##### Table of Contents



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 thequarterly period ended March 31, 2002.
|--- | -------------------------------------------------------------------------------------------------------------------------------------



|[   ] | Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 For theTransition 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                         | 
|                              | 
|Common Stock, $0.01 Par Value | 





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TABLE OF CONTENTS



|                            |                                                                                                |                                            |  |  |  |  |  | 
|--------------------------- | ---------------------------------------------------------------------------------------------- | ------------------------------------------ |  |  |  |  |  | 
|                            |                                                                                                | CONSOLIDATED BALANCE SHEETS               
|                            |                                                                                                | CONSOLIDATED STATEMENTS OF INCOME         
|                            |                                                                                                | CONSOLIDATED STATEMENTS OF CASH FLOW      
|                            |                                                                                                | 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.                            
|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 10.26              



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##### Table of Contents






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

|                                                                                                                                                    |                                                                                                                      |                                               |                                                                                                                                                |                            |            |           |             |            |            |        |            | 
|--------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------- | --------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ---------- | --------- | ----------- | ---------- | ---------- | ------ | ---------- | 
|                                                                                                                                                    |                                                                                                                      |                                               |                                                                                                                                                |                            |            | MARCH 31, |             | JUNE 30,  
|                                                                                                                                                    |                                                                                                                      |                                               |                                                                                                                                                |                            |            | 2002      |             | 2001      
|                                                                                                                                                    |                                                                                                                      |                                               |                                                                                                                                                |                            |            |           |             |           
|                                                                                                                                                   
|                                                                                                                                                   
|                                                                                                                                                   
|                                                                                                                                                   
|ASSETS                                                                                                                                              |                                                                                                                      |                                               |                                                                                                                                                |                            |            |           |             |           
|                                                                                                                                                   
|                                                                                                                                                   
|                                                                                                                                                   
|                                                                                                                                                   
|CURRENT ASSETS:                                                                                                                                     |                                                                                                                      |                                               |                                                                                                                                                |                            |            |           |             |           
|                                                                                                                                                    | Cash and cash equivalents                                                                                            |                                               | $                                                                                                                                              | 1,780,000                  |            |           | $           | 3,886,000  |           
|                                                                                                                                                    | Trade accounts receivable, net of allowance for doubtful accounts
of $1,852,000 at 3/31/02 and $1,653,000 at 6/30/01 |                                               |                                                                                                                                                | 48,438,000                 |            |           |             | 53,530,000 |           
|                                                                                                                                                    | Inventories, principally aviation fuel                                                                               |                                               |                                                                                                                                                | 2,961,000                  |            |           |             | 4,069,000  |           
|                                                                                                                                                    | Prepaid expenses and other current assets                                                                            |                                               |                                                                                                                                                | 5,013,000                  |            |           |             | 2,882,000  |           
|                                                                                                                                                    | Notes receivable from affiliate (Note 9)                                                                             |                                               |                                                                                                                                                | 1,400,000                  |            |           |             |            |           
|                                                                                                                                                    | Net assets of discontinued operations (Note 2)                                                                       |                                               |                                                                                                                                                |                            |            |           |             | 4,338,000  |           
|                                                                                                                                                    |                                                                                                                      |                                               |                                                                                                                                                |                            |            |           |             |           
|                                                                                                                                                    |                                                                                                                      | Total current assets                          |                                                                                                                                                |                            | 59,592,000 |           |             |            | 68,705,000 |       
|PROPERTY, EQUIPMENT AND LEASEHOLDS , net of accumulated
depreciation and amortization of $56,210,079 at 3/31/02 and $52,165,000
at 6/30/01 (Note 9) |                                                                                                                      |                                               | 64,262,000                                                                                                                                     |                            |            |           | 71,779,000  |           
|NOTES RECEIVABLE                                                                                                                                    |                                                                                                                      |                                               | 1,618,000                                                                                                                                      |                            |            |           | 1,510,000   |           
|OTHER ASSETS                                                                                                                                        |                                                                                                                      |                                               | 7,976,000                                                                                                                                      |                            |            |           | 9,140,000   |           
|                                                                                                                                                    |                                                                                                                      |                                               |                                                                                                                                                |                            |            |           |             |           
|                                                                                                                                                    |                                                                                                                      | $                                             | 133,448,000                                                                                                                                    |                            |            | $         | 151,134,000 |           
|                                                                                                                                                    |                                                                                                                      |                                               |                                                                                                                                                |                            |            |           |             |           
|                                                                                                                                                   
|                                                                                                                                                   
|                                                                                                                                                   
|                                                                                                                                                   
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                |                                                                                                                      |                                               |                                                                                                                                                |                            |            |           |             |           
|                                                                                                                                                   
|                                                                                                                                                   
|                                                                                                                                                   
|                                                                                                                                                   
|CURRENT LIABILITIES:                                                                                                                                |                                                                                                                      |                                               |                                                                                                                                                |                            |            |           |             |           
|                                                                                                                                                    | Accounts payable                                                                                                     |                                               | $                                                                                                                                              | 23,583,000                 |            |           | $           | 31,764,000 |           
|                                                                                                                                                    | Accrued expenses and other current liabilities                                                                       |                                               |                                                                                                                                                | 8,367,000                  |            |           |             | 10,357,000 |           
|                                                                                                                                                    | Current portion of long-term debt                                                                                    |                                               |                                                                                                                                                | 7,272,000                  |            |           |             | 7,461,000  |           
|                                                                                                                                                    |                                                                                                                      |                                               |                                                                                                                                                |                            |            |           |             |           
|                                                                                                                                                    |                                                                                                                      | Total current liabilities                     |                                                                                                                                                |                            | 39,222,000 |           |             |            | 49,582,000 |       
|LONG-TERM DEBT                                                                                                                                      |                                                                                                                      |                                               | 34,313,000                                                                                                                                     |                            |            |           | 44,560,000  |           
|DEFERRED GAIN (Note 9)                                                                                                                              |                                                                                                                      |                                               | 2,212,000                                                                                                                                      |                            |            |           |             |           
|DEFERRED INCOME TAXES                                                                                                                               |                                                                                                                      |                                               | 444,000                                                                                                                                        |                            |            |           | 380,000     |           
|SENIOR SUBORDINATED NOTE (Note 5)                                                                                                                   |                                                                                                                      |                                               | 23,170,000                                                                                                                                     |                            |            |           | 23,030,000  |           
|COMMITMENTS AND CONTINGENCIES (Note 4)                                                                                                              |                                                                                                                      |                                               |                                                                                                                                                |                            |            |           |             |           
|STOCKHOLDERS EQUITY:                                                                                                                               |                                                                                                                      |                                               |                                                                                                                                                |                            |            |           |             |           
|                                                                                                                                                    |                                                                                                                      |                                               | Preferred Stock  $.01 par value; authorized 3,000,000 shares;
no shares outstanding                                                           |                            |            |           |             |            |            |        |           
|                                                                                                                                                    |                                                                                                                      |                                               | Common Stock  $ .01 par value; authorized 18,000,000 shares;
outstanding 6,517,949 shares at 3/31/02;
outstanding 6,576,680 shares at 6/30/01 |                            |            | 65,000    |             |            |            | 66,000 |           
|                                                                                                                                                    |                                                                                                                      | Additional paid-in capital                    |                                                                                                                                                |                            | 21,254,000 |           |             |            | 21,442,000 |       
|                                                                                                                                                    |                                                                                                                      | Retained earnings                             |                                                                                                                                                |                            | 13,645,000 |           |             |            | 12,835,000 |       
|                                                                                                                                                    |                                                                                                                      | Accumulated other comprehensive loss (Note 8) |                                                                                                                                                |                            | (344,000   | )         |             |            | (228,000   | )     
|                                                                                                                                                    |                                                                                                                      | Notes receivable from sale of stock           |                                                                                                                                                |                            | (533,000   | )         |             |            | (533,000   | )     
|                                                                                                                                                    |                                                                                                                      |                                               |                                                                                                                                                |                            |            |           |             |           
|                                                                                                                                                    |                                                                                                                      |                                               |                                                                                                                                                | Total stockholders equity |            |           | 34,087,000  |            |            |        | 33,582,000 | 
|                                                                                                                                                    |                                                                                                                      |                                               |                                                                                                                                                |                            |            |           |             |           
|                                                                                                                                                    |                                                                                                                      | $                                             | 133,448,000                                                                                                                                    |                            |            | $         | 151,134,000 |           
|                                                                                                                                                    |                                                                                                                      |                                               |                                                                                                                                                |                            |            |           |             |           

