UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended April 30, 2002

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from________ to_________

Commission file number 2-87778A

THE FLIGHT INTERNATIONAL GROUP, INC.
(Exact name of registrant as specified in its charter)

Georgia 58-1476225
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

One Lear Drive 23602
Newport News VA (Zip Code)
(Address of principal executive offices)

(757) 886-5500
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act:
New Common Stock, par value $.01 per share
(Title of class)

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 No X.

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and will
not be contained, to the best of issuer's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ X ]

As of the date hereof, there is no public market for the issuer's securities.

Indicate by check mark whether the issuer has filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court. Yes No

As of August 16, 2002 there were 1,109,588 shares of the issuer's New Common
Stock, par value $.01 per share, issued and outstanding.

PART I

ITEM 1. BUSINESS.

GENERAL

Introduction

The Flight International Group, Inc. (the "Company") was incorporated
in Georgia on May 7, 1982. The Company is an aviation services company that
performs military training services using specially modified commercial
aircraft, principally under contract with the United States Department of
Defense ("DOD"), other government agencies and foreign countries, operating
through its direct and indirect subsidiaries. In addition, with the use of these
aircraft, the Company has established a market for training and testing in the
aerospace industry. The Company also operates a fixed base operation ("FBO") at
the Newport News/Williamsburg International Airport ("NN/W Airport"), a
scheduled cargo and charter passenger airline throughout Alaska, and an Aircraft
Modification, Repair and Overhaul ("MRO") Center at the NN/W Airport.

Flight International, Inc., a Georgia corporation ("FII"); Flight
International Aviation, Inc., a Georgia corporation ("FIA"); Flight
International Sales and Leasing, Inc., a Delaware corporation ("FSL"); Flight
Alaska, Inc., a Delaware Corporation ("FAI"); and, until April 2001, Flight
International Services, Inc., a Delaware corporation ("FIS"), are each
wholly-owned subsidiaries of the Company. Flight International of Florida Inc.,
a Florida corporation ("FIF"), is a wholly owned subsidiary of FII.

On May 9, 2002, the Company entered into an Asset Purchase Agreement
with VTF Corporation ("VTF"). As detailed in the Preliminary Proxy Statement
filed August 16, 2002, VTF will assume substantially all of the Company's assets
and liabilities and those of the Company's wholly-owned subsidiaries for
$6,500,000 (subject to adjustment based on the amount of indebtedness assumed by
VTF). The transaction is subject to approval of the Company's shareholders and
other closing conditions. There can be no assurance that the transaction will be
consummated.

Government Contracts

The majority of the Company's revenues are derived from contracts with
the United States Federal government. For fiscal year 30, 2002, revenue from
contracts with the United States government represented approximately 68.7% of
the Company's consolidated revenues, as compared to 63.9% in fiscal 2001 and
80.1% in fiscal 2000.

United States Federal government contract awards are made through
sealed competitive bids, unless an exemption from full and open competition
under federal procurement laws is applicable. Under the regulations governing
sealed bidding, the qualified bidder with the lowest price and the price-related
factors most advantageous to the government is generally awarded the contract.
Under negotiated procurements, other evaluation factors such as experience,
quality of technical approach and management capability may weigh more heavily
than price in the selection process.

Typically the Company's contracts with the DOD have been awarded
competitively pursuant to federal procurement laws and procedures. These
agreements are usually annual contracts having additional one-year option
periods that may be exercised by the DOD.

For each year of any government contract, including the base year and
any option year that the government has elected to take, all contract revenues
are contingent upon the availability of adequate funding.

Typically payments received under government contracts normally are
based upon flight hours at the price per flight hour as established in the
contract. Flight hours are measured from the time aircraft and personnel depart
for a pre-designated location to perform the assigned training or support
mission through completion of the mission and the return of the aircraft to the
predetermined station. Under most government contracts, it is necessary to
attain a predetermined mission success rate or other contract performance
standard.

Minimum guaranteed contract payments under most government contracts
are based on an established number of flight hours that the government is
required to order during each year of the contract. The Company's price for
"guaranteed" flight hours is fixed in the contract, but the government may order
more flight hours than specified in the contract. Such "excess" hours are paid
for at an established contract price for excess hours.

For each contract year, the Company receives payment from the
government for the number of guaranteed flight hours specified in the contract
at the applicable contract rate. Payment to the Company for unflown guaranteed
hours, if any, will be determined in accordance with standard government
reimbursement procedures and will not be received until the end of the contract
year.

The Company's DOD contracts generally are firm, fixed-price contracts
under which the Company bears the risk that the prices paid by the government
will be sufficient to cover actual costs incurred in performing under the
contract, plus the amount of profit expected in pricing its bid or proposal. The
Company may, however, file claims for equitable adjustment in the event certain
unforeseeable cost overruns occur. The resolution of such claims is a
negotiation between the parties and no assurance can be given that all or any
part of the relief will be granted.

In some instances, the Company may be selected as a "sole-source"
provider to perform its services. In this case, final pricing is negotiated
between the parties based on costs and profit margins acceptable to both. The
Defense Contract Audit Agency ("DCAA") has the right to audit the Company's
books and records. When firm, fixed-price contracts are awarded after a
competitive bid, prices are not normally subject to re-negotiation or
retroactive adjustment and therefore the chances of such an audit are greatly
diminished. In the event a contract is awarded to the Company on a sole-source
basis, final prices and costing are subject to full audit by the DCAA.

Competition

The Government markets in which the Company conducts fleet operations
are moderately competitive. Price usually is a significant factor considered in
awarding contracts. Many firms, ranging in size from companies having
substantially smaller operations than the Company to affiliates of major
corporations having substantially greater resources than the Company, compete
directly with the Company for contracts awarded by the United States government
and the other fleet operations customers and potential customers of the Company.

Competitive factors other than price which affect the award of flight
operations contracts include the number of employees, total company revenues,
the firm's experience in the field of aviation services and adequacy of
resources, including maintenance personnel, aircrews, repair facilities and
aircraft.

Competition is an even greater factor in the commercial segment of the
flight operations market where barriers to entry are lower than in the
government sector. This is due in part to the fact that aircraft may not require
unique modifications in order to perform the desired services. In this market
the Company competes with numerous companies, some of which also compete in the
market for military contracts. Price also can be a significant factor where, on
occasion, competitors are single aircraft operators engaged in the business on a
part-time basis.

In October 1999, the Company entered into an agreement with Geophysical
& Environmental Resources Corporation ("GERC"), an unrelated party, to form
Geoflight, LLC, ("GFL") a joint venture between GERC and the Company. GFL was
formed to provide remote sensing services to public and private customers using
an array of airborne sensing devices. Management believed this transaction would
position the Company to compete in the emerging market for private aerial
imaging and intelligence gathering services. No substantial investments were
made in GFL, nor did GFL have any material operations in fiscal year 2002.

In December 1999, the Company entered into an agreement with the United
States Bankruptcy Court for the District of Alaska (the "Court") to manage the
operations of Yute Air Alaska, Inc. ("Yute"). The Company managed the ongoing
operations of Yute until March 28, 2000, when the Court approved and ordered the
sale of selected assets of Yute to FAI. An asset purchase agreement was executed
on April 28, 2000 following successful transfer of Yute's Air Carrier Operating
Certificate and Certificate of Public Convenience and Necessity. The acquisition
represented the Company's desire to expand its services into the scheduled cargo
airline business. Total consideration for the transaction consisted of $373,282
in cash and $775,000 in additional long-term debt obligations.

Effective February 29, 2000, the Company completed, through Flight
International Services, Inc. ("FIS"), the acquisition of the assets and certain
liabilities of Flight Systems, Inc., in Myrtle Beach, South Carolina. The
acquisition represented the Company's desire to expand its services and
capabilities in the commercial aircraft maintenance and modification business.
Total consideration for the transaction consisted of $150,000 cash and 101,398
shares of Common Stock of the Company and the assumption of approximately
$468,000 in net liabilities. Between March 1, 2000 and April 30, 2000 the
Company made additional investments in working capital in FIS.

By July 2000, management determined that an economic downturn was
already having substantial negative impact on commercial aviation. The Company
failed to realize its targets for revenue growth in this market segment. In
October 2000, with the downturn deepening, a decision was made to sell the
assets of FIS and a search was conducted for a likely buyer. In November 2000,
the Company entered into an agreement with Reliance Aviation Industries, Inc.
("Reliance") to sell substantially all of the business of FIS in a stock sale
transaction for a $600,000 promissory note payable over 48 months, beginning in
May 2001. Reliance subsequently defaulted in its obligations under the note and
the Company reclaimed tooling, inventory and equipment. Based on re-marketers
valuations of the reclaimed assets, bad debt expense of $210,000 was recorded
for the shortfall between the realizable value of the reclaimed assets and the
remaining balance on the note. Losses from this discontinued operation totaled
$2,506,003 in fiscal year 2001, consisting of a loss from discontinued
operations of $1,461,003 and a loss on disposal of discontinued operations of
$1,045,000.

Uncertain military and political climate

The Company is operating its business at a time of significant
instability in domestic and international security affairs. As it was in fiscal
year 2002, the Company's business may be particularly sensitive to military
and/or terrorist attack, to changes in utilization and demand caused by actual
and perceived risk of such attacks, and shifts in government fiscal priorities
to tax relief or defense spending. While these world events and subsequent
government responses may have a near term negative impact, it is not known
whether such events, including terrorism and other heightened security concerns,
will have any long-term effect, positive or negative, on the Company's business.

Fleet Composition

As of April 30, 2002, the Company operated 46 aircraft. As of the date
hereof, the Company operates 47 aircraft. FII operates 22 Learjets, five
Fairchild Metro III's and four other prop aircraft. These aircraft are used in
the conduct of fleet operations for government and commercial customers. The
Company plans to return three Learjet 20's Series, which have become surplus
resources to the Lessor in the near future. In addition, the Company owns and
operates electronic warfare equipment used in conjunction with its fleet
operations contracts.

FAI operates four twin-turboprop Casa 212s, one twin-prop Navajo
Chieftain and nine single-engine prop aircraft. The Company introduced a Twin
turbine Beech KingAir in March, 2002.

FIA provides a Cessna 172E in conjunction with its flight training
programs and has access to FII's twin-engine fleet for multi-engine training
opportunities. The Company maintains an inventory of spare aircraft parts,
equipment and tooling used in support of the Company's fleet, as well as for the
repair and maintenance of third party aircraft. In addition to the aircraft
listed above, the Company currently holds two Jetstream J-31 turbo-prop aircraft
for resale.

Flight International, Inc. - Fleet Operations

In August 1996, the Company was awarded the Commercial Air
Services-Military Operations Support contract ("CAS-MOS"), a derivative of the
original government contract awarded to the Company in 1980 and operated until
September 1993. The new contract began on October 1, 1996 and would have
completed its final option period in September 2001. After submitting a firm,
fixed-price proposal in a competitive-bid environment, the Company was notified
that it was the sole bidder for the follow-on contract that was to have been
awarded by October 1, 2001. The Company was further notified that the bid
exceeded the maximum funding authorization for the requested services and the
contract would require re-bidding after the DOD revised the scope of the
requested services to ensure they would be within budget guidelines. To ensure
the continuation of training services, the DOD requested up to four additional
90-day extension periods (referred to as option periods 5, 6, 7, and 8) to the
current contract to allow sufficient time for the re-bidding and award
processes. The Company agreed to the government imposed price increases in each
of the four potential option periods based on expected utilization rates, but
was subsequently notified that option periods 5,6,7,and 8 would not include two
Lear 30 aircraft added in the final year of the original contract. On March 31,
2002, the Company completed the sixth and final option period of the 1996
contract. The contract contributed 50.9% of the Company's revenue in fiscal year
2001 and 54.6% for fiscal year 2002.

In April 2002, the Company was awarded the follow-on CAS-MOS contract
and began operations in an uninterrupted manner on April 1, 2002. The new
contract is again comprised of a base and four annual option periods through
March 31, 2007. The new contract substantially reduces the Company's risks
associated with fuel-cost fluctuations, as fuel becomes government furnished. In
addition, market-associated cost increases for liability and hull insurance will
be reimbursable by the government under the new agreement. The Company also has
negotiated with its subcontractors to recover overhead and administrative costs,
further strengthening its position. Under new guidelines required of "large
contractors", the Company must now conform to "Cost Accounting Standards" as
outlined in the Federal Acquisition Regulations. During the period of conversion
to these standards, the government reserves the right to review overhead and
indirect costs and adjust the prices paid for the services provided based on
proven expenses in these areas. Since the government has accepted the risk of
fuel and insurance volatility, total funding for the Company's services may be
competing with these costs in out-years. No assurances can be made that activity
levels will remain at the base-year level in option periods, but any changes in
utilization in subsequent years would result in the renegotiation of rates
between the parties. Furthermore, there can be no assurance that the government
will exercise any of the options on the CAS-MOS contract to continue past the
base year.

In September 1999, the Company was awarded a Commercial Air Services
contract to provide Electronic Warfare ("EW") training and VIP transportation
for the United States Navy's 6th Fleet deployed in and around the Mediterranean
Sea ("CAS-MED"). Based in Naples, Italy, the contract requires three Learjet 30
Series aircraft, two of which require "multi-mission" configuration that provide
passenger transportation as well as required training services. The contract,
which consists of one base year and 4 option years, commenced on October 1,
1999. In fiscal year 2002, the contract contributed 6.2% of the Company's
revenues. There can be no assurance that the government will exercise its
remaining options on the CAS-MED contract.

The Company is a relatively small competitor in the European
marketplace for EW training, target tow and VIP transportation services.
Management has attempted to penetrate this marketplace using the CAS-MED
contract as a springboard. Competitors in this market include a number of large
companies with significant financial resources and no assurances can be given
that the Company will increase its market share.

FII performs contract flight services for the DOD, other government
agencies and commercial customers. The Company utilizes specially modified
business jets, propjets and piston-powered aircraft in conjunction with the
training of military aircrews, radar operators and weapons controllers in the
techniques of airborne target identification and interception.

Under the DOD contracts, FII's aircraft provide radar calibration and
target acquisition training, tow airborne targets for air-to-air and
surface-to-air missile and gunnery live firing exercises and use airborne
electronic countermeasures equipment and techniques to disrupt ship, aircraft
and land based communications and radar. Contracts with the DOD generally
provide for compensation based on flight hours of usage. Flight crews are
required to hold United States government security clearances in connection with
certain classified aspects of the services provided.

In addition to its contracts with the DOD, a small portion of the
Company's revenues from fleet operations are generated from customers in the
aerospace industry that use specially configured aircraft for training and
testing. Typically, customers utilize aircraft and flight crews in connection
with product development. Many of these services are provided pursuant to
purchase orders rather than long-term contracts.

Seasonality is a significant factor in contract fleet operations
(historically representing a majority of FII's revenues) affecting both revenue
and cash flow. Revenues are lower during midsummer and winter months. To help
mitigate these effects, the Company requested and was granted the ability to
bill the government for a portion of its fixed operating expenses on a monthly
basis under the CAS-MOS contract effective November 2001. The Company
anticipates that this method of invoicing will reduce the negative impact caused
by seasonality in the future, but can provide no assurance that the program,
which is being conducted on experimental basis during the base year of the
contract, will continue in the future.

In addition to offering contract fleet services, FII offers its
aircraft and equipment for lease or rental to DOD and other government
customers. During the fiscal year ended April 30, 2002, the Company continued to
provide aircraft leasing and maintenance to the U.S. Navy/Naval Weapons Center
in China Lake, California, providing Metro III aircraft necessary to accomplish
transportation of naval personnel. This revenue stream returned to nominal
levels in 2002, following two years of elevated revenues, when the Navy desired
to upgrade the Metro III fleet with additional avionics and structural
modifications.

Flight Alaska, Inc.

On April 28, 2000, FAI began providing scheduled air cargo services
from five major hubs in Western Alaska to more than 60 villages throughout the
state. Flight Alaska's primary customer is the United States Postal Service.
Mail in Alaska is tendered to qualified air carriers serving the state through
an "equitable tender" system that provides each carrier with an equal share of
the mail for each market served. Through its acquisition of Yute Air's assets
and the transfer of Yute's operating certificates, FAI was automatically
qualified to receive an equitable share. FAI has expanded its operations to
every major hub in Alaska.

FAI utilizes a combination of single and twin engine reciprocating
aircraft to perform its mail and freight carriage services. The Company believes
that the single engine aircraft acquired in the Yute Air acquisition are well
suited to carry mail and freight to the small villages throughout Alaska. The
twin-engine aircraft are equipped to operate in all but the worst weather
conditions.

Mail rates are set by the US Department of Transportation ("DOT") and
are updated periodically based on average industry costs. Management believes
the Company's ownership costs provide a competitive advantage and allow
management to spend more than its competitors on training and other safety
investments. In general, insurance costs in Alaska are double those experienced
in the Company's other operations. Through aggressive safety programs,
management intends to reduce its insurance costs in Alaska and further enhance
its competitive position.

In response to rapidly escalating fuel prices in 1999, Alaskan air
carriers petitioned the DOT for interim fuel cost adjustments. The DOT honored
the request and has instituted a quarterly adjustment decreasing the carrier's
exposure to fuel cost volatility.

FAI also provides charter freight and passenger services to government
organizations and businesses throughout the state. FAI has negotiated contracts
and agreements with several oil producers and oil-field support companies to
provide air transportation for passengers and freight on Alaska's North Slope.
In addition, management has negotiated aircraft storage and maintenance support
agreements with Phillips Petroleum to support that company's aviation
operations.

In December 2001, FAI was granted authority by the DOT to carry
passengers on a scheduled basis. Management implemented a plan to develop
scheduled-passenger operations in underserved markets utilizing twin-engine
aircraft capable of carrying both passengers and freight. These services began
in May 2002 in Nome, Alaska. FIA contributed 18.7% of total revenues in
fiscal 2002, 15.3% in fiscal 2001 and 3.4% in fiscal 2000.

Flight International Aviation, Inc.

FIA operates a Fixed Base Operation ("FBO") at the NN/W Airport
pursuant to an agreement with the Peninsula Airport Commission that terminates
in January 2004. The Company offers a full range of aviation services
customarily provided by such a facility to third parties. These services include
aircraft fueling, maintenance services (including inspections and engine and
airframe repairs), aircraft modifications, avionics installation and
replacement, charter, pilot services and aircraft storage.

The competitive market for FBO services may be local, regional or
national, depending upon the particular type of service considered. Competition
with respect to fuel and maintenance generally arises from other FBOs located at
the same airport or within the vicinity of such airport. The availability of
storage hangars for aircraft is also an important competitive factor. Generally,
pilots with aircraft hangared at a facility will purchase fuel and a substantial
portion of their maintenance and avionics requirements at that facility. The
Company maintains three hangars at its Newport News FBO that are used for its
fleet of aircraft as well as third-party aircraft. Management does not believe
that revenues from its FBO are dependent on a single customer. FIA contributions
to total revenues for fiscal 2002, 2001, and 2000 are 3.9%, 4.4%, and 5.9%
respectively.

Flight International, Inc. - Modification Repair and Overhaul Center

FII operates a Modification, Repair and Overhaul (MRO) Center, in
conjunction with its fleet operations at the NN/W Airport, pursuant to an
agreement with the Peninsula Airport Commission that terminates in January 2004.
The MRO Center consists of approximately 29,000 square feet of hangar space and
25,000 square feet of maintenance, shop and office space.

FII intends to exploit the expertise it has developed maintaining its
fleet of aircraft to repair, modify and maintain customer aircraft. The airport
is strategically located in the highly traveled Eastern Seaboard corridor, with
a heavy concentration of corporate aviation. FII competes with other facilities,
particularly Learjet Service Centers, nationwide.

During 1998 and 1999, management forecasted that demand for
modification, repair and overhaul services by aircraft Original Equipment
Manufacturers (OEM's) would provide an excellent growth opportunity to expand on
the Company's ability to design and modify "special missions" aircraft.
Additionally, several OEM's approached the Company to perform post-production
modifications to recently manufactured aircraft, minimizing disruption of the
OEM's highly automated assembly processes.

In February 2000, the Company acquired the assets and certain
liabilities of Flight Systems, Inc. (FSI), a subsidiary of Aviation Technology
Group, Inc. in Myrtle Beach, South Carolina. Located on the site of a former
U.S. Air Force base, the facility provided ample facilities to expand the
Company's aircraft Modification, Repair and Overhaul business lines into larger,
more complex aircraft. A wholly owned subsidiary, Flight International Services,
Inc., was established to utilize the assets acquired from FSI. FSI's core
business, Airline Heavy Check maintenance, provided the Company with an existing
revenue base upon which to build the modification work. FSI's 80 employees were
hired by FIS to continue the inspection, repair and overhaul services provided
to several airlines.

The facilities in Myrtle Beach provided sufficient room for repair and
overhaul of regional airline sized aircraft and virtually all corporate
aircraft. Capabilities at FIS included airframe, interiors, sheet metal,
accessories, composites, and paint shops.

The economic recession of early 2000 caused a dramatic reduction in
demand for both air carrier and corporate MRO services. When anticipated revenue
growth failed to materialize, management determined that the FIS division would
not be economically viable within an acceptable time period. The decision was
made to dispose of the business and a suitable buyer was found in November 2000.

