINCE SALES OF SATELLITE COMMUNICATIONS EQUIPMENT ARE DEPENDENT ON THE GROWTH OF
COMMUNICATIONS NETWORKS, AS MARKET DEMAND FOR THESE NETWORKS DECLINES, OUR
REVENUE AND PROFITABILITY ARE LIKELY TO DECLINE.

         We derive, and expect to continue to derive, a significant amount of
revenues from the sale of satellite ground segment systems and networks. If the
long-term growth in demand for communications networks does not return from its
depressed level, the demand for our satellite ground segment systems and
networks may decline or grow more slowly than we expect. As a result, we may


                                       21
<PAGE>

not be able to grow our business, our revenue may decline from current levels
and our results of operations may be harmed. The demand for communications
networks and the products used in these networks is affected by various factors,
many of which are beyond our control. For example, the depressed level of
general economic conditions has affected the overall rate of capital spending by
our customers. Also, many companies have found it increasingly difficult to
raise capital to finish building their communications networks and, therefore,
have placed fewer orders with our customers. The economic slowdown resulted in a
softening of demand from our customers. We cannot predict the extent to which
demand will increase. Further, increased competition among satellite ground
segment systems and networks manufacturers has increased pricing pressures.

RISKS ASSOCIATED WITH OPERATING IN INTERNATIONAL MARKETS COULD RESTRICT OUR
ABILITY TO EXPAND GLOBALLY AND HARM OUR BUSINESS AND PROSPECTS.

         We market and sell our products and services in the United States and
internationally. We anticipate that international sales will continue to account
for a significant portion of our total revenues for the foreseeable future with
a significant portion of the international revenue coming from developing
countries. We presently conduct our international sales in the following
geographic areas: Africa, the Asia-Pacific Region, Australia, Central and South
America, Eastern and Central Europe and the Middle East. There are a number of
risks inherent in conducting our business internationally, including:

          o    general political and economic instability in international
               markets, including the war in Iraq, could impede our ability to
               deliver our products and services to customers and harm our
               results of operations;

          o    changes in regulatory requirements could restrict our ability to
               deliver services to our international customers;

          o    export restrictions, tariffs, licenses and other trade barriers
               could prevent us from adequately equipping our network
               facilities;

          o    differing technology standards across countries may impede our
               ability to integrate our products and services across
               international borders;

          o    protectionist laws and business practices favoring local
               competition may give unequal bargaining leverage to key vendors
               in countries where competition is scarce, significantly
               increasing our operating costs;

          o    increased expenses associated with marketing services in foreign
               countries could effect our ability to compete;

          o    relying on local subcontractors for installation of our products
               and services could adversely impact the quality of our products
               and services;

          o    difficulties in staffing and managing foreign operations could
               effect our ability to compete;

          o    potentially adverse taxes could adversely affect our results of
               operations;

          o    complex foreign laws and treaties could affect our ability to
               compete; and

          o    difficulties in collecting accounts receivable could adversely
               affect our results of operations.

         These and other risks could impede our ability to manage our
international operations effectively, limit the future growth of our business,
increase our costs and require significant management attention.

IF NETSAT DOES NOT EXECUTE ITS BUSINESS STRATEGY OR IF THE MARKET FOR ITS
SERVICES FAILS TO DEVELOP OR DEVELOPS MORE SLOWLY THAN IT EXPECTS, OUR RESULTS
OF OPERATIONS WILL BE HARMED AND OUR STOCK PRICE MAY BE ADVERSELY AFFECTED.

         NetSat's revenues from data communications services have decreased
during the fiscal year ended June 30, 2003. Revenues will continue to be reduced
as a result of customer contracts assigned to vendors pursuant to settlement
agreements reached in February 2003 and October 2002. As of June 30, 2003, the
future revenues, which will be foregone, amounts to $32.2 million, of which $5.0
million relates to fiscal year ending June 30, 2004. NetSat's future revenues
and results of operations are dependent on its execution of its business
strategy and development of the market for its current and future services. In
particular, the current level and manner of utilization of NetSat's transponder
space, as well as a decrease in orders currently being experienced, continues to
harm our results of operation. Despite the agreements reached with two of the
Company's vendors in February 2003 and October 2002, which modified and reduced
the Company's satellite bandwidth obligations, we cannot assure you that the
transponder space will be


                                       22
<PAGE>

efficiently and substantially utilized or that an increase in orders will be
realized. NetSat has had, and we expect will continue to have, cash
requirements, which have and will decrease our cash resources. If NetSat does
not efficiently and substantially utilize its transponder space capacity or
increase its level of orders, its cash requirements may increase and our results
of operations will be harmed.

YOU SHOULD NOT RELY ON OUR QUARTERLY OPERATING RESULTS AS AN INDICATION OF OUR
FUTURE RESULTS BECAUSE THEY ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS, AND IF WE
FAIL TO MEET THE EXPECTATIONS OF PUBLIC MARKET ANALYSTS OR INVESTORS, OUR STOCK
PRICE COULD DECLINE SIGNIFICANTLY.

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

          o    delays and/or a decrease in the booking of new contracts;

          o    general political and economic conditions in the United States
               and abroad, including the war in Iraq;

          o    the length of time needed to initiate and complete customer
               contracts;

          o    the demand for and acceptance of our existing products and
               services;

          o    the cost of providing our products and services;

          o    market acceptance of new products and services;

          o    the mix of revenue between our standard products, custom-built
               products and our communications services;

          o    the timing of significant marketing programs;

          o    our ability to hire and retain additional personnel;

          o    the competition in our markets; and

          o    difficult global economic conditions and the currency
               devaluations in international markets, which have adversely
               impacted and may continue to adversely impact our quarterly
               results.

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

OUR MARKETS ARE HIGHLY COMPETITIVE AND WE HAVE MANY ESTABLISHED COMPETITORS, AND
WE MAY LOSE MARKET SHARE AS A RESULT.

         The markets in which we operate are highly competitive and this
competition could harm our ability to sell our products and services on prices
and terms favorable to us. Our primary competitors in the satellite ground
segment and networks market include systems integrators like IDB Systems, a
division of MCI and equipment manufacturers who also provide integrated systems
like Andrew Corporation and Tripoint Global.

         In the end-to-end satellite-based communication solutions and
communications services markets, we compete with other satellite communication
companies who provide similar services, like Verestar. In addition, we may
compete with other communications service providers like MCI and satellite
owners like Panamsat, Loral Skynet, New Skies Satellites N.V. and Intelsat. We
anticipate that our competitors may develop or acquire services that provide
functionality that is similar to that provided by our services and that those
services may be offered at significantly lower prices or bundled with other
services. These competitors may have the financial resources to withstand
substantial price competition and may be in a better position to endure
difficult economic conditions in international markets, and may be able to
respond more quickly than we can to new or emerging technologies and changes in
customer requirements. Moreover, many of our competitors have more extensive
customer bases, broader customer relationships and broader industry alliances
than we do that they could use to their advantage in competitive situations.

         The markets in which we operate have limited barriers to entry and we
expect that we will face additional competition from


                                       23
<PAGE>

existing competitors and new market entrants in the future. Moreover, our
current and potential competitors have established or may establish strategic
relationships among themselves or with third parties to increase the ability of
their products and services to address the needs of our current and prospective
customers. Existing and new competitors with their potential strategic
relationships may rapidly acquire significant market share, which would harm our
business and financial condition.

IF THE SATELLITE COMMUNICATIONS INDUSTRY FAILS TO CONTINUE TO DEVELOP OR NEW
TECHNOLOGY MAKES IT OBSOLETE OUR BUSINESS AND FINANCIAL CONDITION WILL BE
HARMED.

         Our business is dependent on the continued success and development of
satellite communications technology, which competes with terrestrial
communications transport technologies like terrestrial microwave, coaxial cable
and fiber optic communications systems. Fiber optic communications systems have
penetrated areas in which we have traditionally provided services. If the
satellite communications industry fails to continue to develop, or any
technological development significantly improves the cost or efficiency of
competing terrestrial systems relative to satellite systems, then our business
and financial condition would be materially harmed.

WE MAY BE UNABLE TO RAISE ADDITIONAL FUNDS TO MEET OUR CAPITAL REQUIREMENTS IN
THE FUTURE.

         We have incurred negative cash flows from operations in each year since
our inception. We believe that our available cash resources will be sufficient
to meet our working capital and capital expenditure requirements through June
30, 2004. However, our future liquidity and capital requirements are difficult
to predict, as they depend on numerous factors, including the success of our
existing product and service offerings, as well as competing technological and
market developments. In particular, NetSat continues to have cash requirements,
which may continue in the future. We may need to raise additional funds in order
to meet additional working capital requirements and to support additional
capital expenditures. Should this need arise, additional funds may not be
available when needed and, even if additional funds are available, we may not
find the terms favorable or commercially reasonable. If adequate funds are
unavailable, we may be required to delay, reduce or eliminate some of our
operating activities, including marketing programs and research and development
programs. If we raise additional funds by issuing equity securities, our
existing stockholders will own a smaller percentage of our capital stock and new
investors may pay less on average for their securities than, and could have
rights superior to, existing stockholders.

A LIMITED NUMBER OF CUSTOMER CONTRACTS ACCOUNT FOR A SIGNIFICANT PORTION OF OUR
REVENUES, AND THE INABILITY TO REPLACE A KEY CUSTOMER CONTRACT WOULD ADVERSELY
AFFECT OUR RESULTS OF OPERATIONS, BUSINESS AND FINANCIAL CONDITION.

         We rely on a small number of customer contracts for a large portion of
our revenue. Specifically, we have agreements with seven customers to provide
equipment and services, from which we expect to generate a significant portion
of our revenues. If any of these customers is unable to implement its business
plan, the market for its services declines, or if all or any of the customers
modifies or terminates its agreement with us, and we are unable to replace these
contracts, our results of operations, business and financial condition would be
materially harmed.

IF OUR PRODUCTS AND SERVICES ARE NOT ACCEPTED IN DEVELOPING COUNTRIES WITH
EMERGING MARKETS, OUR REVENUES WILL BE IMPAIRED.

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

          o    the speed at which communications infrastructure, including
               terrestrial microwave, coaxial cable and fiber optic
               communications systems, which compete with satellite-based
               services, is built;

          o    the effectiveness of our local resellers and sales
               representatives in marketing and selling our products and
               services; and

          o    the acceptance of our products and services by customers.

         If our products and services are not accepted, or the market potential
we anticipate does not develop, our revenues will be impaired.


                                       24
<PAGE>

WE DEPEND UPON CERTAIN KEY PERSONNEL AND MAY NOT BE ABLE TO RETAIN THESE
EMPLOYEES.

         Our future performance depends on the continued service of our key
technical, managerial and marketing personnel; in particular, David Hershberg,
Kenneth Miller, Stephen Yablonski and Donald Woodring. The employment of any of
our key personnel could cease at any time.

UNAUTHORIZED USE OF OUR INTELLECTUAL PROPERTY BY THIRD PARTIES MAY DAMAGE OUR
BUSINESS.

         We regard our trademarks, trade secrets and other intellectual property
as beneficial to our success. Unauthorized use of our intellectual property by
third parties may damage our business. We rely on trademark, trade secret and
patent protection and contracts, including confidentiality and license
agreements 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 obtain and use our intellectual property
without our authorization.

         We currently have been granted three patents in the United States, one
for remote access to the Internet using satellites, another for satellite
communication with automatic frequency control, and most recently, we have been
granted a patent concerning a monitor and control system for satellite
communications networks and the like. We have two other patents pending in the
United States, one for implementing facsimile and data communications using
Internet protocols and another for a distributed satellite-based cellular
network. We currently have one Patent Cooperation Treaty patent application
pending for implementing facsimile and data communications using Internet
protocols. We also intend to seek further patents on our technology, if
appropriate. We cannot assure you that patents will be issued for any of our
pending or future patents or that any claims allowed from such applications will
be of sufficient scope, or be issued in all countries where our products and
services can be sold, to provide meaningful protection or any commercial
advantage to us. Also, our competitors may be able to design around our patents.
The laws of some foreign countries in which our products and services are or may
be developed, manufactured or sold may not protect our products and services or
intellectual property rights to the same extent as do the laws of the United
States and thus make the possibility of piracy of our technology and products
and services more likely.

         We have filed applications for trademark registration of Globecomm
Systems Inc., Globecomm, and GSI in the United States and various other
countries, and have been granted registrations for some of these terms in Europe
and Russia. We have received trademark registrations for NetSat in the United
States, the European Community, Russia, and Brazil. We have various other
trademarks registered or pending for registration in the United States and in
other countries and may seek registration of other trademarks and service marks
in the future. We cannot assure you that registrations will be granted from any
of our pending or future applications, or that any registrations that are
granted will prevent others from using similar trademarks in connection with
related goods and services.

DEFENDING AGAINST INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS COULD BE TIME
CONSUMING AND EXPENSIVE, AND IF WE ARE NOT SUCCESSFUL, COULD CAUSE SUBSTANTIAL
EXPENSES AND DISRUPT OUR BUSINESS.

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

WE MAY NOT BE ABLE TO KEEP PACE WITH TECHNOLOGICAL CHANGES, WHICH WOULD MAKE OUR
PRODUCTS AND SERVICES BECOME NON-COMPETITIVE AND OBSOLETE.

         The telecommunications industry, including satellite-based
communications services, is characterized by rapidly changing technologies,
frequent new product and service introductions and evolving industry standards.
If we are unable, for technological or other reasons, to develop and introduce
new products and services or enhancements to existing products and services in a
timely manner or in response to changing market conditions or customer
requirements, our products and services would become non-competitive and
obsolete, which would harm our business, results of operations and financial
condition.


                                       25
<PAGE>

WE DEPEND ON OUR SUPPLIERS, SOME OF WHICH ARE OUR SOLE OR A LIMITED SOURCE OF
SUPPLY, AND THE LOSS OF THESE SUPPLIERS WOULD MATERIALLY ADVERSELY AFFECT OUR
BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

         We currently obtain most of our critical components and services from
single or limited sources and generally do not maintain significant inventories
or have long-term or exclusive supply contracts with our source vendors. We have
from time to time experienced delays in receiving products from vendors due to
lack of availability, quality control or manufacturing problems, shortages of
materials or components or product design difficulties. We may experience delays
in the future and replacement services or products may not be available when
needed, or at all, or at commercially reasonable rates or prices. If we were to
change some of our vendors, we would have to perform additional testing
procedures on the service or product supplied by the new vendors, which would
prevent or delay the availability of our products and services. Furthermore, our
costs could increase significantly if we need to change vendors. If we do not
receive timely deliveries of quality products and services, or if there are
significant increases in the prices of these products or services, it could have
a material adverse effect on our business, results of operations and financial
condition.

