<PAGE>


                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 10-K/A

(Mark One)

          [X]  Annual Report Pursuant to Section 13 or 15(d) of the Securities
               Exchange Act of 1934 [No Fee Required] For the Fiscal Year Ended
               June 30, 2001.


          [ ] Transition Report Pursuant to Section 13 or 15(d) of the
              Securities Exchange Act of 1934 [No Fee Required] For the
              transition period from _____________ to ____________

                           Commission File No. 0-27206
                             SPACEHAB, Incorporated
                                300 D Street, SW
                                    Suite 814
                             Washington, D.C. 20024
                                 (202) 488-3500

       Incorporated in the              IRS Employer Identification
       State of Washington              Number 91-1273737

        Securities Registered pursuant to Section 12(b) of the Act: None
           Securities Registered pursuant to Section 12(g) of the Act:

         Title of Each Class                           Name of Each Exchange
         Common Stock                                  on which Registered
         (no par value)                                NASDAQ National Market

         Number of shares of Common Stock (no par value) outstanding as of
August 23, 2001:11,528,145. Aggregate market value of Common Stock (no par
value) held by non-affiliates of the registrant on August 19, 2001, based upon
the closing price of the Common Stock on the Nasdaq National Market of $1.91 was
approximately $22,018,757.

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

YES_X_  NO ___.


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

<PAGE>

Item 8.  Financial Statements and Supplementary Data

(As amended October 17, 2001, to include signature on Report of Independent
Auditors).

Report of Independent Auditors

The Board of Directors
SPACEHAB, Incorporated and Subsidiaries

We have audited the accompanying consolidated balance sheet of SPACEHAB,
Incorporated and subsidiaries (the Company) as of June 30, 2001, and the related
consolidated statements of income, shareholders' equity, and cash flows for the
year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of SPACEHAB,
Incorporated and subsidiaries at June 30, 2001, and the consolidated results of
their operations and their cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As more fully described in Note 1, the
Company has incurred significant losses from operations, negative cash flows and
has a working capital deficiency. In addition, the Company has not complied with
certain covenants of loan agreements with banks. These conditions raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 1. The
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the outcome of this
uncertainty.


                                                   /s/ Ernst & Young LLP

McLean, Virginia
October 12, 2001

                                       21

<PAGE>

Report of Independent Auditors

The Board of Directors
SPACEHAB, Incorporated and Subsidiaries:

         We have audited the accompanying consolidated balance sheet of
SPACEHAB, Incorporated and subsidiaries (the Company) as of June 30, 2000, and
the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the years in the two-year period ended June 30, 2000.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

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

         In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of SPACEHAB,
Incorporated and subsidiaries as of June 30, 2000, and the results of their
operations and their cash flows for each of the years in the two-year period
ended June 30, 2000, in conformity with accounting principles generally
accepted in the United States of America.

                                                                  /s/ KPMG LLP
                                                                      KPMG LLP

McLean, Virginia
August 31, 2000

                                       22

<PAGE>

SPACEHAB, INCORPORATED AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except share data)

<TABLE>
<CAPTION>


                                                                                                       June 30,
                                                                                                ------------------------
Assets                                                                                                2001         2000
------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                 <C>           <C>

Current assets:
     Cash and cash equivalents                                                                  $       34   $    6,949
     Accounts receivable, net  (note 4)                                                             17,358       25,798
     Prepaid expenses and other current assets                                                       1,381        2,328
------------------------------------------------------------------------------------------------------------------------

Total current assets                                                                                18,773       35,075
------------------------------------------------------------------------------------------------------------------------
Property and equipment:
     Flight assets                                                                                 159,400      106,950
     Module improvements in progress                                                                24,188       66,066
     Payload processing facilities                                                                  40,192       29,398
     Furniture, fixtures equipment and leasehold improvements                                       13,854       12,650
------------------------------------------------------------------------------------------------------------------------
                                                                                                   237,634      215,064
Less accumulated depreciation and amortization                                                     (63,580)     (56,380)
-----------------------------------------------------------------------------------------------------------------------
Property and equipment, net                                                                        174,054      158,684

Goodwill, net of accumulated amortization of $3,500 and 2,428, respectively                         21,347       23,301
Investment in Guigne, net (note 19)                                                                  1,800        1,800
Other assets, net                                                                                    6,503        6,249
------------------------------------------------------------------------------------------------------------------------
Total assets                                                                                    $  222,477   $  225,109
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
------------------------------------------------------------------------------------------------------------------------

Current liabilities:
     Loans payable under credit agreement, current portion (note 6)                             $      333   $      333
     Loans payable, current portion (note 8)                                                         3,126        3,126
     Revolving loan payable (note 8)                                                                 6,750        4,500
     Accounts payable                                                                               10,533       10,540
     Accounts payable-Astrium                                                                        2,751          807
     Accrued expenses                                                                                7,739        6,986
     Accrued subcontracting services                                                                 2,112        1,999
     Convertible notes payable to shareholder (note 7)                                               7,860            -
     Deferred revenue                                                                               18,993        8,385
------------------------------------------------------------------------------------------------------------------------

Total current liabilities                                                                           60,197       36,676
------------------------------------------------------------------------------------------------------------------------

Loans payable under credit agreement, net of current portion (note 6)                                    -          333
Loans payable, net of current portion (note 8)                                                       1,139        4,458
Convertible notes payable to shareholder (note 7)                                                        -        7,860
Accrued contract costs                                                                                 100          880
Miscellaneous note payable                                                                             200            -
Deferred revenue                                                                                     7,235        6,870
Deferred income taxes (note 13)                                                                          -        2,080
Convertible subordinated notes payable (note 8)                                                     63,250       63,250
------------------------------------------------------------------------------------------------------------------------

Total liabilities                                                                                  132,121      122,407
------------------------------------------------------------------------------------------------------------------------
Commitments and contingencies (notes 1, 11 and 16) Stockholders' equity (notes
7, 8, 11 and 12):
     Preferred stock, no par value, convertible, authorized 2,500,000 shares, issued and
     outstanding 1,333,334 shares, (liquidation preference of $12,000)                             11,892       11,892
     Common stock, no par value, authorized 30,000,000 shares, issued
        and outstanding 11,528,145 and 11,345,032 shares, respectively                             82,513       82,074
     Additional paid-in capital                                                                        16           16
     Retained earnings (accumulated deficit)                                                       (4,065)        8,720
------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity                                                                         90,356      102,702
------------------------------------------------------------------------------------------------------------------------

Total liabilities and stockholders' equity                                                      $ 222,477    $ 225,109
------------------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to consolidated financial statements.

                                       23

<PAGE>

SPACEHAB, INCORPORATED AND SUBSIDIARIES

Consolidated Statements of Operations
(In thousands, except share data)

<TABLE>
<CAPTION>


-----------------------------------------------------------------------------------------------------------------------
                                                                            Year ended      Year ended      Year ended
                                                                             June 30,        June 30,        June 30,
                                                                               2001            2000            1999
-----------------------------------------------------------------------------------------------------------------------
<S>                                                                       <C>               <C>             <C>

Revenue                                                                 $      105,254     $   105,708     $   107,720
-----------------------------------------------------------------------------------------------------------------------

Costs of revenue                                                                92,243          87,931          89,283
-----------------------------------------------------------------------------------------------------------------------

Gross profit                                                                    13,011          17,777          18,437
-----------------------------------------------------------------------------------------------------------------------

Operating expenses:
     Selling, general and administrative                                        21,796          17,832          14,599
     Research and development                                                      393           2,440           3,636
-----------------------------------------------------------------------------------------------------------------------

Total operating expenses                                                        22,189          20,272          18,235
-----------------------------------------------------------------------------------------------------------------------

Income (loss) from operations                                                   (9,178)         (2,495)            202

Interest expense, net of capitalized interest (note 3)                          (4,804)         (3,773)         (4,905)

Interest and other income, net                                                     311             662           1,615
-----------------------------------------------------------------------------------------------------------------------

Loss before income taxes                                                       (13,671)         (5,606)         (3,088)
Income tax benefit  (note 13)                                                     (886)         (1,762)           (499)
-----------------------------------------------------------------------------------------------------------------------

Net Loss                                                                $      (12,785)    $    (3,844)    $    (2,589)
-----------------------------------------------------------------------------------------------------------------------

Basic Loss per share:
Net Loss per share - basic                                              $        (1.12)    $     (0.34)    $     (0.23)
-----------------------------------------------------------------------------------------------------------------------

Shares used in computing net loss per share - basic                         11,400,482      11,272,767      11,184,742
-----------------------------------------------------------------------------------------------------------------------

Diluted Loss per share:
Net loss per share - diluted                                            $        (1.12)    $     (0.34)    $     (0.23)
-----------------------------------------------------------------------------------------------------------------------

Shares used in computing net loss per share - diluted                       11,400,482      11,272,767      11,184,742
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.

                                       24

<PAGE>

SPACEHAB, INCORPORATED AND SUBSIDIARIES

Consolidated Statements of Stockholders' Equity
(In thousands, except share data)

<TABLE>
<CAPTION>


---------------------------------------------------------------------------------------------------------------------
                                                             Convertible
                                                           Preferred Stock         Common Stock         Additional
                                                         --------------------- ----------------------      Paid-In
                                                            Shares     Amount       Shares    Amount       Capital
---------------------------------------------------------------------------------------------------------------------
<S>                                                      <C>          <C>       <C>         <C>          <C>

Balance at June 30, 1998                                         -    $     -   11,168,161  $ 81,239       $   16

Common stock issued upon stock option exercises                  -          -        1,070         8            -
Common stock issued under employee stock purchase plan           -          -       60,415       338            -
Net income                                                       -          -            -         -            -
--------------------------------------------------------------------------------------------------------------------

Balance at June 30, 1999                                         -    $     -   11,229,646  $ 81,585       $   16
--------------------------------------------------------------------------------------------------------------------

Preferred stock issued                                   1,333,334     11,892            -         -            -
Common stock issued under employee stock purchase plan           -          -      115,386       489            -
Net loss                                                         -          -            -         -            -
--------------------------------------------------------------------------------------------------------------------

Balance at June 30, 2000                                 1,333,334    $11,892   11,345,032  $ 82,074       $   16
--------------------------------------------------------------------------------------------------------------------
Common stock issued under employee stock purchase plan           -          -      183,113       439            -
Net loss                                                         -          -            -         -            -
--------------------------------------------------------------------------------------------------------------------

Balance at June 30, 2001                                 1,333,334    $11,892   11,528,145  $ 82,513       $   16
---------------------------------------------------------------------------------------------------------------------

<CAPTION>


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

                                                                    Retained
                                                                    Earnings            Total
                                                                (Accumulated     Stockholders'
                                                                     Deficit)          Equity
                                                                 -----------------------------
<S>                                                               <C>              <C>

Balance at June 30, 1998                                          $  15,153       $   96,408

Common stock issued upon stock option exercises                           -                8
Common stock issued under employee stock purchase plan                    -              338
Net income                                                           (2,589)          (2,589)
-------------------------------------------------------          ---------------------------

Balance at June 30, 1999                                          $  12,564       $   94,165
-------------------------------------------------------          ---------------------------

Preferred stock issued                                                    -           11,892
Common stock issued under employee stock purchase plan                    -              489
Net loss                                                             (3,844)          (3,844)
-------------------------------------------------------          ---------------------------

