3




                                  UNITED STATES
                       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, 2005

[ ] 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.
        (Exact name of small business issuer as specified 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)

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

                                      None
                  (Former name, former address and former fiscal year,
                                if changed since last report)

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
    -----    -----

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of August 12, 2005 the Issuer had
1,606,557 Shares of Common Stock, par value $0.001 per share, outstanding, of
which 63,300 are held as Treasury Stock.

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

<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 1 "Financial Statements,"
statements concerning the Company's belief that full adoption of SFAS 153 will
not have an impact on the Company's results; and the expectation that the credit
facility will be renewed on market terms; (ii) in Item 2 "Management's
Discussion and Analysis or Plan of Operation -- Liquidity and Capital
Resources," statements concerning the Company's belief that it will continue to
be in compliance with its credit facility covenants; the expectation that the
credit facility will be renewed on market terms; the Company's belief that it
will have adequate cash flow to meet its ongoing operational needs, including
credit facility repayments; the Company's belief that its assumptions used to
forecast cash flow are reasonable; the Company's expectation regarding the
long-term decline of lease rentals from its current portfolio; (iii) in Item 2
"Management's Discussion and Analysis or Plan of Operation -- Outlook,"
statements concerning the Company's anticipation with respect to approval by the
lenders of a previously acquired aircraft for inclusion in the collateral base
in the third quarter of 2005; and the Company's belief that the Company will
have sufficient cash to fund any required repayments resulting from scheduled
lease expirations; and (iv) in Item 2 "Management's Discussion and Analysis or
Plan of Operation -- Factors that May Affect Future Results," statements
regarding the Company's belief that it will have sufficient cash funds to make
any payments that are required under the credit facility due to collateral pool
limitations arising from assets coming off lease; the anticipated increased
compliance cost created by the Sarbanes-Oxley Act and the Company's ability to
fund such increased costs; the Company's anticipated purchase of used aircraft
and concentration on turboprop equipment, the Company's intention to concentrate
on future leases to regional air carriers; the Company's belief that overseas
markets present opportunities; and the Company's belief that it is competitive
because of JMC's experience and operational efficiency in identifying and
obtaining financing for the transaction types desired by regional air carriers.

These forward-looking statements involve risks and uncertainties, and it is
important to note that the Company's actual results could differ materially from
those projected or assumed in such forward-looking statements. Among the factors
that could cause actual results to differ materially are the factors detailed
under the heading "Management's Discussion and Analysis or Plan of Operation --
Factors that May Affect Future Results," including general economic conditions,
particularly those that affect the demand for regional aircraft and engines and
the financial status of the Company's primary customers, foreign regional
passenger airlines; rapidly rising interest rates accompanied by a flat or
decreasing lease rental market; further disruptions to the air travel industry
due to terrorist attacks; increasing jet fuel costs that weaken the financial
health of air carriers; the Company's ability to renew and enlarge its credit
facility on reasonable business terms at or prior to its expiration or find
alternative financing sources; the financial performance of the Company's
lessees and their compliance with rental, maintenance and return conditions
under their respective leases; unanticipated lease defaults by the Company's
lessees; 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.


<PAGE>


<table>
<caption>
                                AeroCentury Corp.
                      Condensed Consolidated Balance Sheet
                                    Unaudited


                                     ASSETS

                                                                               <c>
                                                                                      June 30,
                                                                                        2005

Assets:
     Cash and cash equivalents                                                    $     2,649,880
     Accounts receivable                                                                  974,360
     Aircraft and aircraft engines held for lease,
        net of accumulated depreciation of $16,392,750                                 79,949,980
     Prepaid expenses and other                                                           433,300
                                                                                  ---------------

Total assets                                                                      $    84,007,520
                                                                                  ===============


                      LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:
     Accounts payable and accrued expenses                                        $       542,350
     Notes payable and accrued interest                                                50,072,590
     Maintenance reserves and accrued costs                                            11,227,590
     Security deposits                                                                  1,894,900
     Prepaid rent                                                                         271,680
     Deferred taxes                                                                       935,320
     Taxes payable                                                                        180,200
                                                                                  ---------------

Total liabilities                                                                      65,124,630
                                                                                  ---------------

Stockholders' equity:
     Preferred stock, $.001 par value, 2,000,000 shares
        authorized, no shares issued and outstanding                                            -
     Common stock, $.001 par value, 3,000,000 shares
        authorized, 1,606,557 shares issued and outstanding                                 1,610
     Paid in capital                                                                   13,821,200
     Retained earnings                                                                  5,564,150
                                                                                  ---------------
                                                                                       19,386,960
     Treasury stock at cost, 63,300 shares                                              (504,070)
                                                                                  ---------------

Total stockholders' equity                                                             18,882,890
                                                                                  ---------------