See accompanying notes to consolidated financial statements

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##### Table of Contents






MERCURY AIR GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

|                                                                                                                                     |                                                                     |                                               |                                                        |           |                   |            |                    |           |             |            |            |        |            |           |             |         |            |           | 
|------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------------------------------- | --------------------------------------------- | ------------------------------------------------------ | --------- | ----------------- | ---------- | ------------------ | --------- | ----------- | ---------- | ---------- | ------ | ---------- | --------- | ----------- | ------- | ---------- | --------- | 
|                                                                                                                                     |                                                                     |                                               |                                                        |           | Nine Months Ended |            | Three Months Ended
|                                                                                                                                     |                                                                     |                                               |                                                        |           | March 31,         |            | March 31,         
|                                                                                                                                     |                                                                     |                                               |                                                        |           |                   |            |                   
|                                                                                                                                     |                                                                     |                                               |                                                        |           | 2002              |            | 2001               |           | 2002        |            | 2001      
|                                                                                                                                     |                                                                     |                                               |                                                        |           |                   |            |                    |           |             |            |           
|Sales and Revenues:                                                                                                                  |                                                                     |                                               |                                                        |           |                   |            |                    |           |             |            |            |        |            |           |             |        
|                                                                                                                                     |                                                                     | Sales                                         |                                                        | $         | 216,203,000       |            |                    | $         | 289,624,000 |            |            | $      | 66,301,000 |           |             | $       | 90,493,000 |          
|                                                                                                                                     |                                                                     | Service revenues                              |                                                        |           | 67,558,000        |            |                    |           | 69,766,000  |            |            |        | 21,617,000 |           |             |         | 23,409,000 |          
|                                                                                                                                     |                                                                     |                                               |                                                        |           |                   |            |                    |           |             |            |            |        |            |           |             |        
|                                                                                                                                     |                                                                     |                                               | 283,761,000                                            |           |                   |            | 359,390,000        |           |             |            | 87,918,000 |        |            |           | 113,902,000 |        
|                                                                                                                                     |                                                                     |                                               |                                                        |           |                   |            |                    |           |             |            |            |        |            |           |             |        
|Costs and Expenses:                                                                                                                  |                                                                     |                                               |                                                        |           |                   |            |                    |           |             |            |            |        |            |           |             |        
|                                                                                                                                     |                                                                     | Cost of sales                                 |                                                        |           | 186,603,000       |            |                    |           | 262,124,000 |            |            |        | 57,025,000 |           |             |         | 82,055,000 |          
|                                                                                                                                     |                                                                     | Operating expenses                            |                                                        |           | 74,518,000        |            |                    |           | 70,119,000  |            |            |        | 24,091,000 |           |             |         | 24,175,000 |          
|                                                                                                                                     |                                                                     |                                               |                                                        |           |                   |            |                    |           |             |            |            |        |            |           |             |        
|                                                                                                                                     |                                                                     |                                               | 261,121,000                                            |           |                   |            | 332,243,000        |           |             |            | 81,116,000 |        |            |           | 106,230,000 |        
|                                                                                                                                     |                                                                     |                                               |                                                        |           |                   |            |                    |           |             |            |            |        |            |           |             |        
|                                                                                                                                     |                                                                     |                                               | Gross Margin (Excluding depreciation
and amortization) |           |                   | 22,640,000 |                    |           |             | 27,147,000 |            |        |            | 6,802,000 |             |         |            | 7,672,000 | 
|                                                                                                                                     |                                                                     |                                               |                                                        |           |                   |            |                    |           |             |            |            |        |            |           |             |        
|Expenses (Income):                                                                                                                   |                                                                     |                                               |                                                        |           |                   |            |                    |           |             |            |            |        |            |           |             |        
|                                                                                                                                     |                                                                     | Selling, general and administrative           |                                                        |           | 7,391,000         |            |                    |           | 6,114,000   |            |            |        | 2,957,000  |           |             |         | 1,959,000  |          
|                                                                                                                                     |                                                                     | Provision for bad debts                       |                                                        |           | 1,247,000         |            |                    |           | 2,575,000   |            |            |        | 475,000    |           |             |         | 676,000    |          
|                                                                                                                                     |                                                                     | Depreciation and amortization                 |                                                        |           | 7,105,000         |            |                    |           | 7,582,000   |            |            |        | 2,074,000  |           |             |         | 2,591,000  |          
|                                                                                                                                     |                                                                     | Interest expense                              |                                                        |           | 4,320,000         |            |                    |           | 5,705,000   |            |            |        | 1,329,000  |           |             |         | 1,847,000  |          
|                                                                                                                                     |                                                                     | Costs and expenses of stock offering (Note 1) |                                                        |           | 985,000           |            |                    |           |             |            |            |        |            |           |             |         |            |          
|                                                                                                                                     |                                                                     | Loss on sale of property                      |                                                        |           | 71,000            |            |                    |           |             |            |            |        |            |           |             |         |            |          
|                                                                                                                                     |                                                                     | Interest income                               |                                                        |           | (72,000           | )          |                    |           | (43,000     | )          |            |        | (44,000    | )         |             |         | (5,000     | )        
|                                                                                                                                     |                                                                     |                                               |                                                        |           |                   |            |                    |           |             |            |            |        |            |           |             |        
|                                                                                                                                     |                                                                     |                                               | 21,047,000                                             |           |                   |            | 21,933,000         |           |             |            | 6,791,000  |        |            |           | 7,068,000   |        
|                                                                                                                                     |                                                                     |                                               |                                                        |           |                   |            |                    |           |             |            |            |        |            |           |             |        
|                                                                                                                                     | Income from Continuing Operations Before
Provision for Income Taxes |                                               |                                                        | 1,593,000 |                   |            |                    | 5,214,000 |             |            |            | 11,000 |            |           |             | 604,000 |           
|                                                                                                                                     |                                                                     | Provision for Income Taxes                    |                                                        |           | 622,000           |            |                    |           | 2,034,000   |            |            |        | 5,000      |           |             |         | 236,000    |          
|                                                                                                                                     |                                                                     |                                               |                                                        |           |                   |            |                    |           |             |            |            |        |            |           |             |        
|Income from Continuing Operations                                                                                                    |                                                                     |                                               | 971,000                                                |           |                   |            | 3,180,000          |           |             |            | 6,000      |        |            |           | 368,000     |        
|(Loss) Income from Discontinued Operations net of
income tax (benefit) charge of ($27,000) in 2002 and
$36,000 and ($44,000) in 2001 |                                                                     |                                               | (42,000                                                | )         |                   |            | 57,000             |           |             |            |            |        |            |           | (69,000     | )      
|                                                                                                                                     |                                                                     |                                               |                                                        |           |                   |            |                    |           |             |            |            |        |            |           |             |        
|Net Income                                                                                                                           |                                                                     | $                                             | 929,000                                                |           |                   | $          | 3,237,000          |           |             | $          | 6,000      |        |            | $         | 299,000     |        
|                                                                                                                                     |                                                                     |                                               |                                                        |           |                   |            |                    |           |             |            |            |        |            |           |             |        
|Net Income Per Common Share (Note 6):                                                                                                |                                                                     |                                               |                                                        |           |                   |            |                    |           |             |            |            |        |            |           |             |        
|Basic:                                                                                                                               |                                                                     |                                               |                                                        |           |                   |            |                    |           |             |            |            |        |            |           |             |        
|                                                                                                                                     |                                                                     | From Continuing Operations                    |                                                        | $         | 0.15              |            |                    | $         | 0.49        |            |            | $      | 0.00       |           |             | $       | 0.06       |          
|                                                                                                                                     |                                                                     | (Loss) Income from Discontinued Operations    |                                                        |           | (0.01             | )          |                    |           | 0.01        |            |            |        |            |           |             |         | (0.01      | )        
|                                                                                                                                     |                                                                     |                                               |                                                        |           |                   |            |                    |           |             |            |            |        |            |           |             |        
|                                                                                                                                     |                                                                     | Net income                                    |                                                        | $         | 0.14              |            |                    | $         | 0.50        |            |            | $      | 0.00       |           |             | $       | 0.05       |          
|                                                                                                                                     |                                                                     |                                               |                                                        |           |                   |            |                    |           |             |            |            |        |            |           |             |        
|Diluted:                                                                                                                             |                                                                     |                                               |                                                        |           |                   |            |                    |           |             |            |            |        |            |           |             |        
|                                                                                                                                     |                                                                     | From Continuing Operations                    |                                                        | $         | 0.14              |            |                    | $         | 0.47        |            |            | $      | 0.00       |           |             | $       | 0.05       |          
|                                                                                                                                     |                                                                     | (Loss) Income from Discontinued Operations    |                                                        |           |                   |            |                    |           | 0.01        |            |            |        |            |           |             |         | (0.01      | )        
|                                                                                                                                     |                                                                     |                                               |                                                        |           |                   |            |                    |           |             |            |            |        |            |           |             |        
|                                                                                                                                     |                                                                     | Net income                                    |                                                        | $         | 0.14              |            |                    | $         | 0.48        |            |            | $      | 0.00       |           |             | $       | 0.04       |          
|                                                                                                                                     |                                                                     |                                               |                                                        |           |                   |            |                    |           |             |            |            |        |            |           |             |        

