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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, 2001

                                       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:

 TITLE OF EACH CLASS                NAME OF EACH EXCHANGE ON WHICH REGISTERED
 -------------------                -----------------------------------------
       None                                             None

          SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
                         Common Stock, $.001 par value

     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. [ ]

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     While it is difficult to determine the number of shares owned by
non-affiliates, the registrant estimates that the aggregate market value of
outstanding common stock on September 25, 2001, based upon the average bid and
asked prices of such common stock on the Nasdaq National Market on September
25, 2001 held by non-affiliates was approximately $64.8 million. For this
computation, the registrant has excluded the market value of all shares of its
common stock reported as beneficially owned by officers, directors and certain
significant stockholders. Such exclusion shall not be deemed to constitute an
admission that any such stockholder is an affiliate of the registrant.

     As of September 25, 2001, there were outstanding 12,717,846 shares of the
registrant's common stock, par value $.001.


                      DOCUMENTS INCORPORATED BY REFERENCE

     The Proxy Statement of Globecomm Systems Inc. relative to the 2001 Annual
Meeting of Stockholders to be held on November 15, 2001, 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

     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 networks capabilities, and the satellite services
capabilities that are generally provided by our wholly-owned subsidiary, NetSat
Express, Inc. The services we offer include wide area network connectivity,
broadband connectivity to end users, Internet connectivity, intranet extension,
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 operations in areas of the world
where high-speed terrestrial links are unreliable, too costly, or not readily
available and include communications service providers, multinational
corporations, Internet Service Providers, or ISPs, 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 satellite communications
applications using fixed satellite, direct broadcast and mobile satellite
systems.

     NetSat Express is a leader in providing end-to-end satellite-based
Internet solutions around the world. NetSat Express offers start-up and
expanding ISPs and other enterprises a wide range of solutions, including
Internet backbone connectivity, network applications, back-office capabilities,
POP infrastructure, Web hosting and network management services.

INDUSTRY OVERVIEW

     Satellite communications systems consist of satellites, or the space
segment, and ground-based transmitting and receiving systems, or the ground
segment. The space segment consists of one or more satellites orbiting the
earth, which typically provide continuous communications coverage over a wide
geographic area. Satellites usually contain multiple transponders, each capable
of independently receiving and transmitting one or more signals from and to
multiple users simultaneously. A transponder is a device that receives signals
from transmitting earth stations, translates these received signals into
transmit signals and amplifies and transmits these signals to receiving earth
stations. The ground segment consists principally of one or more earth
stations, which provide a communications link to the end user either directly
or through a terrestrial network. 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.

     Satellite communications is a rapidly growing segment of the global
communications infrastructure. Satellites are increasingly becoming important
in light of the growth of the Internet and other broadband applications and the
globalization of communications. New broadband satellite systems offer services
similar to newly built broadband terrestrial systems.

Satellite communications industry participants include:

o    designers, manufacturers and operators of satellites;

o    designers, manufacturers and integrators of ground segment products,
     systems and networks; and

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o    communications services providers, which may or may not own the actual
     satellites used for transmission.

         The three principal classes of satellite services include:

         FIXED SATELLITE SERVICES. Fixed satellite services are used to provide
communications applications like voice, data and video between fixed land-based
earth stations. These applications include Internet access, business to business
communications, Internet Protocol-based telephony services and cable and
broadcast television distribution. The introduction of high-power satellites
that deliver a wide array of broadband applications has created additional
growth within the fixed satellite services segment. This is enabled by the use
of smaller, less costly earth stations, including very small aperture terminals.
Future higher bandwidth systems are expected to increase the number of
applications and further reduce the cost of providing satellite services. We
believe these systems will offer the additional bandwidth needed for emerging
broadband communications applications.

         DIRECT BROADCAST SERVICES. Direct broadcast satellite services provide
a direct transmission link from high-power satellites to customers over a wide
geographic area. These services deliver content cost-effectively by
incorporating the use of smaller satellite receiving antennas and digital video
technology, particularly in areas underserved by cable. These services are used
in direct-to-home television services and are increasingly being used in direct
broadcast data services.

         MOBILE SATELLITE SERVICES. Mobile satellite services, which operate
between fixed earth stations and mobile earth stations, or terminals, provide
mobile voice and data transmission capability on land, sea and air. New mobile
satellite services are being developed using satellite systems that orbit at
different altitudes above the earth. These satellite systems are designed to
bring more extensive coverage and circuit reliability for mobile telephone and
data services to users throughout the world.

ADVANTAGES OF SATELLITES OVER TERRESTRIAL ALTERNATIVES

We believe satellites provide the following advantages over terrestrial
alternatives for broadband applications:

o    Satellites enable high-speed communications services where terrestrial
     alternatives are unavailable or inadequate. Many areas of the world lack
     the sophisticated fiber optic cable and digital switching infrastructure
     required for the high-speed transmission of data. Satellites are well
     suited to connect these areas that cannot be connected efficiently or
     cost-effectively by terrestrial transmission systems.

o    Satellite networks can be rapidly installed, upgraded and reconfigured. In
     contrast, the installation of fiber optic cable is time consuming and
     requires obtaining rights-of-way.

o    Satellite networks bypass much of the often complex terrestrial networks.
     This avoids the service level issues related to potential terrestrial
     network congestion as well as the use of multiple network service
     providers.

o    Satellite networks, because of their broadcast nature, are inherently
     capable of multicasting, or transmitting data simultaneously from one point
     to multiple locations.

o    Satellite networks, in some situations, are more cost-effective than
     terrestrial alternatives where the flow of data traffic to the user is
     greater than the flow of data from the user. For example, an Internet user
     wanting to access a web site sends a small bandwidth request to a content
     server that returns a high bandwidth response, which is the web page
     viewed. Capacity can go unused on many terrestrial


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     networks due to this uneven flow of traffic whereas satellite networks are
     capable of providing capacity on an imbalanced, or asymmetric, basis.

o    The cost to provide satellite services does not increase with the distance
     between sending and receiving locations. In contrast, the cost of
     terrestrial network transmission increases with distance.

INDUSTRY TRENDS

     Continuing worldwide deregulation of telecommunications services market

     Many countries are deregulating their telecommunications services markets
in response to growing consumer and business demands, international
competition, and technological developments. The Global Agreement on Trade in
Services administered by the World Trade Organization provides for the
deregulation of telecommunications markets in the 75 countries, which have
signed the agreement. These countries include developed countries in North
America, Western Europe, and Asia and developing countries in Africa, Asia, and
Central and South America. Deregulation is creating opportunities for new
companies to compete with the incumbent national telecommunications companies.
These new companies will need to build communications infrastructure and/or buy
communications services. We believe this trend toward deregulation is favorable
to the growth of satellite services, as new service providers can establish
their own infrastructure faster and generally at a lower cost with satellite
communications services than with terrestrial alternatives.

     Economic development worldwide and the increasing globalization of
business

     We believe that as multinational corporations globalize and expand into
new markets, the demand for diverse and customized communications services will
continue to grow. For many large national or multinational companies operating
in geographically dispersed locations, satellite networks provide the only
opportunity for broadband connectivity as the capacity, quality or availability
of terrestrial infrastructure is often limited or nonexistent in many of these
locations. We believe that these corporations, including those operating in
sectors including energy and transportation, which have continually changing
global network needs, will expand their use of satellite-based communications.

     Growth of the Internet outside North America and Western Europe

     The growth of the Internet has been dramatic, and this growth is projected
to continue, particularly outside North America and Western Europe.
Satellite-based communications are benefiting from this trend as many of these
regions lack the terrestrial networks required to accommodate the rapid and
reliable transmission of the vast amounts of information underlying the
Internet. We believe the development of communications infrastructure in much
of the world will in large part depend upon the rapid installation of satellite
communications services. Satellite-based communications services, in some
situations, are better suited than terrestrial alternatives to cost-effectively
address the imbalance of traffic flows inherent in international Internet usage
today because they provide capacity on an asymmetric basis.

     New Internet technology-based applications

     CORPORATE INTRANETS AND VIRTUAL PRIVATE NETWORKS. The technologies which
have been developed for the Internet have been used in the creation of private
corporate networks, or intranets. Intranets provide employees in geographically
dispersed locations with access to corporate databases and other private
corporate information. There is a rapidly growing marketplace for intranet
services in the United States and other developed countries, as corporations
have recognized their benefits. In parts of the world where land-based networks
are inadequate or unavailable, we believe intranets represent a rapidly growing
market for satellite-based communications services. The growth of intranets is
being supported by the evolution of



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virtual private network technology and services that ensure the security of
sensitive corporate data when transmitted over the Internet or other shared
networks. Virtual private networks offer the appearance, functionality and
usefulness of a dedicated private network at a lower cost because they use
shared networks. Furthermore, virtual private networks not only allow access to
internal corporate information, but can also be used to provide telephony
services using Internet Protocol and to transmit video or a combination of any
of these three.

     CONTENT DELIVERY SERVICES AND MULTICASTING. Content providers and large
ISPs are increasingly using content delivery services that can enhance access
to multimedia and static content for their users and enhance web site response
times by avoiding delays and outages caused by public network congestion. One
implementation being used to improve web site response times involves
broadcasting data simultaneously to geographically dispersed servers that are
closer to the person requesting the information, thereby avoiding potential
congestion that could occur on standard terrestrial networks. This broadcasting
of data from one location to many locations is known as multicasting. Satellite
multicasting is not only used for content delivery services as described above,
but also for the transmission of multimedia content in real time.

     Increased distribution of television programming to regional, national and
international audiences

     Significant growth in the number of broadcasters creating programming and
the number of channels available to viewers is largely responsible for the
expansion of the global cable and broadcast television markets. The
introduction of digital television technology has also contributed to the
growth in this market by reducing the transmission costs for channels reaching
smaller and more distant audiences.

     We believe that the number of smaller programmers will continue to
increase as transmission costs decline, while major programmers will increase
their offerings by expanding the number of regional channels and specialized
versions of their primary channels. Satellites offer advantages in providing
enhanced television to rural markets given the cost and time to install
traditional cable and fiber optic infrastructure.

     Continuing technological advancements

     We believe a number of technological advances will stimulate demand for
satellite-based communications services:

o    INTERNET PROTOCOL. Internet Protocol is transforming the communications
     industry by allowing all forms of communications to be carried in one
     format using a standard protocol. Therefore, Internet Protocol allows for
     the transmission of voice, video, and data on a single network. These
     networks use bandwidth efficiently, thereby reducing transmission costs and
     allowing for enhanced applications. We believe the reduction in
     transmission costs and enhanced applications will continue to stimulate
     demand for communications services worldwide including satellite-based
     services.

o    ENHANCEMENTS IN SATELLITE TECHNOLOGY HELP REDUCE COSTS. The latest
     generation of satellites has up to three times more power than satellites
     launched in the early 1990s. As technology improves, satellites in the
     future will be even more powerful and longer-lived than current satellites.
     In addition, we believe satellites in the future will carry more
     transponders and therefore provide more transmission capacity. We expect
     these new satellites will decrease the cost of capacity, thereby increasing
     the demand for satellite-based communications services.

o    KA-BAND TECHNOLOGY. The Ka-band transponders will offer five to ten times
     the bandwidth of today's transponders. Ka-band technology typically uses
     smaller, more high-powered spot beams, which allow for smaller ground
     antennas and lower cost per data transmitted. The use of Ka-band technology
     is expected to lead to less expensive capacity and increase the demand for
     satellite-based communications.



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o    BROADBAND TECHNOLOGY. Broadband technology, increasingly available on fiber
     optic networks, sophisticated urban cable networks and through
     high-bandwidth telephone line technologies, is creating demand for robust
     applications like delivery of multimedia content that narrow-band
     technologies cannot satisfy. We believe that satellites can provide the
     principal means to deliver broadband applications beyond the geographical
     limitations of both existing and future broadband terrestrial networks.

o    COMPRESSED DIGITAL VIDEO. Compressed digital video technology is designed
     to compress up to ten high-quality video channels in the same bandwidth
     that previously carried a single analog channel. This technology has
     lowered the costs of delivering programming via satellite and cable
     television systems, thereby permitting more programming options to be
     provided to smaller niche markets.

SERVICES AND PRODUCTS

OUR COMMUNICATIONS SERVICES

     We offer end-to-end, value-added satellite-based communications
infrastructure and services. We engineer and provide 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. We tailor these 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.

     The following describes some of our standardized services:

     WIDE AREA NETWORK ANYWHERE(TM). This service offering provides high speed
networking between major communications points of presence, or POPs. We are
currently providing this service for Telefonica Data of Spain, connecting POPs
in Sao Paulo, Lima, Bogota and Santiago in South America to Hauppauge, New
York. This is an example of using this standardized service as a building block
in a custom-engineered solution.

     INTRANET ANYWHERE(TM). This service offering provides secure high-speed
data transmission directly to local area networks using standards-based
satellite receiver technology. We intend to offer this service to customers
requiring secure high-speed data transmission between corporate headquarters
and one or more remote offices.

     ISDN ANYWHERE(TM). This service offering provides full-time connections at
rates of 64 kilobits per second, or Kbps, and 128 Kbps to geographically
dispersed locations. We can provide these services to organizations needing
full-time digital connections for voice, data and videoconferencing 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. This service provides data rates from 64 Kbps up to 384
Kbps to geographically dispersed locations. Customers who have high bandwidth
requirements would use this service to reduce their costs when they only need
intermittent services, like emergency communications services.


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

         THE CHALLENGE. We were selected by Mercury Communications, Inc., a new
communications service provider in Angola, to design and implement the voice,
data and Internet infrastructure as well as the connections between Angola and
the United States, where the existing communications infrastructure was
inadequate.

         THE SOLUTION. We designed and continue to build a nationwide voice and
data telecommunications network using a combination of satellite systems,
terrestrial microwave systems and local wireless communications technology. In
addition, we provided Mercury with the information technology infrastructure
necessary to provide Internet access from the United States Internet backbone to
Soyo and Luanda, Angola using satellites. We also provide international
satellite connections for voice and data traffic between Soyo and Luanda, and
Houston, Texas as well as the associated billing services. The voice and data
satellite network we custom-engineered is based on a combination of network
technologies, each designed to enhance delivery of a particular service. We
currently provide network services to operate and maintain these communications
services.


[DIAGRAM OF MERCURY COMMUNICATIONS, INC. NETWORK DEPICTING THE COMMUNICATIONS
SYSTEM INFRASTRUCTURE THAT PROVIDES PHONE SERVICE CONNECTIVITY AND INTERNET
CONNECTIVITY FOR USERS IN ANGOLA USING TERRESTRIAL CONNECTIONS AND WIRELESS
LOCAL LOOP CONNECTIONS WITH THE U.S. PUBLIC TELEPHONE NETWORK AND THE U.S.
INTERNET BACKBONE USING A SATELLITE THAT TRANSMITS TO AND FROM EARTH STATIONS
IN THE UNITED STATES AND ANGOLA.]

OUR GROUND SEGMENT SYSTEMS AND NETWORKS

         We design, engineer, integrate and install satellite-based ground
segment system 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



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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.

CUSTOMIZABLE MODULAR EARTH STATIONS

     MODULAR BUILDING BLOCK EARTH STATION. 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. We
typically sell these earth stations at prices ranging from approximately
$250,000 to $600,000.

     COMMERCIAL TERMINAL FAMILY. This family of earth stations encompass a
range of general purpose, medium-capacity earth stations, and are 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. We
typically sell these earth stations at prices ranging from approximately
$100,000 to $300,000.

     COMPACT EARTH STATION. 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. We
typically sell these earth stations at prices ranging from approximately
$20,000 to $45,000.

     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. We market these earth stations at prices
ranging from approximately $50,000 to $100,000.

