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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


Form 10-Q/A

(Mark One)

| | [X] |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934
| | --- |  | --------------------------------------------------------------------------------------

| |  |                                                   | 
| |  | ------------------------------------------------- | 
| |  | For the quarterly period ended September 30, 2002

| |       |  |                                                                                          
| | ----- |  | -----------------------------------------------------------------------------------------
| | [   ] |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT OF 1934
| |       |  |                                                                                          
| |       |  | For the transition period from      to                                                   

Commission file no. 1-7134

Mercury Air Group, Inc.

(Exact name of registrant as specified in its charter)


|                                                                       |  |                                                  
|---------------------------------------------------------------------- |  | -------------------------------------------------
|Delaware(State or other jurisdiction of
incorporation or organization) |  | 11-1800515(I.R.S. Employer
Identification Number)

|                                                                              |  |                
|----------------------------------------------------------------------------- |  | ---------------
|5456 McConnell Avenue
Los Angeles, CA(Address of principal executive offices) |  | 90066(Zip Code)

Registrants telephone number, including area code:
(310) 827-2737

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X]     No [   ]

Indicate by check mark whether the Registrant is an Accelerated Filer (as
defined by rule 12 (b) 2 of the Securities Exchange Act of
1934.)  Yes [     ]      No [X]

Indicate the number of shares outstanding of each of the issuers classes
of common equity, as of the latest practicable date.

|                              |  |                              |           | 
|----------------------------- |  | ---------------------------- | --------- | 
|                              |  | Number of Shares Outstanding
|Title                         |  | as of November 12, 2002     
|                              |  |                             
|Common Stock, $0.01 Par Value |  |                              | 6,439,999 | 



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INTRODUCTORY NOTE

The registrant is filing this Form 10-Q/A to give effect to the
restatement as discussed in Note 1  Restatement to the consolidated
financial statements. Only Part 1, Items 1 and 2 of the original 10-Q filing
are being amended and restated as part of this Form 10-Q/A.

2



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TABLE OF CONTENTS



|                               |                                                                                               |  |  |  |  |  |  | 
|------------------------------ | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION
|                               | Item 1. Financial Statements                                                                 
|                               | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                               | Item 3. Quantitative and Qualitative Disclosure About Market Risk                            
|PART II  OTHER INFORMATION   
|                               | Item 1. Legal Proceedings                                                                    
|                               | Item 2. Change in Securities                                                                 
|                               | Item 3. Default Upon Senior Securities                                                       
|                               | Item 4. Submission of Matters to a Vote of Security Holders                                  
|                               | Item 5. Other Information                                                                    
|                               | Item 6. Exhibits and Exhibit List                                                            
|SIGNATURES                    
|EX-31.1                       
|EX-31.2                       
|EX-32.1                       
|EX-32.2                       



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PART I  FINANCIAL INFORMATION




Item 1.Financial Statements

MERCURY AIR GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

|                                                                                                                                          |                                                                                                                                               |                           |             |                            |             |                        |             |            |             |  |             | 
|----------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------- | ----------- | -------------------------- | ----------- | ---------------------- | ----------- | ---------- | ----------- |  | ----------- | 
|                                                                                                                                          |                                                                                                                                               |                           |             |                            |             | September 30,          |             | June 30,  
|                                                                                                                                          |                                                                                                                                               |                           |             |                            |             | 2002 (Unaudited)       |             | 2002      
|                                                                                                                                          |                                                                                                                                               |                           |             |                            |             |                        |             |           
|                                                                                                                                          |                                                                                                                                               |                           |             |                            |             | (Restated, See Note 1)
|ASSETS                                                                                                                                   
|CURRENT ASSETS:                                                                                                                           |                                                                                                                                               |                           |             |                            |             |                        |             |           
|                                                                                                                                          | Cash and cash equivalents                                                                                                                     |                           | $           | 4,007,000                  |             |                        | $           | 5,565,000  |            
|                                                                                                                                          | Restricted cash                                                                                                                               |                           |             | 250,000                    |             |                        |             | 3,780,000  |            
|                                                                                                                                          | Trade accounts receivable, net of allowance for doubtful accounts of $1,869,000 at
9/30/02 and $1,583,000 at 6/30/02                          |                           |             | 46,656,000                 |             |                        |             | 47,570,000 |            
|                                                                                                                                          | Inventories, principally aviation fuel                                                                                                        |                           |             | 6,561,000                  |             |                        |             | 2,985,000  |            
|                                                                                                                                          | Prepaid expenses and other current assets                                                                                                     |                           |             | 3,201,000                  |             |                        |             | 3,042,000  |            
|                                                                                                                                          |                                                                                                                                               |                           |             |                            |             |                        |             |           
|                                                                                                                                          |                                                                                                                                               | TOTAL CURRENT ASSETS      |             |                            | 60,675,000  |                        |             |            | 62,942,000  | 
|PROPERTY, EQUIPMENT AND LEASEHOLDS, net of accumulated depreciation and amortization
of $55,469,000 at 9/30/02 and $54,383,000 at 6/30/02 |                                                                                                                                               |                           | 59,722,000  |                            |             |                        | 61,094,000  |           
|NOTES RECEIVABLE                                                                                                                          |                                                                                                                                               |                           | 2,078,000   |                            |             |                        | 2,158,000   |           
|DEFERRED INCOME TAXES                                                                                                                     |                                                                                                                                               |                           | 1,301,000   |                            |             |                        | 1,302,000   |           
|GOODWILL                                                                                                                                  |                                                                                                                                               |                           | 4,389,000   |                            |             |                        | 4,389,000   |           
|OTHER INTANGIBLE ASSETS                                                                                                                   |                                                                                                                                               |                           | 208,000     |                            |             |                        | 233,000     |           
|OTHER ASSETS                                                                                                                              |                                                                                                                                               |                           | 4,013,000   |                            |             |                        | 4,096,000   |           
|                                                                                                                                          |                                                                                                                                               |                           |             |                            |             |                        |             |            |            
|                                                                                                                                          |                                                                                                                                               | TOTAL ASSETS              |             | $                          | 132,386,000 |                        |             | $          | 136,214,000 | 
|                                                                                                                                          |                                                                                                                                               |                           |             |                            |             |                        |             |            |            
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                     
|CURRENT LIABILITIES:                                                                                                                      |                                                                                                                                               |                           |             |                            |             |                        |             |           
|                                                                                                                                          | Accounts payable                                                                                                                              |                           | $           | 32,693,000                 |             |                        | $           | 35,449,000 |            
|                                                                                                                                          | Accrued expenses and other current liabilities                                                                                                |                           |             | 8,589,000                  |             |                        |             | 8,861,000  |            
|                                                                                                                                          | Current portion of long-term debt                                                                                                             |                           |             | 14,830,000                 |             |                        |             | 14,677,000 |            
|                                                                                                                                          | Senior subordinated note, current                                                                                                             |                           |             | 23,228,000                 |             |                        |             | 23,179,000 |            
|                                                                                                                                          |                                                                                                                                               |                           |             |                            |             |                        |             |           
|                                                                                                                                          |                                                                                                                                               | TOTAL CURRENT LIABILITIES |             |                            | 79,340,000  |                        |             |            | 82,166,000  | 
|LONG-TERM DEBT                                                                                                                            |                                                                                                                                               |                           | 16,945,000  |                            |             |                        | 17,516,000  |           
|DEFERRED INCOME TAXES                                                                                                                     |                                                                                                                                               |                           | 169,000     |                            |             |                        | 169,000     |           
|DEFERRED RENT                                                                                                                             |                                                                                                                                               |                           | 2,090,000   |                            |             |                        | 1,943,000   |           
|                                                                                                                                          |                                                                                                                                               |                           |             |                            |             |                        |             |           
|                                                                                                                                          |                                                                                                                                               |                           |             | TOTAL LIABILITIES          |             |                        | 98,544,000  |            |             |  | 101,794,000 | 
|STOCKHOLDERS EQUITY:                                                                                                                     |                                                                                                                                               |                           |             |                            |             |                        |             |           
|                                                                                                                                          | Preferred Stock  $0.01 par value; authorized 3,000,000 shares; no shares outstanding                                                         |                           |             |                            |             |                        |             |            |            
|                                                                                                                                          | Common Stock  $0.01 par value; authorized 18,000,000 shares; outstanding 6,439,999
and 6,541,699 shares at 9/30/02 and 6/30/02, respectively |                           |             | 64,000                     |             |                        |             | 66,000     |            
|                                                                                                                                          | Additional paid-in capital                                                                                                                    |                           |             | 22,219,000                 |             |                        |             | 22,233,000 |            
|                                                                                                                                          | Retained earnings                                                                                                                             |                           |             | 16,247,000                 |             |                        |             | 16,872,000 |            
|                                                                                                                                          | Accumulated other comprehensive loss                                                                                                          |                           |             | (355,000                   | )           |                        |             | (316,000   | )          
|                                                                                                                                          | Notes receivable from officers                                                                                                                |                           |             | (4,333,000                 | )           |                        |             | (4,435,000 | )          
|                                                                                                                                          |                                                                                                                                               |                           |             |                            |             |                        |             |           
|                                                                                                                                          |                                                                                                                                               |                           |             | TOTAL STOCKHOLDERS EQUITY |             |                        | 33,842,000  |            |             |  | 34,420,000  | 
|                                                                                                                                          |                                                                                                                                               |                           |             |                            |             |                        |             |           
|                                                                                                                                          |                                                                                                                                               | $                         | 132,386,000 |                            |             | $                      | 136,214,000 |           
|                                                                                                                                          |                                                                                                                                               |                           |             |                            |             |                        |             |            |            

See accompanying notes to consolidated financial statements

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MERCURY AIR GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

|                                                                           |                                     |                                                        |             |                        |           |      |             |            |           |  
|-------------------------------------------------------------------------- | ----------------------------------- | ------------------------------------------------------ | ----------- | ---------------------- | --------- | ---- | ----------- | ---------- | --------- | -
|                                                                           |                                     |                                                        |             | Three Months Ended    
|                                                                           |                                     |                                                        |             | September 30,         
|                                                                           |                                     |                                                        |             |                       
|                                                                           |                                     |                                                        |             | 2002                   |           | 2001
|                                                                           |                                     |                                                        |             |                        |           |     
|                                                                           |                                     |                                                        |             | (Restated, See Note 1) |           |      |             |           
|Sales and revenues:                                                        |                                     |                                                        |             |                        |           |      |             |           
|                                                                           | Sales                               |                                                        | $           | 85,450,000             |           |      | $           | 80,443,000 |          
|                                                                           | Service revenues                    |                                                        |             | 22,445,000             |           |      |             | 23,309,000 |          
|                                                                           |                                     |                                                        |             |                        |           |      |             |           
|                                                                           |                                     |                                                        | 107,895,000 |                        |           |      | 103,752,000 |           
|                                                                           |                                     |                                                        |             |                        |           |      |             |           
|Costs and expenses:                                                        |                                     |                                                        |             |                        |           |      |             |           
|                                                                           | Cost of sales                       |                                                        |             | 76,034,000             |           |      |             | 70,289,000 |          
|                                                                           | Operating expenses                  |                                                        |             | 25,911,000             |           |      |             | 25,739,000 |          
|                                                                           |                                     |                                                        |             |                        |           |      |             |           
|                                                                           |                                     |                                                        | 101,945,000 |                        |           |      | 96,028,000  |           
|                                                                           |                                     |                                                        |             |                        |           |      |             |           
|                                                                           |                                     | Gross margin (excluding depreciation and amortization) |             |                        | 5,950,000 |      |             |            | 7,724,000 |  
|                                                                           |                                     |                                                        |             |                        |           |      |             |           
|Expenses (Income):                                                         |                                     |                                                        |             |                        |           |      |             |           
|                                                                           | Selling, general and administrative |                                                        |             | 3,115,000              |           |      |             | 1,960,000  |          
|                                                                           | Provision for bad debts             |                                                        |             | 352,000                |           |      |             | 585,000    |          
|                                                                           | Depreciation and amortization       |                                                        |             | 2,051,000              |           |      |             | 2,304,000  |          
|                                                                           | Interest expense                    |                                                        |             | 1,384,000              |           |      |             | 1,526,000  |          
|                                                                           | Interest income                     |                                                        |             | (52,000                | )         |      |             | (17,000    | )        
|                                                                           |                                     |                                                        |             |                        |           |      |             |           
|                                                                           |                                     |                                                        | 6,850,000   |                        |           |      | 6,358,000   |           
|                                                                           |                                     |                                                        |             |                        |           |      |             |           
|Income (loss) from continuing operations before provision for income
taxes |                                     |                                                        | (900,000    | )                      |           |      | 1,366,000   |           
|Income tax provision (benefit)                                             |                                     |                                                        | (311,000    | )                      |           |      | 526,000     |           
|                                                                           |                                     |                                                        |             |                        |           |      |             |           
|Income (loss) from continuing operations                                   |                                     |                                                        | (589,000    | )                      |           |      | 840,000     |           
|Loss from discontinued operations net of income tax benefit of $27,000     |                                     |                                                        |             |                        |           |      | (42,000     | )         
|                                                                           |                                     |                                                        |             |                        |           |      |             |           
|Net income (loss)                                                          |                                     | $                                                      | (589,000    | )                      |           | $    | 798,000     |           
|                                                                           |                                     |                                                        |             |                        |           |      |             |            |          
|                                                                           | Net income (loss) per common share: |                                                        |             |                        |           |      |             |            |          
|                                                                           | Basic:                              |                                                        |             |                        |           |      |             |            |          
|                                                                           |                                     | From continuing operations                             |             | $                      | (0.09     | )    |             | $          | 0.13      |  
|                                                                           |                                     | Loss from discontinued operations                      |             |                        |           |      |             |            | (0.01     | )
|                                                                           |                                     |                                                        |             |                        |           |      |             |           
|                                                                           |                                     | Net income (loss)                                      |             | $                      | (0.09     | )    |             | $          | 0.12      |  
|                                                                           |                                     |                                                        |             |                        |           |      |             |            |          
|                                                                           | Diluted:                            |                                                        |             |                        |           |      |             |            |          
|                                                                           |                                     | From continuing operations                             |             | $                      | (0.09     | )    |             | $          | 0.12      |  
|                                                                           |                                     | Loss from discontinued operations                      |             |                        |           |      |             |            | (0.01     | )
|                                                                           |                                     |                                                        |             |                        |           |      |             |           
|                                                                           |                                     | Net income (loss)                                      |             | $                      | (0.09     | )    |             | $          | 0.11      |  
|                                                                           |                                     |                                                        |             |                        |           |      |             |            |          

