0001036848-17-000010.txt : 20170323 0001036848-17-000010.hdr.sgml : 20170323 20170323122608 ACCESSION NUMBER: 0001036848-17-000010 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20170323 FILED AS OF DATE: 20170323 DATE AS OF CHANGE: 20170323 EFFECTIVENESS DATE: 20170323 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AEROCENTURY CORP CENTRAL INDEX KEY: 0001036848 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EQUIPMENT RENTAL & LEASING, NEC [7359] IRS NUMBER: 943263974 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: 1934 Act SEC FILE NUMBER: 001-13387 FILM NUMBER: 17709097 BUSINESS ADDRESS: STREET 1: 1440 CHAPIN AVE STE 310 CITY: BURLINGAME STATE: CA ZIP: 94010 BUSINESS PHONE: 6503401888 MAIL ADDRESS: STREET 1: 1440 CHAPIN AVENUE SUITE 310 CITY: BURLINGAME STATE: CA ZIP: 94010 FORMER COMPANY: FORMER CONFORMED NAME: AEROMAX INC DATE OF NAME CHANGE: 19970331 DEF 14A 1 acyproxy2017.htm AEROCENTURY CORP. 2017 PROXY STATEMENT

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934

Filed by the Registrant ý Filed by a party other than the Registrant o

Check the appropriate box:

Preliminary proxy statement

Confidential, For Use of the Commission Only (as permitted by Rule 14a—6(e)(2))

ý Definitive proxy statement

¨ Definitive additional materials

¨ Soliciting material under Rule 14a-12

AeroCentury Corp.

(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):

ý No fee required.

¨ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1) Title of each class of securities to which transaction applies:

(2) Aggregate number of securities to which transactions applies:

(3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

(4) Proposed maximum aggregate value of transaction:

(5) Total fee paid:

¨ Fee paid previously with preliminary materials:

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.

(1) Amount previously paid:

(2) Form, Schedule or Registration Statement No.:

(3) Filing Party:

(4) Date Filed:

AEROCENTURY CORP.

NOTICE OF 2017 ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON MAY 3, 2017

TO OUR STOCKHOLDERS:

You are cordially invited to attend the 2017 Annual Meeting of Stockholders of AeroCentury Corp. (the "Company"), which will be held at the Hiller Aviation Museum, 601 Skyway Road, San Carlos, California at 12:00 p.m. on May 3, 2017, for the following purposes:

1. To elect two directors to the Board of Directors;

To approve, in an advisory (non-binding) vote, the Company's executive compensation as disclosed in the accompanying Proxy Statement;

To consider and vote upon a proposal to ratify the selection of BDO USA, LLP as independent registered public accounting firm for the Company for the fiscal year ending December 31, 2017; and

To act upon such other business as may properly come before the meeting or any adjournment or postponement thereof.

These matters are more fully described in the Proxy Statement accompanying this Notice.

The Board of Directors has fixed the close of business on March 1, 2017, as the record date for determining those stockholders who will be entitled to vote at the 2017 Annual Meeting of Stockholders. The stock transfer books will not be closed between the record date and the date of the meeting.

A quorum comprising the holders of the majority of the issued and outstanding shares of Common Stock of the Company on the record date, excluding shares held by the Company as treasury stock, must be present or represented by proxy for the transaction of business at the Annual Meeting. Accordingly, it is important that your shares be represented at the 2017 Annual Meeting of Stockholders. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT IN THE ENCLOSED ENVELOPE. Your proxy may be revoked at any time prior to the time it is voted.

If you plan to attend the meeting, please call the Company's Investor Relations Department at (650) 340-1888, so that your name can be placed on the guest list at the Hiller Aviation Museum entrance. Please read the proxy materials carefully. Your vote is important, and the Company appreciates your cooperation in considering and acting on the matters presented.

Sincerely yours,

/s/ Michael G. Magnusson

Michael G. Magnusson

President

March 23, 2017

Burlingame, California

PROXY STATEMENT

FOR

2017 ANNUAL MEETING OF STOCKHOLDERS

AEROCENTURY CORP.

TO BE HELD ON MAY 3, 2017

This Proxy Statement and the enclosed proxy card are furnished in connection with the solicitation by the Board of Directors (the "Board") of AEROCENTURY CORP. (the "Company") of proxies to be voted at the 2017 Annual Meeting of Stockholders (the "2017 Annual Meeting" or the "Annual Meeting"), which will be held at 12:00 p.m. on May 3, 2017, at the Hiller Aviation Museum, 601 Skyway Road, San Carlos, California, or at any adjournments or postponements thereof, for the purposes set forth in the accompanying Notice of 2017 Annual Meeting of Stockholders. You do not need to attend the meeting to vote your shares. Instead, you may simply complete, date, sign and return the attached proxy card. This Proxy Statement and the proxy card were first mailed to stockholders on or about March 23, 2017.

The Company's 2016 Annual Report was mailed to stockholders concurrently with this Proxy Statement. The 2016 Annual Report is not to be regarded as proxy soliciting material or as a communication by means of which any solicitation of proxies is to be made.

VOTING RIGHTS AND SOLICITATION

Record Date and Required Quorum. The close of business on March 1, 2017, was the record date for stockholders entitled to notice of, and to vote at, the 2017 Annual Meeting. As of that date, the Company had 1,566,699 shares of Common Stock, $0.001 par value (the "Common Stock") outstanding. The presence at the Annual Meeting of a majority of the issued and outstanding shares of Common Stock, or 783,350 shares, either present in person or represented by proxy, will constitute a quorum for the transaction of business at the Annual Meeting. All of the shares of the Company's Common Stock outstanding on the record date are entitled to vote at the 2017 Annual Meeting, and stockholders of record entitled to vote at the Annual Meeting will have one vote for each share of Common Stock so held with regard to each matter to be voted upon. Your proxy may be revoked at any time prior to the time it is voted.

Voting if you are the Registered Holder of Shares. If your shares are registered directly in your name with the Company's transfer agent, Continental Stock Transfer & Trust Co., you are considered the "stockholder of record" with respect to these shares and the Company is sending these proxy materials directly to you. As the stockholder of record, you have the right to grant your voting proxy directly to the Company by completing the enclosed proxy card or to vote in person at the Annual Meeting. To grant your voting proxy, you should return the enclosed proxy card to the Company.

Voting if you hold shares in a Brokerage or other Nominee Account. If your shares are held by a broker or by a bank or other nominee (each, a "Record Holder") in a brokerage or other account, then you are considered the "beneficial owner" of shares held "in street name." Your Record Holder is considered the stockholder of record with respect to those shares, and has forwarded these proxy materials to you. As the beneficial owner of your shares, you have the right to direct your Record Holder on how to vote. To direct your Record Holder on how to vote your shares, you must follow the procedure explained in the accompanying materials provided by your Record Holder, which procedure generally consists of completing and returning to your Record Holder an instruction card that was sent to you by the Record Holder along with this Proxy Statement. Your Record Holder may also have provided information on how to give voting instructions to the Record Holder by telephone or online through the Internet. Notwithstanding that your Record Holder will be voting your shares on your behalf and as instructed by you, you may still attend the Annual Meeting. If you are going to attend the meeting and want to vote your shares directly there rather than have your Record Holder vote your shares, you must obtain a proxy card issued in your name from the Record Holder with respect to your shares.

Effect of Returning the Proxy Card to the Company. Shares of the Company's Common Stock represented by proxies in the accompanying form that are properly executed and returned to the Company will be voted at the 2017 Annual Meeting in accordance with the instructions of the stockholder of record contained therein. In the absence of contrary instructions, shares represented by such proxies will be voted FOR the election of the director candidates as described herein under "Proposal 1: Election of Directors"; FOR approval, in an advisory (non-binding) vote, of the Company's executive compensation as disclosed in this Proxy Statement as described herein under "Proposal 2: Advisory Vote on Executive Compensation"; and FOR ratification of the selection of BDO USA, LLP as independent registered public accounting firm as described herein under "Proposal 3: Ratification of Selection of Independent Registered Public Accounting Firm."

The Company does not know of any matters to be presented at the Annual Meeting other than those set forth in this Proxy Statement and in the Notice accompanying this Proxy Statement. If other matters should properly come before the Annual Meeting, the proxy holders will vote on such matters in accordance with their best judgment. Proxies will confer upon the proxy holders discretionary authority to vote upon matters that may properly be raised at the Annual Meeting, but are unknown to the Company as of the date hereof. In addition, the proxies confer upon the proxy holders the authority to adjourn or postpone the Annual Meeting in order to assure that all stockholders who wish to vote on the matters will be able to cast their votes and to act upon the matters incident to the conduct of the meeting.

Revocation of a Previously Submitted Proxy. Any stockholder of record has the right to revoke his or her proxy at any time before it is voted at the Annual Meeting by: (1) delivering to the Company (to the attention of Toni M. Perazzo, Secretary, 1440 Chapin Avenue, Suite 310, Burlingame, California 94010) a written notice of revocation; or (2) delivering a duly executed proxy or voting instructions bearing a later date than the proxy being revoked (to the attention of Toni M. Perazzo, Secretary, 1440 Chapin Avenue, Suite 310, Burlingame, California 94010) or (3) attending the Annual Meeting and voting in person.

Effect of Broker Non-Votes. A "broker non-vote" occurs when a Record Holder lacks discretionary voting power to vote on a "non-routine" proposal and the beneficial owner fails to give the Record Holder voting instructions on that matter. Broker non-votes are, in all cases, counted for purposes of determining a quorum for the Annual Meeting. Under the rules of the New York Stock Exchange, however, the effect of a broker non-vote depends upon whether the broker non-vote occurs with respect to "routine" or "non-routine" matters presented at the Annual Meeting, as discussed below.

Non-Routine Matters Presented at the 2017 Stockholders' Meeting. The election of directors (Proposal 1) and the advisory vote on executive compensation (Proposal 2) are considered "non-routine" matters. If you are a beneficial owner, failure to provide instructions to your Record Holder in the manner directed by your Record Holder will result in your shares not being voted by the Record Holder in connection with these proposals. Your Record Holder has enclosed or otherwise provided to you a voting instruction card for you to use in directing the Record Holder how to vote your shares. Your Record Holder may also have provided information regarding how to give voting instructions through the Internet or by telephone.

Routine Matters Presented at the 2017 Stockholders' Meeting. The ratification of the selection of BDO USA, LLP as the Company's independent registered public accounting firm for fiscal year 2017 is currently considered a "routine" matter, and your Record Holder has the discretionary voting power to vote your shares on this matter even if you fail to return the voting instruction card to your Record Holder.

Stockholder Vote Required to Approve Proposal 1. The election of directors by stockholders shall be determined by a plurality of the votes cast by the stockholders of record entitled to vote at the election, present in person or represented by proxy. The two candidates receiving the greatest number of affirmative votes of the shares present in person, or represented by proxy, and entitled to vote at the Annual Meeting will be elected, provided a quorum is present. Abstentions and broker non-votes will not be counted toward a candidate's total. Because Record Holders who hold shares for a beneficial owner "in street name" do not have discretionary voting authority over such shares in an election of directors, shares held "in street name" will not be voted in this election for a director unless the beneficial owner specifically instructs the Record Holder on how to vote.

Stockholder Vote Required to Approve Proposal 2. The proposal on approval of executive compensation will be approved in a non-binding advisory vote if the votes cast in favor exceed the votes cast against approval. Abstentions and broker non-votes will not be counted as either a vote "For" or "Against" Proposal 2. Because Record Holders who hold shares "in street name" do not have discretionary voting authority over such shares in such non-routine matters, shares held "in street name" will not be voted on this advisory vote on executive compensation unless the beneficial owner specifically instructs the Record Holder on how to vote.

Stockholder Vote Required to Approve Proposal 3. Ratification of the Company's selection of independent registered public accounting firm will require the affirmative vote of a majority of the shares present in person, or represented by proxy, and entitled to vote at the Annual Meeting, provided a quorum is present. As a result, abstentions and broker non-votes will have the same effect as votes against the proposal. As stated above, a Record Holder that holds shares "in street name" has discretionary voting power to vote on this matter in the absence of instruction from the beneficial owner.

Proxy Solicitation. The entire cost of soliciting proxies will be borne by the Company. Proxies will be solicited principally through the use of the mails, but, if deemed desirable, may be solicited personally or by telephone, facsimile or special letter by officers and Company employees for no additional compensation. Arrangements may be made with brokerage houses and other custodians, nominees and fiduciaries to send proxies and proxy material to the beneficial owners of the Company's Common Stock, and such persons may be reimbursed for their expenses.

HOUSEHOLDING OF ANNUAL MEETING MATERIALS

Some Record Holders may be participating in the practice of "householding" proxy statements and annual reports. This means that only one copy of the proxy statement and annual report may have been sent to multiple stockholders sharing the same household. The Company will promptly deliver a separate copy of either document to any stockholder requesting such copies who contacts the Company's Investor Relations Department at (650) 340-1888 or by mail to 1440 Chapin Avenue, Suite 310, Burlingame, California 94010. If a stockholder is receiving multiple copies of the proxy statement and annual report at the stockholder's household and would like to receive only a single copy of the proxy statement and annual report for a stockholder's household in the future, the stockholder should contact the stockholder's Record Holder, or the Company's Investor Relations Department to request mailing of a single copy of the proxy statement and annual report.

PROPOSAL 1:

ELECTION OF DIRECTORS

Two of the Company's four directors will be elected at the 2017 Annual Meeting. The Board of Directors has nominated the nominees set forth below. The proxy holders intend to vote all proxies received by them in the accompanying form FOR the nominees for director listed below, unless instructions to the contrary are marked on the proxy. In the event that a nominee is unable or declines to serve as a director at the time of the 2017 Annual Meeting, the proxies will be voted for any nominee who shall be designated by the present Board of Directors to fill the vacancy. In the event that additional persons are nominated for election as director, the proxy holders intend to vote all proxies received by them for the nominee listed below. As of the date of this Proxy Statement, the Board of Directors is not aware that the nominee is unable or will decline to serve as a director. The term of office of a person elected as a director at the Annual Meeting will continue until the 2020 Annual Meeting of Stockholders or until the director's resignation or removal, or a successor has been elected.