The Company continues to expand its MRO business lines at its
facilities at the NN/W Airport. The Company plans to utilize its expertise as a
producer of "special missions" aircraft and its considerable experience with
Learjet aircraft to expand its MRO sales.

The MRO contributed 4.5% of total revenues in fiscal 2002, 7.4% in
fiscal 2001, and 5.2% in fiscal 2000.

Regulation

The Company's business is subject to regulation by the U.S. Federal
Aviation Administration ("FAA") and the Department of Transportation, under the
provisions of the Federal Aviation Act of 1958, as amended (the "Aviation Act").
The DOT is responsible for, among other things, evaluating and determining the
fitness of individuals and organizations to function as air carriers, and
maintaining jurisdiction over consolidations, mergers and acquisitions of air
carriers.

The FAA regulates aircraft and air carrier operations, including
personnel employed, equipment used, ground facilities, maintenance,
communications and other matters. More specifically, the FAA regulates the
operation of aircraft in commercial operations, including FII and FAI
operations, under Federal Aviation Regulation Part 135, and regulates MRO
Centers, including those operated by FII and, formerly by FIS, under Federal
Aviation Regulation Part 145.

The FAA has the authority to suspend or revoke the approval of air
carriers, commercial operators, repair stations and pilot schools, or their
licensed personnel, for failure to comply with any FAA regulation, and can
"ground" aircraft if questions arise concerning their airworthiness. Management
believes the Company holds all operating, airworthiness and other FAA
certificates required for the conduct of its business, although these
certificates may be suspended or revoked for cause.

The FAA also has authority under the Noise Control Act of 1972, as
amended, to monitor and regulate aircraft engine noise. Management believes that
the aircraft operated by the Company are in compliance with regulations
promulgated by the FAA and that such aircraft also comply with regulations for
aircraft exhaust promulgated by the Environmental Protection Agency pursuant to
the Clean Air Act of 1979, as amended. In addition, the Company's operations may
be subject to local regulation with respect to noise control. Such authorities
and ordinances could restrict the Company's use of older Learjets, which produce
greater engine noise than newer models.

Because of the extensive use of radio and other communication
facilities in its aircraft operations, the Company is also subject to the
Federal Communications Commission Act of 1934, as amended (the "FCC Act"), and
regulation there under by the Federal Communications Commission ("FCC"). The
Company believes it is in compliance with all material requirements of the FCC
Act and the FCC.

The Company maintains a fuel storage area at its FBO and handles
materials that are subject to federal, state and local regulations. The Company
believes it is in compliance with all such regulations and does not currently
anticipate that maintaining compliance will have a material effect on the
capital expenditures, earnings or competitive position of the Company. The
Company believes the costs and effects of compliance with such regulations are
minor.

Compliance with the regulatory requirements applicable to the Company's
business imposes material burdens on the Company, including license
requirements, maintenance, training, record keeping and reporting obligations
and limitations on the manner in which the Company operates its aircraft.
Further, the cost of compliance with these requirements is significant.
Management believes, however, that the regulatory requirements applicable to the
Company generally are no more burdensome to the Company than to other businesses
operating in the aviation services industry.

As of April 31, 2002, the Company had 281 employees, including 209
full-time employees. None of the Company's employees is covered by a collective
bargaining agreement.

ITEM 2. DESCRIPTION OF PROPERTY.

The Company's executive offices and corporate headquarters are located
at One Lear Drive, Newport News, Virginia 23602, where the Company has
approximately 10,000 square feet of office space.

As of April 30, 2002, FIA's leasehold interests at the NN/W Airport
represent approximately 1.6% of the total assets of the Company. These leasehold
interests consist of three hangars totaling 29,000 square feet and approximately
25,000 square feet of maintenance shop and office space. The leasehold
improvements are amortized on a straight-line basis over the term of the land
lease, which runs through January 2004. There are no plans for additional
improvements to the property, and, in the opinion of management, the property is
adequately insured.

As of April 30, 2002, FAI's leasehold interests in Bethel, Alaska,
acquired in June 2000, represent approximately 3.8% of the total assets of the
Company. These leasehold interests consist of a single hangar totaling 14,000
square feet of hangar, shop and office space. These leasehold improvements are
amortized on a straight-line basis over the term of the land lease, which runs
through June 2015. In the opinion of management, the property and its contents
are adequately insured.

FAI's leasehold interests in Anchorage, Alaska consist of a single
hangar totaling 5,800 square feet of hangar, shop and office space, leased from
Signature Aviation, on a month-to-month basis. There are no plans for leasehold
improvements to this facility. In the opinion of management, the property and
its contents are adequately insured.

FAI's leasehold interests in Dillingham, Alaska consist of a single
hangar totaling 6,400 square feet of hangar, shop, office, and mail-storage
space. The leasehold runs month-to-month. There are no plans for additional
improvements to the property. In the opinion of management, the property and its
contents are adequately insured.

FAI's leasehold interests in Deadhorse, Alaska consist of a portable
hangar facility erected in December 2000. The land lease consists of 13,500
square feet of land upon which the 8,000 square foot hangar was erected. The
land lease runs annually, with three option years. There are no plans for
additional improvements to the property. In the opinion of management, the
property and its contents are adequately insured.

The Company presently maintains or operates a fleet of 47 aircraft, of
which 11 are owned and 36 are leased. The Company also owns, subject to a Deed
of Trust and Security Interest Lien to Vbank, formerly First Union National
Bank, certain buildings, hangars and maintenance facilities. As of April 30,
2002, the indebtedness to Vbank was approximately $615,286. The indebtedness to
Vbank provides for complete amortization thereof through graduated payments
through November 2003, at which time the entire obligation will be satisfied.

A majority of the Company's assets are pledged as collateral on its
debt and capital lease obligations. The Company leases the land underlying its
maintenance and headquarters building and hangars until the year 2004, pursuant
to a lease agreement with the Peninsula Airport Commission of Newport News,
Virginia.

ITEM 3. LEGAL PROCEEDINGS.

Except as described below, there are no material legal proceedings to
which the Company is a party or to which any of its assets or properties are
subject. The Company is subject to normal litigations in the ordinary course of
business.

Charles T. Myers, Flight Systems, Inc., Aviation Technologies, Inc. and
George Kosko v. Flight International Group, Inc. The plaintiffs alleged that the
Company breached an asset purchase agreement by failing to pay various
liabilities incurred by Aviation Technologies Group, Inc. following the
Company's acquisition of Flight Systems, Inc. It is also alleged that the
Company failed to pay loans made to it by Flight Systems, Inc. The Plaintiffs
have also asserted an unjust enrichment claim based on the same facts. The
co-plaintiff in that case, George Kosko, is an attorney who represented Charles
Myers in the asset purchase process. Mr. Kosko is suing to recover attorneys
fees that he contends the Company owes him for work he did representing Mr.
Myers and his companies in negotiating the asset purchase agreement. The Company
has answered the Complaint, discovery is ongoing and the Company is defending
the case vigorously. The Company believes that an unfavorable outcome is
unlikely. The Company believes it has paid all that it owed to the Plaintiffs
and it has pending viable counterclaims. Management believes that the value of
the counterclaims could well outweigh the collective value of all claims made in
the Complaint, but there can be no assurance thereof.

There has been a recent development in the Charles Myers, et al v
Flight International Group, Inc. litigation as previously reported pending in
United States District Court in South Carolina. Mr. Myers, a Shareholder of the
Company, filed a motion to enjoin the sale of the Company's assets. His theory
is that the Company would no longer be able to respond to a judgment favorable
to the plaintiffs. In our view and the Company's counsel view, the motion is
frivolous. The Company has filed its response, which details the deficiencies of
the motion for a preliminary injunction. Our counsel has advised us that they do
not believe the motion poses any serious threat to the transaction, however, we
can provide no assurances thereof.

The claim by Mr. Kosko for attorney fees is $84,917. The Company has
offered the amount that was asserted to be due Mr. Kosko at the time of closing,
which was approximately $50,000. The Company has continued to offer that amount
to Kosko. The demand made by Mr. Myers and his related companies is $220,733.
Counsel does not believe that Mr. Myers and his related companies will be able
to recover that amount based upon the facts as known at this juncture in the
litigation.

BB&T of South Carolina v. Aviation Technologies, Inc. and Charles T.
Myers v. Flight International Group, Inc. This is a case brought against Myers
and his related companies relating to $26,838 of indebtedness they admittedly
owe BB&T. Mr. Myers and his related company, Aviation Technologies Group, filed
a third party complaint against The Flight International Group arguing that it
is responsible for this debt due to the sale. Counsel does not believe that Mr.
Myers and his related companies will be able to recover that amount based upon
the facts as known at this juncture in the litigation.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

No matters were submitted to a vote of security holders of the Company
during the fiscal quarter ended April 30, 2002.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

The Company became a reporting company under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), in 1984, at the time of its
initial public offering of securities.

The shares of New Common Stock of the Company currently are not listed
on any stock exchange or listed on any automated quotation system.

The Company believes that since April 30, 1993, virtually no public
trading has taken place with respect to the New Common Stock and its predecessor
class of common stock. There is no established public trading market currently
for the New Common Stock, and, therefore, no bid information is available.

The approximate number of holders of record of Common Stock as of
August 16, 2002 is 1,528. The Company has no other class of securities
authorized. On December 10, 1996, the shareholders of the Company approved an
amendment to the Company's Amended Certificate of Incorporation to increase the
number of authorized shares of Common Stock from 1,000,000 to 10,000,000 shares.

There have been no cash dividends declared in the past five fiscal
years, and the Company does not anticipate awarding cash dividends in the
foreseeable future, except as one possible action following consummation of the
transactions contemplated by the Asset Purchase Agreement.

ITEM 6. SELECTED FINANCIAL DATA.

SELECTED CONSOLIDATED FINANCIAL DATA

The following table sets forth selected consolidated financial data for the
Company and its subsidiaries as of and for each of the fiscal years: 2002, 2001,
2000, 1999 and 1998. No pro forma data for the Company giving effect to the
proposed Asset Sale is provided because the Company does not believe such
information is material to shareholders in evaluating the proposed Asset Sale
since the proposed Asset Sale consideration is all cash.

The financial information for the Company, as of and for each of the fiscal
years: 2002, 2001, 2000, 1999 and 1998 has been derived from the consolidated
financial statements of the Company, which have been audited by BDO Seidman,
LLP. The following financial information should be read in conjunction with
"Management's Discussion and Analysis" and the Consolidated Financial Statements
of the Company and the notes thereto included in this proxy statement.

<table>
<caption>
As of or for the Year Ended April 30,
--------------------------------------------------------------------------------------
2002 2001(2) 2000(1) 1999 1998
----------------- --------------------------------------------------------------------

Statements of Operations
Data:
Net revenues $ 44,788,464 $ 37,400,960 $ 28,984,109 $ 25,313,924 $ 22,060,399
Operating costs and
expenses 46,574,746 37,271,322 27,300,578 24,173,464 20,935,929
Income (loss) from
continuing operations
before taxes (2,731,025) (975,016) 1,335,849 809,411 758,883
Loss from discontinued
operations - (1,460,721) (457,568) - -
Loss on disposal of
subsidiary - (1,045,282) - - -
Net income (loss) (2,731,025) (3,481,019) 878,281 809,411 725,883
Basic and diluted earning
(loss)
per share data:
Continuing operations (2.46) (0.88) 1.29 0.80 0.72
Discontinued operations - (2.26) (0.44) 0.00 0.00
Balance sheet data:
Current assets 14,692,306 10,192,369 13,274,490 7,303,060 7,675,340
Total assets 25,166,430 21,025,793 20,130,977 11,915,382 11,793,619
Current liabilities 20,820,894 13,459,329 11,043,809 5,683,068 4,866,982
Long-term debt and
other liabilities 6,143,359 6,633,760 4,673,445 3,018,730 4,512,907
Shareholders' equity (deficit) (1,797,823) 932,704 4,413,723 3,213,584 2,404,173
Other data:
Book value per share N/A 0.84 3.98 3.17 2.38
</table>

(1) Includes the acquired net assets of FAI and FIS
(2) Includes operations of FAI, acquired April 2000.

SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES

The Company's significant accounting policies are more fully described in its
Summary of Accounting Policies to the Company's consolidated financial
statements. The preparation of financial statements in conformity with
accounting principles generally accepted within the United States requires
management to make estimates and assumptions in certain circumstances that
affect amounts reported in the accompanying financial statements and related
notes. In preparing these financial statements, management has made its best
estimates and judgments of certain amounts included in the financial statements,
giving due consideration to materiality. The Company does not believe there is a
great likelihood that materially different amounts would be reported related to
the accounting policies described below; however, application of these
accounting policies involves the exercise of judgment and the use of assumptions
as to future uncertainties and, as a result, actual results could differ from
these estimates.

Revenue Recognition

The Company recognizes contract revenue as hours are flown, at the average rate
per flight hour, over the term of each contract. Certain contracts provide for a
guaranteed minimum number of flight hours per contract year. Contract revenue
for such guaranteed but unflown hours, if any, is recognized at the end of the
contract year. The Company recognizes maintenance revenue at the time of
completion.

Calculation of Inventory

The Company's inventories are recorded as follows:

Aircraft parts, which consist of rotables and repairable and expendable aircraft
components, are recorded using the specific identification method at the lower
of cost or market for rotables and repairable aircraft components, and the lower
of average cost or market for expendable components.

Targets and cable, which are special equipment required to perform target tow
missions, are recorded at the lower of average cost or market.

Fuel, which includes Jet A and Avgas, both of which are consumed in the
performance of contracts and sold commercially, is recorded at the lower of
average cost or market.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION.

RESULTS OF OPERATIONS

YEAR ENDED APRIL 30, 2002 COMPARED TO THE YEAR ENDED APRIL 30, 2001

Revenues

For the year ended April 30, 2002, revenues from continuing operations totaled
$44,788,464. This represents an increase of 19.75% over the prior year. In
fiscal year 2002, the Company's revenues were generated from three sources.
Fleet Operations of owned or leased aircraft accounted for 91.7% of total
revenue, while the MRO Center produced 4.5% of sales and the FBO provided 3.8%
of total revenues.

A year-over-year revenue comparison for each source is outlined in the
following table. Fleet Operations and Fixed Base Operations showed increases
while the MRO Center posted a decrease in revenues as displayed below (in
thousands):

12 Months Ended 12 Months Ended
April 30, 2002 April 30, 2001 % Increase (Decrease)
-------------- -------------- ---------------------

Fleet Operations $ 41,059 $ 33,009 24.4%
MRO Center $ 2,023 $ 2,761 (26.7)%
Newport News FBO $ 1,706 $ 1,630 4.7%

The increase in Fleet Operations revenues can be attributed to a 15.6% net
increase in FII's Government fleet operations sales, a 112.0% increase in FII's
commercial fleet operations sales due to flight operations conducted in
Australia and a 46.4% increase in revenues at FAI associated with charter
operations as part of a six month sub-contract with Bristol Environmental. Fleet
Operations revenues were adversely impacted by reductions in revenues of
$858,000 for the aircraft-leasing contract at China Lake as revenues returned to
"pre-aircraft modification" levels. Revenues associated with the CAS-MED
contract decreased by $294,000. NATO and CAS-MOS revenues increased $5,483,000,
however sub-contractor revenues for tanker operations added $4,606,000 of this
total. While the revenue gains for CAS-MOS of $716,000 represented a 3.8%
increase, management had been forecasting an 8.0% increase based on the
assumption that the CAS-MOS bridge contract's service level would mirror the
previous contracts. Two aircraft required by the original CAS-MOS contract were
excluded from the bridge contract. As a direct result, the Company's revenues
were $800,000 lower than its forecasts. Similarly, revenues in Flight Alaska,
Inc. were lower than its forecasts by approximately $1,000,000 as revenue
opportunities for FAI's large twin turbo-prop aircraft were adversely impacted
by the events of September 11th. Anticipated oil industry revenues failed to
materialize as several of the major oil producers on the North Slope of Alaska
curtailed their exploration and development plans. Finally, the oil industry's
plans to explore and develop the Alaska Natural Wildlife Refuge (ANWR) were
dealt a severe blow when the United States Congress failed to pass enabling
legislation. The prospects of future oil exploration and development have been
significantly diminished. The Company plans to reposition the four CASA 212's
and the Beech King Air to more profitable DOD contracts under FII.

MRO Center revenues were lower in fiscal 2002 as general economic conditions
impacted the aviation maintenance sector significantly. Airframe "Service Life
Extension Program" (SLEP) revenues decreased over prior year's levels as a
result of the uncertainty after September 11th. The Company began to realize
value from its efforts to develop and market a Landing Gear SLEP. Commercial and
government MRO activities were also curtailed by internal modification and depot
level maintenance requirements on existing and newly acquired fleet operations
aircraft.

FBO revenues increased in fiscal 2002 over the prior year, despite the effects
of September 11th, due to an increase in discount air carrier operations at the
NN/W Airport. Increased fuel prices also contributed to the gain offsetting the
reduction in the volume of gallons pumped. In addition, at year-end the Company
was awarded the Defense Fuel Sales contract for the NN/W airport that will
provide roughly $1,000,000 in annual fuel sales revenues for DOD customers such
as FII's military training operations. The three-year contract runs through
March 31, 2005. There can be no assurances that the contract would continue past
that date.

Cost of Services

Cost of services from continuing operations includes the direct operating
expenses of aircraft utilized and maintained by the Company. Types of expenses
incurred include the following: lease, fuel, insurance, maintenance, pilots and
equipment. Also included are the costs of operating the FBO at the NN/W Airport,
the costs of goods sold and direct labor for the MRO Center.

For fiscal year 2002, there was a 29.1% increase in cost of services from
continuing operations. The major factors contributing to the increase in cost of
services were expenses related to the cost of fuel, aircraft lease, insurance
and tax expenses associated with temporarily idle assets required for the
delayed follow on contract and general increases in operational activities
associated with growth in CAS-MOS subcontracted services and Flight Alaska
business lines. Overall gross margins declined to 7.8% from 15% in the prior
year. Included in the net change is a reclassification of previously recorded
G&A expenses. This change was in response to the CAS-MOS directed requirement
for Cost Accounting Standards compliance. Had these changes not been made
management estimates that, the gross margin would have declined to 9.9% from 15%
for the prior fiscal year.

During fiscal year 2002, fuel prices were stable, but at historically elevated
levels and substantially above the prices bid in the Company's long-term
contracts. Management requested an equitable fuel adjustment for the
Government's fiscal year that ended September 30, 2001, but the request has been
denied. Fuel expenses were adjusted upward $240,000 in fiscal year 2002 to
reflect these additional un-reimbursed costs from fiscal 2001.

As is prevalent in capital-intensive businesses, the majority of the Company's
direct operating costs are fixed. Aircraft ownership, insurance, taxes,
facilities related costs, certificate management personnel and related
overheads, and contract management personnel and their related overheads are
determined by contractual commitment and cannot be readily reduced. Most of the
remaining costs, including flight crew and maintenance wages, tend to be
semi-variable in nature based on contractual commitments to respond to our
customer's requests for service with little or no notice.

As the sole bidder on the new CAS-MOS contract, the Company began preparations
for performing the new contract in November 2001 anticipating a January contract
start date. The new contract called for additional Learjet 30 Series aircraft
with greater time-on-station capabilities than six of the Company's existing
Learjet 20 Series aircraft. While modification costs can be capitalized,
aircraft ownership expenses during the preparation process cannot. Management
calculates the ownership costs for the three additional aircraft acquired for
the follow-on CAS-MOS contract generated $575,000 of expenses in fiscal 2002.
With the contract award date postponed until April 1st, the Company had no other
interim use for these aircraft causing significant erosion in operating margin.

Management believes that with the start-up of the follow-on CAS-MOS contract,
fleet utilization rates and revenue yield increases have positioned the Company
for substantially higher margins than have been experienced in the past 5 years.

Depreciation and Amortization

Aircraft and engines are depreciated as follows: aircraft are depreciated on a
straight-line basis over 12 years, while engines are depreciated based on hours
flown down to a core value. In addition, a reserve is recorded to cover the cost
of major periodic inspections on engines. Electronic Warfare equipment is
depreciated on a straight-line basis over five years. All other property and
equipment is depreciated over its estimated useful life or lease term, if
applicable.

Depreciation and amortization of $1,609,342 for fiscal year 2002 reflects an
increase of 25.5% compared to fiscal year 2001. The $327,402 increase is due
primarily to depreciation on an additional aircraft and equipment of $160,000,
increased activity levels for fleet aircraft resulting in increased engine
depreciation expenses of $5,000, increased airframe depreciation of $60,000 and
depreciation associated with the assets acquired in Alaska of $105,000.

General, Corporate and Administrative

General, corporate and administrative expenses from continuing operations
consist principally of facility costs associated with the Company's hangars and
corporate headquarters, and labor costs associated with the administrative and
sales staff. General, corporate and administrative expenses from continuing
operations aggregated $3,813,459 for the fiscal year 2002, a decrease of 16%
over the fiscal year 2001. The decrease was primarily due to the
reclassification of overhead type expenses to the Cost of Services line. This
change was in response to the CAS-MOS directed requirement for Cost Accounting
Standards compliance. Had these changes not been made, general, corporate and
administrative expenses would have been consistent with prior fiscal years'
expenses.