See accompanying notes to consolidated financial statements

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MERCURY AIR GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

|                                                                     |                                                            |   |                                                                |                                                     |   |                        |            |            |   |            |            |  
|-------------------------------------------------------------------- | ---------------------------------------------------------- | - | -------------------------------------------------------------- | --------------------------------------------------- | - | ---------------------- | ---------- | ---------- | - | ---------- | ---------- | -
|                                                                     |                                                            |   |                                                                |                                                     |   | Three Months Ended    
|                                                                     |                                                            |   |                                                                |                                                     |   | September 30,         
|                                                                     |                                                            |   |                                                                |                                                     |   |                       
|                                                                     |                                                            |   |                                                                |                                                     |   | 2002                   |            | 2001      
|                                                                     |                                                            |   |                                                                |                                                     |   |                        |            |           
|                                                                     |                                                            |   |                                                                |                                                     |   | (Restated, See Note 1) |            |            |   |           
|CASH FLOWS FROM OPERATING ACTIVITIES:                                |                                                            |   |                                                                |                                                     |   |                        |            |           
|                                                                     | Net income (loss)                                          |   | $                                                              | (589,000                                            | ) |                        | $          | 798,000    |  
|                                                                     | Plus: Loss from discontinued operations                    |   |                                                                |                                                     |   |                        |            | 42,000     |  
|                                                                     |                                                            |   |                                                                |                                                     |   |                        |            |           
|                                                                     | Income (loss) from continuing operations                   |   |                                                                | (589,000                                            | ) |                        |            | 840,000    |  
|                                                                     | Adjustments to derive cash flow from operating activities: |   |                                                                |                                                     |   |                        |            |            |  
|                                                                     |                                                            |   | Bad debt expense                                               |                                                     |   | 352,000                |            |            |   | 585,000    |           
|                                                                     |                                                            |   | Depreciation and amortization                                  |                                                     |   | 2,051,000              |            |            |   | 2,304,000  |           
|                                                                     |                                                            |   | Deferred income taxes                                          |                                                     |   | 1,000                  |            |            |   | 12,000     |           
|                                                                     |                                                            |   | Deferred rent                                                  |                                                     |   | 147,000                |            |            |   | 147,000    |           
|                                                                     |                                                            |   | Compensation expense related to remeasurement of stock options |                                                     |   | 318,000                |            |            |   | 12,000     |           
|                                                                     |                                                            |   | Expense related to amortization of executive stock plan        |                                                     |   | 102,000                |            |            |   |            |           
|                                                                     |                                                            |   | Amortization of senior subordinated note discount              |                                                     |   | 49,000                 |            |            |   | 47,000     |           
|                                                                     |                                                            |   | Loss on retirement of assets                                   |                                                     |   | 41,000                 |            |            |   |            |           
|                                                                     | Changes in operating assets and liabilities:               |   |                                                                |                                                     |   |                        |            |            |  
|                                                                     |                                                            |   | Trade and other accounts receivable                            |                                                     |   | 562,000                |            |            |   | 3,644,000  |           
|                                                                     |                                                            |   | Inventories                                                    |                                                     |   | (3,576,000             | )          |            |   | (313,000   | )         
|                                                                     |                                                            |   | Prepaid expenses and other current assets                      |                                                     |   | (159,000               | )          |            |   | (690,000   | )         
|                                                                     |                                                            |   | Accounts payable                                               |                                                     |   | (2,756,000             | )          |            |   | (5,687,000 | )         
|                                                                     |                                                            |   | Accrued expenses and other current liabilities                 |                                                     |   | (272,000               | )          |            |   | (3,729,000 | )         
|                                                                     |                                                            |   |                                                                |                                                     |   |                        |            |           
|                                                                     |                                                            |   |                                                                | Net cash used in operating activities               |   |                        | (3,729,000 | )          |   |            | (2,828,000 | )
|                                                                     |                                                            |   |                                                                |                                                     |   |                        |            |           
|CASH FLOWS FROM INVESTING ACTIVITIES:                                |                                                            |   |                                                                |                                                     |   |                        |            |           
|                                                                     | Decrease in restricted cash                                |   |                                                                | 3,530,000                                           |   |                        |            |            |  
|                                                                     | Increase in other assets                                   |   |                                                                | (37,000                                             | ) |                        |            | (17,000    | )
|                                                                     | (Increase) decrease in notes receivables                   |   |                                                                | 80,000                                              |   |                        |            | (413,000   | )
|                                                                     | Proceeds from sale of property                             |   |                                                                | 35,000                                              |   |                        |            |            |  
|                                                                     | Additions to property, equipment and leaseholds            |   |                                                                | (610,000                                            | ) |                        |            | (1,326,000 | )
|                                                                     |                                                            |   |                                                                |                                                     |   |                        |            |           
|                                                                     |                                                            |   |                                                                | Net cash provided by (used in) investing activities |   |                        | 2,998,000  |            |   |            | (1,756,000 | )
|                                                                     |                                                            |   |                                                                |                                                     |   |                        |            |           
|CASH FLOWS FROM FINANCING ACTIVITIES:                                |                                                            |   |                                                                |                                                     |   |                        |            |           
|                                                                     | Proceeds from credit facility                              |   |                                                                | 11,275,000                                          |   |                        |            | 4,000,000  |  
|                                                                     | Reduction of debt instruments                              |   |                                                                | (11,693,000                                         | ) |                        |            | (6,663,000 | )
|                                                                     | Repurchase of common stock                                 |   |                                                                | (370,000                                            | ) |                        |            |            |  
|                                                                     |                                                            |   |                                                                |                                                     |   |                        |            |           
|                                                                     |                                                            |   |                                                                | Net cash used in financing activities               |   |                        | (788,000   | )          |   |            | (2,663,000 | )
|                                                                     |                                                            |   |                                                                |                                                     |   |                        |            |           
|Effect of exchange rate changes on cash                              |                                                            |   | (39,000                                                        | )                                                   |   |                        |            |           
|NET DECREASE IN CASH AND CASH EQUIVALENTS FROM CONTINUING
OPERATIONS |                                                            |   | (1,558,000                                                     | )                                                   |   |                        | (7,247,000 | )         
|NET CASH PROVIDED BY DISCONTINUED OPERATIONS                         |                                                            |   |                                                                |                                                     |   |                        | 4,236,000  |           
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                       |                                                            |   | 5,565,000                                                      |                                                     |   |                        | 3,886,000  |           
|                                                                     |                                                            |   |                                                                |                                                     |   |                        |            |           
|CASH AND CASH EQUIVALENTS, END OF PERIOD                             |                                                            | $ | 4,007,000                                                      |                                                     |   | $                      | 875,000    |           
|                                                                     |                                                            |   |                                                                |                                                     |   |                        |            |            |  
|CASH PAID DURING THE PERIOD FOR:                                     |                                                            |   |                                                                |                                                     |   |                        |            |           
|                                                                     | Interest                                                   |   | $                                                              | 1,286,000                                           |   |                        | $          | 1,498,000  |  
|                                                                     | Income taxes                                               |   | $                                                              | 4,539,000                                           |   |                        |            |            |  

See accompanying notes to consolidated financial statements

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MERCURY AIR GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002
(Unaudited)

Note 1  General

Business

Mercury Air Group, Inc. (the Company), a Delaware Corporation, was
organized in 1956 and provides a broad range of services to the aviation
industry through four principal operating units: fixed base operations, cargo
operations, fuels sales, and government contract services. Fixed base
operations (FBOs) include fuel sales, into-plane services, ground support
services, aircraft hangar and tie-down facilities and maintenance at certain
locations for commercial, private, general aviation and military aircraft.
Cargo operations consist of cargo handling, space logistics operations and
general cargo sales agent services. Fuel sales include the sale of fuel and
delivery of fuel primarily to domestic and international commercial airlines,
business aviation and air freight airlines. Government contract services
consist of aircraft refueling and fuel storage operations, base operating
support (BOS) services, air terminal and ground handling services and weather
observation and forecasting services performed principally for agencies of the
United States Government. Additionally, the Company had a fifth operating unit,
RPA Airline Automation Services, Inc. (RPA) which was sold on July 3, 2001
and is classified as a discontinued operation. (See Note 2).

