SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-QSB
(Mark One)
[ X ] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the quarterly period ended June 30, 2002

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


Commission File Number:  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 Act:  None

Check whether the Issuer: (1) 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
   ---    ---

As of August 13, 2002 the Issuer had 1,606,557 Shares of Common Stock
outstanding, of which 63,300 are held as Treasury Stock.

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








<PAGE>



                                     PART I

                              Financial Information

Forward-Looking Statements

This Quarterly Report on Form 10-QSB 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 Quarterly 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 2 "Management's Discussion and
Analysis or Plan of Operation -- Liquidity and Capital Resources," statements
regarding the lack of requirement for the Company to make monthly repayments on
the Company's revolving credit facility through December 31, 2002; the adequacy
of cash flow to cover any unanticipated repayment requirements; the adequacy of
the Company's cash flow to meet reasonably expected increases in interest rates
applicable to the Company's credit facility obligations; and the sufficiency of
the Company's cash to meet certain guaranty payments under a guaranty delivered
to a vendor to a lessee; (ii) in Item 2 "Management's Discussion and Analysis or
Plan of Operation -- Outlook," statements regarding the Company's belief that it
will have sufficient flexibility to lease assets for terms which will enable the
Company to maintain compliance with its credit facility covenants; the Company's
anticipation that it will not need to make any repayments under its credit line;
the sufficiency of the Company's cash flow to fund any unanticipated necessary
principal payments on its credit facility through December 2002; the Company's
anticipation that any acquisitions made in 2002 will be financed by the
revolving credit facility; the Company's expectation that a certain aircraft
will be delivered to a lessee in early September 2002; the anticipated use of
revolving credit facility financing to repay special asset-based financing on an
aircraft being returned by the lessee; the anticipated re-lease of that aircraft
within a six-month "remarketing period", and the belief that a sale of such
aircraft would result in proceeds sufficient to repay the balloon payment due
under its asset-based financing; and the Company's expectation regarding rental
income and net income for the comparable periods in 2002 versus 2001; and (iii)
in Item 2 "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
anticipated lack of need by the Company to make repayments on the Company's
credit facility through December 2002; the Company's intention to repay a
portion of the revolving loans from proceeds of subsequent debt or equity
financings; the Company's anticipated acquisition of primarily used aircraft;
the attractiveness of overseas markets; JMC's competitiveness due to its
experience and operational efficiency in financing transaction types desired by
regional air carriers and its global reputation; 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 or, if necessary, negotiate extensions of
waivers of such compliance; 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
Quarterly Report should be read as being applicable to all related
forward-looking statements wherever they appear herein. All forward-looking
statements and risk factors included in this document are made as of the date
hereof, based on information available to the Company as of the date hereof, and
the Company assumes no obligation to update any forward-looking statement or
risk factor. You should consult the risk factors listed from time to time in the
Company's filings with the Securities and Exchange Commission and, in
particular, its Report on Form 10-KSB for the fiscal year ended December 31,
2001.



<PAGE>



Item 1.       Financial Statements

                                AeroCentury Corp.
                           Consolidated Balance Sheet


                                     ASSETS
<TABLE>
<S>                                                                               <c>
                                                                                      Unaudited
                                                                                      June 30,

                                                                                        2002

Assets:
     Cash and cash equivalents                                                    $     2,343,110
     Deposits                                                                           6,282,580
     Accounts receivable                                                                  866,130
     Aircraft and aircraft engines on operating leases,
        net of accumulated depreciation of $16,784,880                                 55,477,910
     Note receivable                                                                       43,410
     Prepaid expenses and other                                                           668,490
                                                                                  ---------------

Total assets                                                                      $    65,681,630
                                                                                  ===============


                      LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:
     Accounts payable and accrued expenses                                        $     1,291,790
     Notes payable and accrued interest                                                34,447,790
     Maintenance reserves and accrued costs                                             4,903,610
     Security deposits                                                                  1,869,740
     Prepaid rent                                                                         171,690
     Deferred taxes                                                                     3,570,800
                                                                                  ---------------

Total liabilities                                                                      46,255,420
                                                                                  ---------------

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                                                                  6,107,470
                                                                                  ---------------

                                                                                       19,930,280
     Treasury stock at cost, 63,300 shares                                              (504,070)
                                                                                  ---------------

Total stockholders' equity                                                             19,426,210
                                                                                  ---------------

Total liabilities and stockholders' equity                                        $    65,681,630
                                                                                  ===============

The accompanying notes are an integral part of these statements.

