<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 March 31, 1998
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
---------
Globecomm Systems Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 11-3225567
- ------------------------------ ----------------------------------
(State or other jurisdiction of I.R.S. Employer Identification No.)
incorporation or organization)
45 Oser Avenue, Hauppauge, New York 11788
- ------------------------------------------- -----------------------------
(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: 9,137,408 shares of
the Company's Common Stock, $.001 par value, were outstanding as of May 8,
1998.
1
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GLOBECOMM SYSTEMS INC.
Index to March 31, 1998 Form 10-Q
<TABLE>
<CAPTION>
Page
Part I -- Financial Information ----
<S> <C> <C>
Item 1. Financial Statements........................................................................3
Consolidated Balance Sheets -- March 31, 1998 and June 30, 1997................... .........3
Consolidated Statements of Operations -- Three and Nine Month Periods Ended
March 31, 1998 and 1997...................................................................5
Consolidated Statement of Changes in Stockholders' Equity -- Nine Month Period
Ended March 31, 1998......................................................................6
Consolidated Statements of Cash Flows -- Nine Months Ended March 31,
1998 and 1997.............................................................................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..........................................................................18
Item 2. Changes in Securities and Use of Proceeds..................................................18
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
</TABLE>
2
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PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GLOBECOMM SYSTEMS INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1998 1997
------------------------------------------
(UNAUDITED) (1)
Assets
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 20,676 $ 5,164
Restricted cash 4,424 1,537
Accounts receivable 19,304 14,350
Inventories, net 1,503 2,293
Prepaid expenses and other current assets 787 307
------------------------------------------
TOTAL CURRENT ASSETS 46,694 23,651
Fixed assets, net 9,393 7,151
Investments 2,129 1,308
Other assets 266 1,176
------------------------------------------
TOTAL ASSETS $ 58,482 $ 33,286
==========================================
</TABLE>
See accompanying notes.
3
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GLOBECOMM SYSTEMS INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1998 1997
------------------------------------------
(UNAUDITED) (1)
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable $ 12,372 $ 16,089
Accrued payroll and related fringe benefits 463 438
Accrued commissions 252 360
Other accrued expenses and current liabilities 394 329
Capital lease obligations 32 56
------------------------------------------
TOTAL CURRENT LIABILITIES 13,513 17,272
Capital lease obligations - 18
------------------------------------------
TOTAL LIABILITIES 13,513 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 March 31, 1998 and 172,304 at June 30, 1997 - -
Class B convertible - shares authorized, issued and outstanding:
none at March 31, 1998 and 514,714 at June 30, 1997 - 1
Common stock, $.001 par value; 22,000,000 shares authorized, shares issued
and outstanding: 9,108,766 at March 31, 1998 and 3,906,119 at June 30,
1997 9 4
Additional paid-in capital 50,310 21,970
Accumulated deficit (5,350) (5,979)
------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 44,969 15,996
------------------------------------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 58,482 $ 33,286
==========================================
</TABLE>
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.
4
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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 NINE MONTHS ENDED
MARCH 31, MARCH 31, MARCH 31, MARCH 31,
1998 1997 1998 1997
---------------------------------------- ----------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 16,261 $ 8,226 $ 47,121 $ 21,532
Costs of revenues 13,294 7,239 40,115 18,736
---------------------------------------- ----------------------------------------
Gross profit 2,967 987 7,006 2,796
---------------------------------------- ----------------------------------------
Operating expenses:
Selling and marketing 1,167 815 2,964 2,216
Research and development 287 122 871 351
General and administrative 1,235 1,118 3,476 2,534
---------------------------------------- ----------------------------------------
Total operating expenses 2,689 2,055 7,311 5,101
---------------------------------------- ----------------------------------------
Income (loss) from operations 278 (1,068) (305) (2,305)
Interest income, net 291 117 934 187
---------------------------------------- ----------------------------------------
Income (loss) before minority
interests in operations of
consolidated subsidiary 569 (951) 629 (2,118)
Minority interests in operations of
consolidated subsidiary - - - 275
---------------------------------------- ----------------------------------------
Net income (loss) $ 569 $ (951) $ 629 $ (1,843)
======================================== ========================================
Basic earnings per share $ 0.06 $ 0.08
==================== =====================
Diluted earnings per share $ 0.06 $ 0.07
==================== =====================
Weighted Average Shares:
Basic 9,095,003 8,331,025
==================== =====================
Diluted 9,950,154 9,309,639
==================== =====================
Pro forma basic loss per share $ (0.16) $ (0.32)
==================== ===================
Pro forma diluted loss per share $ (0.16) $ (0.32)
==================== ===================
Shares used in computing pro forma
loss per share
Basic 5,805,532 5,752,888
==================== ===================
Diluted 5,886,757 5,834,113
==================== ===================
</TABLE>
See accompanying notes.
