UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                  FORM 10-KSB/A
(Mark One)

 [ X ] Annual Report Under Section 13 or 15(d) of the Securities Exchange
         Act of 1934 For the fiscal year ended December 31, 2004

                                       OR


[ ] Transition  Report Under Section 13 or 15(d) of the Securities  Exchange Act
of 1934 For the transition period from ____________ to ____________

                        Commission File Number: 001-13387
                                AeroCentury Corp.
                 (Name of small business issuer in its charter)

            Delaware                             94-3263974
 (State or other jurisdiction of         (I.R.S. Employer Identification No.)
 incorporation or organization)

             1440 Chapin Avenue, Suite 310
                Burlingame, California                    94010
       (Address of principal executive offices)        (Zip Code)

                               Issuer's telephone number,
                                including area code:
                                 (650) 340-1888

Securities  registered pursuant to Section 12(b) of the Act: Title of Each Class
Name of Exchange on Which  Registered  Common Stock,  $0.001 par value  American
Stock Exchange

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

Check whether the Issuer:  (1) filed all reports required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 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  
                                                             ---   ----

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained herein, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]

Revenues for the Issuer's most recent fiscal year:  $10,903,840

On March 11, 2005, the aggregate market value of the voting and non-voting
common equity held by non-affiliates (based upon the average of bid and asked
price as of March 10, 2005) was $6,144,338.

As of March 11, 2005, the Issuer had 1,543,257 shares of Common Stock
outstanding.

Documents Incorporated by Reference: Part III of this Report on Form 10-KSB
incorporates information by reference from the Registrant's Proxy Statement for
its 2005 Annual Meeting to be filed on or about March 23, 2005.

Transitional Small Business Disclosure Format (check one): Yes       No   x  
                                                              -----     ----



                                     PART I

Forward-Looking Statements

This Annual Report on Form 10-KSB includes "forward-looking statements" within
the meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. All statements in this Annual Report other than statements of historical
fact are "forward looking statements" for purposes of these provisions,
including any statements of plans and objectives for future operations and any
statements of assumptions underlying any of the foregoing. Statements that
include the use of terminology such as "may," "will," "expects," "plans,"
"anticipates," "estimates," "potential," or "continue," or the negative thereof,
or other comparable terminology are forward-looking statements.

Forward-looking statements include: (i) in Item 1 "Description of Business --
Business of the Company," statements regarding the Company's intent to achieve
its business objective by reinvesting cash flow and obtaining short-term and
long-term debt and/or equity financing; the Company's belief that it can
purchase assets at an appropriate price and maintain an acceptable overall
on-lease rate for the Company's assets; the Company's belief that it is able and
willing to enter into transactions with a wider range of lessees than would be
possible for traditional, large lending institutions and leasing companies; (ii)
in Item 1 "Description of Business - Working Capital Needs," statements
regarding the Company's belief that it has sufficient cash to fund expenses and
provide excess cash flow; the Company's expectation that it will be able to
extend its credit facility at market terms; (iii) in Item 1 "Description of
Business -- Competition," statements regarding the Company's belief that it has
a competitive advantage due to its experience and operational efficiency in
financing the transaction sizes that are desired by the regional air carrier
market; the Company's belief that that the Company also has a competitive
advantage because JMC has developed a reputation as a global participant in the
aircraft leasing market (iv) in Item 5 "Market for Common Equity, Related
Stockholder matters and Small Business Issuer Purchases of Equity Securities --
Dividends," the Company's intention to refrain from declaring dividends in the
foreseeable future, in order to reinvest earnings into acquisition of additional
assets; (v) in Item 6 "Management's Discussion and Analysis or Plan of Operation
-- Liquidity and Capital Resources," statements regarding the Company's belief
that it will continue to be in compliance with all covenants of its credit
facility; the Company's belief that the credit facility will be renewed on
market terms; the Company's belief that the Company will have adequate cash flow
to meet its on-going operational needs, including required repayments under the
credit facility; (vi) in Item 6 "Management's Discussion and Analysis or Plan of
Operation -- Outlook," statements regarding the Company's anticipation that
lenders will approve inclusion of a 2004 aircraft acquisition in the borrowing
base in the second quarter of 2005; the Company's belief that it will have
sufficient cash to fund any required repayments under its credit facility caused
by lease expirations; (vii) in Item 6 "Management's Discussion and Analysis or
Plan of Operation -- Factors that May Affect Future Results," statements
regarding the Company's belief that it will have sufficient cash to fund any
required repayments under its credit facility caused by borrowing base
limitations as a result of assets scheduled to come off lease in the near term;
the Company's anticipation that it will have sufficient funds to pay increased
Sarbanes-Oxley compliance costs; the Company's anticipated acquisition of
primarily used aircraft; the opportunities available in overseas markets; and
(viii) in Item 7 "Financial Statements - Notes to Consolidated Financial
Statements", statements regarding the Company's anticipation regarding renewal
of the credit facility on market terms.

These forward-looking statements involve risks and uncertainties, and it is
important to note that the Company's actual results could differ materially from
those projected or assumed in such forward-looking statements. Among the factors
that could cause actual results to differ materially are the factors detailed
under the heading "Management's Discussion and Analysis or Plan of Operation --
Factors That May Affect Future Results," including general economic conditions,
particularly those that affect the demand for regional aircraft and engines and
the financial status of the Company's primary customers, foreign regional
passenger airlines; further disruptions to the air travel industry due to
terrorist attacks or wartime hostilities or catastrophic events; increasing jet
fuel costs that weaken the financial health of air carrier; the Company's
ability to renew and enlarge its credit facility on reasonable business terms at
or prior to its expiration; the financial performance of the Company's lessees
and their compliance with rental, maintenance and return conditions under their
respective leases; the availability of suitable aircraft acquisition
transactions in the regional aircraft market; and future trends and results
which cannot be predicted with certainty. The cautionary statements made in this
Annual Report should be read as being applicable to all related forward-looking
statements wherever they appear herein. All forward-looking statements and risk
factors included in this document are made as of the date hereof, based on
information available to the Company as of the date hereof, and the Company
assumes no obligation to update any forward-looking statement or risk factor.
You should consult the risk factors listed from time to time in the Company's
filings with the Securities and Exchange Commission.






Item 1.           Description of Business.

Business of the Company

AeroCentury Corp. ("AeroCentury"), a Delaware corporation, uses leveraged
financing to acquire leased aircraft assets. AeroCentury was formed in 1997.
Financial information for AeroCentury and its wholly-owned subsidiary,
AeroCentury Investments II LLC ("AeroCentury II LLC") (collectively, the
"Company"), is presented on a consolidated basis. All intercompany balances and
transactions have been eliminated in consolidation.

The business of the Company is managed by JetFleet Management Corp. ("JMC"),
pursuant to a management agreement between the Company and JMC, which is an
integrated aircraft management, marketing and financing business and a
subsidiary of JetFleet Holding Corp. ("JHC"). Certain officers of the Company
are also officers of JHC and JMC and hold significant ownership positions in
both JHC and the Company.

The Company is engaged in the business of investing in used regional aircraft
equipment leased to foreign and domestic regional air carriers and has been
engaged in such business since its formation. The Company's principal business
objective is to increase stockholder value by acquiring aircraft assets and
managing those assets in order to provide a return on investment through lease
revenue and, eventually, sale proceeds. The Company intends to achieve its
business objective by reinvesting cash flow and obtaining short-term and
long-term debt and/or equity financing.

The Company's success in achieving its objective will depend in large part on
its success in three areas: asset selection, lessee selection and obtaining
acquisition financing.

The Company acquires additional assets in one of three ways. The Company may
purchase an asset already subject to a lease and assume the rights of the
seller, as lessor under the existing lease. In addition the Company may purchase
an asset, usually from an air carrier, and lease it back to the seller. Finally,
the Company may purchase an asset from a seller and then immediately enter into
a new lease for the aircraft with a third party lessee. In this last case, the
Company does not purchase an asset unless a potential lessee has been identified
and has committed to lease the aircraft.

The Company generally targets used regional aircraft and engines with purchase
prices between $1 million and $10 million, and lease terms less than five years.
In determining assets for acquisition, the Company evaluates, among other
things, the type of asset, its current price and projected future value, its
versatility or specialized uses, the current and projected future availability
of and demand for that asset, and the type and number of future potential
lessees. Because JMC has extensive experience in purchasing, leasing and selling
used regional aircraft, the Company believes it can purchase these assets at an
appropriate price and maintain an acceptable overall on-lease rate for the
Company's assets.

In order to improve the remarketability of an aircraft after expiration of the
lease, the Company focuses on having lease provisions for its aircraft that
provide for maintenance and return conditions, such that when the lessee returns
the aircraft, the Company receives the aircraft in a condition which allows it
to expediently re-lease or sell the aircraft, or receives sufficient payments
from the lessee to cover any maintenance or overhaul of the aircraft required to
bring the aircraft to such a state.

When considering whether to accept transactions with a lessee, the Company
examines the creditworthiness of the lessee, its short- and long-term growth
prospects, its financial status and backing, the impact of pending governmental
regulation or de-regulation of the lessee's market, all of which are weighed in
determining the lease rate that is offered to the lessee. In addition, where
applicable, it is the Company's policy to monitor the lessee's business and
financial performance closely throughout the term of the lease, and if
requested, provide assistance drawn from the experience of the Company's
management in many areas of the air carrier industry. Because of its "hands-on"
approach to portfolio management, the Company believes it is able and willing to
enter into transactions with a wider range of lessees than would be possible for
traditional, large lending institutions and leasing companies.







Working Capital Needs

The Company's portfolio of assets has historically generated revenues which have
more than covered the Company's cash expenses, which consist mainly of
maintenance expense, financing interest payments, management fees, professional
fees and insurance.

The Company's management fees are based upon the size of the asset pool. The
majority of the maintenance expense incurred by the Company during 2004 was
either paid in cash during the year or will be paid during 2005. As the Company
has continued to use acquisition debt financing under its revolving credit
facility, which expires on October 31, 2005, interest expense has become an
increasingly larger portion of the Company's expenses. However, each advance on
the credit facility funds the acquisition of an asset subject to a lease, and
the lease revenue expected to be received with respect to the asset is greater
than the incremental increase in required interest payments arising from such
advance. Professional fees are paid to third parties for expenses not covered by
JMC under the Management Agreement. Insurance expense includes amounts paid for
directors and officers insurance, as well as aircraft insurance for periods when
an aircraft is off lease. So long as the Company succeeds in keeping the
majority of its assets on lease and interest rates do not rise significantly and
rapidly, the Company's cash flow should be sufficient to cover maintenance
expenses, interest expense, management fees, professional fees and insurance and
provide excess cash flow. This, of course, is dependent upon the Company being
able to extend its credit facility beyond the October 31, 2005 expiration. The
Company expects to be able to obtain such facility at market terms.

Competition

The Company competes for customers, who generally are regional commercial
aircraft operators that are seeking to lease aircraft under an operating lease,
with other leasing companies, banks, financial institutions, and aircraft
leasing partnerships. Management believes that competition may increase if
competitors who have traditionally neglected the regional air carrier market
begin to focus on that market. Because competition is largely based on price and
lease terms, the entry of new competitors into the market, particularly those
with greater access to capital markets than the Company, could lead to fewer
acquisition opportunities for the Company and/or lease terms less favorable to
the Company on new acquisitions as well as renewals of existing leases or new
leases of existing aircraft, all of which could lead to lower revenues for the
Company.

The Company, however, believes that it has a competitive advantage due to its
experience and operational efficiency in financing the transaction sizes that
are desired by the regional air carrier market. Management believes that the
Company also has a competitive advantage because JMC has developed a reputation
as a global participant in the aircraft leasing market.

Dependence on Significant Customers

For the year ended December 31, 2004, the Company had four significant
customers, which accounted for 24%, 16%, 11% and 10%, respectively, of lease
revenue. Concentration of credit risk with respect to lease receivables will
diminish in the future if the Company is able to lease additional assets or
re-lease assets currently on lease to significant customers to new customers.

Employees

Under the Company's management contract with JMC, JMC is responsible for all
administration and management of the Company. Consequently, the Company does not
have any employees.







Item 2.           Description of Property.

As of December 31, 2004, the Company did not own or lease any real property,
plant or materially important physical properties. The Company maintains its
principal office at 1440 Chapin Avenue, Suite 310, Burlingame, California 94010.
However, since the Company has no employees and the Company's portfolio of
leased aircraft assets is managed and administered under the terms of a
management agreement with JMC, all office facilities are provided by JMC.

At December 31, 2004, the Company owned eight deHavilland DHC-8s, one
deHavilland DHC-7, three deHavilland DHC-6s, one Fairchild Metro III, two Shorts
SD 3-60s, ten Fokker 50s, two Saab 340As and one turboprop engine.

Item 3.           Legal Proceedings.

The Company is not involved in any material legal proceedings.

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

None.

                                     PART II

Item 5. Market for Common Equity, Related Stockholder Matters and Small Business
Issuer Purchases of Equity Securities.

The shares of the Company's Common Stock are traded on the American Stock
Exchange ("AMEX") under the symbol "ACY."

Market Information

The Company's Common Stock has been traded on the AMEX since January 16, 1998.
The following table sets forth the high and low sales prices reported on the
AMEX for the Company's Common Stock for the periods indicated:

                 Period                       High        Low
------------------------------------------ ----------- ----------

Fiscal year ended December 31, 2004:
     Fourth Quarter ...................    $3.20       $2.41
     Third Quarter.....................     2.45        2.05
     Second Quarter....................     3.14        2.32
     First Quarter.....................     3.65        3.00
Fiscal year ended December 31, 2003:
     Fourth Quarter....................     3.57        2.90
     Third Quarter.....................     4.95        2.99
     Second Quarter....................     5.45        2.80
     First Quarter.....................     3.50        2.57

On March 10, 2005, the closing stock sale price on the AMEX was $5.12 per share.