</table>
<PAGE>



                                AeroCentury Corp.
                        Consolidated Statements of Income

<table>
<caption>
                                                 For the Six Months                    For the Three Months
                                                   Ended June 30,                         Ended June 30,
<S>                                     <C>                 <C>                 <C>               <C>

                                              2002               2001                 2002                2001
                                              ----               ----                 ----                ----
                                                      Unaudited                              Unaudited
Revenues:

     Rent income                        $     4,423,540     $     5,391,420     $     2,229,900    $      2,632,330
     Other income                                58,720             184,350              27,270              73,510
                                        ---------------     ---------------     ---------------    ----------------

                                              4,482,260           5,575,770           2,257,170           2,705,840
                                        ---------------     ---------------     ---------------    ----------------
Expenses:

     Management fees                            837,650             890,810             416,990             442,800
     Depreciation                             1,366,050           1,395,400             685,340             697,700
     Interest                                   937,240           1,571,520             469,730             727,650
     Maintenance                                225,510            (12,130)             149,430            (14,270)
     Professional fees and general
        and administrative                      258,340             213,900             129,580             108,650
                                        ---------------     ---------------     ---------------    ----------------

                                              3,624,790           4,059,500           1,851,070           1,962,530
                                        ---------------     ---------------     ---------------    ----------------

Income before taxes                             857,470           1,516,270             406,100             743,310

Tax provision                                   292,880             502,130             141,120             238,550
                                        ---------------     ---------------     ---------------    ----------------

Net income                              $       564,590     $     1,014,140     $       264,980    $        504,760
                                        ===============     ===============     ===============    ================

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

Basic earnings per share                $          0.37     $          0.66     $          0.17    $           0.33
                                        ===============     ===============     ===============    ================


The accompanying notes are an integral part of these statements.


</table>


<PAGE>



                                AeroCentury Corp.
                      Consolidated Statements of Cash Flows

<table>
<caption>

                                                                                 For the Six Months Ended June 30,
                                                                                      2002                2001
                                                                                      ----                ----
                                                                                             Unaudited
<S>                                                                             <C>                <C>


Net cash provided by operating activities                                       $     2,177,580    $      1,208,920

Investing activity -
   Purchase of aircraft and aircraft engines                                          (316,600)           (275,380)
                                                                                ---------------    ----------------
Net cash used in investing activity                                                   (316,600)           (275,380)

Financing activities:
   Payments received on note receivable                                                  25,160              24,430
   Repayment of notes payable                                                       (2,223,190)         (3,169,870)
                                                                                ---------------    ----------------
Net cash used in financing activities                                               (2,198,030)         (3,145,440)

Net decrease in cash and cash equivalents                                             (337,050)         (2,211,900)

Cash and cash equivalents, beginning of period                                        2,680,160           3,184,470
                                                                                ---------------    ----------------

Cash and cash equivalents, end of period                                        $     2,343,110    $        972,570
                                                                                ===============    ================


The accompanying notes are an integral part of these statements.

</table>
<PAGE>



                                AeroCentury Corp.
                   Notes to Consolidated Financial Statements
                                  June 30, 2002

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 June 30, 2002, the Company held security deposits of $1,869,740,
refundable maintenance reserves received from lessees of $2,037,570 and
non-refundable maintenance reserves of $2,375,270.