Balance at June 30, 2000                                         $    8,720       $  102,702
-------------------------------------------------------          ---------------------------
Common stock issued under employee stock purchase plan                    -              439
Net loss                                                            (12,785)         (12,785)
-------------------------------------------------------          ---------------------------

Balance at June 30, 2001                                         $   (4,065)      $   90,356
-------------------------------------------------------          ---------------------------
</TABLE>


See accompanying notes to consolidated financial statements

                                       25

<PAGE>

SPACEHAB, INCORPORATED AND SUBSIDIARIES

Consolidated Statements of Cash Flows
(In thousands)

<TABLE>
<CAPTION>


                                                                        Year ended      Year ended      Year ended
                                                                        June 30, 2001   June 30, 2000   June 30, 1999
----------------------------------------------------------------------------------------------------------------------
<S>                                                                    <C>              <C>            <C>
Cash flows from operating activities:
    Net loss                                                           $   (12,785)      $ (3,844)           $ (2,589)
    Adjustments to reconcile net loss to net cash provided
      by (used for) operating activities:
        Depreciation                                                         8,691          7,133               5,909
        Amortization                                                         1,259          1,089               1,108
        Amortization of debt placement costs                                   623            528                 538
        Valuation allowance of deferred tax asset                            3,292              -                   -
        Valuation allowance of investment in Guigne                              -           (200)                  -
        Changes in assets and liabilities:
            (Increase) decrease in accounts receivable                       8,440         (8,327)             (3,126)
            (Increase) decrease in prepaid expenses and other
            current assets                                                     947         (1,182)               (290)
            Decrease (increase) in deferred mission costs                        -         (1,031)                  -
            Increase in other assets                                       (1,064)           (240)                (14)
            Increase (decrease) in deferred flight revenue                  10,973         11,093              (7,762)
            Increase in accounts payable and accrued expenses                2,007          1,955                 345
            Increase (decrease) in advance billings                              -              -              (1,567)
            Increase (decrease) in accrued  subcontracting
            services                                                           113         (4,788)                 97
            Increase (decrease) in deferred taxes                           (5,372)          (762)              1,020
----------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) operating activities                        17,124          1,424              (6,331)
----------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
    Payments for flight assets under construction                          (20,150)       (23,009)            (27,381)
    Payments for building under construction                                (8,934)        (4,868)               (871)
    Purchases of property, equipment and leasehold improvements             (1,558)        (2,361)             (4,222)
    Cash received from sale of Flight assets                                 7,566
    Purchase of Johnson Engineering, net of cash acquired                        -          1,200             (24,745)
    Purchase of The Space Store                                                  -           (156)                  -
    Investment in Guigne                                                         -           (600)             (1,400)
----------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities                                     (23,076)       (29,794)            (58,619)
----------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
    Payments of note payable to insurers                                      (333)          (333)               (500)
    Proceeds from issuance of convertible preferred stock                        -         11,892                   -
    Proceeds from note payable                                                   -              -               1,000
    Proceeds from revolving line of credit                                   2,250          4,500                   -
    Payments of note payable                                                (3,319)        (2,575)             (2,842)
    Payments of note payable to shareholder                                      -              -              (4,035)
    Proceeds from exercise of stock options                                      -              -                   8
    Proceeds from issuance of common stock, net of expenses                    439            489                 338
----------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) financing activities                          (963)        13,973              (6,031)
----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents                        (6,915)       (14,397)            (70,981)
Cash and cash equivalents at beginning of year                               6,949         21,346              92,327
----------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year                                   $    34        $ 6,949            $ 21,346
----------------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to consolidated financial statements

                                       26

<PAGE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)      Description of the Company, Operating Environment and Liquidity

         Description of the Company and Operating Environment

                SPACEHAB, Incorporated (the "Company") is the first company to
         commercially develop, own and operate habitable modules that provide
         space-based laboratory research facilities and cargo services aboard
         the U.S. Space Shuttle system. The Company currently owns and operates
         four pressurized laboratory and logistics supply modules, which
         significantly enhance the capabilities of the Space Shuttle fleet. The
         Company is currently constructing a module that will attach to the
         International Space Station ("ISS") and be primarily used for storage,
         power and utility service and laboratory facilities for long-duration
         research. The Company's modules are unique to the Space Shuttle fleet
         and ISS.

                To date, the Company has successfully completed sixteen missions
         aboard the Space Shuttle and substantially all of the Company's revenue
         has been generated under contracts with National Aeronautics and Space
         Administration ("NASA"). The Company's contracts are subject to
         periodic funding allocations by NASA. NASA's funding is dependent on
         receiving annual appropriations from the United States government.
         During the years ended June 30, 2001, 2000, and 1999 approximately 83%,
         86% and 80% of the Company's revenues were generated under U.S.
         Government contracts.

                On February 12, 1997, the Company acquired the assets and
         certain of the liabilities of Astrotech Space Operations, L.P.
         ("Astrotech"), a subsidiary of Northrop Grumman, a provider of
         commercial satellite launch processing services and payload processing
         facilities in the United States. These services are provided at the
         Astrotech facilities in Cape Canaveral, Florida and Vandenberg Air
         Force Base in California, and are provided to launch service providers
         on a fixed-price basis. Additionally, Astrotech provides management and
         consulting services to the Boeing Company for its Sea Launch program at
         the Sea Launch facility in Long Beach, California.

                On July 1, 1998, the Company acquired all of the outstanding
         shares of capital stock of Johnson Engineering Corporation ("JE"). JE
         performs several critical services for NASA including flight crew
         support services, operations, training and fabrication of mockups at
         NASA's Neutral Buoyancy Laboratory and at NASA's Space Vehicle Mockup
         Facility, where astronauts train for both Space Shuttle and ISS
         missions. JE also designs and fabricates flight hardware, such as
         flight crew equipment and crew quarters' habitability outfitting as
         well as providing stowage integration services. JE is also responsible
         for configuration management of the ISS.

                On April 11, 2000, the Company announced the formation of Space
         Media, Inc. ("SMI"), a majority-owned subsidiary that intends to create
         proprietary space-themed content for education and commerce. During the
         year ended June 30, 2001, SMI's activities were refocused primarily to
         develop content for the STARS Academy(TM), corporate promotion and
         advertising opportunities and offering a library of content that can be
         redistributed through various media channels. The STARS Academy is a
         global education program offering students a scientific, cultural and
         social adventure across the earth, into the oceans and aboard the
         International Space Station. SMI offers retail products associated with
         the STARS Academy. The STARS Academy program currently is planning to
         launch student-designed experiments on a Space Shuttle mission next
         year for schools in Australia, Canada, China, Israel, Japan, Singapore,
         Thailand, and the United States. During the year ended June 30, 2000,
         SMI acquired The Space Store, an online retail operation, anticipating
         that e-commerce is expected to be an integral part of its Internet
         business. The Space Store currently offers an assortment of
         space-related products through its Space Store website,
         www.spacestore.com.
         ------------------

                   In the year ended June 30, 2000, the Company also began
         development and completed the preliminary design phase, in partnership
         with RSC Energia ("Energia") of Korolev, Russia, of a commercial space
         station habitation module. Named Enterprise(TM), this multipurpose
         module will be attached to the ISS. The Company anticipates that
         Enterprise will be the world's first commercial real estate in space
         and the first commercial module attached to the ISS. Enterprise is


                                       27

<PAGE>


         currently designed to offer space station users habitation, stowage
         space, communications, power and other utilities, and laboratory
         facilities for long-duration research.

                  The Company and Energia completed the organization of Space
         Station Enterprise, LLC ("SSE LLC"), a Delaware limited liability
         corporation, to complete development and future operation of
         Enterprise. The Company and Energia have an equal ownership interest in
         SSE LLC. SSE LLC is actively pursuing additional investors to provide
         investment funds and participate as owners of SSE LLC in completing
         Enterprise. Enterprise is anticipated to be launched in early 2004.

         Liquidity

                  The Company has incurred net losses in the years ended June
         30, 2001, 2000 and 1999. Historically, the Company has financed its
         capital expenditures, research and development and working capital
         requirements with progress payments under its various contracts, as
         well as with proceeds received from both public and private debt and
         equity offerings and borrowings under credit facilities.

                  The accompanying consolidated financial statements have been
         prepared on a going concern basis, which contemplates the realization
         of assets and satisfaction of liabilities in the normal course of
         business. The financial statements do not include any adjustments
         relating to the recoverability of assets and classification of
         liabilities that might be necessary should the Company be unable to
         continue as a going concern.

                  The Company's liquidity has been constrained over the past
         fiscal year. A significant portion of this constraint arose from
         funding of new operations and assets to support future Company growth
         and construction of the new Astrotech Florida facility prior to
         obtaining external financing. In addition, the Company was committed to
         capital investments to complete certain flight assets.

                Due to changes in the external markets, the Company reevaluated
         its strategy. Beginning in the third quarter of the fiscal year,
         management began an aggressive multi-faceted plan to improve the
         Company's financial position and liquidity. This plan included the
         following components: i) completing the external financing for the new
         facility required to support operations at Astrotech's Florida
         location; ii) reducing operating costs and establishing an operating
         plan for fiscal year 2002 which provides for sufficient cash flow to
         support efficient operations; iii) renegotiating the terms and
         conditions of the Revolving Line of Credit (note B); iv) limiting cash
         commitments for future capital investments and new asset development;
         v) restructuring the repayment of certain debts maturing in fiscal year
         2002; vi) divesting non-core assets; vii) obtaining external investor
         funding for its Space Media subsidiary; viii) completing negotiations
         for certain contract equitable adjustments due to the Company under it
         long-term services contract with NASA (note 10); and ix) improving the
         overall liquidity of the Company. Management anticipates that this
         strategy will generate sufficient additional liquidity to support its
         operations and satisfy its debt obligations.

                Under this Plan, the Company undertook extensive efforts to
         reduce cash required for both operations and capital investments.
         Specifically, the Company took steps to reduce overhead beginning in
         the third quarter of the fiscal year and reduced its workforce by
         approximately 10%. The Company's fiscal year 2002 operating plan will
         continue to realize efficiencies from these actions. Subsequent to June
         30, 2001, Astrotech obtained $20 million of financing for the expansion
         of its payload processing facilities. The financing provides funds for
         completion of the facility construction as well as a return of
         approximately $6.5 million of previously invested working capital of
         the Company. The Company used approximately $3.1 million of these
         working capital funds to repay an existing obligation under Astrotech's
         credit facility (note 8). Additionally, the Company completed planned
         divesting of non-core assets (note 21). Development and construction of
         new assets is currently limited to those assets required to fulfill
         existing commitments under contracts. The Company has no further
         on-going commitments to fund development or construction of any asset.

                  Under this Plan, the Company refocused the scope of SMI's
         operations on near term initiatives in order to maximize the potential
         return of capital invested to date in SMI. Subsequent to year end, the
         Company obtained $750,000 from an investor to fund future operations of
         SMI in


                                       28

<PAGE>



         exchange for equity in SMI. As a result, the Company's ownership
         interest in SMI was reduced to approximately 51% in September 2001.