See accompanying notes to consolidated financial statements

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##### Table of Contents






MERCURY AIR GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)

|                                                                                |                                                                         |                                                   |                                                     |             |                             |             |            |             |             |             |  
|------------------------------------------------------------------------------- | ----------------------------------------------------------------------- | ------------------------------------------------- | --------------------------------------------------- | ----------- | --------------------------- | ----------- | ---------- | ----------- | ----------- | ----------- | -
|                                                                                |                                                                         |                                                   |                                                     |             | NINE MONTHS ENDED MARCH 31,
|                                                                                |                                                                         |                                                   |                                                     |             |                            
|                                                                                |                                                                         |                                                   |                                                     |             | 2002                        |             | 2001      
|                                                                                |                                                                         |                                                   |                                                     |             |                             |             |           
|CASH FLOWS FROM OPERATING ACTIVITIES:                                           |                                                                         |                                                   |                                                     |             |                             |             |            |            
|                                                                                | Net income                                                              |                                                   | $                                                   | 929,000     |                             |             | $          | 3,237,000   |            
|                                                                                | Less: (Loss) Income from discontinued operations                        |                                                   |                                                     | (42,000     | )                           |             |            | 57,000      |            
|                                                                                |                                                                         |                                                   |                                                     |             |                             |             |            |            
|                                                                                | Income from continuing operations                                       |                                                   |                                                     | 971,000     |                             |             |            | 3,180,000   |            
|                                                                                | Adjustments to derive cash flow from Operating activities:              |                                                   |                                                     |             |                             |             |            |             |            
|                                                                                |                                                                         | Loss on sale of property                          |                                                     |             | 71,000                      |             |            |             |             |            
|                                                                                |                                                                         | Provision for bad debts                           |                                                     |             | 1,247,000                   |             |            |             | 2,575,000   |            
|                                                                                |                                                                         | Depreciation and amortization                     |                                                     |             | 7,105,000                   |             |            |             | 7,582,000   |            
|                                                                                |                                                                         | Deferred income taxes                             |                                                     |             | 64,000                      |             |            |             |             |            
|                                                                                |                                                                         | Amortization of senior subordinated note discount |                                                     |             | 140,000                     |             |            |             | 140,000     |            
|                                                                                |                                                                         | Amortization of deferred gain                     |                                                     |             | (15,000                     | )           |            |             |             |            
|                                                                                | Changes in operating assets and liabilities:                            |                                                   |                                                     |             |                             |             |            |             |            
|                                                                                |                                                                         | Trade and other accounts receivable               |                                                     |             | 3,845,000                   |             |            |             | (11,310,000 | )          
|                                                                                |                                                                         | Inventories                                       |                                                     |             | 1,108,000                   |             |            |             | 195,000     |            
|                                                                                |                                                                         | Prepaid expenses and other current assets         |                                                     |             | (2,131,000                  | )           |            |             | (1,264,000  | )          
|                                                                                |                                                                         | Accounts payable                                  |                                                     |             | (8,181,000                  | )           |            |             | 5,181,000   |            
|                                                                                |                                                                         | Accrued expenses and other current liabilities    |                                                     |             | (1,990,000                  | )           |            |             | 3,239,000   |            
|                                                                                |                                                                         |                                                   |                                                     |             |                             |             |            |            
|                                                                                |                                                                         |                                                   | Net cash provided by operating activities           |             |                             | 2,234,000   |            |             |             | 9,518,000   |  
|                                                                                |                                                                         |                                                   |                                                     |             |                             |             |            |            
|CASH FLOWS FROM INVESTING ACTIVITIES:                                           |                                                                         |                                                   |                                                     |             |                             |             |            |            
|                                                                                | Decrease in other assets                                                |                                                   |                                                     | 479,000     |                             |             |            | 1,596,000   |            
|                                                                                | Increase in notes receivable                                            |                                                   |                                                     | (108,000    | )                           |             |            |             |            
|                                                                                | Acquisition of businesses                                               |                                                   |                                                     |             |                             |             |            | (10,400,000 | )          
|                                                                                | Proceeds from sale of property                                          |                                                   |                                                     | 4,758,000   |                             |             |            |             |            
|                                                                                | Additions to property, equipment and leaseholds                         |                                                   |                                                     | (2,905,000  | )                           |             |            | (4,405,000  | )          
|                                                                                |                                                                         |                                                   |                                                     |             |                             |             |            |            
|                                                                                |                                                                         |                                                   | Net cash provided by (used in) investing activities |             |                             | 2,224,000   |            |             |             | (13,209,000 | )
|                                                                                |                                                                         |                                                   |                                                     |             |                             |             |            |            
|CASH FLOWS FROM FINANCING ACTIVITIES:                                           |                                                                         |                                                   |                                                     |             |                             |             |            |            
|                                                                                | Proceeds from long-term debt                                            |                                                   |                                                     | 10,250,000  |                             |             |            | 11,969,000  |            
|                                                                                | Reduction of long-term debt                                             |                                                   |                                                     | (20,686,000 | )                           |             |            | (9,654,000  | )          
|                                                                                | Reduction of note receivable from sale of stock                         |                                                   |                                                     |             |                             |             |            | 75,000      |            
|                                                                                | Repurchase of common stock                                              |                                                   |                                                     | (313,000    | )                           |             |            |             |            
|                                                                                | Proceeds from issuance of common stock                                  |                                                   |                                                     | 5,000       |                             |             |            | 257,000     |            
|                                                                                |                                                                         |                                                   |                                                     |             |                             |             |            |            
|                                                                                |                                                                         |                                                   | Net cash (used in) provided by financing activities |             |                             | (10,744,000 | )          |             |             | 2,647,000   |  
|                                                                                |                                                                         |                                                   |                                                     |             |                             |             |            |            
|Effect of exchange rate changes on cash                                         |                                                                         |                                                   | (116,000                                            | )           |                             |             |            |            
|Net Cash provided by Discontinued Operations                                    |                                                                         |                                                   | 4,296,000                                           |             |                             |             | 354,000    |            
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS FROM CONTINUING OPERATIONS |                                                                         |                                                   | (6,402,000                                          | )           |                             |             | (1,044,000 | )          
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|CASH AND CASH EQUIVALENTS, beginning of period                                  |                                                                         |                                                   | 3,886,000                                           |             |                             |             | 2,143,000  |            
|                                                                                |                                                                         |                                                   |                                                     |             |                             |             |            |            
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|CASH AND CASH EQUIVALENTS, end of period                                        |                                                                         | $                                                 | 1,780,000                                           |             |                             | $           | 1,453,000  |            
|                                                                                |                                                                         |                                                   |                                                     |             |                             |             |            |            
|CASH PAID DURING THE PERIOD:                                                    |                                                                         |                                                   |                                                     |             |                             |             |            |            
|                                                                                | Interest                                                                |                                                   | $                                                   | 4,250,000   |                             |             | $          | 3,816,000   |            
|                                                                                | Income taxes paid (refunded)                                            |                                                   | $                                                   | 470,000     |                             |             |            | ($715,000   | )          
|SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITIES:                         |                                                                         |                                                   |                                                     |             |                             |             |            |            
|                                                                                | Note receivable from affiliate related to
the sale of property (Note 9) |                                                   | $                                                   | 1,400,000   |                             |             |            |             |            