<PAGE>



                                AeroCentury Corp.
                   Notes to Consolidated Financial Statements
                                  June 30, 2002

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. 144, "Accounting for the Impairment or Disposal of Long-lived Assets,"
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 June 30, 2002, the Company had
accrued maintenance costs of approximately $819,000 related to several of its
aircraft.

<page>

                                AeroCentury Corp.
                   Notes to Consolidated Financial Statements
                                  June 30, 2002

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.

         The most significant estimates with regards to these financial
statements are the residual values of the aircraft, the useful lives of the
aircraft, and the estimated amount and timing of cash flow associated with each
aircraft that are used to evaluate impairment, if any.

(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 three months and six
months ended June 30, 2002 and 2001.

(l)      Recent Accounting Pronouncements

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 adopted 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 has not had a material  effect
on the Company's results of operations or financial position.



<PAGE>



                                AeroCentury Corp.
                   Notes to Consolidated Financial Statements
                                  June 30, 2002

2.       Aircraft and Aircraft Engines On Operating Leases

         At June 30, 2002, 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 or sell any aircraft during the first
six months of 2002, but did capitalize a total of $316,600 of equipment added to
several aircraft.

         The Company leased its two DHC-7 aircraft in May 2002, to a regional
carrier in Haiti, for a term of 42 months.

         The lease for the Company's Fairchild Metro III remains in effect from
its expiration date of March 30, 2002 until the pre-return inspection of the
aircraft is complete, which the Company expects to occur during the third
quarter of 2002.

         During May 2002, the lessee for two of the Company's Fokker 50 aircraft
extended one lease from April 30, 2002 to November 30, 2002, with an option to
extend for an additional year, and re-leased the second aircraft, which had been
off lease, for a one-year term.

         Under the terms provided therein, the leases for two of the Company's
other Fokker 50 aircraft remained in effect from their expiration date of
January 13, 2002, until their pre-return inspections were completed in July
2002. The lessee continued to pay rent through mutually-agreed dates in June.
During 2001, the Company conducted a preliminary inspection of the aircraft and
concluded that certain components would be in better condition than required by
the return provisions of the leases. In such a situation, the leases stipulated
that the Company was required to compensate the lessee. As a result, during
2001, the Company accrued an estimate of $609,000 of compensation related to
these two aircraft. As discussed in Note 8, both aircraft were returned to the
Company in July 2002, and the Company and the lessee agreed on a final amount of
compensation.

3.       Note Receivable

         At June 30, 2002, 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 between 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 is being repaid through increased
rent during the remainder of the lease term, which expires on April 30, 2003.

4.       Notes Payable and Accrued Interest

         The Company has a revolving credit facility totaling $50 million. The
facility, which expires on June 28, 2003, bore interest through March 30, 2002,
at the Company's option, at either (i) prime or (ii) LIBOR plus a margin of 200
to 250 basis points depending on certain financial ratios. On March 7, 2002, the
Company and its lenders agreed to modify certain financial covenants contained
in the loan agreement for the 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. The changes are
in effect through December 31, 2002. In return for granting such changes, the
Company's lenders increased 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.


<PAGE>



                                AeroCentury Corp.
                   Notes to Consolidated Financial Statements
                                  June 30, 2002

4.       Notes Payable and Accrued Interest (continued)

         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 June 30, 2002, the Company was in compliance with all
such covenants. As of June 30, 2002, $24,925,000 was outstanding under the
credit facility, and interest of $165,570 was accrued, using a combination of
prime and LIBOR rates.

         As discussed in Note 1, in 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 June 30, 2002 was $6,530,770 and interest of $8,480 was accrued.
As of June 30, 2002, the Company was in compliance with all covenants of the
loan agreements pertaining to the financing of these two aircraft.

         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, which was 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. The bank has agreed that the six month period will not
begin until the aircraft are returned and accepted by the Company because, under
the lease terms, the lessee continued to pay rent after the original expiration
date. The lessee redelivered the aircraft to the Company during July 2002. As
discussed in Note 8, during the third quarter of 2002, the Company used funds
from its revolving credit facility to repay the outstanding bank financing
related to one of the aircraft and transferred title to the aircraft from
AeroCentury LLC to AeroCentury Corp.