                  The Company's ability to continue as a going concern is
          dependent on its ability to complete the restructure of certain debt
          obligations, secure the remaining portion of contract funding on the
          equitable adjustment due under its contract with NASA, achieve its
          fiscal year 2002 operating and cash flow objectives, and comply with
          the terms of its credit facility. The Company is in ongoing
          negotiations with its senior lender to renegotiate the terms and
          conditions of its credit facility and with Alenia Spazio S.p.A. to
          restructure its debt. The Company continues to receive negotiated
          interim funding for work performed under the NASA contract equitable
          adjustment (note 10). Management believes it will be successful in
          negotiating the repayment terms of its debt due to Alenia Spazio
          S.p.A.; however, there can be no assurances that the Company will be
          able to reach agreement with Alenia Spazio S.p.A. on the terms and
          conditions of a restructure. Additionally, management of the Company
          strongly believes such funding under its equitable adjustment with
          NASA will continue, although there can be no assurances that the
          contract will be fully funded in a timely manner to provide sufficient
          operating cash flow to support operations.

                  The Company's plans indicate that all cash generated from
         operations during the next fiscal year will be used to fund operations
         and reduce existing debt. The Company believes that the cash flows from
         operations, borrowings under the New Credit Facility and spending
         reductions related to discretionary capital expenditures and other
         expenses will be sufficient to enable the Company to meet its cash
         requirements for the next twelve months.

                  As discussed above, management has implemented and completed a
         significant portion of the plan begun in the third quarter of the
         fiscal year and expects that it will be successful in accomplishing the
         remaining portion of the plan; however, no assurance can be given that
         the Company will be successful in achieving the remaining goals. If the
         Company is unable to complete its strategy, cash flow may be
         insufficient to cover the Company's operating and debt service
         requirements in fiscal year 2002.

(2)      Summary of Significant Accounting Policies

         Principles of Consolidation and Basis of Presentation

                The consolidated financial statements include the accounts of
         SPACEHAB, Incorporated and its wholly owned and majority-owned
         subsidiaries Astrotech, JE and SMI. All significant intercompany
         transactions have been eliminated in consolidation.

         Cash and Cash Equivalents

                For purposes of its consolidated statements of cash flows, the
         Company considers short-term investments with original maturities of
         three months or less to be cash equivalents. Cash equivalents are
         primarily made up of money market investments and overnight repurchase
         agreements recorded at cost, which approximates market value.

         Property and Equipment

                Property and equipment are stated at cost. All furniture,
         fixtures and equipment are depreciated using the straight-line method
         over the estimated useful lives of the respective assets, which is
         generally five years. The Company's payload processing facilities are
         depreciated using the straight-line method over their estimated useful
         lives ranging from sixteen to forty-three years.

         Goodwill

                The excess of the cost over the fair value of net tangible and
         identifiable intangible assets acquired in business combinations
         accounted for as a purchase has been assigned to goodwill. Goodwill is
         being amortized on a straight-line basis over five to twenty-five
         years.


                                       29

<PAGE>

                    The Company periodically evaluates whether changes have
         occurred that would require revision of the remaining estimated useful
         life of the assigned goodwill or render the goodwill not recoverable.
         If such circumstances arise, the Company would use an estimate of the
         undiscounted value of expected future operating cash flows to determine
         whether the goodwill is recoverable.

         Investments in Affiliates

                  The Company generally uses the equity method of accounting for
         its investments in, and earnings of, investees. In accordance with the
         equity method of accounting, the carrying amount of such an investment
         is initially recorded at cost and is increased to reflect the Company's
         share of the investor's income and is reduced to reflect the Company's
         share of the investor's losses. Investments in which the Company has
         less than 20% ownership and no significant influence are accounted for
         under the cost method and are carried at cost.

         Impairment of Long-Lived Assets

                The Company accounts for long-lived assets in accordance with
         the provisions of Statements of Financial Accounting Standards ("SFAS")
         SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and
         for Long-Lived Assets to Be Disposed Of. This Statement requires that
         long-lived assets and certain identifiable intangibles be reviewed for
         impairment whenever events or changes in circumstances indicate that
         the carrying amount of an asset may not be recoverable. Recoverability
         of assets to be held and used is measured by a comparison of the
         carrying amount of an asset to future net cash flows expected to be
         generated by the asset. If such assets are considered to be impaired,
         the impairment to be recognized is measured by the amount by which the
         carrying amount of the assets exceeds the fair value of the assets.
         Assets to be disposed of are reported at the lower of the carrying
         amount or fair value less costs to sell.

         Stock-Based Compensation

                  The Company accounts for stock-based employee compensation
         arrangements using the intrinsic value method as prescribed in
         Accounting Principles Board Opinion No. 25, Accounting for Stock Issued
         to Employees ("APB Opinion 25"), and related interpretations.
         Accordingly, compensation cost for options to purchase common stock
         granted to employees is measured as the excess, if any, of the fair
         value of common stock at the date of the grant over the exercise price
         an employee must pay to acquire the common stock. The Company has
         adopted the disclosure requirements of SFAS No. 123, Accounting for
         Stock-based Compensation ("SFAS 123").

                Warrants to purchase common stock granted to other than
         employees as consideration for goods or services rendered are
         recognized at fair value.

         Revenue Recognition

                Revenue generated under the REALMS Contract and for all other
         contract awards for which the capability to successfully complete the
         contract can be reasonably assured and costs at completion can be
         reliably estimated at contract inception, revenue recognition under the
         percentage-of-completion method is being used based on costs incurred
         over the period of the contract. Revenue provided by JE is primarily
         derived from cost-plus award fee contracts, whereby revenue is
         recognized to the extent of costs incurred plus estimates of award fee
         revenues using the percentage-of-completion method. Award fees, which
         provide earnings based on the Company's contract performance as
         determined by NASA evaluations, are recorded when the amounts can be
         reasonably estimated, or are awarded. Changes in estimated costs to
         complete, provisions for contract losses and estimated amounts
         recognized as award fees are recognized in the period they become
         known. Revenue provided by Astrotech's payload processing services is
         recognized ratably over the occupancy period of the satellite while in
         the Astrotech facilities.

         Research and Development

                Research and development costs are expensed as incurred.

                                       30

<PAGE>

         Income Taxes

                The Company recognizes income taxes under the asset and
         liability method. Deferred tax assets and liabilities are recognized
         for the future tax consequences attributable to differences between the
         financial statement carrying amounts of existing assets and liabilities
         and their respective tax bases and operating loss and tax credit carry
         forward. Deferred tax assets and liabilities are measured using enacted
         tax rates expected to apply to taxable income in the years in which
         those temporary differences are expected to be recovered or settled.
         The effect on deferred tax assets and liabilities of a change in tax
         rates is recognized in income in the period that includes the enactment
         date.

         Net Income (Loss) Per Share

                Net income (loss) per share is presented on both a basic and
         diluted basis in accordance with the provisions of SFAS No. 128,
         Earnings per Share.

                Basic earnings (loss) per share are calculated by dividing net
         income (loss) by the weighted average number of common shares
         outstanding during the period. Diluted earnings (loss) per share
         includes all common stock options and warrants and other common stock,
         to the extent dilutive, that potentially may be issued as a result of
         conversion privileges, including the convertible subordinated notes
         payable (note 8).

         Accounting Estimates

                The preparation of consolidated 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 consolidated financial statements
         and the reported amounts of revenue and expenses during the reporting
         periods. Actual results could differ from these estimates.

         Reclassifications

                Certain 2000 and 1999 amounts have been reclassified to conform
         with the 2001 consolidated financial statement presentation.

         New Accounting Pronouncements

                In June 2001, the Financial Accounting Standards Board issued
         SFAS No. 142, "Accounting for Goodwill and Other Intangible Assets."
         The Statement eliminates the requirement to amortize costs in excess of
         net assets acquired (goodwill) under the purchase method of accounting,
         and sets forth a new methodology for periodically assessing and, if
         warranted, recording impairment of goodwill. Early adoption of this
         standard is permitted July 1, 2001, however, the Company does not plan
         to early adopt. The Company will be required to adopt the new rules
         effective July 1, 2002. The elimination of amortization of goodwill is
         expected to increase earnings by approximately $1.0 million. The
         Company will analyze and assess the impairment provisions of the new
         Statement, but has not yet determined the impact, if any, of the
         adoption of those provisions.

   (3)   Statements of Cash Flows - Supplemental Information

                Cash paid for interest costs was approximately $7.0 million;
         $6.9 million and $5.4 million for the years ended June 30, 2001, 2000
         and 1999, respectively. The Company capitalized interest of
         approximately $2.7 million, $3.7 million and $2.5 million during the
         years ended June 30, 2001, 2000 and 1999, respectively, related to the
         module improvements and a building in progress.

                The Company paid no income taxes for the years ended June 30,
         2001 and 2000, and paid income taxes of approximately $400,000 for the
         year ended June 30, 1999.


                                       31

<PAGE>





   (4)   Accounts Receivable

         At June 30, 2001 and 2000, accounts receivable consisted of (in
         thousands):
<TABLE>
<CAPTION>

                                                                         2001                2000
                --------------------------------------------------- ---------------- --------------
<S>                                                                 <C>              <C>

                              U.S. government contracts:
                              Billed                                $       9,181       $    18,506
                              Unbilled                                      3,085             3,400
                --------------------------------------------------- ---------------- --------------

                              Total U.S. government contracts              12,266            21,906
                --------------------------------------------------- ---------------- --------------
                              Commercial contracts:
                              Billed                                        4,378            1,612
                              Unbilled                                        714            2,280
                --------------------------------------------------- ---------------- --------------
                              Total commercial contracts                    5,092            3,892
                --------------------------------------------------- ---------------- --------------
                              Total accounts receivable             $      17,358    $      25,798
                --------------------------------------------------- ---------------- --------------
</TABLE>

                The Company anticipates collecting substantially all receivables
         within one year.

                The accuracy and appropriateness of the Company's direct and
         indirect costs and expenses under its government contracts, and
         therefore its accounts receivable recorded pursuant to such contracts,
         are subject to extensive regulation and audit, including by the U.S.
         Defense Contract Audit Agency or by other appropriate agencies of the
         U.S. government. Such agencies have the right to challenge the
         Company's cost estimates or allocations with respect to any government
         contract. Additionally, a substantial portion of the payments to the
         Company under government contracts are provisional payments that are
         subject to potential adjustment upon audit by such agencies. In the
         opinion of management, any adjustments likely to result from inquiries
         or audits of its contracts would not have a material adverse impact on
         the Company's financial condition or results of operations.

   (5)   Acquisition

         The Space Store

                On June 28, 2000, the Company paid approximately $200,000
         including transaction costs, to acquire all of the capital stock of The
         Space Store. The business combination has been accounted for using the
         purchase method under APB Opinion 16. The purchase price has been
         allocated to the assets and liabilities acquired based on estimates of
         fair value as of the date of acquisition. Based on the allocation of
         the net assets acquired, goodwill of approximately $200,000 was
         recorded. Such goodwill is being amortized on a straight-line basis
         over 5 years. Historical results of operations of The Space Store are
         insignificant. The Space Store is a wholly owned subsidiary of SMI. The
         Space Store is involved in e-commerce and sells space related items.

(6)      Loans Payable Under Credit Agreement

                Prior to an August 1996 amendment, the Company's credit
         agreement consisted of a $6.5 million term loan bearing interest at 1
         percent per month and a $5.5 million non-interest-bearing term loan
         with several insurance companies. In addition, a revolving credit
         commitment with a subcontractor and former shareholder provided a
         maximum outstanding balance of $6.0 million and bore interest at a rate
         of 1 percent per month.

                In August 1996, the Company's credit agreement was amended. In
         exchange for the full satisfaction of the Company's term loans with the
         various insurance companies, the Company paid the insurance companies
         $2.5 million and agreed to pay an additional $2.0 million under a new
         non-interest-bearing term loan. As of June 30, 2001, the remaining
         balance due under the term


                                       32

<PAGE>



         loan is $0.33 million due on August 1, 2001, which was repaid
         subsequent to the year ended June 30, 2001.