OUR NETWORK MAY EXPERIENCE SECURITY BREACHES, WHICH COULD DISRUPT OUR SERVICES.

         Our network infrastructure may be vulnerable to computer viruses,
break-ins, denial of service attacks and similar disruptive problems caused by
our customers or other Internet users. Computer viruses, break-ins, denial of
service attacks or other problems caused by third parties could lead to
interruptions, delays or cessation in service to our customers. There currently
is no existing technology that provides absolute security, and the cost of
minimizing these security breaches could be prohibitively expensive. We may face
liability to customers for such security breaches. Furthermore, these incidents
could deter potential customers and adversely affect existing customer
relationships.

SATELLITES UPON WHICH WE RELY MAY BE DAMAGED OR LOST, OR MALFUNCTION.

         The damage, loss or malfunction of any of the satellites used by us, or
a temporary or permanent malfunction of any of the satellites upon which we
rely, would likely result in the interruption of our satellite-based
communications services. This interruption would have a material adverse effect
on our business, results of operations and financial condition.

A THIRD PARTY COULD BE PREVENTED FROM ACQUIRING SHARES OF OUR STOCK AT A PREMIUM
TO THE MARKET PRICE BECAUSE OF OUR ANTI-TAKEOVER PROVISIONS.

         Various provisions with respect to votes in the election of directors,
special meetings of stockholders, and advance notice requirements for
stockholder proposals and director nominations of our amended and restated
certificate of incorporation, bylaws and Section 203 of the General Corporation
Laws of the State of Delaware could make it more difficult for a third party to
acquire us, even if doing so might be beneficial to our stockholders. In
addition, we have a poison pill in place that could make an acquisition of us by
a third party more difficult.

RISKS RELATED TO GOVERNMENT APPROVALS

WE ARE SUBJECT TO MANY GOVERNMENT REGULATIONS, AND FAILURE TO COMPLY WITH THEM
WILL HARM OUR BUSINESS.

   Operations and Use of Satellites

         We are subject to various federal laws and regulations, which may have
negative effects on our business. We operate Federal Communication Commission,
or FCC, licensed earth stations in Hauppauge, New York, subject to the
Communications Act of 1934, as amended, or the FCC Act, and the rules and
regulations of FCC. Pursuant to the FCC Act and rules, we have obtained and are
required to maintain radio transmission licenses from the FCC for both domestic
and foreign operations of our earth stations. We have also obtained and are
required to maintain authorization issued under Section 214 of the FCC Act to
act as a telecommunications carrier, which authorization also extends to NetSat.
These licenses should be renewed by the FCC in the normal course as long as we
remain in compliance with FCC rules and regulations. However, we cannot
guarantee that the FCC will grant additional licenses when our existing licenses
expire, nor are we assured that the FCC will not adopt new or modified technical
requirements that will require us to incur expenditures to modify or upgrade our
equipment as a condition of retaining our licenses. We are also required to
comply with FCC regulations regarding the exposure of humans to radio frequency
radiation from our earth stations. These regulations, as well as local land use
regulations, restrict our freedom to choose where to locate our earth stations.
In addition, prior to a third party acquisition of us, we would need to seek
approval from the FCC to transfer the radio transmission licenses we have
obtained to the third party upon the consummation of the acquisition. However,
we cannot assure you that the FCC will permit the transfer of these licenses.
These approvals may make it more difficult for a third party to acquire us.


                                       26
<PAGE>

   Foreign Ownership

         We may, in the future, be required to seek FCC approval if foreign
ownership of our stock exceeds the specified criteria. Failure to comply with
these policies could result in an order to divest the offending foreign
ownership, fines, denial of license renewal, and/or license revocation
proceedings against the licensee by the FCC.

   Foreign Regulations

         Regulatory schemes in countries in which we may seek to provide our
satellite-delivered data communications services may impose impediments on our
operations. Some countries in which we intend to operate have telecommunications
laws and regulations that do not currently contemplate technical advances in
telecommunications technology like Internet/intranet transmission by satellite.
We cannot assure you that the present regulatory environment in any of those
countries will not be changed in a manner, which may have a material adverse
impact on our business. Either we or our local partners typically must obtain
authorization for each country in which we provide our satellite-delivered data
communications services. The regulatory schemes in each country are different,
and thus there may be instances of noncompliance of which we are not aware. We
cannot assure you that our licenses and approvals are or will remain sufficient
in the view of foreign regulatory authorities, or that necessary licenses and
approvals will be granted on a timely basis in all jurisdictions in which we
wish to offer our products and services or that restrictions applicable thereto
will not be unduly burdensome.

   Regulation of the Internet

         Due to the increasing popularity and use of the Internet, it is
possible that a number of laws and regulations may be adopted at the local,
national or international levels with respect to the Internet, covering issues
including user privacy and expression, pricing of products and services,
taxation, advertising, intellectual property rights, information security or the
convergence of traditional communication services with Internet communications.
It is anticipated that a substantial portion of our Internet operations will be
carried out in countries that may impose greater regulation of the content of
information coming into the country than that which is generally applicable in
the United States; for example, privacy regulations in 35 countries in Europe
and content restrictions in countries such as the Republic of China. To the
extent that we provide content as a part of our Internet services, it will be
subject to laws regulating content. Moreover, the adoption of laws or
regulations may decrease the growth of the Internet, which could in turn
decrease the demand for our Internet services or increase our cost of doing
business or in some other manner have a material adverse effect on our business,
operating results and financial condition. In addition, the applicability of
existing laws governing issues including property ownership, copyrights and
other intellectual property issues, taxation, libel, court jurisdiction and
personal privacy to the Internet is uncertain. The vast majority of these laws
were adopted prior to the advent of the Internet and related technologies and,
as a result, do not contemplate or address the unique issues of the Internet and
related technologies. Changes to these laws intended to address these issues,
including some recently proposed changes, could create uncertainty in the
marketplace which could reduce demand for our products and services, could
increase our cost of doing business as a result of costs of litigation or
increased product development costs, or could in some other manner have a
material adverse effect on our business, financial condition and results of
operations.

   Telecommunications Taxation, Support Requirements, and Access Charges

         All telecommunications carriers providing domestic services in the
United States are required to contribute a portion of their gross revenues for
the support of universal telecommunications services; and some
telecommunications services are subject to special taxation and to contribution
requirements to support services to special groups, like persons with
disabilities. Our services may be subject to new or increased taxes and
contribution requirements that could affect our profitability, particularly if
we are not able to pass them through to customers for either competitive or
regulatory reasons.

         Internet services are currently exempt from charges that long distance
telephone companies pay for access to the networks of local telephone companies
in the United States. Efforts have been made from time to time, and may be made
again in the future, to eliminate this exemption. If these access charges are
imposed on telephone lines used to reach Internet service providers and/or if
flat rate telephone services for Internet access are eliminated or curtailed,
the cost to customers who access our satellite facilities using telephone
company-provided facilities could increase to an extent that could discourage
the demand for our services. Likewise, the demand for our services in other
countries may be affected by the availability and cost of local telephone or
other telecommunications facilities to reach our facilities.


                                       27
<PAGE>

   Export of Telecommunications Equipment

         The sale of our ground segment systems, networks, and communications
services outside the United States is subject to compliance with the regulations
of the United States Export Administration Regulations. The absence of
comparable restrictions on competitors in other countries may adversely affect
our competitive position. In addition, in order to ship our products into other
countries, the products must satisfy the technical requirements of that
particular country. If we were unable to comply with such requirements with
respect to a significant quantity of our products, our sales in those countries
could be restricted, which could have a material adverse effect on our business,
results of operations and financial condition.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         We are subject to a variety of risks, including foreign currency
exchange rate fluctuations relating to certain purchases from foreign vendors.
In the normal course of business, we assess these risks and have established
policies and procedures to manage our exposure to fluctuations in foreign
currency values.

         Our objective to managing our exposure to foreign currency exchange
rate fluctuations is to reduce the impact of adverse fluctuations in earnings
and cash flows associated with foreign currency exchange rates for certain
purchases from foreign vendors, if applicable. Accordingly, we may utilize from
time to time foreign currency forward contracts to hedge our exposure on firm
commitments denominated in foreign currency. During the fiscal years ended June
30, 2003, 2002 and 2001, we had no such foreign currency forward contracts.

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

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

         None

ITEM 9A. CONTROLS AND PROCEDURES

         We have established disclosure controls and procedures to ensure that
material information relating to us, including our consolidated subsidiaries, is
made known to the officers who certify our financial reports and to other
members of senior management and the Board of Directors.

         As of the end of the period covered by this Annual Report on Form 10-K,
we carried out an evaluation, under the supervision and with the participation
of our senior management, including our principal executive officer and
principal financial officer, of the effectiveness of the design and operation of
our disclosure controls and procedures (as defined in Rules 13a- 14(c) and 15d-
14(c) under the Securities Exchange Act of 1934, as amended). Based upon the
evaluation, our principal executive officer and principal financial officer
concluded that our disclosure controls and procedures are effective for
gathering, analyzing and disclosing the information that we are required to
disclose in reports filed under the Securities Exchange Act of 1934, as amended.

         There have been no significant changes in our internal control over
financial reporting (as defined in Exchange Act Rule 13a- 15(f) of the
Securities Exchange Act of 1934, as amended) or in other factors during the
fiscal quarter and fiscal year ended June 30, 2003 that materially affected, or
are reasonably likely to materially affect, our internal control over financial
reporting subsequent to the date of our most recent evaluation.


                                       28
<PAGE>

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         Certain information in response to this item is incorporated herein by
reference to "Election of Directors" and "Executive Officers" in Globecomm
Systems Inc.'s Proxy Statement to be filed with the Securities and Exchange
Commission (the "SEC"). Information on compliance with section 16(a) of the
Exchange Act is incorporated herein by reference to "Section 16(a) Beneficial
Ownership Reporting Compliance" in the Registrant's Proxy Statement to be filed
with the SEC.

ITEM 11. EXECUTIVE COMPENSATION

         Information in response to this item is incorporated herein by
reference to "Executive Compensation and Other Information" in the Registrant's
Proxy Statement to be filed with the SEC.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         Information in response to this item is incorporated herein by
reference to "Security Ownership of Certain Beneficial Owners and Management" in
the Registrant's Proxy Statement to be filed with the SEC.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Information in response to this item is incorporated herein by
reference to "Certain Transactions" in the Registrant's Proxy Statement to be
filed with the SEC.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

         Information in response to this item is incorporated herein by
reference to "Report of the Audit Committee of the Board of Directors" in the
Registrant's Proxy Statement to be filed with the SEC.


                                       29
<PAGE>

                                     PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(A) (1) INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S>                                                                                                         <C>
        Report of Independent Auditors......................................................................      F-1
        Consolidated Balance Sheets as of June 30, 2003 and 2002............................................      F-2
        Consolidated Statements of Operations for the years ended
          June 30, 2003, 2002 and 2001......................................................................      F-3
        Consolidated Statements of Changes in Stockholders' Equity for the years ended
          June 30, 2003, 2002 and 2001......................................................................      F-4
        Consolidated Statements of Cash Flows for the years ended
          June 30, 2003, 2002 and 2001......................................................................      F-5
        Notes to Consolidated Financial Statements..........................................................      F-6

       (2) INDEX TO CONSOLIDATED FINANCIAL STATEMENT SCHEDULE

        Schedule II - Valuation and Qualifying Accounts.....................................................      S-1

         All other schedules for which provision is made in the applicable
         accounting regulation from the Securities and Exchange Commission are
         not required under the related instructions or are inapplicable and
         therefore have been omitted.
</TABLE>



                                       30
<PAGE>

       (3) INDEX OF EXHIBITS

Exhibit No.

3.1         Amended and Restated Certificate of Incorporation (incorporated by
            reference to Exhibit 3.1 of the Registrant's Annual Report on Form
            10-K for the fiscal year ended June 30, 1999).

3.2         Amended and Restated By-laws of the Registrant (incorporated by
            reference to Exhibit 3.2 of the Registrant's Annual Report on Form
            10-K for the fiscal year ended June 30, 1999).

4.2         See Exhibits 3.1 and 3.2 for provisions of the Amended and Restated
            Certificate of Incorporation and Amended and Restated By-laws of the
            Registrant defining rights of holders of Common Stock of the
            Registrant (incorporated by reference to Exhibit 4.2 of the
            Registrant's Registration Statement on Form S-1, File No. 333-22425
            (the "Registration Statement")).

10.1        Form of Registration Rights Agreement dated as of February 1997
            (incorporated by reference to Exhibit 10.1 of the Registration
            Statement).

10.2        Form of Registration Rights Agreement dated May 30, 1996
            (incorporated by reference to Exhibit 10.2 of the Registration
            Statement).

10.3        Form of Registration Rights Agreement dated December 31, 1996, as
            amended (incorporated by reference to Exhibit 10.3 of the
            Registration Statement).

10.4        Letter Agreement for purchase and sale of 199,500 shares of Common
            Stock dated November 9, 1995 between the Registrant and Thomson-CSF
            (incorporated by reference to Exhibit 10.4 of the Registration
            Statement).

10.5        Investment Agreement dated February 12, 1996 by and between Shiron
            Satellite Communications (1996) Ltd. and the Registrant
            (incorporated by reference to Exhibit 10.5 of the Registration
            Statement).

10.6*       Stock Purchase Agreement dated as of August 30, 1996 by and between
            C-Grams Unlimited Inc. and the Registrant (incorporated by reference
            to Exhibit 10.6 of the Registration Statement).

10.7        Memorandum of Understanding dated December 18, 1996 by and between
            NetSat Express, Inc. and Applied Theory Communications, Inc.
            (incorporated by reference to Exhibit 10.7 of the Registration
            Statement).

10.8        Stock Purchase Agreement dated as of August 23, 1996 by and between
            NetSat Express, Inc. and Hughes Network Systems, Inc. (incorporated
            by reference to Exhibit 10.8 of the Registration Statement).

10.9        Employment Agreement dated as of January 27, 1997 between the
            Registrant and David E. Hershberg (incorporated by reference to
            Exhibit 10.9 of the Registration Statement).

10.10       Employment Agreement dated as of January 27, 1997 between the
            Registrant and Kenneth A. Miller (incorporated by reference to
            Exhibit 10.10 of the Registration Statement).

10.11       Purchase and Sale Agreement, 45 Oser Avenue, Hauppauge, New York,
            dated December 12, 1996 by and between Eaton Corporation and the
            Registrant (incorporated by reference to Exhibit 10.13 of the
            Registration Statement).

