and other current assets of $2.8 million, offset by $24.2 million in accounts payable, $9.8 million in deferred revenue, $3.3 million in current portion of long term debt and $8.5 million in accrued expenses and other current liabilities.

Net cash provided by operating activities during the fiscal year ended June 30, 2007 was $14.4 million, which primarily related to: net income of $8.3 million; an increase in accounts payable of $4.3 million relating to the increase in revenue and timing of vendor payments; a non-cash item representing depreciation and amortization expense of $3.3 million primarily related to the network operations center and satellite earth station equipment; an increase in accrued payroll and related fringe benefits of $3.0 million primarily due to an increase in the Company’s pay for performance plan; an increase in deferred revenues of $1.2 million due to timing differences between project billings and revenue recognition milestones resulting from specific customer contracts; offset by an increase in accounts receivable of $4.6 million due to the increase in revenues and an increase in inventories of $2.8 million due to the increased business levels and the timing of shipments on certain contracts.

Net cash used in investing activities during fiscal year ended June 30, 2007 was $36.9 million, which consisted of $19.1 million related to the acquisition of GlobalSat and capital expenditures of $17.8 million which primarily related to the purchase of network operations center and teleport assets primarily for a large program with Showtime Network Inc. for which service began on July 1, 2007. In addition, we upgraded our Hauppauge facility to meet the requirements of our increase in business levels.

Net cash provided by financing activities during fiscal year ended June 30, 2007 was $23.6 million which primarily related to $16.0 million of borrowings from the term note used to partially fund the acquisition of GlobalSat, $6.4 million of proceeds from the exercise of stock options and $1.4 million of proceeds from the exercise of warrants.

On May 2, 2007, we acquired the GlobalSat business for a purchase price of $18.5 million in cash. The purchase price was funded, in part, through a five-year $16.0 million acquisition term loan (‘‘Acquisition Loan’’) provided by Citibank, N.A. The Acquisition Loan bears interest at the prime rate or LIBOR plus 225 basis points, at our discretion, and is collateralized by a first priority security interest on all of our assets, including the GSM assets. In addition, the credit facility contains certain financial and other covenants, monthly reporting provisions and other requirements, with which we were in compliance with at June 30, 2007. The remaining principal balance as of June 30, 2007 was $15.7 million.

We have a credit facility in place with Citibank, N.A, which expires on November 30, 2007. The credit facility is comprised of: (1) a $25 million borrowing base line of credit (the ‘‘Line’’), which is available for standby letters of credit, commercial letters of credit and loans; (2) a bridge line of credit in the amount of $7 million, which is to support equipment purchases; and (3) a foreign exchange line in the amount of $10 million. If there are direct borrowings under the Line, the commercial letters of credit and direct borrowings may not be drawn in amounts in excess of $20 million. The Line bears interest at the prime rate or LIBOR plus 225 basis points, at our discretion, and is collateralized by a first priority security interest on all of our assets. We can be advanced up to 80% of eligible accounts receivable and 100% of unrestricted cash. The credit facility provides that we may borrow and apply letters of credit against the availability under the Line. In addition, the credit facility contains certain financial and other covenants, deposit requirements, monthly reporting provisions and other requirements. The credit facility is uncommitted and advances are subject to Citibank, N.A.’s approval. As of June 30, 2007, no borrowings were outstanding under the credit facility; however, there were standby letters of credit of approximately $13.4 million, which were applied against and reduced the amounts available under the facility.

We lease satellite space segment services and other equipment under various operating lease agreements, which expire in various years through fiscal 2013. Future minimum lease payments due on these leases through June 30, 2008 are approximately $13.6 million.

We expect that our cash and working capital requirements for operating activities will increase as we continue to implement our business strategy. Management anticipates additional working capital requirements for work in progress for orders as obtained and that we may periodically experience negative cash flows due to variances in quarter to quarter operating performance and if cash is used to fund any future acquisitions of complementary businesses, technologies and intellectual property. No

32

acquisitions are currently at a stage which are probable of completion. We will use existing working capital and, if required, use our credit facility to meet these additional working capital requirements.

On August 17, 2007, we completed an offering of equity securities totaling $33,750,000 in gross proceeds. We sold 3,000,000 shares of common stock at a price of $11.25 per share and granted to the underwriters an overallotment option of 450,000 additional shares at the same terms. On August 21, 2007, we received $31,893,750 after deducting underwriting discounts and commissions. As of the date of this report, the underwriters overallotment option of 450,000 additional shares has not been exercised.

Our future capital requirements will depend upon many factors, including the success of our marketing efforts in the infrastructure solutions and services business, the nature and timing of customer orders and the level of capital requirements related to the expansion of our service offerings. Based on current plans, we believe that our existing capital resources will be sufficient to meet working capital requirements at least through June 30, 2008. However, we cannot assure you that there will be no unforeseen events or circumstances that would consume available resources significantly before that time.

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, capital expenditures, research and development activities, the timing and extent of our marketing programs, and we may be required to reduce headcount. We cannot assure you that additional financing will be available to us on acceptable terms, or at all.

Contractual Obligations and Commercial Commitments

At June 30, 2007, we had contractual obligations and commercial commitments as follows (in thousands):

			Payments Due by Period
Contractual Obligations			Total						Less than 1 year						1-3 years						4-5 years						More than 5 years
Operating leases				$	20,872					$	13,553					$	6,263					$	1,042					$	14
Long term debt				$	15,845					$	3,312					$	6,400					$	6,133					$	—
Total contractual cash obligations				$	36,717					$	16,865					$	12,663					$	7,175					$	14

									Amount of Commitment Expiration Per Period
Other Commercial Commitments			Total Amounts Committed						Less than 1 year						1-3 years						4-5 years						More than 5 years
Standby letters of credit				$	13,420					$	12,621					$	799					$	—					$	—
Total commercial commitments				$	13,420					$	12,621					$	799					$	—					$	—

Related Party Transactions

During January 2003, pursuant to a letter agreement, we combined the then outstanding loan and advances receivable from an individual who is a former executive officer and a current employee into a $0.3 million promissory note. Under the terms of the letter agreement we will forgive the outstanding principal and interest amounts due on the promissory note in five annual installments beginning in January 2004 so long as the former executive officer remains an employee, subject to the terms of the letter agreement. In March 2007, we forgave the fourth installment under the promissory note.

On August 17, 2007, the Company completed an offering of equity securities totaling $33,750,000 in gross proceeds. On August 21, 2007, the Company received $31,893,750 after deducting underwriting discounts and commissions. Stephens Inc. acted as a joint lead bookrunners in our August 17, 2007 offering. Because A. Robert Towbin serves on our Board of Directors and as an Executive Vice President and Managing Director of Stephens Inc., Stephens Inc. may be deemed to be an ‘‘affiliate’’ of Globecomm

33

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under Rule 2720 of the Conduct Rules of the National Association of Securities Dealers, Inc. (‘‘NASD’’). Accordingly, the offering was made in compliance with the applicable provisions of Rule 2720, which require that the offering price of the common stock be no higher than that recommended by a ‘‘qualified independent underwriter,’’ as defined in Rule 2720.

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 in 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. Accordingly, we may utilize from time to time foreign currency forward contracts to hedge our exposure on firm commitments denominated in foreign currency. At June 30, 2007, we had no outstanding foreign exchange contracts.

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

Item 8.    Financial Statements and Supplementary Data

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

Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None

Item 9A.    Controls and Procedures

Evaluation of Disclosure Controls and Procedures.    Our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the ‘‘Exchange Act’’)) are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Our Chief Executive Officer and the Chief Financial Officer have reviewed the effectiveness of our disclosure controls and procedures as of June 30, 2007 and, based on their evaluation, have concluded that the disclosure controls and procedures were effective as of such date. We have excluded from this assessment the operations of Globecomm Services Maryland which was acquired as of April 30, 2007.

Management’s Report on Internal Control Over Financial Reporting.    Under Section 404 of the Sarbanes-Oxley Act of 2002, management is required to assess the effectiveness of the Company’s internal control over financial reporting as of the end of each fiscal year and report, based on that assessment, whether the Company’s internal control over financial reporting is effective.

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is designed to provide reasonable assurance as to the reliability of the Company’s financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles.

Internal controls over financial reporting, no matter how well designed, have inherent limitations. Therefore, internal control over financial reporting determined to be effective can provide only reasonable assurance with respect to financial statement preparation and may not prevent or detect all misstatements. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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The Company’s management has assessed the effectiveness of the Company’s internal control over financial reporting as of June 30, 2007. In making this assessment, the Company used the criteria established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in ‘‘Internal Control — Integrated Framework.’’ These criteria are in the areas of control environment, risk assessment, control activities, information and communication, and monitoring. The Company’s assessment included extensive documenting, evaluating and testing the design and operating effectiveness of its internal control over financial reporting.

Based on the Company’s processes and assessment, as described above, management has concluded that, as of June 30, 2007, the Company’s internal control over financial reporting was effective.

