UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                  FORM 10-Q/A


     (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934
         For the quarterly period ended...............December 31, 1997


                                       OR


             ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934.


                         Commission file number 0-27206


                             SPACEHAB, Incorporated
                             1595 Spring Hill Road
                                   Suite 360
                             Vienna, Virginia 22182
                                 (703) 821-3000



          Incorporated in the State of           I.R.S. Employer
          Washington                             Identification
                                                 No. 91-1273737


The number of shares of Common Stock  outstanding as of the close of business on
February 5, 1998:


               Class              Number of Shares Outstanding
               Common Stock       11,154,568


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
                                                             -----      -----


<PAGE>


                       SPACEHAB, INCORPORATED AND SUBSIDIARY
                 DECEMBER 31, 1997 QUARTERLY REPORT ON FORM 10-Q/A
                                 TABLE OF CONTENTS


This  Form  10-Q/A is being  filed  due to a  clerical  error  reflected  in the
unaudited  condensed  consolidated  statement of operations  for the three month
period ended December 31, 1997. The impact of this clerical error resulted in an
overstatement  of net income for the three month period ended  December 31, 1997
of $551,918,  or $0.05 per share (basic EPS) and $0.04 per share  (diluted EPS).
The  net  income  amount  reflected  in  the  unaudited  condensed  consolidated
statement of  operations  for the six month  period ended  December 31, 1997 are
correct as previously filed.

PART 1   FINANCIAL INFORMATION                                    Page

  Item 1.   Unaudited Consolidated Financial Statements

         Condensed Consolidated Balance Sheets as of June 30,
         1997 and December 31, 1997                                  3

         Condensed Consolidated Statements of Operations for the
         Three and Six months ended December 31, 1996 and 1997       4

         Condensed Consolidated Statements of Cash Flows for the
         Six months ended December 31, 1996 and 1997                 5

         Notes to Condensed Consolidated Financial Statements        6


  Item 2. Management's Discussion and Analysis of Financial
          Condition and Results of Operations                        9


PART II - OTHER INFORMATION

  Item 4. Submission of Matters to a Vote of Security Holders       13

  Item 6. Exhibits and Reports on Form 8-K                          14



<PAGE>


PART 1:  FINANCIAL INFORMATION
Item 1.  CONSOLIDATED FINANCIAL STATEMENTS

                     SPACEHAB, INCORPORATED AND SUBSIDIARY
                     Condensed Consolidated Balance Sheets


<TABLE>
<CAPTION>

                                                   June 30,       December 31,
                                                     1997             1997
                                                   (audited)       (unaudited)
                                                 --------------   --------------
                              ASSETS
<S>                                                <C>              <C>
Cash and cash equivalents                          $12,886,731      $79,856,749
Receivables                                          5,176,255        8,091,539
Prepaid and other current assets                       199,247        1,153,759
                                                   -----------      ----------- 
    Total current assets                            18,262,233       89,102,047
Property, plant and equipment, net of
 accumulated depreciation and amortization
 of $38,115,620 and $40,683,502                     90,961,873       96,244,607
Goodwill, net of accumulated amortization of
$55,947 and $143,780                                 3,394,773        3,306,940
Deferred mission costs                               1,438,910        2,587,452
Other assets, net                                      392,587        5,655,712
                                                   -----------      ----------- 
     Total assets                                 $114,450,376     $196,896,758
                                                  ============     ============
      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Note payable, current portion                $         -       $ 3,160,000
     Loan payable under credit agreement,
       current portion                                 500,000          500,000
     Accounts payable and accrued expenses           2,408,111        3,295,089
     Accrued consulting and subcontracting
       services                                      9,052,308        4,441,844
     Advanced billings                                 846,855                -
                                                   -----------      ----------- 
          Total current liabilities                 12,807,274       11,396,933
Notes payable to shareholder                        11,225,246       11,921,643
Loan payable under credit agreement, net of
  current portion                                    1,500,000        1,000,000
Note payable, net of current portion                         -       10,253,074
Convertible notes payable                                    -       63,250,000
Deferred flight revenue                              2,295,898       12,313,949
                                                   -----------      ----------- 
          Total liabilities                         27,828,418      110,135,599
Commitments and contingencies
Stockholders' equity:
     Common stock, no par value, authorized
       30,000,000 shares, issued and outstanding
       11,149,737 and 11,154,568 shares,             81,057,164      81,123,730
       respectively
     Additional paid-in capital                          16,299          16,299
     Accumulated earnings                             5,548,495       5,621,130
                                                    -----------     ----------- 
       Total stockholders' equity                    86,621,958      86,761,159
                                                    -----------     ----------- 
       Total liabilities and stockholders' equity  $114,450,376    $196,896,758
                                                   ============    ============
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.




