13

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-KSB

(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, 2001

                                       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. [X]

Revenues for the Issuer's most recent fiscal year:  $11,231,990

On March 25, 2002, 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 25, 2002) was $5,746,810.

As of March 25, 2002, the Issuer had 1,543,257 shares of Common Stock
outstanding.

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

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 2002 Annual Meeting to be filed on or about March 26, 2002.

                                     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 "Business -- Business of the Company,"
statements regarding the Company's intention to achieve its business objective
by reinvesting cash flow and obtaining short-term and long-term financing and/or
equity financing; JMC's ability to use its industry knowledge to purchase assets
at an appropriate price, maintain a high overall on-lease rate and purchase
assets that are likely to retain their value until the end of the initial lease
of the assets; the Company's focus on lease provisions that provide for lessee
maintenance and return conditions; and the Company's ability to enter into
transactions with a wider range of lessees than traditional, large lending
institutions and leasing companies; (ii) in Item 1 "Business -- Working Capital
Needs," the statements that the Company believes it has sufficient cash to fund
certain repayments; and the Company's belief that the Company's cash flow should
be sufficient to cover management fees, professional fees and interest expense,
and provide excess cash flow that can be used with financings to acquire
additional assets; (iii) in Item 1 "Business -- Competition," statements
regarding the Company's belief that it has a competitive advantage due to its
experience and operational efficiency in financing transactions of a certain
size; and management's belief that the Company has a competitive advantage
because JMC has developed a reputation as a global participant in the aircraft
leasing market; (iv) in Item 6 "Management's Discussion and Analysis or Plan of
Operation -- Liquidity and Capital Resources," statements regarding the
Company's intention to achieve its business objective by reinvesting cash flow
and obtaining short-term and long-term financing and/or equity financing; the
adequacy of the Company's cash flow to make a repayment of approximately
$1,400,000 on the Company's credit facility and to meet increased interest rates
and principal payments under the Company's revolving credit facility; the
Company's expectation that certain aircraft will be returned and accepted by the
Company in the second quarter of 2002; and management's belief that the Company
will have adequate cash flow to meet its on-going operational needs; (v) in Item
6 "Management's Discussion and Analysis or Plan of Operation -- Outlook,"
statements regarding the Company's belief that it will have sufficient
flexibility to re-lease assets for terms which will enable the Company to
maintain compliance with its credit facility covenants; the Company's
anticipation that it will have sufficient cash flow to fund payments on its
credit facility through December 2002; management's focus on remarketing efforts
to enable greater use of the revolving credit facility; the Company's
expectation that certain aircraft will be returned and accepted by the Company
in the second quarter of 2002; and the Company's belief that any sale of certain
aircraft would generate more than enough funds to pay the balloon payment due on
its special purpose asset-based bank financing; and (vi) in Item 6 "Management's
Discussion and Analysis or Plan of Operation -- Factors that May Affect Future
Results," statements regarding the possibility that certain current economic
conditions may favor the Company in that there may be a greater likelihood of
renewals by existing lessees and increased demand for more economically operated
turboprop aircraft (which make up most of the Company's portfolio); an increased
desire for short-term leases by aircraft lessees; the adequacy of the Company's
cash flow to make a repayment on the Company's credit facility; the Company's
intention to repay a portion of the revolving loans from proceeds of subsequent
debt or equity financings and the likelihood that such replacement financing
would provide the Company with more favorable long-term repayment terms and
permit the Company to make further borrowings under the revolving credit
facility equal to the amount of revolving debt refinanced; the attractiveness of
overseas markets; JMC's competitiveness due to its experience and operational
efficiency in financing transaction types desired by regional air carriers; the
acquisition by lessees of additional war risk coverage before new policy
limitations take effect; and the Company's ability to obtain third party
guaranties, letters of credit or other credit enhancements from future lessees.
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, regional passenger
airlines; the lack of any further disruptions to the air travel industry similar
to that which occurred on September 11, 2001; the success of the Company's
remarketing efforts with respect to aircraft that are returned upon expiration
or termination of leases; the Company's ability to remain in compliance with the
terms of its credit facility agreement; 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 Report on Form 10-KSB 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 Reports on Forms 10-QSB and 8-K.

Item 1.           Description of Business.

Business of the Company

AeroCentury Corp. ("AeroCentury") was incorporated in the state of Delaware on
February 28, 1997. AeroCentury was formed solely for the purpose of acquiring
JetFleet Aircraft, L.P. ("JetFleet I") and JetFleet Aircraft II, L.P. ("JetFleet
II"), California limited partnerships (collectively, the "Partnerships") in a
statutory merger (the "Consolidation"). JetFleet I and JetFleet II were
organized in October 1989 and October 1991, respectively. Prior to the
Consolidation, the Partnerships engaged in the business of ownership,
management, leasing and acquisition of a portfolio of aircraft equipment. Upon
completion of the Consolidation, which occurred on January 1, 1998, AeroCentury
succeeded to the Partnerships' business.

During November 1999 and September 2000, AeroCentury Corp. formed two
wholly-owned subsidiaries, AeroCentury Investments LLC ("AeroCentury LLC") and
AeroCentury Investments II LLC ("AeroCentury II LLC"), respectively, for the
purpose of acquiring aircraft using a combination of cash and bank financing
separate from AeroCentury Corp.'s credit facility. Financial information for
AeroCentury, AeroCentury LLC and AeroCentury II LLC (collectively, the
"Company") is presented on a consolidated basis. All intercompany balances and
transactions have been eliminated in consolidation.

At December 31, 1997, all of the Company's outstanding common stock, consisting
of 150,000 shares, was owned by JetFleet Holding Corp. ("JHC"). JHC is the
parent corporation of JetFleet Management Corp. ("JMC"), which is an integrated
aircraft management, marketing and financing business. JMC is the management
company for the Company pursuant to the Management Agreement between JMC 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. By assuming the
business of the Partnerships in January 1998, the Company became owner of a
portfolio of aircraft and engines on lease and generating positive cash flow.
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 from creditworthy lessees, and eventually
resale proceeds. The Company intends to achieve its business objective by
reinvesting cash flow and obtaining short-term and long-term financing 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 most common
situation is when the Company purchases an asset already subject to a lease and
assumes 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 would not purchase an asset unless
a potential lessee had been identified and had 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 a high overall on-lease rate for the Company's assets.
Furthermore, the Company believes that JMC's industry knowledge enables it to
purchase assets that are likely to retain their value through and after the end
of the initial lease of the asset.

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 back in a condition which allows
it to immediately re-lease or sell the aircraft at an attractive rate, 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 weighed against the
lease rate that is offered by 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 more
than cover the Company's expenses. The Company incurs and pays monthly
management fees, which are based upon the size of the asset pool. The
maintenance expense incurred by the Company during 2001 was either paid in cash
during the year or will be paid during 2002. The Company believes that it has
sufficient cash to fund such repayments. As the Company continues to use
acquisition debt financing under its revolving credit facility which expires
June 28, 2003, interest expense has and will become an increasingly larger
portion of the Company's expenses. However, each advance on the credit facility
is accompanied by the acquisition of an asset subject to a lease, providing for
lease payments that should be greater than increased payments required to repay
the loan obligations arising from such advance. Professional fees are paid to
third parties for expenses not covered by JMC under the Management Agreement. 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 management fees, professional fees and interest
expense, and provide excess cash flow that can be used with equity or debt
financings to acquire additional assets.