         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. The 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 June 30, 2002 was $2,810,140
and interest of $7,830 was accrued. As of June 30, 2002, the Company was in
compliance with all covenants of the loan agreements pertaining to the financing
of this aircraft.



<PAGE>



                                AeroCentury Corp.
                   Notes to Consolidated Financial Statements
                                  June 30, 2002

5.       Income Taxes

         The items comprising income tax expense are as follows:
<table>
<caption>
                                                                               For the Six Months Ended June 30,
<S>                                                                          <C>                <C>


                                                                                    2002                2001
                                                                                    ----                ----
         Current tax provision:
              Federal                                                        $              -    $        99,870
              State                                                                     6,050              1,890
              Foreign                                                                  72,130             79,160
                                                                              ---------------    ---------------

              Current tax provision                                                    78,180            180,920
                                                                             ----------------    ---------------

         Deferred tax provision/(benefit):
              Federal                                                                 216,960            330,930
              State                                                                   (2,260)            (9,720)
                                                                             ----------------    ---------------

              Deferred tax provision                                                  214,700            321,210
                                                                             ----------------    ---------------

         Total provision for income taxes                                    $        292,880    $       502,130
                                                                             ================    ===============

         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 Six Months Ended June 30,
                                                                                    2002                2001
                                                                                    ----                ----
         Income tax expense at
               statutory federal income tax rate                             $        291,540    $       515,530
         State taxes net of federal benefit                                             7,260             14,160
         Tax refunds                                                                        -           (15,470)
         Tax rate differences                                                         (5,920)           (12,090)
                                                                             ----------------    ---------------

         Total income tax expense                                            $        292,880    $       502,130
                                                                             ================    ===============
</table>

         Temporary differences and carryforwards that gave rise to a significant
portion of deferred tax assets and liabilities as of June 30, 2002 are as
follows:

 Deferred tax assets:
      Organizational costs                                $          7,700
      Maintenance reserves                                         760,340
      Foreign tax credit carryover                                 139,330
      Deferred maintenance                                         168,760
      Net operating loss carryover                                  77,640
      Prepaid rent and other                                        60,100
                                                          ----------------
          Deferred tax assets                                    1,213,870
 Deferred tax liabilities:
      Depreciation on aircraft and aircraft engines            (4,514,750)
      Other                                                      (269,920)
                                                          ----------------

          Net deferred tax liabilities                    $    (3,570,800)
                                                          ================

<PAGE>




                                AeroCentury Corp.
                   Notes to Consolidated Financial Statements
                                  June 30, 2002

5.       Income Taxes (continued)

         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 excess foreign tax credits may be
carried back to the two preceding tax years and then forward to the five
succeeding tax years, expiring at the end of 2006. Net operating losses may be
carried back to the five preceding tax years and then forward to the twenty
succeeding tax years, expiring at the end of 2022.

6.       Commitments and Contingencies

         In connection with the re-lease of two of the Company's aircraft, the
Company has guaranteed, up to a maximum of $150,000, the lessee's payments under
a contract with a third party vendor for spare parts. The lessee has agreed to
reimburse the Company for any payments made under the guarantee, upon demand by
the Company. If the lessee does not make such reimbursements or does not comply
with any provisions of the parts agreement, the Company may declare an event of
default under the leases.

7.       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 $837,650 and $890,810 during the six months ended June 30, 2002 and
2001, respectively, and $416,990 and $442,800 during the quarters ended June 30,
2002 and 2001, respectively. Because the Company did not acquire or sell any
aircraft during the first six months of 2002 or 2001, no acquisition or
remarketing fees were paid to JMC.

         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
June 30, 2002, 37,833 such options had been exercised.



