SPACEHAB, Incorporated, a leading
provider of commercial space services, today announced financial
results for the second quarter ended December 31, 2005 of its fiscal
year 2006.

Second Quarter Results

SPACEHAB posted a second quarter fiscal 2006 net loss of $8.9
million, or $0.70 per share, on revenue of $11.8 million compared with
second quarter fiscal year 2005 net loss of $1.2 million, or $0.10 per
share, on revenue of $13.1 million.

The quarter loss includes a non-cash charge of $6.3 million as the
Company wrote down the book value of one of its two pressurized space
shuttle modules and changed the depreciable life of its remaining
space shuttle assets to align with NASA’s current launch manifest that
anticipates retiring the space shuttle fleet at the end of 2010. “With
a limited number of shuttle flights remaining, we anticipate that the
most efficient use of our flight assets to support NASA’s objectives
is the combined use of our pressurized module flown in conjunction
with our cargo carrying pallet in support of International Space
Station assembly and operations,” stated Brian K. Harrington, SPACEHAB
Chief Financial Officer. “This approach optimizes the amount of
equipment and provisions shipped to the space station. Since this more
favorable method uses our single module, Flight Unit 2, we have
reduced the book value of our aft module, Flight Unit 3, which in the
past provided a larger, double module capability when needed,”
concluded Harrington. SPACEHAB’s single module is under contract for
use on the STS-116 and 118 shuttle missions as is the cargo carrier.
Second quarter results also include a non-cash charge of $0.6 million
of deferred financing cost relative to the note exchange transaction
completed in November.

“As NASA and the aerospace community implement the nation’s Vision
for Space Exploration, we will be transitioning our existing programs
away from shuttle operations, subsequently retiring certain space
assets, and developing new capabilities and hardware that support
next-generation services,” stated Michael E. Kearney, SPACEHAB
President and Chief Executive Officer. “As with most companies,
requirements change, technology improves, and the need to develop new
and improved assets is imperative for market leadership.”

Six Months Results

SPACEHAB’s net loss for the six months ended December 31, 2005 was
$10.8 million, or $0.85 per share, on revenue of $23.8 million
compared to a net income of $5.7 million, or $0.40 per share, on
revenue of $26.2 million for first six months of the prior fiscal
year. Included in the prior year results was a recovery of $8.2
million from NASA in partial indemnification for losses the Company
sustained in the Space Shuttle Columbia tragedy in February 2003.

Following launch of the STS-114 mission in July 2005, space
shuttle missions have been deferred until resolution of foam-related
technical issues. This rescheduling of space shuttle missions has had
an impact on Company revenues and margins for the fiscal year and is
expected to have a continued impact on revenue through the end of the
fiscal year. However, SPACEHAB is generally reimbursed under its
contract with NASA, through Lockheed Martin, for additional costs due
to delays.

Liquidity

SPACEHAB’s cash and short-term investments were approximately $3.8
million as of December 31, 2005. Current liabilities decreased to
$18.4 million at December 31, 2005 compared to $20.5 million at June
30, 2005 due to reductions in accounts payable and accrued expense. As
of December 31, 2005 SPACEHAB carried a contract backlog of $66.5
million which represents the expected value of contractually-committed
work, portions of which are subject to the space shuttle’s return to
flight or future government funding decisions.

The Company’s revolving line of credit in the amount of $5.0
million is secured by accounts receivable and includes financial
covenants that, if not met, require cash deposits securing advances.
SPACEHAB currently has no outstanding advances on this line of credit.
The line of credit terminates on February 11, 2006 and the Company is
currently negotiating an extension.

During the quarter the Company completed an offer to exchange its
5.5% senior convertible notes due 2010 for all of its outstanding 8.0%
convertible subordinated notes due 2007. At the close of the offer,
SPACEHAB issued approximately $52,944,000 in new notes leaving
approximately $10,306,000 of old notes outstanding. The new notes are
convertible into SPACEHAB common stock at the rate of $1.50 per share
and are subject to mandatory conversion if the Company’s stock trades
above $1.95 per share for 20 consecutive days. The issuance of the
convertible notes is consistent with SPACEHAB’s strategy to refinance
its outstanding debt in advance of maturity, reduce its cash
requirements and strengthen its balance sheet.

As announced on February 3, 2005 SPACEHAB filed a civil complaint
with the Federal District Court for the Southern District of Texas
against NASA. The Company is seeking recovery of losses of $79.7
million from the Space Shuttle Columbia tragedy.