5
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GLOBECOMM SYSTEMS INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
PREFERRED STOCK
---------------
CLASS A CLASS B COMMON STOCK ADDITIONAL TOTAL
----------------- ----------------- --------------- 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
Common (172,304) - (514,714) (1) 1,958,060 2 (1) - -
Initial Public
Offering - - - - 3,162,500 3 27,901 - 27,904
Exercise of
Options - - - - 75,287 - 329 - 329
Exercise of
Warrants - - - - 6,800 - 55 - 55
Options
granted to
employees
and directors - - - - - - 56 - 56
Net Income - - - - - - - 629 629
----------------------------------------------------------------------------------------------------------
Balance at
March 31,
1998 - $ - - $ - 9,108,766 $9 $50,310 $(5,350) $44,969
==========================================================================================================
</TABLE>
See accompanying notes
6
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GLOBECOMM SYSTEMS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31, MARCH 31,
1998 1997
------------------------------------------
(UNAUDITED)
<S> <C> <C>
NET INCOME (LOSS) $ 629 $ (1,843)
OPERATING ACTIVITIES:
Adjustments to reconcile net income (loss) to cash used in operating activities:
Depreciation and amortization 510 244
Amortization of organization costs 40 21
Stock compensation expense 56 56
Minority interests in operations of consolidated subsidiary - (275)
Changes in operating assets and liabilities:
Accounts receivable (4,954) (6,158)
Inventories 790 127
Prepaid expenses and other current assets (480) (362)
Other assets 870 (8)
Accounts payable (3,717) 3,433
Accrued payroll and related fringe benefits 25 25
Accrued commissions and other accrued expenses (43) 290
------------------------------------------
NET CASH USED IN OPERATING ACTIVITIES (6,274) (4,450)
------------------------------------------
INVESTING ACTIVITIES:
Purchases of investments (821) (898)
Purchases of fixed assets (2,752) (3,964)
Payment of organization costs - (81)
Restricted cash (2,887) (260)
------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (6,460) (5,203)
------------------------------------------
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 - 12,046
Proceeds from issuance of warrants - 562
Proceeds from exercise of warrants 55 -
Proceeds from exercise of stock options 329 -
Repayment of loan to stockholder - (315)
Payments under capital leases (42) (41)
------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 28,246 12,527
------------------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 15,512 2,874
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 5,164 3,435
------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 20,676 $ 6,309
==========================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest $ 5 $ 50
==========================================
</TABLE>
See accompanying notes.
7
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Globecomm Systems Inc.
Notes to Consolidated Financial Statements
March 31, 1998
(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 nine-month periods ended March
31,1998 are based on the weighted average number of common shares outstanding
during the period.
8
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Pro forma basic loss per share for the three and nine-month periods ended
March 31, 1997 is based on the weighted average number of shares of common
stock outstanding including the conversion of the Class A and Class B
Convertible Preferred Stock into common stock, which occurred upon the
consummation of the Company's IPO. However, in accordance with Staff Accounting
Bulletin 98 of the Securities and Exchange Commission, options to purchase
common stock for nominal consideration have been reflected in diluted loss per
share for all periods presented in a manner similar to a stock split, even if
anti-dilutive.
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 mainly derived from sales of ground segment
systems and networks, increased by $8.0 million, or 97.7% to $16.3 million and
increased by $25.6 million, or 118.8% to $47.1 million, respectively, for the
three and nine-month periods ended March 31, 1998 compared to comparable
periods ended March 31, 1997. The increase was primarily the result of revenues
generated by a significant negotiated contract for a satellite and cellular
telecommunications network for a customer in Africa.
Costs of Revenues. Costs of revenues increased by $6.1 million, or 83.6%
to $13.3 million and increased by $21.4 million, or 114.1% to $40.1 million,
respectively, for the three and nine-month periods ended March 31, 1998
compared to comparable periods ended March 31, 1997. The increase was primarily
due to the costs incurred with respect to the negotiated contract in Africa, as
well as an increase in the shipment and/or completion of other ground segment
systems and networks contracts.
Gross Profit. Gross profit increased by $2.0 million or 200.6% to $3.0
million, for the three-month period ended March 31, 1998 from $1.0 million for
the comparable period in the preceding year. For the nine-month period ended
March 31, 1998, gross profit increased by $4.2 million, or 150.6% to $7.0
million from $2.8 million for the comparable period in the preceding year. The
increase was primarily due to the margin on the negotiated contract in Africa
and the increase in the shipment of ground segment systems and networks.
9
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Gross profit as a percentage of revenues for the three-month period ended
March 31, 1998 was 18.2% in comparison to 12.0% 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 nine-month period ended March 31, 1998 increased
to 14.9% from 13.0% for the same period in the preceding year. Such increase
was due primarily to a significant negotiated contract, which resulted in a
higher gross profit margin in the second and third quarters of Fiscal 1998.