     EXPLORER II MOBILE TERMINALS. We designed this family of digital terminals
to serve the mobile satellite services market for high-speed data and voice
terminals with optional video conferencing. We offer the Explorer II, a high
speed data terminal for use in news gathering, emergency communications, data
gathering, and other applications requiring mobility and data at rates of 64
Kbps. We typically sell these earth stations at prices ranging from
approximately $20,000 to $50,000.

NETSAT EXPRESS SERVICES

     NetSat Express is an ISP that offers Internet access and related services
to ISPs and other enterprises around the world. NetSat Express combines
satellite and terrestrial communications networks to provide customers around
the world high-speed access services to the United States Internet backbone.
NetSat Express currently has customers in Africa, the Pacific Rim region,
Australia, Central and South America, Eastern and Central Europe and the Middle
East.

     Internet Access Services

     NetSat Express' Internet access service, marketed under the Access
Plus(TM) brand name, provides high-speed access to the United States Internet
backbone. NetSat Express provides the necessary satellite transmission services
and terrestrial transit and routing services. In addition, it currently
provides earth stations and the necessary installation services together with
Globecomm. NetSat Express' services are highly configurable, providing
guaranteed levels of service for its customers. Its services can be implemented
through its worldwide network, and global deployment capabilities through
suppliers like Globecomm. NetSat Express provides a wide variety of circuit
sizes, which allows it to serve large and small ISPs, communications services
providers and corporations. A circuit is comprised of satellite and




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terrestrial components that provide the bandwidth needed by the customer.
NetSat Express' customers lease circuits as small as 64 Kbps and as large as 45
Mbps, where a megabit is 1000 times larger than a kilobit. NetSat Express
offers two-way circuits, providing bandwidth to and from the Internet, as well
as one-way circuits, where the customer has its own return circuit through a
local terrestrial connection to the Internet.

     NetSat Express also provides a bandwidth capacity bursting option,
allowing bursts of up to the full capacity of a satellite circuit. With
bursting, the customer's guaranteed bandwidth is a part of a shared satellite
channel with other customers who also have guaranteed bandwidths. The bursting
service allows a customer to acquire more bandwidth than its guarantee when
there is available bandwidth on the same shared satellite channel that NetSat
Express has not committed to other customers.

     NetSat Express' Strategic Relationships

     NetSat Express has developed a number of strategic relationships that are
expected to provide it with access to services and technology that complements
its strategy. An agreement with Globix Corporation provides quality access to
the United States Internet backbone and hosting facilities. A re-marketing
agreement with IBM provides NetSat Express with access to technology and
marketing assistance in the delivery of ISP-related hardware and software
solutions. These agreements all complement NetSat Express' strategy to
facilitate the development of ISPs around the world.

SALES AND MARKETING

     We market our products and services to communications services providers,
multinational corporations, ISPs, content providers and government entities. We
have structured our sales and marketing approach to respond effectively to the
growing 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.

     We use regional business teams to sell and market our communications
services and ground segment systems and networks. These business teams are
responsible for orders and programs in the regions to which they are assigned
as well as for the delivery of our products and services, and finally, 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
us and our customers. 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 also sell to industry-specific markets through direct and indirect
sales channels. These industry-specific markets currently include the oil
industry, the broadcast industry and the United States government. We intend to
expand our direct and indirect sales and marketing efforts to these
industry-specific markets.

     We have sales and marketing staff located at our headquarters in
Hauppauge, New York, as well as in Hong Kong 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, 2001, we employed 46
persons with sales and



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marketing responsibility, of which 17 are full-time sales executives and 29
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 Express' marketing strategy is carried out primarily through
Globecomm's sales channels including Globecomm's 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,
multinational corporations, ISPs, content providers and government entities. We
typically rely upon a small number of customers for a large portion of our
revenues. For example, approximately 11% of our revenues in fiscal 2001 were
derived from sales to one customer. We expect that in the near term a
significant portion of our revenues will continue to be derived from one or 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, 2001, our backlog was approximately $101.0 million compared to
approximately $100.1 million at June 30, 2000. 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 but have not been accepted by the customer. Our backlog at any given
time is not necessarily indicative of future period revenues. A substantial
portion of our backlog has been 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, 2001, $44.2 million, or approximately 43.8%, of our
backlog represented contracts with five 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 28.

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.

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



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     We, along with NetSat Express, lease transponder capacity to meet the
bandwidth needs of our and their customers. NetSat Express leases 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.

     NetSat Express has built and staffs a network operations center, or NOC,
to manage its customer circuits. The NOC operates 24 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 or, from NetSat
Express, as a part of its service the equipment needed at the customers'
locations to transmit and receive the satellite signals. Globecomm Systems
offers 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. Project teams generally consist of between two and 10
employees and may include engineers, integration specialists, buyer-planners
and an operations team. Our products and system design capabilities are used in
the engineering and design phases of a project. Once a 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, depending primarily on production volume.

     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 outsourced much of our research and development by making
strategic investments in some of our suppliers who perform research and
development for us. Thus, the costs of developing new technologies are funded
partially by the investments made in these strategic suppliers. This provides
us with a cost-effective means to develop new technology, while minimizing our
direct expenditures. Furthermore, we believe that outsourcing research and
development allows us to retain our flexibility in developing solutions for our
customers, while at the same time providing the opportunity to develop products
through our strategic supplier relationships. Our internal research and
development efforts generally focus on the development of products not
available from other suppliers to the industry. Current efforts are focused on
developing customizable systems. For the years ended June 30, 1999, 2000 and
2001, we have incurred approximately $1.3 million, $0.8 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
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.



                                      12
<PAGE>

     In the communications services market, we believe that our ability to
compete successfully is based primarily on management 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 three groups: (1) vertically integrated
satellite systems providers like Nippon Electric Corporation (2) system
integrators like IDB Systems, a division of MCI WorldCom Inc. and (3) equipment
manufacturers who also provide integrated systems like Andrew Corporation and
Vertex-RSI.

     In the communications services and Internet access services markets, we
compete with other satellite communication companies who provide similar
services, like Loral CyberStar, Inc., PanAmSat Corporation and Verestar, as
well as other Internet services providers. In addition, we may compete with
other communications services providers like Teleglobe, Inc. and MCI WorldCom
Inc. 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 two patents in the United States, for remote access to
the Internet using satellites and for satellite communication with automatic
frequency control and have two patent applications pending in the United
States. We also intend to seek further 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 Express has received trademark registration for NetSat
Express in the United States, the European Community, Russia, and Brazil. We
have also received trademark registrations in the United States for
MBB2001(TM), CTF2001(TM), CES2001(TM) and AXXSYS(TM), which relate to our
customizable modular earth stations. We 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 (the "Act"), and the rules and
regulations of the FCC. Pursuant to the Act and 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. These licenses
should


                                      13
<PAGE>

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 Express does not currently hold any FCC licenses, permits, or
authorizations, nor does it currently provide any FCC regulated services.
Therefore it is not subject to the Act or the rules and regulations of the FCC.
However, NetSat Express 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.

     COMMON CARRIER REGULATION

     We currently provide services to our customers on a private carrier basis
and not as a common carrier. However, we do have FCC authority to operate as a
common carrier, if we so choose. Were our business methods or the federal
regulatory structure to change such that operating as a common carrier becomes
desirable, we would be required to comply with the FCC's requirements for
common carriers. These requirements include, but are not limited to, filing
tariffs setting forth 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

     As long as we offer services on a private basis, there are no restrictions
on foreign ownership of our earth stations. If we offered services as a common
carrier, however, we would be subject to statutory requirements that 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 for foreign
ownership if we operate as a common carrier and ownership of our stock exceeds
the thresholds mentioned above. Failure to comply with these policies may
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 and 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



                                      14
<PAGE>

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 restrictions applicable thereto 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 Express'
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 including
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 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 Express' 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
again in the future, to eliminate this exemption. If these access charges are

                                      15
<PAGE>

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 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 that 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, 2001, we had 224 full-time employees, including 107 in
engineering and program management, 63 in the manufacturing, operations
support, and network operations, 17 in sales and marketing, and 37 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 approximately 122,000 square feet of space in a facility on
approximately seven acres located at 45 Oser Avenue, Hauppauge, New York. This
facility houses our principal offices and production facilities as well as
offices and the network operations center of NetSat Express. We are in the
second year of a five-year lease at a base monthly rent of approximately $3,600
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 $3,900.

ITEM 3. LEGAL PROCEEDINGS

     On July 26, 2000, we filed a lawsuit against Gilat Satellite Networks Ltd.
and StarBand Communications Inc. in the United States District Court for the
Eastern District of New York, charging them with infringement of our United
States Patent No. 5,912,883. The defendants have denied infringement, and have
challenged the validity of the patent.

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

     None




                                      16
<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 2000 and 2001 high and low sales prices are as follows:

                                                  High               Low
                                                  ----               ---
First Quarter Fiscal 2001..............         $ 16.06           $ 9.25
Second Quarter Fiscal 2001.............           14.25             4.31
Third Quarter Fiscal 2001..............           13.69             7.38
Fourth Quarter Fiscal 2001.............           10.75             6.06

First Quarter Fiscal 2000..............           10.91             8.00
Second Quarter Fiscal 2000.............           26.00             9.75
Third Quarter Fiscal 2000..............           41.13            19.50
Fourth Quarter Fiscal 2000.............           26.75            10.50

     At September 25, 2001, there were approximately 3,500 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 25, 2001, our
market price per share was $5.74.

     As of June 30, 2001, 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 effective date for the registration statement (Registration No.
333-30808) filed on Form S-3 (the "S-3 Registration Statement") under the
Securities Act of 1933, as amended, for our secondary offering was March 30,
2000. The class of securities sold was common stock. The offering commenced on
April 4, 2000 and all securities were sold in the offering. The managing
underwriters for the offering were ING Barings LLC and C.E. Unterberg, Towbin.

     Pursuant to the S-3 Registration Statement, we registered and sold
2,000,000 shares of our common stock for an aggregate offering price of
$54,000,000. We incurred total expenses in the offering of approximately
$3,903,000, of which approximately $3,240,000 represented underwriting
discounts and commissions and approximately $663,000 represented other
expenses. All such payments were direct or indirect payments to third parties.
The net offering proceeds to us after deducting the total expenses was
approximately $50,097,000.

     From the effective date of the S-3 Registration Statement to June 30,
2001, the net offering proceeds were used to fund a revolving credit facility
for up to $15.0 million to NetSat Express, for our working capital and general
corporate purposes.

     On March 30, 2001, we issued 233,334 shares of our common stock, a
warrant to purchase an additional 262,501 shares of common stock and
approximately $581,000 in cash in exchange for 2,000,000 shares of Series A
participating preferred stock and 333,334 shares of common stock of NetSat
Express from a minority stockholder. We issued the shares of common stock and
the warrant above pursuant to Rule 501 of Regulation D ("Rule 501") of the
Securities Act of 1933, as amended.



                                      17
<PAGE>

     During April and May 2001, we issued 484,570 shares of our common stock,
warrants to purchase an additional 545,142 shares of our common stock and
approximately $1,212,000 in cash in exchange for 4,845,704 shares of common
stock of NetSat Express from certain minority stockholders. We issued the
shares of common stock and the warrant above pursuant to Rule 501 of the
Securities Act of 1933, as amended.

     The effective date for the registration statement (Registration No.
333-61904) filed on Form S-3 under the Securities Act of 1933, as amended, was
May 30, 2001. The class of securities registered was common stock. Pursuant to
this S-3 registration statement, we registered 1,525,547 shares, which are held
by some of our current stockholders. This amount includes 807,643 shares of
common stock issuable upon exercise of warrants to purchase common stock held by
some of our current stockholders. The Company incurred total expenses in the
offering of approximately $237,000, which represented legal, accounting and
other professional expenses.

ITEM 6. SELECTED FINANCIAL DATA

     The Company's selected consolidated financial data as of and for each of
the five years in the period ended June 30, 2001 have been derived from our
audited consolidated financial statements. In the following table, pro forma
basic and diluted net loss per share for the year ended June 30, 1997, is based
on the weighted-average number of shares of common stock outstanding including
the conversion of the Class A and Class B Convertible Preferred Stock into
common stock, which occurred upon the consummation of the Company's initial
public offering. However, in accordance with Staff Accounting Bulletin 98 of
the Securities and Exchange Commission, options to purchase common stock for
nominal consideration have been reflected in diluted loss per share for all
periods presented in a manner similar to a stock split, even if anti-dilutive.
Historical losses per share have not been presented because such amounts are
not deemed meaningful due to the significant change in the Company's capital
structure, which occurred in connection with the initial public offering.
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. EBITDA is a financial
measure commonly used in our industry and should not be considered in isolation
or as a substitute for net income, cash flows from operating activities or
other measures of liquidity determined in accordance with accounting principles
generally accepted in the United States. EBITDA may not be comparable to other
similarly titled measures of other companies. The Company records an order in
backlog when it receives 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 but have not been accepted by the customer. The Company's backlog
at any given time is not necessarily indicative of future period revenues.

                                      18
<PAGE>

<TABLE>
<CAPTION>
                                                    SELECTED FINANCIAL DATA
                                             (IN THOUSANDS, EXCEPT PER SHARE DATA)

                                                                                 YEARS ENDED JUNE 30,
                                                -----------------------------------------------------------------------------------
                                                       1997              1998            1999              2000           2001
                                                       ----              ----            ----              ----           ----
<S>                                              <C>               <C>              <C>              <C>            <C>
STATEMENTS OF OPERATIONS DATA:
Revenues......................................   $   36,220         $  58,105       $  49,058        $   78,571     $   102,914
Costs of revenues.............................       32,060            49,532          43,516            67,245          83,640
                                                ----------------   --------------   ---------------  ------------  -----------------
Gross profit..................................        4,160             8,573           5,542            11,326          19,274
                                                ----------------   --------------   ---------------  ------------  -----------------
Operating expenses:
  Network operations..........................            -                 -             514             1,926           5,182
  Selling and marketing.......................        3,282             4,187           5,183             6,139           7,235
  Research and development....................          649             1,188           1,325               784             850
  General and administrative..................        3,449             5,010           6,040            10,361          14,568
  Terminated acquisition costs................            -                 -             972                 -               -
  Asset impairment charge.....................            -                 -             679                 -           2,857
  Restructuring charge........................            -                 -               -                 -           1,950
                                                ----------------   --------------   ---------------  ------------  -----------------
Total operating expenses......................        7,380            10,385          14,713            19,210          32,642
                                                ----------------   --------------   ---------------  ------------  -----------------
Loss from operations..........................       (3,220)           (1,812)         (9,171)           (7,884)        (13,368)
Other income (expense):
   Interest income............................          298             1,271             980             1,727           3,194
   Interest expense...........................          (22)               (5)             (1)           (2,522)         (6,579)
   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................................       (2,944)             (546)         (8,192)           (6,326)        (16,449)
Provision for income taxes....................            -                 -               -                 -          (1,600)
                                                ----------------  --------------    ---------------  ------------  -----------------
Loss before minority interests in operations
    of consolidated subsidiary................       (2,944)             (546)         (8,192)           (6,326)        (18,049)
Minority interests in operations of
    consolidated subsidiary...................          275                 -               -             2,745            (650)
                                                ----------------  --------------    ---------------  ------------  -----------------
Net loss......................................   $   (2,669)       $     (546)      $  (8,192)        $  (3,581)   $    (18,699)
                                                ================  ==============    ===============  ============  =================
Basic and diluted net loss per common share...                     $    (0.06)      $   (0.90)        $   (0.36)   $      (1.55)
                                                                  ==============    ===============  ============  =================
Weighted-average shares used in the
    calculation of basic and diluted net loss
    per common share.........................                           8,553           9,109            10,016          12,060
                                                                  ==============    ===============  ============  =================
Pro forma basic and diluted net loss per
    common share (unaudited)..................   $    (0.44)
                                                ================
Shares used in the calculation of  pro forma
    basic and diluted  net loss per common
    share (unaudited).........................        6,086
                                                ================

