SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549



                                   FORM 8-K

                                CURRENT REPORT

                    PURSUANT TO SECTION 13 or 15(d) OF THE
                       SECURITIES EXCHANGE ACT OF 1934


              Date of Report (Date of earliest event reported):


                                 July 1, 1998


                            Spacehab, Incorporated
            (Exact name of registrant as specified in its charter)


                                  Washington
                   (State or jurisdiction of incorporation)


      0-27206                                         91-1273737
(Commission File Number)               (IRS Employer Identification No.)



                1595 Spring Hill Road, Vienna, Virginia 22182
             (Address of principal executive offices) (Zip Code)


                                (703) 821-3000
                       (Registrant's Telephone Number)




<PAGE>




Item 2.  Acquisition or Disposition of Assets

      On July 1, 1998,  pursuant to a Stock Purchase  Agreement dated as of July
1,  1998  (the  "Stock  Purchase   Agreement"),   Spacehab,   Incorporated  (the
"Registrant"),  acquired all the outstanding  shares of capital stock of Johnson
Engineering Corporation, a Colorado corporation ("Johnson Engineering"). Johnson
Engineering,  headquartered  in  Houston,  Texas,  is  primarily  engaged in the
business of providing engineering services to the National Aeronautics and Space
Administration  ("NASA").  A copy  of the  Stock  Purchase  Agreement  is  filed
herewith as Exhibit 2.1 and reference is made thereto for the complete terms and
conditions thereof.

      The purchase price of $24,500,000 in cash (subject to adjustment following
a review of the closing date  balance  sheet of Johnson  Engineering)  was based
upon the business  prospects of Johnson  Engineering  and the estimated value of
synergies to be realized by the  integration of the Registrant and capital stock
of Johnson  Engineering.  Registrant  purchased  all the  outstanding  shares of
capital stock of Johnson  Engineering  from the former  shareholders,  Eugene A.
Cernan,  William A. Jackson and W.T. Short, all of whom have executed employment
and  non-competition  agreements with Registrant as of July 1, 1998.  Registrant
obtained  the funds for the  purchase  price from an offering in October 1997 of
its 8% Convertible Subordinated Notes due 2007.

      Registrant  intends to operate Johnson  Engineering under its current name
as  a  wholly-owned   subsidiary  of  Registrant.   Registrant  expects  Johnson
Engineering to continue to operate its business in the same manner as before the
acquisition.


Item 7.  Financial Statements, Pro Forma Financial Information and Exhibits

             (a)  Pro forma financial  information of Registrant  reflecting the
                  acquisition of Johnson Engineering.

                  Unaudited pro forma Consolidated Balance Sheet as of March 31,
                  1998.

                  Unaudited pro forma  Consolidated  Statement of Income for the
                        nine-month period ended March 31, 1998.

                  Unaudited pro forma  Consolidated  Statement of Income for the
                        year ended June 30, 1997.

                  Notes  to  Unaudited   Pro  Forma   Consolidated   Financial
                        Statements.

             (b) Financial statements of Johnson Engineering.

                  Unaudited Balance Sheet as of March 31, 1998.

                  Unaudited Statements of Earnings for the  three-month  periods
                        ended March 31, 1997 and 1998.

                  Unaudited Statements of Cash Flows for the three-month periods
                        ended March 31, 1997 and 1998.

                  Note to Financial Statements

                  Report of Independent Certified Public Accountants.

                  Audited Balance Sheet as of December 31, 1997.

                  Audited  Statement of Earnings for the year ended December 31,
                  1997.

                  Audited Statement of  Stockholders'  Equity for the year ended
                        December 31, 1997.

                  Audited  Statement  of Cash Flows for the year ended  December
                        31, 1997.
                  Notes to Financial Statements

             (c)     Exhibits.

                  The following Exhibits are included with this Form 8-K:

      2.1   Stock  Purchase  Agreement  dated  as of July 1,  1998 by and  among
            Spacehab,  Incorporated,  a Washington corporation, as buyer, Eugene
            A.  Cernan,  William A.  Jackson and W.T.  Short,  as  sellers,  and
            Johnson Engineering Corporation, a Colorado corporation.  (Schedules
            and  Exhibits  have  been  omitted  pursuant  to Item  601(b)(2)  of
            Regulation S-K. Such Schedules and Exhibits are listed and described
            in the Stock Purchase Agreement. Registrant hereby agrees to furnish
            to the Securities and Exchange Commission,  upon its request, any or
            all such omitted Schedules and Exhibits.)

      23    Consent of Grant Thornton LLP.

      99.1 Press Release of the Registrant, dated July 1, 1998.



<PAGE>


                      UNAUDITED PRO FORMA FINANCIAL DATA


      The  following  unaudited  consolidated  pro forma  financial  information
consists of an Unaudited  Pro Forma  Consolidated  Balance Sheet as of March 31,
1998 and  Unaudited  Pro Forma  Consolidated  Statements  of Income for the nine
months  ended  March 31,  1998 and the year ended June 30,  1997 (the "Pro Forma
Statements").

      The  Unaudited  Pro Forma  Consolidated  Balance Sheet gives effect to the
acquisition  of Johnson  Engineering  as if it occurred on March 31,  1998.  The
Unaudited Pro Forma Consolidated  Statements of Income for the nine months ended
March 31, 1998 and the year ended June 30,  1997 give effect to the  acquisition
of Johnson Engineering as if it occurred at the beginning of such periods.

      The  acquisition  of Johnson  Engineering  will be accounted for using the
purchase  method of  accounting  and,  accordingly,  the purchase  price will be
allocated  to the  tangible  and  identifiable  intangible  assets  acquired and
liabilities  assumed  based on their  respective  fair  values as of the date of
consummation  of the  acquisition.  The pro forma  adjustments  are  based  upon
available  information and upon certain assumptions that management believes are
reasonable.  The actual  allocation  of the  purchase  price,  however,  and the
resulting  effect on net income  from  operations  may differ from the pro forma
amounts included herein.

      Management  believes  that, on the basis set forth  herein,  the Pro Forma
Statements reflect a reasonable  estimate of this transaction based on currently
available information.  The pro forma financial data do not purport to represent
what the Company's  financial  position or results of operations  would actually
have been had this  transaction in fact occurred on the date or at the beginning
of the period  indicated  or to project  the  Company's  financial  position  or
results of  operations  for any future date or period  indicated.  The Pro Forma
Statements  should  be read  in  conjunction  with  the  consolidated  financial
statements  and related  footnotes  of  Spacehab,  Incorporated  included in the
Company's 1997 annual report on Form 10-K and the Company's  quarterly report on
Form 10-Q for the quarter ended March 31, 1998.



<PAGE>


<TABLE>
<CAPTION>
                UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
                                March 31, 1998
                                (in thousands)

                                                          Historical
                                                      --------------------
                                                      SPACEHAB   Johnson   Adjustments   Pro Forma
                                                               Engineering
                                                      ---------------------------------------------
                                ASSETS

                   Current assets:
                   <S>                                 <C>        <C>       <C>         <C>
                      Cash and cash equivalents.....   $84,962    $    2    $(26,028)(1)$ 58,936
                      Receivables, net..............    12,972     8,466                  21,438
                      Prepaid and other current
                        assets......................     1,767       239                   2,006
                                                       -------    ------    ---------    -------
                       Total current assets..........   99,701     8,707     (26,028)     82,380

                   Property and equipment, net......   100,890       351                 101,241
                   Goodwill, net....................     3,268        --      24,781(1)   28,049
                   Deferred mission costs...........     1,918        --                   1,918
                   Other assets, net................     5,775       247                   6,022
                                                       -------    ------     -------    --------
                   TOTAL ASSETS.....................  $211,552    $9,305     $(1,247)   $219,610
                                                      ========    ======     =======    ========
                            LIABILITIES AND
                         SHAREHOLDERS' EQUITY

                   Current Liabilities:
                    Current maturities of
                     long-term debt..............      $ 3,660    $  400    $   --       $4,060
                    Accounts payable and accrued
                     expenses.........................   4,656     4,042                  8,698
                    Accrued consulting and
                     subcontracting services             6,871     2,516                  9,387
                    Advance billings..............         377        --                    377
                                                        ------     -----     -----       ------
                        Total current liabilities.....  15,564     6,958        --       22,522

                   Notes payable to shareholder.....    11,895        --                 11,895
                   Loan payable under credit
                     agreement, net of current
                     portion.....................        1,000        --                  1,000
                   Note payable, net of current
                     portion.....................        9,547        --                  9,547
                   Convertible notes payable........    63,250        --                 63,250
                   Deferred flight revenue and
                   other liabilities................    18,570        --     1,100(1)    19,670
                                                       -------     -----     -----      -------
                      Total liabilities.............   119,826     6,958     1,100      127,884