                In conjunction with a payment in December 1998 of certain
         principal of notes payable due to Alenia Spazio S.p.A., (note 7), the
         annual interest rate on the outstanding balances under the credit
         agreement was amended to be 8.25 percent per year. Aggregate interest
         cost incurred on the debts due under the credit agreement was
         approximately $30,000, $57,000 and $40,000 for the years ended June 30,
         2001, 2000 and 1999, respectively.

   (7)   Convertible Notes Payable to Shareholder

                The Company issued subordinated notes for a portion of the
         amount due to Alenia Spazio S.p.A. ("Alenia"), a shareholder, under a
         previously completed construction contract for the Company's flight
         modules. In December 1998, the Company amended its agreement with
         Alenia Spazio S.p.A. relative to the subordinated notes payable with a
         then outstanding principal balance of $11.9 million due in August 2001.
         In exchange for payment of $4.0 million, Alenia agreed to waive the
         interest payment due for the quarter ended December 31, 1998 and to
         reduce the annual interest rate on the subordinated notes from 12 to 10
         percent on the outstanding balance as of January 1, 1999. In addition,
         Alenia may elect to convert, in whole or part, the remaining principal
         amount into equity, on terms and conditions to be agreed with the
         Company.

                The subordinated notes had aggregate outstanding balances of
         $7.9 million at June 30, 2001. The notes bear interest at an annual
         rate of 10 percent. No amount of principal or accrued interest on the
         notes is due until all amounts under the amended and restated credit
         agreement due to the various insurance companies (note 6) are repaid.
         All principal payments were due under these notes on August 1, 2001.
         The maturity date of this debt was extended from August 1, 2001 to
         October 31, 2001. The Company is in ongoing discussions with Alenia to
         restructure the terms of this debt to provide for repayment over an
         extended period.

                During the year ended June 30, 1998, the Company began paying
         interest on these notes quarterly. The Company paid approximately
         $800,000 interest during each of the years ended June 30, 2001 and 2000
         and $400,000 in 1999.

   (8)   Other Debt

         Revolving Loan Payable

                On June 16, 1997, the Company entered into a $10.0 million
         revolving loan payable line of credit agreement with a financial
         institution. Outstanding balances on the line of credit accrue interest
         at either the lender's prime rate or a LIBOR-based rate. Certain assets
         of the Company collateralize this loan. The agreement expired on August
         31, 2000. Through June 30, 2000, the Company had drawn $4.5 million
         against the line of credit.

                On August 9, 2000, the Company entered into a $15 million
         revolving credit facility with a financial institution that provides a
         working capital line of credit with a letter of credit sub-limit of
         $10.0 million. This new credit facility replaced the current $10
         million revolving line of credit. Certain assets of the Company
         collateralize the new credit facility. The term of the agreement is
         through August 2003. Through June 30, 2001, the Company had drawn $6.75
         million against the line of credit.

                In conjunction with the Astrotech financing of its satellite
         processing facility in Titusville, Florida, in August 2001, the terms
         of the credit facility have been amended. Astrotech is no longer a
         party to the credit facility and the maximum amount allowable to be
         drawn under the Credit Facility has been reduced to $6.5 million. The
         Company is in the process of negotiating new covenants and revisions
         to certain terms of the New Credit Facility.

         Loans Payable

                On July 14, 1997, the Company's subsidiary, Astrotech, entered
         into a credit facility for loans of up to $15.0 million with a
         financial institution. The term of the agreement is through

                                       33

<PAGE>



         July 13, 2002. This loan is collateralized by the assets of Astrotech
         and certain other assets of the Company, and is guaranteed by the
         Company. Interest accrues at LIBOR plus three percent. Principal and
         interest are payable on a quarterly basis. In April 1999, the Company
         borrowed an additional $1.0 million under this credit facility with
         the same terms, conditions and expiration date of the original loan.
         Principal payments of approximately $3.1 million are due fiscal year
         ended 2002, $1.1 million are due in the fiscal year early 2003, and
         $40,000 in the fiscal year ending 2004. At June 30, 2001, the Company
         had an outstanding balance of $4.3 million under this credit facility
         and accrued interest of $87,000. In conjunction with the Astrotech
         financing, $3.1 million of the balance outstanding at the year ended
         June 30, 2001 was subsequently repaid.

         Convertible Subordinated Notes

                In October 1997, the Company completed a private placement
         offering for $63.25 million of aggregate principal of unsecured 8
         percent Convertible Subordinated Notes due 2007. Interest is payable
         semi-annually. The notes are convertible into the common stock of the
         Company at a rate of $13.625 per share. This offering provided the
         Company with net proceeds of approximately $59.9 million to be used for
         capital expenditures associated with the development and construction
         of space related assets and for other general corporate purposes.

         Loan Covenants

                For the year ended June 30, 2001 the Company was in breach of
         certain loan covenants of the Term Loan and New Credit Facility. The
         Company received a waiver of the covenant violation on the New Credit
         Facility as of June 30, 2001 and also received a waiver and covenant
         reset for the Term Loan. For the year ended June 30, 2000, the Company
         was in breach of certain covenants of the Term Loan and Revolving Line
         of Credit facility. The covenant for the Revolving Line of Credit was
         waived through its term and the covenant on the Term Loan agreement
         was waived and amended on a going forward basis. The Company is in the
         process of negotiating new covenants on the New Credit Facility for
         future periods. Although there can be no assurances, the Company
         believes it will be in compliance with the amended covenants of the
         Term Loan and existing covenants of the New Credit Facility during the
         year ended June 30, 2002.

   (9)   Fair Value of Financial Instruments

                The following table presents the carrying amounts and estimated
         fair values of the Company's financial instruments as of June 30, 2001
         and 2000 in accordance with SFAS No. 107, Disclosures about Fair Value
         of Financial Instruments (in thousands):

<TABLE>
<CAPTION>

                                                            June 30, 2001             June 30, 2000
                                                        --------------------       --------------------
                                                        Carrying        Fair       Carrying        Fair
                                                         Amount         Value        Amount        Value
         -------------------------------------------- ------------- ------------- ------------ -------------
<S>                                                  <C>            <C>          <C>            <C>
         Financial liabilities:
              Loans payable under
                credit agreement                       $       333   $      333    $      667   $      579
              Notes payable to shareholder                   7,860        7,860         7,860        7,860
              Loans payable under credit facility            4,264        4,264         7,583        7,583
              Convertible notes payable                     63,250       38,029        63,250       44,908
         -------------------------------------------- ------------- ------------- ------------ -------------
</TABLE>

                The fair value of the Company's long-term debt is based on
         quoted market price or is estimated based on the current rates offered
         to the Company for debt of similar remaining maturities and other
         terms. The carrying amounts of cash and cash equivalents, accounts
         receivable, and accounts payable and accrued expenses approximate their
         fair market value because of the relatively short duration of these
         instruments.



                                       34

<PAGE>


  (10)   NASA Contracts

              Research and Logistics Module Services Contract

                On December 21, 1997, the Company entered into the REALMS
         Contract to provide to NASA its flight modules and related integration
         services over three missions at an aggregate fixed price of $44.9
         million. This contract provides for NASA to use the flight modules for
         both science and logistics missions. During the period from December
         21, 1997 to June 30, 2001, this contract was amended whereby the REALMS
         contract value was increased to $160.3 million and the number of
         missions was increased to seven.

                During the years ended June 30, 2001, 2000 and 1999, the Company
         recognized $36.6 million, $33.3 million and $28.2 million of revenue,
         respectively, under this contract. SPACEHAB has a claim in excess of
         the REALMS contract value of approximately $7.9 million relative to an
         equitable adjustment due to a two-year slip in the launch date of the
         Space Shuttle flight STS-107.

         Flight Crew Systems Development Contract ("FCSD")

                  JE primarily operates under the Flight Crew Systems
         Development contract ("FCSD" Contract") which is currently a $366.6
         million multitask cost-plus-award and incentive-fee contract. The
         contract commenced in May 1993 and was scheduled to conclude in April
         2001. NASA has exercised its option to extend certain tasks for an
         additional year through April 2002. JE performs several critical
         services for NASA including flight crew support services, operations,
         training and fabrication of mockups at NASA's Neutral Buoyancy
         Laboratory and at NASA's Space Vehicle Mockup Facility, where
         astronauts train for both Space Shuttle and ISS missions. JE also
         provides stowage integration services and is also responsible for
         configuration management of the ISS.

                  During the years ended June 30, 2001, 2000 and 1999, the
         Company recognized $50.7 million, $57.9 million, $57.7 million of
         revenue, respectively, under this contract.

  (11)   Stockholder Rights Plan

                On March 26, 1999, the Board of Directors adopted a Stockholder
         Rights Plan designed to deter coercive takeover tactics and to prevent
         a potential acquirer from gaining control of the Company without
         offering a fair price to all of the Company's stockholders. A dividend
         of one preferred share purchase right (a "Right") was declared on every
         share of Common Stock outstanding on April 9, 1999. Each Right under
         the Plan entitles the holder to buy one one-thousandth of a share of a
         new series of junior participating preferred stock for $35. If any
         person or group becomes the beneficial owner of 15 percent or more of
         common stock (with certain limited exceptions), then each Right (not
         owned by the 15 percent stockholder) will then entitle its holder to
         purchase, at the Right's then current exercise price, common shares
         having a market value of twice the exercise price. In addition, if
         after any person has become a 15 percent stockholder, and is involved
         in a merger or other business combination transaction with another
         person, each Right will entitle its holder (other than the 15 percent
         stockholder) to purchase, at the Right's then current exercise price,
         common shares of the acquiring company having a value of twice the
         Right's then current exercise price. The rights were granted to each
         shareholder of record on April 9, 1999. At any time before a person or
         group acquires a 15% position, the Company generally will be entitled
         to redeem the Rights at a redemption price of $0.01 per Right. The
         Rights will expire on April 9, 2009.

(12)     Common Stock Option and Stock Purchase Plans

                As of June 30, 2001, approximately 1,538,798 shares of common
         stock were reserved for future grants of stock options under the
         Company's three stock option plans.

                                       35

<PAGE>



         Non-qualified Options

                Non-qualified options are granted at the sole discretion of the
         Board of Directors. Prior to the adoption of the 1994 Stock Incentive
         Plan (the "1994 Plan"), stock options granted to the Company's officers
         and employees were part of their employment contract or offer. The
         number and price of the options granted was defined in the employment
         agreements and such options vest incrementally over a period of four
         years and generally expire within ten years of the date of grant.

         The 1994 Plan

                Under the terms of the 1994 Plan, the number and price of the
         options granted to employees is determined by the Board of Directors
         and such options vest, in most cases, incrementally over a period of
         four years and expire no more than ten years after the date of grant.

         The Directors' Stock Option Plan

                Prior to an amendment on October 21, 1997, each non-employee
         member of the Board of Directors was annually granted options to
         purchase 5,000 shares of common stock at exercise prices equal to the
         fair market value on the date of grant. Subsequent to the amendment,
         each non-employee member of the Board of Directors received a one-time
         grant of an option to purchase 10,000 shares of common stock. Further,
         each new non-employee director after the amendment date receives a
         one-time grant of an option to purchase 10,000 at an exercise price
         equal to fair market value on the date of grant. In addition, effective
         as of the date of each annual meeting of the Company's stockholders on
         or after the effective date, each non-employee director who is elected
         or continues as a member of the Board of Directors of the Company shall
         be awarded an option to purchase 5,000 shares of common stock. Options
         under the Director's Plan vest after one year and expire seven years
         from the date of grant.