Nominees to Board of Directors

Mr. Roy E. Hahn, age 64. Mr. Hahn is Chair of the Audit Committee of the Board of Directors and has served on the Board since 2007. Mr. Hahn is currently Managing Director of Marbridge Group, LLC, an alternative investment management firm he founded in 2004. Prior to his founding of Marbridge Group, LLC, he was Managing Director of Chenery Associates, an investment management firm. Mr. Hahn was a Director at Coopers & Lybrand from 1987 to 1988, and a tax partner with that firm from 1989 to 2003. Prior to Coopers & Lybrand, he was a partner at Arthur Young & Co. His educational background includes a Bachelor's Degree in Accounting from San Francisco State University. Mr. Hahn is a certified public accountant and a member of the American Institute of Certified Public Accountants and the California Society of Certified Public Accountants.

The Board of Directors has concluded that Mr. Hahn should serve as a director of the Company because of his knowledge of the Company's business and history, his status as an "audit committee financial expert," and his overall expertise in accounting and finance principles and international finance transactions.

Ms. Toni M. Perazzo, age 70. Ms. Perazzo is a member of the Executive Committee of the Board of Directors and has served on the Board since the Company's inception in 1997. She is the Company's Chief Financial Officer, Treasurer, Senior Vice President-Finance, and Secretary of the Company. She is also President and Chief Financial Officer of JMC (the management company for the Company), where she has been an officer in various capacities since 1997. Her prior positions include Assistant Vice President for a savings and loan, controller of an oil and gas syndicator and a senior auditor with Arthur Young & Co., Certified Public Accountants. She received her Bachelor's Degree from the University of California at Berkeley, and her Master's Degree in Business Administration from the University of Southern California. Ms. Perazzo is a certified public accountant and member of the California Society of Certified Public Accountants and the American Institute of Certified Public Accountants.

The Board of Directors has concluded that Ms. Perazzo should serve as a director of the Company because of her knowledge of the Company's business and history, capitalization structure and finances, and her accounting and audit experience, as well as her many years of experience with JMC.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE NOMINEES LISTED ABOVE.

PROPOSAL 2:

ADVISORY VOTE ON EXECUTIVE COMPENSATION

The Company is requesting your advisory approval of the compensation of the Company's named executive officers as disclosed in the compensation table and the narrative discussion set forth in this Proxy Statement. This non-binding advisory vote is commonly referred to as a "say on pay" vote and is required to be conducted pursuant to Section 14A of the Securities Exchange Act of 1934, as amended. Because the Company receives management services from JetFleet Management Corp. ("JMC"), the Company has no employees and does not pay any compensation to its named executive officers. Instead, the named executive officers of the Company are compensated in their capacities as employees of JMC. You are encouraged to carefully review the information concerning compensation paid by JMC to the Company's named executive officers beneath the caption "Executive Compensation" in the section of this Proxy Statement entitled "Information Regarding the Company's Directors and Officers."

The Company asks you to indicate your support for the compensation of the Company's named executive officers as described in this Proxy Statement. This vote is not intended to address any specific item of compensation, but rather the overall compensation of the named executive officers and the practices described in this Proxy Statement. Accordingly, the Company requests that you vote, on an advisory basis, "FOR" the following resolution at the Annual Meeting:

"RESOLVED, that the compensation paid to the Company's named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, is hereby approved."

While the results of this advisory vote are not binding, the Board of Directors will consider the outcome of the vote in deciding whether to take any action as a result of the vote and when making future compensation decisions for named executive officers.

The Company currently anticipates that it will conduct a "say on pay" advisory vote every year and anticipates that the next "say on pay" vote will occur at the 2018 annual meeting. The Company also currently intends to ask stockholders every six years whether the "say on pay" vote should occur every one, two or three years. The Company currently anticipates that the next advisory vote as to frequency of "say on pay" advisory votes will occur at the 2019 annual meeting.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE COMPENSATION OF THE NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THIS PROXY STATEMENT.

PROPOSAL 3:

RATIFICATION OF SELECTION OF

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The firm of BDO USA, LLP served as independent registered public accounting firm for the Company for the fiscal year ended December 31, 2016. The Board of Directors desires that the firm continue in this capacity for the 2017 fiscal year. Accordingly, a proposal will be presented at the Annual Meeting to ratify the selection by the Board of Directors of BDO USA, LLP as the independent registered public accounting firm to audit the accounts and records of the Company for the fiscal year ending December 31, 2017, and to perform other appropriate services. In the event that stockholders fail to ratify the selection of BDO USA, LLP, the Board of Directors will reconsider such selection.

A representative of BDO USA, LLP will be present at the Annual Meeting, will have the opportunity to make a statement if he or she so desires and will be available to respond to appropriate questions.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE SELECTION OF BDO USA, LLP AS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.

INFORMATION REGARDING AUDITORS

Audit Fees. The aggregate fees accrued by the Company as payable to BDO USA, LLP (the "Auditor") for professional services rendered for the audit of the Company's financial statements for the fiscal year ended December 31, 2016, and for the review of the financial statements included in the Company's Forms 10-Q during the 2016 fiscal year was approximately $295,500. During the fiscal year ended December 31, 2016, the Company did not accrue any fees payable to the Auditor for audit-related services or Sarbanes-Oxley internal controls compliance review.

The aggregate fees accrued by the Company as payable to Auditor for professional services rendered for the audit of the Company's financial statements for the fiscal year ended December 31, 2015, and for the review of the financial statements included in the Company's Forms 10-Q during the 2015 fiscal year was $298,000. During the fiscal year ended December 31, 2015, the Company did not accrue any fees payable to the Auditor for audit-related services or Sarbanes-Oxley internal controls compliance review.

Audit-Related Fees. The Company made no payments to the Auditor for audit-related services in the fiscal years ended December 31, 2015 and 2016.

Tax Fees. The Company made no payments to the Auditor for tax-related services, including tax planning and preparation of returns, in the fiscal years ended December 31, 2015 and 2016.

All Other Fees. No other fees were paid to the Auditor in the fiscal years ended December 31, 2015 and 2016.

Audit Committee Approval. The retainer agreements between the Company and the Auditor containing the terms and conditions and estimated fees to be paid to the Auditor for audit and tax return preparation services were pre-approved by the Audit Committee at the beginning of their respective engagements. The Audit Committee's policy is to pre-approve all audit and non-audit services provided by the Auditor. These services may include audit services, audit-related services, tax services and other services. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. The Audit Committee has delegated pre-approval authority to its Chair when expedition of services is necessary. The Auditor and management are required to periodically report to the full Audit Committee regarding the extent of services provided by the Auditor in accordance with this pre-approval, and the fees for the services performed to date. None of the services rendered by the Auditor were rendered pursuant to the de minimis exception established by the Securities and Exchange Commission.

AUDIT COMMITTEE REPORT

Notwithstanding anything to the contrary set forth in any of the Company's previous filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, that might incorporate future filings, including this Proxy Statement, in whole or in part, the following Report of the Audit Committee shall not be deemed to be "soliciting material" or to be "filed" with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any such filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

The Audit Committee of the Board of Directors of the Company serves as the representative of the Board of Directors for general oversight of the Company's financial accounting and reporting process, internal controls, audit process and process for monitoring compliance with laws and regulations. The Audit Committee is responsible for the appointment, compensation and oversight of the work of the Auditor. The members of the Audit Committee are independent (as defined in Section 803A of the NYSE MKT Company Guide). The Company's management has primary responsibility for preparing the Company's financial statements and the Company's financial reporting process. The Company's Auditor, BDO USA, LLP, is responsible for expressing an opinion on the fairness and conformity of the Company's audited financial statements to accounting principles generally accepted in the United States of America In this context, the Audit Committee hereby reports as follows:

1. The Audit Committee reviewed and discussed the audited financial statements with the Company's management.

2. The Audit Committee discussed with the Auditor the matters required to be discussed by Public Company Accounting Oversight Board ("PCAOB") auditing standards 1301 - Communications with Audit Committees ("AS 1301").

3. The Audit Committee reviewed and discussed with BDO USA, LLP its judgments as to the quality and acceptability of the Company's accounting principles and such other matters as are required to be discussed pursuant to AS 1301.

4. The Audit Committee reviewed and discussed with the Auditor its independence from the Company and its management. As part of that review, the Auditor provided the Audit Committee the written disclosures and letter required by PCAOB Ethics and Independence Rule 3526, Communication with Audit Committees Concerning Independence.

5. Based on the review and discussion referred to in paragraphs (1) through (4) above, the Audit Committee recommended to the Board of Directors of the Company, and the Board of Directors has approved, that the audited financial statements be included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2016, for filing with the Securities and Exchange Commission.

The Audit Committee held seven meetings during the fiscal year ended December 31, 2016.

Submitted by the Audit Committee of the Board of Directors:

Roy E. Hahn, Chair

Evan M. Wallach

David P. Wilson

INFORMATION REGARDING THE COMPANY'S

DIRECTORS AND OFFICERS

Current Board of Directors

When considering whether directors and nominees have the experience, qualifications, attributes, skills, diversity of experience and background, taken as a whole, to enable the Board of Directors to satisfy its oversight responsibilities effectively in light of the Company's business and structure, the Board of Directors focused primarily on the information discussed in each of the directors' individual biographies set forth below.

Mr. Hahn and Ms. Perazzo each have a term expiring at the Company's 2017 Annual Meeting. Each has been nominated for re-election to the Board of Directors. For biographical information on Mr. Hahn and Ms. Perazzo, see "PROPOSAL 1: ELECTION OF DIRECTORS - Nominees to Board of Directors," above.

The following director has a term expiring at the Company's 2018 Annual Meeting of Stockholders.

Mr. David P. Wilson, age 62. Mr. Wilson has been a member of the Company's Board of Directors and the Audit Committee since February 2015. Mr. Wilson retired in 2014 from General Electric Capital Aviation Services ("GECAS"), where he was most recently a Senior Vice President, concentrating on asset sales and aircraft securitizations to a worldwide investor base. Prior to his 21-year tenure at GECAS, Mr. Wilson held positions as a product specialist and in aircraft finance marketing at Citicorp's Equipment Finance and Leasing Division. Prior to joining Citicorp in 1985, Mr. Wilson held various financial positions at De Lange Landen (formerly Master Lease Corp.) and Air Products. Mr. Wilson started his career with Ernst & Ernst in 1977. Mr. Wilson received a Bachelor's Degree in Accounting and Finance from Boston College in 1977 and a MS/MBA in Finance from Drexel University in Philadelphia in 1983.

The Board of Directors has concluded that Mr. Wilson should serve as a director of the Company because of his knowledge of the aircraft leasing and finance industry.

The following director has a term expiring at the Company's 2019 Annual Meeting of Stockholders:

Mr. Evan M. Wallach, age 62. Mr. Wallach is President and Chief Executive Officer of Global Airfinance Services, Inc., an aviation consulting business he founded in 1998 and returned to in June 2012. Mr. Wallach is the Chair of the Board of Directors of the Company, and a member of the Audit Committee and Executive Committee. He has served on the Board since 1997 and was appointed Chair in 2016. From December 2009 until June 2012, Mr. Wallach was Managing Director, Aviation/Transportation Markets at Jefferies & Company, Inc. From 2005 to 2009, Mr. Wallach was a Managing Director, Airline/Aircraft Securities Sales at Guggenheim Capital Markets, LLC, a securities broker/dealer. From 2001 to 2005, he served as Managing Director, Fixed Income Institutional Sales, at Piper Jaffray LLC, and from 1998 to 2001 he served as Vice President, Finance of C-S Aviation Inc., an aviation consulting firm. Mr. Wallach has specialized in aircraft and airline financing for over thirty years, having held senior level positions with The CIT Group, Bankers Trust Company, Kendall Capital Partners, Drexel Burnham Lambert, and American Express Aircraft Leasing. Mr. Wallach received a Bachelor's Degree in Political Science from State University of New York at Stony Brook and a Master's Degree in Business Administration from the University of Michigan.

The Board of Directors has concluded that Mr. Wallach should serve as a director of the Company because of his knowledge of the Company's business and history and his expertise in aircraft finance.

Board Meetings and Committees

The Board of Directors of the Company held seven full board meetings during the fiscal year ended December 31, 2016. During the last year, no incumbent director attended fewer than 75% of the meetings of the Board of Directors and its committees on which he or she served that were held during the period in which he or she was a director.

The Company has an Audit Committee and an Executive Committee of the Board of Directors. The Audit Committee operates under a charter approved by the Board of Directors, which is filed as an exhibit to this Proxy Statement and is also available on the Company's website at http://www.aerocentury.com/audit.php. The Audit Committee meets with the Company's financial management and its independent registered public accounting firm to review internal financial information, audit plans and results, and financial reporting procedures. This committee currently consists of Roy E. Hahn, Chair, Evan M. Wallach and David P. Wilson. The Board has determined that Messrs. Hahn, Wallach and Wilson are independent within the meaning of "independence" as set forth in the NYSE MKT Company Guide.

The Board of Directors has determined that at least one members of the Audit Committee, Mr. Hahn, is an "audit committee financial expert" within the meaning of Item 407(d)(5) of Regulation S-K of the Securities Exchange Act of 1934, as amended. Mr. Hahn is also an "independent director" within the meaning of Section 803A of the NYSE MKT Company Guide. Mr. Hahn is a founder of Marbridge Group, LLC, an alternative investment management firm, and prior to that was a tax partner in the accounting firms of Coopers & Lybrand and Arthur Young & Co. In the course of his career, Mr. Hahn acquired (i) an understanding of generally accepted accounting principles and financial statements, (ii) the ability to assess the general application of such principles in connection with the accounting for estimates, accruals and reserves, (iii) experience preparing, auditing, analyzing or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the Company's financial statements, (iv) an understanding of internal control over financial reporting, and (v) an understanding of audit committee functions.

