International Airline Support Group Inc – ‘10-K’ for 5/31/02

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------

 FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS
13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

[X]     Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act  of  1934  for  the  fiscal  year  ended  MAY  31,  2002                    
                          --------------

[  ]     Transition  Report  Pursuant  to  Section 13 or 15(d) of the Securities
Exchange  Act  of  1934  for  the transition period from ____________________ to
_______________________                                                         

Commission File Number

 INTERNATIONAL AIRLINE SUPPORT GROUP, INC.

(Exact name of Registrant as specified in its charter)

Delaware          59-2223025
--------          ----------
 (State or Other Jurisdiction of
Incorporation or Organization)          (I.R.S. Employer Identification No.)
------------------------------          ------------------------------------

 1954 Airport Road, Suite 200,
 Atlanta, Georgia          30341
(Address of Principal Executive Offices)          (Zip Code)
----------------------------------------          ----------

(770) 455-7575

(Registrant's telephone number, including area code)

 Securities registered pursuant to Section 12(b) of the Act:

 Title of class          Name of each exchange on which registered
Common Stock, $.001 par value          American Stock Exchange
-----------------------------          -----------------------

 Securities registered pursuant to Section 12(g) of the Act:  None

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

Indicate  by  check mark if disclosure of delinquent filers pursuant to Item 405
of  Regulation  S-K  is  not contained herein, and will not be contained, to the
best  of  the  Registrant'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.  [  ]                                          

     At  August  15,  2002,  the  aggregate market value of common stock held by
non-affiliates  of  the  Registrant  was  approximately  $1,512,246.            

     The  number  of  shares  of the Registrant's Common Stock outstanding as of
August  15,  2002  was  2,151,497.                                              

DOCUMENTS INCORPORATED BY REFERENCE:

     Portions  of  the  Proxy  Statement  for  the  2002  Annual  Meeting of the
Company's  Stockholders  are  incorporated  by  reference  in  Parts III and IV.

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INTERNATIONAL AIRLINE SUPPORT GROUP INC.
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED MAY 31, 2002

 TABLE OF CONTENTS
 -----------------

                                                                            PAGE
                                                                            ----

PART  I                                                                       1 
Item  1.     Business                                                         1 
Item  2.     Properties                                                      11 
Item  3.     Legal  Proceedings                                              11 
Item  4.     Submission  of  Matters  to  a  Vote  of  Security  Holders     11 
PART  II                                                                     12 
Item  5.     Market  for  the  Registrant's Common Stock and Related            
Stockholder                                           
Matters                                                                      12 
Item  6.     Selected  Financial  Data                                       13 
Item  7.     Management's  Discussion  and  Analysis  of Financial              
Condition and                                         
Results  of  Operations.                                                     14 
Item 7A.     Quantitative and Qualitative Disclosures about Market Risk      19 
Item  8.     Financial  Statements  and  Supplementary  Data                 19 
Item  9.     Changes  in  and  Disagreements  with Accountants on               
Accounting and                                        
Financial  Disclosure                                                        20 
PART  III                                                                    21 
Item  10.     Directors  and  Executive  Officers  of  the  Registrant       21 
Item  11.     Executive  Compensation                                        21 
Item  12.     Security  Ownership  of  Certain Beneficial Owners and            
             Management                                                     21
Item  13.     Certain  Relationships  and  Related  Transactions             21 
PART  IV                                                                     22 
Item  14.     Exhibits,  Financial  Statement Schedules and Reports on          
             Form 8-K                                                       22
SIGNATURES                                                                   26 
             Certifications                                                 26

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26

PART I

ITEM  1.     BUSINESS                                                           
-------      --------                                                           

     THIS ANNUAL REPORT ON FORM 10-K CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS
WITHIN  THE  MEANING  OF  SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED  (THE  "EXCHANGE ACT"), INCLUDING THE PLANS AND OBJECTIVES OF MANAGEMENT
FOR  THE  BUSINESS,  OPERATIONS  AND  FINANCIAL PERFORMANCE OF THE COMPANY.  THE
FORWARD-LOOKING  STATEMENTS AND ASSOCIATED RISKS SET FORTH IN THIS ANNUAL REPORT
MAY  INCLUDE  OR  RELATE TO, AMONG OTHER THINGS, (I) THE COMPANY'S DEPENDENCE ON
ITS  SENIOR  MANAGEMENT;  (II)  THE  EFFECTS  OF  THE  ECONOMY  ON THE COMPANY'S
OPERATIONS;  (III)  THE  COMPANY'S  ABILITY  TO  LEASE  AND  REMARKET  AIRCRAFT 
PROFITABLY;  (IV)  THE  COMPANY'S  ABILITY  TO  ACQUIRE  ADDITIONAL INVENTORY ON
FAVORABLE TERMS; (V) DECLINE IN DEMAND FOR THE COMPANY'S INVENTORY; (VI) DECLINE
IN  VALUE  OF THE COMPANY'S INVENTORY; (VII) THE  CONCENTRATION OF THE COMPANY'S
SALES OF PARTS FOR A LIMITED NUMBER OF AIRCRAFT TYPES AND TO A LIMITED NUMBER OF
CUSTOMERS;  (VIII)  THE  COMPANY'S PLANS TO BROADEN ITS PRODUCT LINES; (IX)  THE
COMPANY'S  ABILITY  TO  RESTRUCTURE ITS EXISTING CREDIT FACILITY OR TO OBTAIN AN
ALTERNATE  SOURCE  OF FINANCING; (X) CONSTRAINTS ON COMPANY'S ACCESS TO CAPITAL;
AND (XI) THE EXISTENCE OF UNCURED DEFAULTS UNDER THE COMPANY'S CREDIT AGREEMENT.
SEE  "CAUTIONARY  STATEMENTS"  HEREIN.                                          

     THE  FORWARD-LOOKING  STATEMENTS  INCLUDED  HEREIN  ARE  BASED UPON CURRENT
EXPECTATIONS  THAT  INVOLVE  A  NUMBER  OF  RISKS  AND  UNCERTAINTIES.  THESE   
FORWARD-LOOKING  STATEMENTS ARE BASED UPON ASSUMPTIONS THAT THE CURRENT ECONOMIC
ENVIRONMENT,  PARTICULARLY  IN  THE  COMMERCIAL AVIATION INDUSTRY, WILL CONTINUE
INDEFINITELY;  THAT DEMAND FOR THE COMPANY'S PRODUCTS AND SERVICES WILL CONTINUE
TO DECLINE FOR THE NEXT SEVERAL YEARS; THAT THE VALUE OF THE COMPANY'S INVENTORY
WILL  DECLINE  AS  A  RESULT OF THE AVAILABILITY OF LARGE QUANTITIES OF AIRCRAFT
PARTS  AT  LIQUIDATION  PRICES; AND THAT THE COMPANY'S ACCESS TO CAPITAL WILL BE
LIMITED  FOR  THE  NEXT  SEVERAL  YEARS.   ASSUMPTIONS RELATING TO THE FOREGOING
INVOLVE  JUDGMENTS  WITH  RESPECT  TO,  AMONG  OTHER  THINGS,  FUTURE  ECONOMIC,
COMPETITIVE  AND  MARKET  CONDITIONS AND FUTURE BUSINESS DECISIONS, ALL OF WHICH
ARE  DIFFICULT  OR IMPOSSIBLE TO PREDICT ACCURATELY AND MOST OF WHICH ARE BEYOND
THE  CONTROL  OF  THE  COMPANY.  ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT THE
RESULTS  CONTEMPLATED IN SUCH FORWARD-LOOKING INFORMATION WILL BE REALIZED.  ANY
OF  THE  FACTORS  DISCLOSED  ABOVE  COULD  CAUSE  THE  COMPANY'S REVENUES OR NET
EARNINGS  TO  DIFFER MATERIALLY FROM PRIOR RESULTS.  IN LIGHT OF THE SIGNIFICANT
UNCERTAINTIES  INHERENT  IN THE FORWARD-LOOKING INFORMATION INCLUDED HEREIN, THE
INCLUSION  OF SUCH INFORMATION SHOULD NOT BE REGARDED AS A REPRESENTATION BY THE
COMPANY  OR ANY OTHER PERSON THAT THE OBJECTIVES OR PLANS OF THE COMPANY WILL BE
ACHIEVED.                                                                       

GENERAL                                                                         

     The  Company is a leading redistributor of aftermarket aircraft spare parts
used primarily for commuter turboprop aircraft, McDonnell Douglas MD-80 and DC-9
aircraft.  Management  believes  that  the Company has one of the most extensive
inventories of aftermarket Embraer EMB-120 Brasilia, MD-80 and DC-9 parts in the
industry.  In  addition,  the  Company provides aircraft spare parts for Airbus,
Boeing,  Lockheed  and  other McDonnell Douglas and commuter turboprop aircraft.
The aircraft spare parts distributed by the Company, including avionics, rotable
and expendable airframe and engine parts, are sold to a wide variety of domestic
and  international  air  cargo carriers, major commercial and regional passenger
airlines,  maintenance and repair facilities and other redistributors.  The wide
variety  of aircraft spare parts distributed by the Company are acquired through
purchase  or consignment of surplus or bulk inventories from airlines, purchases
from  other  redistributors  and  disassembly  of  aircraft.                    

     In  addition  to  being  a  provider  of  aircraft spare parts, the Company
leverages  its  industry  expertise  to  purchase,  sell  and lease aircraft and
engines.  The  Company  has  periodically acquired, leased and sold a variety of
narrow-body  commercial  jet  aircraft, such as Boeing 727 and 737 and McDonnell
Douglas MD-80 and DC-9 aircraft, as well as commuter turboprop aircraft, such as
Embraer  EMB-120  aircraft.  The  Company  currently  owns eight Embraer EMB-120
aircraft,  five  of  which  are  leased.  The Company derives revenue from lease
payments  and  seeks  to  sell  spare  parts  to  the lessee both for the leased
aircraft and other aircraft in the lessee's fleet.  Upon return of the aircraft,
the  Company  either  re-leases, sells or disassembles the aircraft for parts in
order  to  achieve  the  highest utilization of the asset.  The Company believes
that  its  aircraft  trading  activities  and  its parts redistribution business
complement  one  another.                                                       

The  Company's  other business activities include providing advisory services on
parts-inventory  disposition  to  air  carriers  and  other  interested parties,
including  aviation  services  companies.  The  Company's  advisory  services   
complement  its  parts  sales  and  aircraft  trading  and leasing activities by
enhancing  the  Company's reputation as an industry expert in commercial jet and
turboprop  parts.                                                               

The Company's strategy is to maintain its position as a leading redistributor of
commuter  turboprop,  MD-80  and  DC-9  aircraft spare parts and to increase its
market share in the aircraft parts redistribution industry during this period of
significant  industry  contraction.  Key  elements  of  the  Company's  strategy
include:                                                                        

-     Utilize  Consignment  Agreements  to  Acquire  Inventory                  
-     Increase  Sales  to  Cargo  Carriers,  Regional  Commercial  Airlines  and
Commuter  Airlines                                                              
-     Broaden  Product  Line                                                    
-     Seek  Additional  Bulk  Purchase  Opportunities                           
-     Continued  Commitment  to  Quality  and  Technological  Innovation        

RECENT  DEVELOPMENTS                                                            

     In  fiscal 1999, the Company entered into a joint venture called Air 41 LLC
for  the  acquisition  of 20 DC-9-41H aircraft from Scandinavian Airlines System
("SAS").  The  aircraft  were  leased  back  to  SAS.  The  Company's  initial  
investment  in  the  joint venture was approximately $1.5 million.  The aircraft
were  financed  through  the  joint  venture, utilizing non-recourse debt to the
partners.  In  connection with the financing, the Company was required to post a
$1.15 million letter of credit.  As a result of the September 11, 2001 terrorist
attacks  on  the  U.S.  and  its  impact  on  the  aviation industry, Air 41 LLC
re-evaluated  the  market  value of its aircraft and determined that their value
was  negatively  impacted  by those attacks.  Air 41 LLC wrote down the carrying
value  of  its  aircraft,  and in the second quarter of fiscal 2002, the Company
recorded a non-cash impairment charge in the amount of $6,024,320 related to its
investment in the joint venture.  The impairment charge eliminated the Company's
investment  in  the  joint  venture.  Accordingly,  the  Company  increased  its
impairment charge by this amount.  During the fourth quarter of fiscal 2002, the
lender  to the joint venture drew the full amount of the letter of credit, which
increased  the  amount  of  indebtedness  outstanding under the Company's credit
agreement  by $1.15 million.  During the first quarter of fiscal 2003, the joint
venture  reached  an  agreement  with its lender to transfer its aircraft to the
lender  in  exchange  for  the cancellation of the joint venture's indebtedness.
The  lender  and  the  Company  executed  mutual releases in connection with the
agreement  between the lender and the joint venture.  The Company will receive a
payment  of  $185,000  from  the  lender  upon the consummation of the agreement
between  the  lender  and  the  joint  venture.                                 

     During  fiscal  2000,  the Company acquired a regional cargo airline, which
does  business  as  North-South  Airways  ("NSA").  During the second quarter of
fiscal  2001,  NSA  sold  shares  of  its  common  stock, reducing the Company's
ownership  interest  from 100% to approximately 35%.  The Company sells parts to
NSA  and  leases it three Embraer EMB-120 aircraft.  As of May 31, 2002, NSA was
in  default  on  the  payment  of  approximately $240,000 of lease payments with
respect to the aircraft.  The Company intends to seek the return of its aircraft
from  NSA  and  to  attempt  to  lease  or sell them to other air carriers.  The
Company believes that it may be unable to collect the unpaid lease payments from
NSA.  The Company is evaluating the possible sale of its investment in NSA.  All
the  uncollectable advances, trade accounts receivable and notes receivable have
been  fully  reserved.                                                          

     The  Company  obtains working capital and long-term financing for inventory
and  aircraft  acquisitions  pursuant  to  a senior secured credit facility (the
"Credit  Facility").  As  of  the  date hereof, the Company is not in compliance
with  certain covenants set forth in its Credit Facility.  The Company ceased to
be  in  compliance  with  the covenants during the second quarter of fiscal 2002
when  it  recorded  a  non-cash  impairment  charge  to  eliminate the Company's
investment  in  the  Air 41 LLC joint venture.  As a result of the defaults, the
entire  principal  amount  of  the  indebtedness  outstanding  under  the Credit
Facility,  approximately  $19,719,000,  has  been  classified  as current in the
accompanying  balance  sheet  at  May 31, 2002.  Furthermore, as a result of the
defaults,  the  Company's  lender  could  accelerate the Company's obligation to
repay  the amount of all borrowings outstanding under the Credit Facility, could
refuse  to  extend  additional  credit to the Company and could foreclose on its
lien  on  the  Company's  assets.  The  Company  would  be  unable  to  continue
operations  if  the  lender  took  such actions.  The Company and its lender are
negotiating  the  terms  of a revised credit facility.  In the negotiations, the
Company  is,  among  other  things,  seeking to delay the repayment of principal
amounts  due  pursuant to the Credit Facility, including a payment in the amount
of $216,000 that is due on September 1, 2002 and that the Company will be unable
to  pay.  The  Company's  lender  is currently extending credit under the Credit
Facility  while  the  terms of the revised credit facility are being negotiated.
The  Company has no assurances, however, that the lender will continue to do so.
The Company is continuing its negotiations with its lender but has no assurances
that  it  will  be able to consummate a revised credit facility with the lender.
Accordingly,  the  Company  is  pursuing  other  alternatives  to  the  lender's
proposal.  Such alternatives include discussions with other potential sources of
financing  and  with  companies  that  might  pursue  a  business  combination  
transaction  with  the  Company.  The  Company has no assurance that any of such
alternatives  will  materialize.                                                

COMPANY  HISTORY                                                                

     The  Company  was founded in 1982 in Miami, Florida.  Initially the Company
focused  on  parting  out DC-8 aircraft and reselling the resulting spare parts.
Based  upon  the  Company's  success  in  parting out DC-8 aircraft, in 1991 the
Company  began purchasing and parting out DC-9 and MD-80 aircraft.  Beginning in
1992,  the  Company began purchasing and parting out Boeing 727 aircraft.  Since
its  founding,  the  Company has acquired over 50 aircraft for parting out.  The
Company  has also engaged in aircraft and engine trading throughout its history.
Beginning  in  fiscal 1999, the Company broadened its product lines by acquiring
significant  parts  inventories  for  McDonnell  Douglas  DC-10,  Boeing 747 and
Embraer  EMB-120  aircraft.  The  Company  also  expanded  its  aircraft trading
activities during fiscal 1999 and 2000, completing the purchase of eight and the
sale  of  two  EMB-120  aircraft.  During fiscal 2000, the Company established a
presence  in  Europe,  establishing  a sales office in France and a distribution
center  in  the  Netherlands.                                                   

INDUSTRY  OVERVIEW                                                              

 The  Company's  customers  include  a  wide  variety  of  domestic  and
international  air  cargo  carriers,  major  commercial,  regional  and commuter
passenger  airlines, maintenance and repair facilities and other redistributors.
The  Company's  customers  were  negatively  impacted  by the September 11, 2001
terrorist  attacks  on the U. S. and the decline in the economy.  As a result of
such  events,  many  air  carriers  are  facing  extremely  difficult  financial
situations.  In  recent months, several carriers ceased operations.  Other major
carriers  sought protection from their creditors by filing bankruptcy petitions.
In  the current environment, most carriers have significantly reduced the number
of flights and aircraft operated, accelerated the retirement of certain types of
aircraft  and  deferred  the  delivery  of  new  aircraft.  The  results  of the
terrorist  attacks  and  the decline in the economy  have adversely affected the
Company's  business  and  its  industry  by  reducing  demand for the industry's
products  and services and limiting the access to capital.  As a result of these
industry  trends,  the  Company  expects  that  the  aircraft  spare  parts     
redistribution  market  will  contract  during  the  next  several  years.      

The  Company  cannot  predict  how long the results of the terrorist attacks and
downturn in market conditions will adversely affect its industry.  The continued
impact  of the events of September 11, 2001 on the Company's industry depends on
a  number  of factors, including the demand from air carriers for the industry's
products  and  services,  the  state  of the overall economy, whether air travel
demand remains at current reduced levels or declines further, the ability of the
industry's  customers  to  satisfy  their  obligations  to  the industry and the
affect,  if  any,  on the value of inventories and equipment on or available for
lease,  which  support  the  air  carriers.  Because  of  the  current  economic
environment, a number of companies in the aircraft parts redistribution industry
have  encountered financial difficulties.  Consequently, many of these companies
have  been forced to sell inventory at reduced prices in order to generate cash,
while  many  other  have  simply  gone  out  of  business  with  their creditors
liquidating  their  inventories.  The  net effect of both of these actions is to
put  significant  pricing pressure on the Company's products and to diminish the
value  of  the  Company's  inventory.                                           

COMPANY  STRATEGY                                                               

   The  Company's  strategy  is  to  maintain  its  position  as  a  leading
redistributor  of commuter turboprop, MD-80 and DC-9 aircraft spare parts and to
increase  its  market share in the aircraft parts redistribution industry during
this  period of significant industry contraction.  Key elements of the Company's
strategy  include:                                                              

     Increase Sales to Cargo Carriers, Regional Commercial Airlines and Commuter
Airlines.  Cargo  carriers,  regional  commercial airlines and commuter airlines
are  among  the  Company's  principal  customers.  Cargo  carriers are important
customers  because  the  fleets  of  such  operators  typically consist of older
aircraft  of  the type for which the Company maintains an extensive inventory of
parts.  Additionally,  such  customers  typically  do  not  maintain  extensive 
inventories  of  spare  parts.  Regional  commercial  airlines  are  important  
customers  because  such  airlines favor narrow-body aircraft, such as MD-80 and
DC-9  aircraft,  for  which the Company is a primary source of spare parts.  The
smaller  commuter  airlines are important customers because their fleets consist
primarily  of  the  turboprop  aircraft  being  retired  by  the larger commuter
airlines.  The  Company has acquired an extensive inventory of aftermarket parts
for  several popular commuter turboprop aircraft types.  The Company will direct
its  marketing activities to broadening its customer base of cargo, regional and
commuter  airlines  in  order  to  increase  market  share and leverage its core
competencies.                                                                   

     Broaden  Product  Line.  Historically,  the  Company  has  been  a  leading
distributor of MD-80 and DC-9 spare parts.  The Company has expanded its product
line  to include aftermarket parts for Airbus A-300, McDonnell Douglas DC-10 and
Boeing  747  aircraft  and  certain commuter aircraft including Embraer, Shorts,
Saab,  de  Havilland,  British  Aerospace  and  ATR  aircraft.  In addition, the
Company  intends  to  expand further its product line to include parts for other
aircraft  that  are likely to be converted to freighters, such as Boeing 767 and
757  aircraft.  As  fleets  of  these  aircraft  age  and  as air cargo carriers
transition  larger  portions  of their fleets to wide-body aircraft, the Company
will  seek  to  capitalize  on the demand for parts resulting from the aging and
continued  use  of  these aircraft models.  Several air cargo carriers currently
utilize  DC-10, 767, 747 and A-300 series aircraft, and the Company believes use
of  these  models  will  continue  to  increase.  The  Company  believes  that a
significant  number  of  these  aircraft types have been or will be converted to
cargo  use  and  that  its  relationship  with  cargo  carriers  will provide an
advantage  in supplying parts for these aircraft to such customers.  The Company
also  believes  that  there is a significant opportunity for the redeployment of
the  Embraer  EMB-120  and  ATR aircraft as cargo aircraft, as commuter carriers
convert  their fleets to small jet aircraft.  The Company has converted three of
the  eight  EMB-120  aircraft  that  it  owns  to full cargo configuration.  The
Company intends to convert its remaining EMB-120 aircraft if customer demand for
the  EMB-120  cargo  variant  justifies  the  conversion  cost.                 

     Utilize  Consignment Agreements to Acquire Inventory.  In recent years, the
Company  acquired  most  of  its  aircraft  parts  inventory by purchasing large
numbers  of  parts  in  bulk  from aircraft operators.  The Company has recently
begun  to  acquire  inventory  by  means  of strategic consignment arrangements.
Pursuant  to  a  consignment  arrangement,  an  aircraft  operator  or financial
institution  permits  the  Company  to  market and sell an inventory of aircraft
parts.  The  Company  receives  a  percentage  of the sales price of a consigned
part.  Consignment arrangements allow the Company to obtain parts inventory on a
favorable  basis  without  committing  its capital to purchasing inventory.  The
Company's margins on sales of consigned parts are, however, typically lower than
margins  realized  on  sales  of  parts  acquired by other methods.  The Company
believes  that  its  market presence, experience in evaluating parts inventories
and  sophisticated  management  information  systems  will enable the Company to
enter  into  additional  consignment  arrangements.                             

Seek  Additional Bulk Purchase Opportunities.  The Company will continue to seek
opportunities  to  purchase  large spare parts inventories in bulk.  The Company
cannot  predict  when  such  opportunities will arise and such opportunities are
dependent  on  the  Company's  ability  to  access  capital.  Bulk  purchase    
opportunities arise when airlines, in order to reduce capital requirements, sell
large amounts of inventory in a single transaction, when inventories of aircraft
spare  parts  are  sold  in  conjunction  with  corporate  restructurings  or   
reorganizations  or  when  an  aircraft  operator  realigns  its aircraft fleet,
reducing  the  number of or exiting a particular aircraft model.  Bulk inventory
purchases  allow the Company to obtain large inventories of aircraft spare parts
at  a  lower  cost  than  can  ordinarily  be obtained by purchasing parts on an
individual basis.  Therefore, the Company realizes higher gross margins on sales
of parts acquired by bulk purchases, as opposed to other methods.  However, bulk
inventory  purchases  require  a  commitment  of  the  Company's  capital.      

     Continued  Commitment to Quality and Technological Innovation.  The Company
emphasizes  adherence  to  high  quality  standards  during  each  stage  of its
operations (product acquisition, documentation, inventory control and delivery).
In  August  1997,  the  ASA,  an  FAA-recognized  independent  quality assurance
organization,  accredited  the Company as an aftermarket supplier.  In addition,
the  Company  believes  it  was  one  of the first aftermarket redistributors to
bar-code its inventory and it has created and sponsors an industry-wide Internet
parts  locator  service  for  its  customers,  which  heightens awareness of the
Company,  enhances  its  position  in the industry and increases sales of parts.

AIRCRAFT  SPARE  PARTS                                                          

     Aircraft  spare  parts  can  be  categorized by their ongoing ability to be
repaired  and  returned  to service.  The general categories are as follows: (i)
rotable,  (ii)  repairable  and  (iii) expendable.  A rotable is a part which is
removed  periodically  as dictated by an operator's maintenance program or on an
as-needed  basis  and  is  typically  repaired  or  overhauled  and  re-used  an
indefinite  number  of  times.  An  important subset of rotables is life limited
parts.  A life limited rotable has a designated number of allowable flight hours
and/or  cycles  (one take-off and landing generally constitutes one cycle) after
which it is rendered unusable.  A repairable is similar to a rotable except that
it  can  only be repaired a limited number of times before it must be discarded.
An  expendable is generally a part which is used and not thereafter repaired for
further  use.                                                                   

     Aircraft  spare parts' conditions are classified within the industry as (i)
factory  new,  (ii)  new  surplus, (iii) overhauled, (iv) serviceable and (v) as
removed.  A factory new or new surplus part is one that has never been installed
or used.  Factory new parts are purchased from manufacturers or their authorized
distributors.  New  surplus  parts  are purchased from excess stock of airlines,
repair  facilities  or  other  redistributors.  An  overhauled  part  has  been 
completely  disassembled,  inspected,  repaired,  reassembled  and  tested  by a
licensed  repair  facility.  An aircraft spare part is classified serviceable if
it is repaired by a licensed repair facility rather than completely disassembled
as  in  an overhaul.  A part may also be classified serviceable if it is removed
by  the  operator  from  an aircraft or engine while operating under an approved
maintenance  program  and  is  functional and meets any manufacturer or time and
cycle  restrictions  applicable  to the part.  With appropriate documentation, a
factory  new,  new surplus, overhauled or serviceable part designation indicates
that  the part can be immediately utilized on an aircraft.  A part in as removed
condition requires functional testing, repair or overhaul by a licensed facility
prior  to  being  returned  to service in an aircraft.  The aircraft spare parts
sold by the Company include avionics, rotable and expendable airframe and engine
parts  for  commercial  aircraft.  Currently,  the  Company  specializes  in    
replacement  parts  for commuter turboprop, MD-80 and DC-9 aircraft.  Management
believes  that  the  Company  has  one  of  the  most  extensive  inventories of
aftermarket  MD-80,  DC-9  and  EMB-120  parts  in the industry.  Currently, the
Company  has  approximately  303,000  inventory  line  items,  (an increase from
approximately  230,000  inventory line items at the end of fiscal 2001 primarily
due  to  consignment  inventories),  many  of  which  represent  multiple  unit 
quantities  and  relate  to the MD-80, DC-9 and EMB-120 aircraft.  Many of these
parts,  such as avionics and engine parts, can also be used by a wide variety of
aircraft  other  than  MD-80,  DC-9  and  EMB-120  aircraft.  In addition to the
Company's  inventory  of  MD-80, DC-9 and EMB-120 parts, the Company's inventory
also  includes spare parts for Boeing 727, 737 and 747 aircraft, Lockheed L-1011
aircraft,  McDonnell  Douglas DC-8 and DC-10 aircraft, and Airbus, Shorts, Saab,
de  Havilland,  British  Aerospace  and ATR aircraft and for the Pratt & Whitney
JT8D  engine  series.                                                           

OPERATIONS  OF  THE  COMPANY                                                    

     The Company's core business is buying and selling aircraft spare parts.  In
addition,  the  Company  engages in the sale and leasing of aircraft and engines
and  provides  advisory  services on parts-inventory disposition to air carriers
and  other  interested  parties,  including  aviation  services  companies.     