Competition

The Company competes for customers, generally regional commercial aircraft
operators that are seeking to lease aircraft under an operating lease. The
Company faces competition from other companies that offer financing, including
leasing companies, banks and other 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. This 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, 2001, the Company had three significant
customers, who accounted for 19%, 13% and 11%, respectively, of lease revenue.
Concentration of credit risk with respect to lease receivables would diminish in
the future, if the Company is able to purchase additional assets and the number
of customers comprising the Company's customer base increases, and their
dispersion across different geographic areas becomes greater.

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, 2001, 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.
All office facilities are provided by JMC without reimbursement by the Company.

At December 31, 2001, the Company owned three deHavilland DHC-8s, two
deHavilland DHC-7s, three deHavilland DHC-6s, one Fairchild Metro III, two
Shorts SD 3-60, six Fokker 50s, two Saab 340As and 26 turboprop engines, one of
which is held in inventory as a spare and is not subject to a lease or to
depreciation.

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 and Related Stockholder Matters.

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, 2001:
     Fourth Quarter ...................    $5.74       $4.70
     Third Quarter.....................    6.55        4.87
     Second Quarter....................    5.30        4.50
     First Quarter.....................    5.75        4.375
Fiscal year ended December 31, 2000:
     Fourth Quarter....................    6.125       4.375
     Third Quarter.....................    7.00        5.75
     Second Quarter....................    8.00        6.75
     First Quarter.....................    7.375       5.625

On March 25, 2002, the closing stock sale price on the AMEX was $4.70 per
share.

Number of Security Holders

According to the Company's transfer agent, the Company had approximately 1,500
stockholders of record as of March 25, 2002. 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

On April 17, 1998, in connection with the adoption of a stockholder rights plan,
the Company filed a Certificate of Designation designating 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, entitling each stockholder to 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.

Stock Repurchase Plan

On October 23, 1998, the Company's Board of Directors adopted a stock repurchase
plan, granting management the authority to repurchase up to 100,000 shares of
the Company's common stock, in privately negotiated transactions or on the
market, at such price and on such terms and conditions deemed satisfactory to
management. As of December 31, 2001, the Company had repurchased 63,300 shares
of its common stock.

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

Business

The Company is engaged in the business of investing in primarily used regional
aircraft equipment leased to foreign and domestic regional air carriers. By
assuming the business of the Partnerships in January 1998, the Company became
owner of a portfolio of unleveraged aircraft and engines on lease and generating
positive cash flow. The Company's principal business objective is to increase
stockholder value by acquiring additional aircraft assets that will provide a
return on investment through lease revenue from creditworthy lessees, and
eventually sale proceeds. The Company intends to achieve its business objective
by reinvesting cash flow and obtaining short-term and long-term financing and/or
equity financing.

Results of Operations

Revenues

The Company had revenues of $11,231,990 and net income of $1,698,940 for the
year ended December 31, 2001 versus revenues of $12,107,760 and net income of
$1,671,340 for the year ended December 31, 2000. Rent income is approximately
$729,000 lower in 2001 versus 2000 primarily due to the decrease in rent from
assets sold during the fourth quarter of 2000 and assets which came off-lease
during the second quarter of 2001, which effect was only partially offset by the
purchases of additional aircraft on lease during the latter half of 2000. Gain
on disposal of aircraft and aircraft engines is approximately $420,000 lower in
2001 due to the sale of one aircraft during 2001 versus three aircraft during
2000. Other income is higher by approximately $273,000 during 2001 versus 2000
primarily due to the net insurance proceeds received as a result of damage to
one of the Company's deHavilland DHC-8 aircraft.

Expense Items

Management fees, which are calculated on the net book value of the aircraft
owned by the Company, and depreciation are approximately $33,000 and $116,000
higher, respectively, in 2001 versus 2000 because the Company purchased
additional aircraft during the second half of 2000, the effect of which more
than offset the sale of assets during 2001 and the fourth quarter of 2000.
Interest expense is approximately $671,000 lower in 2001 versus 2000 because of
lower interest rates and a lower average principal balance during 2001.
Professional fees and general administrative expense were approximately the same
in both years, although decreases in certain expense categories during 2001 were
offset by an increase in insurance expense related to off-lease aircraft.

Maintenance expense is approximately $99,000 higher in 2001 versus 2000. During
2001, the Company incurred approximately $1,153,000 of maintenance expense,
primarily in connection with the preparation of aircraft for delivery to new
lessees, the Company's obligations under the return provisions of two expiring
leases, and the periodic review of the adequacy of maintenance reserves in light
of the number of hours flown and airworthiness directives issued by the
manufacturer or government authority versus the return conditions specified in
the leases. During the year, the Company also reversed approximately $291,000 of
maintenance expense which had been accrued previously, but was paid by the
respective lessees during 2001.

The Company's effective tax rate in 2001 was approximately 33% versus
approximately 34% in 2000. The Company's tax rate is subject to changes in the
mix of domestic and foreign leased assets, the proportions of revenue generated
within and outside of California and numerous other factors, including changes
in tax laws.

Liquidity and Capital Resources

The Company is currently financing its assets primarily through credit facility
borrowings and excess cash flow. On June 28, 2000, the Company signed an
agreement for a revolving credit facility totaling $50 million. The facility,
which expires on June 28, 2003, bears interest, at the Company's option, at
either (i) prime or (ii) LIBOR plus a margin ranging from 200 to 250 basis
points, depending on certain financial ratios. As discussed below, certain terms
of the Company's credit facility have changed effective March 31, 2002. The
Company's assets, excluding those of AeroCentury LLC and AeroCentury II LLC,
serve as collateral under the facility and, in accordance with the credit
agreement, the Company must maintain compliance with certain financial
covenants. As of December 31, 2001, $26,425,000 was outstanding under the credit
facility, and interest of $11,460 was accrued, using a combination of prime and
LIBOR rates. Because of the collateral limitations discussed below in "Outlook",
approximately $407,000 of the approximately $24 million of unused credit
facility was available for borrowing at December 31, 2001. The Company expects
to make a repayment of approximately $1,400,000 on the credit facility during
March 2002 in order to remain in compliance with its covenants. The Company has
sufficient cash to make such a repayment.

The Company believes that the worldwide economic downturn coupled with the
events of September 11, 2001 in the United States have created increased demand
for shorter term leases. As a result, the Company approached the agent bank for
the Company's revolving credit facility to discuss changes to certain financial
covenants contained in the loan agreement. The Company believes such changes are
necessary to enable it to continue to take advantage of business opportunities
in the current industry environment. The Company received approval of the
requested changes from its lenders during March 2002. In return for granting
such changes, the banks have changed the margin on the interest rates chosen by
the Company from a floating margin to a fixed margin of 275 basis points,
effective March 31, 2002. The Company believes it will have sufficient cash flow
to fund the increased interest rate as well as any principal payments through
December 2002.

The majority of the Company's borrowings are financed using one-, three- or
six-month LIBOR rates, which have decreased since the Company began financing
pursuant to such rates during June 1999. The Company believes it has adequate
cash flow to meet reasonably expected increases in interest rates applicable to
its credit facility obligations.

The primary source of the Company's acquisition financing is the credit
facility, which carries a floating interest rate. Therefore, the Company's
interest expense will generally move up or down with the prevailing interest
rates, as the Company has not entered into any interest rate hedges. 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 remains constant. However, because
lease rates for the Company's assets typically are fixed under existing leases,
the Company typically does not experience any positive or negative impact in
revenue from changes in market lease rates due to interest rate changes until
such leases have terminated.