<PAGE>


                      SPACEHAB, INCORPORATED AND SUBSIDIARY
           Unaudited Condensed Consolidated Statements of Operations



<TABLE>
<CAPTION>

                                            Three Months              Six Months
                                         Ended December 31,       Ended December 31,
                                       -----------------------  ------------------------
                                         1996         1997          1996        1997
                                                  (as restated)
                                       ----------  -----------   -----------  ----------
<S>                                   <C>          <C>          <C>          <C>
Revenue                               $22,992,176  $17,755,687  $23,105,418  $20,292,944
Costs of revenue:
   Integration and operations           6,425,204   6,143,154     8,972,459    9,960,648
   Depreciation                         2,376,138   1,223,527     4,752,277    2,446,186
   Insurance and other                    106,250     552,979       106,250      752,019
                                       -----------  ----------   -----------  ----------
      Total costs of revenue            8,907,592   7,919,660    13,830,986   13,158,853
                                       -----------  ----------   -----------  ----------
Gross profit                           14,084,584   9,836,027     9,274,432    7,134,091
Operating expenses:
   Marketing, general and
    administrative                      1,622,120   3,243,010     2,982,527    5,880,734
   Research and development               314,564     759,768       314,564    1,051,577
                                       ----------  ----------    ----------   ----------
     Total operating expenses          1,936,684    4,002,778     3,297,091    6,932,311
                                       -----------  ----------   -----------  ----------
     Income from operations            12,147,900   5,833,249      5,977,341     201,780
Interest expense, net of capitalized
amounts                                  (318,035) (1,175,542)      (678,317) (1,378,335)
Interest and other income                 459,665   1,147,529        814,574   1,409,880
Other expense                                   -           -        897,649           -
                                       -----------  ----------   -----------  ----------
      Income before income taxes       12,289,530   5,805,236      5,215,949     233,325
Income tax expense                      1,230,000      78,461      1,230,000     160,688
                                       -----------  ----------   -----------  ----------
     Income before extraordinary item  11,059,530   5,726,775      3,985,949      72,637
Extraordinary item - gain on early
retirement of debt, net of taxes                -           -      3,274,029          -
                                       -----------  ----------   -----------  ----------
      Net income                       $11,059,530  $5,726,775    $7,259,978     $72,637
                                       ===========  ==========   ===========  ==========
Basic earnings per share:
  Income before extraordinary item           $1.00       $0.51         $0.36       $0.01
  Extraordinary item                            -           -           0.30          -
                                       -----------  ----------   -----------  ----------
Net income per share                         $1.00       $0.51         $0.66       $0.01
                                       ===========  ==========   ===========  ==========
Shares used in computing net income
 per share                              11,111,997  11,149,789    11,091,443  11,148,830
                                       ===========  ==========   ===========  ==========
Diluted earnings per share:
  Income before extraordinary item           $0.99       $0.43         $0.36       $0.01
  Extraordinary item                            -           -           0.29           -
                                       -----------  ----------   -----------  ----------
Net income per share                         $0.99       $0.43         $0.65       $0.01
                                       ===========  ==========   ===========  ==========
Shares used in computing net income
  per share - assuming dilution         11,146,236  15,034,271   11,147,737   11,401,426
                                       ===========  ==========   ===========  ==========
</TABLE>









See accompanying notes to unaudited condensed consolidated financial statements.

<PAGE>


                     SPACEHAB, INCORPORATED AND SUBSIDIARY
           Unaudited Condensed Consolidated Statements of Cash Flows


<TABLE>
<CAPTION>
                                                Six Months Ended December 31,
                                                    1996             1997
                                              -------------     -------------
    Cash flows provided by (used for)
     operating activities:
<S>                                             <C>                  <C>
     Net income                                  $7,259,978           72,637
      Adjustments to reconcile net income
      to net cash provided by operating
      activities:
       Depreciation and amortization              4,894,891        2,655,715
       Gain on early retirement of debt,
       net of taxes, before legal expenses       (3,383,892)               -

       Amortization of financing fees                     -          134,085
       Changes in assets and liabilities:
         Increase in accounts receivable         (1,600,992)      (2,915,284)
         Increase in prepaid and other
           current assets                          (896,872)        (954,512)
         Increase in deferred mission costs         (99,873)      (1,148,542)
         Increase in other assets                  (121,967)      (1,574,973)
         Increase (decrease) in deferred
          flight revenue                         (4,598,576)      10,018,051
         Increase (decrease) in accounts
          payable and accrued expenses           (2,232,186)         886,978
         Increase in advanced billings                    -         (846,855)
         Decrease in accrued consulting
           and subcontracting services             (269,689)        (692,606)
                                              -------------   --------------
            Net cash provided by (used for)
               operating activities              (1,049,178)       5,634,694
                                              -------------   --------------
    Cash flows used for investing activities:
    
