<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1997
-----------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------------------- --------------------------
Commission file number 000-22839
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Globecomm Systems Inc.
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(Exact name of registrant as specified in its charter)
Delaware 11-3225567
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
45 Oser Avenue, Hauppauge, New York 11788
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (516) 231-9800
---------------------------
FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE
LAST REPORT.
Indicate by check [X] whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: 9,083,865 shares
of the Company's Common Stock, $.001 par value, were outstanding as of
February 6, 1998.
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GLOBECOMM SYSTEMS INC.
Index to December 31, 1997 Form 10-Q
Page
----
Part I -- Financial Information
Item 1. Financial Statements................................................ 3
Consolidated Balance Sheets -- December 31, 1997 and
June 30, 1997..................................................... 3
Consolidated Statements of Operations -- Three and
Six Month Periods Ended December 31, 1997 and 1996................ 5
Consolidated Statement of Changes in Stockholders' Equity
-- Six Month Period Ended December 31, 1997....................... 6
Consolidated Statements of Cash Flows -- Six Months Ended
December 31, 1997 and 1996........................................ 7
Notes to Consolidated Financial Statements.......................... 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..................... 9
Part II -- Other Information
Item 1. Legal Proceedings................................................... 17
Item 2. Changes in Securities and Use of Proceeds........................... 17
Item 3. Defaults Upon Senior Securities..................................... 18
Item 4. Submission of Matters to a Vote of Security Holders................. 18
Item 5. Other Information................................................... 18
Item 6. Exhibits and Report on Form 8-K..................................... 18
Signatures.......................................................... 21
2
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PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GLOBECOMM SYSTEMS INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE DATA)
DECEMBER 31, JUNE 30,
1997 1997
------------ --------
(UNAUDITED) (1)
Assets
Current assets:
Cash and cash equivalents $18,875 $ 5,164
Restricted cash 3,554 1,537
Accounts receivable 24,420 14,350
Inventories, net 1,114 2,293
Prepaid expenses and other current assets 743 307
------- -------
TOTAL CURRENT ASSETS 48,706 23,651
Fixed assets, net 8,827 7,151
Investments 1,914 1,308
Other assets 355 1,176
------- -------
TOTAL ASSETS $59,802 $33,286
======= =======
See accompanying notes.
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GLOBECOMM SYSTEMS INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE DATA)
DECEMBER 31, JUNE 30,
1997 1997
-------------- -------
(UNAUDITED) (1)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $14,243 $16,089
Accrued payroll and related fringe benefits 566 438
Accrued commissions 295 360
Other accrued expenses and current liabilities 408 329
Capital lease obligations 45 56
------- -------
TOTAL CURRENT LIABILITIES 15,557 17,272
Capital lease obligations 1 18
------- -------
TOTAL LIABILITIES 15,558 17,290
------- -------
COMMITMENTS
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value; 3,000,000 shares
authorized
Class A convertible - shares authorized,
issued and outstanding: none at December 31, 1997
and 172,304 at June 30, 1997 -- --
Class B convertible - shares authorized, issued
and outstanding: none at December 31, 1997 and
514,714 at June 30, 1997 -- 1
Common stock, $.001 par value; 22,000,000 shares
authorized, shares issued and outstanding:
9,081,865 at December 31, 1997 and 3,906,119 at
June 30, 1997 (5,864,120 after giving pro forma
effect to the conversion of preferred stock into
common stock) 9 4
Additional paid-in capital 50,154 21,970
Accumulated deficit (5,919) (5,979)
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TOTAL STOCKHOLDERS' EQUITY 44,244 15,996
------- -------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $59,802 $33,286
======= =======
See accompanying notes.
(1) The balance sheet at June 30, 1997 has been derived from the audited
financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
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GLOBECOMM SYSTEMS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED; IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1997 1996
----------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Revenues $ 16,269 $ 9,151 $ 30,860 $ 13,306
Costs of revenues 13,902 7,906 26,821 11,497
----------- ---------- ---------- ----------
Gross profit 2,367 1,245 4,039 1,809
----------- ---------- ---------- ----------
Operating expenses:
Selling and marketing 966 847 1,797 1,401
Research and development 304 137 584 229
General and administrative 1,153 755 2,241 1,416
----------- ---------- ---------- ----------
Total operating expenses 2,423 1,739 4,622 3,046
----------- ---------- ---------- ----------
Loss from operations (56) (494) (583) (1,237)
Interest income, net 379 56 643 70
----------- ---------- ---------- ----------
Income (loss) before
minority interests in
operations of consolidated
subsidiary 323 (438) 60 (1,167)
Minority interests in
operations of consolidated
subsidiary -- 100 -- 275
----------- ---------- ---------- ----------
Net income (loss) $ 323 $ (338) $ 60 $ (892)
=========== ========== ========== ==========
Basic earnings per share $ 0.04 $ 0.01
=========== ==========
Diluted earnings per share $ 0.03 $ 0.01
=========== ==========
Weighted Average Shares:
Basic 9,078,256 7,954,386
=========== ==========
Diluted 10,194,301 9,074,131
=========== ==========
Pro forma basic loss per
share $ (0.06) $ (0.15)
========== ==========
Shares used in computing
pro forma basic loss per
share 5,949,067 5,949,067
========== ==========
</TABLE>
See accompanying notes.
5
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<TABLE>
<CAPTION>
GLOBECOMM SYSTEMS INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS EXCEPT SHARE DATA)
PREFERRED STOCK
--------------- COMMON STOCK ADDITIONAL TOTAL
CLASS A CLASS B ------------ PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT EQUITY
------ ------ ------ ------ ------ ------ --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
June 30, 1997 172,304 $ -- 514,714 $1 3,906,119 $4 $21,970 $(5,979) $15,996
Conversion of
Preferred
Stock to (172,304) -- (514,714) (1) 1,958,060 2 (1) -- --
Common
Initial Public -- -- -- -- 3,162,500 3 27,901 -- 27,904
Offering
Exercise of -- -- -- -- 49,486 -- 201 -- 201
Options
Exercise of -- -- -- -- 5,700 -- 46 -- 46
Warrants
Options granted
to employees
and directors -- -- -- -- -- -- 37 -- 37
Net Income -- -- -- -- -- -- -- 60 60
------ ------ ------- ------ --------- ------ -------- ----------- -----------
Balance at
December 31, 1997 -- $ -- -- $-- 9,081,865 $9 $50,154 $ (5,919) $ 44,244
====== ====== ======= ====== ========= ====== ========= =========== ===========
</TABLE>
See accompanying notes.