During November 1999, the Company acquired two aircraft using cash and bank
financing separate from its credit facility. The financing consisted of a note
in the amount of $9,061,000. This note is collateralized by these aircraft and
is non-recourse to the Company. The balance of the note at December 31, 2001 was
$7,037,930. Payments due under the note consist of monthly principal and
interest, and a balloon principal payment due at the end of a six month
remarketing period, originally August 15, 2002. However, because the lessee has
not returned the aircraft and, under the terms of the lease, is continuing to
make rental payments, the bank has agreed that the six month period will not
begin until the aircraft are returned and accepted by the Company. The Company
expects the aircraft to be returned early in the second quarter of 2002. The
note bears fixed interest at 8.04% through February 15, 2002 and a floating rate
thereafter. The Company is in compliance with all covenants of the loan
agreements pertaining to the financing of these aircraft. See "Outlook" below,
for a discussion of the Company's prospects for these two aircraft.

A similar financing was concluded in September 2000, consisting of a note in the
amount of $3,575,000, due April 18, 2003, which bears fixed interest at 8.36%
for the acquisition of one aircraft. This note is collateralized by this
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 balance of the note payable at December 31, 2001 was
$3,026,170 and interest of $9,560 was accrued. The Company is in compliance with
all covenants of the loan agreements pertaining to the financing of this
aircraft.

The Company's primary source of revenue is lease rentals collected from lessees
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 lessee
will not be renewing its lease, the Company immediately initiates marketing
efforts to locate a potential new lessee or purchaser for the aircraft. This
procedure helps the Company reduce the time that an asset will be "off-lease."
The Company's aircraft are subject to leases with varying expiration dates
between March 2002 and October 2004. Given the varying lease terms and
expiration dates for the aircraft in the Company's portfolio, management
believes that the Company will have adequate cash flow to meet its on-going
operational needs. See "Outlook" below, for a discussion of factors which may
affect the Company's cash flow.

The Company's cash flow from operations for the year ended December 31, 2001
versus 2000 decreased by approximately $1,262,000. The decrease from year to
year was due primarily to the effect of the change in accounts payable and
accrued expenses, and maintenance reserves and accrued costs. The effect of
these changes was only partially offset by the positive effect of the change in
deposits and deferred taxes during 2001 versus 2000.

Specifically, the Company's cash flow from operations for the year ended
December 31, 2001 consisted of net income of $1,698,940 and adjustments
consisting primarily of depreciation of $2,789,550, increases in deposits,
accounts receivable and prepaid expenses and other assets of $123,290, $24,710
and $34,580, respectively, and decreases in notes receivable, accounts payable
and accrued expenses, accrued interest on notes payable, maintenance reserves
and accrued costs, security deposits and prepaid rent of $48,980, $243,210,
$48,300, $1,101,050, $96,030 and $142,090, respectively, and an increase in
deferred taxes of $639,380.

Specifically, the Company's cash flow from operations for the year ended
December 31, 2000 consisted of net income of $1,671,340 and adjustments
consisting primarily of depreciation of $2,673,950, increases in deposits,
accounts receivable, notes receivable, and prepaid expenses and other assets of
$1,444,410, $263,400, $117,550 and $257,550, respectively, an increase in
accounts payable and accrued expenses of $1,154,080, increases in maintenance
reserves and accrued costs, security deposits and prepaid rent of $1,920,500,
$28,660 and $59,500, respectively, and decreases in accrued interest on notes
payable and deferred taxes of $155,160 and $686,860, respectively.

The decrease in cash flow provided by financing activities from year to year was
a result of principal repayments on the Company's indebtedness, which, during
2000, were more than offset by borrowings used to finance aircraft purchases.
The only cash flow used for investing activities during 2001 was for equipment
added to aircraft already owned by the Company, as compared to 2000, when the
Company purchased three aircraft.

Outlook

Based on the revised terms of the credit facility discussed under "Liquidity and
Capital Resources" above, the Company believes that it will have sufficient
flexibility to re-lease assets for terms which will enable the Company to
maintain compliance with its credit facility covenants. The Company anticipates
having sufficient cash flow to fund any payments through December 2002. In
addition, if the Company elects to sell any of its aircraft, the proceeds would
be used to pay down the related principal balance and any excess cash could be
used toward acquisitions.

The Company has previously used special purpose asset-based financing for the
acquisition of three aircraft and may have such financing available again in the
future. Currently, however, the Company does not have sufficient cash flow to
fund the equity portion of a special purpose financing. Therefore, the revolving
credit facility is currently the Company's only funding source for new
acquisitions. Until some portion of its aircraft that are off lease are
re-leased or sold, however, there is not sufficient borrowing base collateral to
permit use of the credit facility for acquisition funding. Thus, the Company's
management is continuing to make remarketing of off-lease aircraft the primary
focus of its efforts in 2002.

As discussed above, during November 1999, the Company acquired two aircraft
using cash and special purpose asset-based bank financing. Payments due under
the note consist of monthly principal and interest, and a balloon principal
payment due at the end of a six month remarketing period, originally August 15,
2002. However, because the lessee has not returned the aircraft and, under the
terms of the lease, is continuing to make rental payments, the bank has agreed
that the six month period will not begin until the aircraft are returned and
accepted by the Company. The Company expects the aircraft to be returned early
in the second quarter of 2002. The Company is currently discussing the sale or
re-lease of both aircraft with several potential customers. The sales prices
under consideration are in excess of net book value, which would generate more
than enough funds to pay the balloon payment due on the financing. Even if the
Company is not able to sell the aircraft for the amounts being discussed, the
Company believes any sale would result in sufficient funds to pay the balloon
payment. Alternatively, if the Company re-leases the aircraft to a new lessee,
the bank has indicated it would be willing to extend the term of the financing
through such re-lease term.

Because the loss of revenue from assets sold during 2000 has been only partially
offset by acquisitions made during 2000 and there were no acquisitions during
2001, and because the borrowing limitations imposed by aircraft currently off
lease will continue if remarketing efforts are not reasonably successful during
the remainder of 2002, it is likely that rent income and net income for 2002
will be substantially lower than in 2001. The extent of the reduction will
depend not only on the success of such remarketing, but also on how quickly
those efforts are completed. In addition, while the Company leases primarily to
regional airlines that operate outside the U.S., management recognizes that some
customers may be adversely impacted by the September 11, 2001 terrorist attacks
in the U.S., as well as the worldwide economic downturn. The Company has agreed
with two of its lessees to reduce and/or defer rent in light of these events.
Also, the Company continues to review its asset valuations in light of the
worldwide economic downturn. Although the Company did not make any valuation
adjustments during 2001, any future adjustments, if necessary, would negatively
affect the Company's financial results and the collateral available for the
Company's revolving 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 off-lease aircraft, may result in changes
to estimated maintenance expense.

Factors that May Affect Future Results

General Economic Conditions. The Company's business is dependent upon general
economic conditions and the strength of the travel and transportation industry.
The industry appeared to be experiencing the beginnings of a cyclical downturn
early in the third quarter, and this downturn was exacerbated by the terrorist
attacks of September 11, 2001 and their aftermath. As a result, there has been a
severe reduction in air travel, and less revenue and less demand for aircraft
capacity by the major air carriers, particularly those that serve U.S. markets.
The duration of the downturn is uncertain.

The Company's lessees and targeted potential lessees have been primarily outside
the U.S. It is not clear what extent the downturn will have on non-U.S. regional
carriers and consequently on the Company's results. It is possible that in
certain instances, current economic circumstances may favor the Company, in that
planned aircraft replacements for the Company's leased aircraft by its lessees
may be cancelled or postponed, resulting in greater likelihood of renewals by
existing lessees. Further, demand for more economically operated turboprop
aircraft, which make up the Company's portfolio, relative to the more expensive
new regional jets, may increase (see "Leasing Risks," below). However, there can
be no assurance that the Company will realize any increase in renewals of
existing leases or experience an increase in demand for turboprop aircraft.