Number of Security Holders

According to the Company's transfer agent, the Company had approximately 1,800
stockholders of record as of March 11, 2005. Because many shares are held by
brokers and other institutions on behalf of stockholders, the Company is unable
to estimate the total number of stockholders represented by these record
holders.







Dividends

No dividends have been declared or paid to date. The Company does not intend to
declare or pay dividends in the foreseeable future, and intends to re-invest any
earnings into acquisition of additional revenue generating aircraft equipment.

Stockholder Rights Plan

In April 1998, in connection with the adoption of a stockholder rights plan, the
Company filed a Certificate of Designation detailing the rights, preferences and
privileges of a new Series A Preferred Stock. Pursuant to the plan, the Company
issued rights to its stockholders of record as of April 23, 1998, giving each
stockholder the right to purchase one one-hundredth of a share of Series A
Preferred Stock for each share of Common Stock held by the stockholder. Such
rights are exercisable only under certain circumstances in connection with a
proposed acquisition or merger of the Company.

Item 6.  Management's Discussion and Analysis or Plan of Operation.

Overview

The Company is a lessor of turboprop aircraft and engines which are used by
customers pursuant to triple net operating leases. The acquisition of such
equipment is generally made using debt financing. The Company's profitability
and cash flow are dependent in large part upon its ability to acquire equipment,
obtain and maintain favorable lease rates on such equipment, and re-lease or
sell owned equipment that comes off lease. The Company is subject to the credit
risk of its lessees, both as to collection of rent and to performance by the
lessees of obligations for maintaining the aircraft. Since lease rates for
assets in the Company's portfolio generally decline as the assets age, the
Company's ability to maintain revenue and earnings over the medium and long term
is dependent upon the Company's ability to grow its asset portfolio.

The Company's principal expenditures are for interest costs on its financing,
management fees, and maintenance of its aircraft assets. Maintenance
expenditures are generally incurred only when aircraft are off lease, are being
prepared for re-lease, or require maintenance in excess of lease return
conditions.

The most significant non-cash expenses include accruals of maintenance costs to
be borne by the Company and aircraft depreciation, both of which are the result
of significant estimates. Maintenance expenses are estimated and accrued based
upon utilization of the aircraft. Depreciation is recognized based upon the
estimated residual value of the aircraft at the end of their estimated lives.
Deviation from these estimates could have a substantial effect on the Company's
cash flow and profitability.

Critical Accounting Policies, Judgments and Estimates

The discussion and analysis of the Company's financial condition and results of
operations are based upon the consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial statements requires
management to make estimates and judgments that affect the reported amounts of
assets and liabilities, revenues and expenses, and the related disclosure of
contingent assets and liabilities at the date of the financial statements.
Actual results may differ from these estimates under different assumptions or
conditions.

The Company's significant accounting policies are described in Note 1 to the
consolidated financial statements. We believe our most critical accounting
policies include the following: Impairment of Long-lived Assets; Depreciation
Policy, Maintenance Reserves and Accrued Costs; Revenue Recognition and
Allowance for Doubtful Accounts; and Accounting for Income Taxes.


a.       Impairment of Long-lived Assets

The Company periodically reviews its portfolio of assets for impairment in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 144,
"Accounting for the Impairment or Disposal of Long-lived Assets." Such review
necessitates estimates of current market values, re-lease rents, residual values
and component values. The estimates are based on currently available market data
and third-party appraisals and are subject to fluctuation from time to time. The
Company initiates its review periodically, whenever events or changes in
circumstances indicate that the carrying amount of a long-lived asset may not be
recoverable. Recoverability of an asset is measured by comparison of its
carrying amount to the expected future undiscounted cash flows (without interest
charges) that the asset is expected to generate. Any impairment to be recognized
is measured by the amount by which the carrying amount of the asset exceeds its
fair market value. Significant management judgment is required in the
forecasting of future operating results which are used in the preparation of
projected undiscounted cash flows and should different conditions prevail,
material write downs may occur.

In accordance with its periodic review of its portfolio of assets for
impairment, during the third quarter of 2004, the Company recorded a provision
for impairment of approximately $463,000 for one of its aircraft, based on the
Company's cash flow analysis and third party appraisals which reflected a
decline in market conditions for this type of aircraft during the year. In
addition, during the fourth quarter of 2004, the Company recorded an impairment
charge of approximately $193,000 for another aircraft, based on the estimated
net sales proceeds pursuant to an agreement to sell the aircraft in early 2005.


b.       Depreciation Policy

The Company's interests in aircraft and aircraft engines are recorded at cost,
which includes acquisition costs. The Company purchases only used aircraft. It
is the Company's policy to hold aircraft for approximately twelve years.
Depreciation is computed using the straight-line method over the twelve year
period to an estimated residual value based on appraisal. Decreases in the
market value of aircraft could not only affect the current value, discussed
above, but could also affect the assumed residual value. The Company
periodically obtains a residual value appraisal for its assets and,
historically, has not written down any estimated residuals.

c.       Maintenance Reserves and Accrued Costs

Maintenance costs under the Company's triple net leases are generally the
responsibility of the lessees. Maintenance reserves and accrued costs in the
accompanying consolidated balance sheet include refundable and non-refundable
maintenance payments received from lessees. The Company periodically reviews
maintenance accruals for each of its aircraft for adequacy in light of the
number of hours flown, airworthiness directives issued by the manufacturer or
government authority, and the return conditions specified in the lease, as well
as the condition of the aircraft upon return or inspection. As a result of such
review, if it is probable that the Company has incurred costs for maintenance in
excess of amounts accrued, the Company records an expense for the additional
required maintenance to be performed.

Significant management judgment is required in determining aircraft condition
and estimating maintenance costs. Absent fixed price maintenance agreements,
these costs cannot be determined until such work is completed. Because of the
potential magnitude of maintenance costs, even slight changes in work scope may
have a material impact on operating results.

With respect to estimated maintenance costs, the Company has found its accruals
to be generally accurate. Nevertheless, the Company has incurred significant
maintenance expense in connection with aircraft which were returned early during
the last two years in a condition worse than required by the lease.
Specifically, the Company incurred maintenance expense of approximately $442,000
and $1,864,000 in connection with the early return of aircraft in 2004 and 2003,
respectively.









d.       Revenue Recognition and Allowance for Doubtful Accounts

Revenue from leasing of aircraft assets is recognized as operating lease revenue
on a straight-line basis over the terms of the applicable lease agreements. The
Company estimates and charges to income a provision for bad debts based on its
experience in the business and with each specific customer, the level of past
due accounts, and its analysis of the lessee's overall financial condition. If
the financial condition of the Company's customers deteriorates, it could result
in actual losses exceeding the estimated allowances.

During 2003, in connection with a lessee's default, the Company recorded an
increase to the allowance for doubtful accounts of $480,000. Based on payment
histories, including this particular lessee's, the Company reversed a portion of
the allowance twelve months later. However, based on subsequent experience and
the Company's revised evaluation of the lessee's intention to make future
payments, the Company increased the allowance back to $480,000 at December 31,
2004.

e.       Accounting for Income Taxes

As part of the process of preparing the Company's consolidated financial
statements, management is required to estimate income taxes in each of the
jurisdictions in which the Company operates. This process involves estimating
the Company's current tax exposure under the most recent tax laws and assessing
temporary differences resulting from differing treatment of items for tax and
accounting purposes. These differences result in deferred tax assets and
liabilities, which are included in our consolidated balance sheet. Management
must also assess the likelihood that the Company's deferred tax assets will be
recovered from future taxable income, and, to the extent management believes it
is more likely than not that some portion or all of the deferred tax assets will
not be realized, the Company must establish a valuation allowance. To the extent
the Company establishes a valuation allowance or changes the allowance in a
period, the Company must reflect the corresponding increase or decrease within
the tax provision in the consolidated statement of operations.

Significant management judgment is required in determining the Company's future
taxable income for purposes of assessing the Company's ability to realize any
benefit from its deferred taxes. In the event that actual results differ from
these estimates or the Company adjusts these estimates in future periods, the
Company's operating results and financial position could be materially affected.


Results of Operations

a.       Revenues

Operating lease revenue was approximately $232,000 higher in 2004 versus 2003,
primarily because of the combined effect of increased lease revenue from
aircraft purchased during 2004 and the re-lease of an aircraft which had been
off-lease during 2003. These increases, totaling approximately $1,358,000, more
than offset a decrease in operating lease revenue of approximately $1,126,000
resulting from lower lease rates for several aircraft in 2004 and a portion of
2003 and the effect of aircraft off lease during the year 2004.

Gain on sale of aircraft and aircraft engines was approximately $1,748,000 for
the year ended December 31, 2004 as a result of the sale of a pool of
twenty-four turboprop engines and the sale of an additional engine, which
resulted in gains of approximately $1,727,000 and $172,000, respectively. These
gains were partially offset by a $151,000 loss on sale of a deHavilland DHC-7
aircraft. There were no sales in 2003.

Other income was approximately $15,000 higher in 2004 than in 2003, primarily as
a result of payments received on one of the Company's notes receivable, which
was signed in the third quarter of 2003. The Company holds the note as part of a
settlement agreement in connection with a lessee default in 2003. At the time
the note was signed, the Company fully reserved the balance due. Accordingly,
all payments it received in late 2003 and the first nine months of 2004 were
recorded as income. At September 30, 2004, based on the payment history to date,
the Company reversed a portion of the allowance, which decreased it to 50% of
the note balance. However, based on recent experience, the Company has a more
pessimistic evaluation of the debtor's intention to make future payments and,
therefore, the Company increased the allowance to 100% of the remaining note
balance at December 31, 2004 and reversed approximately $111,000 of income
recognized in the third quarter. In January 2005, the Company sent a default
notice to the debtor.

b.       Expense items

Depreciation was approximately $194,000 higher in 2004 versus 2003 and
management fees, which are calculated on the net book value of the aircraft
owned by the Company, were approximately $78,000 higher in 2004, primarily
because of the purchase of aircraft in 2004, the effect of which was partially
offset by sales of assets during 2004.

Interest expense was approximately $480,000 higher in 2004 versus 2003 primarily
as a result of higher average interest rates arising from changes in the
Company's credit facility pricing in August 2003 and higher market interest
rates upon which the revolving credit facility variable interest rates are
based, the effect of which was partially offset by a lower average principal
balance in 2004.

Maintenance expense was approximately $1,245,000 lower in 2004 compared to 2003
because, even though the Company incurred maintenance expense in connection with
the early return of two aircraft in 2004 and incurred additional expenses in
connection with: (i) its periodic review of the adequacy of its maintenance
reserves and (ii) off-lease aircraft in 2004, the total of those amounts was
less than the maintenance expense incurred in connection with a lessee default
in 2003.

During 2004, the Company recorded an impairment charge of approximately $463,000
for one of its aircraft, based on the Company's cash flow analysis and third
party appraisals. In addition, the Company recorded an impairment charge of
approximately $193,000 for another aircraft, based on the estimated net sales
proceeds pursuant to an agreement to sell the aircraft in early 2005.

Professional fees and general and administrative expenses were approximately
$10,000 higher in 2004 versus 2003, primarily as a result of higher accounting
fees and fees paid in connection with the collection of amounts due under one of
the Company's notes receivable. These increases were partially offset by lower
legal fees related to the renewal of the Company's credit facility and re-lease
of aircraft during 2004.

Insurance expense was approximately $35,000 higher in 2004 versus 2003 primarily
as a result of the Company having to provide owner coverage for more off-lease
aircraft-days in 2004. This increase was partially offset by lower rates per
dollar of coverage in 2004 versus 2003.

Bad debt expense was approximately $753,000 lower in 2004 versus 2003 because,
during 2003, the Company recorded bad debt expense of approximately $650,000 for
all rent and maintenance reserves owed by a lessee which defaulted on its
payment obligations under leases for two aircraft and $250,000 to establish an
allowance related to amounts due from another lessee for rent and maintenance
necessary to meet the return conditions under its lease. In 2004, the Company
recorded bad debt expense of approximately $147,000 for rent and reserves in
connection with the early return of two aircraft by a lessee.

The Company's effective tax rates in 2004 and 2003 were approximately 34% and
37%, respectively. Since the Company incurred a loss for the year ended December
31, 2003, the recognition of the tax benefits related to the reduced state tax
rates increased the Company's tax benefit from the loss and its effective tax
rate for that year. Conversely, the Company had income for the year ended
December 31, 2004, and the recognition of tax benefits related to the reduced
state tax rates decreased the Company's effective tax rate for the year.







Liquidity and Capital Resources

The Company is currently financing its assets primarily through credit facility
borrowings, special purpose financing and excess cash flow.

(a)      Credit facility

In August 2003, the Company reached agreement with its lenders to renew the
credit facility through August 31, 2004. In January 2004, a third bank was added
to the Company's credit facility participant group. The new participant agreed
to finance $10 million, bringing the Company's credit facility limit to $50
million. The facility bore interest, at the Company's option, at either (i)
prime plus a margin of 50 to 150 basis points or (ii) LIBOR plus a margin of 275
to 375 basis points. Both the prime and LIBOR margins were determined by certain
financial ratios. In 2004, the facility was renewed through October 31, 2005.
The renewal agreement also revised certain pricing and covenant provisions and
waived noncompliance with two covenants at September 30, 2004. In connection
with the renewal, the LIBOR margin was set at 375 basis points through March 31,
2005, after which a margin of 275 to 375 basis points will be determined by
certain financial ratios.

During 2004, the Company repaid a total of $7,050,000 of the outstanding
principal under its credit facility. In accordance with the agreement for the
credit facility, the Company must maintain compliance with certain financial
covenants. As of December 31, 2004, $46,805,000 was outstanding under the credit
facility and interest of $286,630 was accrued. The Company was in compliance
with all covenants as of that date and is currently in compliance. Based on its
current projections, the Company believes it will continue to be in compliance
with all covenants of its credit facility, but there can be no assurance of such
compliance. See "Factors That May Affect Future Results - 'Credit Facility
Obligations' and 'Risks of Debt Financing'," below.