6
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<TABLE>
<CAPTION>
GLOBECOMM SYSTEMS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
(UNAUDITED)
<S> <C> <C>
NET INCOME (LOSS) $ 60 $ (892)
OPERATING ACTIVITIES:
Adjustments to reconcile net income (loss) to cash used in
operating activities:
Depreciation and amortization 329 125
Amortization of organization costs 27 14
Stock compensation expense 37 33
Minority interests in operations of consolidated
subsidiary -- (275)
Changes in operating assets and liabilities:
Accounts receivable (10,070) (5,839)
Inventories 1,179 1,288
Prepaid expenses and other current assets (436) 11
Other assets 794 (8)
Accounts payable (1,846) 3,509
Accrued payroll and related fringe benefits 128 103
Accrued commissions and other accrued expenses 14 958
------------------------------
NET CASH USED IN OPERATING ACTIVITIES (9,784) (973)
------------------------------
INVESTING ACTIVITIES:
Purchases of investments (606) (840)
Purchases of fixed assets (2,005) (3,011)
Payment of organization costs -- (81)
Restricted cash (2,017) (384)
------------------------------
NET CASH USED IN INVESTING ACTIVITIES (4,628) (4,316)
------------------------------
FINANCING ACTIVITIES:
Proceeds from sales of common stock, net -- 275
Proceeds from initial public offering of common
stock, net 27,904 --
Proceeds from sales of preferred stock, net -- 11,222
Proceeds from exercise of warrants 46 --
Proceeds from exercise of stock options 201 --
Payments under capital leases (28) (25)
------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 28,123 11,472
------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 13,711 6,183
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 5,164 3,435
==============================
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 18,875 $ 9,618
==============================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest $ 4 $ 6
==============================
</TABLE>
See accompanying notes.
7
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Globecomm Systems Inc.
Notes to Consolidated Financial Statements
December 31, 1997
(Unaudited)
1. Initial Public Offering
On August 13, 1997, Globecomm Systems Inc. (the "Company") consummated an
initial public offering ("IPO") of 3,162,500 shares of the Company's common
stock at a price to the public of $10.00 per share. This included 412,500
shares purchased pursuant to the Underwriters' over-allotment option, which
was exercised in full on August 27, 1997. The net proceeds to the Company
amounted to $27,904,000 after the underwriters' discount and related expenses
of the offering.
The net proceeds have been invested in cash and cash equivalents, such as,
short-term debt instruments, certificates of deposit or direct or guaranteed
obligations of the United States.
2. Basis of Presentation
The accompanying unaudited financial statements have been prepared in
conformity with generally accepted accounting principles and reflect all
adjustments consisting of normal recurring adjustments which, in the opinion
of management, are necessary for a fair presentation of the results for the
periods shown. The results of operations for such periods are not necessarily
indicative of the results expected for the full fiscal year or for any future
period. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates and
assumptions.
The accompanying financial statements should be read in conjunction with
the audited financial statements of the Company for the year ended June 30,
1997 and the notes thereto contained in the Company's Registration Statement
on Form S-1, Registration No. 333-22425, filed with the Securities and
Exchange Commission on February 27, 1997, as amended.
3. Summary of Significant Accounting Policies
Basic and Diluted Earnings Per Share and Pro Forma Basic Loss Per Share
During the quarter ended December 31, 1997, the Company adopted the
provisions of Financial Accounting Standards Board Statement of Financial
Accounting Standard ("SFAS") No. 128 "Earnings Per Share". Statement 128
replaced the previously reported primary and fully diluted earnings per share
with basic and diluted earnings per share. Unlike primary earnings per share,
basic earnings per share excludes any dilutive effects of options, warrants,
and convertible securities. Diluted earnings per share is very similar to the
previously reported fully diluted earnings per share. Earnings per share
amounts for all periods presented have been restated to conform to Statement
128 requirements.
Basic earnings per share for the three and six-month periods ended December
31,1997 are based on the weighted average number of common shares outstanding
during the period.
Pro forma basic loss per share for the three and six-month periods ended
December 31, 1996 is based on the weighted average number of shares of common
stock outstanding including the conversion of the Class A and Class B
Convertible Preferred Stock into common stock, which occurred upon the
consummation of the Company's IPO. However, in accordance with Staff
Accounting Bulletin 83 of the Securities and Exchange Commission, common stock
and common stock equivalents that were issued during the 12 months preceding
the IPO at prices below the IPO price ($10.00 per share) have been included in
the Company's pro forma basic loss per share computation using the treasury
stock method and the IPO price, and treated as if they had been issued at the
Company's inception even though they were antidilutive.
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
This Quarterly Report on Form 10-Q contains certain statements of a
forward-looking nature relating to future events or the future financial
performance of the Company. Such statements are only predictions and the
actual events or results may differ materially from the results discussed in
the forward-looking statements. Factors that could cause or contribute to such
differences include those discussed below as well as those discussed in other
filings made by the Company with the Securities and Exchange Commission,
including the Company's Registration Statement on Form S-1, Registration No.
333-22425, as amended and Quarterly Reports on Form 10-Q.
OVERVIEW
The Company designs, assembles and installs satellite ground segment
systems and networks which support a wide range of satellite communications
applications, including fixed, mobile and direct broadcast services as well as
certain military applications. The Company's customers include prime
communications infrastructure contractors, government-owned PTTs, other
telecommunications carriers, producers and distributors of news and
entertainment content and other corporations. Through its subsidiary, NetSat
Express, Inc. ("NetSat Express"), the Company also offers Internet access by
satellite for businesses and organizations, corporate Intranets, and data
communication services in developing countries.