In 2002 the Company realized bad debt expense of approximately $500,000.
Included in this adjustment was a charge of $210,000 for the default of a note
receivable from Reliance Aerotech associated with the sale of FIS's assets.
Overall, bad debt expense was decreased by $500,000 over those experienced in
fiscal 2001.

In fiscal 2002, the Company experienced approximately $300,000 in
one-time legal and accounting support costs associated with the VTF acquisition,
$215,000 for additional accounting and operating software design and
implementation expenses and $196,000 in general increases associated with growth
in operating levels.

Interest Expense

Net interest expense for fiscal 2002 decreased to $944,743 from $1,104,654 for
the prior fiscal year, or 14.5%. The decrease in interest expense is principally
due to the decrease in interest rates charged on the gross borrowing and
adjustments for overcharged interest expenses in the prior year.

Income Tax Expense

Income tax expense varies from statutory tax rates principally because of the
utilization of net operating loss carry forwards. For further discussion see
Note 8 to the Consolidated Financial Statements included herein.

Net Income

The consolidated net loss on continuing operations for fiscal year 2002 was
$2,731,025, or a loss of $2.46 per share. In fiscal year 2001, the consolidated
net loss on continuing operations was $975,016 or $.88 per share and total
consolidated net loss after discontinued operations was $3,481,019 or $3.14 per
share. The weighted average number of shares was 1,109,588 and 1,109,424
respectively.

YEAR ENDED APRIL 30, 2001 COMPARED TO THE YEAR ENDED APRIL 30, 2000

Revenues

For fiscal year 2001, revenues from continuing operations totaled $37,400,960.
This represents an increase of 29.0% over the prior year. In fiscal year 2001,
the Company's revenues were generated from three sources. Fleet Operations of
owned or leased aircraft accounted for 88.3% of total revenue, while the MRO
Center produced 7.3% of sales and the FBO provided 4.4% of total revenues.

A year-over-year revenue comparison for each source is outlined in the following
table. While Fleet Operations and the MRO Center showed substantial increases,
Fixed Base Operations revenues decreased as displayed below (in thousands):

12 Months Ended 12 Months Ended
April 30, 2001 April 30, 2000 % Increase (Decrease)
-------------- -------------- ---------------------
Fleet Operations $ 33,009 $25,772 28.1%
MRO Center $ 2,761 $ 1,510 82.8%
Newport News FBO $ 1,630 $ 1,702 (4.4)%

The increase in Fleet Operations revenues is due to continued expansion of
flying hours in the CAS-MOS contract, the addition of FAI's revenue stream, and
an increase in compensation associated with an extension of the Company's
contract with the U.S. Navy to supply and maintain five Metro III aircraft for
charter passenger service at China Lake, California. Included in the extension
of the China Lake Contract were revenues for modifying the Metro III fleet to
new DOD safety and operating standards. At the end of fiscal 2001, the Company
deployed additional assets to Australia in support of an interim flight training
services agreement to provide EW training for the Royal Australian Navy. As a
subcontractor to Raytheon Australia, the Company will also participate in the
modification of a Learjet 35 Series during fiscal 2003. In addition, the
Company's efforts to grow European sales met with success as sales to NATO and
several NATO-related customers also increased. In the past, parts sales to
government agencies were classified as Fleet Operations revenue. Management
reclassified approximately $585,000 from Fleet Operations to Commercial
Maintenance during fiscal 2001. On a comparable basis, Fleet Operations revenues
would have increased by 30.3% over fiscal 2000 levels.

MRO Center revenues were up due to the performance of several large aircraft
modification and refurbishment programs during the year ended April 30, 2001.
During this period, several customers brought high-time aircraft for Service
Life Extension Program services. Management also took steps during 2001 to place
all maintenance-related revenues under its MRO business line. In the past, parts
sales to government agencies were classified as Fleet Operations revenue.
Management reclassified approximately $585,000 from Fleet Operations to
Commercial Maintenance during fiscal 2001. On a comparable basis, MRO revenues
increased by 44.1% over fiscal 2000 levels.

FBO revenues decreased due to continued market share erosion and a softening of
the overall general aviation activities during the year.

Cost of Services

For fiscal year 2001, there was a 30.6% increase in cost of services from
continuing operations. The major factor contributing to the increase in cost of
services was expenses related to the cost of fuel, aircraft hull and liability
insurance expenses, and general increases in operational activities associated
with growth in CAS-MOS and Flight Alaska business lines. The overall gross
margin declined to 15% from 16% in the prior year.

The Company has worked to decrease its exposure to volatile fuel prices by
performing as many services as possible on an Aircraft, Crew, Maintenance and
Insurance (ACMI) basis. Under an ACMI arrangement, the Company is responsible
for aircraft ownership, crew, maintenance and insurance expenses. The customer
is responsible for cost of fuel, ground handling, landing and air traffic
control fees (if any), and any and all crew accommodation expenses. Due to
existing fixed-price contracts and the Company's common-carriage operations, it
is neither practical nor possible to perform all the Company's services on an
ACMI basis and the Company is not able to eliminate this exposure completely.
During fiscal year 2001, fuel prices were extremely volatile increasing over 30%
from the prior year and adversely affected profitability. Management
subsequently requested an equitable fuel adjustment for the same period from the
DOD and that request is currently being reviewed. In anticipation of a partial
reimbursement, management recorded a credit of $240,000 for fiscal year 2001. No
assurance can be made that all or part of this equitable fuel adjustment request
will be honored.

Depreciation and Amortization

Depreciation and amortization of $1,281,940 for the fiscal year ended April 30,
2001 reflects an increase of 62.4% compared to fiscal year 2000. The $492,423
increase is due primarily to depreciation on an additional aircraft and
equipment of $125,000 increased activity levels for fleet aircraft that
increased engine depreciation expenses of $70,000, and depreciation associated
with the assets acquired in Alaska of $205,000.

General, Corporate and Administrative

General, corporate and administrative expenses from continuing operations
consist principally of facility costs associated with the Company's hangars and
corporate headquarters, and labor costs associated with the administrative and
sales staff. General, corporate and administrative expenses from continuing
operations aggregated $4,537,730 for fiscal year 2001, an increase of 71.5% over
the prior fiscal year. The increase was a result of expenses associated with
continuing implementation of new accounting software systems, administrative and
traffic related expenses associated with the Company's Alaska operations,
additional legal fees associated with the Company's divestitures during the year
and an increase in bad debt expense of approximately $947,000. This bad debt
expense was primarily due to additional reserve requirements combined with
direct customer account write-offs.

Interest Expense

Interest expense increased to $1,104,654 from $347,682 for the prior fiscal
year, or 217.7%. The increase in interest expense is principally due to an
increase in short-term borrowings to fund the working capital requirements of
the additional business enterprises that began or were acquired during the
fiscal year and interest on the additional fixed assets added during fiscal
2001. The Company had capitalized interest of approximately $166,000 related to
assets held for resale in fiscal 2000. See "Liquidity and Capital Resources"
below.

Income Tax Expense

Net Income

The consolidated net loss on continuing operations for fiscal year 2001 was
$975,016, or a loss of $.88 per share and the consolidated net loss after
discontinued operations was $3,481,019 or a loss of $3.14 per share compared to
a net profit on continuing operations of $1,335,849 or $1.29 per share and a
consolidated net profit after discontinued operations of $878,281 or $0.85 per
share, for the year ended April 30, 2000. For fiscal 2000, the impact to net
income from the discontinued Myrtle Beach Operation was $457,568. The weighted
average number of shares was 1,109,424 and 1,029,656, respectively.

YEAR ENDED APRIL 30, 2000 COMPARED TO THE YEAR ENDED APRIL 30, 1999

Revenues

For fiscal year 2000, revenues from continuing operations totaled $28,984,109.
This represents an increase of 14.5% over the prior fiscal year. In fiscal year
2000, the Company's revenues were generated from three sources. Fleet Operations
of owned or leased aircraft accounted for 89.0% of total revenue, while the MRO
Centers (Commercial Maintenance) produced 5.2% of sales and the FBO provided
5.8% of total revenues.

A year-over-year revenue comparison for each source is outlined in the following
table. While Fleet Operations showed substantial increases, Commercial
Maintenance and Fixed Base Operations revenues decreased as displayed below (in
thousands):

12 Months Ended 12 Months Ended
April 30, 2000 April 30, 1999 % Increase (Decrease)
-------------- -------------- ---------------------
Fleet Operations $25,772 $20,875 23.5%
Commercial Maintenance $ 1,510 $ 2,667 (43.4)%
Newport News FBO $ 1,702 $ 1,772 (4.0)%

The increase in Fleet Operations revenues is due to continued expansion of
flying hours in the CAS-MOS contract, the addition of the CAS-MED contract in
October 1999, and an increase in compensation associated with an extension of
the Company's contract with the U.S. Navy to supply and maintain five Metro III
aircraft for charter passenger service at China Lake, California. Included in
the extension of the China Lake Contract were revenues for modifying the Metro
III fleet to new DOD safety and operating standards.

Commercial Maintenance revenues were down due to the Company's requirement to
procure and ready three additional Learjet 30 Series aircraft for operations in
conjunction with the award of the CAS-MED contract.

FBO revenues decreased due to increased competition at the NN/W Airport that
resulted in the loss of some fuel sales market share.

Cost of Services

Cost of services from continuing operations includes the direct operating
expenses of aircraft utilized and maintained by the Company. Types of expenses
incurred include the following: lease, fuel, insurance, maintenance, pilots and
equipment. Also included are the costs of operating the FBO at the NN/W Airport
and the costs of goods sold and direct labor for the MRO Centers.

For fiscal year 2000, there was a 14.2% increase in cost of services from
continuing operations. The major factor contributing to the increase in cost of
services was expenses related to the cost of fuel, some non-recurring expenses
associated with start-up of the CAS-MED contract and the Flight Systems, Inc.
acquisition. The overall gross margin increased to 16.0% from 15.8% in the prior
fiscal year.

The Company has worked to decrease its exposure to volatile fuel prices by
performing as many services as possible on an Aircraft, Crew, Maintenance and
Insurance (ACMI) basis. Under an ACMI arrangement, the Company is responsible
for aircraft ownership, crew, maintenance and insurance expenses. The customer
is responsible for cost of fuel, ground handling, landing and air traffic
control fees (if any), and any and all crew accommodation expenses. Due to
existing fixed-price contracts and the Company's common-carriage operations, it
is neither practical nor possible to perform all the Company's services on an
ACMI basis and the Company is not able to eliminate this exposure completely.
During fiscal year 2000, fuel prices increased over 100% and adversely affected
profitability. During fiscal year 2000, actual fuel expense was $2,545,580
versus $2,217,290 in the prior year, which reflects both an increase in fuel
price and flight activity.

During fiscal year 2000, the Company recognized approximately $300,000 in
expense reimbursement for federal excise taxes paid in prior years for fuel used
in connection with the CAS-MOS contract. The expense was initially recognized in
fiscal years 1997, 1998 and 1999. This tax reimbursement is shown as an offset
to fiscal year 2000 fuel expense.

Depreciation and Amortization

Aircraft and engines are depreciated as follows: aircraft are depreciated on a
straight-line basis over 12 years, while engines are depreciated based on hours
flown down to a core value. In addition, a reserve is recorded to cover the cost
of major periodic inspections on engines. Electronic warfare equipment is
depreciated on a straight-line basis over five years. All other property and
equipment is depreciated over its estimated useful life or lease term, if
applicable.

Depreciation and amortization of $884,611 for fiscal year 2000 reflects an
increase of 47.3% compared to fiscal year 1999. The $284,000 increase is due
primarily to fully depreciating an aircraft engine which required overhaul
prematurely of $105,000, the addition of depreciation for two months at FIS of
$95,000, increases in assets associated with additional aircraft, equipment and
facilities required for expansion of the CAS-MOS and CAS-MED contracts, and
GeoFlight equipment.

General, Corporate and Administrative

General, corporate and administrative expenses from continuing operations
consist principally of facility costs associated with the Company's hangars and
corporate headquarters, and labor costs associated with the administrative and
sales staff. General, corporate and administrative expenses from continuing
operations aggregated $2,645,932 for the year ended April 30, 2000, an increase
of 14.0% over the prior twelve-month period. The increase was a result of
additions of personnel responsible for the Company's new activities, expenses
associated with implementation of new accounting software systems and
additional legal fees associated with the Company's expansion during the year.

Interest Expense

Interest expense increased to $347,682 from $331,049 for the prior fiscal year,
or 5.1%. The increase in interest expense is principally due to an increase in
short-term borrowings to fund the working capital requirements of the new
contracts and business enterprises that began or were acquired during the fiscal
year. In addition, the Company capitalized interest of approximately $166,000
related to assets held for resale. See "Liquidity and Capital Resources" below.

Income Tax Expense

Net Income

The consolidated net profit from continuing operations for fiscal year 2000 was
$1,335,849, a profit of $1.29 per share compared to a net profit of $809,411 or
$0.80 per share, for fiscal year 1999. The weighted average number of shares was
1,029,656 and 1,013,976, respectively.

In the fourth quarter of fiscal year 2000, the Company recorded net adjustments,
which increased net income by approximately $400,000, reflecting an adjustment
for approximately $825,000 of unrecorded contracts revenues earned during the
third quarter and a deferral of a portion of a gain related to a sale-leaseback
transaction of $425,000.

YEAR ENDED APRIL 30, 1999 COMPARED TO THE YEAR ENDED APRIL 30, 1998

Revenues

For the year ended April 30, 1999, revenues totaled $25,313,924. This
represents an increase of 15% over the prior year. Company revenue is generated
from three sources. Flight operations of owned or leased aircraft accounts for
82% of total revenue, followed by the maintenance and repair facility at 11% and
the FBO at 7% of total revenue.

While flight operations and the FBO showed substantial increases, the
maintenance and repair facility revenue increased to a greater extent, as
displayed below (in thousands):

12 Months Ended 12 Months Ended
April 30, 1999 April 30, 1998 % Increase
--------------- --------------- ----------
Flight Operations $20,875 $ 18,585 12%
Commercial Maintenance $ 2,667 $ 1,853 44%
Newport News FBO $ 1,772 $ 1,622 9%

The increase in flight operations is primarily due to a 10% increase in
revenues from the CAS-MOS contract. Other contract flying also increased by more
than 20%. Maintenance revenue increased due to a large mid year project
involving the rebuilding of a damaged Learjet. FBO revenues increased following
a pattern of increased traffic through the NN/W Airport.

Cost of Services

Cost of services include, the direct operating expenses of aircraft
owned and leased by the Company. Types of expenses incurred include the
following: lease, fuel, insurance, maintenance, pilots and equipment. Also
included are the costs of operating the FBO at the NN/W Airport. The costs for
the aircraft repair facility are also included in costs of services.

For fiscal year 1999 there was a 17% increase in costs of services. The
major factor contributing to the increase in cost of services was expenses
related to the CAS-MOS contract. The overall gross margin declined to 16% from
18% in the prior fiscal year.

Depreciation and Amortization

Aircraft and engines are depreciated as follows: aircraft are
depreciated on a straight-line basis over 12 years. Engines are depreciated
based on hours flown down to a core value. In addition, a reserve is recorded to
cover the cost of major periodic inspections on engines. Electronic warfare
equipment is depreciated on a straight-line basis over five years. All other
property and equipment is depreciated over its estimated useful life or lease
term, if applicable.

Depreciation and amortization of $600,658 for fiscal year 1999 reflects
an increase of 5% compared to fiscal year 1998. This change is primarily due to
an engine purchase completed during the year.

General, Corporate and Administrative

General, corporate and administrative expenses consist principally of
facility costs associated with the three hangars and corporate headquarters
building, and labor costs associated with the administrative and sales staff.
General, corporate and administrative expenses aggregated $2,320,463 for fiscal
year 1999, an increase of 7% over the prior fiscal year. The increase is not due
to one particular event but more of an overall increase in all aspects of
general and administrative costs.

Interest Expense

Interest expense decreased to $331,049 from $365,540 for the prior
fiscal year, or 9%. The decrease in interest expense is principally due to the
pay down of long-term debt as well as more favorable rates of interest on the
line of credit with Crestar Bank.

Income Tax Expense

Income tax expense varies from statutory tax rates principally because
of the utilization of net operating loss carry forwards.

Net Income

The consolidated net profit for fiscal year 1999 was $809,411, a profit
of $.80 per share compared to a net profit of $725,883, or $.72 per share, for
fiscal year 1998. The weighted average number of shares was 1,013,976 for both
years.

LIQUIDITY AND CAPITAL RESOURCES

YEAR ENDED APRIL 30, 2002

The Company's growth plan resulted in a significant number of financing
transactions in fiscal year 2002. During that year, the Company continued to
fund its growth and operations primarily through short and long-term borrowings.

Cash from Operations

Net losses and non-operating items and the effect of depreciation and
reserves absorbed $1,053,214 in fiscal 2002 versus $1,697,706 absorbed in
fiscal 2001. Changes in working capital accounts provided $3,504,055 in fiscal
year 2002 while providing $2,117,807 in the prior fiscal year. On a net basis,
the Company's operating activities provided $2,450,841 for fiscal year 2002,
while providing $420,101 in the comparable prior year period.

Cash to Investing Activities

Acquisition of additional property and equipment absorbed $1,654,541,
additional investment assets held for resale absorbed $1,566,081, and investment
in other long-term assets consumed $65,000. The purchase of two J-31 aircraft
and their preparation for resale absorbed $1,566,081 and investment in other
long term assets consumed $65,000. On a net basis, investment activities
resulted in the absorption of $3,199,926 in fiscal year 2002.

Cash from Financing Activities

In fiscal year 2002, the Company utilized a combination of short and
long-term borrowing to fund its expansion needs. Net proceeds from long-term
debt and notes payable provided $1,300,000. Net proceeds from lines of credit
provided an additional $883,232 in cash to fund increased working capital
requirements that accompanied the expansion. Repayment of scheduled long-term
debt and notes payable absorbed $1,422,391. During the fiscal year, short and
long-term financing activities provided a total of $760,841.

For fiscal year 2002, the Company realized a net increase in cash and
cash equivalents of $11,756.

On February 25, 1998, the Company entered into a line of credit with
SunTrust Bank ("SunTrust") for its short term financing needs. The agreement
provided for up to $2,750,000 in credit. The loan was represented by a demand
note which could have been payable at any time upon the demand of SunTrust. The
Company was obligated to pay interest to SunTrust at prime rate plus one-half
percent of the average balance outstanding. The line was secured by the
Company's accounts receivable and an assignment of the CAS-MOS contract.

On August 1, 1999, the Company entered into an agreement with Wachovia
Bank, N.A. ("Wachovia") to provide $1,300,000 in "floor-plan" debt, at an
interest rate of prime plus 1%, to facilitate the purchase of a Learjet 35
Series aircraft that the Company intended to refurbish and sell. In a related
transaction dated August 15, 1999, the Company refinanced one of its owned
Learjet aircraft to secure $500,000 of additional working capital to cover
refurbishment investments on this aircraft. These aircraft provide security for
the debt.

On October 15, 1999, the Company entered into an agreement with First
Commercial Bank to provide $225,000 in term debt at an interest rate of prime
plus .75% to facilitate the purchase of one Piper Navajo and one Piper Aztec for
use in the Company's GFL operation.

On February 29, 2000, as part of the FIS acquisition, the Company
entered into an agreement with a shareholder for a non-interest bearing
stockholder note payable maturing February 28, 2001 in the amount of $168,953.
Net advances from February 29, 2000 to April 30, 2000 increased the balance to
$238,585. Following a complete reconciliation of accounts between December 15,
1999 and February 29, 2001, the Company concluded that it believes that the
shareholder misrepresented the basis for this note. The disposition of this note
is part of the basis of current litigation and no action has been taken to
reduce the current liability of approximately $203,000 until the outcome of the
litigation is known.

In April 2000, the Company entered into an agreement with Wachovia to
provide $240,000 in long-term debt at an interest rate of LIBOR plus 3% to
purchase the assets of Perry Avionics in Myrtle Beach, South Carolina. The
assets acquired in the transaction provide security for the 3-year loan.

In April 2000, the Company entered into an agreement with Wachovia to
provide $775,000 in long-term financing at an interest rate of LIBOR plus 3% to
facilitate the purchase of selected assets of Yute. The aircraft, spare parts
and equipment acquired provide security for the 5-year loan.

On June 5, 2000, the Company entered into an agreement with the Alaska
Industrial Development and Export Authority to purchase a hangar in Bethel,
Alaska for $1,100,000. The purchase was financed in total by AIDEA and is
payable over 15 years at an interest rate of 9.25%. The loan is collateralized
by the hangar facilities.

