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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

[X]       Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period endedSeptember 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                                                       |  | 11-1800515                             
|                                                               |  |                                        
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer
Identification Number)
|                                                              
|5456 McConnell Avenue, Los Angeles, CA                         |  | 90066                                  
|                                                               |  |                                        
|(Address of principal executive offices)                       |  | (Zip Code)                             

(310) 827-2737

---

(Registrants telephone number, including area code)


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

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





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TABLE OF CONTENTS



|                                |                                                                                                |                                            |  |  |  |  |  | 
|------------------------------- | ---------------------------------------------------------------------------------------------- | ------------------------------------------ |  |  |  |  |  | 
|PART 1  FINANCIALS INFORMATION
|                                | Item 1. Financial Statements                                                                  
|                                |                                                                                                | CONSOLIDATED BALANCE SHEETS               
|                                |                                                                                                | CONSOLIDATED STATEMENTS OF OPERATIONS     
|                                |                                                                                                | CONSOLIDATED STATEMENTS OF CASH FLOWS     
|                                |                                                                                                | NOTES TO CONSOLIDATED 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.                            
|                                | Item 4. CONTROLS AND PROCEDURES                                                               
|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 (a) Exhibits and Exhibit List                                                          
|SIGNATURES                     
|EXHIBIT 99.2                   



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##### Table of Contents






PART 1  FINANCIALS INFORMATION




Item 1. Financial Statements




MERCURY AIR GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)

|                                                                                                                                          |                                                                                                                                |                            |             |            |            |               |             |            |            |  |  | 
|----------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------ | -------------------------- | ----------- | ---------- | ---------- | ------------- | ----------- | ---------- | ---------- |  |  | 
|                                                                                                                                          |                                                                                                                                |                            |             |            |            | SEPTEMBER 30, |             | JUNE 30,  
|                                                                                                                                          |                                                                                                                                |                            |             |            |            | 2002          |             | 2002      
|                                                                                                                                          |                                                                                                                                |                            |             |            |            |               |             |           
|ASSETS                                                                                                                                    |                                                                                                                                |                            |             |            |            |               |             |           
|CURRENT ASSETS:                                                                                                                           |                                                                                                                                |                            |             |            |            |               |             |           
|                                                                                                                                          | Cash and cash equivalents                                                                                                      |                            | $           | 4,006,000  |            |               | $           | 5,554,000  |           
|                                                                                                                                          | 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           |                            |             | 46,059,000 |            |               |             | 46,958,000 |           
|                                                                                                                                          | Inventories, principally aviation fuel                                                                                         |                            |             | 6,561,000  |            |               |             | 2,985,000  |           
|                                                                                                                                          | Prepaid expenses and other current assets                                                                                      |                            |             | 3,201,000  |            |               |             | 3,077,000  |           
|                                                                                                                                          | Note receivable from affiliate                                                                                                 |                            |             | 1,400,000  |            |               |             | 1,400,000  |           
|                                                                                                                                          |                                                                                                                                |                            |             |            |            |               |             |           
|                                                                                                                                          |                                                                                                                                | Total current assets       |             |            | 61,477,000 |               |             |            | 63,754,000 | 
|PROPERTY, EQUIPMENT AND LEASEHOLDS, net of accumulated depreciation and
amortization of $54,732,000 at 9/30/02 and $53,668,000 at 6/30/02 |                                                                                                                                |                            | 57,936,000  |            |            |               | 59,286,000  |           
|NOTES RECEIVABLE                                                                                                                          |                                                                                                                                |                            | 2,078,000   |            |            |               | 2,158,000   |           
|DEFERRED INCOME TAXES                                                                                                                     |                                                                                                                                |                            | 766,000     |            |            |               | 770,000     |           
|GOODWILL                                                                                                                                  |                                                                                                                                |                            | 4,389,000   |            |            |               | 4,389,000   |           
|OTHER INTANGIBLE ASSETS                                                                                                                   |                                                                                                                                |                            | 208,000     |            |            |               | 233,000     |           
|OTHER ASSETS                                                                                                                              |                                                                                                                                |                            | 4,013,000   |            |            |               | 4,096,000   |           
|                                                                                                                                          |                                                                                                                                |                            |             |            |            |               |             |           
|                                                                                                                                          |                                                                                                                                | $                          | 130,867,000 |            |            | $             | 134,686,000 |           
|                                                                                                                                          |                                                                                                                                |                            |             |            |            |               |             |           
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                      |                                                                                                                                |                            |             |            |            |               |             |           
|CURRENT LIABILITIES:                                                                                                                      |                                                                                                                                |                            |             |            |            |               |             |           
|                                                                                                                                          | Accounts payable                                                                                                               |                            | $           | 32,329,000 |            |               | $           | 35,085,000 |           
|                                                                                                                                          | Accrued expenses and other current liabilities                                                                                 |                            |             | 8,072,000  |            |               |             | 8,459,000  |           
|                                                                                                                                          | Current portion of long-term debt (Note 5)                                                                                     |                            |             | 14,830,000 |            |               |             | 14,677,000 |           
|                                                                                                                                          | Senior Subordinated Note, current (Note 5)                                                                                     |                            |             | 23,228,000 |            |               |             | 23,179,000 |           
|                                                                                                                                          |                                                                                                                                |                            |             |            |            |               |             |           
|                                                                                                                                          |                                                                                                                                | Total current liabilities  |             |            | 78,459,000 |               |             |            | 81,400,000 | 
|LONG-TERM DEBT                                                                                                                            |                                                                                                                                |                            | 13,799,000  |            |            |               | 14,351,000  |           
|DEFERRED GAIN                                                                                                                             |                                                                                                                                |                            | 2,126,000   |            |            |               | 2,146,000   |           
|DEFERRED RENT                                                                                                                             |                                                                                                                                |                            | 2,090,000   |            |            |               | 1,943,000   |           
|COMMITMENTS AND CONTINGENCIES (Note 4)                                                                                                    |                                                                                                                                |                            |             |            |            |               |             |           
|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 shares at 9/30/02 and 6,541,699 at 6/30/02 |                            |             | 64,000     |            |               |             | 65,000     |           
|                                                                                                                                          | Additional paid-in capital                                                                                                     |                            |             | 21,404,000 |            |               |             | 21,419,000 |           
|                                                                                                                                          | Retained earnings                                                                                                              |                            |             | 17,233,000 |            |               |             | 17,751,000 |           
|                                                                                                                                          | Accumulated other comprehensive loss (Note 8)                                                                                  |                            |             | (355,000   | )          |               |             | (316,000   | )         
|                                                                                                                                          | Notes receivable from sale of stock                                                                                            |                            |             | (3,953,000 | )          |               |             | (4,073,000 | )         
|                                                                                                                                          |                                                                                                                                |                            |             |            |            |               |             |           
|                                                                                                                                          |                                                                                                                                | Total stockholders equity |             |            | 34,393,000 |               |             |            | 34,846,000 | 
|                                                                                                                                          |                                                                                                                                |                            |             |            |            |               |             |           
|                                                                                                                                          |                                                                                                                                | $                          | 130,867,000 |            |            | $             | 134,686,000 |           
|                                                                                                                                          |                                                                                                                                |                            |             |            |            |               |             |           