RESULTS OF OPERATIONS
Revenues. Revenues, which were derived from sales of ground segment systems
and networks, increased by $7.1 million, or 77.8% to $16.3 million and $17.6
million, or 131.9% to $30.9 million, respectively for the three and six-month
periods ended December 31, 1997 compared to comparable periods ended December
31, 1996. The increase was primarily the result of an increase in the volume
of shipments and/or completion of ground segment systems and networks
contracts.
Costs of Revenues. Costs of revenues increased by $6.0 million, or 75.8% to
$13.9 million and $15.3 million, or 133.3% to $26.8 million, respectively for
the three and six-month periods ended December 31, 1997 compared to comparable
periods ended December 31, 1996. The increase was primarily due to the
increase in the shipment and/or completion of ground segment systems and
networks contracts.
Gross Profit. Gross profit increased by $1.1 million to $2.4 million, or
90.1% for the three-month period ended December 31, 1997 from $1.2 million for
the comparable period in the preceding year. For the six-month period ended
December 31, 1997, gross profit increased by $2.2 million, or 123.3% to $4.0
million from $1.8 million for the comparable period in the preceding year. The
increase was primarily due to the increase in the shipment of ground segment
systems and networks.
Gross profit as a percentage of revenues for the three-month period was
14.5% in comparison to 13.6% for the same period in the preceding year. The
increase was due primarily to a significant negotiated contract, which
resulted in a higher gross profit margin. Gross profit as a percentage of
revenues for the six-month period ended December 31, 1997 decreased to 13.1%
from 13.6% for the same period in the preceding year. Such decrease was due
primarily to a higher percentage of revenues in the first quarter of fiscal
1998 derived from orders which were awarded through a lower margin competitive
bidding process.
Selling and Marketing. Selling and marketing expenses increased by $0.1
million, or 14.0%, to $1.0 million and $0.4 million, or 28.3% to $1.8 million,
respectively for the three and six-month periods ended December 31, 1997. The
increase was primarily due to the increase in the number of bids and proposals
prepared by the Company as a result of the increasing volume of business.
9
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Research and Development. Research and development expenses increased by
$0.2 million, or 121.9%, to $0.3 million and $0.4 million, or 155.0% to $0.6
million, respectively for the three and six-month periods ended December 31,
1997. The increase is due to an increase in development costs associated with
customizable systems.
General and Administrative. General and administrative expenses increased
by $0.4 million, or 52.7%, to $1.2 million for the three-month period ended
December 31, 1997 from $0.8 million for the same period in the preceding year,
but decreased as a percentage of revenues to 7.1% from 8.3% for the same
period in the prior year. For the six-month period ended December 31, 1997,
general and administrative expenses increased by $0.8 million, or 58.3% to
$2.2 million in comparison to $1.4 million for the same period in the
preceding year. The increase in general and administrative expenses for the
three and six-month periods resulted from an increase in costs associated with
operating a public company, personnel increases and an increase in expenses
associated with NetSat Express.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1997, the Company had working capital of $33.1 million,
including cash and cash equivalents of $18.9 million, restricted cash of $3.6
million, accounts receivable of $24.4 million and inventories of $1.1 million,
offset by $14.2 million in accounts payable and $1.3 million in accrued
expenses.
Several factors had a major effect on the Company's liquidity during the
period ended December 31, 1997. First, the net proceeds from the Company's IPO
amounted to $27.9 million after the underwriters' discount and related
expenses of the offering. Second, the increase in accounts receivable of $10.1
million due to the level of sales recorded in the later part of the second
quarter of 1998, a decrease in accounts payable of approximately $1.8 million,
offset by a decrease in inventories of $1.2 million. The third factor
affecting liquidity during the six-month period ended December 31, 1997 was
the Company's investment activities. The Company spent an additional $2.0
million in fixed asset additions, including additional improvements to
complete the Company's office and assembly-facility. In addition, the Company
increased its investment in its strategic suppliers by approximately $0.6
million during the period.
The Company's future capital requirements will depend upon many factors,
including the extent to which it is able to locate additional strategic
suppliers in whose technology it wishes to invest, the success of the
Company's marketing efforts in both the satellite ground segment and Internet
services fields, the nature and timing of customer orders and the extent to
which it must conduct research and development efforts internally. Based on
current plans, the Company believes that its existing capital resources will
be sufficient to meet its capital requirements for at least the next 12
months.
CERTAIN BUSINESS CONSIDERATIONS
LIMITED OPERATING HISTORY; HISTORY OF OPERATING LOSSES AND ACCUMULATED DEFICIT
The Company, which was formed in August 1994, has a limited operating
history upon which an evaluation of the Company can be based and has incurred
significant operating losses since its inception. The Company has financed its
operations to date primarily from the sale of equity securities and, to a
lesser degree, from stockholder loans. The Company generated its first revenue
from its ground segment systems and networks business in June 1995 and has
generated only minimal revenues from its satellite-delivered data
communications services business, which commenced operations in July 1996. The
Company incurred operating losses of $1.1 million, $2.3 million and $2.7
million during the fiscal years ended June 30, 1995, 1996 and 1997,
respectively and may incur further operating losses as it attempts to expand
its business. The Company's ability to expand its business and generate
additional revenues and positive operating and net income is dependent, in
large part, on its ability to obtain new contracts and the profitability of
such contracts, and there can be no assurance that the Company will generate
significant additional revenues or positive operating or net income. As of
December 31, 1997, the Company had an accumulated deficit of $5.9 million.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations - Liquidity and Capital Resources."