<PAGE>



                                AeroCentury Corp.
                   Notes to Consolidated Financial Statements
                                  June 30, 2002

8.       Subsequent Events

         In July 2002, two of the Company's Fokker 50 aircraft were returned by
the lessee. At that time, the Company determined that the amount of compensation
due to the lessee, pursuant to the leases and based on the condition of certain
components of the aircraft, was approximately $395,000. Because the Company had
accrued an estimate of $609,000 during 2001, it reversed the difference of
approximately $214,000 during the third quarter of 2002. Also in July 2002, the
Company used funds from its revolving credit facility to repay the outstanding
bank financing related to one of the aircraft and transferred title to that
aircraft from AeroCentury LLC to AeroCentury Corp. The Company and a new
customer signed a term sheet for a 38-month lease for the aircraft in June 2002,
and the Company subsequently received a security deposit from the lessee.
Delivery of the aircraft is anticipated to occur in early September 2002. The
re-lease of the aircraft will allow the Company to include the aircraft in the
collateral base for its revolving credit facility.

         The second aircraft remains financed under the terms of the loan
agreement between the lender and the wholly-owned special purpose entity that
holds title to the aircraft, pursuant to provisions permitting a six month
remarketing period upon termination of a lessee's lease, which began in July
2002 (see Note 4).


<PAGE>



Item 2.  Management's Discussion and Analysis or Plan of Operation.

Critical Accounting Policies

In response to the Securities and Exchange Commission's Release No. 33-8040,
"Cautionary Advice Regarding Disclosure About Critical Accounting Policies", the
Company has identified the most critical accounting policies upon which its
financial status depends. It determined the critical principles by considering
accounting policies that involve the most complex or subjective decisions or
assessments. The Company identified its most critical accounting policies to be
those related to lease rental revenue recognition, depreciation policies and
valuation of aircraft.

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.

Depreciation Policies

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.

Valuation of Aircraft

In accordance with Statement of Financial Accounting Standards ("SFAS") No. 144,
"Accounting for the Impairment or Disposal of Long-lived Assets," 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.

Results of Operations

Revenues

The Company had revenues of $4,482,260 and $5,575,770 and net income of $564,590
and $1,014,140 for the six months ended June 30, 2002 and 2001, respectively,
and revenues of $2,257,170 and $2,705,840 and net income of $264,980 and
$504,760 for the three months ended June 30, 2002 and 2001, respectively.

Rent income is approximately $968,000 lower in the six months ended June 30,
2002 versus the six months ended June 30, 2001 primarily due to assets which
came off lease during 2001 and the first half of 2002, some of which were
subsequently re-leased at lower rates, and assets which came off lease during
2001 and 2002 and remained off lease during a portion of the first half of 2002.
Rent income for the three months ended June 30, 2002 was lower by approximately
$402,000 versus the three months ended June 30, 2001 for the same reasons.

Other income was lower by approximately $126,000 and $46,000 during the six
months and three months ended June 30, 2002 versus the six months and three
months ended June 30, 2001, respectively, due to lower interest rates on lower
cash balances.

Expense Items

Management fees, which are calculated on the net book value of the aircraft
owned by the Company, were approximately $53,000 and $26,000 lower in the six
months and three months ended June 30, 2002 versus the six months and three
months ended June 30, 2001, respectively, because the Company did not purchase
any aircraft during 2001 or the first six months of 2002. In addition, the
Company sold one aircraft during the fourth quarter of 2001. Depreciation was
approximately $29,000 and $12,000 lower in the six months and three months ended
June 30, 2002 versus the six months and three months ended June 30, 2001,
respectively, for the same reasons.

Interest expense was approximately $634,000 and $258,000 lower in the six months
and three months ended June 30, 2002 versus the six months and three months
ended June 30, 2001, respectively, because of lower interest rates and a lower
average principal balance during 2002. Maintenance expense was approximately
$238,000 and $164,000 higher in the six months and three months ended June 30,
2002 versus the six months and three months ended June 30, 2001, respectively,
due to maintenance performed on several of the Company's aircraft in connection
with their re-lease to new lessees during the first six months of 2002.
Professional fees and general administrative expenses were approximately $44,000
and $21,000 higher in the six months and three months ended June 30, 2002,
versus the six months and three months ended June 30, 2001, primarily due to
additional aircraft insurance expense as a result of higher insurance premiums,
as well as higher legal and accounting expense. The effect of such increases was
partially offset by decreases in certain other expense categories.