<CAPTION>
                                                                                 YEARS ENDED JUNE 30,
                                                ------------------------------------------------------------------------------------
                                                       1997              1998            1999              2000            2001
                                                       ----              ----            ----              ----            ----
<S>                                              <C>               <C>              <C>              <C>            <C>
OTHER OPERATING DATA:
EBITDA........................................   $   (2,858)       $   (1,096)      $  (7,904)       $   (4,537)    $    (6,139)
Cash flows used in operating activities.......       (1,958)           (5,678)         (4,408)           (8,925)        (12,063)
Cash flows used in investing activities.......       (8,221)           (7,342)         (4,435)             (361)         (7,206)
Cash flows provided by (used in) financing
    activities................................       11,908            29,198            (555)           62,614            (982)
Capital expenditures, net of non-cash capital
 lease expenditures...........................        6,765             3,678           3,818             6,926           5,350
Backlog at end of year........................       40,807            43,572          63,746           100,139         101,013
</TABLE>

                                      19
<PAGE>


<TABLE>
<CAPTION>
                                                                                       JUNE 30,
                                                 -----------------------------------------------------------------------------------
                                                        1997            1998             1999            2000              2001
                                                        ----            ----             ----            ----              ----
<S>                                                 <C>              <C>             <C>            <C>               <C>
 BALANCE SHEET DATA:
 Cash and cash equivalents......................    $    5,164       $  31,342        $  11,944      $    65,289       $    45,038
 Working capital...............................          6,379          31,461           19,450           74,531            60,639
 Total assets..................................         38,921          60,617           61,653          222,754           124,999
 Long-term liabilities.........................             18               -                -           96,355            13,446
 Minority interests in consolidated subsidiary.              -               -                -              126                 -
 Series A Participating Preferred stock of
  consolidated subsidiary......................              -               -                -            5,000                 -
 Total stockholders' equity....................         15,996          44,014           36,257           90,524            85,141
</TABLE>

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

         This Annual Report on Form 10-K contains, in addition to historical
information, forward-looking statements that involve risks and uncertainties.
Our actual results could differ significantly from the results discussed in the
forward-looking statements. Factors that could cause or contribute to such
differences include those discussed in "Risk Factors" as well as those discussed
elsewhere in this Annual Report on Form 10-K.

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 virtually all 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 may at times be 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. The period from contract award through installation of ground
segment systems and networks and communications services supplied by us
generally is from three to twelve months.

         We recognize revenue in accordance with Staff Accounting Bulletin No.
101, Revenue Recognition in Financial Statements, for our short-term (less than
twelve months in term) production-type contracts that are sold separately as
stand-alone ground segment systems. Such contracts typically require less
engineering, drafting and design efforts than other longer-term production-type
projects and usually require customer acceptance upon completion of installation
of the equipment at the customers' site. Accordingly, we typically recognize
80-90% of the contract value upon shipment with the balance recognized upon
receipt of the customers' final acceptance. Installation is not deemed to be
essential to the functionality of the equipment since installation is mechanical
in nature and does not require significant change to the features or capability
of the equipment, or require complex software integration and interfacing. In
addition, the customer or other vendors can install the equipment; and generally
the cost of installation is approximately 10-20% of the sales value of the
related equipment. Payments received in advance by customers are deferred until
shipment and are presented as deferred revenue.

         We use the percentage-of-completion method of accounting to recognize
revenue for our long-term (in excess of twelve months in term), more complex
production-type contracts that are generally integrated into complete ground
segment networks, 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.

         NetSat Express' revenues are derived primarily from Internet access
service fees and sales of hardware and equipment. Service revenues from Internet
access are recognized ratably over the period in which



                                      20
<PAGE>

services are provided. Sales of hardware and equipment are recognized upon
shipment. Payments received in advance of providing Internet access services
are deferred until the period such services are provided and are presented as
deferred revenue.

         Contract costs generally include purchased material, direct labor,
overhead and other indirect costs. Anticipated contracted losses are recognized
as they become known. Costs of revenues consist primarily of the costs of
purchased materials, direct labor and related overhead expenses, project-related
travel, living costs and subcontractor salaries. In addition, cost of revenues
relating to Internet access service fees consists primarily of satellite space
segment charges and Internet connectivity fees. Network operations expenses
consist primarily of costs associated with the operation of NetSat Express'
network operations center on a twenty-four hour a day, seven day a week basis
including personnel and related costs. 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 paid to engineers. General and administrative expenses
consist of expenses associated with our management, finance, contract and
administrative functions. We anticipate that network operations expenses and
research and development expenses will continue to increase during the next
several years due to expected increases in personnel and related expenses to
support our increasing service base.

RESULTS OF OPERATIONS

     The following table sets forth certain operating data as a percentage of
total revenues for the years indicated:

<TABLE>
<CAPTION>
                                                                            YEARS ENDED JUNE 30,
                                                          ---------------------------------------------------------
                                                                 1999               2000               2001
                                                                 ----               ----               ----
<S>                                                           <C>               <C>                 <C>
PERCENTAGE OF TOTAL REVENUES:
Revenues..............................................           100.0  %          100.0  %            100.0  %
Costs of revenues.....................................            88.7              85.6                81.3
                                                          ---------------    --------------     --------------
Gross profit..........................................            11.3              14.4                18.7
Operating expenses:
  Network operations..................................             1.0               2.4                 5.0
  Selling and marketing...............................            10.6               7.8                 7.0
  Research and development............................             2.7               1.0                 0.8
  General and administrative..........................            12.3              13.2                14.2
  Terminated acquisition costs........................             2.0                 -                   -
  Asset impairment charge.............................             1.4                 -                 2.8
  Restructuring charge................................               -                 -                 1.9
                                                          ---------------    --------------     --------------
Total operating expenses..............................            30.0              24.4                31.7
                                                          ---------------    --------------     --------------
Loss from operations..................................           (18.7)            (10.0)              (13.0)

Other income (expense):
  Interest income....................................              2.0               2.1                 3.1
  Interest expense...................................                -              (3.2)               (6.4)
  Gain on sale of consolidated subsidiary's common stock             -               3.0                   -
  Gain on sale of investment.........................                -                 -                 0.3
                                                          ---------------    --------------     --------------
Loss before income taxes and minority interests in
 operations of consolidated subsidiary................           (16.7)             (8.1)              (16.0)
Provision for income taxes............................               -                 -                (1.6)
                                                          ---------------    --------------     --------------
Loss before minority interests in operations of
 consolidated subsidiary..............................           (16.7)             (8.1)              (17.6)
Minority interests in operations of consolidated
 subsidiary...........................................               -               3.5                (0.6)
                                                          ---------------    --------------     --------------
Net loss..............................................           (16.7)  %          (4.6) %            (18.2) %
                                                          ===============    ==============     ==============
</TABLE>



                                      21
<PAGE>

FISCAL YEARS ENDED JUNE 30, 2000 AND 2001

     Revenues. Revenues increased by $24.3 million, or 31.0% from $78.6 million
for the fiscal year ended June 30, 2000 to $102.9 million for the fiscal year
ended June 30, 2001. The increase reflects strong growth in revenues generated
by NetSat Express from additional service revenues derived from new and
existing Internet access service customers as well as an increase in revenues
generated by Globecomm Systems' core infrastructure business.

     Gross Profit. Gross profit increased by $7.9 million, or 70.2%, from $11.3
million for the fiscal year ended June 30, 2000 to $19.3 million for the fiscal
year ended June 30, 2001. The increase reflects increased revenues generated by
NetSat Express from additional service revenues derived from new and existing
Internet access service customers and an increase in shipments in the domestic
satellite infrastructure business. Gross profit as a percentage of revenues
increased from 14.4% for the fiscal year ended June 30, 2000 to 18.7% for the
fiscal year ended June 30, 2001. This increase is mainly attributable to an
increase in NetSat Express' gross profit as a result of higher utilization of
network capacity. Included in cost of revenues for the fiscal year ended June
30, 2001 is a one-time restructuring charge of $0.5 million related to fees
incurred in connection with the termination of certain NetSat Express leased
transponders. We expect our gross profit margins to decline in the future due
to the under-utilization of NetSat Express' satellite transponder space.

     Network Operations. Network operations expenses increased by $3.3 million,
or 169.1%, from $1.9 million for the fiscal year ended June 30, 2000 to $5.2
million for the fiscal year ended June 30, 2001. The increase is due to the
continuing expansion of NetSat Express' network operations center and related
expenses to support the increasing service base.

     Selling and Marketing. Selling and marketing expenses increased by $1.1
million, or 17.9%, from $6.1 million for the fiscal year ended June 30, 2000 to
$7.2 million for the fiscal year ended June 30, 2001. This increase is
attributable to an increase in NetSat Express' sales and marketing efforts to
penetrate into new regions.

     Research and Development. Research and development expenses increased by
$0.1 million, or 8.4%, from $0.8 million for the fiscal year ended June 30,
2000 to $0.9 million for the fiscal year ended June 30, 2001. This increase is
due to NetSat Express' research and development efforts for potential new
products.

     General and Administrative. General and administrative expenses increased
by $4.2 million, or 40.6%, from $10.4 million for the fiscal year ended June
30, 2000 to $14.6 million for the fiscal year ended June 30, 2001. General and
administrative expenses as a percentage of revenues increased from 13.2% for
the fiscal year ended June 30, 2000 to 14.2% for the fiscal year ended June 30,
2001. The increase in general and administrative expenses for the fiscal year
ended June 30, 2001 primarily resulted from an increase in NetSat Express'
amortization expense related to capital leases entered into during fiscal 2000
for satellite space segment transponders and an increase in NetSat Express'
personnel, including expenses related to its management team.

     Asset Impairment Charge. 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 fourth quarter ended June 30, 2001. Our
management evaluated these investments and believed it would be appropriate to
write-down these investments to zero based on there financial uncertainty.

     Restructuring Charge. The restructuring charge of $2.0 million for the
fiscal year ended June 30, 2001 relates to management's plan to reduce costs
and improve NetSat's operating efficiencies. The components of the
restructuring charge include $0.9 million for severance payments to terminated
NetSat employees, $0.6 million for costs associated with terminated NetSat
financing activities and $0.5 million for the discontinuance of certain NetSat
product lines.

                                      22
<PAGE>

     Interest Income. Interest income increased by $1.5 million, or 84.9%, from
$1.7 million for the fiscal year ended June 30, 2000 to $3.2 million for the
fiscal year ended June 30, 2001. This increase is primarily due to the increase
of cash and cash equivalents due to the investment of the net proceeds from our
secondary common stock offering completed in April 2000.

     Interest Expense. Interest expense increased by $4.1 million, or 160.9%,
from $2.5 million for the fiscal year ended June 30, 2000 to $6.6 million for
the fiscal year ended June 30, 2001. This increase relates to NetSat Express'
capital lease obligations entered into during fiscal year 2000 for satellite
space segment transponders.

     Gain on Sale of Consolidated Subsidiary's Common Stock. The gain on sale
of consolidated subsidiary's common stock of $2.4 million for the fiscal year
ended June 30, 2000 relates to our sale of 1,400,000 shares of common stock of
NetSat Express at $2.50 per share during the fiscal second quarter ended
December 31, 1999.

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

     NetSat Express. Our consolidated subsidiary, NetSat Express, experienced
an increase in revenues of $15.2 million, or 170.5%, from $9.0 million for the
fiscal year ended June 30, 2000 to $24.2 million for the fiscal year ended June
30, 2001. The increase resulted from additional service revenues derived from
new and existing Internet access service customers. Net loss for NetSat Express
increased by $9.3 million, or 130.6%, from $7.1 million for the fiscal year
ended June 30, 2000 to $16.4 million for the fiscal year ended June 30, 2001.
The increase is primarily due to an increase in general and administrative
expenses associated with an increase in amortization expense related to capital
leases entered into during fiscal 2000 for satellite space segment
transponders, an increase in personnel, including expenses related to
developing its management team, an increase in selling and marketing efforts to
penetrate into new regions and an increase in network operation expenses due to
expansion of NetSat Express' network operations center and related expenses to
support the increasing service base and the restructuring charge.

FISCAL YEARS ENDED JUNE 30, 1999 AND 2000

     Revenues. Revenues increased by $29.5 million, or 60.2%, from $49.1
million for the fiscal year ended June 30, 1999 to $78.6 million for the fiscal
year ended June 30, 2000. The increase reflects increased shipments for both
international and domestic projects and an increase in revenues generated by
NetSat Express.

     Gross Profit. Gross profit increased by $5.8 million, or 104.4%, from $5.5
million for the fiscal year ended June 30, 1999 to $11.3 million for the fiscal
year ended June 30, 2000. The increase reflects increased shipments for both
international and domestic projects and an increase in revenues generated by
NetSat Express. Gross profit as a percentage of revenues increased from 11.3%
for the fiscal year ended June 30, 1999 to 14.4% for the fiscal year ended June
30, 2000. This increase is mainly attributable to an increase in the NetSat
Express gross profit for the fiscal year ended June 30, 2000 compared to the
comparable period in the prior year.

     Network Operations. Network operations expenses increased by $1.4 million,
or 274.7%, from $0.5 million for the fiscal year ended June 30, 1999 to $1.9
million for the fiscal year ended June 30, 2000. The increase is due to the
continuing expansion of NetSat Express' network operations center and related
expenses to support the increasing service base.

                                      23
<PAGE>

     Selling and Marketing. Selling and marketing expenses increased by $1.0
million, or 18.4%, from $5.2 million for the fiscal year ended June 30, 1999 to
$6.1 million for the fiscal year ended June 30, 2000. This increase is
attributable to an increase in NetSat Express' sales and marketing efforts to
penetrate into new regions offset by a decrease by Globecomm Systems' sales and
marketing efforts.

     Research and Development. Research and development expenses decreased by
$0.5 million, or 40.8%, from $1.3 million for the fiscal year ended June 30,
1999 to $0.8 million for the fiscal year ended June 30, 2000. This decrease is
primarily due to the completion of the Explorer-Ku Multimedia Portable
Satellite Earth Station.

     General and Administrative. General and administrative expenses increased
by $4.3 million, or 71.5%, from $6.0 million for the fiscal year ended June 30,
1999 to $10.4 million for the fiscal year ended June 30, 2000. General and
administrative expenses as a percentage of revenues increased from 12.3% for
the fiscal year ended June 30, 1999 to 13.2% for the fiscal year ended June 30,
2000. The increase in general and administrative expenses for the fiscal year
ended June 30, 2000 primarily resulted from an increase in NetSat Express'
personnel, including expenses related to developing its management team and
depreciation expense related to capital leases entered into during fiscal 2000
for satellite space segment transponders.

     Terminated Acquisition. Terminated acquisition costs of $1.0 million for
the fiscal year ended June 30, 1999 relate to legal, accounting and other
expenses associated with the termination of a proposed acquisition of a mobile
satellite communications business during the first quarter ended September 30,
1998, due to the determination that the acquisition was not in the best
interest of our stockholders.

     Asset Impairment Charge. The asset impairment charge of $0.7 million for
the fiscal year ended June 30, 1999, related to two investments that were
written-down in the fiscal fourth quarter ended June 30, 1999. Our management
evaluated these investments and believed it would be appropriate to write-down
these investments to zero.

     Interest Income. Interest income increased by $0.7 million, or 76.2%, from
$1.0 million for the fiscal year ended June 30, 1999 to $1.7 million for the
fiscal year ended June 30, 2000. This increase was primarily due to the
increase of cash and cash equivalents during the fourth quarter ended June 30,
2000 as a result of the investment of the net proceeds from our secondary
common stock offering plus the investment of the net proceeds of NetSat
Express' private offerings in fiscal 2000.