10
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INTENSE COMPETITION; LIMITED BARRIERS TO ENTRY
The markets for both ground segment systems and networks and
satellite-delivered data communications services are highly competitive. Many
of the Company's competitors have greater market presence, engineering and
marketing capabilities, and financial, technological and personnel resources
than those available to the Company. As a result, such competitors may be able
to develop and expand their products and services more quickly, adapt more
swiftly to new or emerging technologies and changes in customer requirements,
take advantage of acquisition and other opportunities more readily, and devote
greater resources to the marketing and sale of their products and services
than can the Company. In addition, there are limited barriers to entry in the
Company's markets and certain of the Company's strategic suppliers and
customers have technologies and capabilities in the Company's product areas
and could choose to compete with the Company or to replace the Company's
products or services with their own. The entry of new competitors, the
decision by a strategic ally to compete with the Company or the decision by a
customer to develop and employ in-house capability to satisfy its satellite
communications needs could have a material adverse effect on the Company's
business, financial condition and results of operations
There can be no assurance that the Company's competitors will not develop
or acquire competing products or that such products will not be offered at
significantly lower prices. In addition, current and potential competitors in
both markets in which the Company competes have established or may establish
cooperative relationships among themselves or with third parties to increase
the ability of their products and services to address the needs of the
Company's current and prospective customers. Accordingly, it is possible that
new competitors or alliances among competitors may emerge and rapidly acquire
significant market share. Increased competition is likely to result in price
reductions, reduced gross profit margins and loss of market share, any of
which would have a material adverse effect on the Company's business, results
of operations and financial condition. There can be no assurance that the
Company will be able to compete successfully against current or future
competitors or that competitive pressures will not have a material adverse
effect on the Company's business, financial condition and results of
operations.
The Company also is dependent on the continued success and development of
the satellite communications industry, which itself competes with other
technologies such as terrestrial microwave, copper wire and fiber optic
communications systems. Any failure of the satellite communications industry
to continue to develop, or any technological development which significantly
improves the capacity, cost or efficiency of such competing systems relative
to satellite systems, could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Rapid Industry
Change; Technological Obsolescence."
RELIANCE ON STRATEGIC RELATIONSHIPS
The Company is dependent on certain customers and suppliers for the
development and expansion of its ground segment system and network business.
However, such relationships are not governed by any contract and accordingly
neither the Company nor such customers or suppliers are obligated to maintain
such strategic relationships. There can be no assurance that the Company will
be able to maintain such strategic relationships, that its strategic customers
and suppliers will continue to assist the Company by developing and expanding
its business and by providing research and development expertise, or that such
strategic customers and suppliers will not actually compete with the Company
in the future. See "Intense Competition; Limited Barriers to Entry."
11
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In addition, the Company relies on the Personal Earth Station and DirecPC
technologies provided by Hughes Network Systems, Inc., a subsidiary of Hughes
Electronics Corp. ("Hughes Network Systems" or "HNS") in connection with the
planned operation of NetSat Express's satellite-delivered data communications
services business. Each project for which NetSat Express uses HNS' DirecPC
technology will require the grant of a license from HNS to NetSat Express.
Hughes Network Systems is under no obligation to grant such licenses and there
can be no assurance that NetSat Express will be able to negotiate such
licensing arrangements with Hughes Network Systems on acceptable terms, or at
all. In addition, failure to maintain a business relationship with Hughes
Network Systems would have a material adverse effect on the Company's
business, financial condition and results of operations.
Because the Company intends to provide its satellite-delivered data
communications services almost entirely in developing markets where the
Company has little or no market experience, the Company will also be dependent
on local partners in such markets to provide marketing expertise and knowledge
of the local regulatory environment in order to facilitate the acquisition of
necessary licenses and access to existing customers. The Company has not yet
formally established an alliance with a local partner. The Company's failure
to form and maintain such alliances with local partners, or the preemption or
disruption of such alliances by the actions of the Company's competitors or
otherwise, would adversely affect the Company's ability to penetrate and
compete successfully in such emerging markets. There can be no assurance that
the Company will be able to compete successfully in the future in such markets
or that competition will not have a material adverse effect on the Company's
business, financial condition and results of operations.
RISK OF CUSTOMER CONCENTRATION
The Company typically relies upon a small number of customers for a large
portion of its revenues. The Company expects that in the near term a
significant portion of its revenues will continue to be derived from one or a
limited number of customers (the identity of whom may vary from period to
period) as the Company seeks to expand its business and its customer base. The
reduction, delay, or cancellation of orders from one or more of such
significant customers would have a material adverse effect on the Company's
business, financial condition and results of operations.
RISK OF MANAGEMENT OF RAPID GROWTH
The Company has been significantly and rapidly expanding its operations
since its inception. In order to pursue successfully the opportunities
presented by the ground segment and emerging satellite-delivered
communications and Internet/intranet-infrastructure markets, the Company will
be required to continue to expand its operations. Such expansion has placed,
and is expected to continue to place, a significant strain on the Company's
personnel, management, financial and other resources. In order to manage any
future growth effectively, the Company will, among other things, be required
to attract, train, motivate and manage a significantly larger number of
employees successfully to conduct product engineering and management, product
implementation, sales activity and customer support activities; manage higher
working capital requirements; and improve its operating and financial systems.
Any failure to manage any future growth in an efficient manner and at a pace
consistent with the Company's business could have a material adverse effect on
the Company's business, financial condition and results of operations.
RISK OF FIXED-PRICE CONTRACTS
Virtually all of the Company's contracts for installation of ground segment
systems and networks are on a fixed-price basis. Profitability of such
contracts is subject to inherent uncertainties as to the cost of performance.
In addition to possible errors or omissions in making initial estimates, cost
overruns may be incurred as a result of unforeseen obstacles, including both
physical conditions and unexpected problems encountered in engineering, design
and testing. Since the Company's business may at certain times be concentrated
in a limited number of large contracts, a significant cost overrun on any one
contract could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Customer Concentration."
12
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INHERENT RISK OF INTERNATIONAL OPERATIONS
Most of the Company's revenues are derived from sales to customers outside
the United States. The Company anticipates that foreign sales will continue to
account for a significant portion of total revenues in the foreseeable future.
The Company's foreign sales are generally denominated in U.S. dollars.