The Company's interest expense in connection with the credit facility generally
moves up or down with prevailing interest rates, as the Company has not entered
into any interest rate hedge transactions for the credit facility indebtedness.
Because aircraft owners seeking financing generally can obtain financing through
either leasing transactions or traditional secured debt financings, prevailing
interest rates are a significant factor in determining market lease rates, and
market lease rates generally move up or down with prevailing interest rates,
assuming supply and demand of the desired equipment remain constant. However,
because lease rates for the Company's assets typically are fixed under existing
leases, the Company normally does not experience any positive or negative impact
in revenue from changes in market lease rates due to interest rate changes until
existing leases have terminated.

The Company's longer term viability will depend upon its ability to renew the
credit facility at its October 2005 expiration with the existing or replacement
lenders, or to refinance the credit facility using equity or alternative debt
financing. Management expects the credit facility to be renewed on market terms;
however, there is no assurance that the Company will be able to achieve either
alternative prior to the currently scheduled expiration. In addition, the
Company will need additional financing for acquisitions of leased assets, which
will be necessary to offset the anticipated decreased lease rates which will
result from future re-leases of the Company's current portfolio.

If the Company is not able to renew the credit facility for the full outstanding
amount, and cannot find suitable alternative financing, it may be required to
make a principal repayment of the outstanding balance, or that portion of the
balance for which replacement financing is not obtained. The Company does not
have sufficient cash reserves to make a repayment of a significant portion of
the outstanding credit facility indebtedness and would be forced to sell assets
in order to raise funds to make such repayment. Such sales would likely not be
on favorable terms to the Company as the full market value of the assets sold
may not be realized by the Company in order to expedite the consummation of the
sales.

Even if the Company is able to successfully sell a portion of its assets and use
the proceeds to repay the credit facility, if a renewed or replacement facility
is not obtained, the Company's future ability to acquire assets would be
significantly impaired, as the credit facility is the Company's primary means of
financing acquisitions and no other sources of acquisition financing are
immediately available. Thus the renewal or replacement of the Company's credit
facility in an amount equal to or greater than the current $50 million limit
will be critical to the Company's future operations.

(b) Special purpose financing

In September 2000, the Company acquired a deHavilland DHC-8 aircraft using cash
and bank financing separate from its credit facility. The financing resulted in
a note obligation in the amount of $3,575,000, due April 15, 2006, which bears
interest at the rate of one-month LIBOR plus 3%. The note is collateralized by
the aircraft and is non-recourse to the Company. Payments due under the note
consist of monthly principal and interest and a balloon principal payment due on
the maturity date. The financing also provides for a six month remarketing
period at the expiration or early termination of the lease. Payments due on the
financing are reduced during this remarketing period and the balloon principal
payment is deferred to the end of the six month period. The balance of the note
payable at December 31, 2004 was $1,895,700 and interest of $2,280 was accrued.
The Company was in compliance with all covenants of this note obligation as of
that date and is currently in compliance.

The availability of special purpose financing in the future will depend on
several factors including (1) the availability of funds to be used for the
equity portion of the financing, (2) the type of asset being financed and (3)
the creditworthiness of the underlying lessee. The availability of funds for the
equity portion of the financing will be dependent on the Company's cash flow, as
discussed in "Cash Flow," below.

(c)      Cash flow

The Company's primary source of revenue is lease rentals of its aircraft assets.
It is the Company's policy to monitor each lessee's needs in periods before
leases are due to expire. If it appears that a customer will not be renewing its
lease, the Company immediately initiates marketing efforts to locate a potential
new lessee or purchaser for the aircraft. The goal of this procedure is to
reduce the time that an asset will be off lease. The Company's aircraft are
subject to leases with varying expiration dates through July 2009.

Management believes that the Company will have adequate cash flow to meet its
ongoing operational needs, including required repayments under its credit
facility, based upon (i) its estimates of future revenues and expenditures and
(ii) the expectation that the credit facility will be renewed on or before
expiration. The Company's expectations concerning such cash flows are based on
existing lease terms and rents, as well as numerous estimates, including (i)
rents on assets to be re-leased, (ii) sale proceeds of certain assets currently
under lease, (iii) the cost and anticipated timing of maintenance to be
performed and (iv) acquisition of additional aircraft and the lease thereof at
favorable lease terms. While the Company believes that the assumptions it has
made in forecasting its cash flow are reasonable in light of experience, actual
results could deviate from such assumptions. Among the more significant external
factors outside the Company's control that could have an impact on the accuracy
of cash flow assumptions are (i) an increase in interest rates that negatively
affects the Company's GAAP profitability and causes the Company to violate
covenants of its credit facility, requiring repayment of some or all of the
amounts outstanding under its credit facility, (ii) lessee non-performance or
non-compliance with lease obligations (which may affect credit facility
collateral limitations as well as revenue and expenses) and (iii) an unexpected
deterioration of demand for aircraft equipment.

(i)      Operating activities

The Company's cash flow from operations for the year ended December 31, 2004
versus 2003 decreased by approximately $2,746,000. The change in cash flow is a
result of changes in several cash flow items during the period, including
principally the following:

         Lease rents, maintenance reserves and security deposits

Lease revenue, net of approximately $279,000 written off to bad debt expense in
2003, and $210,000 and $346,000 deferred to future years in 2004 and 2003,
respectively, was approximately $647,000 higher in 2004 than in 2003, due
primarily to the effect of increased lease revenue from aircraft purchased
during 2004, which was partially offset by the effect of lower lease rates for
several aircraft and the effect of aircraft off lease during 2004. In addition,
the Company received approximately $103,000 more of cash payments for deferred
rent during 2004 compared to 2003. In December 2004, it also received $165,000
for rent due in January 2005. It is expected that rental rates on aircraft to be
re-leased will continue to decline, so that, absent additional acquisitions by
the Company, aggregate lease revenues for the current portfolio can be expected
to decline over the long term.

Payments received from lessees for maintenance reserves increased by
approximately $1,288,000 in 2004 versus 2003, reflecting principally an increase
in the number of aircraft owned by the Company, an increase in usage by lessees,
and reserves received from the seller of the aircraft purchased by the Company
in July 2004. Security deposits collected from lessees increased by
approximately $367,000 in 2004 primarily as a result deposits received in
connection with the Company's acquisitions during the year, net of deposits
refunded to lessees at lease expiration or applied to past due amounts.

         Expenditures for maintenance

Expenditures for maintenance were approximately $123,000 more in 2004 than in
2003 primarily as a result of the payment of a portion of maintenance accruals
recorded in 2003 in connection with the return of three aircraft from a lessee
declared in default of its obligations.

         Aircraft insurance

Expenditures for aircraft insurance increased by approximately $129,000 during
2004 compared to 2003, primarily as a result of higher prepayments, which are
based on the Company's estimated off-lease aircraft at the time of the policy's
renewal in April of each year. Actual insurance expense depends on the aircraft
which are off lease in any given period.

         Expenditures for interest

Expenditures for interest expense increased by approximately $192,000 in 2004
versus 2003, primarily as a result of pricing changes in the Company's credit
facility in the third quarter of 2003 and higher market interest rates. Interest
expenditures in future periods will be a product of prevailing interest rates
and the outstanding principal balance on financings, which may be influenced by
future acquisitions and/or required repayments resulting from changes in the
collateral base.

         Income taxes

Current income tax payments decreased by approximately $180,000, as a result of
decreased annualized estimated taxable income resulting from increased
depreciation on aircraft acquired in 2004, increased interest deductions
primarily as a result of higher average interest rates noted above, and
increased maintenance expense related to off-lease aircraft. The effect of these
items was partially offset by a decrease in bad debt expense from year to year.

The sale of a pool of twenty-four turboprop engines at the end of 2004 increased
the Company's taxable income and consequently increased current year tax expense
by approximately $1,704,000. Payment for the increased tax expense will occur in
2005.

(ii)     Investing activities

The increase in cash flow used for investing activities in 2004 versus 2003 was
primarily due to the Company's purchase of aircraft in 2004 versus no purchases
in 2003.







(iii)    Financing activities

The Company borrowed $14,700,000 on its credit facility to fund the purchase of
aircraft in 2004 versus no such borrowings in 2003. The Company repaid
approximately $4,680,000 more of its outstanding debt in 2004 than it repaid in
2003. The net effect of the Company's borrowing activities resulted in an
increase in cash provided by financing activities of approximately $10,020,000
from year to year.

Outlook

The Company continually monitors the financial condition of its lessees in order
to minimize the likelihood of significant defaults. In particular, the Company
is currently monitoring the performance of two lessees with a total of three
aircraft under lease. These leases were recently amended to defer a portion of
rent and maintenance reserves payments due during the second half of 2004 to
2005.
 Any weakening in the aircraft industry may also affect the performance of
lessees that currently appear creditworthy. See "Factors that May Affect Future
Results - General Economic Conditions," below.

Although the Company purchased seven aircraft in 2004, additional acquisitions
of leased assets will be necessary to offset the anticipated decreased lease
rates which will most likely result from future re-leases of the Company's
current portfolio. The Company's banks have not yet approved one of the 2004
acquisitions for inclusion in the credit facility borrowing base. Until such
approval, the Company's ability to borrow is more limited than it otherwise
would be, which will adversely affect both the Company's results and its
covenant compliance. The Company expects the lenders to approve inclusion of
this aircraft in the borrowing base in the second quarter of 2005.

The Company periodically reviews its portfolio of assets for impairment, based
on the Company's cash flow analysis and third party appraisals. Any future
adjustments, if necessary, would negatively affect the Company's financial
results and the collateral available for the Company's credit facility. In
addition, the Company's periodic review of the adequacy of its maintenance
reserves, as well as routine and manufacturer-required maintenance for any
off-lease aircraft, may result in changes to estimated maintenance expense,
further reducing earnings.

As a result of depreciation and borrowing base restrictions with respect to
aircraft having leases expiring in 2005, the Company may be required to make
principal repayments under its credit facility. A focus of the Company,
therefore, continues to be re-leasing aircraft that come off lease to limit the
amount of any required repayment. Management believes that the Company will have
sufficient cash to fund any required repayments resulting from scheduled lease
expirations.

During 2004, the former lessee of one of the Company's aircraft signed a note in
the amount of approximately $625,000 for rent and maintenance in excess of the
security deposit which was held by the Company. Previously, the Company had
recorded a $250,000 allowance against the amount receivable and believes this
allowance is adequate to cover any shortfall in payment under the note. The
Company has received the first three payments due under the note. Based on the
debtor's continued payments, the Company may reverse a portion of the allowance
in the future.

Factors that May Affect Future Results

Term of Credit Facility. As discussed in "Liquidity and Capital Resources --
Credit Facility" above, the term of the credit facility was extended for one
year, until October 31, 2005. The Company's longer term viability will depend
upon its ability to renew the credit facility at its October 2005 expiration
with the existing or replacement lenders, or to refinance the credit facility
using equity or alternative debt financing. There is no assurance that the
Company will be able to achieve either alternative prior to the currently
scheduled expiration of the credit facility on October 31, 2005. In addition,
the Company will need additional financing for acquisitions of leased assets,
which will be necessary to offset the anticipated decreased lease rates which
will result from future re-leases of the Company's current portfolio.

If the Company is not able to renew the credit facility for the full outstanding
amount, and cannot find suitable alternative financing, it may be required to
repay the outstanding balance, or that portion of the balance for which
replacement financing is not obtained. The Company does not have sufficient cash
reserves to make a repayment of a significant portion of the outstanding credit
facility indebtedness and would be forced to sell assets in order to raise funds
to make such repayment. Such sales would likely not be on favorable terms to the
Company as the full market value of the assets sold may not be realized by the
Company in order to expedite the consummation of the sales.

In any event, if a renewed or replacement facility is not obtained, the
Company's future ability to acquire assets will be significantly impaired, as
the credit facility is the Company's primary means of financing acquisitions and
no other sources of acquisition financing are immediately available. Thus the
renewal or replacement of the Company's credit facility in an amount equal or
greater than the current $50 million limit will be critical to the Company's
asset and revenue growth. The approval of the banks for the inclusion of the
aircraft purchased by the Company in July 2004 in the credit facility collateral
base will be a critical factor in the Company's ability to acquire additional
assets in the short term. If such approval is not received, it is likely the
Company will not be able to acquire any assets unless the credit facility is
increased. See "Outlook," above.

Credit Facility Obligations. The Company is obligated to make repayment of
principal under the credit facility in order to maintain certain debt ratios
with respect to its assets in the borrowing base. Assets that come off lease and
remain off-lease for a period of time are removed from the borrowing base. The
Company believes it will have sufficient cash funds to make any payment that
arises due to borrowing base limitations caused by assets scheduled to come off
lease in the near term. The Company's belief is based on certain assumptions
regarding renewal of existing leases, a lack of extraordinary interest rate
increases, continuing GAAP profitability, no lessee defaults or bankruptcies,
and certain other matters that the Company deems reasonable in light of its
experience in the industry. There can be no assurance that the Company's
assumptions will prove to be correct. If the assumptions are incorrect (for
example, if an asset in the collateral base unexpectedly goes off lease for an
extended period of time) and the Company has not obtained an applicable waiver
or amendment of applicable covenants from its lenders to deal with the
situation, the Company may have to sell a significant portion of its portfolio
in order to maintain compliance with covenants or face default on its credit
facility.

Concentration of Lessees and Aircraft Type. As a result of a December 2004
acquisition, and sales of assets in 2004, the Company's largest customer, a
Taiwanese carrier, currently accounts for approximately 39% of the Company's
monthly lease revenue. The Company's two largest customers together (the
Taiwanese lessee and a Swedish lessee) currently account for approximately 55%
of the Company's monthly lease revenue. A lease default by or collection
problems with one of these customers could have a disproportionate negative
impact on the Company's financial results, and therefore, the Company's
operating results are especially sensitive to any negative developments with
respect to these customers in terms of lease compliance or collection. Such
concentration of lessee credit risk will diminish in the future only if the
Company is able to lease additional assets to new lessees.