At this time, it appears that large, major carriers have been most affected by
these adverse events. To the extent that the Company's regional lessees depend
on passenger traffic from the major carriers, they may also be adversely
affected. Those regional carriers that are less dependent on the major carriers,
however, may be less affected. Nevertheless, since regional carriers are
generally not as well-capitalized as major air carriers, the downturn may result
in the increased possibility of an economic failure of one or more of the
Company's lessees. The combined effect of all or any decreased air travel,
further weakening of the industry as a result of subsequent threats of attacks
similar to the September 11 events, an increase in the price of jet fuel due to
fears of hostilities and increased costs and reduced operations by air carriers
due to new security directives, depending on their scope and duration, could
have a material adverse impact on the Company's lessees and thus the Company's
results. Further, if there is substantial excess capacity for regional air
carriers, the supply of regional aircraft may become out of balance with demand.
If this were to occur, the Company's off-lease periods for its aircraft may
significantly increase, and the value of its portfolio of aircraft could be
adversely impacted.

One anticipated result of the economic situation is that lessees are likely to
desire shorter-term leases which will give those lessees more short-term
flexibility to deal with the current downturn. The Company's ability to enter
into such short-term leases is somewhat limited by credit facility covenants
that govern to what extent aircraft on short-term leases can be added to the
collateral base that determines how much the Company can draw under the credit
facility (see "Credit Facility Availability and Repayments Based on Collateral
Base," below).

Credit Facility Availability and Repayments Based on Collateral Base. As
discussed above, in "Outlook" the Company's ability to draw on its $50 million
credit facility is dependent upon the status of its collateral base. If a
significant portion of the collateral base is off-lease for an extended period
of time (see "Ownership Risks" below), this may affect the amount the Company
can borrow under its credit line. Since the Company currently does not have
additional, immediately available sources of acquisition funding, the ability to
draw fully on its credit facility will be critical to the continuation of the
Company's asset and revenue growth. Further, as discussed above in "Outlook", if
the aircraft which are off lease or will come off lease during 2002 remain
either unsold or off-lease for an extended period of time, the Company will be
required to make significant principal repayments to bring its credit facility
covenants into compliance. While the Company believes it has sufficient cash to
make such repayments, this belief is based on certain assumptions regarding
renewal of existing leases, a lack of extraordinary interest rate increases, no
further 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 its assumptions will turn out to be correct. If the
assumptions do not prove to be true, and the Company has not obtained a waiver
or amendment of such 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 the covenants, or, if that is not possible, default on
its credit facility.

Risks of Debt Financing. The Company's use of acquisition financing under its
revolving 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 revolving loans are secured by the Company's
existing assets as well as the assets acquired with each financing. Any default
under the revolving credit facility could result in foreclosure upon not only
the asset acquired using such financing, but also the existing assets of the
Company securing the revolving loan.

In order to achieve optimal benefit from the revolving credit facility, the
Company intends to repay a portion of the revolving loans from proceeds of
subsequent term debt or equity financings. Such replacement financing would
likely provide the Company with more favorable long-term repayment terms and
also would permit the Company to make further borrowings under the revolving
credit facility equal to the amount of revolving debt refinanced. There can be
no assurance that the Company will be able to obtain the necessary amount of
replacement term debt or equity financing on favorable terms so as to permit
multiple draws on the revolving credit facility.

All of the Company's current credit facility indebtedness carries a floating
interest rate based upon either the lender's prime rate or a floating LIBOR
rate. If the applicable index rate increases, and the Company has not entered
into a mitigating hedge transaction, then the Company's payment obligations
under the credit facility would increase and could result in lower net revenues
for the Company. As discussed above, however, the Company may also have
available to it financing separate from its credit facility, which financing has
carried a fixed rate of interest in the past.

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. 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, but not always, reflects economic conditions and the strength of the
travel and transportation industry, which is currently experiencing a severe
downturn. The demand for and value of many types of older aircraft in the recent
past have been depressed by such factors as airline financial difficulties,
increased fuel costs, the number of new aircraft on order and the number of
older 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 be
decreased. This could result in lower lease rates and values for the Company's
existing turboprop aircraft.

Reliance on JMC. All management of the Company is performed by JMC under a
management agreement which is in its fifth 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 Board of Directors, however, has ultimate control and
supervisory responsibility over all aspects of the Company and owes fiduciary
duties to the Company and its stockholders. In addition, 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.

The management agreement may be terminated upon a default in the obligations of
JMC to the Company, and provides for liquidated damages in the event of a
wrongful termination of the agreement 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 over obligations 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.

Ownership Risks. Most of the Company's portfolio is leased under operating
leases, where the terms of the leases do not take up the entire 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 lease for
such equipment expires, the Company's business, financial condition, cash flow,
ability to service debt and results of operation could be adversely affected.

Lessee Credit Risk. If a lessee defaults upon its obligations under a lease, 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 significant 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, under Section 1110 of the Bankruptcy Code, the Company
would be automatically prevented from exercising any remedies for a period of 60
days. By the end of the 60-day period, the lessee must agree to perform the
obligations and cure any defaults, or the Company would 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.

International Risks. The Company has focused recently on leases in overseas
markets, which are currently dynamic and which the Company believes present
attractive 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 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 would
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 add difficulty in recovering an aircraft in the event
that a foreign lessee defaults.

Leases with foreign lessees are 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
dollar-denominated lease payment provisions, the Company could still be affected
by a devaluation of the lessee's local currency which would make it more
difficult for a lessee to meet its dollar-denominated lease payments, increasing
the risk of default of that lessee, particularly if that carrier's 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 of
complying with such requirements will fall primarily upon lessees of equipment,
there can be no assurance that the cost of complying with such government
regulations 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. The Company, however, believes
that it is competitive because of JMC's experience and operational efficiency in
financing 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 are strong, but generally unrated and more speculative
than the major air carriers, 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 this will
benefit the Company. There is 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 and benefit
the Company.

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 its aircraft
assets. It is, however, not clear to what extent such statutory protection would
be available to the Company and such act may not apply to aircraft operated in
foreign countries. Also, although the Company may carry insurance or require a
lessee to insure against a risk, 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.

Risks Related to Regional Air Carriers. Because the Company has concentrated its
existing leases and intends to concentrate on leases to regional air carriers,
it is subject to certain risks. First, 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. Leasing transactions with 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 enhancement, if it deems them necessary. There is no
assurance, however, that such enhancements will be available or that even if
obtained will fully protect the Company from losses resulting from a lessee
default or bankruptcy. Second, 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.

Possible Volatility of Stock Price. The market price of the Company's common
stock could be subject to fluctuations in response to operating results of the
Company, 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 shares. Consequently, a single or small number of trades could
result in a market fluctuation not related to any business or financial
development relating to the Company.

Item 7.           Financial Statements.

(a)               Financial Statements and Schedules

         (1)      Financial statements for the Company:

                           Report of Independent Public Accountants, Arthur
                           Andersen LLP Consolidated Balance Sheet as of
                           December 31, 2001 Consolidated Statements of Income
                           for the Years Ended December 31, 2001 and 2000
                           Consolidated Statements of Stockholders' Investment
                           for the Years Ended
                              December 31, 2001 and 2000
                           Consolidated Statements of Cash Flows for the Years
                              Ended December 31, 2001 and 2000
                          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.