Update of Ongoing Operations

Leveraging its extensive hands-on experience in architecting,
defining, developing and operating commercial space flight asset
services, SPACEHAB is preparing its proposal in support of NASA’s
commercial space station resupply requirements known as the Commercial
Orbital Transportation Service (COTS) Demonstration. With anticipated
funding of $500 million, NASA is seeking a commercial service to
provide cargo transportation to and from the International Space
Station. In addition, the objective of the spaceflight capability
demonstrations is to stimulate commercial enterprises in space and
lead to innovative, cost effective access to low-Earth orbit.

In preparation for this procurement, which has a scheduled award
date of June 2006, SPACEHAB has established partnerships and is
securing suppliers with the objective of constructing an
operationally-viable and affordable commercial solution for supplying
a high-value logistics service to the International Space Station. “I
am confident our proven expertise and established infrastructure in
this area, and the versatility that our approach provides, give us an
advantage in this competition,” said Kearney in a Company announcement
issued subsequent to quarter end.

In addition to this high priority business development
opportunity, SPACEHAB’s three major business units carry on their
support to manned and unmanned missions to space, assisting both
commercial and government initiatives. SPACEHAB Flight Services (SFS)
continues its support of the STS-121 space shuttle mission set for
launch in May 2006. Changes in the equipment needed for International
Space Station operations have resulted in NASA’s need to further
engage SPACEHAB’s support, through its contract with Lockheed Martin,
in removing and replacing equipment set for launch on the Company’s
cargo carrier being flown on this mission. As announced after quarter
end, SPACEHAB has been authorized approximately $500,000 for the first
sixty days of this effort.

The SFS business unit is also under contract to support the
STS-116 and 118 flights. These missions use the Company’s cargo
pallets, one set for permanent deployment and attachment to the space
station, but also utilize SPACEHAB’s patented module system which will
transport thousands of pounds of equipment and provisions, much of it
transferred to the space station for use by the astronaut crews that
live for extended periods in space.

In December 2005 SPACEHAB signed an agreement with
Netherlands-based HE Space Operations to market the Company’s
commercial space services throughout Europe. The strategic alliance
creates opportunities for SPACEHAB to provide commercial space access
to a broad range of government, industry and academic institutions
eager to engage in space-based research, technology development and
industrial processing.

Astrotech Space Operations provides support necessary for its
customers to successfully process their spaceflight hardware for
launch, including advance planning; use of unique facilities; and
spacecraft checkout, fueling, encapsulation, transport, and remote
control through launch. During the quarter the Company was awarded a
new NASA mission, THEMIS, under its indefinite-delivery,
indefinite-quantity contract with NASA. THEMIS joins the STEREO and
Dawn spacecraft, all of which are in the launch processing queue
preparing to visit Astrotech’s extensive facilities in Titusville,
Florida. For this contract Astrotech is making facility and equipment
improvements that will be reimbursed by NASA as they are completed.

This quarter saw the successful launch of the Inmarsat-4
communications satellite from the Odyssey Launch Platform. Astrotech
provided payload processing and facilities management support for this
Sea Launch program at the Home Port facilities in Long Beach,
California under a long-term contract with Sea Launch Company LLC.
Inmarsat-4 is designed to provide high-speed mobile service to people
throughout the Americas. It is one in a series of satellites
supporting the Broadband Global Area Network for high-speed delivery
of Internet and intranet content and solutions, video-on-demand, video
conferencing, fax, e-mail, phone and LAN access.

SPACEHAB Government Services continues its exceptional support to
NASA’s International Space Station program, primarily in the areas of
configuration and data management supporting the final acceptance of
space station hardware and software for NASA and the sixteen
international partners. During the quarter, NASA bestowed a 100% award
fee evaluation score on the Program Integration and Control contract
for which the Company is a subcontractor. SPACEHAB began work on the
five-year contract in November 2003 as a subcontractor to the ARES
Corporation. NASA has the option to issue two one-year contract
options that could expand the overall contract to seven years.

Conference Call

SPACEHAB will host a conference call at 10:00 a.m. Central time
following the earnings release. During the call management will
discuss the Company’s second quarter financial results as well as
other recent and potential future developments relating to SPACEHAB.
To participate on the call please dial 800.289.0569 (domestic calls)
or 913.981.5542 (international calls). A taped replay will be
available following the conference call until 11:59 p.m. Eastern time
on February 8, 2006 at 888.203.1112 (domestic calls) or 719.457.0820
(international calls) via access code 5419074. To hear a replay of the
call via the Internet, visit the Investor Information section of the
SPACEHAB website at www.spacehab.com. This audio archived webcast of
the conference call is available on the Company website for
approximately one year.