The acquisition of four Fokker 50 aircraft and three DHC-8 aircraft in 2004 made
these two aircraft types the dominant aircraft types in the portfolio,
constituting 10 and 8, respectively, of the 27 aircraft and representing 38% and
47%, respectively, based on book value. As a result, a change in the
desirability and availability of either or both of these types of aircraft,
which would in turn affect valuations of such aircraft, would have a
disproportionately large impact on the Company's portfolio value. Such aircraft
type concentration will diminish if the Company acquires additional assets of
other types. Conversely, acquisition of additional Fokker 50 or DHC-8 aircraft
will increase the Company's risks related to its concentration of those aircraft
types.

Increased Compliance Costs. Due to new Sarbanes-Oxley requirements applicable to
the Company by December 2006 relating to internal controls and auditors'
responsibilities to review and opine on those controls, the Company anticipates
that the fees and expenses in connection with audit services are likely to
significantly increase. The increase will generally arise from increased auditor
responsibilities as well as an increased scope of examination of the Company
which will broaden to include the Company's internal controls. Audit fees are
expected to increase by approximately 100% and there may be additional costs
arising from mandated testing of internal controls that will begin to take place
in 2005 and be performed on a continual basis thereafter. The exact amount of
these costs can only be determined as the Company proceeds further with its
analysis of current internal controls. The Company, however, anticipates that it
will have sufficient funds to pay for the increased compliance cost.

Risks of Debt Financing. The Company's use of acquisition financing under its
credit facility and its special purpose financings subject the Company to
increased risks of leveraging. If, due to a lessee default, the Company is
unable to repay the debt secured by the aircraft acquired, then the Company
could lose title to the acquired aircraft in a foreclosure proceeding. With
respect to the credit facility, the loans are secured by the Company's existing
assets as well as the specific assets acquired with each financing. In addition
to payment obligations, the credit facility also requires the Company to comply
with certain financial covenants, including a requirement of positive quarterly
earnings, interest coverage and net worth ratios. Any default under the credit
facility, if not waived by the lenders, could result in foreclosure upon not
only the asset acquired using such financing, but also the existing assets of
the Company securing the loan.

General Economic Conditions. The Company's business is dependent upon general
economic conditions and the strength of the travel and transportation industry.
The industry recently experienced a severe cyclical downturn which began in
2001. This downturn was exacerbated by the terrorist attacks of September 11,
2001 and a reduction in airline passenger loads caused by Severe Acute
Respiratory Syndrome ("SARS") in 2002. As a result, there was an overall
significant reduction in air travel and less demand for aircraft capacity by the
major air carriers. There are signs that the industry is beginning to recover
from the downturn, but it is unclear whether any recovery will be a sustained
one. Any recovery could be stalled or reversed by any number of events or
circumstances, including the global economy slipping back into recession, or
specific events related to the air travel industry, such as further weakening of
the air carrier or travel industries as a result of terrorist attacks, or an
increase in operational or labor costs. Recent spikes in oil prices, if they
persist, may have a particularly deleterious effect on airline revenue and
increase the likelihood of weakening results for airlines that have not hedged
aircraft fuel costs, and in the most extreme cases, may initiate or accelerate
the failure of many already marginal carriers.

Since regional carriers are generally not as well-capitalized as major air
carriers, any economic setback in the industry may result in the increased
possibility of an economic failure of one or more of the Company's lessees,
particularly since many carriers are undertaking expansion of capacity to
accommodate the recovering air passenger traffic. If lessees experience
financial difficulties, this could, in turn, affect the Company's financial
performance.

During any periods of economic contraction, carriers generally reduce capacity,
in response to lower passenger loads, and as a result there is a reduced demand
for aircraft and a corresponding decrease in market lease rental rates and
aircraft values. This reduced market value for aircraft could affect the
Company's results if the market value of an asset or assets in the Company's
aircraft portfolio falls below book value, and the Company determines that a
write-down of the value on the Company's balance sheet is appropriate.
Furthermore, as older leases expire and are replaced by lease renewals or
re-leases at decreasing lease rates, the lease revenue of the Company on its
existing portfolio is likely to decline, with the magnitude of the decline
dependent on the length of the downturn and the depth of the decline in market
rents.

Economic downturns can affect specific regions of the world exclusively. As the
Company's portfolio is not entirely globally diversified, a localized downturn
in one of the key regions in which the Company leases aircraft (e.g., Europe or
Asia) could have a significant adverse impact on the Company.

Interest Rate Risk. The Company's current credit facility and special purpose
subsidiary indebtedness carry a floating interest rate based upon either the
lender's prime rate or a floating LIBOR rate. Lease rates, generally, but not
always, move with interest rates. Because lease rates are fixed at the
origination of leases, interest rate increases during the term of a lease have
no effect on existing lease payments. Therefore, if interest rates rise
significantly, and there is relatively little lease origination by the Company
following such rate increases, the Company could experience lower net earnings.
The Company has not hedged its interest rate obligations. Consequently, if an
interest rate increase were great enough, the Company might not be able to
generate sufficient lease revenue to meet its interest payment and other
obligations and comply with the net earnings covenant of its credit facility.

Leasing Risks. The Company's successful negotiation of lease extensions,
re-leases and sales may be critical to its ability to achieve its financial
objectives, and involves a number of risks. Demand for lease or purchase of the
assets depends on the economic condition of the airline industry which is, in
turn, sensitive to general economic conditions. The ability to remarket
equipment at acceptable rates may depend on the demand and market values at the
time of remarketing. The Company anticipates that the bulk of the equipment it
acquires will be used aircraft equipment. The market for used aircraft is
cyclical, and generally reflects economic conditions and the strength of the
travel and transportation industry. The demand for and value of many types of
used aircraft in the recent past has been depressed by such factors as airline
financial difficulties, increased fuel costs, the number of new aircraft on
order and the number of aircraft coming off-lease. The Company's expected
concentration in a limited number of airframe and aircraft engine types
(generally, turboprop equipment) subjects the Company to economic risks if those
airframe or engine types should decline in value. If "regional jets" were to be
used on short routes previously served by turboprops, even though regional jets
are more expensive to operate than turboprops, the demand for turboprops could
lessen. This could result in lower lease rates and values for the Company's
existing turboprop aircraft.

Lessee Credit Risk. If a customer defaults upon its lease obligations, the
Company may be limited in its ability to enforce remedies. Most of the Company's
lessees are small regional passenger airlines, which may be even more sensitive
to airline industry market conditions than the major airlines. As a result, the
Company's inability to collect rent under a lease or to repossess equipment in
the event of a default by a lessee could have a material adverse effect on the
Company's revenue. If a lessee that is a certified U.S. airline is in default
under the lease and seeks protection under Chapter 11 of the United States
Bankruptcy Code, Section 1110 of the Bankruptcy Code would automatically prevent
the Company from exercising any remedies for a period of 60 days. After the
60-day period has passed, the lessee must agree to perform the obligations and
cure any defaults, or the Company will have the right to repossess the
equipment. This procedure under the Bankruptcy Code has been subject to
significant recent litigation, however, and it is possible that the Company's
enforcement rights may be further adversely affected by a declaration of
bankruptcy by a defaulting lessee. Most of the Company's lessees are foreign and
not subject to U.S. bankruptcy laws but there may be similar applicable foreign
bankruptcy debtor protection schemes available to foreign carriers.

Risks Related to Regional Air Carriers. Because the Company has concentrated its
existing leases and intends to concentrate on future leases to regional air
carriers, it is subject to certain risks. Some of the lessees in the regional
air carrier market are companies that are start-up, low capital, low margin
operations. Often, the success of such carriers is dependent upon arrangements
with major trunk carriers, which may be subject to termination or cancellation
by such major carrier. These types of lessees result in a generally higher lease
rate on aircraft, but may entail higher risk of default or lessee bankruptcy.
The Company evaluates the credit risk of each lessee carefully, and attempts to
obtain a third party guaranty, letters of credit or other credit enhancements,
if it deems them necessary. There is no assurance, however, that such
enhancements will be available or that if obtained they will fully protect the
Company from losses resulting from a lessee default or bankruptcy. Also, a
significant area of growth of this market is in areas outside of the United
States, where collection and enforcement are often more difficult and
complicated than in the United States.

Reliance on JMC. All management of the Company is performed by JMC under a
management agreement which is in the eighth year of a 20-year term and provides
for an asset-based management fee. JMC is not a fiduciary to the Company or its
stockholders. The Company's Board of Directors has ultimate control and
supervisory responsibility over all aspects of the Company and owes fiduciary
duties to the Company and its stockholders. While JMC may not owe any fiduciary
duties to the Company by virtue of the management agreement, the officers of JMC
are also officers of the Company, and in that capacity owe fiduciary duties to
the Company and the stockholders by virtue of holding such offices with the
Company. In addition, certain officers of the Company hold significant ownership
positions in JHC and the Company.

The JMC management agreement may be terminated if JMC defaults on its
obligations to the Company. However, the agreement provides for liquidated
damages in the event of its wrongful termination by the Company. All of the
officers of JMC are also officers of the Company, and certain directors of the
Company are also directors of JMC. Consequently, the directors and officers of
JMC may have a conflict of interest in the event of a dispute between the
Company and JMC. Although the Company has taken steps to prevent conflicts of
interest arising from such dual roles, such conflicts may still occur.

JMC has acted as management company for two other aircraft portfolio owners,
JetFleet III, which raised approximately $13,000,000 from investors, and
AeroCentury IV, Inc. ("AeroCentury IV"), which raised approximately $5,000,000
from investors.

In the first quarter of 2002, AeroCentury IV defaulted on certain obligations to
noteholders. In June 2002, the indenture trustee for AeroCentury IV's
noteholders repossessed AeroCentury IV's assets and took over management of
AeroCentury IV's remaining assets. JetFleet III defaulted on its Bond obligation
of $11,076,350 in May 2004. The indenture trustee for JetFleet III bondholders
repossessed JetFleet III's unsold assets in late May 2004.

Ownership Risks. Most of the Company's portfolio is leased under operating
leases, where the terms of the leases are less than the entire anticipated
useful life of an asset. The Company's ability to recover its purchase
investment in an asset subject to an operating lease is dependent upon the
Company's ability to profitably re-lease or sell the asset after the expiration
of the initial lease term. Some of the factors that have an impact on the
Company's ability to re-lease or sell include worldwide economic conditions,
general aircraft market conditions, regulatory changes that may make an asset's
use more expensive or preclude use unless the asset is modified, changes in the
supply or cost of aircraft equipment and technological developments which cause
the asset to become obsolete. In addition, a successful investment in an asset
subject to an operating lease depends in part upon having the asset returned by
the lessee in serviceable condition as required under the lease. If the Company
is unable to remarket its aircraft equipment on favorable terms when the
operating leases for such equipment expire, the Company's business, financial
condition, cash flow, ability to service debt and results of operations could be
adversely affected.

Furthermore, during the ownership of an asset, an asset impairment charge
against the Company's earnings may result from the occurrence of unexpected
adverse changes that impact the Company's estimates of expected cash flows
generated from such asset. The Company periodically reviews long-term assets for
impairments, in particular, when events or changes in circumstances indicate the
carrying value of an asset may not be recoverable. An impairment loss is
recognized when the carrying amount of an asset is not recoverable and exceeds
its fair value. The Company may be required to recognize asset impairment
charges in the future as a result of a prolonged weak economic environment,
challenging market conditions in the airline industry or events related to
particular lessees, assets or asset types.

International Risks. The Company has focused on leases in overseas markets,
which the Company believes present opportunities. Leases with foreign lessees,
however, may present somewhat different credit risks than those with domestic
lessees.

Foreign laws, regulations and judicial procedures may be more or less protective
of lessor rights than those which apply in the United States. The Company could
experience collection or repossession problems related to the enforcement of its
lease agreements under foreign local laws and the remedies in foreign
jurisdictions. The protections potentially offered by Section 1110 of the
Bankruptcy Code do not apply to non-U.S. carriers, and applicable local law may
not offer similar protections. Certain countries do not have a central
registration or recording system with which to locally establish the Company's
interest in equipment and related leases. This could make it more difficult for
the Company to recover an aircraft in the event of a default by a foreign
lessee.

A lease with a foreign lessee is subject to risks related to the economy of the
country or region in which such lessee is located, which may be weaker than the
U.S. economy. On the other hand, a foreign economy may remain strong even though
the U.S. economy does not. A foreign economic downturn may impact a foreign
lessee's ability to make lease payments, even though the U.S. and other
economies remain stable. Furthermore, foreign lessees are subject to risks
related to currency conversion fluctuations. Although the Company's current
leases are all payable in U.S. dollars, the Company may agree in the future to
leases that permit payment in foreign currency, which would subject such lease
revenue to monetary risk due to currency fluctuations. Even with U.S.
dollar-denominated lease payment provisions, the Company could still be affected
by a devaluation of the lessee's local currency that would make it more
difficult for a lessee to meet its U.S. dollar-denominated lease payments,
increasing the risk of default of that lessee, particularly if its revenue is
primarily derived in the local currency.

Government Regulation. There are a number of areas in which government
regulation may result in costs to the Company. These include aircraft
registration, safety requirements, required equipment modifications, and
aircraft noise requirements. Although it is contemplated that the burden and
cost of complying with such requirements will fall primarily upon lessees of
equipment, there can be no assurance that the cost will not fall on the Company.
Furthermore, future government regulations could cause the value of any
non-complying equipment owned by the Company to decline substantially.

Competition. The aircraft leasing industry is highly competitive. The Company
competes with aircraft manufacturers, distributors, airlines and other
operators, equipment managers, leasing companies, equipment leasing programs,
financial institutions and other parties engaged in leasing, managing or
remarketing aircraft, many of which have significantly greater financial
resources and more experience than the Company. However, the Company believes
that it is competitive because of JMC's experience and operational efficiency in
identifying and obtaining financing for the transaction types desired by
regional air carriers. This market segment, which is characterized by
transaction sizes of less than $10 million and lessee credits that may be
strong, but are generally unrated, is not well served by the Company's larger
competitors in the aircraft industry. JMC has developed a reputation as a global
participant in this segment of the market, and the Company believes that JMC's
reputation will benefit the Company. There is, however, no assurance that the
lack of significant competition from the larger aircraft leasing companies will
continue or that the reputation of JMC will continue to be strong in this market
segment.