     Inventory  Acquisition.  The  Company  acquires parts inventory by means of
strategic  consignment  arrangements,  by  purchasing  individual  parts  from  
airlines,  repair  facilities  or  other  redistributors,  by  purchasing excess
inventory  from  aircraft  operators  or by purchasing aircraft for disassembly.
The  Company may also fill a customer order for a part not held in the Company's
inventory  by locating the part for the customer from another vendor, purchasing
the  part  and  then  reselling  the  part to the customer.  The Company obtains
inventory on consignment, or purchases inventory in bulk from, airlines that are
eliminating  certain  portions  of  their  spare  parts  inventory  due  to  the
retirement  of  an  aircraft  type  from  their  fleets,  implementing inventory
reduction  programs  to  reduce costs, downsizing their operations or ceasing to
conduct  business.  The  Company's  ability  to  purchase  inventory  in bulk is
dependent  on  the  Company's  ability  to  access  capital.                    

     Aircraft and Engine Sales and Leasing.  The Company has determined that its
spare  parts  sales  opportunities  are  enhanced  by providing existing and new
customers  with  whole aircraft and engines through sale and lease transactions.
Such  transactions allow the Company to expand its customer base for spare parts
and, through leasing, to reduce the cost basis in its aircraft and engines.  The
Company derives revenue from lease payments and seeks to sell spare parts to the
lessee  both  for  the leased aircraft as well as other aircraft in the lessee's
fleet.  Upon  return  of  the  aircraft,  the Company either re-leases, sells or
disassembles  the aircraft for parts in order to achieve the highest utilization
of  the  asset.  The  success  of  the  Company's  aircraft and engine sales and
leasing  is  dependent  on  the  Company's  ability  to  access  capital.       

     The  Company  currently  owns eight Embraer EMB-120 aircraft, five of which
are  leased.  Three  of  the aircraft are leased to NSA.  The Company's aircraft
leases  are  operating leases rather than finance leases and expire between July
2003  and  August  2003.  Under an operating lease, the Company retains title to
the  aircraft  or  engine, thereby retaining the potential benefits and assuming
the  risk  of  the  residual  value of the aircraft or engine.  Operating leases
allow  aircraft  operators  greater fleet and financial flexibility due to their
shorter-term  nature,  the  relatively small initial capital outlay necessary to
obtain use of the aircraft or engine and off-balance sheet accounting treatment.
The  Company  currently  focuses  on  leasing  commuter  turboprop  aircraft,   
particularly  the  EMB-120.                                                     

SALES  AND  MARKETING;  CUSTOMERS                                               

     The  Company  has  developed  a  sales  and  marketing infrastructure which
includes  well-trained and knowledgeable sales personnel, computerized inventory
management,  listing  of parts in electronic industry data bank catalogues and a
home page on the Internet.  Crucial to the successful marketing of the Company's
inventory  is  the  Company's  ability to make timely delivery of spare parts in
reliable  condition.  The Company believes aircraft operators are more sensitive
to  reliability  and  timeliness  than  price.                                  

During  fiscal  2000  the  Company established a presence in Europe by opening a
sales office in Nantes, France, and a distribution center at Schipohl Airport in
the  Netherlands.  The  distribution  center  is  managed for the Company by KLM
Aerospace  Logistics  Group,  which provides all shipping and logistics services
necessary  for  the  delivery  of  parts  to  the  Company's European customers.

     In  addition  to  directly marketing its inventory, the Company has created
and  sponsors an industry-wide internet parts locator service, which is found at
http:\\www.ipls.com.  The Company's internet service is a free service available
to  any  potential customer and lists all of the inventory available for sale by
the  Company.  In  order  to  increase  its  value  to  potential customers, the
Company's  Internet  service  also  lists  the  inventory of over 100 additional
aftermarket  parts redistributors, representing more than 1.2 million individual
parts.  Similarly,  the  Company  lists  its  inventory  in  the  Air  Transport
Association's  computerized  databank  ("AIRS")  and  with the Inventory Locator
Service  ("ILS")  proprietary  computerized  databank.  Buyers of aircraft spare
parts  can  access  any of the databases described above, as well as other parts
databases,  to  determine  the  companies  which  have  the  desired  inventory 
available.  Neither  the  Company's service, AIRS nor ILS list price information
relating  to  particular  parts.                                                

     Market  forces  establish  the  price  for  aftermarket aircraft parts.  No
pricing  service  or  price catalogue exists for aftermarket parts.  Aftermarket
aircraft  parts  prices  are determined by referencing new parts catalogues with
consideration  given  to existing supply and demand conditions.  Often, aircraft
operators  will  opt for quality aftermarket parts even when new parts are still
in  production.  Aftermarket  aircraft  parts  meet the same FAA standard as new
parts,  cost  less than the same new parts and are often more readily available.

 The  Company's  customers  include  a  wide  variety  of  domestic  and
international  air  cargo  carriers,  major  commercial,  regional  and commuter
passenger  airlines, maintenance and repair facilities and other redistributors.
Management  believes  that  its  customer  relationships  are  important  to the
Company's  operational  success.  The  Company  maintains  an  adequate level of
inventory  in  order  to  service  its customers in a timely manner.  Management
believes  that  availability  and timely delivery of quality spare parts are the
primary  factors  considered  by  customers  when  making a spare parts purchase
decision.  Cargo  carriers,  regional  commercial airlines and commuter airlines
are  among  the  Company's  principal  customers.  Cargo  carriers are important
customers  because  the  fleets  of  such  operators  typically consist of older
aircraft  of  the type for which the Company maintains an extensive inventory of
parts and because such customers typically do not maintain extensive inventories
of  spare  parts.  Regional  commercial airlines are important customers because
such  airlines  favor narrow-body aircraft, such as MD-80 and DC-9 aircraft, for
which  the  Company  is  a  primary source of spare parts.  The smaller commuter
airlines  are  important customers because their fleets consist primarily of the
turboprop  aircraft  being retired by the larger commuter airlines.  The Company
has  acquired  an  extensive  inventory of aftermarket parts for several popular
commuter  turboprop  aircraft  types.                                           
     In  fiscal  2002,  NSA, a related party, accounted for more than 23% of its
sales.  In  2001,  no  customer accounted for 10% of the Company's revenues.  In
fiscal  2000,  two  customers accounted for more than 10% of the Company's total
revenues.  Currently,  the Company believes that it has no customer, the loss of
which  would have a material adverse effect on the Company's business, financial
condition  and  results of operations.  In a given period, a substantial portion
of  the  Company's  revenues  may  be  attributable  to  the sale of one or more
aircraft  or  engines.  Such  sales are unpredictable transactions dependent, in
part,  upon  the  Company's  ability  to  purchase  an  aircraft or engine at an
attractive  price  and  resell it within a relatively brief period of time.  The
revenues  from  the sale of an aircraft or engine, the timing of inventory sales
or  a  lease  transaction  during  a given period may result in a customer being
considered  a  major  customer  of  the  Company  for  that  period.            

QUALITY  ASSURANCE                                                              

     The  Company  adheres to stringent quality control standards and procedures
in  the  purchase  and sale of its products.  In August 1997, the ASA accredited
the  Company's  quality  assurance  system  after the completion of an extensive
facilities  audit  and  numerous  meetings with the Company's management.  Parts
procured  from an accredited supplier convey assurance to the purchaser that the
quality  is  as  stated  and  the  appropriate  documentation  is on file at the
supplier's  place  of  business.  Furthermore,  accreditation provides assurance
that  the  supplier  has implemented an appropriate quality assurance system and
has  demonstrated the ability to maintain that system.  In addition, many of the
Company's  customers  periodically  audit  the  Company's  operations  to ensure
compliance  with  such  customer's  quality  standards.                         

     Because  aircraft  operators  require  a readily available and identifiable
source of inventory meeting regulatory requirements, the Company has implemented
a  total  quality  assurance program.  This program consists of numerous quality
procedures,  including  the  following:                                         

-     Inspection  procedures mandating that procured aircraft, engines and parts
be  traceable  to  a  source  approved  by  the  Company;                       

-     Training  and  supervision  of  personnel  to properly carry out the total
quality  assurance  program;  and                                               

-     On-going  quality  review board meetings conducted by senior management to
oversee  the  total  quality  assurance  program.                               

GOVERNMENT  REGULATION                                                          

     The  aviation  industry is highly regulated in the United States by the FAA
and  in  other  countries by similar regulatory agencies.  These regulations are
designed  to  ensure  that  all  aircraft,  engines  and aircraft components are
continuously  maintained in proper condition for the safe operation of aircraft.
Before  spare  parts  are  installed  on  an  aircraft,  they  must meet certain
standards as to their condition and have appropriate documentation.  Parts owned
or  acquired  by  the  Company  may  not meet currently applicable standards, or
standards  may  change  in  the  future,  causing parts already contained in the
Company's  inventory  to  be  scrapped or modified.  While most of the Company's
operations  are  not  currently  regulated  directly by the FAA, the independent
facilities  that  repair  and  overhaul  the Company's products and the aircraft
operators  that  ultimately  utilize  the  Company's  products  are  subject  to
extensive  regulation.  Accordingly,  the  Company  must consider the regulatory
requirements  of  its  customers  and  provide  them with parts that comply with
airworthiness  standards  established  by  the  FAA,  together  with  required  
documentation  which  enables  these  customers  to comply with other applicable
regulatory  requirements.  The inspection, maintenance and repair procedures for
the various types of aircraft, engines and aircraft components are prescribed by
regulatory  authorities  and  can  be  performed  only  by  FAA-licensed  repair
facilities  utilizing certified technicians.  Compliance with applicable FAA and
OEM  standards are required prior to installation of a part on an aircraft.  The
Company  only  utilizes  FAA-licensed  repair  facilities  to repair and certify
aircraft,  engines  and  aircraft  components.                                  

     In  September  1996,  the  FAA  issued  an advisory circular to support the
implementation  of  a  voluntary  accreditation program for civil aircraft parts
suppliers.  This  accreditation program establishes quality standards applicable
to  aftermarket  suppliers,  such  as  the  Company, and designates FAA approved
organizations  such  as  the ASA to perform quality assurance audits for initial
accreditation  of  aftermarket suppliers.  Quality assurance audits are required
on  an  on-going  basis  to  maintain  accreditation.  In  addition, many of the
Company's  customers  periodically  audit  the  Company's  operations  to ensure
compliance  with  such  customer's quality standards.  The Company believes that
ongoing  quality  assurance audits and strict adherence to its quality assurance
system  is  essential to meeting the needs of its existing and future customers.
In  August  1997,  the  Company  received  accreditation  from  the  ASA.       

     The  inability of the Company to supply its customers with spare parts on a
timely  basis,  or  any  occurrence  of  the  Company  providing  products which
subsequently  fail,  may  adversely  affect the Company's relationships with its
customers  and  have  a  material  adverse  effect  on  its  business, financial
condition  and results of operations.  The core operations of the Company may in
the  future  be  subject  to  FAA or other regulatory requirements.  The Company
closely  monitors  the FAA and industry trade groups in an attempt to understand
how  possible future regulations might impact the Company.  There can also be no
assurance  that new and more stringent government regulations, if enacted, would
not  have  a  direct  or  indirect  adverse  effect  on  the  Company.          

     An  important  factor  in  the  aircraft  spare parts redistribution market
relates  to  the  documentation and traceability of an aircraft spare part.  The
Company  requires  all  of  its  suppliers  to provide adequate documentation as
dictated  by  the  Company's  customers.  The  Company  utilizes electronic data
scanning  and  storage  techniques  to  maintain  complete  copies  of  all     
documentation.  Documentation  required  includes,  where  applicable,  (i)  a  
maintenance  release  from a certified FAA repair facility signed and dated by a
licensed  airframe  and/or power plant mechanic or other certified inspector who
repaired  the  aircraft  spare part and an inspection to certify that the proper
methods,  materials  and  workmanship  were  used,  (ii)  a  "tear-down"  report
detailing  the  discrepancies  and corrective actions taken during the last shop
repair  and  (iii)  an  invoice  or  purchase  order  for  an  approved  source.

PRODUCT  LIABILITY                                                              

     The  commercial  aviation  industry  periodically  experiences catastrophic
losses.  As  a  redistributor,  the  Company  may  be  named as a defendant in a
lawsuit as a result of such catastrophic loss if a part sold by the Company were
installed  in  an  incident-related aircraft.  Although no lawsuit has ever been
filed  against  the  Company based upon a product liability theory, no assurance
can  be  given  that claims will not arise in the future.  However, an uninsured
claim,  or a claim for which third-party indemnification is not available, could
have  a  material  adverse effect on the Company's business, financial condition
and  results  of  operations.                                                   

COMPETITION                                                                     

     The  aircraft spare parts redistribution market is highly competitive.  The
market  consists  of  a  limited  number of well-capitalized companies selling a
broad  range  of products and numerous small competitors serving distinct market
niches.  Certain  of  these  competitors  have  substantially greater financial,
marketing  and  other  resources  than  the  Company.  The Company believes that
current  industry  trends  will benefit larger, well-capitalized companies.  The
Company  believes  that range and depth of inventories, quality and traceability
of  products, service and price are the key competitive factors in the industry.
The  principal  companies  with  which the Company competes are AAR Corp., Volvo
Aero  Services,  Kellstrom  Industries  Inc. and The Memphis Group, Inc., all of
which  are significantly larger than the Company.  Customers in need of aircraft
parts  have  access,  through  on-line inventory catalogues, to a broad array of
suppliers,  including  aircraft  manufacturers,  airlines  and aircraft services
companies, which may have the effect of increasing competition for, and lowering
prices  on,  parts  sales.                                                      

EMPLOYEES                                                                       

     As  of  May  31,  2002, the Company had 29 employees.  The Company is not a
party  to  any  collective  bargaining  agreement.  The  Company  believes  its 
relations  with  its  employees  are  good.                                     

CAUTIONARY  STATEMENTS                                                          

     This Annual Report on Form 10-K contains certain forward-looking statements
within  the  meaning  of the Exchange Act, including the plans and objectives of
management  for  the  business,  operations  and  financial  performance  of the
Company.  The  forward-looking statements and associated risks set forth in this
Annual  Report  may  include  or  relate to, among other things, the factors set
forth  below,  together  with other information set forth in this Annual Report.

     Risks Associated with Uncured Defaults.  As of the date hereof, the Company
is  not  in  compliance with certain covenants set forth in its Credit Facility.
The  Company  ceased  to  be  in compliance with the covenants during the second
quarter  of  fiscal  2002  when  it  recorded  a  non-cash  impairment charge to
eliminate  the  Company's investment in Air 41 LLC.  The Company is obligated to
make  a  principal  payment  of  $216,000  pursuant  to  its  Credit Facility on
September 1, 2002.  The Company will be unable to make the payment.  As a result
of  the  covenant  defaults,  the  entire  principal  amount of the indebtedness
outstanding  under  the  Credit  Facility,  approximately  $19,719,000, has been
classified  as  current  in  the  accompanying  balance  sheet  at May 31, 2002.
Furthermore,  as a result of the defaults, the Company's lender could accelerate
the Company's obligation to repay the amount of all borrowings outstanding under
the Credit Facility, could refuse to extend additional credit to the Company and
could  foreclose  on  its  lien  on  the Company's assets.  The Company would be
unable  to  continue  operations if the lender took such actions.  The report of
the  independent  certified  public accountants on the financial statements that
accompany  this  Annual  Report on Form 10-K includes a paragraph that indicates
the uncertainty about the Company's ability to continue operations caused by the
uncured  defaults.                                                              

     Risks  Associated  with Lack of Access to Capital.  The Company's access to
capital is extremely limited because of the current economic environment and the
existence  of  uncured  defaults  under  its  Credit  Facility.  The  Company is
dependant  on  the  access  to  capital to finance inventory acquisition and its
aircraft  and engine sales and leasing transactions.  Without access to adequate
capital,  the Company will be unable to implement its strategy.  The shortage of
capital  has  had a material adverse impact on the Company's business, financial
condition  and  results  of  operations.  The  Company  expects  to  be  capital
constrained  and to experience increased borrowing costs for several more years.

     Effects  of the Economy on the Operations of the Company.  The Company does
not  expect growth in the aircraft spare parts redistribution market in the next
several  years.  The  Company's customers include a wide variety of domestic and
international  air  cargo  carriers,  major  commercial,  regional  and commuter
passenger  airlines, maintenance and repair facilities and other redistributors.
As  a  result,  of  the September 11, 2001 terrorist attacks on the U.S. and the
decline  in  the  economy,  many  air  carriers  are  facing extremely difficult
financial  situations.  In  recent  months,  several carriers ceased operations.
Other major carriers sought protection from their creditors by filing bankruptcy
petitions.  Because  of  the current economic environment, a number of companies
in  the  aircraft  parts  redistribution industry have encountered difficulties.
The  Company  is  not  immune  to  a  decline in the aviation industry or to the
economic  woes  of  its  competitors.  Such  factors have had a material adverse
effect on the Company's business, financial condition and results of operations.
The  Company  expects  that the current economic conditions will continue for at
least  several  more  years.                                                    

Reliance  on  Executive  Officers.  The  continued  success  of  the  Company is
dependent  to  a  significant degree upon the services of its executive officers
and  upon  the  Company's  ability  to  attract  and  retain qualified personnel
experienced in the various phases of the Company's business.  The ability of the
Company  to  operate  successfully  could  be  jeopardized if one or more of its
executive  officers were unavailable and capable successors were not found.  The
Company  does  not  maintain key man insurance on any of its executive officers.
The  Company  has an employment agreement with Alexius A. Dyer III, its Chairman
of  the  Board, President and Chief Executive Officer.  The employment agreement
between  the Company and Mr. Dyer may be terminated by Mr. Dyer upon a change of
control  of  the  Company.                                                      

Risks Associated with Leases.  The Company currently leases five Embraer EMB-120
aircraft  to  aircraft  operators.  Three  of  the aircraft are leased to NSA, a
regional cargo carrier that is partly owned by the Company.  As of May 31, 2002,
NSA  was  in  default in the payment of approximately $240,000 of lease payments
with  respect  to  the  aircraft.  The Company believes that it may be unable to
collect  the  unpaid  lease  payments from NSA.  All of the Company's leases are
operating  leases,  as  opposed  to finance leases.  The success of an operating
lease  depends  in  part  upon  having  the aircraft and engines returned to the
Company  in  marketable  condition as required by the lease of such aircraft and
engines.  In  addition,  the  financial  return from a leased aircraft or engine
depends in part on the re-lease of aircraft and/or engines on favorable terms on
a  timely basis, the ability to sell the aircraft or engines at favorable prices
or  realize  sufficient  value from the disassembly for parts of the aircraft or
engines  at  the  end  of  the  lease term.  Numerous factors, many of which are
beyond  the  control of the Company, may have an impact on the Company's ability
to  re-lease or sell aircraft, engines and parts.  These factors include general
market  conditions,  regulatory  changes  (particularly  those  imposing        
environmental,  maintenance  and other requirements on the operation of aircraft
and  engines),  changes  in  the  supply  or  cost  of  aircraft and engines and
technological  development.  Consequently,  there  can  be no assurance that the
Company's estimated residual value for aircraft or engines will be realized.  If
the  Company  is  unable  to re-lease, sell its aircraft or engines on favorable
terms or realize sufficient value from the disassembly for parts of the aircraft
or engines on a timely basis upon expiration of the related lease, its business,
financial condition and results of operations may be adversely affected.  In the
event  that a lessee defaults in the performance of its obligations, the Company
may be unable to enforce its remedies under a lease.  The Company's inability to
collect lease payments when due or to repossess aircraft or engines in the event
of a default by a lessee could have an adverse effect on the Company's business,
financial  condition  and  results  of  operations.                             

Risks  Regarding  the  Company's  Inventory.  The  Company acquires inventory by
purchasing  individual  parts  from  airlines,  repair  facilities  or  other   
redistributors,  by  purchasing  excess  inventory  from  aircraft operators and
financial  institutions  that  have  foreclosed  on  inventories of parts, or by
purchasing  aircraft  for disassembly.  The Company also obtains parts inventory
on consignment from airlines.  The Company's business is substantially dependent
on  its  ability  to  acquire  inventory by one of these methods because its net
sales  are  directly  influenced  by  the  level  and  composition  of inventory
available for sale.  Because the size and composition of the Company's inventory
is  critical  to  its  results  of  operations and because there is no organized
market  to  procure  surplus  inventory, the Company's operations are materially
dependent  on  the  success  of  management  in identifying potential sources of
inventory  and  obtaining  a consignment of the inventory on acceptable terms or
purchasing  it  at  acceptable prices.  There can be no assurance that inventory
will  be  available on acceptable terms or at the times required by the Company.
In addition, once acquired, the market value of the Company's inventory could be
adversely affected by factors beyond the Company's control, such as a decline in
the  commercial  aviation  industry,  the  sudden  availability  of  additional 
inventory,  a  sudden decline in demand for the Company's parts due to a decline
in  use  of  certain  aircraft  types,  regulatory  changes mandating uneconomic
improvements  to  items  in  inventory,  or  a  decision  by  an  OEM  to  begin
manufacturing  new parts that would compete with aftermarket parts.  Any of such
factors  could  result  in  the  Company's  inventory being overvalued and could
require  the  Company  to  write down its inventory valuations in order to bring
them  in  line  with  the  revised  fair  market  value.  Because of the current
economic environment, a number of companies in the parts redistribution industry
have  encountered  financial  difficulties.  Many  of  these companies have been
forced to sell inventory at reduced prices in order to generate cash, while many
others  have  simply gone out of business with their creditors liquidating their
inventories.  The  net  effect  of  both  of these actions is to put significant
pricing  pressure  on  the  Company's  products and to diminish the value of the
Company's  inventory.  The failure to identify and acquire inventory in a timely
fashion on acceptable terms or a decline in the value of the Company's inventory
would  have  a  material  adverse  effect  on  the Company's business, financial
condition  and  results  of  operations.                                        

     Concentration  on  MD-80,  DC-9  and Turboprop Aircraft.  The Company's net
sales are concentrated in parts for MD-80, DC-9 and turboprop aircraft.  Neither
the  DC-9  nor  the MD-80 is still in production, as is the case for many of the
turboprop aircraft for which the Company sells parts.  Any decline in the use of
MD-80,  DC-9  and  turboprop  aircraft  by  aircraft  operators, the unscheduled
removal from service of large numbers of these aircraft or the grounding of such
aircraft  by  governmental  authorities  for  any  reason  could have a material
adverse  effect  on  the  Company's business, financial condition and results of
operations.  In  the  event  these aircraft are removed from service, demand for
the  Company's  MD-80,  DC-9 and turboprop parts could decline and the supply of
spare  parts  may  increase,  which  would have a material adverse effect on the
Company's  business,  financial condition and results of operations.  Because of
the  current  economic environment, many air carriers have significantly reduced
the  number of flights and aircraft operated and have accelerated the retirement
of  certain  types  of  aircraft.  Both  actions have reduced the demand for the
Company's  inventory.                                                           

Broadening  of Product Line.  The Company has recently expanded its product line
to  include  aftermarket parts for Airbus A-300, McDonnell Douglas DC-10, Boeing
747  aircraft and certain commuter turboprop aircraft including Embraer, Shorts,
Saab,  de  Havilland,  British  Aerospace  and  ATR  aircraft.  In addition, the
Company  intends  to broaden further its product line to include parts for other
aircraft  that  are likely to be converted to freighters, such as Boeing 767 and
757  aircraft.  The  Company has limited experience with respect to the purchase
and  sale  of  spare parts for these aircraft models.  There can be no assurance
that  the  Company  will  have  the  same level of success in managing its parts
inventories  for  such  aircraft  that  it has had with parts for MD-80 and DC-9
aircraft.  The  failure  to  successfully  broaden its product line could have a
material  adverse  effect  on  the  Company's  ability  to  implement its growth
strategy.                                                                       

ITEM  2.     PROPERTIES                                                         

     The  Company's executive offices and operations are located at 1954 Airport
Road,  Suite  200,  Atlanta,  Georgia  30341,  consisting of approximately 3,600
square  feet  of  leased  space  pursuant  to a lease expiring in May 2004.  The
Company  leases approximately 29,500 square feet of warehouse facilities in Fort
Lauderdale,  Florida  pursuant  to a lease expiring in May 2005.  All facilities
are  rented  at  competitive  rates for their location and utility.  The Company
believes  that  its  facilities  are  adequate for its needs for the foreseeable
future.                                                                         

ITEM  3.     LEGAL  PROCEEDINGS                                                 

     The  Company  is  not  now  a defendant in any material litigation or other
legal  proceeding.  The  Company  may become a defendant in legal proceedings in
the  ordinary  course  of  business.                                            

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

None.                                                                 

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PART II       

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

     The  Company's  Common Stock, which has been publicly traded since April 2,
1990,  is  listed  and  traded  on  the American Stock Exchange under the symbol
"YLF."  The  following  table  sets forth the high and low closing prices of the
Common  Stock  as  reported  on  the American Stock Exchange for each quarter in
fiscal  2002  and  2001.                                                        

2002 Fiscal Year          High                Low                               
----------------          ----                ---                               
First  Quarter         $  1.00           $    0.70                              
Second  Quarter           0.85                0.50                              
Third  Quarter            1.65                0.55                              
Fourth  Quarter           1.50                1.05                              

2001 Fiscal Year          High                Low                               
----------------          ----                ---                               
First  Quarter         $ 2.875            $   1.9375                            
Second  Quarter          1.875                1.00                              
Third  Quarter            1.30                0.75                              
Fourth  Quarter           1.06                0.75                              

     At  August  15,  2002,  there  were  126 holders of record of the Company's
Common  Stock.                                                                  

     The  Company  has  never paid dividends on the Common Stock.  The Company's
Credit  Facility prohibits the Company from paying dividends on the Common Stock
as  long  as  indebtedness issued pursuant to such facility remains outstanding.
It  unlikely  that  the  Company  will  pay dividends on the Common Stock in the
future.                                                                         

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ITEM  6.     SELECTED  FINANCIAL  DATA.                                         

     The selected consolidated financial data presented below for, and as of the
end  of,  each  of  the fiscal years in the five-year period ended May 31, 2002,
have  been derived from the Company's audited consolidated financial statements.
The consolidated financial statements of the Company as of May 31, 2001 and 2002
and  for  the  three-year period ended May 31, 2002 and the accountant's reports
thereon  are  included  in  Item  8  of  this  Form  10-K.                      