About SPACEHAB, Incorporated

SPACEHAB, Incorporated (www.spacehab.com) is a leading provider of
commercial and government space services with three primary business
units. The Flight Services business unit develops, owns, and operates
habitat and laboratory modules and cargo carriers aboard NASA’s Space
Shuttles for Space Station resupply and research purposes. SPACEHAB’s
Astrotech subsidiary provides payload processing support services for
both commercial and government customers at company-owned facilities
in Florida and California. The Company’s Government Services business
unit supports NASA’s Johnson Space Center providing configuration
management, product engineering, and support services for both the
Space Station and Space Shuttle programs. Additionally, through The
Space Store, Space Media provides space merchandise to the public and
space enthusiasts worldwide (www.thespacestore.com).

The statements in this document may contain forward-looking
statements that are made pursuant to the Safe Harbor provisions of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements are subject to risks, trends, and uncertainties that could
cause actual results to be materially different from the
forward-looking statement. These factors include, but are not limited
to, continued government support and funding for key space programs,
product performance and market acceptance of products and services, as
well as other risk factors and business considerations described in
the company’s Securities & Exchange Commission filings including the
annual report on Form 10-K. Any forward-looking statements in this
document should be evaluated in light of these important risk factors.
The Company assumes no obligation to update these forward-looking
statements.

                             Tables follow


                SPACEHAB, INCORPORATED AND SUBSIDIARIES
       Unaudited Condensed Consolidated Statements of Operations
                   (In thousands, except share data)


                            Three Months             Six Months
                         Ended December 31,       Ended December 31,
                       -----------------------------------------------
                          2005        2004        2005        2004
                       ----------- ----------- ----------- -----------
Revenue                   $11,793     $13,138     $23,778     $26,171
Costs of revenue           16,072      10,721      26,284      21,507
                       ----------- ----------- ----------- -----------
Gross profit               (4,279)      2,417      (2,506)      4,664
                       ----------- ----------- ----------- -----------
Operating expenses
  Selling, general and
   administrative           2,655       2,269       4,935       4,235
  Research and
   development                133           8         211          16
  Recovery related to
   Research Double
   Module                       -           -           -      (8,244)
                       ----------- ----------- ----------- -----------
     Total operating
      expenses              2,788       2,277       5,146      (3,993)
                       ----------- ----------- ----------- -----------
     Income from
      operations           (7,067)        140      (7,652)      8,657
Interest expense           (1,852)     (1,428)     (3,260)     (2,886)
Interest and other
 income, net                   63          39         172          81
                       ----------- ----------- ----------- -----------
Income (loss) before
 income taxes              (8,856)     (1,249)    (10,740)      5,852
Income tax expense              -           -         (32)       (142)
                       ----------- ----------- ----------- -----------
     Net income (loss)    $(8,856)    $(1,249)   $(10,772)     $5,710
                       =========== =========== =========== ===========
Income (loss) per
 share:
Net income (loss) per
 share - basic             $(0.70)     $(0.10)     $(0.85)      $0.45
                       =========== =========== =========== ===========
Shares used in
 computing net income
 (loss) per share -
 basic                 12,718,242  12,609,863  12,694,909  12,592,044
                       =========== =========== =========== ===========

Net income (loss) per
 share - diluted           $(0.70)     $(0.10)     $(0.85)      $0.40
                       =========== =========== =========== ===========
Shares used in
 computing net income
 (loss) per share -
 diluted               12,718,242  12,609,863  12,694,909  14,200,519
                       =========== =========== =========== ===========


                SPACEHAB, INCORPORATED AND SUBSIDIARIES
                 Condensed Consolidated Balance Sheets
                            (In thousands)


                                            December 31,
                                               2005         June 30,
                                            (unaudited)       2005
                                           ---------------------------
                  ASSETS
Cash and cash equivalents, including
 restricted amounts of $2,550 and $970           $3,846        $8,297
Accounts receivable, net                         13,433        16,906
Prepaid expenses and other current assets         3,412           693
                                           ------------- -------------
     Total current assets                        20,691        25,896
Property, plant, and equipment, net of
 accumulated depreciation and amortization       63,786        73,647
Other assets, net                                 3,655         2,408
                                           ------------- -------------
     Total assets                               $88,132      $101,951
                                           ============= =============
   LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities                             $18,412       $20,461
Long-term liabilities                            65,445        66,693
Stockholders' equity                              4,275        14,797
                                           ------------- -------------
     Total liabilities and stockholders'
      equity                                    $88,132      $101,951
                                           ============= =============


Contact:

SPACEHAB, Inc.
Kimberly Campbell, 713-558-5049
campbell@spacehab.com
www.spacehab.com