Casualties, Insurance Coverage. The Company, as owner of transportation
equipment, may be named in a suit claiming damages for injuries or damage to
property caused by its assets. As a triple net lessor, the Company is generally
protected against such claims, since the lessee would be responsible for, insure
against and indemnify the Company for, such claims. Further, some protection may
be provided by the United States Aviation Act with respect to the Company's
aircraft assets. It is, however, not clear to what extent such statutory
protection would be available to the Company, and the United States Aviation Act
may not apply to aircraft operated in foreign countries. Also, although the
Company's leases generally require a lessee to insure against likely risks,
there may be certain cases where the loss is not entirely covered by the lessee
or its insurance. Though this is a remote possibility, an uninsured loss with
respect to the equipment, or an insured loss for which insurance proceeds are
inadequate, would result in a possible loss of invested capital in and any
profits anticipated from, such equipment, as well as a potential claim directly
against the Company.

Possible Volatility of Stock Price. The market price of the Company's common
stock could be subject to fluctuations in response to the Company's operating
results, changes in general conditions in the economy, the financial markets,
the airline industry, changes in accounting principles or tax laws applicable to
the Company or its lessees, or other developments affecting the Company, its
customers or its competitors, some of which may be unrelated to the Company's
performance. Also, because the Company has a relatively small capitalization of
approximately 1.5 million shares, there is a correspondingly limited amount of
trading of the Company's shares. Consequently, a single or small number of
trades could result in a market fluctuation not related to any business or
financial development concerning the Company.






Item 7.           Financial Statements.

(a)               Financial Statements and Schedules
      
         (1) Financial statements for the Company:

                           Report of Independent Registered Accounting Firm,
                              PricewaterhouseCoopers LLP
                           Consolidated Balance Sheet as of December 31, 2004
                           Consolidated Statements of Operations for the Years Ended December 31, 2004
                             and 2003
                           Consolidated Statements of Stockholders' Equity for the Years Ended
                              December 31, 2004 and 2003
                           Consolidated Statements of Cash Flows for the Years Ended
                              December 31, 2004 and 2003
                           Notes to Financial Statements

         (2) Schedules:

                  All schedules have been omitted since the required information
                  is presented in the financial statements or is not applicable.










                Report of Independent Registered Accounting Firm




To the Stockholders of AeroCentury Corp.:

In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, stockholders' equity and cash flows
present fairly, in all material respects, the financial position of AeroCentury
Corp. and subsidiary at December 31, 2004, and the results of their operations
and their cash flows for the years ended December 31, 2004 and 2003 in
conformity with accounting principles generally accepted in the United States of
America. 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 of these statements in
accordance with auditing standards of the Public Company Accounting Oversight
Board (United States). 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP


San Francisco, California
March 7, 2005









                                                 AeroCentury Corp.
                                            Consolidated Balance Sheet


                                                      ASSETS
                                                                               
                                                                                    December 31,
                                                                                        2004
                                                                                -------------------

Assets:
     Cash and cash equivalents                                                    $     2,403,630
     Accounts receivable                                                                6,455,250
     Notes receivable, net of allowance for doubtful accounts of $623,690                 294,590
     Aircraft and aircraft engines held for lease,
        net of accumulated depreciation of $14,702,340                                 72,621,330
     Aircraft and aircraft engines held for sale,
        net of accumulated depreciation of $3,523,640                                   1,746,860
     Prepaid expenses and other                                                           409,870
                                                                                       ----------

Total assets                                                                      $    83,931,530
                                                                                       ==========

                                       LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:
     Accounts payable and accrued expenses                                        $       868,120
     Notes payable and accrued interest                                                48,989,610
     Maintenance reserves and accrued costs                                            10,292,520
     Security deposits                                                                  1,775,290
     Prepaid rent                                                                         404,930
     Unearned income                                                                        2,590
     Deferred taxes                                                                     1,097,580
     Taxes payable                                                                      1,703,710
                                                                                       ----------
Total liabilities                                                                      65,134,350
                                                                                       ----------

Stockholders' equity:
     Preferred stock, $.001 par value, 2,000,000 shares
        authorized, no shares issued and outstanding                                            -
     Common stock, $.001 par value, 3,000,000 shares
        authorized, 1,606,557 shares issued and outstanding                                 1,610
     Paid in capital                                                                   13,821,200
     Retained earnings                                                                  5,478,440
                                                                                       ----------
                                                                                       19,301,250
     Treasury stock at cost, 63,300 shares                                              (504,070)
                                                                                       ----------
Total stockholders' equity                                                             18,797,180
                                                                                       ----------
Total liabilities and stockholders' equity                                        $    83,931,530
                                                                                       ==========                       

The accompanying notes are an integral part of these statements.







                                                 AeroCentury Corp.
                                       Consolidated Statements of Operations


                                                                                     For the Years Ended December 31,

                                                                                       2004                2003
                                                                                ------------------   ----------------
                                                                                            
Revenues:

     Operating lease revenue                                                    $     8,995,720    $      8,764,040
     Gain on sale of aircraft and aircraft engines                                    1,748,140                   -
     Other income                                                                       159,980             145,470
                                                                                     ----------           ---------
                                                                                     10,903,840           8,909,510
                                                                                     ----------           ---------
Expenses:

     Depreciation                                                                     3,554,620           3,360,600
     Interest                                                                         2,420,580           1,940,920
     Management fees                                                                  1,988,290           1,909,850
     Maintenance                                                                        846,660           2,091,200
     Provision for impairment in value of aircraft                                      656,650                   -
     Professional fees and general and administrative                                   582,870             572,750
     Insurance                                                                          304,450             269,950
     Bad debt expense                                                                   146,750             899,910
                                                                                     ----------          ----------
                                                                                     10,500,870          11,045,180
                                                                                     ----------          ----------
Income/(loss) before taxes                                                              402,970         (2,135,670)

Tax provision/(benefit)                                                                 136,600           (795,370)
                                                                                     ----------          ----------
Net income/(loss)                                                               $       266,370    $    (1,340,300)
                                                                                     ==========         ===========
Weighted average common shares outstanding                                            1,543,257           1,543,257
                                                                                     ==========         ===========
Basic earnings/(loss) per share                                                 $          0.17    $         (0.87)
                                                                                     ==========         ===========

The accompanying notes are an integral part of these statements.












                                                 AeroCentury Corp.
                                  Consolidated Statements of Stockholders' Equity
                                  For the Years Ended December 31, 2004 and 2003

                                                                                 
                              Common            Paid-in           Retained        Treasury
                               Stock            Capital           Earnings          Stock             Total

Balance,
  December 31, 2002        $       1,610    $   13,821,200    $   6,552,370     $   (504,070)      $19,871,110

Net loss                               -                 -      (1,340,300)                 -      (1,340,300)
                           --------------   --------------    -------------     -------------    -------------
Balance,
  December 31, 2003        $       1,610    $   13,821,200    $   5,212,070     $   (504,070)    $  18,530,810

Net income                             -                 -          266,370                 -          266,370
                           -------------   ---------------    -------------     -------------    -------------
Balance,
  December 31, 2004        $       1,610    $   13,821,200    $   5,478,440     $   (504,070)    $  18,797,180
                           =============    ==============    =============     =============    =============

The accompanying notes are an integral part of these statements.







                                                 AeroCentury Corp.
                                       Consolidated Statements of Cash Flows


                                                                                 For the Years Ended December 31,
                                                                                      2004                2003
                                                                                ----------------   ----------------
                                                                                             
Operating activities:
   Net income/(loss)                                                            $       266,370    $    (1,340,300)
   Adjustments to reconcile net income/(loss) to
     net cash provided by operating activities:
       Gain on sale of aircraft and aircraft engines                                (1,748,140)                   -
       Depreciation                                                                   3,554,620           3,360,600
       Provision for impairment in value of aircraft                                    656,650                   -
       Deferred taxes                                                               (1,686,870)           (978,390)
       Change in operating assets and liabilities:
         Accounts receivable                                                        (5,095,550)             440,940
         Reversal of allowance on note receivable                                      (10,750)                   -
         Prepaid expenses and other                                                     289,590           (216,930)
         Accounts payable and accrued expenses                                          383,730            (45,260)
         Accrued interest on notes payable                                              131,310            (75,160)
         Maintenance reserves and accrued costs                                       1,556,460           2,964,560
         Security deposits                                                              343,740           (822,900)
         Prepaid rent                                                                   206,170              12,730
         Unearned income                                                                  2,590                   -
         Taxes payable                                                                1,703,710                   -
                                                                                ---------------    ----------------
Net cash provided by operating activities                                               553,630           3,299,890

Investing activities:
   Payments received on note receivable                                                  90,950              17,600
   Issuance of note receivable                                                        (374,790)                   -
   Proceeds from disposal of assets                                                   7,320,660                   -
   Purchase of aircraft and aircraft engines                                       (22,000,540)            (10,010)
                                                                                ---------------    ----------------
Net cash (used)/provided by investing activities                                   (14,963,730)               7,590

Financing activities:
   Issuance of notes payable                                                         14,700,000                   -
   Repayment of notes payable                                                       (7,334,900)         (2,654,850)
                                                                                ---------------    ----------------
Net cash provided/(used) by financing activities                                      7,365,100         (2,654,850)
                                                                                ---------------    ----------------
Net (decrease)/increase in cash and cash equivalents                                (7,045,000)             652,630

Cash and cash equivalents, beginning of period                                        9,448,630           8,796,000
                                                                                ---------------    ----------------
Cash and cash equivalents, end of period                                        $     2,403,630    $      9,448,630
                                                                                ===============    ================

During the years ended December 31, 2004 and 2003, the Company paid interest
totaling $2,289,530 and $1,969,950, respectively, and income taxes totaling
$1,080 and $181,530, respectively.


The accompanying notes are an integral part of these statements.






                                                 AeroCentury Corp.
                                    Notes to Consolidated Financial Statements
                                                 December 31, 2004

1.       Organization and Summary of Significant Accounting Policies

(a)      Basis of Presentation

         AeroCentury Corp. ("AeroCentury"), a Delaware corporation, uses
leveraged financing to acquire leased aircraft assets. The Company purchases
used regional aircraft on lease to foreign and domestic regional carriers.
Financial information for AeroCentury and its wholly-owned subsidiary,
AeroCentury Investments II LLC ("AeroCentury II LLC") (collectively, the
"Company"), is presented on a consolidated basis. All intercompany balances and
transactions have been eliminated in consolidation.

(b)      Cash and Cash Equivalents/Deposits

         The Company considers highly liquid investments readily convertible
into known amounts of cash, with original maturities of 90 days or less, as cash
equivalents. Because the Company's leases do not restrict the Company's use of
such amounts, cash previously reported as deposits, representing cash balances
held related to maintenance reserves and security deposits, has been
reclassified to cash and cash equivalents.

(c) Aircraft and Aircraft Engines Held For Lease and Held for Sale


         The Company's interests in aircraft and aircraft engines are recorded
at cost, which includes acquisition costs. The Company purchases only used
aircraft. It is the Company's policy to hold aircraft for approximately twelve
years. Depreciation is computed using the straight-line method over the twelve
year period to an estimated residual value based on appraisal. Decreases in the
market value of aircraft could not only affect the current value, but could also
affect the assumed residual value. The Company periodically obtains a residual
value appraisal for its assets and, historically, has not written down any
estimated residuals. The Company's aircraft and aircraft engines which are held
for sale are not subject to depreciation.


(d)      Impairment of Long-lived Assets

         The Company periodically reviews its portfolio of assets for impairment
in accordance with Statement of Financial Accounting Standards ("SFAS") No. 144,
"Accounting for the Impairment or Disposal of Long-lived Assets." Such review
necessitates estimates of current market values, re-lease rents, residual values
and component values. The estimates are based on currently available market data
and are subject to fluctuation from time to time. The Company initiates its
review periodically, whenever events or changes in circumstances indicate that
the carrying amount of a long-lived asset may not be recoverable. Recoverability
of an asset is measured by comparison of its carrying amount to the expected
future undiscounted cash flows (without interest charges) that the asset is
expected to generate. Any impairment to be recognized is measured by the amount
by which the carrying amount of the asset exceeds its fair market value.
Significant management judgment is required in the forecasting of future
operating results which are used in the preparation of projected undiscounted
cash flows and, should different conditions prevail, material write downs may
occur.

(e)      Loan Commitment and Related Fees

         To the extent that the Company is required to pay loan commitment fees
and legal fees in order to secure debt, such fees are amortized over the life of
the related loan.







                                                 AeroCentury Corp.
                                    Notes to Consolidated Financial Statements
                                                 December 31, 2004

1. Organization and Summary of Significant Accounting Policies (continued)


(f)      Maintenance Reserves and Accrued Costs

         Maintenance costs under the Company's triple net leases are generally
the responsibility of the lessees. The accompanying consolidated balance sheet
reflects liabilities for maintenance reserves and accrued costs, which include
refundable and non-refundable maintenance payments received from lessees. At
December 31, 2004, the Company's maintenance accruals consisted of the
following:

                                                                    
         Refundable maintenance reserves                               $     445,800
         Non-refundable maintenance reserves                               7,550,200
         Accrued costs                                                     2,296,520
                                                                       -------------
                                                                       $  10,292,520
                                                                       =============

         Maintenance reserves received by the Company are accounted for as a
liability, which is reduced when maintenance work is performed during the lease.
Maintenance reserves which are refundable to the lessee are refunded after all
return conditions specified in the lease and, in some cases, any other payments
due under the lease, are satisfied. Any refundable reserves retained by the
Company to satisfy return conditions are reclassified to the Company's own
maintenance payable account at lease end. Maintenance reserves which are
non-refundable to the lessee are recorded as income at lease end. If an aircraft
is returned early, any collected reserves are reclassified to the Company's own
maintenance payable account.