      Payments for modules under
        construction                                 (2,232)      (8,339,226)
      Payments for building under
        construction                                      -       (2,046,419)
      Purchase of property and equipment         (2,000,414)        (686,432)
                                              -------------   --------------
           Net cash used for investing
               activities                        (2,002,646)     (11,072,077)
                                              -------------   --------------
    Cash flows provided by (used for) 
     financing activities:
      Payment of note payable to Insurers        (3,185,060)        (500,000)
      Payment of  debt placement fees                     -       (3,822,239)
      Proceeds from issuance of convertible
        notes payable                                    -        63,250,000
      Payment of legal fees on early
        retirement of debt                         (109,986)              -
      Proceeds from note payable                          -       13,413,074
      Proceeds from issuance of common stock         24,000           66,566
                                                -----------     ------------
          Net cash provided by (used for)
           financing activities                  (3,271,046)      72,407,401
                                                -----------     ------------
             Net increase (decrease) in cash
               and cash equivalents              (6,322,870)      66,970,018
    Cash and cash equivalents at beginning       
    of period                                    50,795,548       12,886,731
                                              -------------   --------------
    Cash and cash equivalents at end of
       period                                   $44,472,678      $79,856,749
                                              =============   ==============

</TABLE>



See accompanying notes to unaudited condensed consolidated financial statements.

<PAGE>


                     SPACEHAB, INCORPORATED AND SUBSIDIARY

Notes to Unaudited Condensed Consolidated Financial Statements

1.  Basis of Presentation:

This  Form  10-Q/A is being  filed  due to a  clerical  error  reflected  in the
unaudited  condensed  consolidated  statement of operations  for the three month
period ended December 31, 1997. The impact of this clerical error resulted in an
overstatement  of net income for the three month period ended  December 31, 1997
of $551,918,  or $0.05 per share (basic  EPS)and $0.04 per share  (diluted EPS).
The  net  income  amount  reflected  in  the  unaudited  condensed  consolidated
statement of  operations  for the six month  period ended  December 31, 1997 are
correct as previously filed.

In the opinion of management,  the accompanying unaudited condensed consolidated
financial  statements  reflect  all  adjustments,   consisting  of  only  normal
recurring  accruals,  necessary  for a fair  presentation  of  the  consolidated
financial position of SPACEHAB,  Incorporated and subsidiary  ("SPACEHAB" or the
"Company") as of December 31, 1997, and the results of their  operations for the
three and six month  periods  ended  December  31,  1996 and 1997 and their cash
flows  for the six  months  ended  December  31,  1996 and  1997.  However,  the
consolidated financial statements are unaudited,  and do not include all related
footnote  disclosures.  The results of  operations  for the three and six months
ended December 31, 1997 are not  necessarily  indicative of the results that may
be expected for the full year.  The Company's  results of  operations  fluctuate
significantly  from  quarter  to  quarter.   The  interim  unaudited   condensed
consolidated  financial  statements  should  be read  in  conjunction  with  the
Company's audited  consolidated  financial statements appearing in the Company's
Form 10-K for the year ended June 30, 1997.

2.  Earnings per Share:

In December 1997,  the Company  adopted the provisions of Statement of Financial
Accounting  Standards (SFAS) No. 128, Earnings Per Share,  which establishes new
guidelines for the  calculations  of earnings per share.  Earnings per share for
all  prior  periods  have  been  restated  to  reflect  the  provisions  of this
Statement.

The following are  reconciliations  of the  numerators and  denominators  of the
basic  and  diluted   earnings  per  share   computations   for  "income  before
extraordinary item" and "extraordinary item" for the three and six month periods
ended December 31, 1997 and 1996, respectively: <TABLE> <CAPTION>

                       Three months ended Decembe 31, 1997    Three months ended December 31, 1996
                          Income       Shares      Per Share     Income        Shares      Per Share
                       (Numerator)  (Denominator)    Amount    (Numerator)  (Denominator)    Amount
                       -----------  -------------  ---------  ------------  -------------  ----------
  Basic EPS:
  Income available to
<S> ..................          <C>          <C>    <C>            <C>          <C>            <C>
  common stockholders    $5,726,775   11,149,789    $ 0.51     $11,059,530     11,111,997   $ 1.00

  Effect of dilutive
   securities:
  Convertible notes
   payable ...........   $  797,063    3,626,446     --              --            --        --
  Options and warrants         --        258,036     --              --           34,239     --
                         ----------   ----------    -----      ----------    ----------    ------
  Diluted EPS:
  Income available to
  common stockholders    $6,523,838   15,034,271   $ 0.43     $11,059,530     11,146,236   $ 0.99
                         ==========   ==========   ======     ===========     ==========   ======
</TABLE>