Total liabilities and stockholders' equity                                        $    84,007,520
                                                                                  ===============

The accompanying notes are an integral part of these statements.
</table>

<PAGE>


<table>
<caption>
                                AeroCentury Corp.
                   Condensed Consolidated Statements of Income
                                    Unaudited


                                                   For the Six Months                   For the Three Months
                                                     Ended June 30,                        Ended June 30,

                                         <c>               <c>                   <c>              <c>
                                                 2005              2004                 2005              2004
                                                 ----              ----                 ----              ----
Revenues:

     Operating lease revenue                $    5,260,090    $   4,317,530         $   2,738,480    $    2,257,730
     Loss on sale of aircraft and
        aircraft engines                          (59,550)                -                     -                 -
     Other income                                   94,470          114,300                16,390            44,070
                                            --------------    -------------         -------------    --------------

                                                 5,295,010        4,431,830             2,754,870         2,301,800
                                            --------------    -------------         -------------    --------------
Expenses:
     Depreciation                                1,905,400        1,744,360               980,270           899,290
     Interest                                    1,579,860        1,124,090               817,140           572,940
     Management fees                             1,111,490         959,410                567,140           496,630
     Professional fees and
        general and administrative                 275,920          294,130               137,470           152,950
     Insurance                                     166,970          123,220                74,360            49,200
     Bad debt expense                               88,110                -                88,110                 -
     Maintenance                                    50,430           92,980                33,820            68,200
     Provision for impairment
       in value of aircraft                         12,180                -                     -                 -
                                            --------------    -------------         -------------    --------------

                                                 5,190,360        4,338,190             2,698,310         2,239,210
                                            --------------    -------------         -------------    --------------

Income before taxes                                104,650           93,640                56,560            62,590

Tax provision                                       18,940           13,410                10,690            12,480
                                            --------------    -------------         -------------    --------------

Net income                                  $       85,710    $      80,230         $      45,870    $       50,110
                                            ==============    =============         =============    ==============

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

Earnings per share                          $         0.06    $        0.05         $        0.03    $         0.03
                                            ==============    =============         =============    ==============

The accompanying notes are an integral part of these statements.
</table>








<PAGE>


<table>
<caption>
                                AeroCentury Corp.
                 Condensed Consolidated Statements of Cash Flows
                                    Unaudited


                                                                                 For the Six Months Ended June 30,
                                                                                      2005                2004
                                                                                      ----                ----

                                                                             <c>                <c>
Net cash provided by operating activities                                       $     1,186,950    $      1,871,960
                                                                                ---------------    ----------------

Investing activities:
   Payments received on note receivable                                                 210,080                   -
   Proceeds from disposal of assets                                                   7,900,130                   -
   Purchase of aircraft and aircraft engines                                       (10,131,370)         (5,985,590)
                                                                                ---------------    ----------------
Net cash used by investing activities                                               (2,021,160)         (5,985,590)
                                                                                ---------------    ----------------

Financing activities:
   Issuance of notes payable                                                          7,516,000           5,200,000
   Repayment of notes payable                                                       (6,435,540)         (4,893,930)
                                                                                ---------------    ----------------
Net cash provided by financing activities                                             1,080,460             306,070
                                                                                ---------------    ----------------

Net increase/(decrease) in cash and cash equivalents                                    246,250         (3,807,560)

Cash and cash equivalents, beginning of period                                        2,403,630           9,448,630
                                                                                ---------------    ----------------

Cash and cash equivalents, end of period                                        $     2,649,880    $      5,641,070
                                                                                ===============    ================

During the six months ended June 30, 2005 and 2004, the Company paid interest
totaling $1,663,430 and $1,095,640, respectively, and income taxes totaling
$1,704,760 and $680, respectively.


The accompanying notes are an integral part of these statements.
</table>

<PAGE>



                                AeroCentury Corp.
        Notes to Condensed Consolidated Financial Statements (Unaudited)
                                  June 30, 2005

1.       Organization and Summary of Significant Accounting Policies

(a)      Basis of Presentation

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

 (b)     Cash and Cash Equivalents/Deposits

         The Company considers highly liquid investments readily convertible
into known amounts of cash, with original maturities of 90 days or less, as cash
equivalents.