10.12       1997 Stock Incentive Plan (incorporated by reference to Exhibit
            10.14 of the Registration Statement).

10.13       Investment Agreement dated August 21, 1998 by and between McKibben
            Communications LLC and the Registrant (incorporated by reference to
            Exhibit 10.13 of the Registrant's Annual Report on Form 10-K for the
            year ended June 30, 1998).

10.14       1999 Employee Stock Purchase Plan (incorporated by reference to
            Exhibit 99.8 of the S-8 of the S-8 Registration Statement).

10.15       Rights Agreement, dated as of December 3, 1998, between the
            Registrant and American Stock Transfer and Trust Company, which
            includes the form of Certificate of Designation for the Series A
            Junior Participating Preferred Stock as Exhibit A, the form of
            Rights Certificate as Exhibit B and the Summary of Rights to
            Purchase Series A Preferred Shares as Exhibit C (incorporated by
            reference to Exhibit 4 of Registrant's Current Report on Form 8-K
            dated December 3, 1998).

10.16       Common Stock Purchase Agreement dated August 11, 1999 between NetSat
            Express, Inc. and Globix Corporation (incorporated by reference to
            Exhibit 10.16 of the Registrant's Annual Report on Form 10-K for the
            year ended June 30, 1999).

10.17       Series A Preferred Stock Purchase Agreement dated August 11, 1999
            between NetSat Express, Inc. and George Soros (incorporated by
            reference to Exhibit 10.17 of the Registrant's Annual Report on Form
            10-K for the year ended June 30, 1999).

10.18       Common Stock Purchase Agreement dated October 28, 1999 between
            NetSat Express, Inc., Globecomm Systems Inc. and Reuters Holdings
            Switzerland SA (incorporated by reference to Exhibit 10.18 of the
            Registrant's Quarterly Report on Form 10-Q, for the quarter ended
            September 30, 1999).

10.19       Negotiable Promissory Note, dated April 1, 2001, between the
            Registrant and Donald Woodring (incorporated by reference to Exhibit
            10.19 of the Registrant's Annual Report on Form 10-K for the year
            ended June 30, 2001).

10.20       Employment Agreement, dated as of October 9, 2001, by and between
            Stephen C. Yablonski and the Registrant (incorporated by reference
            to Exhibit 10.20 of the Registrant's Quarterly Report on Form 10-Q,
            for the quarter ended September 30, 2001).


                                       31
<PAGE>


10.21       Employment Agreement, dated as of October 9, 2001, by and between
            Andrew C. Melfi and the Registrant (incorporated by reference to
            Exhibit 10.21 of the Registrant's Quarterly Report on Form 10-Q, for
            the quarter ended September 30, 2001).

10.22       Employment Agreement, dated as of October 9, 2001, by and between
            Donald G. Woodring and the Registrant (incorporated by reference to
            Exhibit 10.22 of the Registrant's Quarterly Report on Form 10-Q, for
            the quarter ended September 30, 2001).

10.23       Employment Agreement, dated as of October 9, 2001, by and between
            Paul J. Johnson and the Registrant (incorporated by reference to
            Exhibit 10.23 of the Registrant's Quarterly Report on Form 10-Q, for
            the quarter ended September 30, 2001).

10.24       Employment Agreement, dated as of October 9, 2001, by and between
            Paul Eterno and the Registrant (incorporated by reference to Exhibit
            10.24 of the Registrant's Quarterly Report on Form 10-Q, for the
            quarter ended September 30, 2001).

10.25       Promissory Note Secured By Stock Pledge Agreement, dated September
            4, 2001, by and between David E. Hershberg and the Registrant
            (incorporated by reference to Exhibit 10.25 of the Registrant's
            Quarterly Report on Form 10-Q, for the quarter ended September 30,
            2001).

10.26       Promissory Note Secured By Stock Pledge Agreement, dated September
            4, 2001, by and between Kenneth A. Miller and the Registrant
            (incorporated by reference to Exhibit 10.26 of the Registrant's
            Quarterly Report on Form 10-Q, for the quarter ended September 30,
            2001).

10.27       Employment Agreement, dated as of January 25, 2002, by and between
            G. Patrick Flemming and the Registrant (incorporated by reference to
            Exhibit 10.27 of the Registrant's Quarterly Report on Form 10-Q, for
            the quarter ended December 31, 2001).

10.28*      Settlement Agreement, dated as of October 1, 2002, by and between
            Loral Skynet(R), a division of Loral SpaceCom Corporation and the
            Registrant (incorporated by reference to Exhibit 10.28 of the
            Registrant's Quarterly Report on Form 10-Q, for the quarter ended
            September 30, 2002).

10.29       Separation Agreement and General Release, dated as of January 22,
            2003, by and between G. Patrick Flemming and the Registrant
            (incorporated by reference to Exhibit 10.29 of the Registrant's
            Quarterly Report on Form 10-Q, for the quarter ended December 31,
            2002).

10.30       Letter Agreement, dated as of January 31, 2003, by and between
            Donald G. Woodring and the Registrant (incorporated by reference to
            Exhibit 10.30 of the Registrant's Quarterly Report on Form 10-Q, for
            the quarter ended December 31, 2002).

10.31       Loan and Security Agreement, dated as of September 25, 2003, by and
            between Silicon Valley Bank and the Registrant (filed herewith).

21          Subsidiaries of the Registrant (filed herewith).

23          Consent of Independent Auditors (filed herewith).

31.1        Chief Executive Officer Certification required by Rules 13a-14 and
            15d-14 under the Securities Exchange Act of 1934, as amended (filed
            herewith).

31.2        Chief Financial Officer Certification required by Rules 13a- 14 and
            15d- 14 under the Securities Exchange Act of 1934, as amended (filed
            herewith).

32          Certification Pursuant to 18 U.S.C. Section 1350, as adopted
            pursuant to Section 906 of Sarbanes Oxley Act of 2002 (filed
            herewith).

         * Confidential treatment granted for portions of this agreement.

(B) REPORTS ON FORM 8-K

         Form 8-K (Item 7) filed on May 14, 2003 with respect to its fiscal 2003
         third quarter and nine-month financial results. Form 8-K (Item 5) filed
         on June 27, 2003 with respect to a settlement agreement between the
         Registrant and a customer.

(C) EXHIBITS

         The response to this portion of Item 15 is submitted as a separate
section of this report.

(D) FINANCIAL STATEMENT SCHEDULES

         The response to this portion of Item 15 is submitted as a separate
section of this report.


                                       32
<PAGE>

                                   SIGNATURES

         PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.

                                       GLOBECOMM SYSTEMS INC.

         Date: 9/29/03                 By:    /s/ DAVID E. HERSHBERG
                                              ---------------------------------
                                              David E. Hershberg,
                                              Chairman of the Board and
                                              Chief Executive Officer


         PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934,
THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.

      SIGNATURE                 TITLE                                    DATE

/s/ DAVID E. HERSHBERG    Chairman of the Board and                     9/29/03
------------------------  Chief Executive Officer
David E. Hershberg        (Principal Executive Officer)

/s/ ANDREW C. MELFI       Vice President, Chief Financial               9/29/03
------------------------  Officer and Treasurer (Principal Financial
Andrew C. Melfi           and Accounting Officer

/s/ KENNETH A. MILLER     President and Director                        9/29/03
------------------------
Kenneth A. Miller

/s/ STEPHEN C. YABLONSKI  Vice President, General Manager               9/29/03
------------------------  and Director
Stephen C. Yablonski

/s/ RICHARD E. CARUSO     Director                                      9/29/03
------------------------
Richard E. Caruso

/s/ BRIAN T. MALONEY      Director                                      9/29/03
------------------------
Brian T. Maloney

/s/ A. ROBERT TOWBIN      Director                                      9/29/03
------------------------
A. Robert Towbin

/s/ DANIEL S. VAN RIPER   Director                                      9/29/03
------------------------
Daniel S. Van Riper

/s/ C.J. WAYLAN           Director                                      9/29/03
------------------------
C.J. Waylan



                                       33
<PAGE>

                         REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Stockholders of
  Globecomm Systems Inc.

         We have audited the accompanying consolidated balance sheets of
Globecomm Systems Inc. (the "Company") as of June 30, 2003 and 2002 and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows for each of the three years in the period ended June 30, 2003.
Our audits also included the financial statement schedule listed in the Index at
Item 15(a). These consolidated financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.

         We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

         In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Globecomm Systems Inc. at June 30, 2003 and 2002, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended June 30, 2003, in conformity with accounting principles generally accepted
in the United States. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.

         As discussed in Note 7 to the consolidated financial statements, the
Company changed its method of accounting for goodwill and other indefinite-lived
intangible assets effective July 1, 2001 to conform with the provisions of
Financial Accounting Standards Board Statement No. 142, "Goodwill and Other
Intangible Assets".


                                       /s/ ERNST & YOUNG LLP
Melville, New York
September 4, 2003


                                      F-1
<PAGE>

                             GLOBECOMM SYSTEMS INC.
                           CONSOLIDATED BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                                  JUNE 30, 2003           JUNE 30, 2002
                                                                                  ----------------        ----------------
<S>                                                                               <C>                     <C>
      ASSETS
      Current assets:
        Cash and cash equivalents.......................................              $  22,016            $    38,708
        Restricted cash.................................................                    608                    588
        Accounts receivable, net........................................                  7,865                 14,999
        Inventories.....................................................                 10,990                  8,594
        Prepaid expenses and other current assets.......................                  2,040                  1,239
        Deferred income taxes...........................................                    125                    138
                                                                                  ----------------        ----------------
      Total current assets..............................................                 43,644                 64,266
      Fixed assets, net.................................................                 17,536                 28,484
      Goodwill..........................................................                  7,204                  7,204
      Other assets......................................................                  1,960                    343
                                                                                  ----------------        ----------------
      Total assets......................................................              $  70,344            $   100,297
                                                                                  ================        ================

      LIABILITIES AND STOCKHOLDERS' EQUITY
      Current liabilities:
        Accounts payable................................................              $  10,615            $    12,918
        Deferred revenues...............................................                  7,666                  3,541
        Accrued payroll and related fringe benefits.....................                  1,114                    957
        Other accrued expenses..........................................                  1,686                  2,076
        Deferred liabilities............................................                    523                    600
        Capital lease obligation........................................                     --                    472
                                                                                  ----------------        ----------------
      Total current liabilities.........................................                 21,604                 20,564
      Deferred liabilities, less current portion........................                  1,303                  3,060
      Capital lease obligation, less current portion....................                     --                  9,633

      Commitments and contingencies

      Stockholders' equity:
        Series A Junior Participating, shares authorized, shares
          issued and outstanding: none in 2003 and 2002.................                     --                     --
        Common stock, $.001 par value, 22,000,000 shares authorized,
          shares issued 12,980,108 in 2003 and 12,933,062 in 2002.......                     13                     13
        Additional paid-in capital......................................                123,739                123,598
        Accumulated deficit.............................................                (73,857)               (54,260)
        Accumulated other comprehensive loss............................                    (10)                   (44)
        Treasury stock, at cost, 403,845 shares in 2003 and
          349,745 shares in 2002........................................                 (2,448)                (2,267)
                                                                                  ----------------        ----------------

      Total stockholders' equity........................................                 47,437                 67,040
                                                                                  ----------------        ----------------

      Total liabilities and stockholders' equity........................              $  70,344            $   100,297
                                                                                  ================        ================
</TABLE>

                             See accompanying notes.


                                      F-2
<PAGE>

                             GLOBECOMM SYSTEMS INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                                               YEARS ENDED JUNE 30,
                                                                                  ------------------------------------------------
                                                                                      2003              2002             2001
                                                                                  --------------    --------------    ------------
<S>                                                                               <C>               <C>               <C>
      Revenues from ground segment systems, networks
        and enterprise solutions........................................          $   40,125        $   64,101        $   78,744
      Revenues from data communications services........................              13,903            22,478            24,170
                                                                                  --------------    --------------    ------------

      Total revenues....................................................              54,028            86,579           102,914
                                                                                  --------------    --------------    ------------

      Costs and operating expenses:
        Costs from ground segment systems, networks
          and enterprise solutions......................................              39,447            57,083            70,907
        Costs from data communications services.........................              17,796            26,705            22,661
        Selling and marketing...........................................               6,042             6,735             7,235
        Research and development........................................                 800             1,185               850
        General and administrative......................................               9,423            11,970             9,822
        Asset impairment charge.........................................                  --               237             2,857
        Restructuring charge............................................                  --                --             1,950
                                                                                  --------------    --------------    ------------

      Total costs and operating expenses................................              73,508           103,915           116,282
                                                                                  --------------    --------------    ------------

      Loss from operations..............................................             (19,480)          (17,336)          (13,368)

      Other income (expense):
        Interest income.................................................                 422             1,030             3,194
        Interest expense................................................                (539)             (957)           (6,579)
        Gain on sale of investment......................................                  --                --               304
                                                                                  --------------    --------------    ------------

      Loss before income taxes and minority interests in operations
        of consolidated subsidiary......................................             (19,597)          (17,263)          (16,449)
      Provision for income taxes........................................                  --                --            (1,600)
                                                                                  --------------    --------------    ------------

      Loss before minority interests in operations of consolidated
        subsidiary......................................................             (19,597)          (17,263)          (18,049)
      Minority interests in operations of consolidated subsidiary.......                  --                --              (650)
                                                                                  --------------    --------------    ------------

      Net loss..........................................................          $  (19,597)       $  (17,263)       $  (18,699)
                                                                                  ==============    ==============    ============

      Basic and diluted net loss per common share.......................          $    (1.56)       $    (1.36)       $    (1.55)
                                                                                  ==============    ==============    ============

      Weighted-average shares used in the calculation of basic
        and diluted net loss per common share...........................              12,565            12,707            12,060
                                                                                  ==============    ==============    ============
</TABLE>

                             See accompanying notes.