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       
|                                                                                |                                              |                                     |                                                        |            |                    |           |            
|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                           |                                     |                                                        | 25,796,000 |                    |           |             | 25,739,000 |      
|                                                                                |                                              |                                     |                                                        |            |                    |           |             |           
|                                                                                |                                              |                                     | 101,830,000                                            |            |                    |           | 96,028,000  |           
|                                                                                |                                              |                                     |                                                        |            |                    |           |             |           
|                                                                                |                                              |                                     | Gross Margin (Excluding depreciation and amortization) |            |                    | 6,065,000 |             |            |       | 7,724,000 | 
|                                                                                |                                              |                                     |                                                        |            |                    |           |             |           
|Expenses (Income):                                                              |                                              |                                     |                                                        |            |                    |           |             |           
|                                                                                | Selling, general and administrative          |                                     |                                                        | 3,224,000  |                    |           |             | 1,960,000  |      
|                                                                                | Provision for bad debts                      |                                     |                                                        | 352,000    |                    |           |             | 585,000    |      
|                                                                                | Depreciation and amortization                |                                     |                                                        | 2,029,000  |                    |           |             | 2,304,000  |      
|                                                                                | Interest expense                             |                                     |                                                        | 1,320,000  |                    |           |             | 1,526,000  |      
|                                                                                | Interest income                              |                                     |                                                        | (70,000    | )                  |           |             | (17,000    | )    
|                                                                                |                                              |                                     |                                                        |            |                    |           |             |           
|                                                                                |                                              |                                     | 6,855,000                                              |            |                    |           | 6,358,000   |           
|                                                                                |                                              |                                     |                                                        |            |                    |           |             |           
|(Loss) Income from Continuing Operations Before Provision for Income Taxes      |                                              |                                     | (790,000                                               | )          |                    |           | 1,366,000   |           
|(Benefit from) Provision for Income Taxes                                       |                                              |                                     | (308,000                                               | )          |                    |           | 533,000     |           
|                                                                                |                                              |                                     |                                                        |            |                    |           |             |           
|(Loss) Income from Continuing Operations                                        |                                              |                                     | (482,000                                               | )          |                    |           | 833,000     |           
|Loss from Discontinued Operations net of Income Tax benefit of $27,000 (Note 2) |                                              |                                     |                                                        |            |                    |           | (42,000     | )         
|                                                                                |                                              |                                     |                                                        |            |                    |           |             |           
|Net (Loss) Income                                                               |                                              | $                                   | (482,000                                               | )          |                    | $         | 791,000     |           
|                                                                                |                                              |                                     |                                                        |            |                    |           |             |           
|                                                                                | Net (Loss) Income Per Common Share (Note 6): |                                     |                                                        |            |                    |           |             |            |      
|                                                                                | Basic:                                       |                                     |                                                        |            |                    |           |             |            |      
|                                                                                |                                              | From Continuing Operations          |                                                        | $          | (0.07              | )         |             | $          | 0.13  |          
|                                                                                |                                              | (Loss) from Discontinued Operations |                                                        |            | 0.00               |           |             |            | (0.01 | )        
|                                                                                |                                              |                                     |                                                        |            |                    |           |             |           
|                                                                                |                                              | Net (Loss) Income                   |                                                        | $          | (0.07              | )         |             | $          | 0.12  |          
|                                                                                |                                              |                                     |                                                        |            |                    |           |             |           
|                                                                                | Diluted:                                     |                                     |                                                        |            |                    |           |             |            |      
|                                                                                |                                              | From Continuing Operations          |                                                        | $          | (0.07              | )         |             | $          | 0.12  |          
|                                                                                |                                              | (Loss) from Discontinued Operations |                                                        |            | 0.00               |           |             |            | (0.01 | )        
|                                                                                |                                              |                                     |                                                        |            |                    |           |             |           
|                                                                                |                                              | Net (Loss) Income                   |                                                        | $          | (0.07              | )         |             | $          | 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      
|                                                                     |                                                            |                                                                |                                                     |             |                    |            |           
|CASH FLOWS FROM OPERATING ACTIVITIES:                                |                                                            |                                                                |                                                     |             |                    |            |            |           