Restatement

The consolidated balance sheets as of September 30 and June 30, 2002 and
the consolidated statements of operations and cash flows for the three-month
period ended September 30, 2002 have been restated related to the
following items: (1) To record as of June 30, 2002 an accrual of $459,000
(representing increased rent expense of $789,000 net of retroactive recoverable
sublease rental income of $330,000) and to accrue $115,000 for the
three-month period ended September 30, 2002 for a rent increase related to one of Air
Cargos warehouse facilities at Los Angeles International Airport which is
retroactive to June 18, 2001. The Company had previously recognized no accrual
for this retroactive rent increase in its fiscal 2002 financial statements, as
the Company was disputing the amount of the increase; however, the Company
subsequently determined that it had received information regarding the proposed
rent increase prior to the issuance of its fiscal 2002 financial statements
which provided substantial evidence that an obligation existed at the balance
sheet date and that the amount of the liability could be reasonably estimated;
(2) To record additional compensation
expense of $430,000 during the fourth quarter of fiscal 2002 in connection with
the 2002 Management Stock Purchase Plan, pursuant to which the Company had
loaned certain officers in May 2002 a total of $3.9 million to purchase shares
of the Companys stock from CFK Partners (which is owned by three of the
Companys directors) at $7.50 per share. The trading price of the shares at
this time was $4.90 per share. A full recourse loan was made to the Companys
Chief Executive Officer in the amount of $2.9 million, and non-recourse loans
totaling $1 million were made to the other executives (Other Executives). The
Company originally recorded a compensation charge of $356,000 in connection
with this transaction to write-down the non-recourse loans based on the
difference between the purchase price paid by the Other Executives for the
shares and the market value of such shares at that time. The Company has
determined that it was proper to record the compensation expense of $356,000 to
reflect the benefit received by CFK Partners for the purchase price paid by the
Other Executives in excess of the market value of such shares at that time;
however, the non-recourse loans should not have been written-down, but rather
additional paid-in capital should have been credited for $356,000. In addition,
the Company determined that it should have recorded additional compensation
expense of $436,000 related to the recourse loan and the shares purchased by
the CEO to also reflect the benefit received by CFK Partners related to the
purchase price paid by the CEO for his shares in excess of the market value of
such shares at that time. The benefit attributed to the CEOs interest in CFK
Partners has been deducted in determining the compensation expense related to
these loans. Accordingly, the fiscal 2002 financial statements have been
restated to record in the fourth quarter of fiscal 2002 the reversal of the
write-down of the non-recourse loans and a credit to additional paid-in capital
for $356,000, and to record additional compensation expense of $436,000. The
non-recourse loans are being accounted for as a variable stock plan pursuant to
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, and the recourse loan is being accounted for as a fixed stock plan;
(3) To reverse the sale-leaseback accounting associated with the sale of a
building housing the Companys corporate headquarters and accounting for this
transaction as a financing effective January 2002. The Company sold the
corporate headquarters to CFK Realty Partners, LLC (CFK Realty), a wholly
owned subsidiary of CFK Partners, and concurrently entered into a ten-year
lease of the property. However, the Company has determined that CFK Realty was
not sufficiently capitalized to permit sale-leaseback accounting and the
non-consolidation of CFK Realty. Accordingly, the fiscal 2002 financial
statements have been restated to fully

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consolidate CFK Realty effective in the third quarter of fiscal 2002,
resulting in land and building totaling $1.8 million, net of accumulated
depreciation, being reinstated on the books of the Company, recording of debt
related to a loan of $3.2 million incurred by CFK Realty to finance the
acquisition, reversal of a deferred gain of $2.1 million recorded by the
Company at the time of the transaction, and the reversal of rent expense and
recording of depreciation resulting in additional pre-tax expense of $23,000
for the third and fourth quarters of fiscal 2002 combined; and (4) to adjust
opening retained earnings by $363,000 to correct for income tax adjustments
that should have been recorded in years prior to fiscal 2001.

The accompanying restated financial statements for the three-month period
ended September 30, 2002 resulted in an increase to the net loss previously
reported by $107,000 and an increase to the basic and diluted net loss per
share of $0.02.

The following tables represent the impact of the restatement on balances
as reported, and as restated for all periods presented:

CONSOLIDATED BALANCE SHEETS

|                                                |                                                                   |                                            |        |        |         |                    |        |                    |         |  |  | 
|----------------------------------------------- | ----------------------------------------------------------------- | ------------------------------------------ | ------ | ------ | ------- | ------------------ | ------ | ------------------ | ------- |  |  | 
|                                                |                                                                   |                                            |        |        |         | September 30, 2002 |        | September 30, 2002
|                                                |                                                                   |                                            |        |        |         | As Reported        |        | As Restated       
|                                                |                                                                   |                                            |        |        |         |                    |        |                   
|                                                |                                                                   |                                            |        |        |         | (In Thousands)     |        | (In Thousands)    
|ASSETS                                         
|CURRENT ASSETS:                                 |                                                                   |                                            |        |        |         |                    |        |                   
|                                                | Cash and cash equivalents                                         |                                            | $      | 4,006  |         |                    | $      | 4,007              |        
|                                                | Restricted cash                                                   |                                            |        | 250    |         |                    |        | 250                |        
|                                                | Trade accounts receivable, net of allowance for doubtful accounts |                                            |        | 46,059 |         |                    |        | 46,656             |        
|                                                | Inventories, principally aviation fuel                            |                                            |        | 6,561  |         |                    |        | 6,561              |        
|                                                | Prepaid expenses and other current assets                         |                                            |        | 3,201  |         |                    |        | 3,201              |        
|                                                | Notes receivable from affiliate                                   |                                            |        | 1,400  |         |                    |        |                    |        
|                                                |                                                                   |                                            |        |        |         |                    |        |                    |        
|                                                |                                                                   | TOTAL CURRENT ASSETS                       |        |        | 61,477  |                    |        |                    | 60,675  | 
|PROPERTY, EQUIPMENT AND LEASEHOLDS, NET         |                                                                   |                                            | 57,936 |        |         |                    | 59,722 |                   
|NOTES RECEIVABLE, net of allowance for doubtful |                                                                   |                                            | 2,078  |        |         |                    | 2,078  |                   
|DEFERRED INCOME TAXES                           |                                                                   |                                            | 766    |        |         |                    | 1,301  |                   
|GOODWILL                                        |                                                                   |                                            | 4,389  |        |         |                    | 4,389  |                   
|OTHER INTANGIBLE ASSETS, NET                    |                                                                   |                                            | 208    |        |         |                    | 208    |                   
|OTHER ASSETS, NET                               |                                                                   |                                            | 4,013  |        |         |                    | 4,013  |                   
|                                                |                                                                   |                                            |        |        |         |                    |        |                    |        
|                                                |                                                                   | TOTAL ASSETS                               |        | $      | 130,867 |                    |        | $                  | 132,386 | 
|                                                |                                                                   |                                            |        |        |         |                    |        |                    |        
|LIABILITIES AND STOCKHOLDERS EQUITY           
|CURRENT LIABILITIES:                            |                                                                   |                                            |        |        |         |                    |        |                   
|                                                | Accounts payable                                                  |                                            | $      | 32,329 |         |                    | $      | 32,693             |        
|                                                | Accrued expenses and other current liabilities                    |                                            |        | 8,072  |         |                    |        | 8,589              |        
|                                                | Current portion of long-term debt                                 |                                            |        | 14,830 |         |                    |        | 14,830             |        
|                                                | Senior subordinated note                                          |                                            |        | 23,228 |         |                    |        | 23,228             |        
|                                                |                                                                   |                                            |        |        |         |                    |        |                    |        
|                                                |                                                                   | TOTAL CURRENT LIABILITIES                  |        |        | 78,459  |                    |        |                    | 79,340  | 
|LONG-TERM DEBT                                  |                                                                   |                                            | 13,799 |        |         |                    | 16,945 |                   
|DEFERRED GAIN                                   |                                                                   |                                            | 2,126  |        |         |                    |        |                   
|DEFERRED INCOME TAXES                           |                                                                   |                                            |        |        |         |                    | 169    |                   
|DEFERRED RENT                                   |                                                                   |                                            | 2,090  |        |         |                    | 2,090  |                   
|                                                |                                                                   |                                            |        |        |         |                    |        |                    |        
|                                                |                                                                   | TOTAL LIABILITIES                          |        |        | 96,474  |                    |        |                    | 98,544  | 
|                                                |                                                                   |                                            |        |        |         |                    |        |                    |        
|STOCKHOLDERS EQUITY:                           |                                                                   |                                            |        |        |         |                    |        |                   
|                                                | Common stock                                                      |                                            |        | 64     |         |                    |        | 64                 |        
|                                                | Additional paid-in capital                                        |                                            |        | 21,404 |         |                    |        | 22,219             |        
|                                                | Retained earnings                                                 |                                            |        | 17,233 |         |                    |        | 16,247             |        
|                                                | Accumulated other comprehensive loss                              |                                            |        | (355   | )       |                    |        | (355               | )      
|                                                | Notes receivable from officers                                    |                                            |        | (3,953 | )       |                    |        | (4,333             | )      
|                                                |                                                                   |                                            |        |        |         |                    |        |                    |        
|                                                |                                                                   | TOTAL STOCKHOLDERS EQUITY                 |        |        | 34,393  |                    |        |                    | 33,842  | 
|                                                |                                                                   |                                            |        |        |         |                    |        |                    |        
|                                                |                                                                   | TOTAL LIABILITIES AND STOCKHOLDERS EQUITY |        | $      | 130,867 |                    |        | $                  | 132,386 | 
|                                                |                                                                   |                                            |        |        |         |                    |        |                    |        

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CONSOLIDATED STATEMENTS OF OPERATIONS

|                                                                  |                                     |                    |                                                        |        |                    |       |                |        |       |       | 
|----------------------------------------------------------------- | ----------------------------------- | ------------------ | ------------------------------------------------------ | ------ | ------------------ | ----- | -------------- | ------ | ----- | ----- | 
|                                                                  |                                     |                    |                                                        |        | Three Months Ended
|                                                                  |                                     |                    |                                                        |        | September 30, 2002
|                                                                  |                                     |                    |                                                        |        |                   
|                                                                  |                                     |                    |                                                        |        | As                 |       |                |        |      
|                                                                  |                                     |                    |                                                        |        | Previously         |       | As            
|                                                                  |                                     |                    |                                                        |        | Reported           |       | Restated      
|                                                                  |                                     |                    |                                                        |        |                    |       |               
|                                                                  |                                     |                    |                                                        |        | (In Thousands)     |       | (In Thousands)
|Sales and revenues                                                |                                     | $                  | 107,895                                                |        |                    | $     | 107,895        |       
|Costs and expenses:                                               |                                     |                    |                                                        |        |                    |       |                |       
|                                                                  | Cost of sales                       |                    |                                                        | 76,034 |                    |       |                | 76,034 |      
|                                                                  | Operating expenses                  |                    |                                                        | 25,796 |                    |       |                | 25,911 |      
|                                                                  |                                     |                    |                                                        |        |                    |       |                |       
|                                                                  |                                     |                    | 101,830                                                |        |                    |       | 101,945        |       
|                                                                  |                                     |                    |                                                        |        |                    |       |                |       
|                                                                  |                                     |                    | Gross margin (excluding depreciation and amortization) |        |                    | 6,065 |                |        |       | 5,950 | 
|                                                                  |                                     |                    |                                                        |        |                    |       |                |       
|Expenses (Income):                                                |                                     |                    |                                                        |        |                    |       |                |       
|                                                                  | Selling, general and administrative |                    |                                                        | 3,224  |                    |       |                | 3,115  |      
|                                                                  | Provision for bad debts             |                    |                                                        | 352    |                    |       |                | 352    |      
|                                                                  | Depreciation and amortization       |                    |                                                        | 2,029  |                    |       |                | 2,051  |      
|                                                                  | Interest expense                    |                    |                                                        | 1,320  |                    |       |                | 1,384  |      
|                                                                  | Interest income                     |                    |                                                        | (70    | )                  |       |                | (52    | )    
|                                                                  |                                     |                    |                                                        |        |                    |       |                |       
|                                                                  |                                     |                    | 6,855                                                  |        |                    |       | 6,850          |       
|                                                                  |                                     |                    |                                                        |        |                    |       |                |       
|Loss from continuing operations before provision for income taxes |                                     |                    | (790                                                   | )      |                    |       | (900           | )     
|Income tax benefit                                                |                                     |                    | (308                                                   | )      |                    |       | (311           | )     
|                                                                  |                                     |                    |                                                        |        |                    |       |                |       
|Income (loss) from continuing operations                          |                                     |                    | (482                                                   | )      |                    |       | (589           | )     
|Loss from discontinued operations                                 |                                     |                    |                                                        |        |                    |       |                |       
|                                                                  |                                     |                    |                                                        |        |                    |       |                |       
|Net income (loss)                                                 |                                     | $                  | (482                                                   | )      |                    | $     | (589           | )     
|                                                                  |                                     |                    |                                                        |        |                    |       |                |       
|Net loss per common share:                                        |                                     |                    |                                                        |        |                    |       |                |       
|                                                                  |                                     | Net loss  basic   |                                                        | $      | (0.07              | )     |                | $      | (0.09 | )    
|                                                                  |                                     | Net loss  diluted |                                                        | $      | (0.07              | )     |                | $      | (0.09 | )    

Risks and Uncertainties

In regard to the Senior Secured Credit Facility, the Company was in
noncompliance with the minimum net earnings covenant requirement for the first
quarter of fiscal 2003 and for the second and third quarters of fiscal 2002.
The Company was also in noncompliance with the maximum capital expenditure
covenant of the Senior Secured Credit Facility and for the Senior Subordinated
12% Note (the Note) for the fiscal year ended June 30, 2002. As a result, the
Company has been engaged in discussions with the Senior Secured Credit Facility
Lenders (the Lenders) and the Note Holder regarding waivers and/or cures for
the noncompliance with these debt covenants. Until such time that waivers are
received or a cure is accomplished, the Lenders and the Note Holder have the
right to provide the Company with written notice declaring the total
obligations associated with the Senior Secured Credit Facility and the Note to
be immediately due and payable. Neither the Lenders nor the Note Holder has
exercised this right.