     Interest Expense. Interest expense was minimal for the fiscal year ended
June 30, 1999 and $2.5 million for the fiscal year ended June 30, 2000. This
increase relates to NetSat Express' capital lease obligations entered into
during fiscal year 2000 for satellite space segment transponders.

     Gain on Sale of Consolidated Subsidiary's Common Stock. The gain on sale
of consolidated subsidiary's common stock of approximately $2.4 million for the
fiscal year ended June 30, 2000 relates to our sale of 1,400,000 shares of
common stock of NetSat Express at $2.50 per share during the second quarter
ended December 31, 1999.

     NetSat Express. Our consolidated subsidiary, NetSat Express, experienced
an increase in revenues of $6.3 million, or 237.7%, from $2.7 million for the
fiscal year ended June 30, 1999 to $9.0 million for the fiscal year ended June
30, 2000. The increase resulted from additional service and hardware revenues
derived from new and existing Internet access service customers. The loss from
operations associated with NetSat Express increased by $7.5 million, or 357.1%,
from $2.1 million for the fiscal year ended June 30, 1999 to $9.6 million for
the fiscal year ended June 30, 2000. The increase was primarily associated with
an increase general and administrative expenses due to an increase in
personnel, including management, and depreciation expense related to capital
leases entered into during fiscal 2000 for satellite space segment
transponders, an increase in network operation expenses due to continuing
expansion of NetSat Express'



                                      24
<PAGE>

network operations center and related expenses to support the increasing
service base and selling and marketing efforts to penetrate into new regions.

QUARTERLY RESULTS

     The following tables set forth unaudited financial information for each of
the eight fiscal quarters in the period ended June 30, 2001. 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.

                                      25
<PAGE>
<TABLE>
<CAPTION>
                                                                      THREE MONTHS ENDED
                                ---------------------------------------------------------------------------------------------------
                                 SEPT. 30,    DEC. 31,      MAR. 31,    JUNE 30,   SEPT. 30,   DEC. 31,   MAR. 31,   JUNE 30,
                                    1999        1999          2000        2000       2000        2000       2001       2001
                                    ----        ----          ----        ----       ----        ----       ----       ----
                                                                               (IN THOUSANDS)
<S>                              <C>         <C>          <C>         <C>         <C>         <C>         <C>       <C>
 CONSOLIDATED STATEMENT OF
    OPERATIONS DATA:
 Revenues......................  $ 19,425      $ 17,373    $  18,570   $  23,203   $ 26,444   $  26,824   $ 24,249   $  25,397
 Costs of revenues.............    16,917        14,968       16,104      19,256     21,330      20,664     19,019      22,627
                                ----------    ----------  -----------  ----------  ---------   ---------  ---------  ----------
 Gross profit..................     2,508         2,405        2,466       3,947      5,114       6,160      5,230       2,770
 Operating expenses:
    Network operations.........       276           442          550         658        756       1,381      1,821       1,224
    Selling and marketing......     1,045         1,381        1,587       2,126      2,096       1,944      1,680       1,515
    Research and development...       130           225          193         236        210         157        258         225
    General and administrative.     1,984         2,130        2,808       3,439      4,494       4,537      3,408       2,129
    Asset impairment charge....         -             -            -           -          -           -          -       2,857
    Restructuring charge.......         -             -            -           -          -           -          -       1,950
                                ----------    ----------  -----------  ----------  ---------   ---------  ---------  ----------
 Total operating expenses......     3,435         4,178        5,138       6,459      7,556       8,019      7,167       9,900
                                ----------    ----------  -----------  ----------  ---------   ---------  ---------  ----------
 Loss from operations..........      (927)       (1,773)      (2,672)     (2,512)    (2,442)     (1,859)    (1,937)     (7,130)
 Other income (expense):
    Interest income............       170           277          282         998        978         868        775         573
    Interest expense...........       (58)         (258)        (769)     (1,437)    (1,951)     (2,077)    (2,306)       (245)
    Gain on sale of
      consolidated subsidiary's
      common stock..............        -         2,353            -           -          -           -          -           -
    Gain on sale of investment..        -             -            -           -          -         304          -           -
                                ----------    ----------  -----------  ----------  ---------   ---------   --------  ----------
 (Loss) income before income
   taxes and minority                (815)          599       (3,159)     (2,951)    (3,415)     (2,764)    (3,468)     (6,802)
   interests...................
 Provision for income taxes....         -             -            -           -       (415)       (580)      (118)       (487)
                                ----------    ----------  -----------  ----------  ---------   ---------   --------  -----------
 (Loss) income before
   minority interests..........      (815)          599       (3,159)     (2,951)    (3,830)     (3,344)    (3,586)     (7,289)
 Minority interests in
   operations of consolidated
   subsidiary..................        76           538        1,075       1,056         37        (555)      (132)          -
                               -----------   -----------  -----------  ----------  ---------   ---------   --------   ---------
 Net (loss) income.............      (739)    $   1,137   $   (2,084)  $  (1,895)  $ (3,793)   $ (3,899)   $(3,718)   $  (7,289)
                                ==========   ===========  ===========  ==========  =========   =========   ========   ==========
PERCENTAGE OF TOTAL REVENUES:
Revenues.......................      100.0 %      100.0 %      100.0 %     100.0 %    100.0 %     100.0 %    100.0 %      100.0 %
Costs of revenues..............       87.1         86.2         86.7        83.0       80.7        77.0       78.4         89.1
                                -----------   ----------  -----------  ---------- ----------   ---------   --------   ----------
Gross profit...................       12.9         13.8         13.3        17.0       19.3        23.0       21.6         10.9
Operating expenses:
   Network operations..........        1.4          2.5          3.0         2.8        2.8         5.1        7.5          4.8
   Selling and marketing.......        5.4          7.9          8.6         9.2        7.9         7.2        6.9          6.0
   Research and development....        0.7          1.3          1.0         1.0        0.8         0.6        1.1          0.9
   General and administrative..       10.2         12.3         15.1        14.8       17.0        17.0       14.1          8.4
   Asset impairment charge.....          -            -            -           -          -           -          -         11.2
   Restructuring charge........          -            -            -           -          -           -          -          7.7
                                -----------  -----------  -----------  ---------- ----------   ---------   --------   ----------
 Total operating expenses......       17.7         24.0         27.7        27.8       28.5        29.9       29.6         39.0
                                -----------  -----------  -----------  ---------- ----------   ---------   --------   ----------
Loss from operations...........       (4.8)       (10.2)       (14.4)      (10.8)      (9.2)       (6.9)      (8.0)       (28.1)
 Other income (expense):
  Interest income..............        0.9          1.6          1.5         4.3        3.7         3.2        3.2          2.3
  Interest expense.............       (0.3)        (1.5)        (4.1)       (6.2)      (7.4)       (7.7)      (9.5)        (1.0)
  Gain on sale of
    consolidated subsidiary's
    common stock...............          -         13.5            -           -          -           -          -            -
  Gain on sale of investment...          -            -            -           -          -         1.1          -            -
                                -----------  -----------  -----------  ---------- ----------   ---------   --------   ----------
(Loss) income before income
  taxes and minority interests.       (4.2)         3.4        (17.0)      (12.7)     (12.9)      (10.3)     (14.3)       (26.8)
Provision for income taxes.....          -            -            -           -       (1.5)       (2.2)      (0.5)        (1.9)
                                -----------  -----------  -----------  ---------- ----------   ---------   ---------  ----------
(Loss) income before
  minority interests...........       (4.2)         3.4        (17.0)      (12.7)     (14.4)      (12.5)     (14.8)       (28.7)
Minority interests in
  operations of consolidated
  subsidiary...................        0.4          3.1          5.8         4.5        0.1        (2.1)      (0.5)           -
                                -----------  -----------  -----------  ---------- ----------   ---------   ---------  ----------
 Net (loss) income.............       (3.8) %       6.5 %      (11.2)%      (8.2)%    (14.3)%     (14.6)%    (15.3)%      (28.7)%
                                ===========  ===========  ===========  ========== ==========   =========   =========  ==========
</TABLE>
                                      26
<PAGE>

     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 28.

LIQUIDITY AND CAPITAL RESOURCES

     At June 30, 2001, we had working capital of $60.6 million, including cash
and cash equivalents of $45.0 million, restricted cash of $0.6 million, net
accounts receivable of $25.3 million, inventories of $15.3 million, prepaid
expenses and other current assets of $0.8 million, offset by $15.3 million in
accounts payable, $5.8 million in deferred revenue and $5.3 million in accrued
expenses and other current liabilities.

     Net cash used in operating activities during the fiscal year ended June
30, 2001 was $12.1 million, which primarily relates to the net loss of $18.7
million, an increase in accounts receivable of $3.3 million due to the timing
of collections on certain contract billings, an increase in inventories of $2.0
million, a decrease in accounts payable of $1.2 million relating to the timing
of vendor payments, offset by depreciation and amortization expense of $7.2
million primarily related to the depreciation on capital leases for satellite
space segment transponders, a one-time asset impairment charge of $2.9 million
and a decrease in net deferred tax assets of $1.9 million.

     Net cash used in investing activities during the fiscal year ended June
30, 2001 was $7.2 million. During the fiscal year ended June 30, 2001, we used
cash of $5.4 million to purchase satellite earth station equipment and fixed
assets primarily related to the build out of the NetSat Express Network
Operations Center. Additionally, $1.8 million was used to purchase the minority
interest in NetSat Express.

     Net cash used in financing activities during the fiscal year ended June
30, 2001 was $1.0 million. During the fiscal year ended June 30, 2001, we made
principal payments under capital leases of $1.7 million, offset by $0.7 million
in cash proceeds received from the exercise of stock options and the sale of
common stock in connection with the employee stock purchase plan.

     In December 2000, we entered into a new $5.0 million credit facility
consisting of (1) a $2.0 million secured domestic line of credit and (2) a $3.0
million secured export-import guaranteed line of credit. This new credit
facility has substantially the same terms as the previous facility, which
expired in December 2000. Each line of credit bears interest at the prime rate
(6.75% at June 30, 2001) plus 0.50% per annum, and is collateralized by a first
security interest on all our assets. The credit facility contains certain
financial covenants, which the Company is in compliance with at June 30, 2001.
As of June 30, 2001, no amounts were outstanding under this credit facility.

     We also lease satellite space segment services and other equipment under
various operating lease agreements, which expire in various years through 2014.
Future minimum lease payments due on these leases through the fiscal year
ending June 30, 2002 are approximately $21.2 million.

     We expect that cash and working capital requirements for our operating
activities will continue to increase as we expand our operations. Management
anticipates that we will experience negative cash flows due to continued
operating losses by NetSat Express.

     Our future capital requirements will depend upon many factors, including
the success of our marketing efforts in the ground segment systems, networks,
and communications services business, the nature and timing of customer orders,
the extent to which we are able to locate additional strategic suppliers in
whose technology we wish to invest, the extent to which we must conduct
research and development efforts internally and potential acquisitions of
complementary businesses, products or technologies. Based on current plans,
management believes that existing capital resources will be sufficient to meet
working capital requirements through June 30, 2002. However, we cannot assure
you that there will be no change that would consume available resources
significantly before that time. For example, recent terrorist attacks on



                                      27
<PAGE>

the United States, as well as future events occurring in response to or in
connection with them, 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 Sates and internationally may impact our results of operations.
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, the extent and timing of hiring additional personnel
and our research and development activities and operating activities of NetSat
Express. We cannot assure you that additional financing will be available to us
on acceptable terms, or at all.

RECENT ACCOUNTING PRONOUNCEMENTS

     In June 2001, the Financial Accounting Standards Board issued Statements
of Financial Accounting Standards No. 141, Business Combinations, and No. 142,
Goodwill and Other Intangible Assets, effective for fiscal years beginning
after December 15, 2001. Under the new rules, goodwill and intangible assets
deemed to have indefinite lives will no longer be amortized but will be subject
to annual impairment tests in accordance with the Statements. Other intangible
assets will continue to be amortized over their useful lives.

     We will early adopt the new rules on accounting for goodwill and other
intangible assets beginning in the first quarter of fiscal 2002. Application of
the nonamortization provisions of the Statement is expected to result in a
decrease in net loss of approximately $860,000 ($.07 per diluted share) per
year. During fiscal 2002, we will perform the first of the required impairment
tests of goodwill. Management has not yet determined what the effect of these
tests will have on our earnings and financial position, however management does
not believe the first of the required impairment tests will result in a
write-down of the recorded goodwill balances.

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 $18.7 million during the fiscal year ended June
30, 2001, $3.6 million during the fiscal year ended June 30, 2000 and $8.2
million during the fiscal year ended June 30, 1999. Our net losses include net
losses of $16.4 million during the fiscal year ended June 30, 2001, $7.1
million during the fiscal year ended June 30, 2000 and $2.1 million during the
fiscal year ended June 30, 1999 for NetSat Express. As of June 30, 2001, our
accumulated deficit was approximately $37.0 million. We anticipate that we will
continue to incur net losses. Our ability to achieve and maintain profitability
will depend upon our ability to generate significant revenues through new
customer contracts and the expansion of our existing products and services,
including our communications services. We cannot assure you that we will be
able to obtain new 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.



                                      28
<PAGE>

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
revenue from the sale of satellite ground segment systems and networks. If the
long-term growth in demand for communications networks does not occur as we
expect, the demand for our satellite ground segment systems and networks may
decline or grow more slowly than we expect. As a result, we may not be able to
grow our business and our revenue and profitability may decline from current
levels. 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, general economic conditions have recently deteriorated and
affected the overall rate of capital spending by our customers. Also, many
companies are finding it increasingly difficult to raise capital to finish
building their communications networks and therefore are placing fewer orders
with our customers. We believe that the current economic slowdown may result in
a softening of demand from our customers. We believe that this slowdown is
generally the result of slower than forecasted growth in a number of key
segments, including communications infrastructure equipment, resulting from a
reduction in the capital spending of service providers. We cannot predict the
extent to which this softening of demand will continue. Further, increased
competition among satellite ground segment systems and networks manufacturers
may lead to overcapacity and falling prices.

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. We
presently conduct our international sales in the following countries: Africa,
the Asia-Pacific Region, Australia, Central and South America, Eastern and
Central Europe and the Middle East. There are some risks inherent in conducting
our business internationally, including:

o    political and economic instability in international markets, as well as a
     result of the terrorist attacks in the United States on September 11, 2001,
     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;

o    decreases in value of foreign currency relative to the U.S. dollar;

o    relying on local subcontractors for installation of our products and
     services;

o    difficulties in staffing and managing foreign operations;

                                      29
<PAGE>

o    potentially adverse taxes;

o    complex foreign laws and treaties; and

o    difficulties in collecting accounts receivable.

     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 WE ARE NOT SUCCESSFUL IN SELLING OUR COMMUNICATIONS SERVICES TO OUR CUSTOMERS
FOR WHOM WE HAVE HISTORICALLY PROVIDED SATELLITE GROUND SEGMENT SYSTEMS AND
NETWORKS, OUR RESULTS OF OPERATIONS WILL BE HARMED.

     We have historically provided our customers with satellite ground segment
systems and networks as a product on a project basis. We intend on marketing to
our customers our communications services. These services not only provide the
implementation of the satellite ground segment systems and networks but also
provides the ongoing operation and maintenance of these systems and networks.
If we are not successful in selling these communications services to our
existing customers it will harm our results of operations.

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

     NetSat Express' future revenues and results of operations are dependent on
its execution of its business strategy and the development of the market for
its current and future services. In particular, if NetSat Express does not
substantially utilize its transponder space, our results of operations, and our
gross profit margins in particular, will be harmed. We cannot assure you that
all of the transponder space will be substantially utilized.