|                                                                     | Net (Loss) Income                                          |                                                                | $                                                   | (482,000    | )                  |            | $          | 791,000    |           
|                                                                     | Less: Loss from discontinued operations                    |                                                                |                                                     |             |                    |            |            | (42,000    | )         
|                                                                     |                                                            |                                                                |                                                     |             |                    |            |            |           
|                                                                     | (Loss) Income from continuing operations                   |                                                                |                                                     | (482,000    | )                  |            |            | 833,000    |           
|                                                                     | Adjustments to derive cash flow from operating activities: |                                                                |                                                     |             |                    |            |            |            |           
|                                                                     |                                                            | Bad debt expense                                               |                                                     |             | 352,000            |            |            |            | 585,000    |           
|                                                                     |                                                            | Depreciation and amortization                                  |                                                     |             | 2,029,000          |            |            |            | 2,304,000  |           
|                                                                     |                                                            | Deferred income taxes                                          |                                                     |             | 4,000              |            |            |            | 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        |                                                     |             | 120,000            |            |            |            |            |           
|                                                                     |                                                            | Amortization of senior subordinated note discount              |                                                     |             | 49,000             |            |            |            | 47,000     |           
|                                                                     |                                                            | Loss on retirement of assets                                   |                                                     |             | 41,000             |            |            |            |            |           
|                                                                     |                                                            | Amortization of deferred gain                                  |                                                     |             | (20,000            | )          |            |            |            |           
|                                                                     | Changes in operating assets and liabilities:               |                                                                |                                                     |             |                    |            |            |            |           
|                                                                     |                                                            | Trade and other accounts receivable                            |                                                     |             | 547,000            |            |            |            | 3,644,000  |           
|                                                                     |                                                            | Inventories                                                    |                                                     |             | (3,576,000         | )          |            |            | (313,000   | )         
|                                                                     |                                                            | Prepaid expenses and other current assets                      |                                                     |             | (124,000           | )          |            |            | (690,000   | )         
|                                                                     |                                                            | Accounts payable                                               |                                                     |             | (2,756,000         | )          |            |            | (5,687,000 | )         
|                                                                     |                                                            | Accrued expenses and other current liabilities                 |                                                     |             | (387,000           | )          |            |            | (3,722,000 | )         
|                                                                     |                                                            |                                                                |                                                     |             |                    |            |            |           
|                                                                     |                                                            |                                                                | Net cash used in operating activities               |             |                    | (3,738,000 | )          |            |            | (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                              |                                                                |                                                     | (11,674,000 | )                  |            |            | (6,663,000 | )         
|                                                                     | Repurchase of common stock                                 |                                                                |                                                     | (370,000    | )                  |            |            |            |           
|                                                                     |                                                            |                                                                |                                                     |             |                    |            |            |           
|                                                                     |                                                            |                                                                | Net cash used in financing activities               |             |                    | (769,000   | )          |            |            | (2,663,000 | )
|                                                                     |                                                            |                                                                |                                                     |             |                    |            |            |           
|Effect of exchange rate changes on cash                              |                                                            |                                                                | (39,000                                             | )           |                    |            |            |           
|NET DECREASE IN CASH AND CASH EQUIVALENTS FROM CONTINUING
OPERATIONS |                                                            |                                                                | (1,548,000                                          | )           |                    |            | (7,247,000 | )         
|NET CASH PROVIDED BY DISCONTINUED OPERATIONS                         |                                                            |                                                                |                                                     |             |                    |            | 4,236,000  |           
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                       |                                                            |                                                                | 5,554,000                                           |             |                    |            | 3,886,000  |           
|                                                                     |                                                            |                                                                |                                                     |             |                    |            |            |           
|CASH AND CASH EQUIVALENTS, END OF PERIOD                             |                                                            | $                                                              | 4,006,000                                           |             |                    | $          | 875,000    |           
|                                                                     |                                                            |                                                                |                                                     |             |                    |            |            |           
|CASH PAID DURING THE PERIOD:                                         |                                                            |                                                                |                                                     |             |                    |            |            |           
|                                                                     | Interest                                                   |                                                                | $                                                   | 1,221,000   |                    |            | $          | 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).