<TABLE>
<CAPTION>
                       Six months ended December 31, 1997      Six months ended December 31, 1996
                          Income       Shares      Per Share     Income        Shares      Per Share
                       (Numerator)  (Denominator)    Amount    (Numerator)  (Denominator)    Amount
                       -----------  -------------  ---------  ------------  -------------  ----------
 Basic EPS:
 Income before
<S>                    <C>            <C>            <C>       <C>            <C>              <C>
  extraordinary item      $72,637     11,148,830     $0.01     $3,985,949     11,091,443       $0.36
 Extraordinary              --             --          --      $3,274,029     11,091,443       $0.30
 Effect of dilutive
  securities:
 Convertible notes
  payable                   --             --          --          --             56,620         --
 Options and warrants       --           252,596       --          --              1,674         --
                         --------    -----------    ------     -----------   -----------       -----
 Diluted EPS:
 Income available to
 common stockholders:
 Income before
  extraordinary item     $72,637     11,401,426     $0.01     $3,985,949     11,147,737       $0.36
 Extraordinary item        --              --          --     $3,274,029     11,147,737       $0.29
</TABLE>

Convertible notes payable outstanding as of December 31, 1997,  convertible into
4,642,202 shares of common stock at $13.625 per share and due October 2007, were
not  included in the  computation  of diluted EPS for the six month period ended
December  31,  1997  as  the   inclusion  of  the   converted   notes  would  be
anti-dilutive.

Options and warrants to purchase  2,377,856  shares of common  stock,  at prices
ranging  from  $7.50 to $24.00 per share,  were  outstanding  for the six months
ended December 31, 1996, but were not included in the computation of diluted EPS
because the options' and warrants' exercise prices were greater than the average
market price of the common shares during the six months ended December 31, 1996.
Similarly,  additional  options to purchase  50,000  shares of common stock at a
price of $7.00 per share were also not  included in the diluted EPS  calculation
for the three month period ended  December 31, 1996.  The options expire between
July 13, 1997 and April 15, 2005 and warrants  expire between  December 31, 1996
and June 21, 1998.

Options and warrants to purchase  1,161,560  shares of common  stock,  at prices
ranging from $11.00 to $14.88 per share,  were outstanding for the three and six
month periods ended December 31, 1997, but were not included in the  computation
of diluted EPS because the options' and warrants'  exercise  prices were greater
than the  average  market  price of the common  shares  during the three and six
month periods ended December 31, 1997.  The options  expire between  January 31,
1998 and October 21, 2004 and warrants expire between December 31, 1997 and June
21, 1998.


3.  Depreciation of Flight Modules:

Effective July 1, 1997, the Company  extended the estimated  useful lives of its
space  modules  through  2012.  This  change in  accounting  estimate is treated
prospectively and is based on current available information from NASA, which has
estimated the life of the Space Shuttle program through at least 2012.




<PAGE>


4.  Revenue Recognition:

Revenue is  recognized  upon  completion  of each  module  flight  under the Mir
contract. Total contract revenue is allocated to each flight based on the amount
of services  the  Company  provides  on the flight  relative  to total  services
provided for all flights under contract.  Obligations associated with a specific
mission,  e.g., integration services, are also recognized upon completion of the
mission.  For new  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  reported based on costs incurred on a
per mission basis over the period of the contract.  The percentage of completion
method will  result in the  recognition  of revenue  over the period of contract
performance,  thereby  decreasing  quarter by quarter  fluctuations  of reported
revenue.  Revenue  provided by the Astrotech  payload  processing  facilities is
recognized  ratably over the occupancy period of the satellites at the Astrotech
facilities.


5. Statements of Cash Flows - Supplemental Information:

(a) Cash paid for interest costs was $0.92 million and $0.68 million for the six
months ended December 31, 1997 and 1996,  respectively.  The Company capitalized
interest of approximately  $0.83 million and $0.02 million during the six months
ended  December  31, 1997 and 1996,  respectively.  (b) The  Company  paid $1.27
million and $1.40 million for income taxes during the six months ended  December
31, 1997 and 1996, respectively.


6.  New Credit Facilities:

On June 26,  1997,  the  Company  entered  into a $10.0  million  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,
and are  collateralized  by  certain  assets  of the  Company.  The  term of the
agreement is through  October 1999. As of December 31, 1997, the Company had not
drawn against the line of credit.

On July 14, 1997, the Company's wholly-owned subsidiary, Astrotech, entered into
a five year  credit  facility  with a financial  institution  for loans of up to
$15.0  million.  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.  Through December 31, 1997, the Company had
drawn $14.12 million against this loan. As of December 31, 1997, the outstanding
balance on this loan was $13.41 million.

In October 1997, the Company completed a private  placement  offering for $63.25
million of aggregate  principal of 8% 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 $59.91 million to be used for capital
expenditures  associated with the development and  construction of space related
assets and for general corporate purposes.

7.  Reclassifications:

Certain  insignificant  reclassification  have been made to the Company's three-
and  six-month  periods  ending  December  31, 1997 to conform to the  Company's
current financial statement presentation.


<PAGE>


ITEM  2.  Management's  Discussion  and  Analysis  of  Financial  Condition  and
Results of Operations.