         The Company periodically reviews its maintenance reserves and
maintenance accruals for adequacy in light of the number of hours flown,
airworthiness directives issued by the manufacturer or government authority, and
the return conditions specified in the lease, as well as the condition of the
aircraft upon return or inspection. As a result of such review, when it is
probable that the Company has incurred costs for maintenance in excess of
amounts accrued, the Company records an expense for the additional work to be
performed. Such costs include maintenance such as engine and propeller
overhauls, structural inspections and work to comply with airworthiness
directives.

         When an aircraft is sold, any remaining accrual is reversed and
included in the Company's gain or loss on sale calculation. During the year
ended December 31, 2004, $475,010 of excess accrual was included in gain on sale
of aircraft and aircraft engines.








                                                 AeroCentury Corp.
                                    Notes to Consolidated Financial Statements
                                                 December 31, 2004

1. Organization and Summary of Significant Accounting Policies (continued)

(f) Maintenance Reserves and Accrued Costs (continued)


Additions to and deductions from the Company's accruals during 2004 and 2003 for
maintenance work were as follows:


                                                                           For the Years Ended December 31,
                                                                                       
                                                                              2004                  2003
                                                                       -------------        --------------
Additions:
     Charged to expense                                                $     886,670         $   1,857,130
     Charged to other:
         Amounts for uncollected maintenance reserves                         52,260               370,520
         Reclassification of reserves collected from lessees
           to the Company's own liability account                            310,030               508,020
                                                                        ------------        --------------
                                                                           1,248,960             2,735,670
                                                                        ------------        --------------


Deductions:
     Paid for previously accrued maintenance                             (2,101,880)           (1,234,020)
     Reversals of over-accrued maintenance                                         -             (156,740)
     Included in gain on sale of aircraft and aircraft engines             (475,010)                     -
                                                                        ------------        --------------

                                                                         (2,576,890)           (1,390,760)
                                                                        ------------        --------------


Net (decrease)/increase in accrued maintenance costs,
  in excess of amounts received under the leases                         (1,327,930)             1,344,910

Balance, beginning of period                                               3,624,450             2,279,540
                                                                        ------------        --------------


Balance, end of period                                                 $   2,296,520         $   3,624,450
                                                                        ============        ==============

(g)      Security deposits


         The Company's leases are typically structured so that if any event of
default occurs under a lease, the Company may apply all or a portion of the
lessee's security deposit to cure such default. If such application of the
security deposit is made, the lessee typically is required to replenish and
maintain the full amount of the deposit during the remaining term of the lease.
All of the security deposits received by the Company are refundable to the
lessee at the end of the lease, upon satisfaction of all lease terms.








                                                 AeroCentury Corp.
                                    Notes to Consolidated Financial Statements
                                                 December 31, 2004

1. Organization and Summary of Significant Accounting Policies (continued)


(h)      Income Taxes

As part of the process of preparing the Company's consolidated financial
statements, management is required to estimate income taxes in each of the
jurisdictions in which the Company operates. This process involves estimating
the Company's current tax exposure under the most recent tax laws and assessing
temporary differences resulting from differing treatment of items for tax and
accounting purposes. These differences result in deferred tax assets and
liabilities, which are included in our consolidated balance sheet. Management
must also assess the likelihood that the Company's deferred tax assets will be
recovered from future taxable income, and, to the extent management believes it
is more likely than not that some portion or all of the deferred tax assets will
not be realized, the Company must establish a valuation allowance. To the extent
the Company establishes a valuation allowance or changes the allowance in a
period, the Company must reflect the corresponding increase or decrease within
the tax provision in the consolidated statement of operations.

(i)      Revenue Recognition and Allowance for Doubtful Accounts

         Revenue from leasing of aircraft assets is recognized as operating
lease revenue on a straight-line basis over the terms of the applicable lease
agreements. The Company estimates and charges to income a provision for bad
debts based on its experience in the business and with each specific customer,
the level of past due accounts, and its analysis of the lessee's overall
financial condition. If the financial condition of the Company's customers
deteriorates it could result in actual losses exceeding the estimated
allowances.

(j)      Use of Estimates

         The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
The Company bases its estimates on historical experience and on various other
assumptions that are believed to be reasonable for making judgments that are not
readily apparent from other sources.

         The most significant estimates with regard to these financial
statements are the residual values of the aircraft, the useful lives of the
aircraft, the amount and timing of cash flow associated with each aircraft that
are used to evaluate impairment, if any, accrued maintenance costs in excess of
amounts received from lessees, the amounts recorded as bad debt allowances, and
accounting for income taxes.

(k)      Comprehensive Income

         The Company does not have any comprehensive income other than the
revenue and expense items included in the consolidated statements of income. As
a result, comprehensive income equals net income/(loss) for the years ended
December 31, 2004 and 2003.









                                                 AeroCentury Corp.
                                    Notes to Consolidated Financial Statements
                                                 December 31, 2004

1. Organization and Summary of Significant Accounting Policies (continued)

(l)      Recent Accounting Pronouncements

         In November 2002, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standard ("SFAS") Interpretation No.
45, "Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others" ("FIN 45"). FIN 45 is
effective for guarantees issued or modified after December 31, 2002. The Company
had one guarantee, which was issued prior to December 31, 2002. During the
second quarter of 2003, the Company recorded a liability for the maximum
obligation it had assumed under this guarantee and wrote off the related
receivable. During the fourth quarter of 2003, the vendor waived the amount due,
and the Company reversed its accrual.

         In January 2003, the FASB issued interpretation FIN No. 46,
Consolidation of Variable Interest Entities ("FIN 46"), which was subsequently
revised in December 2003 ("FIN 46R"). FIN 46R requires a variable interest
entity to be consolidated by a company if that company is the primary
beneficiary of the entity. A company is a primary beneficiary if it is subject
to a majority of the risk of loss from the variable interest entity's activities
or entitled to receive a majority of the entity's residual returns or both. FIN
46R also requires disclosures about variable interest entities that a company is
not required to consolidate but in which it has a significant variable interest.
FIN 46R was applicable immediately to variable interest entities created after
January 31, 2003, and is effective for all other existing entities in financial
statements for periods ending after December 15, 2004. Certain of the disclosure
requirements apply in all financial statements issued after December 31, 2003,
regardless of when the variable interest entity was established. The Company has
no interest in any variable interest entity and, therefore, the full adoption of
FIN 46R had no effect on the Company's consolidated financial condition or
results of operations.

         SFAS 146, Accounting for Costs Associated with Exit or Disposal
Activities, was effective for activities that were initiated after December 31,
2002. SFAS 146 addresses significant issues regarding the recognition,
measurement and reporting of costs that are associated with exit and disposal
activities, including restructuring activities that were previously accounted
for under Emerging Issues Task Force ("EITF") No. 94-3, Liability Recognition
for Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring). The adoption of SFAS 146
had no effect on the Company's consolidated financial condition or results of
operations.

         SFAS 150, Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equities, addresses how to classify and
measure certain financial instruments with characteristics of both liabilities
(or an asset in some circumstances) and equity. SFAS 150 requirements apply to
issuers' classification and measurement of freestanding financial instruments,
including those that comprise more than one option or forward contract. It
requires that all instruments with characteristics of both liabilities and
equity be classified as a liability and remeasured at fair value on each
reporting date. SFAS 150 was effective immediately for all financial instruments
entered into or modified after May 31, 2003, and for the first interim period
beginning after June 15, 2003 for all other instruments. The adoption of SFAS
150 had no effect on the Company's consolidated financial condition or results
of operations.

         SFAS 153, Exchanges of Nonmonetary Assets, addresses the measurement of
exchanges of nonmonetary assets. It eliminates the exception from fair value
measurement for nonmonetary exchanges of similar productive assets in paragraph
21(b) of APB Opinion No. 29, Accounting for Nonmonetary Transactions, and
replaces it with an exception for exchanges that do not have commercial
substance. SFAS 153 specifies that a nonmonetary exchange has commercial
substance if the future cash flows of the entity are expected to change
significantly as a result of the exchange. The provisions of SFAS 153 will be
effective for nonmonetary asset exchanges occurring in

                                                 AeroCentury Corp.
                                    Notes to Consolidated Financial Statements
                                                 December 31, 2004

1. Organization and Summary of Significant Accounting Policies (continued)

(l) Recent Accounting Pronouncements (continued)

fiscal periods beginning after June 15, 2005. The Company does not expect the
full adoption of SFAS 153 to have an impact on the Company's consolidated
financial statements or results of operations.

2.       Aircraft and Aircraft Engines Held for Lease


         At December 31, 2004, the Company owned eight deHavilland DHC-8s, three
deHavilland DHC-6s, two Shorts SD 3-60s, ten Fokker 50s, two Saab 340As, one
Fairchild Metro III and one turboprop engine which are held for lease. During
2004, the Company acquired four Fokker 50 aircraft with lease terms varying
between 18 and 30 months and three deHavilland DHC-8 aircraft with lease terms
of 36 months. The Company sold a deHavilland DHC-7 aircraft, resulting in a loss
of approximately $151,000, a pool of twenty-four turboprop engines, resulting in
a gain of approximately $1,727,000 and another spare engine, resulting in a gain
of approximately $172,000.

         The Company also extended the leases for several of its aircraft. In
addition, the leases for two of the Company's Fokker 50 aircraft were amended to
extend the lease term for two years and to defer $210,000 of rent due during the
second half of 2004 to 2005 to accommodate the lessee's cash flow needs. The
lease for one of the Company's Shorts SD 3-60 aircraft was amended to defer
$67,000 of rent and maintenance reserves payments due during the second half of
2004 to 2005 because of a delay in completing maintenance required to return the
aircraft to service. The two lessees owed the Company in total $308,000 and
$77,000, respectively, at December 31, 2004. The Company believes that both
amounts will be collected.


         At December 31, 2004, the following aircraft and one spare turboprop
engine were off lease:

         During the second quarter of 2004, the lessee of the Fairchild Metro
         III aircraft filed for bankruptcy protection in Canada, at which time
         the lessee owed maintenance reserves of $11,320 attributable to periods
         before the filing date. The Company and the lessee subsequently agreed
         to terminate the lessee's obligation to pay rent as of September 30,
         2004 and the lessee returned the aircraft to the Company. The Company
         holds a security deposit of $25,890 from the lessee. The Company is
         seeking re-lease or sale opportunities for this aircraft.

         During the third quarter, the Company and the lessee of the Company's
         two Saab 340A aircraft reached an agreement for the lessee to return
         the aircraft to a maintenance facility, in return for which ACY
         released the lessee from its obligations under the leases. The Company
         wrote off approximately $147,000 of rent receivable and approximately
         $33,000 of prepaid legal expenses which would have been amortized over
         the remainder of the leases. In addition, approximately $390,000 was
         accrued for estimated maintenance to be performed to ready the aircraft
         for re-lease. The Company is seeking re-lease or sale opportunities for
         these aircraft, as well as the off lease turboprop engine.

         The Company is seeking re-lease or sale opportunities for one of its
Shorts SD 3-60 aircraft.


         In accordance with its periodic review of its portfolio of assets for
impairment, the Company recorded a provision for impairment of approximately
$463,000 for one of its aircraft, based on the Company's cash flow analysis and
third party appraisals which reflected a decline in market conditions for this
type of aircraft during the year.









                                                 AeroCentury Corp.
                                    Notes to Consolidated Financial Statements
                                                 December 31, 2004

3.       Aircraft and Aircraft Engines Held for Sale

         At December 31, 2004, the Company owned a deHavilland DHC-7, which is
included in the Caribbean segment in Note 4. During the fourth quarter of 2004,
the Company agreed to sell the aircraft in early 2005. At December 31, 2004, the
Company recorded an impairment charge of approximately $193,000 for the
aircraft, which included estimated maintenance and other estimated sales-related
costs. As discussed in Note 11, the aircraft was sold in February 2005.

4.       Operating Segments

         The Company operates in one business segment, leasing of regional
aircraft to regional airlines, primarily foreign, and therefore does not present
separate segment information for lines of business.

         Approximately 10% and 11% of the Company's operating lease revenue was
derived from lessees domiciled in the United States during 2004 and 2003,
respectively. All revenues relating to aircraft leased and operated
internationally are denominated and payable in U.S. dollars.

         The tables below set forth geographic information about the Company's
operating leased aircraft equipment, grouped by domicile of the lessee:
 


                                                                               Operating Lease Revenue for the
                                                                                   Years Ended December 31,

                                                                                           
                                                                                      2004                  2003
                                                                             ----------------    ---------------
              Asia                                                           $      3,703,150    $     3,094,620
              Europe and United Kingdom                                             2,577,450          2,331,360
              Caribbean                                                             1,180,780          1,250,670
              United States and Canada                                              1,043,830          1,082,220
              South America                                                           490,510          1,005,170
                                                                             ----------------    ---------------
                                                                             $      8,995,720    $     8,764,040
                                                                             ================    ===============

                                                                           Net Book Value at
                                                                              December 31,
                                                                                  2004
                                                                             ----------------
              Asia                                                           $     33,539,660
              Europe and United Kingdom                                            20,011,180
              Caribbean                                                            15,309,560
              South America                                                         4,532,790
              United States and Canada                                                975,000
                                                                             ----------------
                                                                             $     74,368,190           
                                                                             ================






                                                 AeroCentury Corp.
                                    Notes to Consolidated Financial Statements
                                                 December 31, 2004

5.       Concentration of Credit Risk

         Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash deposits and
receivables. The Company places its deposits with financial institutions and
other creditworthy issuers and limits the amount of credit exposure to any one
party.

         For the year ended December 31, 2004, the Company had four significant
customers, which accounted for 24%, 16%, 11% and 10%, respectively, of lease
revenue. For the year ended December 31, 2003, the Company had two significant
customers, which accounted for 22% and 11%, respectively, of lease revenue.