                                AeroCentury Corp.
                           Consolidated Balance Sheet



                                     ASSETS
                                                                                    December 31,
                                                                                        2001
                                                                               
Assets:
     Cash and cash equivalents                                                    $     2,680,160
     Deposits                                                                           6,986,860
     Accounts receivable                                                                  595,870
     Aircraft and aircraft engines on operating leases,
        net of accumulated depreciation of $15,418,830                                 56,527,350
     Note receivable                                                                       68,570
     Prepaid expenses and other                                                           651,260
                                                                                  ---------------

Total assets                                                                      $    67,510,070
                                                                                  ===============


                      LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:
     Accounts payable and accrued expenses                                        $     1,642,130
     Notes payable and accrued interest                                                36,510,120
     Maintenance reserves and accrued costs                                             5,209,140
     Security deposits                                                                  1,717,770
     Prepaid rent                                                                         213,190
     Deferred taxes                                                                     3,356,100
                                                                                  ---------------

Total liabilities                                                                      48,648,450
                                                                                  ---------------

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                                                                  5,542,880
                                                                                  ---------------
                                                                                       19,365,690
     Treasury stock at cost, 63,300 shares                                              (504,070)
                                                                                  ---------------

Total stockholders' equity                                                             18,861,620
                                                                                  ---------------

Total liabilities and stockholders' equity                                        $   67,510,070
                                                                                  ===============


The accompanying notes are an integral part of these statements.








                                AeroCentury Corp.
                        Consolidated Statements of Income



                                                                                 For the Years Ended December 31,
                                                                                             

                                                                                      2001                2000
                                                                                      ----                ----
Revenues:

     Rent income                                                                $    10,150,920    $     10,880,130
     Gain on disposal of aircraft and aircraft engines                                  326,730             746,570
     Other income                                                                       754,340             481,060
                                                                                ---------------    ----------------

                                                                                     11,231,990          12,107,760
                                                                                ---------------    ----------------
Expenses:

     Management fees                                                                  1,758,050           1,725,250
     Depreciation                                                                     2,789,550           2,673,950
     Interest                                                                         2,800,470           3,471,450
     Maintenance                                                                        861,540             762,920
     Professional fees and general and administrative                                   497,710             494,260
     Provision for impairment in value of aircraft                                            -             462,500
                                                                                ---------------    ----------------

                                                                                      8,707,320           9,590,330
                                                                                ---------------    ----------------

Income before taxes                                                                   2,524,670           2,517,430

Tax provision                                                                           825,730             846,090
                                                                                ---------------    ----------------

Net income                                                                      $     1,698,940    $      1,671,340
                                                                                ===============    ================

Weighted average common shares outstanding                                            1,543,257           1,543,257
                                                                                ===============    ================

Basic earnings per share                                                        $          1.10    $           1.08
                                                                                ===============    ================


The accompanying notes are an integral part of these statements.










                                AeroCentury Corp.
               Consolidated Statements of Stockholders' Investment
                 For the Years Ended December 31, 2001 and 2000



                              Common            Paid-in           Retained        Treasury
                               Stock            Capital           Earnings          Stock             Total
                                                                                  

Balance,
  December 31, 1999        $       1,610    $   13,821,200    $   2,172,600     $   (504,070)    $  15,491,340

Net income                             -                 -        1,671,340                 -        1,671,340
                           -------------    --------------    -------------     -------------    -------------

Balance,
  December 31, 2000                1,610        13,821,200        3,843,940         (504,070)       17,162,680

Net income                             -                 -        1,698,940                 -        1,698,940
                           -------------    --------------    -------------     -------------    -------------

Balance,
  December 31, 2001        $       1,610    $   13,821,200    $   5,542,880     $   (504,070)    $  18,861,620
                           =============    ==============    =============     =============    =============




The accompanying notes are an integral part of these statements.








                                AeroCentury Corp.
                      Consolidated Statements of Cash Flows



                                                                                 For the Years Ended December 31,
                                                                                             

                                                                                      2001                2000
                                                                                      ----                ----

Operating activities:
   Net income                                                                   $     1,698,940    $      1,671,340
   Adjustments to reconcile net income to
     net cash provided by operating activities:
       Depreciation                                                                   2,789,550           2,673,950
       Gain on disposal of aircraft and aircraft engines                              (326,730)           (746,570)
       Provision for impairment in value of aircraft                                          -             462,500
       Change in operating assets and liabilities:
         Deposits                                                                     (123,290)         (1,444,410)
         Accounts receivable                                                           (24,710)           (263,400)
         Prepaid expenses and other                                                    (34,580)           (257,550)
         Accounts payable and accrued expenses                                        (243,210)           1,154,080
         Accrued interest on notes payable                                             (48,300)           (155,160)
         Maintenance reserves and accrued costs                                     (1,101,050)           1,920,500
         Security deposits                                                             (96,030)              28,660
         Prepaid rent                                                                 (142,090)              59,500
         Deferred taxes                                                                 639,380           (686,860)
                                                                                ---------------    ----------------
Net cash provided by operating activities                                             2,987,880           4,416,580

Investing activities:
   Proceeds from disposal of aircraft and aircraft engines                            1,406,440           5,096,560
   Purchase of aircraft and aircraft engines                                          (285,420)        (11,743,700)
                                                                                ---------------    ----------------
Net cash provided/(used) by investing activities                                      1,121,020         (6,647,140)

Financing activities:
   Payments received on/(issuance of) note receivable                                    48,980           (117,550)
   Issuance of notes payable                                                                  -           9,885,000
   Repayment of notes payable                                                       (4,662,190)         (5,604,150)
                                                                                ---------------    ----------------
Net cash (used)/provided by financing activities                                    (4,613,210)           4,163,300

Net (decrease)/increase in cash and cash equivalents                                  (504,310)           1,932,740

Cash and cash equivalents, beginning of period                                        3,184,470           1,251,730
                                                                                ---------------    ----------------

Cash and cash equivalents, end of period                                        $     2,680,160    $      3,184,470
                                                                                ===============    ================

During the years ended December 31, 2001 and 2000, the Company paid interest
totaling $2,771,610 and $3,813,950, respectively, and income taxes totaling
$1,331,780 and $388,270, respectively.


The accompanying notes are an integral part of these statements.







                                AeroCentury Corp.
                   Notes to Consolidated Financial Statements
                                December 31, 2001

1.       Organization and Summary of Significant Accounting Policies

(a)      Basis of Presentation

         AeroCentury Corp. ("AeroCentury") was incorporated in the state of
Delaware on February 28, 1997. AeroCentury was formed solely for the purpose of
acquiring JetFleet Aircraft, L.P. and JetFleet Aircraft II, L.P., partnerships
formed under California law for the purpose of investing in leased aircraft
equipment, (collectively, the "Partnerships") in a statutory merger (the
"Consolidation"), which was effective January 1, 1998. The Consolidation was
treated as a "pooling-of-interests" under accounting principles generally
accepted in the United States. AeroCentury is continuing in the aircraft leasing
business in which the Partnerships engaged and is using leveraged financing to
acquire additional aircraft assets on lease.

         During November 1999 and September 2000, AeroCentury Corp. formed two
wholly-owned subsidiaries, AeroCentury Investments LLC ("AeroCentury LLC") and
AeroCentury Investments II LLC ("AeroCentury II LLC"), respectively, for the
purpose of acquiring aircraft using a combination of cash and bank financing
separate from AeroCentury Corp.'s revolving credit facility. Financial
information for AeroCentury, AeroCentury LLC and AeroCentury II LLC
(collectively, the "Company") is presented on a consolidated basis. All
intercompany balances and transactions have been eliminated in consolidation.