General

      This document may contain "forward-looking  statements" within the meaning
of Section 27A of the  Securities  Act of 1933 and Section 21E of the Securities
Exchange  Act  of  1934,   including  (without  limitation)  the  "General"  and
"Liquidity and Capital  Resources"  sections of this Item 2. Such statements are
subject to certain risks and  uncertainties,  including those discussed  herein,
which could cause actual results to differ  materially  from those  projected in
such statements.

      SPACEHAB was  incorporated in 1984 to  commercially  develop space habitat
modules to operate in the cargo bay of the Space Shuttles.

      The Company  currently  operates  under two contracts  with NASA,  the Mir
Contract,  with a total  contract  value of $90.2  million and the  Research and
Logistics Module Services  Contract,  (the "REALMS  Contract"),  a $61.8 million
contract  for two research  missions on board the Space  Shuttle and a logistics
mission to resupply the  International  Space Station.  To date, the Company has
recognized $65.8 million of the Mir contract value,  representing the completion
of the first five missions. The remaining $24.4 million represents the final two
Mir option  missions  scheduled to be flown during  fiscal 1998.  The  aggregate
value of the newly  awarded  REALMS  contract  is $42.8  million  for three firm
missions for NASA.  The  additional  $19.0 million will be derived from three of
NASA's major  International  Space Station  partners;  the European Space Agency
(ESA), the National Space  Development  Agency of Japan (NASDA) and the Canadian
Space Agency (CSA).  The Company has the potential to increase the total current
contract value of $61.8 million by  approximately  $22.0 million  through module
usage  sales  to  commercial   customers  for   microgravity   space   research.
Additionally, the REALMS contract has an option for a fourth mission valued at a
minimum of $15.8  million.  The first two of these  missions are  scheduled  for
flights in the second quarter of fiscal 1999;  the third is currently  projected
for launch in May 2000.

      SPACEHAB  generates  revenue by providing lockers and/or volume within the
SPACEHAB Modules, and by integration and operations support services provided to
scientists and researchers  responsible  for the  experiments  and/or by NASA or
International  Agencies to carry  logistics  supplies for Module missions aboard
the Shuttle system. Under the Mir Contract,  the Company recognizes revenue only
at the  completion  of each Space  Shuttle  mission  utilizing  Company  assets.
Accordingly,  the  Company's  quarterly  revenue  and  profits  have  fluctuated
dramatically  based on NASA's  launch  schedule and will continue to do so under
the Mir Contract and any other  contract for which  revenue is  recognized  only
upon  completion of a mission.  For the REALMS  contract and for future  contact
awards for which the  capability  to  successfully  complete the contract can be
demonstrated   at   contract   inception,    revenue   recognition   under   the
percentage-of-completion  method is being  reported based on costs incurred on a
per mission basis over the period of the contract. The  percentage-of-completion
method  results  in the  recognition  of  revenue  over the  period of  contract
performance,  thereby decreasing the quarter-by-quarter fluctuations of reported
revenue.

      Astrotech  revenue is derived from various multiyear fixed price contracts
with  satellite and launch  vehicle  manufacturers.  The services and facilities
Astrotech  provides to its customers  support the final  assembly,  checkout and
countdown  functions  associated  with  preparing a satellite  for launch.  This
preparation  includes:  the  final  assembly  and  checkout  of  the  satellite,
installation  of the solid  rocket  motors,  loading of the  liquid  propellant,
encapsulation  of the  satellite in the launch  vehicle,  transportation  to the
launch pad and command and control of the satellite during pre-launch countdown.
Revenue provided by the Astrotech  payload  processing  facilities is recognized
ratably over the occupancy period of the satellites in the Astrotech facilities.
Astrotech  will  recognize   additional  revenue  from  an  exclusive  multiyear
agreement to process all Sea Launch  program  payoads at the Boeing  facility in
Long Beach, California.

      The expenses associated with the operations of SPACEHAB are recorded based
on the type of expense.  Costs of revenue  include  integration  and  operations
expenses associated with the performance of two types of efforts: (i) sustaining
engineering  in  support  of all  missions  under a  contract  and (ii)  mission
specific experiment support. Expenses associated with sustaining engineering are
expensed as incurred. Mission specific expenses relating to the Mir Contract are
recorded as assets and not expensed until the specific Space Shuttle  mission is
flown and the related  revenue is  recognized.  Other  costs of revenue  include
depreciation  expense and costs associated with the Astrotech payload processing
facilities.  Flight related  insurance  covering  transportation of the SPACEHAB
Modules  from  SPACEHAB's  payload  processing  facility  to the Space  Shuttle,
in-flight  insurance and  third-party  liability  insurance are also included in
costs  of  revenue  and  are  expensed  as  incurred.   Marketing,  general  and
administrative and interest and other expenses are recognized when incurred.



RESULTS OF OPERATIONS

For the three  months  ended  December  31, 1997 as compared to the three months
ended December 31, 1996.