                                                        [Enlarge/Download Table]

                                                              YEAR ENDED MAY 31,                            

                                                    1998        1999       2000        2001         2002    
                                                    ----        ----       ----        ----         ----    
                                                     (IN THOUSANDS, EXCEPT PER SHARE DATA)                  

OPERATING  DATA:                                                                                            
----------------                                                                                            
                                                                                                            
Net  sales                                        $25,648     $24,344     $23,480        $18,299  $  14,420 
Lease  and  service  revenue                        2,315       3,328       2,724          2,631      1,378 
Lease  Revenue  -  related party                      --          --         --              595      1,350 
                                                    -----       -----      -----          ---         ----- 
       Total  revenue                              27,963       27,672       26,204       21,525     17,148 

Total  operating  expenses                         23,186       24,406       24,247       20,705     16,041 
Equity  in  net  earnings  of unconsolidated         --          1,026        1,757        1,550       (142)
Impairment  of  investments                          --           --           --           --       (7,023)
                                                   -----        -----        -----        -----      -------
Income  (loss)  from  operations                   4,777         4,292        3,714        2,370     (6,238)
Interest  expense,  net                            1,934         1,302        1,657        1,800      1,123 

Earnings  (loss)  before  income  taxes            2,843         2,990        2,057          570     (7,361)
Provision  (benefit)  for income taxes            (2,820)        1,036          800          227      1,173 
Net  earnings  (loss)                             $5,663        $1,954       $1,257         $343   $ (8,534)
                                                 =======       =======      =======       =======   ======= 

PER  SHARE  DATA:                                                                                           
-----------------                                                                                           
Net  earnings (loss) per common                                                                             
   share  -  basic                               $ 2.29    $     0.77     $    0.57     $   0.16   $ (4.01) 
                                                   ====       =======       =======      =======    ======= 
Weighted  average  shares  outstanding                                                                      
     used  in  basic  calculation             2,471,025     2,550,940     2,189,539    2,168,937 2,128,127  

Net  earnings  (loss)  per  common                                                                          
  share  -  diluted                               $2.03         $0.72         $0.55        $0.16    $(4.01) 
                                                  =====     =========       =======      =======    ======= 
Weighted  average  shares  outstanding used                                                                 
   in diluted calculation                     2,793,414     2,720,513     2,268,472    2,172,504 2,128,127  


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                                                                [Download Table]

                                 AT  MAY  31,                              
                          1998   1999         2000         2001     2002   
                          ----   ----         ----         ----     ----   
                                        (IN  THOUSANDS)                    
                                                                           
BALANCE  SHEET  DATA:                                                      
Working  capital       $10,228  $11,524      $13,444     $11,328  $(11,832)
Total  assets           23,636   23,976       35,183      35,805    25,465 
Total  debt              9,648    9,594       20,094      20,392    21,302 
Stockholders'  equity   10,808   11,263       12,468      12,662     4,163 


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

OVERVIEW                                                                        

     The  Company  is primarily engaged in the sale of aircraft, aircraft parts,
leasing of aircraft and engines and related services.  The Company also provides
advisory  services  on  parts-inventory  disposition  to  air carriers and other
interested  parties, including aviation services companies.  The Company's total
revenue  includes  net  parts sales revenue and lease and service revenue.   Net
sales  revenue  includes  revenue  from  individual parts sales and revenue from
aircraft  and  engine  sales.  Aircraft  and  engine  sales  are  unpredictable 
transactions,  dependent,  in  part,  upon  the Company's ability to purchase an
aircraft or engine and resell it within a relatively brief period of time.  In a
given period, a substantial portion of the Company's revenue may be attributable
to  the  sale  of  aircraft  or  engines.  Cost  of  sales consists primarily of
inventory,  aircraft  and  engine  costs  and shipping charges.  The cost of the
inventory  is  determined  on  a  specific identification basis and inventory is
stated  at  the  lower  of  cost or market.  The Company's operating results are
affected  by  many factors, including the timing of orders from large customers,
the  timing of aircraft and engine sales, the timing of expenditures to purchase
parts  inventory,  aircraft  and  engines  and the mix of parts contained in the
Company's  inventory.  The  Company does not obtain long-term purchase orders or
commitments  from  its  customers.                                              

CRITICAL  ACCOUNTING  POLICIES                                                  

REVENUE  RECOGNITION                                                            

     Revenue  from  the sale of parts is recognized when products are shipped to
the  customer.  Revenue  from  aircraft  and engine sales is recognized when the
Company has received consideration for the sale price, the risk of ownership has
passed  to  the  buyer,  and  collectibility  is  reasonably assured.  Lease and
service  revenue  are  recognized  on an accrual basis, unless collectibility is
uncertain.                                                                      

PROPERTY  AND  EQUIPMENT                                                        

     Property  and  equipment are stated at cost, less accumulated depreciation.
Depreciation  is  provided  for  in  amounts  sufficient  to  relate the cost of
depreciable  assets,  less  their  estimated  salvage values, to operations over
their  estimated  life  utilizing  straight-line  and  accelerated methods.  The
estimated  lives  of  the depreciable assets range from 3 to 12 years.  Overhaul
costs  on  aircraft  held  for  lease  are  capitalized and depreciated over the
estimated  service  life  of the overhaul.  For income tax purposes, accelerated
methods  of depreciation are generally used.  Deferred income taxes are provided
for  the difference between depreciation expense for tax and financial reporting
purposes.  The Company does not provide for depreciation expense on aircraft and
engines  classified  as  available  for  sale.                                  

LONG-LIVED  ASSETS                                                              

     The  Company  evaluates  long-lived assets, including intangible assets, in
accordance  with  the  provisions of Statement of Financial Accounting Standards
No.  121  ("FAS  121"),  Accounting  for  Impairment  of  Long-Lived  Assets and
Long-Lived Assets to be disposed of.  An impairment review is performed whenever
events  or  changes in circumstances indicate that the carrying value may not be
recoverable.  Factors  the  Company  considers  important which could trigger an
impairment review include, but are not limited to, significant under-performance
relative to projected operating results, significant changes in strategy for the
Company's  overall  business,  and  significant  industry  or  economic  trends.

RESULTS  OF  OPERATIONS                                                         

FISCAL  2002  COMPARED  WITH  FISCAL  2001                                      

     Net  sales  decreased  by  21.2% from $18.3 million in fiscal 2001 to $14.4
million  in fiscal 2002.  This decrease was primarily due to a decrease in parts
and  engine  sales, which was partially offset by an increase in aircraft sales.
The  decline  in  parts  sales  is  attributable  to the weaker economy, pricing
pressure  from  our  competition,  a  higher  percentage of turboprop part sales
compared  to  jet  part  sales  and a higher percentage of expendable part sales
compared  to  rotable part sales.  Turboprop parts on average tend to have lower
selling  prices  than  equivalent jet parts, while expendable parts also tend to
sell  for  less  than  rotable parts.  During fiscal 2002, the Company sold nine
engines  and  one  aircraft as compared to fiscal 2001, during which the Company
sold  eleven engines and no aircraft.  Lease and service revenue decreased 15.4%
from  $3.2  million in fiscal 2001 to $2.7 million in fiscal 2002, due primarily
to  fewer  assets  being  on  lease  during  fiscal  2002.  Due primarily to the
decrease  in  parts  and  engine  sales  and  the  decrease in lease and service
revenue,  partially  offset by the increase in aircraft sales, total revenue for
fiscal 2002 decreased 20.3% to $17.1 million from $21.5 million for fiscal 2001.

     Cost  of  sales  decreased 23.9% from $14.1 million in fiscal 2001 to $10.7
million  in  fiscal  2002.  Cost  of  sales  as  a  percentage  of total revenue
decreased  from  65.6%  in  fiscal  2001  to  62.6%  in fiscal 2002.  The       
decrease  in  the  cost of sales as a percentage of total revenue in fiscal 2002
compared  to  fiscal  2001  was due to a higher percentage of total             
revenue  being provided by aircraft and engine sales and higher margins in      
aircraft and engine sales. The cost of sales on part sales decreased 32.3%      
from  $10.6 million in fiscal 2001 to $7.2 million in fiscal 2002  This decrease
was  primarily  due  to  the decrease  in  sales  in  the  period.              

     Selling,  general  and  administrative  expenses  decreased 25.9% from $5.6
million  in  fiscal  2001 to $4.1 million in fiscal 2002.  This decrease was due
primarily  to  lower commissions due to lower parts sales, decreases in salaries
and  wages, provision for doubtful accounts, advertising and telephone expenses,
partially  offset by higher owned aircraft expense in fiscal 2002.  In addition,
during  fiscal year 2002, the Company re-evaluated certain accruals and reserves
and reduced the balances.  The effect of this re-evaluation and reduction was to
reduce  Selling,  General  and  Administrative  expenses  by  $300,000.         

     Depreciation was $1,028,000 in fiscal 2001 compared to $1,173,000 in fiscal
2002.  The  increase  from  fiscal  2001 to fiscal 2002 was due primarily to the
Company's  reclassification  of  certain aircraft available for sale to aircraft
held  for lease, as the Company depreciates aircraft held for lease but does not
depreciate  aircraft  available  for  sale.                                     

     Equity  in  Net  Earnings  of  Unconsolidated  Joint Venture decreased from
$1,550,496  for  fiscal  2001  to  a  loss of $142,475 during fiscal 2002.  This
decrease  is  primarily due to the losses from NSA, whose earnings are reflected
under the equity method of accounting and additional losses were taken according
to  EITF 99-10 and EITF 98-13 as the Company had made advances and financings to
NSA  during  fiscal  2002.                                                      

     During  the  second quarter of fiscal 2002, the Company recorded a non-cash
impairment  charge  of  $6 million related to its investment in Air 41 LLC.  The
Company  recorded this impairment charge because Air 41 LLC wrote down the value
of  its  aircraft to reflect current economic conditions.  In the fourth quarter
of  2002,  the  Company  recorded and additional $1 million impairment charge as
explained  in  the  Recent  Development  section.                               

     Interest  expense  decreased  32.5%  from  $2,002,000  in  fiscal  2001  to
$1,351,000 in fiscal 2002.  The decrease in interest expense resulted from lower
interest  rates  during  the  corresponding periods and reduced outstanding term
loan  balance.  Interest  and other income for fiscal 2002 was $227,000 compared
to  other  income  of  $202,000  in  fiscal  2001.                              

     The  Company's income tax expense in fiscal 2002 was $1,173,000 compared to
$227,000  in  fiscal 2001.  The income tax expense in fiscal 2002 was the result
of a valuation allowance recorded against the Company's deferred tax assets (see
Note  G  -  Income Taxes).  Total loss for fiscal 2002 were $8,534,000, or $4.01
per  share  -  basic and $4.01 per share - diluted, compared to net earnings for
fiscal  2001  of  $343,000,  or  $0.16  per  share - basic and $0.16 per share -
diluted.                                                                        

     During  fiscal  2001,  the Company repurchased 168,701 shares of its common
stock  at  an  average  price  of  $0.875 pursuant to a stock repurchase program
announced  in  December  1998.  The Company did not repurchase any shares of its
common  stock  during  fiscal  2002.  In fiscal 2002, the Company issued 125,000
shares  of  Common  Stock  under  its  restricted  stock  plan.                 

FISCAL  2001  COMPARED  WITH  FISCAL  2000                                      

     Net  sales  decreased  by  22.1% from $23.5 million in fiscal 2000 to $18.3
million  in fiscal 2001.  This decrease was primarily due to a decrease in parts
sales  and  aircraft  sales, which was partially offset by an increase in engine
sales.  The  decline  in  parts  sales  is  attributable  to the weaker economy,
pricing  pressure  from  our  competition, a higher percentage of turboprop part
sales  compared  to  jet  part  sales and a higher percentage of expendable part
sales  compared  to rotable part sales.  Turboprop parts on average tend to have
lower selling prices than equivalent jet parts, while expendable parts also tend
to  sell  for  less  than  rotable  parts.  During fiscal 2001, the Company sold
eleven  engines  and  no  aircraft  as compared to fiscal 2000, during which the
Company  sold  nine  engines  and  three  aircraft.  Lease  and  service revenue
increased 18.5% from $2.7 million in fiscal 2000 to $3.2 million in fiscal 2001,
due  primarily  to more assets being on lease during fiscal 2001.  Due primarily
to  the  decrease  in  parts  sales  and aircraft sales, partially offset by the
increase in engine sales and lease and service revenue, total revenue for fiscal
2001  decreased  17.9%  to  $21.5  million  from  $26.2 million for fiscal 2000.

     Cost  of  sales  decreased 19.0% from $17.4 million in fiscal 2000 to $14.1
million  in  fiscal  2001.  Cost  of  sales  as  a  percentage  of total revenue
decreased  from  66.2%  in  fiscal  2000  to  65.6%  in fiscal 2001.  The slight
decrease  in  the  cost of sales as a percentage of total revenue in fiscal 2001
compared  to  fiscal  2000  was  due  primarily  to a higher percentage of total
revenue  being provided by lease and service revenue which traditionally carries
a  much  lower  cost  of  sales.  The cost of sales on part sales increased from
fiscal  2000  to  fiscal  2001.  As  the  Company  enters  into more consignment
agreements  and sells more parts on consignment, the Company anticipates that it
will  incur higher cost of sales as a percentage of revenues.  These higher cost
of  sales  should  be  partially  offset  by  lower  inventory  costs, including
interest.                                                                       

     Selling,  general  and  administrative  expenses  decreased  3.5% from $5.8
million  in  fiscal  2000 to $5.6 million in fiscal 2001.  This decrease was due
primarily  to  lower commissions due to lower parts sales and lower professional
fees, partially offset by higher health care and insurance costs and an increase
in  the  Company's  provision  for  doubtful  accounts  in  fiscal  2001.       

     Depreciation was $1,092,000 in fiscal 2000 compared to $1,028,000 in fiscal
2001.  The  net  decrease from fiscal 2000 to fiscal 2001 was due primarily to a
change  in  the  leasing  portfolio  from  engines  to  aircraft, as the Company
depreciates  aircraft  over  a  longer  period  of  time  than  engines.        

     Equity in Net Earnings of Unconsolidated Joint Venture decreased 11.8% from
$1,757,000  for  fiscal  2000  compared  to $1,550,000 during fiscal 2001.  This
decrease  is  primarily due to the losses from NSA, whose earnings are reflected
under  the  equity  method  of  accounting.                                     

     Interest  expense  increased  17.2%  from  $1,708,000  in  fiscal  2000  to
$2,002,000  in  fiscal  2001.  The  increase in interest expense resulted from a
higher  outstanding average balance as the Company, among other things, financed
the  purchase of aircraft held for lease, and, while rates have been decreasing,
an  average  higher interest rate during fiscal 2001.  Interest and other income
for fiscal 2001 was $202,000 compared to other income of $51,000 in fiscal 2000.

     The  Company's  income  tax expense in fiscal 2001 was $227,000 compared to
$800,000  in  fiscal 2000.  Net earnings for fiscal 2001 were $343,000, or $0.16
per  share  -  basic and $0.16 per share - diluted, compared to net earnings for
fiscal  2000  of  $1,257,000,  or  $0.57 per share - basic and $0.55 per share -
diluted.                                                                        

     In  the third quarter of fiscal 1999, the Company began acquiring shares of
its  common  stock  in  connection  with a stock repurchase program announced in
December  1998.  During fiscal 2000, the Company repurchased 4,200 shares of its
common  stock  at  an  average  price of $4.39.  During fiscal 2001, the Company
repurchased  168,700  shares  of its common stock at an average price of $0.875.

LIQUIDITY  AND  CAPITAL  RESOURCES                                              

     The  Company  obtains working capital and long-term financing for inventory
and  aircraft acquisitions pursuant to the Credit Facility.  The Credit Facility
includes  a  revolving  credit facility that permits the Company to borrow up to
$14  million.  It  also  includes two term loans that totaled approximately $8.4
million  as  of  May  31,  2002.  The  Credit Facility matures in December 2005,
although,  as  noted  below,  the  lender  may  declare  all amounts outstanding
pursuant  to  it  to  be immediately due and payable as a result of the defaults
described  below.  The  Company  is  required  to make partial repayments of the
principal  of  the  term  loans,  including a payment of $216,000 that is due on
September  1,  2002, which the Company will be unable to pay.  The interest rate
that  the  Company pays on borrowings pursuant to the Credit Facility is subject
to  fluctuation  and  may  change based upon certain financial covenants.  As of
August  15,  2002,  the interest rate under the Credit Facility was the lender's
base  rate  minus 0.25% (4.5%).  The Credit Facility is secured by substantially
all  of  the  assets of the Company and availability of amounts for borrowing is
subject  to  certain  limitations  and  restrictions.  Such  limitations  and   
restrictions  are  discussed  in  the Company's Proxy Statement/Prospectus filed
with  the  Securities  and  Exchange  Commission  on  August 29, 1996 and in the
Amendments to the Credit Facility filed on various dates as listed below in Item
6.  Exhibits  and  Reports  on  Form  8-K.                                      

     As  of  the  date  hereof,  the  Company  is not in compliance with certain
covenants  included  in  the  Credit  Facility.  The  Company  ceased  to  be in
compliance  with  the covenants during the second quarter of fiscal 2002 when it
recorded  a  non-cash impairment charge to eliminate the Company's investment in
Air  41  LLC.  As  a  result  of the default, the entire principal amount of the
indebtedness  outstanding  under the Credit Facility, approximately $19,719,000,
has  been  classified  as  current  in the accompanying balance sheet at May 31,
2002.  Furthermore,  as  a  result  of  the defaults, the Company's lender could
accelerate  the  Company's  obligation  to  repay  the  amount of all borrowings
outstanding  under the Credit Facility, could refuse to extend additional credit
to  the  Company  and  could foreclose on its lien on the Company's assets.  The
Company  would be unable to continue operations if the lender took such actions.
The  report  of  the  independent  certified public accountants on the financial
statements  that  accompany this Annual Report on Form 10-K includes a paragraph
that  indicates  the  uncertainty  about  the  Company's  ability  to  continue 
operations  caused  by  the  uncured  defaults.                                 

     The  Company  and  its lender are negotiating the terms of a revised credit
facility.  In  the  negotiations, the Company is, among other things, seeking to
delay  the  repayment  of  principal amounts due with respect to the term loans,
including  the  payment  due  on  September  1,  2002.  The  Company's lender is
currently  extending  credit  under  the  Credit Facility while the terms of the
revised  credit  facility  are being negotiated.  The Company has no assurances,
however,  that  the  lender  will  continue  to  do  so.                        

     On  August  22,  2002, the Company received the proposed terms of a revised
credit  facility from the lender.  The proposed terms would reduce the amount of
the  revolving  credit  facility  to  $2 million.  The entire amount outstanding
under  the  Credit  Facility  would be converted to a term loan.  The total term
loan  balance  under the lender's proposal would be approximately $18.5 million.
The  Company  would  be  required  to  make  periodic payments of principal with
respect to the term loan and to repay it in full by August 31, 2003.  The amount
of  the  revolving  credit  facility  would  be increased by a percentage of the
amount of the term loan repaid, up to a maximum revolving credit facility of $10
million.  The  amounts  the  Company  would  be  permitted  to  borrow under the
revolving  credit  facility  would  be  based  on  the  amount  of  its accounts
receivable  and  the  value  of  its inventory.  The interest rate on borrowings
pursuant  to the revolving credit facility would be the lender's prime rate plus
3%.  The interest rate on the proposed term loan would be initially the lender's
prime  rate plus 4%.  The interest rate on the term loan would be reduced as the
term  loan  is  repaid.                                                         

     The  Company  is  continuing  its  negotiations  with its lender but has no
assurances that it will be able to consummate a revised credit facility with the
lender.  Accordingly, the Company is pursuing other alternatives to the lender's
proposal.  Such alternatives include discussions with other potential sources of
financing  and  with  companies  that  might  pursue  a  business  combination  
transaction  with  the  Company.  The  Company has no assurance that any of such
alternatives  will  materialize.                                                

     As  of  August  22,  2002,  the Company would have been permitted to borrow
approximately  $104,000  pursuant  to  the  Credit Facility, but for the uncured
defaults  described  above.   The Company's lender is currently extending credit
under  the  Credit  Facility  while the terms of the revised credit facility are
being  negotiated.  The Company has no assurances, however, that the lender will
continue  to  do so.  Furthermore, following September 1, 2002, the Company will
be  in  default  in  the  repayment of an installment of principal due under the
Credit  Facility,  which may cause the lender to withhold additional credit.  If
the  lender  were  to  refuse  to extend additional credit, the Company would be
unable  to  continue  its  operations.  At  present,  the  Company will not have
sufficient working capital to conduct its operations unless the lender increases
the  amount  of  borrowing  availability.                                       

     Net  cash  provided  by operating activities for the fiscal years ended May
31,  2002  and  2001  amounted  to $1,414,000 and $3,115,000, respectively.  The
change  from  net  cash  used in operating activities was due primarily to large
expenditures  for  aircraft  held  in  inventory  during  fiscal  2001.         

     Net  cash used in investing activities for fiscal 2002 and 2001 amounted to
$730,000 and $3,745,000 respectively.  For fiscal 2002 and 2001, the primary use
of  funds  for  investing  activities  was capital expenditures for aircraft and
engines,  partially  offset  by  the  sale  of  engines  held  for  lease.      

     Net  cash used in financing activities for fiscal 2002 and 2001 amounted to
$673,000  and  $20,000,  respectively.  For  fiscal  2002  net cash was used for
financing  activities  primarily related to repayment of bank loans.  For fiscal
2001,  the  Company  refinanced its term loan and revolver Credit Facility.  The
primary  use  of cash in financing activities was the purchase of treasury stock
for  $149,000  and  the  payment  of  deferred  debt  costs  of  $168,000.      

FLUCTUATIONS  IN  OPERATING  RESULTS                                            

     The  Company's  operating results, both on an annual and a quarterly basis,
are  affected  by  many  factors,  including  the  timing  of  large orders from
customers,  the  timing of expenditures to purchase inventory in anticipation of
future  sales,  the  Company's  ability  to  obtain  inventory on consignment on
acceptable  terms,  the  mix  of available aircraft spare parts contained at any
time  in  the  Company's  inventory,  the  timing of aircraft or engine sales or
leases,  unanticipated  aircraft  or  engine  lease terminations, default by any
lessees  and many other factors largely outside the Company's control. Since the
Company  typically does not obtain long-term purchase orders or commitments from
its  customers,  it  must  anticipate the future volume of orders based upon the
historic  purchasing patterns of its customers and discussions with customers as
to their future requirements. Cancellations, reductions or delays in orders by a
customer  or  group  of  customers  could  have a material adverse effect on the
Company's  business, financial condition and results of operations. In addition,
due  to  the  value of a single aircraft or engine sale relative to the value of
parts  typically  sold  by  the Company, any concentration of aircraft or engine
sales  in  a particular quarter may obscure existing or developing trends in the
Company's  business,  financial  condition  and  results  of  operations.       

RECENT  ACCOUNTING  PRONOUNCEMENT                                               

     In  June  2001,  the Financial Accounting Standards Board ("FASB") approved
the  issuance  of  SFAS No. 141, "Business Combinations" and SFAS 142, "Goodwill
and  Other  Intangible  Assets."  The  new  standards  require that all business
combinations  initiated  after  June  30,  2001  must be accounted for under the
purchase  method.  In addition, all intangible assets acquired that are obtained
through  contractual  or  legal  right, or are capable of being separately sold,
transferred, licensed, rented or exchanged shall be recognized as an asset apart
from goodwill.  Goodwill and intangibles with indefinite lives will no longer be
subject  to  amortization,  but  will  be  subject  to  an annual assessment for
impairment  by applying a fair value based test.  As the Company has no goodwill
or  other  intangibles  generated  as  a  result  of a business combination, the
adoption  of  these Standards is not expected to have an impact on the Company's
operations.                                                                     

     In  November  2001,  the  Emerging Issues Task Force reached a consensus on
EITF  Issue  01-9  "Accounting for Consideration Given by a Vendor to a Customer
including  a Reseller of the Vendor's Products."  Also, in August 2001, the FASB
issued  Statement  of Financial Accounting Standards (SFAS) No. 144, "Accounting
for  the  Impairment or Disposal of Long-Lived Assets."  SFAS No. 144 supersedes
SFAS  No.  121,  "Accounting  for  the  Impairment  of Long-Lived Assets and for
Long-Lived  Assets  to be Disposed Of."  SFAS No. 144 retained substantially all
of  the  requirements  of  SFAS  No.  121 while resolving certain implementation
issues.  SFAS No. 144 is effective for fiscal years beginning after December 15,
2001.  Management believes the impact of these pronouncements on its operations,
if  any,  will  not  be  material.                                              

In  August  2001,  the  FASB issued Accounting for the Impairment or Disposal of
Long-Lived  Assets.  This statement addresses financial accounting and reporting
for  the  impairment  or  disposal  of  long-lived assets.  SFAS NO. 144 will be
effective  for financial statements of fiscal years beginning after December 15,
2001.  The  Company  expects  to adopt this statement for the fiscal year ending
May 31, 2003, and does not anticipate that it will have a material impact on the
Company's  consolidated  financial  results.                                    

In  July  2002,  the  FASB issued Statement 146, Accounting for Costs Associated
with  Exit  or  Disposal  Activities.  SFAS  146  nullifies EITF 94-3, Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity  (including  Certain Costs Incurred in a Restructuring).  The statement
provides  guidance  on  the accounting and disclosure requirements for companies
that  incur  costs  to  exit  an  activity.  SFAS  146  is effective for exit or
disposal  activities  initiated  after  December 31, 2002.  Early application is
encouraged.  Restatement  of  previously  issued  financial  statements  is     
prohibited.                                                                     

ITEM  7A.  QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES ABOUT MARKET RISK        

     The  Company's  major  market  risk exposure is to changing interest rates.
The Company's policy is to manage interest rate risk through the use of floating
rate  debt  instruments.  The Company has loans under a Credit Facility totaling
approximately  $19  million  at  May  31, 2002.  The interest rate on the Credit
Facility, which fluctuates based on certain financial ratios of the Company, was
the lender's prime rate less .25% at May 31, 2002 (4.5%).  An immediate increase
of 10% in interest rates would increase the Company's annual interest expense by
approximately  $84,000.                                                         

ITEM  8.     FINANCIAL  STATEMENTS  AND  SUPPLEMENTARY DATA                     

     Information  with  respect  to  this  Item  is  contained  in the Company's
consolidated financial statements and financial statement schedules indicated in
the  Index  on  Page  F-1 of this Annual Report on Form 10-K and is incorporated
herein  by  reference.                                                          

  The  information  contained  in  the  Company's  consolidated  financial
statements  and financial statement schedules indicated in the Index on Page F-1
of  this Annual Report on Form 10-K were prepared assuming that the Company will
continue  as a going concern.  As of May 31, 2002, the Company was in default of
certain  debt  covenants  of  its  Credit  Facility.  In  addition,  the Company
incurred  a  net  loss  of $8,533,856 during the year ended May 31, 2002 and the
Company's  current  liabilities  exceed  their  current  assets  by $11,832,694.
Management  has  indicated  that  it will be unable to pay a scheduled September
2002  term loan principle payment in the amount of $216,000. These factors raise
substantial  doubt  about  the Company's ability to continue as a going concern.
The  financial  statements do not include any adjustments that might result from
the  outcome  of  this  uncertainty.                                            

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

None.                                                                 

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PART III        

ITEM  10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                   

     The  information  contained  under the heading "Information as to Directors
and Executive Officers" in the Company's definitive proxy statement for its 2002
Annual  Meeting  of stockholders (the "2002 Proxy Statement") is incorporated by
reference  herein.                                                              

ITEM  11.  EXECUTIVE  COMPENSATION                                              

     The information contained under the heading "Executive Compensation" in the
2002  Proxy  Statement  is  incorporated  herein  by  reference.                