(c)      Aircraft and Aircraft Engines Held For Lease

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

(d)      Impairment of Long-lived Assets

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





<PAGE>



                                AeroCentury Corp.
        Notes to Condensed Consolidated Financial Statements (Unaudited)
                                  June 30, 2005

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

(e)      Loan Commitment and Related Fees

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

(f)      Maintenance Reserves and Accrued Costs

         Maintenance costs under the Company's triple net leases are generally
the responsibility of the lessees. The accompanying consolidated balance sheet
reflects liabilities for maintenance reserves and accrued costs, which include
refundable and non-refundable maintenance payments received from lessees. At
June 30, 2005, the Company's maintenance accruals consisted of the following:

         Refundable maintenance reserves        $     480,940
         Non-refundable maintenance reserves        8,906,500
         Accrued costs                              1,840,150
                                                  -----------
                                                $  11,227,590
                                                  ===========

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

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

         When an aircraft is sold, any remaining accrual is reversed and
included in the Company's gain or loss on sale calculation. During the six
months ended June 30, 2005 and 2004, $282,030 and $0, respectively, of excess
accrual was included in gain on sale of aircraft and aircraft engines.




<PAGE>



                                AeroCentury Corp.
        Notes to Condensed Consolidated Financial Statements (Unaudited)
                                  June 30, 2005

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

(f)      Maintenance Reserves and Accrued Costs (continued)

         Additions to and deductions  from the Company's  accruals  during the
six months ended June 30, 2005 and 2004 for  maintenance work were as follows:
<table>
<caption>
                                                                        For the Six Months Ended June 30,
                                                                              2005                  2004
                                                                              ----                  ----

                                                                    <c>                   <c>
Additions:
     Charged to expense                                                $      28,300         $     165,330
     Charged to other:
         Reclassification of reserves collected from lessees
           to the Company's own liability account                             40,050                33,030
                                                                       -------------         -------------
                                                                              68,350               198,360
                                                                       -------------         -------------

Deductions:
     Paid for previously accrued maintenance                               (241,930)           (1,035,960)
     Reversals of over-accrued maintenance                                     (760)                 (480)
     Included in gain on sale of aircraft and aircraft engines             (282,030)                     -
                                                                       -------------         -------------
                                                                           (524,720)           (1,036,440)
                                                                       -------------         -------------

Net decrease in accrued maintenance costs,
  in excess of amounts received under the leases                           (456,370)             (838,080)

Balance, beginning of period                                               2,296,520             3,624,450
                                                                       -------------         -------------

Balance, end of period                                                 $   1,840,150         $   2,786,370
                                                                       =============         =============
</table>

(g)      Security deposits

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

(h)      Income Taxes

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



<PAGE>



                                AeroCentury Corp.
        Notes to Condensed Consolidated Financial Statements (Unaudited)
                                  June 30, 2005

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

(h)      Income Taxes (continued)

or changes the allowance in a period, the Company must reflect the corresponding
increase or decrease within the tax provision in the statement of operations.

(i)      Revenue Recognition and Allowance for Doubtful Accounts

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

(j)      Use of Estimates

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

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

(k)      Comprehensive Income

         The Company does not have any comprehensive income other than the
revenue and expense items included in the consolidated statements of income. As
a result, comprehensive income equals net income for the three months and six
months ended June 30, 2005 and 2004.

(l)      Recent Accounting Pronouncements

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



<PAGE>



                                AeroCentury Corp.
        Notes to Condensed Consolidated Financial Statements (Unaudited)
                                  June 30, 2005

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

(l)      Recent Accounting Pronouncements (continued)

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

         SFAS 153, Exchanges of Nonmonetary Assets, addresses the measurement of
exchanges of nonmonetary assets. It eliminates the exception from fair value
measurement for nonmonetary exchanges of similar productive assets in paragraph
21(b) of APB Opinion No. 29, Accounting for Nonmonetary Transactions, and
replaces it with an exception for exchanges that do not have commercial
substance. SFAS 153 specifies that a nonmonetary exchange has commercial
substance if the future cash flows of the entity are expected to change
significantly as a result of the exchange. The provisions of SFAS 153 will be
effective for nonmonetary asset exchanges occurring in fiscal periods beginning
after June 15, 2005. The Company does not expect the full adoption of SFAS 153
to have an impact on the Company's consolidated financial condition or results
of operations.

(m)      Reclassifications

         Certain prior year amounts within the footnotes have been reclassified
to conform to the current year presentation.

2.       Aircraft and Aircraft Engines Held for Lease

         At June 30, 2005, the Company owned seven deHavilland DHC-8-300s, three
deHavilland DHC-8-100s, three deHavilland DHC-6s, two Shorts SD 3-60s, ten
Fokker 50s, two Saab 340As, one Saab 340B and one turboprop engine which are
held for lease.

         During the second quarter of 2005:

         The Company sold its Fairchild Metro III aircraft, which was previously
held for sale and which had been written down by approximately $12,000 to its
estimated net sale value at March 31, 2005.

         The Company purchased two deHavilland DHC-8 aircraft in a sale and
leaseback transaction with a regional carrier in Norway for a term of 36 months.
The lessee also leases the DHC-8 aircraft owned by AeroCentury Investments II
LLC.