On September 5, 2000, the Company entered into a new Loan and Security
Agreement with Wachovia for all its short-term financing needs. The new
agreement provides for up to $5,500,000 in credit and is represented by a term
note. The Company is obligated to pay Wachovia interest at LIBOR plus 2.5% on
the average outstanding balance plus 25 basis points on any unused portion of
the line. The line may be reduced at the discretion of the Company, without
penalty. This instrument, which replaces current short-term financing of
$4,123,127 at BB&T, SunTrust, Harbor, and Wachovia Banks collectively,
represents more favorable pricing, terms and conditions to the Company. The new
line is secured by the Company's accounts receivable, inventory held for resale,
intangible assets and an assignment of its CAS-MOS and CAS-MED contracts. In
August 2001 and January 2002 the line was increased to provide additional
working capital to fund the continued revenue growth of the Company. Currently,
the credit line is authorized up to $7,250,000 and carries a rate of Prime plus
one-half percent. As of April 30, 2002, the available balance on the line is
$1,421,000.

In February 2001, the Company determined it had operational need for an
aircraft that previously was shown as an asset held for resale. Bank financing
in the amount of $2,100,000 in term debt at a rate of LIBOR plus 3% was secured
from Wachovia Bank for the asset, which has an estimated market value of
$2,500,000.

In July 2001, the Company purchased two Jetstream 31 aircraft from
Maritime Sales and Leasing Inc. (an affiliate of our Chairman and President,
David E. Sandlin and a director, John Bone) with the intent to prepare them for
resale. The two aircraft were acquired for $1,300,000 and were financed with an
equal amount of term debt at a rate of 8.55% by Wachovia Bank. The planes have
been substantially prepared for resale and are being marketed by the Company
currently.

The Company operates in a capital-intensive industry. Typically, major
expenses are incurred in connection with the initiation of a new contract. These
costs can consist of acquisition of additional aircraft, equipment and training,
and these costs can be reduced through leasing arrangements and advance payments
from customers, if obtainable. The Company believes that it will be able to
arrange through available means the financing of these initial contract costs
when necessary, although no assurance can be given.

Contractual obligations and commercial commitments of the Company as of
April 30, 2002 are approximately as follows:

SCHEDULE OF CONTRACTUAL OBLIGATIONS:

Payments due by period
----------------------------------------------------------------------------------------
Less than
Total 1 year 1-3 years 4-5 years After 5 years
----------------------------------------------------------------------------------------

Long-term
debt $ 7,090,256 $1,555,433 $ 3,567,812 $1,104,311 $862,700
Capital
leases 439,540 252,500 187,040 - -
Operating
leases 22,079,000 5,817,000 9,877,000 6,385,000 -
-------------------------------------------------------------------------------
Total
Contractual
cash
obligations $29,608,796 7,624,933 $13,631,852 $7,489,311 $862,700
===============================================================================
</table>
In addition to the above minimum lease commitments, historically the
Company has incurred additional lease expense that is based on hours flown for
which there is no minimum obligation. Amounts paid under these agreements were
approximately $10,473,000, $6,839,000, $7,028,000, $4,160,000 and $3,485,000,
for the years ended April 30, 2002, 2001, 2000, 1999 and 1998, respectively.

SCHEDULE OF COMMERCIAL COMMITMENTS:

<table>
<caption>
Amount of commitment expiration per period
----------------------------------------------------------------------------------------
Less than
Total 1 year 1-3 years 4-5 years After 5 years
----------------------------------------------------------------------------------------

Line of
credit * $7,250,000 $7,250,000 $ - $ - $ -
</table>

* The Company has a line of credit agreement with a bank. The Company may borrow
up to 90% of net eligible accounts receivable on government contracts and 85% of
commercial receivables. Borrowings under the line of credit may not exceed
$7,250,000. At April 30, 2002, the Company had borrowings outstanding under the
line of approximately $5,830,000.

The Company believes that it will be able to refinance debt as
necessary as it becomes due. In addition, the Company believes that current
levels of cash together with cash from operations and funds available under its
borrowing arrangements will be sufficient to meet its capital requirements for
the next twelve months.

BUSINESS TRENDS AND RESULTS OF SUBSIDIARY OPERATIONS

General

On a consolidated basis, the Company's profitability was adversely
impacted during fiscal 2002 by the losses associated with its Alaska operations,
lower than anticipated asset utilization and revenue generation on the CAS-MOS
bridge contract, efforts of the Company to prepare for the new CAS-MOS contract,
fuel cost adjustments associated with the DOD's denial of equitable adjustments
for operations in fiscal 2001 and 2002, additional legal and professional fees
associated with the VTF sale and accounting system software implementation, and
bad debt expenses associated with stale receivables from both government and
commercial customers.

The trend toward slowing revenue growth continued in 2002 and was
dramatically exacerbated by the events of September 11, 2001. Training services
and air carrier operations were immediately halted and resumed on a limited
basis after approximately one week. While security concerns associated with
aircraft operations were eventually resolved, demand for the Company's services
were reduced in both Alaskan operations and from the U.S. Navy, which found
itself, deploying more assets around the world and, as a result, disrupting its
training schedules.

In July 2000, the aviation industry entered an economic downturn that
resulted in a significant reduction in revenue stream from airline maintenance
customers that formed the core of FIS's customer base. In addition, the
Company's source of growth revenues was interrupted as the commercial aircraft
modification market also turned down. By the end of July 2000, management
determined that the original business plan for its Myrtle Beach operations was
no longer attainable and made a decision to sell the FIS business. A qualified
buyer was found and the FIS business was sold on November 6, 2000. Losses from
this operation totaled $1,460,721 while losses on the disposal of this operation
were $1,045,000 in fiscal 2001. In fiscal 2002, the company experienced an
additional write off of $210,000 when the purchaser of FIS's assets, Reliance
Aerotech, Inc. defaulted on its note to the Company for the equipment that was
part of the sale. The Company retrieved the equipment that formed the collateral
for the note and valued the assets at $303,000 based on estimated market values
obtained from independent third party equipment marketers. The additional loss
was taken as bad debt expense in 2002 and represents the difference between the
balance due on the note and collateral value at the time of default.

Profitability Improvement

The Company has embarked on a long-term effort to decrease its exposure
to the cyclical nature of, and narrow margins that are prevalent in, its
DOD-based contracts. In an effort to achieve these goals, the Company has
expanded operations in areas where it has developed expertise and unique
capabilities with the specific intent of attracting a non- or counter-cyclical
customer base. Management believes that aircraft and facility utilization are
the major components of the Company's financial success. The Company's DOD
contracts tend to be characterized by "fixed-rate per aircraft hour" price
schedules and the flying tends to peak in late spring, late summer and early
fall.

Excess capacity is currently being measured on a contract-by-contract
basis using new software tools. This will enable the immediate realignment of
aircraft assets to more promising opportunities. The Company has identified its
Alaskan turbo-prop services as a low-productivity operation. The Company intends
to secure alternative opportunities to deploy its fleet of Casa 212 aircraft in
response to this negative development. Based on opportunities to provide
services to the DOD for additional training, management believes these aircraft
can be re-deployed between now and November. Potential revenues associated with
these new services would provide increased yields and aircraft utilization
profiles that allow for profitable operations on a year-round basis.

The Company has identified an alternative use for the King Air 200 that
will increase productivity and yield by deploying this asset to an additional US
Government customer. If profitable uses for these five aircraft cannot be
attained, the aircraft will be returned to the Lessor. Assuming management is
successful in its efforts to re-deploy these aircraft, the Company would realize
normal aircraft utilization rates, a substantial increase in revenues and yields
and a return to reasonable profitability for these assets. Management believes
that the remaining operations in Alaska will be break-even to slightly
profitable after reductions in direct and indirect salaries and wages, and
associated overhead expenses, that would be surplus without these large
aircraft.

The Company has identified two Learjet 30 Series and three Learjet 20
Series aircraft that are currently underutilized. With the recent award of
contracts for U.S. Air Force gunnery practice and Canadian Air Force interim
flight services, management believes that the two Lear 30 aircraft will have
become fully utilized by September 2002. The three Learjet 20 aircraft are being
prepared for return to the Lessor with transfer anticipated as of August 31,
2002.

The Company has also increased its sale of training services to NATO
and NATO Member countries in Europe. Management is pursuing training
opportunities for U.S. Air Force squadrons deployed to bases in foreign
countries. If successful, utilization of European based assets could well exceed
domestic utilization rates.

Fuel Prices

Since April 1999, the cost of jet fuel has increased from $.50 to over
$1.28 per gallon. Crude oil prices have increased from under $10.00 per barrel
in February 1999 to over $32.00 per barrel in August 2000. While the core rate
of inflation has remained fairly stable during this period, the Company is
vulnerable to dramatic fluctuations in oil prices. The meteoric rise in fuel
costs in 2001 also severely impacted the Company's profitability. The cost of
jet fuel peaked in fiscal 2001 at $1.28 per gallon. Management estimates that
the negative impact of fuel increases on Company-wide profitability exceeded
$750,000 in fiscal 2001 and 2002 combined. To mitigate this exposure, the
Company attempts to negotiate contracts that have frequent fuel price cost
adjustments, or passes the risk to the customer altogether. The Company has
achieved moderate success in these efforts. In March 2002, as a condition of the
follow-on CAS-MOS contract, aviation fuel became a government furnished item.
Management believes that the profitability stabilization provided by "customer
provided fuel" will result in substantial cost savings since short-tern fuel
costs swings are passed on to the customer as an "over-and-above" reimbursable
expense.

Risk Management

Despite an insurance loss rate under 4% during the prior five years,
the Company experienced a significant increase in hull and liability insurance
premiums in fiscal years 1999 and 2000. Underlying these increases in premiums
were general industry trends based on liability loss experience, particularly in
Alaska. In an effort to bring premiums in line with our loss experience, the
Company initiated negotiations with alternative underwriters. In December 2000,
the Company selected Willis of New York, Inc. as its aviation broker and
completed a thorough review of coverages. Management estimates that suggestions
by the broker on coverage modifications and extensive negotiations with
underwriters resulted in a $400,000 savings in fiscal 2001. Subsequent events of
September 11, 2001 have put significant upward pressure on renewal premium
rates.

During renewal negotiations just completed, the Company's premiums
increased 30% over 2001 rates, which management believes is appreciably below
industry-average rate increases which have been exceeding 80% since September
11th. Management credits its broker and risk management staff with the
successful differentiation of the Company's operations from the industry in
general as the impetus for these favorable outcomes. The Company anticipates it
will recoup a substantial portion of the current year increase on its CAS-MOS
contract as negotiations included an adjustment clause in the contract renewal.
Claims for equitable adjustment will be made on the Company's other long-term
contracts. No assurances can be made that these requests will be honored.

Flight International, Inc.

Revenues for FII grew to $34,687,235 in fiscal year 2002 from
$30,084,610 in the prior fiscal year, an increase of 15.3%. Net income declined
to a loss of $1,043,538 from a loss of $452,171 in the prior year.

Annual revenues from the CAS-MOS contract have been approximately $24.1
million, $18.8 million, $16.8 million and $15.2 million, for the fiscal years
ended April 30, 2002, April 30, 2000 and April 30, 1999. This contract currently
represents 69.5% of FII's total revenues, up from 63.3% in fiscal year 2001 and
61.2% in fiscal year 2000.

During fiscal 2002, the Company began providing aerial refueling
services to several branches of the DOD through a sub-contractor, Omega Air.
This revolutionary commercial venture provides an economical alternative for the
US Air Force's tanker fleet during periods of peak demand. A pilot program
initiated in July 2001 was expanded when the DOD awarded a seperate contract for
tanker services in January 2002. In total up to 1200 hours of tanker time could
be flown between July 2001 and December 2002. During fiscal 2002, approximately
760 hours of service were provided and management anticipates that virtually all
of the potential 1200 program hours will be used by the end of the current
contract period, which ends December 31, 2002. While the program has been an
operational success, no assurances can be given that any of the option periods
will be exercised. Revenues associated with the program were $4,606,000 and the
Company incurred $4,250,000 of direct costs to provide the services in fiscal
2002.

The tanker program provided the majority of growth for the CAS-MOS
contracts in fiscal 2002. Excluding tanker services, CAS-MOS revenues only
increased by approximately 3.8% for 2002 levels, as compared to 13.1% for fiscal
2001 and 10.5% in 2000 and substantially below forecast. This revenue shortfall,
which can be attributed to the events of September 11th and the reduction of two
aircraft from the contract for 7 months of the contract year was approximately
$800,000.

The Company's new CAS-MOS contract requires a restructuring of FII's
aircraft fleet. Three additional Learjet 30 Series aircraft with "multi-mission"
capability were acquired in anticipation of being placed in service, as the
Company was the sole bidder during the latest competitive bidding process. For
the last six months of fiscal 2002, the Company leased three more aircraft than
the bridge contract required to prepare for the follow-on contract. Management
calculates the un-capitalized ownership costs associated with preparing these
three aircraft for service to be approximately $575,000.

With the initialization of services under the follow-on CAS-MOS
contract, management expects this program to achieve reasonable profit levels in
2003. Cost components for fuel have been substantially reduced while yield
increases for flight hours have increased substantially. While the new contract
calls for a reduction in hours compared to the prior contract, the yield
increases and cost reductions will result in profitable operations. Management
believes, based on current utilization rates, that the DOD could well exceed the
guaranteed hours for the base year. Due to its fixed and variable pricing
structure, approximately 44% of the CAS-MOS program's revenue stream is
recognized on a fixed basis. If, by contract year-end, the DOD purchases excess
hours, average yield per flight hour flown will increase substantially due to
the fixed revenue element while costs remain stable. Unlike excess pricing in
past CAS-MOS contracts, the impact of flying substantial excess hours would have
a positive impact on FII's profitability for fiscal 2003. While FII management
anticipates up to 500 hours of excess time in 2003, no assurances can be made
that any excess hours will be ordered.

FII management has been notified that it was the successful bidder for
gunnery practice tow services with the US Air Force after demonstrating the
efficacy of these flight services in 2002. Management anticipates this contract,
valued at $4,000,000 over the next 5 years will commence in September 2002 and
increase asset utilization rates by approximately 350 hours annually.

In July 2002, management concluded discussions with the Canadian Air
Force to add flight-training services through the CAS-MOS contract. These
services began in late July and are expected to generate approximately 400 hours
of additional flying time during fiscal 2003.

FII management has made an unsolicited proposal to provide interim
Special Forces training support services for the U.S. Army. The DOD has
requested that the Company demonstrate the service capabilities of its Casa 212
aircraft, which are uniquely outfitted to provide paratrooper training, and
personnel and cargo transportation in multiple cabin configurations. Services
will commence in mid-August. The Company believes that the demand for these
services will increase dramatically in the near future and provide substantial
opportunities to re-deploy all of the Company's Casa 212 fleet.

Flight Alaska, Inc.

On May 1, 2000, the Company established a separate subsidiary to better
manage its growing operations in Alaska. As a part of FII in 1999, the Alaska
operations received minimal oversight and limited direct marketing effort.
During 2000, and particularly following the acquisition of Yute Air, a local
management team, assembled through combination of the two subsidiaries,
accelerated the revenue growth rate of the Company's Alaska division. In fiscal
year 2000, the operating results of the Alaska division were reported as part of
FII. Had they been reported separately, the division would have stated revenues
of $1,100,000 and costs of $1,950,000.

In late August 2000, FAI negotiated a contract with Phillips Alaska,
Inc. To support these operations, and additional operations on the North Slope
of Alaska, the Company constructed a minimal hangar in Deadhorse, Alaska, large
enough to accommodate two Casa 212 and one single-engine aircraft. The total
cost of procurement and construction was approximately $200,000 and the
structure can be economically disassembled and sold should the Company's
commitment to North Slope operations change.

Revenues for fiscal year 2001 totaled $5,734,360 versus $1,100,000 for
Alaska operations during the same period in the prior year for an increase of
421%. In April 2001, the Company entered into an agreement with Bristol
Environmental Engineering to provide logistics support services from Anchorage,
Alaska to Amchitka Island in the Aleutian Chain. These services were provided
predominantly by two of the Company's Learjet 35 Series aircraft. No assurances
can be given that this contract will continue in the future.

The Company continued its services to a number of oil service companies
during fiscal 2001. The majority of these services were provided to Phillips
Petroleum. During this period, Flight Alaska expanded its North Slope operations
to coincide with the opening of the National Petroleum Reserve and the
anticipated opening of the Arctic National Wildlife Refuge for exploration. The
Company expanded services to include freight, mail and passenger flights from
Deadhorse, Alaska to surrounding village communities.

Revenues for fiscal 2002 totaled $8,395,501 versus $5,734,360 in 2001.
Revenues continued to expand in early 2002 as FAI provided charter services to
the Department of Interior using two of its Casa-212 aircraft and passenger
transportation services to Bristol Environmental as part of a hazardous waste
removal contract with the US Navy for Amchitka Island in the Aleutians. After
September 11th, revenue growth slowed dramatically as services were initially
halted, then the economy slipped deeper into recession. Revenues were
substantially impacted by retrenchment of oil company exploration and
development efforts on the North Slope. For the year, revenues were under
forecast by $1,000,000 while costs exceeded budget by $200,000 due to ownership
expenses on non-performing assets being inducted into service in fiscal 2002 and
2003.

With the failure of Congress to enact legislation to open ANWR for
exploration and drilling, FAI management now believes there to be insufficient
growth potential to warrant the number of large turbo-prop aircraft assets. The
Company plans to move all four of its Casa-212 assets to more promising
opportunities with the DOD and re-deploy the King Air 200 to service with
another U.S. Government agency in the near future. Along with the transfer of
assets, FAI management intends to downsize personnel and related overhead
expenses to bring them in-line with anticipated mail and passenger revenues.
These reductions in direct, overhead and general and administrative costs will
occur at the end of the peak summer season.

MRO Center

MRO work is conducted in the Company's Newport News, Virginia hangar
facilities. Building on its expertise derived from maintaining and operating
Learjet aircraft for training services, the Company plans to expand aircraft
"special missions" modification and service work for countries and companies
that wish to develop internal commercial or government training programs.

In fiscal year 2000, the Company realized a need for better production
planning and control capabilities in its MRO Centers. In May 2000, the Company
entered into an agreement with Continuum Applied Technology, Inc. to acquire
that company's production planning and tracking system for use in its MRO
Centers. The software will enable management to better manage its labor force,
plan maintenance projects, and control labor and materials expenses. The
software was initially deployed in its discontinued operations and is scheduled
for implementation in its NN/W MRO center in the coming months. The investment
in software and hardware required was approximately $150,000.

In late fiscal 2000, the Company acquired the assets of Flight Systems,
Inc. to expand its MRO capabilities to include aircraft larger than a Learjet.
In fiscal year 2001, the market for air carrier heavy maintenance that had been
the mainstay of business activities for FIS turned steeply downward. In
addition, the Company's agreement with Bombardier to modify up to twenty-four
Lear 45 Series aircraft was terminated after the completion of the fifth
aircraft when Bombardier Aerospace determined that the economic conditions were
significantly reducing the demand for the modifications. With these two sources
of income declining precipitously, the Company determined that the value of FIS
was significantly below its liquidation value. A suitable buyer was found and
the operations in Myrtle Beach were disposed of effective November 6, 2000.

Revenues from continuing operations grew for the fiscal year 2001 to
$2,761,155 from a restated $1,510,000 in the prior year. This revenue growth was
attributable to increased sales in accessory overhaul, sheet metal and hangar
refurbishment work associated with the Company's Service Life Extension Program
for Learjet 20 and 30 Series aircraft. As the fleet of Learjets ages, management
anticipates continued growth in the market for SLEP services from $1,000,000 in
fiscal 2001 although the growth rate will be volatile in the next few years.1
Effective in fiscal 2001, management started reporting sales of
maintenance-related parts, services and labor to government customers as MRO
revenues rather than fleet operations revenues. In 2001, $585,000 of revenue is
included in MRO revenue totals. Had 2001 been stated on an equivalent basis to
fiscal 2000, revenues would have increased 44.1%

MRO revenues for fiscal 2002 dropped to $2,023,014 as the economy in
general and aviation in particular slid deeper into recession. Airframe SLEP
revenues, which are anticipated to be volatile for the next few years, were
significantly lower in 2002. Landing gear SLEP revenues added $468,000 during
the year. These revenues are expected to continue at current levels for the next
two years as the primary customer uses the services on a U.S. Air Force Learjet
maintenance program with up to 100 aircraft, that will require landing gear SLEP
during the contract period.

In January 2002, the Company entered into an agreement with Raytheon
Aircraft of Australia to produce a Learjet 35 Series aircraft capable of a full
range of Electronic Warfare training activities. The aircraft is scheduled for
completion in February 2003. Management projects that revenues associated with
this project will be recognized entirely in fiscal year 2003.

Fixed Base Operation

FIA was confronted with increased competition in fiscal year 2000,
which placed margin pressure on its main revenue stream - fuel sales. In
conjunction with the increased competition, two of the Company's airline
customers renegotiated fuel service agreements placing even greater pressure on
margins. Correspondingly, revenues decreased slightly to $1,702,000 in fiscal
year 2000 from $1,772,000 in fiscal year 1999.

During fiscal year 2001, revenues for FIA decreased to $1,630,000 from
$1,702,000 in fiscal year 2000. FIA saw market share and margin erosion as many
of the competitive factors that affected 2000 continue in 2001. In addition,
high fuel prices and shrinking economic growth rates combined to reduce the
Company's sales throughout 2001. During this period, the Company renegotiated a
number of its contracts with customers serving the NN/W Airport. Many of these
agreements were in the form of "Into-Plane" agreements that reduce the Company's
operational risk of inventory shrinkage as the customers own their own fuel
inventory. Net profits for the subsidiary were $69,609 in fiscal year 2001,
versus a net profit of $183,386 for the previous year.

