FORM 10-QSB

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

(Mark One)

|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 1998

                                       OR

|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from ________ to ___________

Commission file number: 001-13387


                                AeroCentury Corp.
             (Exact name of Registrant as specified in its charter)

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

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

                                  650-340-1888
               (Registrant's telephone number including area code)

                                 Not applicable
(Former name, former address, and former fiscal year, if changed since last
report)

     Check whether the issuer (1) has filed all reports  required to be filed by
Section 13 or 15(d) of the  Securities  Exchange  Act of 1934 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 ____

              APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
                  PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

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


                   (APPLICABLE ONLY TO CORPORATE REGISTRANTS)

     State the number of shares  outstanding of each of the issuer's  classes of
common stock, as of the latest practicable date.

Title                                                        Outstanding

Common Stock                                                 1,606,557
Rights to Purchase Series A Preferred Stock                  0


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

<PAGE>

Part I.  Financial Information

Item 1.  Financial Statements


                                                           AeroCentury Corp.
                                                            Balance Sheets

                                                                ASSETS
<TABLE>
<CAPTION>

                                                                             June 30,             December 31,
                                                                               1998                   1997
                                                                            (Unaudited)
<S>                                                                      <C>                   <C>

Cash and cash equivalents                                                $     1,459,720       $         7,980
Deposits                                                                         911,310                     -
Accounts receivable                                                               54,240                     -
Aircraft and aircraft engines under operating leases
     and aircraft held for operating leases, net of
     accumulated depreciation of $15,444,400 in 1998                          16,924,350                     -
Prepaid expenses and other assets                                                 61,430                 5,450
Deferred tax asset                                                               276,550                87,770
                                                                         ---------------       ---------------
Total assets                                                             $    19,687,600       $       101,200
                                                                         ===============       ===============
                                                
                                                    LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
     Accounts payable                                                    $       106,990       $       207,690
     Payable to affiliates                                                        72,310               157,100
     Notes payable                                                               866,670                     -
     Accrued maintenance costs                                                 1,453,690                     -
     Security deposits                                                           143,100                     -
     Prepaid rent received                                                        83,550                     -
     Deferred taxes                                                            3,025,900                     -
     Taxes payable                                                                     -                   880
                                                                         ---------------       ---------------       
Total liabilities                                                              5,752,210               365,670
                                                                
Shareholders' 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 and 150,000 shares issued
        and outstanding in 1998 and 1997, respectively                             1,610                   150
     Paid in capital                                                          13,821,200               149,850
     Retained earnings/(accumulated deficit)                                     112,580              (414,470)
                                                                         ---------------       ---------------
Total shareholders' equity                                                    13,935,390              (264,470)
                                                                         ---------------       ---------------
Total liabilities and shareholders' equity                               $    19,687,600       $       101,200
                                                                         ===============       ===============
See accompanying notes.

</TABLE>



<PAGE>
                                                           

                                AeroCentury Corp.
                            Statements of Operations
                                   (Unaudited)
<TABLE>
<CAPTION>


                                                       For the Period
                                     For the           from Inception
                                   Six Months        (February 28, 1997)              For the Three Months
                                 Ended June 30,          to June 30,                     Ended June 30,
                                      1998                   1997                   1998                1997
<S>                             <C>                    <C>                   <C>                   <C>

Revenues:

Rent income                     $     1,674,890        $            -        $     864,970         $           -
Interest income                          21,360                   880                9,360                   650
                                ---------------        --------------        -------------         ------------- 
                                      1,696,250                   880              874,330                   650

Expenses:

Management fees                         287,850                     -              146,740                     -
Depreciation                            338,080                     -              175,290                     -
Interest                                 34,090                     -               26,000                     -
Professional fees and
   general and administrative           151,680                     -               73,230                     -
Consolidation offering costs                  -               130,210                    -               112,200
Franchise taxes                           8,400                   800                5,400                   800
                                ---------------        --------------        -------------         -------------

                                        820,100               131,010              426,660               113,000
                                ---------------        --------------        -------------         -------------
Income before taxes                     876,150              (130,130)             447,670              (112,350)

Tax provision                           349,100                     -              178,660                     -
                                ---------------        --------------        -------------         -------------  
Net income/(loss)               $       527,050        $     (130,130)       $     269,010         $    (112,350)
                                ===============        ==============        =============         ==============
Weighted average common
   shares outstanding                 1,606,557               150,000            1,606,557               150,000
                                ===============        ==============        =============         =============
Earnings/(loss) per share       $          0.33        $        (0.87)       $        0.17         $       (0.75)
                                ===============        ==============        =============         =============   