                                      F-3
<PAGE>

<TABLE>
<CAPTION>
                                                       GLOBECOMM SYSTEMS INC.
                                     CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                              YEARS ENDED JUNE 30, 2003, 2002 AND 2001
                                                           (IN THOUSANDS)

                                                                                                                      ACCUMULATED
                                                                         COMMON STOCK     ADDITIONAL                     OTHER
                                                                      -------------------   PAID-IN     ACCUMULATED  COMPREHENSIVE
                                                                      SHARES    AMOUNT      CAPITAL      DEFICIT         LOSS
                                                                      --------  ---------  ----------  ------------- --------------
<S>                                                                   <C>       <C>        <C>         <C>           <C>
Balance at June 30, 2000...........................................    12,024      $12     $110,105        $(18,298)       $17
Proceeds from exercise of stock options............................        69        -          358               -          -
Issuance of common stock in connection with employee stock purchase
    plan...........................................................        55        -          328               -          -
Issuance of common stock in connection with acquisition of minority
    interests in consolidated subsidiary...........................       718        1        6,582               -          -
Issuance of warrants in connection with acquisition of minority
    interests in consolidated subsidiary...........................         -        -        5,043               -          -
Issuance of options in connection with acquisition of minority
    interests in consolidated subsidiary...........................         -        -          309               -          -
Acquisition of minority interests in consolidated subsidiary.......         -        -          907               -          -
Forfeiture of consolidated subsidiary's employee stock options.....         -        -         (225)              -          -
Minority interests resulting from issuance of consolidated
    subsidiary's common stock.......................................        -        -         (131)              -          -
Comprehensive loss:
   Net loss........................................................         -        -            -         (18,699)         -
   Loss from foreign currency translation..........................         -        -            -                        (55)
   Loss from available-for-sale securities.........................         -        -            -               -        (19)


Total comprehensive loss...........................................         -        -            -               -          -
                                                                      --------  ---------  ----------   ------------- --------------

Balance at June 30, 2001...........................................    12,866       13      123,276         (36,997)       (57)
Proceeds from exercise of stock options............................        10        -           38               -          -
Issuance of common stock in connection with employee stock purchase
    plan...........................................................        57        -          247               -          -
Purchases of treasury stock (see Note 13)..........................         -        -            -               -          -
Issuance of stock options for services.............................         -        -           37               -          -
Comprehensive loss:
   Net loss........................................................         -        -            -         (17,263)         -
   Gain from foreign currency translation..........................         -        -            -               -        128
   Loss from available-for-sale securities.........................         -        -            -               -       (115)


Total comprehensive loss...........................................         -        -            -               -          -
                                                                      --------  ---------  ----------   ------------- --------------

Balance at June 30, 2002...........................................    12,933       13      123,598         (54,260)       (44)
Issuance of common stock in connection with employee stock purchase
    plan...........................................................        47        -          141               -          -
Purchases of treasury stock........................................         -        -            -               -          -
Comprehensive loss:
   Net loss........................................................         -        -            -         (19,597)         -
   Gain from foreign currency translation..........................         -        -            -               -         96
   Loss from available-for-sale securities.........................         -        -            -               -        (62)


Total comprehensive loss...........................................         -        -            -               -          -
                                                                      --------  ---------  ----------   ------------- --------------
Balance at June 30, 2003...........................................    12,980      $13     $123,739        $(73,857)      $(10)
                                                                      ========  =========  ==========   ============= ==============

<PAGE>

<CAPTION>
                                                                                           TREASURY STOCK           TOTAL
                                                                       DEFERRED         ---------------------    STOCKHOLDERS'
                                                                      COMPENSATION       SHARES      AMOUNT         EQUITY
                                                                      --------------    ---------  ---------    --------------
<S>                                                                   <C>               <C>         <C>          <C>
Balance at June 30, 2000...........................................      $ (218)              148   $(1,094)      $  90,524
Proceeds from exercise of stock options............................           -                -         -             358
Issuance of common stock in connection with employee stock purchase
    plan...........................................................           -                -         -             328
Issuance of common stock in connection with acquisition of minority
    interests in consolidated subsidiary...........................           -                -         -           6,583
Issuance of warrants in connection with acquisition of minority
    interests in consolidated subsidiary...........................           -                -         -           5,043
Issuance of options in connection with acquisition of minority
    interests in consolidated subsidiary...........................           -                -         -             309
Acquisition of minority interests in consolidated subsidiary.......           -                -         -             907
Forfeiture of consolidated subsidiary's employee stock options.....         218                -         -              (7)
Minority interests resulting from issuance of consolidated
    subsidiary's common stock......................................           -                -         -            (131)
Comprehensive loss:
   Net loss........................................................           -                -         -         (18,699)
   Loss from foreign currency translation..........................           -                -         -             (55)
   Loss from available-for-sale securities.........................           -                -         -             (19)
                                                                                                                --------------
Total comprehensive loss...........................................           -                -         -         (18,773)
                                                                      --------------    ---------  ---------    --------------

Balance at June 30, 2001...........................................           -              148    (1,094)         85,141
Proceeds from exercise of stock options............................           -                -         -              38
Issuance of common stock in connection with employee stock purchase
    plan...........................................................           -                -         -             247
Purchases of treasury stock (see Note 13)..........................           -              202    (1,173)         (1,173)
Issuance of stock options for services.............................           -                -         -              37
Comprehensive loss:
   Net loss........................................................           -                -         -         (17,263)
   Gain from foreign currency translation..........................           -                -         -             128
   Loss from available-for-sale securities.........................           -                -         -            (115)
                                                                                                                --------------
Total comprehensive loss...........................................           -                -         -         (17,250)
                                                                      --------------    ---------  ---------    --------------

Balance at June 30, 2002...........................................           -              350    (2,267)         67,040
Issuance of common stock in connection with employee stock purchase
    plan...........................................................           -                -         -             141
Purchases of treasury stock........................................           -               54      (181)           (181)
Comprehensive loss:
   Net loss........................................................           -                -         -         (19,597)
   Gain from foreign currency translation..........................           -                -         -              96
   Loss from available-for-sale securities.........................           -                -         -             (62)
                                                                                                                 --------------
Total comprehensive loss...........................................           -                -         -         (19,563)
                                                                      --------------    ---------  ---------    --------------
Balance at June 30, 2003...........................................      $    -              404   $(2,448)      $  47,437
                                                                      ==============    =========  =========    ==============
</TABLE>

                             See accompanying notes.


                                      F-4
<PAGE>

                             GLOBECOMM SYSTEMS INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                                YEARS ENDED JUNE 30,
                                                                                    ----------------------------------------------
                                                                                       2003           2002              2001
                                                                                    -----------    -----------     ---------------
<S>                                                                                 <C>            <C>             <C>
    OPERATING ACTIVITIES:
    Net loss................................................................        $(19,597)      $(17,263)       $  (18,699)
    Adjustments to reconcile net loss to net cash used in operating
    activities:
      Depreciation and amortization.........................................           3,532          3,661             7,229
      Change in deferred liabilities........................................          (1,834)            19                --
      Gain on termination of capital lease..................................            (959)            --                --
      Provision for doubtful accounts.......................................             683          3,951             1,753
      Deferred income taxes.................................................              13           (138)            1,942
      Stock compensation expense............................................              --             37                --
      Asset impairment charge...............................................              --            237             2,857
      Loss on disposal of fixed assets and other............................              --             --               280
      Minority interests in operations of consolidated subsidiary...........              --             --               650
      Gain on sale of investment............................................              --             --              (304)
      Changes in operating assets and liabilities:
        Accounts receivable.................................................           6,533          6,308            (3,047)
        Inventories.........................................................          (2,338)         6,714            (1,950)
        Prepaid expenses and other current assets...........................            (896)          (443)              588
        Other assets........................................................          (1,617)           247                35
        Accounts payable....................................................          (2,394)        (2,449)           (1,177)
        Deferred revenues...................................................           4,125         (2,308)             (462)
        Accrued payroll and related fringe benefits.........................             155             26               251
        Other accrued expenses..............................................            (120)        (1,541)           (1,769)
                                                                                    -----------    -----------     ---------------

    Net cash used in operating activities...................................         (14,714)        (2,942)          (11,823)
                                                                                    -----------    -----------     ---------------

    INVESTING ACTIVITIES:
    Purchases of fixed assets...............................................          (1,732)        (1,687)           (5,350)
    Repayment of promissory note from a related party.......................              40             --                --
    Restricted cash.........................................................             (20)            --              (167)
    Issuance of promissory notes to related parties.........................              --           (700)             (240)
    Purchases of investments................................................              --             --              (100)
    Proceeds from sale of investments.......................................              --             --               204
    Purchases of consolidated subsidiary's common stock.....................              --             --            (1,212)
    Purchase of consolidated subsidiary's preferred stock...................              --             --              (581)
                                                                                    -----------    -----------     ---------------

    Net cash used in investing activities...................................          (1,712)        (2,387)           (7,446)
                                                                                    -----------    -----------     ---------------

    FINANCING ACTIVITIES:
    Proceeds from exercise of stock options.................................              --             38               358
    Proceeds from sale of common stock in connection with employee stock
       purchase plan .......................................................             141            247               328
    Purchases of treasury stock.............................................            (181)          (873)               --
    Payments under capital leases...........................................            (270)          (430)           (1,668)
                                                                                    -----------    -----------     ---------------

    Net cash used in financing activities...................................            (310)        (1,018)             (982)
                                                                                    -----------    -----------     ---------------

    Effect of foreign currency translation on cash..........................              44             17                --
                                                                                    -----------    -----------     ---------------

    Net decrease in cash and cash equivalents...............................         (16,692)        (6,330)          (20,251)

    Cash and cash equivalents at beginning of year..........................          38,708         45,038            65,289
                                                                                    -----------    -----------     ---------------

    Cash and cash equivalents at end of year................................        $ 22,016       $ 38,708        $   45,038
                                                                                    ===========    ===========     ===============

    SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
    Cash paid for interest..................................................        $    539       $    957        $    8,145
                                                                                    ===========    ===========     ===============
</TABLE>

                             See accompanying notes.


                                      F-5
<PAGE>

                             GLOBECOMM SYSTEMS INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2003

1. ORGANIZATION AND DESCRIPTION OF BUSINESS

         Globecomm Systems Inc. ("Globecomm") was incorporated in the State of
Delaware on August 17, 1994. The Company is an end-to-end satellite
communications solutions provider. The Company's core business provides
end-to-end, value-added satellite-based enterprise communications solutions.
This business supplies ground segment systems and networks for satellite-based
communications including hardware and software to support a wide range of
satellite systems. The Company's wholly-owned subsidiary, NetSat Express, Inc.
("NetSat") provides network services solutions including Internet backbone
connectivity, content delivery network applications, back-office capabilities,
points of presence ("POP") infrastructure and other network management services.

         The Company has incurred operating losses since its inception and has
an accumulated deficit at June 30, 2003 of approximately $73,857,000. Such
losses have resulted principally from costs related to data communications
services, general and administrative and selling and marketing expenses
associated with the Company's operations. Management believes that its existing
capital resources will be sufficient to meet its working capital needs through
June 30, 2004.

2. SIGNIFICANT ACCOUNTING POLICIES

   Principles of Consolidation

         The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries, NetSat and Globecomm Systems Europe
Limited (collectively, the "Company"). All significant intercompany balances and
transactions have been eliminated in consolidation.

   Sale of Stock by Subsidiary

         The Company recognizes changes in the ownership percentage of its
subsidiaries caused by issuances of the subsidiary's stock as an adjustment to
additional paid-in capital in the consolidated statements of changes in
stockholders' equity.

   Accounting Estimates

         The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the consolidated
financial statements and accompanying notes. Actual results could differ from
those estimates.

   Revenue Recognition

         The Company recognizes revenue in accordance with Staff Accounting
Bulletin No. 101 ("SAB 101"), Revenue Recognition in Financial Statements, for
its production-type contracts that are sold separately as standard satellite
ground segment systems when persuasive evidence of an arrangement exists, the
selling price is fixed or determinable, collectibility is reasonably assured,
delivery has occurred and the contractual performance specifications have been
met. The Company's standard satellite ground segment systems produced in
connection with these contracts are typically short-term (less than twelve
months in term) and manufactured using a standard modular production process.
Such systems require less engineering, drafting and design efforts than the
Company's long-term complex production-type projects. Revenue is recognized on
the Company's standard satellite ground segment systems upon shipment and
acceptance of factory performance testing which is when title transfers to the
customer. The amount of revenues recorded on each standard production-type
contract is reduced by the customers' contractual holdback amount, which
typically requires 10% to 30% of the contract value to be retained by the
customer until installation and final acceptance is complete. The customer
generally becomes


                                      F-6
<PAGE>

                             GLOBECOMM SYSTEMS INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

obligated to pay 70% to 90% of the contract value upon shipment and acceptance
of factory performance testing. Installation is not deemed to be essential to
the functionality of the system since installation does not require significant
changes to the features or capabilities of the system, does not require complex
software integration and interfacing and the Company has not experienced any
difficulties installing such equipment. In addition, the customer or other third
party vendors can install the system. The estimated relative fair value of the
installation services is determined by management, which is typically less than
the customer's contractual holdback percentage. If the holdback is less than the
fair value of installation, the Company will defer recognition of revenues,
determined on a contract-by-contract basis equal to the fair value of the
installation services. Payments received in advance by customers are deferred
until shipment and are presented as deferred revenues in the accompanying
consolidated balance sheets.

         The Company recognizes revenue using the percentage-of-completion
method of accounting upon the achievement of certain contractual milestones in
accordance with Statement of Position 81-1, Accounting for Performance of
Construction-Type and Certain Production-Type Contracts, for its non-standard,
complex production-type contracts for the production of satellite ground segment
systems and equipment that are generally integrated into the customers'
satellite ground segment network. The equipment and systems produced in
connection with these contracts are typically long-term (in excess of twelve
months in term) and require significant customer-specific engineering, drafting
and design effort in order to effectively integrate all of the customizable
earth station equipment into the customers' ground segment network. These
contracts generally have larger contract values, greater economic risks and
substantive specific contractual performance requirements due to the engineering
and design complexity of such systems and related equipment. Progress payments
received in advance by customers are netted against the inventory balances in
the accompanying consolidated balance sheets.

         Contract costs generally include purchased material, direct labor,
overhead and other direct costs. Anticipated contracted losses are recognized,
as they become known.

         Revenues from data communications services are derived primarily from
Internet access service fees. Service revenues from Internet access are
recognized ratably over the period in which services are provided. Payments
received in advance of providing Internet access services are deferred until the
period such services are provided and are presented as deferred revenues in the
accompanying consolidated balance sheets.

   Costs from Ground Segment Systems, Networks and Enterprise Solutions

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

   Costs from Data Communications Services

         Costs from data communications services relating to Internet access
service fees consist primarily of satellite space segment charges, Internet
connectivity fees and network operations expenses. Satellite space segment
charges consist of the costs associated with obtaining satellite bandwidth (the
measure of capacity) used in the transmission of services to and from the
satellite leased from operators, depreciation relating to capitalized satellite
transponder leases and network operations expenses. Network operations expenses
consist primarily of costs associated 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 and depreciation.