For fiscal 2002, FIA revenues totaled $1,706,000 versus $1,630,000 for
the same period in the prior year. This 6.9% increase in revenues can be
attributed to increased commercial airline activities at the NN/W Airport and
price increases that were passed through to the customers. Margins increased due
to the stabilization, and eventual easing of raw fuel costs during the year. Net
profits for fiscal year 2002 totaled $125,411 versus $69,609 for the prior
fiscal year.

In January 2002, the Company was awarded a 3-year contract to serve as
the Defense Fuels Supplier for the NN/W Airport. In doing so, the Company has
negotiated an "Into-Plane" fee with the DOD that ensures compensation for
fueling the Company's own aircraft used in FII's training services with the
Navy. Management believes that this contract will increase revenues by
$1,000,000 annually. No assurances can be provided that this contract will be
re-awarded to the Company when it comes up for renewal in April 2005.

Management believes that the full service capability offered by the
Company places FIA in an excellent position to compete effectively in the
future.

In May 2002, the FASB issued SFAS No. 145, "Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections." This statement changes certain accounting related to the
extinguishment of debt, and eliminates inconsistencies between the required
accounting for sale-leaseback transactions and the required accounting for
certain lease modifications that have economic effects that are similar to
sale-leaseback transactions. SFAS No. 145 also amends other existing
authoritative pronouncements to make various technical corrections, clarify
meanings, or describe their applicability under changed conditions. The
statement is effective after May 15, 2002 and early application is encouraged as
of the beginning of the fiscal year or as of the beginning of the interm period
in which the statement is issued. The adoption of the statement is not expected
to have an impact on the Company's present financial condition or results of
operations.

In July 2002, the FASB issued SFAS No. 146 "Accounting for Costs
Associated with Exit or Disposal Activities." SFAS No. 146 provides guidance on
the timing of the recognition of costs associated with exit or disposal
activities. The new guidance requires costs associated with exit or disposal
activities be recognized when incurred. Previous guidance required recognition
of these types of costs at the date of commitment to an exit or disposal plan.
The provisions of the statement are to be adopted prospectively after December
31, 2002. Although SFAS No. 146 may impact the accounting for costs related to
exit or disposal activities we may enter into in the future, particularly the
timing of the recognition of these costs, the adoption of the statement will not
have an impact on the Company's present financial condition or results of
operations.

ITEM 7B. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The Company is exposed to the impact of interest rate changes on its
variable rate debt instruments. If interest rates increased by 10%, the expected
impact on net income would be immaterial.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

See pages F-1 to F-25, attached.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

Not applicable.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

IDENTIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS

The current officers and directors will serve for terms of one year or
until their respective successors are elected and qualified. The current
officers and directors are:

Name Age Date of Election Position

David E. Sandlin 58 March 30, 1994 Chairman, President,
Chief Executive Officer,
Director

Robert C. Dynan 46 April 3, 2000 Executive Vice President

Matthew J. Nowicki 43 June 3, 2002 Chief Financial Officer
and Treasurer

Ann P. Campbell 63 April 13, 1993 Corporate Secretary

C. Lofton Fouts, Jr. 70 February 13, 1995 Director

John R. Bone 51 February 13, 1995 Director

Vice Admiral Richard M. 69 May 24, 1995 Director
Dunleavy (Ret.)

The Board is required to remain at six (6) members until changed by
vote of shareholders. The members of the Board need not be Shareholders of the
Company. Further, three members of the Board may be, but are not required to be,
officers, employees, consultants or independent contractors engaged, employed or
retained by the Company or its subsidiaries and/or affiliates. Messrs. Sandlin
and Bone represent these directors. The Company has been seeking to replace
Wayne M. Richmon, a former director who resigned from the Board and as Chief
Financial Officer in September 1999. The remaining three directors must be
individuals who are not directly or indirectly engaged, employed or retained by
the Company or its subsidiaries or affiliates. Messrs. Fouts and Dunleavy
represent two of these three directors. James N. Lingan was the third of these
"independent" directors until his death in March 1998. The Board had attempted
to seek a replacement for Mr. Lingan.

Each director and executive officer's business experience during the
past five years is described below:

David E. Sandlin. Mr. Sandlin has been Chairman, President and a
Director of the Company since March 30, 1994, and was formerly President of
Flight International Sales and Leasing, Inc. Mr. Sandlin has been involved in
aircraft marketing and management since 1978. He has worked in various
capacities for Cessna and Dassault and has extensive experience with Learjets.
In 1990 he founded DESCO Aviation Consultants International ("DESCO") and is an
officer, director and 50% shareholder of Maritime Sales & Leasing, Inc.
("Maritime"), a major lessor of turbine aircraft. Maritime has leased a total of
24 aircraft to FII and four aircraft to FAI. In addition, Mr. Sandlin leases one
aircraft personally to FAI.

Matthew J. Nowicki. Mr. Nowicki was appointed Chief Financial Officer
and Treasurer of the Company in June, 2002. Prior to joining the Company, Mr.
Nowicki was Controller of CMS Information Services, Inc., an information
technology company. From February, 1999 until January, 2000, he served as
Director of Finance and Accounting for EG&G Services, Logistics Division. From
1989-2000, Mr. Nowicki held various accounting and financial positions for
various divisions of EG&G, Inc., including Controller and Senior Accountant. Mr.
Nowicki received his BS in accounting from the University of Central Florida in
1993, and is a licensed CPA in the State of Virginia.

Robert C. Dynan. Mr. Dynan has been Executive Vice President of the
Company since August, 2001. Mr. Dynan has worked with aviation-related
businesses since 1976. From 1991 to 1998, he served in various management
capacities for Mesa Air Group, Inc., including Vice President of Customer
Service for its Air Midwest and WestAir subsidiaries. In April, 1994 he was
appointed President of Mesa's Liberty Express division and was elected President
of Mesa Airlines, Inc. in January 1998. In October 1998, he was elected
President and Chief Operating Officer of Northern Air Cargo, Inc. In January
2000 he served as a consultant on the Company's Yute Air acquisition and
formally joined Flight International as CFO and Treasurer in April, 2000. Mr.
Dynan received his undergraduate degree in Aviation Management from Auburn
University and his Masters of Business Administration degree from the Harvard
Graduate School of Business.

Ann P. Campbell. Ms. Campbell, Corporate Secretary, joined the Company
in 1987 as Secretary to the Chief Financial Officer of the Company. Since that
time, she has served as Executive Secretary to the Chief Operating Officer and
President, and Assistant to the Chairman. Prior to her tenure at the Company,
Ms. Campbell has over fifteen years experience as a legal secretary and
currently serves as Executive Secretary to the Chairman and the Executive Vice
President.

C. Lofton Fouts, Jr. Mr. Fouts, Director, has been involved in the
aviation industry for 29 years. He wrote the original Piper Flite Center
training syllabus, the first standardized flight program used nationwide in the
general aviation industry. In 1988, Mr. Fouts formed Lofton Fouts & Associates,
Inc., a general aviation consulting business specializing in sales, acquisitions
and mergers of fixed base operations and related aviation businesses.

John R. Bone. Mr. Bone, Director, is President of Global Jet, a
corporate aircraft sales and brokerage firm, and is an officer, director and 50%
shareholder of Maritime. Mr. Bone studied aeronautical engineering at Northrup
University. He is an A&P mechanic, has worked as Chief Pilot for major U.S.
companies and currently is a pilot with a major United States airline. Global
Jet, with Mr. Bone, has been instrumental in developing the fleet of Learjets
for Phoenix Air Group, a competitor of FII.

Vice Admiral Richard M. Dunleavy (Ret.). Admiral Dunleavy, Director,
was formerly Assistant Chief of Naval Operations (Air Warfare). Admiral Dunleavy
joined the Staff of the Chief of Naval Operations in 1976. From 1978 to 1979 he
was Commanding Officer of the USS Ponchatoula and assumed command of the USS
Coral Sea in 1979. In 1981, he was selected as Commander of U.S. Naval Forces in
the Philippines and later became Commander, Carrier Group FOUR/Commander
Striking Force Atlantic. From 1986 to 1989 he was Commander, Naval Air Force,
U.S. Atlantic Fleet. Admiral Dunleavy's military awards include a Distinguished
Service Medal, three Legions of Merit, eight Air Medals and four Navy
Commendation Medals.

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

The Company believes that all required Forms 3 and 4 with respect to
the fiscal year ended April 30, 2002 were furnished to the Registrant.

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth a profile of the Company's executive
compensation and shows, among other things, salaries and other compensation paid
during the last three years, and certain options granted for the Chief Executive
Officer of the Company and the other executive officers of the Company who had
aggregate remuneration exceeding $100,000 (the "Named Officers"). The tables
following show option grant and option exercise information with respect to the
Named Officers.

ANNUAL COMPENSATION

Annual Other Securities
Long term Underlying
Name, Principal Position Year Salary Comp.(1) Compensation Options

David E. Sandlin(3) 2002 $169,115 $ 25,717 None--
Chairman, President 2001 $146,410 $ 30,295 None--
Chief Executive Officer, 2000 $134,124 $ 39,199 $----(2)--
Director 1999 $129,842 $ 37,969 $----(2)--
Robert C. Dynan(4) 2002 $101,923 $ 14,922 None
Excutive Vice President

(1) The Sandlin Agreement and Mr. Sandlin's employment arrangement prior to
entering into the Sandlin Agreement provides for certain perquisites,
including an apartment in Newport News, Virginia, travel costs to and
from his home in Atlanta, Georgia and an automobile in Newport News.
Mr. Dynan's perquisites are provided for in his employment agreement.

(2) On July 16, 1999, Mr. Sandlin was granted 25,000 options vesting over
the next two years at an option price of $3.49. On August 1, 1999, Mr.
Sandlin was granted an additional 33,000 options vesting over the next
two years at the same option price of $3.49. See "Employment
Agreements," below. On July 1, 2000, Mr. Sandlin was granted 10,000 and
54,000 shares vesting over the next two years at an option price of
$4.38.

(3) Mr. Sandlin is an officer, director and 50% shareholder of Maritime.
Maritime has leased a total of 28 aircraft to the various subsidiaries
of the Company and has engaged in certain other activities with the
Company. The Company does not believe that any of the foregoing
constituted compensation to Mr. Sandlin, but makes this disclosure for
the sake of completeness. See "Certain Relationships and Related
Transactions".

(4) On July 1, 2000, Mr. Dynan was granted 7,500 options vesting over the
next two years and at an option price of $3.98 per share.

OPTION/SAR GRANTS IN LAST TWO FISCAL YEARS

Potential Alternative to
Realizable Value to (f) and (g)
at assigned annual rates Grant Date Value
of stock appreciation
for option term

(a) (b) (c) (d) (e) (f) (g)
- ----------------- -------- --------- --------- --------- --------- ----------

David E. Sandlin 64,000 total opt $4.38 July 2005 n/a n/a n/a
173,000

Robert C. Dynan 7,500 total opt $3.98 July 2005 n/a n/a n/a
, 7,500

(a) Name
(b) Number of Securities Underlying Options/SARs Granted (#)
(c) Percentage of Total Options/SARs Granted to Employee in Fiscal Year
(d) Exercise or Base Price ($/sh)
(e) Expiration Date
(f) Potential Realizable Value %
(g) Potential Realizable Value %

AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTIONS/SAR VALUES

This table is not included because no options were exercised by the named
executive officers during the fiscal years ended April 30, 2001 and 2002.

THE FLIGHT INTERNATIONAL GROUP, INC. 401(K) PLAN
- ------------------------------------------------

The Flight International Group, Inc. 401(k) Plan (the "401(k) Plan") is a
defined contribution plan sponsored by the Company. The 401(k) Plan covers all
eligible employees of the Company. Employees become eligible to participate upon
completing one year of service in a job classification not subject to a
collective bargaining agreement. One year of service is defined as any
consecutive 12 month period in which the employee works 1,000 hours.

Participants may elect to have 1% to 60% of their compensation contributed
to the 401(k) Plan, up to the maximum allowed by law. Contributions to the
401(k) Plan are matched by the Company at the rate of 50% of the first 6% of
employees' contributions. All employee contributions, rollover contributions and
earnings thereon are 100% vested. Company contributions vest at a rate of 20%
per year. The participant may designate his contribution and employer matching
contributions to be invested in any combination of fifteen funds maintained by
the Trustee. After a participant dies or retires, the participant or his
beneficiary is entitled to receive the entire vested balance of his account. The
Company reserves the right to amend or terminate the 401(k) Plan at any time. If
the 401(k) Plan is terminated, each participant is then vested with the amount
in his account. The Company contributed $104,215.62, $98,052.36 and $79,193.20
to the 401(k) Plan in fiscal years 2002, 2001 and 2000, respectively.

The 401(k) Plan has received a determination letter exempting it from
Federal Income Taxes.

DIRECTOR'S COMPENSATION
- -----------------------

Directors who are not members of management or affiliates thereof
receive $1,000 for each Board meeting attended, plus out-of-pocket expenses
incurred in connection with such attendance. Members of management and
affiliates thereof who are directors do not receive separate compensation
therefor.

EMPLOYMENT AGREEMENTS
- ---------------------

The Sandlin Agreement is dated 1 October 2001 and continues for a term
which expires September 30, 2006. Mr. Sandlin's base salary as per the agreement
is $200,000 per year (subject to increases by the Board of Directors taking into
consideration certain factors specified therein).

Mr. Sandlin is reimbursed for all necessary and reasonable expenses
incurred in performing under the Sandlin Agreement and certain other expenses
specific therein (including without limitation for the cost of an apartment and
automobile for his use in Newport News, Virginia and his travel expenses to and
from his home in Atlanta, Georgia and Newport News). He is also entitled to
participate in any benefit programs which the Company may establish.

The Company may terminate the Sandlin Agreement for "cause" (as defined
therein), in the event of the death or disability of Mr. Sandlin or at any time
after delivery to Mr. Sandlin of a written notice of termination. Mr. Sandlin
may terminate the Sandlin Agreement on sixty (60) days written notice for, among
other things, a reduction in his base salary below that in existence upon
signing (or other material breach by the Company), the relocation of the
Company's offices and the assignment of duties inconsistent with his position or
material adverse alteration in the nature or status of his responsibilities or
conditions of employment (including without limitation material reductions in
vacation or material increase in overnight travel obligations not reasonably
required).

In the event that the Sandlin Agreement is terminated by the Company
for cause or in the event of death or disability, or in the event Mr. Sandlin
terminates the Sandlin Agreement other than in connection with a change in
control, Mr. Sandlin receives his salary, expense reimbursements and other
benefits through the date of termination, in addition to any applicable
insurance benefits.

In the event of termination by the Company not for cause, death or
disability, or in the event Mr. Sandlin terminates the Sandlin Agreement in
connection with a change in control, Mr. Sandlin receives the amounts described
above plus a lump sum severance payment equal to the sum total of all base
salary due to him for the remainder of his agreement, at the rate in effect at
the time notice of termination is given. In this circumstance, the Company, for
one year after termination, also will provide Mr. Sandlin with life and health
insurance benefits substantially similar to those he was receiving immediately
prior to the notice of termination. A change in control is deemed to have
occurred in the event of a sale of the Company or merger of the Company with
another business pursuant to which any person or entity other than certain
specified entities (these are Maritime, Global Jet, Phoenix Air Group and DESCO,
Aviation Consultants) become beneficial owners of capital stock of the Company.

The Sandlin Agreement prohibits Mr. Sandlin, during the term of the
Sandlin Agreement and for one year thereafter, from serving as an employee,
owner, partner, agent, director, officer, consultant or shareholder (except
ownership of 5% or less of most public companies) of a business which is
materially in competition with the business of the Company, but this provision
can be modified by formal resolution of at least 75% of the Board of Directors
(excluding Mr. Sandlin). The Company agrees to indemnify Mr. Sandlin against
reasonable expenses, liabilities and losses incurred or suffered by him in
connection with his service to the Company.

INCENTIVE STOCK OPTION PLAN
- ---------------------------

In August 1998, the Company adopted The Flight International Group 1998
Stock Option Plan (the "Option Plan") by the Board of Directors, and the Option
Plan was approved by the Shareholders in October 1998.

The Option Plan is administered by the Board of Directors (or by a
committee of the Board of Directors, if one is appointed for this purpose),
provided that members of the Board of Directors who are either eligible for
Awards (as defined below) or have been granted Awards may not vote on any
matters affecting the administration of the Plan or the grant of any Award
pursuant to the Plan if required pursuant to Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") or Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code").

The Option Plan provides for the granting of incentive stock options
(within the meaning of Section 422 of the Code) and nonqualified stock options
(individually an "Award" or collectively, "Awards"), to those officers or other
key employees, directors or consultants, with potential to contribute to the
future success of the Company or its subsidiaries, provided, that only employees
may be granted incentive stock options. The Board of Directors has discretion to
select the persons to whom Awards will granted (from among those eligible), to
determine the type, size and terms and conditions applicable to each Award and
the authority to interpret, construe and implement the provisions of the Option
Plan. Notwithstanding the foregoing, with respect to incentive stock, the
aggregate fair market value (determined at the time such Award is granted) of
the shares of Common Stock with respect to which incentive stock options are
exercisable for the first time by such employee during any calendar year shall
not exceed $100,000 under all plans of the employer corporation or its parent or
subsidiaries. The Board of Directors' decision is binding on the Company and
persons eligible to participate in the Option Plan and all other persons having
any interest in the Option Plan.

The total number of shares of Common Stock that my be subject to Awards
under the Option Plan is 500,000, subject to adjustment in accordance with the
terms of the Option Plan. Common Stock issued under the Option Plan may be
either authorized but unissued shares, treasury shares or any combination
thereof. To the fullest extent permitted under Rule 16b-3 under the Exchange Act
and Sections 162(m) and 422 of the Code, any shares of Common Stock subject to
an Award which lapses, expires or is otherwise terminated prior to the issuance
of such shares may become available for new Awards.

Options to purchase Common Stock granted as Awards ("Options"), which
may be nonqualified or incentive stock options, may be granted under the Option
Plan at an exercise price (the "Option Price") determined by the Board of
Directors in its discretion, provided, that the Option Price of incentive stock
options may be no less than the fair market value of the underlying Common Stock
on the date of grant (or 110% of fair market value in the case of an incentive
stock option granted to a ten percent shareholder).

Options will expire not later than ten years after the date on which
they are granted. Options become exercisable at such times and in such
installments as determined by the Board of Directors. Notwithstanding the
foregoing, however, each Option shall, except as otherwise provided in the stock
option agreement between the Company and an optionee, become exercisable in full
for the aggregate number of shares covered thereby unconditionally on the first
day following the occurrence of any of the following: (a) the approval by the
shareholders of the Company of an Approved Transaction; (b) a Control Purchase;
or (c) a Board Change (each as defined below).

For purposes of the Option Plan, (i) an "Approved Transaction" shall
mean (A) any consolidation or merger of the Company in which the Company is not
the continuing or surviving corporation or pursuant to which shares of Common
Stock would be converted into cash, securities or other property, other than a
merger of the Company in which the holders of Common Stock immediately prior to
the merger have the same proportionate ownership of common stock of the
surviving corporation immediately after the merger, or (B) any sale, lease,
exchange, or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the Company, or (C)
the adoption of any plan or proposal for the liquidation or dissolution of the
Company; (ii) a "Control Purchase" shall mean circumstances in which any person
(as such term is defined in Sections 13(d)(3) and 14(d)(2) of the Exchange Act),
corporation or other entity (other than the Company or any employee benefit plan
sponsored by the Company or any subsidiary of the Company) (x) shall purchase
any Common Stock of the Company (or securities convertible into the Company's
Common Stock) for cash, securities or any other consideration pursuant to a
tender offer or exchange offer, without the prior consent of the Board of
Directors, or (y) shall become the "beneficial owner" (as such term is defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of
the Company representing twenty-five percent (25%) or more of the combined
voting power of the then outstanding securities of the Company ordinarily (and
apart from rights accruing under special circumstances) having the right to vote
in the election of directors (calculated as provided in paragraph (d) of such
Rule 13d-3 in the case of rights to acquire the Company's securities), and (iii)
A "Board Change" shall mean circumstances in which, during any period of two
consecutive years of less, individuals who at the beginning of such period
constitute the entire Board shall cease for any reason to constitute a majority
thereof unless the election, or the nomination for election by the Company's
shareholders, of each new director was approved by a vote of at lease a majority
of the directors then still in office.

In the event that dividends are payable in Common Stock or in the event
there are splits, subdivisions or combinations of shares of Common Stock, the
number of shares available under the Option Plan shall be increased or decreased
proportionately, as the case may be, and the number of shares delivered upon the
exercise thereafter of any Option theretofore granted or issued shall be
increased or decreased proportionately, as the case may be, without change in
the aggregate purchase price.