In October 2002, the Company received written notice from the Lenders that
as a result of the noncompliance with these debt covenants, the Lenders are
under no obligation to make any additional loans under the Senior Secured
Credit Facility, although they are not precluded from making additional loans.
In November 2002, the Company received written notice from the Note Holder
constituting a Subordinated Default Notice whereby the Note Holder advised the
Company of the event of default, and while not declaring the outstanding
principal and accrued interest immediately due and payable, the Note Holder
reserves all rights to take any action allowable under the Note Agreement,
including the acceleration of the maturity date. This notice also advised the
Company that the Note Holder is due additional interest at the default rate
until such defaults are cured or waived. The default interest represents an
additional 2.0% per annum over the stated interest rate of 12.0% on the
outstanding balance and was retroactive to June 30, 2002.

In addition to having had discussions with the Lenders and the Note Holder
regarding waivers for these debt covenants, the Company has also engaged a
financial advisor and is in discussions with other lenders to provide new
financing to replace the Senior Secured Credit Facility and the Note. There can
be no assurance that the Company could obtain the financing necessary, which
may result in the Company having inadequate financial resources to meet this
obligation if the Lenders and/or the Note Holder exercise their right to
declare the outstanding obligations associated with the Senior Secured Credit
Facility and the Note to be immediately due

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and payable. However, the Company believes it will be able to secure new
financing to replace the Senior Secured Credit Facility and the Note even in
the event of the Lenders and the Note Holder exercising their right to
accelerate the maturity dates.

In April 2002, the Company received a notice from Los Angeles World
Airports (LAWA) of a proposed rent increase for one of Air Cargos warehouse
facilities at LAX (the Avion Warehouse) retroactive to June 18, 2001. In
response to this notice, the Company submitted protests to the LAWA Staff and
Board of Commissioners regarding the proposed increase on the basis that: 1)
the Company had made a substantial investment in the warehouse facility and the
proposed rental increase would greatly reduce the Companys ability to achieve
an acceptable rate of return on the Companys investment to date; 2) if any
increase is to be made, it should be determined based on the Company being a
developer of the facility and not strictly a tenant; and 3) that the amount of
the proposed increase is not justified given the general business environment
of the air cargo handling operations. In response to the Companys protests to
the proposed increase, in September 2002 the Company received a revised notice
from LAWA of a reduced proposal for a rental increase for the Avion Warehouse.
The LAWA Staff intend to present their recommended rental increase to the LAWA
Board of Commissioners for approval in late January 2004. From June 18, 2001
through June 30, 2002, the accumulated amount of the retroactive rent increase
is $789,000, which will be partially offset by recoverable retroactive sublease
rental income of $330,000. The LAWA Staff has indicated that the retroactive
portion of the rent increase would be payable by the Company in equal monthly
installments over the remaining term of the lease agreement, which is scheduled
to expire in June 2006. The proposed increase in the monthly rent, on a
go-forward basis, would be $64,600, or 35%, from the existing monthly rent. The
Company has accrued $459,000 for the retroactive rent increase, which is net of
increased recoverable retroactive sublease rental income, as of June 30, 2002,
and has accrued an additional $115,000 for the three-month period
ended September 30, 2002,
resulting in a total accrual of $574,000 as of September 30, 2002. See the
discussion above in this Note 1 under Restatement regarding the restatement
of the financial statements.

On November 6, 2002 National Airlines, Inc. (National), a customer of
the Companys MercFuel, Inc. (MercFuel) subsidiary, announced that they were
ceasing operations effective on that date. The Company has been providing fuel
to National since May 1999. In December 2000, National filed for bankruptcy
protection and the Company continued to sell fuel to National on a secured
basis under the auspices of the bankruptcy court. Sales by MercFuel to National
for the three months ended September 30, 2002 and 2001 were $17.5 million and
$15.1 million, respectively, representing 16.2% and 14.5% of the Companys
consolidated revenue for those periods. As of November 6, 2002, the Company
estimates the outstanding account receivable from National to be $375 thousand
which is adequately secured.

As a result of Nationals cessation of operations in November 2002 and the
limited access to additional borrowings under the Companys credit facility,
the Company may encounter difficulties in meeting its near-term working capital
requirements. The Company is in discussions with its major suppliers to extend
additional credit terms to enable the Company to meet its working capital
requirements. The Company believes that upon securing the new financing, it
will have sufficient liquidity to meet its ongoing working capital
requirements.

Accounts receivable is comprised primarily of trade receivables from
customers and is net of an allowance for doubtful accounts. The Companys
credit risk is based in part on the following: 1) substantially all receivables
are related to a single industry, aviation, 2) there is a concentration of
credit risk as there are several customers who at any time have significant
balances owed to the Company, and 3) significant balances are owed by certain
customers that are not adequately capitalized. In addition, significantly
higher fuel prices for extended periods of time have a negative impact on the
aviation industry as it substantially increases airlines operating expenses.
Smaller airlines with lower levels of capital may be more seriously impacted.
The Company assesses its credit portfolio on an ongoing basis and establishes
allowances which it believes are adequate to absorb potential credit problems
that can be reasonably anticipated.

The Company purchases fuel from a limited number of suppliers. If the
Companys relationship with any of these key suppliers terminates, the Company
may not be able to obtain a sufficient quantity of fuel on favorable terms or
may experience difficulty in obtaining fuel from alternative suppliers.
Furthermore, difficulties faced by these suppliers or fuel shortages or the
inability to obtain fuel from alternate sources at acceptable prices and terms,
could impair the Companys ability to sell fuel to its customers at competitive
prices and terms.

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Basis of Presentation

The accompanying unaudited financial statements reflect all adjustments
(consisting of normal, recurring accruals only) which are necessary to fairly
present the results for the interim periods. Such financial statements have
been prepared in accordance with the instructions to Form 10-Q and Rule 10-01
of Regulation S-X and therefore do not include all the information or footnotes
necessary for a complete presentation. They should be read in conjunction with
the Companys Annual Report on Form 10-K for the year ended June 30, 2002 and
the notes thereto. The results of operations for the three months ended
September 30, 2002 are not necessarily indicative of results for the full year.

New Accounting Pronouncements

In July 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible
Assets. The Company has elected to adopt SFAS No. 142 on July 1, 2002. SFAS
No. 142 requires, among other things, the discontinuance of goodwill
amortization. Had the non-amortization provisions of SFAS No. 142 not been
adopted, amortization of goodwill would have been $0.1 million for the quarter
ended September 30, 2002. The pro forma net loss would have been $0.6 million
an increase of $0.1 million, or a loss of $0.09 per share versus the net loss
of $0.5 million or $0.07 per share actually reported. For the quarter ended
September 30, 2001, the pro forma net income before goodwill amortization was
$0.9 million or $0.13 per share fully diluted compared to the net income of
$0.8 million or $0.11 per share actually reported. In addition, the standard
includes provisions for the reclassification of certain existing recognized
intangibles as goodwill, reassessment of the useful lives of existing
recognized intangibles, reclassification of certain intangibles out of
previously reported goodwill and the identification of reporting units for
purposes of assessing potential future impairments of goodwill. SFAS. No. 142
also requires the Company to complete a transitional goodwill impairment test
six months from the date of adoption. The impact on the Companys first quarter
for 2003 results were immaterial. The company has not yet determined whether
there will be an impairment to its recorded goodwill as of June 30, 2002.

Effective July 1, 2002, the Company adopted SFAS No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets, which supersedes FASB
Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of. This new statement also supersedes
certain aspects of APB Opinion No. 30, Reporting the Results of
Operations-Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions,
with regard to reporting the effects of a disposal of a segment of a business
and will require expected future operating losses from discontinued operations
to be reported in discontinued operations in the period incurred (rather than
as of the measurement date as presently required by APB Opinion No. 30). In
addition, more dispositions may qualify for discontinued operations treatment.

The adoption of SFAS No. 144 did not have a material effect on the
Companys consolidated financial position on results of operations.

In April 2002, the FASB issued SFAS No. 145, Rescission of FASB
Statements Nos, 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical
Corrections, which rescinds and amends other existing authoritative
pronouncements to make various technical corrections, clarify meanings, or
describe their applicability under changed conditions. The Company believes
that SFAS No. 145 will not have a material effect on the Companys consolidated
financial position or results of operations.

In July 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. SFAS No. 146 requires that cost
associated with an exit or disposal activity be recognized when incurred as
opposed to an entitys commitment to an exit plan as previously allowed. The
provisions of SFAS No. 146 are effective for exit or disposal activities that
are initiated after December 31, 2002, with early application encouraged. The
Company does not believe that SFAS No. 146 will have a material effect on the
Companys consolidated financial position or results or operations.

Note 2  Discontinued Operations

On July 3, 2001, the Company completed the sale of its subsidiary, RPA
Airline Automation Services, Inc. (RPA), which provided airline revenue
accounting and management information software consisting of proprietary
software programs which are marketed to foreign and domestic airlines. During
the quarter ended September 30, 2001, the Company recorded a loss of $42,000
related to the sale of a building that had previously been RPAs corporate
headquarters. At September 30, 2002, the Company no longer retained any
significant assets or liabilities related to RPA.

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Note 3  Income Taxes

Income taxes have been computed based on the estimated annual effective
income tax rate for the respective periods.

Note 4  Litigation

In April 2000, Mercury filed a collection action against AER Global
Logistics (AER) in the state of New York. AER filed a counterclaim for $5.0
million alleging among other things, tortious interference with contract.
Mercury believes that this claim is without merit, and accordingly, does not
believe this matter will have a significant impact on it financial position or
operating results.

On April 3, 2001 Mercury received notice of an action filed by Skylink
Express, Inc. in the Superior Court of Justice Ontario, Canada against Excel
Cargo, Inc. and others for damages to aircraft occurring on November 30, 1999
and January 10, 2000 at Mirabel International Airport Quebec for a total amount
of $2.5 million Canadian ($1.65 million U.S.) plus interest and fees. Mercury
does not believe the outcome of this claim will have a significant impact on
its financial position or operating results.

On November 30, 2001, the Company received notice of a counter-complaint
filed by UPS against the Company and a third party seeking indemnification and
reimbursement in the amount of $0.5 million for the costs incurred as a result
of the fuel spill at the Ontario, California Airport. The Company has provided
a response to UPS denying such claim and on September 28, 2001, filed a lawsuit
seeking reimbursement for damages. Mercury does not believe the outcome of this
claim will have a significant impact on its financial position or operating
results.

On May 1, 2002, Mercury received a Notice of Violation (NOV) for its
Fort Wayne, Indiana facility alleging that Mercurys Spill Prevention, Control
and Countermeasure Plan (SPCC) does not meet certain federal regulatory
guidelines. Specifically, the EPA alleged that Mercurys SPCC failed to provide
for proper parking, secondary containment, and proper drainage of its refueler
trucks. The EPA has requested that Mercury submit a written response to its
allegations. The Company is in the process of responding to the EPA. Mercury
intends to fully comply with all EPA requirements.

On October 31, 2002 a complaint was filed before the National Labor
Relations Board Region 12 on behalf of the Transport Workers Union of America,
Local 525, AFL-CIO alleging that Maytag Aircraft Corporation has been engaging
in unfair labor practices as set forth in the National Labor Relations Act at
its Patrick Air Force Base location. The Company is in the process of
responding to this compliant which is now scheduled for a hearing in April of
2003. Mercury does not believe that the outcome of this claim will have a
significant impact its consolidated financial position or operating results.

The Company is also a defendant in certain litigation arising in the
normal course of business. In the opinion of management, the ultimate
resolution of such litigation will not have a significant effect on its
financial position or operating results.