See accompanying notes.
<PAGE>

</TABLE>





                                AeroCentury Corp.
                            Statements of Cash Flows
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                                          For the Period
                                                                                          from Inception
                                                         For the Six Months           (February 28, 1997) to
                                                         Ended June 30, 1998               June 30, 1997
<S>                                                         <C>                           <C>    
Net cash provided by operating activities                   $     1,686,680               $        (22,290)

Investing activity -
     Purchase of aircraft                                        (1,124,470)                             -
                                                            ---------------               ----------------      
Net cash used in investing activities                            (1,124,470)                             -

Financing activities:
     Issuance of secured note                                       866,670                              -
     Sale of common stock                                                 -                        150,000
     Organization costs                                                   -                           (450)
                                                            ---------------               ----------------
Net cash provided by investing activities                           866,670                        149,550

Net change from consolidation of partnerships                        22,860                              -

Net increase in cash and cash equivalents                         1,451,740                        127,260

Cash and cash equivalents, beginning of period                        7,980                              -
                                                            ---------------               ----------------
Cash and cash equivalents, end of period                    $     1,459,720               $        127,260
                                                            ===============               ================


















See accompanying notes.

</TABLE>
<PAGE>

                                AeroCentury Corp.
                          Notes to Financial Statements
                                  June 30, 1998
                                   (Unaudited)


1.   Basis of presentation

     AeroCentury Corp. (the "Company") was incorporated in the state of Delaware
on February 28, 1997. The Company 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").
A  Registration  Statement  on Form S-4 for the  proposed  Consolidation  became
effective on September 23, 1997 and the  Consolidation  was effective January 1,
1998. The Company intends to continue in the aircraft  leasing business in which
the  Partnerships  engaged  and  plans to use  leveraged  financing  to  acquire
additional aircraft assets on lease.

     Because  greater than 90% of the limited  partnership  units of each of the
Partnerships   agreed  to  the   Consolidation,   it  has  been   treated  as  a
pooling-of-interests  under generally  accepted  accounting  principles with the
assets and liabilities of the combining  entities recorded at historical cost on
the  Consolidation  date.  On January  16,  1998,  the Company was listed on the
American Stock Exchange under the symbol ACY.

     The accompanying  balance sheets at June 30, 1998 and December 31, 1997 and
statements of  operations  and cash flows for the six months ended June 30, 1998
and the period  from  inception  (February  28,  1997) to June 30,  1997 and the
quarters  ended June 30, 1998 and 1997 reflect all  adjustments  (consisting  of
only  normal  recurring  accruals)  which are,  in the  opinion of the  Company,
necessary  for a fair  presentation  of the  financial  results.  The results of
operations  of such  periods  are  not  necessarily  indicative  of  results  of
operations for a full year.

     Organization and capitalization

     At December 31, 1997, all of the Company's  outstanding  stock was owned by
JetFleet  Management Corp.  ("JMC"), a California  corporation formed in January
1994. On January 1, 1998,  1,456,557  additional  common shares were issued as a
result of the Consolidation.

     JMC is an integrated aircraft management, marketing and financing business.
Prior to the Consolidation,  JMC managed the aircraft assets of the Partnerships
on behalf of their general partners and limited  partners.  JMC also manages the
aircraft  assets  of  JetFleet  III  and   AeroCentury   IV,  Inc.,   California
corporations which are subsidiaries of JMC.

     On April 17, 1998, in connection with the adoption of a shareholder  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  shareholders  of record as of April 23,
1998, entitling each shareholder 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
shareholder.



<PAGE>

                                AeroCentury Corp.
                          Notes to Financial Statements
                                  June 30, 1998
                                   (Unaudited)


1.    Basis of presentation (continued)

     Aircraft and aircraft  engines under operating leases and aircraft held for
operating leases

     The  Company's  interests in aircraft and aircraft  engines are recorded at
cost, which includes  acquisition costs and loan fees.  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.  The
depreciable  base of the assets acquired by the Company in the  Consolidation is
equal to the net book value of the assets at December 31, 1997.

     Income taxes

     The Company follows the liability  method of accounting for income taxes as
required by the  provisions of Statement of Financial  Accounting  Standards No.
109 - Accounting for Income Taxes.