See accompanying notes to consolidated financial statements

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##### Table of Contents






MERCURY AIR GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2002

(Unaudited)

Note 1  General:

Business:

Mercury Air Group, Inc., ( the Company) a Delaware corporation, provides
a broad range of services to the aviation industry through four principal
operating units: fuel sales, cargo operations, fixed base operations and U.S.
government contract 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. Cargo operations consist of cargo handling,
space logistics operations and general cargo sales agent 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.
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).

MercFuel, Inc:

On March 7, 2001, the Company announced its plan to create an independent
publicly traded company, MercFuel, Inc. (MercFuel). MercFuel was organized
in Delaware on October 27, 2000 as a wholly owned subsidiary of the Company.
On January 1, 2001, the Company transferred to MercFuel, the assets and
liabilities of its Fuel Sales division. On May 16, 2001 and amended twice
thereafter, MercFuel filed a registration statement related to the proposed
sale of 1,200,000 shares of common stock (the Offering). On April 30, 2001,
MercFuel agreed to sell 239,942 shares of common stock in a private placement
at a per share price of $4.35. Due to market conditions, the Company was not
able to complete the Offering and the proceeds of the private placement have
been returned. The Company incurred $985,000 of expenses associated with the
Offering and private placement which were expensed in the quarter ended
December 31, 2001. The Company has also elected to withdraw MercFuels
application for registration of its common stock; depending on market
conditions and other factors, the Company may re-file a registration statement
at a later point in time. The Company may pursue various financing options
with respect to MercFuel.

2



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##### Table of Contents



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, 2001 and the notes thereto. The results of operations for the nine
months ended March 31, 2002 are not necessarily indicative of results for the
full year.

New Accounting Pronouncements:

In July 2001, the Financial Accounting Standards Board (FASB) issued
SFAS No. 141, Business Combinations. SFAS No. 141 requires the purchase
method of accounting for business combinations initiated after June 30, 2001
and eliminates the pooling-of-interest method. The adoption of SFAS No. 141
did not have an impact on the Companys financial statements.

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. 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 Company has not yet determined what impact the adoption will have
on its financial statements.

In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, which supersedes FASB Statement
No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of. This new statement also supersedes
certain aspects of APB Opinion No. 30, Reporting the Results of
Operations-Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions,
with regard to reporting the effects of a disposal of a segment of a business
and will require expected future operating losses from discontinued operations
to be reported in discontinued operations in the period incurred (rather than
as of the measurement date as presently required by APB Opinion No. 30). In
addition, more dispositions may qualify for discontinued operations treatment.
The provisions of this statement are required to be applied on July 1, 2002.
The Company has not yet determined what effect this statement will have on its
financial statements.

3



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##### Table of Contents



Note 2  Discontinued Operations:

On July 3, 2001, the Company completed the sale of the net assets of its
subsidiary, known as RPA Airline Automation Services, Inc. (RPA),which
provides airline revenue accounting and
management information software consisting of proprietary software programs
which are marketed to foreign and domestic airlines. The Company has
reclassified its consolidated financial statements to reflect the sale of RPA
and to segregate the revenues, direct costs and expenses (excluding allocated
costs), assets and liabilities, and cash flows of RPA. The net operating
results, net assets and net cash flows of this business have been reported as
Discontinued Operations in the accompanying consolidated financial
statements. Summarized income statement information for the nine months ended
March 31, 2001 and balance sheet information as of June 30, 2001 are as
follows:

|                              |  |                   |           | 
|----------------------------- |  | ----------------- | --------- | 
|                              |  | Nine Months Ended
|Income Statement Information: |  | March 31, 2001   
|                              |  |                  
|Service revenues              |  | $                 | 4,049,000 | 
|Operating expense             |  |                   | 3,723,000 | 
|                              |  |                   |           | 
|Gross margin                  |  |                   | 326,000   | 
|                              |  |                   |           | 
|Other expense                 |  |                   | 233,000   | 
|                              |  |                   |           | 
|Income before income taxes    |  |                   | 93,000    | 
|Income tax charge             |  |                   | 36,000    | 
|                              |  |                   |           | 
|Net income                    |  | $                 | 57,000    | 
|                              |  |                   |           | 

|                                      |  |               |           | 
|------------------------------------- |  | ------------- | --------- | 
|Balance Sheet Information:            |  | June 30, 2001
|                                      |  |              
|Current assets                        |  | $             | 4,324,000 | 
|Total assets                          |  |               | 5,292,000 | 
|Current and total liabilities         |  |               | 954,000   | 
|Net assets of discontinued operations |  |               | 4,338,000 | 

During the quarter ended September 30, 2001, the Company recorded a loss of
$42,000 related to sale of a building that had previously been RPAs corporate
headquarters. At March 31, 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.

4



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##### Table of Contents



Note 4- Commitments and Contingencies:

In April 2000, Mercury filed a collection action against AER Global
Logistics (AER) in the state of New York. AER filed a counterclaim for $1.0
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 $470,000 for the costs incurred as a result of a
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 June 7, 2000, Jupiter Airline Automation Services, Inc. formerly known
as RPA Airline Automation Services, a wholly owned subsidiary of the Company,
filed an action in the Circuit Court of the 11th Judicial Circuit in Miami-Dade
County, Florida against Challenge Air Cargo, Inc,. seeking damages for breach
of contract. In August 2000, the Company received notice that Challenge Air
Cargo, Inc. had filed a counter-claim seeking damages for breach of contract.
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 no later than May 31, 2002. Mercury intends to fully comply
with all EPA requirements.

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.

5



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##### Table of Contents



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 exercise price to $5.50 per share. The reduction in the
exercise price of the warrants resulted in an insignificant change in the value
of warrants. 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. On November 16, 2001 and
effective September 30, 2001, the Company received a waiver pertaining to the
interest coverage test and the agreement was amended by reducing the ongoing
interest coverage test. The Company was in compliance with the debt covenants
at March 31, 2002.