Consequently, a decrease in the value of foreign currencies relative to the
U.S. dollar, such as the currency devaluations in the Pacific Rim region, may
adversely affect demand for the Company's products and services by increasing
the price of the Company's products and services in the currency of the
countries in which they are sold. Additional risks inherent in the Company's
international business activities include various and changing regulatory
requirements, costs and risks of relying upon local subcontractors for the
installation of its ground segment systems and networks, increased sales and
marketing expenses, availability of export licenses, tariffs and other trade
barriers, political and economic instability, difficulties in staffing and
managing foreign operations, potentially adverse taxes, complex foreign laws
and treaties and the possibility of difficulty in accounts receivable
collections. The recent economic and monetary crisis in the Pacific Rim
countries, including Korea, Malaysia, Thailand, Philippines, Indonesia and
other countries in the region, has resulted in uncertainty regarding the demand
in such countries for capital equipment such as the ground segment systems and
networks supplied by the Company. The Company continues to monitor the
economic conditions in the Pacific Rim region and its potential impact on
the Company. At this time it is too early to determine the effect the economic
situation in the Pacific Rim region will have on the Company's revenue growth
and results of operations. In addition, the Company is subject to the Foreign
Corrupt Practices Act (the "FCPA") which may place the Company at a
competitive disadvantage to foreign companies, which are not subject to the
FCPA. There can be no assurance that any of these factors will not have a
material adverse effect on the Company's business, financial condition and
results of operations.
EMPHASIS ON DEVELOPING MARKETS; UNCERTAIN MARKET POTENTIAL
The Company believes a substantial portion of the growth in demand for its
ground segment systems and networks and its recently launched
satellite-delivered data communications services will come from customers in
developing countries. There can be no assurance that such increases in demand
will occur or that prospective customers will accept such products and
services in sufficient quantities or at all. The degree to which the Company
is able to penetrate potential markets in developing countries will be
affected in major part by the speed with which other competing elements of the
communications infrastructure, such as telephone lines, other
satellite-delivered solutions and fiber optic cable and television cable, are
installed in the developing countries and with respect to the Company's data
communications services, on the effectiveness of the Company's local partners
in such markets. The failure to have its products and services accepted in
developing countries would have a material adverse effect on the Company's
business, financial condition and results of operations. See "Intense
Competition; Limited Barriers to Entry" and "Reliance on Strategic
Relationships."
RAPID INDUSTRY CHANGE; TECHNOLOGICAL OBSOLESCENCE
The telecommunications industry, including the satellite communications
ground segment systems and networks and data communication services
businesses, is characterized by rapid and continuous technological change.
Future technological advances in the telecommunications industry may result in
the availability of new products or services that could compete with the
satellite ground segment products and services provided by the Company or
render the Company's products and services obsolete. There can be no assurance
that the Company will be successful in developing and introducing new products
and services that meet changing customer needs or in responding to
technological changes or evolving industry standards in a timely manner, if at
all, or that services or technologies developed by others will not render the
Company's products or services noncompetitive. Any failure by the Company to
respond to changing market conditions, technological developments, evolving
industry standards or changing customer requirements, or the development of
competing technology or products that render the Company's products and
services noncompetitive or obsolete would have a material adverse effect on
the Company's business, financial condition and results of operations.
13
<PAGE>
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are coded
to accept only two digit entries in the data code field. These data code
fields will need to accept four digit entries to distinguish 21st century
dates. As a result, in less than two years, computer systems and/or software
used by many companies may need to be upgraded to comply with such "Year 2000"
requirements. Significant uncertainty exists in the software industry
concerning the potential effects associated with such compliance. Although the
Company's internal systems as well as the software it installs in its
satellite ground segment systems and networks are designed to be Year 2000
compliant, there can be no assurance that such systems and software contain
all necessary date code changes.
The Company and its customers may be affected by Year 2000 issues.
Compliance with Year 2000 requirements may disrupt the Company's ability to
continue designing, assembling and installing its satellite ground segment
systems and networks. The Company may also incur certain expenditures in
connection with Year 2000 compliance. Additionally, even if the Company's
internal systems and the software it installs in its ground segment systems
and networks are Year 2000 compliant, there can be no assurance that the
equipment the Company obtains from third-party vendors and incorporates into
its ground segment systems and networks is Year 2000 compliant. If such
equipment is not Year 2000 compliant, it could disrupt the ability of the
Company's customers to use the Company's ground segment systems and networks.
In addition, there can be no assurance that equipment operated by third
parties that interface with or contain the Company's products will timely
achieve Year 2000 compliance. Furthermore, if the Company's ground segment
systems and networks were unable to be used by the Company's customers because
of Year 2000 compliance problems, there can be no assurance that the Company's
customers will not commence litigation against the Company for such systems
and networks failure. Any of the foregoing could result in a material adverse
effect on the Company's business, financial condition and results of
operations.
DEPENDENCE UPON SUPPLIERS; SOLE AND LIMITED SOURCES OF SUPPLY
The Company currently procures most of the critical components and services
for its products from single or limited sources in connection with specific
contracts and does not otherwise carry significant inventories or have
long-term or exclusive supply contracts with its source vendors. The Company
has from time to time experienced delays in receiving products from certain of
its vendors due to quality control or manufacturing problems, shortages of
materials or components or product design difficulties. There can be no
assurance that similar problems will not recur or that replacement products
will be available when needed at commercially reasonable rates, or at all. If
the Company were to change certain of its vendors, the Company would be
required to perform additional testing procedures upon the components supplied
by such new vendors, which could prevent or delay product shipments.
Additionally, prices could increase significantly in connection with changes
of vendors. Any inability of the Company to obtain timely deliveries of
materials of acceptable quality or timely services, or any significant
increase in the prices of materials or services, could have a material adverse
effect on the Company's business, financial condition and results of
operations. See "Risk of Fixed-Price Contracts" and "Quarterly Fluctuations".
QUARTERLY FLUCTUATIONS
The Company may in the future experience significant quarter to quarter
fluctuations in its results of operations, which may result in volatility in
the price of the Company's Common Stock. Quarterly results of operations may
fluctuate as a result of a variety of factors, including the timing of the
initiation and completion of contracts, the demand for the Company's products
and services, the introduction of new or enhanced products and services by the
Company or its competitors, market acceptance of new products and services,
the mix of revenues between custom-built satellite communications systems and
networks designed for its customers and standard installations provided to its
customers, the growth of demand for Internet infrastructure-based products and
services in developing countries, the timing of significant marketing
programs, the extent and timing of the hiring of additional personnel,
competitive conditions in the industry and general economic conditions in the
U.S. and abroad, such as the currency devaluations in the Pacific Rim region.