CURRENCY DEVALUATIONS IN THE FOREIGN MARKETS IN WHICH WE OPERATE COULD DECREASE
DEMAND FOR OUR PRODUCTS AND SERVICES.

     We denominate our foreign sales in U.S. dollars. Consequently, decreases
in the value of local currencies relative to the U.S. dollar in the markets in
which we operate, adversely affect the demand for our products and services by
increasing the price of our products and services in the currencies of the
countries in which they are sold. The difficult economic conditions in Russia
and other international markets and the resulting foreign currency devaluations
have led to a decrease in demand for our products and services and the decrease
in bookings received by us from these and other foreign regions has adversely
effected our results of operations for the fiscal year ended June 30, 2001. We
expect that these negative trends will continue to adversely impact our results
of operations.

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:



                                      30
<PAGE>

o    general political and economic conditions in the United States and abroad
     as a result of the terrorist attacks on September 11, 2001;

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

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

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

o    the cost of providing our products and services;

o    the introduction of new and improved products and services by us or our
     competitors;

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
     Russia and other international markets which have, 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 the
expectations of public market analysts and investors, 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 vertically integrated satellite systems
providers like Nippon Electric Corporation, systems integrators like IDB
Systems, a division of MCI WorldCom Inc. and equipment manufacturers who also
provide integrated systems like Andrew Corporation and Vertex-RSI.

     In the communications services and Internet access services markets, we
compete with other satellite communication companies who provide similar
services, like Loral CyberStar, Inc. and PanAmSat Corporation and Verestar, as
well as other Internet services providers. In addition, we may compete with
other communications service providers like Teleglobe, Inc. and MCI WorldCom
Inc. 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 to three years. These
competitors have the financial resources to withstand substantial price


                                      31
<PAGE>

competition and may be in a better position to endure difficult economic
conditions in Russia and other 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 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 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. 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, 2002. 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. 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, hiring of additional personnel 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.

WE RELY ON OUR RELATIONSHIPS WITH RESELLERS IN DEVELOPING COUNTRIES WITH
EMERGING MARKETS FOR SALES OF OUR PRODUCTS AND SERVICES AND THE LOSS OR FAILURE
OF ANY OF THESE RELATIONSHIPS MAY HARM OUR ABILITY TO MARKET AND SELL OUR
PRODUCTS AND SERVICES.

     We intend to provide our products and services and NetSat Express'
services almost entirely in developing countries where we have little or no
market experience. We intend to rely on resellers in those markets to provide
their expertise and knowledge of the local regulatory environment in order to
make access to customers in emerging markets easier. If we are unable to
maintain these relationships, or develop new ones in other emerging markets,
our ability to enter into and compete successfully in developing countries
would be adversely affected.




                                      32
<PAGE>

A LIMITED NUMBER OF CUSTOMERS ACCOUNT FOR A HIGH PERCENTAGE OF OUR REVENUE, AND
THE LOSS OF A KEY CUSTOMER WOULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS,
BUSINESS AND FINANCIAL CONDITION.

     We rely on a small number of customers for a large portion of our
revenues and expect that a significant portion of our revenues will continue to
be derived from a limited number of customers. We anticipate that our operating
results in any given period will continue to depend to a significant extent upon
revenues from large contracts with a small number of customers. As a result of
this concentration of our customer base, a loss of or decrease in business from
one or more of these customers would materially adversely affect our results of
operations and financial condition.

OUR INABILITY TO EFFECTIVELY MANAGE OUR GROWTH AND EXPANSION COULD SERIOUSLY
HARM OUR ABILITY TO EFFECTIVELY RUN OUR BUSINESS.

     Since our inception, we have continued to increase the scope of our
operations. This growth has placed, and our anticipated growth will continue to
place, a significant strain on our personnel, management, financial and other
resources. Any failure to manage our growth effectively could seriously harm our
ability to respond to customers, monitor the quality of our products and
services and maintain the overall efficiency of our operations. In order to
continue to pursue the opportunities presented by our satellite-based
communications services, we plan to continue to hire key officers and other
employees and to increase our operating expenses by broadening our customer
support capabilities, expanding our sales and marketing operations and improving
our operating and financial systems. If we fail to manage any future growth in
an efficient manner, and at a pace consistent with our business, our results of
operations, financial condition and business will be harmed.

WE ANTICIPATE SIGNIFICANT REVENUES FROM FIVE CONTRACTS AND A MODIFICATION OR
TERMINATION OF ALL OR ANY OF THESE CONTRACTS WOULD HAVE A MATERIAL ADVERSE
EFFECT ON OUR RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

     We have agreements with five customers to provide equipment and
services, which we expect to generate substantial revenues. If any of these
customers are unable to implement their business plans, the market for their
services declines, or all or any of the customers modifies or terminates its
agreement with us, our results of operations and financial condition would be
harmed.

WE ARE PAID A FIXED PRICE IN MOST OF OUR CUSTOMER CONTRACTS, AND ANY VARIATION
BETWEEN THE FIXED PRICE AND THE ACTUAL COST OF PERFORMANCE MAY HARM OUR
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

     A majority of our customer contracts are on a fixed-price basis. The
profitability of these contracts is subject to inherent uncertainties in the
cost of performance, including costs related to unforeseen obstacles and
unexpected problems encountered in engineering, design and testing of our
products and services. Because a significant portion of our revenues is
dependent upon a small number of customers, if the fixed price is significantly
less than the actual cost of performance on any one contract, our results of
operations and financial condition could be adversely affected.

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:



                                      33
<PAGE>

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 value-added 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.

WE DEPEND UPON CERTAIN KEY PERSONNEL AND MAY NOT BE ABLE TO RETAIN THESE
EMPLOYEES OR RECRUIT ADDITIONAL QUALIFIED PERSONNEL, WHICH WOULD HARM OUR
BUSINESS.

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

      Our future success depends upon our ability to attract, retain and
motivate highly skilled employees. Because the competition for qualified
employees among companies in the satellite communications industry and the
networking industry is intense, we may not be successful in recruiting or
retaining qualified personnel, which would harm our business.

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 two patents in the United States, for
remote access to the Internet using satellites, and for satellite communication
with automatic frequency control, and have two patent applications pending in
the United States. 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 any 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 Express 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 intend to 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.



                                      34
<PAGE>

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.

THROUGH THEIR OWNERSHIP, OUR OFFICERS AND DIRECTORS AND THEIR AFFILIATES MAY BE
ABLE TO EXERT SUBSTANTIAL INFLUENCE OVER OUR MANAGEMENT.

      As of September 25, 2001, our officers and directors, and their
affiliates beneficially own approximately 1.8 million shares, constituting
approximately 13.4% of our outstanding common stock. These stockholders, acting
together, may be able to exert significant influence over the election of
directors and other corporate actions requiring stockholder approval.

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.

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
get 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.



                                      35
<PAGE>

WE MAY BE UNABLE TO LEASE TRANSPONDER SPACE ON SATELLITES, WHICH COULD LIMIT OUR
ABILITY TO PROVIDE OUR SERVICES TO OUR CUSTOMERS.

     We and NetSat Express lease transponder space on satellites in order to
provide communications and Internet services to our customers and the customers
of NetSat Express. The supply of transponder space serving a geographic region
on earth is limited by the number of satellites that are in orbit above that
geographic region. If companies that own and deploy satellites in orbit
underestimate the demand for transponder space in a given geographic area or
they are simply unable to build and launch enough satellites to keep up with
increasing demand, the price for leasing transponder space could rise,
increasing our cost of operations or we simply may not be able to lease enough
transponder space where needed to meet the demands of our customers. We
currently anticipate that the rapid growth in the demand for satellite-based
communications worldwide could lead to a short-term shortage of transponder
space.

WE RELY ON NETSAT EXPRESS, OUR WHOLLY-OWNED SUBSIDIARY, FOR OUR MAIN SUPPLY OF
SPACE SEGMENT ON SATELLITES. IF ITS BUSINESS FAILS OR WE ARE OTHERWISE UNABLE TO
CONTINUE TO RELY ON NETSAT EXPRESS FOR THIS SUPPLY, OUR BUSINESS MAY BE HARMED.

     We currently depend on NetSat Express for a majority of our transponder
space on satellites. We do not have a long-term agreement in place with NetSat
Express, as most of our needs are filled on a purchase order basis. If NetSat
Express is unable to develop its business or if we are unable to continue to
rely on their supply for space segment, then we will have to find alternative
suppliers. If we are unable to find another supplier of transponder space or if
we are unable to find one on terms favorable to us, then our business may be
harmed.

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.

OUR STOCK PRICE IS HIGHLY VOLATILE.

     Our stock price has fluctuated substantially since our initial public
offering, which was completed in August 1997. The market price for our common
stock, like that of the securities of many telecommunications and high
technology industry companies, is likely to remain volatile based on many
factors, including the following:

o    quarterly variations in operating results;

o    announcements of new technology, products or services by us or any of our
     competitors;

o    acceptance of satellite-based communication services and Internet access
     services in developing countries with emerging markets;



                                      36
<PAGE>

o    changes in financial estimates or recommendations by security analysts; or

o    general market conditions, including, but not limited to, results of the
     terrorist attacks on September 11, 2001.

     In the past, following periods of volatility in the market price of a
particular company's securities, securities class action litigation has often
been brought against that company. We may become involved in this type of
litigation in the future. Litigation of this type is often extremely expensive
and diverts management's attention and resources, which could significantly harm
our business.

A THIRD PARTY COULD BE PREVENTED FROM ACQUIRING YOUR SHARES OF 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 you and our other
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 Communications Commission,
or FCC licensed earth stations in Hauppauge, New York, subject to the
Communications Act of 1934, as amended (the Act), and the rules and regulations
of FCC. Pursuant to the 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. 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 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.

FOREIGN OWNERSHIP

     We may, in the future, be required to seek FCC approval for foreign
ownership if we operate as a common carrier and ownership of our stock exceeds
the specified criteria. Failure to comply with these policies may 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


                                      37
<PAGE>

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, which 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 including 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 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 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 U.S. 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.

                                      38
<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 utilize from time
to time foreign currency forward contracts to hedge our exposure on firm
commitments denominated in foreign currency. During the years ended June 30,
1999, 2000 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, and secondly, our fixed long-term capital lease
agreement. 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 14(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


                                    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 "Compliance with Reporting
Requirements" 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.



                                      39
<PAGE>

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.

                                    PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(A)  (1)  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


          Report of Independent Auditors............................. F-1
          Consolidated Balance Sheets as of June 30, 2000 and 2001... F-2
          Consolidated Statements of Operations for the years
               ended June 30, 1999, 2000 and 2001.................... F-3
          Consolidated Statements of Changes in Stockholders' Equity
               for the years ended June 30, 1999, 2000 and 2001...... F-4
          Consolidated Statements of Cash Flows for the years
               ended June 30, 1999, 2000 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.

     (3)  LISTING OF EXHIBITS

Exhibit No.
-----------

3.1      Amended and Restated Certificate of Incorporation (incorporated by
         reference to Exhibit 3.1 of the Company'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 Company'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).

                                      40
<PAGE>

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 Company'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 Company
         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
         Company'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 Company'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 Company'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 Company'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 (filed herewith).

                                      41
<PAGE>

21       Subsidiaries of the Registrant (filed herewith).

23       Consent of Independent Auditors (filed herewith).

* Confidential treatment granted for portions of this agreement.

(B)      REPORTS ON FORM 8-K

         None

(C)      EXHIBITS

         The response to this portion of Item 14 is submitted as a separate
section of this report.

(C)      FINANCIAL STATEMENT SCHEDULES

         The response to this portion of Item 14 is submitted as a separate
section of this report.


                                      42
<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.

<TABLE>
<S>                                                                                          <C>
By:  /s/ DAVID E. HERSHBERG                                                                  Date: 9/28/01
     ----------------------
David E. Hershberg,
Chairman of the Board and
Chief Executive Officer
</TABLE>

         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.

<TABLE>
<CAPTION>
                 SIGNATURE                                       TITLE                              DATE
                 ---------                                       -----                              ----
<S>             <C>                                 <C>                                       <C>
 /s/             DAVID E. HERSHBERG                 Chairman of the Board and                      9/28/01
---------------------------------------------       Chief Executive Officer
                 David E. Hershberg                 (Principal Executive Officer)


 /s/              ANDREW C. MELFI                   Vice President and                             9/28/01
---------------------------------------------       Chief Financial Officer
                  Andrew C. Melfi                   (Principal Financial and Accounting
                                                    Officer)


 /s/             KENNETH A. MILLER                  President and Director                         9/28/01
---------------------------------------------
                 Kenneth A. Miller


 /s/             DONALD G. WOODRING                 Vice President and Director                    9/28/01
---------------------------------------------
                 Donald G. Woodring


 /s/            STEPHEN C. YABLONSKI                Vice President, General Manager and            9/28/01
---------------------------------------------       Director
                Stephen C. Yablonski


 /s/               BENJAMIN DUHOV                   Director                                       9/28/01
---------------------------------------------
                   Benjamin Duhov


 /s/                C.J. WAYLAN                     Director                                       9/28/01
---------------------------------------------
                    C.J. Waylan


 /s/              A. ROBERT TOWBIN                  Director                                       9/28/01
---------------------------------------------
                  A. Robert Towbin


 /s/             RICHARD E. CARUSO                  Director                                       9/28/01
---------------------------------------------
                 Richard E. Caruso
</TABLE>


                                      43
<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. as of June 30, 2000 and 2001 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, 2001. Our audits
also included the financial statement schedule listed in the Index at Item
14(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, 2000 and 2001, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended June 30, 2001, 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.