Note 5  Debt

On September 10, 1999, the Company issued, in a private placement, a $24.0
million senior Subordinated 12% Note (the Note) due 2006 with detachable
warrants to purchase 503,126 shares of the Companys common stock exercisable
at $6.50 per share for seven years. On November 16, 2001, the agreement was
amended to reduce the warrant exercise price to $5.50 per share. The Note
agreement contains covenants that, among other matters, limit senior
indebtedness, the disposition of assets and unfunded capital expenditures. The
covenants also included a ratio test for interest coverage, leverage, fixed
charge coverage and debt service. In addition, the Company has a Note Payable
to banks that consists principally of a credit facility (the Senior Secured
Credit Facility), which provides for a term loan (Term Loan), an acquisition
line (Acquisition Line) and a revolving line of credit (Revolver). The
Senior Secured Credit Facility expires in March 2004. As of September 30, 2002,
the Company had $0.4 million outstanding on the Term Loan, $5.8 million
outstanding on the Acquisition Line, and $7.1 million outstanding on the
Revolver. There is also $16.5 million of the Senior Secured Credit Facility
utilized to issue stand-by letters of credit as of September 30, 2002. The
Senior Secured Credit Facility contains covenants that require the maintenance
of certain financial ratios, minimum tangible net worth (as defined), minimum
profitability levels, maximum leverage and minimum debt service coverage and
quick ratios and limitation on annual capital expenditures. Additionally, the
Company is prohibited from paying dividends in excess of $400,000 per year.

In regard to the Senior Secured Credit Facility, the Company was in
noncompliance with the minimum net earnings covenant requirement for the first
quarter of fiscal 2003 and for the second and third quarters of fiscal 2002.
The Company was also in noncompliance with the maximum capital expenditure
covenant of the Senior Secured Credit Facility and for the Note for the fiscal
year ended June 30, 2002. As a result, the Company has been engaged in
discussions with the Senior Secured Credit Facility Lenders

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(the Lenders) and the Note Holder regarding waivers and/or cures for the
noncompliance with these debt covenants. Until such time that waivers are
received or a cure is accomplished, the Lenders and the Note Holders have the
right to provide the Company with written notice declaring the total
obligations associated with the Senior Secured Credit Facility and the Note to
be immediately due and payable. Neither the Lenders nor the Note Holder has
exercised this right.

In October 2002, the Company received written notice from the Lenders that
as a result of the noncompliance with these debt covenants, the Lenders are
under no obligation to make any additional loans under the Senior Secured
Credit Facility, although they are not precluded from making additional loans.
In November 2002, the Company received written notice from the Note Holder
constituting a Subordinated Default Notice whereby the Note Holder advised the
Company of the event of default, and while not declaring the outstanding
principal and accrued interest immediately due and payable, the Note Holder
reserves all rights to take any action allowable under the Note Agreement,
including the acceleration of the maturity date. This notice also advised the
Company that the Note Holder is due additional interest at the default rate
until such defaults are cured or waived. The default interest represents an
additional 2.0% per annum over the stated interest rate of 12.0% on the
outstanding balance and was retroactive to June 30, 2002.

In addition to having had discussions with the Lenders and the Note Holder
regarding waivers for these debt covenants, the Company has also engaged a
financial advisor and is in discussions with other lenders to provide new
financing to replace the Senior Secured Credit Facility and the Note. There can
be no assurance that the Company could obtain the financing necessary, which
may result in the Company having inadequate financial resources to meet this
obligation if the Lenders and/or the Note Holder exercise their right to
declare the outstanding obligations associated with the Senior Secured Credit
Facility and the Note to be immediately due and payable. However, the Company
believes it will be able to secure new financing to replace the Senior Secured
Credit Facility and the Note even in the event of the Lenders and the Note
Holder exercising their right to accelerate the maturity dates.

As of September 30, 2002, the total principal amount outstanding on the
Senior Secured Credit Facility and the Note, amounting to $13.3 million and
$23.2 million respectively, was classified on the Companys Balance Sheet as
Current portion of long-term debt and Senior Subordinated Note, current.

Note 6  Net Income (Loss) Per Share

Basic net income (loss) per share is computed by dividing net income
(loss) by the weighted average number of common shares outstanding during the
period. Diluted net income (loss) per share is computed by dividing net income
(loss) by the weighted average number of common shares and potential common
shares except for amounts that are antidilutive. Potential common shares
include stock options and shares resulting from the assumed conversion of
subordinated debentures, when dilutive.

|                                                                                             |  |                    |           |                    |  |         |           |       |  |  |           |  |  |  |           | 
|-------------------------------------------------------------------------------------------- |  | ------------------ | --------- | ------------------ |  | ------- | --------- | ----- |  |  | --------- |  |  |  | --------- | 
|                                                                                             |  | Three Months Ended |           | Three Months Ended
|                                                                                             |  | September 30, 2002 |           | September 30, 2001
|                                                                                             |  |                    |           |                   
|                                                                                             |  | Diluted            |           | Basic              |  | Diluted |           | Basic
|                                                                                             |  |                    |           |                    |  |         |           |      
|Weighted average number of common shares
outstanding during the period                       |  |                    | 6,463,000 |                    |  |         | 6,463,000 |       |  |  | 6,577,000 |  |  |  | 6,577,000 | 
|Common share equivalents resulting from
the assumed exercise of stock options                |  |                    |           |                    |  |         |           |       |  |  | 163,000   |  |  |  |           | 
|Common shares resulting from the assumed
conversion of debentures                            |  |                    |           |                    |  |         |           |       |  |  | 36,000    |  |  |  |           | 
|Weighted average number of common and common
equivalent shares outstanding
during the period |  |                    | 6,463,000 |                    |  |         | 6,463,000 |       |  |  | 6,776,000 |  |  |  | 6,577,000 | 

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Note 7  Segment Reporting

The Company operates and reports its activities through four principal
units: 1) Fuel Sales, 2) Fixed Based Operations, 3) Cargo Operations and 4)
Government Contract Services.

|                                                       |  |       |        |            |  |            |        |          |  |                        |        |       |  |            |        |           |  |   |        |  |  |   |         | 
|------------------------------------------------------ |  | ----- | ------ | ---------- |  | ---------- | ------ | -------- |  | ---------------------- | ------ | ----- |  | ---------- | ------ | --------- |  | - | ------ |  |  | - | ------- | 
|                                                       |  |       |        |            |  |            |        |          |  |                        |        |       |  | Government |        | Corporate |  |   |        | 
|                                                       |  | Fuel  |        | Fixed Base |  | Cargo      |        | Contract |  | or                     |        |       |  |           
|                                                       |  | Sales |        | Operations |  | Operations |        | Services |  | Unallocated            |        | Total
|                                                       |  |       |        |            |  |            |        |          |  |                        |        |      
|                                                       |  |       |        |            |  |            |        |          |  | (Dollars In Thousands) |        |       |  |            |        |           |  |  
|QUARTER ENDED
SEPTEMBER 30, 2002 
Restated see Note 1 |  |       |        |            |  |            |        |          |  |                        |        |       |  |            |        |           |  |   |        |  |  |   |         | 
|Revenues                                               |  | $     | 70,573 |            |  | $          | 23,826 |          |  | $                      | 7,290  |       |  | $          | 6,206  |           |  |   |        |  |  | $ | 107,895 | 
|Gross Margin                                           |  |       | 1,620  |            |  |            | 2,973  |          |  |                        | 404    |       |  |            | 953    |           |  |   |        |  |  |   | 5,950   | 
|Depreciation and Amortization                          |  |       | 54     |            |  |            | 1,253  |          |  |                        | 546    |       |  |            | 91     |           |  | $ | 107    |  |  |   | 2,051   | 
|Capital Expenditures                                   |  |       |        |            |  |            | 524    |          |  |                        | 65     |       |  |            |        |           |  |   | 21     |  |  |   | 610     | 
|Segment Assets                                         |  |       | 30,957 |            |  |            | 58,797 |          |  |                        | 15,262 |       |  |            | 12,059 |           |  |   | 15,311 |  |  |   | 132,386 | 
|QUARTER ENDED
SEPTEMBER 30, 2001                       |  |       |        |            |  |            |        |          |  |                        |        |       |  |            |        |           |  |   |        |  |  |   |         | 
|Revenues                                               |  | $     | 64,500 |            |  | $          | 23,962 |          |  | $                      | 7,138  |       |  | $          | 8,152  |           |  |   |        |  |  | $ | 103,752 | 
|Gross Margin                                           |  |       | 1,946  |            |  |            | 3,464  |          |  |                        | 287    |       |  |            | 2,027  |           |  |   |        |  |  |   | 7,724   | 
|Depreciation and Amortization                          |  |       | 15     |            |  |            | 1,343  |          |  |                        | 587    |       |  |            | 193    |           |  | $ | 166    |  |  |   | 2,304   | 
|Capital Expenditures                                   |  |       |        |            |  |            | 1,225  |          |  |                        | 97     |       |  |            |        |           |  |   | 4      |  |  |   | 1,326   | 
|Segment Assets                                         |  |       | 26,968 |            |  |            | 66,651 |          |  |                        | 16,873 |       |  |            | 13,237 |           |  |   | 17,636 |  |  |   | 141,365 | 

Gross margin is used as the measure of profit and loss for segment
reporting purposes as it is viewed by key decision makers as the principal
operating indicator in measuring segment profitability. The key decision makers
also view bad debt expense as an important measure of profit and loss. The
predominant component of bad debt expense relates to Fuel Sales. Bad debt
expense for Fuel Sales was approximately $293,000 and $485,000 for the
three-month periods ended September 30, 2002 and 2001, respectively; total bad
debt expense was $352,000 and $585,000 for the three-month periods ended
September 30, 2002 and 2001, respectively.

Note 8  Comprehensive Income

Comprehensive income (loss) is summarized as follows:

|                                        |  |                    |          |      |  |   |         | 
|--------------------------------------- |  | ------------------ | -------- | ---- |  | - | ------- | 
|                                        |  | Three Months Ended
|                                        |  | September 30,     
|                                        |  |                   
|                                        |  | 2002               |          | 2001
|                                        |  |                    |          |     
|Net income (loss)  restated            |  | $                  | (589,000 | )    |  | $ | 798,000 | 
|Foreign currency translation adjustment |  |                    | (39,000  | )    |  |   |        | 
|                                        |  |                    |          |      |  |   |         | 
|Comprehensive income (loss)             |  | $                  | (628,000 | )    |  | $ | 798,000 | 
|                                        |  |                    |          |      |  |   |         | 

Note 9  Related Party Transactions

CFK Partners, LLC is a partnership consisting of three of the Companys
directors, one of whom also serves as the Companys Chief Executive Officer and
another who serves as Chairman of the Board. In addition, CFK Partners, LLC
also owns approximately 30% of the Companys outstanding common stock.

In January 2002, the Company sold the land and the office building which
houses its corporate headquarters to CFK Realty Partners, LLC
(CFK Realty) for $4,200,000,
consisting of $2,800,000 cash and a note receivable of $1,400,000. The note
accrues interest at 5% and contains provisions whereby CFK Realty can
elect to extend the maturity date in one year increments through December 31,
2004. The note had an original maturity date of December 31, 2002. In early
December 2002, the Company received notification from CFK Realty that it
was exercising its right to extend the maturity date of the note for an
additional one year period.

CFK Realty financed the purchase of the headquarters through a $3.2
million loan. CFK Realty was formed by the same partners who formed CFK
Partners. See Note 1 under Restatement regarding
the restatement of the financial statements.