   Revenue.  The Company  recorded  revenue of  approximately  $17.76 and $22.99
million for the three months ended December 31, 1997 and 1996, respectively.  In
accordance  with the Company's  revenue  recognition  policy for the Mir and the
Commercial Middeck Augmentation Module contract (the "CMAM" contract) Contracts,
revenue is recorded at the completion of a mission when the SPACEHAB modules are
returned to the  Company.  Revenue  was  recognized  for the fifth Mir  Contract
mission ($13.60  million) during the quarter ended December 31, 1997 in addition
to revenue generated from the REALMS Contract ($1.72 million) and from Astrotech
($2.43  million).  In contrast,  revenue for the quarter ended December 31, 1996
was derived from the CMAM  Contract($7.96  million),  the Mir  Contract  ($14.22
million) and the NASDA/ESA Contract ($0.81 million).

   Costs of Revenue.  Costs of revenue for the quarter  ended  December 31, 1997
decreased  11.09% to $7.92  million,  as compared  to $8.91  million for quarter
ended  December 31,  1996.  The primary  components  of costs of revenue for the
quarter ended December 31, 1997 include  integration  and operation  costs under
the Mir Contract ($4.60 million),  the REALMS Contract ($0.89 million),  and the
NASDA/ESA Contract ($0.12 million);  Astrotech operations ($0.84 million);  and,
depreciation ($1.22 million). The primary components of costs of revenue for the
quarter ended December 31, 1996 included  integration and operations costs under
the Mir Contract ($5.27 million), the NASDA/ESA Contract ($0.76 million) and the
CMAM Contract ($0.40 million);  and, depreciation ($2.38 million). This decrease
in depreciation  expense during 1997 is primarily  attributable to the impact of
extending the estimated  useful lives of the Company's  modules.  This change in
accounting  estimate is treated  prospectively and is based on current available
information  from NASA,  which  extends the  estimated  useful life of the space
shuttle program to at least 2012.

   Operating  Expenses.  Operating expenses increased  approximately  106.68% to
approximately  $4.00  million for the three  months  ended  December 31, 1997 as
compared to approximately  $1.94 million for the three months ended December 31,
1996. This increase is due primarily to the Company's efforts to increase staff,
adding strength in engineering, design and research and development capabilities
and reflects the additional  costs of  approximately  $0.39 million incurred for
operating the Astrotech subsidiary.

   Interest Expense.  Interest expense was  approximately  $1.18 million for the
three months ended December 31, 1997 as compared to approximately  $0.32 million
for the three months ended  December 31,  1996.  There was  approximately  $0.45
million and $0.02 million capitalized amounts for the quarter ended December 31,
1997  and  1996,  respectively.  Capitalized  interest  for the  quarters  ended
December  31,  1997 and 1996 was  based  on the  construction  of the  Company's
science  module with  double  module  hardware,  which will be placed in service
beginning in late 1999.  Additional  amounts were capitalized during the quarter
ended December 31, 1997 relating to the construction of an expanded facility for
Astrotech.

   Interest and Other Income.  Interest and other income was approximately $1.15
million and $0.46 million for the three months ended December 31, 1997 and 1996,
respectively.  This increase is due to short term interest earned by the Company
for the  investment  of proceeds  received from the  Company's  debt  financings
completed during July and October 1997.

    Net Income. Net income was approximately  $5.73 million,  or $0.51 per share
(basic EPS), for the quarter ended December 31, 1997, on 11,149,789  shares,  as
compared to $11.06  million,  or $1.00 per share  (basic  EPS),  for the quarter
ended December 31, 1996, on 11,111,997 shares.

   For the six months  ended  December  31,  1997 as  compared to the six months
ended December 31, 1996.

   Revenue.  The Company recorded  revenue of  approximately  $20.29 million and
$23.11   million  for  the  six  months  ended   December  31,  1997  and  1996,
respectively.  Revenue  recognized during the six months ended December 31, 1997
was from the Mir Contract ($13.60 million),  REALMS Contract ($1.72 million) and
Astrotech  ($4.97  million).  Conversely,  for the six months ended December 31,
1996  the  Company's  revenue  was  attributable  to the  Mir  Contract  ($14.22
million), CMAM Contract ($7.96 million) and NASDA/ESA Contract ($0.93 million).

   Costs of Revenue. Costs of revenue for the six months ended December 31, 1997
decreased 4.86% to $13.16 million,  as compared to $13.83 million for six months
ended December 31, 1996. The primary  components of costs of revenue for the six
months ended December 31, 1997 include integration and operation costs under the
Mir Contract ($7.51 million), REALMS Contract ($0.93 million), and the NASDA/ESA
Contract  ($0.20  million);   Astrotech   operations   ($1.61   million);   and,
depreciation  ($2.45 million).  In contrast,  the primary components of costs of
revenue for the six months ended  December  31, 1996  included  integration  and
operations costs under the Mir Contract ($7.17 million),  the NASDA/ESA Contract
($0.85 million) and the CMAM Contract ($1.06 million);  and, depreciation ($4.75
million). This decrease in depreciation expense is attributable to the impact of
extending the estimated  useful lives of the Company's  modules.  This change in
accounting  estimate is treated  prospectively and is based on current available
information  from NASA,  which  extends the  estimated  useful life of the Space
Shuttle program to at least 2012.