                                     /S/ ERNST & YOUNG LLP

Melville, New York
August 10, 2001


                                      F-1

<PAGE>


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


<TABLE>
<CAPTION>
                                                              JUNE 30,            JUNE 30,
                                                                2000               2001
                                                                ----               ----
<S>                                                      <C>                <C>
 ASSETS
Current assets:
  Cash and cash equivalents............................. $         65,289      $        45,038
  Restricted cash.......................................              421                  588
  Accounts receivable, net..............................           22,722               25,337
  Inventories...........................................           13,335               15,285
  Prepaid expenses and other current assets.............            1,571                  803
  Deferred income taxes.................................            1,942                    -
                                                         -------------------   -----------------
Total current assets....................................          105,280               87,051

Fixed assets, net.......................................          112,784               30,456
Investments.............................................            2,961                    -
Other assets, net of accumulated amortization
     of $215 in 2000 and $458 in 2001...................            1,729                7,492
                                                         -------------------   -----------------
Total assets............................................ $        222,754      $       124,999
                                                         ===================   =================

 LIABILITIES AND STOCKHOLDERS' EQUITY
 Current liabilities:
   Accounts payable..................................... $         16,494      $        15,317
   Deferred revenue.....................................            6,287                5,825
   Accrued payroll and related fringe benefits..........              680                  931
   Accrued interest.....................................            1,566                    -
   Other accrued expenses...............................            3,812                3,609
   Deferred liability...................................              194                  300
   Capital lease obligations............................            1,716                  430
                                                          -------------------   -----------------
 Total current liabilities..............................           30,749               26,412

 Deferred liability, less current portion...............            1,853                3,341
 Capital lease obligations, less current portion........           94,502               10,105
 Minority interests in consolidated subsidiary..........              126                    -
 Series A Participating Preferred stock of consolidated
   subsidiary, at redemption value......................            5,000                    -

 Commitments and contingencies
 Stockholders' equity:
   Series A Junior Participating, shares authorized,
     issued and outstanding: none in 2000 and 2001......                -                     -
   Common stock, $.001 par value, 22,000,000
     shares authorized, shares issued:
     12,024,256 in 2000 and 12,865,591 in 2001 .........               12                    13
   Additional paid-in capital...........................          110,105               123,276
   Accumulated deficit..................................          (18,298)              (36,997)
   Accumulated other comprehensive income (loss)........               17                   (57)
   Deferred compensation................................             (218)                    -
   Treasury stock, at cost, 147,745 shares
     in 2000 and 2001 ..................................           (1,094)               (1,094)
                                                          -------------------   -----------------
 Total stockholders' equity.............................           90,524                85,141
                                                          -------------------   -----------------
 Total liabilities and stockholders' equity.............  $       222,754       $       124,999
                                                          ===================   =================
</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,
                                                                -----------------------------------------------------------------
                                                                       1999                 2000                  2001
                                                                       ----                 ----                  ----
<S>                                                             <C>                <C>                      <C>
Revenues.....................................................   $    49,058          $    78,571            $  102,914
Costs of revenues............................................        43,516               67,245                83,640
                                                                ----------------     ---------------        --------------
Gross profit.................................................         5,542               11,326                19,274
                                                                ----------------     ---------------        --------------

Operating expenses:
      Network operations......................................          514                1,926                 5,182
      Selling and marketing...................................        5,183                6,139                 7,235
      Research and development................................        1,325                  784                   850
      General and administrative..............................        6,040               10,361                14,568
      Terminated acquisition costs............................          972                    -                     -
      Asset impairment charge.................................          679                    -                 2,857
      Restructuring charge....................................            -                    -                 1,950
                                                                ----------------     ---------------        --------------
Total operating expenses......................................       14,713               19,210                32,642
                                                                ----------------     ---------------        --------------
Loss from operations..........................................       (9,171)              (7,884)              (13,368)

Other income (expense):
      Interest income.........................................          980                1,727                 3,194
      Interest expense........................................           (1)              (2,522)               (6,579)
      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..................       (8,192)              (6,326)              (16,449)
Provision for income taxes....................................            -                    -                (1,600)
                                                                ----------------     ---------------        --------------
Loss before minority interests in operations of
   consolidated subsidiary....................................       (8,192)              (6,326)              (18,049)
Minority interests in operations of
   consolidated subsidiary....................................            -                2,745                  (650)
                                                                ----------------     ---------------        --------------
Net loss......................................................   $   (8,192)         $    (3,581)           $  (18,699)
                                                                ================     ===============        ==============

Basic and diluted net loss per common share...................   $    (0.90)         $     (0.36)           $    (1.55)
                                                                ================     ===============        ==============
Weighted-average shares used in the calculation of basic
   and diluted net loss per common share......................        9,109               10,016                12,060
                                                                ================     ===============        ==============
</TABLE>





                            See accompanying notes.

                                      F-3


<PAGE>
                             GLOBECOMM SYSTEMS INC.
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                    YEARS ENDED JUNE 30, 1999, 2000 AND 2001
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                                                                     ACCUMULATED
                                                            COMMON STOCK           ADDITIONAL                          OTHER
                                                         --------------------       PAID-IN        ACCUMULATED     COMPREHENSIVE
                                                         SHARES       AMOUNT        CAPITAL          DEFICIT        INCOME (LOSS)
                                                         ------       ------        -------          -------        -------------
<S>                                                      <C>        <C>           <C>              <C>                    <C>
Balance at June 30, 1998 .............................    9,166      $     9       $  50,530        $  (6,525)        $        -
Issuance of common stock in exchange for minority
     shares in subsidiary ............................       43            -             250                -                  -
Issuance of common stock in connection  with
     acquisition .....................................       50            -             406                -                  -
Proceeds from exercise of stock options  .............       39            -             148                -                  -
Exercise of stock options in exchange for shares of
     common stock ....................................       49            -             258                -                  -
Issuance of common stock in connection with
     employee stock purchase plan ....................       18            -              94                -                  -
Purchases of treasury stock ..........................        -            -               -                -                  -
Options granted to employees and directors ...........        -            -              75                -                  -
Grant of consolidated subsidiary's employee
     stock options ...................................        -            -             300                -                  -
Amortization of deferred compensation ................        -            -               -                -                  -
Net loss .............................................        -            -               -           (8,192)                 -
                                                         ------      -------       ---------        ---------        -----------
Balance at June 30, 1999 .............................    9,365            9          52,061          (14,717)                 -
Proceeds from secondary offering, net of
     issuance cost of $3,903 .........................    2,000            2          50,095                -                  -
Proceeds from issuance of consolidated subsidiary's
     common stock and stock options, net of
     issuing costs of  $1,002 ........................        -            -           4,012                -                  -
Minority interests resulting from issuance of
     consolidated subsidiary's common stock and
     stock options ....................................       -            -          (2,197)               -                  -
Proceeds from exercise of stock options ...............     577            1           3,569                -                  -
Tax benefit from exercise of non-qualified stock options      -            -           1,942                -                  -
Proceeds from exercise of warrants ....................       2            -              12                -                  -
Exercise of stock options in exchange for shares
     of common stock ..................................      54            -             291                -                  -
Issuance of common stock in connection with
     employee stock purchase plan .....................      26            -             252                -                  -
Options granted to employees and directors ............       -            -              24                -                  -
Options of consolidated subsidiary's common stock
     granted to consultants. ..........................       -            -              44                -                  -
Amortization of deferred compensation .................       -            -               -                -                  -
Comprehensive loss:
     Net loss .........................................       -            -               -           (3,581)                 -
     Gain from foreign currency translation ...........       -            -               -                -                 17
Total comprehensive loss ..............................       -            -               -                -                  -
                                                         ------      -------       ---------        ---------        -----------
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)
                                                         ======      =======       =========        =========        ===========

<CAPTION>
                                                                            TREASURY STOCK            TOTAL
                                                               DEFERRED   --------------------    STOCKHOLDERS'
                                                             COMPENSATION   SHARES     AMOUNT        EQUITY
                                                             ------------   ------     ------        ------
<S>                                                          <C>            <C>       <C>          <C>
Balance at June 30, 1998 .............................       $      -           -     $       -   $   44,014
Issuance of common stock in exchange for minority
     shares in subsidiary ............................              -           -             -          250
Issuance of common stock in connection with
     acquisition .....................................              -           -             -          406
Proceeds from exercise of stock options  .............              -           -             -          148
Exercise of stock options in exchange for shares of
     common stock ....................................              -          26           (258)          -
Issuance of common stock in connection with
     employee stock purchase plan ....................              -           -             -           94
Purchases of treasury stock ..........................              -         114           (545)       (545)
Options granted to employees and directors ...........              -           -             -           75
Grant of consolidated subsidiary's employee
     stock options ...................................           (300)          -             -            -
Amortization of deferred compensation ................              7           -             -            7
Net loss .............................................              -           -             -       (8,192)
                                                             ------------   ------     --------     --------
Balance at June 30, 1999 .............................           (293)        140           (803)     36,257
Proceeds from secondary offering, net of
     issuance cost of $3,903 .........................              -           -             -       50,097
Proceeds from issuance of consolidated subsidiary's
     common stock and stock options, net of
     issuing costs of  $1,002 ........................              -           -             -        4,012
Minority interests resulting from issuance of
     consolidated subsidiary's common stock and
     stock options ....................................             -           -             -       (2,197)
Proceeds from exercise of stock options ...............             -           -             -        3,570
Tax benefit from exercise of non-qualified stock options            -           -             -        1,942
Proceeds from exercise of warrants ....................             -           -             -           12
Exercise of stock options in exchange for shares
     of common stock ..................................             -           8           (291)          -
Issuance of common stock in connection with
     employee stock purchase plan .....................             -           -             -          252
Options granted to employees and directors ............             -           -             -           24
Options of consolidated subsidiary's common stock
     granted to consultants. ..........................             -           -             -           44
Amortization of deferred compensation .................            75           -             -           75
Comprehensive loss:
     Net loss .........................................             -           -             -       (3,581)
     Gain from foreign currency translation ...........             -           -             -           17
                                                                                                    --------
Total comprehensive loss ..............................             -           -             -       (3,564)
                                                             ------------   ------     --------     --------
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
                                                             ============   ======     ========   ==========
</TABLE>

                            See accompanying notes.

                                      F-4
<PAGE>
                             GLOBECOMM SYSTEMS INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                          YEARS ENDED JUNE 30,
                                                                            ----------------------------------------------------
                                                                                1999               2000               2001
                                                                                ----               ----               ----
<S>                                                                     <C>                <C>                 <C>
OPERATING ACTIVITIES:
Net loss...............................................................  $    (8,192)       $    (3,581)       $   (18,699)
Adjustments to reconcile net loss to net cash used in operating
  activities:
    Depreciation and amortization......................................        1,267              3,347              7,229
    Stock compensation expense.........................................           82                143                  -
    Provision for doubtful accounts....................................          100                360              1,753
    Loss on disposal of fixed assets and other.........................          129                  -                280
    Asset impairment charge............................................          679                  -              2,857
    Minority interests in operations of consolidated subsidiary........            -             (2,745)               650
    Interest on capital lease obligations..............................            -                186                  -
    Gain on sale of consolidated subsidiary's common stock.............            -             (2,353)                 -
    Gain on sale of investment.........................................            -                  -               (304)
    Deferred income taxes..............................................            -             (1,942)             1,942
    Changes in operating assets and liabilities:
       Accounts receivable.............................................         (230)            (4,935)            (3,295)
       Inventories.....................................................       (6,408)            (3,273)            (1,950)
       Prepaid expenses and other current assets.......................         (572)              (364)               596
       Other assets....................................................          (74)              (727)                35
       Accounts payable................................................        5,707             (2,255)            (1,177)
       Deferred revenue................................................        1,841              1,996               (462)
       Accrued payroll and related fringe benefits.....................          227               (179)               251
       Accrued interest and other accrued expenses.....................        1,036              5,350             (1,769)
       Deferred liability..............................................            -              2,047                  -
                                                                         -----------------  -----------------  -----------------
Net cash used in operating activities..................................       (4,408)            (8,925)           (12,063)
                                                                         -----------------  -----------------  -----------------
INVESTING ACTIVITIES:
Purchases of fixed assets..............................................       (3,818)            (6,926)            (5,350)
Purchases of investments...............................................       (1,547)                 -               (100)
Proceeds from sale of investments......................................            -                  -                204
Purchases of consolidated subsidiary's common stock....................            -                  -             (1,212)
Purchase of consolidated subsidiary's preferred stock..................            -                  -               (581)
Proceeds from sale of consolidated subsidiary's common stock...........            -              3,500                  -
Restricted cash........................................................          930              3,065               (167)
                                                                         -----------------  -----------------  -----------------
Net cash used in investing activities..................................       (4,435)              (361)            (7,206)
                                                                         -----------------  -----------------  -----------------
FINANCING ACTIVITIES:
Proceeds from sale of common stock, net................................            -             50,097                  -
Proceeds from sale of consolidated subsidiary's common stock, net .....            -              3,398                  -
Proceeds from sale of consolidated subsidiary's preferred stock........            -              5,000                  -
Proceeds from exercise of stock options................................          148              3,570                358
Proceeds from exercise of consolidated subsidiary's stock options......            -                614                  -
Proceeds from exercise of warrants.....................................            -                 12                  -
Proceeds from sale of common stock in connection with employee stock
  purchase plan........................................................           94                252                328
Purchases of treasury stock............................................         (545)                 -                  -
Payment of deferred offering costs.....................................         (234)                 -                  -
Payments under capital leases..........................................          (18)              (329)            (1,668)
                                                                         -----------------  -----------------  -----------------
Net cash (used in) provided by financing activities....................         (555)            62,614               (982)
                                                                         -----------------  -----------------  -----------------
Effect of foreign currency translation on cash ........................            -                 17                  -
Net (decrease) increase  in cash and cash equivalents..................       (9,398)            53,345            (20,251)
Cash and cash equivalents at beginning of year.........................       21,342             11,944             65,289
                                                                         -----------------  -----------------  -----------------
Cash and cash equivalents at end of year...............................  $    11,944        $    65,289        $    45,038
                                                                         =================  =================  =================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest.................................................  $         1        $       769        $     8,145
                                                                         =================  =================  =================
</TABLE>
                            See accompanying notes.

                                      F-5

<PAGE>

                             GLOBECOMM SYSTEMS INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 JUNE 30, 2001


1. ORGANIZATION AND DESCRIPTION OF BUSINESS

         Globecomm Systems Inc. (the "Company") 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 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 end-to-end satellite based Internet solutions including network
connectivity, broadband connectivity to end users, Internet connectivity,
Intranet extensions, media distribution and other network services on a global
basis.

         The Company has incurred operating losses since its inception and has
an accumulated deficit at June 30, 2001 of approximately $36,997,000. Such
losses have resulted principally from 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, 2002.

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. All significant intercompany balances and transactions have been
eliminated in consolidation.

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, Revenue Recognition in Financial Statements, for its
short-term (less than twelve months in term) production-type contracts that are
sold separately as stand-alone ground segment systems. Such contracts typically
require less engineering, drafting and design efforts than other longer-term
production-type projects and usually require customer acceptance upon
completion of installation of the equipment at the customers' site.
Accordingly, the Company typically recognizes 80-90% of the contract value upon
shipment with the balance recognized upon receipt of the customers' final
acceptance. Installation is not deemed to be essential to the functionality of
the equipment since installation is mechanical in nature and does not require
significant change to the features or capability of the equipment, or require
complex software integration and interfacing. In addition, the customer or
other vendors can install the equipment; and generally the cost of installation
is approximately 10-20% of the sales value of the related equipment. Payments
received in advance by customers are deferred until shipment and are presented
as deferred revenue in the accompanying consolidated balance sheets.



                                      F-6
<PAGE>

                             GLOBECOMM SYSTEMS INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 JUNE 30, 2001
                                  (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         The Company uses the percentage-of-completion method of accounting to
recognize revenue for its long-term (in excess of twelve months in term), more
complex production-type contracts that are generally integrated into complete
ground segment networks, 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. Contract costs
generally include purchased material, direct labor, overhead and other indirect
costs. Anticipated contracted losses are recognized as they become known.

         NetSat's revenues are derived primarily from Internet access service
fees and sales of hardware and equipment. Service revenues from Internet access
are recognized ratably over the period in which services are provided. Sales of
hardware and equipment are recognized upon shipment. Payments received in
advance of providing Internet access services are deferred until the period such
services are provided and are presented as deferred revenue in the accompanying
consolidated balance sheets.

Cost of Revenues

         In addition to contract costs, cost of revenues relating to Internet
access service fees consist primarily of satellite space segment charges and
Internet connectivity fees. Cost of revenues associated with hardware and
equipment sales consist primarily of the purchase of the related products.

Network Operations

         Network operations expenses consist primarily of costs associated with
the operation of the Network Operation Center (the "NOC"), including teleport
services and maintaining a twenty-four hour a day, seven-day a week staff to
monitor the operations of the NOC.

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.

Cash Equivalents

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




                                      F-7
<PAGE>



                             GLOBECOMM SYSTEMS INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 JUNE 30, 2001
                                  (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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 assets held under capital leases is
calculated using the straight-line method over the estimated useful lives of
the assets. Amortization of satellite space segment transponders held under
capital leases is calculated based on the greater of the straight-line method
over the estimated useful life of the satellite transponders or the ratio of
total megahertz used during the period to the total megahertz available under
such leases. Amortization of leasehold improvements is calculated using the
straight-line method over the shorter of the lease term or estimated useful
life of the improvement.

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 is estimated
based on the current rates offered to the Company for obligations of similar
terms and maturities. The fair value of obligations under capital lease was not
significantly different than the carrying value at June 30, 2001.

Stock Based Compensation

         The Company accounts for stock option grants in accordance with
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").