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

Results of Operations  Comparison of the Three Months ended September 30, 2002
and September 30, 2001

The following tables set forth, for the periods indicated, the revenues
and gross margin for each of the Companys four operating units, as well as
selected other financial statement data.

|                                                    |  |                                  |       |          |  |                 |       |          |  |   |       |            |  |  |       |  
|--------------------------------------------------- |  | -------------------------------- | ----- | -------- |  | --------------- | ----- | -------- |  | - | ----- | ---------- |  |  | ----- | -
|                                                    |  | Three Months Ended September 30,
|                                                    |  |                                 
|                                                    |  | 2002
(Restated)(1)               |       | 2001    
|                                                    |  |                                  |       |         
|                                                    |  |                                  |       |          |  | % of Total      |       |          |  |   |       | % of Total
|                                                    |  | Amount                           |       | Revenues |  | Amount          |       | Revenues
|                                                    |  |                                  |       |          |  |                 |       |         
|                                                    |  |                                  |       |          |  | ($ in millions) |       |          |  |  
|Revenues:                                           |  |                                  |       |          |  |                 |       |          |  |   |       |            |  |  |       |  
|Fuel sales                                          |  | $                                | 70.6  |          |  |                 | 65.4  | %        |  | $ | 64.5  |            |  |  | 62.1  | %
|FBOs                                                |  |                                  | 23.8  |          |  |                 | 22.1  |          |  |   | 24.0  |            |  |  | 23.1  |  
|Cargo operations                                    |  |                                  | 7.3   |          |  |                 | 6.8   |          |  |   | 7.1   |            |  |  | 6.9   |  
|Government contract services                        |  |                                  | 6.2   |          |  |                 | 5.7   |          |  |   | 8.2   |            |  |  | 7.9   |  
|                                                    |  |                                  |       |          |  |                 |       |          |  |   |       |            |  |  |       |  
|Total revenue                                       |  | $                                | 107.9 |          |  |                 | 100.0 | %        |  | $ | 103.8 |            |  |  | 100.0 | %
|                                                    |  |                                  |       |          |  |                 |       |          |  |   |       |            |  |  |       |  
|                                                   
|                                                    |  |                                  |       |          |  | % of Unit       |       |          |  |   |       | % of Unit 
|                                                    |  | Amount                           |       | Revenues |  | Amount          |       | Revenues
|                                                    |  |                                  |       |          |  |                 |       |         
|Gross margin(2):                                    |  |                                  |       |          |  |                 |       |          |  |   |       |            |  |  |       |  
|Fuel sales                                          |  | $                                | 1.6   |          |  |                 | 2.3   | %        |  | $ | 1.9   |            |  |  | 3.0   | %
|FBOs                                                |  |                                  | 3.0   |          |  |                 | 12.5  |          |  |   | 3.5   |            |  |  | 14.5  |  
|Cargo operations                                    |  |                                  | 0.4   |          |  |                 | 5.5   |          |  |   | 0.3   |            |  |  | 4.0   |  
|Government contract services                        |  |                                  | 1.0   |          |  |                 | 15.4  |          |  |   | 2.0   |            |  |  | 24.9  |  
|                                                    |  |                                  |       |          |  |                 |       |          |  |   |       |            |  |  |       |  
|Total gross margin                                  |  | $                                | 6.0   |          |  |                 | 5.5   | %        |  | $ | 7.7   |            |  |  | 7.5   | %
|                                                    |  |                                  |       |          |  |                 |       |          |  |   |       |            |  |  |       |  
|                                                   
|                                                    |  |                                  |       |          |  | % of Total      |       |          |  |   |       | % of Total
|                                                    |  | Amount                           |       | Revenues |  | Amount          |       | Revenues
|                                                    |  |                                  |       |          |  |                 |       |         
|Selling, general and administrative                 |  | $                                | 3.1   |          |  |                 | 2.9   | %        |  | $ | 1.9   |            |  |  | 1.9   | %
|Provision for bad debts                             |  |                                  | 0.4   |          |  |                 | 0.3   |          |  |   | 0.6   |            |  |  | 0.6   |  
|Depreciation and amortization                       |  |                                  | 2.1   |          |  |                 | 1.9   |          |  |   | 2.3   |            |  |  | 2.2   |  
|Interest expense and other                          |  |                                  | 1.3   |          |  |                 | 1.2   |          |  |   | 1.5   |            |  |  | 1.5   |  
|                                                    |  |                                  |       |          |  |                 |       |          |  |   |       |            |  |  |       |  
|Income (loss) from continuing operations before tax |  |                                  | (0.9  | )        |  |                 | (0.8  | )        |  |   | 1.4   |            |  |  | 1.3   |  
|Income tax provision (benefit)                      |  |                                  | (0.3  | )        |  |                 | (0.3  | )        |  |   | 0.5   |            |  |  | 0.5   |  
|                                                    |  |                                  |       |          |  |                 |       |          |  |   |       |            |  |  |       |  
|Income (loss) from continuing operations            |  |                                  | (0.6  | )        |  |                 | (0.5  | )        |  |   | 0.9   |            |  |  | 0.8   |  
|Loss from discontinued operations                   |  |                                  | 0.0   |          |  |                 | 0.0   |          |  |   | (0.1  | )          |  |  | 0.0   |  
|                                                    |  |                                  |       |          |  |                 |       |          |  |   |       |            |  |  |       |  
|Net income (loss)                                   |  | $                                | (0.6  | )        |  |                 | (0.5  | )%       |  | $ | 0.8   |            |  |  | 0.8   | %
|                                                    |  |                                  |       |          |  |                 |       |          |  |   |       |            |  |  |       |  

|(1) |  | See Note 1 of Notes to
consolidated financial statements under Restatement
regarding the restatement of the financial statements.                     
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) |  | Gross margin as used here and throughout Managements Discussion excludes
depreciation and amortization and selling, general and administrative
expense.

Three Months Ended September 30, 2002 Compared to September 30, 2001

Revenue increased by 4.0% to $107.9 million in the current period from
$103.8 million in the prior year due to higher fuel volume in the current
period. Gross margin decreased 23.0% to $ 6.0 million in the current period
from $7.7 million a year ago, primarily due to a decline in Government Contract
Services operations and a decrease in FBO volume and revenue as a result of the
sale of the Companys FBO facility in Bedford, Massachusetts (Bedford FBO) in
June 2002. Revenue in the Fuel Sales, FBO and Cargo Operation segments of the
Companys business, was negatively impacted in the first quarter of fiscal 2002
due to the disruptions in air travel and airport operations following the
events of September 11, 2001.

Revenues from fuel sales represented 65.4% of total revenues in the
current period compared to 62.1% of revenues in the comparable prior year
quarter. Revenues from fuel sales increased 9.4% to $70.6 million on sales of
80.0 million gallons from $64.5 million last year on sales of 72.3 million
gallons. Gross margin from fuel sales was $1.6 million in the current period
compared with

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$1.9 million last year primarily due to a 1.1 cent reduction in the
average fuel sale prices to 88.1 cents per gallon while the cost of fuel
decreased approximately 0.6 cents per gallon to 84.6 cents per gallon as
compared to the first quarter of fiscal 2002.

On November 6, 2002 National Airlines, Inc. (National), a customer of
the Companys MercFuel, Inc. (MercFuel) subsidiary, announced that they were
ceasing operations effective on that date. The Company has been providing fuel
to National since May 1999. In December 2000, National filed for bankruptcy
protection and the Company continued to sell fuel to National on a secured
basis under the auspices of the bankruptcy court. Sales by MercFuel to National
for the three months ended September 30, 2002 and 2001 were $17.5 million and
$15.1 million, respectively, representing 16.2% and 14.5% of the Companys
consolidated revenue for those periods. As of November 6, 2002, the Company
estimated the accounts receivable from National to be $375 thousand which is
adequately secured.

Revenues from FBOs were $23.8 million on sales of 8.7 million gallons in
the current period compared to $24.0 million a year ago on sales of 9.2 million
gallons, a 0.6% decrease. After excluding the revenues from the Companys
Bedford FBO total FBO revenues increased 5.4% from the year ago period
primarily due to higher average fuel sales prices with insignificant change in
sales volume. Gross margin decreased 14.2% in the current period to $3.0
million from $3.5 million last year. The gross margin decrease was primarily
caused by a 2% decrease in volume as a result of the sale of the Companys
Bedford FBO. Excluding the gross margin from the Bedford FBO for the first
quarter of fiscal year 2002, gross margin was down $0.3 million or 8.8%.

Revenues from cargo operations increased 2.1% to $7.3 million from $7.1
million in the prior year due primarily to improvements in the Cargo handling
operation. Gross margin from cargo operations in the current period increased
40.8% to $0.4 million from $0.3 million in the year ago period due to an
increase in the cargo handling operations, offset partially by a decrease in
Mercury World Cargo.

Revenues from government contract services decreased 23.8% in the current
period to $6.2 million from $8.2 million in the year ago period due to the loss
of the Yokota, Japan contract in September 2001 which provided $1.4 million or
17.1% of total revenues during the quarter ended September 30, 2001. Gross
margin from government contract services in the current period decreased 53.0%
to $1.0 million from $2.0 million last year due to the loss of the Yokota,
Japan contract which generated $0.5 million in the prior years first quarter
and higher legal settlement reserves of $0.3 million.

Selling, general and administrative expenses in the current quarter
increased 59.4% to $3.1 million from $1.9 million in last years quarter
primarily due to increased expenses of $0.6 million associated with refinancing
and recapitalization initiatives, $0.3 million associated with the extension of
certain stock options, and $0.3 million associated with a reserve for legal
settlements.

Provision for bad debts decreased 39.8% in the current period to $0.4
million from $0.6 million a year ago.

Depreciation and amortization expense was $2.1 million in the current
period compared to $2.3 million a year ago a decrease of 10.9% due primarily to
the sale of the Companys Bedford FBO during the prior fiscal year.

Interest expense and other decreased by 11.7% in the current period to
$1.3 million from $1.5 million a year ago due to lower outstanding principal of
debt and lower effective interest rates.

Income tax expense approximated 34.5% and 38.5% of pre-tax income in the
three month ended September 30, 2002 and 2001, respectively, reflecting the
expected effective annual tax rate.

The loss from discontinued operations of $42 thousand during the quarter
ended September 30, 2001 was related to the sale of property held by RPA which
was included in net assets of discontinued operations at June 30, 2001.

Liquidity and Capital Resources

As of September 30, 2002, the Companys cash and cash equivalents were
$4.0 million, a reduction of $1.6 million for the three month period then
ended. Cash used in operating activities for the three month period ended
September 30, 2002 was $3.7 million comprised of cash generated of $2.5 million
from earnings, adjusted for non-cash items, less $6.2 million for an increase
in net working capital. The increase in working capital was primarily due to an
increase in inventory and a reduction in accounts payable.

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During the first three months of FY 2003, the Company generated $3.0
million in investing activities primarily due to a reduction in restricted cash
used to reduce long term debt. The Companys financing activities resulted in a
net cash outlay of $0.8 million during the first quarter primarily associated
with the scheduled repayment of long term debt.

The Companys senior secured credit facility consists of a $35.0 million
Revolver, a Term Loan with an outstanding balance of $0.4 million and an
Acquisition Facility with an outstanding balance of $5.9 million as of
September 30, 2002. As of September 30, 2002, the Company had $7.0 million in
loans drawn against the Revolver Facility in addition to having $16.5 million
of letters of credit outstanding secured by the Revolver, leaving an unused
balance of $1.4 million. The Senior Secured Credit Facility contains provisions
that require the maintenance of certain financial ratios including minimum
tangible net worth (as defined), minimum quarterly profitability levels,
maximum leverage and minimum debt service coverage ratios, and maximum annual
capital expenditure levels. In addition, the Company is prohibited from paying
dividends in excess of $400 thousand per year. These facilities mature in March
2004.

The Company also has outstanding a $24.0 million Senior Subordinated 12%
Note (the Note) due in 2006 with detachable warrants to purchase 503,126
shares of the Companys common stock exercisable at $5.50 per share through
maturity date of the Note. The Note agreement contains covenants that, among
other matters, limit senior indebtedness, the disposition of assets and
unfunded capital expenditures. The covenants also include a ratio test for
interest coverage, leverage, fixed charge coverage and debt service.

In regard to the Senior Secured Credit Facility, the Company was in
non-compliance with the minimum net earnings covenant requirement for the first
quarter of fiscal 2003 and for the second and third quarters of fiscal 2002.
The Company was also in noncompliance with the maximum capital expenditure
covenant of the Senior Secured Credit Facility and for the Note for the fiscal
year ended June 30, 2002. As a result, the Company has been engaged in
discussions with the Senior Secured Credit Facility Lenders (the Lenders) and
the Note Holder regarding waivers and/or cures for the noncompliance with these
debt covenants. Until such time that waivers are received or a cure in
accomplished, the Lenders and the Note Holder have the right to provide the
Company with written notice declaring the total obligations associated with the
Senior Secured Credit Facility and the Note to be immediately due and payable.
Neither the Lenders nor the Note Holder has exercised this right. The Company
has classified the total principal amounts outstanding on the Senior Secured
Credit Facility and the Note, amounting to $13.3 million and $23.2 million as
of September 30, 2002 respectively, as Current Portion of Long Term Debt and
Senior Subordinated Note, current. Neither the Lenders nor the Note Holder have
exercised this right.