     Cash and cash equivalents

     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

     As of June 30, 1998 the Company held deposits which  represent  maintenance
reserves  collected  from  lessees  and  interest  earned  on  those  funds,  as
applicable.  This amount is not  included in the cash  balance for  statement of
cash flow purposes.

     Use of estimates

     The  preparation  of financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions that affect certain  reported amounts and disclosures.  Accordingly,
actual results could differ from those estimates.

     Maintenance reserves

     All  aircraft  are  operated  pursuant to triple net leases under which the
lessee is responsible  for maintenance  and overhaul,  insurance,  and operating
costs. In some cases,  reserves are collected from the lessee based on estimated
maintenance cost. Annually, management reviews the level of maintenance reserves
collected  from  lessees for each asset,  as  applicable,  in order to determine
whether reserves  collected in the future should be adjusted based on changes in
estimated costs.
<PAGE>

                                AeroCentury Corp.
                          Notes to Financial Statements
                                  June 30, 1998
                                   (Unaudited)


     
     2. Aircraft and aircraft  engines under operating  leases and aircraft held
for operating leases.

     There were no asset acquisitions during the quarter ended June 30, 1998.

     3. Notes payable

     In connection  with its purchase of the Shorts SD-360 during March 1998 the
Company borrowed $866,670 from an affiliate and issued a secured promissory note
which bears interest at the rate of 12% per annum,  payable  monthly in arrears,
and is due on March 31, 1999, but may be prepaid without penalty at any time.

     4. Credit facility

     On June 30,  1998 the  Company  obtained  a $15  million  revolving  credit
facility to acquire  turboprop  aircraft  and engines for lease.  The  facility,
which expires on June 30, 2000, bears interest at either prime or LIBOR plus 200
basis  points and may be renewed  annually.  The facility may be expanded to $30
million with  participation of additional banks. As of June 30, 1998, no amounts
were outstanding under the credit facility.


<PAGE>

                                AeroCentury Corp.
                          Notes to Financial Statements
                                  June 30, 1998
                                   (Unaudited)

     5. Income Taxes

     The items comprising income tax expense are as follows:
<TABLE>
<S>                                                                        <C>
 
     Current tax provision:
         Federal                                                           $                -
         State                                                                              -
                                                                           ------------------ 
         Current tax provision                                                              -
                                                                           ------------------ 
     Deferred tax provision:
         Federal                                                                      297,970
         State                                                                         51,130
                                                                           ------------------
         Deferred tax provision                                                       349,100
                                                                           ------------------
     Total provision for income taxes                                      $          349,100
                                                                           ================== 

     Total income tax expense differs from the amount which would be provided by
applying the statutory federal income tax rate to pretax earnings as illustrated
below:

     Income tax expense at
           statutory federal income tax rate                               $          297,970
     State taxes net of federal benefit                                                51,130
                                                                           ------------------
     Total income tax expense                                              $          349,100
                                                                           ==================

     Temporary  differences and  carryforwards  which gave rise to a significant
portion of deferred tax assets and liabilities as
of June 30, 1998 are as follows:
 
     Deferred tax assets:
         Amortization of organizational costs                              $           81,620
         Maintenance reserves                                                         116,170
         Prepaid rent                                                                  33,280
         Net operating loss carryforwards                                              45,480
                                                                           ------------------  
            Net deferred tax assets                                                   276,550
         
     Deferred tax liabilities -                                              
         Depreciation on aircraft and engines                                      (3,025,900)
                                                                           ------------------
            Net deferred tax liability                                     $       (2,749,350)
                                                                           ==================
</TABLE>

     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. The Company's net operating losses may
be carried forward for fifteen years and expire in 2012.
<PAGE>

                                AeroCentury Corp.
                          Notes to Financial Statements
                                  June 30, 1998
                                   (Unaudited)


     6. Related party transactions

     The  Company's   portfolio  of  leased   aircraft  assets  is  managed  and
administered  under the terms of a  management  agreement  with JMC.  Under this
agreement, JMC receives a monthly management fee based on the net asset value of
the assets under  management.  In addition,  JMC may receive a brokerage fee for
locating  assets for the  Company,  provided  that such fee is not more than the
customary and usual  brokerage fee that would be paid to an  unaffiliated  party
for such a transaction,  and provided further that the aggregate  purchase price
including  chargeable  acquisition  costs and any brokerage fee shall not exceed
the fair market value of the asset based on appraisal.