In the event that an Option holder ceases to be an employee for any
reason other than permanent disability, retirement under certain circumstances
(as determined by the Board of Directors) or death, any Option, including any
unexercised portion thereof, which was otherwise exercisable on the date of
termination, shall automatically terminate upon the date on which the Option
holder ceased to be so employed. In the event of the termination of an Option
holder's employment resulting from retirement or permanent disability of the
Option holder while an employee, any Option granted to such employee shall be
exercisable for one (1) year after the date of termination of employment due to
permanent disability, but in no event after the expiration of the exercise
period. In the event of the death of an Option holder while an employee, or
during the one (1) year period after the date of termination of employment due
to retirement or permanent disability of the Option holder, that portion of the
Option which had become exercisable on the date of death shall be exercisable by
his or her personal representatives, heirs or legatees at any time prior to the
expiration of one (1) year from the date of the death of the Option holder, but
in no event after the expiration of the exercise period.

The Board of Directors may at any time alter, amend, suspend or
discontinue the Option Plan, but no amendment, alteration, suspension or
discontinuation shall be made which would impair the rights of any recipient of
an Option under any agreement theretofore entered into under the Option Plan,
without his consent, or which, without the requisite vote of the shareholders of
the Company approving such action, would:

(a) except as is provided in the Option Plan, increase the total number of
shares of stock reserved for the purposes of the Option Plan; or

(b) extend the duration of the Option Plan; or

(d) change the category of persons who can be eligible participants under
the Option Plan. Without limiting the foregoing, the Board of Directors may, any
time or from time to time, authorize the Company, without the consent of the
respective recipients, to issue new Options in exchange for the surrender and
cancellation of any or all outstanding Options.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.

The following table sets forth information as of August 16, 2002
regarding the beneficial ownership of the Company's Common Stock of (i) each
person known by the Company to own beneficially more than 5% of the Company's
outstanding Common Stock, (ii) each director of the Company, and (iii) all
directors and executive officers of the Company as a group. Except as otherwise
specified, the named beneficial owner has sole voting and investment power.

Name and Amount and
Address of Nature of
Beneficial Beneficial
Owner Ownership (1) Percent of Class

David E. Sandlin 403,000 36.33%
c/o The Flight International Group, Inc.
One Lear Drive,
Newport News, Virginia 23602

Robert C. Dynan 7,500 *
c/o The Flight International Group, Inc.
One Lear Drive,
Newport News, Virginia 23602

Ann P. Campbell 9,000 *
c/o The Flight International Group, Inc.
One Lear Drive,
Newport News, Virginia 23602

C. Lofton Fouts, Jr. 5,000 *
9027 High St., Kensington Gardens
Douglasville, GA 30135

John R. Bone 175,000 15.77%
3 East Broad St.
Newman, GA 30263

Vice Admiral Richard M. Dunleavy (Ret.) 5,000 *
2220 Sandfiddler Road
Virginia Beach, VA 23456

Maritime Sales & Leasing, Inc. 108,993 9.82%
3 East Broad Street,
Newnan, Georgia 30623

Charles T. Myers 101,398 9.14%
4497 Carriage Run
Murrells Inlet, South Carolina 29576

Flight Partners Limited., L.P. ("FPP") 60,048 5.41%
c/o Lincolnshire Management, Inc.
780 Third Avenue
New York, NY 10017
Attention: Mr. T. J. Maloney

SouthTrust Bank of Alabama, N.A. 107,408 9.68%
112 N. 20th Street, 3rd Floor
Birmingham, AL 35203
Attention: Mr. Ronald Downey

LeasePlan USA, Inc. 61,346 5.53%
180 Interstate North Parkway, Suite 400
Atlanta, GA 30339
Attention: John Stasiowski, Vice President

ALL DIRECTORS AND
EXECUTIVE OFFICERS
AS A GROUP (6 individuals) 738,478 66.56%

* Represents less than a one percent interest.

(1) Includes currently exercisable options to purchase shares of common
stock, namely: Sandlin (173,000), Campbell (9,000), Bone (5,000),
Dunleavy (5,000), Dynan (7,500) and Fouts (5,000).

(2) Includes 2,822 shares owned by Mr. Sandlin's daughter Elizabeth.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Mr. Sandlin is an officer, director and 50% shareholder of Maritime, a
major lessor of turbine aircraft. Maritime has leased a total of 26 aircraft to
the Company's subsidiaries at a total cost to the Company of $6,947,000 for the
fiscal year 2002. In addition, Mr. Sandlin personally has leased one aircraft to
Flight Alaska, Inc. at a total cost of $27,000 in fiscal 2002. On November 18,
1999, the Company entered into an agreement with Maritime to sell a Lear 30
aircraft and two turbofan engines to Maritime for $1,700,000 and leased those
assets back through a two-year lease at a rate of $26,000 per month plus engine
reserves at a rate of $225 per aircraft hour. These rates are considered to be
fair market rates. The Company believes the financial and other arrangements
between it, Maritime and Mr. Sandlin are reasonable and fair and similar to
arrangements that would have been made in an arm's length transaction between
the Company and an unaffiliated third party. The Company does not believe that
Mr. Sandlin's relationship with Maritime materially interferes with his ability
to fully perform his obligations to the Company as a director, officer and
employee.

The Company has the following liabilities and assets specific to Maritime
Sales and Leasing: Notes payable, $409,000, Lease Payable, $813,000, Accounts
Receivable $178,000 and Lease deposits $337,000. In addition the Company has
entered into lease agreements with Maritime Sales and Leasing ("MSL") for
certain aircraft and engines which require future minimum lease payments at
April 30, 2002 for each of the next five years as follows: 2003 - $4,590,000,
2004 - $4,276,000, 2005 - $3,883,000, 2006 - $3,620,000 and 2007 - $1,763,000.
During the year ended April 30, 2000, the Company entered into a sale/leaseback
transaction with MSL to sell a plane and two engines. Total proceeds from the
sale were $1,700,000, however due to the terms of leaseback, the Company is
amortizing approximately $566,000 of the $916,000 gain realized on the
transaction over the 2 year term of the lease. The deferred gain as of April 30,
2001 and 2000 was $141,531 and $424,591, respectively. The remaining deferred
gain of $141,531 as of April 30, 2001 was recognized during fiscal 2002.

Mr. Bone is an officer, director and 50% shareholder of Maritime. In
addition, Mr. Bone is the sole shareholder, director and officer of Global Jet
("Global Jet"), which, with Mr. Bone, has been instrumental in developing the
fleet of Learjets for Phoenix Air Group, a competitor of FII. The Company does
not believe that Mr. Bone's relationships with Maritime and Global Jet
materially interfere with Mr. Bone's ability to fully perform his obligations to
the Company as a director.

Mr, Sandlin is also a one third owner along with Mr. Bone and one other
individual of The Aviation Company (TAC), an aircraft marketing and leasing
company based in Wilmington NC, In the fiscal 2002, the Company paid TAC
$311,000 for aircraft leases. In Febuary 2001, the Company entered into an
agreement with TAC for the sale of a Learjet Series 20 aircraft for the $500,000
and subsequently leased the aircraft for $11,000 per month plus engine reserves
on a one-year lease with four renewable options. In March 2002, the lease was
amended to have the aircraft modified at lessor expense and the monthly lease
expense was increased to $13,564. The Company currently leases or rents 1
Learjet Series 30, 2 Learjet 20, 1 King Air 200 and 1 Piper Navajo from TAC. All
lease and reserve rates are considered to be fair market rates. The Company does
not feel that Mr. Sandlin's or Mr. Bone's relationship with TAC materially
interfere with their ability to fully perform their obligations to the Company.

The Company has lease agreements for certain aircraft with TAC.
David Sandlin has an ownership interest in TAC. Approximately $311,000, $22,000,
$3,000 and $67,000 of lease expense was incurred for the years ended April 30,
2002, 2001, 2000 and 1999, respectively. The Company also has lease agreements
for certain aircraft directly with David Sandlin. Approximately $22,000 and
$26,000 of lease expense was incurred for the years ended April 30, 2002 and
2001, respectively. Required future minimum lease payments at April 30, 2002 for
each of the next five years to TAC are approximately as follows: 2003 -
$727,000, 2004 - $727,000, 2005 - $727,000, 2006 - $632,000 and 2007 - $361,000.

Mr. Charles T. Myers is a shareholder of the Company. In addition, Mr.
Myers sold his business, Flight Systems, Inc. to the Company on February 29,
2000. In conjunction with the sale of those assets, Mr. Myers provided the
Company with a Shareholder Note Payable in the amount of approximately $203,000.
The non-interest bearing note matured on February 28, 2001 and was to be repaid
through funds generated from operations. The Company has not repaid this loan,
and currently disputes the amounts owed thereunder in connection with the
pending action by Mr. Myers against the Company. There can be no assurance as to
whether the Company will be obligated to pay any amounts under this note.

On May 9, 2002, the Company entered into an Asset Purchase Agreement
with VTF Corporation ("VTF"). As detailed in the Preliminary Proxy Statement
filed August 16, 2002, VTF will assume substantially all of the Company's assets
and liabilities and those of the Company's wholly owned subsidiaries for
$6,500,000 (subject to adjustment based on the amount of indebtedness assumed by
VTF). The transaction is subject to approval of the Company's shareholders and
other closing conditions, including the contemporaneous sale of Maritime (which
is owned by Messrs. Bone and Sandlin) for a cash purchase price of $13,915,000
plus the assumption of specified indebtedness.

The Board of Directors of the Company currently requires approval or
ratification by the Board of all related party transactions.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

1. The exhibits required to be filed as part of this Annual Report on
Form 10-K are listed in the attached Exhibit Index.

2. During the quarter ended April 30, 2002, the Company filed no
Current Reports on Form 8-K.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

Dated: August 16, 2002 THE FLIGHT INTERNATIONAL GROUP, INC.

By: /s/ David E. Sandlin
--------------------
David E. Sandlin
Principal Executive Officer

By: /s/ Robert C. Dynan
----------------------
Robert C. Dynan
Principal Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.

Signature Title Date
--------- ----- ---------
s/ David E. Sandlin Chairman, Director, August 16, 2002
-------------------- President, CEO
David E. Sandlin

s/ C. Lofton Fouts, Jr. Director August 16, 2002
-----------------------
C. Lofton Fouts, Jr.

s/ John R. Bone Director August 16, 2002
---------------
s/John R. Bone

s/ Richard M. Dunleavy (Ret.) Director August 16, 2002
-----------------------------
Vice Admiral
Richard M. Dunleavy (Ret.)

EXHIBIT INDEX

Exhibit
Number Page Description

3(a) Amended and Restated Articles of
Incorporation of the Company
(incorporated by reference to the
Company's Report on Form10-KSB for
the fiscal year ended April 30,
1996).

3(b) Bylaws of the Company (incorporated
by reference to the Company's Report
on Form 10-KSB for the fiscal year
ended April 30, 1996).

10(a) Lease Agreement dated November 8,
1984 between the Peninsula Airport
Commission and Flight International
Aviation, Inc., as amended.
(incorporated by reference to
Exhibit 10(n) to the Company's
Report on Form 10-K for the fiscal
year ended April 30, 1988).

10(b) Intentionally omitted

10(c) Intentionally omitted

10(d) Intentionally omitted

10(e) Intentionally omitted

10(f) Award/Contract No. N00019 dated
August 30, 1996, issued by the
United States Naval Air Systems
Command, AIR-2.5.3, Patuxent River,
MD to Flight International, Inc.
("CAS-MOS" Contract) (incorporated
by reference to the Company's Report
on Form 10-KSB/A for the fiscal year
ended April 30, 1996). Certain
portions of this Exhibit have been
omitted based upon a request for
confidential treatment with the
Securities and Exchange Commission
(the "Commission"). The confidential
portions have been filed with the
Commission.

10(g) Intentionally omitted.

10(h) Intentionally omitted.

10(i) Fourth Modification Agreement, dated
as of April 30, 1996, by and between
Flight International Aviation, Inc.,
Steven D. Delaney, Otto W. Konrad
and Signet Bank (incorporated by
reference to the Company's Report on
Form 10-KSB for the fiscal year
ended April 30, 1996).

10(j) Amended and Restated Deed of Trust
Note, dated April 30, 1996, from
Flight International Aviation, Inc.,
as maker, to Signet Bank
(incorporated by reference to the
Company's Report on Form 10-KSB for
the fiscal year ended April 30,
1996).

10(k) Documents Relating to Crestar Bank
Loan (incorporated by reference to
the Company's Report on form 10-QSB
for the quarter ended January 31,
1998).

10(l) Documents Relating to Wachovia Bank
Refinancing (incorporated by
reference to the Company's Report on
Form 10-QSB for the quarter ended
January 31, 1998).

10(m) Option Agreement between David E.
Sandlin and the Company dated March
9, 1998 (incorporated by reference
to the Company's Report on Form
10-KSB for the year ended April 30,
1998).

10(n) Current pricing information with
respect to CAS-MOS Contract
(incorporated by reference to the
Company's Report on Form 10-QSB for
the quarter ended December 31, 1999)

10(o) Yute Air Alaska Bankruptcy Court
Order dated February 25, 2000

10(p) Flight Systems, Inc. Asset Purchase
Agreement dated February 29, 2000
incorporated by reference to the
Company's report on Form 10-KSB for
the fiscal year ended April 30,
2000.

10(q) Documents relating to Alaska
Industrial Development and Export
Authority Agreement dated June 5,
2000 incorporated by reference to
the Company's report on Form 10-KSB
for the fiscal year ended April 30,
2000.

10(r) Documents relating to Wachovia Bank
Line of Credit Agreement dated
August 28, 2000 incorporated by
reference to the Company's report on
Form 10-KSB for the fiscal year
ended April 30, 2000. Additional
documents filed herewith.

10(t) Employment Agreement dated October
1, 2001 between the Company and
David E. Sandlin.

10(u) Award/Contract No. N00019-02-D-3157
dated 1 April, 2002 issued by the
U.S. Naval Air Systems Command, AIR
2.4.5.1.10, NAS Patuxent River, MD
to Flight International, Inc.
(CAS-MOS Contract, Lot I) ). Certain
portions of this Exhibit have been
omitted based upon a request for
confidential treatment with the
Securities and Exchange Commission
(the "Commission"). The confidential
portions have been filed with the
Commission.

10(v) Award/Contract No. N00019-01-0037
dated 1 January, 2002 issued by the
U.S. Naval Air Systems Command, AIR
2.4.5.1.10, NAS Patuxent River, MD
to Flight International, Inc.
(CAS-MOS Contract, Lot III)

10(w) Asset Purchase Agreement date May 9,
2002, by and between The Flight
International Group, its
subsidiaries and VTF Corporation

99.1 Certification Pursuant to Section
906 of the Sarbanes-Oxley Act of
2002

56
The Flight International Group, Inc.
and Subsidiaries

The Flight International Group, Inc.
and Subdidaries.

Consolidated Financial Statements
Years Ended April 30, 2002, 2001, 2000 and 1999

F-1

The Flight International Group, Inc.
and Subsidiaries

Table of Contents

Report of Independent Certified Public Accountants F-3

Consolidated Financial Statements

Balance Sheets F-4

Statements of Operations F-6

Statements of Stockholders' Equity (Deficit) F-7

Statements of Cash Flows F-8

Summary of Accounting Policies F-9-12

Notes to Consolidated Financial Statements F-13 - 25

F-2

REPORT OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS

To the Board of Directors and Stockholders of
The Flight International Group, Inc.

We have audited the accompanying consolidated balance sheets of The
Flight International Group, Inc. and subsidiaries as of April 30, 2002, 2001 and
2000, and the related consolidated statements of operations, stockholders'
equity (deficit), and cash flows for each of the four years in the period ended
April 30, 2002. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of The Flight
International Group, Inc. and subsidiaries as of April 30, 2002, 2001 and 2000,
and the results of their operations and their cash flows for each of the four
years in the period ended April 30, 2002 in conformity with accounting
principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses and has a net
capital deficiency that raise substantial doubt about its ability to continue as
a going concern. Management's plans in regard to these matters are also
described in Note 1 to the financial statements. The financial statements do not
include any adjustments that might result from the outcome of the uncertainty.

/s/ BDO Seidman, LLP

Richmond, Virginia
August 2, 2002

F-3

CONSOLIDATED BALANCE SHEETS

ASSETS
April 30,
---------------------------------------------
2002 2001 2000
---- ---- ----

Current assets
Cash $ 195,573 $ 183,817 $ 167,647
Accounts receivable, net (Notes 3,6 and 13) 8,213,821 6,329,370 5,701,100
Inventories (Notes 4, 6 and 7) 2,967,050 2,827,982 3,123,887
Costs in excess of billings 812,408 154,401 722,259
Prepaid expenses and other 170,091 78,320 202,412
Deposits (Note 13) 462,978 487,979 706,173
Note receivable - current portion (Note 2) 304,304 130,500 -
Assets held for sale 1,566,081 - 2,651,012
- ------------------------------------------------------------------------------------------------------------------
Total current assets 14,692,306 10,192,369 13,274,490
- ------------------------------------------------------------------------------------------------------------------
Property and equipment, net (Notes 5, 6, 7 and 9) 9,822,459 9,728,393 5,313,631

Other long-term assets, net of amortization of approximately
$139,000, $90,000 and $42,000 651,665 635,531 580,308
Note receivable, less current portion (Note 2) - 469,500 -
Goodwill, net of amortization of approximately $11,000 (Note 2) - - 962,548
- ------------------------------------------------------------------------------------------------------------------
Total other assets 651,665 1,105,031 1,542,856
- ------------------------------------------------------------------------------------------------------------------

Total assets $25,166,430 $21,025,793 $20,130,977
- ------------------------------------------------------------------------------------------------------------------

F-4

CONSOLIDATED BALANCE SHEETS (Continued)

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

April 30,
-----------------------------------------------
2002 2001 2000
---- ---- ----

Current liabilities
Accounts payable (Note 13) $ 7,777,745 $ 3,606,365 $ 2,272,191
Deferred gain - current portion (Note 13) - 141,531 283,060
Accrued fuel expense (Note 16) 362,603 926,053 1,010,682
Accrued expenses and other liabilities (Note 13) 3,261,226 1,631,632 1,884,880
Deferred revenue 878,285 - -
Accrued compensation and benefits 771,417 635,372 372,495
Notes payable (Note 6) 5,829,158 4,945,926 3,900,391
Long-term debt due currently (Note 7) 1,737,649 1,369,639 1,081,525
Note payable stockholder (Note 13) 202,811 202,811 238,585
- ------------------------------------------------------------------------------------------------------------------
Total current liabilities 20,820,894 13,459,329 11,043,809

Deferred gain, less current portion (Note 13) - - 141,531
Accrued engine reserves (Note 16) 450,025 450,025 642,002
Long-term debt, less current maturities (Note 7) 5,693,334 6,183,735 3,889,912

Total liabilities 26,964,253 20,093,089 15,717,254
- ------------------------------------------------------------------------------------------------------------------

Commitments and contingencies (Notes 9, 10 and 11)

Stockholders' equity (deficit)
Common stock, $.01 par value, 10,000,000 shares
authorized; 1,109,588 issued and outstanding (Note 15) 11,097 11,095 11,095
Additional paid-in capital 1,329,016 1,328,520 1,328,520
Retained earnings (deficit) (3,137,936) (406,911) 3,074,108

Total stockholders' equity (deficit) (1,797,823) 932,704 4,413,723
- ------------------------------------------------------------------------------------------------------------------

Total liabilities and stockholders' equity (deficit) $ 25,166,430 $21,025,793 $20,130,977

- ------------------------------------------------------------------------------------------------------------------
See accompanying summary of accounting policies and notes to consolidated financial statements.

F-5

CONSOLIDATED STATEMENTS OF OPERATIONS

Year Ended April 30,
--------------------------------------------------------------------
2002 2001 2000 1999
---- ---- ---- ----

Revenues (Note 12) $44,788,464 $37,400,960 $28,984,109 $25,313,924
- ----------------------------------------------------------------------------------------------------------------------

Operating costs and expenses
Costs of services (Note 13) 41,293,476 31,803,584 24,357,200 21,322,103
Gain on disposal of assets (Note 13) (141,531) (351,932) (492,071) (69,760)
Depreciation and amortization 1,609,342 1,281,940 789,517 600,658
General, corporate and administrative 3,813,459 4,537,730 2,645,932 2,320,463

Total operating costs and expenses 46,574,746 37,271,322 27,300,578 24,173,464
- ----------------------------------------------------------------------------------------------------------------------

Operating income (loss) (1,786,282) 129,638 1,683,531 1,140,460

Interest expense 944,743 1,104,654 347,682 331,049
- ----------------------------------------------------------------------------------------------------------------------

Income (loss) from continuing operations
before taxes (2,731,025) (975,016) 1,335,849 809,411

Loss from discontinued operations (Note 2) - (1,460,721) (457,568) -

Loss on disposal of subsidiary (Note 2) - (1,045,282) - -
- ----------------------------------------------------------------------------------------------------------------------

Net income (loss) $ (2,731,025) $(3,481,019) $ 878,281 $ 809,411
- -----------------------------------------------------------------------------------------------------------------------

Basic and diluted earnings (loss) per
share data:
Continuing operations $ (2.46) $ (.88) $ 1.29 $ .80
Discontinued operations - (2.26) (.44) -

$ (2.46) $ (3.14) $ .85 $ .80
- ----------------------------------------------------------------------------------------------------------------------
Weighted average number of shares - basic 1,109,588 1,109,424 1,029,656 1,013,976
Weighted average number of shares - diluted 1,109,588 1,109,424 1,039,217 1,013,976
- ----------------------------------------------------------------------------------------------------------------------

See accompanying summary of accounting policies and notes to consolidated financial statements.