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. Potential common
shares include stock options and shares resulting from the assumed conversion
of subordinated debentures, when dilutive.

|                                                                                             |  |                   |           |                    |  |                |           |                |  |         |           |       |  |         |           |       |  |  |           |  |  |  |           |  |  |  |           |  |  |  |           | 
|-------------------------------------------------------------------------------------------- |  | ----------------- | --------- | ------------------ |  | -------------- | --------- | -------------- |  | ------- | --------- | ----- |  | ------- | --------- | ----- |  |  | --------- |  |  |  | --------- |  |  |  | --------- |  |  |  | --------- | 
|                                                                                             |  | Nine Months Ended |           | Three Months Ended
|                                                                                             |  |                   |           |                   
|                                                                                             |  | March 31, 2002    |           | March 31, 2001     |  | March 31, 2002 |           | March 31, 2001
|                                                                                             |  |                   |           |                    |  |                |           |               
|                                                                                             |  | Diluted           |           | Basic              |  | Diluted        |           | Basic          |  | Diluted |           | Basic |  | Diluted |           | Basic
|                                                                                             |  |                   |           |                    |  |                |           |                |  |         |           |       |  |         |           |      
|Weighted average number of
common shares outstanding
during the period                       |  |                   | 6,557,000 |                    |  |                | 6,557,000 |                |  |         | 6,521,000 |       |  |         | 6,521,000 |       |  |  | 6,518,000 |  |  |  | 6,518,000 |  |  |  | 6,531,000 |  |  |  | 6,531,000 | 
|Common share equivalents
resulting from the
assumed exercise of
stock options                |  |                   | 142,000   |                    |  |                |          |                |  |         | 171,000   |       |  |         |          |       |  |  | 151,000   |  |  |  |          |  |  |  | 167,000   |  |  |  |          | 
|Common shares resulting
from the assumed
conversion of debentures                            |  |                   | 28,000    |                    |  |                |          |                |  |         | 44,000    |       |  |         |          |       |  |  | 28,000    |  |  |  |          |  |  |  | 44,000    |  |  |  |          | 
|                                                                                             |  |                   |           |                    |  |                |           |                |  |         |           |       |  |         |           |       |  |  |           |  |  |  |           |  |  |  |           |  |  |  |           | 
|Weighted average number of
common and common
equivalent shares
outstanding during the
period |  |                   | 6,727,000 |                    |  |                | 6,557,000 |                |  |         | 6,736,000 |       |  |         | 6,521,000 |       |  |  | 6,697,000 |  |  |  | 6,518,000 |  |  |  | 6,742,000 |  |  |  | 6,531,000 | 
|                                                                                             |  |                   |           |                    |  |                |           |                |  |         |           |       |  |         |           |       |  |  |           |  |  |  |           |  |  |  |           |  |  |  |           | 

6



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##### Table of Contents



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. Additionally, the Company had a fifth operating
unit, RPA, which was sold on July 3, 2001. As a result, RPA historical
operating results have been reclassified as discontinued operations. The
segment data for the quarter and nine months ended March 31, 2001 included
below has been restated to exclude amounts related to the RPA business unit.

|                                 |  |            |         |            |  |            |        |          |  |             |        |       |  |            |        |           |  |  |        |   |  |   |         | 
|-------------------------------- |  | ---------- | ------- | ---------- |  | ---------- | ------ | -------- |  | ----------- | ------ | ----- |  | ---------- | ------ | --------- |  |  | ------ | - |  | - | ------- | 
|                                 |  |            |         |            |  |            |        |          |  |             |        |       |  | Government |        | Corporate |  |  |        |  
|                                 |  |            |         |            |  | Fixed Base |        | Cargo    |  | Contract    |        | or    |  |            |        |          
|(Dollars in Thousands)           |  | Fuel Sales |         | Operations |  | Operations |        | Services |  | Unallocated |        | Total
|                                 |  |            |         |            |  |            |        |          |  |             |        |      
|Quarter Ended March 31, 2002     |  |            |         |            |  |            |        |          |  |             |        |       |  |            |        |           |  |  |        |   |  |   |        
|Revenues                         |  | $          | 52,243  |            |  | $          | 22,491 |          |  | $           | 6,400  |       |  | $          | 6,784  |           |  |  |        |   |  | $ | 87,918  | 
|Gross Margin                     |  |            | 1,833   |            |  |            | 3,301  |          |  |             | (6     | )     |  |            | 1,674  |           |  |  |        |   |  |   | 6,802   | 
|Depreciation and Amortization    |  |            | 16      |            |  |            | 1,489  |          |  |             | 275    |       |  |            | 171    |           |  |  | 123    |   |  |   | 2,074   | 
|Capital Expenditures             |  |            | 11      |            |  |            | 661    |          |  |             | 45     |       |  |            | 5      |           |  |  | 14     |   |  |   | 736     | 
|Segment Assets                   |  |            | 30,635  |            |  |            | 47,565 |          |  |             | 32,347 |       |  |            | 24,275 |           |  |  | (1,374 | ) |  |   | 133,448 | 
|                                
|Quarter Ended March 31, 2001     |  |            |         |            |  |            |        |          |  |             |        |       |  |            |        |           |  |  |        |   |  |   |        
|Revenues                         |  | $          | 74,965  |            |  | $          | 24,082 |          |  | $           | 7,936  |       |  | $          | 6,919  |           |  |  |        |   |  | $ | 113,902 | 
|Gross Margin                     |  |            | 1,318   |            |  |            | 3,523  |          |  |             | 1,541  |       |  |            | 1,290  |           |  |  |        |   |  |   | 7,672   | 
|Depreciation and Amortization    |  |            | 186     |            |  |            | 1,334  |          |  |             | 861    |       |  |            | 210    |           |  |  |        |   |  |   | 2,591   | 
|Capital Expenditures             |  |            | 0       |            |  |            | 838    |          |  |             | 244    |       |  |            | 9      |           |  |  | 46     |   |  |   | 1,137   | 
|Segment Assets                   |  |            | 23,297  |            |  |            | 40,158 |          |  |             | 35,311 |       |  |            | 21,424 |           |  |  | 29,370 |   |  |   | 149,560 | 
|                                
|Nine Months Ended March 31, 2002 |  |            |         |            |  |            |        |          |  |             |        |       |  |            |        |           |  |  |        |   |  |  
|Revenues                         |  | $          | 171,353 |            |  | $          | 69,575 |          |  | $           | 21,086 |       |  | $          | 21,747 |           |  |  |        |   |  | $ | 283,761 | 
|Gross Margin                     |  |            | 5,090   |            |  |            | 10,690 |          |  |             | 1,449  |       |  |            | 5,411  |           |  |  |        |   |  |   | 22,640  | 
|Depreciation and Amortization    |  |            | 31      |            |  |            | 4,301  |          |  |             | 1,755  |       |  |            | 384    |           |  |  | 634    |   |  |   | 7,105   | 
|Capital Expenditures             |  |            | 22      |            |  |            | 2,718  |          |  |             | 142    |       |  |            | 5      |           |  |  | 18     |   |  |   | 2,905   | 
|Segment Assets                   |  |            | 30,635  |            |  |            | 47,565 |          |  |             | 32,347 |       |  |            | 24,275 |           |  |  | (1,374 | ) |  |   | 133,448 | 
|                                
|Nine Months Ended March 31, 2001 |  |            |         |            |  |            |        |          |  |             |        |       |  |            |        |           |  |  |        |   |  |  
|Revenues                         |  | $          | 239,870 |            |  | $          | 74,417 |          |  | $           | 23,664 |       |  | $          | 21,439 |           |  |  |        |   |  | $ | 359,390 | 
|Gross Margin                     |  |            | 5,852   |            |  |            | 11,332 |          |  |             | 5,612  |       |  |            | 4,351  |           |  |  |        |   |  |   | 27,147  | 
|Depreciation and Amortization    |  |            | 559     |            |  |            | 3,918  |          |  |             | 2,467  |       |  |            | 638    |           |  |  |        |   |  |   | 7,582   | 
|Capital Expenditures             |  |            | 11      |            |  |            | 13,138 |          |  |             | 1,576  |       |  |            | (34    | )         |  |  | 114    |   |  |   | 14,805  | 
|Segment Assets                   |  |            | 23,297  |            |  |            | 40,158 |          |  |             | 35,311 |       |  |            | 21,424 |           |  |  | 29,370 |   |  |   | 149,560 | 

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 $402,000 and $651,000; total bad debt
expense was $475,000 and $676,000 for the quarter ended March 31, 2002 and
March 31, 2001, respectively. Bad debt expense for fuel sales was
approximately $1,021,000 and $2,350,000; total bad debt expense was $1,247,000
and $2,575,000 for the nine months ended March 31, 2002 and March 31, 2001,
respectively.