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 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.

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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

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

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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.

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.

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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
(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  EARNINGS PER SHARE:

Basic earnings per common share is computed by dividing net income by the
weighted average number of common shares outstanding during the period. Diluted
earnings per share is computed by dividing net income 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.

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|                                                                                             |  |                    |           |                    |  |         |           |       |  |  |           |  |  |  |           | 
|-------------------------------------------------------------------------------------------- |  | ------------------ | --------- | ------------------ |  | ------- | --------- | ----- |  |  | --------- |  |  |  | --------- | 
|                                                                                             |  | 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 | 

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 |  |                        |        |            |  |            |        |          |  |             |        |       |  |            |        |           |  |   |        |  |  |   |         | 
|Revenues                         |  | $                      | 70,573 |            |  | $          | 23,826 |          |  | $           | 7,290  |       |  | $          | 6,206  |           |  |   |        |  |  | $ | 107,895 | 
|Gross Margin                     |  |                        | 1,620  |            |  |            | 2,973  |          |  |             | 519    |       |  |            | 953    |           |  |   |        |  |  |   | 6,065   | 
|Depreciation and Amortization    |  |                        | 54     |            |  |            | 1,253  |          |  |             | 546    |       |  |            | 91     |           |  | $ | 85     |  |  |   | 2,029   | 
|Capital Expenditures             |  |                        |        |            |  |            | 524    |          |  |             | 65     |       |  |            |        |           |  |   | 21     |  |  |   | 610     | 
|Segment Assets                   |  |                        | 30,957 |            |  |            | 58,797 |          |  |             | 15,262 |       |  |            | 12,059 |           |  |   | 13,792 |  |  |   | 130,867 | 
|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; total bad debt expense was $352,000
and $585,000 in the quarter ending September 2002 and September 2001,
respectively.