F-6

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

Common Stock Additional Retained
---------------------- Paid-in Earnings
Shares Amount Capital (Deficit)
- -------------------------------------------------------------------------------------------------------------------------

Balance, April 30, 1998 1,013,976 $10,140 $1,007,617 $1,386,416

Net income - - - 809,411
- -------------------------------------------------------------------------------------------------------------------------
Balance, April 30, 1999 1,013,976 10,140 1,007,617 2,195,827

Shares issued in acquisition (Note 1) 101,398 1,014 353,886 -

Shares redeemed (Note 15) (5,950) (59) (32,983) -

Net income - - - 878,281
- -------------------------------------------------------------------------------------------------------------------------

Balance, April 30, 2000 1,109,424 1,095 1,328,520 3,074,108

Net loss - - - (3,481,019)
- -------------------------------------------------------------------------------------------------------------------------

Balance, April 30, 2001 1,109,424 11,095 1,328,520 (406,911)

Stock Options exercised 164 2 496

Net loss - - - (2,731,025)
- -------------------------------------------------------------------------------------------------------------------------
Balance, April 30, 2002 1,109,588 $11,097 $1,329,016 $(3,137,936)
- -------------------------------------------------------------------------------------------------------------------------

See accompanying summary of accounting policies and notes to consolidated financial statements.

F-7

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended April 30,
---------------------------------------------------------------------
2002 2001 2000 1999
---- ---- ---- ----

Operating activities
Net income (loss) $(2,731,025) $(3,481,019) $ 878,281 $ 809,411
Adjustments to reconcile net income (loss)
to net cash provided by operating activities
Bad debt - note receivable 210,000 - - -
Loss on disposal of subsidiary - 1,045,282 - -
Depreciation and amortization 1,609,342 1,281,940 884,611 600,658
Engine reserve - (191,977) 193,553 (296,178)
Gain on sale of assets (141,531) (351,932) (492,071) (69,759)
Net cash provided (absorbed) by
Accounts receivable (1,884,451) (1,337,356) (1,684,436) 472,055
Inventories (139,068) (47,010) (256,692) (798,854)
Costs in excess of billings (658,007) 567,858 (288,343) (111)
Prepaid expenses and other assets (66,771) 375,987 (211,696) 682,974
Accounts payable 4,171,380 2,534,382 1,093,011 105,206
Accrued expenses and other liabilities 1,202,687 23,946 283,321 275,736
Deferred revenue 878,285 - (727,586) (950,802)
Income taxes payable - - - (20,000)
- ----------------------------------------------------------------------------------------------------------------------------

Net cash provided (absorbed) by operating
activities 2,450,841 420,101 (328,047) 810,336
- ----------------------------------------------------------------------------------------------------------------------------

Investing activities
Proceeds from sale of assets held for resale - 1,225,000 - -
Proceeds from sale of property and equipment - 500,000 1,700,000 -
Investment in property and equipment (1,654,541) (5,182,533) (1,710,923) (1,103,201)
Investment in assets held for sale (1,566,081) (320,592) (2,651,012) -
Investment in other long-term assets (65,000) (257,500) - -
Proceeds from note receivable repayment 85,696 - - -
Acquisitions - - (1,298,281) -
- ----------------------------------------------------------------------------------------------------------------------------

Net cash absorbed by investing activities (3,199,926) (4,035,625) (3,960,216) (1,103,201)
- ----------------------------------------------------------------------------------------------------------------------------

Financing activities
Proceeds from lines of credit, net 883,232 2,748,662 1,116,760 629,409
Repayment of long-term debt (1,422,391) (4,354,697) (1,024,774) (856,260)
Proceeds from long-term debt 1,300,000 5,273,504 4,215,000 495,000
Net shareholder advances (repayments) - (35,775) 69,632 -
- ----------------------------------------------------------------------------------------------------------------------------

Net cash provided by financing activities 760,841 3,631,694 4,376,618 268,149
- ----------------------------------------------------------------------------------------------------------------------------

Net increase (decrease) in cash and cash equivalents 11,756 16,170 88,355 (24,716)

Cash and cash equivalents, beginning of year 183,817 167,647 79,292 104,008
- ----------------------------------------------------------------------------------------------------------------------------

Cash and cash equivalents, end of year $ 195,573 $ 183,817 $ 167,647 $ 79,292
- ----------------------------------------------------------------------------------------------------------------------------

See accompanying summary of accounting policies and notes to consolidated financial statements.

F-8

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business - The Flight International Group, Inc. and
Subsidiaries (the "Company") is an aviation services company that performs
military training services using specially modified commercial aircraft,
principally under contracts with the United States Department of Defense, other
government agencies and foreign countries. In addition, the Company has
established a market for training and testing in the aerospace industry. The
Company also operates a fixed base operation ("FBO") at the Newport
News/Williamsburg International Airport.

The Company provided commercial airplane maintenance at its Myrtle
Beach, South Carolina location until the subsidiary was sold November 30, 2000.
The Company also provides flight services through its subsidiary in Alaska,
Flight Alaska, Inc. ("FAI"), which includes mail service for the United States
Postal Service and corporate and private charter services.

Principles of Consolidation - The consolidated financial statements
include the accounts of the Company and its wholly owned subsidiaries. All
significant intercompany transactions and balances have been eliminated.

Inventories - Aircraft parts - Aircraft parts include rotables,
repairable and expendable aircraft components. Rotables and repairables are
recorded using the specific identification method and are valued at the lower of
cost or market. Expendables are recorded at the lower of average cost or market.

Targets and cable - Targets and cable are special equipment required to
perform target tow missions and are recorded at the lower of average cost or
market.

Fuel - Fuel includes Jet A and Avgas, both of which are consumed in the
performance of contracts and sold commercially. Fuel is recorded at the lower of
average cost or market.

Costs in Excess of Billings - Costs in excess of billings consists of
the cost of parts and labor of customer maintenance work orders in process.
Completed work orders are included in accounts receivable.

Property and Equipment - Property and equipment are recorded at cost.
The cost of improvements are capitalized, while the cost of replacements,
maintenance and repairs which do not improve or extend the life of the
respective assets are expensed.

Depreciation and amortization of property and equipment are provided,
for financial reporting purposes, as follows:

Aircraft and Engines - Aircraft are depreciated on a straight-line
basis over 12 years. Engines are depreciated based on hours flown down to a core
value.

Electronic Warfare Equipment - Substantially all electronic warfare
equipment and related aircraft modifications are utilized to train military
aircrews, radar operators and weapons controllers in the techniques of airborne
target identification and intercept. Such equipment and related aircraft
modifications are carried at the lower of cost or market value and are
depreciated on a straight-line basis over 5 years.

Other equipment - All other property and equipment is depreciated on a
straight-line basis over its estimated useful life or lease term, as applicable.
Estimated useful lives are as follows: leasehold interests and improvements,
primarily in the airport buildings - 20 months (remaining lease term);
equipment, computers, office furniture, and fixtures 3 - 7 years.

F-9

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)

Goodwill - Goodwill was stated at the excess amount of the purchase
price over net assets acquired, net of accumulated amortization. Goodwill at
April 30, 2000 was related to the Company's Myrtle Beach, South Carolina
subsidiary. The subsidiary was sold by the Company to an outside party effective
November 30, 2000 and the remaining net goodwill was written-off as a result of
the disposal.

Assets Held for Sale - Assets held for sale balance at April 30, 2000
includes costs related to the acquisition and refurbishment of three airplanes.
The assets are stated at the lower of cost or market. Two planes were sold
during the year ended April 30, 2001 and another was put into service by the
Company and therefore transferred to property and equipment. Assets held for
sale at April 30, 2002 includes costs related to acquisition and refurbishment
of two airplanes.

Other Long-Term Assets - Other long-term assets includes costs incurred
in developing proprietary airplane maintenance and modification certifications.
These costs total approximately $680,000 and $615,000 at April 30, 2002 and
2001, respectively, and are being amortized on a straight line basis over 10-15
years, the estimated lives of the certifications. The Company also is licensed
through its Alaska subsidiary to carry mail for the U.S. Postal Service. The
license was acquired at a cost of approximately $100,000 and has no expiration
date.

Asset Impairments and Disposals - The Company reviews the carrying
values of its long-lived and identifiable intangible assets for possible
impairment whenever events or changes in circumstances indicate that the
carrying amount of the assets may not be recoverable, as determined based on
undiscounted cash flows over the remaining amortization periods. If there is
evidence of impairment, the carrying value of related assets would be reduced by
the estimated shortfall of undiscounted cash flows.

Fair Value of Financial Instruments - Financial instruments which
potentially subject the Company to concentrations of credit risk consist
principally of cash and cash equivalents, and trade receivables. The Company
places its cash and cash equivalents with high credit qualified financial
institutions.

The following details the fair values of financial instruments for
which it is practicable to estimate the value:

Cash and cash equivalents - The carrying amounts approximate fair value
because of the short maturity of these instruments.

Debt - The aggregate fair value of the Company's long-term debt
obligations, which is based upon quoted market prices and rates currently
available to the Company for debt with similar terms and maturities,
approximates the carrying amount.

Revenue Recognition - Contract Revenue - The Company recognizes
contract revenue as hours are flown, at the average rate per flight hour, over
the term of each contract. Certain contracts provide for a guaranteed minimum
number of flight hours per contract year. Contract revenue for such guaranteed
but unflown hours, if any, is recognized at the end of the contract year.

The Company has a major airplane modification job in progress as of
April 30, 2002 for a customer. The contract is expected to be complete near the
end of the year ended April 30, 2003. Due to the length of the contract it will
be accounted for on the percentage of completion method based on milestones set
forth in the contract. As of April 30, 2002 the Company had not achieved any of
the contact milestones and therefore no revenues have been recognized. The
Company had accumulated approximately $672,000 and $878,000 of costs and
deferred revenue, respectively, related to the contract as of April 30, 2002.

F-10

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)

Maintenance Revenue - The Company recognizes maintenance revenue at the
time of completion.

Income Taxes - Deferred income taxes are recognized for the tax
consequences of "temporary differences" by applying enacted statutory tax rates
applicable to future years to differences between the financial statement
carrying amounts and the tax bases of existing assets and liabilities. The
effect on deferred taxes of a change in tax rates is recognized in income in the
period that includes the enactment date.

Statement of Cash Flows - For purposes of the statement of cash flows,
the Company considers all highly-liquid instruments purchased with a maturity of
three months or less to be cash equivalents.

Earnings Per Share - Basic earnings per share is computed by dividing
income available to common shareholders by the weighted average number of common
shares outstanding for the period. Diluted earnings per share reflects the
potential dilutive effect of stock options that could share in earnings of the
Company.

Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

Accounting Pronouncements - In June 2001, the Financial Accounting
Standards Board finalized FASB Statements No. 141, Business Combinations (SFAS
141), and No. 142, Goodwill and Other Intangible Assets (SFAS 142). SFAS 141
requires the use of the purchase method of accounting and prohibits the use of
the pooling-of-interests method of accounting for business combinations
initiated after June 30, 2001. SFAS 141 also requires that the Company recognize
acquired intangible assets apart from goodwill if the acquired intangible assets
meet certain criteria. SFAS 141 applies to all business combinations initiated
after June 30, 2001 and for purchase business combinations completed on or after
July 1, 2001. It also requires, upon adoption of SFAS 142, that the Company
reclassify the carrying amounts of intangible assets and goodwill based on the
criteria in SFAS 141. The adoption of this statement is not expected to have an
impact on the Company's financial condition or results of operations.

SFAS 142 requires, among other things, that companies no longer
amortize goodwill, but instead test goodwill for impairment at least annually.
In addition, SFAS 142 requires that the Company identify reporting units for the
purposes of assessing potential future impairments of goodwill, reassess the
useful lives of other existing recognized intangible assets, and cease
amortization of intangible assets with an indefinite useful life. An intangible
asset with an indefinite useful life should be tested for impairment in
accordance with the guidance in SFAS 142. SFAS 142 is required to be applied in
fiscal years beginning after December 15, 2001 to all goodwill and other
intangible assets recognized at that date, regardless of when those assets were
initially recognized. SFAS 142 requires the Company to complete a transitional
goodwill impairment test six months from the date of adoption. The Company is
also required to reassess the useful lives of other intangible assets within the
first interim quarter after adoption of SFAS 142. The adoption of this statement
is not expected to have an impact on the Company's financial condition or
results of operations.

F-11

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)

In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" ("SFAS 144"). This statement
addresses financial accounting and reporting for the impairment or disposal of
long-lived assets. This statement supersedes FASB Statement No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of", and the accounting and reporting provisions 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". This statement also amends ARB No. 51, "Consolidated
Financial Statements", to eliminate the exception to consolidation for a
subsidiary for which control is likely to be temporary. This statement requires
that one accounting model be used for long-lived assets to be disposed of by
sale, whether previously held and used or newly acquired. This statement also
broadens the presentation of discontinued operations to include more disposal
transactions. SFAS 144 is effective for fiscal years beginning after December
15, 2001 and interim periods within those fiscal years. Currently, the Company
is assessing but has not determined how the adoption of SFAS 144 will impact its
financial position and results of operations.

In May 2002, the FASB issued SFAS No. 145, "Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections." This statement changes certain accounting related to the
extinguishment of debt, and eliminates inconsistencies between the required
accounting for sale-leaseback transactions and the required accounting for
certain lease modifications that have economic effects that are similar to
sale-leaseback transactions. SFAS No. 145 also amends other existing
authoritative pronouncements to make various technical corrections, clarify
meanings, or describe their applicability under changed conditions. The
statement is effective after May 15, 2002 and early application is encouraged as
of the beginning of the fiscal year or as of the beginning of the interim period
in which the statement is issued. The adoption of the statement is not expected
to have an impact on the Company's present financial condition or results of
operations.

F-12

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Management's Plans - In November 2001, the Company entered into a
letter of intent with a third party to sell virtually all operations and related
net assets of the Company. Consummation of the transaction is subject to various
conditions, including negotiation and execution of a definitive agreement and
approval by the Company's Board of Directors and shareholders. If the
transaction occurs, it is anticipated that it would close in fall of 2002.

Should the sale not be consummated, management has implemented significant
operating changes to ensure the success of the Company. The following is a
summary of the major changes:

The Company's primary government services contract was renewed April 1, 2002.
This contract's structure changed, resulting in an increase in the incremental
cash flow realized from the fixed monthly billing change. Additionally, the
combined billing value per flight hour has increased.

The Company is restructuring its fleet and is currently in process of
reassigning several assets from the Alaska subsidiary to anticipated new
contracts. A realignment of resources will increase fleet utilization and
provide the basis for an increase revenue stream.

Operating policies and procedures are being revised and overhead cost structures
are being adjusted to ensure an efficient and compliant operating
infrastructure.

The customer base has been expanded due to a recent contract award from the US
Air Force. This contract has a five-year performance period with annual
estimated revenue of $700,000.

The Company is aggressively seeking new business opportunities and has several
potential contract awards outstanding. These proposals include six new customers
from both the commercial and governmental market.

The Company is very confident that implementing the newly established operating
budget, utilizing an efficient corporate infrastructure, and expanding its
customer base will achieve its business plan.

The financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classifications of liabilities that may result from the possible inability
of the Company to continue as a going concern.

Note 2 - Acquisitions and Disposal of Subsidiary - The Company acquired the
assets of Flight Systems, Inc. on March 1, 2000. The purchase price was composed
of $150,000 of cash plus 101,398 shares of Company stock and assumption of
liabilities. The shares were valued at $3.50 per share. The operations which are
located in Myrtle Beach, South Carolina were immediately reincorporated into
Flight International Services, Inc. ("FIS") a newly formed wholly owned
subsidiary of the Company. Approximately $973,000 of goodwill was recorded on
FIS related to the acquisition, and was being amortized evenly over a 15 year
period until the disposal of FIS. During April 2000, FIS acquired approximately
all of the fixed assets of an avionics company for approximately $240,000.

In April 2000, the Company acquired substantially all assets of YUTE Alaska
through a newly formed entity Flight Alaska, Inc. ("FAI"). The acquisition was
part of a bankruptcy liquidation. The asset purchase was financed by FAI in part
with long-term debt totaling $775,000.

F-13

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

Note 2 - Acquisitions and Disposal of Subsidiary (continued)

A summary of the acquisitions of FIS and FAI during the year ended April 30,
2000 is as follows:

FIS FAI
- --------------------------------------------------------------------------------
Fair value of assets acquired $ 785,000 $1,221,000
Goodwill recorded 973,000 -
Liabilities assumed/incurred 1,253,000 73,000
Cash paid 150,000 1,148,000
Fair value of stock issued for acquisition 355,000 -

The Company disposed of its subsidiary FIS effective November 30, 2000 for a
$600,000 note receivable. The note was to mature April 2005 in equal monthly
installments of principal and interest at 9% of $14,934 beginning May 2001. The
sale was closed in April 2001. As a condition of the sale all outstanding FIS
debt to banks and shareholders was not assumed by the buyer. As a result of the
sale, the Company recorded a loss on disposal of the subsidiary of approximately
$1,045,000. Operating results of FIS were as follows:

May 1, 2000 March 1, 2000
Through Through
For the Periods November 30, 2000 April 30, 2000
- --------------------------------------------------------------------------------
Revenues $ 3,327,493 $ 537,132
Net loss from discontinued operations (1,460,721) (457,568)
Net loss on disposal of subsidiary (1,045,282) -
Net loss from disposed subsidiary (2,506,003) (457,568)
- --------------------------------------------------------------------------------

Net loss per share (basic and diluted):
Discontinued operations $ (1.32) $ (.44)
Loss on disposal of subsidiary $ (.94) $ -
- --------------------------------------------------------------------------------

As of April 30, 2002, the Company recorded bad debt expense of $210,000 due to
default on the note receivable subsequent to year end. The outstanding principal
was reduced from approximately $514,000 to $304,000 as of April 30, 2002. The
$304,000 represents the estimated realizable value of all operating assets of
FIS turned over to the Company in satisfaction of the note.

F-14

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

Note 3 - Accounts Receivable - The balance of accounts receivable is comprised
of the following:

April 30,
-----------------------------------------
2002 2001 2000
---- ---- ----
Flight operations contracts
and programs $7,403,302 $5,722,238 $5,063,132
Commercial 808,585 856,535 551,426
Other receivables 496,650 362,317 106,229
---------- ---------- ----------

8,708,537 6,941,090 5,720,787
Less: allowance for
doubtful accounts (494,716) (611,720) (19,687)
----------- ----------- ------------

$8,213,821 $6,329,370 $5,701,100
=========== =========== ============

Accounts receivable from flight operations contracts and programs consist of the
following:

April 30,
--------------------------------------------
2002 2001 2000
---- ---- ----

U.S. Government
Amounts billed $5,976,248 $3,968,879 $2,053,128
Services provided,
not billed 452,927 978,520 2,129,655
---------- ----------- ----------

6,429,175 4,947,399 4,182,783
---------- ---------- ----------

Commercial Customers
Amounts billed 974,127 774,839 770,679
Services provided,
not billed - - 109,670
---------- ---------- ----------

974,127 774,839 880,349
---------- ---------- ----------

Total flight operations
contracts and programs $7,403,302 $5,722,238 $5,063,132
========= ========= =========

Accounts receivable are billed in accordance with the terms of the contracts
under which they arise.

Note 4 - Inventories - Inventories are compromised of:

April 30,
-----------------------------------------
2002 2001 2000
---- ---- ----

Aircraft parts $2,737,760 $2,579,701 $2,928,592
Targets and cable 207,065 224,073 183,308
Fuel 22,225 24,208 11,987
----------- ----------- ----------
$2,967,050 $2,827,982 $3,123,887
========= ========= =========

F-15

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

Note 5 - Property and Equipment - Property and equipment consist of the
following:

April 30,
---------------------------------------
2002 2001 2000
---- ---- ----

Aircraft, improvements, and engines $ 8,335,544 $ 6,868,259 $3,220,532
Electronic warfare equipment 963,147 963,147 519,147
Buildings and leasehold improvements 3,487,277 3,430,650 2,246,378
Office furniture and fixtures 872,481 787,009 287,392
Other equipment 1,473,656 1,428,499 1,839,260
--------- --------- ----------

15,132,105 13,477,564 8,112,709
Accumulated depreciation
and amortization (5,309,646) (3,749,171) (2,799,078)
----------- ---------- -----------

Property and equipment, net $ 9,822,459 $ 9,728,393 $5,313,631
========= ========= =========

Note 6 - Notes Payable - In August 2000, the Company entered into a $5,500,000
line of credit agreement with a bank in Newport News, Virginia, which was
subsequently increased to $6,000,000 as of July 2001 and to $7,250,000 as of
December 2001. The current term of the agreement runs through August 31, 2002.
Under the agreement, the Company may obtain advances up to 85% of amounts billed
by the Company on government contracts. The Company pays interest at a variable
rate, which was approximately 5.25% at April 30, 2002. Outstanding advances at
April 30, 2002, 2001 and 2000 were approximately $5,829,000, $4,946,000 and
$3,900,000, respectively. Under the agreement, the Company was required to
maintain certain net worth ratios. The Company was not in compliance with these
ratios at April 30, 2001. However, an amendment to the line of credit deleted
the net worth requirement as of May 1, 2001 and waived any default by the
Company. The agreement was also amended December 1, 2001 to include virtually
all equipment of the Company as collateral. The Company believes it will be able
to refinance the debt as it becomes due.