Management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of June 30, 2007 has been audited by our independent auditors, as stated in their report, which appears in the ‘‘Report of Independent Registered Public Accounting Firm’’ on page F-2 of this Annual Report on Form 10-K.

Changes in Internal Control Over Financial Reporting.    There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the three months ended June 30, 2007 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 9B.    Other Information

None

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PART III

Item 10.    Directors and Executive Officers of the Registrant

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

Item 11.    Executive Compensation

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

Item 12.    Security Ownership of Certain Beneficial Owners and Management

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

Item 13.    Certain Relationships and Related Transactions

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

Item 14.    Principal Accounting Fees and Services

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

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PART IV

Item 15.    Exhibits, Financial Statement Schedules

(A) (1)   Index to Consolidated Financial Statements

Reports of Independent Registered Public Accounting Firm			F-1
Consolidated Balance Sheets as of June 30, 2007 and 2006			F-4
Consolidated Statements of Operations for the years ended June 30, 2007, 2006 and 2005			F-5
Consolidated Statements of Changes in Stockholders’ Equity for the years ended June 30, 2007, 2006 and 2005			F-6
Consolidated Statements of Cash Flows for the years ended June 30, 2007, 2006 and 2005			F-7
Notes to Consolidated Financial Statements			F-8

        (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 SEC are not required under the related instructions or are inapplicable and therefore have been omitted.

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        (3)   Index of Exhibits

Exhibit No.
	3	.1				Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 of the Registrant’s Annual Report on Form 10-K for the fiscal year ended June 30, 1998).
	3	.2				Amended and Restated By-laws of the Registrant (incorporated by reference to Exhibit 3.2 of the Registrant’s Annual Report on Form 10-K for the fiscal year ended June 30, 1998).
	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				Employment Agreement dated as of October 9, 2001 by and between the Registrant and David E. Hershberg (incorporated by reference to Exhibit 10.9 of the Registrant’s Quarterly Report on Form 10-Q, for the quarter ended September 30, 2001).
	10	.2				Employment Agreement dated as of October 9, 2001 by and between the Registrant and Kenneth A. Miller (incorporated by reference to Exhibit 10.10 of the Registrant’s Quarterly Report on Form 10-Q, for the quarter ended September 30, 2001).
	10	.3				The Amended and Restated 1997 Stock Incentive Plan (incorporated by reference to Exhibit 99 of the Registrant’s Registration Statement on Form S-8 Registration, File No. 333-112351).
	10	.4				1999 Employee Stock Purchase Plan (incorporated by reference to Exhibit 99.8 of the Registrant’s Registration Statement on Form S-8, File No. 333-70527).
	10	.5				Rights Agreement, dated as of December 3, 1998, between the Registrant and American Stock Transfer and Trust Company, which includes the form of Certificate of Designation for the Series A Junior Participating Preferred Stock as Exhibit A, the form of Rights Certificate as Exhibit B and the Summary of Rights to Purchase Series A Preferred Shares as Exhibit C (incorporated by reference to Exhibit 4 of Registrant’s Current Report on Form 8-K, dated December 3, 1998).
	10	.6				Negotiable Promissory Note, dated April 1, 2001, between the Registrant and Donald Woodring (incorporated by reference to Exhibit 10.19 of the Registrant’s Annual Report on Form 10-K for the year ended June 30, 2001).
	10	.7				Employment Agreement, dated as of October 9, 2001, by and between Stephen C. Yablonski and the Registrant (incorporated by reference to Exhibit 10.20 of the Registrant’s Quarterly Report on Form 10-Q, for the quarter ended September 30, 2001).
	10	.8				Employment Agreement, dated as of October 9, 2001, by and between Andrew C. Melfi and the Registrant (incorporated by reference to Exhibit 10.21 of the Registrant’s Quarterly Report on Form 10-Q, for the quarter ended September 30, 2001).
	10	.9				Employment Agreement, dated as of October 9, 2001, by and between Donald G. Woodring and the Registrant (incorporated by reference to Exhibit 10.22 of the Registrant’s Quarterly Report on Form 10-Q, for the quarter ended September 30, 2001).
	10	.10				Employment Agreement, dated as of October 9, 2001, by and between Paul J. Johnson and the Registrant (incorporated by reference to Exhibit 10.23 of the Registrant’s Quarterly Report on Form 10-Q, for the quarter ended September 30, 2001).
	10	.11				Employment Agreement, dated as of October 9, 2001, by and between Paul Eterno and the Registrant (incorporated by reference to Exhibit 10.24 of the Registrant’s Quarterly Report on Form 10-Q, for the quarter ended September 30, 2001).

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Exhibit No.
	10	.12				Promissory Note Secured By Stock Pledge Agreement, dated September 4, 2001, by and between Kenneth A. Miller and the Registrant (incorporated by reference to Exhibit 10.26 of the Registrant’s Quarterly Report on Form 10-Q, for the quarter ended September 30, 2001).
	10	.13*				Settlement Agreement, dated as of October 1, 2002, by and between Loral Skynet®, a division of Loral SpaceCom Corporation and the Registrant (incorporated by reference to Exhibit 10.28 of the Registrant’s Quarterly Report on Form 10-Q, for the quarter ended September 30, 2002).
	10	.14				Letter Agreement, dated as of January 31, 2003, by and between Donald G. Woodring and the Registrant (incorporated by reference to Exhibit 10.30 of the Registrant’s Quarterly Report on Form 10-Q, for the quarter ended December 31, 2002).
	10	.15				Loan and Security Agreement, dated as of September 15, 2003, by and between Silicon Valley Bank and the Registrant (incorporated by reference to Exhibit 10.31 of the Registrant’s Annual Report on Form 10-K for the year ended June 30, 2003).
	10	.16				Loan Modification Agreement, dated as of October 8, 2003, by and between Silicon Valley Bank and the Registrant (incorporated by reference to Exhibit 10.17 of the Registrant’s Annual Report on Form 10-K for the year ended June 30, 2004).
	10	.17				Second Loan Modification Agreement, dated as of March 2, 2004, by and between Silicon Valley Bank and the Registrant (incorporated by reference to Exhibit 10.18 of the Registrant’s Annual Report on Form 10-K for the year ended June 30, 2004).
	10	.18				Third Loan Modification Agreement, dated as of June 2, 2004, by and between Silicon Valley Bank and the Registrant (incorporated by reference to Exhibit 10.19 of the Registrant’s Annual Report on Form 10-K for the year ended June 30, 2004).
	10	.19				Fourth Loan Modification Agreement, dated as of September 24, 2004, by and between Silicon Valley Bank and the Registrant (incorporated by reference to Exhibit 10.20 of the Registrant’s Annual Report on Form 10-K for the year ended June 30, 2004).
	10	.20				Fifth Loan Modification Agreement, dated as of October 29, 2004, by and between Silicon Valley Bank and the Registrant (incorporated by reference to Exhibit 10.1 of the Registrant’s Registration Statement on Form 8-K, File No. 000-22839).
	10	.21				Sixth Loan Modification Agreement, dated as of November 2, 2005, by and between Silicon Valley Bank and the Registrant (incorporated by reference to Exhibit 10.1 of the Registrant’s Registration Statement on Form 8-K, File No. 000-22839).
	10	.22				Credit Facility dated October 31, 2006, by and between the Registrant and Citibank, N.A. (incorporated by reference to Exhibit 10.1 of the Registrant’s Registration Statement on Form 8-K, file No. 000-22839).
	10	.23				Term Loan Agreement dated May 2, 2007, by and between the Registrant and Citibank, N.A. (filed herewith).
	10	.24				2006 Incentive Stock Plan. (incorporated by reference to Appendix A of the Registrant’s Definitive proxy on schedule 14A, filed with the Commission on October 13, 2006).
	10	.25				Asset Purchase Agreement, dated May 2, 2007, by and between the Registrant and Lyman Bros., Inc. (incorporated by reference to Exhibit 2.1 of the Registrant’s Registration Statement on Form 8-K, file No. 000-22839).

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Exhibit No.
	10	.26				Form of Securities Purchase Agreement, dated as of December 31, 2003, by and between the Registrant and each of the purchasers listed on Exhibit A thereto (incorporated herein by reference to Exhibit 4.5 of the Registrant’s Registration Statement on Form S-3, File No. 333-112024).
	10	.27				Form of Warrant, dated as of December 31, 2003, by and between the Registrant and each of the purchasers listed on Exhibit A thereto (incorporated herein by reference to Exhibit 4.5 of the Registrant’s Registration Statement on Form S-3, File No. 333-112024).
	14					Registrant’s Code of Ethics and Business Conduct (incorporated by reference to Exhibit 14 of the Registrant’s Annual Report on Form 10-K for the year ended June 30, 2004).
	21					Subsidiaries of the Registrant (filed herewith).
	23					Consent of Independent Registered Public Accounting Firm (filed herewith).
	31	.1				Chief Executive Officer Certification required by Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as amended (filed herewith).
	31	.2				Chief Financial Officer Certification required by Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as amended (filed herewith).
	32					Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes Oxley Act of 2002 (filed herewith).