         1997 Employee Stock Purchase Plan

                During the year ended June 30, 1998, the Company adopted an
         employee stock purchase plan that permits eligible employees to
         purchase shares of common stock of the Company at prices no less than
         85 percent of the current market price. Eligible employees may elect to
         participate in the plan by authorizing payroll deductions from one
         percent to ten percent of gross compensation for each payroll period.
         On the last day of each quarter, each participant's contribution
         account is used to purchase the maximum number of whole and fractional
         shares of common stock determined by dividing the contribution
         account's balance by the lesser of 85 percent of the price of a share
         of common stock on the first day of the quarter or the last day of a
         quarter. The number of shares of common stock that may be purchased
         under the plan is 1,500,000. Through June 30, 2001, employees have
         purchased approximately 372,000 shares under the plan.

         Space Media, Inc. Stock Option Plan

                During the year ended June 30, 2000, Space Media, Inc., a
         majority owned subsidiary of the Company, adopted an option plan ("SMI
         Plan") for employees, officers, directors and consultants of Space
         Media, Inc. Under the terms of the SMI Plan, 1,500,000 shares have been
         reserved for future grants for which the number and price of the
         options granted is determined by the Board of Directors and such
         options vest, in most cases, incrementally over a period of four years
         and expire no more than ten years after the date of grant. At June 30,
         2001, there were 611,250 options issued and outstanding under the SMI
         Plan at a weighted average exercise price of $1.23. The options vest
         equally over a four-year period and have a life of 10 years. There were
         148,734 options exercisable as of June 30, 2001.

                                       36

<PAGE>



         Stock Option Activity Summary

                The following table summarizes the Company's stock option plans,
         excluding the SMI plan:


<TABLE>
<CAPTION>

                                   Non-qualified Options             1994 Plan                Directors' Plan
                                 ---------------------------  -------------------------   -------------------------
                                                  Weighted                   Weighted                    Weighted
                                                  Average                    Average                     Average
                                    Shares        Exercise      Shares       Exercise       Shares       Exercise
                                  outstanding      Price      Outstanding     Price       Outstanding     price
-------------------------------------------------------------------------------------------------------------------
<S>                               <C>            <C>         <C>             <C>          <C>            <C>

Outstanding at June 30, 1998           300,045   $  12.33     1,478,253    $    8.62        190,000     $   9.99
     Granted                           300,000      14.00       572,713        11.69         50,000         7.00
     Exercised                               -          -         1,070         9.69              -            -
     Forfeited                         106,241      12.00       140,670         9.16              -            -
-----------------------------------------------------------------------------------------------------------------
                                       493,804   $  13.42     1,909,226    $    9.50        240,000     $   9.37
Outstanding at June 30, 1999
     Granted                                 -          -     1,034,674         5.10         35,000         4.13
     Exercised                               -          -             -            -              -            -
     Forfeited                          95,831      12.39       360,287         7.06              -            -
-----------------------------------------------------------------------------------------------------------------
Outstanding at June 30, 2000           397,973   $  13.66     2,583,613    $    8.05        275,000     $   8.70
     Granted                                 -          -     1,036,040         4.44         40,000         4.00
     Exercised                               -          -             -            -              -            -
     Forfeited                          67,707      12.55       967,539         8.11              -            -
-----------------------------------------------------------------------------------------------------------------
Outstanding at June 30, 2001           330,266   $  13.89     2,652,114    $    6.62        315,000     $   8.11
-----------------------------------------------------------------------------------------------------------------
Options exercisable at:
     June 30, 1999                     191,770   $  12.39     1,072,121    $    8.56        190,000     $   9.99
     June 30, 2000                     397,973      13.66     1,423,660         8.58        240,000         9.37
     June 30, 2001                     330,266      13.89     1,272,238         7.89        275,000         8.70
Weighted-average fair value at
date of grant during the fiscal
period ended
         June 30, 1999                 300,000   $   3.12       572,713    $    4.50         50,000     $   2.21
         June 30, 2000                       -          -     1,034,674         3.02         35,000         1.87
         June 30, 2001                       -          -     1,036,040         2.06         40,000         1.85
-------------------------------------------------------------------------------------------------------------------
</TABLE>

                The following table summarizes information about the Company's
         stock options outstanding at June 30, 2001:

<TABLE>
<CAPTION>


                                          Options outstanding                 Options exercisable
                              ----------------------------------------- ------------------------------
                                              Weighted-
                                              Average      Weighted-                      Weighted-
                                             Remaining     Average                        Average
                                  Number     Contractual   Exercise         Number        Exercise
Range of exercise prices        Outstanding  life (years)  price         exercisable        Price
----------------------------- -------------- ------------- ------------ -------------- ---------------
<S>                            <C>             <C>        <C>             <C>           <C>

$ 2.81 - 4.75                       552,000     9.16      $     3.69       53,750        $  4.34

  4.88 - 5.75                     1,036,310     7.64            5.06      305,586           5.21

  6.63 - 10.13                      693,889     2.10            7.02      691,889           7.01

 10.63 - 14.50                    1,009,081     4.63           12.28      820,179          12.42

 24.00                                6,100     1.25           24.00        6,100          24.00
----------------------------- -------------- --------   ------------ -------------- ---------------
$ 2.81 - $24.00                   3,297,380     5.79      $     7.49  $ 1,877,504           9.06
----------------------------- -------------- --------   ------------ -------------- ---------------
</TABLE>

                The Company applies APB Opinion 25 and related interpretations
         in accounting for its plans. Accordingly, as all options have been
         granted at exercise prices equal to the fair market value as of the
         date of grant, no compensation cost has been recognized under these
         plans in the accompanying consolidated financial statements. Had
         compensation cost been determined

                                       37


<PAGE>


          consistent with SFAS 123, the Company's net income (loss) and earnings
          (loss) per common share would have been reduced (increased) to the pro
          forma amounts indicated below (in thousands, except per share data):

<TABLE>
<CAPTION>


                                                            Year Ended       Year Ended        Year Ended
                                                         June 30, 2001    June 30, 2000     June 30, 1999
         -------------------------------------------------------------------------------------------------
<S>                                                       <C>               <C>             <C>
         Net income (loss):
              As reported                                   $ (12,785)        $ (3,844)         $ (2,589)
              Pro forma                                     $ (13,982)          (4,996)           (4,424)
         -------------------------------------------------------------------------------------------------
         Net income (loss) per share - basic:
              As reported                                    $  (1.12)        $  (0.34)         $  (0.23)
              Pro forma                                      $  (1.23)           (0.44)            (0.40)
         -------------------------------------------------------------------------------------------------
</TABLE>
                The fair value of each option granted and each employee stock
         purchase right is estimated using the Black-Scholes option-pricing
         model with the following weighted average assumptions used for grants
         in fiscal years 2001, 2000 and 1999, respectively: 0.0 percent dividend
         growth; expected volatility ranging from 35 percent to 50 percent;
         risk-free interest rates ranging from 5.68 percent to 7.875 percent;
         and expected lives ranging from three months to seven years.

                The effects of compensation cost as determined under SFAS 123 on
         pro forma net income (loss) in years ended June 30, 2001, 2000 and 1999
         may not be representative of the effects on pro forma net income (loss)
         in future periods.

         Warrants

                The Company also has 53,000 currently exercisable warrants
         outstanding to purchase the Company's common stock at $9.00 per share,
         with an expiration date of June 2002. The fair market value of these
         warrants was recognized at issuance. All such warrants were issued at
         exercise prices equivalent to, or in excess of, the determined fair
         market value of the Company's common stock at the date of issuance.

(13)     Income Taxes

                  The Company accounts for taxes under Statement of Financial
         Accounting Standards No. 109, Accounting for Income Taxes (SFAS 109).
         Under SFAS 109, deferred tax liabilities and assets are determined
         based on the difference between the financial statement and tax basis
         of assets and liabilities using enacted rates expected to be in effect
         during the year in which the differences reverse.

                The components of income tax expense (benefit) from continuing
         operations are as follows (in thousands):

<TABLE>
<CAPTION>


                                                                         Years Ended June 30,
                                                            ------------------------------------------------
                                                                      2001           2000              1999
         ---------------------------------------------------------------------------------------------------
<S>                                                        <C>               <C>                    <C>

         Current:
         Federal                                                $        -        $     -         $  (1,447)

         State                                                         127              -                15
         Foreign                                                        70
         ---------------------------------------------------------------------------------------------------
                                                                       197              -            (1,432)
         ---------------------------------------------------------------------------------------------------
         Deferred:
         Federal                                                      (685)        (1,477)               847

         State and Local                                              (398)          (285)                86
         Foreign
         ---------------------------------------------------------------------------------------------------

                                                                    (1,083)        (1,762)               933
          --------------------------------------------------------------------------------------------------
         Income Tax Expense (Benefit)                          $      (886)       $(1,762)        $     (499)
         ---------------------------------------------------------------------------------------------------
</TABLE>

                                       38

<PAGE>



         A reconciliation of the reported income tax expense to the amount that
         would result by applying the U.S. federal statutory rate of 34 percent
         to the income (loss) before income taxes to the actual amount of income
         tax expense (benefit) recognized follows (in thousands):

<TABLE>
<CAPTION>


                                                                         Years Ended June 30,
                                                            ------------------------------------------------
                                                                        2001             2000          1999
         ---------------------------------------------------------------------------------------------------
<S>                                                           <C>                  <C>             <C>

         Expected expense (benefit)                                $ (4,648)        $ (1,906)     $ (1,050)
         Change in valuation allowance                                3,948               43           169
         State income taxes                                            (491)            (188)          (15)
         Other, primarily goodwill amortization                         305              289           397
         Total                                                       $ (886)        $ (1,762)      $  (499)
         ---------------------------------------------------------------------------------------------------
</TABLE>

          The Company's deferred tax asset as of June 30, 2001 and 2000 consists
          of the following (in thousands):


<TABLE>
<CAPTION>

                                                                               2001                  2000
         --------------------------------------------------------------------------------------------------
<S>                                                                    <C>                     <C>

         Deferred Tax Assets:
         Net Operating Loss Carryforwards                              $     15,818           $     10,472
         General business Credit Carryforwards                                2,170                  2,170
         Alternative Minimum Tax Credit Carryforwards                         3,292                  3,292
         Accrued Expenses                                                     1,636                    999
         Capitalized Start-up and Organization Costs                          1,602                    751
         Other                                                                  190                    110
         --------------------------------------------------------------------------------------------------
         Total Gross Deferred Tax Assets                                     24,708                 17,794
         Less - Valuation Allowance                                          (4,160)                  (212)
         --------------------------------------------------------------------------------------------------
         Net Deferred Tax Assets                                             20,548                 17,582
         --------------------------------------------------------------------------------------------------
         Deferred Tax Liabilities:
         Property and Equipment, principally due to
         differences in depreciation                                         20,493                 18,550
         Other                                                                   55                    115
         --------------------------------------------------------------------------------------------------
         Total Gross Deferred Tax Liabilities                                20,548                 18,665
         --------------------------------------------------------------------------------------------------
         Net Deferred Tax Assets/(Liabilities)                                    0           $     (1,083)
         --------------------------------------------------------------------------------------------------
</TABLE>



                As of June 30, 2000, current deferred tax assets of $997,000 are
         included in prepaid expenses and other current assets in the
         accompanying balance sheet.