     In March 1998,  the Company  acquired an aircraft on lease using cash and a
loan of $866,670 from an affiliate.

     7. Pro forma selected financial information for 1997

     Following is pro forma condensed  information  giving effect to the January
1, 1998 Consolidation as if it had been completed on January 1, 1997.

<TABLE>
<CAPTION>
                                                       Six months ended            Quarter ended
Summary of Operations:                                    June 30, 1997            June 30, 1997
<S>                                                          <C>                      <C>

Revenues                                                     $1,680,600                 $832,320
Net income                                                     $610,740                 $327,340
Earnings per share                                                $0.38                    $0.20
Number of common shares outstanding                           1,606,557                1,606,557

Summary Balance Sheet:                                    June 30, 1997

Total assets                                                $18,445,090
Total liabilities                                             3,982,340
                                                            -----------
Shareholders' equity                                        $14,462,750
                                                            ===========
</TABLE>

     The above results include pro forma adjustments for management fees and for
depreciation expense.

<PAGE>


     Item 2.  Management's  Discussion  and Analysis of Financial  Condition and
Results of Operation

Liquidity and Capital Resources
 
     During the six months ended June 30, 1998, the Company's  primary source of
liquidity was cash flow from operating  leases.  In connection with the purchase
of an aircraft in March 1998,  the Company  borrowed  $866,670  and issued a 12%
note due March 31, 1999.  The Company  plans to use its net cash flow to pay the
note interest and principal, which may be prepaid without penalty.
 
     On June 30,  1998,  the  Company  obtained a $15 million  revolving  credit
facility to finance the acquisition of turboprop aircraft and engines for lease.
The  facility may be expanded to $30 million with  participation  of  additional
banks.  As of June 30,  1998,  no  amounts  were  outstanding  under the  credit
facility.
 
Results of Operations
 
     The Company had no significant  operations  during first six months of 1997
other than incurring costs in connection with the proposed Consolidation.
 
     On a pro forma basis, giving effect to the January 1, 1998 Consolidation as
if it had been completed on January 1, 1997, the Company would have had revenues
of  $1,680,600  and  $832,320  and net income of $610,740  ($0.38 per share) and
$327,340   ($0.20)  for  the  six  months  and  quarter  ended  June  30,  1997,
respectively,  versus  revenues of  $1,696,250  and  $874,330  and net income of
$527,050 ($0.33 per share) and $269,020 ($0.17 per share) for the six months and
quarter ended June 30, 1998, respectively. Pro forma interest income for the six
month and three month periods  ended June 30, 1997,  is higher by  approximately
$54,000 and $24,000, respectively,  versus 1998 because of a finance lease which
expired in June 1997. The 1997 higher revenues are partially offset by increased
rent income of approximately  $69,000 in 1998 versus 1997 due to the purchase of
an additional aircraft on lease in early March 1998. Depreciation and management
fees are approximately  $36,000 higher in 1998 versus pro forma amounts for 1997
also because of the 1998 aircraft acquisition.
 
Factors that May Affect Future Results
 
     Certain  statements  contained  in this  report  and,  in  particular,  the
discussion regarding the Company's beliefs, plans, objectives,  expectations and
intentions  regarding  the  Company's  ability  to meet cash flow  requirements,
obtain  additional  acquisition  or term  indebtedness,  and acquire  additional
assets in the  "Management's  Discussion  and Analysis or Plan of Operation" are
forward-looking statements.  While the Company believes that such statements are
accurate,  the Company's business is dependent upon general economic conditions,
particularly  those that affect the demand for  turboprop  aircraft and engines,
including  competition for turboprop and other  aircraft,  and future trends and
results cannot be predicted with certainty.  The Company's  actual results could
differ materially from those discussed in such forward looking  statements.  The
cautionary  statements made in this Report should be read as being applicable to
all related  forward-looking  statements  wherever  they appear in this  Report.
Factors  that  could  cause or  contribute  to such  differences  include  those
discussed below.
 
     Risks of Debt Financing.  The Company's use of acquisition  financing under
its newly-obtained  revolving credit agreement for a maximum of $15 million will
subject the Company to increased  risks of leveraging.  The revolving loans will
be secured by the Company's  currently  unleveraged assets as well as the assets
to be acquired  with the  financing.  Any  default  under the  revolving  credit
agreement  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 the revolving  loans from proceeds of subsequent  term
debt or equity financings.  Such replacement financing would provide the Company
with more favorable  long-term repayment terms and also would permit the Company
to make  further  draws under the  revolving  credit line 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  line of
credit. While the Company intends to request an increase in the revolving credit
facility to $30 million upon reaching the current maximum $15 million  revolving
credit  limit,  such an  increase is  dependent  upon the ability of the current
revolving  credit lender  ("Lender") to find additional loan  participants,  and
there is no assurance that such participants will be located by the Lender.
 