See "Inherent Risk of International Operations". Due to the foregoing factors,
it is likely that in one or more future quarters the Company's operating
results will be below the expectations of public market analysts and investors.
Such an event could have a material adverse effect on the price of the
Company's Common Stock.
14
<PAGE>
RISK OF FAILURE TO COMPLY WITH GOVERNMENT REGULATIONS
The Company is subject to various federal laws and regulations which may
have negative effects on the Company. The Company intends to erect a teleport
in Hauppauge, New York, which will be subject to FCC Rules and Regulations.
The Company will be required to obtain a license from the FCC for both
domestic and international operation of the teleport and must operate it in
compliance with FCC Rules and Regulations for the term of the license. There
can be no assurance that the Company will be able to obtain or maintain the
necessary license.
Under the FCC Rules and Regulations, non-U.S. citizens or their
representatives, foreign governments, or corporations otherwise subject to
control by non-U.S. citizens, may not own more than 20% of a licensee
directly, or, if the FCC finds it consistent with the public interest, may not
own more than 25% of the parent of a licensee. Non-U.S. citizens may not serve
as officers of a licensee or as members of a licensee's board of directors,
although the FCC may waive this requirement in whole or in part. Failure to
comply with these requirements may result in the FCC issuing an order to the
entity requiring divestiture of alien ownership to bring the entity into
compliance with the FCC Rules and Regulations. In addition, fines, a denial of
renewal or revocation of the license are possible. The Company has no
knowledge of any present foreign ownership which would result in a violation
of the FCC Rules and Regulations, but there can be no assurance that foreign
holders will not in the future hold more than 20% or 25% of the Common Stock
of the Company.
Regulatory schemes in countries in which the Company may seek to provide
its satellite-delivered data communications services may impose impediments on
the Company's operations. Certain countries in which the Company intends to
operate have telecommunications laws and regulations that do not currently
contemplate technical advances in broadcast technology such as
Internet/intranet transmission by satellite. There can be no assurance that
the present regulatory environment in any such country will not be changed in
a manner which may have a material adverse impact on the Company's business.
The Company or its local partners typically must obtain authorization for each
country in which the Company provides its satellite-delivered data
communications services. Although the Company believes that it or its local
partners will be able to obtain the requisite licenses and approvals from the
countries in which the Company intends to provide service, the regulatory
schemes in each country are different and thus there may be instances of
noncompliance of which the Company is not aware. Although the Company believes
these regulatory schemes will not prevent the Company from pursuing its
business plan, there can be no assurance such licenses and approvals are or
will remain sufficient in the view of foreign regulatory authorities, or that
necessary licenses and approvals will be granted on a timely basis in all
jurisdictions in which the Company wishes to offer its services or that
restrictions applicable thereto will not be unduly burdensome.
The sale of the Company's ground segment systems and networks outside the
United States is subject to compliance with the regulations of the United
States Export Administration Regulations. The absence of comparable
restrictions on competitors in other countries may adversely affect the
Company's competitive position. In addition, in order to ship its products
into European Union countries, the Company must satisfy certain technical
requirements. If the Company were unable to comply with such requirements with
respect to a significant quantity of the Company's products, the Company's
sales in Europe could be restricted, which could have a material adverse
effect on the Company's business, financial condition and results of
operations.
15
<PAGE>
DEPENDENCE ON KEY PERSONNEL
The Company's future success depends to a significant extent on its
executive officers and certain technical, managerial and marketing personnel.
The loss of the services of any of these individuals or group of individuals
could have a material adverse effect on the Company's business, financial
condition and results of operations. The Company maintains term life insurance
in the amount of $1.0 million on David E. Hershberg, the Chairman and Chief
Executive Officer of the Company and term life insurance in the amount of
$500,000 for each of Messrs. Miller, DiCicco, Woodring, Yablonski and Melfi,
all of whom are officers of the Company. The Company believes that its future
success also will depend significantly upon its ability to attract, motivate
and retain additional highly skilled technical, managerial and marketing
personnel. Competition for such personnel is intense, and there can be no
assurance that the Company will be successful in attracting, assimilating and
retaining the personnel it requires to grow and operate profitably.
PROPRIETARY TECHNOLOGY; RISK OF INFRINGEMENT
The Company relies heavily on the technological and creative skills of its
personnel, new product developments, computer programs and designs, frequent
product enhancements, reliable product support and proprietary technological
expertise in maintaining its competitive position, and lacks patent protection
for its products and services. There can be no assurance that others will not
independently develop or acquire substantially equivalent techniques or
otherwise gain access to the Company's proprietary and confidential
technological expertise or disclose such technologies or that the Company can
ultimately protect its rights to such proprietary technological expertise.
The Company generally relies on confidentiality agreements with its
consultants, key employees and sales representatives to protect its
proprietary technological expertise, and generally controls access to and
distribution of its technology, software and other proprietary information.
Despite these precautions, there can be no assurance that such agreements will
not be breached, that the Company will have adequate remedies for any such
breach or that a third party will not copy or otherwise obtain and use the
Company's products or technology without authorization or develop similar
products or technology independently. Failure by the Company to maintain
protection of its proprietary technological expertise for any reason could
have a material adverse effect on the Company's business, financial condition
and results of operations.
The Company is subject to the risk of alleged infringement of intellectual
property rights of others. Most of the Company's officers and employees were
formerly officers or employees of other companies in the industry. The Company
believes that neither it nor its officers or employees have violated any
agreements with, or obligations to, prior employers. Although the Company is
not aware of any pending or threatened infringement claims with respect to the
Company's current or future products, there can be no assurance that third
parties, including previous employers, will not assert such claims or that any
such claims will not require the Company to enter into license arrangements or
result in protracted and costly litigation, regardless of the merits of such
claims. No assurance can be given that any necessary licenses will be
available or that, if available, such licenses can be obtained on commercially
reasonable terms. Furthermore, litigation may be necessary to enforce or
protect the Company's intellectual property rights, to determine the validity
and scope of the proprietary rights of others, or to defend against claims of
infringement or invalidity. Such litigation could result in substantial costs
and diversion of resources and could have a material adverse effect on the
Company's business, financial condition and results of operations.