The Audit Committee held seven meetings during the fiscal year ended December 31, 2016.

The Executive Committee has the authority to acquire, dispose of and finance investments for the Company and execute contracts and agreements, including those related to the borrowing of money by the Company, and generally exercises all other powers of the Board of Directors except for those which require action by all of the directors or the independent directors under the Certificate of Incorporation or the Bylaws of the Company, or under applicable law. The Executive Committee currently consists of only two directors, Toni M. Perazzo and Evan M. Wallach.

The Company does not have a formal Nominating Committee. The independent directors separately consider and make recommendations to the full Board of Directors regarding any candidate being considered to serve on the Board of Directors. The full Board of Directors reviews potential candidates for the Board of Directors. While the Board of Directors does not have a specific policy for considering nominees recommended by stockholders, this does not mean that a recommendation would not be considered if received from a stockholder. The Board has not yet considered a procedure for considering nominees recommended by stockholders in addition to the procedures already set forth in the Bylaws of the Company. It believes that the current informal consideration process has been adequate in light of the historical absence of stockholder proposals. In any event, there would be no difference between the manner in which the Board of Directors would evaluate a nominee for director whether recommended by a stockholder or recommended by a member of the Board of Directors or one of the Company's executive officers. In 2017, the Company engaged a professional search firm to identify and evaluate potential nominees to the Board of Directors. Additionally, other than attempting to constitute the Board of Directors with directors who have skills and experience that are relevant and helpful to the Company's industry and operations and who have the desire and capacity to actively serve, the Board of Directors does not have a policy of considering diversity in identifying director nominees.

In reviewing a potential candidate for the Board, the Board of Directors considers the individual's experience in the Company's industry, the general business or other experience of the candidate, the needs of the Company for an additional or replacement director, the personality of the candidate, and the candidate's interest in the business of the Company, as well as numerous other subjective criteria. Of greatest importance is the individual's integrity, willingness to actively participate and ability to bring to the Company his or her experience and knowledge in areas that are most beneficial to the Company. The Board intends to continue to evaluate candidates for election to the Board on the basis of the foregoing criteria.

Since the Company receives management services from JMC, the Company has no employees and does not pay any compensation to its officers. As a result, the Company has no compensation committee.

Board Leadership Structure

The Board believes its current leadership structure best serves the objectives of the Board's oversight of management, the Board's ability to carry out its roles and responsibilities on behalf of the stockholders, and the Company's overall governance. The Board believes that Evan M. Wallach is best situated to serve as Chair of the Board because he is familiar with the Company's business and industry, and most capable of effectively identifying strategic priorities for the Company, leading the Board in discussions regarding the Company's business and industry, and focusing the Board on execution of strategy. As an independent director, Mr. Wallach brings a different perspective on the strategy development for the Company from the Company's management, and can draw upon not only his deep knowledge of the Company but also experience, oversight and expertise from outside the Company and its industry. The Board believes that appointing a non-executive Chair provides a check and balance on the power of management and therefore enhances the Board's oversight of Company strategy and policy making.

Board of Directors' Role in Risk Oversight

The Company is exposed to a number of operational and financial risks. The Board plays an active role in overseeing management of such risks. The Company's President (who is not a member of the Board) is directly responsible for a number of operational risks, such as the risks inherent in acquiring and owning used aircraft or engines, the risks associated with leasing such aircraft or engines to air carriers, and the risks inherent in disposing of such aircraft or engines. The Board regularly receives reports from the President on these risks and works closely with the Company's management on strategies to manage these risks and to develop contingency plans. The Company's Chief Financial Officer (who is a member of the Board of Directors) is directly responsible for a number of financial risks, such as the risks associated with the Company's credit and liquidity. The Board regularly receives reports from the Chief Financial Officer on these risks and works closely with the Company's management on strategies to manage these risks and to develop contingency plans. The Board also meets and confers regularly with the Company's management to identify other risks faced by the Company, and the President, Senior Vice President – Finance and General Counsel of the Company attend all board meetings as non-voting guests of the Board. The Company believes that this and other interaction with senior management of the Company provides the Board with visibility into and access to the details underlying the risks the Company faces, and thereby enhances the quality of the Board's risk oversight. Also, the Audit Committee oversees management of certain specific financial risks, such as variable interest rate risk.

Communication between Stockholders and Directors

The Company's Board of Directors currently does not have a formal process for stockholders to send communications to the Board of Directors and does not believe such procedures are necessary at this time because it believes that informal communications are sufficient to communicate questions, comments and observations that could be useful to the Board.

Director Attendance at Annual Meeting

It is the policy of the Company and Board of Directors that directors attend the Annual Meeting and be available for questions from the stockholders. All directors, including the director nominated for election, attended the 2016 Annual Meeting. It is anticipated that the directors nominated for election at the 2017 Annual Meeting will also attend that meeting.

Board Independence

If the nominees to the Board of Directors are elected, a majority of the Board of Directors of the Company, consisting of Messrs. Hahn, Wallach and Wilson, will be "independent directors," as defined in accordance with Section 803A of the NYSE MKT Company Guide.

Involvement in Legal Proceedings

No director or associate of a director is involved in a material proceeding as a party adverse to the Company or with a material interest adverse to the Company.

Family Relationships

There are no family relationships among the Company's directors or executive officers.

Director Compensation

Non-employee board members receive an annual fee of $25,000, paid in quarterly installments and are also reimbursed for all reasonable out-of-pocket costs incurred in connection with their attendance at such meetings of the Board of Directors. Non-employee members also receive $1,000 annually for each committee membership, the audit committee Chair receives an additional $3,000, and the Chair of the Board receives an additional $14,000. An officer of the Company who serves as a Board member does not receive any compensation for Board or committee membership. No member of the Company's Board of Directors receives equity compensation in relation to his/her service as a member of the Company's Board of Directors.

The table below provides the compensation of the Company's current directors for the fiscal year ended December 31, 2016:

FISCAL YEAR 2016 DIRECTOR COMPENSATION

Name	Fees Earned or Paid in Cash ($) (1)		Total ($)
Roy E. Hahn		26,750		26,750
David P. Wilson		26,000		26,000
Evan M. Wallach		36,500		36,500

(1)

Toni M. Perazzo was an officer of the Company and JMC during 2016 and therefore did not receive compensation for her service as a member of the Company's Board of Directors or committee thereof, in accordance with the Company's director compensation policy. Each of Messrs. Hahn, Wallach and Wilson earned $25,000 as a non-employee member of the Board Messrs. Hahn, Wallach and Wilson each earned an additional $1,000 for their respective memberships on the Audit Committee during the year, and Mr. Hahn earned an additional $750 for a partial year of chairmanship of the Audit Committee. Mr. Wallach earned an additional $10,500 for a partial year as Chair of the Board.

Officers and Key Employees

For the biography of Toni M. Perazzo, Chief Financial Officer, Treasurer, Secretary and Senior Vice President - Finance, see "Proposal 1 -- Directors." Listed below are the other officers of the Company who are also key officers and employees of JMC, and are responsible for the management of various aspects of the Company's business:

Mr. Michael G. Magnusson, President, age 59. Mr. Magnusson is the Company's President, and is Managing Director of JMC, the management company for AeroCentury Corp., since September of 2016. Prior to joining the Company and JMC in 2016, he was with Saab Aircraft, which he joined in 1982 and where he held positions of increasing responsibility culminating in his appointment as Chief Executive Officer of the Saab Aircraft Leasing in 2001. Mr. Magnusson received a Master's Degree in Aeronautical Engineering in 1982 from KTH Royal Institute of Technology in Stockholm, Sweden.

Mr. Brian J. Ginna, Vice President, Corporate Development, age 48. Mr. Ginna is responsible for all corporate communications, investor relations and public relations of the Company and JMC. Since 1991, Mr. Ginna has been employed with JMC and JMC-affiliated companies in positions of increasing responsibility. Mr. Ginna received a Bachelor's Degree in Finance from Babson College.

Mr. Harold M. Lyons, Vice President, Finance, age 58. Mr. Lyons has been responsible for overseeing tax accounting and tax analysis as well as Sarbanes-Oxley internal controls compliance review for the Company since 2003. Mr. Lyons has been employed by JMC and JMC affiliated companies since 1992. Mr. Lyons was previously a Manager in the Tax Department of Coopers & Lybrand, Certified Public Accountants and, before that, Mr. Lyons was a Manager in the Tax Department of Arthur Young & Co., Certified Public Accountants. He received a Bachelor's Degree in Business Administration (specializing in Accounting and Applied Economics) and a Master's Degree in Business Administration (specializing in finance and management science) from the University of California, Berkeley. Mr. Lyons is a certified public accountant, and is a member of the American Institute of Certified Public Accountants (and a member of the Tax Section) and of the California Society of Public Accountants.

Mr. Frank Pegueros, Senior Vice President, Operations, age 57. Mr. Pegueros is responsible for negotiation of aircraft acquisitions and aircraft remarketing and sales, as well as drafting of contractual documents. Mr. Pegueros joined JMC and the Company in 2007 and was previously in a variety of positions with United Airlines over a twenty‑year period. Initially as power plant engineer and finally as a senior aircraft sales executive, he was a member of the United's aircraft team responsible for aircraft acquisitions and sales as well as lender negotiations. He is a graduate of Cal Poly State University with BS in Aeronautical Engineering.

Mr. Glenn Roberts, Vice President, Controller, age 52. Mr. Roberts is responsible for financial accounting and analysis as its controller since 1997. He has been employed by the Company and JMC and related companies since 1989 in various capacities of increasing responsibility.

Mr. Christopher B. Tigno, General Counsel, age 55. Mr. Tigno is responsible for all legal matters of the Company and JMC and all of its related companies, including supervision of outside counsel, documentation of aircraft asset acquisition transactions and corporate and securities matters. Prior to joining the Company, he was Senior Counsel with the law firm of Wilson, Ryan & Campilongo from 1992 to 1996, and before that was associated with the law firm of Fenwick & West from 1988 to 1992 and the law firm of Morrison & Foerster from 1986 to 1988. Mr. Tigno received his Juris Doctor Degree from the University of California at Berkeley, Boalt Hall School of Law, and was admitted to the California Bar in 1986. He also holds a Bachelor's Degree in Chemical Engineering from Stanford University.

Executive Compensation

Because the Company receives management services from JMC, the Company has no employees and does not pay any compensation to its executive officers. Instead, the executive officers of the Company are compensated in their capacities as employees of JMC. JMC is an at-will employer, and none of its employees, other than Managing Director, Michael G. Magnusson, has an employment agreement with JMC. The compensation paid by JMC to the Company's executive officers consists solely of base salary plus bonus payments. Ms. Toni M. Perazzo, in her capacity as President of JMC, has sole discretion in determining annual salary and bonus payments for the JMC officers (other than Mr. Magnusson) and employees, including Ms. Perazzo's own salary and bonus.

The following table sets forth certain information for the fiscal years ending December 31, 2015 and December 31, 2016, concerning compensation paid by JMC to the Company's executive officers who were serving as such at December 31, 2016:

SUMMARY COMPENSATION TABLE

Name and Position

Year

Salary

($)

Bonus

($)

All Other

Compensation

($)

Total

($)

Michael G. Magnusson, President of the Company; Managing Director of JMC (1)

2015

2016

N/A

116,666

N/A

116,666

Toni M. Perazzo, CFO, Treasurer, Senior VP - Finance & Secretary of the Company; President & CFO of JMC; (2)

2015

2016

310,000

300,000

130,000

140,000

440,000

(1)	Michael G. Magnusson was hired effective September 1, 2016. Amount reflects a partial year of salary at the rate of $350,000.

(2)	Toni M. Perazzo also served as Interim President of the Company for eight months of 2016.

JMC is a wholly-owned subsidiary of JetFleet Holding Corp. ("JCH"). Ms. Perazzo owns or controls approximately 56% of the outstanding shares of stock of JHC, and thus has an indirect ownership interest in JMC of approximately 56%. JHC did not pay any dividends to its stockholders during either 2015 or 2016. The Company paid management fees, acquisition fees and remarketing expense reimbursements to JMC of $6,613,200 and $6,453,000 during 2016 and 2015, respectively. Because of her indirect ownership interest in JMC, Ms. Perazzo had an indirect interest in approximately 56% of these management fees, acquisition fees, and remarketing expense reimbursements, or $3,703,392 and $3,613,680 in 2016 and 2015, respectively. Although Ms. Perazzo did not receive any compensation or dividends from JHC in 2016 or 2015, to the extent that the management fees, acquisition fees, and remarketing expense reimbursements paid by the Company to JMC are in excess of JMC's expenses in managing the Company's portfolio enhance the value of JMC's equity, and in turn the value of JHC's equity, the payment by the Company of management fees to JMC indirectly enhances the value of Ms. Perazzo's ownership interest in JHC.

JMC Management Fee and Risk Management

Because the Company has no employees, it has no compensation policies or practices that are reasonably likely to have a material adverse effect on the Company. However, the structure of the Company's management fee arrangement with JMC may affect the Company's risk exposure. All decisions regarding acquisitions and disposal of assets from the Company's portfolio are made by JMC. All management fees, acquisition fees and remarketing expense reimbursements paid by the Company to JMC are paid pursuant to the Management Agreement, which was most recently amended and restated on August 17, 2015.