                   Shareholders' equity:
                      Common stock..................    81,198        20       (20)(1)   81,198
                      Additional paid-in capital....        16        69       (69)(1)       16
                      Retained earnings ............    10,512     2,258    (2,258)(1)   10,512
                                                       -------     -----     -----      -------
                      Total shareholders' equity....    91,726     2,347    (2,347)      91,726
                                                       -------     -----     -----      -------
                    TOTAL LIABILITIES AND
                     SHAREHOLDERS' EQUITY...........  $211,552    $9,305   $(1,247)    $219,610
                                                      ========    ======   ========    ========
</TABLE>



     See accompanying notes to unaudited pro forma consolidated financial
                                  statements



<PAGE>


<TABLE>
<CAPTION>

             UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
                       Nine Months Ended March 31, 1998
                (dollars in thousands, except per share data)

                                   Historical
                                      --------------------
                                      SPACEHAB   Johnson    Adjustments   Pro Forma
                                                Engineering
                                      ---------------------------------------------
<S>                                 <C>           <C>           <C>          <C>
       Revenue.................     $ 39,290      $36,965       $  --        $76,255
        Costs of Revenue:
          Integration and
          operations..............    18,370       33,380          (39)(4)    51,711
          Depreciation.........        2,935          --                       2,935
          Insurance and other
           direct costs                  915          --                         915
                                    --------      -------       ------      --------
             Total costs of revenue   22,220       33,380          39         55,561
                                    --------      -------       ------      --------
         Gross profit                 17,070        3,585          (39)       20,694
          Marketing, general and                                  (212)(4)
           administrative expenses    10,022        1,506          743 (3)    12,059
          Research and development     1,793           75                      1,868
                                    --------      -------       ------      --------
         Total operating expenses     11,815        1,581          531        13,927
                                    --------      -------       ------      --------
          Income from operations..     5,255        2,004         (492)        6,767
          Interest expense, net of
            capitalized amounts       (2,632)         (18)                    (2,650)
          Interest and other income    2,341          275                      2,616
                                    --------      -------       ------      --------
          Income before income taxes   4,964        2,261         (492)        6,733
          Income tax expense......        --           --          292(5)        292
                                    --------      -------       ------      --------
          Net income..............  $  4,964       $2,261       $ (784)       $6,441
                                    ========      =======       ======      ========
          Net income per
           share--diluted.......... $   0.44                                  $ 0.56
                                    ========                                ========
          Shares used in computing
            net income--per
            share--assuming dilution  11,408                                  11,408
                                    ========                                ========
</TABLE>







     See accompanying notes to unaudited pro forma consolidated financial
                                  statements



<PAGE>


             UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
                           Year Ended June 30, 1997
                (dollars in thousands, except per share data)
<TABLE>
<CAPTION>

                                   Historical
                                    ---------------------
                                    SPACEHAB     Johnson     Adjustments    Pro Forma
                                               Engineering(2)
                                    --------------------------------------------------
<S>                                 <C>          <C>                         <C>
        Revenue                     $ 56,601     $ 36,776                    $ 93,377
        Costs of Revenue:
          Integration and             23,799       32,790      $    (52)(4)    56,537
           operations............
          Depreciation...........      9,825           --                       9,825
          Insurance and other
           direct costs..........        496           --                         496
                                     -------      -------      --------      --------
          Total costs of revenue...   34,120       32,790           (52)       66,858
                                     -------      -------      --------      --------
         Gross profit..............   22,481        3,986            52        26,519
                                     -------      -------      --------      --------
         Marketing, general and                                    (282)(4)
           administrative expenses.    8,567        1,842           991 (3)   11,118
         Research and development..    1,252           70                      1,322
                                     -------      -------      --------     --------
          Total operating expenses.    9,819        1,912           709       12,440
                                     -------      -------      --------     --------
         Income from operations....   12,662        2,074          (657)      14,079
        Interest expense, net of
         capitalized amounts.......     (955)         (52)                    (1,007)
        Interests and other income      1,822           --                     1,822
                                      -------      -------      --------    --------
        Income before income taxes     13,529        2,022          (657)     14,894
        Income tax expense........      2,971           --           306       3,277
                                      -------      -------      --------    --------
        Net income................    $10,558(6)   $ 2,022         $(963)   $ 11,617
                                      =======      =======      ========    ========
        Net income per
         share--diluted............. $   0.95(6)                            $   1.04
                                     ========      =======      ========    ========
       Shares used in computing
         net income per share
         --assuming dilution          11,180                                  11,180
                                     ========      =======      ========    ========
</TABLE>

See accompanying notes to unaudited pro forma consolidated financial statements.

<PAGE>
        Notes to Unaudited Pro Forma Consolidated Financial Statements

      The  Unaudited  Pro Forma  Consolidated  Balance Sheet gives effect to the
acquisition  of Johnson  Engineering  as if it occurred on March 31,  1998.  The
Unaudited Pro Forma Consolidated  Statements of Income for the nine months ended
March 31, 1998 and the year ended June 30,  1997 give effect to the  acquisition
of Johnson Engineering as if it occurred at the beginning of such periods.

(1)   To recognize the acquisition of Johnson Engineering. The Company purchased
      all of the  outstanding  common  stock  from the  former  shareholders  of
      Johnson  Engineering  for $24.5  million in cash  (subject  to  adjustment
      following  a  review  of  the  closing  date  balance   sheet  of  Johnson
      Engineering),  and incurred approximately $1.5 million in costs associated
      with the acquisition.

      The  acquisition  of Johnson  Engineering  will be accounted for using the
      purchase method of accounting and, accordingly, the purchase price will be
      allocated to the tangible and identifiable  intangible assets acquired and
      liabilities  assumed based on their  respective  fair values as of date of
      consummation   of  the   acquisition.   For  purposes  of  the  pro  forma
      information, management of the Company has assumed that the fair values of
      the assets and liabilities acquired will be equal to their respective book
      values  as of the  date  of the  acquisition,  although  the  Company  has
      included a pro forma  adjustment  to record a $1.1  million  liability  to
      recognize the fair value of Johnson Engineering's  long-term contract with
      NASA.

      The pro forma  adjustments  are based upon available  information and upon
      certain  assumptions that management  believes are reasonable.  The actual
      allocation of the purchase price, however, and the resulting effect on net
      income  from  operations  may differ from the pro forma  amounts  included
      herein.

(2)   To reflect the  historical  results of operations of Johnson  Engineering.
      Johnson Engineering had adopted a December 31 year-end,  while the Company
      operates  on  a  June  30  year-end.  Accordingly,  Johnson  Engineering's
      historical  results of  operations  have been  conformed to the  Company's
      fiscal  year-end  of June 30  with  respect  to the  Unaudited  Pro  Forma
      Consolidated Statements of Income for the nine months ended March 31, 1998
      and the year ended June 30, 1997.

(3) To recognize the amortization of goodwill over a 25-year period.

(4)   To recognize the reduction in the  historical  executive  compensation  of
      Johnson Engineering based on employment agreements with certain executives
      of Johnson Engineering.

(5)   To recognize  Federal and state income  taxes.  Prior to the  acquisition,
      Johnson Engineering had elected S Corporation status for federal and state
      income tax purposes,  and accordingly,  Johnson  Engineering's  historical
      results of operations  reflect no provisions for income taxes.  Subsequent
      to the acquisition,  Johnson  Engineering's  results of operations will be
      consolidated  with those of the Company  for federal and state  income tax
      purposes.

(6)   Excludes  an  extraordinary  gain of $3,274 (or $0.29 per  share),  net of
      taxes, relating to the Company favorably amending and restating the Credit
      Agreement.
<PAGE>
                       Johnson Engineering Corporation
<TABLE>
<CAPTION>

                           UNAUDITED BALANCE SHEET

                                March 31, 1998

                        ASSETS

CURRENT ASSETS
<S>                                                                   <C>       
   Cash ........................................................      $    2,288
   Accounts receivable, net of allowance for doubtful
   accounts of $8,584 ..........................................       8,457,842
   Unbilled revenue ............................................           7,612
   Prepaid and other ...........................................         239,305
                                                                      ----------
            Total current assets ...............................       8,707,047

PROPERTY AND EQUIPMENT
   Leasehold improvements ......................................         276,969
   Furniture and equipment .....................................         228,597
   Computer equipment ..........................................          90,725
   Purchased software ..........................................          39,718
                                                                         636,009
      Less accumulated depreciation and amortization ...........         285,397
                                                                         350,612
                                                                      ----------
OTHER ASSETS ...................................................         147,800
   Retainage ...................................................          99,710
   Other .......................................................            --
                                                                         247,510

            Total Assets .......................................      $9,305,169
                                                                      ==========
         LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
   Note payable to bank ........................................      $  400,000
   Accounts payable ............................................       4,041,694
   Accrued and other current liabilities .......................       2,384,760
   Accrued contract liability ..................................         130,958
                                                                      ----------
            Total current liabilities ..........................       6,957,412

