In January 2004 the Company filed a formal proceeding with NASA seeking indemnification under the Company's ReALMS contract in the amount of $87.7 million for the value of the Company's Research Double Module (RDM) and related equipment that was destroyed during the STS-107 Space Shuttle Columbia tragedy. NASA responded to this contract claim on October 5, 2004. NASA's determination states that its liability is limited under the ReALMS contract to $8.0 million. The Company received payment of $8.2 million, which included $0.2 million of interest, from NASA in October 2004. The Company has the right to appeal NASA's decision to deny its claim for indemnification in excess of $8.0 million. The appeal can be filed with either the Armed Services Board of Contract Appeals or the U.S. Court of Federal Claims. SPACEHAB is evaluating its options in appealing NASA's determination.

The claim now made under the Federal Tort Claims Act is separate and in addition to the previously filed claim under SPACEHAB's contract with NASA for which the RDM was provided. Under the Federal Tort Claims Act, SPACEHAB is claiming that NASA's negligence led to the space shuttle accident and the destruction of the RDM and, accordingly, the Company seeks restitution of the loss it suffered regardless of contractual arrangements between NASA and the Company. Under federal tort claim procedures, NASA has statutory deadlines for responding to such claims. In the event that the Company's administrative claim is denied, the Company would have the right to pursue the claim in the Federal district court.

SPACEHAB's claim specifies the following four areas of negligence by NASA that led to the destruction of the Space Shuttle Columbia and the Company's RDM: (i) NASA personnel negligently provided NASA decision-makers with false information that obscured the risks to STS-107 and the RDM, (ii) NASA negligently violated its own rules on foam shedding when compliance with those rules would have prevented the accident, (iii) NASA created organizational barriers that prevented effective communication and analysis of critical safety information and thereby caused the accident, and (iv) NASA negligently failed to comply with accepted engineering standards and thereby caused the destruction of the RDM. These acts and their implicit negligence are documented in the Columbia Accident Investigation Board (CAIB) report which represents the findings of the post-accident investigation. NASA has “embraced the CAIB report and its recommendations” and “fully accepts the Board's findings.”

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.

FOR MORE INFORMATION:

Kimberly Campbell
Vice President
Corporate Marketing and Communications
SPACEHAB, Inc.
713.558.5049
campbell@spacehab.com