         At December 31, 2004, the Company had one significant receivable, which
accounted for 85% of the Company's total receivables. The receivable, which was
related to the sale of an engine portfolio in late 2004, was collected in
January 2005.

         As of December 31, 2004, minimum future operating lease revenue
payments receivable under noncancelable leases were as follows:

              Year
             -------
              2005    $      9,062,380
              2006           5,188,300
              2007           3,844,150
              2008             766,650
              2009             239,400
                      ----------------
                      $     19,100,880
                      ================

6.       Notes Receivable

         During the third quarter of 2003, the Company's two DHC-7 aircraft were
returned to the Company by a defaulted lessee, and a settlement agreement was
reached with the lessee in the amount of $500,000. The lessee paid $20,000 to
the Company at the time of the settlement and signed a note in the amount of
$480,000. At that time, the Company fully reserved the balance due. Accordingly,
all payments received in 2003 and the first nine months of 2004 were recorded as
income. At September 30, 2004, based on the payment history to date, the Company
reversed a portion of the allowance, which decreased it to 50% of the note
balance. However, based on recent experience, the Company's evaluation of the
debtor's intention to make future payments has changed, and the Company
increased the allowance to 100% of the remaining note balance at December 31,
2004. As discussed in Note 11, in January 2005, the Company sent a default
notice to the debtor and subsequently filed a lawsuit against the debtor.

         The lease for one of the Company's aircraft expired in September 2002,
but the lessee was obligated under the lease to continue to pay rent until
certain return conditions were met. The Company and the lessee agreed to certain
terms and conditions regarding the return of the aircraft and the amounts owed
by the lessee. Although the Company held a security deposit from this lessee,
the amount of the deposit was not sufficient to pay the rent accrued through the
return date and reimburse the Company for maintenance work which was performed
to meet the return conditions of the lease. During 2004, the lessee signed a
note in the amount of approximately $625,000, to be paid in 18 monthly
installments. The Company had previously recorded a $250,000 allowance against
the amount receivable and believes that such allowance is adequate to cover any
shortfall in payment under the note.








                                                 AeroCentury Corp.
                                    Notes to Consolidated Financial Statements
                                                 December 31, 2004

7.       Notes Payable and Accrued Interest

(a)      Credit facility

         In August 2003, the Company reached agreement with its lenders to renew
the credit facility through August 31, 2004. In January 2004, a third bank was
added to the Company's credit facility participant group. The new participant
agreed to finance $10 million, bringing the Company's credit facility limit to
$50 million. The facility bore interest, at the Company's option, at either (i)
prime plus a margin of 50 to 150 basis points or (ii) LIBOR plus a margin of 275
to 375 basis points. Both the prime and LIBOR margins were determined by certain
financial ratios. In 2004, the facility was renewed through October 31, 2005.
The renewal agreement also revised certain pricing and covenant provisions and
waived noncompliance with two covenants at September 30, 2004. In connection
with the renewal, the LIBOR margin was set at 375 basis points through March
2005, after which a margin of 275 to 375 basis points will be determined by
certain financial ratios.

         During 2004, the Company repaid a total of $7,050,000 of the
outstanding principal under its credit facility. In accordance with the
agreement for the credit facility, the Company must maintain compliance with
certain financial covenants, such as a requirement for bank approval of new
leases and a net worth ratio. As of December 31, 2004, the Company was in
compliance with all covenants, $46,805,000 was outstanding under the credit
facility, and interest of $286,630 was accrued.

         The Company's longer term viability will depend upon its ability to
renew the credit facility at its October 2005 expiration with the existing or
replacement lenders, or to refinance the credit facility using equity or
alternative debt financing. Management expects the credit facility to be renewed
on market terms; however, there is no assurance that the Company will be able to
achieve either alternative prior to the currently scheduled expiration.

         If the Company is not able to renew the credit facility for the full
outstanding amount, and cannot find suitable alternative financing, it may be
required to make a principal repayment of the outstanding balance, or that
portion of the balance for which replacement financing is not obtained. The
Company does not have sufficient cash reserves to make a repayment of a
significant portion of the outstanding credit facility indebtedness and would be
forced to sell assets in order to raise funds to make such repayment. Such sales
would likely not be on favorable terms to the Company as the full market value
of the assets sold may not be realized by the Company in order to expedite the
consummation of the sales.

         Even if the Company is able to successfully sell a portion of its
assets and use the proceeds to repay the credit facility, if a renewed or
replacement facility is not obtained, the Company's future ability to acquire
assets would be significantly impaired, as the credit facility is the Company's
primary means of financing acquisitions and no other sources of acquisition
financing are immediately available. Thus the renewal or replacement of the
Company's credit facility in an amount equal to or greater than the current $50
million limit will be critical to the Company's future operations.








                                                 AeroCentury Corp.
                                    Notes to Consolidated Financial Statements
                                                 December 31, 2004

7.       Notes Payable and Accrued Interest (continued)

(b) Special purpose financing

         In September 2000, the Company acquired a deHavilland DHC-8 aircraft
using cash and bank financing separate from its credit facility. The financing
resulted in a note obligation, as amended, in the amount of $3,575,000, due
April 15, 2006, which bears interest at the rate of one-month LIBOR plus 3%. The
note is collateralized by the aircraft and is non-recourse to the Company.
Payments due under the note consist of monthly principal and interest and a
balloon principal payment due on the maturity date. The financing also provides
for a six month remarketing period at the expiration or early termination of the
lease. Payments due on the financing are reduced during this remarketing period
and the balloon principal payment is deferred to the end of the six month
period. The balance of the note payable at December 31, 2004 was $1,895,700 and
interest of $2,280 was accrued. As of December 31, 2004, the Company was in
compliance with all covenants of this note obligation.

8.       Stockholder Rights Plan

         In 1998, in connection with the adoption of a stockholder rights plan,
the Company filed a Certificate of Designation, setting forth the rights,
preferences and privileges of a new Series A Preferred Stock. Pursuant to the
plan, the Company issued rights to its stockholders, giving each stockholder the
right to purchase one one-hundredth of a share of Series A Preferred Stock for
each share of Common Stock held by the stockholder. Such rights are exercisable
only under certain circumstances concerning a proposed acquisition or merger of
the Company.

9.       Income Taxes

         The items comprising income tax expense/(benefit) are as follows:



                                                                                For the Years Ended December 31,
                                                                                           
                                                                                    2004                2003
                                                                                ---------------  ---------------
         Current tax provision:                                                 
              Federal                                                           $   1,725,900    $       171,700
              State                                                                    97,570             11,320
                                                                                -------------    ---------------
              Current tax provision                                                 1,823,470            183,020
                                                                                =============    ===============
         Deferred tax benefit:
              Federal                                                             (1,622,060)          (900,770)
              State                                                                  (64,810)           (77,620)
                                                                                -------------    ---------------
              Deferred tax benefit                                                (1,686,870)          (978,390)
                                                                                -------------    ---------------
         Total provision/(benefit) for income taxes                             $    136,600     $     (795,370)
                                                                                =============    ===============








                                                 AeroCentury Corp.
                                    Notes to Consolidated Financial Statements
                                                 December 31, 2004

9.       Income Taxes (continued)

         Total income tax expense/(benefit) differs from the amount that would
be provided by applying the statutory federal income tax rate to pretax earnings
as illustrated below:


                                                                               For the Years Ended December 31,

                                                                                           
                                                                                    2004                2003
                                                                             -----------------   ---------------
         Income tax provision/(benefit) at statutory federal income tax rate $        137,010    $     (726,130)
         State tax provision/(benefit), net of federal benefit                          4,960            (8,840)
         Tax rate differences                                                         (5,370)           (60,400)
                                                                             -----------------   ---------------
         Total income tax provision/(benefit)                                $        136,600    $     (795,370)
                                                                             =================   ===============

         Tax rate differences result from a decrease in the Company's effective
state tax rate due to changes in state apportionment percentages.

         Temporary differences and carry-forwards that give rise to a
significant portion of deferred tax assets and liabilities as of December 31,
2004 are as follows:

 
                                                                          
         Deferred tax assets:
              Bad debt allowance                                               $      212,150
              Deferred maintenance                                                    932,280
              Maintenance reserves                                                  2,404,600
              Prepaid rent and other                                                  138,340
                                                                              ---------------
                  Deferred tax assets                                               3,687,370
         Deferred tax liabilities:
              Depreciation on aircraft and aircraft engines                       (4,565,880)
              Unearned income                                                        (48,070)
              Other                                                                 (171,000)
                                                                              ---------------
                  Net deferred tax liabilities                                $   (1,097,580)
                                                                              ===============


         No valuation allowance is deemed necessary, as the Company has
concluded, based on an assessment of all available evidence, that it is more
likely than not that future taxable income will be sufficient to realize the tax
benefits of all the deferred tax assets on the consolidated balance sheet.








                               AeroCentury Corp.
              Notes to Condensed Consolidated Financial Statements
                               December 31, 2004

10.      Related Party Transactions

         Since the Company has no employees, the Company's portfolio of leased
aircraft assets is managed and administered under the terms of a management
agreement with JetFleet Management Corp. ("JMC"), which is an integrated
aircraft management, marketing and financing business and a subsidiary of
JetFleet Holding Corp. ("JHC"). Certain officers of the Company are also
officers of JHC and JMC and hold significant ownership positions in both JHC and
the Company. Under the management agreement, JMC receives a monthly management
fee based on the net asset value of the assets under management. JMC may also
receive an acquisition fee for locating assets for the Company, provided that
the aggregate purchase price, including chargeable acquisition costs and any
acquisition fee, does not exceed the fair market value of the asset based on
appraisal, and a remarketing fee in connection with the sale or re-lease of the
Company's assets. The management fees, acquisition fees and remarketing fees may
not exceed the customary and usual fees that would be paid to an unaffiliated
party for such
services. The Company recorded management fees of $1,988,290 and $1,909,850
during the years ended December 31, 2004 and 2003, respectively. The Company
paid acquisition fees totaling $800,000 to JMC in 2004, in connection with the
Company's purchase of seven aircraft. Because the Company did not acquire any
aircraft during 2003, no acquisition fees were paid to JMC for this period. In
2004, the Company recorded remarketing fees totaling $275,500 to JMC in
connection with the sale of an aircraft, a spare engine and a pool of
twenty-four of the Company's turboprop engines. No remarketing fees were paid to
JMC during the 2003.

11.      Subsequent Events

         In the first quarter of 2005, as a result of a late payment and
subsequent non-payment on one of the Company's notes receivable, and the
Company's evaluation of the debtor's intention to make future payments, the
Company sent a default notice to the debtor and subsequently filed a lawsuit
against the debtor.

         In February 2005, the Company sold its deHavilland DHC-7 aircraft and
recognized an additional loss of approximately $60,000, which was incurred
subsequent to December 31, 2004. In connection with the sale, the Company paid a
remarketing fee of $49,650 to JMC.




Item 8.           Changes in and Disagreements With Accountants
                  on Accounting and Financial Disclosure.

None.

Item 8A. Controls and Procedures

Quarterly evaluation of the Company's Disclosure Controls and Internal Controls.
As of the end of the period covered by this report, the Company evaluated the
effectiveness of the design and operation of its "disclosure controls and
procedures" ("Disclosure Controls"), and its "internal control over financial
reporting" ("Internal Controls"). This evaluation (the "Controls Evaluation")
was done under the supervision and with the participation of management,
including the Company's Chief Executive Officer ("CEO") and Chief Financial
Officer ("CFO"). Rules adopted by the SEC require that in this section of the
Report the Company present the conclusions of the CEO and the CFO about the
effectiveness of our Disclosure Controls and Internal Controls based on and as
of the date of the Controls Evaluation.

CEO and CFO Certifications. Attached as exhibits to this report are two separate
forms of "Certifications" of the CEO and the CFO. The first form of
Certification is required in accordance with Section 302 of the Sarbanes-Oxley
Act of 2002 (the "Section 302 Certification"). This section of the report is the
information concerning the Controls Evaluation referred to in the Section 302
Certifications and this information should be read in conjunction with the
Section 302 Certifications for a more complete understanding of the topics
presented.

Disclosure Controls and Internal Controls. Disclosure Controls are procedures
that are designed with the objective of ensuring that information required to be
disclosed in the Company's reports filed under the Securities Exchange Act of
1934 (the "Exchange Act"), such as this report, is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission's ("SEC") rules and forms. Disclosure Controls are also
designed with the objective of ensuring that such information is accumulated and
communicated to the Company's management, including the CEO and CFO, as
appropriate to allow timely decisions regarding required disclosure. Internal
Controls are procedures which are designed with the objective of providing
reasonable assurance that (1) the Company's transactions are properly
authorized; (2) the Company's assets are safeguarded against unauthorized or
improper use; and (3) the Company's transactions are properly recorded and
reported, all to permit the preparation of the Company's consolidated financial
statements in conformity with generally accepted accounting principles.

Limitations on the Effectiveness of Controls. The Company's management,
including the CEO and CFO, does not expect that its Disclosure Controls or its
Internal Controls will prevent all errors and all fraud. A control system, no
matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Further,
the design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their
costs. Because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control issues and instances
of fraud, if any, within the Company have been detected. These inherent
limitations include the realities that judgments in decision-making can be
faulty, and that breakdowns can occur because of simple error or mistake.
Additionally, controls can be circumvented by the individual acts of some
persons, by collusion of two or more people, or by management override of the
control. The design of any system of controls also is based in part upon certain
assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving its stated goals under all potential
future conditions; over time, control may become inadequate because of changes
in conditions, or the degree of compliance with the policies or procedures may
deteriorate. Because of the inherent limitations in a cost-effective control
system, misstatements due to error or fraud may occur and not be detected.