*	Confidential treatment granted for portions of this agreement.

(B)    Exhibits

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

(C)    Financial Statement Schedules

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

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SIGNATURES

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

			GLOBECOMM SYSTEMS INC.
Date: September 13, 2007			By:			/s/ DAVID E. HERSHBERG
						David E. Hershberg, Chairman of the Board and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature		Title		Date
/s/ DAVID E. HERSHBERG		Chairman of the Board and Chief Executive Officer (Principal Executive Officer)		9/13/07
David E. Hershberg
/s/ ANDREW C. MELFI		Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)		9/13/07
Andrew C. Melfi
/s/ KENNETH A. MILLER		President and Director		9/13/07
Kenneth A. Miller
/s/ RICHARD E. CARUSO		Director		9/13/07
Richard E. Caruso
/s/ HARRY L. HUTCHERSON Jr.		Director		9/13/07
Harry L. Hutcherson Jr.
/s/ BRIAN T. MALONEY		Director		9/13/07
Brian T. Maloney
/s/ JACK A. SHAW		Director		9/13/07
Jack A. Shaw
/s/ A. ROBERT TOWBIN		Director		9/13/07
A. Robert Towbin
/s/ C.J. WAYLAN		Director		9/13/07
C.J. Waylan

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

We have audited the accompanying consolidated balance sheets of Globecomm Systems Inc. (the ‘‘Company’’) as of June 30, 2007 and 2006 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, 2007. Our audits also included the financial statement schedule listed in the index at Item 15(a). These consolidated financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Globecomm Systems Inc. at June 30, 2007 and 2006, and the consolidated results of its operations and its cash flows for each of the three years in the period ended June 30, 2007, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

As discussed in Note 2 to the consolidated financial statements, in 2006 the Company changed its method of accounting for stock-based compensation.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of June 30, 2007, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated August 10, 2007 expressed an unqualified opinion thereon.

/s/ ERNST & YOUNG LLP

Melville, New York
August 10, 2007

F-1

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON
INTERNAL CONTROL OVER FINANCIAL REPORTING

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

We have audited management’s assessment, included in Management’s Report on Internal Control Over Financial Reporting that Globecomm Systems Inc. maintained effective internal control over financial reporting as of June 30, 2007, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Globecomm Systems Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As indicated in Management’s Report on Internal Control Over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Globecomm Services Maryland LLC, which is included in the 2007 consolidated financial statements of Globecomm Systems Inc. and constituted approximately $10.2 million and $1.3 million of total and net assets, respectively, as of June 30, 2007 and approximately $5.1 million and $0.7 million of revenue and net income, respectively, for the year then ended. Our audit of internal control over financial reporting of Globecomm Systems Inc. also did not include an evaluation of the internal control over financial reporting of Globecomm Services Maryland LLC.

In our opinion, management’s assessment that Globecomm Systems Inc. maintained effective internal control over financial reporting as of June 30, 2007, is fairly stated, in all material respects, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also, in our opinion, Globecomm Systems Inc. maintained, in all material respects, effective internal control over financial reporting as of June 30, 2007, based on the COSO criteria.

F-2

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We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Globecomm Systems Inc. as of June 30, 2007 and 2006 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, 2007 and our report dated August 10, 2007 expressed an unqualified opinion thereon.

/s/ ERNST & YOUNG LLP

Melville, New York
August 10, 2007

F-3

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GLOBECOMM SYSTEMS INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)

			June 30, 2007						June 30, 2006
Assets
Current assets:
Cash and cash equivalents				$	25,558					$	24,512
Accounts receivable, net					38,378						30,837
Inventories					16,294						13,058
Prepaid expenses and other current assets					2,823						1,131
Deferred income taxes					—						22
Total current assets					83,053						69,560
Fixed assets, net					33,238						15,510
Goodwill					22,197						7,204
Intangibles, net					3,474						—
Other assets					921						960
Total assets				$	142,883					$	93,234
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable				$	24,170					$	19,020
Deferred revenues					9,792						1,691
Accrued payroll and related fringe benefits					6,037						2,872
Other accrued expenses					2,235						1,966
Deferred liabilities					256						316
Long term debt – current					3,312						—
Total current liabilities					45,802						25,865
Other liabilities					1,035						353
Long term debt					12,533						—
Commitments and contingencies
Stockholders’ equity:
Series A Junior Participating, shares authorized, shares issued and outstanding: none in 2007 and 2006					—						—
Common stock, $.001 par value, shares authorized: 50,000,000 at June 30, 2007 and 2006; shares issued: 16,942,449 in 2007 and 15,660,524 in 2006					17						16
Additional paid-in capital					143,843						135,673
Accumulated deficit					(57,566	)					(65,892	)
Treasury stock, at cost, 465,351 shares in 2007 and 2006					(2,781	)					(2,781	)
Total stockholders’ equity					83,513						67,016
Total liabilities and stockholders’ equity				$	142,883					$	93,234

See accompanying notes.

F-4

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GLOBECOMM SYSTEMS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

			Years Ended June 30,
			2007						2006						2005
Revenues from infrastructure solutions				$	114,612					$	97,967					$	90,656
Revenues from services					36,133						28,069						18,928
Total revenues					150,745						126,036						109,584
Costs and operating expenses:
Costs from infrastructure solutions					92,197						81,410						75,357
Costs from services					29,052						23,605						15,527
Selling and marketing					8,376						7,029						5,821
Research and development					1,451						1,052						1,021
General and administrative					12,297						9,589						7,596
Total costs and operating expenses					143,373						122,685						105,322
Income from operations					7,372						3,351						4,262
Other income (expense):
Interest income					1,370						965						444
Interest expense					(205	)					—						—
Gain on liquidation of foreign subsidiary					—						264						—
Gain on sale of available-for-sale securities					—						—						132
Gain on sale of investment					—						—						40
Income before income taxes					8,537						4,580						4,878
Provision for income taxes					211						88						64
Net income				$	8,326					$	4,492					$	4,814
Basic net income per common share				$	0.53					$	0.30					$	0.33
Diluted net income per common share				$	0.50					$	0.29					$	0.32
Weighted-average shares used in the calculation of basic net income per common share					15,795						15,001						14,422
Weighted-average shares used in the calculation of diluted net income per common share					16,672						15,608						14,966

See accompanying notes.

F-5

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GLOBECOMM SYSTEMS INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
YEARS ENDED JUNE 30, 2007, 2006 AND 2005
(In thousands)

			Common Stock												Additional Paid-in Capital						Accumulated Deficit						Accumulated Other Comprehensive Income (Loss)						Treasury Stock												Total Stockholders’ Equity
			Shares						Amount																								Shares						Amount
Balance at June 30, 2004					14,629						15						130,503						(75,198	)					267						465						(2,781	)					52,806
Proceeds from exercise of stock options					200						—						863						—						—						—						—						863
Issuance of common stock in connection with employee stock purchase plan					38						—						178						—						—						—						—						178
Issuance of stock options for services					—						—						6						—						—						—						—						6
Stock options acceleration					—						—						147						—						—						—						—						147
Proceeds from exercise of warrants					237						—						1,306						—						—						—						—						1,306
Comprehensive income:
Net income					—						—						—						4,814						—						—						—						4,814
Gain from foreign currency translation					—						—						—						—						17						—						—						17
Total comprehensive income											—						—						—						—						—						—						4,831
Balance at June 30, 2005					15,104						15						133,003						(70,384	)					284						465						(2,781	)					60,137
Proceeds from exercise of stock options					477						1						2,090						—						—						—						—						2,091
Stock compensation expense					—						—						115						—						—						—						—						115
Proceeds from exercise of warrants					80						—						440						—						—						—						—						440
Tax benefit from stock compensation plan					—						—						25						—						—						—						—						25
Comprehensive income:
Net income					—						—						—						4,492						—						—						—						4,492
Loss from foreign currency translation					—						—						—						—						(20	)					—						—						(20	)
Realized gain on liquidation of foreign subsidiary					—						—						—						—						(264	)					—						—						(264	)
Total comprehensive income																																															4,208
Balance at June 30, 2006					15,661						16						135,673						(65,892	)					—						465						(2,781	)					67,016
Proceeds from exercise of stock options					1,002						1						6,436						—						—						—						—						6,437
Stock compensation expense					—						—						214						—						—						—						—						214
Grant of restricted shares					37						—						—						—						—						—						—						—
Proceeds from exercise of warrants					242						—						1,444						—						—						—						—						1,444
Tax benefit from stock compensation plan					—						—						76						—						—						—						—						76
Net Income					—						—						—						8,326						—						—						—						8,326
Balance at June 30, 2007					16,942						17						143,843						(57,566	)					—						465						(2,781	)					83,513

See accompanying notes.