The Company's effective tax rates in the six months and three months ended June
30, 2002 were approximately 34% and 35%, respectively, versus 33% and 32% for
the six months and three months ended June 30, 2001, respectively. 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. The Company has a revolving credit facility
totaling $50 million. The facility, which expires on June 28, 2003, bore
interest through March 30, 2002, at the Company's option, at either (i) prime or
(ii) LIBOR plus a margin of 200 to 250 basis points depending on certain
financial ratios. On March 7, 2002, the Company and its lenders agreed to
modify, through December 31, 2002, certain financial covenants contained in the
loan agreement for the 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 Company's lenders increased 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. To the extent the Company is unable
to successfully negotiate continuing waivers of these covenants beyond December
31, 2002, or if business results do not enable the Company to meet the prior
financial covenants, the Company's financial condition and operating results
could be adversely affected.

The Company's assets, excluding those of AeroCentury LLC and AeroCentury II LLC,
serve as collateral under the revolving credit facility and, in accordance with
the credit agreement, the Company must maintain compliance with certain
financial covenants. The Company made repayments on its facility in the amount
of $1,400,000 and $100,000 in March and April 2002, respectively, because of
certain collateral borrowing base limitations. Based on the current and
projected lease status of the Company's aircraft, the Company does not believe
it will be required to make any additional repayments through December 31, 2002.
If, however, the Company is required to make any such repayments, the Company
believes it will have sufficient cash to do so.

At June 30, 2002, $24,925,000 was outstanding under the credit facility, and
interest of $165,570 was accrued, using a combination of prime and LIBOR rates.
The Company is currently in compliance with all covenants of the revolving
credit facility. The majority of the Company's borrowings are financed using
one-, three- or six-month LIBOR rates. The Company believes it has adequate cash
flow to meet reasonably expected increases in interest rates applicable to its
credit facility obligations.

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
hedge transactions. Because aircraft owners seeking financing generally can
obtain financing through either leasing transactions or traditional secured debt
financings, prevailing interest rates are a significant factor in determining
market lease rates, and market lease rates generally move up or down with
prevailing interest rates, assuming supply and demand of the desired equipment
remain constant.
 However, because lease rates for the Company's assets typically are fixed under
existing leases, the Company usually 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.

In 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 note bears fixed interest at 8.04% through
February 15, 2002 and a floating rate thereafter. The balance of the note at
June 30, 2002 was $6,530,770 and interest of $8,480 was accrued. 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, which was
originally August 15, 2002. Under the provisions of the loan agreement, payments
due on the financing are reduced during this six month period. The Company's
lender agreed that the six month period would not begin until the aircraft were
returned and accepted by the Company because, under the lease terms, the lessee
continued to pay rent after the original expiration date. The lessee redelivered
the aircraft to the Company in July 2002. At that time, the Company determined
that the amount of compensation due to the lessee, pursuant to the leases and
based on the condition of certain components of the aircraft, was approximately
$395,000. Because the Company had accrued an estimate of $609,000 during 2001,
it reversed the difference of approximately $214,000 during the third quarter of
2002 and remitted the compensation payment to the lessee. 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 status of these
two aircraft.

A similar special purpose entity 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. The 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 June 30,
2002 was $2,810,140 and interest of $7,830 was accrued. The Company is in
compliance with all covenants of the loan agreement 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
through November 2005. 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.