         The Company purchased a Saab 340B aircraft which is subject to a lease
with a regional carrier in Australia for a term expiring in March 2009. This
aircraft is owned by AeroCentury IV LLC.

         The lessee for one of the Company's Fokker 50 aircraft extended the
lease for two years, from its expiration date of May 15, 2006 to May 15, 2008.



<PAGE>



                                AeroCentury Corp.
        Notes to Condensed Consolidated Financial Statements (Unaudited)
                                  June 30, 2005

2.       Aircraft and Aircraft Engines Held for Lease (continued)

         The lessee for two of the Company's DHC-8 aircraft extended the leases
from their expiration dates in April to June 15, 2005. The lessee has indicated
that it will return one of the aircraft and extend the lease for the other. The
aircraft which will be returned to the Company is currently undergoing
maintenance and the lease remains in effect. The lease for the second aircraft
also remains in effect until the Company and the lessee negotiate an extension.

         At June 30, 2005, the Company's two Saab 340A aircraft, one of the
Company's Shorts SD 3-60 aircraft and the Company's spare turboprop engine were
off lease. The Company is seeking re-lease or sale opportunities for these
assets.

3.       Notes Receivable

         In connection with a lease default during the third quarter of 2003,
the former lessee paid $20,000 to the Company at the time of the settlement and
signed a note in the amount of $480,000. The lessee made all payments due
through December 31, 2004 but, as a result of a late payment and subsequent
non-payment, and the Company's evaluation of the debtor's intention to make
future payments, the Company fully reserved the balance of the note at December
31, 2004. The balance of the fully reserved note is $370,090 at June 30, 2005.
During the second quarter of 2005, the Company obtained a default judgment
against the lessee in the United States and is evaluating the cost/benefit of
enforcing it abroad.

         During 2004, the former lessee of one of the Company's aircraft signed
a note in the amount of approximately $625,000, to be paid in 18 monthly
installments. The Company received all payments due through June 30, 2005. The
note was for rent and maintenance in excess of the security deposit held by the
Company. The Company had previously recorded a $250,000 allowance against the
amount receivable. During the second quarter, the Company received notice that
the lessee had filed for reorganization. At June 30, 2005, the Company recorded
additional bad debt expense of $88,110 to fully reserve the balance of the note.

4.       Notes Payable and Accrued Interest

(a)      Credit facility

         In 2004, the Company's credit facility was renewed through October 31,
2005. In connection with the renewal, the LIBOR margin was set at 375 basis
points through March 2005, after which a margin of 275 to 375 basis points is
determined by certain financial ratios.

         During the first six months of 2005, the Company repaid a total of
$6,300,000 of the outstanding principal under its credit facility. The Company
must maintain compliance with certain covenants under its credit facility
agreement. As of June 30, 2005, the Company was in compliance with all
covenants, $48,021,000 was outstanding under the credit facility, and interest
of $289,280 was accrued.

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



<PAGE>



                                AeroCentury Corp.
        Notes to Condensed Consolidated Financial Statements (Unaudited)
                                  June 30, 2005

4.       Notes Payable and Accrued Interest (continued)

(a)      Credit facility (continued)

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

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

(b)      Special purpose financing

         In September 2000, the Company acquired a deHavilland DHC-8 aircraft
using cash and bank financing separate from its credit facility. The financing
resulted in a note obligation in the amount of $3,575,000, due April 15, 2006,
which bears interest at the rate of one-month LIBOR plus 3%. The note is
collateralized by the aircraft and is non-recourse to the Company. Payments due
under the note consist of monthly principal and interest and a balloon principal
payment due on the maturity date. The financing also provides for a six month
remarketing period at the expiration or early termination of the lease. Payments
due on the financing are reduced during this remarketing period and the balloon
principal payment is deferred to the end of the six month period. The balance of
the note payable at June 30, 2005 was $1,760,160 and interest of $2,150 was
accrued. As of June 30, 2005, the Company was in compliance with all covenants
of this note obligation.

5.       Stockholder Rights Plan

         On April 8, 1998, the Company's Board of Directors adopted a
stockholder rights plan granting a dividend of one stock purchase right for each
share of the Company's common stock outstanding as of April 23, 1998. The rights
will become exercisable only upon the occurrence of certain events specified in
the plan, including the acquisition of 15% of the Company's outstanding common
stock by a person or group. Each right entitles the holder to purchase one
one-hundredth of a share of Series A Preferred Stock of the Company at an
exercise price of $66.00 per one-one-hundredth of a share. Each right entitles
the holder, other than an "acquiring person," to acquire shares of the Company's
common stock at a 50% discount to the then prevailing market price. The
Company's Board of Directors may redeem outstanding rights at a price of $0.01
per right.