STOCKHOLDERS' EQUITY
   Common stock - $1 par value; authorized, 50,000
     shares; issued and outstanding, 20,000 shares .............          20,000
   Additional paid-in capital ..................................          69,015
   Retained earnings ...........................................       2,258,742
                                                                       2,347,757
                                                                      ----------
            Total Liabilities and Stockholders' Equity .........      $9,305,169
                                                                      ==========
</TABLE>

         The accompanying note is an integral part of this statement.
<PAGE>

                       Johnson Engineering Corporation
<TABLE>
<CAPTION>
                       UNAUDITED STATEMENTS OF EARNINGS

                  Three months ended March 31, 1997 and 1998


REVENUES ...................................................          1997          1998
                                                               -----------   -----------
<S> ........................................................           <C>           <C>
   Contract revenues .......................................   $ 7,724,595   $11,769,008
   Other, net ..............................................        10,383         2,288
                                                               -----------   -----------
            Total revenues .................................     7,734,978    11,771,296
                                                               -----------   -----------

COSTS AND EXPENSES
   Cost of revenues ........................................     6,893,530    10,480,999
   General and administrative
   expenses ................................................       373,543       571,860
   Research and development expenses .......................        23,838        28,926
   Interest expense ........................................         6,310         7,364
                                                               -----------   -----------
            Total costs and expenses .......................     7,297,221    11,089,149
                                                               -----------   -----------
           NET EARNINGS ....................................   $   437,757   $   682,147
                                                               ===========   ===========
</TABLE>

        The accompanying note is an integral part of these statements.


<PAGE>


<TABLE>
<CAPTION>
                       Johnson Engineering Corporation

                      UNAUDITED STATEMENTS OF CASH FLOWS

                  Three months ended March 31, 1997 and 1998


                                                                      1997           1998
                                                               -----------    -----------
Cash flows from operating activities
<S> ........................................................           <C>            <C>
   Net earnings ............................................   $   437,757    $   682,147
   Adjustments to reconcile net
     earnings to net cash used in
     operating activities
      Depreciation and amortization ........................        23,019         28,856
      Changes in current assets and
          liabilities
        Accounts receivable, net ...........................      (666,647)    (3,056,408)
        Unbilled revenue ...................................       482,135        428,698
        Prepaid and other ..................................       122,604       (127,727)
        Accounts payable ...................................    (1,195,784)       650,752
        Accrued liabilities ................................       287,297      1,230,422
                                                               -----------    -----------
        Net cash used in operating
          activities .......................................      (509,619)      (163,260)
Cash flows from investing activities
   Purchases of property and
   equipment ...............................................        (7,309)       (32,806)
   Retainage ...............................................          --           30,000
   Other assets ............................................        (3,279)       (26,226)
                                                               -----------    -----------
        Net cash used in investing
           activities ......................................       (10,588)       (29,032)
Cash flows from financing activities
   Borrowings under note payable ...........................     3,550,000      3,140,000
   Repayments on note payable ..............................    (2,175,000)    (2,740,000)
   Distributions to stockholders ...........................      (600,000)      (207,508)
                                                               -----------    -----------
        Net cash provided by
           financing activities ............................       775,000        192,492
                                                               -----------    -----------
        NET INCREASE IN CASH ...............................       254,793            200
Cash at beginning of period ................................         3,800          2,088
                                                               -----------    -----------
Cash at end of period ......................................   $   258,593    $     2,288
                                                               ===========    ===========
Cash paid during the period for
interest ...................................................   $     6,311    $     7,364
                                                               ===========    ===========
</TABLE>
        The accompanying note is an integral part of these statements.

<PAGE>
                       Johnson Engineering Corporation

                         NOTE TO FINANCIAL STATEMENTS

                           March 31, 1997 and 1998


NOTE A - NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Johnson  Engineering   Corporation  (the  "Company")  is  primarily  engaged  in
providing engineering services and products to the federal government.

The interim  financial  statements  included  herein  have been  prepared by the
Company without audit.  Certain  information and footnote  disclosures  normally
included in financial  statements prepared in accordance with generally accepted
accounting  principles  have  been  condensed  or  omitted.  In the  opinion  of
management,  all adjustments  necessary to present fairly the financial position
of Johnson  Engineering  Corporation,  as of March 31, 1998,  and the results of
operations  and cash flows for the three  months  ended  March 31, 1997 and 1998
have been  included  and are of a  normal,  recurring  nature.  The  results  of
operations  for such  interim  periods  are not  necessarily  indicative  of the
results for the full year.
<PAGE>

              REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors
Johnson Engineering Corporation


      We have  audited the  accompanying  balance  sheet of Johnson  Engineering
Corporation (a Colorado  corporation),  as of December 31, 1997, and the related
statements of earnings,  stockholders'  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  generally  accepted  auditing
standards.  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  financial  position  of  Johnson  Engineering
Corporation,  as of December 31, 1997, and the results of its operations and its
cash  flows  for the year  then  ended in  conformity  with  generally  accepted
accounting principles.




GRANT THORNTON LLP


Oklahoma City, Oklahoma
May 8, 1998



<PAGE>


                       Johnson Engineering Corporation

<TABLE>
<CAPTION>
                                BALANCE SHEET

                              December 31, 1997

                        ASSETS

CURRENT ASSETS
<S> .................................................          <C>
   Cash .............................................   $    2,088
   Accounts receivable, net of allowance for doubtful    5,401,434
      accounts of $8,584
   Unbilled revenue .................................      436,310
   Prepaid and other ................................      111,578
                                                        ----------
            Total current assets ....................    5,951,410

PROPERTY AND EQUIPMENT
   Leasehold improvements ...........................      264,860
   Furniture and equipment ..........................      223,149
   Computer equipment ...............................       90,725
   Purchased software ...............................       39,718
                                                        ----------
                                                           618,452
      Less accumulated depreciation and amortization       256,541
                                                        ----------
                                                           361,911
OTHER ASSETS
   Retainage ........................................      177,800
   Other ............................................       73,484
                                                           251,284
                                                        ----------
            Total Assets ............................   $6,564,605
                                                        ==========
         LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
   Accounts payable .................................   $3,406,191
   Accrued liabilities ..............................    1,154,338
   Accrued contract liability .......................      130,958
                                                        ----------
            Total current liabilities ...............    4,691,487

COMMITMENTS .........................................         --

STOCKHOLDERS' EQUITY
   Common stock - $1 par value; authorized, 50,000 ..       20,000
      shares; issued
      and outstanding, 20,000 shares
   Additional paid-in-capital .......................       69,015
   Retained earnings ................................    1,784,103
                                                         1,873,118
                                                        ----------
         Total Liabilities and Stockholders' Equity .   $6,564,605
                                                        ==========
</TABLE>

        The accompanying notes are an integral part of this statement.



<PAGE>


<TABLE>
<CAPTION>
                      Johnson Engineering Corporation

                            STATEMENT OF EARNINGS

                         Year ended December 31, 1997

REVENUES
<S> .................................................           <C>
   Contract revenues ................................   $42,778,523
   Gain on disposal of staffing services division ...       275,000
   Other, net .......................................        11,330
                                                        -----------
            Total revenues ..........................    43,064,853

COSTS AND EXPENSES
   Cost of revenues .................................    38,540,704
   General and administrative expenses ..............     1,986,589
   Research and development expenses ................        92,080
   Interest expense .................................        25,584
                                                        -----------
            Total costs and expenses ................    40,644,957
                                                        -----------
            NET EARNINGS ............................   $ 2,419,896
                                                        ===========

</TABLE>

        The accompanying notes are an integral part of this statement.
<PAGE>


<TABLE>
<CAPTION>
                       Johnson Engineering Corporation

                      STATEMENT OF STOCKHOLDERS' EQUITY

                         Year ended December 31, 1997

                         Common Stock
                         -------------    Additional               Receivable      Total
                                            paid-in    Retained      from       stockholders'
                        Shares  Amount      capital    earnings    stockholders    equity
                        ------  -------  -----------   ----------  ------------ ------------


Balance
<S>                     <C>     <C>        <C>        <C>          <C>         <C>
at January 1, 1997      20,000  $20,000    $69,015    $1,750,220   $(700,000)  $1,139,235

Net earnings                -       -           -      2,419,896          -     2,419,896

Distribution to
     stockholders           -       -           -     (2,386,013)    700,000   (1,686,013)
                        ------     ----      -----    ----------   ----------  ----------
Balance
at December 31, 1997    20,000  $20,000    $69,015   $1,784,103    $      -    $1,873,118
                        ======  =======    =======   ==========    ==========  ==========
</TABLE>



        The accompanying notes are an integral part of this statement.