In October 2002, the Company received written notice from the Lenders that
as a result of the noncompliance with these debt covenants, the Lenders are
under no obligation to make any additional loans under the Senior Secured
Credit Facility, although they are not precluded from making additional loans.
In November 2002, the Company received written notice from the Note Holder
constituting a Subordinated Default Notice whereby the Note Holder advised the
Company of the event of default, and while not declaring the outstanding
principal and accrued interest immediately due and payable, the Note Holder
reserves all rights to take any action allowable under the Note Agreement,
including the acceleration of the maturity date. This notice also advised the
Company that the Note Holder is due additional interest at the default rate
until such defaults are cured or waived. The default interest represents an
additional 2.0% per annum over the stated interest rate of 12.0% on the
outstanding balance and was retroactive to June 30, 2002

The Company has engaged a financial advisor and is in discussions with
other lenders to secure new financing to replace the Senior Secured Credit
Facility and the Note. The Company has received, and is in further discussions
with these lenders, regarding term sheets associated with replacement debt
facilities. There can be no assurance that the Company could obtain the
financing necessary if the Lenders and the Note Holder exercise their right to
accelerate the maturity dates, which may result in the Company having
inadequate financial resources to meet this obligation. However, the Company
believes it will be able to secure new financing to replace the Senior Secured
Credit Facility and the Note even in the event of the Lenders and Note Holder
exercising their right to accelerate the maturity dates.

As a result of Nationals Airlines, Incs cessation of operations in
November 2002 and the limited access to additional borrowings under the
Revolver, the Company may encounter difficulties in meeting its near-term
working capital requirements. The Company is in discussions with its major
suppliers to extend additional credit terms to enable the Company to meet its
working capital requirements. The Company believes that upon securing the new
financing, it will have sufficient liquidity to meet its ongoing working
capital requirements. In the event that fuel prices increase significantly for
an extended period of time, the Companys liquidity could be adversely
impacted.

Critical Accounting Policies

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##### Table of Contents



Managements beliefs regarding significant accounting policies have not
changed significantly from those discussed in Item 7 of the Companys Annual
Report on Form 10-K for the year ended June 30, 2002.




Item 3.Quantitative and Qualitative Disclosure About Market Risk

There has been no material change during the quarter ended September 30,
2001 from the disclosures regarding market risk presented in the Companys
Annual Report on Form 10-K for the year ended June 30, 2001.

Item 4.Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Based on evaluations as of a date within 90 days of the filing date of
this report, our principal executive officer and principal financial officer,
with the participation of our management team, have concluded that our
disclosure controls and procedures (as defined in Rules 13a-14 (c) and 15d-14
(c) under the Securities Exchange Act) are effective to ensure that information
required to be disclosed by us in reports that we file or submit under the
Securities Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the rules and forms of the SEC.

Changes in Internal Controls

There were no significant changes in our internal controls or in other
factors that could significantly affect these internal controls subsequent to
the date of their most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Forward-Looking Statements

Statements contained in this Quarterly Report on Form 10-Q which are not
historical facts are forward-looking statements. In addition, Mercury, from
time-to-time, makes forward-looking statements concerning its expected future
operations and performance and other developments. Such forward-looking
statements are necessarily estimates reflecting Mercurys best judgment based
upon current information and involve a number of risks and uncertainties, and
there can be no assurance that other factors will not affect the accuracy of
such forward-looking statements. While it is impossible to identify all such
factors, factors which could cause actual results to differ materially from
those estimated by Mercury include, but are not limited to, risks associated
with acquisitions, the financial condition of customers, non-renewal of
contracts, government regulation, as well as operating risks, general
conditions in the economy and capital markets, and other factors which may be
identified from time-to-time in Mercurys Securities and Exchange Commission
filings and other public announcements.




PART II  OTHER INFORMATION




Item 1.Legal Proceedings

In April 2000, Mercury filed a collection action against AER Global
Logistics (AER) in the state of New York. AER filed a counterclaim for $5.0
million alleging among other things, tortious interference with contract.
Mercury believes that this claim is without merit, and accordingly, does not
believe this matter will have a significant impact on it financial position or
operating results.

On April 3, 2001 Mercury received notice of an action filed by Skylink
Express, Inc. in the Superior Court of Justice Ontario, Canada against Excel
Cargo, Inc. and others for damages to aircraft occurring on November 30, 1999
and January 10, 2000 at Mirabel International Airport Quebec for a total amount
of $2.5 million Canadian ($1.65 million U.S.) plus interest and fees. Mercury
does not believe the outcome of this claim will have a significant impact on
its financial position or operating results.

On November 30, 2001, the Company received notice of a counter-complaint
filed by UPS against the Company and a third party seeking indemnification and
reimbursement in the amount of $0.5 million for the costs incurred as a result
of the fuel spill at the Ontario, CA Airport. The Company has provided a
response to UPS denying such claim and on September 28, 2001, filed a lawsuit
seeking reimbursement for damages. Mercury does not believe the outcome of this
claim will have a significant impact on its financial position or operating
results.

17



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##### Table of Contents



On May 1, 2002, Mercury received a Notice of Violation (NOV) for its
Fort Wayne, Indiana facility alleging that Mercurys Spill Prevention, Control
and Countermeasure Plan (SPCC) does not meet certain federal regulatory
guidelines. Specifically, the EPA alleged that Mercurys SPCC failed to provide
for proper parking, secondary containment, and proper drainage of its refueler
trucks. The EPA has requested that Mercury submit a written response to its
allegations. The Company is in the process of responding to the EPA. Mercury
intends to fully comply with all EPA requirements.

On October 31, 2002 a complaint was filed before the National Labor
Relations Board Region 12 on behalf of the Transport Workers Union of America,
Local 525, AFL-CIO alleging that Maytag Aircraft Corporation has been engaging
in unfair labor practices as set forth in the National Labor Relations Act at
its Patrick Air Force Base location. The Company is in the process of
responding to this compliant which is now scheduled for a hearing in April of
2003. Mercury does not believe that the outcome of this claim will have a
significant impact its consolidated financial position or operating results.

The Company is also a defendant in certain litigation arising in the
normal course of business. In the opinion of management, the ultimate
resolution of such litigation will not have a significant effect on its
financial position or operating results.




Item 2.Change in Securities

None




Item 3.Default Upon Senior Securities

The Company was in noncompliance with the maximum capital expenditure
covenant of the Senior Secured 12% Note (the Note) for the fiscal year ended
June 30, 2002. In November, 2002, the Company received written notice from the
Note Holder constituting a Subordinated Default Notice whereby the Note Holder
advised the Company of the event of default, and while not declaring the
outstanding principal and accrued interest immediately due and payable, the
Note Holder reserves all rights to take any action allowable under the Note
Agreement, including the acceleration of the maturity date. The notice also
advised the Company that the Note holder is due additional interest at the
default rate until such defaults are cured or waived. The default interest
represents an additional 2.0% per annum over the stated interest rate of 12.0%
on the outstanding balance and is to be effective retroactive to June 30, 2002.




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

None




Item 5.Other Information

None




Item 6.Exhibits and Exhibit List

(a)  Exhibits and Exhibit List:

|        |  |                                                                                                                                                                                                                                                                                                                      
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                      
|No.     |  | Description                                                                                                                                                                                                                                                                                                          
|        |  |                                                                                                                                                                                                                                                                                                                      
|2.1     |  | Agreement and Plan of Merger adopted January 9, 2001.(17)                                                                                                                                                                                                                                                            
|        |  |                                                                                                                                                                                                                                                                                                                      
|2.2     |  | Certificate of Merger.(17)                                                                                                                                                                                                                                                                                           
|        |  |                                                                                                                                                                                                                                                                                                                      
|3.1     |  | Bylaws of Company adopted January 9, 2001.(17)                                                                                                                                                                                                                                                                       
|        |  |                                                                                                                                                                                                                                                                                                                      
|3.2     |  | Certificate of Incorporation.(17)                                                                                                                                                                                                                                                                                    
|        |  |                                                                                                                                                                                                                                                                                                                      
|4.1     |  | Loan Agreement between California Economic Development Financing Authority and Mercury Air Group, Inc.
relating to $19,000,000 California Economic Development Financing Authority Variable Rate Demand
Airport Facilities Revenue Bonds, Series 1998 (Mercury Air Group, Inc. Project) dated as of April 1,
1998.(2)
|        |  |                                                                                                                                                                                                                                                                                                                      
|4.2     |  | Securities Purchase Agreement dated September 10, 1999 by and among Mercury Air Group, Inc. and J.H.
Whitney Mezzanine Fund, L.P.(12)                                                                                                                                                                                
|        |  |                                                                                                                                                                                                                                                                                                                      
|4.3     |  | Amendment No. 1 dated as of September 30, 2000 by and between J.H. Whitney Mezzanine, L.P. and Mercury
Air Group, Inc. to the Securities Agreement.(16)                                                                                                                                                              