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT        

Security  Ownership  of  Certain  Beneficial  Owners  and  Management.          

     The  information  contained  under  the  headings  "Directors and Executive
Officers"  and  "Principal  Stockholders"  in  the  2002  Proxy  Statement  is  
incorporated  herein  by  reference.                                            

ITEM  13.  CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS                   

The  information  contained  under  the  heading  "Executive          
Compensation--Certain  Transactions" in the 2002 Proxy Statement is incorporated
by  reference.                                                                  

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PART IV       

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

(a)  Financial  Statements     Page  or  Method  of  Filing                     
--------------------------     ----------------------------                     

     (1)  Index to Consolidated Financial Statements             F-1

     (2)  Report of Independent Certified Public Accountants     F-2

(3)  Consolidated  Financial  Statements  and  Notes  to  Consolidated Financial
Statements  of  the Company, including Consolidated Balance Sheets as of May 31,
2002  and  2001  and related Consolidated Statements of Operations, Consolidated
Cash Flows and Consolidated Stockholders' Equity (Deficit) for each of the years
         in the three-year period ended May 31, 2002             F-3

(b)  Financial  Statements  Schedules     Page  or  Method  of  Filing          
-------------------------------------     ----------------------------          

   (1)  Schedule II.  Valuation and Qualifying Accounts        S-1

Schedules  not  listed  above  and  columns  within  certain Schedules have been
omitted  because  of  the absence of conditions under which they are required or
because  the  required  material  information  is  included  in the Consolidated
Financial  Statements or Notes to the Consolidated Financial Statements included
herein.                                                                         

(c)     Exhibits                                                      
--------                                              

Exhibit                                                               
Number     Description     Page  Number  or  Method  of  Filing       
------     -----------     ------------------------------------       

     2.4          Incorporated by reference to Exhibit 2.4 to Amendment No. 2 to
the  Company's Registration Statement on Form S-4 filed on August 29, 1996 (File
No.  333-08065).                                                                
          Credit  Agreement between BNY Financial Corporation and the Registrant
          ----------------------------------------------------------------------
(the  "Credit  Agreement").                                                     
---------------------------                                                     
          First  Amendment,  Waiver  and  Agreement, dated as of March 24, 1997,
between  BNY  Financial Corporation and the Registrant and related to the Credit
Agreement.     Incorporated  by reference to Exhibit 2.5 to the Company's Annual
Report  on  Form  10-K for the fiscal year ended May 31, 1999 (the "1999 10-K").
2.5                                                                   
---                                                                   
          Second Amendment and Agreement, dated as of September 9, 1997, between
BNY  Financial  Corporation  and  the  Registrant  and  related  to  the  Credit
Agreement.                                                                      
     2.6          Incorporated by reference to Exhibit 2.6 to the Company's 1999
     ---          --------------------------------------------------------------
10-K.                                                                           
-----                                                                           
          Third  Amendment  and Agreement, dated as of October 15, 1997, between
BNY  Financial  Corporation  and  the  Registrant  and  related  to  the  Credit
Agreement.                                                                      
     2.7          Incorporated  by  reference  to  Exhibit 2.7 to the 1999 10-K.
     ---          --------------------------------------------------------------
          Fourth  Amendment and Agreement, dated as of February 2, 1998, between
BNY  Financial  Corporation  and  the  Registrant  and  related  to  the  Credit
Agreement.                                                                      
     2.8          Incorporated  by  reference  to  Exhibit 2.8 to the 1999 10-K.
     ---          --------------------------------------------------------------
          Fifth  Amendment,  dated  as  of  July 16, 1998, between BNY Financial
Corporation  and  the  Registrant  and  related  to  the  Credit  Agreement.    
     2.9          Incorporated  by  reference  to  Exhibit 2.9 to the 1999 10-K.
     ---          --------------------------------------------------------------
          Sixth  Amendment,  dated  as  of  May  30, 1998, between BNY Financial
Corporation  and  the  Registrant  and  related  to  the  Credit  Agreement.    
     2.10          Incorporated  by  reference to Exhibit 2.10 to the 1999 10-K.
     ----          -------------------------------------------------------------
          Seventh Amendment, dated as of October 28, 1998, between BNY Financial
Corporation  and  the  Registrant  and  related  to  the  Credit  Agreement.    
     2.11          Incorporated  by  reference to Exhibit 2.11 to the 1999 10-K.
     ----          -------------------------------------------------------------
          Eighth  Amendment and Agreement, dated as of December 8, 1998, between
BNY  Financial  Corporation  and  the  Registrant  and  related  to  the  Credit
Agreement.     Incorporated  by  reference  to  Exhibit  2.12  to  the Company's
Quarterly  Report  for  the  quarter  ending  November  30,  2000.              
2.12                                                                  
----                                                                  
          Ninth  Amendment  and Agreement, dated as of July 1, 1999, between BNY
Financial  Corporation  and  the Registrant and related to the Credit Agreement.
Incorporated  by reference to Exhibit 2.13 to the Company's Quarterly Report for
the  quarter  ending  November  30,  2000.                                      
2.13                                                                  
----                                                                  
          Tenth  Amendment and Agreement, dated as of November 17, 1999, between
BNY  Financial  Corporation  and  the  Registrant  and  related  to  the  Credit
Agreement.     Incorporated  by  reference  to  Exhibit  2.14  to  the Company's
Quarterly  Report  for  the  quarter  ending  November  30,  2000.              
2.14                                                                  
----                                                                  
               Incorporated  by  reference  to  Exhibit  2.15  to  the Company's
Quarterly  Report  for  the  quarter  ending  November  30,  2000.              
     2.15     Eleventh  Amendment,  Waiver and Agreement, dated as of January 5,
     ----     ------------------------------------------------------------------
2001, by and between the Registrant and GMAC Commercial Credit LLC, as successor
 -------------------------------------------------------------------------------
in  interest  by  merger  to BNY Financial Corporation and related to the Credit
--------------------------------------------------------------------------------
Agreement.                                                                      
----------                                                                      

 3.1     Amended  and  Restated  Certificate  of  Incorporation  of  the
 ---     ---------------------------------------------------------------
Registrant.     Incorporated by reference to Exhibit 3.1 to the Company's Annual
     ---  -     ----------------------------------------------------------------
Report  on  Form  10-K  for  the  fiscal year ended May 31, 1996 (the "1996 Form
--------------------------------------------------------------------------------
10-K").                                                                         
-------                                                                         

     3.2     Restated  and Amended Bylaws of the Registrant.     Incorporated by
     ---     -----------------------------------------------     ---------------
reference  to  Exhibit  3.2  to  the  1996  Form  10-K.                         
-------------------------------------------------------                         

     4.1     Specimen Common Stock Certificate.     Incorporated by reference to
     ---     ----------------------------------     ----------------------------
Exhibit  4.1  to  the  1996  Form  10-K.                                        
----------------------------------------                                        

     10.1.1     Second Amended and Restated Employment Agreement, dated July 25,
     ------     ----------------------------------------------------------------
2001,  between  the  Registrant  and  Alexius  A.  Dyer III.     Incorporated by
------------------------------------------------------------     ---------------
reference  to Exhibit 10.1.1 to the Company's Annual Report on Form 10-K for the
--------------------------------------------------------------------------------
fiscal  year  ended  May  31,  2001.                                            
------------------------------------                                            

     10.2.1     1996  Long-Term Incentive and Share Award Plan.     Incorporated
     ------     -----------------------------------------------     ------------
by  reference  to  Appendix  B to the Proxy Statement/Prospectus included in the
--------------------------------------------------------------------------------
Company's Registration Statement on Form S-4 (File No. 333-08065), filed on July
--------------------------------------------------------------------------------
12,  1996.                                                                      
----------                                                                      

     10.2.2     401(k)  Plan.     Incorporated  by  reference to Exhibit 10-H to
     ------     -------------     ----------------------------------------------
the  Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1992
  ------------------------------------------------------------------------------
(the  "1992  Form  10-K").                                                      
--------------------------                                                      

     10.2.3     Bonus  Plan.     Incorporated  by reference to Exhibit 10.2.4 to
     ------     ------------     -----------------------------------------------
the  1992  Form  10-K.                                                          
---------------------                                                         

     10.2.4     Cafeteria  Plan.     Incorporated by reference to Exhibit 10.2.5
     ------     ----------------     -------------------------------------------
of  the  Company's  Annual Report on Form 10-K for the fiscal year ended May 31,
--------------------------------------------------------------------------------
1993.                                                                           
-----                                                                           

   10.2.5     Form  of  Option  Certificate  (Employee  Non-Qualified  Stock
   ------     --------------------------------------------------------------
Option).     Incorporated  by reference to Exhibit 10.2.5 to the 1996 Form 10-K.
     ---     -------------------------------------------------------------------

   10.2.6     Form  of  Option  Certificate  (Director  Non-Qualified  Stock
   ------     --------------------------------------------------------------
Option).     Incorporated  by reference to Exhibit 10.2.6 to the 1996 Form 10-K.
     ---     -------------------------------------------------------------------

10.2.7     Form  of  Option  Certificate  (Incentive  Stock  Option). 
------     ---------------------------------------------------------- 
Incorporated  by  reference  to  Exhibit  10.2.7  to  the  1996  Form  10-K.    
 -----------------------------------------------------------------------

  10.14     Commission  Agreement  dated  December  1,  1995  between  the
  -----     --------------------------------------------------------------
Registrant  and  J.M.  Associates, Inc.     Incorporated by reference to Exhibit
     ----------------------------------     ------------------------------------
10.14  to  the  1996  Form  10-K.                                               
-------------------------------                                             

     10.15     Office  Lease  Agreement  dated  January  31,  1997  between  the
     -----     -----------------------------------------------------------------
Registrant and Globe Corporate Center, as amended.     Incorporated by reference
     ---------------------------------------------     -------------------------
to  Exhibit  10.17  to  the  1997  Form  10-K.                                  
----------------------------------------------                                  
               Incorporated by reference to Exhibit 10.18 to the 1997 Form 10-K.
     10.16     Lease  Agreement  dated March 31, 1997 between the Registrant and
     -----     -----------------------------------------------------------------
Port  95-4,  Ltd.                                                               
----------------                                                              
               Incorporated  by  reference  to  Exhibit  10.20  to the Company's
Quarterly  Report  for  the  quarter  ending  November  30,  2000.              
     10.17     Securities  Purchase  Agreement,  dated September 18, 2000, among
     -----     -----------------------------------------------------------------
Diamond  Aviation,  Inc.,  the  Registrant  and  the  purchasers  named therein.
  ------------------------------------------------------------------------------
          Stockholders  Agreement,  dated  September  18,  2000,  among  Diamond
Aviation,  Inc.,  the  Registrant  and  the  purchasers  named  therein.        
Incorporated by reference to Exhibit 10.19 to the Company's Quarterly Report for
the  quarter  ending  November  30,  2000.                                      
10.18                                                                 
-----                                                                 
     10.19     Lease  Extension  and  Modification  Agreement dated December 10,
     -----     -----------------------------------------------------------------
2001  between  the  Registrant  and  Port  95-4,  Ltd.     Filed  herewith.     
---------------------------------------------------     ----------------  

    10.20     Term  Loan  Agreement  dated  December  20,  20002  between  the
    -----     ----------------------------------------------------------------
Registrant  and  Bombardier  Capital,  Inc.     Filed  herewith.                
--------------------------------------     ----------------           

21     Subsidiaries.     Filed  herewith.                             
--     -------------     ----------------                             

23     Consent  of  Grant  Thornton  LLP     Filed  herewith.         
--     ---------------------------------     ----------------         

     Certification  of  the Principal Executive Officer of the Company
pursuant to 18 USC Section 1350                             

99.1          Filed  herewith.                                        

99.2          Filed herewith                                          

            Certification  of  the Principal Financial  Officer of
 the Company pursuant to 18 USC Section 1350

(d)     Reports  on  Form  8-K.                                       
----------------------                                

     The Company filed one Current Report on Form 8-K during the last quarter of
the  fiscal  year  covered  by  this  Annual  Report.                           

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SIGNATURES          

     Pursuant  to  the  requirements  of  Section  13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report on Form 10-K to be
signed on its behalf by the undersigned, thereunto duly authorized this 29th day
of  August,  2002.                                                              

International  Airline  Support  Group,  Inc.,                        
a  Delaware  corporation                                                        

By:     /s/  Alexius  A.  Dyer  III                                             
--------------------------------                                          
Alexius  A.  Dyer  III                                              
Chairman  of  the  Board,  Chief  Executive  Officer                  
and  President                                                        

     Pursuant  to  the requirements of the Securities Exchange Act of 1934, this
report  on Form 10-K has been signed below by the following persons on behalf of
the  Company  and  in  the  capacities  and  on  the  dates  indicated.         

SIGNATURE     TITLE     DATE                                                    
---------     -----     ----                                                    

/s/  Alexius  A. Dyer III     Chairman of the Board, Chief Executive Officer and
-------------------------                 President  and  Director              

Alexius  A.  Dyer  III     (Principal  Executive  Officer)     August  29,  2002
----------------------     -------------------------------     -----------------

/s/  Qiang  Wang                                                                
----------------                                                                
Qiang  Wang     Vice  President  -  Finance  and  Principal  Accounting  Officer
-----------     ----------------------------------------------------------------
August  29,  2002                                                               
-----------------                                                               

/s/  F.  Dixon  McElwee,  Jr.                                                   
-----------------------------                                                   
F.  Dixon  McElwee,  Jr.            Director     August  29,  2002              

/s/  E.  James  Mueller                                                         
-----------------------                                                         
E.  James  Mueller                  Director     August  29,  2002              

/s/  George  Murnane                                                            
--------------------                                                            
George  Murnane  III                Director     August  29,  2002              
--------------------                                                            

/s/  Gen.  Ronald  R.  Fogleman     Director     August  29,  2002              
-------------------------------                  -----------------              
Gen.  Ronald  R.  Fogleman                                                      

CERTIFICATIONS              
==============              

I,  ALEXIUS  A.  DYER  III,  CERTIFY  THAT                            

     1.     I  HAVE  REVIEWED  THIS  ANNUAL REPORT ON FORM 10-K OF INTERNATIONAL
AIRLINE  SUPPORT  GROUP,  INC.                                                  

     2.     BASED  ON  MY  KNOWLEDGE,  THIS  ANNUAL  REPORT DOES NOT CONTAIN ANY
UNTRUE  STATEMENT  OF A MATERIAL FACT OR OMIT TO STATE A MATERIAL FACT NECESSARY
TO  MAKE  THE  STATEMENTS  MADE,  IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH SUCH
STATEMENTS  WERE MADE, NOT MISLEADING WITH RESPECT TO THE PERIOD COVERED BY THIS
ANNUAL  REPORT.                                                                 

     3.     BASED  ON MY KNOWLEDGE, THE FINANCIAL STATEMENTS AND OTHER FINANCIAL
INFORMATION  INCLUDED  IN THE REPORT FAIRLY PRESENT IN ALL MATERIAL RESPECTS THE
FINANCIAL  CONDITION AND RESULTS OF OPERATIONS OF THE REGISTRANT AS OF, AND FOR,
THE  PERIODS  PRESENTED  IN  THIS  ANNUAL  REPORT                               

DATE:  AUGUST  29,  2002                                                        

                        /S/  ALEXIUS  A.  DYER  III_______
                        ==================================
                   NAME:  ALEXIUS  A.  DYER  III
                          TITLE:     CHAIRMAN,  PRESIDENT  AND
                                     CHIEF  EXECUTIVE  OFFICER

I,  JOHN  WANG,  CERTIFY  THAT                                        

     1.     I  HAVE  REVIEWED  THIS  ANNUAL REPORT ON FORM 10-K OF INTERNATIONAL
AIRLINE  SUPPORT  GROUP,  INC.                                                  

     2.     BASED  ON  MY  KNOWLEDGE,  THIS  ANNUAL  REPORT DOES NOT CONTAIN ANY
UNTRUE  STATEMENT  OF A MATERIAL FACT OR OMIT TO STATE A MATERIAL FACT NECESSARY
TO  MAKE  THE  STATEMENTS  MADE,  IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH SUCH
STATEMENTS  WERE MADE, NOT MISLEADING WITH RESPECT TO THE PERIOD COVERED BY THIS
ANNUAL  REPORT.                                                                 

     3.     BASED  ON MY KNOWLEDGE, THE FINANCIAL STATEMENTS AND OTHER FINANCIAL
INFORMATION  INCLUDED  IN THE REPORT FAIRLY PRESENT IN ALL MATERIAL RESPECTS THE
FINANCIAL  CONDITION AND RESULTS OF OPERATIONS OF THE REGISTRANT AS OF, AND FOR,
THE  PERIODS  PRESENTED  IN  THIS  ANNUAL  REPORT                               

DATE:  AUGUST  29,  2002                                              

     /S/  JOHN  WANG
           =====================
       NAME:  JOHN  WANG
                            TITLE:     VICE  PRESIDENT  -  FINANCE

FINANCIAL  STATEMENTS  AND  REPORT  OF  INDEPENDENT                             
CERTIFIED  PUBLIC  ACCOUNTANTS                                                  
INTERNATIONAL  AIRLINE  SUPPORT  GROUP,  INC.                                   
AND  SUBSIDIARIES                                                               
May  31,  2002,  2001  and  2000                                                

 F-1

INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARY

 INDEX TO FINANCIAL STATEMENTS

                                                                            PAGE
                                                                            ----

Report  of  independent  certified  public  accountants                      F-2

Consolidated  balance  sheets  as  of  May  31,  2002  and  2001             F-3

Consolidated statements of operations for the years ended                       
May 31, 2002, 2001 and 2000                                                  F-4

Consolidated statement of stockholders' equity (deficit) for the                
years ended May 31,  2002,  2001  and  2000                                  F-5

Consolidated statements of cash flows for the years ended                       
May 31, 2002, 2001 and 2000                                                  F-6

Notes  to  consolidated  financial  statements                               F-8

Schedule  II  -  Valuation  and  qualifying  accounts                        S-1

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 F-2

 REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS

Board  of  Directors  and  Stockholders                                         
International  Airline  Support  Group,  Inc.                                   

We  have  audited  the accompanying consolidated balance sheets of International
Airline  Support  Group,  Inc. and Subsidiaries as of May 31, 2002 and 2001, and
the  related  consolidated statements of operations, stockholders' equity and   
cash flows for each of the three  years  ended  May  31,  2002.  These financial
statements  are  the  responsibility  of  the  Company's  management.  Our      
responsibility  is  to express an opinion on these financial statements based on
our  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 financial statements referred to above present fairly, in
all  material  respects,  the  consolidated  financial position of International
Airline Support Group, Inc. and Subsidiaries as of May 31, 2002 and 2001 and the
consolidated  results of its operations and its consolidated cash flows for each
of  the three years ended May 31, 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 B to the
financial  statements, as of May 31, 2002, the Company was in default of certain
debt  covenants  of  its term and revolving credit agreements.  In addition, the
Company  incurred  a  net loss of $8,533,856 during the year ended May 31, 2002,
and  the  Company's  current  liabilities  exceed  its  current  assets  by     
$11,832,694.  Management has indicated that it will be unable to pay a scheduled
September  2002  term  loan  principal payment in the amount of $216,000.  These
factors  raise  substantial  doubt  about the Company's ability to continue as a
going  concern.  Management's  plans  about  these matters are also described in
Note  B.  The  financial  statements  do  not include any adjustments that might
result  from  the  outcome  of  this  uncertainty.                              

We  have  also  audited Schedule II of International Airline Support Group, Inc.
and Subsidiaries for each of the three years ended May 31, 2002. In our opinion,
this  schedule  presents  fairly,  in  all  material  respects,  the information
required  to  be  set  forth  therein.                                          

Miami,  Florida                                                                 
July  26,  2002,                                                                
except  for  Note  O  as  to  which                                             
the  date  is  August  9,  2002                                                 

The  accompanying  notes  are  an  integral  part  of  these  statements.       

               F-2

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                    INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARIES

                 CONSOLIDATED BALANCE SHEETS

              ASSETS

                                                        [Enlarge/Download Table]

                                                                                              May  31,         
                                                                                   --------------------------- 
                                                                                       2002            2001    
                                                                                   -----------     ----------- 
                                                                                                               
Current assets                                                                                                 
     Cash and cash equivalents                                                     $    80,316      $   70,290 
     Accounts receivable, net of allowance for doubtful accounts                                               
       of $735,282 in 2002 and $301,424 in 2001                                      1,216,535       2,558,176 
     Inventories including aircraft and engines available for sale                   7,836,564      12,471,871 
     Deferred tax benefit, net                                                               -       1,088,953 
     Other current assets                                                              194,401         198,449 
     Current portion of notes receivable - related party                               141,818          78,454 
                                                                                   -----------     ----------- 
              Total current assets                                                   9,469,634      16,466,193 

Property and equipment                                                                                         
     Aircraft and engines held for lease                                             6,375,000       6,375,000 
     Aircraft and engines held for lease - related party                            11,205,348       7,598,285 
     Leasehold improvements                                                            166,991         166,991 
     Machinery and equipment                                                         1,124,825       1,089,341 
                                                                                   -----------     ----------- 
                                                                                    18,872,164      15,229,617 
     Less accumulated depreciation                                                   3,135,446       2,643,867 
                                                                                   -----------     ----------- 

              Property and equipment, net                                           15,736,718      12,585,750 
                                                                                   -----------     ----------- 

Other assets                                                                                                   
     Investment in join ventures                                                             -       5,559,057 
     Notes receivable - related party, net                                             158,182         725,714 
     Deferred debt costs, net                                                          100,508         232,373 
     Deferred tax benefit, net                                                               -          83,745 
     Deposits and other assets                                                               -         152,440 
                                                                                   -----------     ----------- 
                                                                                       258,690       6,753,329 
                                                                                   -----------     ----------- 

                                                                                  $ 25,465,042    $ 35,805,272 
                                                                                  = ==========    = ========== 

                                            LIABILITIES AND STOCKHOLDERS' EQUITY                               

Current liabilities                                                                                            
     Current maturities of long-term obligations                                  $          -    $  2,387,642 
     Current maturities of long-term obligations in default                         19,719,089               - 
     Accounts payable                                                                1,137,645       1,965,179 
     Accrued liabilities                                                               445,594         785,867 
                                                                                   -----------     ----------- 
              Total current liabilities                                             21,302,328       5,138,688 

Long-term obligations, less current maturities                                               -      18,004,574 

Stockholders' equity                                                                                           
     Preferred stock - $.001 par value; authorized 2,000,000 shares;                                           
       no shares  outstanding  in  2002  and  2001,  respectively                            -               - 
     Common stock - $.001 par value; authorized 20,000,000 shares;                                             
       issued and outstanding  2,661,723  shares  in  2002                                                     
       and 2001                                                                          2,661           2,661 
     Additional paid-in capital                                                     13,902,909      13,902,909 
     Deferred compensation                                                            (67,840)               - 
     Retained earnings (accumulated deficit)                                       (7,662,626)         871,230 
     Common stock in treasury, at cost - 515,226 and 640,226 shares                                            
        in 2002 and 2001, respectively                                             (2,012,390)      (2,114,790)
                                                                                   -----------     ----------- 
              Total stockholders' equity                                             4,162,714      12,662,010 
                                                                                   -----------     ----------- 

                                                                                  $ 25,465,042    $ 35,805,272 
                                                                                  = ==========    = ========== 

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                    INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF OPERATIONS

                                                        [Enlarge/Download Table]

                                                                                  Years Ended May 31,             
                                                                    --------------------------------------------- 
                                                                         2002             2001            2000    
                                                                     -----------       ----------      ---------- 
                                                                                                                  
Revenues                                                                                                          
     Net sales                                                      $ 14,420,068     $ 18,299,222    $ 23,479,801 
     Lease and service revenue                                         1,378,411        2,630,435       2,724,365 
     Lease revenue - related party                                     1,350,000          595,000               - 
                                                                     -----------       ----------      ---------- 

              Total revenues                                          17,148,479       21,524,657      26,204,166 

Cost of sales                                                         10,739,755       14,110,335      17,350,142 
Selling, general and administrative expenses                           4,127,330        5,566,428       5,805,426 
Depreciation - property and equipment                                     51,851           93,898          61,629 
Depreciation - aircraft and engines held for lease - related party     1,122,086          934,241       1,030,187 
                                                                     -----------       ----------      ---------- 

              Total costs                                             16,041,022       20,704,902      24,247,384 

Equity in net earnings (loss) of unconsolidated                                                                   
  joint ventures, net                                                   (142,475)       1,550,496       1,757,114 
Impairment of investment in joint venture - Air 41 LLC                (7,203,065)               -               - 

              Income (loss) from operations                           (6,238,083)       2,370,251       3,713,896 

Interest expense                                                       1,351,026        2,001,886       1,707,998 
Interest and other income                                               (227,951)        (202,169)        (51,185)

              Earnings (loss) before income taxes                     (7,361,158)         570,534       2,057,083 

Provision for income taxes                                             1,172,698          227,073         800,490 
                                                                     -----------       ----------      ---------- 

              Net earnings (loss)                                   $ (8,533,856)    $    343,461    $  1,256,593 
                                                                    = ==========     = ==========    =  ========= 

Per share data:                                                                                                   
     Earnings  (loss) per common share - basic                      $      (4.01)    $        .16    $        .57 
                                                                    = ==========     = ==========    =  ========= 

     Weighted average shares outstanding used in basic                                                            
       calculation                                                     2,128,127        2,168,937       2,189,539 
                                                                       =========        =========       ========= 

     Earnings (loss) per common share - diluted                     $      (4.01)    $        .16    $        .55 
                                                                    = ==========     = ==========    =  ========= 

     Weighted average shares outstanding used in diluted                                                          
       calculation                                                     2,128,127        2,172,504       2,268,472 
                                                                       =========        =========       ========= 

The accompanying notes are an integral part of this statement.                  