F-6

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GLOBECOMM SYSTEMS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

			Years Ended June 30,
			2007						2006						2005
Operating Activities:
Net income				$	8,326					$	4,492					$	4,814
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization					3,333						3,023						2,695
Provision for doubtful accounts					546						426						104
Deferred income taxes					22						16						45
Stock compensation expense					214						115						153
Gain on sale of available-for-sale securities					—						—						(132	)
Gain on sale of investment					—						—						(40	)
Tax benefit from stock compensation plan					76						25						—
Gain on liquidation of foreign subsidiary					—						(264	)					—
Changes in operating assets and liabilities:
Accounts receivable					(4,632	)					(8,569	)					(8,464	)
Inventories					(2,795	)					(174	)					(9,119	)
Prepaid expenses and other current assets					103						(273	)					416
Other assets					58						73						63
Accounts payable					4,258						3,471						63
Deferred revenues					1,235						(3,870	)					4,482
Accrued payroll and related fringe benefits					2,961						699						1,019
Other accrued expenses					30						(2	)					292
Other liabilities					622						(317	)					(317	)
Net cash provided by (used in) operating activities					14,357						(1,129	)					(3,926	)
Investing Activities:
Purchases of fixed assets					(17,808	)					(2,484	)					(3,303	)
Acquisition of business net of cash received					(19,069	)					—						—
Restricted cash					—						—						1,903
Proceeds from the sale of available-for-sale securities					—						—						330
Net cash used in investing activities					(36,877	)					(2,484	)					(1,070	)
Financing Activities:
Proceeds from exercise of stock options					6,437						2,091						863
Proceeds from exercise of warrants					1,444						440						1,306
Proceeds from sale of common stock in connection with employee stock purchase plan					—						—						178
Borrowings under acquisition loan					16,000						—						—
Repayments of debt					(315	)					—						—
Net cash provided by financing activities					23,566						2,531						2,347
Effect of foreign currency translation on cash					—						(15	)					6
Net increase (decrease) increase in cash and cash equivalents					1,046						(1,097	)					(2,643	)
Cash and cash equivalents at beginning of year					24,512						25,609						28,252
Cash and cash equivalents at end of year				$	25,558					$	24,512					$	25,609
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest				$	86					$	—					$	—
Cash paid for income taxes					109						198						5

See accompanying notes.

F-7

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GLOBECOMM SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2007

1.    Organization and Description of Business

Globecomm Systems Inc. (‘‘Globecomm’’) was incorporated in the State of Delaware on August 17, 1994. The Company’s core business provides end-to-end, value-added satellite-based communications solutions. This business supplies infrastructure solutions for satellite-based communications including hardware and software to support a wide range of satellite systems. The Company’s wholly-owned subsidiaries, Globecomm Network Services Corporation (‘‘GNSC’’) and Globecomm Services Maryland LLC (‘‘GSM’’) provide satellite communication services capabilities.

2.    Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, GNSC, GSM and Globecomm Systems Europe Limited (collectively, the ‘‘Company’’). On June 30, 2006, the Company liquidated the Globecomm Systems Europe Limited entity. 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. 104 (‘‘SAB 104’’), Revenue Recognition, for its production-type contracts that are sold separately as standard satellite ground segment systems when persuasive evidence of an arrangement exists, the selling price is fixed or determinable, collectibility is reasonably assured, delivery has occurred and the contractual performance specifications have been met. The Company’s standard satellite ground segment systems produced in connection with these contracts are typically short-term (less than twelve months in term) and manufactured using a standard modular production process. Such systems require less engineering, drafting and design efforts than the Company’s long-term complex production-type projects. Revenue is recognized on the Company’s standard satellite ground segment systems upon shipment and acceptance of factory performance testing which is when title transfers to the customer. The amount of revenues recorded on each standard production-type contract is reduced by the customers’ contractual holdback amount, which typically requires 10% to 30% of the contract value to be retained by the customer until installation and final acceptance is complete. The customer generally becomes obligated to pay 70% to 90% of the contract value upon shipment and acceptance of factory performance testing. Installation is not deemed to be essential to the functionality of the system since installation does not require significant changes to the features or capabilities of the equipment, does not require complex software integration and interfacing and the Company has not experienced any difficulties installing such equipment. In addition, the customer or other third party vendors can install the equipment. The estimated relative fair value of the installation services is determined by management, which is typically less than the customer’s contractual holdback percentage. If the holdback is less than the fair value of installation, the Company will defer recognition of revenues, determined on a contract-by-contract basis equal to the fair value of the installation services. Payments received in advance by customers are deferred until shipment and are presented as deferred revenues in the accompanying consolidated balance sheets.

F-8

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

2.    Significant Accounting Policies (continued)

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

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

Revenues from services consist of managed network services and lifecycle support services for a broad variety of communications applications. Service revenues are recognized ratably over the period in which services are provided. Payments received in advance of services are deferred until the period such services are provided and are presented as deferred revenues in the accompanying consolidated balance sheets.

Costs from Infrastructure Solutions

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

Costs from Services

Costs from services relating to Internet-based services consist primarily of satellite space segment charges, Internet connectivity fees, voice termination costs and network operations expenses. Satellite space segment charges consist of the costs associated with obtaining satellite bandwidth (the measure of capacity) used in the transmission of services to and from the satellite leased from operators. Network operations expenses consist primarily of costs associated with the operation of the Network Operation Centers, on a twenty-four hour a day, seven-day a week basis, including personnel and related costs and depreciation.

Research and Development

Research and development expenditures are expensed as incurred.

Inventories

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

Cash Equivalents

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

F-9

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GLOBECOMM SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (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 leasehold improvements and leased equipment is calculated using the straight-line method over the shorter of the lease term or estimated useful life of the asset.

Fair Value of Financial Instruments

The recorded amounts of the Company’s cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, approximate their fair values because of the short maturity of these instruments. The recorded amount of the Company’s debt approximates its fair value due to its variable interest rate.

Stock-Based Compensation

In December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123R (revised 2004), Share-Based Payment, which is a revision of SFAS 123 (‘‘SFAS 123R’’). SFAS 123R eliminates the ability to account for share-based compensation under the intrinsic value method permitted by Accounting Principles Board Opinion No. 25 (‘‘APB 25’’), Accounting for Stock Issued to Employees. This requires the Company to adopt the fair value model for recognizing compensation expense for employee stock options, and has the effect of reducing the Company’s reported net income and net income per share.

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

The fair value of options granted under the Company’s 1997 and 2006 Plans was estimated at date of grant using a Black-Scholes option pricing model with the following assumptions for the years ended June 30, 2007, 2006 and 2005: weighted average risk-free interest rate of 4.6% (2007), 4.6% (2006) and 3.6% (2005), weighted average volatility factor of the expected market price of the Company’s common stock of .57 (2007), .65 (2006) and .41 (2005), no dividend yields and a weighted-average expected life of the options of four years for the years ended June 30, 2007 and 2006 and five years for the year ended June 30, 2005.

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options, which have no vesting restrictions. 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-10

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

2.    Significant Accounting Policies (continued)

The following table details the effect on net income and net income per share had stock-based compensation expense for the stock options been recorded in the year ended June 30, 2005 based on the fair-value method under SFAS 123R. (in thousands, except per share data)

Reported net income				$	4,814
Stock compensation expense included in net income as reported					153
Stock compensation expense determined under fair value method					(2,909	)
Pro-forma net income				$	2,058
Reported basic net income per common share				$	0.33
Reported diluted net income per common share				$	0.32
Pro-forma basic and diluted net income per common share				$	0.14

As of June 30, 2007 there was approximately $396,000 of unrecognized compensation cost related to non-vested stock-based compensation related to outstanding stock options. The cost is expected to be recognized over a weighted-average period of 3.5 years.

In May 2005, in response to FAS 123R, the Board of Directors of the Company, upon recommendation of its Compensation Committee, approved an acceleration of all unvested options granted to employees and directors under the Company’s Amended and Restated 1997 Stock Incentive Plan. As a result of the acceleration, options to acquire 863,165 shares of the Company’s common stock became immediately exercisable. In order to prevent unintended personal benefit to directors and executive officers, the Board of Directors, upon recommendation of its Compensation Committee, imposed restrictions on any shares received through the exercise of accelerated options held by those individuals. These restrictions prevent their sale of stock obtained through exercise of an accelerated option prior to the earlier of the original vesting date or the individual’s termination of employment. The restrictions applied to 306,220 options. A one-time non-cash compensation charge of approximately $147,000 was recorded in the fourth quarter of 2005 as a result of the acceleration.