Selling and Marketing. Selling and marketing expenses increased by $0.4
million, or 43.2%, to $1.2 million and increased by $0.7 million, or 33.8% to
$3.0 million, respectively, for the three and nine-month periods ended March
31, 1998. The increase was primarily due to the increase in the number of bids
and proposals prepared by the Company.
Research and Development. Research and development expenses increased by
$0.2 million, or 135.2%, to $0.3 million and increased by $0.5 million, or
148.1% to $0.9 million, respectively, for the three and nine-month periods
ended March 31, 1998. The increase is due to an increase in development costs
associated with customizable systems.
General and Administrative. General and administrative expenses increased
by $0.1 million, or 10.5%, to $1.2 million for the three-month period ended
March 31, 1998 from $1.1 million for the same period in the preceding year, but
decreased as a percentage of revenues to 7.6% from 13.6% for the same period in
the prior year. For the nine-month period ended March 31, 1998, general and
administrative expenses increased by $0.9 million, or 37.2% to $3.5 million in
comparison to $2.5 million for the same period in the preceding year. The
increase in general and administrative expenses for the three and nine-month
periods resulted from an increase in legal and other costs associated with
operating a public company and an increase in personnel and related expenses.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1998, the Company had working capital of $33.2 million,
including cash and cash equivalents of $20.7 million, restricted cash of $4.4
million, accounts receivable of $19.3 million, inventories of $1.5 million and
prepaid and other current assets of $0.8 million, offset by $12.4 million in
accounts payable and $1.1 million in accrued expenses.
Several factors had a major effect on the Company's liquidity during the
nine month period ended March 31, 1998. 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, accounts receivable increased by $5.0
million due to the increase in the level of sales, accounts payable
decreased by approximately $3.7 million, inventories decreased by $0.8 million.
The third factor affecting liquidity during the nine-month period ended
March 31, 1998 was the Company's investment activities. The Company spent
an additional $2.8 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 $0.8 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, the extent to which it must
conduct research and development efforts internally and potential acquisitions
of complementary businesses, products or technologies. 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.
10
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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 has reported two consecutive quarters of net income.
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 continue to report quarterly or annual positive operating or net
income. As of March 31, 1998, the Company had an accumulated deficit of $5.4
million. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources."
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
difficult economic conditions in the Pacific Rim region and other international
markets and its potential impact on the Company. In the short term, continuing
to overcome continued delays in bookings from the Pacific Rim and other
international markets will be a significant challenge to the Company. 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.
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, delays in the booking of
new 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
11
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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 difficult economic conditions and currency devaluations in
the Pacific Rim region and other international markets. 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.
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
12
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strategic customers and suppliers will not actually compete with the Company
in the future. See "Intense Competition; Limited Barriers to Entry."
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
13
<PAGE>
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."
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.
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
14
<PAGE>
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".
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 has obtained certain licenses 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 additional licenses that may
be required or maintain the necessary licenses.
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
15
<PAGE>
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.
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
16
<PAGE>
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.
The Company has filed applications for trademark registration of Globecomm
Systems Inc. in the United States, China, the European Union and the Russian
Federation 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 May 8, 1998, the Company's officers and directors, and their
affiliates beneficially own approximately 2,226,420 shares, constituting
approximately 23.4% 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."
17
<PAGE>
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.
333-22425) 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 March 31,
1998, the approximate amount of net offering proceeds used were
$2,672,000 to fund capital expenditures and investments in strategic
suppliers and $12,613,000 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.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
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: May 12, 1998 /s/ David E. Hershberg
-----------------------
David E. Hershberg
Chief Executive Officer and
Chairman of the Board of Directors
Date: May 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>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> JUN-30-1998 JUN-30-1998
<PERIOD-END> MAR-31-1998 MAR-31-1998
<CASH> 20,676 20,676
<SECURITIES> 0 0
<RECEIVABLES> 19,304 19,304
<ALLOWANCES> 0 0
<INVENTORY> 1,503 1,503
<CURRENT-ASSETS> 46,694 46,694
<PP&E> 10,352 10,352
<DEPRECIATION> 959 959
<TOTAL-ASSETS> 58,482 58,482
<CURRENT-LIABILITIES> 13,513 13,513
<BONDS> 0 0
0 0
0 0
<COMMON> 9 9
<OTHER-SE> 50,301 50,301
<TOTAL-LIABILITY-AND-EQUITY> 58,482 58,482
<SALES> 16,261 47,121
<TOTAL-REVENUES> 16,261 47,121
<CGS> 13,294 40,115
<TOTAL-COSTS> 13,294 40,115
<OTHER-EXPENSES> 2,689 7,311
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 4
<INCOME-PRETAX> 569 629
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 569 629
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 569 629
<EPS-PRIMARY> 0.06 0.08
<EPS-DILUTED> 0.06 0.07
</TABLE>