                The net changes in the total valuation allowance for the years
         ended June 30, 2001, 2000, and 1999 were increases of approximately
         $3.9 million, $43,000 and $169,000, respectively.

                At June 30, 2001, the Company had accumulated net operating
         losses of approximately $41.7 million for Federal income tax purposes,
         which are available to offset future regular taxable income. These
         operating loss carryforwards expire between the years 2007 and 2021.
         Utilization of these net operating losses may be subject to limitations
         in the event of significant changes in stock ownership of the Company.

                Additionally, the Company has approximately $2.2 million and
         $3.3 million of research and experimentation and alternative minimum
         tax credit carryforwards, respectively, available to offset future
         regular tax liabilities. The research and experimentation credits
         expire between the years 2002 and 2008; the alternative minimum tax
         credits carry-forward indefinitely.

                In assessing the realizability of its net deferred tax assets,
         management considers whether it is more likely than not that some
         portion or all of the net deferred tax assets are realizable.
         Management considers the scheduled reversal of deferred tax
         liabilities, projected future taxable income, and tax planning
         strategies in making this assessment. As of June 30, 2001, the Company
         provided a full valuation allowance of approximately $4.2 million
         against its net deferred tax assets.

                                       39

<PAGE>


  (14)   Net Income (Loss) Per Share

                The following are reconciliation's of the numerators and
         denominators of the basic and diluted earnings (loss) per share
         computations for the years ended June 30, 2001, 2000 and 1999 (in
         thousands, except share data):

<TABLE>
<CAPTION>

                                                                            Per common            Assuming
                                                                                 share            Dilution
           -------------------------------------------------------------------------------------------------
<S>                                                                          <C>                 <C>

           Year Ended June 30, 2001
           Net loss                                                   $       (12,785)         $      (12,785)
           Net loss, as adjusted                                      $       (12,785)         $      (12,785)
           ----------------------------------------------------------------------------------------------------
           Weighted average outstanding common shares                       11,400,482              11,400,482
           Adjusted shares                                                  11,400,482              11,400,482
           ----------------------------------------------------------------------------------------------------
           Year Ended June 30, 2000
           Net loss                                                   $        (3,844)         $       (3,844)
           Net loss, as adjusted                                      $        (3,844)         $       (3,844)
           ----------------------------------------------------------------------------------------------------
           Weighted average outstanding common shares                       11,272,767              11,272,767
           Adjusted shares                                                  11,272,767              11,272,767
           ----------------------------------------------------------------------------------------------------
           Year Ended June 30, 1999
           Net loss                                                   $        (2,589)         $       (2,589)
           Net loss, as adjusted                                      $        (2,589)         $       (2,589)
           ----------------------------------------------------------------------------------------------------
           Weighted average outstanding common shares                       11,184,742              11,184,742
           ----------------------------------------------------------------------------------------------------
           Adjusted shares                                                  11,184,742              11,184,742
</TABLE>

                All options and warrants to purchase shares of common stock were
         excluded from the computations of diluted earnings (loss) per share for
         the years ended June 30, 2001, 2000 and 1999, because the impact of
         such options and warrants is anti-dilutive.

  (15)   Employee Benefit Plan

                The Company has a defined contribution retirement plan, which
         covers all employees and officers. For the years ended June 30, 2001,
         2000 and 1999, the Company contributed $1.8 million, $1.5 million and
         $0.8 million, respectively, to the plan. The Company has the right, but
         not the obligation, to make contributions to the plan in future years
         at the discretion of the Company's Board of Directors.

  (16)   Commitments

         Integration and Operations Contracts

                On August 13, 1997, the Company initiated a letter agreement
         with The Boeing Company ("Boeing"), a major subcontractor and
         shareholder, for standard integration and operation services to the
         Company for future missions that were not already provided for under
         its contract for missions to the Mir Space Station. In August 1998,
         this letter agreement became a cost plus incentive fee contract whereby
         Boeing will provide integration and operations services required to
         successfully complete four research missions (one single module mission
         and three double module missions) and seven logistics double module
         missions. Additionally, there are several tasks that are separately
         priced to yield a contract value of up to $139.5 million. As of June
         30, 2001, $75.1 million has been incurred under this commitment.

         Module Construction Contracts

                During the year ended June 30, 1997, the Company entered into a
         $43.1 million cost-plus-fee contract with Boeing to construct a new
         research module with associated double module hardware. The Company has
         taken initial delivery of the module and has completed its
         construction. The Company has incurred approximately $43.0 million in
         construction costs through June 30, 2001.


                                       40

<PAGE>



                During the year ended June 30, 1999, the Company entered into a
         $4.6 million letter agreement with Boeing to initiate activities to
         support the fabrication of an adaptable double module. The letter
         contract period of performance is through November 2000. The Company
         has incurred $3.9 million in costs through June 30, 2001.

         Leases

                The Company is obligated under capital leases for equipment and
         noncancelable operating leases for equipment, office space, storage
         space, and the land for a payload processing facility. Future minimum
         payments under these capital leases and noncancelable operating leases
         are as follows (in thousands):
<TABLE>
<CAPTION>


                                                                                   Capital        Operating
         Year ending June 30,                                                      Leases           Leases
         --------------------------------------------------------------------------------------------------
<S>                                                                              <C>             <C>

         2002                                                                   $      40        $   2,265
         2003                                                                          28            1,824
         2004                                                                          22              864
         2005                                                                           1              668
         2006 and thereafter                                                            -            4,904
         --------------------------------------------------------------------------------------------------

                                                                                       91        $  10,525
                                                                                                 ---------
         Less: amount representing interest between 9% and 12%                         (8)
         ---------------------------------------------------------------------------------
         Present value of net minimum capital lease payments                    $      83
         ---------------------------------------------------------------------------------
</TABLE>

         Rent expense for the years ended June 30, 2001, 2000 and 1999 was
         approximately $2.9 million, $2.1 million and $2.2 million respectively.

         For the year ended June 30, 2001, the capitalized lease assets are
         recorded at $365,424 and the annual amortization is $44,000.

(17)     Segment information

                Based on its organization, the Company operates in four business
         segments: SPACEHAB, now designated Flight Services for Company
         management reporting, JE, Astrotech and SMI. SPACEHAB was founded to
         commercially develop space habitat modules to operate in the cargo bay
         of the Space Shuttles. Flight Services provides access to the modules
         and integration and operations support services for both NASA and
         commercial customers. JE is primarily engaged in providing engineering
         services and products to the Federal Government and NASA, primarily
         under the FCSD Contract. Astrotech provides payload-processing
         facilities to serve the satellite manufacturing and launch services
         industry. Astrotech currently provides launch site preparation of
         flight ready satellites to major U.S. space launch companies and
         satellite manufacturers. SMI was established in April 2000, to develop
         space themed commercial business activities.

                The Company's chief operating decision maker utilizes both
         revenue and income before taxes, including allocated interest based on
         the investment in the segment, in assessing performance and making
         overall operating decisions and resource allocations. As such, other
         income/expense items including taxes and corporate overhead have not
         been allocated from Flight Services to the various segments.

                                       41

<PAGE>



                  The accounting policies of the segments are the same as those
         described in the summary of significant accounting policies, see note
         2. Information about the Company's segments is as follows:


<TABLE>
<CAPTION>



                                                                      (in thousands)
         Year Ended June 30, 2001:                                          Net           Depreciation
                                                       Pre-Tax             Fixed              And
                                     Revenue        Income (loss)          Assets         Amortization
                                  ------------------------------------------------------------------------
<S>                                   <C>             <C>               <C>                <C>

         Flight Services                 $44,997        $(7,868)         $135,055             $7,107
         Johnson Engineering              53,526           (887)            2,806              1,647
         Astrotech                         6,230             18            36,135                966
         SMI                                 501         (4,934)               58                230
                                  ------------------------------------------------------------------------
                                        $105,254       $(13,671)         $174,054             $9,950
                                  ------------------------------------------------------------------------

         Year Ended June 30, 2000:                                          Net           Depreciation
                                                       Pre-Tax             Fixed              And
                                     Revenue        Income (loss)          Assets         Amortization
                                  ------------------------------------------------------------------------
         Flight Services                 $39,871          $(928)         $129,709             $5,702
         Johnson Engineering              58,254            108             3,000              1,537
         Astrotech                         7,583         (2,944)           25,975                983
         SMI                                   -         (1,842)                -                  -
                                  ------------------------------------------------------------------------
                                        $105,708        $(5,606)         $158,684             $8,222
                                  ------------------------------------------------------------------------

         Year ended June 30, 1999:                                          Net           Depreciation
                                                       Pre-Tax             Fixed              And
                                     Revenue            Income             Assets         Amortization
                                  ------------------------------------------------------------------------
         Flight Services                 $39,477        $(2,925)         $109,912             $4,689
         Johnson Engineering              58,398            342             1,647              1,164
         Astrotech                         9,845           (505)           20,625              1,164
         SMI                                   -              -                 -                  -
                                  ------------------------------------------------------------------------
                                        $107,720        $(3,088)         $132,184             $7,017
                                  ------------------------------------------------------------------------
</TABLE>

                  Foreign revenue for the years ended June 30, 2001, 2000 and
         1999 was approximately $6.6 million, $1.7 million and $10.9 million
         respectively. Domestic revenue for the years ended June 30, 2001, 2000
         and 1999 was approximately $98.7 million, $104.0 million and $96.8
         million respectively.

(18)        Convertible Preferred Stock

                  On August 2, 1999, Astrium, a related party, a shareholder,
         purchased an additional $12.0 million equity stake in SPACEHAB
         representing 1,333,334 shares of Series B Senior Convertible Preferred
         Stock. Under the agreement, Astrium, a related party, purchased all of
         SPACEHAB's 975,000 authorized and uninsured shares of preferred stock.
         At the annual stockholders meeting held on October 14, 1999, the
         shareholders approved the proposal to increase the number of authorized
         shares of preferred stock to 2,500,000, in order to complete the
         transaction with Astrium, a related party, allowing them to purchase
         the additional 358,334 preferred shares. The preferred stock purchase
         increased Astrium's, a related party, voting interest in SPACEHAB to
         approximately 11.5 percent. The Series B Senior Convertible Preferred
         Stock is: convertible at the holders' option on the basis of one share
         of preferred stock for one share of common stock, entitled to vote on
         an "as converted" basis the equivalent number of shares of common stock
         and has preference in liquidation, dissolution or winding up of $9.00
         per preferred share. No dividends are payable on the convertible
         preferred shares.

                  Astrium, a related party, provides unpressurized payload and
         integration efforts to SPACEHAB on a fixed price basis in addition to
         providing engineering services as required. For the years ended June
         30, 2001, 2000 and 1999, Astrium's, a related party, payload and
         integration services included in cost of revenue was approximately $4.3
         million, $3.6 million and $2.1 million respectively.

                                       42

<PAGE>




(19)     Investment in Guigne

                  During June 1998, the Company entered into a joint venture
         agreement with Guigne Technologies Limited ("GTL"), a Canadian company,
         for the purpose of developing, fabricating, marketing and selling of
         SpaceDRUMS services, a containerless processing facility intended to be
         deployed on the ISS. In accordance with the joint venture agreement,
         the Company had contributed, in exchange for a 50 percent interest in
         the joint venture, an aggregate of $2.0 million of working capital to
         the joint venture through December 1999. The Company's contributions
         were made in the form of an unsecured non-interest bearing note. The
         joint venture has entered into contracts with an aggregate value of
         $6.9 million for the lease of the SpaceDRUMS facility with an unrelated
         party.