Under the current Management Agreement, the Company pays JMC a monthly management fee in arrears. The monthly management fee is equal to (i) 0.25% of the first $400 million of the net asset value of the Company's aircraft assets as of the end of the month, plus, (ii) if applicable, 0.20833% of the next $100 million of net asset value as of the end of the month, plus, (iii) if applicable, 0.16667% of any net asset value in excess of $500 million as of the end of the month. Upon purchase of an asset or multiple assets in a single transaction, JMC receives an acquisition fee of 3% of the total purchase price paid by the Company, and on a sale of an asset owned by the Company, JMC receives a resale fee of 3% of total purchase price received by the Company. The Management Agreement provides that JMC is responsible for the following expenses, without reimbursement from the Company: all salaries, bonus, cost of employee benefits, and hiring, employment law compliance and attorney expenses for all JMC employees providing services to the Company; all costs of airfare, lodging and reimbursement of JMC employees travelling on Company business; cost of all office space and office equipment utilized in the Company's business; all costs of electronic infrastructure, computer equipment, cell phone services, IT and other office and administrative expenses used or incurred by JMC employees for the Company's business; and all remarketing expenses and fees for third parties engaged by JMC for remarketing, resale or re-lease, except as otherwise approved by the Company for direct compensation by the Company. The Company is, however, responsible to pay directly, or reimburse JMC for, the following expenses: outside corporate and securities compliance counsel fees and expense, local and Federal Aviation Administration and International Registry counsel attorney's fees and expenses incurred in connection with Company aircraft transactions; independent auditor fees and expenses; third party expenses in connection with periodic securities filings and other SEC compliance requirements; director compensation, director and officer liability insurance, hull and liability insurance for the Company's off-lease portfolio, credit facility interest, fees and expenses; lessor payments required under the Company's leases with lessees; income, sales, VAT and all taxes assessed against the Company; and all remarketing expenses and fees for third parties engaged directly by the Company.

Under this management fee structure, a larger volume of acquisitions generates acquisition fees and also increases the periodic management fee by increasing the size of the asset portfolio. This management fee structure may create a situation where a decision by JMC for the Company to forego an asset acquisition transaction deemed to be an unacceptable business risk due to the lessee or the asset type is in conflict with JMC's own pecuniary interest, and conversely a situation where a decision by JMC for the Company to pursue an asset acquisition transaction that presents significant business risk due to the lessee or the asset type furthers JMC's own pecuniary interest. As a result, the management fee structure could act to incent greater risk-taking by JMC in asset acquisition decision-making.

The Company has established objective target guidelines for yields on acquired assets. Further, the Board must approve any acquisition that involves a new asset type, and such approval must include the affirmative vote of a majority of the outside directors. Two further mitigating factors are that JMC is the largest single shareholder of the Company's stock, and that the Company is JMC's sole customer for management service. Therefore, there is a significant concert of interests of both JMC and the Company in decision-making that would promote the optimum financial performance of the Company. While the Company currently believes the foregoing are effective mitigating factors against undue compensation-incented risk-taking by JMC, there is no assurance that such mechanisms can entirely and effectively eliminate such risk.

The current Management Agreement has a term that expires on August 17, 2025. The Management Agreement contains a provision that entitles the Company to unilaterally terminate the Management Agreement prior to its scheduled expiration. If the Company exercises its right to unilaterally terminate the Management Agreement before its scheduled expiration or JMC terminates the Management Agreement due to a breach of the Management Agreement by the Company, the Company will be required to pay JMC an amount equal to the greater of: (a) $15,000,000; or (b) the product of: (i) the average of the management fees payable by the Company to JMC during the last twelve calendar months prior to such termination; multiplied by (ii) a number equal to the number of calendar months remaining in the term of the Management Agreement, subject, however, to a minimum of 24 months and a maximum of 36 months.

Because a principal purpose of the Management Agreement is for JMC to manage the Company's aircraft asset portfolio, the Management Agreement is deemed to have been breached and terminated by the Company, resulting in the obligation to pay an amount equal to the early termination fee described above, if the Company sells or disposes of 25% or more of its assets (based upon fair market value) in a transaction not recommended by JMC. The Management Agreement is not affected by a change in control of the Company, such as a merger, acquisition or consolidation of the Company with or by another entity that acquires a majority ownership interest in the Company, and such an event would not cause a termination fee to be payable under the Management Agreement.

The Company recognizes that Ms. Perazzo's indirect interests in any early termination fee payable by the Company to JMC would present a potential conflict of interest in the context of an early termination of the Management Agreement proposed by the Company. As a result, (i) the independent directors (i.e., the members of the Board of Directors of the Company other than Ms. Perazzo) meet regularly outside of the presence of Ms. Perazzo and other members of the Company's management to provide regular opportunities to discuss these potential conflicts of interest, and (ii) on matters involving the Company's dealings with JMC, such dealings must be approved both by a majority vote of the entire board and by a majority vote of the independent directors.

Compensation Committee Interlocks and Insider Participation

Toni M. Perazzo is an executive officer and director of both the Company and JMC. As described above under "Employee Compensation," the Company receives management services from JMC and has no employees and does not pay any compensation to its executive officers. The Company does not have a compensation committee because it has no employees. None of the Company's executive officers serves on a compensation committee (or any other committee of the board of directors performing similar functions), and there were no interlocks or insider participation between any member of the Board of Directors and any member of the board of directors or any compensation committee of another entity.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information regarding the beneficial ownership of the Company's Common Stock as of March 1, 2017, by: (i) each person or entity that is known to the Company to own beneficially more than five percent of the outstanding shares of the Company's Common Stock; (ii) each director; (ii) each named executive officer; and (iii) all directors and executive officers as a group.

Name, Position & Address	No. of Shares (1)		Percentage of Common Stock (2)
Michael G. Magnusson, President (3)		0		*
Toni M. Perazzo Director, Sr. Vice President-Finance, Secretary and Principal Stockholder (3)(4)		366,554		23.40	%
Evan M. Wallach Director (3)		770		*
Roy E. Hahn Director (3)		0		*
David P. Wilson Director (3)		215		*
All directors and executive officers as a group (5 persons)		367,539		23.46	%
JetFleet Holding Corp. Principal Stockholder (5)		214,876		13.72	%
Seabreeze Capital Management, LLC (6)		107,655		6.87	%
Lee G. Beaumont (7)		150,950		9.63	%
Dimensional Fund Advisors LP (8)		80,537		5.14	%

----------------------------------

* Less than 1%

Footnotes to Security Ownership:

(1) Except as indicated in the footnotes to this table, the stockholders named in the table are known to the Company to have sole voting and investment power with respect to all shares of Common Stock shown as beneficially owned by them, subject to community property laws where applicable. Beneficial ownership of shares is determined in accordance with the rules of the Securities and Exchange Commission ("SEC") and generally includes any shares over which a person exercises sole or shared voting or investment power, or of which a person has the right to acquire ownership within 60 days after, March 1, 2017.

(2) For purposes of calculating percentages, 1,566,699 shares were used as the total outstanding shares, consisting of 1,566,699 shares of outstanding Common Stock (excluding Company treasury stock) as of March 1, 2017.

(3) The mailing address is c/o AeroCentury Corp., 1440 Chapin Avenue Suite 310, Burlingame, California 94010.

(4) Includes 214,876 shares owned by JetFleet Management Corp., a wholly owned subsidiary of JetFleet Holding Corp., of which Ms. Perazzo is an officer, director and/or principal shareholder; 60,869 shares held by Stargate Trust, an irrevocable trust, of which Ms. Perazzo is a beneficial owner; 60,869 shares indirectly held by the ARC Trust, an irrevocable trust, of which a dependent child of Ms. Perazzo is the beneficiary; and 6,500 shares held in a UGMA account for such child.

(5) Consists of 214,876 shares owned by a wholly owned subsidiary, JetFleet Management Corp. JetFleet Holding Corp., 1440 Chapin Avenue, Suite 310, Burlingame, CA 94010.

(6) Based solely on a Schedule 13G/A filed with the SEC on February 8, 2017, Seabreeze Capital Management, LLC has sole voting power and sole dispositive power with respect to 107,655 shares as of December 31, 2016. Seabreeze Capital Management, LLC, 3511 Venture Drive, Huntington Beach, CA 92649.

(7) Based solely on a Schedule 13D/A filed with the SEC on April 14, 2015, Lee G. Beaumont has sole voting power and sole dispositive power with respect to 150,950 shares as of April 13, 2015. Lee G. Beaumont, 2090 Centro Street, East, Tiburon, CA 94920.

(8) Based solely on a Schedule 13G filed with the SEC on February 10, 2014, Dimensional Fund Advisors LP has sole voting power and sole dispositive power with respect to 80,537 shares as of December 31, 2013. According to the Schedule 13G, Dimensional Fund Advisors LP, as an investment adviser, furnishes investment advice to four investment companies and serves as investment manager to certain other commingled group trusts and separate accounts (collectively referred to as the "Dimensional Funds"). In certain cases, subsidiaries of Dimensional Fund Advisors LP may act as an adviser or sub-adviser to certain Fund. In its role as investment adviser, sub-adviser and/or manager, Dimensional Fund Advisors LP or its subsidiaries (collectively, "Dimensional") may be deemed to be the beneficial owner of the shares of owned by the Dimensional Funds, but Dimensional and its subsidiaries disclaim beneficial ownership of such shares. Dimensional Fund Advisors LP, Palisades West, Building One, 6300 Bee Cave Road, Austin, Texas, 78746.

RELATED PARTY TRANSACTIONS

Management Agreement. JMC acts as the management company for the Company under the Second Amended and Restated Management Agreement, dated August 17, 2015, between JMC and the Company (the "Management Agreement"). All management fees, acquisition fees and remarketing expense reimbursements paid by the Company to JMC are paid pursuant to the Management Agreement. The officers of the Company are also officers of JMC and the sole member of JMC's Board of Directors is on the Board of Directors of the Company. JMC is a wholly-owned subsidiary of JHC. Ms. Perazzo owns or controls approximately 56% of the outstanding shares of stock of JHC, and thus has an indirect ownership interest in JMC of approximately 56%. As a result of her indirect ownership interest in JMC, Ms. Perazzo has an indirect interest in the management fees, acquisition fees and remarketing expense reimbursements paid by the Company to JMC. Although Ms. Perazzo did not receive any compensation or dividends from JHC in 2015 or 2016, to the extent that the management fees, acquisition fees and remarketing expense reimbursements paid by the Company to JMC, net of expenses incurred by JMC in management of the Company's portfolio, enhance the value of JMC's equity, and in turn the value of JHC's equity, the payment by the Company of management fees to JMC indirectly enhances the value of Ms. Perazzo's ownership interest in JHC.

Office Space. The Company maintains its principal office at the offices of JMC at 1440 Chapin Avenue, Suite 310, Burlingame, California 94010, without reimbursement to JMC.

16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company's directors and executive officers and persons who own more than ten percent of a registered class of the Company's equity securities, to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities of the Company. Officers, directors and greater than ten percent stockholders are required by Securities and Exchange Commission regulation to furnish the Company with copies of all Section 16(a) reports they file.

Based solely upon review of the copies of such reports furnished to the Company and written representations that no other reports were required, the Company believes that there was compliance for the fiscal year ended December 31, 2016 with all Section 16(a) filing requirements applicable to the Company's officers, directors and greater than ten percent beneficial owners, except as follows: (i) the purchase of 4 shares of Common Stock by director David Wilson on August 30, 2016, was reported one day late on September 6, 2016, as Mr. Wilson was initially unaware that his trade order for 140 shares had actually been executed in two lots, 4 shares on one day and the remainder executed the next day; and (ii) the purchases of 200 shares, 100 shares, 100 shares, 100 shares of Common Stock on August 17, 2016, August 18, 2016, August 22, 2016, August 29, 2016, respectively, by director Evan Wallach, which were reported on September 6, 2016, due to late reporting of these purchases to the Company.

CODE OF BUSINESS CONDUCT AND ETHICS

It is the policy of the Company to conduct its affairs in accordance with all applicable laws, rules and regulations of the jurisdictions in which it does business. As part of this policy, the Company maintains a Code of Conduct and Business Ethics, which is available on the Company's website at http://www.aerocentury.com/code-of-conduct.php.

STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS

Requirements for Stockholder Proposals to be Brought Before 2018 Annual Meeting of Stockholders ("2018 Annual Meeting"). For stockholder proposals to be considered properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Company. To be timely for the 2018 Annual Meeting, notice of stockholder proposals must be delivered to, or mailed and received by, the Secretary of the Company at the principal executive offices of the Company between November 22, 2017 and December 22, 2017. A stockholder's notice to the Secretary must set forth, as to each matter the stockholder proposes to bring before the annual meeting: (i) a brief description of the business desired to be brought before the Annual Meeting and the reasons for conducting such business at the Annual Meeting, (ii) the name and record address of the stockholder proposing such business, (iii) the number of shares of the Company's Common Stock which are beneficially owned by the stockholder, (iv) any material interest of the stockholder in such business and (vi) certain other detailed information as set forth in Section 7.11 of the Bylaws of the Company, which information is designed to uncover undisclosed relationships, interests or potential biases that could affect how the Company and/or its stockholders may understand or react to a proposal.

Requirements for Director Nominations for the 2018 Annual Meeting

For nominations by a stockholder for election to the Board of Directors to be properly brought before an annual meeting of stockholders, the stockholder must have given timely notice thereof to the Company not later than the close of business on November 22, 2017. Article II, Section 4 of the Amended and Restated Bylaws sets forth certain comprehensive information required to be included in that notice. These provisions are designed to uncover undisclosed relationships, interests or potential biases that could affect how the Company and/or its stockholders may understand or react to a nomination.

Requirements for Stockholder Proposals to be Considered for Inclusion in the Company's Proxy Materials. In order to be considered for inclusion in the Company's proxy materials for the 2018 meeting, stockholder proposals submitted pursuant to Rule 14a-8 under the Exchange Act and intended to be presented at the Company's 2018 Annual Meeting must be received by the Company not later than November 22, 2017.