Goodwill

         Goodwill represents excess of the purchase price over the fair value
of the net assets acquired. Amortization expense relating to goodwill is
amortized on a straight-line basis over periods ranging from five-to-ten years.
Such amounts are included in other assets in the accompanying consolidated
balance sheets. Goodwill is approximately $899,000 and $7,899,000, net of
accumulated amortization of $215,000 and $458,000, respectively, at June 30,
2000 and 2001.

Long-Lived Assets

         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. 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.



                                      F-8
<PAGE>
                             GLOBECOMM SYSTEMS INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 JUNE 30, 2001
                                  (CONTINUED)



2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recently Issued Accounting Standards

         In June 2001, the Financial Accounting Standards Board issued SFAS No.
141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets,
effective for fiscal years beginning after December 15, 2001. Under the new
rules, goodwill and intangible assets deemed to have indefinite lives will no
longer be amortized but will be subject to annual impairment tests in accordance
with the Statements. Other intangible assets will continue to be amortized over
their useful lives.

         The Company will early adopt the new rules on accounting for goodwill
and other intangible assets beginning in the first quarter of fiscal 2002.
Application of the nonamortization provisions of the Statement is expected to
result in a decrease in net loss of approximately $860,000 ($.07 per diluted
share) per year. During fiscal 2002, the Company will perform the first of the
required impairment tests of goodwill. The Company has not yet determined what
the effect of these tests will be on the earnings and financial position of the
Company, however the Company does not believe the first of the required
impairment tests will result in a write-down of the related goodwill balances.

Reclassifications

         Certain balances in the prior years have been reclassified to conform
to the current year presentation.

3. INVENTORIES

    Inventories consist of the following:

                                           JUNE 30,            JUNE 30,
                                             2000                2001
                                         -------------      --------------
                                                 (IN THOUSANDS)

Raw materials and component parts.......  $        450      $         608
Work-in-progress........................        12,885             14,677
                                         --------------     --------------
                                          $     13,335      $      15,285
                                         ==============     ==============

                                      F-9
<PAGE>

                             GLOBECOMM SYSTEMS INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 JUNE 30, 2001
                                  (CONTINUED)


4. FIXED ASSETS

        Fixed assets consist of the following:

                                               JUNE 30,            JUNE 30,
                                                 2000                2001
                                             -------------     ---------------
                                                      (IN THOUSANDS)

Land......................................   $      1,750       $       1,750
Building and improvements.................          5,510               5,914
Computer equipment........................          1,900               2,740
Machinery and equipment...................          1,761               2,414
Network Operations Center.................          3,320               5,137
Satellite earth station equipment.........          6,362               8,554
Furniture and fixtures....................            760               1,189
Leasehold improvements....................             29                  29
Satellite transponders....................         96,361              11,256
Construction-in-progress..................            507                   -
                                             -------------     ---------------
                                                  118,260              38,983

Less accumulated depreciation
     and amortization.....................          5,476               8,527
                                             -------------     ---------------
                                             $    112,784       $      30,456
                                             =============     ===============

5.   INVESTMENTS

         The Company has various investments in strategic alliance companies
that are accounted for under the cost method of accounting, as the Company does
not have the ability to exercise significant influence over such investments,
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. Similarly
in fiscal 1999, the Company's management evaluated its investments and
determined it would be appropriate to write-down certain investments to net
realizable value. As a result, the Company recorded an asset impairment charge
of approximately $679,000 and $2,857,000 during the fourth quarters of fiscal
1999 and 2001, respectively. Such amounts have been included in operating
expenses in the accompanying consolidated statements of operations.

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


6. TERMINATED ACQUISITION COSTS

         During the year ended June 30, 1999, the Company incurred certain costs
in connection with an attempt to acquire another company. During the first
quarter of fiscal 1999, the Company terminated this proposed acquisition and, as
a result, incurred costs of approximately $972,000 representing legal,

                                     F-10
<PAGE>

                             GLOBECOMM SYSTEMS INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 JUNE 30, 2001
                                  (CONTINUED)

6. TERMINATED ACQUISITION COSTS (CONTINUED)

accounting and other acquisition related costs, which have been charged to
operations for the year ended June 30, 1999.

7. COMMON STOCK

Issuance of Common Stock in Connection with Acquisition

         On May 25, 1999, the Company acquired the business of Global-Net, Inc.
("Global-Net"), a wireless local loop telephone network solutions business,
located in New York, in exchange for 50,000 shares of the Company's common stock
with a fair market value of $8.13 per share on the date of acquisition. Had this
acquisition been consummated as of July 1, 1998, the unaudited pro-forma
consolidated revenues and results of operations would not have been materially
different for the year ended June 30, 1999. The purchase price of approximately
$406,000 has been allocated to goodwill and is being amortized over five years.

Sales of Common Stock

         During March 1999, a minority shareholder in NetSat agreed to exchange
its 1,680,000 shares of convertible preferred stock (representing approximately
14%) of NetSat for 42,533 shares of the Company. The shares of the Company were
valued at $5.88 per share at the date of the agreement. Accordingly, the Company
recorded goodwill of approximately $250,000 in connection with this transaction,
which is being amortized over five-years. During May 1999, the Company exercised
its right to convert its 1,680,000 shares of NetSat convertible preferred stock
into 1,680,000 shares of common stock of NetSat.

         On April 4, 2000, the Company completed a secondary public offering of
2,000,000 shares of its common stock for an aggregate offering price of
$54,000,000. The Company incurred total expenses in the offering of
approximately $3,903,000 of which approximately $3,240,000 represented
underwriting discounts and commissions and approximately $663,000 represented
other expenses. The net proceeds to the Company after deducting the total
expenses were approximately $50,097,000.

Stock Issued to Consultants

         During November 1996, the Company issued a ten-year warrant to five
consultants for services to purchase an aggregate of 64,000 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, 2001, warrants to purchase 55,825
shares of the Company's common stock noted above are outstanding and
exercisable.

Treasury Stock

         On September 1, 1998, the Company's Board of Directors authorized the
repurchase of up to $2.0 million of the Company's outstanding common stock. The
repurchase program allows for purchases to be made intermittently, through open
market and privately negotiated transactions. Timing, price, quantity and the
manner of purchase are at the discretion of the Company's management subject to
compliance with the applicable securities laws. During the year ended June 30,
1999, the Company repurchased 114,200 shares of the Company's common stock under
the repurchase program for an aggregate purchase price of approximately
$545,000.


                                     F-11
<PAGE>
                             GLOBECOMM SYSTEMS INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 JUNE 30, 2001
                                  (CONTINUED)


7. COMMON STOCK  (CONTINUED)

         During June 1999, an employee of the Company surrendered 25,438 shares
of the Company's common stock, with a fair market value at time of surrender of
$10.13 per share, in exchange for the exercise of 49,875 stock options with
exercise prices ranging from $4.68 to $8.07. Accordingly, the Company recorded
25,438 shares in treasury stock, with a fair value of approximately $258,000,
and issued 24,437 shares of the Company's common stock to the employee.

         During March 2000, an employee of the Company surrendered 8,107 shares
of the Company's common stock, with a fair market value at time of surrender of
$35.88 per share, in exchange for the exercise of 54,338 stock options with
exercise prices ranging from $4.68 to $8.07. Accordingly, the Company recorded
8,107 shares in treasury stock, with a fair value of approximately $291,000, and
issued 46,231 shares of the Company's common stock to the employee.


8. NETSAT'S EQUITY TRANSACTIONS AND RESTRUCTURING

         On August 11, 1999, NetSat issued and sold 2,000,000 shares of its
Series A Participating Preferred Stock ("Preferred Stock") for $2.50 per share
and 2,000,000 shares of its common stock for $2.50 per share in a private
offering yielding net proceeds of approximately $6,963,000, net of offering
costs of approximately $937,000. The Company's common stock ownership percentage
in NetSat was reduced from approximately 95% to approximately 81% following the
issuance and sale of the common stock. Accordingly, the Company recorded a
credit to stockholders' equity of approximately $1,700,000 during fiscal 2000
reflecting the increase in its share of the net equity of NetSat as a result of
the common stock offering.

         During October 1999, the Company and NetSat entered into a common stock
purchase agreement with an investor to purchase 2,000,000 shares of NetSat's
common stock for $2.50 per share, of which 1,400,000 shares were purchased
directly from the Company and 600,000 shares were issued and sold directly by
NetSat, yielding net proceeds of approximately $4,935,000, net of offering costs
of $65,000. As a result, the Company recorded a gain of approximately $2,353,000
from the sale of its 1,400,000 shares of NetSat's common stock during the second
quarter of fiscal 2000. The Company's common stock ownership percentage in
NetSat was reduced from approximately 81% to approximately 69% following the
issuance and sale of the NetSat common stock. Accordingly, the Company recorded
a credit to stockholders' equity of approximately $830,000 during fiscal 2000
reflecting the increase in its share of the net equity of NetSat as a result of
the common stock offering.

         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 $1,950,000 during the fourth quarter of
fiscal year ended June 30, 2001. The restructuring is 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. The restructuring will be
completed during the first quarter of fiscal 2002. The major components of the
restructuring charge include severance payments to terminated NetSat employees
of approximately $850,000, fees incurred in connection with the termination of
certain satellite lease transponders of approximately $540,000 (charged to cost
of sales), 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

                                     F-12
<PAGE>

                             GLOBECOMM SYSTEMS INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 JUNE 30, 2001
                                  (CONTINUED)

8. NETSAT'S EQUITY TRANSACTIONS AND RESTRUCTURING (CONTINUED)

estimated book value of equipment in the amount of approximately $480,000 in
connection with NetSat's discontinuance of certain product lines. At June 30,
2001, approximately $500,000 of the restructuring charge is accrued and included
in other accrued expenses in the accompanying consolidated balance sheets.

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

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, which represents
the excess of the value of the Company's securities issued over the recorded
minority interests at the time of the transactions. Such goodwill is being
amortized over ten years.

9. 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, the Company's stockholders approved
an amendment to the 1997 Plan to increase the number of shares authorized for
issuance under the 1997 Plan by 800,000 shares.

         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


                                     F-13
<PAGE>
                             GLOBECOMM SYSTEMS INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 JUNE 30, 2001
                                  (CONTINUED)

9. STOCK OPTION AND STOCK PURCHASE PLANS (CONTINUED)

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
1999, 2000 and 2001, the Company increased the number of options authorized for
grant under the 1997 Plan pursuant to the automatic 1% provision by 181,335,
95,623 and 119,505, respectively. At June 30, 2001, the remaining options
available for grant under the 1997 Plan was 173,713.

         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 a propriety 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, 1999, 2000
and 2001, the Company issued 18,529, 25,733 and 54,905 shares of its common
stock to participating employees in connection with the 1999 Plan. At June 30,
2001, the remaining shares available for issuance under the 1999 Plan was
300,833.

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

<TABLE>
<CAPTION>
                                                                YEARS ENDED JUNE 30,
                                -------------------------------------------------------------------------------------
                                          1999                         2000                          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......    1,795        $  7.16         2,007       $   7.32        1,578         $ 10.10
Grants..........................      306           7.54           353          18.54          944            7.78
Exercised.......................      (88)          4.59          (631)          6.11          (69)           5.22
Canceled........................       (6)         10.64          (151)          9.58          (71)          11.24
                                   ------                       ------                      ------
Balance, end of year............    2,007           7.32         1,578          10.10        2,382            9.28
                                   ======        =======        ======       ========       ======         ========

Exercisable, end of year........    1,017        $  6.29           863       $   7.19        1,170         $  8.61
                                   ======        =======        ======       ========       ======         ========

Weighted-average fair value of
   options granted during the
   year.........................                 $  3.94                     $  12.38                      $  5.21
                                                 =======                     ========                      ========
</TABLE>


                                     F-14
<PAGE>

                             GLOBECOMM SYSTEMS INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 JUNE 30, 2001
                                  (CONTINUED)

9. STOCK OPTION AND STOCK PURCHASE PLANS (CONTINUED)

         As a result of stock options granted during fiscal 1995, 1996 and
1997, the Company recorded stock compensation expense of approximately $75,000
and $24,000 during the years ended June 30, 1999 and 2000, respectively, based
on the difference between the fair market value of the shares and the option
exercise prices at the dates of grant. As of June 30, 2000, there was no
additional stock compensation expense to be recorded relating to these grants.

         The following table summarizes information about stock options
outstanding at June 30, 2001 (In thousands, except per share price):

<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>
   $3.51     -     $5.06            427                 4.8        $ 4.60            392             $ 4.57
   $5.50     -     $8.07          1,097                 8.0          7.32            390               7.84
   $8.26     -    $11.75            468                 8.0         10.19            195               9.74
  $12.75     -    $18.88            174                 6.1         14.77            128              14.76
  $21.00     -    $28.00            216                 8.0         22.10             65              22.06
                                 ------                                            -----
   $3.51     -    $28.00          2,382                 7.3        $ 9.28          1,170             $ 8.61
                                 ======              ======        ======          =====             =======
</TABLE>

         The Company has reserved approximately 3,419,000 shares of its common
stock for issuance upon exercise of all available and outstanding options and
warrants at June 30, 2001.

         In connection with the acquisition of the minority interests of
NetSat, 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 share is
required by SFAS No. 123, 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 these 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, 1999, 2000 and 2001: risk-free
interest rate of 6.5%, volatility factor of the expected market price of the
Company's common stock of .91 (1999), .92 (2000), and .81 (2001), a
weighted-average expected life of the option of six-years and no dividend
yields.

         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.




                                     F-15
<PAGE>
                             GLOBECOMM SYSTEMS INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 JUNE 30, 2001
                                  (CONTINUED)

9. STOCK OPTION AND STOCK PURCHASE PLANS (CONTINUED)

         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:

                                              YEARS ENDED JUNE 30,
                                ----------------------------------------------
                                     1999             2000           2001
                                     ----             ----           ----
Pro forma net loss
     (in thousands)...........     $(9,851)         $(5,445)       $(19,749)
                                   =======          =======        ========
Basic and diluted pro-forma
   net loss per common share..     $ (1.08)         $ (0.54)       $  (1.64)
                                   =======          =======        ========


10. 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 and dilutive equivalent 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 if their
effect is anti-dilutive. Diluted net loss per share for the years ended June
30, 1999, 2000 and 2001, excludes the effect of approximately 321,000, 951,000
and 415,000 stock options, respectively, and approximately 23,000, 32,000 and
10,000 warrants in 1999, 2000 and 2001, respectively, as their effect would
have been anti-dilutive.

11. 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 20%
of their pre-tax compensation. Participant contributions up to 4% of pre-tax
compensation were fully matched by the Company during the years ended June 30,
1999, 2000, and 2001. The plan also provides for discretionary contributions by
the Company. The Company contributed approximately $317,000, $259,000 and
$539,000 to the 401(k) plan during the years ended June 30, 1999, 2000, and
2001, respectively. There were no discretionary contributions made by the
Company during the years ended June 30, 1999, 2000, and 2001.

12. INCOME TAXES

         Income taxes are provided using the liability method. Accordingly,
deferred tax assets and liabilities are recognized for future tax consequences
attributable to the difference between the carrying amount of the assets and
liabilities for financial statement and income tax purposes, as determined
under the enacted tax laws and rates that will be in effect when the
differences are expected to reverse.

                                     F-16
<PAGE>

                             GLOBECOMM SYSTEMS INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 JUNE 30, 2001
                                  (CONTINUED)



12. INCOME TAXES (CONTINUED)

The income tax provision (benefit) for the years ended June 30, 1999, 2000 and
2001 calculated under the provisions of SFAS No.109 "Accounting for Income
Taxes" are as follows:

                                               YEARS ENDED JUNE 30,
                                     ----------------------------------------
                                        1999          2000           2001
                                        ----          ----           ----
                                                (In thousands)
Current:
   Federal...........................$     -     $    1,635      $        -
   State and local...................      -            307            (342)
                                     --------    ------------    ------------
                                           -          1,942            (342)
Deferred, net of valuation allowance.      -         (1,942)          1,942
                                     --------    ------------    ------------
                                     $     -     $        -      $    1,600
                                     ========    ============    ============

         During fiscal 2001, the Company recorded $342,000 of investment tax
credits with state and local governments.