                  The joint venture agreement contained an option whereby the
         Company could exchange its interest in the joint venture and the $2.0
         million note for a common equity interest in Guigne Inc. ("GI"), the
         ultimate parent of GTL. In accordance with the terms of the joint
         venture agreement, in December 1999 the Company notified GI of its
         intention to exercise its option. Under the option, the equity interest
         obtained in GI was determined by dividing the $2.0 million contributed
         by the Company by the fair market value of GI, as determined by
         independent appraisal, at the date of exchange. However, such equity
         interest could not exceed 19% of the outstanding equity of GI. The
         independent appraisal and conversion were finalized subsequent to June
         30, 2000, with an effective date of January 1, 2000, and resulted in
         the Company obtaining a 15% common equity interest in GI. The Company
         accounts for its investment in GI on the cost method. Upon the
         exchange, the joint venture was dissolved and all property, rights,
         assets and liabilities of the joint venture became the property,
         rights, assets and liabilities of GI.

                The Company did not have the ability to exclusively control the
         operational and financial policies of the joint venture, although the
         Company did exert significant influence and as such recognized its
         investment in the joint venture prior to the exchange using the
         modified equity method of accounting. During the year ended December
         31, 1999, no revenues and no expenses were recognized by the joint
         venture. During the quarter ended December 31, 1999, at the time of the
         Company's exercise of its option, the Company recognized a $0.2 million
         valuation allowance against its investment in GI based on the Company's
         estimate of the fair value of GI.

(20)     Asset Sale

                  On November 30, 2000, Astrium, a related party, entered into
         an agreement with the Company to purchase the Company's Integrated
         Cargo Carrier ("ICC") and Vertical Cargo Carrier ("VCC") flight assets.
         The total purchase price of $15.4 million is comprised of both cash and
         services payments. The transaction will occur in two phases. The first
         phase is for the purchase of the ICC assets and the second phase is for
         the purchase of the VCC assets. Phase one of the transactions was
         completed in the three months ended March 31, 2001. The sale was
         approximately at book value and the Company recognized a minimal loss.
         SPACEHAB has entered into an agreement with Astrium, a related party,
         to lease these assets for a period of four years with two additional
         four-year options.

(21)     Subsequent Events

                  On August 2, 2001, SPACEHAB'S Astrotech subsidiary sold the
         assets of its Oriole sounding rocket program and related property for
         approximately $1.2 million to DTI Associates, of Arlington, Virginia.
         The sale, effective July 26, 2001, turns over all physical and
         intellectual property assets of Astrotech's sounding rocket program,
         including the design of the Oriole Rocket, except for those assets
         required for Astrotech to fulfill the terms of an agreement with an
         existing customer. The terms of the sale are as follows; an initial
         cash payment at closing, five equal monthly payments beginning
         September 2001 and a promissory interest bearing note, secured by the
         Astrotech Sounding Rocket Program intellectual property, due July 26,
         2002. Astrotech is expected to record a gain on the sale.

                  On August 9, 2001, SPACEHAB's Johnson Engineering (JE)
         Subsidiary sold its Filter Housing Machining operations assets and
         technology for approximately $850,000 to Clear Lake Industries Holdings
         LLC (CLI), a company recently formed by W.T (Tom) Short, Retired
         SPACEHAB Senior Vice President for JE. The sale was effective July 1,
         2001. The termS of the


                                       43

<PAGE>



         sale are as follows: an initial cash payment at closing and an
         interest bearing note due June 29, 2006. The sale was recorded at book
         value.

                  On September 10, 2001, SPACEHAB's Astrotech subsidiary
         completed a $20 million financing of its satellite processing facility
         expansion project in Titusville, Florida with a financial institution.
         The proceeds of this financing are to be used to complete the
         construction of the payload process facility and supporting
         infra-structure. The loan is collaterized primarily by the multi year
         payload processing contracts with Boeing and Lockheed Martin. Interest
         accrues on the outstanding principal balance at a LIBOR-based rate,
         adjustable quarterly. The loan is payable on January 15, 2011. In
         conjunction with this financing, a swap agreement was entered into to
         provide for a fixed rate of interest under the loan commitment
         beginning January 2002.

                  On October 1, 2001, SPACEHAB received a $750,000 equity
         investment in Space Media, Inc. from EscottVentures II, LLC, of
         Melbourne, Florida. EscottVentures II has assumed a seat on SMI's board
         of directors along with its equity stake. SPACEHAB's ownership in Space
         Media, Inc. has been reduced to approximately 51% as a result of
         EscottVentures II equity investment.

(22)     Summary of Selected Quarterly Financial Data (Unaudited)

                  The following is a summary of selected quarterly financial
         data for the previous three fiscal years (in thousands, except per
         share data):

<TABLE>
<CAPTION>


                                                                  Three months ended
                                          -----------------------------------------------------------------
                                            September 30        December 31        March 31        June 30
--------------------------------------------------------------------------------------------   ------------
<S>                                          <C>               <C>                <C>           <C>
Year ended June 30, 2001
Revenue                                          $26,966           $23,975         $24,453        $29,860
Income (loss) from operations                     (1,602)           (3,066)         (3,089)        (1,421)
Net income (loss)                                 (1,480)           (2,738)         (2,973)        (5,594)

Net income (loss) per share - basic                (0.13)            (0.24)          (0.26)         (0.49)
Net income (loss) per share - diluted              (0.13)            (0.24)          (0.26)         (0.49)
-----------------------------------------------------------------------------------------------------------
Year ended June 30, 2000
Revenue                                          $25,978           $26,011         $25,057        $28,662
Income (loss) from operations                     (2,087)           (1,239)            111            720
Net income (loss)                                 (1,959)           (1,272)           (635)            22

Net income (loss) per share - basic                (0.17)            (0.11)          (0.06)          0.00
Net income (loss) per share - diluted              (0.17)            (0.11)          (0.06)          0.00
------------------------------------------------------------------------------------------------------------
Year ended June 30, 1999
Revenue                                          $28,273            $23,634        $26,693        $29,120
Income (loss) from operations                      2,151             (2,007)           338           (280)

Net income (loss)                                    413             (1,851)          (541)          (610)
Net income (loss) per share - basic                 0.04             (0.17)          (0.05)         (0.05)
Net income (loss) per share - diluted               0.04             (0.17)          (0.05)         (0.05)
------------------------------------------------------------------------------------------------------------
</TABLE>



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

         None

                                       44

<PAGE>

PART III

Item 10.   Directors and Executive Officers of the Registrant.

         The information required by this item will be contained in the
Company's definitive Proxy Statement for its 2001 Annual Meeting of Stockholders
and is hereby incorporated by reference thereto.

Item 11.   Executive Compensation.

         The information required by this item will be contained in the
Company's definitive Proxy Statement for its 2001 Annual Meeting of Stockholders
and is hereby incorporated by reference thereto.

Item 12.   Security Ownership of Certain Beneficial Owners and Management.

         The information required by this item will be contained in the
Company's definitive Proxy Statement for its 2001 Annual Meeting of Stockholders
and is hereby incorporated by reference thereto.

Item 13.  Certain Relationships and Related Transactions.

         The information required by this item will be contained in the
Company's definitive Proxy Statement for its 2001 Annual Meeting of Stockholders
and is hereby incorporated by reference thereto.

PART IV

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
          (As Amended October 17, 2001, to include Consent of Independent
          Auditors, Exhibit 23.1)

(a)      The following documents are filed as part of the report:

1.       Financial Statements.

         The following consolidated financial statements of SPACEHAB,
         Incorporated and its wholly owned and majority-owned subsidiaries and
         related notes, are set forth herein as indicated below.

                                                                     Page
                                                                     ----

         Report of Ernst & Young LLP, Independent Auditors ........    1
         Report of KPMG LLP, Independent Auditors..................    2
         Consolidated Balance Sheets ..............................    3
         Consolidated Statements of Operations ....................    4
         Consolidated Statements of Stockholders' Equity ..........    5
         Consolidated Statements of Cash Flows ....................    6
         Notes to Consolidated Financial Statements ...............    7

2.       Financial Statement Schedules.

         All financial statement schedules required to be filed in Part IV, Item
         14 (a) have been omitted because they are not applicable, not required,
         or because the required information is included in the financial
         statements or notes thereto.

3.       Exhibits.

                                       45

<PAGE>






Exhibit No.             Description of Exhibit

3.1*            Amended and Restated Articles of Incorporation of the Company.

3.2             Designation of Rights, Terms and Preferences of Series A Junior
                Preferred Stock (see Exhibit 4.4 of this Report on Form 10-K).

3.3++           Designation of Rights, Terms and Preferences of Series B Senior
                Convertible Preferred Stock of SPACEHAB, Incorporated.

3.4*            Articles of Amendment of SPACEHAB, Incorporated, including the
                Designation of Rights, Terms and Preferences of Additional
                Shares of Series B Senior Convertible Preferred Stock of
                SPACEHAB, Incorporated.

3.5*            Amended and Restated By-Laws of the Company.

4.1++           Designation of Rights, Terms and Preferences of Series B Senior
                Convertible Preferred Stock of the Registrant.

4.2++           Preferred Stock Purchase Agreement between the Registrant and
                DaimlerChrysler Aerospace AG dated as of August 2, 1999.

4.3++           Registration Rights Agreement between the Registrant and
                DaimlerChrysler Aerospace AG dated as of August 5, 1999.

4.4+            Rights Agreement, dated as of March 26, 1999, between the
                Registrant and American Stock Transfer & Trust Company. The
                Rights Agreement includes the Designation of Rights, Terms and
                Preferences of Series A Junior Preferred Stock as Exhibit A, the
                form of Rights Certificate as Exhibit B and the Summary of
                Rights as Exhibit C.

10.3*           Cost Plus Incentive Fee Contract (Number SHB 1009), dated
                November 23, 1994, between the Registrant and McDonnell Douglas
                (including the amendments thereto) (the "Mir Contract").

10.6*           Amended and Restated Representation Agreement, dated August 15,
                1995, by and between the Registrant and Mitsubishi Corporation.

10.7*           Letter Agreement dated August 15, 1995, by and between the
                Registrant and Mitsubishi Corporation.

10.12***        Amended and Restated Credit Agreement, dated August 20, 1996
                among the Registrant, the Insurers listed therein and the Chase
                Manhattan Bank (National Association), as agent.

10.13*//////    SPACEHAB, Incorporated 1995 Directors' Stock Option Plan (as
                amended and restated effective October 21, 1997).

10.27**         Indemnification Agreement, dated December 27, 1995, between the
                Company and Dr. Shelley A. Harrison.

10.28**         Indemnification Agreement, dated December 27, 1995, between the
                Company and Dr. Edward E. David, Jr.

10.32**         Indemnification Agreement, dated December 27, 1995, between the
                Company and James R. Thompson.

10.36**         Indemnification Agreement, dated December 27, 1995, between the
                Company and David A. Rossi.

10.37**         Indemnification Agreement, dated December 27, 1995, between the
                Company and Dr. Shi H. Huang.

10.38**         Indemnification Agreement, dated December 27, 1995, between the
                Company and Nelda J. Wilbanks.

10.39**         Indemnification Agreement, dated December 27, 1995, between the
                Company and M. Dale Steffey.