<PAGE>


<TABLE>
<CAPTION>
                       Johnson Engineering Corporation

                           STATEMENT OF CASH FLOWS

                         Year ended December 31, 1997


Increase (Decrease) in Cash
Cash flows from operating activities
<S> ..........................................................            <C>
   Net earnings ..............................................   $  2,419,896
   Adjustments  to reconcile net earnings to net cash provided
   by operating activities
     Depreciation and amortization ...........................         94,412
     Gain on sale of staffing services division ..............       (275,000)
     Loss on disposal of property and equipment ..............         27,697
     Changes in current assets and liabilities
       Accounts receivable, net ..............................     (1,491,744)
       Unbilled revenue ......................................         45,725
       Prepaid and other .....................................         43,676
       Accounts payable ......................................        591,035
       Accrued liabilities ...................................        (25,090)
                                                                 ------------
         Net cash provided by operating activities ...........      1,430,607
                                                                 ------------
   Cash flows from investing activities
     Proceeds from disposal of property and equipment ........          2,390
     Purchases of property and equipment .....................       (148,434)
     Proceeds from sale of staffing services division ........        391,330
     Other assets ............................................          8,408
                                                                 ------------
         Net cash provided by investing activities ...........        253,694
                                                                 ------------
   Cash flows from financing activities
     Borrowings under note payable ...........................     12,215,000
     Repayments on note payable ..............................    (12,215,000)
     Distributions to stockholders ...........................     (1,686,013)
                                                                 ------------
         Net cash used in financing activities ...............     (1,686,013)
                                                                 ------------
         NET DECREASE IN CASH ................................         (1,712)
   Cash at beginning of period ...............................          3,800
                                                                 ------------
   Cash at end of period .....................................   $      2,088
                                                                 ============
   Cash paid during the period for:
     Interest ................................................   $     36,344
     Income taxes ............................................           --
                                                               
</TABLE>
------------------

Noncash investing and financing activities:

In 1997, the Company sold its staffing  services  division,  including  accounts
receivable of $146,330, for a cash payment of $391,330 and a $30,000 retainage.

In 1997, the Company  exchanged a condominium for a $69,290 note receivable from
a stockholder.

In  1997,  the  Company   distributed  a  $700,000  note  receivable  for  stock
subscription to the stockholders.

        The accompanying notes are an integral part of this statement.



<PAGE>


                       Johnson Engineering Corporation

                        NOTES TO FINANCIAL STATEMENTS

                              December 31, 1997


NOTE A - NATURE OF OPERATIONS AND SUMMARY OF ACCOUNTING POLICIES

Johnson Engineering Corporation (the "Company") was incorporated in the state of
Colorado in 1973 and is primarily engaged in providing  engineering services and
products to the federal government.

On September 1, 1997, the Company sold its technical  staffing services division
for approximately  $421,000,  resulting in a gain of $275,000.  The sale of this
division  had no  significant  impact on the  financial  position  or results of
operations of the Company.

A summary of the significant  accounting  policies  consistently  applied in the
preparation of the accompanying financial statements follows.

 1.   Contract Revenues

In April  1993,  the  Company  was  awarded a  contract  with  NASA  (the  "NASA
Contract")  for a period of five years,  with priced option  renewals up to nine
years. The Company derived  approximately 97% of its total revenues for the year
ended  December  31,  1997 from  this  long-term  federal  contract  with  NASA.
Additionally,  at December 31, 1997, approximately 97% of the Company's accounts
receivable  were due from NASA. In April 1998,  NASA exercised the first renewal
option, which extended the contract to April 2001.

The Company's NASA contract is on a cost-plus-award-fee  basis and is subject to
review  and  negotiation  by  NASA.  Revenues  on  cost-plus-fee  contracts  are
recognized  to the extent of costs  incurred plus  base-fee  revenues  using the
percentage-of-completion  method, measured on costs incurred.  Award fees, which
provide  earnings based on the Company's  contract  performance as determined by
periodic  NASA  evaluations,  are  recorded  when the amounts can be  reasonably
estimated, or are awarded. As award fees are determined by NASA evaluations,  it
is at least reasonably possible estimated award fees will be revised in the near
term.  Approximately  $400,000 of estimated  award fees  recognized as income in
1997 are subject to  evaluation.  Retainages  of  $147,800 at December  31, 1997
represent  amounts  withheld on contracts  until NASA  performs  final  contract
audits.

Contract costs, including indirect costs, are subject to audit and adjustment by
negotiations  between the Company and NASA. The Company has reserved $130,958 as
accrued contract liability for potential  disallowed costs and future credits on
government contracts as of December 31, 1997.

Unbilled revenues  represent amounts earned but not yet billed by the Company on
contracts.



<PAGE>


                       Johnson Engineering Corporation

                  NOTES TO FINANCIAL STATEMENTS - CONTINUED

                              December 31, 1997

NOTE A - NATURE OF OPERATIONS AND SUMMARY OF ACCOUNTING POLICIES - CONTINUED

 2.   Property and Equipment

Property and equipment are recorded at cost.  Depreciation  and amortization are
provided using  straight-line and accelerated  methods over the estimated useful
lives of the related assets ranging from three to seven years.

Depreciation  expense of $94,412 was  recorded  for the year ended  December 31,
1997.

 3.   Income Taxes

Federal income taxes on net earnings are payable  personally by the stockholders
pursuant to an election under  Subchapter S of the Internal  Revenue Code not to
have the Company taxed as a corporation. Accordingly, no provision has been made
for federal income taxes.

 4.   Use of Estimates

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial  statements and accompanying notes;
accordingly, actual results could differ from those estimates.

NOTE B - COMMON STOCK TRANSACTIONS

The Company issued 20,000 shares of common stock for a $700,000 note  receivable
from  stockholders in 1994. The 6.34%  interest-bearing  note receivable for the
stock  subscription  which was  collateralized by the common stock purchased and
had been reflected as a component of  stockholders'  equity in the  accompanying
financial statements was distributed to the stockholders in 1997.

NOTE C - NOTE PAYABLE TO BANK

The Company has a $2,500,000 line of credit agreement which is collateralized by
cash, accounts receivable,  inventory,  and equipment.  The line of credit bears
interest at the bank's base rate plus .5% (9% at December 31, 1997) and contains
restrictive covenants relating to tangible net worth, ratio of current assets to
current  liabilities,  coverage of earnings  before  interest,  income taxes and
depreciation  and  amortization to outstanding  debt,  dividends and payments to
stockholders,  among other  restrictions.  The line of credit matures on May 31,
1998, and at December 31, 1997, no amounts were outstanding under the line.



<PAGE>


                          Johnson Engineering Corporation

                     NOTES TO FINANCIAL STATEMENTS - CONTINUED

                                 December 31, 1997

NOTE D - COMMITMENTS

The Company has a consulting  contract with the Company's  former president that
provides  for a retainer as well as a percentage  of contract  net  profits,  as
defined,  for contract years six through nine (currently in contract year five);
new contracts net profits,  as defined,  obtained before  September 1, 1998; and
net revenue on shelf technology that existed at November 1994.

The Company rents office space and equipment  under  operating  leases.  Related
rent expense was $333,270 for the year ended  December 31, 1997.  Future minimum
lease  commitments  as of December 31, 1997 for the office and equipment  leases
are as follows:

            Year ending December 31
                  1998                            $555,032
                  1999                             565,001
                  2000                             563,159
                  2001                             569,431
                  2002                             515,492
                  Thereafter                       238,482
                                                  --------
                                                $3,006,597
                                                ==========

NOTE E  - EMPLOYEE SAVINGS PLAN

The Company has an employee  savings plan under  Section  401(k) of the Internal
Revenue  Code  covering  personnel  who have been  employed at least six months.
Employees may contribute up to 10% of their compensation to the plan.  Beginning
January 1, 1997,  the Company began  contributing  an amount equal to 50% of the
employees'  contributions not to exceed 5% of the employees'  compensation.  The
Company also has the ability to make additional  discretionary  contributions to
the  plan.  At  December  31,  1997,  the  Company  had  accrued   discretionary
contributions of approximately  $137,000.  For 1997,  expense under the plan was
approximately $653,000.

NOTE F - RELATED PARTY TRANSACTIONS

In 1997, the Company exchanged a condominium for a $69,290 uncollateralized note
receivable  from a stockholder,  which  resulted in a gain of $10,844.  The note
requires monthly  interest  payments at 5.7%, with unpaid principal and interest
due in February 2000 and has been  included in other assets in the  accompanying
financial statements.



<PAGE>


                                    EXHIBIT INDEX


  Exhibit Number   Description of Exhibit
  --------------
        2.1        Stock  Purchase  Agreement  dated  as of July 1,  1998 by and
                   among Spacehab,  Incorporated,  a Washington corporation,  as
                   buyer,  Eugene A. Cernan,  William A. Jackson and W.T. Short,
                   as sellers, and Johnson Engineering  Corporation,  a Colorado
                   corporation.   (Schedules  and  Exhibits  have  been  omitted
                   pursuant to Item 601(b)(2) of Regulation  S-K. Such Schedules
                   and Exhibits are listed and  described in the Stock  Purchase
                   Agreement.   Registrant  hereby  agrees  to  furnish  to  the
                   Securities and Exchange Commission,  upon its request, any or
                   all such omitted Schedules and Exhibits.)