ANNUAL REPORT ON FORM 10-K

A copy of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2016, is available without charge to each person solicited by this Proxy Statement upon the written request of such person to Investor Relations, AeroCentury Corp., 1440 Chapin Avenue, Suite 310, Burlingame, California 94010.

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDER MEETING TO BE HELD ON MAY 3, 2017

The Notice of Annual Meeting, Proxy Statement, and the Company's Annual Report on Form 10-K for the year ended December 31, 2016 are available online at:

http://www.aerocentury.com/downloads.htm

OTHER MATTERS

Management does not know of any matters to be presented at this Annual Meeting other than those set forth herein and in the Notice accompanying this Proxy Statement, nor has it received any notice of any matter by the deadline prescribed by SEC Rule 14a-4(c). Without limiting the Company's ability to apply the advance notice provisions in its Amended and Restated Bylaws with respect to the procedures that must be followed for a matter to be properly presented at an annual meeting, if other matters should properly come before the meeting, the proxy holders will vote on such matters in accordance with their best judgment.

It is important that your shares be represented at the Annual Meeting, regardless of the number of shares that you hold. YOU ARE, THEREFORE, URGED TO EXECUTE PROMPTLY AND RETURN THE ACCOMPANYING PROXY IN THE ENVELOPE THAT HAS BEEN ENCLOSED FOR YOUR CONVENIENCE. Stockholders of record who are present at the Annual Meeting may revoke their proxies and vote in person or, if they prefer, may abstain from voting in person and allow their proxies to be voted.

By Order of the Board of Directors,

/s/ Michael G. Magnusson

Michael G. Magnusson, President

March 23, 2017

Burlingame, California

ATTACHMENT A

TO AEROCENTURY CORP. 2017 PROXY STATEMENT

AUDIT COMMITTEE CHARTER

Revised May 5, 2016

I.	ORGANIZATION

The Audit Committee shall be comprised of two or more directors, as determined by the Corporation's Board of Directors (the "Board"). The Audit Committee members shall be designated by the Board and shall serve at the discretion of the Board.

Each member of the Audit Committee shall meet the audit committee independence requirements of the New York Stock Exchange MKT ("NYSE MKT") and any other applicable laws, rules and regulations.

Each member of the Audit Committee shall be able to read and understand fundamental financial statements in accordance with the rules of the NYSE MKT audit committee requirements. At least one member shall have past employment experience in finance or accounting, a professional certification in accounting or other comparable experience or background that results in the individual's possessing the requisite financial sophistication, including a current or past position as a chief executive or financial officer or other senior officer with financial oversight responsibilities.

II. STATEMENT OF POLICY

The Audit Committee is appointed by the Board to oversee the accounting and financial reporting processes of the Corporation and audits of the financial statements of the Corporation and to have direct and sole responsibility for the appointment, compensation, retention, oversight and termination of the Corporation's independent auditors ("Auditors"). The Audit Committee shall further provide assistance and expertise to the full corporate board of directors in fulfilling their responsibility to the shareholders, potential shareholders, and investment community relating to corporate accounting, reporting practices of the corporation, and the quality and integrity of the financial reports of the corporation. In so doing, it is the responsibility of the Audit Committee to maintain free and open means of communication between the directors, the Auditors, and the financial management of the Corporation. In addition, the Audit Committee shall review the policies and procedures adopted by the Corporation to fulfill its responsibilities regarding the fair and accurate presentation of financial statements in accordance with generally accepted accounting principles and applicable rules and regulations of the Securities and Exchange Commission and the NYSE MKT audit committee requirements.

III.

POWERS

The Audit Committee shall have the power to conduct or authorize investigations into any matters within the Committee's scope of responsibilities. The Committee shall be empowered to engage independent counsel and other advisers, at the Corporation's expense, without seeking approval from the Board or any officer of the Corporation, as the Committee determines necessary to carry out its duties. While the Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Committee to plan or conduct audits or to determine that the Corporation's financial statements are complete and accurate and are in accordance with generally accepted accounting principles. Those tasks are the responsibility of management and the independent auditor. The Board and the Committee are in place to represent the Corporation's stockholders. Accordingly, the independent auditor is ultimately accountable to the Board and the Committee.

IV.	RESPONSIBILITIES

The Audit Committee shall undertake those specific duties and responsibilities listed below and such other duties as the Board shall from time to time prescribe. All powers of the Committee are subject to the restrictions designated in the Corporation's Bylaws and applicable law. In carrying out its responsibilities, the Audit Committee believes its policies and procedures should remain flexible, in order to best react to changing conditions and to ensure to the directors and shareholders that the corporate accounting and reporting practices of the Corporation are in accordance with all requirements and are of the highest quality.

The Audit Committee's responsibilities shall be as follows:

1. Review and reassess the adequacy of this Charter annually.

2. With respect to the Corporation's Auditors:

a. The Committee is directly and solely responsible for the appointment, compensation, retention, and oversight of the work and termination of the Corporation's Auditors (including resolving disagreements between management and the Auditors regarding financial reporting). The Committee shall preapprove all auditing services (including the provision of comfort letters) and non-audit services provided by the Auditors to the Corporation, other than as may be allowed by applicable law. The Committee may delegate to one or more designated Committee members the authority to grant preapprovals required by the foregoing sentence. The decisions of any Committee member to whom such authority is delegated hereunder shall be presented to the Committee at each of its scheduled meetings. The Auditors shall be ultimately accountable to the Board and to the Committee as representatives of the Corporation's stockholders.

Review the independence of the Auditors, including a review of management consulting services, and related fees, provided by the Auditors. The Committee shall request that the Auditors at least annually provide a formal written statement delineating all relationships between the Auditors and the Corporation consistent with the NYSE MKT audit committee requirements and the applicable requirements of the Public Company Accounting Oversight Board ("PCAOB"), including PCAOB Rule 3526, and request information from the Auditors and management to determine the presence or absence of a conflict of interest. The Committee shall actively engage the Auditors in a dialogue with respect to any disclosed relationships or services that may impact the objectivity and independence of the Auditors. The Committee shall take, or recommend that the full Board take, appropriate action to oversee the independence of the Auditors.

Review and discuss with the Auditors and management, before release, the audited financial statements and the Management's Discussion and Analysis proposed to be included in the Corporation's Annual Report on Form 10-K. Make a recommendation to the Board whether or not the audited financial statements should be included in the Corporation's Annual Report on Form 10-K.

In consultation with the Auditors and management, consider and review at the completion of the annual examinations and such other times as the Committee may deem appropriate:

The Corporation's annual financial statements and related notes.

The Auditors' audit of the financial statements and their report thereon.

The Auditors' reports regarding critical accounting policies, alternative treatments of financial information and other material written communications between the Auditors and management.

Any deficiency in, or suggested improvement to, the procedures or practices employed by the Corporation as reported by the Auditors in their annual management letter.

Periodically and to the extent appropriate under the circumstances, it may be advisable for the Committee, with the assistance of the Auditors and/or management, to consider and review the following:

Any significant changes required in the Auditors' audit plan.

Any difficulties or disputes with management encountered during the course of the audit.

The adequacy of the Corporation's system of internal financial controls.

The effect or potential effect of any regulatory regime, accounting initiatives or off-balance sheet structures on the Corporation's financial statements.

Any correspondence with regulators or governmental agencies and any employee complaints or published reports that raise material issues regarding the Corporation's financial statements or accounting policies.

Other matters related to the conduct of the audit, which are to be communicated to the Committee under generally accepted auditing standards and pursuant to the requirements of the PCAOB.

Discuss with the Auditors the matters required to be discussed by Statement on Auditing Standards No. 114, as modified or supplemented, and PCAOB Auditing Standard No. 16.

Obtain from the Auditors assurance that it has complied with Section 10A of the Securities Exchange Act of 1934.

Establish procedures for (a) the receipt, retention and treatment of complaints received by the Corporation regarding accounting, internal accounting controls or auditing matters and (b) the confidential, anonymous submission by the Corporation's employees of concerns regarding questionable accounting or auditing matters.

Prepare a report in the Corporation's proxy statement in accordance with SEC requirements.

10.

Discuss guidelines and policies governing the process by which senior management of the Company and the relevant departments of the Company assess and manage the Company's exposure to risk, and to discuss the Company's major financial risk exposures and the steps management has taken to monitor and control such exposures;

11.

Review accounting and financial human resources and succession planning with the Corporation

12.

Submit the minutes of all meetings of the Audit Committee to, or discuss the matters discussed at each Committee meeting with, the Board.

13.

Investigate any matter brought to its attention within the scope of its duties, with the power to retain separate outside counsel and other advisors, solely representing and reporting to the Audit Committee, for this purpose if, in its judgment, that is appropriate.

V. MEETINGS

The Audit Committee shall meet as often as it determines is appropriate to carry out its responsibilities under this Charter, but no less frequently than quarterly. Periodic

meetings of the Audit Committee should include at least the following meetings:

1. Prior to the annual audit;

2. After completion of the annual audit and before financial statements are issued;

3. Before the annual meeting of shareholders, which would include the preparation of the Audit Committee's report to the entire Board.

Meetings should provide the opportunity not only to review the Corporation's quarterly and annual financial results but also perform a preliminary review of annual and quarterly financial reports of the Corporation, and review filings with the Securities and Exchange Commission. The Audit Committee should set its own agenda and should be able to secure whatever information it may feel it needs to be well informed as to the issues before it.

Special meetings of the Committee may be called by any member of the Audit Committee or at the request of the Auditors.

VI. MINUTES

Minutes shall be kept of each meeting of the Committee and will be provided to each member of the Board. Any action of the Committee shall be subject to revision, modification or rescission by the Board.

VII. FUNDING

The Committee shall have available funding from the Corporation as determined by the Committee for payment of:

1. compensation to any accounting firm engaged for the purpose or preparing or issuing an audit report or performing other audit, review or attest services for the Corporation;

2. compensation to any advisers employed by the Committee; and

3. ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its duties.

EX-99.1 2 proxycard.htm AEROCENTURY CORP 2017 PROXY CARD

PROXY CARD FRONT

PROXY

AeroCentury Corp. This Proxy is Solicited on Behalf of the Board of Directors.

1440 Chapin Avenue, Suite 310, Burlingame, California 94010

The undersigned hereby appoints Toni M. Perazzo and Christopher B. Tigno, as Proxies, with full power of substitution, and hereby authorizes them to represent and to vote, as designated below, all of the shares of Common Stock of AeroCentury Corp. (the "Company") held of record by the undersigned on March 1, 2017, at the 2017 Annual Meeting of Stockholders of the Company to be held on May 3, 2017, or at any adjournment or postponement thereof.

1. ELECTION OF DIRECTOR ☐ FOR the nominee listed below ☐ WITHHOLD AUTHORITY

(except as marked to the contrary below) to vote for the nominee listed below

(Instruction: To withhold authority to vote for any individual nominee strike a line through the nominee's name in the list below)

Roy E. Hahn Toni M. Perazzo

2. PROPOSAL TO APPROVE, by non-binding vote, the compensation of the Company's named executive officers as disclosed in the Proxy Statement.

☐ FOR ☐ AGAINST ☐ ABSTAIN

3. PROPOSAL TO RATIFY THE APPOINTMENT OF BDO USA, LLP as independent auditors for the Company for the fiscal year ending December 31, 2017.

☐ FOR ☐ AGAINST ☐ ABSTAIN

4. In their discretion, the Proxies are authorized to vote upon such other matters as may properly come before the meeting or at any adjournment or postponement thereof.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS NO. 1, 2 AND 3

PLEASE TURN OVER, DATE AND SIGN REVERSE SIDE

[PROXY CARD BACK]

PLEASE MARK, SIGN AND DATE AND RETURN THIS PROXY CARD PROMPTLY

USING THE ENCLOSED ENVELOPE

THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS SPECIFIED ON THE REVERSE SIDE. IF NO SPECIFICATION IS MADE, THEN THIS PROXY WILL BE VOTED "FOR" THE NOMINEE LISTED ON THE REVERSE SIDE FOR THE BOARD OF DIRECTORS AND "FOR" PROPOSALS NO. 2 AND 3.

Please sign exactly as your name appears on the attached label. When shares are held by joint tenants, both should sign. When signing as an attorney, executor, administrator, trustee, or guardian, please give full title as such. If a corporation, please sign in full corporate name by President or other authorized officer. If a partnership, please sign in partnership name by authorized person.

Change of Address (if applicable): ___________________________________

SIGNATURE(S) (below)

Title (if any) _______________________ Date ________________________

(Second Signature, if held jointly)

EX-99.2 3 acyannualreport.htm AEROCENTURY CORP. ANNUAL REPORT 2017

[Front Cover]

[Graphics Omitted]

Worldwide • Regional Aircraft • Leasing

2016 Annual Report

TO OUR STOCKHOLDERS

In 2016, earnings were $1.2 million, or $0.78 per diluted share, which included $3.4 million in gains from sale or disposition of assets. In 2015, earnings were $6.4 million, or $4.17 per diluted share, which included $12.0 million in gains on sale or disposition of assets.

Consistent with our strategy to sell older aircraft for cash or through sales-type finance leases, we sold four older regional jet aircraft and one aircraft engine for cash, and sold three older turboprop aircraft pursuant to sales-type finance leases during 2016. We reinvested the sales proceeds in newer, more fuel-efficient models during the third quarter: two Bombardier CRJ-1000 regional jet aircraft on lease to Air Nostrum (Spain), and two Bombardier CRJ-900 aircraft on lease with Adria Airways (Slovenia), representing $69 million of investments. These acquisitions increased the net book value of our aggregate asset portfolio by 24%, to $192.8 million from $155.3 million a year ago. Although operating lease revenue was slightly lower in 2016 than in 2015, the 2016 acquisitions are beginning to have a marked impact on operating lease revenue.

Utilization remained strong at 93% in 2016, compared to 92% in 2015.

Book value per share was $27.13 at December 31, 2016, compared to $26.35 per share at December 31, 2015.