   Operating Expenses.  Operating expenses increased by approximately 110.26% to
approximately  $6.93  million  for the six months  ended  December  31,  1997 as
compared to  approximately  $3.30 million for the six months ended  December 31,
1996. This increase is due primarily to the Company's efforts to increase staff,
adding strength in engineering, design and research and development capabilities
and reflects the additional costs of  approximately  $0.67 million for operating
the Astrotech subsidiary.

   Interest Expense.  Interest expense was  approximately  $1.38 million for the
six months ended  December 31, 1997 as compared to  approximately  $0.68 million
for the six months  ended  December  31,  1996.  There was  approximately  $0.83
million and $0.02 capitalized interest amounts for the six months ended December
31,  1997  and  1996,  respectively.  Interest  was  capitalized  based  on  the
construction of the Company's  science module with double module hardware during
the six months ended  December 31, 1997 and 1996,  however,  additional  amounts
were  capitalized in 1997 for costs incurred on the  construction of an expanded
facility for Astrotech.

   Interest and Other Income.  Interest and other income was approximately $1.41
million and $0.81  million for the six months ended  December 31, 1997 and 1996,
respectively.  This increase is due to short-term interest earned by the Company
for the investment of proceeds received from the Company's credit facilities.

    Net Income/Loss.  Net income was approximately  $0.07 million,  or $0.01 per
share (basic and diluted EPS),  on 11,148,830  shares (basic EPS) as compared to
$7.26 million, or $0.66 per share (basic EPS), for the six months ended December
31, 1996, on 11,091,443 shares.


LIQUIDITY AND CAPITAL RESOURCES

Liquidity and Capital Resources

   The Company has historically financed its capital expenditures,  research and
development and working capital  requirements  with progress  payments under its
contracts,  including  the  CMAM  Contract,  the  Mir  Contract,  the  NASDA/ESA
Contracts and  Astrotech's  operations,  as well as with proceeds  received from
private equity offerings and borrowings under credit facilities. During December
1995,  SPACEHAB  completed  an  initial  public  offering  of common  stock (the
"Offering"),  which  provided  the Company  with net  proceeds of  approximately
$43.48  million.  In June 1997, the Company signed an agreement with a financial
institution  securing a $10.0 million  revolving line of credit (the  "Revolving
Line of Credit") that the Company may use for working  capital  purposes.  As of
December 31, 1997,  no amounts were drawn on this line of credit.  In July 1997,
Astrotech  obtained a five-year term loan (the "Term Loan Agreement"),  which is
guaranteed  by  SPACEHAB,  and  provides  for draws of up to $15.0  million  for
general  corporate  purposes.  Through  December 31, 1997, the Company had drawn
$14.12  million  on this  loan and had an  outstanding  balance  on that date of
$13.41  million.  Further,  on October 21, 1997 the Company  completed a private
placement  offering of convertible  subordinated  notes (the "Notes  Offering"),
which provided the Company with net proceeds of approximately  $59.91 million to
be  used  for  capital   expenditures   associated   with  the  development  and
construction of space related assets and for general corporate purposes.

   Cash Flows from  Operating  Activities.  Cash  flows  provided  by (used for)
operating  activities for the six months ended December 31, 1997 and 1996,  were
$5.63  million  and ($1.05)  million  respectively.  The  increase in cash flows
provided by operating  activities is due to a variety of offsetting factors. The
most  significant  factor of this  increase is deferred  flight  revenue,  which
reflects  billing  during the six months ended  December 31, 1997 for the option
missions under the Mir contract and the REALMS contract.

   Cash Flows from Investing  Activities.  For the six months ended December 31,
1997 and 1996,  cash flows used for  investing  activities  consisted of capital
expenditures of approximately $11.07 million and $2.00 million, respectively. Of
this  amount,  $4.42  million  of the  expenditures  in  the  current  year  are
attributable  to the  construction  of the Company's  science module with double
module  hardware,  which module is to be  completed  in early 1999.  The Company
anticipates  that it will spend between $35.0 million and $38.0 million in total
on the asset.  As of December  31,  1997,  the  Company has spent  approximately
$18.19 million on this asset. In addition,  the Company has spent  approximately
$2.05 million for the construction of an expanded facility for Astrotech.