      23          Consent of Grant Thornton LLP.

      99.1        Press Release of the Registrant, dated July 1, 1998.




<PAGE>


                                  SIGNATURES


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


                             SPACEHAB, INCORPORATED


                                    By:   /s/ Margaret E. Grayson
                                        -------------------------
                               Margaret E. Grayson
                             Vice President and CFO


Dated:  July 12, 1998.
[{"type": "8-K", "sequence": "1", "description": "CURRENT REPORT", "secsgml_size_bytes": 52153}]
{"company-data": {"conformed-name": "SPACEHAB INC \\WA\\", "cik": "0001001907", "assigned-sic": "3760", "irs-number": "911273737", "state-of-incorporation": "WA", "fiscal-year-end": "0630"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "000-27206", "film-number": "98664938"}, "business-address": {"street1": "1595 SPRING HILL ROAD", "street2": "STE 360", "city": "VIENNA", "state": "VA", "zip": "22182", "phone": "7038213000"}, "mail-address": {"street1": "1595 SPRING HILL ROAD", "street2": "SUITE 360", "city": "VIENNA", "state": "VA", "zip": "22182"}}
SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                   FORM 8-K

                                CURRENT REPORT

                    PURSUANT TO SECTION 13 or 15(d) OF THE
                       SECURITIES EXCHANGE ACT OF 1934

              Date of Report (Date of earliest event reported):

                                 July 1, 1998

                            Spacehab, Incorporated
            (Exact name of registrant as specified in its charter)

                                  Washington
                   (State or jurisdiction of incorporation)

      0-27206                                         91-1273737
(Commission File Number)               (IRS Employer Identification No.)

                1595 Spring Hill Road, Vienna, Virginia 22182
             (Address of principal executive offices) (Zip Code)

                                (703) 821-3000
                       (Registrant's Telephone Number)
Item 2.  Acquisition or Disposition of Assets

      On July 1, 1998,  pursuant to a Stock Purchase  Agreement dated as of July
1,  1998  (the  "Stock  Purchase   Agreement"),   Spacehab,   Incorporated  (the
"Registrant"),  acquired all the outstanding  shares of capital stock of Johnson
Engineering Corporation, a Colorado corporation ("Johnson Engineering"). Johnson
Engineering,  headquartered  in  Houston,  Texas,  is  primarily  engaged in the
business of providing engineering services to the National Aeronautics and Space
Administration  ("NASA").  A copy  of the  Stock  Purchase  Agreement  is  filed
herewith as Exhibit 2.1 and reference is made thereto for the complete terms and
conditions thereof.

      The purchase price of $24,500,000 in cash (subject to adjustment following
a review of the closing date  balance  sheet of Johnson  Engineering)  was based
upon the business  prospects of Johnson  Engineering  and the estimated value of
synergies to be realized by the  integration of the Registrant and capital stock
of Johnson  Engineering.  Registrant  purchased  all the  outstanding  shares of
capital stock of Johnson  Engineering  from the former  shareholders,  Eugene A.
Cernan,  William A. Jackson and W.T. Short, all of whom have executed employment
and  non-competition  agreements with Registrant as of July 1, 1998.  Registrant
obtained  the funds for the  purchase  price from an offering in October 1997 of
its 8% Convertible Subordinated Notes due 2007.

      Registrant  intends to operate Johnson  Engineering under its current name
as  a  wholly-owned   subsidiary  of  Registrant.   Registrant  expects  Johnson
Engineering to continue to operate its business in the same manner as before the
acquisition.

Item 7.  Financial Statements, Pro Forma Financial Information and Exhibits

             (a)  Pro forma financial  information of Registrant  reflecting the
                  acquisition of Johnson Engineering.

                  Unaudited pro forma Consolidated Balance Sheet as of March 31,
                  1998.

                  Unaudited pro forma  Consolidated  Statement of Income for the
                        nine-month period ended March 31, 1998.

                  Unaudited pro forma  Consolidated  Statement of Income for the
                        year ended June 30, 1997.

                  Notes  to  Unaudited   Pro  Forma   Consolidated   Financial
                        Statements.

             (b) Financial statements of Johnson Engineering.

                  Unaudited Balance Sheet as of March 31, 1998.

                  Unaudited Statements of Earnings for the  three-month  periods
                        ended March 31, 1997 and 1998.

                  Unaudited Statements of Cash Flows for the three-month periods
                        ended March 31, 1997 and 1998.

                  Note to Financial Statements

                  Report of Independent Certified Public Accountants.

                  Audited Balance Sheet as of December 31, 1997.

                  Audited  Statement of Earnings for the year ended December 31,
                  1997.

                  Audited Statement of  Stockholders'  Equity for the year ended
                        December 31, 1997.

                  Audited  Statement  of Cash Flows for the year ended  December
                        31, 1997.
                  Notes to Financial Statements

             (c)     Exhibits.

                  The following Exhibits are included with this Form 8-K:

      2.1   Stock  Purchase  Agreement  dated  as of July 1,  1998 by and  among
            Spacehab,  Incorporated,  a Washington corporation, as buyer, Eugene
            A.  Cernan,  William A.  Jackson and W.T.  Short,  as  sellers,  and
            Johnson Engineering Corporation, a Colorado corporation.  (Schedules
            and  Exhibits  have  been  omitted  pursuant  to Item  601(b)(2)  of
            Regulation S-K. Such Schedules and Exhibits are listed and described
            in the Stock Purchase Agreement. Registrant hereby agrees to furnish
            to the Securities and Exchange Commission,  upon its request, any or
            all such omitted Schedules and Exhibits.)

      23    Consent of Grant Thornton LLP.

      99.1 Press Release of the Registrant, dated July 1, 1998.
UNAUDITED PRO FORMA FINANCIAL DATA

      The  following  unaudited  consolidated  pro forma  financial  information
consists of an Unaudited  Pro Forma  Consolidated  Balance Sheet as of March 31,
1998 and  Unaudited  Pro Forma  Consolidated  Statements  of Income for the nine
months  ended  March 31,  1998 and the year ended June 30,  1997 (the "Pro Forma
Statements").

      The  Unaudited  Pro Forma  Consolidated  Balance Sheet gives effect to the
acquisition  of Johnson  Engineering  as if it occurred on March 31,  1998.  The
Unaudited Pro Forma Consolidated  Statements of Income for the nine months ended
March 31, 1998 and the year ended June 30,  1997 give effect to the  acquisition
of Johnson Engineering as if it occurred at the beginning of such periods.

      The  acquisition  of Johnson  Engineering  will be accounted for using the
purchase  method of  accounting  and,  accordingly,  the purchase  price will be
allocated  to the  tangible  and  identifiable  intangible  assets  acquired and
liabilities  assumed  based on their  respective  fair  values as of the date of
consummation  of the  acquisition.  The pro forma  adjustments  are  based  upon
available  information and upon certain assumptions that management believes are
reasonable.  The actual  allocation  of the  purchase  price,  however,  and the
resulting  effect on net income  from  operations  may differ from the pro forma
amounts included herein.

      Management  believes  that, on the basis set forth  herein,  the Pro Forma
Statements reflect a reasonable  estimate of this transaction based on currently
available information.  The pro forma financial data do not purport to represent
what the Company's  financial  position or results of operations  would actually
have been had this  transaction in fact occurred on the date or at the beginning
of the period  indicated  or to project  the  Company's  financial  position  or
results of  operations  for any future date or period  indicated.  The Pro Forma
Statements  should  be read  in  conjunction  with  the  consolidated  financial
statements  and related  footnotes  of  Spacehab,  Incorporated  included in the
Company's 1997 annual report on Form 10-K and the Company's  quarterly report on
Form 10-Q for the quarter ended March 31, 1998.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
                                March 31, 1998
                                (in thousands)

                                                          Historical
                                                      --------------------
                                                      SPACEHAB   Johnson   Adjustments   Pro Forma
                                                               Engineering
                                                      ---------------------------------------------
                                ASSETS

                   Current assets:
Cash and cash equivalents.....   $84,962    $    2    $(26,028)(1)$ 58,936
                      Receivables, net..............    12,972     8,466                  21,438
                      Prepaid and other current
                        assets......................     1,767       239                   2,006
                                                       -------    ------    ---------    -------
                       Total current assets..........   99,701     8,707     (26,028)     82,380

                   Property and equipment, net......   100,890       351                 101,241
                   Goodwill, net....................     3,268        --      24,781(1)   28,049
                   Deferred mission costs...........     1,918        --                   1,918
                   Other assets, net................     5,775       247                   6,022
                                                       -------    ------     -------    --------
                   TOTAL ASSETS.....................  $211,552    $9,305     $(1,247)   $219,610
                                                      ========    ======     =======    ========
                            LIABILITIES AND
                         SHAREHOLDERS' EQUITY