                                      F-7
<PAGE>

                             GLOBECOMM SYSTEMS INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

   Research and Development

         Research and development expenditures are expensed as incurred.

   Inventories

         Inventories, which consist primarily of work-in-progress from costs
incurred in connection with specific customer contracts, are stated at the lower
of cost (using the first-in, first-out method of accounting) or market value.
Progress payments received under long-term contracts are netted against
inventories.

   Cash Equivalents

         The Company classifies highly liquid financial instruments with a
maturity, at the purchase date, of three months or less as cash equivalents.

   Fixed Assets

         Fixed assets are stated at cost less accumulated depreciation and
amortization. Major improvements are capitalized and repairs and maintenance
costs are expensed as incurred. Depreciation is calculated using the
straight-line method over the estimated useful lives of the assets ranging from
three to twenty-five years. Amortization of satellite space segment transponders
held under capital lease is calculated using the straight-line method over the
estimated useful life of the satellite transponder. Amortization of leasehold
improvements and leased equipment is calculated using the straight-line method
over the shorter of the lease term or estimated useful life of the asset.

   Fair Value of Financial Instruments

         The recorded amounts of the Company's cash and cash equivalents,
accounts receivable, accounts payable, and accrued liabilities approximate their
fair values principally because of the short-term nature of these items. The
fair value of the Company's obligation under its capital lease was estimated
based on the current rates offered to the Company for obligations of similar
terms and maturities. The fair value of obligations under the Company's capital
lease was not significantly different than the carrying value at June 30, 2002.

   Stock-Based Compensation

         The Company accounts for stock option grants using the intrinsic value
method prescribed in Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees, and complies with the disclosure provisions of
Statement of Financial Accounting Standards ("SFAS") No. 123, Accounting for
Stock-Based Compensation ("SFAS No. 123"), as amended by SFAS No. 148,
Accounting for Stock-Based Compensation-Transition and Disclosure ("SFAS No.
148").

   Goodwill and Other Intangible Assets

         Goodwill represents excess of the purchase price over the fair value of
the net assets acquired. Beginning in fiscal 2002 with the adoption of SFAS No.
142, Goodwill and Other Intangible Assets, goodwill and other indefinite life
intangible assets are no longer amortized, but instead tested for impairment at
least annually. Prior to fiscal 2002, goodwill and other intangibles were
amortized using the straight-line method over periods ranging from five-to-ten
years (see Note 7).


                                      F-8
<PAGE>

                             GLOBECOMM SYSTEMS INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

   Long-Lived Assets

         For other than goodwill and indefinite life intangibles, when
impairment indicators are present, the Company reviews the carrying value of its
assets in determining the ultimate recoverability of their unamortized values
using future undiscounted cash flows expected to be generated by the assets in
accordance with the provisions of SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. If such assets are considered impaired, the
impairment recognized is measured by the amount by which the carrying amount of
the asset exceeds the future discounted cash flows. Assets to be disposed of are
reported at the lower of the carrying amount or fair value, less cost to sell.

         The Company evaluates the periods of amortization continually in
determining whether later events and circumstances warrant revised estimates of
useful lives. If estimates are changed, the unamortized cost will be allocated
to the increased or decreased number of remaining periods in the revised lives.

   Reclassifications

         Certain balances in the prior years have been reclassified to conform
to the current year presentation. During fiscal 2002, the Company changed the
presentation of its consolidated statement of operations to better represent
current industry reporting practices.

3. ACCOUNTS RECEIVABLE

         At June 30, 2003, the Company had billed and unbilled accounts
receivable balances outstanding for contracts in progress of $4,977,000 and
$47,000, respectively, and had billed and unbilled accounts receivable balances
outstanding for completed contracts of $2,841,000 and $0, respectively.

         At June 30, 2002, the Company had billed and unbilled accounts
receivable balances outstanding for contracts in progress of $11,350,000 and
$408,000, respectively, and billed and unbilled accounts receivable balances
outstanding for completed contracts of $3,241,000 and $0, respectively.

         Accounts receivable include amounts billed but not paid by customers
pursuant to retainage provisions in connection with ground segment systems,
networks and enterprise solutions contracts. At June 30, 2003 and 2002, there
was $120,000 and $448,000, respectively, billed but not paid by customers under
retainage provisions in connection with long-term contracts. Such balances are
included in accounts receivable in the accompanying consolidated balance sheets.
Based on the Company's experience with similar contracts in recent years, billed
receivables relating to long-term contracts are expected to be collected within
one year.

         Unbilled amounts relating to long-term contracts include recoverable
costs and accrued profit on progress completed, which have not been billed. Such
amounts are billed in accordance with the contract terms, typically upon
shipment of the product, achievement of contractual milestones, or completion of
the contract. At June 30, 2003 and 2002, there were no unbilled amounts relating
to long-term contracts included in the accompanying consolidated balance sheets.

4. INVENTORIES

         Inventories consist of the following:

<TABLE>
<CAPTION>
                                                                            JUNE 30,             JUNE 30,
                                                                              2003                 2002
                                                                         ---------------       --------------
                                                                                   (IN THOUSANDS)
<S>                                                                      <C>                    <C>
         Raw materials and component parts........................       $      495             $     876
         Work-in-progress.........................................           10,495                 7,718
                                                                         ---------------       --------------
                                                                         $   10,990             $   8,594
                                                                         ===============       ==============
</TABLE>

         At June 30, 2003 and 2002, there were no progress payments to net
against inventories under long-term contracts.



                                      F-9
<PAGE>

                             GLOBECOMM SYSTEMS INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


5. FIXED ASSETS

         Fixed assets consist of the following:

<TABLE>
<CAPTION>
                                                                            JUNE 30,             JUNE 30,
                                                                              2003                 2002
                                                                         ----------------      -------------
                                                                                   (IN THOUSANDS)
<S>                                                                          <C>               <C>
         Land.....................................................           $   1,750         $    1,750
         Building and improvements................................               5,992              5,992
         Computer equipment.......................................               3,003              2,943
         Machinery and equipment..................................               2,493              2,441
         Network Operations Center................................               6,848              5,600
         Satellite earth station equipment........................               8,304              9,356
         Furniture and fixtures...................................               1,331              1,308
         Leasehold improvements...................................                  --                 29
         Satellite transponders (see Note 17).....................                  --             11,256
                                                                         ----------------      -------------
                                                                                29,721             40,675
         Less accumulated depreciation and amortization...........              12,185             12,191
                                                                         ----------------      -------------
                                                                             $  17,536         $   28,484
                                                                         ================      =============
</TABLE>

6. INVESTMENTS

         The Company has various investments in strategic alliance companies
that were accounted for under the cost method of accounting, as the Company does
not have the ability to exercise significant influence and there are no readily
determinable market values for such investments. The Company periodically
evaluates the carrying value of these investments to determine that they are
recorded at the lower of cost or estimated net realizable value. Due to the
significant decline in the public equity markets and the financial uncertainty
of such investments, during fiscal 2001 the Company's management evaluated these
investments and determined it would be appropriate to write-down these
investments to net realizable value. Accordingly, during the fourth quarter of
fiscal 2001, the Company recorded an asset impairment charge of approximately
$2,857,000, which is included in costs and operating expenses in the
accompanying consolidated statement of operations for the fiscal year ended June
30, 2001, and reduced the carrying value of these investments to zero.

         During December 2000, the Company sold its interest in one of its
investments, which was being accounted for under the cost method of accounting,
and recorded a gain on sale of investments of approximately $304,000 during
fiscal 2001. Such gain was included in the consolidated statement of operations
for the fiscal year ended June 30, 2001.

7. GOODWILL

         Effective July 1, 2001, the Company adopted the new rules on accounting
for goodwill and other intangible assets. Under the new rules, goodwill and
other indefinite life intangible assets are no longer amortized, but instead
tested for impairment at least annually. The Company completed its annual
goodwill impairment tests during the fourth quarter of fiscal 2003 for both its
ground segment systems, networks and enterprise solutions and data
communications services reporting units. Based upon the estimated fair market
values, no impairment was identified and no write-down of the net carrying value
of goodwill was deemed necessary.

         In the fourth quarter of fiscal 2002, the Company recognized an
impairment charge of approximately $237,000 in connection with its ground
segment systems, networks and enterprise solutions reporting unit, representing
the net carrying value of goodwill relating to the acquisition of a wireless
local loop telephone network solutions business in fiscal 1999. This charge is
included in costs and operating expenses in the accompanying consolidated
statement of operations for the fiscal year ended June 30, 2002.

         The net carrying value of goodwill is approximately $7,204,000 at June
30, 2003 and 2002, which relates to the data communications services reporting
unit.

         Had the Company been accounting for its goodwill under SFAS No. 142 for
all periods presented, the Company's net loss and basic and diluted net loss per
common share would have been as follows:


                                      F-10
<PAGE>

                             GLOBECOMM SYSTEMS INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

7. GOODWILL (CONTINUED)

<TABLE>
<CAPTION>
                                                                                           YEARS ENDED JUNE 30,
                                                                              ------------------------------------------------
                                                                                   2003             2002             2001
                                                                              ---------------    ------------    -------------
                                                                                   (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                                           <C>                <C>             <C>
         Reported net loss...............................................     $  (19,597)        $  (17,263)     $  (18,699)
         Add back goodwill amortization, net of tax......................             --                 --             291
                                                                              ---------------    ------------    -------------

         Adjusted net loss...............................................     $  (19,597)        $  (17,263)     $  (18,408)
                                                                              ===============    ============    =============

         Basic and diluted net loss per common share:
              As reported................................................     $    (1.56)        $    (1.36)    $     (1.55)
              Goodwill amortization......................................             --                 --            0.02
                                                                              ---------------    ------------    -------------

         Adjusted basic and diluted net loss per common share............     $    (1.56)        $    (1.36)    $     (1.53)
                                                                              ===============    ============    =============
</TABLE>

8. COMMON STOCK

   Stock Issued to Consultants

         During November 1996, the Company issued a ten-year warrant to five
consultants for services to purchase an aggregate of 64,125 shares of common
stock at a price per share of $8.07, equal to the fair market value of the
shares at the date of issuance. At June 30, 2003, warrants to purchase 55,825
shares of the Company's common stock noted above are outstanding and
exercisable.

   Treasury Stock

         The Company has a stock repurchase program under which the Company is
authorized to repurchase up to $2.0 million of its outstanding common stock.
Pursuant to this plan, the Company repurchased 54,100 and 202,000 shares of
common stock in fiscal 2003 and 2002, at an aggregate cost of approximately
$181,000 and $1,173,000, respectively. Included in the fiscal 2002 repurchases
was 200,000 shares repurchased at a fair market price of $5.82 per share from
the Company's Chief Executive Officer (see Note 13). The repurchase program
allows for purchases to be made intermittently, through open market and
privately negotiated transactions. Timing, price, quantity and manner of
purchases are at the discretion of the Company's management, depending on market
conditions and other factors, subject to compliance with the applicable
securities laws.

9. NETSAT RESTRUCTURING

         During April 2001, in connection with management's plan to reduce costs
and to improve NetSat's operating efficiencies, the Company recorded a
restructuring charge of approximately $2,490,000 (of which $540,000 was charged
to costs from data communications services) during fiscal 2001. The
restructuring was primarily associated with the discontinuance of certain NetSat
product lines to enhance the Company's strategic redeployment of its
consolidated operating activities, enabling the Company to offer its customers
end-to-end satellite communications solutions while integrating operations and
reducing costs. As a result of this restructuring, the Company terminated 31
employees including executive management, marketing, administration and
operations support personnel. The major components of the restructuring charge
included severance payments to terminated NetSat employees of approximately
$850,000, fees incurred in connection with the termination of certain leased
satellite transponders of approximately $540,000 (charged to costs from data
communications services), the write-off of certain capitalized costs in the
amount of approximately $620,000 associated with NetSat's terminated financing
activities and the write-off of the estimated book value of equipment in the
amount of approximately $480,000 in connection with NetSat's discontinuance of
certain product lines. During fiscal 2002, the restructuring plan was completed
whereby $250,000 was charged against the restructuring accrual of $500,000 for
charges relating to space segment cancellation fees, and $250,000 was reversed
into income (credited to costs from data communications services) due to the
resolution of liabilities for less than originally estimated.

         In connection with the Company's restructuring plan, the Company also
acquired the following minority interests in NetSat:


                                      F-11
<PAGE>

                             GLOBECOMM SYSTEMS INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

9. NETSAT RESTRUCTURING (CONTINUED)

         a)   On March 30, 2001, the Company acquired 2,000,000 shares of
              NetSat's Preferred Stock and 333,334 shares of NetSat's common
              stock from a minority stockholder for approximately $581,000 in
              cash, the issuance of 233,334 shares of the Company's common stock
              and the issuance of a five-year warrant to purchase 262,501 shares
              of the Company's common stock.

         b)   During April and May 2001, the Company acquired 4,845,704 shares
              of NetSat's common stock from minority stockholders for
              approximately $1,212,000 in cash, the issuance of 484,570 shares
              of the Company's common stock and the issuance of warrants to
              purchase 545,142 shares of the Company's common stock.

         c)   In connection with the acquisition of the minority interests of
              NetSat, on May 25, 2001, the Company exchanged all of the current
              employees outstanding NetSat common stock options for an equal
              value of the Company's common stock options. As a result,
              1,188,808 of NetSat common stock options were exchanged for 50,588
              common stock options of the Company.

         In connection with these transactions, the Company wholly owns NetSat
and, accordingly, recorded goodwill of approximately $7,001,000 during fiscal
2001, which represents the excess of the value of the Company's securities
issued over the recorded minority interests at the time of the transactions. In
accordance with the provisions of SFAS No. 142, effective July 1, 2001, the
Company ceased amortizing the goodwill associated with these transactions, which
at such time had a remaining balance of $6,913,000 and was being amortized over
ten years. Such goodwill was tested for impairment upon the adoption of SFAS No.
142 as of July 1, 2001 and again in connection with the annual asset impairment
test during the fourth quarters of fiscal 2002 and 2003 whereby no impairment
was identified.

10. STOCK OPTION AND STOCK PURCHASE PLANS

         On February 26, 1997, the Company's Board of Directors authorized, and
the stockholders subsequently approved, the 1997 Stock Incentive Plan ("1997
Plan"), which authorized the granting to employees, directors and consultants of
the Company options to purchase an aggregate of 2,280,000 shares of the
Company's common stock. In November 2000 and 2001, the Company's stockholders
approved amendments to the 1997 Plan whereby the number of shares authorized for
issuance under the 1997 Plan increased by 800,000 shares in fiscal 2001 and
2002.