The Company currently has three patent applications pending in the United
States and a Patent Cooperation Treaty ("PCT") application, corresponding to
one of the United States applications, is pending in a number of foreign
jurisdictions. The Company also intends to seek further patents on its
technology, if appropriate. There can be no assurance that patents will issue
from any of the Company's pending or any future applications or that any
claims allowed from such applications will be of sufficient scope or strength,
or be issued in all countries where the Company's products can be sold, to
provide meaningful protection or any commercial advantage to the Company.
Also, competitors of the Company may be able to design around the Company's
patents. The laws of certain foreign countries in which the Company's products
are or may be developed, manufactured or sold may not protect the Company's
products or intellectual property rights to the same extent as do the laws of
the United States and thus make the possibility of piracy of the Company's
technology and products more likely.
16
<PAGE>
The Company has filed applications for trademark registration of Globecomm
Systems Inc. in the United States and of NetSat Express in the United States,
Singapore, the European Union, the Russian Federation and Brazil, and intends
to seek registration of other trademarks in the future. There can be no
assurance that registrations will be granted from any of the Company's pending
or future applications, or that any registrations that are granted to the
Company will prevent others from using similar trademarks in connection with
related goods and services.
RISK OF CONCENTRATED OWNERSHIP
As of February 6, 1998, the Company's officers and directors, and their
affiliates beneficially own approximately 2,193,003 shares, constituting
approximately 23.3% of the Company's outstanding Common Stock. These
stockholders, if acting together, may be able to exert significant influence
over the election of directors and other corporate actions requiring
stockholder approval.
POSSIBLE VOLATILITY OF STOCK PRICE
The market price of the Company's Common Stock could be subject to wide
fluctuations in response to quarterly variations in operating results,
announcements of technological innovations or new products by the Company or
its competitors, acceptance of satellite communication services in developing
countries, and other events or factors. In addition, the stock market has
experienced extreme price and volume fluctuations, which have affected the
market price of securities of many companies in the telecommunications and
high technology industries. These broad market fluctuations may adversely
affect the market price of the Company's Common Stock. See "Quarterly
Fluctuations."
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
The effective date of the Company's first registration statement (the
"Registration Statement") filed on Form S-1 (Registration No. 33-22425)
under the Securities Act of 1933, as amended, was August 7, 1997. The
class of securities registered was Common Stock. The offering commenced
on August 8, 1997 and all securities were sold in the offering. The
managing underwriters for the offering were PaineWebber Incorporated
and C.E. Unterberg, Towbin.
Pursuant to the Registration Statement, the Company registered and sold
3,162,500 shares of Common Stock for an aggregate offering price of
$31,625,000.
The Company incurred total expenses in the offering of $3,721,000 of
which $2,214,000 represented underwriting discounts and commissions and
$1,507,000 represented other expenses. All of such expenses were direct
or indirect payments to others. The net offering proceeds to the
Company after deducting the total expenses were $27,904,000.
From the effective date of the Registration Statement to December 31,
1997, the approximate amount of net offering proceeds used were
$2,531,000 to fund capital expenditures and investments in strategic
suppliers and $12,343,000 for working capital purposes, increased
selling and marketing efforts, and increased internal research and
development expenses. All of such payments were direct or indirect
payments to others.
17
<PAGE>
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Company's Annual Meeting of Stockholders was held on November
13, 1997 (the "Annual Meeting").
(b) The matters voted upon at the Annual Meeting and the results of the
voting were as follows:
(i) The following individuals were elected by the Stockholders to
serve as Directors:
Board Member Votes for Votes Withheld
------------ --------- --------------
Thomas A. DiCicco 6,893,510 750
Benjamin Duhov 6,893,510 750
Herman Fialkov 6,893,610 650
Shelley A. Harrison 6,893,610 650
David E. Hershberg 6,881,470 12,790
Kenneth A. Miller 6,893,610 650
A. Robert Towbin 6,893,610 650
C.J. Waylan 6,893,610 650
Donald G. Woodring 6,893,510 750
Stephen C. Yablonski 6,893,610 650
(ii) The appointment of Ernst & Young LLP as independent auditors
of the Company to serve for the year ending June 30, 1998 was
voted upon as follows: 6,875,145 shares voted for; 7,343 shares
voted against; and 11,772 shares abstaining.
Item 5. Other Information
None
Item 6. Exhibits and Report on Form 8-K
(a) Exhibits
Exhibit No.
- -----------
3.1 Form of Amended and Restated Certificate of Incorporation (incorporated
by reference to exhibit 3.2 to the Company's Registration Statement).
3.2 Form of Amended and Restated By-Laws of the Registrant (incorporated by
reference to exhibit 3.4 to the Company's Registration Statement).
4.1 Specimen Common Stock Certificate (incorporated by reference to exhibit
4.1 to the Company's Registration Statement).
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.
4.3 Form of Registration Rights Agreement dated as of February 1997
(incorporated by reference to exhibit 10.1 to the Company's Registration
Statement).
18
<PAGE>
4.4 Form of Registration Rights Agreement dated May 30, 1996 (incorporated
by reference to exhibit 10.2 to the Company's Registration Statement).
4.5 Form of Registration Rights Agreement dated December 31, 1996, as
amended (incorporated by reference to exhibit 10.3 to the Company's
Registration Statement).
10.4 Letter Agreement for purchase and sale of 199,500 shares of Common Stock
dated November 9, 1995 between the Registrant and Thomson-CSF
(incorporated by reference to exhibit 10.4 to the Company's Registration
Statement).
10.5 Investment Agreement dated February 12, 1996 by and between Shiron
Satellite Communications (1996) Ltd. and the Registrant (incorporated by
reference to exhibit 10.5 to the Company's Registration Statement).