10.43**         Indemnification Agreement, dated December 27, 1995, between the
                Company and Hironori Aihara.


                                       46

<PAGE>

10.49*//        Cost Plus Fee Contract (Number SHB 1013), dated July 31, 1997,
                between the Registrant and McDonnell Douglas Corporation,
                McDonnell Douglas Aerospace Huntsville Division (the "Research
                Double Module Contract").

10.52*//        Office Building Lease Agreement, dated October 6, 1993, between
                Astrotech and the Secretary of the Air Force (Lease number
                SPCVAN - 2-94-001).

10.54*//        Loan and Security Agreement, dated June 16, 1997, between the
                Registrant, Astrotech and First Union National Bank (formerly
                known as Signet Bank) (the "Revolving Credit Agreement").

10.55*//        Loan and Security Agreement, dated July 14, 1997, between
                Astrotech and the CIT Group/Equipment Financing, Inc. (the "Term
                Loan Agreement").

10.57*//        Employment and Non-Interference Agreement, dated April 10, 1997,
                between the Company and John M. Lounge.

10.58*//        Indemnification Agreement, dated October 22, 1996, between the
                Company and John M. Lounge.

10.69*///       ESA Contract, Dated October 10, 1997, between the Registrant and
                Intospace GmbH (the "ESA Contract").

10.70*////      NAS 9-97199, dated December 21, 1997, between the Registrant and
                NASA (the "REALMS Contract").

10.73*////      Employment Agreement and Non-Interference Agreement dated
                January 15, 1998, between the Company and David A. Rossi.

10.74*////      Amendment number 1 to Loan and Security Agreement dated December
                31, 1997, between the Company and First Union National Bank.

10.80*/////     CSA Contract, dated May 21, 1998, between the Registrant and the
                Canadian Space Agency.

10.81*/////     Gemini Office Building Lease Agreement, dated January 14, 1998,
                between the Registrant and Puget of Texas

10.82*/////     SHB98006, dated July 8, 1998, between the Registrant and Benz
                Aerospace AG, Raumfahrt-Infrastuktur

10.84*/////     Capital Office Park Lease as amended, dated April 23, 1998,
                between Astrotech and Eleventh Springhill Lake Associates L.L.P.

10.85+++        Letter Agreement between the Company and Alenia Aerospazio.

10.86+++        Employment and Non-Interference Agreement dated July 1, 1998
                between the Company and William A. Jackson

10.87+++        Employment and Non-Interference Agreement dated July 1, 1998
                between the Company and Eugene A. Cernan

10.88+++        Employment and Non-Interference Agreement dated July 1, 1998
                between the Company and W.T. Short

10.89+++        Modification S/A 14 to NAS9-97199 dated November 25, 1998,
                between the Company and NASA.

10.90++++       SPACEHAB, Incorporated 1994 Stock Incentive Plan (as amended and
                restated effective October 14, 1999).


                                       47

<PAGE>

10.92++++       Employment and Non-Interference Agreement, dated March 1, 1999,
                between the Company and Michael Kearney.

10.93++++       Contract No. NAS 9-18800 between NASA and Johnson Engineering
                dated April 28, 1993.

10.94++++       Cost Plus Incentive Fee Contract No. SHB 1014 dated August 14,
                1997 between the Boeing Company and the Registrant.

10.95++++       Amended and Restated Employment and Non-Interference Agreement,
                dated April 1, 1997, between the Company and Dr. Shelly A.
                Harrison, amended and restated as of January 15, 1999.

10.97++++       Lease for property at 555 Forge River Dr. Suite #150, Webster,
                TX between Johnson Engineering and CD UP LP a wholly owned
                subsidiary of Carey Diversified LLC, successor in interest to
                J.A. Billip Development Corporation dated April 30, 1993, as
                amended.

10.98++++       Lease for property at 18100 Upper Bay Road, Suite #208, Houston,
                TX between Johnson Engineering Corporation and Nassau
                Development Company, dated February 19, 1998.

10.99++++       Lease for property at 920, 926 and 928 Gemini Ave., Houston, TX
                under Standard Commercial Lease between Johnson Engineering
                Corporation and Lakeland Development dated February 1, 1998.

10.100++++      Lease for property at 300 D Street, SW, Suite #814, Washington,
                DC, between the Registrant and The Washington Design Center, LLC
                dated December 16, 1998.

10.101++++      Lease for property at 16850 Titan, Houston, TX between Johnson
                Engineering Corporation and Computer Extension Systems, Inc.
                dated August 1, 1999.

10.102++++      Agreement of Sale and Purchase of Leasehold Interest between
                Eastern American Technologies Corporation and SPACEHAB,
                Incorporated dated August 1997.

10.103*//////   SPACEHAB, Incorporated 1997 Employee Stock Purchase Plan.


10.104          Secured Promissory Note, dated March 30, 1999, between the
                Company and The CIT Group/Equipment Financing, Inc.

10.105          Amendment No 2 to Loan and Security Agreement, dated October 15,
                1999 between the Company, First Union National Bank and certain
                other parties.

10.106+++++     Agreement between Astrotech Space Operations, Inc. and McDonnell
                Douglas Corporation, dated January 7, 2000.

10.107+++++     Agreement between Astrotech Space Operations, Inc. and Lockheed
                Martin Commercial Launch Services, Inc. dated January 24, 2000.

10.108          Amendment No. 3 to Loan and Security Agreement, dated January
                31, 2000 between the Company, First Union National Bank and
                certain other parties.

10.109          Employment and Non-Interference Agreement, dated February 14,
                2000, between the Company and Julia A. Pulzone.

10.110          Amendment No. 4 to Loan and Security Agreement, dated May 18,
                2000 between the Company, First Union National Bank and certain
                other parties.

10.111          Third Amendment and Assignment of Industrial Real Estate Lease,
                and Consent to Assignment of Industrial Real Estate Lease, dated
                July 24, 2000, between the Company, American National Insurance
                Company and Pall Corporation.

                                       48

<PAGE>

10.112          Financing and Security Agreement, dated August 9, 2000, by and
                among Bank of America, N.A. and the Company, Johnson Engineering
                Corporation, Astrotech Space Operations, Inc. and Space Media,
                Inc.

10.113*++++     Employment and Non-Interference Agreement, dated as of January
                1, 2001, between the Company and Michael Kearney.

16.*++          Changes in Registrant's Certifying Accountant.

21.*//          Subsidiary of the Registrant.

23.1            Consent of Ernst & Young LLP, Independent Auditors

23.2            Consent of KPMG LLP.

*               Incorporated by reference to the Registrant's Registration
                Statement on Form S-1 (File No. 33-97812) and all amendments
                thereto, originally filed with the Securities and Exchange
                Commission on October 5, 1995.

**              Incorporated by reference to the Registrant's Report on Form
                10-Q for the quarter ended December 31, 1995, filed February 14,
                1996.

***             Incorporated by reference to the Registrant's Report on Form
                10-K for the fiscal year ended June 30, 1996, filed with the
                Securities and Exchange Commission on September 17, 1996.

****            Incorporated by reference to the Registrant's Annual Report on
                Form 10-K/A for the year ended June 30, 1996, filed with the
                Securities and Exchange Commission on December 20, 1996.

*****           Incorporated by reference to the Registrant's Report on Form
                10-Q/A for the quarter ended September 30, 1996, filed with the
                Securities and Exchange Commission on December 20, 1996.

*/              Incorporated by reference to the Registrant's Report on Form 8-K
                filed with the Securities and Exchange Commission on February
                27, 1997.

*//             Incorporated by reference to the Registrant's Report on Form
                10-K for the fiscal year ended June 30, 1997, filed with the
                Securities and Exchange Commission on September 12, 1997.

*///            Incorporated by reference to the Registrant's Report on Form
                10-Q for the quarter ended September 30, 2000, filed November
                14, 2000.

*////           Incorporated by reference to the Registrant's Report on Form
                10-Q for the quarter ended December 31, 1997, filed February 5,
                1998.

*/////          Incorporated by reference to the Registrant's Report on Form
                10-K for the fiscal year ended June 30, 1998, filed with the
                Securities and Exchange Commission on September 17, 1998.

*//////         Incorporated by reference to the Registrant's Definitive Proxy
                Statement, filed with the Securities and Exchange Commission on
                September 12, 1997.

+               Incorporated by reference to the Registrant's Report on Form 8-K
                filed with the Securities and Exchange Commission on April 1,
                1999.


                                       49

<PAGE>


++              Incorporated by reference to the Registrant's Report on Form 8-K
                filed with the Securities and Exchange Commission on August 19,
                1999.

+++             Incorporated by reference to the Registrant's Report on Form
                10-Q for the quarter ended December 31, 1998.

++++            Incorporated by reference to the Registrant's Report on Form
                10-K for the fiscal year ended June 30, 1999, filed with the
                Securities and Exchange Commission on September 17, 1999.

+++++           Incorporated by reference to the Registrant's Report on Form
                10-Q for the quarter ended March 31, 2000, filed with the
                Securities and Exchange Commission on May 12, 2000.

*+              Incorporated by reference to the Registrant's Report on Form
                10-K for the fiscal year ended June 30, 2000, filed with the
                Securities and Exchange Commission on September 12, 2000.

*++             Incorporated by reference to the Registrant's Report on Form 8-K
                filed with the Securities and Exchange Commission on September
                13, 2000.

*+++            Incorporated by reference to the Registrant's Report on Form
                10-Q for the quarter ended September 30, 2000.

*++++           Incorporated by reference to the Registrant's Report on Form
                10-Q for the quarter ended March 31, 2001.



The following Reports on Form 8-K were filed by the Registrant during the period
                            covered by this report.


(a)             Reports on Form 8-K.

                A report on Form 8-K was filed September 13, 2000 announcing the
                dismissal of KPMG LLP as the independent public accountants of
                the Company and the appointment of Ernst & Young LLP as its new
                independent accountants for the fiscal year ended June 30, 2001,
                subject to stockholder ratification. Stockholder ratification
                was obtained at the Annual Meeting of Stockholders on October
                12, 2000.

                                       50

<PAGE>

                                   SIGNATURES

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

                                     SPACEHAB, Incorporated

                                     By:      /s/ Dr. Shelley A. Harrison
                                              ---------------------------
                                              Dr. Shelley A. Harrison
                                              Chairman of the Board and
                                              Chief Executive Officer

Date:
                                     By:      /s/ Julia A. Pulzone
                                              -----------------------
                                              Julia A. Pulzone
                                              Senior Vice President, Finance
                                              and Chief Financial Officer

Date:

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

/s/ Hironori Aihara                         Director          October 15, 2001
------------------------------------
Hironori Aihara

/s/ Melvin D. Booth                         Director          October 15, 2001
------------------------------------
Melvin D. Booth

/s/ Dr. Edward E. David, Jr.                Director          October 15, 2001
------------------------------------
Dr. Edward E. David, Jr.

/s/ Richard Fairbanks.III                   Director          October 15, 2001
------------------------------------
Richard Fairbanks

/s/ Michael E. Kearney                      Director          October 15, 2001
------------------------------------
Michael Kearney


/s/ Josef Kind.                             Director          October 15, 2001
------------------------------------
Josef Kind

/s/ Gordon S. Macklin                       Director          October 15, 2001
------------------------------------
Gordon S. Macklin

/s/ Yury P. Semenov                         Director          October 15, 2001
------------------------------------
Dr. Yury P. Semenov

/s/ James R. Thompson                       Director          October 15, 2001
------------------------------------
James R. Thompson

                                       51