<PAGE>



                                AeroCentury Corp.
        Notes to Condensed Consolidated Financial Statements (Unaudited)
                                  June 30, 2005

6.       Income Taxes

         The items comprising income tax expense are as follows:
<table>
<caption>

                                                                               For the Six Months Ended June 30,
                                                                                      2005                2004
        
                                                                 <c>                  <c>
         Current tax provision:
              Federal                                                        $        180,200    $             -
              State                                                                     1,010              1,850
                                                                             ----------------    ---------------
              Current tax provision                                                   181,210              1,850
                                                                             ----------------    ---------------

         Deferred tax benefit:
              Federal                                                               (144,960)             31,210
              State                                                                  (17,310)           (19,650)
                                                                             ----------------    ---------------
              Deferred tax benefit                                                  (162,270)             11,560
                                                                             ----------------    ---------------
         Total provision for income taxes                                    $         18,940    $        13,410
                                                                             ================    ===============
 </table>
         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:
<table>
<caption>
                                                                               For the Six Months Ended June 30,
                                                                                    2005                2004
                                                                                    ----                ----
        
                                                                  <c>                <c>

         Income tax provision at statutory federal income tax rate           $         35,580    $        31,840
         State tax provision, net of federal benefit                                      670              1,350
         Tax rate differences                                                        (17,310)           (19,780)
                                                                             ----------------    ---------------
         Total income tax provision                                          $         18,940    $        13,410
                                                                             ================    ===============
</table>

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

         Temporary differences and carry-forwards that give rise to a
significant portion of deferred tax assets and liabilities as of June 30, 2005
are as follows:
<table>
        
                                                                  <c>
         Deferred tax assets:
              Bad debt allowance                                             $        240,840
              Deferred maintenance                                                    853,090
              Maintenance reserves                                                  2,796,210
              Prepaid rent and other                                                   92,670
                                                                             ----------------
                  Deferred tax assets                                               3,982,810
         Deferred tax liabilities:
              Depreciation on aircraft and aircraft engines                       (4,740,700)
              Unearned income                                                        (23,530)
              Other                                                                 (153,900)
                                                                             ----------------
                  Net deferred tax liabilities                               $      (935,320)
                                                                             ================
</table>
         No valuation allowance is deemed necessary, as the Company has
concluded, based on an assessment of all available evidence, that it is more
likely than not that future taxable income will be sufficient to realize the tax
benefits of all the deferred tax assets on the consolidated balance sheet.


<PAGE>



                                AeroCentury Corp.
        Notes to Condensed Consolidated Financial Statements (Unaudited)
                                  June 30, 2005

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"), which is an integrated
aircraft management, marketing and financing business and a subsidiary of
JetFleet Holding Corp. ("JHC"). Certain officers of the Company are also
officers of JHC and JMC and hold significant ownership positions in both JHC and
the Company. Under the management agreement, JMC receives a monthly management
fee based on the net asset value of the assets under management. JMC may also
receive an acquisition fee for locating assets for the Company, provided that
the aggregate purchase price, including chargeable acquisition costs and any
acquisition fee, does not exceed the fair market value of the asset based on
appraisal, and a remarketing fee in connection with the sale or re-lease of the
Company's assets. The management fees, acquisition fees and remarketing fees may
not exceed the customary and usual fees that would be paid to an unaffiliated
party for such services. The Company recorded management fees of $1,111,490 and
$959,410 during the six months ended June 30, 2005 and 2004, respectively. The
Company accrued acquisition fees totaling $354,900 and $260,000, payable to JMC,
during the first six months of 2005 and 2004, respectively. The Company recorded
remarketing fees totaling $73,250 to JMC in connection with the sale of aircraft
in 2005. No remarketing fees were accrued or paid to JMC during 2004.



<PAGE>



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

Overview

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

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

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

Critical Accounting Policies, Judgments and Estimates

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

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

a.       Impairment of Long-lived Assets

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

During the first quarter of 2005, the Company recorded an impairment charge of
approximately $12,000 for an aircraft, based on the estimated net proceeds
pursuant to a sales agreement.

b.       Depreciation Policy

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

c.       Maintenance Reserves and Accrued Costs

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

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

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

d.       Revenue Recognition and Allowance for Doubtful Accounts

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

e.       Accounting for Income Taxes

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

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

Results of Operations

a.       Revenues

Operating lease revenue was approximately $943,000 higher in the six months
ended June 30, 2005 versus the same period in 2004, primarily because of
increased operating lease revenue from aircraft purchased beginning in April
2004 and rent from aircraft which had been off lease for part of 2004. These
increases, totaling approximately $1,943,000, were partially offset by decreases
totaling $1,000,000 due to lower lease rates for several aircraft in 2005,
aircraft that were on lease in 2004 but off lease during 2005 and the sale of a
pool of turboprop engines in December 2004.