In connection with the re-lease of two of the Company's aircraft, the Company
has guaranteed, up to a maximum of $150,000, the lessee's payments under a
contract with a third party vendor for spare parts. The lessee has agreed to
reimburse the Company for any payments made under the guarantee, upon demand by
the Company. If the lessee does not make such reimbursements or does not comply
with any provisions of the parts agreement, the Company may declare an event of
default under the leases. Based on the lessee's credit history and its financial
condition, the Company believes it is unlikely that it will have to perform
under the guaranty. If, however, the Company does have to perform, the Company
believes it will have sufficient cash to fund any necessary payments.

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 six months ended June 30, 2002
versus the six months ended June 30, 2001 increased by approximately $969,000.
The increase from year to year was due primarily to the effect of the change in
deposits, accounts payable and accrued expenses, accrued interest on notes
payable and security deposits. The effect of these changes was only partially
offset by the negative effect of the change in net income, accounts receivable,
maintenance deposits and accrued costs, and deferred taxes during 2002 versus
2001.

Specifically, the Company's cash flow from operations for the six months ended
June 30, 2002 consisted of net income of $564,590 and adjustments consisting
primarily of depreciation of $1,366,050, increases in accounts receivable,
accrued interest on notes payable, security deposits and deferred taxes of
$270,260, $160,860, $151,970 and $214,700, respectively, and decreases in
deposits, accounts payable and accrued expenses, and maintenance deposits and
accrued costs, of $704,280, $350,340 and $305,540, respectively.

Specifically, the Company's cash flow from operations for the six months ended
June 30, 2001 consisted of net income of $1,014,140 and adjustments consisting
primarily of depreciation of $1,395,400, an increase in deposits of $637,610, a
decrease in accounts receivable of $157,650, a decrease in accounts payable and
accrued expenses of $1,056,640, and increases in maintenance reserves and
accrued costs and deferred taxes of $140,030 and $321,210, respectively.

The decrease in cash flow used by financing activities from year to year was a
result of lower principal repayments on the Company's indebtedness. The increase
in cash flow used for investing activities during 2002 was due to equipment
added to aircraft already owned by the Company, versus a smaller amount of such
spending the first six months of 2001.

Outlook

Based on the revised terms of the revolving credit facility discussed under
"Liquidity and Capital Resources" above, the Company believes that it will have
sufficient flexibility to lease assets for terms which will enable the Company
to maintain compliance with its credit facility covenants. In addition, due to
the re-lease of several assets during the first six months of 2002, the Company
does not anticipate that it will be required to make any additional principal
repayments under the revolving credit facility through December 31, 2002.

The Company has previously used special purpose asset-based financing for the
acquisition of three aircraft. Although the Company anticipates generating
sufficient cash flow during the remainder of 2002 to fund the equity portion of
a special purpose financing, because assets which were re-leased during the
second quarter of 2002 have increased the collateral available on its revolving
credit facility, the Company anticipates using that facility for any
acquisitions it may make during the remainder of 2002, rather than using special
purpose asset based financing.

As discussed above, in 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, which was originally August 15,
2002. However, because the lessee did not return the aircraft until July 2002
and, under the terms of the lease, continued to make rental payments, the
Company's lender agreed that the six month period would not begin until the
aircraft were returned and accepted by the Company. The Company and a new
customer signed a term sheet for a 38-month lease for the aircraft in June 2002,
and the Company subsequently received a security deposit from the lessee.
Delivery of the aircraft is anticipated to occur in early September 2002. The
re-lease of the aircraft will allow the Company to include the aircraft in the
collateral base for its revolving credit facility.

The Company is currently discussing the re-lease or sale of the second aircraft
with several potential customers. The Company now believes that it is more
likely that the aircraft will be leased rather than sold. Beginning in July
2002, this aircraft is being financed pursuant to provisions permitting a six
month remarketing period which requires a fixed monthly payment using a floating
interest rate and a balloon payment at the end of six months. If the Company
re-leases the aircraft to a new lessee, the Company anticipates using additional
funds from its revolving credit facility to pay the balloon payment and transfer
title of the second aircraft from AeroCentury LLC to AeroCentury Corp. The
Company anticipates being able to re-lease the aircraft within the six month
period. If the Company sells the aircraft, the Company believes any sale would
result in sufficient proceeds to fund the balloon payment.