Goodwill and Other Intangible Assets

Goodwill represents the excess of the purchase price of businesses over the fair value of the identifiable net assets acquired. In accordance with SFAS No. 142, Goodwill and Other Intangible Assets, goodwill and other indefinite life intangible assets are no longer amortized, but instead tested for impairment at least annually. The impairment test for goodwill uses a two-step approach, which is performed at the reporting unit level. Step one compares the fair value of the reporting unit (calculated using a discounted cash flow method) to its carrying value. If the carrying value exceeds the fair value, there is a potential impairment and step two must be performed. Step two compares the carrying value of the reporting unit’s goodwill to its implied fair value (i.e., fair value of the reporting unit less the fair value of the unit’s assets and liabilities, including identifiable intangible assets). If the carrying value of goodwill exceeds its implied fair value, the excess is required to be recorded as an impairment.

The net carrying value of goodwill is approximately $22,197,000 and $7,204,000 at June 30, 2007 and 2006, which relates to the services reporting unit. The Company performs the goodwill impairment test annually in the fourth quarter. No impairment was noted on the goodwill and intangible assets at June 30, 2007.

F-11

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

2.    Significant Accounting Policies (continued)

Intangibles subject to amortization consist of the following:

			June 30, 2007
			(in thousands)
Customer relationships				$	3,000
Contracts backlog					640
Covenant not to compete					60
					3,700
Less accumulated amortization					226
Intangibles, net				$	3,474

Amortization is calculated using the straight-line method over the estimated useful lives of the assets. The useful lives were estimated as 8 years, 8 months and 3 years for customer relationships, contracts backlog and the covenants not to compete, respectively. Amortization expense of $226,000 was included in general and administrative expenses in the year ended June 30, 2007.

Amortization expense for the next five years related to these intangible assets is expected to be as follows (in thousands):

2008				$	875
2009					395
2010					392
2011					375
2012					375

Long-Lived Assets

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

The Company evaluates the periods of amortization 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.

Comprehensive Income

Accumulated other comprehensive income for the year ended June 30, 2005 of approximately $284,000 represented an unrealized gain from foreign currency translation related to a foreign subsidiary.

Product Warranties

The Company offers warranties on its contracts, the specific terms and conditions of which vary depending upon the contract and work performed. Generally, a basic limited warranty, including parts and labor, is provided to customers for one year. The Company can recoup certain of these costs through product warranties it holds with its original equipment manufacturers, which typically are one year in term. Historically, warranty expense has been minimal, however, management periodically assesses the need for any additional warranty reserve.

F-12

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

2.    Significant Accounting Policies (continued)

Recent Accounting Pronouncements

In June 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109 (‘‘FIN 48’’), which clarifies the accounting for uncertainty in income tax positions. FIN 48 requires that the Company recognize in its financial statements the benefits of tax return positions if that tax position is more likely than not of being sustained on audit, based on its technical merits. The provisions of FIN 48 are effective as of the beginning of the Company’s 2008 fiscal year, with the cumulative effect of the change in accounting principle recorded as an adjustment to opening retained earnings.  The Company is currently evaluating the impact of adopting FIN 48 on its financial statements.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (‘‘SFAS 157’’). SFAS 157 establishes a common definition for fair value under accounting principles generally accepted in the United States, establishes a framework for measuring fair value and expands disclosure requirements about such fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007. The Company is currently evaluating the impact of adopting SFAS 157 on its financial statements.

3.    Acquisition

On April 23, 2007, the Company entered into an Asset Purchase Agreement (the ‘‘Purchase Agreement’’) with Lyman Bros., Inc., a Utah corporation (‘‘Lyman’’), and GlobalSat, LLC, a Maryland limited liability company and a wholly-owned subsidiary of Lyman Bros., Inc. (‘‘GlobalSat’’). The Purchase Agreement provides for the acquisition of substantially all of the assets and the assumption of certain liabilities of GlobalSat (the ‘‘Assets’’), and the acquisition of 100% of the equity interests of Lyman Maryland Properties, LLC, a Utah limited liability company, and Turbo Logic Associates, LLC a Delaware limited liability company, each a wholly-owned subsidiary of Lyman, comprising the GlobalSat Division of Lyman Bros. The transaction closed on May 2, 2007.

Pursuant to the terms of the Purchase Agreement, the Company acquired the GlobalSat Division from Lyman for a purchase price of $18.5 million in cash. The purchase price was partially funded through a $16 million acquisition term loan provided by Citibank, N.A.

GlobalSat was a privately held global provider of satellite-based telecommunications services. Headquartered in metropolitan Washington D.C., it employed approximately 70 employees worldwide of which a majority are U.S. Government cleared and had a high concentration of recurring service revenues in the government marketplace.

The Company has accounted for the acquisition as a purchase under the purchase method of accounting, the assets and liabilities of GlobalSat are recorded as of the acquisition date at their respective fair values and consolidated with those of the Company. The excess of the purchase price over the net assets acquired recorded as goodwill and other intangible assets of approximately $18,693,000 is deductible for income tax purposes over 15 years.

F-13

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

3.    Acquisition (continued)

The purchase price allocation, which includes approximately $677,000 in transaction related costs, is as follows (in thousands):

Total current assets				$	5,848
Fixed assets					3,027
Other assets					19
Goodwill					14,993
Customer relationships					3,000
Contracts backlog					640
Covenant not to compete					60
Liabilities					(8,362	)
Total Purchase Price				$	19,225

The following unaudited pro forma information assumes that the acquisitions occurred on July 1 of each year presented, after giving effect to certain adjustments, including amortization of intangibles, increased interest expense on the acquisition note, decrease in interest income due to use of cash to partially fund acquisition, and income tax adjustments. The pro forma results are not necessarily indicative of the results of operations that would actually have occurred had the transaction taken place on the dates indicated or of the results that may occur in the future:

			Years Ended June 30,
			2007						2006
			(in thousands) (unaudited)
Revenues				$	169,069					$	146,070
Net income				$	8,736					$	4,882
Basic net income per common share				$	0.55					$	0.33
Diluted net income per common share				$	0.52					$	0.31

4.    Accounts Receivable

Accounts receivable include amounts billed but not paid by customers pursuant to retainage provisions in connection with infrastructure solutions contracts. At June 30, 2006, there was approximately $1,438,000 billed but not paid by customers under retainage provisions in connection with long-term contracts. Such balances are included in accounts receivable in the accompanying consolidated balance sheets. Based on the Company’s experience with similar contracts in recent years, billed receivables relating to long-term contracts are expected to be collected within one year.

F-14

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

5.    Inventories

Inventories consist of the following:

			June 30, 2007						June 30, 2006
			(In thousands)
Raw materials and component parts				$	230					$	110
Work-in-progress					17,507						14,564
					17,737						14,674
Less progress payments					1,443						1,616
				$	16,294					$	13,058

6.    Fixed Assets

Fixed assets consist of the following:

			June 30, 2007						June 30, 2006
			(In thousands)
Land				$	2,116					$	1,750
Building and improvements					8,037						6,606
Computer equipment					3,743						3,373
Machinery and equipment					3,926						3,487
Network Operations Center					13,137						10,747
Satellite earth station equipment					9,838						8,808
Furniture and fixtures					1,576						1,336
Leasehold improvements					63						—
Construction-in-progress					14,489						—
					56,925						36,107
Less accumulated depreciation and amortization					23,687						20,597
				$	33,238					$	15,510

7.    Long Term Debt

Debt consists of the following:

			June 30, 2007
			(in thousands)
Acquisition Loan (a)				$	15,733
Other note at 7% interest due November 2007					112
					15,845
Less current portion					3,312
Long Term Debt				$	12,533

F-15

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

7.    Long Term Debt (continued)

The purchase of GSM was funded, in part, through a five-year $16.0 million acquisition term loan (‘‘Acquisition Loan’’) provided by Citibank, N.A on May 2, 2007. The Acquisition Loan bears interest at the prime rate or LIBOR plus 225 basis points, at the Company’s discretion, and is collateralized by a first priority security interest on all of the Company’s assets, including the GSM assets. In addition, the credit facility contains certain financial and other covenants, monthly reporting provisions and other requirements, with which the Company was in compliance with at June 30, 2007. The balance is paid in equal monthly installments of approximately $267,000.

Future minimum payments under these debt agreements, excluding interest, consisted of the following at June 30, 2007 (in thousands):

2008				$	3,312
2009					3,200
2010					3,200
2011					3,200
2012					2,933
				$	15,845

Line of Credit

On October 31, 2006, the Company entered into a secured credit facility with Citibank, N.A, which expires on November 30, 2007. The credit facility is comprised of: (1) a $25 million borrowing base line of credit (the ‘‘Line’’), which is available for standby letters of credit, commercial letters of credit and loans; (2) a bridge line of credit in the amount of $7 million, which is to support equipment purchases; and (3) a foreign exchange line in the amount of $10 million. If there are direct borrowings under the Line, the commercial letters of credit and loans may not be drawn in amounts in excess of $20 million. The Line bears interest at the prime rate or LIBOR plus 225 basis points, at the discretion of the Company, and is collateralized by a first priority security interest on all of the assets of the Company. The Company can be advanced up to 80% of eligible accounts receivable and 100% of unrestricted cash. The credit facility provides that the Company may borrow and apply letters of credit against the availability under the line of credit. In addition, the credit facility contains certain financial and other covenants, deposit requirements, monthly reporting provisions and other requirements, with which the Company was in compliance with at June 30, 2007. The credit facility is uncommitted and advances are subject to Citibank, N.A.’s approval. As of June 30, 2007, no borrowings were outstanding under this credit facility, however, there were standby letters of credit of approximately $13.4 million, which were applied against and reduced the amounts available under this credit facility.