7



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##### Table of Contents



Note 8  Comprehensive Income:

For the periods presented, adjustments to derive comprehensive income
(loss) from net income are as follows.

|                            |  |                   |          |                    |  |      |           |      |  |   |          |   |  |   |         | 
|--------------------------- |  | ----------------- | -------- | ------------------ |  | ---- | --------- | ---- |  | - | -------- | - |  | - | ------- | 
|                            |  | Nine Months Ended |          | Three Months Ended
|                            |  | March 31,         |          | March 31,         
|                            |  |                   |          |                   
|                            |  | 2002              |          | 2001               |  | 2002 |           | 2001
|                            |  |                   |          |                    |  |      |           |     
|Net Income                  |  | $                 | 929,000  |                    |  | $    | 3,237,000 |      |  | $ | 6,000    |   |  | $ | 299,000 | 
|Foreign Currency Adjustment |  |                   | (116,000 | )                  |  |      |          |      |  |   | (116,000 | ) |  |   |        | 
|                            |  |                   |          |                    |  |      |           |      |  |   |          |   |  |   |         | 
|Comprehensive Income (Loss) |  | $                 | 813,000  |                    |  | $    | 3,237,000 |      |  | $ | (110,000 | ) |  | $ | 299,000 | 
|                            |  |                   |          |                    |  |      |           |      |  |   |          |   |  |   |         | 

Note 9  Sales Leaseback Related Party Transaction:

In January 2002, the Company sold land and building which comprise its
corporate headquarters to CFK Realty Partners, LLC (CFK Partners) for $4.1
million, consisting of $2.7 million in cash and a note receivable of $1.4
million. The note receivable accrues interest at 5% and is due on December 31,
2002, however, CFK Partners has options to extend the note through December 31,
2004. Concurrently, the Company also entered into a ten-year lease for the
property. The lease payments currently approximate $37,000 per month. The
excess of the sales price over the net book value of the property of
$2,227,000 was recorded as a deferred gain. Of this gain, $827,000 (the amount
of cash received in excess of net book value) is being amortized as an offset
to rent expense over the ten year term of the lease agreement. The remaining
deferred gain will be amortized over the remaining term of the lease beginning
at such time as it meets the criteria for gain recognition.

CFK Partners is a partnership consisting of three of the Companys
directors, one of whom also serves as the Companys Chief Executive Officer.
In addition, CFK Partners also owns approximately 30% of the Companys
outstanding shares.

8



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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 March 31, 2002 and
March 31, 2001 and Comparison of the Nine Months Ended March 31, 2002 and March
31, 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 date.

|                                             |  |                             |       |                              |  |            |      |          |  |        |       |            |  |        |      |          |  |            |      |  |  |  |      |            |  |   |       |   |  |  |      |  
|-------------------------------------------- |  | --------------------------- | ----- | ---------------------------- |  | ---------- | ---- | -------- |  | ------ | ----- | ---------- |  | ------ | ---- | -------- |  | ---------- | ---- |  |  |  | ---- | ---------- |  | - | ----- | - |  |  | ---- | -
|                                             |  | Nine Months Ended March 31, |       | Three Months Ended March 31,
|                                             |  |                             |       |                             
|($ in millions)                              |  | 2002                        |       | 2001                         |  | 2002       |      | 2001    
|                                             |  |                             |       |                              |  |            |      |         
|                                             |  |                             |       |                              |  | % of Total |      |          |  |        |       | % of Total |  |        |      |          |  | % of Total |      |  |  |  |      | % of Total
|                                             |  | Amount                      |       | Revenues                     |  | Amount     |      | Revenues |  | Amount |       | Revenues   |  | Amount |      | Revenues
|                                             |  |                             |       |                              |  |            |      |          |  |        |       |            |  |        |      |         
|Revenues:                                    |  |                             |       |                              |  |            |      |          |  |        |       |            |  |        |      |          |  |            |      |  |  |  |      |            |  |   |       |   |  |  |      |  
|Fuel sales                                   |  | $                           | 171.4 |                              |  |            | 60.4 | %        |  | $      | 239.9 |            |  |        | 66.7 | %        |  | $          | 52.2 |  |  |  | 59.4 | %          |  | $ | 75.0  |   |  |  | 65.8 | %
|FBOs                                         |  |                             | 69.6  |                              |  |            | 24.5 |          |  |        | 74.4  |            |  |        | 20.7 |          |  |            | 22.5 |  |  |  | 25.6 |            |  |   | 24.1  |   |  |  | 21.1 |  
|Cargo operations                             |  |                             | 21.1  |                              |  |            | 7.4  |          |  |        | 23.7  |            |  |        | 6.6  |          |  |            | 6.4  |  |  |  | 7.3  |            |  |   | 7.9   |   |  |  | 7.0  |  
|Government contract services                 |  |                             | 21.7  |                              |  |            | 7.7  |          |  |        | 21.4  |            |  |        | 6.0  |          |  |            | 6.8  |  |  |  | 7.7  |            |  |   | 6.9   |   |  |  | 6.1  |  
|                                             |  |                             |       |                              |  |            |      |          |  |        |       |            |  |        |      |          |  |            |      |  |  |  |      |            |  |   |       |   |  |  |      |  
|Total Revenue                                |  | $                           | 283.8 |                              |  |            | 100  | %        |  | $      | 359.4 |            |  |        | 100  | %        |  | $          | 87.9 |  |  |  | 100  | %          |  | $ | 113.9 |   |  |  | 100  | %
|                                             |  |                             |       |                              |  |            |      |          |  |        |       |            |  |        |      |          |  |            |      |  |  |  |      |            |  |   |       |   |  |  |      |  
|                                             |  |                             |       |                              |  | % of Total |      |          |  |        |       | % of Total |  |        |      |          |  | % of Total |      |  |  |  |      | % of Total
|                                             |  | Amount                      |       | Revenues                     |  | Amount     |      | Revenues |  | Amount |       | Revenues   |  | Amount |      | Revenues
|                                             |  |                             |       |                              |  |            |      |          |  |        |       |            |  |        |      |         
|Gross Margin(1):                             |  |                             |       |                              |  |            |      |          |  |        |       |            |  |        |      |          |  |            |      |  |  |  |      |            |  |   |       |   |  |  |      |  
|Fuel sales                                   |  | $                           | 5.1   |                              |  |            | 3.0  | %        |  | $      | 5.8   |            |  |        | 2.4  | %        |  | $          | 1.8  |  |  |  | 3.5  | %          |  | $ | 1.3   |   |  |  | 1.8  | %
|FBOs                                         |  |                             | 10.7  |                              |  |            | 15.4 |          |  |        | 11.3  |            |  |        | 15.2 |          |  |            | 3.3  |  |  |  | 14.7 |            |  |   | 3.5   |   |  |  | 14.6 |  
|Cargo operations                             |  |                             | 1.4   |                              |  |            | 6.9  |          |  |        | 5.6   |            |  |        | 23.7 |          |  |            |     |  |  |  |     |            |  |   | 1.5   |   |  |  | 19.4 |  
|Government contract services                 |  |                             | 5.4   |                              |  |            | 24.9 |          |  |        | 4.4   |            |  |        | 20.3 |          |  |            | 1.7  |  |  |  | 24.7 |            |  |   | 1.3   |   |  |  | 18.6 |  
|                                             |  |                             |       |                              |  |            |      |          |  |        |       |            |  |        |      |          |  |            |      |  |  |  |      |            |  |   |       |   |  |  |      |  
|Total Gross Margin                           |  | $                           | 22.6  |                              |  |            | 8.0  | %        |  | $      | 27.1  |            |  |        | 7.6  | %        |  | $          | 6.8  |  |  |  | 7.7  | %          |  | $ | 7.7   |   |  |  | 7.6  | %
|                                             |  |                             |       |                              |  |            |      |          |  |        |       |            |  |        |      |          |  |            |      |  |  |  |      |            |  |   |       |   |  |  |      |  
|                                             |  |                             |       |                              |  | % of Total |      |          |  |        |       | % of Total |  |        |      |          |  | % of Total |      |  |  |  |      | % of Total
|                                             |  | Amount                      |       | Revenues                     |  | Amount     |      | Revenues |  | Amount |       | Revenues   |  | Amount |      | Revenues
|                                             |  |                             |       |                              |  |            |      |          |  |        |       |            |  |        |      |         
|Selling, general and administrative          |  | $                           | 7.4   |                              |  |            | 2.6  | %        |  | $      | 6.1   |            |  |        | 1.7  | %        |  | $          | 2.9  |  |  |  | 3.4  | %          |  | $ | 2.0   |   |  |  | 1.7  | %
|Provision for bad debts                      |  |                             | 1.2   |                              |  |            | 0.4  |          |  |        | 2.5   |            |  |        | 0.7  |          |  |            | 0.5  |  |  |  | .5   |            |  |   | 0.7   |   |  |  | 0.6  |  
|Depreciation and amortization                |  |                             | 7.1   |                              |  |            | 2.5  |          |  |        | 7.6   |            |  |        | 2.1  |          |  |            | 2.1  |  |  |  | 2.4  |            |  |   | 2.6   |   |  |  | 2.3  |  
|Interest expense and other                   |  |                             | 5.3   |                              |  |            | 1.9  |          |  |        | 5.7   |            |  |        | 1.6  |          |  |            | 1.3  |  |  |  | 1.5  |            |  |   | 1.8   |   |  |  | 1.6  |  
|                                             |  |                             |       |                              |  |            |      |          |  |        |       |            |  |        |      |          |  |            |      |  |  |  |      |            |  |   |       |   |  |  |      |  
|Income before income taxes                   |  |                             | 1.6   |                              |  |            | 0.6  |          |  |        | 5.2   |            |  |        | 1.5  |          |  |            |     |  |  |  |     |            |  |   | 0.6   |   |  |  | 0.5  |  
|Provision for income taxes                   |  |                             | 0.6   |                              |  |            | 0.2  |          |  |        | 2.0   |            |  |        | 0.6  |          |  |            |     |  |  |  |     |            |  |   | .2    |   |  |  | .2   |  
|                                             |  |                             |       |                              |  |            |      |          |  |        |       |            |  |        |      |          |  |            |      |  |  |  |      |            |  |   |       |   |  |  |      |  
|Income from continuing operations
before tax |  |                             | 1.0   |                              |  |            | 0.3  |          |  |        | 3.2   |            |  |        | 0.9  |          |  |            |     |  |  |  |     |            |  |   | 0.4   |   |  |  | 0.3  |  
|(Loss) Income from discontinued
operations   |  |                             | (0.1  | )                            |  |            |     |          |  |        | 0.1   |            |  |        |     |          |  |            |     |  |  |  |     |            |  |   | (0.1  | ) |  |  | 0.1  |  
|                                             |  |                             |       |                              |  |            |      |          |  |        |       |            |  |        |      |          |  |            |      |  |  |  |      |            |  |   |       |   |  |  |      |  
|Net income                                   |  | $                           | 0.9   |                              |  |            | 0.3  | %        |  | $      | 3.2   |            |  |        | 0.1  | %        |  | $          |     |  |  |  |     | %          |  | $ | 0.3   |   |  |  | 0.3  | %
|                                             |  |                             |       |                              |  |            |      |          |  |        |       |            |  |        |      |          |  |            |      |  |  |  |      |            |  |   |       |   |  |  |      |  