         Certain amounts previously reported have been reclassified to conform
to the current year presentation. These reclassifications do not affect
previously reported net income or stockholders' equity.

 (b)     Capitalization

         In 1998, in connection with the adoption of a stockholder rights plan,
the Company filed a Certificate of Designation, designating the rights,
preferences and privileges of a new Series A Preferred Stock. Pursuant to the
plan, the Company issued rights to its stockholders, entitling each stockholder
to 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.

         The Company's Board of Directors adopted a stock repurchase plan in
1998, granting management the authority to repurchase up to 100,000 shares of
the Company's common stock, in privately negotiated transactions or on the
market, at such price and on such terms and conditions deemed satisfactory to
management. The Company has repurchased 63,300 shares in total and has not
repurchased any shares since 1999.

         As discussed above, AeroCentury is the sole member and manager of
AeroCentury LLC and AeroCentury II LLC.

(c)      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. Deposits represent cash balances held related to maintenance
reserves and security deposits and generally are subject to withdrawal
restrictions.

         At December 31, 2001, the Company held security deposits of $1,717,770,
refundable maintenance reserves received from lessees of $2,639,730 and
non-refundable maintenance reserves of $2,629,360.







                                AeroCentury Corp.
                   Notes to Consolidated Financial Statements
                                December 31, 2001

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

(c)      Cash and Cash Equivalents/Deposits (continued)

         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 currently held by the Company are refundable to the
lessee at the end of the lease.

         Maintenance reserves which are refundable to the lessee at the end of
the lease may be retained by the Company if such amounts are necessary to meet
the return conditions specified in the lease and, in some cases, to satisfy any
other payments due under the lease.

         Non-refundable maintenance reserves held by the Company are accounted
for as a liability until the aircraft has been returned at the end of the lease,
at which time the Company evaluates the adequacy of the remaining reserves in
light of maintenance to be performed as a result of hours flown. At that time,
any excess is recorded as income. When an aircraft is sold, any excess
non-refundable maintenance reserves are recorded as income.

(d)      Aircraft and Aircraft Engines On Operating Leases

         The Company's interests in aircraft and aircraft engines are recorded
at cost, which includes acquisition costs. Depreciation is computed using the
straight-line method over the aircraft's estimated economic life (generally
assumed to be twelve years), to an estimated residual value based on appraisal.
The depreciable base of the assets acquired by the Company in the Consolidation
was equal to the net book value of the assets at December 31, 1997.

(e)      Impairment of Long-lived Assets

         In accordance with Statement of Financial Accounting Standards ("SFAS")
No. 121, "Accounting for the Impairment of Long-lived Assets and Long-lived
Assets to Be Disposed Of," assets are reviewed for impairment whenever events or
changes in circumstances indicate that the book value of the asset may not be
recoverable. Periodically, the Company reviews its long-lived assets for
impairment based on estimated future nondiscounted cash flows attributable to
the assets. In the event such cash flows are not expected to be sufficient to
recover the recorded value of the assets, the assets are written down to their
estimated realizable value.

(f)      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.

(g)      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 balance sheet include refundable and non-refundable maintenance
payments received from lessees. The Company periodically reviews maintenance
reserves 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 a result of such review, when it is
probable that the Company has incurred costs for maintenance in excess of
amounts received from lessees, the Company accrues its share of costs for work
to be performed as a result of hours flown. At December 31, 2001, the Company
had accrued maintenance costs of approximately $787,000 related to several of
its aircraft.


                                AeroCentury Corp.
                   Notes to Consolidated Financial Statements
                                December 31, 2001

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

(h)      Income Taxes

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

(i)      Revenue Recognition

         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.

(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.

(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 for the years ended December
31, 2001 and 2000.

(l)      Recent Accounting Pronouncements

         SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities, as amended by SFAS No. 138, was issued in June 1999. This statement
establishes accounting and reporting standards requiring that all derivative
instruments are recorded on the balance sheet as either an asset or a liability,
measured at fair value. The statement requires that changes in the derivative's
fair value be recognized currently in earnings unless specific hedge accounting
criteria are met and such hedge accounting treatment is elected. The Company
adopted SFAS No. 133 on January 1, 2001. Because the Company does not hold any
derivatives as defined in SFAS No. 133, the adoption of SFAS No. 133 did not
have a material effect on its results of operations or financial position.

     In August 2001, the Financial  Accounting  Standards  Board issued SFAS No.
144,  "Accounting  for the  Impairment or Disposal of Long-lived  Assets," which
supercedes SFAS No. 121, "Accounting for the Impairment of Long-lived Assets and
Long-lived  Assets to Be Disposed  of." SFAS No. 144 is effective  for financial
statements  issued for fiscal years  beginning  after  December  15,  2001,  and
interim  periods within those fiscal years.  The Company will adopt SFAS No. 144
on January 1, 2002.  Because SFAS No. 144 retains the fundamental  provisions of
SFAS No. 121 for (a) recognition and measurement of the impairment of long-lived
assets  to be held and used  and (b)  measurement  of  long-lived  assets  to be
disposed  of by sale,  the  adoption  of SFAS No. 144 is not  expected to have a
material effect on the Company's results of operations or financial position.







                                AeroCentury Corp.
                   Notes to Consolidated Financial Statements
                                December 31, 2001

2.       Aircraft and Aircraft Engines On Operating Leases

         At December 31, 2001, the Company owned three deHavilland DHC-8s, two
deHavilland DHC-7s, three deHavilland DHC-6s, one Fairchild Metro III, two
Shorts SD 3-60, six Fokker 50s, two Saab 340As and 26 turboprop engines, one of
which is held in inventory as a spare and is not subject to a lease or to
depreciation. The Company did not acquire any aircraft during 2001, but did
capitalize a total of $285,420 of equipment added to four aircraft. One of the
aircraft to which equipment was added was sold during the fourth quarter of
2001. This aircraft was the only aircraft which the Company sold during the
year.

         In 2001, the Company and the lessee of two of the Company's DHC-6
aircraft agreed to the terms pertaining to the early termination of the leases
for the two aircraft. Under the agreement, the lessee paid all rent and reserves
through the return dates in April 2001, and performed certain maintenance
procedures prior to such return. At the same time, the Company reversed the
$66,000 allowance against a portion of the receivables it had recorded at
December 31, 2000. Both aircraft subsequently were re-leased to a regional
airline. Prior to delivery of the aircraft, however, the Company incurred
approximately $7,000 of maintenance work in addition to estimates accrued during
2000. In addition, the Company capitalized approximately $36,000 of equipment
added to the aircraft.

         The lease for one of the Company's two DHC-7 aircraft was extended from
September 30, 2000 to the date of completion of its pre-return inspection in
July 2001. The Company is currently seeking re-lease or sale opportunities for
both DHC-7 aircraft.

         At the time of purchase, one of the Company's Shorts SD 3-60 aircraft
was subject to a 48-month lease, expiring in March 2002, with a British regional
airline. During 2000, the lessee filed for reorganization and subsequently
returned the aircraft to the Company. During 2001, the reorganization trustee
paid a portion of the maintenance expense which had been accrued by the Company
at the time the aircraft was returned and the Company reversed that portion of
the maintenance accrual. In connection with the delivery of the aircraft to a
new lessee during 2001, the Company capitalized approximately $239,000 of
equipment added to the aircraft and incurred approximately $166,000 of
additional maintenance expenses. In addition, based on its periodic review of
the adequacy of maintenance reserves, the Company accrued an incremental $50,000
of maintenance expense. During the fourth quarter of 2001, the Company and the
lessee agreed to the early lease termination and the aircraft was sold to a
third party. Because the aircraft was sold "as is", the $326,730 gain on sale
included retained cash maintenance reserves which had been received from the two
lessees and a reversal of all previously accrued maintenance.