During the year ended April 30, 1998 the Company entered into a $2,000,000 asset
based borrowing agreement with a bank in Newport News, Virginia, which was
subsequently increased to $2,700,000. Under the terms of the agreement, the
Company could obtain advances up to 85% of amounts billed by the Company on
government contracts. The Company paid interest at prime plus .50% on
outstanding advances. Outstanding advances at April 30, 2000 were approximately
$2,024,000. The line of credit was paid off in August 2000 with additional
financing.

During the year ended April 30, 2000, the Company entered into a $500,000
commercial line of credit agreement with a bank in Newport News, Virginia,
maturing September 1, 2000. The line of credit was paid off in January 2001.

During the year ended April 30, 2000, the Company entered into a loan agreement
for $1,300,000 with a bank in Newport News, secured by aircraft. The loan was
paid off in February 2001.

F-16

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

Note 7 - Long-Term Debt - Long-term debt consists of the following:

April 30,
---------------------------------------------
2002 2001 2000
---- ---- ----

Note payable to a bank with interest payable at the monthly
LIBOR Index plus 3% (4.8%), due in equal monthly
installments of principal and interest of $17,500, beginning
May 1, 2001 through April 1, 2004, secured by aircraft. $ 1,907,500 $ 2,100,000 $ -

Note payable to a state authority with interest payable of
9.25%, due in equal monthly installments of $11,321
through June 1, 2015, secured by real property located in
Anchorage, Alaska. 1,031,860 1,071,732 -

Note payable to a bank with interest payable at 8.55%, due
in equal monthly installments of principal and interest of
$11,898, maturing July 2006, secured by aircraft. 695,366 - -

Note payable to a bank with interest payable at 8.5%,
due in graduated monthly installments of principal and
interest, beginning at $19,000 and ending at $37,000,
through November 1, 2003, secured by a first mortgage
deed of trust on leasehold improvements and assignment
of leases on certain real property located in Newport News,
Virginia. 615,286 951,800 1,238,041

Note payable to a bank with interest payable at 9.25%,
due in equal monthly principal installments of $15,938
plus interest through January 15, 2005, secured by aircraft. 541,875 733,125 908,438

Note payable to a bank with interest payable at 8.55%, due
in equal monthly installments of principal and interest of
$8,725 through July 2006, secured by aircraft. 509,914 - -

Note payable to a bank with interest payable at the LIBOR
Index plus 3% (4.8%), due in monthly installments of
$16,500 beginning June 1, 2000 through May 1, 2005,
secured by aircraft. 478,174 640,152 775,000

Note payable to a related party with interest at 8.5%, due with
one payment of $25,000 on June 15, 2001 and thereafter in
equal monthly installments of principal and interest of $9,775
through June 15, 2006, secured by aircraft. (See Note 13) 409,149 500,000 -

F-17

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

Note 7 - Long-Term Debt (continued)

April 30,
-----------------------------------------
2002 2001 2000
---- ---- ----

Capital lease obligation, due in quarterly installments of
principal and interest of $50,500, through March 31,
2004, secured by computer equipment (Note 9). $ 340,727 $ 433,971 $ -

Note payable to a bank with interest payable at Prime rate
plus 1.00% (5.75%), due in equal monthly installments of
principal of $5,952 plus interest maturing on August 15,
2006, secured by aircraft. 315,488 386,912 452,384

Note payable to a company with interest payable of 18.5%,
due in equal bi-annual installments of principal and interest
of $27,500 due June 1, 2009, unsecured. 208,101 226,677 -

Note payable to a bank with interest payable at the Prime
rate plus 0.75% (5.5%), due in equal monthly installments
of principal and interest of $1,875 through October 15, 2004,
secured by aircraft. 170,615 193,125 215,625

Note payable to a bank with interest payable at the LIBOR
Index rate plus 3% (4.8%), due in monthly installments of
principal of $6,668 plus interest through October 10, 2003,
secured by aircraft. 119,982 199,994 -

Note payable to a bank with interest payable at prime plus
.25% (5%), due in equal monthly installments of principal
and interest of $3,472 through November 2003, secured by
equipment. 65,972 107,639 -

Note payable to an insurance company with interest payable
at 8.7%, due in monthly installments of $3,503 maturing
September 2002. 17,141 - -

Note payable to a bank with interest payable at 8.9%, due
in equal monthly installments of principal and interest
of $376 maturing on March 1, 2003, secured by a vehicle. 3,833 8,247 11,085

F-18

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

Note 7 - Long-Term Debt (continued)

April 30,
---------------------------------------------
2002 2001 2000
---- ---- ----

Note payable to a bank with interest payable at 8.22%, due
in equal monthly installments of principal and interest of
$13,602 through February 2002, secured by certain property
and equipment. Refinanced during the year ended April 30,
2001. $ - $ - $ 288,948

Note payable to a bank with interest payable at 8%, due in
equal monthly installments of principal and interest of
$12,452, maturing August 2000, collateralized by inventory. - - 205,416

Note payable to a bank with interest payable at the monthly
LIBOR Index plus 3.00%, graduated monthly installments of
principal and interest, beginning at $8,000 and ending at $12,000,
through September 1, 2004, secured by aircraft. Refinanced
during the year ended April 30, 2001. - - 876,500
--------- ---------- ---------
7,430,983 7,553,374 4,971,437
Current maturities 1,737,649 1,369,639 1,081,525
--------- --------- ---------

Long-term debt, net $5,693,334 $6,183,735 $3,889,912
========= ========= =========

At April 30, 2002, aggregate principal payments due for long-term debt for the
next five fiscal years and thereafter were as follows:

2003 $1,737,649
2004 2,889,627
2005 836,626
2006 463,199
2007 641,112
Thereafter 862,770
----------

$7,430,983

F-19

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

Note 8 - Income Taxes - Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amount of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.

The sources of estimated temporary differences and their effect on net deferred
tax assets (liabilities) are summarized as follows:

April 30,
-------------------------------------------------------
2002 2001 2000
---- ---- ----

Deferred gain $ - $ 54,000 $ 161,000
Engine reserve 227,000 227,000 244,000
Allowance for bad debts 96,000 168,000 7,000
Vacation expense 123,000 87,000 83,000
Net operating loss carryforwards 4,900,000 4,400,000 2,432,000
Basis difference of property and equipment (380,000) (40,000) -
----------- ------------ -----------

Net deferred tax asset 4,966,000 4,896,000 2,927,000
Valuation allowance (4,966,000) (4,896,000) (2,927,000)
---------- ---------- -----------

$ - $ - $ -
=========== =========== ============

The Company has recorded a valuation allowance for the deferred tax asset due to
uncertainty of its realization.

As of April 30, 2002, the cumulative net operating loss available for federal
income tax purposes was estimated at approximately $13 million which will expire
primarily during years ended 2011, 2019, 2021 and 2022

Note 9 - Lease Commitments - The Company leases various aircraft and engines
under operating leases for use on its contracts. Total lease expense for these
aircraft and engines was approximately $15,931,000, $11,488,000, $9,719,000 and
$7,272,000 for the years ended April 30, 2002, 2001, 2000 and 1999,
respectively. Such lease expenses included approximately $10,473,000,
$6,839,000, $7,028,000 and $4,160,000 for the years ended April 30, 2002, 2001,
2000 and 1999, respectively, for contingent rentals based on hours flown. See
discussion of related party lease commitments at Note 13.

The Company leases various office facilities and airport property under lease
arrangements with terms expiring through May 2004. Other operating leases are
for office machines and aircraft maintenance equipment. The lease expense for
these operating leases was approximately $960,000, $651,000, $391,000 and
$369,000 for the years ended April 30, 2002, 2001, 2000 and 1999, respectively.
Such lease expenses included approximately $66,000, $95,000, $105,000 and
$102,000 for the years ended April 30, 2002, 2001, 2000 and 1999, respectively,
for contingent rentals based on revenue.

The Company has a capital lease obligation with a finance company related to
computer equipment. Property and equipment at April 30, 2002 includes the leased
equipment of approximately $363,000, net of amortization of approximately
$223,000.

F-20

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

Note 9 - Lease Commitments (continued)

At April 30, 2002, future minimum lease payments excluding contingent rentals on
capital and operating leases for each of the next five fiscal years were as
follows:

Capital Operating
------- ---------
2003 $252,500 $5,817,000
2004 187,040 5,206,000
2005 - 4,671,000
2006 - 4,260,000
2007 - 2,125,000
--------------------------------------------------------------
Total minimum lease payments 439,540 22,079,00
Amounts representing interest 98,813 -
--------------------------------------------------------------
$340,727 $22,079,000
--------------------------------------------------------------

Note 10 - Claims, Contingencies, and Commitments - On February 4, 1994, the
Company filed voluntary petitions in the United States Bankruptcy Court for the
Eastern District of Virginia (the "Bankruptcy Court") for reorganization under
Chapter 11 of the United States Bankruptcy Code (the "Code"). On December 8,
1994, the Bankruptcy Court entered an order confirming the Company's joint plan
of reorganization (the "Plan"), and the Plan became effective on December 28,
1994 (the "Effective Date"). For accounting purposes, the effective date was
deemed to be December 31, 1994.

Pursuant to the Plan, a total of 1,000,000 shares of new common stock were
authorized and 998,976 shares were issued. The 9,899,713 shares of common stock
previously outstanding were retired. Of the new shares of common stock issued,
51,000 shares are being held by the Company to satisfy the remaining claims of
the unsecured creditors.

As a result of a state sales and use tax audit, the Company was assessed a
liability of approximately $280,000 for periods ended December 31, 2000 and
prior and a lien was placed on certain real property owned by the Company. The
Company has accrued approximately $240,000 based on a settlement of the
assessment as of April 30, 2002 and 2001.

The Company is involved in litigation with a shareholder of the Company and
former employee of FIS who was also the principle owner of Flight Systems, Inc.
("Flight Systems") whose assets were purchased by FIS in February 2000. The
shareholder, his attorney, and Flight Systems allege that the Company has failed
to satisfy certain liabilities due to them individually and collectively as a
result of the Company's acquisition of Flight Systems. The attorney claims the
Company owes approximately $85,000 for services rendered. The shareholder and
Flight Systems collectively claim approximately $221,000 of unpaid liabilities
including shareholder loans payable. The Company plans to defend the litigation
vigorously and believes it is possible that it may assert counter claims that
outweigh the litigation claims. As of April 30, 2002 and 2001 the Company has
liabilities recorded of approximately $54,000 and $203,000 in each year related
to the attorney fees and shareholder payables, respectively.

F-21

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

Note 11 - Employee Benefit Plans - The Company sponsors a defined contribution
pension plan covering all eligible employees. Employees become eligible to
participate upon completing one year of service in a job classification not
subject to a collective bargaining agreement. One year of service is defined as
any consecutive 12 month period in which the employee works 1,000 hours.
Participants may elect to have 1% to 15% of their compensation contributed to
the Plan, up to the maximum allowed by law. Contributions to the Plan are
matched by the Company at the rate of 50% of the first 6% of employees'
contributions. All employee contributions, rollover contributions, and earnings
thereon are 100% vested. Company contributions vest at a rate of 20% per year.
The participant may designate his contribution and employer matching
contributions to be invested in any combination of seven money market, stock or
bond funds maintained by the Trustee. After a participant dies or retires, the
participant or his beneficiary is entitled to receive the entire vested balance
of his account.

The Company reserves the right to amend or terminate the Plan at any time. If
the Plan is terminated, each participant is then vested with the amount in their
account. The Company contributed approximately $111,000, $130,000, $72,000 and
$59,000 to the plan for the years ended April 30, 2002, 2001, 2000 and 1999,
respectively.

Note 12 - Transactions With Major Customer - Revenues from all U.S. government
contracts included in Flight operations are approximately as follows:

Year Ended April 30, Amount Percent
------------------- -------- -------
2002 $29,918,000 69%
2001 $23,893,000 64%
2000 $23,643,000 80%
1999 $19,444,000 77%

Note 13 - Related Parties - The Company had a note payable on advances from a
stockholder of $202,811 at April 30, 2002 and 2001, respectively. See further
discussion at Notes 2 and 10 regarding the stockholder who acquired shares of
the Company as the principal owner of Flight Systems, Inc.

The Company has entered into lease agreements with Maritime Sales and Leasing
("MSL") for certain aircraft and engines which require future minimum lease
payments at April 30, 2002 for each of the next five years as follows: 2003 -
$4,590,000, 2004 - $4,276,000, 2005 - $3,883,000 and 2006 - $3,620,000 and 2007
- - $1,763,000. David Sandlin, Chairman, President and CEO of the Company, is also
an owner of MSL. Related to these agreements, the Company has deposits of
approximately $337,000 with MSL as of April 30, 2002.

During the year ended April 30, 2000, the Company entered into a sale/leaseback
transaction with MSL to sell a plane and two engines. Total proceeds from the
sale were $1,700,000, however due to the terms of leaseback, the Company is
amortizing approximately $566,000 of the $916,000 gain realized on the
transaction over the 2 year term of the lease. The deferred gain as of April 30,
2001 and 2000 was $141,531 and $424,591, respectively. The remaining deferred
gain of $141,531 as of April 30, 2001 was recognized during 2002.

The Company has lease agreements for certain aircraft with the Aviation Company.
David Sandlin has an ownership interest in the Aviation Company. Approximately
$311,000, $22,000, $3,000 and $67,000 of lease expense was incurred for the
years ended April 30, 2002, 2001, 2000 and 1999, respectively. The Company also
has lease agreements for certain aircraft directly with David Sandlin.
Approximately $22,000 and $26,000 of lease expense was incurred for the years
ended April 30, 2002 and 2001, respectively. Required future minimum lease
payments at April 30, 2002 for each of the next five years to the Aviation
Company are approximately as follows: 2003 - $727,000, 2004 - $727,000,
2005 - $727,000, 2006 - $632,000 and 2007 - $361,000.

In February 2001, the Company entered into a sale/leaseback transaction with the
Aviation Company to sell a plane and two engines for $500,000. The Company
recognized the entire gain in 2001 of approximately $113,000 related to the
transaction based on the present value of the lease payments over the five year
term.

F-22

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

Note 13 - Related Parties (continued)

Total lease expense including contingent rentals on all related party leases
were approximately as follows:

Year Ended April 30,

2002 $7,286,000
2001 $5,725,000
2000 $4,942,000
1999 $3,085,000

The amounts due to and from MSL including amounts related to the leasing
arrangements described are approximately as follows:

April 30, 2002 2001 2000
- ------------------------------------------------------------------------

Note payable (Note 7) $409,000 $500,000 $ -
Leases payable 813,000 110,000 182,000

Accounts receivable 178,000 165,000 124,000
Lease deposits 337,000 337,000 409,000

Note 14 - Supplemental Disclosure of Cash Flow Information - The Company made
interest payments of approximately $935,000, $1,030,000, $520,000 and $355,000
for the years ended April 30, 2002, 2001, 2000 and 1999 respectively, including
interest capitalized of approximately $111,000 and $90,000 for the years ended
April 30, 2001 and 2000, respectively.

During the year ended April 30, 2001, the Company transferred approximately $1.7
million of costs related to aircraft and engines classified as held for sale at
April 30, 2000 to property and equipment.

F-23

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

Note 15 - Stockholders' Equity - During the year ended April 30, 2000, the
Company redeemed 5,950 shares of stock in satisfaction of an outstanding
receivable of approximately $33,000.

In August 1998, the Company implemented a stock option plan to provide incentive
to employees, directors, and consultants. The initial term of the plan is 10
years and a total of 500,000 shares are available for grant. Under the new plan,
38,000 options previously issued to an officer of the Company at an exercise
price of $2.00 were replaced by 45,000 options at $3.12 in 1999. The following
table summarizes all option activity:

Year Ended April 30, 2002 2001 2000 1999
- ------------------------------------------------------------------------------------------------------------------------
Weighted- Weighted- Weighted- Weighted-
average average average average
exercise exercise exercise exercise
Shares price Shares price Shares price Shares price

- ------------------------------------------------------------------------------------------------------------------------

Options outstanding
at beginning of year 243,850 $3.63 153,350 $3.25 74,650 $3.07 38,000 $2.00

Options granted - - 90,500 4.26 92,000 3.37 74,650 3.07
Options exercised (164) 3.00 - - - - - -
Options forfeited
(cancelled) - - - - (13,300) 3.10 (38,000) 2.00
- ------------------------------------------------------------------------------------------------------------------------
Options outstanding
at end of year 243,686 $3.63 243,850 $3.63 153,350 $3.25 74,650 $3.07
- ------------------------------------------------------------------------------------------------------------------------

As of April 30, 2002, all options are vested and exercisable at a weighted
average price per share of $3.63. The weighted average remaining life of options
outstanding is approximately seven years. The Company applies APB Opinion 25 and
related interpretations in accounting for stock options. Accordingly, no
compensation cost has been recognized. For the purposes of computing the
proforma amounts, the fair value of each option on the date of grant is
estimated using the Black-Scholes option pricing model with the following
assumptions: no dividend yield, no expected volatility, risk-free interest rate
of approximately 6% no options were granted during 2002. The options granted
during the year ended April 30, 2001 had substantially no fair value under the
Black-Scholes method. Proforma net income and basic and diluted earnings per
share under the provisions of SFAS 123 for the effect of options granted and
outstanding for the years ended April 30, 2000 and 1999 are $735,494 and $.71
and $715,575 and $.71, respectively with no proforma effect for the years ended
April 30, 2002 and 2001.

Note 16 - Accounting Estimates - During the year ended April 30, 2001, the
Company changed its method for estimating certain reserves for airplane engine
overhauls which resulted in a decrease of approximately $275,000 in accrued
engine reserves and related engine reserve expense as of and for the year ended
April 30, 2001.

The Company makes significant estimates related to its unbilled fuel liability.
The Company accrues its fuel liability based on estimated actual usage
throughout the year and adjusts, if necessary at year end, the liability based
on actual invoices received and expected future invoices.

F-24

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

Note 16 - Accounting Estimates (continued)

As of April 30, 2002, the Company recorded bad debt expense of $210,000 due to
default on the note receivable subsequent to year end. The outstanding principal
was reduced from approximately $514,000 to $304,000 as of April 30, 2002. The
$304,000 represents the estimated realizable value of all
operating assets of FIS turned over to the Company in satisfaction of
the note. The Company believes that the $304,000 balance as of April 30, 2002
estimates the realizable value of the assets received.

Note 17 - Sale of Assets - In November 2001, the Company entered into a letter
on intent with a third party to sell virtually all operations and related net
assets of the Company. Consummation of the transaction is subject to various
conditions, including negotiation and execution of a definitive agreement and
approval by the Company's Board of Directors and shareholders. If the
transaction occurs, it is anticipated that it would close in fall of 2002.

Note 18 - Fourth Quarter Adjustments - In the fourth quarter of the year ended
April 30, 2002, the Company recorded net adjustments which increased its net
loss by approximately $610,000. The Company determined that $240,000 and
$160,000 previously accrued for equitable fuel expense reimbursement in 2001 and
2002, respectively, was unlikely to be recovered from the government. In
addition, the Company recorded bad debt expenses in the fourth quarter of
approximately $210,000 due to default on a note receivable as discussed in Note
2 to the financial statements.

In the fourth quarter of the year ended April 30, 2000, the Company recorded net
adjustments which increased its net income by approximately $400,000 reflecting
approximately $825,000 of unrecorded contract revenues earned during the third
quarter and the deferral of a portion of a gain related to a sale-leaseback
transaction ($425,000).

F-25

REPORT ON FINANCIAL STATEMENT SCHEDULE

The audits referred to in our report dated August 2, 2002, relating to the
consolidated financial statements of Flight International Group, Inc., which are
contained in Item 8 of the Form 10-K included the audits of the financial
statement schedule listed in the accompanying index. This financial statement
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion on the financial statement schedule based upon our
audits.

In our opinion such financial statement schedule presents fairly, in all
material respects, the information set forth therein.

/s/ BDO Seidman, LLP

Richmond, Virginia
August 2, 2002

SCHEDULE II
VALUATION AND QUALIFIYING ACCOUNTS (In Thousands) Flight International, Group,
Inc.

For Each of the Four Fiscal Years Ended April, 30
- -------------------------------------------------------------------------------------------------

Balance at Charged to Balance
Beginning Costs and at End
Year Description of Period Expenses Deductions (1) of Period

2002 Allowance for doubtful accounts......$612 $ 284 $401 $495

2001 Allowance for doubtful accounts......$ 20 $1,023 $431 $612

2000 Allowance for doubtful accounts......$ 71 $ 135 $186 $ 20

1999 Allowance for doubtful accounts......$198 $ 55 $182 $ 71
- -------------------------------------------------------------------------------------------------

(1) Uncollectible receivables written off, net of recoveries.