8.    Common Stock

Private Placement

On December 31, 2003, the Company completed a private placement transaction of equity securities and issued 1,500,000 shares of common stock at a price of $4.50 per share for an aggregate price of $6,750,000 and issued warrants to purchase up to 750,000 shares of common stock at an exercise price of $5.50 per share. The warrants became exercisable on July 1, 2004 and will expire on December 31, 2008. The Company incurred total expenses of approximately $583,000, of which approximately $456,000 represented placement agent commissions and approximately $127,000 represented other expenses. After deducting total expenses, the net proceeds received by the Company in January 2004 were approximately $6,167,000. At June 30, 2007, warrants to purchase 232,500 shares of the Company’s common stock noted above are outstanding and exercisable.

F-16

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

9.    Stock Option and Stock Purchase Plans

On November 22, 2006, the Company’s Board of Directors authorized, and the stockholders subsequently approved, the 2006 Stock Incentive Plan (‘‘2006 Plan’’), which provides for grants of stock options or restricted stock awards to employees, directors and consultants of the Company for an aggregate of 850,000 shares of the Company’s common stock. At June 30, 2007, the number of remaining options available for grant under the 2006 Plan was 738,800.

On February 26, 1997, the Company’s Board of Directors authorized, and the stockholders subsequently approved, the 1997 Stock Incentive Plan (‘‘1997 Plan’’), which authorized the granting to employees, directors and consultants of the Company options to purchase an aggregate of 2,280,000 shares of the Company’s common stock. In November 2000 and 2001, the Company’s stockholders approved amendments to the 1997 Plan whereby the number of shares authorized for issuance under the 1997 Plan increased by 800,000 shares in fiscal 2001 and 2002. In November 2004, the Company’s stockholders approved amendments to the 1997 Plan whereby the number of shares authorized for issuance under the 1997 Plan increased by 1,000,000 shares. On November 22, 2006, the Company terminated the 1997 Plan and cancelled all remaining unissued shares totaling approximately 1,311,000. No new options can be granted from the 1997 Plan.

Options granted under the 1997 Plan and 2006 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 granted upon initial election to the Board of Directors generally vest one third on the grant date and an additional one third on each of the next two succeeding anniversaries of the date of grant. Each additional annual grant vests immediately. All Director options expire the earlier of ten years from the date of grant or one year from concluding service as a director of the Company. In May 2005 (as discussed in Note 2), in response to FAS 123R, the Board of Directors of the Company approved an acceleration of all unvested options granted to employees and directors under the 1997 Plan. Restricted stock awards vest annually in equal installments over a three-year period.

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

			Years Ended June 30,
			2007												2006												2005
			Shares Under Option						Weighted- Average Exercise Price						Shares Under Option						Weighted- Average Exercise Price						Shares Under Option						Weighted- Average Exercise Price
Balance, beginning of year					2,809					$	7.55						3,258					$	7.16						3,359					$	7.05
Grants					94						10.86						79						6.90						206						6.34
Exercised					(1,002	)					6.42						(477	)					4.38						(200	)					4.31
Canceled					(38	)					7.52						(51	)					11.58						(107	)					7.20
Balance, end of year					1,863						8.32						2,809						7.55						3,258						7.16
Exercisable, end of year					1,782					$	8.22						2,760					$	7.55						3,258					$	7.16
Weighted-average fair value options granted during the year										$	5.26											$	3.77											$	4.16

F-17

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

9.    Stock Option and Stock Purchase Plans (continued)

The following table summarizes information about stock options outstanding at June 30, 2007 (in thousands, except per share amounts):

			Options Outstanding																		Options Exercisable
Range of Exercise Price			Number Outstanding						Weighted- Average Remaining Contractual Life (Years)						Weighted- Average Exercise Price						Number Exercisable						Weighted- Average Exercise Price
$1.47 – $1.47					2						6.5					$	1.47						2					$	1.47
$3.14 – $4.68					503						5.5					$	3.78						503					$	3.78
$5.06 – $7.49					764						4.9					$	6.57						741					$	6.55
$7.63 – $10.99					215						4.2					$	9.57						196					$	9.67
$11.22 – $17.13					212						3.3					$	13.43						173					$	13.45
$18.38 – $25.25					149						2.4					$	21.24						149					$	21.24
$28.00 – $28.00					18						2.6					$	28.00						18					$	28.00
					1,863						4.6					$	8.32						1,782					$	8.22

Restricted stock granted under the 2006 Plan totaled 37,000 shares in the year ended June 30, 2007. The weighted average grant date fair value of restricted stock granted in during the year ended June 30, 2007 was $13.61. As of June 30, 2007 there was approximately $485,000 of unrecognized compensation cost related to non-vested stock-based compensation related to the restricted shares. The cost is expected to be recognized over a weighted-average period of 2.9 years.

The Company has reserved approximately 2,872,000 shares of its common stock for issuance upon exercise of all available and outstanding options, warrants, and unvested restricted shares at June 30, 2007.

On September 23, 1998, the Board of Directors adopted, and the stockholders subsequently approved, the 1999 Employee Stock Purchase Plan (‘‘1999 Plan’’). Pursuant to the 1999 Plan, 400,000 shares of the Company’s common stock will be reserved for issuance. The 1999 Plan is intended to provide eligible employees of the Company, and its participating affiliates, the opportunity to acquire an interest in the Company at the lesser of 85% of fair market value at date of grant or date of purchase through participation in the payroll-deduction based employee stock purchase plan. During the year ended June 30, 2005 the Company issued 37,961 shares of its common stock to participating employees in connection with the 1999 Plan. The Board of Directors suspended the 1999 Plan effective July 1, 2005 due to the impact on the Company’s operating results due to the adoption of SFAS 123R. At June 30, 2007, the number of remaining shares available for issuance under the 1999 Plan was 121,321.

10.    Basic and Diluted Net Income Per Common Share

The Company computes net income per share in accordance with the provisions of SFAS No. 128, Earnings Per Share. Basic net income per common share is computed by dividing the net income for the period by the weighted-average number of common shares outstanding for the period. For diluted net income per common share, the weighted average shares include the incremental common shares issuable upon the exercise of stock options and warrants (using the treasury stock method) and unvested restricted shares. The incremental common shares for stock options and warrants are excluded from the calculation of diluted net income per share, if their effect is anti-dilutive. Diluted net income per share for the years ended June 30, 2007, 2006 and 2005, excludes the effect of approximately 430,000, 1,407,000, and 2,577,000 stock options and warrants in the calculation of the incremental common shares, respectively, as their effect would have been anti-dilutive.

F-18

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

11.    Retirement Plan

The Company maintains a 401(k) plan, which covers substantially all employees of the Company. Participants may elect to contribute from 1% to 75% of their pre-tax compensation, subject to elective deferral limitations under Section 403 of the Internal Revenue Code. The plan allows for a matching contribution equal to the discretionary percentage of a participating employee not to exceed 4% of their compensation by the Company. The Company contributed approximately $640,000, $547,000, and $236,000 to the 401(k) plan during the years ended June 30, 2007, 2006 and 2005, respectively. As of June 30, 2007, the Company has accrued $357,000 included in accrued payroll and related fringe benefits in the accompanying balance sheet. In addition, the plan also provides for discretionary profit sharing contributions by the Company. There were no discretionary profit sharing contributions made by the Company during the years ended June 30, 2007, 2006 and 2005.

12.    Related Party Transactions

During fiscal 2001, the Company advanced $200,000 to a former executive officer of the Company. The Company received a promissory note payable on December 31, 2002 for this advance, which bore interest at an annual rate of 5.0% payable quarterly. During fiscal 2002, the Company increased the $200,000 loan to $300,000 and amended the promissory note accordingly. During fiscal 2003, this former executive officer resigned from the board of directors and pursuant to a letter agreement (the ‘‘agreement’’) the Company consolidated the then outstanding loan and advances receivable from this former executive officer and current employee of the Company into a $321,000 promissory note. Under the terms of the letter agreement the Company will forgive the outstanding principal and interest amounts due on the promissory note in five annual installments beginning in January 2005 so long as the former executive officer remains an employee of the Company, subject to the terms of the agreement. At June 30, 2007 and 2006, the annual installment to be forgiven within one year along with accrued interest outstanding under this promissory note was included in other current assets in the accompanying consolidated balance sheet. The remaining principal balance outstanding at June 30, 2007 and 2006 was approximately $65,000 and $130,000, respectively.

13.    Income Taxes

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

During fiscal 2007 and 2006, the Company recorded a tax provision of approximately $211,000 and $88,000, respectively.