The aircraft leasing industry continues to evolve. Competition in the acquisition market remains fierce, leading to higher aircraft prices and lower lease rates. We remain committed to expanding our fleet through quality acquisitions, but will only enter into transactions that make good economic sense for AeroCentury.

I joined AeroCentury in September of 2016 after working in the regional aircraft industry for more than 30 years. A large part of my time since has been spent visiting AeroCentury's customers worldwide, as well as attending international conferences in order to promote AeroCentury's brand and further expand its exposure and contacts in the aviation industry. I have been gratified by the reception I have received from industry leaders at these events and am impressed by AeroCentury's strong reputation within the industry. I am pleased to be part of AeroCentury's management team and look forward to the Company's promising future.

We appreciate your continued support.

Sincerely,

/s/ Michael G. Magnusson

Michael Magnusson

President

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-K

(Mark One)

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2016

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

For the transition period from ____________ to ____________

Commission File Number: 001-13387

AeroCentury Corp.

(Exact name of Registrant as Specified in Its Charter)

Delaware		94-3263974
(State or Other Jurisdiction of Incorporation or Organization)		(IRS Employer Identification No.)

1440 Chapin Avenue, Suite 310

Burlingame, California 94010

(Address of Principal Executive Offices)

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

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Name of each exchange on which registered
Common Stock, par value $0.001 per share	NYSE MKT Exchange

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes ☐ No ☒

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ☒ No ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ☐ Accelerated filer ☐

Non-accelerated filer ☐ Smaller reporting company ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

The aggregate market value of the voting and non-voting common equity held by non-affiliates (based upon the closing price as of June 30, 2016) was $10,877,500.

The number of shares of the Registrant's Common Stock outstanding as of March 9, 2017 was 1,566,699.

DOCUMENTS INCORPORATED BY REFERENCE

Part III of this Annual Report on Form 10-K incorporates information by reference from the Registrant's Proxy Statement for its 2017 Annual Meeting of Stockholders. Except as expressly incorporated by reference, the Registrant's Proxy Statement shall not be deemed to be a part of this Annual Report on Form 10-K.

- 1 -

PART I

FINANCIAL INFORMATION

Forward-Looking Statements

This Annual Report on Form 10-K includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended ("the Exchange Act"). All statements in this 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 these statements: (i) in Part I, Item 1, "Business of the Company," that the Company can purchase assets at an appropriate price and maintain an acceptable overall on-lease rate for the Company's assets; and that it is able and willing to enter into transactions with a wider range of lessees than would be possible for traditional, large lending institutions and leasing companies; (ii) in Part I, Item 1, "Working Capital Needs," that the Company will have sufficient cash flow or borrowing availability to fund maintenance costs; (iii) in Part I, Item 1, "Competition," that the Company has a competitive advantage due to its experience and operational efficiency in financing the transaction sizes that are desired by many in the regional air carrier market; and that the Company continues to have a competitive advantage because JMC has developed a presence as a global participant in the regional aircraft leasing market; (iv) in Part I, Item 1, "Environmental Matters," that neither compliance with federal, state and local provisions regulating discharge of greenhouse gas emissions (including carbon dioxide (CO2)) in the environment and/or aircraft noise regulations, nor remedial agreements or other actions relating to the environment, has had, or is expected to have, a material effect on the Company's capital expenditures, financial condition, results of operations or competitive position; (v) in Part I, Item 3, "Legal Proceedings," that none of the current litigation, if resolved adverse to the Company, is anticipated to have a material adverse effect on the Company; (vi) in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources," that the Company will be in compliance with all of its credit facility covenants at future calculation dates; and that the Company will have adequate cash flow to meet its ongoing operational needs, including any required repayments under the Credit Facility due to borrowing base limitations; (vii) in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations – Outlook," that the Company does not anticipate any future weakening of the financial condition of its overall customer base, but believes that there may be further shakeouts of weaker carriers in the industry before the financial situation improves across the board; that the Company continues to expect slow growth in the number of aircraft and aircraft engines needed for operation by carriers in nearly all geographic areas, especially in western Europe, as compared to periods before the global downturn; that that there will be intense competition among buyers of leased assets available for acquisition; that the Company could experience a delay in remarketing its assets, as well as lower rental rates for assets that are remarketed; that the Company expects that the customers for four aircraft leases and two engine leases that expire in 2017 will choose to return the assets rather than renew the leases; that the Company will be in compliance with all of its Credit Facility covenants at future calculation dates; and that available borrowings under the Credit Facility will be sufficient to meet its continuing obligations and, if the Credit Facility is expanded from its current amount of $150 million to the maximum of $180 million, to fund anticipated acquisitions; (viii) in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations – Factors that May Affect Future Results," that the Company will be in compliance with all of its credit facility covenants; that competition has and will likely continue to create upward pressure on acquisition prices for many of the aircraft types that the Company has targeted to buy and, at the same time, create downward pressure on lease rates, resulting in lower margins for the Company and, therefore, fewer acceptable acquisition opportunities for the Company; that the Company will have sufficient cash funds to make any required principal repayment that arises due to borrowing limitations; that the Company does not anticipate any worsening of the financial condition of its overall customer base, but believes that there may be further shakeouts of weaker carriers in economically troubled regions; that most of the Company's growth will be outside North America; that the overall industry expertise of JMC's personnel and its technical resources should permit the Company to effectively manage new aircraft types; that there are effective mitigating factors against undue compensation-incented risk-taking by JMC; that it is not expected that the costs of complying with current environmental regulations will have a material adverse effect on the Company's financial position, results of operations, or cash flows; that the Company has sufficient cyber-security measures in place commensurate with the risks to the Company of a successful cyber-attack or breach of security; and that sufficient replacement mechanisms exist in the event of such a cyber-attack interruption that there would not be a material adverse financial impact on the Company's business; and (ix) in Part II, Item 8, "Financial Statements," that the adoption of the provisions of ASU 2016-01 will not have a substantial effect on its balance sheet or statement of operations; that the accounting for the Company's existing operating and sales-type leases will not be affected by adoption of Topic 842, nor does it expect classification of its future leases to be significantly affected by adoption; that certain pre-lease costs that are currently capitalized and amortized over operating lease terms or offset against gain on sale in sales-type leases will instead be expensed when incurred under the new standards of Topic 842; that Company does not expect to adopt Topic 842 early, and does expect to elect practical expedients in connection with its adoption, including not re-evaluating lease classification or capitalized initial direct costs on existing leases; that the outcome of any existing or known threatened proceedings, even if determined adversely, should not have a material adverse effect on the Company's business, financial condition, liquidity or results of operations. 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 of Financial Condition and Results of Operations –– Factors That May Affect Future Results," including no sudden current economic downturn or unanticipated future financial crises or other unanticipated events, such as war, terrorist events or a flu epidemic that might adversely affect the travel industry or the commercial airline business, the lack of any unexpected lessee defaults or insolvency; a deterioration of the market values of aircraft types owned by the Company; compliance by the Company's lessees with obligations under their respective leases; the continued availability of financing for acquisitions under the Credit Facility; the Company's success in finding appropriate assets to acquire with such financing; deviations from the assumption that future major maintenance expenses will be relatively evenly spaced over the entire portfolio; and future trends and results which cannot be predicted with certainty. The cautionary statements made in this 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.

- 2 -

Item 1. Business.

Business of the Company

AeroCentury Corp., a Delaware corporation incorporated in 1997, typically acquires used regional aircraft for lease to regional carriers worldwide. In August 2016, AeroCentury Corp. formed two wholly-owned subsidiaries, ACY 19002 Limited ("ACY 19002") and ACY 19003 Limited ("ACY 19003") for the purpose of acquiring aircraft using a combination of cash and financing separate from the parent's credit facility.

The business of AeroCentury Corp., ACY 19002 and ACY 19003 (collectively, the "Company") is managed by JetFleet Management Corp. ("JMC"), pursuant to a management agreement (the "Management Agreement") with JMC. JMC 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.

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

The Company's success in achieving its objective depends in large part on its success in three areas: asset selection, lessee selection and obtaining financing for acquisition of aircraft and engines.

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

The Company generally targets used regional aircraft with purchase prices between $5 million and $20 million, and lease terms of three to ten years. In determining assets for acquisition, the Company evaluates, among other things, the type of asset, its current price and projected future value, its versatility or specialized uses, the current and projected availability of and demand for that asset, and the type and number of future potential lessees. Because JMC has extensive experience in purchasing, leasing and selling used regional aircraft, the Company believes it can purchase these assets at an appropriate price and maintain an acceptable overall on-lease rate for the Company's assets.

In order to improve the remarketability of an aircraft after expiration of a lease, the Company's leases generally contain provisions that require lessees to either return the aircraft in a condition that allows the Company to expediently re-lease or sell the aircraft, or pay sufficient amounts based on usage under the lease to cover any maintenance or overhaul of the aircraft required to bring the aircraft to such a state.

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

The Company has funded its asset acquisitions primarily through debt financing supplemented by free cash flow. The Company's primary source of debt financing has been a secured credit facility. The Company's current credit facility (the "Credit Facility") is provided by a syndicate of banks, with MUFG Union Bank, N.A. as agent, and expires on May 31, 2019. As discussed above, during 2016, the Company also financed the purchase of two aircraft using special purpose financing.

Working Capital Needs

The Company's portfolio of assets has historically generated revenues that have exceeded the Company's cash expenses, which consist mainly of management fees, maintenance costs, principal and interest payments on debt, professional fees, and insurance premiums.

The management fees paid by the Company to JMC are based upon the book value of the Company's asset pool. Maintenance costs for off-lease aircraft are recognized as expenses as incurred, while reimbursement of lessee maintenance costs from previously collected maintenance reserves reduce the Company's maintenance reserves liability. Interest expense is dependent on both the balance of the Company's indebtedness and applicable interest rates. Professional fees are paid to third parties for expenses not covered by JMC under the Management Agreement. Insurance expense includes amounts paid for directors and officers insurance, as well as product liability insurance and aircraft hull insurance for periods when an aircraft is off lease.

So long as the Company succeeds in keeping the majority of its assets on lease and interest rates do not rise significantly and rapidly, the Company's cash flow should continue to be sufficient to cover its expenses and provide excess cash flow. If the Company incurs unusually large maintenance costs or reimbursements for maintenance in any given period, the Company expects it will have sufficient cash flow or borrowing availability under its credit facility to fund such maintenance.

- 3 -

Competition

The Company competes with other leasing companies, banks, financial institutions, private equity firms, and aircraft leasing syndicates for customers that generally are regional commercial aircraft operators seeking to lease aircraft under operating leases. Competition has increased as competitors who have traditionally neglected the regional air carrier market have recently focused on that market. The industry has also experienced a number of consolidations of smaller leasing companies, creating a handful of very large companies operating in this market. Because competition is largely based on price and lease terms, the entry of new competitors into the market, the creation of larger competitors due to consolidation, and/or the entry of traditional large aircraft lessors into the regional aircraft niche, particularly those with greater access to capital markets than the Company, could lead to fewer acquisition opportunities for the Company and/or lease terms less favorable to the Company, as well as fewer renewals of existing leases or new leases of existing aircraft, all of which could lead to lower revenues, profitability and cash flow for the Company.

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

Dependence on Significant Customers

For the year ended December 31, 2016, the Company's three largest customers accounted for 21%, 17% and 17% of lease revenue. For the year ended December 31, 2015, the Company's three largest customers accounted for 17%, 16% and 15% of lease revenue. Concentration of credit risk with respect to lease receivables will diminish in the future only if the Company is able to re-lease assets currently on lease to significant customers to new customers and/or acquire assets for lease to new customers.

Environmental Matters

Neither compliance with federal, state and local provisions regulating discharge of greenhouse gas emissions (including carbon dioxide (CO2)) in the environment and/or aircraft noise regulations, nor remedial agreements or other actions relating to the environment, has had, or is expected to have, a material effect on the Company's capital expenditures, financial condition, results of operations or competitive position.

Employees

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

Available Information

The headquarters of AeroCentury Corp. is located at 1440 Chapin Avenue, Suite 310, Burlingame, California 94010. The main telephone number is (650) 340-1888. The Company's website is located at: http://www.aerocentury.com.

The Company is subject to the reporting requirements of the Securities Exchange Act (the "Exchange Act"). Therefore, the Company files periodic reports, proxy statements and other information with the Securities and Exchange Commission (the "SEC"). Copies of these materials, filed by us with the SEC, are available free of charge on the Company's website at www.aerocentury.com through the Investor Relations link (SEC Filings). The public may read and copy any materials the Company files with the SEC at the SEC's Public Reference Room of the SEC at 100 F Street N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.

Item 1A. Risk Factors.

Smaller reporting companies are not required to provide this information.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

As of December 31, 2016, the Company did not own or lease any real property, plant or materially important physical properties. The Company maintains its principal office at 1440 Chapin Avenue, Suite 310, Burlingame, California 94010. However, since the Company has no employees and the Company's portfolio of leased aircraft assets is managed and administered under the terms of the Management Agreement with JMC, all office facilities are provided by JMC.

For information regarding the aircraft and aircraft engines owned by the Company, refer to Note 3 to the Company's consolidated financial statements in Item 8 of this Annual Report on Form 10-K.

Item 3. Legal Proceedings.

The Company from time to time engages in ordinary course litigation relating to lease collection matters against defaulting lessees and mechanic's lien claims by vendors hired by lessees. None of the current litigation, if resolved adverse to the Company, is anticipated to have a material adverse effect on the Company's financial condition or results of operations.

Item 4. Mine Safety Disclosures.

Not applicable.

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PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and

Issuer Purchases of Equity Securities.

The shares of the Company's Common Stock are traded on the NYSE MKT exchange ("NYSE MKT") under the symbol "ACY."