NOTE 8  COMPREHENSIVE INCOME:

Comprehensive (Loss) income is summarized as follows:

|                                        |  |                    |          |      |  |   |         | 
|--------------------------------------- |  | ------------------ | -------- | ---- |  | - | ------- | 
|                                        |  | Three Months Ended
|                                        |  | September 30,     
|                                        |  |                   
|                                        |  | 2002               |          | 2001
|                                        |  |                    |          |     
|Net (Loss) Income                       |  | $                  | (482,000 | )    |  | $ | 791,000 | 
|Foreign Currency Translation Adjustment |  |                    | (39,000  | )    |  |   |        | 
|                                        |  |                    |          |      |  |   |         | 
|Comprehensive (Loss) Income             |  | $                  | (521,000 | )    |  | $ | 791,000 | 
|                                        |  |                    |          |      |  |   |         | 

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##### Table of Contents






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,
|                             |  |                                 
|                             |  | ($ IN MILLIONS)                 
|                             |  |                                 
|                             |  | 2002                             |       | 2001    
|                             |  |                                  |       |         
|                             |  |                                  |       |          |  | % OF TOTAL |       |          |  |   |       | % OF TOTAL
|                             |  | AMOUNT                           |       | REVENUES |  | AMOUNT     |       | REVENUES
|                             |  |                                  |       |          |  |            |       |         
|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(1):             |  |        |     |          |  |           |      |          |  |   |     |           |  |  |      |  
|Fuel Sales                   |  | $      | 1.6 |          |  |           | 2.3  | %        |  | $ | 1.9 |           |  |  | 3.0  | %
|FBOs                         |  |        | 3.0 |          |  |           | 12.5 |          |  |   | 3.5 |           |  |  | 14.5 |  
|Cargo Operations             |  |        | 0.5 |          |  |           | 7.1  |          |  |   | 0.3 |           |  |  | 4.0  |  
|Government Contract Services |  |        | 1.0 |          |  |           | 15.4 |          |  |   | 2.0 |           |  |  | 24.9 |  
|                             |  |        |     |          |  |           |      |          |  |   |     |           |  |  |      |  
|Total Gross Margin           |  | $      | 6.1 |          |  |           | 5.6  | %        |  | $ | 7.7 |           |  |  | 7.5  | %
|                             |  |        |     |          |  |           |      |          |  |   |     |           |  |  |      |  

|                                                    |  |        |      |          |  |            |      |          |  |   |      |            |  |  |     |  
|--------------------------------------------------- |  | ------ | ---- | -------- |  | ---------- | ---- | -------- |  | - | ---- | ---------- |  |  | --- | -
|                                                    |  |        |      |          |  | % of Total |      |          |  |   |      | % of Total
|                                                    |  | Amount |      | Revenues |  | Amount     |      | Revenues
|                                                    |  |        |      |          |  |            |      |         
|Selling, general and administrative                 |  | $      | 3.2  |          |  |            | 3.0  | %        |  | $ | 1.9  |            |  |  | 1.9 | %
|Provision for bad debts                             |  |        | 0.4  |          |  |            | 0.3  |          |  |   | 0.6  |            |  |  | 0.6 |  
|Depreciation and amortization                       |  |        | 2.0  |          |  |            | 1.9  |          |  |   | 2.3  |            |  |  | 2.2 |  
|Interest expense and other                          |  |        | 1.3  |          |  |            | 1.1  |          |  |   | 1.5  |            |  |  | 1.5 |  
|                                                    |  |        |      |          |  |            |      |          |  |   |      |            |  |  |     |  
|(Loss) Income from continuing operations before tax |  |        | (0.8 | )        |  |            | (0.7 | )        |  |   | 1.4  |            |  |  | 1.3 |  
|(Benefit from) Provision for income taxes           |  |        | (0.3 | )        |  |            | (0.3 | )        |  |   | 0.5  |            |  |  | 0.5 |  
|                                                    |  |        |      |          |  |            |      |          |  |   |      |            |  |  |     |  
|(Loss) Income from continuing operations            |  |        | (0.5 | )        |  |            | (0.4 | )        |  |   | 0.9  |            |  |  | 0.8 |  
|(Loss) income from discontinued operations          |  |        | 0.0  |          |  |            | 0.0  |          |  |   | (0.1 | )          |  |  | 0.0 |  
|                                                    |  |        |      |          |  |            |      |          |  |   |      |            |  |  |     |  
|Net (Loss) Income                                   |  | $      | (0.5 | )        |  |            | (0.4 | )%       |  | $ | 0.8  |            |  |  | 0.8 | %
|                                                    |  |        |      |          |  |            |      |          |  |   |      |            |  |  |     |  



---

|(1) |  | 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 21.5% to $ 6.1 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 $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.