---

|(1) |  | Gross margin as used here and throughout Managements Discussion excludes
depreciation and amortization and selling, general and administrative expense
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------

9



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##### Table of Contents



Three Months ended March 31, 2002 Compared to March 31, 2001

Revenue decreased by 22.8% to $87.9 million in the current period from $113.9
million in the prior year primarily due to lower fuel prices and fuel volume
in the current period. Gross margin decreased 11.3 % to $ 6.8 million in the
current period from $7.7 million a year ago, primarily due to declines in Cargo
operations. The declines were, in part, caused by the slow down in the airline
industry resulting from the events of September 11, 2001 and general economic
conditions.

Revenues from fuel sales represented 59.4% of total revenues in the current
period compared to 65.8% of revenues a year ago. Revenues from fuel sales
decreased 30.3% to $52.2 million from $75.0 million last year. The decrease
from fuel sales was due to a decrease of 22% in the price of fuel sold and a
decrease of 11.2% in volume sold. Gross margin from fuel sales increased to
$1.8 million in the current period compared with $1.3 million last year
primarily due to higher per gallon margins in the current period caused by a
change in the customer mix. The volume decline was, in part, caused by the slow
down in the airline industry.

Revenues from FBOs decreased 6.6 % to $22.5 million in the current period
compared to $24.1 million a year ago. The decrease in revenue was primarily due
to a decline in fuel prices of 8% and a reduction in fuel volume of 2 % .
Gross margin decreased 6.3% in the current period to $3.3 million from $3.5
million last year due to lower volume.

Revenues from cargo operations decreased 19.4% to $6.4 million in the current
period from $7.9 million a year ago. Revenues were lower in cargo handling,
brokerage and general sales agency (GSA) due to softness in worldwide trade
markets causing a decline in revenues from existing customers. Cargo
operations in the current period reflected a slight loss in gross margin as
compared to a $1.5 million gross margin in the year ago period primarily due to
lower revenues. The Companys Cargo operations in Atlanta were negatively
impacted during the latest period by higher lease costs associated with a new
facility and lower revenues primarily caused by the loss of an account which
had represented approximately 30% of its revenues in the year ago period and
none in the current period. In response, the Company subleased its Atlanta
warehouse facility which should result in improved financial results in
future periods. Revenues from existing customers at the Companys LAX
operations for both warehouse and GSA were lower compared to last year due to a
softer marketplace. The Cargo business has been impacted by a slowdown in
worldwide air cargo tonnage and shipments.

Revenues from government contract services decreased slightly in the current
period to $6.8 million from $6.9 million in the year ago period due to the loss
of the Yokota, Japan housing maintenance contract in September 2001 and lower
weather observation and forecasting revenues from fewer contracts, partially
offset by new contracts added in fiscal 2001 and in the current period. The
Yokota, Japan contract provided $0.8 million or 11.8% of total revenues
during the quarter ended March 31, 2001 and $5.1 million or 17.6% of total
revenues during fiscal year 2001. This revenue loss was mitigated in part by
increased revenue on the Kuwait refueling contract which provided $0.5 million
in increased revenues compared to the year ago quarter. Gross margin from
government contract services in the current period increased 29.8% to $1.7
million from $1.3 million last year due to higher margins.

Selling, general and administrative expenses increased 51.7% to $2.9 million in
the current period from $2.0 million a year ago due primarily to employee
severance expenses and higher legal and professional fees in the current
period.

10



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##### Table of Contents



Provision for bad debts decreased 29.7% in the current period to $0.5 million
from $0.7 million a year ago primarily due to lower sales in the current
period and lower reserve requirements.

Depreciation and amortization expense decreased 20.0% in the current period to
$2.1 million from $2.6 million in the year ago period primarily due to a
decrease in the level of capital expenditures.

Interest expense decreased by 28.0% in the current period to $1.3 million from
$1.8 million a year ago due to lower interest rates and lower average
outstanding debt.

Income tax expense approximated 39% of pre-tax income in both periods
reflecting the expected effective annual tax rate.

Loss from discontinued operations was $69,000 in the year ago period net of
income tax benefit of $44,000 and was related to RPAs operations.

Nine Months Ended March 31, 2002 compared to March 31, 2001.

Revenues decreased 21.0% to $283.8 million from $359.4 million in the prior
year primarily due to lower fuel prices in the current period. Gross margin
decreased 16.6 % to $22.6 million from $27.1 million a year ago primarily due
to declines from Cargo operations. The decline in gross margin was in part,
caused by the slow down in the airline industry and the temporary cessation of
commercial and general aviation resulting from the events of September 11, 2001
and general economic conditions.