Scope of the Controls Evaluation. The CEO/CFO evaluation of the Company's
Disclosure Controls and the Company's Internal Controls included a review of the
controls objectives and design, the controls implementation by the company and
the effect of the controls on the information generated for use in this report.
In the course of the Controls Evaluation, we sought to identify data errors,
controls problems or acts of fraud and to confirm that appropriate corrective
action, including process improvements, were being undertaken. This type of
evaluation will be done on a quarterly basis so that the conclusions concerning
controls effectiveness can be reported in the Company's quarterly reports on
Form 10-QSB and annual report on Form 10-KSB. The Company's Internal Controls
are also evaluated on an ongoing basis by other personnel in the Company's
finance organization and by the Company's independent auditors in connection
with their audit and review activities. The overall goals of these various
evaluation activities are to monitor the Company's Disclosure Controls and the
Company's Internal Controls and to make modifications as necessary; the
Company's intent in this regard is that the Disclosure Controls and the Internal
Controls will be maintained as dynamic systems that change (including with
improvements and corrections) as conditions warrant.

Among other matters, the Company sought in its evaluation to determine whether
there were any "significant deficiencies" or "material weaknesses" in the
Company's Internal Controls, or whether the Company had identified any acts of
fraud involving personnel who have a significant role in the Company's Internal
Controls. This information was important both for the Controls Evaluation
generally and because item 5 in the Section 302 Certifications of the CEO and
CFO require that the CEO and CFO disclose that information to the Audit
Committee of the Company's Board and to the Company's independent auditors and
to report on related matters in this section of the Report. In the professional
auditing literature, "significant deficiencies" are referred to as "reportable
conditions"; these are control issues that could have a significant adverse
effect on the ability to record, process, summarize and report financial data in
the financial statements. A "material weakness" is defined in the auditing
literature as a particularly serious reportable condition where the internal
control does not reduce to a relatively low level the risk that misstatements
caused by error or fraud may occur in amounts that would be material in relation
to the financial statements and not be detected within a timely period by
employees in the normal course of performing their assigned functions. The
Company also sought to deal with other controls matters in the Controls
Evaluation, and in each case if a problem was identified, the Company considered
what revision, improvement and/or correction to make in accordance with our
on-going procedures.

In accordance with SEC requirements, the CEO and CFO note that there has been no
significant change in Internal Controls that occurred during our most recent
fiscal quarter that has materially affected or is reasonably likely to
materially affect our Internal Controls.


Conclusions. Based upon the Controls Evaluation, the Company's CEO and CFO have
concluded that, (i)the Company's Disclosure Controls are effective to ensure
that the information required to be disclosed by the Company in the reports that
it files under the Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the Commission's rules and forms and then
accumulated and communicated to Company management, including the CEO and CFO,
as appropriate to make timely decisions regarding required disclosures, and (ii)
that the Company's Internal Controls are effective to provide reasonable
assurance that the Company's consolidated financial statements are fairly
presented in conformity with generally accepted accounting principles.


Item 8B. Other Information

None.

                                                     PART III

Item 9.           Directors, Executive Officers, Promoters and Control Persons;
                  Compliance with Section 16(a) of the Exchange Act.

Information relating to our board of directors and executive officers, including
the independence of the audit committee and audit committee financial expert,
will be incorporated by reference from the Company's definitive proxy statement
("the "2005 Proxy Statement") for its annual stockholders' meeting to be held on
April 28, 2005 in the section entitled "Information Regarding the Company's
Directors and Officers."

The Company has adopted a code of business conduct and ethics, or code of
conduct. The code of conduct qualifies as a "code of ethics" within the meaning
of Section 406 of the Sarbanes-Oxley Act of 2002 and the rules promulgated
thereunder. A copy of the code of conduct is available on the Company's website
at www.aerocentury.com or upon written request to the Investor Relations
Department, 1440 Chapin Avenue, Suite 310, Burlingame, California 94010. To the
extent required by law, any amendments to, or waivers from, any provision of the
code will be promptly disclosed publicly. To the extent permitted by such
requirements, we intend to make such public disclosure on our website in
accordance with SEC rules.

On September 2, 2004, Neal D. Crispin (President & Chairman) purchased 1,000
shares of Common Stock on the open market. Although a Form 4 was timely filed
for Mr. Crispin, a corresponding Form 4 showing a single increase in the
indirect beneficial ownership of Toni M. Perazzo (Director, Sr. Vice
President-Finance and Secretary) was not timely filed due to an inadvertent
clerical error, but was subsequently filed.

Item 10.          Executive Compensation.

Incorporated by reference to the section of the 2005 Proxy Statement entitled
"Information Regarding the Company's Directors and Officers -- Employee
Compensation."

Item 11. Security Ownership of Certain Beneficial Owners and Management and
                  Related Stockholder Matters.

Incorporated by reference to the section of the 2005 Proxy Statement entitled
"Security Ownership of Certain Beneficial Owners and Management."

Item 12. Certain Relationships and Related Transactions.

Incorporated by reference to the section of the 2005 Proxy Statement entitled
"Related Party Transactions."

Item 13. Exhibits.

         (a)      Exhibits

                        
                  3.1      Certificate of Incorporation of the Company,
                           incorporated by reference to Exhibit 3.08 to the
                           registration statement on Form S-4/A filed with the
                           Securities and Exchange Commission on July 24, 1997.

                  3.2      Form of Certificate of Amendment of Certificate of
                           Incorporation of the Company, incorporated by
                           reference to Exhibit 3.07 to the registration
                           statement on Form S-4/A filed with the Securities and
                           Exchange Commission on June 10, 1997.

                  3.3      Amended and Restated Bylaws of the Company dated
                           January 22, 1999, incorporated by reference to
                           Exhibit 3.1 to the Report on Form 10-KSB for the
                           fiscal year ended December 31, 1998.

                  3.4      Certificate of Designation of the Company dated April
                           15, 1998, incorporated by reference to Exhibit 3.2 to
                           the Report on Form 10-KSB for the fiscal year ended
                           December 31, 1998.

                  3.5      Amended and Restated Stockholder Rights Agreement,
                           dated January 22, 1999, incorporated by reference to
                           Exhibit 1 to Form 8-A/A filed with the Securities and
                           Exchange Commission on February 4, 1999.

                  4.1      Reference is made to Exhibit 3.5.

                  *        10.1 Employment Agreement between the Company and
                           Neal D. Crispin, dated April 24, 2003, incorporated
                           by reference to Exhibit 10.1 to the Report on Form
                           10-KSB for the fiscal year ended December 31, 2003.

                  *10.2    Employment Agreement between the Company and Marc J.
                           Anderson, dated April 24, 2003, incorporated by
                           reference to Exhibit 10.2 to the Report on Form
                           10-KSB for the fiscal year ended December 31, 2003.

                  10.3     Credit Agreement between First Union National Bank
                           and the Company, dated June 30, 1998, incorporated by
                           reference to Exhibit 10.1 to the Report on Form 8-K
                           filed with the Securities and Exchange Commission on
                           July 2, 1998.

                  10.4     Form of Indemnity Agreement between the Company and
                           each of its directors and officers, incorporated by
                           reference to Exhibit 10.03 to the Report on Form
                           10-KSB for the fiscal year ended December 31, 1997.

                  10.5     Amended and Restated Management Agreement, dated
                           April 23, 1998, between the Company and JetFleet
                           Management Corp., incorporated by reference to
                           Exhibit 10.5 to the Report on Form 10-KSB for the
                           fiscal year ended December 31, 1999.

                  10.6     Certificate of Designation of the Company dated April
                           15, 1998, incorporated by reference to exhibit 3.2 to
                           Report on Form 10-KSB for the fiscal year ended
                           December 31, 1998.

                  10.7     Amended and Restated Credit Agreement, dated June 28,
                           2000, between the Company and National City Bank, as
                           agent, and California Bank & Trust and Sanwa Bank
                           California, incorporated by reference to Exhibit 10.1
                           to the Report on Form 8-K filed with the Securities
                           and Exchange Commission on July 21, 2000.

                  10.8     Amendment to Amended and Restated Credit Agreement,
                           between National City Bank, as agent, and California
                           Bank & Trust and United California Bank, dated March
                           7, 2002, incorporated by reference to Exhibit 10.1 to
                           the Report on Form 8-K filed with the Securities and
                           Exchange Commission on March 12, 2002.

                  10.9     Second Amendment to Amended and Restated Credit
                           Agreement between National City Bank, as agent, and
                           California Bank & Trust and Bank of the West,
                           Successor in Interest to United California Bank,
                           formerly known as Sanwa Bank California, dated
                           January 1, 2003, incorporated by reference to Exhibit
                           10.1 to the Report on Form 8-K filed with the
                           Securities and Exchange Commission on February 20,
                           2003.

                  10.10    Third Amendment to Amended and Restated Credit
                           Agreement between National City Bank, as agent, and
                           California Bank & Trust and Bank of the West,
                           Successor in Interest to United California Bank,
                           formerly known as Sanwa Bank California, dated ,
                           dated June 28 2003, incorporated by reference to
                           Exhibit 10.1 to the Report on Form 8-K filed with the
                           Securities and Exchange Commission on July 1, 2003.

                  10.11    Fourth Amendment to Amended and Restated Credit
                           Agreement between National City Bank, as agent, and
                           California Bank & Trust, dated August 28 2003,
                           incorporated by reference to Exhibit 10.1 to the
                           Report on Form 8-K filed with the Securities and
                           Exchange Commission on August 28, 2003.

                  10.12    Fifth Amendment to Amended and Restated Credit
                           Agreement between National City Bank, as agent, and
                           California Bank & Trust and Bank of the West,
                           Successor in Interest to United California Bank,
                           formerly known as Sanwa Bank California, dated as of
                           August 28, 2003, incorporated by reference to Exhibit
                           10.1 to the Report on Form 8-K filed with the
                           Securities and Exchange Commission on October 1,
                           2003.

                  10.13    Sixth Amendment to Amended and Restated Credit
                           Agreement between National City Bank, as agent, and
                           California Bank & Trust and Bank of the West,
                           Successor in Interest to United California Bank,
                           formerly known as Sanwa Bank California, dated
                           January 2, 2004, incorporated by reference to Exhibit
                           10.1 to the Report on Form 8-K filed with the
                           Securities and Exchange Commission on January 2,
                           2004.

                  10.14    Seventh Amendment to Amended and Restated Credit
                           Agreement between the Company, National City Bank, as
                           agent, and National City Bank, California Bank &
                           Trust California Bank & Trust and First Bank dba
                           First Bank & Trust, as lenders, dated August 30,
                           2004, incorporated by reference to Exhibit 10.1 to
                           the Report on Form 8-K filed with the Securities and
                           Exchange Commission on August 31, 2004

                  10.15    Eighth Amendment to Amended and Restated Credit
                           Agreement between the Company, National City Bank, as
                           agent, and National City Bank, California Bank &
                           Trust California Bank & Trust and First Bank dba
                           First Bank & Trust, as lenders, dated October 28,
                           2004, incorporated by reference to Exhibit 10.1 to
                           the Report on Form 8-K filed with the Securities and
                           Exchange Commission on October 29, 2004.

                  10.16    Ninth Amendment to Amended and Restated Credit
                           Agreement between the Company, National City Bank, as
                           agent, and National City Bank, California Bank &
                           Trust California Bank & Trust and First Bank dba
                           First Bank & Trust, as lenders, dated November 4,
                           2004, incorporated by reference to Exhibit 10.1 to
                           the Report on Form 8-K filed with the Securities and
                           Exchange Commission on November 8, 2004.

                  10.17    Aircraft  Purchase  and  Sale  Agreements  between 
                           AeroCentury  Corp.  and UNI  Airways
                           Corporation, dated December 3, 2004.

                  21       Subsidiaries of the Company.

                  31.1     Certification of Neal D. Crispin,  Chief Executive  
                           Officer,  pursuant to Section 302 of the 
                           Sarbanes-Oxley Act of 2002.

                  31.2     Certification of Toni M. Perazzo,  Chief Financial 
                           Officer,  pursuant to Section 302 of
                           the Sarbanes-Oxley Act of 2002.


                  32.1     Certification of Neal D. Crispin,  Chief Executive
                           Officer,  pursuant to Section 906 of
                           the Sarbanes-Oxley Act of 2002.

                  32.2     Certification of Toni M. Perazzo,  Chief Financial  
                           Officer,  pursuant to Section 906 of
                           the Sarbanes-Oxley Act of 2002.
--------------------
         * Indicates management contract or compensatory plan or arrangement.


Item 14. Principal Accountant Fees and Services.

Incorporated by reference to the section of the 2005 Proxy Statement entitled
"Information Regarding Auditors - Audit Fees."








                                                    SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has
caused this Report on Form 10-KSB/A to be signed on its behalf by the
undersigned, thereunto duly authorized on August 19, 2005.

  AEROCENTURY CORP.

  By:    /s/ Toni M. Perazzo
         ------------------------
         Toni M. Perazzo

  Title: Senior Vice President-Finance and
         Chief Financial Officer


                                POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Neal D. Crispin and Toni M. Perazzo, and each of
them, his or her attorneys-in-fact, each with the power of substitution, for him
or her in any and all capacities, to sign any amendments to this Report on Form
10-KSB/A and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorneys-in-fact, or his or her
substitute or substitutes, may do or cause to be done by virtue hereof.

In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities indicated on
August 19, 2005.

     Signature                                  Title

 /s/ Neal D. Crispin      Director, President and Chairman of the
 ---------------------    Board of Directors of the Registrant
 Neal D. Crispin          (Principal Executive Officer)


 /s/ Toni M. Perazzo      Director, Senior Vice President-Finance and Secretary
 ----------------------   of the Registrant (Principal Financial and Accounting
 Toni M. Perazzo          Officer)

/s/ Marc J. Anderson      Director, Chief Operating Officer, 
-----------------------   Senior Vice President
Marc J. Anderson

 /s/ Thomas G. Hiniker    Director
 ----------------------
 Thomas G. Hiniker

 /s/ Thomas W. Orr        Director
 --------------------
 Thomas W. Orr

 /s/ Evan M. Wallach      Director
 --------------------
 Evan M. Wallach