Market Information

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

Period	High		Low
Fiscal year ended December 31, 2016:
Fourth Quarter	$	9.69	$	8.50
Third Quarter		9.50		8.50
Second Quarter		11.45		8.52
First Quarter		14.88		10.03
Fiscal year ended December 31, 2015:
Fourth Quarter		13.00		8.21
Third Quarter		13.00		7.70
Second Quarter		13.45		8.01
First Quarter		14.00		7.61

On March 8, 2017, the closing sale price of the Company's Common Stock on the NYSE MKT exchange was $10.20 per share.

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Sale of Unregistered Securities

In April 2007, the Company issued warrants to purchase up to 81,224 shares of the Company's Common Stock at $8.75 per share. On December 16, 2015, the holders of the warrants exercised all warrants outstanding on a "cashless" basis, resulting in the issuance on that date of 23,442 net shares of Common Stock. Such shares of Common Stock were issued pursuant to an exemption from registration under Section 3(a)(9) of the Securities Act of 1933, as amended (the "Securities Act"), and no underwriters were used in connection with the warrant exercise. For additional information related to the warrants, see Note 10 and Note 12 of Notes to Consolidated Financial Statements included in this Report. The 23,442 shares issued to the holders of the warrants may be resold by such holders under an exemption from registration provided by Rule 144 under the Securities Act.

Number of Security Holders

According to the Company's transfer agent, the Company had approximately 1,300 stockholders of record as of March 9, 2017. Because brokers and other institutions on behalf of beneficial stockholders hold many of the Company's shares of Common Stock, the Company is unable to estimate the total number of beneficial stockholders represented by those record holders.

Dividends

No dividends have been declared or paid to date. The Company has no plans at this time to declare or pay dividends, and intends to re-invest any earnings into the acquisition of additional revenue-generating aircraft equipment.

The terms of the Credit Facility prohibit the Company from declaring or paying dividends on its Common Stock, except for cash dividends in an aggregate annual amount not to exceed 50% of the Company's net income in the immediately preceding fiscal year so long as immediately prior to and immediately following such dividend the Company is not in default under the Credit Facility.

Stockholder Rights Plan

For information regarding the Company's stockholder rights plan, refer to Note 8 to the Company's consolidated financial statements in Item 8 of this Annual Report on Form 10-K.

Item 6. Selected Financial Data.

This report does not include information described under Item 301 of Regulation S-K pursuant to the rules of the SEC that permit "smaller reporting companies" to omit such information.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Overview

The Company owns regional aircraft and engines, which are typically leased to customers under triple net leases with terms that are less than the useful life of the assets. A "triple net operating lease" is an operating lease under which, in addition to monthly rental payments, the lessee is generally responsible for the taxes, insurance and maintenance and repair of the aircraft arising from the use and operation of the aircraft during the term of the lease. 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 equipment that comes off lease. The Company is subject to the credit risk of its lessees, both as to collection of rental payments and as to performance by lessees of their obligations to maintain the equipment. Since lease rates for assets in the Company's portfolio generally decline as assets age, the Company's ability to maintain and grow revenue and earnings is primarily dependent upon the Company's ability to acquire and lease additional assets.

The Company's primary uses of cash are for purchases of aircraft and engines, maintenance, debt service payments, management fees, insurance and professional fees.

The Company's most significant non-cash expenses include aircraft and engine depreciation, amortization of costs associated with the Company's indebtedness, which is included in interest expense, and, in some years, impairment provisions, which are affected by significant estimates.

Critical Accounting Policies, Judgments and Estimates

The Company's discussion and analysis of its financial condition and results of operations are based upon its consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated 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 consolidated financial statements. 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. For a discussion of Critical Accounting Policies, Judgments and Estimates, refer to Note 1 to the Company's consolidated financial statements in Item 8 of this Annual Report on Form 10-K.

For a discussion of the Company's accounting policies regarding maintenance reserves, refer to Note 1(m) to the Company's consolidatedfinancial statements in Item 8 of this Annual Report on Form 10-K.

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Results of Operations

The Company recorded net income of $1.2 million in 2016 compared to net income of $6.4 million in 2015.

Operating lease revenue decreased 4% to $24.5 million in 2016 from $25.5 million in 2015, primarily due to: (i) the loss of revenue from an aircraft that was involved in an accident in April 2016 and was declared a total loss, (ii) the loss of revenue from assets that were sold for cash and sold pursuant to sales-type finance leases in 2015, (iii) less revenue for an engine that was on lease during 2015 and was returned at lease end during the third quarter of 2016, and (iv) the loss of revenue from an aircraft that was returned prior to lease end, for which the Company ceased recording revenue during the second quarter of 2016. The effects of these decreases was partially offset by revenue from assets that were purchased during the third quarter of 2016 and revenue from two engines that were off lease in 2015, but on lease in 2016.

During 2016, the Company also recorded a $2.1 million gain on insurance proceeds related to an aircraft that was involved in an accident and declared a total loss. During 2015, the Company recorded $6.8 million of net gains on sales, reflecting the sale of four aircraft.

During 2016, the Company recorded $1.2 million of net gains on sales-type finance leases related to three aircraft, compared to net gains of $5.2 million related to five sales-type finance leases in 2015.

Maintenance reserves that are retained by the Company at lease end are recorded as revenue at that time. The Company recorded no maintenance reserves revenue in 2016, compared to $0.6 million in 2015, when two aircraft were returned to the Company.

During 2016, the Company acquired four aircraft. The Company added no equipment to its portfolio during 2015; however, it paid acquisition costs in 2015 related to 2014 asset acquisitions.

During 2016, consistent with its policy of selling older aircraft at the appropriate time, the Company sold four regional jet aircraft that had been held for sale, and, pursuant to sales-type finance leases, an additional three turboprop aircraft that had been held for lease. During 2015, the Company sold a turboprop aircraft that had been held for sale; two turboprop aircraft were sold to their lessee; and, pursuant to sales-type finance leases, it sold an additional five turboprop aircraft that had been held for lease.

Depreciation was approximately the same in 2016 and 2015.

The average net book value of assets held for lease during 2016 and 2015 was approximately $163.4 million and $171.0 million, respectively. Management fees, which are based on the net book value of the Company's aircraft and engines as well as finance lease receivable balances, decreased by 7% in 2016 as compared to 2015.

Average portfolio utilization increased to approximately 93% during 2016 from approximately 92% during 2015.

The Company's interest expense decreased by 13% to $5.3 million in 2016 from $6.1 million in 2015, primarily as a result of a lower average debt balance and decreased amortization of debt issuance costs during the 2016 period, the effect of which was partially offset by a higher average interest rate in 2016.

The Company's maintenance expense decreased by 30% to $3.3 million in 2016 from $4.7 million in 2015, primarily as a result of a decrease in one-time maintenance performed by the Company on off-lease aircraft to prepare them for re-lease.

The Company's professional fees, general and administrative and other expenses increased by 40% to $1.7 million in 2016 from $1.2 million in 2015, primarily as a result of expenses incurred in connection with the return of three aircraft by a lessee during 2016.

During 2016, the Company recorded impairment charges of (i) $0.9 million for a spare engine, based on its appraised value, (ii) $0.2 million on a second spare engine, based on its net sales value and (iii) $0.1 million related to two of its four regional jet aircraft based on a reduced sales price. During 2015, the Company recorded impairment charges of (i) $0.2 million for one of its turboprop aircraft that is held for lease, based on its appraised value, (ii) $0.8 million for its four regional jet aircraft that were held for sale, based on estimated sales proceeds, and (iii) $0.3 million for one of its turboprop aircraft that is held for sale, based on estimated proceeds to be received from a consignment vendor that is selling the aircraft in parts.

During 2016, the Company recorded bad debt expense of $0.8 million related to an aircraft that was returned prior to lease end and for which the Company did not receive the operating lease revenue accrued in prior periods. The Company recorded no bad debt expense during 2015.

The Company's insurance expense decreased by 25% to $0.3 million in 2016 from $0.4 million in 2015, primarily due to a reduction in premiums due to sales and fewer off-lease aircraft in 2016.

During 2016, the Company reached a settlement of $0.1 million related to goods and services tax that had been accrued in 2014 and 2015 for four of the Company's aircraft that were leased to a foreign customer. As a result of such settlement, during 2016, the Company reversed $0.4 million of other tax expense.

Liquidity and Capital Resources

The Company is currently financing its assets primarily through debt financing and excess cash flows.

(a) Credit Facility

The Company has a $150 million Credit Facility, as described in Note 6 to the Company's consolidated financial statements in Item 8 of this Annual Report on Form 10-K. The Company was in compliance with all covenants at December 31, 2016 and December 31, 2015.

Based on its current projections, the Company believes that it will be in compliance with all of its Credit Facility covenants at future calculation dates. Although the Company believes that the assumptions it has made in forecasting its compliance with the Credit Facility covenants are reasonable in light of experience, actual results could deviate from such assumptions and there can be no assurance that the Company's beliefs will prove to be correct. Among the more significant factors that could have an impact on the accuracy of the Company's covenant compliance forecasts are (i) unanticipated decreases in the market value of the Company's assets, or in the rental rates deemed achievable for such assets that cause the Company to record an impairment charge against earnings; (ii) lessee non-compliance with lease obligations, (iii) inability to locate new lessees for returned equipment within a reasonable remarketing period, or at a rent level consistent with projected rates, (iv) inability to locate and acquire a sufficient volume of additional assets at prices that will produce acceptable net returns, (v) increases in interest rates, or (vi) inability to timely dispose of off-lease assets at prices commensurate with their market value.

Although the Company believes it will continue to be in compliance with all of the Credit Facility covenants, there can be no assurance of such compliance and, in the event of any non-compliance, the Company would need to seek waivers or amendment of applicable covenants from its lenders if such compliance failure is not timely cured. Any default under the Credit Facility, if not cured in the time permitted under the facility or waived by the lenders, could result in the Company's inability to borrow any further amounts under the Credit Facility, the acceleration of the Company's obligation to repay amounts borrowed under the Credit Facility, or foreclosure upon any or all of the assets of the Company.

(b) Special purpose financings

In August 2016, the Company acquired, using wholly-owned special purpose entities, two regional jet aircraft, using cash and third-party financing separate from its Credit Facility. The acquisition resulted in note obligations to the third party of $9,805,600 and $9,804,300, by each of the special purpose entities, respectively, and each note bears interest at the rate of 4.455%. The note obligations require installment payments that are funded from the rent payments on the related aircraft leases through October 3, 2020 and November 7, 2020. The note obligations are collateralized by the aircraft and are recourse only to the special purpose entity borrower and its aircraft asset, subject to standard exceptions for this type of financing. Payments due under the notes consist of quarterly principal and interest.

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The Company's primary sources of cash are rent payments due under the Company's operating and finance leases, maintenance reserves, which are billed monthly to lessees based on asset usage, and proceeds from the sale of aircraft and engines.

The Company's primary uses of cash are for (i) purchase of assets, (ii) Credit Facility and special purpose financing interest and principal payments, (iii) maintenance expense and reimbursement to lessees from collected maintenance reserves, (iv), management fees, and (v) professional fees, including legal, accounting and directors' fees costs.

The Company's payments for maintenance consist of reimbursements to lessees for eligible maintenance costs under their leases and maintenance incurred directly by the Company for preparation of off-lease assets for re-lease to new customers. The timing and amount of such payments may vary widely between quarterly and annual periods, as the required maintenance events can vary greatly in magnitude and cost, and the performance of the required maintenance events by the lessee or the Company, as applicable, are not regularly scheduled calendar events and do not occur at uniform intervals throughout any calendar period. The Company's maintenance payments typically constitute a large portion of its cash needs, and the Company may from time to time borrow additional funds under the Credit Facility to provide funding for such payments.

Management fees paid by the Company are relatively predictable because they are based on the net asset value of the Company's portfolio and finance lease receivable balances. Because of this, the risk of increased costs for employee salaries and benefits, worldwide travel related to the management of the Company's aircraft portfolio, office rent, outside technical experts and other overhead expenses is entirely placed on JMC.

The amount of interest paid by the Company depends primarily on the outstanding balance of its Credit Facility, which carries a floating interest rate as well as an interest rate margin, and is therefore also dependent on changes in prevailing interest rates. Interest related to the Company's special purpose financings is payable at a fixed rate.

Management believes that the Company will have adequate cash flow to meet its ongoing operational needs, including any required repayments under the Credit Facility, based upon its estimates of future revenues and expenditures, which include assumptions regarding (i) revenues for assets to be re-leased, (ii) cost and anticipated timing of maintenance to be performed, (iii) required debt payments, (iv) timely use of proceeds of unused debt capacity for additional acquisitions of income producing assets and (v) interest rates. Although 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. As discussed above, in "Liquidity and Capital Resources – (a) Credit Facility," there are a number of factors that may cause actual results to deviate from such forecasts.

(i) Operating activities

The Company's cash flow from operations increased by $0.8 million in 2016 compared to 2015. As discussed below, the increase in cash flow was primarily a result of increases in payments received for operating lease revenue and net security deposits, and decreases in payments for interest, aircraft insurance, maintenance and management fees. This positive effect was partially offset by decreases in payments received for maintenance reserves and increases in payments for maintenance and professional fees.

Payments for operating lease revenue

Rent receipts from lessees increased by $1.7 million in 2016 compared to 2015, primarily due to higher rent from assets purchased and leased to customers during 2016.

As of the date of this filing, the Company is receiving no lease revenue for three aircraft and two engines that are off lease. The total book value of these assets is $11.7 million, representing 6% of the Company's total assets held for lease. In addition, an off-lease turboprop aircraft, with a book value of $1.5 million, is being held for sale and is not generating any lease revenue.

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Payments for security deposits

Net security deposits received by the Company increased by $0.8 million in 2016 compared to 2015, primarily as a result of lease deposits received in connection with aircraft purchased by the Company during the 2016 period.

Payments for interest

Payments for interest decreased by $0.5 million in 2016 compared to 2015 as a result of a lower average Credit Facility balance during 2016.