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                    INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARIES

                  CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

                                                        [Enlarge/Download Table]


                                                                      Retained        Common                                  
                                Common Stock         Additional       Earnings        Stock in                                
                             --------------------                                                                             
                             Number of     Par        Paid-In      (Accumulated      Treasury,      Deferred                  
                              Shares      Value       Capital         Deficit)       at Cost      Compensation      Total     
                             ---------  ---------   ------------  -------------    ------------   ------------   ------------ 
Balance at June 1,                                                                                                            
                                                                                                                              
  1999                       2,655,723   $  2,655   $ 13,936,089      $(728,824)  $  (1,946,780)  $          -   $ 11,263,140 

Exercise of stock                                                                                                             
  options                        6,000          6         19,557              -               -              -         19,563 

Repurchase of stock options          -          -        (52,737)             -               -              -        (52,737)

Repurchase of common                                                                                                          
  stock                              -          -              -              -         (18,711)             -        (18,711)

Net earnings                         -          -              -      1,256,593               -              -      1,256,593 
                             ---------  ---------   ------------  -------------    ------------   ------------   ------------ 

Balance at May 31,                                                                                                            
  2000                       2,661,723      2,661     13,902,909        527,769      (1,965,491)             -     12,467,848 

Repurchase of common                                                                                                          
  stock                              -          -              -              -        (149,299)             -       (149,299)

Net earnings                         -          -              -        343,461               -              -        343,461 
                             ---------  ---------   ------------  -------------    ------------   ------------   ------------ 

Balance at May 31,                                                                                                            
  2001                       2,661,723      2,661    13,902,909         871,230      (2,114,790)             -     12,662,010 

Restricted stock grant               -          -             -               -         102,400        (67,840)        34,560 

Net loss                             -          -             -      (8,533,856)              -              -     (8,533,856)
                             ---------  ---------   ------------  -------------    ------------   ------------   ------------ 

Balance at May 31,                                                                                                            
  2002                       2,661,723   $  2,661  $ 13,902,909    $ (7,662,626)  $  (2,012,390)  $    (67,840)  $  4,162,714 
                             =========   ========  ============    =============  ==============  =============  ============ 


The accompanying notes are an integral part of these statements.                

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                    INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                        [Enlarge/Download Table]

                                                                                Years Ended May 31,                  
                                                                        -------------------------------------------- 
                                                                            2002            2001            2000     
                                                                        ------------    ------------    ------------ 
                                                                                                                     
Cash flows from operating activities:                                                                                
     Net earnings (loss)                                                $ (8,533,856)   $    343,461    $  1,256,593 
     Adjustments to reconcile net earnings (loss) to net cash                                                        
       provided by (used in) operating activities, net of                                                            
       effects of deconsolidation of North-South in fiscal 2001:                                                     
          Impairment of investment in Air 41 Joint Venture                 7,203,065               -               - 
          Depreciation and amortization                                    1,277,653       1,193,024       1,423,653 
          Gain on sale of aircraft and engines held for lease                 40,000        (254,443)       (108,611)
          Equity in net (earnings) loss of joint ventures, net               142,475      (1,550,496)     (1,757,114)
          Compensation expense                                                34,560               -               - 
          Deferred tax expense                                             1,172,698         227,073         800,490 
          Provision for bad debt                                             375,828         202,169         172,893 
          Provision for slow moving inventory                                604,557         143,290         107,518 
          Changes in assets and liabilities:                                                                         
               Accounts receivable                                           346,824        (356,350)        (81,396)
               Inventories                                                  (238,835)      2,658,029      (1,783,971)
               Other current assets                                            4,048         372,427        (449,352)
               Other assets                                                  152,440        (152,440)         66,155 
               Accounts payable and accrued liabilities                   (1,167,807)        289,379        (617,418)
                                                                        ------------    ------------    ------------ 
                   Net cash provided by (used in) operating activities     1,413,650       3,115,123        (970,560)

Cash flows from investing activities:                                                                                
     Distributions received from joint ventures                              140,886         334,000         360,000 
     Cash acquired in acquisition                                                  -               -           4,754 
     Cash relinquished upon deconsolidation of North-South                         -         (18,922)              - 
     Capital expenditures, including aircraft and engines held                                                       
       for lease                                                          (4,937,319)     (6,087,766)    (10,011,392)
     Payment of letter of credit for joint venture                        (1,150,000)              -               - 
     Investment in joint ventures                                            (48,595)       (203,095)        (89,450)
     Proceeds from sale of aircraft and engines held for lease             4,842,000       2,083,000       1,176,000 
     Purchase stock of Diamond Aviation                                            -               -        (125,000)
     Payments received on notes receivable  - related party                  422,531         146,835               - 
                                                                        ------------    ------------    ------------ 
                   Net cash (used in) investing activities                  (730,497)     (3,745,948)     (8,685,088)

Cash flows from financing activities:                                                                                
     Net (payments) borrowings under revolving line of credit              1,754,958      (3,056,764)      3,866,961 
     Borrowings under term loans                                             285,039       6,151,172       7,300,000 
     Payments under term loans                                            (2,713,124)     (2,795,913)     (1,630,600)
     Purchase of treasury stock                                                    -        (149,299)        (18,711)
     Repurchase of stock options                                                   -               -         (52,737)
     Proceeds from the exercise of stock options                                   -               -          19,563 
     Payment of deferred debt costs                                                -        (169,192)              - 
                                                                        ------------    ------------    ------------ 
                   Net cash (used in) provided by financing activities      (673,127)        (19,996)      9,484,476 
                                                                        ------------    ------------    ------------ 

Net (decrease) increase in cash and cash equivalents                          10,026        (650,821)       (171,172)

Cash and cash equivalents at beginning of year                                70,290         721,111         892,283 
                                                                        ------------    ------------    ------------ 
Cash and cash equivalents at end of year                                $     80,316    $     70,290     $   721,111 
                                                                        =     ======    =     ======     =   ======= 

Supplemental disclosures of cash flow information                                                                    
     Cash paid during the year for:                                                                                  
          Interest                                                      $  1,266,758    $  1,791,728     $ 1,501,503 
                                                                        =  =========    =  =========     = ========= 
          Income taxes                                                  $          -    $          -     $    20,000 
                                                                        =  =========    =  =========     = ========= 

   (continued)

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INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARIES

 CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

Non-cash investing and financing activities:                                    

In April 2000, the Company purchased all of the outstanding stock of  
North-South Airways Inc.  (North-South) for approximately $125,000 in cash and  
approximately  $880,000  in assumed debt.  In conjunction with this acquisition,
the  Company  recorded  the  following  assets  and  liabilities:               

         Cash                                                     $      4,754
         Accounts receivable                                      $     73,788
         Aircraft in operations                                   $  1,114,919
          Accounts payable and accrued expenses                    $   (114,758)
          Debt                                                    $  (1,078,703)

     In  September  2000,  North-South  sold  additional shares of stock raising
approximately  $1,000,000.  This  sale  of stock reduced the Company's ownership
interest  commencing September 1, 2000 in North-South from 100% to approximately
35%.  Accordingly,  commencing  September 1, 2000, the Company is accounting for
its  investment in North-South under the equity method.  As of May 31, 2002, the
Company  had notes receivable of $300,000, net of the reserve, relating to loans
provided  to  North-South, which are secured by certain aircraft operated by the
airline.                                                                        

     In  fiscal  2002,  the  Company reclassified certain aircraft available for
sale to aircraft held for lease with a net book value of $4,269,585.  Certain of
the  aircraft  were  leased  to  a  related  party.                             

During  fiscal  2002,  the  Company  recorded an impairment charge of $7,203,065
related  to  its  investment  in  Air  41  LLC  joint venture, thus reducing its
investment  to  zero.                                                           

During fiscal 2002, the Company issued 160,000 shares of its common stock out of
treasury  stock  under its Restricted Stock Plan. 35,000 shares were returned to
the  Company  upon the resignation of certain employees holding the stock. As of
May 31, 2002, the Company has deferred compensation expense of $67,840 reflected
as  a  component  of  stockholders'  equity.                                    

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     F-8

INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 MAY 31, 2002, 2001 AND 2000

NOTE  A  -  DESCRIPTION  OF  COMPANY  BUSINESS  AND  SUMMARY  OF  SIGNIFICANT   
ACCOUNTING  POLICIES                                                  

     International  Airline Support Group, Inc. and Subsidiaries (the "Company")
is  primarily  engaged in the sale of aircraft, engines, aircraft parts, leasing
of  aircraft  and engines and related services. Since its inception in 1982, the
Company  has  become  a  primary source of replacement parts for widely operated
aircraft  models  such  as  the  McDonnell  Douglas  MD-80 and DC-9, and Embraer
EMB-120.                                                                        

a)     Basis  of  Presentation                                        
-----------------------                                 

          The  consolidated  statements  include  the  accounts of International
Airline  Support  Group  and  its  subsidiaries.  The  related  entities  are   
collectively  referred  to  as  the  ("Company").  All  material  intercompany  
transactions  and  balances  have  been  eliminated  in  the  consolidation.  In
September  2000,  North-South  Airways  (North-South)  sold additional shares of
stock  raising  approximately  $1,000,000.  This  sale  of  stock  reduced  the 
Company's  ownership  interest  in  North-South  from 100% to approximately 35%.
Accordingly,  commencing  September  1,  2000, the Company is accounting for its
investment  in  North-South  under  the  equity  method.                        

b)     Cash  and  Cash  Equivalents                                   
----------------------------                            

          The  Company  considers  all  highly  liquid investments with original
maturities  of  three  months  or  less  at  the  time  of  purchase  to be cash
equivalents.                                                                    

c)     Inventories                                                    
-----------                                             

          Inventories  are  stated  at the lower of cost or market.  The cost of
aircraft,  engines and aircraft parts is determined on a specific identification
basis.                                                                          

d)     Property  and  Equipment                                       
------------------------                                

       Property  and  equipment  are  stated  at  cost,  less  accumulated
depreciation.  Depreciation  is provided for in amounts sufficient to relate the
cost  of  depreciable assets, less their estimated salvage values, to operations
over  their estimated life utilizing straight-line and accelerated methods.  The
estimated  lives  of  the depreciable assets range from 3 to 12 years.  Overhaul
costs  on  aircraft  held  for  lease  are  capitalized and depreciated over the
estimated  service  life  of the overhaul.  For income tax purposes, accelerated
methods  of depreciation are generally used.  Deferred income taxes are provided
for  the difference between depreciation expense for tax and financial reporting
purposes.  The Company does not provide for depreciation expense on aircraft and
engines  classified  as  available  for  sale.                                  

e)     Deferred  Debt  Costs                                          
---------------------                                   

          The  deferred debt costs relate to the costs associated with obtaining
the  Senior  Secured  Revolving Credit Loan Facility and the Senior Secured Term
Loans.  These  costs are being amortized using the interest method over the life
of  the  respective  debt  issue.  Accumulated  amortization at May 31, 2002 and
2001,  was  $818,507  and  $688,968,  respectively.                             

                                                                     (continued)

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NOTE  A  -  DESCRIPTION  OF  COMPANY  BUSINESS  AND  SUMMARY  OF  SIGNIFICANT   
ACCOUNTING  POLICIES  -  Continued                                    

f)     Earnings  (loss)  Per  Share                                   
----------------------------                            

          Basic net earnings (loss) per share equals net earnings (loss) divided
by the weighted average shares outstanding during the year.  The computation of 
diluted net earnings (loss) per share includes dilutive common stock equivalents
in the weighted  average  shares  outstanding.  The  reconciliation between  the
computations  is  as  follows:                                                  

                                    Basic       Basic       Diluted    Diluted
        Net Earnings (loss)      Shares        EPS         Shares      EPS
          -------------------   -----------   ---------     -------    -------
 2002     $  (8,533,856)         2,128,127    $ (4.01)     2,128,127  $ (4.01)
2001     $     343,461          2,168,937    $   .16      2,172,504  $   .16
2000     $   1,256,593          2,189,539    $   .57      2,268,472  $   .55

Included  in  diluted shares are common stock equivalents relating to options of
3,567,  and  78,933  for  fiscal  2001  and  2000,  respectively.  Common  stock
equivalents have been excluded from the diluted per share calculations in fiscal
2002,  as  the  Company  incurred a net loss and their inclusion would have been
anti-dilutive.  Potential  common  stock  equivalents  at  May  31,  2002  were 
outstanding  stock  options  to  purchase 760,774 shares of the Company's common
stock  with  exercise  prices  ranging  from  $0.55  to  $3.31  per  share.     

g)     Revenue  Recognition                                           
--------------------                                    

          Revenue from the sale of parts is recognized when products are shipped
to  the  customer.  Net  sales  is  comprised of gross sales less provisions for
estimated  customer  returns  and  discounts.  Revenue  from aircraft and engine
sales  is  recognized  when the Company has received consideration for the sales
price,  the  risk  of  ownership  has passed to the buyer, and collectibility is
reasonably  assured.  Lease  and  service  revenue  are recognized on an accrual
basis,  unless  collectibility  is  uncertain.                                  

          Included  in net sales is revenue from exchange of parts transactions.
This  revenue  is  generated  from  fees paid by the Company's customers for the
exchange  of  parts, and is recognized when the Company has fulfilled all of its
obligations  under  the  exchange  agreement.                                   

h)     Employee  Benefit  Plan                                        
-----------------------                                 

          In  fiscal  1992,  the Company established a contributory 401(K) plan.
The  plan  is a defined contribution plan covering all eligible employees of the
Company, to which the Company makes certain discretionary matching contributions
based  upon  the  level  of its employees' contributions.  The amount charged to
operations  in  fiscal  2002, 2001 and 2000 was insignificant.  The Company does
not  provide  any  health  or  other  benefits  to  retirees.                   

i)     Fair  Value  of  Financial  Instruments                        
---------------------------------------                 

          The  carrying  value  of cash and cash equivalents, trade receivables,
and  accounts payable approximate fair value due to the short-term maturities of
these  instruments.  The  carrying  value  of the debt under the Senior Facility
approximates  fair value as it is floating rate debt.  The carrying value of the
notes  receivable  - related party approximates fair value as the interest rates
on  the  notes  approximate  the  current  market  rates.                       

                                                                     (continued)

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NOTE  A  -  DESCRIPTION  OF  COMPANY  BUSINESS  AND  SUMMARY  OF  SIGNIFICANT   
ACCOUNTING  POLICIES  -  Continued                                    

j)     Income  Taxes                                                  
-------------                                           

          Income  taxes  are  provided based on earnings reported for tax return
purposes  in addition to a provision for deferred income taxes.  Deferred income
taxes  are  provided in order to reflect the tax consequences in future years of
differences  between  the  financial  statement  and  tax  basis  of  assets and
liabilities  at  each  year  end.  The  Company  provides  a valuation allowance
against its deferred tax assets when it believes that it is more likely than not
that  the  asset  will  not  be  realized.                                      

k)     Management  Estimates                                          
---------------------                                   

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

l)     New  Accounting  Pronouncements                                
-------------------------------                         

          In  June  2001,  the Financial Accounting Standards Board approved the
issuance  of  SFAS  No. 141, "Business Combinations" and SFAS 142, "Goodwill and
Other  Intangible  Assets."  The  new  standards  require  that  all  business  
combinations  initiated  after  June  30,  2001  must be accounted for under the
purchase  method.  In addition, all intangible assets acquired that are obtained
through  contractual  or  legal  right, or are capable of being separately sold,
transferred, licensed, rented or exchanged shall be recognized as an asset apart
from goodwill.  Goodwill and intangibles with indefinite lives will no longer be
subject  to  amortization,  but  will  be  subject  to  an annual assessment for
impairment  by applying a fair value based test.  As the Company has no goodwill
or  other  intangibles  generated  as  a  result  of a business combination, the
adoption  of  these standards will not presently have an impact on the Company's
operations.                                                                     

          In  November  2001, the Emerging Issues Task Force reached a consensus
on  EITF  Issue  01-9  "Accounting  for  Consideration  Given  by  a Vendor to a
Customer  including a Reseller of the Vendor's Products."  Also, in August 2001,
the  Financial  Accounting  Standards Board (FASB) issued Statement of Financial
Accounting  Standards (SFAS) No. 144, "Accounting for the Impairment or Disposal
of  Long-Lived  Assets."  SFAS  No. 144 supersedes SFAS No. 121, "Accounting for
the  Impairment  of  Long-Lived  Assets and for Long-Lived Assets to be Disposed
Of."  SFAS  No.  144  retained substantially all of the requirements of SFAS No.
121  while  resolving  certain implementation issues.  SFAS No. 144 is effective
for  fiscal  years  beginning  after December 15, 2001.  Management believes the
impact  of  these  pronouncements on its current operations, if any, will not be
material.                                                                       

                                                                     (continued)

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NOTE  A  -  DESCRIPTION  OF  COMPANY  BUSINESS  AND  SUMMARY  OF  SIGNIFICANT   
ACCOUNTING  POLICIES  -  Continued                                    

l)     New  Accounting  Pronouncements  -  Continued                            
---------------------------------------------                     

          In  July  2002,  the  FASB  issued Statement 146, Accounting for Costs
Associated  with  Exit  or  Disposal  Activities.  SFAS 146 nullifics EITF 94-3,
Liability  Recognition for Certain Employee Termination Benefits and Other Costs
to  Exit an Activity (including Certain Costs Incurred in a Restructuring).  The
statement  provides  guidance  on the accounting and disclosure requirements for
companies  that incur costs to exit an activity.  SFAS 146 is effective for exit
or  disposal activities initiated after December 31, 2002.  Early application is
encouraged.  Restatement  of  previously  issued  financial  statements  is     
prohibited.                                                                     

m)     Business  Segment  and  Geographic  Area  Information          
-----------------------------------------------------   

          The  Company sells aircraft and aircraft parts, and leases aircraft to
foreign  and  domestic  customers.  Most of the Company's sales take place on an
unsecured  basis,  and  a  majority of the sales are to aircraft operators.  The
Company's  revenues  are  derived primarily from customers located in the United
States  and  all  of  the  Company's long-lived assets are located in the United
States.  North-South  Airways,  a  related  party,  accounted  for  23%  of  the
Company's  revenue  in fiscal 2002.  No customers accounted for more than 10% of
the  Company's  revenue  in  fiscal 2001.  One customer accounted for 12% of the
Company's  revenue  in fiscal 2000 and another customer accounted for 11% of the
Company's  revenue  in  fiscal  2000.                                           

n)     Accounting  for  Stock  Based  Compensation                    
-------------------------------------------             

          The  Company accounts for stock options issued to non-employees, under
SFAS  123, "Accounting for Stock Based Compensation."  The exercise price of all
options  granted  by  the  Company equals the market price at the date of grant.
The  Company's  employee  stock option plan is accounted for using the intrinsic
value method under APB 25.  The Company provides disclosure of certain pro forma
information  as  if  the  fair  value-based method had been applied in measuring
compensation  expense  (see  Note  H).                                          

o)     Advertising  Costs                                                       
------------------                                                

Advertising  costs are expensed as incurred and are included in selling, general
and  administrative  expenses.  Total  advertising costs for the years ended May
31,  2002,  2001  and  2000  were  insignificant                                

p)     Shipping  and  Handling  Costs                                           
------------------------------                                    

     Costs incurred for shipping and handling are included in cost of sales when
incurred. Amounts billed to a customer for shipping and handling are reported as
revenue.                                                                        

q)   Long Lived Assets                                                          
-----------------                                                     

   The  Company evaluates long-lived assets, including intangible assets, in
accordance  with  the  provisions of Statement of Financial Accounting Standards
No.  121  ("FAS  121"),  Accounting  for  Impairment  of  Long-Lived  Assets and
Long-Lived  Assets  to be Disposed of.  An impaired review is performed whenever
events  or changes in circumstances indicated that the carrying value may not be
recoverable.  Factors  the  Company  considers  important which could trigger an
impairment  review include, but are not limited to significant under-performance
relative to projected operating results, significant changes in strategy for the
Company's  overall  business,  and  significant  industry  or  economic  trends.

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NOTE  B  -  REALIZATION  OF  ASSETS                                             

The  accompanying  financial  statements  have  been prepared in conformity with
accounting  principles generally accepted in the United States of America, which
contemplate  continuation of the Company as a going concern.  However, as of May
31,  2002,  the Company was in default (see Note F) of certain debt covenants of
its  term  and  revolving credit agreements and incurred a substantial loss from
operations  for  the  year ended May 31, 2002.  Management has indicated that it
will  be unable to pay a scheduled September 2002 term loan principal payment in
the  amount  of $216,000.  This default could result in the entire amount of the
debt  becoming due and payable, although management has proposed alternatives to
remedy  the  condition  and  believes  it  will  be  satisfactorily  resolved.  

In view of the matters described in the preceding paragraph, recoverability of a
major  portion  of  the recorded asset amounts shown in the accompanying balance
sheet  is  dependent  upon continued operations of the Company, which in turn is
dependent  upon  the  Company's  ability to meet its financing requirements on a
continuing  basis,  to  maintain present financing, and to succeed in its future
operations.  The financial statements do not include any adjustments relating to
the  recoverability  and classification of recorded asset amounts or amounts and
classification  of  liabilities  that  might  be necessary should the Company be
unable  to  continue  in  existence.                                            

Management  has  developed  a  business  plan for fiscal 2003 which contemplates
positive net earnings, obtaining additional working capital, and the refinancing
or  restructuring  of its bank credit agreement to long-term arrangements, which
it  believes  are sufficient to provide the Company with the ability to continue
in  existence.                                                                  

NOTE  C  -  INVESTMENT  IN  NORTH-SOUTH  AIRWAYS                                

     In  April  2000,  the  Company  purchased  all  of the outstanding stock of
North-South  Airways (North-South), a small regional airline that operates under
an  Air  Carrier  Certificate  under  Part 135 of the regulations of the Federal
Aviation  Administration.  The  Company  purchased North-South for approximately
$125,000  in  cash  and approximately $880,000 in assumed debt.  The acquisition
has been accounted for as a purchase and accordingly, the assets and liabilities
have  been  recorded  at their estimated fair values at the date of acquisition.
No  goodwill  was  recorded  as  a  result  of this acquisition.  The results of
operations  of  North-South  are  included  in  the  accompanying  consolidated 
statement  of  operations as of the date of the acquisition.  In September 2000,
North-South  sold  additional  shares  of  stock  raising  approximately        
$1,000,000.  This  sale  of  stock  reduced the Company's ownership interest  in
North-South  from 100% to approximately  35%.  Accordingly, commencing September
2000,  the Company is accounting for its investment in North-South Airways under
the  equity  method,  and  the  accounts  of North-South are not included in the
consolidated  statements  as  of  May  31,  2002  or  2001.                     

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NOTE  D  -  INVESTMENT  IN  JOINT  VENTURES                                     

AIR41  LLC  Joint  Venture                                            
--------------------------                                            

     On September 16, 1998, the Company entered into a joint venture (the "AIR41
Joint  Venture")  for  the acquisition of 20 DC-9-41H aircraft from Scandinavian
Airlines  System  ("SAS").  The  aircraft were leased back to SAS and the leases
had  an  average  term  of  39 months.  The Company's original investment in the
AIR41 Joint Venture was $1.4 million, which represents a 50% ownership interest.
The  Company's  AIR41  Joint  Venture partner is AirCorp, Inc., a privately held
company.  The  aircraft  purchases  were  financed  through  the  joint venture,
utilizing  non-recourse  debt  to the partners.  The AIR41 Joint Venture debt is
secured  by  the AIR41 aircraft.  In connection with this financing, the Company
had to post a $1.15 million letter of credit.  The Company and its joint venture
partner  are  collectively guarantors on the AIR41 Joint Venture's obligation as
the lessor of the aircraft.  The AIR41 Joint Venture was accounted for under the
equity  method.                                                                 

     In  the  second  quarter  of  fiscal  2002, the Company recorded a non-cash
impairment  charge  in the amount of $6,024,320 related to its investment in the
Air 41 Joint Venture.  The impairment charge eliminated the Company's investment
in  the  Air  41  Joint  Venture.  During the fourth quarter of fiscal 2002, the
lender  to the Air 41 Joint Venture drew the full amount of the Company's letter
of  credit,  which  increased  the  amount of indebtedness outstanding under the
Company's  credit  agreement  by  $1.15  million  and was recorded as additional
impairment  expense.  Prior  to  the  impairment  charges,  the Company recorded
$600,000  for  equity  in  net  earnings  of Air 41 during the fiscal year 2002.

     In  fiscal  2002,  2001  and  2000,  100%,  93% and 100% of the AIR41 Joint
Venture  revenue  was  derived  from  SAS.  See  Note  O  -  Subsequent  Event. 

North-South  Airways                                                  
--------------------                                                  

     In  April  2000,  the  Company  purchased  all  of the outstanding stock of
North-South  Airways (North-South), a small regional airline that operates under
an  Air  Carrier  Certificate  under  Part 135 of the regulations of the Federal
Aviation  Administration.  In September 2000, North-South sold additional shares
of  stock  raising  approximately  $1,000,000.  This  sale  of stock reduced the
Company's  ownership  interest  in  North-South  from 100% to approximately 35%.
Accordingly,  commencing  September  2000,  the  Company  is  accounting for its
investment  in  North-South  under  the  equity  method.                        

  During  the  year  ended  2002,  the  Company  recorded  net  losses  of
approximately  $742,000  related  to  its equity investment in North-South.  The
loss  amount  recorded  exceeded the Company's  investment  percentage  in  the 
North-South  loss  due  to  the  requirement of EITF 99-10 and EITF 98-13 as the
Company had made advances and financings to North-South during fiscal year 2002.
As  of  May 31, 2002, North-South was in default on the payment of certain lease
payments.  The  Company  is  evaluating  the  possible sale of its investment in
North-South.                                                                    

                                                                     (continued)

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NOTE D  - INVESTMENT  IN  JOINT  VENTURES  -  Continued                         

                                                        [Enlarge/Download Table]

 A condensed summary of the Company's two joint venture operations follows:                      

                                 2002               2002                 2001           2001     
                              Air 41 LLC         North-South           Air 41 LLC    North-South 
                             ------------        ------------         ------------   ------------
                                                                                                 
Current assets               $          -       $    435,224          $          -  $    874,008 
Non-current assets             50,295,347            625,405            67,904,833       973,478 
                             ------------       ------------          ------------  ------------ 
     Total assets            $ 50,295,347       $  1,060,629          $ 67,904,833  $  1,847,486 
                             ============       ============          ============  ============ 

Current liabilities          $ 51,719,531       $  2,054,178          $ 33,922,187  $  1,364,270 
Non-current liabilities                 -                  -            22,948,658             - 
                             ------------       ------------          ------------  ------------ 
     Total liabilities       $ 51,719,531       $  2,054,178          $ 56,870,845  $  1,364,270 
                             ============       ============          ============  ============ 

     Revenue                 $  9,930,000       $  4,638,635          $ 13,949,000  $  1,791,127 
                             ============       ============          ============  ============ 

     Net earnings (loss)     $(12,176,172)      $ (1,478,765)         $  3,699,459  $ (1,010,208)
                             =============      =============         ============  =============

     All revenues of the joint ventures were derived primary from entities other
than  members  of  the  consolidated  group.                                    