Operating lease revenue was approximately $481,000 higher in the three months
ended June 30, 2005 versus the three months ended June 30, 2004 for the same
reasons as above. These factors resulted in increases of approximately $948,000
which were partially offset by decreases of approximately $467,000.

Loss on sale of aircraft and aircraft engines was approximately $60,000 for the
six months ended June 30, 2005 as a result of the sale of a deHavilland DHC-7,
which had been written down to its estimated net sale value at December 31,
2004. At the time of sale, the Company recognized an additional loss of
approximately $60,000 incurred subsequent to December 31, 2004.

Other income was approximately $20,000 lower in the six months ended June 30,
2005 versus the same period in 2004, primarily because of lower interest income
in 2005 and payments received in 2004 on one of the Company's notes receivable,
the effect of which was partially offset by the reversal in 2005 of previously
accrued maintenance expenses in connection with the sale of one of the Company's
aircraft in 2004. Other income was approximately $28,000 lower in the three
months ended June 30, 2005 versus the three month period in 2004, primarily as a
result of lower interest income in 2005 and payments received in 2004 on one of
the Company's notes receivable.

b.       Expense items

Depreciation was approximately $161,000 and $81,000 higher in the six months and
three months ended June 30, 2005 versus the same periods in 2004, respectively,
primarily because of the purchase of aircraft beginning in April 2004 and in
2005, the effect of which was partially offset by the sale of assets in the
second half of 2004 and first half of 2005. Management fees were approximately
$152,000 and $71,000 higher in the six month and three month periods of 2005
compared to 2004, respectively, for the same reasons.

Interest expense was approximately $456,000 and $244,000 higher in the six
months and three months ended June 30, 2005, respectively, versus the same
periods in 2004, primarily as a result of higher market interest rates and a
higher average principal balance in 2005 compared to 2004.

Professional fees and general and administrative expenses were approximately
$18,000 and $15,000 lower in the six months and three months ended June 30,
2005, respectively, primarily because of lower legal fees. This decrease was
partially offset by higher accounting fees.

Insurance expense was approximately $44,000 and $25,000 higher in the six month
and three month periods of 2005, respectively, primarily as a result of having
to provide owner coverage on aircraft for more off-lease days in 2005 as
compared to last year. This increase was partially offset by lower rates per
dollar of coverage in 2005 versus 2004.

During the three months ended June 30, 2005, the Company recorded bad debt
expense of approximately $88,000, to fully reserve the balance of a note
receivable from the former lessee of one of the Company's aircraft, based on a
notice received from the lessee that it had filed for reorganization. The
Company recorded no bad debt expense in the six months ended June 30, 2004.

Maintenance expense was approximately $43,000 lower in the six months ended June
30, 2005 versus the same period in 2004, primarily as a result of maintenance
performed to prepare an aircraft for re-lease in 2004. Maintenance expense was
approximately $34,000 lower in the three months ended June 30, 2005 versus the
same period in 2004, primarily as a result of the Company's accruals in 2004 for
its share of maintenance on two aircraft in excess of reserves received from
lessees.

During the first six months of 2005, the Company recorded an impairment charge
of approximately $12,000, based on the estimated net sales proceeds pursuant to
an agreement to sell the aircraft in April 2005. The Company recorded no such
provisions in the first six months of 2004.

The Company's effective tax rates for the six months ended June 30, 2005 and
2004 were approximately 18% and 14%, respectively. The Company had less income
for the six months ended June 30, 2004 than for the six months ended June 30,
2005. Thus, the recognition of the tax benefits related to the reduced state tax
rates decreased the Company's tax expense and its effective tax rate more for
the six month period of 2004 than for the same period of 2005.

The Company's effective tax rates for the three months ended June 30, 2005 and
2004 were approximately 19% and 20%, respectively. The Company had slightly less
income for the three month period of 2005 than for the same period of 2004.
Thus, the recognition of the tax benefits related to the reduced state tax rates
decreased the Company's tax expense and its effective tax rate more for the
three month period of 2005 than for the three month period of 2004.

Liquidity and Capital Resources

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

(a)      Credit facility

In 2004, the Company's credit facility was renewed through October 31, 2005. In
connection with the renewal, the LIBOR margin was set at 375 basis points
through March 2005, after which a margin of 275 to 375 basis points is
determined by certain financial ratios.

During the first six months of 2005, the Company repaid a total of $6,300,000 of
the outstanding principal under its credit facility. As of June 30, 2005,
$48,021,000 was outstanding under the credit facility, and interest of $289,280
was accrued. The Company was in compliance with all covenants as of June 30,
2005 and is currently in compliance. Based on its current projections, the
Company believes it will continue to be in compliance with all covenants of its
credit facility, but there can be no assurance of such compliance. See "Factors
That May Affect Future Results - 'Credit Facility Obligations' and 'Risks of
Debt Financing'," below.