It is likely that rent income and net income for the second half of 2002 will be
substantially lower than the comparable period in 2001, because several aircraft
have been off-lease or re-leased at lower rates and one aircraft was sold during
2001. It is likely that market lease rates will remain significantly below prior
market levels as a result of downward pressure from low interest rates, a
slowdown in the air carrier industry and the economy as a whole. The extent of
the reduction in revenue and net income will depend on the success of
remarketing aircraft with leases due to expire and how quickly those efforts are
completed.

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, could 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, further reducing earnings.

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 is experiencing a cyclical downturn which began in mid-2001. 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 appears that the downturn has had an impact on some non-U.S.
regional carriers, but it remains to be seen how widespread the impact will be
and how severely such carriers will be affected. 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.

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. At this time, in response to lower
passenger loads, many carriers have reduced capacity, and as a result there has
been a reduced demand for aircraft. As a result, market lease rental rates have
decreased across all aircraft types, including regional aircraft. If reduced
demand remains unchanged for an extended period of time, there could be a
negative effect on aircraft values. Even if the aircraft are not sold by the
Company, a reduced market value for aircraft in the Company's portfolio could
affect the Company's results if the market value falls below the asset's book
value, and the Company determines that a writedown of the asset's value on the
Company's book is appropriate.

One anticipated result of the economic situation is that lessees are likely to
desire shorter-term leases which will give those lessees more 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 revolving 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. While the Company believes it will not be
required to make additional repayments under its revolving credit facility due
to collateral base limitations, 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 these assumptions will turn out to be correct. If
the assumptions do not prove to be true, and the Company has not obtained an
additional 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 revolving credit facility, the 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 debt or equity financings. Such replacement financing 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. JMC is also management company for two other aircraft
portfolio owners, JetFleet III and AeroCentury IV, Inc. ("AeroCentury IV").
JetFleet III and AeroCentury IV are in the liquidation or wrap-up phase.
AeroCentury IV has been selling assets and recently defaulted on certain
obligations to noteholders. The indenture trustee for AeroCentury IV's
noteholders has foreclosed and will sell the remaining two assets. JetFleet III
is compliance with the terms of its trust indenture.

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 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 U.S.
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 U.S. 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, however, no assurance that the lack of
significant competition from the larger aircraft leasing companies will continue
or that the reputation of JMC will continue to be strong in this market segment
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's leases generally require a
lessee to insure against likely risks, there may be certain cases where the loss
is not entirely covered by the lessee or its insurance. Though this is a remote
possibility, an uninsured loss with respect to the equipment, or an insured loss
for which insurance proceeds are inadequate, would result in a possible loss of
invested capital in and any profits anticipated from, such equipment, as well as
a potential claim directly against the Company.

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.

                                     PART II

                                OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K.

(a)      Exhibits.

Exhibit
Number                                       Description

3.1*          Amended and Restated Bylaws of the Company dated January 22, 1999.

3.2*          Certificate of Designation of the Company dated
               April 15, 1998.

3.3**        Amended and Restated  Stockholder  Rights  Agreement  dated
               January 22, 1999.

4.1          Reference is made to Exhibits 3.1, 3.2 and 3.3.

----------

* Incorporated by reference to the same numbered exhibit previously filed with
the Company's Annual Report on Form 10-KSB for the fiscal year ended December
31, 1998.

** Incorporated by reference to Exhibit 1 previously filed with the Company's
Form 8-A/A filed with the Securities and Exchange Commission on February 4,
1999.

(b)      Reports on Form 8-K.

None





<PAGE>



                                   SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                      AEROCENTURY CORP.


Date:    August 13, 2002              By:    /s/ Toni M. Perazzo
                                                -------------------------------
                                                Toni M. Perazzo

                                      Title: Senior Vice President-Finance and
                                             Chief Financial Officer