10.6* Stock Purchase Agreement dated as of August 30, 1996 by and between
C-Grams Unlimited Inc. and the Registrant (incorporated by reference to
exhibit 10.6 to the Company's Registration Statement).
10.7 Memorandum of Understanding dated December 18, 1996 by and between
NetSat Express, Inc. and Applied Theory Communications, Inc.
(incorporated by reference to exhibit 10.7 to the Company's Registration
Statement).
10.8 Stock Purchase Agreement dated as of August 23, 1996 by and between
NetSat Express, Inc. and Hughes Network Systems, Inc. (incorporated by
reference to exhibit 10.8 to the Company's Registration Statement).
10.9 Employment Agreement dated as of January 27, 1997 between the Registrant
and David E. Hershberg (incorporated by reference to exhibit 10.9 to the
Company's Registration Statement).
10.10 Employment Agreement dated as of January 27, 1997 between the Registrant
and Kenneth A. Miller (incorporated by reference to exhibit 10.10 to the
Company's Registration Statement).
10.11 Purchase and Sale Agreement, 45 Oser Avenue, Hauppauge, New York, dated
December 12, 1996 by and between Eaton Corporation and the Registrant
(incorporated by reference to exhibit 10.13 to the Company's
Registration Statement).
10.12 1997 Stock Incentive Plan (incorporated by reference to exhibit 10.14 to
the Company's Registration Statement).
27 Financial Data Schedule.
- ----------
* Confidential treatment granted
(b) Reports on Form 8-K
No reports on Form 8-K.
19
<PAGE>
GLOBECOMM SYSTEMS, INC.
Exhibit Index
Exhibit No.
- -----------
3.1 Form of Amended and Restated Certificate of Incorporation (incorporated
by reference to exhibit 3.2 to the Company's Registration Statement).
3.2 Form of Amended and Restated By-Laws of the Registrant (incorporated by
reference to exhibit 3.4 to the Company's Registration Statement).
4.1 Specimen Common Stock Certificate (incorporated by reference to exhibit
4.1 to the Company's Registration Statement).
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.
4.3 Form of Registration Rights Agreement dated as of February 1997
(incorporated by reference to exhibit 10.1 to the Company's Registration
Statement).
4.4 Form of Registration Rights Agreement dated May 30, 1996 (incorporated
by reference to exhibit 10.2 to the Company's Registration Statement).
4.5 Form of Registration Rights Agreement dated December 31, 1996, as
amended (incorporated by reference to exhibit 10.3 to the Company's
Registration Statement).
10.4 Letter Agreement for purchase and sale of 199,500 shares of Common Stock
dated November 9, 1995 between the Registrant and Thomson-CSF
(incorporated by reference to exhibit 10.4 to the Company's Registration
Statement).
10.5 Investment Agreement dated February 12, 1996 by and between Shiron
Satellite Communications (1996) Ltd. and the Registrant (incorporated by
reference to exhibit 10.5 to the Company's Registration Statement).
10.6* Stock Purchase Agreement dated as of August 30, 1996 by and between
C-Grams Unlimited Inc. and the Registrant (incorporated by reference to
exhibit 10.6 to the Company's Registration Statement).
10.7 Memorandum of Understanding dated December 18, 1996 by and between
NetSat Express, Inc. and Applied Theory Communications, Inc.
(incorporated by reference to exhibit 10.7 to the Company's Registration
Statement).
10.8 Stock Purchase Agreement dated as of August 23, 1996 by and between
NetSat Express, Inc. and Hughes Network Systems, Inc. (incorporated by
reference to exhibit 10.8 to the Company's Registration Statement).
10.9 Employment Agreement dated as of January 27, 1997 between the Registrant
and David E. Hershberg (incorporated by reference to exhibit 10.9 to the
Company's Registration Statement).
10.10 Employment Agreement dated as of January 27, 1997 between the Registrant
and Kenneth A. Miller (incorporated by reference to exhibit 10.10 to the
Company's Registration Statement).
10.11 Purchase and Sale Agreement, 45 Oser Avenue, Hauppauge, New York, dated
December 12, 1996 by and between Eaton Corporation and the Registrant
(incorporated by reference to exhibit 10.13 to the Company's
Registration Statement).
10.12 1997 Stock Incentive Plan (incorporated by reference to exhibit 10.14
to the Company's Registration Statement).
27 Financial Data Schedule.
* Confidential treatment granted
20
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
------------------------
(Registrant)
Date: February 12, 1998 /s/ David E. Hershberg
-----------------------
David E. Hershberg
Chief Executive Officer and
Chairman of the Board of
Directors
Date: February 12, 1998 /s/ Andrew C. Melfi
---------------------
Andrew C. Melfi
Chief Financial Officer
(Principal Financial and
Accounting Officer)
21
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Globecomm Systems Inc. Financial Statements, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C> <C>
<MULTIPLIER> 1,000
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> JUN-30-1998 JUN-30-1998
<PERIOD-END> DEC-31-1997 DEC-31-1997
<CASH> 18,875 18,875
<SECURITIES> 0 0
<RECEIVABLES> 24,420 24,420
<ALLOWANCES> 0 0
<INVENTORY> 1,114 1,114
<CURRENT-ASSETS> 48,706 48,706
<PP&E> 9,604 9,604
<DEPRECIATION> 777 777
<TOTAL-ASSETS> 59,802 59,802
<CURRENT-LIABILITIES> 15,558 15,558
<BONDS> 0 0
0 0
0 0
<COMMON> 9 9
<OTHER-SE> 44,235 44,235
<TOTAL-LIABILITY-AND-EQUITY> 59,802 59,802
<SALES> 16,269 30,860
<TOTAL-REVENUES> 16,269 30,860
<CGS> 13,902 26,821
<TOTAL-COSTS> 13,902 26,821
<OTHER-EXPENSES> 2,423 4,622
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 2 4
<INCOME-PRETAX> 323 60
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 323 60
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 323 60
<EPS-PRIMARY> 0.04 0.01
<EPS-DILUTED> 0.03 0.01
</TABLE>