                   Current Liabilities:
                    Current maturities of
                     long-term debt..............      $ 3,660    $  400    $   --       $4,060
                    Accounts payable and accrued
                     expenses.........................   4,656     4,042                  8,698
                    Accrued consulting and
                     subcontracting services             6,871     2,516                  9,387
                    Advance billings..............         377        --                    377
                                                        ------     -----     -----       ------
                        Total current liabilities.....  15,564     6,958        --       22,522

                   Notes payable to shareholder.....    11,895        --                 11,895
                   Loan payable under credit
                     agreement, net of current
                     portion.....................        1,000        --                  1,000
                   Note payable, net of current
                     portion.....................        9,547        --                  9,547
                   Convertible notes payable........    63,250        --                 63,250
                   Deferred flight revenue and
                   other liabilities................    18,570        --     1,100(1)    19,670
                                                       -------     -----     -----      -------
                      Total liabilities.............   119,826     6,958     1,100      127,884

                   Shareholders' equity:
                      Common stock..................    81,198        20       (20)(1)   81,198
                      Additional paid-in capital....        16        69       (69)(1)       16
                      Retained earnings ............    10,512     2,258    (2,258)(1)   10,512
                                                       -------     -----     -----      -------
                      Total shareholders' equity....    91,726     2,347    (2,347)      91,726
                                                       -------     -----     -----      -------
                    TOTAL LIABILITIES AND
                     SHAREHOLDERS' EQUITY...........  $211,552    $9,305   $(1,247)    $219,610
                                                      ========    ======   ========    ========
See accompanying notes to unaudited pro forma consolidated financial
                                  statements
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
                       Nine Months Ended March 31, 1998
                (dollars in thousands, except per share data)

                                   Historical
                                      --------------------
                                      SPACEHAB   Johnson    Adjustments   Pro Forma
                                                Engineering
                                      ---------------------------------------------
Revenue.................     $ 39,290      $36,965       $  --        $76,255
        Costs of Revenue:
          Integration and
          operations..............    18,370       33,380          (39)(4)    51,711
          Depreciation.........        2,935          --                       2,935
          Insurance and other
           direct costs                  915          --                         915
                                    --------      -------       ------      --------
             Total costs of revenue   22,220       33,380          39         55,561
                                    --------      -------       ------      --------
         Gross profit                 17,070        3,585          (39)       20,694
          Marketing, general and                                  (212)(4)
           administrative expenses    10,022        1,506          743 (3)    12,059
          Research and development     1,793           75                      1,868
                                    --------      -------       ------      --------
         Total operating expenses     11,815        1,581          531        13,927
                                    --------      -------       ------      --------
          Income from operations..     5,255        2,004         (492)        6,767
          Interest expense, net of
            capitalized amounts       (2,632)         (18)                    (2,650)
          Interest and other income    2,341          275                      2,616
                                    --------      -------       ------      --------
          Income before income taxes   4,964        2,261         (492)        6,733
          Income tax expense......        --           --          292(5)        292
                                    --------      -------       ------      --------
          Net income..............  $  4,964       $2,261       $ (784)       $6,441
                                    ========      =======       ======      ========
          Net income per
           share--diluted.......... $   0.44                                  $ 0.56
                                    ========                                ========
          Shares used in computing
            net income--per
            share--assuming dilution  11,408                                  11,408
                                    ========                                ========
See accompanying notes to unaudited pro forma consolidated financial
                                  statements
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
                           Year Ended June 30, 1997
                (dollars in thousands, except per share data)
Historical
                                    ---------------------
                                    SPACEHAB     Johnson     Adjustments    Pro Forma
                                               Engineering(2)
                                    --------------------------------------------------
Revenue                     $ 56,601     $ 36,776                    $ 93,377
        Costs of Revenue:
          Integration and             23,799       32,790      $    (52)(4)    56,537
           operations............
          Depreciation...........      9,825           --                       9,825
          Insurance and other
           direct costs..........        496           --                         496
                                     -------      -------      --------      --------
          Total costs of revenue...   34,120       32,790           (52)       66,858
                                     -------      -------      --------      --------
         Gross profit..............   22,481        3,986            52        26,519
                                     -------      -------      --------      --------
         Marketing, general and                                    (282)(4)
           administrative expenses.    8,567        1,842           991 (3)   11,118
         Research and development..    1,252           70                      1,322
                                     -------      -------      --------     --------
          Total operating expenses.    9,819        1,912           709       12,440
                                     -------      -------      --------     --------
         Income from operations....   12,662        2,074          (657)      14,079
        Interest expense, net of
         capitalized amounts.......     (955)         (52)                    (1,007)
        Interests and other income      1,822           --                     1,822
                                      -------      -------      --------    --------
        Income before income taxes     13,529        2,022          (657)     14,894
        Income tax expense........      2,971           --           306       3,277
                                      -------      -------      --------    --------
        Net income................    $10,558(6)   $ 2,022         $(963)   $ 11,617
                                      =======      =======      ========    ========
        Net income per
         share--diluted............. $   0.95(6)                            $   1.04
                                     ========      =======      ========    ========
       Shares used in computing
         net income per share
         --assuming dilution          11,180                                  11,180
                                     ========      =======      ========    ========
See accompanying notes to unaudited pro forma consolidated financial statements.
Notes to Unaudited Pro Forma Consolidated Financial Statements

      The  Unaudited  Pro Forma  Consolidated  Balance Sheet gives effect to the
acquisition  of Johnson  Engineering  as if it occurred on March 31,  1998.  The
Unaudited Pro Forma Consolidated  Statements of Income for the nine months ended
March 31, 1998 and the year ended June 30,  1997 give effect to the  acquisition
of Johnson Engineering as if it occurred at the beginning of such periods.

(1)   To recognize the acquisition of Johnson Engineering. The Company purchased
      all of the  outstanding  common  stock  from the  former  shareholders  of
      Johnson  Engineering  for $24.5  million in cash  (subject  to  adjustment
      following  a  review  of  the  closing  date  balance   sheet  of  Johnson
      Engineering),  and incurred approximately $1.5 million in costs associated
      with the acquisition.

      The  acquisition  of Johnson  Engineering  will be accounted for using the
      purchase method of accounting and, accordingly, the purchase price will be
      allocated to the tangible and identifiable  intangible assets acquired and
      liabilities  assumed based on their  respective  fair values as of date of
      consummation   of  the   acquisition.   For  purposes  of  the  pro  forma
      information, management of the Company has assumed that the fair values of
      the assets and liabilities acquired will be equal to their respective book
      values  as of the  date  of the  acquisition,  although  the  Company  has
      included a pro forma  adjustment  to record a $1.1  million  liability  to
      recognize the fair value of Johnson Engineering's  long-term contract with
      NASA.

      The pro forma  adjustments  are based upon available  information and upon
      certain  assumptions that management  believes are reasonable.  The actual
      allocation of the purchase price, however, and the resulting effect on net
      income  from  operations  may differ from the pro forma  amounts  included
      herein.

(2)   To reflect the  historical  results of operations of Johnson  Engineering.
      Johnson Engineering had adopted a December 31 year-end,  while the Company
      operates  on  a  June  30  year-end.  Accordingly,  Johnson  Engineering's
      historical  results of  operations  have been  conformed to the  Company's
      fiscal  year-end  of June 30  with  respect  to the  Unaudited  Pro  Forma
      Consolidated Statements of Income for the nine months ended March 31, 1998
      and the year ended June 30, 1997.

(3) To recognize the amortization of goodwill over a 25-year period.

(4)   To recognize the reduction in the  historical  executive  compensation  of
      Johnson Engineering based on employment agreements with certain executives
      of Johnson Engineering.

(5)   To recognize  Federal and state income  taxes.  Prior to the  acquisition,
      Johnson Engineering had elected S Corporation status for federal and state
      income tax purposes,  and accordingly,  Johnson  Engineering's  historical
      results of operations  reflect no provisions for income taxes.  Subsequent
      to the acquisition,  Johnson  Engineering's  results of operations will be
      consolidated  with those of the Company  for federal and state  income tax
      purposes.