     Included  in  the  Company's  consolidated  retained  earnings (accumulated
deficit)  is approximately $(2,904,000) and $4,442,000 relating to the Company's
share  in  the  net earnings (loss) of the joint ventures as of May 31, 2002 and
2001,  respectively.                                                            

NOTE  E  -  INVENTORIES                                                         

                                                        [Enlarge/Download Table]

Inventories  at  May  31,  2002  and  2001  consisted  of  the  following:             

                                                       2002                   2001     
                                                   -------------          -------------
                                                                                       
    Aircraft parts                                 $  6,110,083           $  6,644,053 

    Aircraft and engines available for sale           1,726,481              5,827,818 
                                                   -------------          -------------
                                                   $  7,836,564           $ 12,471,871 
                                                   =  =========           = ========== 

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NOTE  F  -  LONG-TERM  OBLIGATIONS                                              

     Long-term  obligations at May 31, 2002 and 2001 consisted of the following:

                                                                [Download Table]


                                            2002          2001    
                                        ------------  ------------
                                                                  
Senior Secured Revolving Credit Loans   $  9,707,683  $  7,952,726

Term loans                                10,011,406    12,439,490
                                        ------------  ------------
                                          19,719,089    20,392,216

Less:  Current  maturities,  including                            
            debt  in  default             19,719,089     2,387,642
                                        ------------  ------------
      Total                             $          -  $ 18,004,574
                                        =  =========  = ==========

     In  October 1996, the Company entered into a Credit Agreement with the Bank
of  New  York, which provided for a $3 million term loan (Term Loan-A) and up to
an  $11  million  revolving  credit.  The  Credit  Facility  is  secured  by    
substantially  all  of the assets of the Company and availability of amounts for
borrowing  is  subject  to certain limitations and restrictions such as accounts
receivable  and  inventory  levels.  The  interest  rate on the Credit Facility,
which  fluctuates  based  on  certain  financial  ratios of the Company, was the
lenders  prime  rate  less  .25%  (4.5% at May 31, 2002).  The revolving line of
credit  was  increased  to  $14 million in fiscal 1998.  As of May 31, 2002, the
amount  available under the line of credit is approximately $1.2 million.  As of
August  22, 2002, the amount available under the line of credit is approximately
$104,000.  The credit agreement includes certain covenants which provide, amount
other things, restrictions relating to the maintenance of consolidated net worth
and  other  financing  ratios,  as  well  as  a  restriction  on  the payment of
dividends.                                                                      

     Beginning  in  the  second quarter and continuing through May 31, 2002, the
Company  was  not  in  compliance with certain covenants set forth in the Credit
Agreement.  As  a  result  of  the default, all of the Company's total long-term
debt  has  been  classified  as  a current liability in the accompanying balance
sheet  at  May  31,  2002.                                                      

     Furthermore,  as  a  result  of  the  default,  the  Company's lender could
accelerate  the  Company's  obligation  to  repay  the  amount of all borrowings
outstanding  under the Credit Facility, could refuse to extend additional credit
to  the  Company  and  could foreclose on its lien on the Company's assets.  The
Company  would be unable to continue operations if the lender took such actions.
The  Company  is  in  negotiations with its lender but has no assurances that it
will  be  able  to  consummate  a  revised  credit facility with the lender.  On
September 1, 2002, the Company is scheduled to pay a $216,000 term loan         
principal payment, the Company  has indicated that it will  be  unable to  make 
this  payment.                                                                  

     During  fiscal  2000,  the  Credit Agreement was amended twice to create an
additional  term loan facility (Term Loans E) in the amount of $7.3 million, due
August  1,  2003,  to  finance  the  purchase  of  three  aircraft.             

     During  fiscal 2001, the Company entered into a loan with another financial
institution  to borrow $1.7 million to finance the purchase of an aircraft.  The
principal  on  the  loan  is  due  in  84 monthly payments of $22,071 commencing
January  2001.  The  interest rate on the loan is fixed at 9.02% per annum.  The
loan  is  collateralized  by  the  aircraft.                                    

   During  fiscal  2001,  the  Credit  Agreement  was  amended  whereby  the
outstanding  term loans were consolidated into one single term loan facility and
the  termination  date  was  extended  to  December  31,  2005.                 

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NOTE  G  -  COMMITMENTS  AND  CONTINGENCIES                                     

Leases                                                                
------                                                                

     The  Company  leases warehouse facilities, office space, as well as certain
equipment  under  long-term  operating  lease  agreements.  Rental expense under
these  leases  for the years ended May 31, 2002, 2001 and 2000 was approximately
$274,000,  $269,000  and  $279,000,  respectively.  At  May 31, 2002, the future
minimum  payments  on  non-cancellable  operating leases are as follows:  2003 -
$264,000,  2004  -  $248,000,  and  2005  -  $224,000.                          

     The  Company  currently  leases  aircraft  and  engines  to customers under
long-term  operating lease agreements.  In addition to minimum base rentals, the
lease  agreements  often  require additional rent based upon aircraft and engine
usage.  The  net  investment  in  aircraft  and  engines  held  for or leased to
customers  was  approximately  $15,488,538  and  $12,321,202 at May 31, 2002 and
2001,  respectively,  net  of  accumulated  depreciation  of  $2,091,810  and   
$1,652,083,  respectively.  At  May 31, 2002, the future rental income under the
long-term operating leases are approximately as follows:  2003 - $2,100,000, and
2004  -  $795,000.  At  May  31,  2002, future rental income under the long-term
operating  leases  to  related  parties  are  approximately  as  follow:  2003 -
$1,000,000  and  2004  -  $540,000.                                             

NOTE  H  -  INCOME  TAXES                                                       

     The  provision  for income taxes for the years ended May 31, 2002, 2001 and
2000  is  as  follows:                                                          

                              2002          2001          2000
                              ----------    ----------    ----------
Current  provision:                                           
      Federal                 $      -      $      -      $      -
      State                          -             -             -
                              --------      --------      --------
                                     -             -             -

  Deferred  provision        1,172,698       227,073       800,490
                             ---------      --------      --------
                           $ 1,172,698     $ 227,073     $ 800,490
                           ===========     =========     =========

                                                                     (continued)

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NOTE  H  -  INCOME  TAXES  -  Continued                                         

     The  tax effect of the Company's temporary differences and carryforwards is
as  follows:                                                                    

                                                        [Enlarge/Download Table]

                                                                2002          2001    
                                                            -----------   ----------- 
                                                                                      
Deferred  tax  assets-  current:                                                      
            Bad  debt  reserve                              $    80,296   $   108,000 
            Inventory  capitalization                           374,040       197,000 
            Accrued  payroll                                      9,874        95,000 
            Accrued  vacation                                    17,345        35,000 
            Reserve  for  inventory                           1,066,865       654,000 
                                                            -----------   ----------- 
            Total  deferred  tax  assets  -  current          1,548,420     1,089,000 

            Valuation  allowance                             (1,548,420)            - 
                                                            -----------   ----------- 

            Deferred  tax  assets,  net                     $         -   $ 1,089,000 
                                                            ===========   =========== 

       Deferred tax (liabilities) assets - non-current:                               
            AIR41  Joint  Venture                           $         -   $  (281,000)
            AIR  41  impairment                               2,585,900             - 
            Depreciation  and  amortization                  (3,674,373)   (4,139,000)
            Net  operating  loss  carryforward  -  federal    2,662,548     3,846,000 
            Net  operating  loss  carryforward  -  state        169,489       426,000 
            Minimum  tax  credit  - federal                     263,564       264,000 
            Other,  net                                         (24,320)      (32,000)
                                                             -----------   -----------
            Total  deferred  tax  assets  -  non-current      1,982,808        84,000 

            Valuation  allowance                             (1,982,808)            - 
                                                             -----------   -----------

            Deferred  tax  assets,  net                     $          -  $     84,000
                                                            ============   ===========

     The  Company's  policy  is  to  record  a  valuation  allowance against its
deferred tax assets if the Company believes that it is more likely than not that
it  will not recognize the deferred tax benefits.  Based on the Company's recent
earnings  history  and  management's  estimate  of  future  profits, the Company
believes  that  it  is  more likely than not that its future profits will not be
sufficient  to  realize  these  benefits,  therefore  a  valuation  allowance of
$3,531,228  has  been  recorded  during  the  fourth  quarter  of  fiscal  2002.

The  following  table summarizes the differences between the Company's effective
tax  rate  and  the  statutory  federal  rate  as  follows:                     

                                                                [Download Table]


                                                        2002      2001      2000  
                                                      --------  --------  --------

                                                                                  
Statutory  federal  rate                                34.0%     34.0%     34.0% 
Equity  in  net loss of unconsolidated joint venture    (4.0)      3.9        -   
Tax  expense(benefit)  from  net  operating                                       
  loss  carryforward                                      -         -         .7  
State  income  taxes                                     1.9       1.9        -   
Valuation  Allowance                                   (47.8)       -         -   
Other                                                     -         -        4.2  
                                                      --------  --------  --------

Effective  tax  rate                                   (15.9)%    39.8%     38.9% 
                                                      ========  ========  ========

(continued)                                                                     

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NOTE  H  -  INCOME  TAXES  -  Continued                                         

     The  Company  has net operating loss carryforwards for federal tax purposes
of  approximately  $7.8  million.  The  net  operating losses expire as follows:
2012  -  $137,000 and 2020 - $7,694,000.  The Company also has a federal minimum
tax  credit  carryover of approximately $264,000 which may be utilized in future
years  to  the  extent  that  the  regular tax liability exceeds the alternative
minimum tax.  Certain provisions of the tax law may limit the net operating loss
and  credit  carryforwards available for use in any given year in the event of a
significant  change  in  ownership  interest.                                   

NOTE  I  -  STOCK  OPTIONS                                                      

Under  the  terms  of  the  Company's  1996  Stock Option Plan (the "Plan"), the
Company has 967,782 shares of common stock reserved.  As of May 31, 2002, 44,380
shares  are  available  to  be issued under the Plan.  The exercise price of all
options  granted  by the Company to the employees equals the market price at the
date  of  the grant.  No compensation expense has been recognized.  The options,
other  than  those issued to the executive officers, vest immediately and expire
10  years  from  the  date  of  the  grant.                                     

          Had  compensation  expense for the issuance of stock options under the
Plan  been  determined based on the fair value of the options at the grant dates
consistent  with the method of SFAS 123, the Company's net earnings and earnings
per  share  would  have  been  changed  to  the  pro  forma  amounts  below.    

                                                                [Download Table]

                                               2002           2001          2000   
                                           -----------    -----------   -----------
                                                                                   
Net  earnings  (loss)                                                              
       As  reported                      $  (8,533,856)  $    343,461  $  1,256,593
       Pro  forma                        $  (8,618,686)  $    317,361  $  1,222,093

  Basic  earnings  (loss)  per  share                                              
       As  reported                      $       (4.01)  $        .16  $        .57
       Pro  forma                        $       (4.05)  $        .15  $        .56

  Diluted  earnings  (loss)  per  share                                            
       As  reported                      $       (4.01)  $        .16  $        .55
       Pro  forma                        $       (4.05)  $        .15  $        .54

     The above pro forma disclosures may not be representative of the effects on
reported  net  earnings  for  future  years as certain options vest over several
years  and  the  Company  may  continue  to  grant  options  to  employees.     

                                                                     (continued)

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NOTE  I  -  STOCK  OPTIONS  -  Continued                                        

     The fair value of each option grant is estimated on the date of grant using
the  binomial  option-pricing  model  with  the  following  weighted-average    
assumptions  used  for  grants  in  fiscal  2002,  2001  and 2000, respectively:
dividend  yield of 0.0 percent for all years; expected volatility of 55 percent,
95  percent  and  40 percent; risk-free interest rates of 4.5 percent; 6 percent
and  6.50  percent;  and  expected  holding  periods  of  4  years.             

     A  summary of the status of the Company's fixed stock options as of May 31,
2002,  2001  and  2000, and changes during the years ending on those dates is as
follows:                                                                        

                                                        [Enlarge/Download Table]


                                     May 31, 2002              May 31, 2001             May 31, 2000    
                                 --------------------      --------------------     --------------------
                                          Weighted  -               Weighted  -              Weighted  -
                                           Average                   Average                  Average   
                                           Exercise                  Exercise                 Exercise  
                              Shares       Price         Shares       Price        Shares      Price    
                            ----------   ---------     ----------   ---------    ----------  ---------  
                                                                                                        
Outstanding  at                                                                                         
  beginning  of year           559,947    $  3.03         529,947    $  3.13        593,154   $  3.12   
Granted                        313,000       0.57          30,000       1.25         25,000      3.44   
Exercised                            -          -               -          -         (6,000)     3.26   
Cancelled                     (112,173)      3.00               -          -        (82,207)     3.10   
                             ---------   ---------     ----------   ---------    ----------  ---------  

Outstanding  at                                                                                         
  end  of  year                760,774    $  1.99         559,947    $  3.03        529,947   $  3.13   
                             =========                  =========                 =========             

Options  exercisable                                                                                    
  at  end  of  year            760,774                    559,947                   447,185             
Weighted-average                                                                                        
  fair  value  of  options                                                                              
  granted  during                                                                                       
  the year                  $     0.27                 $     0.87                $     1.38             


     The  following  information applies to options outstanding at May 31, 2002:

                                                        [Enlarge/Download Table]

                                    Options  Outstanding                 Options  Exercisable          
                              ------------------------------         ----------------------------      
                                Weighted  -                                                            
                                 Average                                                               
                                Remaining              Weighted  -                      Weighted  -    
    Ranges  of                  Contractual             Average                          Average       
Exercise  Prices    Shares         Life              Exercise Price       Shares       Exercise Price  
----------------  ----------   ------------          --------------    ------------    ----------------
                                                                                                       
$0.55  -  $0.81      310,000           9.55           $     0.57            310,000     $     0.57     
$1.25  -  $1.30       33,000           8.62                 1.25             33,000           1.25     
$2.75  -  $3.31      417,774           5.09                 3.10            417,774           3.10     
                     -------                                                -------                    
                     760,774                                                760,774                    
                     =======                                                =======                    


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NOTE  J  -  STOCK  REPURCHASE  AND  RESTRICTED  STOCK  PLAN                     

     In  the  third  quarter  of 1999, the Company began acquiring shares of its
common stock in connection with a stock repurchase program approved by the Board
of  Directors  in  December  1998.  During  fiscal 2001, fiscal 2000 and the six
months  ended  May  31, 1999, the Company repurchased 168,701, 4,200 and 467,325
shares,  respectively  of  its common stock for a total expenditure of $149,299,
$18,711  and  $1,946,780,  respectively.  Any  such  future  purchases  must  be
approved  by  the  Company's  lender.                                           

     In  August  2001,  the  Board  of  Directors  approved  the  adoption  of a
Restricted  Stock Plan (the "Plan") to make restricted stock grants to employees
of the Company.  The Board reserved 167,800 shares of the Company's common stock
to  be  issued under the Plan.  On September 1, 2001, the Company issued 160,000
shares  of  its  common  stock  out of treasury stock under this Plan and during
fiscal  2002, 35,000 shares were returned to the Company upon the resignation of
certain  employees  holding  the  stock.  As  of  May  31, 2002, the Company has
deferred  compensation  expense  of  $67,840  reflected  as  a  component  of   
stockholders'  equity.  The  Company  recorded deferred compensation of $102,400
upon  issuance  of  the stock and amortized $34,560 into expense during the year
ended  May  31,  2002.                                                          

NOTE  K  -  RELATED  PARTY  TRANSACTIONS                                        

     Under  the commission agreement entered into with the Company during fiscal
1994,  an  outside director is entitled to 3-4% of revenues generated from sales
to  customers brought in by the director.  The Company paid the outside director
approximately $0, $60,000 and $60,000 for the years ended May 31, 2002, 2001 and
2000.  This  agreement  can  be  canceled  by  either  party  at  any  time.    

     An  executive  of the Company's partner in the AIR41 Joint Venture was also
an  executive  of  one  of  the Company's significant customers until the fourth
quarter  of fiscal 2000.  Total sales to this significant customer were $826,000
in fiscal 2000.  The Company makes advances to the AIR41 Joint Venture on behalf
of  the  Company's  partner  in the AIR41 Joint Venture.  As of May 31, 2002 and
2001,  the  outstanding  advances  were $0 and $156,568, respectively, which are
included  in  accounts  receivable.                                             

   The  notes  receivable  -  related  party  represents  amounts  due  from
North-South.  The  notes  receivable  are  collateralized  by  certain  of      
North-South's  aircraft  and  accrue  interest at a rate of 9.5% per annum.  The
future  principal  payments  on  the  notes  receivable  are as follows:  2003 -
$209,235,  and  2004  -  $90,765.                                               

     Total  lease  and service income recognized by the Company related to these
leases was approximately $1,350,000 and $595,000 in fiscal 2002 and fiscal 2001,
respectively.  In  addition, during fiscal 2002 and 2001, the Company sold parts
inventory  to  North-South  representing  sales  of approximately $2,525,000 and
$248,000,  respectively.  The  Company  performs  certain  services on behalf of
North-South.  Accordingly,  the Company charges North-South $5,000 per month for
these  services,  which  is  reflected  as  an  offset  to  selling, general and
administrative  expenses.  As  of  May  31,  2002  and 2001, the amount due from
North-South  was  $255,000  (after reserves) and $79,862, respectively, which is
included  in accounts receivable.  In fiscal 2002, the Company purchased certain
aircraft  spare  parts  in  the  amount  of  $81,000  from  North-South.        
                                                                     (continued)

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NOTE  K  -  RELATED  PARTY  TRANSACTIONS  -  Continued                          

     A  board  member of the Company is a executive and a member of the Board of
Directors  of  one  of  the Company's customers.  The Company both purchases and
sells  inventory  to this customer.  Total sales to this customer were $284,200,
$77,450  and $80,000 in fiscal 2002, 2001 and 2000, respectively.  As of May 31,
2002  and 2001, the accounts receivable from this customer were approximately $0
and  $18,000,  respectively.  Total  purchases  from  this  customer  were      
approximately  $876,000,  $1.1  million  and $1.6 in fiscal 2002, 2001 and 2000,
respectively.  As  of  May  31, 2002 and 2001, the Company has a payable to this
customer  of  approximately  $104,337  and  $330,000,  respectively.            

NOTE  L  -  ACCRUED  LIABILITIES                                                

     Accrued  liabilities  at  May  31, 2002 and 2001 consisted of the following
items:                                                                          

                2002                  2001
                -----------          -----------

Customer  deposits         $   104,760          $   158,612           
Accrued  payroll               295,287              377,760           
Accrued  property  taxes         5,500              118,499           
Other                           40,047              130,996           
                     ------              -------
                $   445,594          $   785,867
                =   =======          =   =======

NOTE  M  -  EMPLOYMENT  AGREEMENTS                                              

     In October 1996, the Company entered into employment agreements with two of
its  executive  officers with a term of five years.  Subsequent to May 31, 2001,
the  agreements  were extended through October 2005.  The agreements provide the
officers  with  a  certain  minimum  annual  salary  plus bonus.  The agreements
provide  the officers with an option to terminate their agreements and receive a
lump  sum payment equal to the officer's average annual compensation paid by the
Company  for  the most recent two years upon a change in control of the Company.
During fiscal 2002, one of the executive officers resigned and the agreement was
terminated.                                                                     

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NOTE  N  -  QUARTERLY  FINANCIAL  INFORMATION  (UNAUDITED)                      

                                                        [Enlarge/Download Table]

                                      First               Second             Third             Fourth                      
Year                                  Quarter             Quarter            Quarter           Quarter              Total  
 --                                  ----------          ---------           ---------        ---------          ----------
                                                 (In  Thousands,  Except  for  Per  Share  Information)                    
2002                                                                                                                       
----                                                                                                                       
                                                                                                                           
Revenues                              $     4,656      $     4,217          $     4,786      $     3,489      $     17,148 
Operating  income  (loss)                     513           (5,782) 1               377           (1,346) 2         (6,238)
Net  earnings  (loss)  available                                                                                           
      for  common  shareholders                 1           (3,678) 1                71           (4,928) 2,3       (8,534)
Earnings  (loss)  per share - basic             -            (1.69)                 .03            (2.30)            (4.01)
     Earnings  (loss)  per  share                                                                                          
        -  diluted                              -            (1.69)                 .03            (2.30)            (4.01)

2001                                                                                                                       
----                                                                                                                       
Revenues                              $     6,770      $     4,675          $     5,221      $     4,859      $     21,525 
Operating  income                             623              727                  476              544             2,370 
     Net  earnings  available                                                                                              
     for common shareholders                   70              117                   30              126               343 
     Earnings  per  share  -  basic           .03              .05                  .01              .06              .16  
     Earnings  per  share  -  diluted         .03              .05                  .01              .06              .16  


1.     Includes  an  impairment  charge  of  $6 million related to the Company's
investment  in  the  Air  41  Joint  Venture.                                   
2.     Includes  an additional impairment charge of $1.15 million related to the
Company's  investment  in  Air  41  Joint  Venture.                             
3.     Includes  deferred  tax  expense  of  $3.5  million  related  to  the    
establishment  of  a valuation allowance account against the deferred tax asset.

NOTE  O  -  SUBSEQUENT  EVENT                                                   

On  August  9,  2002,  the  Air  41 Joint Venture reached an agreement with its 
lender  to  transfer its aircraft to the lender in exchange for the cancellation
of the Air 41 Joint Venture's indebtedness.  The lender and the Company executed
mutual  releases in connection with the agreement between the lender and the Air
41  Joint  Venture.  The  Company  will  receive  a payment of $185,000 from the
lender  upon the consummation of the agreement between the lender and the Air 41
Joint  Venture.                                                                 

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The  accompanying  notes  are  an  integral  part  of  this  statement.         

 F-1

INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARY

 INDEX TO FINANCIAL STATEMENTS

                                                                            PAGE
                                                                            ----

Report  of  independent  certified  public  accountants                      F-2

Consolidated  balance  sheets  as  of  May  31,  2002  and  2001             F-3

Consolidated statements of operations for the years ended May 31, 2002,         
 2001 and 2000                                                               F-4

Consolidated statement of stockholders' equity (deficit) for the years          
ended May 31,  2002,  2001  and  2000                                        F-5

Consolidated statements of cash flows for the years ended                       
May 31, 2002, 2001 and 2000                                                  F-6

Notes  to  consolidated  financial  statements                               F-8

Schedule  II  -  Valuation  and  qualifying  accounts                        S-1

   FINANCIAL  STATEMENTS  AND  REPORT  OF  INDEPENDENT
CERTIFIED  PUBLIC  ACCOUNTANTS      
AIR  41  LLC          
May  31,  2002,  2001  and  2000      

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 C O N T E N T S

                                                                      Page

REPORT  OF  INDEPENDENT  CERTIFIED  PUBLIC  ACCOUNTANTS                   1     

FINANCIAL  STATEMENTS                                                           

BALANCE  SHEETS                                                      2

STATEMENTS  OF  OPERATIONS                                           3

STATEMENT  OF  MEMBERS'  CAPITAL  (DEFICIT)                          4

STATEMENTS  OF  CASH  FLOWS                                          5

NOTES  TO  FINANCIAL  STATEMENTS                              6  -  10

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 REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS

Board  of  Directors                                                            
AIR  41  LLC                                                                    

We have audited the accompanying balance sheets of AIR 41 LLC (the "Company") as
of  May  31,  2002  and 2001, and the related statements of operations, members'
capital  (deficit) and cash flows for each of the three years then ended.  These
financial  statements  are  the responsibility of the Company's management.  Our
responsibility  is  to express an opinion on these financial statements based on
our  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 financial statements referred to above present fairly, in
all  material  respects, the financial position of AIR 41 LLC as of May 31, 2002
and  2001 and the results of its operations and its cash flows each of the three
years then ended, 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 B to the
financial statements, as of May 31, 2002, the Company was in default of its loan
agreement.  In addition, the Company incurred a net loss of $12.1 million during
the  year  ended  May 31, 2002, and the Company's current liabilities exceed its
current  assets  by  $51.7 million.  These factors raise substantial doubt about
the  Company's  ability to continue as a going concern.  Managements' plan about
these  matters  are  described  in  Note  B.                                    

Miami,  Florida                                                                 
July  26,  2002,                                                                
(except  for  Note  F  as  to  which                                            
the  date  is  August  9,  2002)                                                

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                                   AIR 41 LLC                                                  
                                 BALANCE SHEETS                                                
                                     MAY 31                                                    

ASSETS                                                                                         
                                                                      2002             2001    
                                                                   -----------      -----------
                                                                                               
Aircraft,  net                                                  $   50,295,347   $   67,692,589

Deferred  debt  costs,  net  of  accumulated                                                   
  amortization  of  $0  and  $413,821  as                                                      
  of  May  31,  2002  and  2001,  respectively                           -              137,244
Other  assets                                                            -               75,000
                                                                         -               ------

                    Total  assets                               $   50,295,347   $   67,904,833
                                                                =   ==========   =   ==========

                   LIABILITIES AND MEMBERS' CAPITAL (DEFICIT)                                  

Current  liabilities                                                                           
     Accounts payable and accrued expenses                      $    1,154,184   $     172,204 
     Deferred  revenue                                                 270,000         600,000 
     Current  portion  of long-term debt                            50,295,347      33,149,983 
                                                                    ----------      ---------- 
                    Total  current  liabilities                     51,719,531      33,922,187 

Long-term  debt,  net  of  current  portion                             -           22,948,658 
Commitment  and  contingencies                                          -               -      

Members'  capital                                                    3,635,584       3,635,484 
Retained  earnings (accumulated deficit)                            (5,059,768)      7,398,404 
                                                                   -----------       --------- 
                   Total  members'  capital  (deficit)              (1,424,184)     11,033,988 
                                                                   -----------      ---------- 

                   Total  liabilities  and  members'                                           
                     capital  (deficit)                        $    50,295,347   $  67,904,833 
                                                               =    ==========   =  ========== 

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                                   AIR 41 LLC                                                        
                            STATEMENTS OF OPERATIONS                                                 
                               YEARS ENDED MAY 31                                                    

                                                          2002                2001            2000   
                                                      -----------         -----------     -----------
                                                                                                     
Rental  revenue                                   $     9,930,000     $    13,949,000  $   14,475,000

Expenses                                                                                             
     Interest  expense                                  4,464,706           5,348,029       5,770,912
     Depreciation  and  amortization                                                                 
       expense                                          3,733,021           4,901,512       5,189,861
     Impairment  of  aircraft                          13,876,465               -                -   
     Other  expense                                        31,980               -                -   
                                                           ------           ---------       -------- 

          Total  expense                               22,106,172          10,249,541     10,960,773 
                                                       ----------          ----------     ---------- 

               Net  earnings  (loss)            $     (12,176,172)     $    3,699,459  $   3,514,227 
                                                =     ============     =    =========  =   ========= 

The  accompanying  notes  are  an  integral  part  of  this  statement.                              