     The revolving line of credit has an initial term of two years, renewable at
the  sole  discretion  of  Lender  and its  participants,  if any.  There  is no
assurance that the line of credit will be renewed.  If the revolving loan is not
renewed by the  Lender and its  participants,  then all  indebtedness  under the
revolving loan agreement will become  immediately  due and payable.  There is no
assurance that the Company will have adequate replacement  financing in place in
order to meet such accelerated repayment obligations.
 
     Acquisition of Additional  Assets.  The Company intends to use the proceeds
of its revolving credit facility to acquire additional assets for the purpose of
generating income for the Company.  The Company anticipates that it will be able
to expend the entire net  financing  proceeds on the  acquisition  of additional
assets on terms  favorable to the Company,  but the Company has not entered into
any contracts for acquisition of any assets,  and there is no assurance that the
Company will be able to purchase assets or lease such assets on favorable terms.
 
     Reliance on JMC.  All  management  of the Company  will be performed by JMC
pursuant to a  Management  Agreement  between  JMC and the  Company  which has a
20-year term and provides for an asset-based  management  fee. JMC will not be a
fiduciary  to the  Company or its  stockholders.  The Board of  Directors  will,
however,  have ultimate control and supervisory  responsibility over all aspects
of  the  Company  and  will  owe  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.  There may,
however, be conflicts of interest arising from such dual roles.
 
     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.  Many 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.
 
     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
re-lease or resell the asset  after the  expiration  of the initial  lease term.
Some of the factors that have an impact on the  Company's  ability to release or
re-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
marketable  condition as required  under the lease.  If the Company is unable to
remarket or sell 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.
 
     Raytheon Lease Renewal.  Three Dash-7  aircraft in the Company's  portfolio
are leased to a subsidiary of Raytheon  Service Company and are used by Raytheon
to  provide  transportation  and  support  services  to the  U.S.  Army  under a
government contract. This aircraft lease expires in September 1998, but Raytheon
has a two-year  renewal  option,  exercisable on or before the later of (i) July
30, 1998 or (ii) notice to Raytheon of renewal of Raytheon's prime contract with
the U.S. Army. If the lease is not renewed, then the Company will be required to
remarket those aircraft. Any re-lease may require some refurbishment,  which may
be at the  Company's  expense  even if the  aircraft  is  returned  by lessee in
complete  compliance with the lease. While such refurbishment is being performed
and until an aircraft is delivered to a new lessee, the Company may experience a
loss of revenue.  The Company  believes  that in the event of  non-renewal  with
respect to any of the leases,  the notice  period will  provide the Company with
sufficient time to locate a new lessee on favorable lease terms. There can be no
assurance,  however, that the Company will not experience some adverse effect on
its revenue and expenses as a result of the non-renewal of the Raytheon lease.
 
     Lessee  Credit Risk.  If a lessee  defaults  upon his  obligations  under a
lease,  the Company may be limited in its ability to enforce  remedies.  Most of
the  Company's  lessees  are  small  domestic  and  foreign  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 still be
further  adversely  affected by a  declaration  of  bankruptcy  by a  defaulting
lessee.

     International  Risks.  Leases with  foreign  lessees  may present  somewhat
greater  credit risks because  certain  foreign laws,  regulations  and judicial
procedures may not be as protective of lessor rights as those which apply in the
United  States.  Although the Company's  current  leases are all payable in U.S.
dollars,  in the future,  it may agree to leases which permit payment in foreign
currency, which would subject such foreign currency-denominated lease revenue to
monetary risk due to currency  fluctuations.  The Company could also  experience
collection  problems  related to the enforcement of its lease  agreements  under
foreign  local laws and the  attendant  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 reliable  registration  or other
recording  system  with which to locally  establish  the  Company's  interest in
equipment, and related leases. This could add difficulty in recovering an engine
in the event that a foreign lessee defaults.

     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 substantially decline.