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

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

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

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

(b)      Special purpose financing

In September 2000, the Company acquired a deHavilland DHC-8 aircraft using cash
and bank financing separate from its credit facility. The financing resulted in
a note obligation in the amount of $3,575,000, due April 15, 2006, which bears
interest at the rate of one-month LIBOR plus 3%. The note is collateralized by
the aircraft and is non-recourse to the Company. Payments due under the note
consist of monthly principal and interest and a balloon principal payment due on
the maturity date. The financing also provides for a six month remarketing
period at the expiration or early termination of the lease. Payments due on the
financing are reduced during this remarketing period and the balloon principal
payment is deferred to the end of the six month period. The balance of the note
payable at June 30, 2005 was $1,760,160 and interest of $2,150 was accrued. The
Company was in compliance with all covenants of this note obligation as of that
date and is currently in compliance.

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

(c)      Cash flow

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

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

(i)      Operating activities

The Company's cash flow from operations for the six months ended June 30, 2005
versus 2004 decreased by approximately $685,000. The change in cash flow is a
result of changes in several cash flow items during the period, including
principally the following:

         Lease rents, maintenance reserves and security deposits

Payments received from lessees for rent were approximately $793,000 higher in
the six months ended June 30, 2005 versus the same period in 2004, due primarily
to the effect of increased lease revenue from aircraft purchased beginning in
April 2004 and 2005, which was partially offset by the effect of lower lease
rates for several aircraft and the effect of aircraft off lease during 2005. In
addition, the Company received approximately $140,000 more of cash payments for
deferred rent during 2005 compared to 2004. Although, as a result of increased
demand generally in the turboprop market, lease rates have stabilized and, in
some cases, risen, it cannot be predicted that rental rates on aircraft to be
re-leased will not decline, so that, absent additional acquisitions by the
Company, aggregate lease revenues for the current portfolio can be expected to
decline over the long term.

Payments received from lessees for maintenance reserves increased by
approximately $554,000 in the first six months of 2005 versus 2004, reflecting
principally an increase in usage by lessees and the acquisition of aircraft
beginning in April 2004 and in 2005.

Security deposits received decreased by approximately $167,000 in the first six
months of 2005 versus the same period in 2004, primarily because of the cash
deposits received in the second quarter of 2004 in connection with the purchase
of four aircraft.

         Expenditures for maintenance

Expenditures for maintenance were approximately $528,000 lower in the first six
months of 2005 versus the first six months of 2004 primarily as a result of
payments during 2004 for maintenance performed to ready two of the Company's
aircraft for remarketing.

         Expenditures for interest

Expenditures for interest expense increased by approximately $447,000 in the six
months ended June 30, 2005 versus the same period in 2004, primarily as a result
of higher average interest rates and a higher average principal balance in 2005.
Interest expenditures in future periods will be a product of prevailing interest
rates and the outstanding principal balance on financings, which may be
influenced by future acquisitions and/or required repayments resulting from
changes in the collateral base.

         Expenditures for management fees

Expenditures for management fees increased by approximately $163,000 in the six
months ended June 30, 2005 versus the six months ended June 30, 2004, primarily
as a result of aircraft purchases in 2005 and the second half of 2004.

         Income taxes

Income tax payments were approximately $1,704,000 higher in the first six months
of 2005 compared to the same period in 2004. The increase was the result of the
sale of a pool of twenty-four turboprop engines at the end of 2004, which
resulted in higher taxable income compared to 2003.

(ii)     Investing activities

The decrease in cash flow used by investing activities in the first six months
of 2005 versus the same period in 2004 was primarily due to the Company's sale
of two aircraft in 2005 and the receipt of sales proceeds in 2005 from a sale of
a pool of turboprop engines in the fourth quarter of 2004, the effect of which
was partially offset by the purchase of aircraft with a combined higher total
purchase price in 2005 than in 2004.

(iii)    Financing activities

The Company borrowed approximately $2,316,000 more on its credit facility in the
first six months of 2005 versus 2004 and repaid approximately $1,542,000 more of
its outstanding debt in 2005.

Outlook

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

Although the Company purchased seven aircraft in 2004 and three aircraft in the
second quarter of 2005, additional acquisitions of leased assets which, due to
rising interest rates, will need to be leased at increased rental rates, will be
necessary to offset the possible decreased lease rates which will most likely
result from future re-leases of the Company's current portfolio. The Company's
ability to acquire additional aircraft is currently limited by the credit
facility borrowing base. A factor in this limitation is that the Company's
credit facility lenders have not yet approved one of the 2004 acquisitions for
inclusion in the credit facility borrowing base. Until such approval, both the
Company's results and its covenant compliance may be adversely affected. The
Company expects the lenders to approve inclusion of this aircraft in the
borrowing base in the third quarter of 2005.