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                                 AIR 41 LLC                                                       
                     STATEMENT OF MEMBERS' CAPITAL (DEFICIT)                                      
                     YEARS ENDED MAY 31, 2002, 2001 AND 2000                                      

                                                                  Retained                        
                                                                  Earnings                        
                                                  Members'     (Accumulated                       
                                                  Capital          Deficit)               Total   
                                                -----------     -------------         ----------- 
                                                                                                  
Balance  at  May  31,  1999                 $     3,174,426   $      1,572,718     $    4,747,144 
Capital  contributions                              178,901            -                  178,901 
Net  earnings                                          -             3,514,227          3,514,227 
Distributions                                          -              (720,000)          (720,000)
                                                   --------         ---------           --------- 

Balance  at  May  31,  2000                $      3,353,327    $      4,366,945   $     7,720,272 
Capital  contributions                              282,257             -                 282,257 
Net  earnings                                         -               3,699,459         3,699,459 
Distributions                                         -                (668,000)         (668,000)
                                                 ---------           --------            -------- 
Balance  at  May  31,  2001                       3,635,584            7,398,404       11,033,988 
Net  loss                                            -              (12,176,172)      (12,176,172)
Distributions                                        -                 (282,000)         (282,000)
                                                 --------            ---------           ---------
Balance  at  May  31,  2002               $       3,635,584    $     (5,059,768)   $   (1,424,184)
                                          =       =========    =     ===========   =   ========== 

The  accompanying  notes  are  an  integral  part  of  these  statements.       

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                                   AIR 41 LLC                                                                   
                            STATEMENTS OF CASH FLOWS                                                            
                               YEARS ENDED MAY 31,                                                              

                                                                    2002              2001             2000     
                                                               -----------       -----------      -----------   
                                                                                                                
Net  cash  flow  from  operating  activities:                                                                   
     Net  earnings  (loss)                                  $  (12,176,172)   $    3,699,459   $    3,514,227   
     Adjustments  to  reconcile  net  earnings  (loss)                                                          
        to  cash  provided  by  operating  activities:                                                          
          Impairment  of  aircraft                              13,876,465             -                 -      
          Depreciation  and  amortization                        3,733,021         4,901,512        5,189,861   
     Changes  in  assets  and  liabilities:                                                                     
          Other  assets                                             -                (75,000)           -       
          Deferred  revenue                                       (330,000)              -              -       
          Accounts  payable  and  accrued  expenses                981,980           (90,751)         (20,715)  
                                                                  ---------          --------         --------  
               Net  cash  provided  by  operating  activities    6,085,294         8,435,220         8,683,373  

Cash  flow  from  investing  activities:                                                                        
     Additions  to  aircraft                                         -              (832,518)         (162,721) 
                                                                 ---------          ---------         --------- 
               Net  cash  used  in  investing  activities            -              (832,518)         (162,721) 

Cash  flows  from  financing  activities:                                                                       
     Principal  payment  on  long-term  debt                    (5,803,294)       (7,926,491)       (7,918,179) 
     Proceeds  from  long-term  debt                                 -               812,010             -      
     Capital  contributions                                          -               282,257           178,901  
     Distributions                                                (282,000)         (668,000)         (720,000) 
     Payment  of  debt  costs                                        -              (102,478)          (61,374) 
                                                                 ----------         ---------          -------- 
               Net  cash  used  in  financing  activities       (6,085,294)       (7,602,702)       (8,520,652) 

     Net  change  in  cash and cash equivalents                      -                  -                 -     

     Cash  and  cash  equivalents  at  beginning of period           -                  -                 -     
                                                                ------------      -----------        -----------

     Cash  and  cash  equivalents at end of period             $     -           $     -           $      -     
                                                               ============      ============      =============

     Supplemental  disclosure  of  cash  flow  information:                                                     
             Cash  paid  during  the  year  for:                                                                
                Interest                                       $ 3,514,000       $ 5,317,279       $   5,813,845
                                                               = =========       = =========       =   =========
                Taxes                                          $     -           $     -           $       -    
                                                               ===========       ===========       =============


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AIR 41 LLC  
 NOTES TO FINANCIAL STATEMENTS
 MAY 31, 2002, 2001 AND 2000

NOTE  A  -  SIGNIFICANT  ACCOUNTING  POLICIES                                   

Basis  of  Presentation                                               
-----------------------                                               

     The  statements include the accounts of AIR 41 LLC (the "Company") which is
equally  owned by International Airline Support Group ("IASG") and Aircorp, Inc.

Nature  of  Operations                                                
----------------------                                                

    The  Company  is  the owner and lessor of twenty McDonnell Douglas aircraft.
The  aircraft  are  leased  primarily to Scandinavian Airline Systems ("SAS"), a
company  based  in  Sweden.  As of May 31, 2002, nine of the twenty aircraft are
leased to SAS, which represents all of the rental revenue for the year ended May
31,  2002.  The  remaining  eleven aircraft are currently not on lease.  All SAS
leases  will  expire  during  fiscal  2003.                                     

Cash  Flow                                                            
----------                                                            

     All monthly rental income from operations is paid directly to the Company's
lender.  The  lender  applies the portion of the rental income to the respective
monthly  principal  and  interest  due  on  the Company's debt and the remaining
portion  is  distributed  back  to the members of the Company.  Accordingly, the
Company  does  not  retain  any  cash.                                          

Aircraft  and  Depreciation                                           

 The  aircraft  is  recorded  at  cost  less  accumulated  depreciation.
Depreciation  is  computed  using  the  straight-line  method  over an estimated
economic  life  of  twelve years with an estimated salvage value equal to 25% of
the  original  asset  cost.  Major improvements to aircraft are capitalized when
incurred  and  depreciated over the useful life of the improvement.  The Company
evaluates  the  carrying  value of the aircraft based upon changes in market and
other  physical and economic conditions and will record write-downs to recognize
a  loss  in  the  value  of the aircraft when management believes that, based on
expected  future  cash flows, the recoverability of the Company's investment has
been  impaired.  The  Company  does  not  record depreciation expense during the
period  the  aircraft  are not in service. (see Note F for an impairment charge)

Operating  Leases                                                     

     The  aircraft  leases  are  accounted  for  as operating leases and have an
average  original  term  of  39 months.  Lease rental revenues are recognized in
equal  installments  over  the  terms  of  the  related  leases.                

                                                                     (continued)

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AIR 41 LLC

 NOTES TO FINANCIAL STATEMENTS

 MAY 31, 2002, 2001 AND 2000

NOTE  A  -  SIGNIFICANT  ACCOUNTING  POLICIES  -  Continued                     

Operating  Leases  -  Continued                                       

     Currently, the Company has no further commitment related to the disposition
of  these  aircraft upon the termination of the leases, although, the Company is
actively  marketing  these  aircraft.  A future impairment in the value of these
aircraft and/or the inability of the Company to sell or re-lease these aircraft,
after  they  come  off  lease,  could  have a significant negative impact on the
Company's  operations.                                                          

Deferred  Debt  Costs                                                 
---------------------                                                 

     Deferred  debt  costs  represent  costs  incurred  related to the loan with
Finova  Capital  Corporation.  These  costs  were  amortized using the effective
interest  rate  method.  At  May  31,  2002,  any  remaining  balance  was fully
amortized.                                                                      

Income  Taxes                                                         
-------------                                                         

     Income  taxes on earnings are payable personally by the members pursuant to
an  election  under  section 701 of the Internal Revenue Code and the Company is
not  taxed as a Corporation. Accordingly, no provision has been made for federal
income  taxes  in  these  financial  statements.                                

Revenue  Recognition                                                  
--------------------                                                  

     Rental  income is recognized on a straight-line basis over the term of each
lease  and  when  collection  is  reasonably  assured.                          

Deferred  Revenue                                                     
-----------------                                                     

     Lease  revenues  received  in advance, but not yet earned, are deferred and
recognized  as  rental  revenue  when  earned.                                  

Use  of  Estimates                                                    

     In  preparing financial statements in conformity with accounting principles
generally  accepted  in  the United States of America, management is required to
make  estimates  and  assumptions that effect the reported amounts of assets and
liabilities  and the disclosure of contingent assets and liabilities at the date
of  the  financial  statements  and  revenue  and  expenses during the reporting
period.  Actual  results  could  differ  from  those  estimates.                

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AIR 41 LLC

 NOTES TO FINANCIAL STATEMENTS

 MAY 31, 2002, 2001 AND 2000

NOTE  B  -  REALIZATION  OF  ASSETS                                             

The  accompanying  financial  statements  have  been prepared in conformity with
accounting  principles generally accepted in the United States of America, which
contemplate  continuation of the Company as a going concern.  However, as of May
31,  2002,  the  Company  was  in  default  of its loan agreement and incurred a
substantial  loss from operations for the year ended May 31, 2002.  In addition,
the  Company's  current  liabilities exceed its current assets by $51.7 million.

In view of the matters described in the preceding paragraph, recoverability of a
major  portion  of  the recorded asset amounts shown in the accompanying balance
sheet  is  dependent  upon continued operations of the Company, which in turn is
dependent  upon  the  Company's  ability to meet its financing requirements on a
continuing  basis,  to  maintain present financing, and to succeed in its future
operations.  The financial statements do not include any adjustments relating to
the  recoverability  and classification of recorded asset amounts or amounts and
classification  of  liabilities  that  might  be necessary should the company be
unable  to  continue in existence.  See Note F - Subsequent event for disclosure
about  a  settlement  with  the  lender,  Finova  Capital  Corporation.         

NOTE  C  -  AIRCRAFT                                                            

Net  Investment  in  Aircraft                                         
-----------------------------                                         

     The  Company's  net  investment in aircraft as of May 31, 2002 consisted of
the  following:                                                                 

                                      2002                  2001
                                      ------------          ------------

   Aircraft  at  cost                  $     80,947,795     $     80,947,795
    Less:  Accumulated depreciation          (16,775,983)         (13,255,206)
                                             ------------          -----------

Aircraft,  net  of  accumulated                                       
    depreciation                       $     64,171,812     $     67,692,589

Impairment  charge  (Note  F)            (13,876,465)              -  
                                            ------------          ----------

   Aircraft,  net                      $     50,295,347     $     67,692,589
                                       =     ==========           ==========

     The  above  aircraft  balance  at  May 31, 2002 represents nine aircraft on
lease  and  eleven  aircraft  available  for  lease.                            
                                                                     (continued)

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AIR 41 LLC
 NOTES TO FINANCIAL STATEMENTS
 MAY 31, 2002, 2001 AND 2000

NOTE  D  -  DEBT                                                                

Long-term  obligations  at  May  31,  consisted  of  the  following:    

                                      2002                  2001
                                      ------------          ------------
Note  payable                    $     50,295,347     $     56,098,641
Less:  Current  maturities             50,295,347           33,149,983
                                       ----------           ----------
                                 $         -          $     22,948,658
                                 =     ==========     =     ==========

     In  September  1998,  the Company entered into a loan agreement with Finova
Capital  Corporation  in  the  amount  of  $76 million.  In connection with this
financing, each of the Company's members posted a $1.5 million letter of credit.
The  annual  interest  rate  on  the  loan  is  fixed  at  8.63% and the loan is
collateralized by the twenty aircraft as well as the interest in the SAS leases.
During  the  original  terms  of  the  leases,  the Company is required to repay
principal  and  interest  on the debt based on 95% of the rental income received
from  the  lease of the aircraft.  Once an aircraft lease expires, the remaining
principal on the aircraft is due to Finova Capital Corporation.  If the aircraft
is  re-leased,  the  repayment  terms of the debt on the aircraft is modified in
accordance  with  the  new  lease terms.  If the aircraft is sold, the remaining
principal  due  on  the  aircraft  is  repaid in full with the proceeds from the
aircraft  sale.  In fiscal 2001, Finova Capital Corporation financed maintenance
to certain of the aircraft totaling approximately $812,000, which has been added
to the total outstanding principal on the loan.  As of May 31, 2001, part of the
loan balance was classified as current portion of long-term debt, collateralized
by  six  aircraft  which  were  scheduled  to  come  off  the  lease.  This loan
represents  non-recourse  debt  to  IASG and Aircorp, Inc.  At May 31, 2002, the
entire  balance  of this debt is classified as current debt due to the fact that
all  the  remaining  aircraft  are due to come off lease in fiscal 2003, and the
Company  has  no further commitment related to the disposition of these aircraft
upon  the  termination  of  these  leases.                                      

During  fiscal  2002,  the  lender drew down $1.15 million on a letter of credit
posted  by  one of the Company's members.  The amount will be used by the lender
to  pay  future  debt  service.                                                 

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AIR 41 LLC

 NOTES TO FINANCIAL STATEMENTS

 MAY 31, 2002, 2001 AND 2000

NOTE  E  -  RELATED  PARTY  TRANSACTIONS                                        

Funding  of  Expenses                                                 
---------------------                                                 

     The  members  pay  all  expenses  on behalf of the Company, which represent
primarily  aircraft  maintenance and improvements.  At May 31, 2002, the Company
owes  a  member  $200,000,  which  is  included  in  accounts  payable.         

Allocation  of  Expenses                                              
------------------------                                              

     Certain  management  and accounting expenses of the Company are absorbed by
IASG  and  have not been allocated to the Company.  These expenses are deemed to
be  insignificant.                                                              

Aircraft  Lease                                                       
---------------                                                       

     In  fiscal  2001,  the  Company  leased  one  of  its aircraft to an entity
controlled by the owner of Aircorp, Inc., a member of the Company.  Total rental
income  from  this related party was  $850,000 for the years ended May 31, 2001.
In  fiscal  2002,  this entity filed for bankruptcy protection, therefore, there
was  no  further  rental  income  from  this  related  party.                   

NOTE  F  -  SUBSEQUENT  EVENT                                                   

     In fiscal 2002, the Company recorded an impairment charge of $13,876,465 in
order  to write down the aircraft to the lower of cost or market. The market was
determined based on an August 9, 2002 settlement with Finova Capital (lender) to
transfer  the  aircraft  to  the  lender in exchange for the cancellation of the
Company's  indebtedness.  The lender and the Company executed mutual releases in
connection with the agreement.  The impairment charge reduces the balance of the
aircraft  to  the  outstanding  loan  balance  as  of  May  31,  2002.          

EXHIBIT  10.19                                                                  
--------------                                                                  

LEASE EXTENSION AND MODIFICATION AGREEMENT

     This  Agreement  made and entered in the 10th day of December, 2001, by and
between  Port 95-4 Ltd., a Florida limited partnership, whose mailing address is
1812  SW  31st  Avenue,  Pembroke  Park,  Florida  33009 (hereinafter called the
"Landlord")  and  International  Airline  Support  Group,  Inc.,  a  Delaware   
corporation  (hereinafter  called the "Tenant"), whose corporate mailing address
is  1954  Airport  Rd.,  Suite  200,  Atlanta,  Georgia  30341.                 

 WITNESSETH:
 -----------

     WHEREAS,  on  March  26,  1997,  Landlord and Tenant entered into a certain
lease  (the "Lease") for that certain premises in Port 95 Building 4, located at
3030 SW 42nd Street, Hollywood, Florida (the "Demised Premises") as described in
the  Lease;  and                                                                

    WHEREAS,  Landlord  and  Tenant  mutually  desire  for  an  extension  and
modification  to  the  Lease  as  indicated  below;  and                        

     NOW  THEREFORE,  for  good  and  valuable consideration, the sufficiency of
which  the  parties  acknowledge,  the  parties with intent to be legally bound,
agree  as  follows:                                                             

1.     The  foregoing  recitals  are  true and correct and by this reference are
incorporated  herein.                                                           
2.     The  effective  date  (the "Effective Date") for this Lease Extension and
Modification  Agreement  shall  be June 1, 2002, and the Lease shall be extended
through  May  31,  2005  (the  "Extended  Lease  Term").                        
3.     Beginning the Effective Date during the Extended Lease Term, Tenant shall
pay  to Landlord a Minimum Rent for the Demised Premises of Six Hundred Eighteen
Thousand  Seventy-six  Dollars  and  Ninety-two  Cents  ($618,076.92),  plus any
                                                                    ----
increased  Expenses pursuant to paragraph 1 (h)(3) of the Lease, plus applicable
                                                      ----
sales  and/or  rent  taxes  thereon,  payable  as  follows:                     
During  the  first  (1st)  year of the Extended Lease Term (to-wit: June 1, 2002
through May 31, 2003, the Minimum Rent due the Landlord for the Demised Premises
shall  be  Two  Hundred  One Thousand One Hundred Thirty-eight Dollars and Sixty
Center  ($201,183.60)  per  annum,  consisting of $161,286.00 as "Base Rent" and
$39,852.00  as  "Expenses,"  payable  monthly,  in advance, at a rate of Sixteen
Thousand  Seven  Hundred Sixty-one Dollars and Fifty-Five Cents ($16,761.55) per
month,  plus  any increased Expenses pursuant to paragraph 1(h)(3) of the Lease,
----                                                            
plus  any  applicable sales and/or rent taxes thereon; beginning the second year
---                                                                           
of  the  Extended  Lease  Term  (to-wit: June 1, 2003 through May 31, 2004), the
Minimum Rent due Landlord annually for the Demised Premises shall be Two Hundred
Five  Thousand  Nine  Hundred  Seventy-seven  Dollars  and  Twenty-four  Cents  
($205,977.24),  consisting  of  $166,125.24  as  "Base  Rent"  and $39,852.00 as
"Expenses,"  payable  monthly,  in  advance,  at  rate of Seventeen Thousand One
Hundred  Sixty-four Dollars and Seventy-Seven Cents ($17,164.77) per month, plus
                                                                            ----
any  increased  Expenses  pursuant  to  paragraph 1(h)(3) of the Lease, plus any
                                                                    ----
applicable  sales  and/or  rent  taxes  thereon; beginning the third year of the
Extended  Lease  Term  (to-wit:  June 1, 2004 through May 31, 2005), the Minimum
Rent  due  Landlord  annually  for the Demised Premises shall be Two Hundred Ten
Thousand  Nine  Hundred  Sixty-one  Dollars  and  Eight  Cents  ($210,961.08),  
consisting  of  $171,109.08 as "Base Rent" and $39,852.00 as "Expenses," payable
monthly  in advance, at a rate of Seventeen Thousand Five Hundred Eighty Dollars
and  Nine  Cents ($17,580.09) per month, plus any increased Expenses pursuant to
      ----
paragraph  1(h)(3)  of  the  Lease,  plus any applicable sales and/or rent taxes
----  
thereon.                                                                        

4.     OPTION  LEASE  TERM: Provided Tenant is not in default of this Lease both
at  the  time  it  exercises this option to renew the Lease and when the "Option
Lease  Term," as defined herein, is scheduled to commence, Tenant may renew this
Lease  for  an  additional term of two (2) years (the "Option Lease Term") under
the  same  terms  and  conditions as the Extended Lease Term, except the Minimum
Rent  due Landlord for the Options Lease Term shall be Four Hundred Thirty-seven
Thousand  Four  Hundred  Ninety-six Dollars and No Cents ($437,496.00), plus any
                                                                    ----
increased  Expenses  pursuant to paragraph 1(h)(3) of the Lease, plus applicable
                                                      ----
sales  and/or  rent  taxes  thereon.                                            

During  the  first  (1st)  year  of  the Option Lease Term (to-wit: June 1, 2005
through May 31, 2006, the Minimum Rent due the Landlord for the Demised Premises
shall  be  Two  Hundred  Sixteen  Thousand  Ninety-six  Dollars  and  No  Cents 
($216,096.00) per annum, consisting of $176,244.00 as "Base Rent" and $39,852.00
as "Expenses," payable monthly, in advance, at a rate of Eighteen Thousand Eight
Dollars  and  No  Cents  ($18,008.00)  per  month,  plus  any increased Expenses
                            ----
pursuant  to  paragraph  1(h)(3)  of the Lease, plus any applicable sales and/or
                    ----
rent  taxes  thereon;  beginning the second year of the Option Lease Term During
(to-wit:  June  1,  2006  through  May  31, 2007), the Minimum Rent due Landlord
annually  for the Demised Premises shall be Two Hundred Twenty-one Thousand Four
Hundred  Dollars and No Cents ($221,400.00) per annum, consisting of $181,548.00
as  "Base  Rent" and $39,852.00 as "Expenses," payable monthly, in advance, at a
rate  of  Eighteen  Thousand  Four Hundred Dollars and No Cents ($18,450.00) per
month,  plus  any increased Expenses pursuant to paragraph 1(h)(3) of the Lease,
----                                                            
plus  any  applicable  sales  and/or  rent  taxes  thereon.  Tenant  shall given
---                                                                           
Landlord  written  notice  (Certified  Mail/Return  Receipt Requested), at least
---                                                                           
ninety  (90)  days prior to the end of the Extended Lease Term, of its desire to
---                                                                           
exercise  this  option  to  renew  the  Lease; if such notice is not received by
Landlord  at least ninety (90) days prior to the end of the Extended Lease Term,
this  paragraph  shall  become  null  and  void,  as  if  it  never  existed.   

5.     During  the Extended Lease Term or Option Lease Term, as the case may be,
and  provided  Tenant is not in default of the Lease, Term may lease in addition
to  the  Demised  Premises  the  adjacent  space  presently  occupied by Carrier
Corporation  (the  "Adjacent  Premises") at the same terms and conditions as the
Demised  Premises  and  at  the same Minimum Rent as the Demised Premises at the
time the Tenant elects to lease the Adjacent Premises (subject to availability).
Tenant  shall  give Landlord prior written notice (Certified Mail/Return Receipt
Requested)  of  its  desire to lease the Adjacent Premises.  Tenant acknowledges
that  the  lease  for  the  Adjacent  Premises ends September 30, 2002, however,
Landlord shall notify Tenant when the Adjacent Premises will become available if
sooner than September 30, 2002.  Upon receipt of such notification, Tenant shall
have forty-eight (48) hours to notify Landlord in writing of its desire to lease
the  Adjacent Premises.  If Tenant fails to so notify Landlord in writing of its
desire  to  lease  the  Adjacent  Premises  within  said forty-eight (48) hours,
Landlord may lease the Adjacent Premises to a third-party tenant without further
obligation  to  Tenant  regarding  the  Adjacent  Premises.                     

6.     Except  as  modified hereby, all other terms, conditions and covenants of
the  Lease  dated  March  26,  1997,  between  Landlord  and  Tenant  are hereby
incorporated  herein  by  reference  and  shall  govern.                        

7.     In the event there is a conflict between the terms and provisions of this
LEASE  EXTENSION  AND MODIFICATION AGREEMENT and the Lease and any modifications
thereof,  the  terms  of  this  AGREEMENT  shall  control.                      

8.     This AGREEMENT may be executed in one or more counterparts, each of which
shall  be  deemed  to  be  an  original.                                        

     IN  WITNESS  WHEREOF,  Landlord and Tenant have executed this AGREEMENT for
the  purpose  herein  expressed  as  of  the  date  above  first  written.      

Signed  in  the  presence  of:                    LANDLORD                      

PORT  95-4,  LTD.,  a  Florida  limited  partnership                            

By:  Port  95-4,  Inc.  a  Florida  corporation,  and  its  sole general partner
___________________________________                                             

___________________________________          By: _______________________________
                                            Charles  M.  Kelsey,  Jr., President

TENANT:   

INTERNATIONAL  AIRLINE  SUPPORT  GROUP,  INC.,  a  Delaware  corporation        
__________________________________                                              

__________________________________          By:______________________________   

                                    Print  Name:__________________________

                                     Title:_______________________________

 -9-

EXHIBIT  10.20                                                                  
--------------                                                                  

 TERM LOAN AGREEMENT

This  TERM  LOAN  AGREEMENT  (this  "AGREEMENT")  is made as of this 20th day of
December, 2000, between INTERNATIONAL AIRLINE SUPPORT GROUP, INC., a corporation
organized  under  the  laws of the State of Delaware, having its at headquarters
1954 Airport Road, Suite 200, Atlanta, Georgia 30341 ("BORROWER") and BOMBARDIER
CAPITAL  INC.,  a  business  corporation  organized  under  the  laws  of  the  
Commonwealth  of  Massachusetts  of  the  United  States  of America, having its
headquarters  at  P.O.  Box  991;  261  Mountain View Drive, Colchester, Vermont
05446-0991,  U.S.A.  ("LENDER").                                                

 WITNESSETH:

     WHEREAS, Borrower desires to purchase an Embraer EMB-120RT Aircraft, serial
number  120.225  (the  "AIRCRAFT");                                             

     WHEREAS,  Borrower  has  requested  Lender  to  make a loan (the "LOAN") to
Borrower  in  the  aggregate  principal  amount  of  One  Million  Seven Hundred
Forty-Two  Thousand Five Hundred United States Dollars (US$1,742,500.00) for the
purpose  of  financing  the  acquisition  of  the  Aircraft;  and               

     WHEREAS,  Lender  is  willing  to  make such Loan, subject to the terms and
conditions  of  this  Agreement.                                                

     NOW,  THEREFORE,  in  consideration  of  the  covenants and promises herein
contained,  the  parties  agree  as  follows:                                   