     Competition.  The  aircraft  leasing  industry is highly  competitive.  The
Company will compete 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 has a  competitive  advantage  in its  niche  market of  financing  used
turbo-prop  aircraft to 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 that of the
major air carriers,  is not well served by the Company's  larger  competitors in
the  aircraft  industry.  JMC,  the  management  company  for the  Company,  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, could be held liable for injuries or damage to property caused by its
assets. Though some protection may be provided by the United States Aviation Act
with  respect  to its  aircraft  assets,  it is 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.  Though the Company may carry
insurance or require a lessee to insure  against a risk,  some risks of loss may
not be insurable.  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.

     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 will involve a number of substantial risks. Demand for lease or
purchase of the assets depends on the economic condition of the airline industry
which is in turn highly  sensitive to general  economic  conditions.  Ability to
re-lease or resell  equipment at  acceptable  rates may depend on the demand and
market values at the time of re-lease or resale.  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.
The demand for and resale  value of many types of older  aircraft  in the recent
past has been  depressed  by such  factors  as airline  financial  difficulties,
increased  fuel  costs,  the number of new  aircraft  on order and the number of
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 aircraft engine types
should decline in value. The recent  introduction of "regional jets" to serve on
short routes  previously  thought to be economical  only for turboprop  aircraft
operation  could decrease the demand for turboprop  aircraft,  while at the same
increasing  the supply of used  turboprop  aircraft.  This could result in lower
lease rates and values for the Company's existing turboprop aircraft.

     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 will be subject to certain risks.  First,  lessees in
the regional air carrier market include a number of 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.  This market segment is also
characterized by low entry costs, and thus, there is strong  competition in this
industry  segment  from  start-ups  as well as  major  airlines.  Thus,  leasing
transactions  with these types of lessees  results in a generally  higher  lease
rate on aircraft,  but may entail  higher risk of default or lessee  bankruptcy.
The Company  will  evaluate the credit risk of each lessee  carefully,  and will
attempt to obtain  third  party  guaranties,  letters of credit or other  credit
enhancements,  if it deems such is 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 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  1.6 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.

     Year  2000  Considerations.   The  Company's  internal  and  administrative
operations are not highly dependent on advanced  technological computer or other
electronic systems,  and,  consequently,  management believes that the Company's
exposure  to loss as a result of Year 2000 issues is not  significant.  Further,
management  believes that the electronic systems used in the equipment leased by
the  Company  to  lessees  will not be  affected  by the Year 2000  issue,  and,
therefore,  this  issue  should not  directly  affect  the  Company's  financial
performance  or the  lessees'  ability  to comply  with their  respective  lease
obligations.  Of course, to the extent that a lessee has Year 2000 problems that
significantly  adversely  affect its overall  financial  status,  such  material
problems may affect the lessee's  operations and increase the risk of default by
a lessee  under its lease with the  Company.  Furthermore,  Year 2000 issues may
have a material  impact on FAA  operations  and the  operations  of certain  air
carriers,  which in turn  would  negatively  affect  the  aircraft  industry  in
general.


Part II.  Other Information

Item 1.  Legal Proceedings

         No disclosure required.

Item 2.  Changes in Securities

         No disclosure required.


Item 3.  Defaults Upon Senior Securities

         No disclosure required.


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

         No disclosure required.


Item 5.  Other Information

         No disclosure required.


Item 6.  Exhibits and Reports on Form 8-K

         Exhibits

         (a)  Exhibit 27.  Financial Data Schedule


         (b) Reports on Form 8-K

     On May 18, 1998, the Company filed a Report on Form 8-K with the Commission
disclosing the  resignation of Vocker  Kristofferson  & Co., as auditors for the
Company.
 
     On May 19, 1998, the Company filed a Report on Form 8-K with the Commission
disclosing the engagement of Arthur Andersen, LLP, as auditors for the Company.

<PAGE>



                                   SIGNATURES

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.

                            AeroCentury Corp.

July 27, 1998                By:  /s/ Neal D. Crispin                          
Date                              -----------------------------------------
                                  Neal D. Crispin, Director, President 
                                  and Chairman of the Board of Directors
                                  of the Registrant(Principal Executive Officer)



July 27, 1998                By: /s/ Toni M. Perazzo
Date                             -------------------------------------------
                                 Toni M. Perazzo, Director, Vice President - 
                                 Finance and Secretary of the Registrant
                                 (Principal Financial and Accounting Officer)



July 27, 1998                By: /s/ Marc J. Anderson
Date                             ------------------------------------------
                                  Marc J. Anderson, Director, Chief Operating 
                                  Officer, Senior Vice President