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

         Employee options generally vest annually in equal installments over a
four-year period and expire on the tenth anniversary of the date of grant.
Director options generally vest annually in equal installments over a three-year
period commencing on the date of grant and expire the earlier of ten years from
the date of grant or one year from concluding service as a director of the
Company.

         The 1997 Plan provides for an automatic increase to the number of
options authorized for grant by an amount equal to 1% of the shares of common
stock outstanding on the last trading day of each calendar year. During fiscal
2003, 2002 and 2001, the Company increased the number of options authorized for
grant under the 1997 Plan pursuant to the automatic 1% provision by 125,644,
127,529 and 119,505, respectively. At June 30, 2003, the remaining options
available for grant under the 1997 Plan was 470,569.

         On September 23, 1998, the Board of Directors adopted, and the
stockholders subsequently approved, the 1999 Employee Stock Purchase Plan ("1999
Plan"). Pursuant to the 1999 Plan, 400,000 shares of the Company's common stock
will be reserved for issuance. The 1999 Plan is intended to provide eligible
employees of the Company, and its participating affiliates, the opportunity to
acquire an interest in the Company at 85% of fair market value at date of
issuance through participation in the payroll-deduction based employee stock
purchase plan. During the years ended June 30, 2003, 2002 and 2001, the Company
issued 47,046, 56,821 and 54,905 shares of its common stock to participating
employees in connection with the 1999 Plan. At June 30, 2003, the remaining
shares available for issuance under the 1999 Plan was 196,966.


                                      F-12
<PAGE>

                             GLOBECOMM SYSTEMS INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

10. STOCK OPTION AND STOCK PURCHASE PLANS (CONTINUED)

         The following table summarizes activity in the Company's stock option
plan (in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                                              YEARS ENDED JUNE 30,
                                            ----------------------------------------------------------------------------------------
                                                       2003                          2002                          2001
                                            ---------------------------   ---------------------------   ----------------------------
                                                           WEIGHTED-                      WEIGHTED-                     WEIGHTED-
                                             SHARES        AVERAGE         SHARES         AVERAGE        SHARES         AVERAGE
                                              UNDER        EXERCISE         UNDER         EXERCISE        UNDER         EXERCISE
                                             OPTION          PRICE         OPTION          PRICE         OPTION           PRICE
                                            ---------    --------------   ----------    -------------   ----------    --------------
<S>                                           <C>           <C>              <C>           <C>            <C>           <C>
         Balance, beginning of year...        2,914         $ 8.07           2,382         $ 9.28         1,578         $ 10.10
         Grants.......................          449           3.70             734           4.79           944            7.78
         Exercised....................           --            --              (10)          3.56           (69)           5.22
         Canceled.....................         (236)          7.11            (192)         10.86           (71)          11.24
                                            ---------                     ----------                    ----------

         Balance, end of year.........        3,127           7.51           2,914           8.07         2,382            9.28
                                            =========                     ==========                    ==========

         Exercisable, end of year.....        1,821         $ 8.69           1,401         $ 8.87         1,170         $  8.61
                                            =========    ==============   ==========    =============   ==========    ==============

         Weighted-average fair value of
           options granted during the year                  $ 2.40                         $ 3.05                       $  5.21
                                                         ==============                 =============                 ==============
</TABLE>

         The following table summarizes information about stock options
outstanding at June 30, 2003 (in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                        OPTIONS OUTSTANDING                             OPTIONS EXERCISABLE
                                      ---------------------------------------------------------  ----------------------------------
                                                              WEIGHTED-
                                                               AVERAGE            WEIGHTED-                            WEIGHTED-
                RANGE OF                                      REMAINING            AVERAGE                              AVERAGE
                EXERCISE                   NUMBER            CONTRACTUAL           EXERCISE           NUMBER           EXERCISE
                  PRICE                 OUTSTANDING         LIFE (YEARS)            PRICE          EXERCISABLE           PRICE
         ------------------------     ----------------    ------------------    ---------------  -----------------   --------------
<S>                                    <C>                <C>                <C>                   <C>              <C>
         $ 3.10  -   $ 4.42..                882                8.7                $  4.02               142            $  4.19
         $ 4.68  -   $ 7.02..                744                5.2                $  5.43               543            $  5.26
         $ 7.09  -   $10.63..              1,028                5.8                $  7.94               771            $  8.12
         $10.69  -   $15.75..                289                5.7                $ 12.87               221            $ 13.31
         $17.13  -   $25.25..                164                6.2                $ 21.18               125            $ 21.16
         $26.69  -   $28.00..                 20                6.0                $ 27.90                19            $ 27.90
                                      ----------------                                           -----------------
                                           3,127                6.5                $  7.51             1,821            $  8.69
                                      ================                                           =================
</TABLE>

         The Company has reserved approximately 4,461,000 shares of its common
stock for issuance upon exercise of all available and outstanding options and
warrants at June 30, 2003.

         In connection with the acquisition of the minority interests of NetSat
in fiscal 2001, the Company cancelled the NetSat 1999 Stock Incentive Plan
during the fourth quarter of fiscal 2001.

   Fair Value Disclosures

         Pro-forma information regarding net loss and net loss per common share
is required by SFAS No. 123 and SFAS No. 148, which also requires that the
information be determined as if the Company has accounted for its stock options
granted subsequent to July 1, 1995 under the fair value method of that
Statement. The fair value of options granted under the Company's 1997 Plan was
estimated at date of grant using a Black-Scholes option pricing model with the
following assumptions for the years ended June 30, 2003, 2002 and 2001:
risk-free interest rate of 3.0% (2003), 4.2% (2002) and 5.4% (2001), volatility
factor of the expected market price of the Company's common stock of .79 (2003),
..75 (2002), and .81 (2001), a weighted-average expected life of the option of
five years and no dividend yields.


                                      F-13
<PAGE>

                             GLOBECOMM SYSTEMS INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

10. STOCK OPTION AND STOCK PURCHASE PLANS (CONTINUED)

         The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options, which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its stock options under the Black-Scholes
option valuation model.

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

<TABLE>
<CAPTION>
                                                                                           YEARS ENDED JUNE 30,
                                                                              ------------------------------------------------
                                                                                   2003             2002             2001
                                                                              ---------------    ------------    -------------
                                                                                   (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                                           <C>                <C>             <C>
         Reported net loss...............................................     $  (19,597)        $  (17,263)     $  (18,699)
         Pro-forma stock compensation expense............................         (2,707)            (2,690)         (2,816)
                                                                              ---------------    ------------    -------------
         Pro-forma net loss..............................................     $  (22,304)        $  (19,953)     $  (21,515)
                                                                              ===============    ============    =============

         Reported basic and diluted net loss per common share............     $    (1.56)        $    (1.36)     $    (1.55)
                                                                              ===============    ============    =============
         Pro-forma basic and diluted net loss per common share...........     $    (1.78)        $    (1.57)     $    (1.78)
                                                                              ===============    ============    =============
</TABLE>

         During the year ended June 30, 2002 compensation expense of $37,000 was
included in the reported net loss. There was no compensation expense included in
reported net loss during the years ended June 30, 2003 and 2001.

11. BASIC AND DILUTED NET LOSS PER COMMON SHARE

         The Company computes net loss per share in accordance with the
provisions of SFAS No. 128, Earnings Per Share. Basic and diluted net loss per
common share is computed by dividing the net loss for the period by the
weighted-average number of common shares outstanding for the period. Common
equivalent shares consist of the incremental common shares issuable upon the
conversion of preferred stock (using an if-converted method) and incremental
shares issuable upon the exercise of stock options and warrants (using the
treasury stock method). Incremental common equivalent shares are excluded from
the calculation of diluted net loss per share, as their effect is anti-dilutive.
There were no incremental stock options and warrants for the year ended June 30
2003, to exclude from diluted net loss per share. Diluted net loss per share for
the years ended June 30, 2002 and 2001, excludes the effect of approximately
172,000 and 415,000 incremental stock options and approximately 0 and 10,000
incremental warrants, respectively, as their effect would have been
anti-dilutive.

12. PENSION PLAN

         The Company maintains a 401(k) plan, which covers substantially all
employees of the Company. Participants may elect to contribute from 1% to 100%
of their pre-tax compensation, subject to elective deferral limitations under
Section 403 of the Internal Revenue Code. Participant contributions up to 4% of
pre-tax compensation were fully matched by the Company during the years ended
June 30, 2003, 2002 and 2001. In addition, the plan also provides for
discretionary contributions by the Company. The Company contributed
approximately $460,000, $470,000 and $539,000 to the 401(k) plan during the
years ended June 30, 2003, 2002 and 2001, respectively. There were no
discretionary contributions made by the Company during the years ended June 30,
2003, 2002 and 2001.

13. RELATED PARTY TRANSACTIONS

         During fiscal 2002, the Company advanced $300,000 to an officer of the
Company. The Company received a promissory note payable on September 30, 2004,
which bears interest at an annual rate of 5.0% payable quarterly, and secured by
a stock pledge agreement. On May 7, 2002, the officer sold 200,000 shares of the
Company's common stock at a fair market price of $5.82 per share


                                      F-14
<PAGE>

                             GLOBECOMM SYSTEMS INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


13. RELATED PARTY TRANSACTIONS (CONTINUED)

on such date to the Company in connection with its stock repurchase program. The
Company deducted amounts outstanding on the promissory note together with
accrued interest thereon from the gross proceeds paid to the officer in
connection with this transaction.

         During fiscal 2002, the Company advanced $300,000 to an officer of the
Company. The Company received a promissory note payable on September 30, 2004,
which bears interest at an annual rate of 5.0% payable quarterly, and secured by
a stock pledge agreement. At June 30, 2003 and 2002, principal amounts
outstanding under this promissory note are included in other assets and accrued
interest receivable thereon is included in other current assets in the
accompanying consolidated balance sheets.

         During fiscal 2001, the Company advanced $200,000 to a former executive
officer of the Company. The Company received a promissory note payable on
December 31, 2002 for this advance, which bore interest at an annual rate of
5.0% payable quarterly. During fiscal 2002, the Company increased the $200,000
loan to $300,000 and amended the promissory note accordingly. During fiscal
2003, this former executive officer resigned from the board of directors and
pursuant to a letter agreement (the "agreement") the Company consolidated the
then outstanding loan and advances receivable from this former executive officer
and current employee of the Company into a $321,000 promissory note. Under the
terms of the letter agreement the Company will forgive the outstanding principal
and interest amounts due on the promissory note in five annual installments
beginning in January 2004 so long as the former executive officer remains an
employee of the Company, subject to the terms of the agreement. At June 30,
2003, the first annual installment to be forgiven in January 2004 with accrued
interest outstanding under this promissory note was included in other current
assets in the accompanying consolidated balance sheet. The remaining principal
amounts to be forgiven subsequent to January 2004 are included in other assets
in the accompanying consolidated balance sheet. At June 30, 2002, principal
amounts and accrued interest outstanding under this promissory note was included
in other current assets in the accompanying consolidated balance sheet.

         During fiscal 2001, the Company advanced $40,000 to an officer of the
Company. The Company received a promissory note payable on December 31, 2002 for
this advance, which bore interest at an annual rate of 5.0% payable quarterly.
During fiscal 2003, the officer repaid the principal and accrued interest
outstanding in full and satisfied the promissory note. At June 30, 2002,
principal amounts and accrued interest outstanding under this promissory note
are included in other current assets in the accompanying consolidated balance
sheet.

14. INCOME TAXES

         The Company computes income taxes using the liability method.
Accordingly, deferred tax assets and liabilities are recognized for estimated
future tax consequences attributable to the differences between the carrying
amount of the assets and liabilities for financial statement and income tax
purposes. The deferred tax assets and liabilities are determined by using
enacted tax laws and rates in effect when the differences are expected to
reverse. Net deferred tax assets are recorded when it is more likely than not
that such tax benefits will be realized.

         The income tax provision (benefit) for the years ended June 30, 2003,
2002 and 2001 calculated under the provisions of SFAS No.109, Accounting for
Income Taxes, are as follows:

<TABLE>
<CAPTION>
                                                                                           YEARS ENDED JUNE 30,
                                                                              ------------------------------------------------
                                                                                   2003             2002             2001
                                                                              ---------------    ------------    -------------
                                                                                              (IN THOUSANDS)
<S>                                                                              <C>              <C>             <C>
         Current:
              Federal....................................................        $    --          $    --         $     --
              State and local............................................             --               --             (342)
              Foreign....................................................             --              138               --
                                                                              ---------------    ------------    -------------
                                                                                      --              138             (342)
         Deferred, net of valuation allowance............................             --             (138)           1,942
                                                                              ---------------    ------------    -------------
                                                                                 $    --          $    --         $  1,600
                                                                              ===============    ============    =============
</TABLE>


                                      F-15
<PAGE>

                             GLOBECOMM SYSTEMS INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


14. INCOME TAXES (CONTINUED)

         During fiscal 2003, 2002 and 2001, the Company recorded approximately
$1,000, $372,000 and $342,000 of state investment tax credits. During fiscal
2002, approximately $75,000 of the tax benefit was recorded as an offset to
state and local capital taxes, approximately $138,000 was recorded as an offset
to the foreign income tax provision recorded by Globecomm Systems Europe Limited
and the remaining $159,000 was recorded as a reduction in general and
administrative expenses in the accompanying consolidated statement of
operations.

         In the fourth quarter of fiscal 2001, the Company acquired the
remaining minority interests in NetSat from certain minority shareholders.
Accordingly, for federal income tax purposes the Company and NetSat files a
consolidated income tax return.

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

<TABLE>
<CAPTION>
                                                                               JUNE 30, 2003          JUNE 30, 2002
                                                                             ------------------      -----------------
                                                                                          (IN THOUSANDS)
<S>                                                                         <C>                       <C>
         Deferred tax assets:
           Net operating loss carryforwards..............................      $  27,092               $  21,476
           Projects in progress..........................................             --                     135
           Accruals and reserves.........................................          2,827                   1,292
           Write-down of investments.....................................            806                   1,280
           State investment tax credit carryforwards.....................            125                     138
                                                                             ------------------      -----------------
                                                                                  30,850                  24,321
         Valuation allowance for deferred tax assets.....................        (27,574)                (23,157)
                                                                             ------------------      -----------------
                                                                                   3,276                   1,164
         Deferred tax liabilities:
           Depreciation and amortization.................................         (3,096)                 (1,026)
           Projects in progress..........................................            (55)                     --
                                                                             ------------------      -----------------
                                                                                  (3,151)                 (1,026)
                                                                             ------------------      -----------------

         Net deferred tax assets.........................................      $     125               $     138
                                                                             ==================      =================
</TABLE>

         In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all of the
deferred tax assets will be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income prior to the
expiration of any net operating loss carryforwards. Due to the uncertainty
regarding the Company's ability to utilize its net operating losses in the
future, the Company has provided a valuation allowance against its operating
losses and temporary differences except for approximately $125,000 representing
state investment tax credit carryforwards that will be utilized to offset state
capital taxes on the Company's combined state tax return.