         The leases for the Company's other two Shorts SD 3-60 aircraft were
extended from March 31, 2001 to their pre-return inspection completion. The
inspections were completed and the aircraft were returned during May 2001. One
of the aircraft has been re-leased to a regional operator in the Caribbean. As
discussed in Note 9, the second aircraft was re-leased to an operator in the
United Kingdom during March 2002.

         The lease for one of the Company's Fokker 50 aircraft has been extended
from June 30, 2001 to April 30, 2002. Under the terms provided therein, the
leases for two of the Company's other Fokker 50 aircraft remain in effect from
their expiration date of January 13, 2002 until their pre-return inspections are
complete, which is estimated to be during the second quarter of 2002; therefore,
the lessee is continuing to pay rent while the aircraft are being prepared for
return. The Company has conducted a preliminary inspection of the aircraft and
concluded that certain components will be in better condition than required by
the return provisions of the leases. In such a situation, the leases stipulate
that the Company is required to compensate the lessee. As a result, the Company
has accrued an estimate of $609,000 of compensation related to these two
aircraft.







                                AeroCentury Corp.
                   Notes to Consolidated Financial Statements
                                December 31, 2001

2.       Aircraft and Aircraft Engines On Operating Leases (continued)

         During October 2001, the lessee for twenty-four of the Company's leased
engines exercised its option to extend the lease for an additional two-year
term, through April 30, 2004 at the same rental rate.

         In June 2001, one of the Company's deHavilland DHC-8 aircraft sustained
significant damage while landing. The Company subsequently received net
insurance proceeds of $350,000, which represented an amount in excess of the
cost of repairs to the aircraft. The insurance proceeds are included in other
income.

         During November 2001, the Company and the lessee of two of the
Company's deHavilland DHC-8 aircraft agreed to amend the leases for the
aircraft. The amendments provide for the deferral of rent and reserves payments
owed to the Company at the time of the amendment, a reduction in the monthly
rent amount, and a deferral of a portion of the reduced rent due during the
first six months of the amendment. In return, the lessee increased the amount of
its security deposit.

3.       Note Receivable

         At December 31, 2001, the Company's note receivable consists of a loan
to one of the Company's long-standing lessees in connection with a
manufacturer-required inspection of the aircraft and repair of certain
components. The Company and the lessee agreed to a cost sharing arrangement
whereby a portion of the cost was funded by maintenance reserves previously paid
by the lessee and the remaining cost was allocated to the Company and the
lessee. The Company recorded a note receivable for the lessee's portion, net of
interest to be received at a rate of 5%, which will be repaid through increased
rent during the remainder of the lease term, which expires on April 30, 2003.

4.       Operating Segments

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

         Approximately 22% and 31% of the Company's operating lease revenue was
derived from lessees domiciled in the United States during 2001 and 2000,
respectively. All leases 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,
                                                                                           
                                                                                      2001              2000
                                                                                      ----              ----

              United States                                                  $      2,236,910    $     3,379,790
              Spain                                                                 1,978,730          1,978,730
              Sweden                                                                1,368,880          1,501,560
              Jamaica                                                               1,130,150            396,870
              Other domiciles                                                       3,436,250          3,623,180
                                                                             ----------------    ---------------
                                                                             $     10,150,920    $    10,880,130
                                                                             ================    ===============










                                AeroCentury Corp.
                   Notes to Consolidated Financial Statements
                                December 31, 2001


4.       Operating Segments (continued)

                                                                                 Net book value at December 31,
                                                                                           

                                                                                      2001              2000
                                                                                      ----              ----

              United States                                                  $     11,480,290    $    11,924,430
              Spain                                                                10,244,650         10,679,550
              Sweden                                                                6,833,530          7,247,870
              Brazil                                                                5,765,290          6,072,050
              Jamaica                                                               6,287,290          6,516,040
              Other domiciles                                                      15,916,300         17,671,260
                                                                             ----------------    ---------------
                                                                             $     56,527,350    $    60,111,200
                                                                             ================    ===============


         For the year ended December 31, 2001, the Company had three significant
customers, which accounted for 19%, 13% and 11%, respectively, of lease revenue.
For the year ended December 31, 2000, the Company had three significant
customers, which accounted for 18%, 14% and 11%, respectively, of lease revenue.

         As of December 31, 2001, minimum future lease rent payments receivable
under noncancelable leases were as follows:

                                                                       
              Year
              2002                                                           $      5,894,730
              2003                                                                  2,290,910
              2004                                                                    680,970
              2005                                                                          -
              2006                                                                          -
                                                                             ----------------
                                                                             $      8,866,610
                                                                             ================


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.

6.       Notes Payable and Accrued Interest

         On June 28, 2000, the Company signed an agreement for a revolving
credit facility totaling $50 million. The facility, which expires on June 28,
2003, bears interest, at the Company's option, at either (i) prime or (ii) LIBOR
plus a margin, currently 200 basis points. The margin can be increased up to 50
basis points, depending on certain financial ratios. The Company's assets,
excluding those of AeroCentury LLC and AeroCentury II LLC, serve as collateral
under the facility and, in accordance with the credit agreement, the Company
must maintain compliance with certain financial covenants. As of December 31,
2001, the Company was in compliance with all such covenants. During 2001, the
Company paid interest at an average rate of approximately 6.2%. As of December
31, 2001, $26,425,000 was outstanding under the credit facility, and interest of
$11,460 was accrued, using a combination of prime and LIBOR rates. As discussed
in Note 9, certain terms of the Company's credit facility were amended during
March 2002.







                                AeroCentury Corp.
                   Notes to Consolidated Financial Statements
                                December 31, 2001

6.       Notes Payable and Accrued Interest (continued)

         As discussed in Note 1, during November 1999 the Company acquired two
aircraft using cash and bank financing separate from its credit facility. The
financing consisted of a note in the amount of $9,061,000. This note is
collateralized by these aircraft and is non-recourse to the Company. The balance
of the note at December 31, 2001 was $7,037,930. Payments due under the note
consist of monthly principal and interest, and a balloon principal payment due
at the end of a six month remarketing period, originally August 15, 2002. Under
the provisions of the loan agreement, payments due on the financing are reduced
during this six month period. The note bears fixed interest at 8.04% through
February 15, 2002 and a floating rate thereafter. As discussed in Note 9, the
bank has agreed that the six month period will not begin until the aircraft are
returned and accepted by the Company. The Company expects the aircraft to be
returned early in the second quarter of 2002. As of December 31, 2001, the
Company was in compliance with all covenants of the loan agreements pertaining
to the financing of these two aircraft.

         A similar financing was concluded in September 2000, consisting of a
note in the amount of $3,575,000, due April 18, 2003, which bears fixed interest
at 8.36% for the acquisition of one aircraft. This note is collateralized by
this 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 balance of the note payable at December 31, 2001 was
$3,026,170 and interest of $9,560 was accrued. As of December 31, 2001, the
Company was in compliance with all covenants of the loan agreements pertaining
to the financing of this aircraft.