(6)   Excludes  an  extraordinary  gain of $3,274 (or $0.29 per  share),  net of
      taxes, relating to the Company favorably amending and restating the Credit
      Agreement.
Johnson Engineering Corporation
UNAUDITED BALANCE SHEET

                                March 31, 1998

                        ASSETS

CURRENT ASSETS
Cash ........................................................      $    2,288
   Accounts receivable, net of allowance for doubtful
   accounts of $8,584 ..........................................       8,457,842
   Unbilled revenue ............................................           7,612
   Prepaid and other ...........................................         239,305
                                                                      ----------
            Total current assets ...............................       8,707,047

PROPERTY AND EQUIPMENT
   Leasehold improvements ......................................         276,969
   Furniture and equipment .....................................         228,597
   Computer equipment ..........................................          90,725
   Purchased software ..........................................          39,718
                                                                         636,009
      Less accumulated depreciation and amortization ...........         285,397
                                                                         350,612
                                                                      ----------
OTHER ASSETS ...................................................         147,800
   Retainage ...................................................          99,710
   Other .......................................................            --
                                                                         247,510

            Total Assets .......................................      $9,305,169
                                                                      ==========
         LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
   Note payable to bank ........................................      $  400,000
   Accounts payable ............................................       4,041,694
   Accrued and other current liabilities .......................       2,384,760
   Accrued contract liability ..................................         130,958
                                                                      ----------
            Total current liabilities ..........................       6,957,412

STOCKHOLDERS' EQUITY
   Common stock - $1 par value; authorized, 50,000
     shares; issued and outstanding, 20,000 shares .............          20,000
   Additional paid-in capital ..................................          69,015
   Retained earnings ...........................................       2,258,742
                                                                       2,347,757
                                                                      ----------
            Total Liabilities and Stockholders' Equity .........      $9,305,169
                                                                      ==========
The accompanying note is an integral part of this statement.
Johnson Engineering Corporation
UNAUDITED STATEMENTS OF EARNINGS

                  Three months ended March 31, 1997 and 1998

REVENUES ...................................................          1997          1998
                                                               -----------   -----------
........................................................
Contract revenues .......................................   $ 7,724,595   $11,769,008
   Other, net ..............................................        10,383         2,288
                                                               -----------   -----------
            Total revenues .................................     7,734,978    11,771,296
                                                               -----------   -----------

COSTS AND EXPENSES
   Cost of revenues ........................................     6,893,530    10,480,999
   General and administrative
   expenses ................................................       373,543       571,860
   Research and development expenses .......................        23,838        28,926
   Interest expense ........................................         6,310         7,364
                                                               -----------   -----------
            Total costs and expenses .......................     7,297,221    11,089,149
                                                               -----------   -----------
           NET EARNINGS ....................................   $   437,757   $   682,147
                                                               ===========   ===========
The accompanying note is an integral part of these statements.
Johnson Engineering Corporation

                      UNAUDITED STATEMENTS OF CASH FLOWS

                  Three months ended March 31, 1997 and 1998

                                                                      1997           1998
                                                               -----------    -----------
Cash flows from operating activities
........................................................
Net earnings ............................................   $   437,757    $   682,147
   Adjustments to reconcile net
     earnings to net cash used in
     operating activities
      Depreciation and amortization ........................        23,019         28,856
      Changes in current assets and
          liabilities
        Accounts receivable, net ...........................      (666,647)    (3,056,408)
        Unbilled revenue ...................................       482,135        428,698
        Prepaid and other ..................................       122,604       (127,727)
        Accounts payable ...................................    (1,195,784)       650,752
        Accrued liabilities ................................       287,297      1,230,422
                                                               -----------    -----------
        Net cash used in operating
          activities .......................................      (509,619)      (163,260)
Cash flows from investing activities
   Purchases of property and
   equipment ...............................................        (7,309)       (32,806)
   Retainage ...............................................          --           30,000
   Other assets ............................................        (3,279)       (26,226)
                                                               -----------    -----------
        Net cash used in investing
           activities ......................................       (10,588)       (29,032)
Cash flows from financing activities
   Borrowings under note payable ...........................     3,550,000      3,140,000
   Repayments on note payable ..............................    (2,175,000)    (2,740,000)
   Distributions to stockholders ...........................      (600,000)      (207,508)
                                                               -----------    -----------
        Net cash provided by
           financing activities ............................       775,000        192,492
                                                               -----------    -----------
        NET INCREASE IN CASH ...............................       254,793            200
Cash at beginning of period ................................         3,800          2,088
                                                               -----------    -----------
Cash at end of period ......................................   $   258,593    $     2,288
                                                               ===========    ===========
Cash paid during the period for
interest ...................................................   $     6,311    $     7,364
                                                               ===========    ===========
The accompanying note is an integral part of these statements.
Johnson Engineering Corporation

                         NOTE TO FINANCIAL STATEMENTS

                           March 31, 1997 and 1998

NOTE A - NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Johnson  Engineering   Corporation  (the  "Company")  is  primarily  engaged  in
providing engineering services and products to the federal government.

The interim  financial  statements  included  herein  have been  prepared by the
Company without audit.  Certain  information and footnote  disclosures  normally
included in financial  statements prepared in accordance with generally accepted
accounting  principles  have  been  condensed  or  omitted.  In the  opinion  of
management,  all adjustments  necessary to present fairly the financial position
of Johnson  Engineering  Corporation,  as of March 31, 1998,  and the results of
operations  and cash flows for the three  months  ended  March 31, 1997 and 1998
have been  included  and are of a  normal,  recurring  nature.  The  results  of
operations  for such  interim  periods  are not  necessarily  indicative  of the
results for the full year.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors
Johnson Engineering Corporation

      We have  audited the  accompanying  balance  sheet of Johnson  Engineering
Corporation (a Colorado  corporation),  as of December 31, 1997, and the related
statements of earnings,  stockholders'  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  generally  accepted  auditing
standards.  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  financial  position  of  Johnson  Engineering
Corporation,  as of December 31, 1997, and the results of its operations and its
cash  flows  for the year  then  ended in  conformity  with  generally  accepted
accounting principles.

GRANT THORNTON LLP

Oklahoma City, Oklahoma
May 8, 1998
Johnson Engineering Corporation
BALANCE SHEET

                              December 31, 1997

                        ASSETS

CURRENT ASSETS
.................................................
Cash .............................................   $    2,088
   Accounts receivable, net of allowance for doubtful    5,401,434
      accounts of $8,584
   Unbilled revenue .................................      436,310
   Prepaid and other ................................      111,578
                                                        ----------
            Total current assets ....................    5,951,410

PROPERTY AND EQUIPMENT
   Leasehold improvements ...........................      264,860
   Furniture and equipment ..........................      223,149
   Computer equipment ...............................       90,725
   Purchased software ...............................       39,718
                                                        ----------
                                                           618,452
      Less accumulated depreciation and amortization       256,541
                                                        ----------
                                                           361,911
OTHER ASSETS
   Retainage ........................................      177,800
   Other ............................................       73,484
                                                           251,284
                                                        ----------
            Total Assets ............................   $6,564,605
                                                        ==========
         LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
   Accounts payable .................................   $3,406,191
   Accrued liabilities ..............................    1,154,338
   Accrued contract liability .......................      130,958
                                                        ----------
            Total current liabilities ...............    4,691,487

COMMITMENTS .........................................         --

STOCKHOLDERS' EQUITY
   Common stock - $1 par value; authorized, 50,000 ..       20,000
      shares; issued
      and outstanding, 20,000 shares
   Additional paid-in-capital .......................       69,015
   Retained earnings ................................    1,784,103
                                                         1,873,118
                                                        ----------
         Total Liabilities and Stockholders' Equity .   $6,564,605
                                                        ==========
The accompanying notes are an integral part of this statement.
Johnson Engineering Corporation

                            STATEMENT OF EARNINGS

                         Year ended December 31, 1997

REVENUES
.................................................
Contract revenues ................................   $42,778,523
   Gain on disposal of staffing services division ...       275,000
   Other, net .......................................        11,330
                                                        -----------
            Total revenues ..........................    43,064,853

COSTS AND EXPENSES
   Cost of revenues .................................    38,540,704
   General and administrative expenses ..............     1,986,589
   Research and development expenses ................        92,080
   Interest expense .................................        25,584
                                                        -----------
            Total costs and expenses ................    40,644,957
                                                        -----------
            NET EARNINGS ............................   $ 2,419,896
                                                        ===========
The accompanying notes are an integral part of this statement.
Johnson Engineering Corporation

                      STATEMENT OF STOCKHOLDERS' EQUITY

                         Year ended December 31, 1997

                         Common Stock
                         -------------    Additional               Receivable      Total
                                            paid-in    Retained      from       stockholders'
                        Shares  Amount      capital    earnings    stockholders    equity
                        ------  -------  -----------   ----------  ------------ ------------

Balance
at January 1, 1997      20,000  $20,000    $69,015    $1,750,220   $(700,000)  $1,139,235

Net earnings                -       -           -      2,419,896          -     2,419,896

Distribution to
     stockholders           -       -           -     (2,386,013)    700,000   (1,686,013)
                        ------     ----      -----    ----------   ----------  ----------
Balance
at December 31, 1997    20,000  $20,000    $69,015   $1,784,103    $      -    $1,873,118
                        ======  =======    =======   ==========    ==========  ==========
The accompanying notes are an integral part of this statement.
Johnson Engineering Corporation