F-19

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

13.    Income Taxes (continued)

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

			June 30, 2007						June 30, 2006
			(In thousands)
Deferred tax assets:
Net operating loss carryforwards				$	24,631					$	26,972
Accruals and reserves					1,336						1,003
Write-down of investments					426						426
State investment tax credit carryforwards					—						22
AMT tax credit					333						150
Capital loss carryforwards					540						1,062
Projects in progress					150						340
					27,416						29,975
Valuation allowance for deferred tax assets					(26,466	)					(28,958	)
					950						1,017
Deferred tax liabilities:
Depreciation and amortization					(950	)					(995	)
Net deferred tax assets				$	—					$	22

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income prior to the expiration of any net operating loss carryforwards. Due to the uncertainty regarding the Company’s ability to utilize its net operating losses in the future, the Company has provided a valuation allowance against its operating losses and temporary differences.

For the years ended June 30, 2007, 2006 and 2005, the valuation allowance decreased by approximately $2,492,000, $1,968,000, and $1,887,000, respectively. Approximately $6,456,000 of the deferred tax asset, if recognized, will be allocated directly to stockholders’ equity relating to non-qualified dispositions of stock option exercises.

At June 30, 2007, the Company had federal net operating loss carryforwards of approximately $58,700,000 of which approximately $21,100,000 may be subject to certain utilization limitations provided by the Internal Revenue Code. The net operating loss carryforwards will expire at various dates beginning in 2010 through 2024, if not utilized.

At June 30, 2007, the Company also had federal alternative minimum tax credit carryforwards of approximately $333,000, which may be carried forward indefinitely.

F-20

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

13.    Income Taxes (continued)

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

			Years Ended June 30,
			2007						2006						2005
Tax at U.S. Federal statutory rate					34	%					34	%					34	%
Foreign Income at varying rates					—						—						7
Other					4						3						—
Change in valuation allowance					(36	)					(35	)					(40	)
					2	%					2	%					1	%

14.    Segment Information

The Company operates through two business segments. Its infrastructure solutions segment, through Globecomm Systems Inc. is engaged in the design, assembly and installation of ground segment systems and networks. Its services segment, through GNSC and GSM, provides satellite communication services capabilities.

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

The following is the Company’s business segment information as of and for the years ended June 30, 2007, 2006 and 2005:

			Years Ended June 30,
			2007						2006						2005
			(In thousands)
Revenues:
Infrastructure solutions				$	114,642					$	99,136					$	91,613
Services					36,628						29,273						21,875
Intercompany eliminations					(525	)					(2,373	)					(3,904	)
Total revenues				$	150,745					$	126,036					$	109,584
Income from operations:
Infrastructure solutions				$	4,790					$	2,370					$	4,229
Services					2,506						837						(296	)
Interest income					1,370						965						444
Gain on sale of investment					—						—						40
Gain on sale of available-for-sale securities					—						—						132
Gain on liquidation of foreign subsidiary					—						264						—
Interest expense					(205	)					—						—
Intercompany eliminations					76						144						329
Income before income taxes				$	8,537					$	4,580					$	4,878
Depreciation and amortization:
Infrastructure solutions				$	1,327					$	1,201					$	1,153
Services					2,065						1,893						1,871
Intercompany Eliminations					(59	)					(71	)					(329	)
Total depreciation and amortization				$	3,333					$	3,023					$	2,695

F-21

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

14.    Segment Information (continued)

			Years Ended June 30,
			2007						2006						2005
			(In thousands)
Expenditures for long-lived assets:
Infrastructure solutions				$	8,875					$	1,410					$	887
Services					8,933						1,074						2,458
Intercompany eliminations					—						—						(42	)
Total expenditures for long-lived assets				$	17,808					$	2,484					$	3,303

			June 30, 2007						June 30, 2006						June 30, 2005
			(In thousands)
Assets:
Infrastructure solutions				$	183,988					$	145,125					$	139,117
Services					29,735						13,256						13,712
Intercompany eliminations					(70,840	)					(65,147	)					(66,451	)
Total assets				$	142,883					$	93,234					$	86,378

At June 30, 2007, 2006 and 2005, the Company had total assets of approximately $56,000, $53,000 and $1,137,000, and long-lived assets of approximately $38,000, $46,000 and $80,000, respectively, located in the United Kingdom.

15.    Significant Customers and Concentrations of Credit Risk

The Company designs, assembles and installs infrastructure solutions for customers in diversified geographic locations. Credit risk with respect to accounts receivable is concentrated due to the limited number of customers. The timing of cash realization is determined based upon the contract or service agreements with the customers. The Company performs ongoing credit evaluations of its customers’ financial condition and in some cases requires a letter of credit or cash in advance for foreign customers. The Company evaluates the collectibility of accounts receivable based on numerous factors, including past transaction history with customers and their credit worthiness. The Company’s estimate of its allowance for doubtful accounts is periodically adjusted when the Company becomes aware of a specific customer’s inability to meet its financial obligations, or as a result of changes in the overall aging of accounts receivable. Allowances related to accounts receivable at June 30, 2007, 2006 and 2005, were approximately $1,113,000, $825,000 and $815,000, respectively.

The Company’s consolidated revenues for the years ended June 30, 2007, 2006 and 2005 included two customers, which accounted for 17% and 11% of the Company’s consolidated revenue, one customer accounted for 11% of the Company’s consolidated revenue and three customers accounted for 20%, 13% and 13% of the Company’s consolidated revenue, respectively.

F-22

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

15.    Significant Customers and Concentrations of Credit Risk (continued)

Revenues earned from infrastructure solutions are attributed to the geographic location to which the equipment is shipped. Revenues earned from services are attributed to the geographic location in which the services are being provided. Revenues from foreign sales as a percentage of total consolidated revenues are as follows:

			Years Ended June 30,
			2007						2006						2005
Africa					7	%					13	%					8	%
North and South America					10	%					5	%					4	%
Asia					4	%					8	%					4	%
Europe					7	%					17	%					25	%
Middle East					24	%					22	%					32	%
					52	%					65	%					73	%

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 one financial institution at June 30, 2007 and 2006. Cash equivalents are comprised of short-term debt instruments and certificates of deposit of direct or guaranteed obligations of the United States, which are held to maturity and approximate fair market value. At times, cash may be in excess of Federal Deposit Insurance Company insurance limits.

16.    Commitments and Contingencies

Lease Commitments

The Company currently leases satellite space segment services, office space, teleport services and other equipment under various operating leases, which expire in various years through 2013. As leases expire, it can be expected that in the normal course of business they will be renewed or replaced.

Future minimum lease payments under non-cancelable operating leases with terms of one year or more consist of the following at June 30, 2007 (in thousands):

2008				$	13,553
2009					5,034
2010					1,229
2011					643
2012					399
Thereafter					14
				$	20,872

Rent expense for satellite space segment services, office space, teleport services, and other equipment was approximately $11,704,000, $10,306,000 and $7,918,000 for years ended June 30, 2007, 2006 and 2005, respectively.

F-23

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

16.    Commitments and Contingencies (continued)

Employment Agreements

During October 2001, the Company entered into three-year employment agreements with six officers and one former officer for an aggregate amount of approximately $1,214,000 per year. The Company will have certain obligations to these individuals if they are terminated. Each employment agreement renews automatically for additional terms of one year, unless either party provides written notice to the other party of its intention to terminate the agreement. During fiscal 2007, the Board of Directors approved increases bringing the aggregate amount to approximately $1,909,000 per year.

17.    Subsequent Event

On August 17, 2007, the Company completed an offering of equity securities totaling $33,750,000 in gross proceeds. The Company issued 3,000,000 shares of common stock at a price of $11.25 per share and granted to the underwriters an overallotment option of 450,000 additional shares at the same terms. On August 21, 2007, the Company received $31,893,750 after deducting underwriting discounts and commissions. As of the date of this report, the underwriters overallotment option has not been exercised.

Stephens Inc. acted as a joint lead bookrunner in the offering. Because A. Robert Towbin serves on our Board of Directors and as an Executive Vice President and Managing Director of Stephens Inc., Stephens Inc. may be deemed to be an ‘‘affiliate’’ of Globecomm under Rule 2720 of the Conduct Rules of the National Association of Securities Dealers, Inc. (‘‘NASD’’). Accordingly, the offering was made in compliance with the applicable provisions of Rule 2720, which require that the offering price of the common stock be no higher than that recommended by a ‘‘qualified independent underwriter,’’ as defined in Rule 2720.

F-24

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GLOBECOMM SYSTEMS INC.