Revenues from fuel sales represented 60.4% of total revenues in the current
period compared to 66.7% of total revenue a year ago. Revenues from fuel sales
decreased 28.6 % to $171.4 million from $239.9 million last year. The
decrease in revenues from fuel sales was primarily due to a decrease of 24% in
the price of fuel sold and, to a lesser extent, a decrease of 6.2% in the
volume of fuel sold. The volume decline was, in part, caused by the slow down
in the airline industry resulting from the events of September 11, 2001. Gross
margin from fuel sales decreased 13.0% in the current period to $5.1 million
from $5.8 million a year ago. The decrease in gross margin from fuel sales was
primarily due to lower margins per gallon based on a change in customer mix.

Revenue from FBOs decreased 6.5% to $69.6 million from $74.4 million a year
ago due to a reduction of approximately 6.6% in the price and 3.4% in the
volume of fuel sold. Gross margin decreased 5.7% to $10.7 million from $11.3
million in the year ago period due primarily to the decline in business
activity following the events of September 11, 2001.

Revenues from cargo operations decreased 10.9% to $21.1 million from $23.7
million a year ago. Revenues were lower in cargo handling, brokerage and GSA
due to softness in the marketplace causing a decline in revenues from existing
customers. Gross margin from cargo operations decreased 74.2 % to $1.4 million
from $5.6 million in the year ago period primarily due to lower revenues and
partially due to higher operating costs, primarily lease costs, associated with
cargo handling.

11



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##### Table of Contents



Revenues from government contract services increased 1.4% to $21.7 million from
$21.4 million in the
year ago period. The increase in revenues from government contract services
was primarily due to the
Addition of new contracts during the last twelve months, partially offset by
lower weather and forecasting revenue from fewer contracts and the loss of the
Yokota, Japan contract in September 2001. The Yokota, Japan contract provided
$4.0 million or 18.6% of total revenues for the nine months ended March 31,
2001. Gross margin from government contract services in the current period
increased 24.4% to $5.4 million from $4.4 million last year due to higher
margins and higher revenue.

Selling, general and administrative expenses in the current period increased
21.1% to $7.4 million from $6.1 million in the year ago period due to
settlement of litigation, employee severance, and increased legal and
professional fees.

Provision for bad debts decreased in the current period to $1.2 million from
$2.5 million in the year ago period due to lower sales in the current period
and lower reserve requirements.

Depreciation and amortization expense was $7.1 million in the current period
compared to $7.6 million in the year ago period.

Interest expense decreased 24.3% in the current nine months to $4.3 million
from $5.7 million a year ago due to lower interest rates and lower average
outstanding borrowings.

Costs and expenses of stock offering of $985,000 related to fees associated
with the planned public and private offering of MercFuel common stock. The
Company was unable to complete the offering and charged the costs to expense
during the quarter ended December 31, 2001.

Loss on sale of property was $71,000 in the current period and is related to
the sale of real estate in Miami.

Income tax expense approximated 39.0% of pretax income in both periods
reflecting the expected effective annual tax rate.

Liquidity and Capital Resources:

The events of September 11, 2001 had a significant impact on the aviation
industry and, as a result, have impacted the Companys operations as well.
However, at this time, the Companys operations are returning to normal
levels. In view of the uncertainty of the ultimate impact upon the aviation
industry, the long-term impact to the Companys customers and operations
cannot be determined at this time.

Mercury has historically financed its operations primarily through
operating cash flow, bank debt and various public and private placements of
bonds and subordinated debt.

As of March 31, 2002, the Company cash and cash equivalents were $1.8 million,
a reduction of $2.1 million for the nine month period. Cash provided by
operating activities was $2.2 million comprised of $1.0 million from earnings
from continuing operations, adjusted for $8.6 million of non-cash items, less
$7.3 million for increases in operating net working capital. The increase in
net working capital is primarily due to lower current liabilities and accrued
expenses.

12



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##### Table of Contents



Net cash generated from investing activities was $2.2. million primarily
comprised of proceeds from assets sales of $4.8 million partially offset by
capital expenditures of $2.9 million.

The Company used $10.7 million of cash in financing activities during the
current period primarily due to the net reduction in long term debt of $10.4
million. The Companys long-term debt, including current portion, as of March
31, 2002 is $64.8 million.

During the first nine months of 2002, the Company also generated $4.3 million
in cash from the sale of RPA in July 2001 and the discontinuation of that
business.

The Companys senior secured bank credit facility consists of a $35.0 million
Revolver, a term loan with an outstanding balance of $5.3 million at March 31,
2002 and an acquisition facility with an outstanding balance of $17.4 million
at March 31, 2002. At March 31, 2002, there was $2.0 million outstanding under
the Revolver. The agreement contains provisions that require the maintenance
of certain financial ratios including minimum tangible net worth (as defined),
minimum profitability levels, maximum leverage and minimum debt service
coverage and quick ratios and limitations on annual capital expenditures.
Additionally, the Company is prohibited from paying dividends in excess of
$400,000 per year. These facilities mature in March 2004.

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, Company agreed to
reduce the 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. On November 16, 2001 and effective September 30, 2001, the Company
received a waiver pertaining to the interest coverage test and the agreement
was amended by reducing the ongoing interest coverage test. The Company was
in compliance with the loan covenants at March 31, 2002.

In the event that fuel prices increase significantly for an extended period of
time, the Companys liquidity could be adversely affected unless the Company is
able to increase vendor credit or increase lending limits under its revolving
credit facility. The Company believes, however its revolver and vendor credit
should provide it with sufficient liquidity in the event of a major temporary
surge in oil prices.




Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

There has been no material change during the quarter ended March 31, 2002 from
the disclosures regarding market risk presented in the Companys Annual Report
on Form 10-K for the year ended June 30, 2001.

13



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##### Table of Contents



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 $1.0 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 $470,000 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 June 7, 2000, Jupiter Airline Automation Services, Inc. former known as RPA
Airline Automation Services, a wholly owned subsidiary of the Company, filed an
action in the Circuit Court of the 11th Judicial Circuit in Miami-Dade County,
Florida against Challenge Air Cargo, Inc,. seeking damages for breach of
contract. In August 2000, the Company received notice that Challenge Air
Cargo, Inc. had filed a counter-claim seeking damages for breach of contract.
Mercury does not believe the outcome of this claim will have a significant
impact on its financial position or operating results.

14



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##### Table of Contents






Item 2. Change in Securities

None




Item 3. Default Upon Senior Securities

None




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)                                                                                                                                                                                              

15



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##### Table of Contents



|        |  |                                                                                                                                                                                                                   
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                   
|No.     |  | Description                                                                                                                                                                                                       
|        |  |                                                                                                                                                                                                                   
|       
|       
|       
|       
|4.7     |  | Amendment No. 2 dated as of September 30, 2001 by and between J.H.
Whitney Mezzanine, L.P. and Mercury Air Group, Inc. to 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 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)                                                                                                
|       
|       
|       
|       
|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)*                                                                                                                        

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##### Table of Contents



|        |  |                                                                                                                                                       
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                       
|No.     |  | Description                                                                                                                                           
|        |  |                                                                                                                                                       
|       
|       
|       
|       
|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
June 7, 2001.(19)                                                                
|       
|       
|       
|       
|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   |  | Sale Leaseback Agreement. Made as of December 31, 2001 by and between
CFK Realty Partners LLC and Mercury Air Group, Inc.(22)                         
|       
|       
|       
|       
|99.1    |  | Partnership Agreement dated as of July 27, 2000 of CFK Partners by and
among Philip J. Fagan, M.D., Frederick H. Kopko, Jr. and Joseph A.
Czyzyk. (13)

*     Denotes managements contract or compensation plan or arrangement

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

17



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##### Table of Contents



|     |  |                                                                                                                                                                                     
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|    
|    
|    
|(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.        
|    
|    
|    
|    
|(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



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##### Table of Contents



|     |  |                                                                                                                                                                                     
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|    
|    
|    
|(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) |  | Filed herewith.                                                                                                                                                                     

(b)  Reports on Form 8-K:

None
19Table of Contents
SIGNATURESPursuant 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 M. Schlax
Robert M. Schlax
Vice President Finance
(Principal Financial Officer)Date: May 13, 200220