 ARTICLE I:     AGREEMENT FOR THE LOAN
Section  1.01     Loan.  Subject  to the terms and conditions of this Agreement,
----                                        
Lender  agrees to make one Loan to Borrower in the aggregate principal amount of
One  Million Seven Hundred Forty-Two Thousand Five Hundred United States Dollars
(US$1,742,500.00)  with  respect  to the Aircraft; and Borrower agrees to borrow
the  same  from  Lender.                                                        
 ARTICLE II:     FINANCING TERMS
Section  2.01     Term.  The  Loan  under this Agreement shall be evidenced by a
----                                        
Promissory  Note  in  the  form  of  Exhibit  A hereto (the "NOTE") delivered by
Borrower to Lender.  The term of the Loan shall be from the date of disbursement
     by Lender of such Loan to December 20, 2007 (the "MATURITY DATE"), at which
time  all  outstanding  amounts  due  shall  be  paid  in  full.                
Section 2.02     Interest Rate. The principal balance of the Loan outstanding at
-------------                                 
     any  time  shall bear interest at a fixed rate per annum of nine and 02/100
percent  (9.02%)  (the  "LOAN  RATE").                                          
Section  2.03     Principal and Interest Payments. Principal and interest on the
-------------------------------             
Loan  shall  be  due  and  payable  in United States Dollars under the terms and
conditions  of  the  Note.  Provided  Borrower  is  not  in  default  under this
Agreement  or  the  Note, Borrower may prepay the Note in its entirety, together
with a Make Whole Amount.  The Make Whole Amount shall be a premium equal to the
     greater  of  i) zero and ii) the excess of the sum of the present values of
each  remaining  scheduled  payment  of  principal  and  interest  on  such Note
discounted  at  the  then  prevailing  applicable  discount  rate  for each such
remaining  cash  flow over the remaining outstanding principal of the Note.  For
purposes  of this calculation, the prevailing discount rate will be equal to (i)
the Loan Rate less (ii) the amount, if any, by which the sum of the interpolated
yield  on  the  like  term  U. S. Treasury Note, as published in The Wall Street
Journal,  of  the term remaining on the original scheduled payments of principal
and  interest  on  the  Note  is  less  than  five  and  18/100 percent (5.18%).
Section  2.04     Interest  Rate  after  Default.  Notwithstanding  any  other  
------------------------------              
provision  of this Agreement from and after the date of any Event of Default (as
hereinafter  defined), any amounts due and owing under this Agreement shall bear
interest  at  a  rate  equal  to two percent (2%) per annum above the Loan Rate,
calculated  on  a  daily  basis.                                                
Section  2.05     Net  Payments.  All  payments  of  any kind due to Lender from
-------------                               
Borrower  pursuant  to  this  Agreement  shall  be  made in the full face amount
thereof, without setoff, counterclaim, or other defense.  All such payments will
be  free  and clear of, and without deduction or withholding for, any present or
future  taxes.                                                                  
Section  2.06     Evidence  of  Indebtedness.  The  Loan  made  by  Lender  and 
--------------------------                  
Borrower's  obligation  to  repay  the Loan with interest in accordance with the
terms  of  this  Agreement  shall be evidenced by this Agreement, the records of
Lender and the Note.  The records of Lender shall be prima facie evidence of the
Loan  and  accrued interest thereon and of all payments made in respect thereof,
except  in  the  case  of  manifest  error.                                     
Section  2.07     Financial  Statements.  Borrower  shall  furnish  to  Lender: 
---------------------                       
(a)     as  soon as available, but in any event within 120 days after the end of
each  fiscal  year  of  Borrower, the balance sheet of Borrower as at the end of
such fiscal year and the related statement of income of Borrower for such fiscal
year,  setting  forth  in  each  case  in  comparative  form the figures for the
previous  fiscal  year;  and                                                    
(b)     upon  request, at least forty-five (45) days after the end of Borrower's
fiscal  quarter,  the  unaudited balance sheet of Borrower as at the end of such
fiscal  quarter  of  Borrower  and  the related unaudited statement of income of
Borrower  for  such  quarter for the portion of the fiscal year of Borrower then
ended,  certified  by  the  chief  financial  officer  of  Borrower.            
 ARTICLE III:      SECURITY FOR THE LOAN
Section 3.01     Note and Security Interest. At all times during the term hereof
--------------------------                    
     and  until  all sums owing pursuant hereto are paid in full, the Loan shall
be  secured  by  the  Aircraft,  the Note and the Aircraft Mortgage and Security
Agreement  in  the  form  of  Exhibit B hereto (the "SECURITY AGREEMENT") by and
between  Borrower  and Lender (collectively, the "COLLATERAL").  This Agreement,
the  Note  and the Security Agreement are collectively referred to herein as the
"CREDIT  DOCUMENTS."                                                            
 ARTICLE IV:      REPRESENTATIONS, WARRANTIES AND INDEMNIFICATIONS
     In  order  to  induce  Lender  to enter into this Agreement and to make the
Loan,  Borrower  makes  the  representations,  warranties,  and indemnifications
hereinafter  set  forth  in  this  Article  IV.                                 
Section  4.01     Indemnity. Borrower shall indemnify Lender and its affiliates,
---------                                   
and  hold  Lender  and  its  affiliates  harmless from any loss, cost or expense
whatsoever  arising  from  the  breach  of  any of Borrower's covenants or other
obligations  set forth in this Agreement or any other Credit Document, including
all  losses suffered by Lender in connection with, arising out of, or in any way
related to (i) protecting, preserving, exercising or enforcing any of the rights
     of  Lender  under this Agreement or the other Credit Documents and (ii) any
claim  (whether  asserted  by  Lender  or  Borrower or any other person) and the
prosecution  or  defense  thereof,  in  any  way  arising  under, related to, or
connected with, this Agreement or the other Credit Documents or the relationship
established  hereunder,  except  to  the  extent  that the same shall arise as a
result  of  Lender's  breach  of this Agreement or the other Credit Documents or
arising  out of Lender's gross negligence or willful misconduct as determined by
a  court  of  competent  jurisdiction  in  a  final  and nonappealable judgment.
Borrower's obligation under this Section 4.01 shall survive the repayment of the
Loan  and  the  Note.                                                           
Section  4.02     Status  and  Authority.  Borrower  is  a  corporation  duly   
----------------------                      
incorporated  and validly existing under the laws of Delaware, and has the power
to  execute,  deliver  and  carry  out  the  terms  and provisions of the Credit
Documents to which it is a party and has taken all necessary action to authorize
     the  execution  of the Credit Documents to which it is a party.  The Credit
Documents  to  which  it  is  a  party  have been duly executed and delivered by
Borrower  and  constitute the legal, valid, and binding obligations of Borrower,
enforceable in accordance with their respective terms, except to the extent that
enforcement  may  be  limited  by  any  applicable  bankruptcy,  insolvency,    
reorganization,  moratorium  or  other  similar laws affecting creditors' rights
generally  and  subject to the application or limitation of equitable principles
by  a  court  of  competent  jurisdiction.                                      
Section 4.03     Material Liabilities. There has been no material adverse change
--------------------                          
in  the  operations,  business,  property,  assets  or  condition  (financial or
otherwise)  of  Borrower  since  the  date  of  Borrower's  financial statements
heretofore  provided  to  Lender.                                               
Section 4.04     Use of Proceeds. Proceeds of the Loan shall be used exclusively
---------------                               
to  pay  a portion of the purchase price for the Aircraft.  Borrower agrees that
the  proceeds of the Loan shall be paid by Lender for the benefit of Borrower as
directed  by  Borrower  in  a  payment  authorization  letter.                  
 ARTICLE V:      CONDITIONS TO CLOSING
     In  addition  to  the  terms and conditions otherwise contained herein, the
making of the Loan is subject to the satisfaction of the conditions contained in
this  Article V.  The date on which the conditions are satisfied and the Loan is
made  is  hereinafter  referred  to  as  the  "CLOSING  DATE."                  
Section 5.01     No Default. Borrower shall not be in default of: (a) any Credit
----------                                    
     Document or (b) any other agreement, loan or document, between Borrower and
Lender.                                                                         
Section  5.02     Representations  and  Warranties.  The  representations  and  
--------------------------------            
warranties  contained  in  the  Credit  Documents  shall  be  true  and correct.
Section  5.03     Delivery  of Documents for the Loan. With respect to the Loan,
-----------------------------------         
on  the  Closing  Date  Borrower  shall  have  delivered to Lender the following
documents:                                                                      

(a)     a  duly  executed  copy  of  each  of  the  Credit  Documents;          
(b)     evidence  of  acceptance  by CT Corporation System of its appointment as
agent  to  receive  service  of  process  in  New  York  on  behalf of Borrower;
(c)     a  certified  copy  of the Articles of Incorporation and Bylaws or other
governing  documents  of  Borrower;                                             
(d)     a  certified  copy  of  the resolutions of the directors authorizing the
transaction  contemplated  herein;                                              
(e)     a  legal  opinion  of  counsel  to Borrower substantially in the form of
Exhibit  C  hereto;                                                             
(f)     a  certificate  of  good  standing  of  Borrower  issued by the Delaware
Secretary  of  State;                                                           
(g)     evidence that good title to the Aircraft is in the name of Borrower; and
(h)     evidence  that  Borrower  has obtained the insurance required by Section
3.4  of  the  Security  Agreement.                                              

ARTICLE VI:      EVENTS OF DEFAULT; REMEDIES
Section  6.01     Events  of  Default.  The  occurrence  of any of the following
-------------------                         
events  shall  constitute  an  "EVENT  OF  DEFAULT"  under  this  Agreement:    

(a)     default  by  Borrower in the payment when due of any principal under the
Loan  or  under  the Note and such default shall continue for a period of thirty
(30)  days  after  Borrower  has  received  written  notice  of  such  default; 
(b)     default  by  Borrower  in  the  payment when due of any interest accrued
under the Loan or under the Note and such default shall continue for a period of
thirty  (30)  days  after  Borrower has received written notice of such default;
(c)     default  by  Borrower  in the payment of any other amounts payable under
this Agreement or default of any other terms or provisions of this Agreement, or
any  other  Credit  Document,  and  such  default shall continue for a period of
thirty  (30)  days  after  Borrower has received written notice of such default;
(d)     default  by Borrower of any other agreement between Borrower and Lender;
(e)     the Security Agreement granted to Lender shall cease to be in full force
and  effect  or shall cease to give to Lender the rights and interests purported
to  be  created  thereunder;                                                    
(f)     the  Collateral or any portion thereof shall be seized or confiscated by
any  governmental authority for any reason whatsoever for a period of sixty (60)
consecutive  days  during  which  a  stay  of  enforcement  of  such seizure and
confiscation,  by  reason  of  a  pending  appeal  or otherwise, shall not be in
effect;                                                                         
(g)     if  Borrower  fails or becomes unable generally to pay its debts as they
come  due,  makes  an  assignment for the benefit of creditors, has a compulsory
winding up order made against it or resolves to be wound up voluntarily, files a
petition  in bankruptcy or for relief under any bankruptcy or insolvency law, is
adjudicated  insolvent or bankrupt, petitions or applies to any tribunal for any
receiver  of  or  any  trustee  for  such company or any substantial part of its
property,  commences  any  proceeding  relating  to  such  company  under  any  
reorganization,  arrangement,  readjustment  of debt, dissolution or liquidation
law  or statute of any jurisdiction whether now or hereafter in effect, and such
proceeding  remains  undismissed for a period of sixty (60) days, or if there is
commenced against Borrower any such proceeding by any act, indicates its consent
to,  approval  of,  or acquiescence in any such proceeding or the appointment of
any  such  receivership  or  trusteeship  and  such  receivership or trusteeship
remains  undismissed  for  a  period  of  sixty (60) days during which a stay of
enforcement  of  proceeding  or  appointment,  by  reason of a pending appeal or
otherwise,  shall  not  be  in  effect;                                         
(h)     any  representation,  warranty  or  statement  made  by Borrower in this
Agreement,  or  any  other  Credit  Document  or  any  notice or other document,
certificate  or statement delivered by Borrower pursuant hereto or in connection
herewith  is  or  proves  to  have been incorrect or misleading when made in the
reasonable  opinion  of  Lender,  Borrower's  ability to perform its obligations
under  any  Credit Document is or will be materially and adversely affected as a
result  thereof;                                                                
(i)     Borrower suspends or ceases or threatens to suspend or cease to carry on
a  material  part  of  its  revenue  producing  business;  or                   
(j)     there  shall  occur  in  the  reasonable  opinion of Lender any material
adverse  change  in the financial condition of Borrower which, in the reasonable
opinion of Lender, will materially impair the ability of Borrower to perform its
obligations  under  the  Credit  Documents;                                     

then  upon the happening of any of the foregoing Events of Default, the Note and
all amounts under this Agreement shall become and be immediately due and payable
and  Lender shall be entitled to all other remedies available at law.  Except as
set  forth in this Agreement, Borrower expressly waives any presentment, demand,
protest  or  other  notice  of  any  kind.                                      

ARTICLE VII:      MISCELLANEOUS PROVISIONS
Section 7.01     Governing Law. This Agreement and the rights and obligations of
-------------                                 
     the parties hereunder shall be governed by and construed in accordance with
the  laws  of  the  State  of  New  York.                                       
Section 7.02     Jurisdiction; Service of Process; Waiver of Immunity. Any legal
      ----------------------------------------------------
     action  or proceeding against Borrower with respect to the Credit Documents
to  which  it  is  a  party  may  be  brought in such of the courts of competent
jurisdiction  of  the State of New York in the City of New York or in the United
States  District  Court  for  the Southern District of New York as Lender or its
respective  successors and permitted assigns, as the case may be, may elect, and
by  execution  and  delivery  of  the  Credit  Documents to which it is a party,
Borrower  irrevocably  submits to the non-exclusive jurisdiction of such courts,
and to appellate courts therefrom, for purposes of legal actions and proceedings
under  each  Credit  Document  and,  in  the  case  of  any such legal action or
proceeding  brought  in  the  above-named  New  York  courts, hereby irrevocably
consents,  during  such  time,  to  the  service  of  process  out of any of the
aforementioned  courts in any such action or proceeding by the mailing of copies
thereof  by  registered  mail,  postage  prepaid, to Borrower at its address set
forth above, or by any other means permitted by applicable law.  Borrower hereby
irrevocably  designates,  appoints  and  empowers  CT  Corporation System as its
authorized  agent for service of process in the State of New York in any suit or
proceeding  with respect to the Credit Documents to which it is a party.  A copy
of  any such process served on such agent shall be promptly forwarded by airmail
by  the  person  commencing such proceeding to Borrower at its address set forth
above.  Borrower  further  irrevocably consents to the service of process out of
any of the aforementioned courts in any such action or proceeding by the mailing
of  copies  thereof  by  registered  or  certified  airmail, postage prepaid, to
Borrower  at  its  address  set  forth above.  The foregoing, however, shall not
limit the rights of Lender to serve process in any other manner permitted by law
or to bring any legal action or proceeding or to obtain execution of judgment in
any  jurisdiction.  Borrower further agrees that final judgment against Borrower
in  any action or proceeding in connection with the Credit Documents to which it
is  a  party  shall  be conclusive and may be enforced in any other jurisdiction
within  or  outside  the  United  States  of  America by suit on the judgment, a
certified  or exemplified copy of which shall be conclusive evidence of the fact
and  the  amount  of Borrowers indebtedness.  TO THE EXTENT THAT BORROWER HAS OR
HEREAFTER  MAY  ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY OF THE ABOVE-NAMED
COURTS  OR  FROM  ANY  LEGAL PROCESS THEREIN, BORROWER HEREBY IRREVOCABLY WAIVES
SUCH  IMMUNITY, AND BORROWER HEREBY IRREVOCABLY WAIVES AND AGREES NOT TO ASSERT,
BY  WAY OF MOTION, AS A DEFENSE, OR OTHERWISE, IN ANY LEGAL ACTION OR PROCEEDING
BROUGHT  HEREUNDER IN ANY OF THE ABOVE-NAMED COURTS (I) ANY CLAIM THAT IT IS NOT
PERSONALLY  SUBJECT  TO THE JURISDICTION OF THE ABOVE-NAMED COURTS, (II) THAT IT
OR ANY OF ITS PROPERTY IS IMMUNE FROM THE ABOVE DESCRIBED LEGAL PROCESS (WHETHER
THROUGH  SERVICE  OR  NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF
EXECUTION,  OR OTHERWISE), (III) THAT SUCH ACTION OR PROCEEDING IS BROUGHT IN AN
INCONVENIENT  FORUM, THAT VENUE FOR THE ACTION OR PROCEEDING IS IMPROPER OR THAT
THE  CREDIT  DOCUMENTS  TO WHICH IT IS A PARTY MAY NOT BE ENFORCED IN OR BY SUCH
COURTS,  OR  (IV)  ANY DEFENSE THAT WOULD HINDER OR DELAY THE LEVY, EXECUTION OR
COLLECTION  OF ANY AMOUNT TO WHICH EITHER PARTY HERETO IS ENTITLED PURSUANT TO A
FINAL  JUDGMENT  OF ANY COURT HAVING JURISDICTION.  NOTHING IN THIS SECTION 7.02
SHALL  LIMIT  ANY  RIGHT OF LENDER TO BRING ACTIONS, SUITS OR PROCEEDINGS IN THE
COURTS  OF  ANY  OTHER  JURISDICTION.  BORROWER  EXPRESSLY ACKNOWLEDGES THAT THE
FOREGOING WAIVER IS INTENDED TO BE IRREVOCABLE AND HEREBY WAIVES ANY RIGHT WHICH
IT  MAY  HAVE  TO  REQUEST  A TRIAL BY JURY IN ANY ACTION RELATING TO THE CREDIT
DOCUMENTS.                                                                      
Section  7.03     Severability.  If  any  part of this Agreement is contrary to,
------------                                
prohibited  by,  or deemed invalid under any applicable law of any jurisdiction,
such  provision  shall,  as  to  such  jurisdiction,  be inapplicable and deemed
omitted  to the extent so contrary, prohibited, or invalid, without invalidating
the  remainder  hereof  or  affecting  the  validity  or  enforceability of such
provision  in  any  other  jurisdiction.                                        
Section  7.04     Counterparts.  This Agreement may be executed in any number of
------------                                
counterparts  and by the different parties hereto on separate counterparts, each
of  which  when so executed and delivered shall be an original, but all of which
shall  together  constitute one and the same instrument, and all signatures need
not  appear  on  any  one  counterpart.                                         
Section  7.05     Benefit of Agreement. This Agreement shall be binding upon and
--------------------                        
shall  inure  to  the  benefit of and be enforceable by Lender and Borrower, and
their  respective  successors  in  interest  and assigns; provided however, that
Borrower  shall  not  assign  or  transfer  any  interest  or  delegate any duty
hereunder  without  the prior written consent of Lender, which consent shall not
be  unreasonably  withheld  or  delayed. Lender shall have the absolute right to
assign  or  transfer  any  interest  herein  or  in  the other Credit Documents,
including,  without limitation, the right to sell participation interests in the
Loan;  provided,  however,  any such assignment or transfer shall not materially
affect  Borrower's  obligations  hereunder,  and  Lender  shall pay or reimburse
Borrower  for  all  of  Borrower's  additional  reasonable  costs  and  expenses
(including  reasonable  fees and disbursements of legal counsel) associated with
effecting  or  resulting from any such assignment or transfer by Lender.  Lender
shall  promptly  give  Borrower  notice  of  any  such  assignment  or transfer.
Section  7.06     Further Documentation. The parties hereto agree that from time
---------------------                       
to  time  after  the  Closing Date, Borrower shall execute and deliver to Lender
such further document or documents as Lender may reasonably request and which is
or  are  reasonably necessary or desirable in order to confirm, further evidence
the  respective  obligations  of  Borrower  and/or  the rights and privileges of
Lender  under  this  Agreement  or  the other Credit Documents, or carry out the
intent  of  the  parties  under  this  Agreement  or the other Credit Documents.
Section  7.07     Transaction  Fee;  Expenses.  Borrower  shall  upon Borrower's
---------------------------                 
execution  of  this Agreement, pay to Lender a non-refundable transaction fee of
Eight Thousand Seven Hundred Twelve and 50/100 Dollars (US$8,712.50).  Provided,
further,  Borrower shall, on demand, pay or reimburse Lender for all of Lender's
reasonable  out-of-pocket  costs  and  expenses  (including  reasonable fees and
disbursements of legal counsel) actually incurred relative to the preparation of
this  Agreement  and  the  Credit  Documents.                                   
Section 7.08     Waivers; Amendments. Any term, covenant, agreement or condition
-------------------                           
of  this  Agreement  or the other Credit Documents may be amended or waived, and
any  departure  therefrom  may be consented to, if, but only if, such amendment,
waiver  or  consent  is in writing and is signed by Lender and Borrower.  Unless
otherwise  specified  in  such  waiver  or  consent,  a  waiver or consent given
hereunder  shall be effective only in the specific instance and for the specific
purpose  for  which  given.                                                     
Section 7.09     Set-Off. Upon and after the occurrence of any Event of Default,
-------                                       
Lender  and each of its affiliates is hereby authorized by Borrower, at any time
and  from  time  to  time after five (5) days' of Borrower's receipt of Lender's
written notice to Borrower, (a) to set off against, and to appropriate and apply
to  the  payment  of,  the  obligations  and  liabilities of Borrower under this
Agreement and the other Credit Documents (whether matured or unmatured, fixed or
contingent or liquidated or unliquidated) any and all amounts owing by Lender or
any  such  affiliate to Borrower (whether matured or unmatured, and, in the case
of  deposits,  whether general or special, time or demand and however evidenced)
and  (b)  pending any such action, to the extent necessary, to hold such amounts
as  collateral  to  secure  such  obligations  and  liabilities.                
Section  7.10     Limitation  of Liability. No claim may be made by either party
------------------------                    
against  the  other  or its affiliates, directors, officers, members, employees,
attorneys or agents for any special, indirect, consequential or punitive damages
in  respect  of  any  breach  or wrongful conduct (whether the claim therefor is
based  on contract, tort or duty imposed by law) in connection with, arising out
of  or  in  any  way  related to the transactions contemplated and relationships
established  by  this  Agreement  or  the  other  Credit  Documents, or any act,
omission  or  event occurring in connection therewith (unless such claims result
from  the  gross negligence or willful misconduct of the party against whom such
claim  is made); and Borrower and Lender each hereby waives, releases and agrees
not  to  sue  the                                                               
Section 7.11     Entire Agreement. This Agreement and the other Credit Documents
----------------                              
embody  the entire agreement between Borrower and Lender and supersede all prior
agreements,  representations and understandings, if any, relating to the subject
matter  hereof.                                                                 
Section  7.12     Currency.  The  payment  obligations  of  Borrower  under this
--------                                    
Agreement  and  the  other Credit Documents shall not be discharged by an amount
paid  in  currency  other  than  United  States  Dollars,  whether pursuant to a
judgment  or  otherwise.                                                        

     IN  WITNESS  WHEREOF,  the  authorized  representatives of the parties have
executed  this  agreement  as  of  the  date  first  written  above.            

BOMBARDIER  CAPITAL  INC.                                                       

By                                                                              
Name:                                                                   
Title:                                                                  

By                                                                              
Name:                                                                   
Title:                                                                  

INTERNATIONAL  AIRLINE  SUPPORT                                                 
GROUP,  INC.                                                                    

By                                                                              
Name:     George  Murnane  III                                                  
--------------------                                        
Title:     Executive  Vice  President  and  COO                         
------------------------------------              

EXHIBIT  21                                                                     
-----------                                                                     

LIST OF SUBSIDIARIES
--------------------

ISAG  -  Virgin  Islands,  Inc.,  United  States  Virgin  Islands               

EXHIBIT  23                                                                     
-----------                                                                     

 AUDITOR'S CONSENT

   We  have  issued  our  report  dated  July  26,  2002,  accompanying  the
consolidated financial statements and schedule appearing in the Annual Report of
International  Airline Support Group, Inc. and Subsidiaries on Form 10-K for the
year ended May 31, 2002.  We hereby consent to the incorporation by reference of
the  aforementioned  report  in  the  Registration  Statements  of International
Airline  Support  Group,  Inc.  and Subsidiaries on Forms S-8 (Registration Nos.
333-13979,  333-41231,  333-90523  and  333-86496).                             

/s/  Grant  Thornton  LLP                                                       

Miami,  Florida                                                                 
August  29,  2002                                                               

EXHIBIT  99.1                                                                   
-------------                                                                   

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

     Pursuant  to  18  U.S.C.   1350,  the  undersigned officer of International
Airline  Support  Group,  Inc.  (the "Company") hereby certifies that the Annual
Report  on  Form 10-K of the Company for the fiscal year ended May 31, 2002 (the
"Report")  fully  complies  with  the  requirements  of  Section  13(a)  of  the
Securities Exchange Act of 1934 and that the information contained in the Report
fairly  presents,  in all material respects, the financial condition and results
of  operations  of  the  Company.                                               

Dated:     August  29,  2002                                                    

                           /s/  Alexius  A.  Dyer  III
                                  ----------------------------------
                   Name:  Alexius  A.  Dyer  III
                          Title:     Chairman,  President  and
                         Chief  Executive  Officer

EXHIBIT  99.2                                                                   
-------------                                                                   

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

     Pursuant  to  18  U.S.C.   1350,  the  undersigned officer of International
Airline  Support  Group,  Inc.  (the "Company") hereby certifies that the Annual
Report  on Form 10-K for the fiscal year ended May 31, 2002 (the "Report") fully
complies  with  the requirements of Section 13(a) of the Securities Exchange Act
of 1934 and that the information contained in the Report fairly presents, in all
material  respects,  the  financial  condition  and results of operations of the
Company.                                                                        

Dated:     August  29,  2002                                                    

               /s/  John  Wang
                       -----------------------
          Name:     John  Wang
                            Title:     Vice  President  -  Finance

                                                        [Enlarge/Download Table]

                                       S-1                                                                      

           INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARIES                                           

                                   SCHEDULE II                                                                  
                        VALUATION AND QUALIFYING ACCOUNTS                                                       

                     YEARS ENDED MAY 31, 2000, 2001 AND 2002                                                    

COLUMN  A                                     COLUMN B               COLUMN C         COLUMN D        COLUMN E  
---------                                     --------              ----------       --------         --------  
                                                                    Additions                                   
                                             Balance  at           Charged  to                       Balance  at
                                             Beginning             Costs  and                         End  of   
    Description                              of  Period             Expenses         Deductions        Period   
    -----------                              ----------           -----------      ------------     ----------- 

Year  ended  May  31,  2000                                                                                     
---------------------------                                                                                     

 Reserves  deducted  from  assets  to                                                                           
     which  they  apply:                                                                                        

                                                                                                                
   Allowance for possible losses on                                                                             
   accounts receivable                    $     342,420       $     172,893     $    342,591  (a)  $     172,722
                                          =     =======       =     =======     =    =======       =    ========

   Inventory  obsolescence  reserve       $   1,339,564       $     107,518     $       -          $   1,447,082
                                          =   =========       =     =======     =    =======       =   =========

Year  ended  May  31,  2001                                                                                     
---------------------------                                                                                     

Reserves  deducted  from  assets                                                                                
   to  which  they  apply:                                                                                      

    Allowance for possible losses                                                                               
     on accounts receivable               $    172,722        $     202,169     $    73,467  (a)   $     301,424
                                          =    =======        =     =======     =    ======         ============

    Inventory  obsolescence  reserve      $  1,447,082        $     143,920     $       -          $   1,591,002
                                          =  =========        =     =======     =    ======        =   =========

Year  ended  May  31,  2002                                                                                     
---------------------------                                                                                     

Reserves  deducted  from  assets  to                                                                            
    which  they  apply:                                                                                         

    Allowance for possible losses on                                                                            
      accounts receivable                 $   301,424         $     615,597     $   181,739  (a)   $     735,282
                                          =   =======         =   =========     =   =======        =     =======

    Inventory  obsolescence  reserve      $ 1,591,002         $     819,882     $      -           $   2,410,884
                                          = =========         =     =======     =   =======        =   =========

Write-off  of  accounts  receivable  against  the  reserve.                                                     

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘10-K’ Filing		Date		First		Last			Other Filings
		12/20/07		44
		5/31/07		44
		6/1/06		44
		5/31/06		44
		12/31/05		24
		6/1/05		44
		5/31/05		44
		6/1/04		44
		5/31/04		44
		8/31/03		7
		8/1/03		24
		6/1/03		44
		5/31/03		7		44
		12/31/02		7		20
		9/30/02		44
		9/1/02		4		24
Filed on:		8/29/02		10		44
		8/22/02		7		24
		8/15/02		1		7
		8/9/02		11		44
		7/26/02		11		44
		6/1/02		44
For Period End:		5/31/02		1		44
		12/15/01		7		19
		9/11/01		4
		9/1/01		29
		6/30/01		7		19
		5/31/01		6		44			10-K
		11/30/00		9					10-Q
		9/18/00		9
		9/1/00		16		17
		5/31/00		10		44			10-K,  10-K/A
		11/17/99		9
		7/1/99		9
		5/31/99		9		38			10-K
		12/8/98		9					4
		10/28/98		9
		9/16/98		22
		7/16/98		9
		5/30/98		9
		2/2/98		9
		10/15/97		9
		9/9/97		9
		3/31/97		9
		3/26/97		44
		3/24/97		9
		1/31/97		9
		8/29/96		7		9			S-4/A,  SC 13E4/A
		5/31/96		9					10-K/A,  10-K405
		12/1/95		9
		5/31/92		9
									List all Filings