The Company currently has three aircraft and one turboprop engine off lease.
Seven aircraft have leases expiring in the second half of 2005. The lessee for
two of the aircraft has indicated that it will return one of the aircraft and
extend the lease for the other. The Company's ability to remain in compliance
with its credit facility covenants and, therefore, renew it at expiration, as
well as increase the facility, is dependent on the Company's success in
re-leasing or selling these assets.

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

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

Factors that May Affect Future Results

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

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

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

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

Concentration of Lessees and Aircraft Type. The Company's three largest
customers, in Taiwan, Norway and Sweden, currently account for approximately
33%, 15% and 14%, respectively, of the Company's monthly lease revenue. A lease
default by or collection problems with one of these customers could have a
disproportionate negative impact on the Company's financial results, and
therefore, the Company's operating results are especially sensitive to any
negative developments with respect to these customers in terms of lease
compliance or collection. Such concentration of lessee credit risk will diminish
in the future only if the Company is able to lease additional assets to new
lessees.

The acquisition of four Fokker 50 aircraft and five DHC-8 aircraft in 2004 and
2005 made these two aircraft types the dominant aircraft types in the portfolio,
constituting 10 and 10, respectively, of the 28 aircraft and representing 34%
and 53%, respectively, based on book value. As a result, a change in the
desirability and availability of either or both of these types of aircraft,
which would in turn affect valuations of such aircraft, would have a
disproportionately large impact on the Company's portfolio value. Such aircraft
type concentration will diminish if the Company acquires additional assets of
other types. Conversely, acquisition of additional Fokker 50 or DHC-8 aircraft
will increase the Company's risks related to its concentration of those aircraft
types.

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

Increased Compliance Costs. Due to new Sarbanes-Oxley Act of 2000 requirements
applicable to the Company in December 2006 relating to internal controls and
auditors' responsibilities to review and opine on those controls, the Company
anticipates that the fees and expenses in connection with audit services are
likely to significantly increase. The increase will generally arise from
increased auditor responsibilities as well as an increased scope of examination
of the Company which will broaden to include the Company's internal controls.
Audit fees are expected to increase significantly and there may be additional
costs arising from mandated testing of internal controls that will begin to take
place in 2005 and will be required to be performed on a continual basis
thereafter. The exact amount of these costs can only be determined as the
Company proceeds further with its analysis of current internal controls. The
Company, however, anticipates that it will have sufficient funds to pay for the
increased compliance cost.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

General Economic Conditions. The Company's business is dependent upon general
economic conditions and the strength of the travel and transportation industry.
The industry recently experienced a severe cyclical downturn which began in
2001. There are signs that the industry is beginning to recover from the
downturn, but it is unclear whether any recovery will be a sustained one. Any
recovery could be stalled or reversed by any number of events or circumstances,
including the global economy slipping back into recession, or specific events
related to the air travel industry, such as further weakening of the air carrier
or travel industries as a result of terrorist attacks, or an increase in
operational or labor costs. Recent spikes in oil prices, if they persist, may
have a negative effect on airline profits and increase the likelihood of
weakening results for airlines that have not hedged aircraft fuel costs, and in
the most extreme cases, may initiate or accelerate the failure of many already
marginal carriers.

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

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

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

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

Item 3.  Controls and Procedures.

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

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

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

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

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

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

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

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



<PAGE>



                                     PART II
                                OTHER INFORMATION


Items 1, 2, 3 and 5 have been omitted as they are not applicable.

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

On April 28, 2005, the Company held its annual stockholders' meeting in San
Carlos, California. At that meeting, Toni M. Perazzo and Thomas G. Hiniker were
re-elected to the Board of Directors:

The vote tally was as follows:

                                         FOR ELECTION          WITHHELD

Ms. Perazzo                                 1,176,021             8,434
Mr. Hiniker                                 1,181,615             2,840

The stockholders also confirmed the appointment of PricewaterhouseCoopers LLP as
auditors of the Company.

The vote was as follows:

In Favor                                    1,178,792
Against                                           609
Abstain                                         5,054

Item 6.  Exhibits

Exhibits

Exhibit
Number                                       Description

31.1          Certification of Neal D. Crispin, Chief Executive Officer,
              pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2          Certification of Toni M. Perazzo, Chief Financial Officer,
              pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*         Certification of Neal D. Crispin, Chief Executive Officer,
              pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*         Certification of Toni M. Perazzo, Chief Financial Officer,
              pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



     * These certificates are furnished to, but shall not be deemed to be filed
with, the Securities and Exchange Commission.






<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 12, 2005                  By:    /s/ Toni M. Perazzo
                                         -------------------------------
                                                Toni M. Perazzo

                                        Title: Senior Vice President-Finance and
                                                Chief Financial Officer