10



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##### Table of Contents



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
80.8% to $0.5 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
64.5% to $3.2 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 $2.0 million in the current period
compared to $2.3 million a year ago a decrease of 11.9% due primarily to the
sale of corporate facilities and the Companys Bedford FBO during the prior
fiscal year.

Interest expense and other decreased by 17.2% 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 39% of pre-tax income in both periods
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 $2.6 million from
earnings, adjusted for non-cash items, less $6.3 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.

During the first three months of FY 2003, the Company generated $0.3 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

11



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##### Table of Contents



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

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.

12



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##### Table of Contents






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.

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.

13



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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 (a) Exhibits and Exhibit List

(b)  Reports on Form 8-K

|        |  |                                                                                                                                                                                                                                                                                                                       
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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)                                                                                                                                                              
|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)                                                                                                                                                                                                         

14



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|        |  |                                                                                                                                                                                                                    
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                    
|No.     |  | Description                                                                                                                                                                                                        
|        |  |                                                                                                                                                                                                                    
|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)                                                                                                                   
|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)                                                                                                

15



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|        |  |                                                                                                                                                       
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                       
|No.     |  | Description                                                                                                                                           
|        |  |                                                                                                                                                       
|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)   
|22.1    |  | Subsidiaries of Registrant. (23)                                                                                                                      
|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)
|99.2    |  | Certification pursuant to 18 U.S.C. Section 1350, As adopted pursuant
to Section 906 of the Sarbanes-Oxley
Act of 2002.                               



---

|*    |  | 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.                        
|    
|    
|    
|    
|(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.       

16



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##### Table of Contents



|(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.

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

17



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##### 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: November 14, 2002

18



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##### Table of Contents



CERTIFICATION

I, Joseph Czyzyk, certify that:



| | 1. |  | I have reviewed this quarterly report on Form 10-Q of Mercury Air
Group, Inc.;                                                                                                                                                                                                                                                
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. |  | Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
|
| | 3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly presents in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;                  
|
| | 4. |  | The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rule 13a-14 and 15d-14) for the registrant and
we have:                                                                                                        

|   |  |                                                                                                                                                                                                                                                                                                
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|a. |  | Designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this quarterly report is being prepared;
|b. |  | Evaluated the effectiveness of the registrants
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this quarterly report (the Evaluation
Date); and                                                                                                  
|c. |  | Presented in the quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;                                                                                                                         



| | 5. |  | The registrants other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrants auditors and the
audit committee of the registrants board of directors (or persons
performing the equivalent function):
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|   |  |                                                                                                                                                                                                                                                                                               
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|a. |  | All significant deficiencies in the design or operation
of internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data
and have identified for the registrants auditors any material
weaknesses in internal controls; and
|b. |  | Any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal controls; and                                                                                                                                        



| | 6. |  | The registrants other certifying officer and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Date: November 14, 2002



| | /s/ Joseph Czyzyk
Joseph Czyzyk
President and CEO
| | -------------------------------------------------

19



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##### Table of Contents



CERTIFICATION

I, Robert Schlax, certify that:



| | 1. |  | I have reviewed this quarterly report on Form 10-Q of Mercury Air
Group, Inc.;                                                                                                                                                                                                                                                
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. |  | Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
|
| | 3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly presents in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;                  
|
| | 4. |  | The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rule 13a-14 and 15d-14) for the registrant and
we have:                                                                                                        

|   |  |                                                                                                                                                                                                                                                                                                
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|a. |  | Designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this quarterly report is being prepared;
|b. |  | Evaluated the effectiveness of the registrants
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this quarterly report (the Evaluation
Date); and                                                                                                  
|c. |  | Presented in the quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;                                                                                                                         



| | 5. |  | The registrants other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrants auditors and the
audit committee of the registrants board of directors (or persons
performing the equivalent function):
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|   |  |                                                                                                                                                                                                                                                                                               
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|d. |  | All significant deficiencies in the design or operation
of internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data
and have identified for the registrants auditors any material
weaknesses in internal controls; and
|e. |  | Any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal controls; and                                                                                                                                        



| | 6. |  | The registrants other certifying officer and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Date: November 14, 2002



| | /s/ Robert Schlax
Robert Schlax
Vice President Finance
(Principal Financial Officer)
| | ------------------------------------------------------------------------------------

20