   Cash Flows from  Financing  Activities.  Cash  flows  provided  by (used for)
financing  activities were approximately  $72.41 million and ($3.27) million for
the six months ended  December 31, 1997 and 1996,  respectively.  During the six
months  ended  December  31,  1997,   the  Company   received  net  proceeds  of
approximately $13.41 million under the Term Loan Agreement.  In August 1997, the
Company also made the first payment of $0.50 million under the Credit Agreement.
In October  1997,  the Company  received  net proceeds of  approximately  $59.91
million by  completing  an  offering  of $55.00  million  of its 8%  Convertible
Subordinated   Notes  due  2007  as  well  as  exercise  of  the   underwriters'
over-allotment for an additional $8.25 million.

   The Company  believes that cash flows from the Notes Offering,  the Term Loan
Agreement,  the Revolving Line of Credit and other current financing  activities
will be sufficient to meet any cash flow  requirements from operations and other
funding requirements for capital asset construction and development for at least
the next twelve months.


PART II - OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS

      NONE


ITEM 2.  CHANGES IN SECURITIES

      NONE


ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

      NONE

<PAGE>


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

      ( a )  The Annual meeting was held on October  21, 1997.

      ( b )       The existing Board of Directors stood for and were duly
reelected at this Annual Meeting.
           The names of the directors are as follows:
           Hironori Aihara
           Robert A. Citron
           Dr. Edward E. David, Jr.
           Dr. Shelley Harrison
           Dr. Shi H. Huang
           Chester M. Lee
           Gordon S. Macklin
           Dr. Brad M. Meslin
           Dr. Udo Pollvogt
           Alvin L. Reeser
           James R. Tompson
           Prof. Ernesto Vallerani
      ( c ) The following matters were brought to a vote of the shareholders
at the meeting:

1.    To ratify the appointment of KPMG Peat Marwick LLP as the Company's
independent auditors for fiscal year 1998.
For 7,180,750           Against     1,105       Abstain     3,699

2. To approve the  amendments  to the  Company's  1994 Stock  Incentive  Plan to
increase the total  number of shares  reserved and  available  for  distribution
under the Plan to 2,750,000. For 2,896,691 Against 1,799,888 Abstain 13,040

3.    To adopt the Company's 1997 Employee Stock Purchase Plan.
For 3,156,386           Against     1,540,226   Abstain     13,007

4. To approve the amendments to the Company's  1995 Directors  Stock Option Plan
to increase the total number of shares  reserved and available for  distribution
under the Plan to 500,000. For 3,916,733 Against 1,311,137 Abstain 15,048

All four items presented to the shareholders were approved and implemented.


ITEM 5.  OTHER INFORMATION

      NONE


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

      (a)Exhibits.  The separate Index to Exhibits  accompanying  this filing is
         incorporated herein by reference.

      (b) Reports on Form 8-K.

         1. Report  on Form  8-K  filed  on  October  29,  1997  disclosing  the
            Registrant's  completion  of an  offering  of $55  million of its 8%
            Convertible  Subordinated  Notes  due  2007  and the  closing  on an
            over-allotment  option for an  additional  $8.250  million of its 8%
            Convertible Subordinated Notes due 2007.

         2. Report  on Form  8-K  filed  on  January  21,  1998  disclosing  the
            Registrant's   retirement   of  Chester  M.  Lee  as  president  and
            appointment  of David A. Rossi,  current  senior Vice  President  of
            Business Development, to president, effective on January 14, 1998.


      Exhibit No.             Description of Exhibits


      10.1*       ESA Contract, dated October 10, 1997, between the Registrant
                  and INTOSPACE GmbH (the "ESA Contract").

      10.2***     NAS 97-199, dated December 21, 1997, between the Registrant
                  and NASA (the "REALMS Contract").

      10.3***     Letter Contract Number SHB 1014, dated August 13, 1997,
                  between the Registrant and McDonnell Douglas
                  Aerospace-Huntsville, (as amended).

      10.4***     Employment Agreement and Non-Interference Agreement dated
                  January 15,  1998,  between  the Company and Chester M. Lee.

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

      10.6***     Amendment number 1 to Employment Agreement and
                  Non-Interference Agreement dated April 1, 1997, between  the
                  Company and Shelley A. Harrison.

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

      11.         Statement regarding Computation of Earnings Per Common Share.

      21.**       Subsidiary of the Registrant

      27          Financial Data Schedule

     *    Incorporated  by  reference  to the  Registrant's  Form  10-Q  for the
          quarter  ended  September  30,  1997  filed  with the  Securities  and
          Exchange Commission on November 6, 1997.

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

     ***  Incorporated  by  reference  to the  Registrant's  Form  10-Q  for the
          quarter  ended  December  31,  1997  filed  with the  Securities  and
          Exchange Commission on February 6, 1998.

<PAGE>


                                   Signature

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.


                             SPACEHAB, INCORPORATED




        Date: June 19, 1998           /S/ MARGARET E. GRAYSON
                                      ----------------------------------
                                      Margaret E. Grayson
                                      Vice President of Finance (CFO)
                                      Treasurer, and Assistant
                                      Secretary
                                      (Principal Financial and
                                      Accounting
                                      Officer)