         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 will file a
consolidated income tax return.

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

                                               JUNE 30, 2000     JUNE 30, 2001
                                               -------------     -------------
                                                       (IN THOUSANDS)
Deferred tax assets:
  Net operating loss carryforwards..........  $      9,801        $    14,772
  Projects in progress......................           286                175
  Accruals and reserves.....................           582              1,659
  Write-down of investments.................           272              1,280
  Deferred revenue..........................           819                  -
  Non-cash compensation charge..............            63                  -
                                             ------------------   --------------
                                                    11,823             17,886
Valuation allowance for deferred tax assets.        (9,658)           (17,401)
                                             ------------------   --------------
                                                     2,165                485
Deferred tax liability:
  Depreciation and amortization.............          (223)              (485)
                                             ------------------   --------------
Net deferred tax assets.....................   $     1,942        $         -
                                             ==================   ==============

         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 the deferred
tax assets is dependent upon the generation of future taxable income. For the
year ended June 30, 2000, management reversed approximately $1,942,000 of the
deferred tax asset valuation allowance reporting an amount that will be
realized based on projected fiscal 2001 taxable income. During fiscal 2001, the
Company provided a full valuation allowance for the net deferred tax assets at
June 30, 2001.

                                     F-17
<PAGE>
                             GLOBECOMM SYSTEMS INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 JUNE 30, 2001
                                  (CONTINUED)

 12. INCOME TAXES (CONTINUED)

         For the years ended June 30, 1999, 2000 and 2001, the valuation
allowance increased approximately $3,276,000, $3,282,000 and $7,743,000,
respectively. Approximately $2,035,000 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 $36,950,000 ($11,150,00 and $25,800,000 for the Company and
NetSat, respectively), which are due to expire through 2021.

         The reconciliation of tax provision (benefit) computed at the U.S.
federal statutory tax rates to the income tax expense (benefit) are as follows:

                                                YEARS ENDED JUNE 30,
                                        ---------------------------------
                                          1999        2000         2001
                                          ----        ----         ----

Tax at U.S. Federal statutory rate......   (34)%       (34)%        (34)%
Expenses not deductible for income
  tax purposes  ........................     -           6            -
Loss for which no tax benefit was
  received..............................    (6)          -           31
State taxes.............................     -           -           (1)
Change in deferred tax asset
 valuation reserve......................    40          28           14
                                        -----------  --------    --------
                                             - %         - %         10 %
                                        ===========  ========    ========

13. SEGMENT INFORMATION

         The Company operates through two business segments. Its Ground Segment
Systems, Networks and Enterprise Solutions Segment, through Globecomm Systems
Inc., is engaged in the design, assembly and installation of ground segment
systems, networks and enterprise solutions for the complex and changing
communications requirements of its customers. Its Data Communications Services
Segment, through NetSat, is engaged in providing high-speed,
satellite-delivered data communications to developing markets worldwide. 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.


                                     F-18
<PAGE>
                             GLOBECOMM SYSTEMS INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 JUNE 30, 2001
                                  (CONTINUED)



13. SEGMENT INFORMATION (CONTINUED)

         The following is the Company's business segment information as of and
for the years ended June 30, 1999, 2000 and 2001:

<TABLE>
<CAPTION>
                                                                               YEARS ENDED JUNE 30,
                                                                  -------------------------------------------
                                                                     1999             2000           2001
                                                                     ----             ----           ----
                                                                                 (IN THOUSANDS)
<S>                                                               <C>              <C>            <C>
Revenues:
  Ground Segment Systems, Networks and Enterprise Solutions...    $ 46,397         $ 74,102       $ 83,364
  Data Communications Services................................       2,661           11,197         27,376
  Intercompany eliminations..................................            -           (6,728)        (7,826)
                                                                  ---------        --------       --------
Total revenues................................................    $ 49,058         $ 78,571       $102,914
                                                                  =========        ========       ========
Loss from operations:
  Ground Segment Systems, Networks and Enterprise Solutions...    $ (7,070)        $   (137)      $ (4,865)
  Data Communications Services................................      (2,101)          (7,193)        (8,538)
Interest income...............................................         980            1,727          3,194
Interest expense..............................................          (1)          (2,522)        (6,579)
Gain on sale of consolidated subsidiary's common stock........           -            2,353              -
Gain on sale of investment....................................           -                -            304
Provision for income taxes....................................           -                -         (1,600)
Minority interests in operations of consolidated subsidiary...           -            2,745           (650)
Intercompany eliminations.....................................           -             (554)            35
                                                                  ---------        --------       --------
Net loss......................................................    $  (8,192)       $ (3,581)      $(18,699)
                                                                  =========        ========       ========
Depreciation and amortization:
  Ground Segment Systems, Networks and Enterprise Solutions...    $   1,007        $  1,370       $  1,695
  Data Communications Services................................          260           1,977          5,543
  Intercompany eliminations...................................            -               -             (9)
                                                                  ---------        --------       --------
Total depreciation and amortization...........................    $   1,267        $  3,347       $  7,229
                                                                  =========        ========       ========
 Expenditures for long-lived assets:
  Ground Segment Systems, Networks and Enterprise Solutions...    $   2,907        $  2,482       $  2,054
  Data Communications Services................................          911         101,249          3,428
  Intercompany eliminations...................................            -            (444)          (132)
                                                                  ---------        --------       --------
Total expenditures for long-lived assets......................    $   3,818        $103,287       $  5,350
                                                                  =========        ========       ========
</TABLE>


                                     F-19
<PAGE>
                             GLOBECOMM SYSTEMS INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 JUNE 30, 2001
                                  (CONTINUED)


13. SEGMENT INFORMATION (CONTINUED)

<TABLE>
<CAPTION>
                                                                  JUNE 30,          JUNE 30,            JUNE 30,
                                                                   1999              2000                2001
                                                                   ----              ----                ----
 Assets:                                                                         (IN THOUSANDS)
<S>                                                          <C>               <C>                <C>
  Ground Segment Systems, Networks and Enterprise
    Solutions...........................................     $     66,307      $     125,106        $   136,103
  Data Communications Services..........................            3,200            109,624             21,985
  Intercompany eliminations.............................           (7,854)           (11,976)           (33,089)
                                                            ----------------  ----------------   ------------------

Total assets............................................     $     61,653      $     222,754        $   124,999
                                                            ================  ================   ==================
</TABLE>

14. 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. Concentration of credit risk with respect to accounts
receivable is limited due to the limited number of customers and that a
substantial portion of accounts receivable are related to balances owed by
major satellite communication companies. 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, 1999,
2000 and 2001, are approximately $107,000, $467,000 and $1,065,000,
respectively.

         No one customer accounted for more than 10% of consolidated revenues
for the year ended June 30, 1999. Two major customers accounted for
approximately 27% (16% and 11%) of the Company's consolidated revenues for the
year ended June 30, 2000. One major customer accounted for approximately 11% of
the Company's consolidated revenues for the year ended June 30, 2001.

         Revenues from foreign sales as a percentage of total consolidated
revenues are as follows:

                                 YEARS ENDED JUNE 30,
                  ----------------------------------------------------
                      1999                  2000             2001
                      ----                  ----             ----
Africa............    14  %                   5  %            2  %
South America.....    11  %                   2  %            8  %
Asia..............    10  %                  12  %           10  %
Europe............     7  %                  24  %           21  %
Middle East.......     2  %                  10  %           13  %
Australia.........     -  %                   2  %            2  %
                  -----------          -------------    -------------
                      44  %                  55  %           56  %
                  ===========          =============    =============

         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 two
financial institutions at June 30, 1999 and three financial institutions at June
30, 2000 and 2001, respectively. Cash equivalents are comprised of short-term
debt instruments, certificates of deposit of direct or guaranteed obligations of
the United States, which are held to maturity and approximate cost. At times,
cash may be in excess of FDIC insurance limits.

                                     F-20
<PAGE>
                             GLOBECOMM SYSTEMS INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 JUNE 30, 2001
                                  (CONTINUED)


15. COMMITMENTS AND CONTINGENCIES

Line of Credit

         In December 2000, the Company entered into a new $5.0 million credit
facility consisting of (1) a $2.0 million secured domestic line of credit and
(2) a $3.0 million secured export-import guaranteed line of credit. This new
credit facility has substantially the same terms as the previous facility,
which expired in December 2000. Each line of credit bears interest at the prime
rate (6.75% at June 30, 2001) plus 0.50% per annum, and is collateralized by a
first security interest on all the Company's assets. The credit facility
contains certain financial covenants, which the Company is in compliance with
at June 30, 2001. As of June 30, 2000 and 2001, no amounts were outstanding
under this credit facility.

Letters of Credit

         The Company utilizes standby letters of credit to secure certain bid
proposals and performance guarantees, while NetSat utilizes standby letters of
credit to secure certain service agreements with third party vendors in the
normal course of business. As of June 30, 2000 and 2001, NetSat had standby
letters of credit outstanding of approximately $1,031,000 and $846,000,
respectively, which is secured by the Company's domestic credit facility. The
Company provides cash collateral for certain letters of credit. As of June 30,
2000 and 2001, cash collateral related to bid proposals amounted to
approximately $150,000 and $0, respectively, and cash collateral related to
performance guarantees amounted to approximately $271,000, and $588,000,
respectively. These amounts are included in restricted cash in the accompanying
consolidated balance sheets.

Lease Commitments

         The Company currently leases satellite space segment services, office
space, teleport services and other equipment under various capital and operating
leases, which expire in various years through 2014. 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.

         During the year ended June 30, 2000, NetSat signed a 15-year and a
14-year capital lease for certain satellite space segment transponders. On April
1, 2001, the Company renegotiated the 15-year satellite space segment
transponder lease resulting 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 will be
amortized into income over the remaining term of the lease.



                                     F-21
<PAGE>

                             GLOBECOMM SYSTEMS INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 JUNE 30, 2001
                                  (CONTINUED)

15. COMMITMENTS AND CONTINGENCIES (CONTINUED)

         At June 30, 2001, future minimum lease payments under the remaining
non-cancelable capital lease agreement is as follows:

         2002..................................     $  1,387
         2003..................................        1,387
         2004..................................        1,387
         2005..................................        1,387
         2006..................................        1,387
         Thereafter............................       11,323
                                                    --------
         Total minimum lease payments               $ 18,258
         Less amount representing interest.....       (7,723)
                                                    --------
         Present value of minimum lease
             payments, net.....................     $ 10,535
                                                    ========

         The satellite space segment transponders under capital leases are
included in fixed assets with a capitalized cost of approximately $96,361,000
and $11,257,000, and accumulated amortization of approximately $1,195,000 and
$1,158,000, at June 30, 2000 and 2001, respectively.

         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, 2001 (In thousands):

         2002..................................     $ 21,173
         2003..................................       19,232
         2004..................................       17,531
         2005..................................       15,686
         2006..................................       13,510
         Thereafter............................       19,904
                                                    --------
                                                    $107,036
                                                    ========

         Rent expense for satellite space segment services, Internet access
services, teleport services, office space and other equipment was approximately
$1,042,000, $5,990,000 and $11,051,000 for the years ended June 30, 1999, 2000
and 2001, respectively.

         Pursuant to several of NetSat's Internet access service agreements,
NetSat is the lessor of satellite earth station equipment that are classified as
operating leases and expire at various dates through 2004. Equipment under these
operating leases are included in fixed assets in the accompanying consolidated
balance sheets and have a net book value of approximately $610,000 and $289,000
at June 30, 2000 and 2001. At June 30, 2001, future minimum lease payments to be
received from equipment under various operating leases are as follows (In
thousands):

          2002.......................................  $  74
          2003.......................................      1
                                                       -----
                                                       $  75
                                                       =====


                                     F-22
<PAGE>
                             GLOBECOMM SYSTEMS INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 JUNE 30, 2001
                                  (CONTINUED)



15. 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 are expected to be launched and become operational during fiscal
2003. Future payments due on such agreements through fiscal 2006 are
approximately $6,000,000. Such satellite space segment services will begin when
the satellite transponders are commercially operational, as defined in the
agreements.

Employment Agreements

        During January 1997, the Company entered into three-year employment
agreements with two of its officers for an aggregate amount of $325,000 per
year. Effective November 1998, 1999 and 2000, such employment agreements
increased to an aggregate amount of $400,000, $423,000 and $516,000,
respectively, per year. The Company will have certain obligations to the two
officers if they are terminated for disability, cause 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.

                                     F-23
<PAGE>



                             GLOBECOMM SYSTEMS INC.
                                 JUNE 30, 2001

                 SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS


<TABLE>
<CAPTION>
                                                                    ADDITIONS
                                                       ------------------------------------
                                          BALANCE AT                      CHARGED TO OTHER
                                         BEGINNING OF  CHARGED TO COSTS       ACCOUNTS-       DEDUCTIONS-    BALANCE AT
      DESCRIPTION                          PERIOD        AND EXPENSES         DESCRIBE         DESCRIBE     END OF PERIOD
----------------------------------       ------------    ------------         ---------       -----------   -------------
<S>                                      <C>               <C>              <C>                <C>              <C>
Year ended June 30, 1999:
Reserves and allowances deducted
from asset accounts:
    Reserve for estimated doubtful
    accounts receivable ..............   $    40,000      $   100,000      $          -       $ (33,000)(a)  $   107,000
    Valuation allowance on
    deferred tax assets ..............     3,100,000                -         3,276,000(b)            -        6,376,000
                                         -----------      -----------      ------------       ---------      ------------
                                         $ 3,140,000      $   100,000      $  3,276,000       $ (33,000)     $ 6,483,000
                                         ===========      ===========      ============       =========      ===========

Year ended June 30, 2000:
Reserves and allowances
deducted from asset accounts:
    Reserve for estimated
    doubtful accounts receivable .....   $   107,000      $   360,000      $          -       $       -      $   467,000
    Valuation allowance on
    deferred tax assets ..............     6,376,000                -         3,282,000(b)            -        9,658,000
                                         -----------      -----------      ------------       ---------      ------------
                                         $ 6,483,000      $   360,000      $  3,282,000       $       -      $10,125,000
                                         ===========      ===========      ============       =========      ===========

Year ended June 30, 2001:
Reserves and allowances
deducted from asset accounts:
     Reserve for estimated
     doubtful accounts receivable ....   $   467,000      $   680,000      $          -       $ (82,000)(a)  $ 1,065,000
     Valuation allowance on
     deferred tax assets .............     9,658,000                -         7,743,000(b)            -       17,401,000
     Reserve on leased
     receivable balances .............             -        1,073,000                 -               -        1,073,000
                                         -----------      -----------      ------------       ---------      ------------
                                         $10,125,000      $ 1,753,000      $  7,743,000       $ (82,000)     $19,539,000
                                         ===========      ===========      ============       =========      ===========
</TABLE>

(a)  Reduction in allowance due to write-off of accounts receivable
     balances.

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


                                       S-1
<PAGE>





INDEX TO EXHIBITS:

Exhibit No.

3.1      Amended and Restated Certificate of Incorporation (incorporated by
         reference to Exhibit 3.1 of the Company'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 Company'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 Company'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 Registration Statement).

10.15    Rights Agreement, dated as of December 3, 1998, between the Company
         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
         Company'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 Company'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 Company'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 Company'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 (filed herewith).

21       Subsidiaries of the Registrant (filed herewith).

23       Consent of Independent Auditors (filed herewith).

* Confidential treatment granted for portions of this agreement.