18



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##### Table of Contents



|        |  |                                                                                                                                                                                                                   
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                   
|No.     |  | Description                                                                                                                                                                                                       
|        |  |                                                                                                                                                                                                                   
|4.4     |  | Waiver and Consent Agreement dated as of December 29, 2000 among Mercury Air Group, Inc. and J.H.
Whitney Mezzanine Fund, L.P.(17)                                                                                
|        |  |                                                                                                                                                                                                                   
|4.5     |  | Waiver and Consent Agreement dated as of July 2, 2001 among Mercury Air Group, Inc. and J.H. Whitney
Mezzanine Fund, L.P(18)                                                                                      
|        |  |                                                                                                                                                                                                                   
|4.6     |  | Waiver Agreement dated as of September 25, 2001 among Mercury Air Group, Inc. and J.H. Whitney
Mezzanine Fund, L.P.(18)                                                                                           
|        |  |                                                                                                                                                                                                                   
|4.7     |  | Amendment No. 2 dated as of September 30, 2001 by and between J.H.Whitney Mezzanine Fund, L.P. and
Mercury Air Group, Inc. to the Securities Purchase Agreement(19)                                               
|        |  |                                                                                                                                                                                                                   
|4.8     |  | Amended and Restated J.H. Whitney Mezzanine Fund , L.P. Warrant(19)                                                                                                                                               
|        |  |                                                                                                                                                                                                                   
|4.9     |  | Waiver Agreement dated as of November 26, 2001 among Mercury Air Group, Inc. and J.H. Whitney
Mezzanine, L.P.(21)                                                                                                 
|        |  |                                                                                                                                                                                                                   
|4.10    |  | Waiver Agreement dated as of December 21, 2001 among Mercury Air Group, inc. and J.H. Whitney
Mezzanine, L.P.(21)                                                                                                 
|        |  |                                                                                                                                                                                                                   
|4.11    |  | Waiver Agreement dated as of June 26, 2002 among Mercury Air Group, inc. and J.H.Whitney Mezzanine,
L.P.(23)                                                                                                      
|        |  |                                                                                                                                                                                                                   
|10.1    |  | Companys 1990 Long-Term Incentive Plan.(4)*                                                                                                                                                                      
|        |  |                                                                                                                                                                                                                   
|10.2    |  | Companys 1990 Directors Stock Option Plan.(1)*                                                                                                                                                                   
|        |  |                                                                                                                                                                                                                   
|10.3    |  | Lease for 6851 West Imperial Highway, Los Angeles, California.(3)                                                                                                                                                 
|        |  |                                                                                                                                                                                                                   
|10.4    |  | Memorandum Dated September 15, 1997 regarding Summary of Officer Life Insurance Policies with Benefits
Payable to Officers or Their Designated Beneficiaries.(8)*                                                 
|        |  |                                                                                                                                                                                                                   
|10.5    |  | Employment Agreement dated November 15, 1994 between the Company and Joseph Czyzyk.(9)*                                                                                                                           
|        |  |                                                                                                                                                                                                                   
|10.6    |  | Non-Qualified Stock Option Agreement dated March 21, 1996, by and between Frederick H. Kopko and
Mercury Air Group, Inc.(6)*                                                                                      
|        |  |                                                                                                                                                                                                                   
|10.7    |  | Companys 1998 Long-Term Incentive Plan.(10)*                                                                                                                                                                     
|        |  |                                                                                                                                                                                                                   
|10.8    |  | Companys 1998 Directors Stock Option Plan.(10)*                                                                                                                                                                  
|        |  |                                                                                                                                                                                                                   
|10.9    |  | Amendment to Employment Agreement by and between Mercury Air Group, Inc. and Joseph A. Czyzyk dated
October 15, 1998.(11)*                                                                                        
|        |  |                                                                                                                                                                                                                   
|10.10   |  | Amendment No. 2 to Employment Agreement by and between Mercury Air Group, Inc. and Joseph A. Czyzyk
dated April 12, 1999.(11)*                                                                                    
|        |  |                                                                                                                                                                                                                   
|10.11   |  | Revolving Credit and Term Loan Agreement dated as of March 2, 1999 by and among Mercury Air Group,
Inc., The Banks listed on Schedule 1 thereto, and The Fleet National Bank f/k/a BankBoston, N.A., as
Agent.(11)
|        |  |                                                                                                                                                                                                                   
|10.12   |  | First Amendment to Revolving Credit and Term Loan Agreement dated as of September 10, 1999.(14)                                                                                                                   
|        |  |                                                                                                                                                                                                                   
|10.13   |  | Second Amendment to Revolving Credit and Term Loan Agreement dated as of March 31, 2000.(14)                                                                                                                      
|        |  |                                                                                                                                                                                                                   
|10.14   |  | Third Amendment, Waiver and Consent to Revolving Credit and Term Loan Agreement dated as of August 11,
2000.(14)                                                                                                  
|        |  |                                                                                                                                                                                                                   
|10.15   |  | The Companys 401(k) Plan consisting of CNA Trust Corporation. Regional Prototype Defined Contribution
Plan and Trust and Adoption Agreement.(14)*                                                                
|        |  |                                                                                                                                                                                                                   
|10.16   |  | Amendment No. 3 to Employment Agreement by and between Mercury Air Group, Inc. and Joseph A. Czyzyk
dated September 11, 2000.(15)*                                                                                
|        |  |                                                                                                                                                                                                                   
|10.17   |  | Employment Agreement dated July 31, 2000 between the Company and Dr. Philip J. Fagan.(15)*                                                                                                                        
|        |  |                                                                                                                                                                                                                   
|10.18   |  | Fourth Amendment to Revolving Credit and Term Loan Agreement dated as of November 14, 2000.(16)                                                                                                                   
|        |  |                                                                                                                                                                                                                   
|10.19   |  | Amendment No. 1 to Mercury Air Group, Inc. 1998 Long-Term Incentive Option Plan as of August 22,
2000.(16)*                                                                                                       
|        |  |                                                                                                                                                                                                                   
|10.20   |  | Amendment No. 1 to Mercury Air Group, Inc. 1998 Directors Stock Option Plan as of August 22, 2000.(16)*                                                                                                           
|        |  |                                                                                                                                                                                                                   
|10.21   |  | Limited Waiver letter Agreement to Revolving Credit and Term Loan Agreement dated as of September 21,
2001.(18)                                                                                                   
|        |  |                                                                                                                                                                                                                   
|10.22   |  | Fifth Amendment to Revolving Credit and Term loan Agreement dated as of September 21, 2001.(18)                                                                                                                   

19



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##### Table of Contents



|        |  |                                                                                                                                                      
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                      
|No.     |  | Description                                                                                                                                          
|        |  |                                                                                                                                                      
|10.23   |  | Limited Consent letter Agreement to Revolving Credit and Term Loan Agreement dated as of September 30,
2001.(19)                                     
|        |  |                                                                                                                                                      
|10.24   |  | 2001 Mercury Air Group, Inc. Stock Incentive Plan(20)                                                                                                
|        |  |                                                                                                                                                      
|10.25   |  | Limited waiver and Consent to Revolving Credit and Term Loan Agreement dated as of December 31,
2001.(21)                                            
|        |  |                                                                                                                                                      
|10.26   |  | 2002 Management Stock Purchase Plan(22)                                                                                                              
|        |  |                                                                                                                                                      
|10.27   |  | Amended and Restated Employment Agreement dated May 22, 2002 between Mercury Air Group, Inc. and
Joseph A, Czyzyk(22)*                               
|        |  |                                                                                                                                                      
|10.28   |  | Employment Agreement dated May 22, 2002 between Mercury Air Group, Inc. and Wayne J. Lovett(22)*                                                     
|        |  |                                                                                                                                                      
|10.29   |  | Employment Agreement dated May 22, 2002 between Mercury Air Group, Inc. and John Enticknap(22)*                                                      
|        |  |                                                                                                                                                      
|10.30   |  | Employment Agreement dated May 22, 2002 between Mercury Air Group, Inc. and Mark Coleman(22)*                                                        
|        |  |                                                                                                                                                      
|10.31   |  | Employment Agreement dated May 22, 2002 between Mercury Air Group, Inc. and Steven S. Antonoff(22)*                                                  
|        |  |                                                                                                                                                      
|10.32   |  | Employment Agreement dated May 22, 2002 between Mercury Air Group, Inc. and Robert Schlax(22)*                                                       
|        |  |                                                                                                                                                      
|10.34   |  | Sale-Leaseback agreement made by and between CFK Realty Partners, LLC and Mercury air Group, Inc.
dated December 15, 2001.(23)                       
|        |  |                                                                                                                                                      
|10.35   |  | Amendment to Sale-Leaseback agreement made by and between CFK Realty Partners, LLC and Mercury Air
Group, Inc.(23)                                   
|        |  |                                                                                                                                                      
|10.36   |  | Promissory Note by CFK Partners, LLC in favor of Mercury Air Group, Inc.(23)                                                                         
|        |  |                                                                                                                                                      
|10.37   |  | Limited Waiver and Consent to Revolving Credit and Term Loan
Agreement dated as June 27, 2002.(23)                                                   
|        |  |                                                                                                                                                      
|10.38   |  | Amendment to No. 1 made to Amended and Restated Employment Agreement dated May 22, 2002 between
Mercury Air Group, Inc. and Joseph A. Czyzyk.*(23)   
|        |  |                                                                                                                                                      
|31.1    |  | Section 302 Certification of Chief Executive Officer                                                                                                 
|        |  |                                                                                                                                                      
|31.2    |  | Section 302 Certification of Chief Financial Officer                                                                                                 
|        |  |                                                                                                                                                      
|32.1    |  | Section 906 Certification of Chief Executive Officer                                                                                                 
|        |  |                                                                                                                                                      
|32.2    |  | Section 906 Certification of Chief Financial Officer                                                                                                 
|        |  |                                                                                                                                                      
|99.1    |  | Partnership Agreement dated as of July 27, 2000 of CFK Partners by and among Philip J. Fagan, M.D.,
Frederick H. Kopko, Jr. and Joseph A. Czyzyk.(13)



---



|* |  | Denotes managements contract or compensation plan or arrangement.
|- |  | -----------------------------------------------------------------



|(1) |  | Such document was previously filed as Appendix A to the Companys Proxy
Statement for the December 10, 1993 Annual Meeting of Shareholders and is
incorporated herein by reference.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | All such documents were previously filed as Exhibits to the Companys
Quarterly Report on Form 10-Q for the quarter ended March 31, 1998 and are
incorporated herein by reference. 
|   
|(3) |  | All such documents were previously filed as Exhibits to the Companys
Registration Statement No. 33-39044 on Form S-2 and are incorporated
herein by reference.                    
|   
|(4) |  | Such document was previously filed as Appendix A to the Companys Proxy
Statement for the December 2, 1992 Annual Meeting of Shareholders.                                         
|   
|(5) |  | All such documents were previously filed as Exhibits to the Companys
Registration Statement No. 33-65085 on Form S-1 and are incorporated
herein by reference.                    
|   
|(6) |  | All such documents were previously filed as Exhibits to the Companys
Quarterly Report on Form 10-Q for the quarter ended March 31, 1996 and are
incorporated herein by reference. 
|   
|(7) |  | All such documents were previously filed as Exhibits to the Companys
Report on Form 8-K filed September 13, 1996 and are incorporated herein by
reference.                        

20



---



##### Table of Contents





|(8)  |  | Such document was previously filed as an Exhibit to the Companys Annual
Report on Form 10-K for the year ended June 30, 1997 and is incorporated
herein by reference.              
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|(9)  |  | All such documents were previously filed as an Exhibit to the Companys
Annual Report on Form 10-K for the year ended June 30, 1998 and is
incorporated herein by reference.        
|    
|(10) |  | Such document was previously filed as Appendix A to the Companys Proxy
Statement for the December 3, 1998 Annual Meeting of Shareholders and
incorporated herein by reference.     
|    
|(11) |  | All such documents were previously filed as an Exhibit to the Companys
Quarterly Report on Form 10-Q for the quarter ended March 31, 1999 and
incorporated herein by reference.    
|    
|(12) |  | All such documents were previously filed as an Exhibit to the Companys
Annual Report on Form 10-K for the year ended June 30, 1999 and is
incorporated herein by reference.        
|    
|(13) |  | Such document was previously filed as an Exhibit to the Companys current
Report on Form 8-K on August 11, 2000 and is incorporated herein by
reference.                            
|    
|(14) |  | All such documents were previously filed as an Exhibit to the Companys
Annual Report on Form 10-K for the year ended June 30, 2000 and is
incorporated herein by reference.        
|    
|(15) |  | All such documents were previously filed as an Exhibit to the Companys
Quarterly Report on Form 10-Q for the quarter ended September 30, 2000 and
incorporated herein by reference.
|    
|(16) |  | All such documents were previously filed as an Exhibit to the Companys
Quarterly Report on Form 10-Q for the quarter ended December 31, 2000 and
incorporated herein by reference. 
|    
|(17) |  | All such documents were previously filed as an Exhibit to the Companys
Quarterly Report on Form 10-Q for the quarter ended March 31, 2001 and
incorporated herein by reference.    
|    
|(18) |  | All such documents were previously filed as an Exhibit to the Companys
Annual Report on Form 10-K for the year ended June 30, 2001 and is
incorporated herein by reference.        
|    
|(19) |  | All such documents were previously filed as an Exhibit to the Companys
Quarterly Report on Form 10-Q for the quarter ended September 30, 2001 and
incorporated herein by reference 
|    
|(20) |  | Such document was previously filed as Appendix A to the Companys Proxy
Statement for the November 7, 2001 Annual Meeting of Shareholders and
incorporated herein by reference.     
|    
|(21) |  | All such documents were previously filed as an Exhibit to the Companys
Quarterly Report on Form 10-Q for the quarter ended December 31, 2001 and
incorporated herein by reference  
|    
|(22) |  | Such document was previously filed as an Exhibit to the Companys current
Report on Form 8-K on June 5, 2002 and is incorporated herein by reference                                
|    
|(23) |  | All such documents were previously filed as an Exhibit to the Companys
Annual Report on Form 10-K for the year ended June 30, 2002 and is
incorporated herein by reference.        
|    
|(24) |  | Such document was previously filed as an Exhibit to the Companys current
Report on Form 8-K on July 11, 2002 and is incorporated herein by
reference                               

(b)  Reports on Form 8-K:

A Form 8-K was filed on June 5, 2002 reporting on Item 5. of other
Events and regulation FD Disclosure.

21



---



##### Table of Contents



A Form 8-K was filed on July 11, 2002 reporting on Item 2. of
Acquisitions or Disposition of Assets.

22



---



##### Table of Contents






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 thereunto duly authorized.

|                      |  |                              
|--------------------- |  | -----------------------------
|                      |  | MERCURY AIR GROUP, INC.      
|                      |  | Registrant                   
|                      |  |                              
|                      |  | /s/ JOSEPH CZYZYK            
|                      |  |                              
|                      |  | Joseph Czyzyk                
|                      |  | Chief Executive Officer      
|                      |  |                              
|                      |  | /s/ ROBERT SCHLAX            
|                      |  |                              
|                      |  | Robert Schlax                
|                      |  | Vice President Finance       
|                      |  | (Principal Financial Officer)
|Date: January 9, 2004 |  |                              

23