         For the years ended June 30, 2003, 2002 and 2001, the valuation
allowance increased approximately $4,417,000, $5,756,000 and $7,743,000,
respectively. Approximately $2,046,000 of the remaining valuation allowance, if
recognized, will be allocated directly to stockholders' equity relating to
non-qualified dispositions of stock option exercises.

         The Company has available net operating loss carryforwards of
approximately $67,731,000 ($25,267,000 and $42,464,000 for the Company and
NetSat, respectively), which are due to expire beginning in 2015 through 2023.
Utilization of the net operating loss carryforwards may be subject to an annual
limitation pursuant to the ownership change limitations provided by the Internal
Revenue Code and similar state provisions.



                                      F-16
<PAGE>

                             GLOBECOMM SYSTEMS INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

14. INCOME TAXES (CONTINUED)

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

<TABLE>
<CAPTION>
                                                                                            YEARS ENDED JUNE 30,
                                                                              -------------------------------------------------
                                                                                   2003             2002             2001
                                                                              ---------------    ------------    --------------
<S>                                                                           <C>              <C>            <C>
         Tax at U.S. Federal statutory rate..............................           (34)%             (34)%            (34)%
         Losses for which no tax benefit was received....................            34                34               45
         State taxes.....................................................            --                --               (1)
                                                                              ---------------    ------------    --------------
                                                                                     --%               --%              10%
                                                                              ===============    ============    ==============
</TABLE>

15. SEGMENT INFORMATION

         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, is engaged in the design, assembly
and installation of ground segment systems, networks and enterprise solutions.
Its data communications services segment, through NetSat, is engaged in
providing high-speed, satellite-delivered data communications. NetSat also
provides Internet access to customers who have limited or no access to
terrestrial network infrastructure capable of supporting the economical delivery
of such services.

         The Company's reportable segments are business units that offer
different products and services. The reportable segments are each managed
separately because they provide distinct products and services.

         The following is the Company's business segment information as of and
for the years ended June 30, 2003, 2002 and 2001:

<TABLE>
<CAPTION>
                                                                                               YEARS ENDED JUNE 30,
                                                                                  ------------------------------------------------
                                                                                      2003              2002             2001
                                                                                  --------------    --------------    ------------
                                                                                                  (IN THOUSANDS)
<S>                                                                               <C>               <C>               <C>
      Revenues:
        Ground segment systems, networks and enterprise solutions.......          $   40,125        $  64,101         $   78,744
        Data communications services....................................              13,903           22,478             24,170
                                                                                  --------------    --------------    ------------

      Total revenues....................................................          $   54,028        $  86,579         $  102,914
                                                                                  ==============    ==============    ============

      Loss from operations:
        Ground segment systems, networks and enterprise solutions.......          $  (12,548)       $  (7,149)        $   (4,865)
        Data communications services....................................              (6,946)         (10,155)            (8,538)
      Interest income...................................................                 422            1,030              3,194
      Interest expense..................................................                (539)            (957)            (6,579)
      Gain on sale of investment........................................                  --               --                304
      Intercompany eliminations.........................................                  14              (32)                35
                                                                                  --------------    --------------    ------------
      Loss before income taxes and minority interest in
        operations of consolidated subsidiary...........................          $  (19,597)       $ (17,263)        $  (16,449)
                                                                                  ==============    ==============    ============

      Depreciation and amortization:
        Ground segment systems, networks and enterprise solutions.......          $    1,595        $   1,598         $    1,695
        Data communications services....................................               1,951            2,075              5,543
        Intercompany eliminations.......................................                 (14)             (12)                (9)
                                                                                  --------------    --------------    ------------

      Total depreciation and amortization...............................          $    3,532        $   3,661         $    7,229
                                                                                  ==============    ==============    ============
</TABLE>


                                      F-17
<PAGE>

                             GLOBECOMM SYSTEMS INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

15.  SEGMENT INFORMATION (CONTINUED)

<TABLE>
<CAPTION>
                                                                                               YEARS ENDED JUNE 30,
                                                                                  ------------------------------------------------
                                                                                      2003              2002             2001
                                                                                  --------------    --------------    ------------
                                                                                                  (IN THOUSANDS)
<S>                                                                               <C>                <C>              <C>
      Expenditures for long-lived assets:
        Ground segment systems, networks and enterprise solutions.......          $      187        $     935         $    2,054
        Data communications services....................................               1,585              752              3,428
        Intercompany eliminations.......................................                 (40)              --               (132)
                                                                                  --------------    --------------    ------------

      Total expenditures for long-lived assets..........................          $    1,732        $   1,687         $    5,350
                                                                                  ==============    ==============    ============

<CAPTION>
                                                                                    JUNE 30,          JUNE 30,         JUNE 30,
                                                                                      2003              2002             2001
                                                                                  --------------    --------------    ------------
                                                                                                  (IN THOUSANDS)
<S>                                                                               <C>                <C>              <C>
      Assets:
        Ground segment systems, networks and enterprise solutions.......          $  118,180         $123,484         $  136,103
        Data communications services....................................              10,405           20,106             21,985
        Intercompany eliminations.......................................             (58,241)         (43,293)           (33,089)
                                                                                  --------------    --------------    ------------

      Total assets......................................................          $   70,344         $100,297         $  124,999
                                                                                  ==============    ==============    ============
</TABLE>

         At June 30, 2003, 2002 and 2001, the Company had total assets of
$3,177,000, $2,012,000 and $4,773,000, and long-lived assets of $56,000, $32,000
and $40,000, respectively, located in the United Kingdom, associated with its
wholly-owned subsidiary, Globecomm Systems Europe Limited.

16. SIGNIFICANT CUSTOMERS AND CONCENTRATIONS OF CREDIT RISK

         The Company designs, assembles and installs satellite ground segment
systems, networks and enterprise solutions for customers in diversified
geographic locations. Credit risk with respect to accounts receivable is
concentrated due to the limited number of customers. The timing of cash
realization is determined based upon the contract or service agreements with the
customers. The Company performs ongoing credit evaluations of its customers'
financial condition and in most cases requires a letter of credit or cash in
advance for foreign customers. Allowances related to accounts receivable at June
30, 2003, 2002 and 2001, are approximately $4,805,000, $4,683,000 and
$1,065,000, respectively.

         No major customer accounted for more than 10% of the Company's
consolidated revenues for the year ended June 30, 2003. One major customer
accounted for approximately 11% of the Company's consolidated revenues for the
years ended June 30, 2002 and 2001.

         Revenues earned from ground segment systems, networks and enterprise
solutions are attributed to the geographic location in which the equipment is
shipped. Revenues earned from data communications services are attributed to the
geographic location in which the services are being provided. Revenues from
foreign sales as a percentage of total consolidated revenues are as follows:

<TABLE>
<CAPTION>
                                                                                  YEARS ENDED JUNE 30,
                                                                    -------------------------------------------------
                                                                         2003              2002             2001
                                                                    ---------------    --------------    ------------
<S>                                                                 <C>           <C>                <C>
      Africa............................................                     7%             3%                 2%
      South America.....................................                    13%             9%                 8%
      Asia..............................................                    16%            16%                10%
      Europe (15% in the UK in 2002)....................                    14%            31%                21%
      Middle East.......................................                    12%            14%                13%
      Australia.........................................                     1%             2%                 2%
                                                                    ---------------    --------------    ------------
                                                                            63%            75%                56%
                                                                    ===============    ==============    ============
</TABLE>


                                      F-18
<PAGE>
                             GLOBECOMM SYSTEMS INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

16. SIGNIFICANT CUSTOMERS AND CONCENTRATIONS OF CREDIT RISK  (CONTINUED)

         Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist principally of cash and trade
receivables. The Company places its cash and cash equivalents with high quality
financial institutions. Substantially all cash and cash equivalents are held in
three financial institutions at June 30, 2003 and 2002, respectively. Cash
equivalents are comprised of short-term debt instruments and certificates of
deposit of direct or guaranteed obligations of the United States, which are held
to maturity and approximate fair market value. At times, cash may be in excess
of Federal Deposit Insurance Company insurance limits.

17. COMMITMENTS AND CONTINGENCIES

   Line of Credit

         At June 30, 2003, the Company maintained a $5,000,000 working capital
line of credit with a bank, which bore interest at the prime rate (4.0% at June
30, 2003) and was collateralized by a first security interest on most of its
assets. In May and July 2003, the credit facility was renewed for additional
time while the Company worked to establish a new bank agreement. The credit
facility, which was extended to September 10, 2003, contained certain financial
covenants, with which the Company was in compliance with at June 30, 2003. As of
June 30, 2003, no amounts were outstanding under this credit facility, however,
there were outstanding standby letters of credit, bid proposals and performance
guarantees of approximately $4,069,000, which were applied against and reduced
the amounts available under the working capital line of credit.

         In September 2003, the Company entered into a new one year credit
agreement with the existing bank, which provides for a working capital credit
facility of up to $7,500,000 consisting of a $3,750,000 secured domestic line of
credit and a $3,750,000 Export-Import Bank secured guaranteed line of credit.
The Company will be advanced up to 80% of eligible domestic accounts receivable
and 90% of eligible foreign accounts receivable under each respective line of
credit, as defined in the agreement. Each line of credit bears interest at the
greater of 6.0% or the prime rate plus 2.0% per annum, and is collateralized by
a first security interest on all personal property of the Company. The credit
agreement allows the Company to borrow and apply letters of credit against the
availability under each line of credit. In addition, the new credit agreement
contains certain financial and other covenants, deposit requirements, monthly
reporting provisions and other requirements, as defined.

         The Company utilizes standby letters of credit to secure certain bid
proposals, performance guarantees, and service agreements with third party
vendors in the normal course of business. As of June 30, 2003 and 2002, the
Company had standby letters of credit, bid proposals and performance guarantees
outstanding of approximately $4,069,000 and $3,638,000, respectively, which were
secured by the Company's working capital line of credit. The Company provides
cash collateral for certain letters of credit. As of June 30, 2003 and 2002, the
Company had cash collateral related to bid proposals of approximately $20,000
and $0, respectively, and had approximately $588,000 of cash collateral related
to performance guarantees. These amounts are included in restricted cash in the
accompanying consolidated balance sheets.

   Lease Transactions

         In connection with management's plan to reduce costs, the Company
entered into a series of agreements that resulted in a continuous reduction of
its satellite bandwidth obligations, as follows:

         In April 2001, the Company renegotiated a 15-year satellite space
segment transponder lease entered into by NetSat during fiscal 2000, which
changed the terms and economics of the agreement and resulted in a change in
accounting for such lease from capital to operating. Accordingly, the change in
accounting reduced the Company's capital lease obligations by approximately
$84,261,000 with a corresponding reduction in net fixed assets of approximately
$80,620,000, resulting in a deferred liability of approximately $3,641,000,
which was being amortized into income over the remaining term of the lease.
During the year ended June 30, 2002, NetSat amortized $300,000 of the deferred
liability into income which is included as a credit to costs from data
communications services, resulting in a balance of approximately $3,341,000 in
deferred liabilities in the accompanying consolidated balance sheet at June 30,
2002.

         In June 2002, NetSat amended the renegotiated satellite space segment
transponder lease to reduce the short-term cash commitment under such agreement
in exchange for a twelve-month extension of the lease term. As a result of this
modification, the Company will record the remaining lease commitment on a
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. Such amount is included
in deferred liabilities in the accompanying consolidated balance sheet at June
30, 2002.


                                      F-19
<PAGE>

                             GLOBECOMM SYSTEMS INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

17. COMMITMENTS AND CONTINGENCIES (CONTINUED)

         In October 2002, the Company reached an agreement with one of its
satellite transponder vendors, which further modified and reduced the Company's
satellite bandwidth obligations. Under the terms of this agreement, the Company
paid $7,574,000, which included a one-time termination fee of $3,586,000, and
$3,988,000, which primarily related to outstanding invoices and an additional
security deposit, assigned $31,573,000 of future contract revenues to the vendor
and reduced the Company's future space segment obligations by $52,209,000.
Accordingly, the Company recorded a charge to costs from data communications
services of $782,000 in the second quarter of fiscal 2003, representing the
difference between the $3,586,000 termination fee and the corresponding
reduction in the deferred liability of $2,804,920, which was to be amortized
into income over the remaining term of the lease. At June 30, 2003, the
remaining balance in deferred liabilities relating to this lease was $1,620,000,
which will be amortized into income over the remaining term of the lease.

         In February 2003, the Company reached an agreement with another of its
satellite transponder vendors, which terminated its capital lease and continued
the reduction of the Company's satellite bandwidth obligations. Under the terms
of this agreement, the Company paid a one-time termination fee of $556,000,
assigned $4,557,000 of future contract revenues to the vendor and reduced the
Company's future space segment obligations by $16,563,000. The difference
between the reduction of capital lease obligation of $9,835,000 and the
reduction of the related net fixed assets of $8,876,000 or $959,000, less the
one-time termination fee of $556,000 was recorded as a deferred gain of
$403,000. The gain is being deferred as the Company has guaranteed six months of
revenues assigned to the vendor. If the assigned revenues are not paid to the
vendor, the Company will be responsible to satisfy the obligation. The deferred
liability will be amortized into income monthly when the guaranteed payments are
satisfied. During the fourth quarter of fiscal 2003, based on confirmation of
payments received by the vendor, the Company amortized $196,000 of the deferred
liability into income which is included as a credit to costs from data
communications services, resulting in a balance of approximately $207,000 in
deferred liabilities in the accompanying consolidated balance sheet at June 30,
2003.

         At June 30, 2002, the satellite space segment transponder under capital
lease was included in fixed assets with a capitalized cost of approximately
$11,256,000 and accumulated amortization of approximately $1,930,000.

   Lease Commitments

         The Company currently leases satellite space segment services, office
space, teleport services and other equipment under various operating leases,
which expire in various years through 2008. As leases expire, it can be expected
that in the normal course of business they will be renewed or replaced. Most
lease agreements contain renewal options.