                           STATEMENT OF CASH FLOWS

                         Year ended December 31, 1997

Increase (Decrease) in Cash
Cash flows from operating activities
..........................................................
Net earnings ..............................................   $  2,419,896
   Adjustments  to reconcile net earnings to net cash provided
   by operating activities
     Depreciation and amortization ...........................         94,412
     Gain on sale of staffing services division ..............       (275,000)
     Loss on disposal of property and equipment ..............         27,697
     Changes in current assets and liabilities
       Accounts receivable, net ..............................     (1,491,744)
       Unbilled revenue ......................................         45,725
       Prepaid and other .....................................         43,676
       Accounts payable ......................................        591,035
       Accrued liabilities ...................................        (25,090)
                                                                 ------------
         Net cash provided by operating activities ...........      1,430,607
                                                                 ------------
   Cash flows from investing activities
     Proceeds from disposal of property and equipment ........          2,390
     Purchases of property and equipment .....................       (148,434)
     Proceeds from sale of staffing services division ........        391,330
     Other assets ............................................          8,408
                                                                 ------------
         Net cash provided by investing activities ...........        253,694
                                                                 ------------
   Cash flows from financing activities
     Borrowings under note payable ...........................     12,215,000
     Repayments on note payable ..............................    (12,215,000)
     Distributions to stockholders ...........................     (1,686,013)
                                                                 ------------
         Net cash used in financing activities ...............     (1,686,013)
                                                                 ------------
         NET DECREASE IN CASH ................................         (1,712)
   Cash at beginning of period ...............................          3,800
                                                                 ------------
   Cash at end of period .....................................   $      2,088
                                                                 ============
   Cash paid during the period for:
     Interest ................................................   $     36,344
     Income taxes ............................................           --
------------------

Noncash investing and financing activities:

In 1997, the Company sold its staffing  services  division,  including  accounts
receivable of $146,330, for a cash payment of $391,330 and a $30,000 retainage.

In 1997, the Company  exchanged a condominium for a $69,290 note receivable from
a stockholder.

In  1997,  the  Company   distributed  a  $700,000  note  receivable  for  stock
subscription to the stockholders.

        The accompanying notes are an integral part of this statement.
Johnson Engineering Corporation

                        NOTES TO FINANCIAL STATEMENTS

                              December 31, 1997

NOTE A - NATURE OF OPERATIONS AND SUMMARY OF ACCOUNTING POLICIES

Johnson Engineering Corporation (the "Company") was incorporated in the state of
Colorado in 1973 and is primarily engaged in providing  engineering services and
products to the federal government.

On September 1, 1997, the Company sold its technical  staffing services division
for approximately  $421,000,  resulting in a gain of $275,000.  The sale of this
division  had no  significant  impact on the  financial  position  or results of
operations of the Company.

A summary of the significant  accounting  policies  consistently  applied in the
preparation of the accompanying financial statements follows.

 1.   Contract Revenues

In April  1993,  the  Company  was  awarded a  contract  with  NASA  (the  "NASA
Contract")  for a period of five years,  with priced option  renewals up to nine
years. The Company derived  approximately 97% of its total revenues for the year
ended  December  31,  1997 from  this  long-term  federal  contract  with  NASA.
Additionally,  at December 31, 1997, approximately 97% of the Company's accounts
receivable  were due from NASA. In April 1998,  NASA exercised the first renewal
option, which extended the contract to April 2001.

The Company's NASA contract is on a cost-plus-award-fee  basis and is subject to
review  and  negotiation  by  NASA.  Revenues  on  cost-plus-fee  contracts  are
recognized  to the extent of costs  incurred plus  base-fee  revenues  using the
percentage-of-completion  method, measured on costs incurred.  Award fees, which
provide  earnings based on the Company's  contract  performance as determined by
periodic  NASA  evaluations,  are  recorded  when the amounts can be  reasonably
estimated, or are awarded. As award fees are determined by NASA evaluations,  it
is at least reasonably possible estimated award fees will be revised in the near
term.  Approximately  $400,000 of estimated  award fees  recognized as income in
1997 are subject to  evaluation.  Retainages  of  $147,800 at December  31, 1997
represent  amounts  withheld on contracts  until NASA  performs  final  contract
audits.

Contract costs, including indirect costs, are subject to audit and adjustment by
negotiations  between the Company and NASA. The Company has reserved $130,958 as
accrued contract liability for potential  disallowed costs and future credits on
government contracts as of December 31, 1997.

Unbilled revenues  represent amounts earned but not yet billed by the Company on
contracts.
Johnson Engineering Corporation

                  NOTES TO FINANCIAL STATEMENTS - CONTINUED

                              December 31, 1997

NOTE A - NATURE OF OPERATIONS AND SUMMARY OF ACCOUNTING POLICIES - CONTINUED

 2.   Property and Equipment

Property and equipment are recorded at cost.  Depreciation  and amortization are
provided using  straight-line and accelerated  methods over the estimated useful
lives of the related assets ranging from three to seven years.

Depreciation  expense of $94,412 was  recorded  for the year ended  December 31,
1997.

 3.   Income Taxes

Federal income taxes on net earnings are payable  personally by the stockholders
pursuant to an election under  Subchapter S of the Internal  Revenue Code not to
have the Company taxed as a corporation. Accordingly, no provision has been made
for federal income taxes.

 4.   Use of Estimates

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial  statements and accompanying notes;
accordingly, actual results could differ from those estimates.

NOTE B - COMMON STOCK TRANSACTIONS

The Company issued 20,000 shares of common stock for a $700,000 note  receivable
from  stockholders in 1994. The 6.34%  interest-bearing  note receivable for the
stock  subscription  which was  collateralized by the common stock purchased and
had been reflected as a component of  stockholders'  equity in the  accompanying
financial statements was distributed to the stockholders in 1997.

NOTE C - NOTE PAYABLE TO BANK

The Company has a $2,500,000 line of credit agreement which is collateralized by
cash, accounts receivable,  inventory,  and equipment.  The line of credit bears
interest at the bank's base rate plus .5% (9% at December 31, 1997) and contains
restrictive covenants relating to tangible net worth, ratio of current assets to
current  liabilities,  coverage of earnings  before  interest,  income taxes and
depreciation  and  amortization to outstanding  debt,  dividends and payments to
stockholders,  among other  restrictions.  The line of credit matures on May 31,
1998, and at December 31, 1997, no amounts were outstanding under the line.
Johnson Engineering Corporation

                     NOTES TO FINANCIAL STATEMENTS - CONTINUED

                                 December 31, 1997

NOTE D - COMMITMENTS

The Company has a consulting  contract with the Company's  former president that
provides  for a retainer as well as a percentage  of contract  net  profits,  as
defined,  for contract years six through nine (currently in contract year five);
new contracts net profits,  as defined,  obtained before  September 1, 1998; and
net revenue on shelf technology that existed at November 1994.

The Company rents office space and equipment  under  operating  leases.  Related
rent expense was $333,270 for the year ended  December 31, 1997.  Future minimum
lease  commitments  as of December 31, 1997 for the office and equipment  leases
are as follows:

            Year ending December 31
                  1998                            $555,032
                  1999                             565,001
                  2000                             563,159
                  2001                             569,431
                  2002                             515,492
                  Thereafter                       238,482
                                                  --------
                                                $3,006,597
                                                ==========

NOTE E  - EMPLOYEE SAVINGS PLAN

The Company has an employee  savings plan under  Section  401(k) of the Internal
Revenue  Code  covering  personnel  who have been  employed at least six months.
Employees may contribute up to 10% of their compensation to the plan.  Beginning
January 1, 1997,  the Company began  contributing  an amount equal to 50% of the
employees'  contributions not to exceed 5% of the employees'  compensation.  The
Company also has the ability to make additional  discretionary  contributions to
the  plan.  At  December  31,  1997,  the  Company  had  accrued   discretionary
contributions of approximately  $137,000.  For 1997,  expense under the plan was
approximately $653,000.

NOTE F - RELATED PARTY TRANSACTIONS

In 1997, the Company exchanged a condominium for a $69,290 uncollateralized note
receivable  from a stockholder,  which  resulted in a gain of $10,844.  The note
requires monthly  interest  payments at 5.7%, with unpaid principal and interest
due in February 2000 and has been  included in other assets in the  accompanying
financial statements.
EXHIBIT INDEX

  Exhibit Number   Description of Exhibit
  --------------
        2.1        Stock  Purchase  Agreement  dated  as of July 1,  1998 by and
                   among Spacehab,  Incorporated,  a Washington corporation,  as
                   buyer,  Eugene A. Cernan,  William A. Jackson and W.T. Short,
                   as sellers, and Johnson Engineering  Corporation,  a Colorado
                   corporation.   (Schedules  and  Exhibits  have  been  omitted
                   pursuant to Item 601(b)(2) of Regulation  S-K. Such Schedules
                   and Exhibits are listed and  described in the Stock  Purchase
                   Agreement.   Registrant  hereby  agrees  to  furnish  to  the
                   Securities and Exchange Commission,  upon its request, any or
                   all such omitted Schedules and Exhibits.)

      23          Consent of Grant Thornton LLP.

      99.1        Press Release of the Registrant, dated July 1, 1998.
SIGNATURES

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

                             SPACEHAB, INCORPORATED

                                    By:   /s/ Margaret E. Grayson
                                        -------------------------
                               Margaret E. Grayson
                             Vice President and CFO

Dated:  July 12, 1998.