7.       Income Taxes


         The items comprising income tax expense are as follows:


                                                                               For the Years Ended December 31,
                                                                                           
                                                                                    2001                2000
                                                                                    ----                ----
         Current tax provision:
              Federal                                                        $         22,780    $     1,299,500
              State                                                                     5,240             75,120
              Foreign                                                                 158,320            158,330
                                                                             ---------------     ---------------

              Current tax provision                                                   186,340          1,532,950
                                                                             ----------------    ---------------

         Deferred tax provision/(benefit):
              Federal                                                                 670,570           (651,930)
              State                                                                   (31,180)           (34,930)
                                                                             ----------------    ---------------

              Deferred tax provision/(benefit)                                        639,390           (686,860)
                                                                             ----------------    ---------------

         Total provision for income taxes                                    $        825,730    $       846,090
                                                                             ================    ===============









                                AeroCentury Corp.
                   Notes to Consolidated Financial Statements
                                December 31, 2001

7.       Income Taxes (continued)

         Total income tax expense 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,
                                                                                           
                                                                                    2001                2000
                                                                                    ----                ----
         Income tax expense at
               statutory federal income tax rate                             $        858,390    $       855,890
         State taxes net of federal benefit                                            19,250             24,100
         Tax refunds                                                                 (15,470)                  -
         Other                                                                       (36,440)           (33,900)
                                                                             ----------------    ---------------

         Total income tax expense                                            $        825,730    $       846,090
                                                                             ================    ===============


         Temporary differences and carryforwards that gave rise to a significant
portion of deferred tax assets and liabilities as of December 31, 2001 are as
follows:

                                                                       

         Deferred tax assets:
              Organizational costs                                           $         15,350
              Maintenance reserves                                                    599,300
              Foreign tax credit carryover                                             67,190
              Prepaid rent                                                             74,110
              Deferred maintenance                                                    227,110
              Other                                                                     1,540
                                                                             ----------------
                  Deferred tax assets                                                 984,600
         Deferred tax liabilities:
              Depreciation on aircraft and aircraft engines                        (4,067,090)
              Other                                                                  (273,610)
                                                                             ----------------

                  Net deferred tax liabilities                               $     (3,356,100)
                                                                             ================


         No valuation allowance is deemed necessary, as the Company anticipates
generating adequate future taxable income to realize the benefits of all
deferred tax assets on the balance sheet.

8.       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"). Under this 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 $1,758,050 and $1,725,250 during the years ended December 31, 2001 and
2000, respectively. Because the Company did not acquire any aircraft during
2001, no acquisition fees were paid to JMC. During 2000, the Company paid JMC a
total of $371,300 in acquisition fees, which are included in the capitalized
cost of the aircraft. During 2001 and 2000, the Company accrued a total of
$13,500 and $77,250, respectively, in remarketing fees due JMC.






                                AeroCentury Corp.
                   Notes to Consolidated Financial Statements
                                December 31, 2001

8.       Related Party Transactions (continued)

         Certain employees of JMC participate in an employee stock incentive
plan which grants options to purchase shares of the Company held by JHC. As of
December 31, 2001, 28,833 such options had been exercised.

9.       Subsequent Events

         On March 7, 2002, the Company and its lenders agreed to modify certain
financial covenants contained in the loan agreement for the Company's revolving
credit facility in order to enable the Company to continue to take advantage of
business opportunities in the current industry environment of increased market
demand for shorter-term leases. In return for granting such changes, the banks
have changed the margin on the interest rates chosen by the Company from a
floating margin to a fixed margin of 275 basis points, effective March 31, 2002.
Under the new terms, the Company expects to make a repayment on its revolving
credit facility in the amount of $1,400,000 during March 2002 because of certain
collateral borrowing base limitations and may be required to make additional
monthly repayments.

         As discussed in Note 6, the balloon principal payment due on the
financing of two aircraft is due at the end of a six month remarketing period,
originally August 15, 2002. However, because the lessee has not returned the
aircraft and, under the terms of the lease, is continuing to make rental
payments, the bank has agreed that the six month period will not begin until the
aircraft are returned and accepted by the Company. The Company expects the
aircraft to be returned early in the second quarter of 2002.

         During March 2002, one of the Company's Shorts SD 3-60 aircraft was
re-leased to an operator in the United Kingdom for a one-year term, with an
option to extend for a second year.




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

None.

                                    PART III

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

Incorporated by reference to the section of the Company's Proxy Statement for
the 2002 Annual Meeting to be filed with the Securities and Exchange Commission
on or about March 26, 2002 (the "2002 Proxy Statement") entitled "Information
Regarding the Company's Directors and Officers."

Item 10.          Executive Compensation.

Incorporated by reference to the section of the 2002 Proxy Statement entitled
"Information Regarding the Company's Directors and Officers -- Employment
Contracts."

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

Incorporated by reference to the section of the 2002 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 2002 Proxy Statement entitled
"Related Party Transactions."

Item 13. Exhibits and Reports on Form 8-K.

         (a)      Exhibits

                  3.1      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.

                  3.2      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.

                  3.3      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.

                  10.1     Employment Agreement between the Company and Neal D.
                           Crispin, dated April 29, 1998, incorporated by
                           reference to Exhibit 10.1 to the Report on Form
                           10-KSB for the fiscal year ended December 31, 1998.

                  10.2     Employment Agreement between the Company and Marc J.
                           Anderson, dated April 28, 1998, incorporated by
                           reference to Exhibit 10.2 to the Report on Form
                           10-KSB for the fiscal year ended December 31, 1998.

                  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     Amendment  No.  1 to  Credit  Agreement, dated March
                           30,  1999  between AeroCentury Corp. and First Union
                           National Bank, as agent, and California Bank & Trust,
                           incorporated  by  reference to Exhibit 10.6 to the
                           Report on Form 10-KSB for the fiscal year ended
                           December 31, 1999.

                  10.7     Amendment No. 2 to Credit Agreement,  dated July 16,
                           1999 between  AeroCentury Corp. and First  Union
                           National  Bank,  as agent,  and  California  Bank &
                           Trust  and Sanwa  Bank California,  incorporated  by
                           reference to Exhibit 10.7 to the Report on Form
                           10-KSB for the fiscal year ended December 31, 1999.

                  10.8     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.

                  10.9     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.

                  10.10    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.

                  10.11    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.

                  10.12    Amended and Restated Shareholder 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.

                  10.13    Amendment  No. 3 to Credit  Agreement,  dated
                           February  22,  2000,  between  the  Company and First
                           Union National  Bank,  as  agent,  and  California
                           Bank & Trust and  Sanwa  Bank  California,
                           incorporated  by reference to Exhibit  10.13 to the
                           Report on Form 10-KSB for the fiscal year ended
                           December 31, 1999.

                  10.14    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.

                  10.15    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.

                  21       Subsidiaries of the Company.

         (b)      Reports on Form 8-K Filed in Last Quarter:

                  None.







                                   SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has
caused this Report on Form 10-KSB to be signed on its behalf by the undersigned,
thereunto duly authorized on March 26, 2002.

                                               AEROCENTURY CORP.


                                       By:    /s/ Neal D. Crispin
                                              -------------------------------
                                              Neal D. Crispin

                                       Title: President


                               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-K 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
March 26, 2002.

         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
     Toni M. Perazzo                   (Principal Financial and Accounting
                                        Officer)


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

     /s/  Maurice J. Averay                   Director
     --------------------------------
     Maurice J. Averay

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

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






                                   Exhibit 21

                           Subsidiaries of the Company



1.       AeroCentury Investments LLC, a Delaware limited liability company

2.       AeroCentury Investments II LLC, a Delaware limited liability company