         Future minimum lease payments under non-cancelable operating leases for
satellite space segment services, Internet access services, teleport services,
office space and other equipment with terms of one year or more consist of the
following at June 30, 2003 (in thousands):

<TABLE>
<S>                                                                          <C>
         2004........................................................            $   6,115
         2005........................................................                6,336
         2006........................................................                5,821
         2007........................................................                5,058
         2008........................................................                2,299
         Thereafter..................................................                  646
                                                                               -----------------
                                                                                 $  26,275
                                                                               =================
</TABLE>

         Rent expense for satellite space segment services, Internet access
services, teleport services, office space and other equipment was approximately
$8,256,000, $17,082,000 and $11,051,000 for the years ended June 30, 2003, 2002
and 2001, respectively.

         In fiscal 2002, the Company entered into a forty-eight month lease
agreement as the lessor of satellite earth station equipment, which is being
classified as an operating lease and expires in May 2006. At June 30, 2003 and
2002, equipment under this operating lease had a net book value of approximately
$416,000 and $562,000, respectively and is included in fixed assets in the
accompanying consolidated balance sheets. At June 30, 2003, future minimum lease
payments to be received from equipment under this operating lease are as
follows: $186,000 in 2004, $186,000 in 2005 and $155,000 in 2006.


                                      F-20
<PAGE>

                             GLOBECOMM SYSTEMS INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


17. COMMITMENTS AND CONTINGENCIES (CONTINUED)

         During fiscal 2001, the Company entered into two thirty-six month
operating lease agreements for satellite space segment transponders on two
satellites that were expected to be launched in late 2002 and operational by
March 2003. Future payments due on such agreements through fiscal 2007 are
approximately $6,000,000. Such satellite space segment services are scheduled to
begin when the satellite transponders are commercially operational, as defined
in the agreements. During fiscal 2003, the Company learned that the vendor has
experienced significant delays in the planned launch and operational dates for
the satellites. As of result of these delays, the Company maintains that it has
a right to terminate the contracts without cost and has provided notification of
such termination. The vendor has denied the Company's assertion that it has a
right to terminate the contracts without cost. If the Company's position were
sustained, total operating lease commitments would be reduced by approximately
$6,000,000.

   Employment Agreements

         During October 2001, the Company entered into three-year employment
agreements with six officers and one former officer for an aggregate amount of
approximately $1,214,000 per year. The Company will have certain obligations to
these individuals if they are terminated for disability or following a change in
control. Each employment agreement renews automatically for additional terms of
one year, unless either party provides written notice to the other party of its
intention to terminate the agreement. During fiscal 2003, the Board of Directors
approved increases bringing the aggregate amount to approximately $1,343,000 per
year.

         During January 2002, the Company entered into a three-year employment
agreement with an officer for an amount of $275,000 per year. The Company will
have certain obligations to this officer if terminated for disability or
following a change in control. The employment agreement renews automatically for
additional terms of one year, unless either party provides written notice to the
other party of its intention to terminate the agreement. In January 2003, the
Company entered into a separation agreement and general release whereby the
employment relationship with this officer was terminated. In accordance with the
terms of this agreement, the Company agreed to pay the officer severance of
$450,000, consisting of a lump sum payment of $250,000 and an additional
$200,000 to be paid monthly for thirty-six months beginning in July 2003, based
on certain conditions defined in the agreement.




                                      F-21
<PAGE>

                             GLOBECOMM SYSTEMS INC.

                 SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
                                                                        ADDITIONS
                                                             ---------------------------------
                                           BALANCE AT         CHARGED TO        CHARGED TO                            BALANCE AT
                                          BEGINNING OF        COSTS AND       OTHER ACCOUNTS-      DEDUCTIONS-          END OF
      DESCRIPTION                            PERIOD            EXPENSES          DESCRIBE           DESCRIBE            PERIOD
      -----------                         --------------     -------------    ----------------    --------------     --------------
<S>                                       <C>                <C>              <C>                 <C>                  <C>
      Year ended June 30, 2003:
        Reserves and allowances deducted
          from asset accounts:
          Reserve for estimated doubtful
            accounts receivable......      $ 4,683,000        $  683,000       $      --          $  (561,000) (b)      $ 4,805,000
          Valuation allowance on deferred
            tax assets...............       23,157,000                --        4,417,000 (a)              --            27,574,000
                                          --------------     -------------    ----------------    --------------     --------------
                                           $27,840,000        $  683,000       $4,417,000         $  (561,000)          $32,379,000
                                          ==============     =============    ================    ==============     ==============

      Year ended June 30, 2002:
        Reserves and allowances deducted
          from asset accounts:
          Reserve for estimated doubtful
             accounts receivable.....      $ 1,065,000        $3,951,000       $      --          $  (333,000) (b)      $ 4,683,000
          Valuation allowance on deferred
             tax assets..............       17,401,000                --        5,756,000 (a)              --            23,157,000
                                          --------------     -------------    ----------------    --------------     --------------
                                           $18,466,000        $3,951,000       $5,756,000         $  (333,000)          $27,840,000
                                          ==============     =============    ================    ==============     ==============

      Year ended June 30, 2001:
        Reserves and allowance deducted
          from asset accounts:
          Reserve for estimated doubtful
             accounts receivable.....      $   467,000        $  680,000       $      --          $   (82,000) (b)      $ 1,065,000
          Valuation allowance on deferred
             tax assets..............        9,658,000                --        7,743,000 (a)              --            17,401,000
          Valuation allowance on leased
             receivables.............               --         1,073,000              --           (1,073,000) (c)              --
                                          --------------     -------------    ----------------    --------------     --------------
                                           $10,125,000        $1,753,000       $7,743,000         $(1,155,000)         $18,466,000
                                          ==============     =============    ================    ==============     ==============
</TABLE>


      (a)        Increase in valuation allowance for net deferred tax assets.

      (b)        Reduction in allowance due to write-off of accounts receivable
                 balances (net of recovery).

      (c)        Reduction in reserve due to write-off of leased receivables.


                                      S-1
<PAGE>

INDEX OF EXHIBITS:

EXHIBIT NO.

3.1         Amended and Restated Certificate of Incorporation (incorporated by
            reference to Exhibit 3.1 of the Registrant's Annual Report on Form
            10-K for the fiscal year ended June 30, 1999).

3.2         Amended and Restated By-laws of the Registrant (incorporated by
            reference to Exhibit 3.2 of the Registrant's Annual Report on Form
            10-K for the fiscal year ended June 30, 1999).

4.2         See Exhibits 3.1 and 3.2 for provisions of the Amended and Restated
            Certificate of Incorporation and Amended and Restated By-laws of the
            Registrant defining rights of holders of Common Stock of the
            Registrant (incorporated by reference to Exhibit 4.2 of the
            Registrant's Registration Statement on Form S-1, File No. 333-22425
            (the "Registration Statement")).

10.1        Form of Registration Rights Agreement dated as of February 1997
            (incorporated by reference to Exhibit 10.1 of the Registration
            Statement).

10.2        Form of Registration Rights Agreement dated May 30, 1996
            (incorporated by reference to Exhibit 10.2 of the Registration
            Statement).

10.3        Form of Registration Rights Agreement dated December 31, 1996, as
            amended (incorporated by reference to Exhibit 10.3 of the
            Registration Statement).

10.4        Letter Agreement for purchase and sale of 199,500 shares of Common
            Stock dated November 9, 1995 between the Registrant and Thomson-CSF
            (incorporated by reference to Exhibit 10.4 of the Registration
            Statement).

10.5        Investment Agreement dated February 12, 1996 by and between Shiron
            Satellite Communications (1996) Ltd. and the Registrant
            (incorporated by reference to Exhibit 10.5 of the Registration
            Statement).

10.6*       Stock Purchase Agreement dated as of August 30, 1996 by and between
            C-Grams Unlimited Inc. and the Registrant (incorporated by reference
            to Exhibit 10.6 of the Registration Statement).

10.7        Memorandum of Understanding dated December 18, 1996 by and between
            NetSat Express, Inc. and Applied Theory Communications, Inc.
            (incorporated by reference to Exhibit 10.7 of the Registration
            Statement).

10.8        Stock Purchase Agreement dated as of August 23, 1996 by and between
            NetSat Express, Inc. and Hughes Network Systems, Inc. (incorporated
            by reference to Exhibit 10.8 of the Registration Statement).

10.9        Employment Agreement dated as of January 27, 1997 between the
            Registrant and David E. Hershberg (incorporated by reference to
            Exhibit 10.9 of the Registration Statement).

10.10       Employment Agreement dated as of January 27, 1997 between the
            Registrant and Kenneth A. Miller (incorporated by reference to
            Exhibit 10.10 of the Registration Statement).

10.11       Purchase and Sale Agreement, 45 Oser Avenue, Hauppauge, New York,
            dated December 12, 1996 by and between Eaton Corporation and the
            Registrant (incorporated by reference to Exhibit 10.13 of the
            Registration Statement).

10.12       1997 Stock Incentive Plan (incorporated by reference to Exhibit
            10.14 of the Registration Statement).

10.13       Investment Agreement dated August 21, 1998 by and between McKibben
            Communications LLC and the Registrant (incorporated by reference to
            Exhibit 10.13 of the Registrant's Annual Report on Form 10-K for the
            year ended June 30, 1998).

10.14       1999 Employee Stock Purchase Plan (incorporated by reference to
            Exhibit 99.8 of the S-8 of the S-8 Registration Statement).

10.15       Rights Agreement, dated as of December 3, 1998, between the
            Registrant and American Stock Transfer and Trust Company, which
            includes the form of Certificate of Designation for the Series A
            Junior Participating Preferred Stock as Exhibit A, the form of
            Rights Certificate as Exhibit B and the Summary of Rights to
            Purchase Series A Preferred Shares as Exhibit C (incorporated by
            reference to Exhibit 4 of Registrant's Current Report on Form 8-K
            dated December 3, 1998).

10.16       Common Stock Purchase Agreement dated August 11, 1999 between NetSat
            Express, Inc. and Globix Corporation (incorporated by reference to
            Exhibit 10.16 of the Registrant's Annual Report on Form 10-K for the
            year ended June 30, 1999).

10.17       Series A Preferred Stock Purchase Agreement dated August 11, 1999
            between NetSat Express, Inc. and George Soros (incorporated by
            reference to Exhibit 10.17 of the Registrant's Annual Report on Form
            10-K for the year ended June 30, 1999).

10.18       Common Stock Purchase Agreement dated October 28, 1999 between
            NetSat Express, Inc., Globecomm Systems Inc. and Reuters Holdings
            Switzerland SA (incorporated by reference to Exhibit 10.18 of the
            Registrant's Quarterly Report on Form 10-Q, for the quarter ended
            September 30, 1999).

10.19       Negotiable Promissory Note, dated April 1, 2001, between the
            Registrant and Donald Woodring (incorporated by reference to Exhibit
            10.19 of the Registrant's Annual Report on Form 10-K for the year
            ended June 30, 2001).

10.20       Employment Agreement, dated as of October 9, 2001, by and between
            Stephen C. Yablonski and the Registrant (incorporated by reference
            to Exhibit 10.20 of the Registrant's Quarterly Report on Form 10-Q,
            for the quarter ended September 30, 2001).

10.21       Employment Agreement, dated as of October 9, 2001, by and between
            Andrew C. Melfi and the Registrant (incorporated by reference to
            Exhibit 10.21 of the Registrant's Quarterly Report on Form 10-Q, for
            the quarter ended September 30, 2001).

10.22       Employment Agreement, dated as of October 9, 2001, by and between
            Donald G. Woodring and the Registrant (incorporated by reference to
            Exhibit 10.22 of the Registrant's Quarterly Report on Form 10-Q, for
            the quarter ended September 30, 2001).

10.23       Employment Agreement, dated as of October 9, 2001, by and between
            Paul J. Johnson and the Registrant (incorporated by reference to
            Exhibit 10.23 of the Registrant's Quarterly Report on Form 10-Q, for
            the quarter ended September 30, 2001).

10.24       Employment Agreement, dated as of October 9, 2001, by and between
            Paul Eterno and the Registrant (incorporated by reference to Exhibit
            10.24 of the Registrant's Quarterly Report on Form 10-Q, for the
            quarter ended September 30, 2001).

10.25       Promissory Note Secured By Stock Pledge Agreement, dated September
            4, 2001, by and between David E. Hershberg and the Registrant
            (incorporated by reference to Exhibit 10.25 of the Registrant's
            Quarterly Report on Form 10-Q, for the quarter ended September 30,
            2001).

10.26       Promissory Note Secured By Stock Pledge Agreement, dated September
            4, 2001, by and between Kenneth A. Miller and the Registrant
            (incorporated by reference to Exhibit 10.26 of the Registrant's
            Quarterly Report on Form 10-Q, for the quarter ended September 30,
            2001).

10.27       Employment Agreement, dated as of January 25, 2002, by and between
            G. Patrick Flemming and the Registrant (incorporated by reference to
            Exhibit 10.27 of the Registrant's Quarterly Report on Form 10-Q, for
            the quarter ended December 31, 2001).

10.28*      Settlement Agreement, dated as of October 1, 2002, by and between
            Loral Skynet(R), a division of Loral SpaceCom Corporation and the
            Registrant (incorporated by reference to Exhibit 10.28 of the
            Registrant's Quarterly Report on Form 10-Q, for the quarter ended
            September 30, 2002).

10.29       Separation Agreement and General Release, dated as of January 22,
            2003, by and between G. Patrick Flemming and the Registrant
            (incorporated by reference to Exhibit 10.29 of the Registrant's
            Quarterly Report on Form 10-Q, for the quarter ended December 31,
            2002).

10.30       Letter Agreement, dated as a January 31, 2003, by and between Donald
            G. Woodring and the Registrant (incorporated by reference to Exhibit
            10.30 of the Registrant's Quarterly Report on Form 10-Q, for the
            quarter ended December 31, 2002).

10.31       Loan and Security Agreement, dated as of September 25, 2003, by and
            between Silicon Valley Bank and the Registrant (filed herewith).

21          Subsidiaries of the Registrant (filed herewith).

23          Consent of Independent Auditors (filed herewith).

31.1        Chief Executive Officer Certification required by Rules 13a-14 and
            15d-14 under the Securities Exchange Act of 1934, as amended (filed
            herewith).

31.2        Chief Financial Officer Certification required by Rules 13a-14 and
            15d-14 under the Securities Exchange Act of 1934, as amended (filed
            herewith).

32          Certification Pursuant to 18 U.S.C. Section 1350, as adopted
            pursuant to Section 906 of Sarbanes Oxley Act of 2002 (filed
            herewith).