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS

Description			Balance at Beginning of Period						Additions						Deductions						Balance at End of Period
Year ended June 30, 2007:
Reserves and allowances deducted from asset accounts:
Reserve for estimated doubtful accounts receivable				$	825,000					$	546,000					$	(258,000	)(c)				$	1,113,000
Valuation allowance on deferred tax assets					28,958,000						—					$	(2,492,000	)(b)					26,466,000
				$	29,783,000					$	546,000					$	(2,750,000	)				$	27,579,000
Year ended June 30, 2006:
Reserves and allowances deducted from asset accounts:
Reserve for estimated doubtful accounts receivable				$	815,000					$	426,000					$	(416,000	)(c)				$	825,000
Valuation allowance on deferred tax assets					30,926,000						—					$	(1,968,000	)(b)					28,958,000
				$	31,741,000					$	426,000					$	(2,384,000	)				$	29,783,000
Year ended June 30, 2005:
Reserves and allowances deducted from asset accounts:
Reserve for estimated doubtful accounts receivable				$	2,618,000					$	(1,350,000	)(a)				$	(453,000	)(c)				$	815,000
Valuation allowance on deferred tax assets					32,813,000						—					$	(1,887,000	)(b)					30,926,000
				$	35,431,000					$	(1,350,000	)				$	(2,340,000	)				$	31,741,000

(a)	Includes recovery of accounts receivable balances (net of charges).

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

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

S-1

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Index of Exhibits

Exhibit No.
	3	.1				Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 of the Registrant’s Annual Report on Form 10-K for the fiscal year ended June 30, 1998).
	3	.2				Amended and Restated By-laws of the Registrant (incorporated by reference to Exhibit 3.2 of the Registrant’s Annual Report on Form 10-K for the fiscal year ended June 30, 1998).
	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				Employment Agreement dated as of October 9, 2001 by and between the Registrant and David E. Hershberg (incorporated by reference to Exhibit 10.9 of the Registrant’s Quarterly Report on Form 10-Q, for the quarter ended September 30, 2001).
	10	.2				Employment Agreement dated as of October 9, 2001 by and between the Registrant and Kenneth A. Miller (incorporated by reference to Exhibit 10.10 of the Registrant’s Quarterly Report on Form 10-Q, for the quarter ended September 30, 2001).
	10	.3				The Amended and Restated 1997 Stock Incentive Plan (incorporated by reference to Exhibit 99 of the Registrant’s Registration Statement on Form S-8 Registration, File No. 333-112351).
	10	.4				1999 Employee Stock Purchase Plan (incorporated by reference to Exhibit 99.8 of the Registrant’s Registration Statement on Form S-8, File No. 333-70527).
	10	.5				Rights Agreement, dated as of December 3, 1998, between the Registrant and American Stock Transfer and Trust Company, which includes the form of Certificate of Designation for the Series A Junior Participating Preferred Stock as Exhibit A, the form of Rights Certificate as Exhibit B and the Summary of Rights to Purchase Series A Preferred Shares as Exhibit C (incorporated by reference to Exhibit 4 of Registrant’s Current Report on Form 8-K, dated December 3, 1998).
	10	.6				Negotiable Promissory Note, dated April 1, 2001, between the Registrant and Donald Woodring (incorporated by reference to Exhibit 10.19 of the Registrant’s Annual Report on Form 10-K for the year ended June 30, 2001).
	10	.7				Employment Agreement, dated as of October 9, 2001, by and between Stephen C. Yablonski and the Registrant (incorporated by reference to Exhibit 10.20 of the Registrant’s Quarterly Report on Form 10-Q, for the quarter ended September 30, 2001).
	10	.8				Employment Agreement, dated as of October 9, 2001, by and between Andrew C. Melfi and the Registrant (incorporated by reference to Exhibit 10.21 of the Registrant’s Quarterly Report on Form 10-Q, for the quarter ended September 30, 2001).
	10	.9				Employment Agreement, dated as of October 9, 2001, by and between Donald G. Woodring and the Registrant (incorporated by reference to Exhibit 10.22 of the Registrant’s Quarterly Report on Form 10-Q, for the quarter ended September 30, 2001).
	10	.10				Employment Agreement, dated as of October 9, 2001, by and between Paul J. Johnson and the Registrant (incorporated by reference to Exhibit 10.23 of the Registrant’s Quarterly Report on Form 10-Q, for the quarter ended September 30, 2001).
	10	.11				Employment Agreement, dated as of October 9, 2001, by and between Paul Eterno and the Registrant (incorporated by reference to Exhibit 10.24 of the Registrant’s Quarterly Report on Form 10-Q, for the quarter ended September 30, 2001).

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Exhibit No.
	10	.12				Promissory Note Secured By Stock Pledge Agreement, dated September 4, 2001, by and between Kenneth A. Miller and the Registrant (incorporated by reference to Exhibit 10.26 of the Registrant’s Quarterly Report on Form 10-Q, for the quarter ended September 30, 2001).
	10	.13*				Settlement Agreement, dated as of October 1, 2002, by and between Loral Skynet®, a division of Loral SpaceCom Corporation and the Registrant (incorporated by reference to Exhibit 10.28 of the Registrant’s Quarterly Report on Form 10-Q, for the quarter ended September 30, 2002).
	10	.14				Letter Agreement, dated as of January 31, 2003, by and between Donald G. Woodring and the Registrant (incorporated by reference to Exhibit 10.30 of the Registrant’s Quarterly Report on Form 10-Q, for the quarter ended December 31, 2002).
	10	.15				Loan and Security Agreement, dated as of September 15, 2003, by and between Silicon Valley Bank and the Registrant (incorporated by reference to Exhibit 10.31 of the Registrant’s Annual Report on Form 10-K for the year ended June 30, 2003).
	10	.16				Loan Modification Agreement, dated as of October 8, 2003, by and between Silicon Valley Bank and the Registrant (incorporated by reference to Exhibit 10.17 of the Registrant’s Annual Report on Form 10-K for the year ended June 30, 2004).
	10	.17				Second Loan Modification Agreement, dated as of March 2, 2004, by and between Silicon Valley Bank and the Registrant (incorporated by reference to Exhibit 10.18 of the Registrant’s Annual Report on Form 10-K for the year ended June 30, 2004).
	10	.18				Third Loan Modification Agreement, dated as of June 2, 2004, by and between Silicon Valley Bank and the Registrant (incorporated by reference to Exhibit 10.19 of the Registrant’s Annual Report on Form 10-K for the year ended June 30, 2004).
	10	.19				Fourth Loan Modification Agreement, dated as of September 24, 2004, by and between Silicon Valley Bank and the Registrant (incorporated by reference to Exhibit 10.20 of the Registrant’s Annual Report on Form 10-K for the year ended June 30, 2004).
	10	.20				Fifth Loan Modification Agreement, dated as of October 29, 2004, by and between Silicon Valley Bank and the Registrant (incorporated by reference to Exhibit 10.1 of the Registrant’s Registration Statement on Form 8-K, File No. 000-22839).
	10	.21				Sixth Loan Modification Agreement, dated as of November 2, 2005, by and between Silicon Valley Bank and the Registrant (incorporated by reference to Exhibit 10.1 of the Registrant’s Registration Statement on Form 8-K, File No. 000-22839).
	10	.22				Credit Facility dated October 31, 2006, by and between the Registrant and Citibank, N.A. (incorporated by reference to Exhibit 10.1 of the Registrant’s Registration Statement on Form 8-K, file No. 000-22839).
	10	.23				Term Loan Agreement dated May 2, 2007, by and between the Registrant and Citibank, N.A. (filed herewith).
	10	.24				2006 Incentive Stock Plan. (incorporated by reference to Appendix A of the Registrant’s Definitive proxy on schedule 14A, filed with the Commission on October 13, 2006).
	10	.25				Asset Purchase Agreement, dated May 2, 2007, by and between the Registrant and Lyman Bros., Inc. (incorporated by reference to Exhibit 2.1 of the Registrant’s Registration Statement on Form 8-K, file No. 000-22839).

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Exhibit No.
	10	.26				Form of Securities Purchase Agreement, dated as of December 31, 2003, by and between the Registrant and each of the purchasers listed on Exhibit A thereto (incorporated herein by reference to Exhibit 4.5 of the Registrant’s Registration Statement on Form S-3, File No. 333-112024.
	10	.27				Form of Warrant, dated as of December 31, 2003, by and between the Registrant and each of the purchasers listed on Exhibit A thereto (incorporated herein by reference to Exhibit 4.5 of the Registrant’s Registration Statement on Form S-3, File No. 333-112024).
	14					Registrant’s Code of Ethics and Business Conduct (incorporated by reference to Exhibit 14 of the Registrant’s Annual Report on Form 10-K for the year ended June 30, 2004).
	21					Subsidiaries of the Registrant (filed herewith).
	23					Consent of Independent Registered Public Accounting Firm (filed herewith).
	31	.1				Chief Executive Officer Certification required by Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as amended (filed herewith).
	31	.2				Chief Financial Officer Certification required by Rules 13a− 14 and 15d− 14 under the Securities Exchange Act of 1934, as amended (filed herewith).
	32					Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes Oxley Act of 2002 (filed herewith).

*	Confidential treatment granted for portions of this agreement.

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