Payment for aircraft insurance

Payments for aircraft insurance decreased by $0.6 million in 2016 compared to 2015, because fewer of the Company's assets were off lease in 2016 and as a result of a difference in the timing of premium payments that are made on a semi-annual basis.

Payments for management fees

Payments for management fees decreased by $0.8 million in 2016 compared to 2015, as a result of sales of aircraft during the fourth quarter of 2015 and during 2016, the effect of which was only partially offset by aircraft acquisitions during 2016, as well as a difference in the timing of payments from year to year.

Payments for maintenance reserves

Receipts for maintenance reserves from lessees decreased by $0.8 million in 2016 compared to 2015, primarily as a result of fewer assets for which the Company collected maintenance reserves in the 2016 period.

Payments for maintenance

Although maintenance expense was lower in 2016 than in 2015, payments for maintenance increased by $2.5 million in 2016 compared to 2015 as a result of a difference in the timing of payments for maintenance.

Payments for professional fees

Payments for professional fees increased by $0.6 million in 2016 compared to 2015 primarily as a result of expenses incurred in connection with the return of three aircraft by one of the Company's customers.

(ii) Investing activities

During 2016 and 2015, the Company received net cash of $6.3 million and $14.7 million, respectively, from the sale of assets. During 2016, the Company also received $18.9 million of insurance proceeds related to the total loss of an aircraft during the period and for damage to an aircraft in 2015. During 2016, the Company used cash of $54.4 million for acquisitions of aircraft. During 2015, the Company used cash of $1.3 million for acquisition costs related to aircraft acquired during the second half of 2014.

(iii) Financing activities

The Company made additional borrowings of $31.3 million under the Credit Facility during 2016 and none in 2015. In 2016 and 2015, the Company repaid $31.6 million and $23.0 million, respectively, of its total outstanding debt under the Credit Facility. Such repayments were funded by excess cash flow and the sale of assets. During each of 2016 and 2015, the Company paid $0.1 million of debt issuance costs. During 2016, the Company's special purpose entities borrowed $19.6 million and repaid $2.0 million.

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Outlook

(a) General

During the global downturn, there was an overall reduction in passenger traffic in some markets where the Company's lessees operate. This weakened the financial condition of some of these lessees, which resulted in these lessees and other carriers slowing expansion or reducing capacity. As a result, the demand for aircraft by these lessees and other carriers decreased, reducing the Company's acquisition and remarketing opportunities. The Company does not anticipate any future weakening of the financial condition of its overall customer base, but believes that there may be further shakeouts of weaker carriers in the industry before the financial situation improves across the board. Overall, the Company continues to expect slow growth in the number of aircraft and aircraft engines needed for operation by carriers in nearly all geographic areas, especially in western Europe, as compared to periods before the global downturn, and that there will be intense competition among buyers of leased assets available for acquisition.

The Company has identified three areas that could challenge the Company's growth and operating results by negatively affecting its collateral base and, therefore, its ability to access sources of financing:

• The Company could experience (i) a delay in remarketing its assets, as well as (ii) lower rental rates for assets that are remarketed. The Company expects that the customers for four aircraft leases and two engine leases that expire in 2017 will choose to return the assets rather than renew the leases.

• Lessees that are located in low- or no-growth areas of the world carry heightened risk of an unanticipated lessee default. A lessee's default and the unscheduled return of an asset to the Company for remarketing could result not only in reduced operating lease revenue but also in unanticipated, unrecoverable expenses arising from the lessee's default on its maintenance and return condition obligations. The Company monitors the performance of all of its customers and has noted that some of the Company's customers continue to experience weakened operating results and have not yet achieved financial stability.

• As a result of the current low-interest rate environment, competition in the Company's market niche has increased significantly as a result of new acquisition and leasing market entrants, some of which are funded by investment banks and private equity firms seeking higher yields on investment assets than are currently available from traditional income investment types. The increased competition has resulted in higher acquisition prices for many of the aircraft types that the Company has targeted to buy and, at the same time, has put downward pressure on lease rates, resulting in lower margins and, therefore, fewer acceptable acquisition opportunities for the Company.

(b) Operating Segments

The Company operates in one business segment, the leasing of regional aircraft and engines to foreign and domestic regional airlines, and therefore does not present separate segment information for lines of business. Because engine leasing is typically characterized by short-term, non-triple net leases, which result in high overall transaction costs, unpredictable off-lease periods and extensive human resource allocation to remarketing, the Company has chosen to own only a few engines that are compatible with its aircraft types.

In addition to six turboprop aircraft that are subject to finance leases, at February 28, 2017, the Company's aircraft and aircraft engines that were on lease or held for lease consisted of the following:

Type	Number owned		% of net book value
Turboprop aircraft		11		23	%
Regional jet aircraft		12		73	%
Engines		4		4	%

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For the month ended February 28, 2017, approximately 28%, 19%, 15% and 14% of the Company's operating lease revenue was derived from customers in Slovenia, Spain, Mozambique and the United States, respectively. Operating lease revenue does not include interest income from the Company's finance leases. The table below sets forth geographic information about the Company's operating lease revenue for leased aircraft and aircraft equipment, grouped by domicile of the lessee:

Region	Number of lessees		% of operating lease revenue
Europe		4		53	%
North America		3		24	%
Africa		1		15	%
Asia		1		4	%
Australia		1		4	%

The Company is seeking remarketing opportunities for two turboprop aircraft and two engines that are held for lease. However, the Company may also consider selling some or all of these assets. The Company is analyzing the amount and timing of maintenance required to remarket the assets, the amount of which may differ significantly if the assets are sold rather than re-leased.

The Company also owns a turboprop aircraft that is held for sale, for which the Company is seeking sales opportunities.

(d) Credit Facility

The unused amount of the Credit Facility was $39.9 million as of the date of this filing. Based on its current projections, the Company believes that it will be in compliance with all of its Credit Facility covenants at future calculation dates. The Company also believes that available borrowings under the Credit Facility will be sufficient to meet its continuing obligations and, if the Credit Facility is expanded from its current amount of $150 million to the maximum of $180 million, to fund anticipated acquisitions. However, there can be no assurance that the Company's beliefs will prove to be correct or that the lenders under the Credit Facility will agree to expand the Credit Facility when requested by the Company.

Factors that May Affect Future Results

Noncompliance with Debt Financial Covenants. The Company's use of debt as the primary form of acquisition financing subjects the Company to increased risks associated with leverage. In addition to payment obligations, the Company's debt agreements include financial covenants, including some requiring the Company to have positive earnings, meet minimum net worth standards and be in compliance with certain other financial ratios.

Although the Company believes it will continue to be in compliance with all of the covenants under its debt agreements, there can be no assurance of such compliance, and in the event of any non-compliance, the Company would need to seek further waivers or amendments of applicable covenants from its lenders if such compliance failure is not timely cured. Any default under a debt agreement, if not cured in the time permitted or waived by the respective lender, could result in the Company's inability to borrow under the Credit Facility, the acceleration of the Company's debt obligations, or the foreclosure upon any or all of the assets of the Company.

Ownership Risks. The Company's leases typically are for a period shorter than the entire, anticipated, remaining useful life of the leased assets. As a result, the Company's recovery of its investment and realization of its expected yield in such a leased asset is dependent upon the Company's ability to profitably re-lease or sell the asset following the expiration of the lease. This ability is affected by worldwide economic conditions, general aircraft market conditions, regulatory changes, changes in the supply or cost of aircraft equipment, and technological developments that may cause the asset to become obsolete. If the Company is unable to remarket its assets on favorable terms when the leases for such assets expire, the Company's financial condition, cash flow, ability to service debt, and results of operations could be adversely affected.

The Company typically acquires used aircraft equipment. The market for used aircraft equipment has been 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, airline consolidations, the number of new aircraft on order and the number of aircraft coming off lease, as well as introduction of new aircraft models and types that may be more technologically advanced, more fuel efficient and/or less costly to maintain and operate. Values may also increase or decrease for certain aircraft types that become more or less desirable based on market conditions and changing airline capacity.

In addition, a successful investment in an asset subject to a lease depends in part upon having the asset returned by the lessee in the condition as required under the lease. Each lease typically obligates a customer to return an asset to the Company in a specified condition, generally in equal or better condition than at delivery to the lessee. The Company strives to ensure this result through onsite management during the return process. If the lessee were to become insolvent during the term of its lease and the Company had to repossess the asset, however, it is unlikely that the lessee would have the financial ability to meet these return obligations. Alternatively, if the lessee filed for bankruptcy and rejected the aircraft lease, the lessee would be required to return the aircraft but would be relieved from further lease obligations, including return conditions specified in the lease. In either case, it is likely that the Company would be required to expend funds in excess of any maintenance reserves collected to return the asset to a remarketable condition.

Several of the Company's leases with financially strong lessees do not require payment of monthly maintenance reserves, which serve as the lessee's advance payment for its future repair and maintenance obligations. If repossession due to lessee default or bankruptcy occurred under such a lease, the Company would be left with the costs of unperformed repair and maintenance under the applicable lease and the Company would likely incur an unanticipated expense in order to re-lease or sell the asset.

Furthermore, the occurrence of unexpected adverse changes that impact the Company's estimates of expected cash flows generated from an asset could result in an asset impairment charge against the Company's earnings. The Company periodically reviews long-term assets for impairment, particularly when events or changes in circumstances indicate the carrying value of an asset may not be recoverable. An impairment charge is recorded when the carrying amount of an asset is estimated to be not recoverable and exceeds its fair value. The Company recorded impairment charges for some of its aircraft in 2015 and 2016, and may be required to record asset impairment charges in the future as a result of a prolonged weak economic environment, challenging market conditions in the airline industry, events related to particular lessees, assets or asset types or other factors affecting the value of aircraft or engines.

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Lessee Credit Risk. The Company carefully evaluates the credit risk of each customer and attempts to obtain a third party guaranty, letters of credit or other credit enhancements, if it deems them necessary, in addition to customary security deposits. There can be no assurance, however, that such enhancements will be available, or that, if obtained, will fully protect the Company from losses resulting from a lessee default or bankruptcy.

If a lessee that is a certified U.S. airline were in default under a lease and sought 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 against such lessee for a period of 60 days. After the 60-day period had passed, the lessee would have to agree to perform the lease obligations and cure any defaults, or the Company would have the right to repossess the equipment. However, this procedure under the Bankruptcy Code has been subject to significant litigation, and it is possible that the Company's enforcement rights would be further adversely affected by a bankruptcy filing by a defaulting lessee.

Several of the Company's customers have experienced significant financial difficulties, become insolvent, or have been declared or have filed for bankruptcy. An insolvency or bankruptcy of a customer usually results in a total loss of the receivables from that customer, as well as the Company incurring additional costs in order to repossess and, in some cases, repair the aircraft leased to the customer. The Company closely monitors the performance of all of its lessees and its risk exposure to any lessee that may be facing financial difficulties, in order to guide decisions with respect to such lessee that would mitigate losses in the event the lessee is unable to meet or rejects its lease obligations. There can be no assurance that additional customers will not become insolvent or file for bankruptcy or that the Company will be able to mitigate any of the resultant losses.

It is possible that the Company may enter into deferral agreements for overdue lessee obligations. When a customer requests a deferral of lease obligations, the Company evaluates the lessee's financial plan, the likelihood that the lessee can remain a viable carrier, and whether the deferral will be repaid according to the agreed schedule. The Company may elect to record the deferred rent and reserve payments from the lessee on a cash basis, which could have a material effect on the Company's financial results in the applicable periods. Deferral agreements with lessees also reduce the Company's borrowing capacity under its Credit Facility.

Competition. The aircraft leasing industry is highly competitive. The Company competes with aircraft manufacturers, distributors, airlines and aircraft 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. The Company believes that it is competitive because of JMC's expertise and operational efficiency in identifying and obtaining financing for the transaction types desired by regional air carriers. This market segment, which in many cases involves customers that are private companies without well-established third party credit ratings, is not well served by large financial institutions. JMC has developed a reputation as a competent global participant in this segment of the market, and the Company believes that JMC's reputation benefits the Company. Competition in the Company's market niche, however, has increased significantly recently as a result of new entrants to the acquisition and leasing market and consolidation of certain competitors in the Company's niche. As competition increases, it has and will likely continue to create upward pressure on acquisition prices for many of the aircraft types that the Company has targeted to buy and, at the same time, create downward pressure on lease rates, resulting in lower margins for the Company and, therefore, fewer acceptable acquisition opportunities for the Company.

Risks Related to Regional Air Carriers. The Company's continued focus on its customer base of regional air carriers subjects the Company to additional risks. Many regional airlines rely heavily or even exclusively on a code-share or other contractual relationship with a major carrier for revenue, and can face financial difficulty or failure if the major carrier terminates the relationship or if the major carrier files for bankruptcy or becomes insolvent. Some regional carriers may depend on contractual arrangements with industrial customers such as mining or oil companies, or franchises from governmental agencies that provide subsidies for operating essential air routes, which may be subject to termination or cancellation on short notice. Furthermore, many lessees in the regional air carrier market are start-up, low-capital, and/or low-margin operators.

Credit Facility Debt Limitations. The amount available to be borrowed under the Credit Facility is limited by asset-specific advance rates. Lease arrearages or off-lease periods for a particular asset that is collateral under the Credit Facility may reduce the loan advance rate permitted with respect to that asset and, therefore, reduce the permitted borrowing under the facility. Amounts subject to payment deferral agreements also reduce the amount of permitted borrowing. The Company believes it will have sufficient cash funds to make any required principal repayment that arises due to any such borrowing limitations.

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Availability of Financing. The Company's continued growth will depend on its ability to continue to obtain capital, either through debt or equity financings. There can be no assurance that the Company will succeed in obtaining capital in the future at terms favorable to the Company.

General Economic Conditions and Lowered Demand for Travel. While the United States economy has seen substantial improvement, not all global regions are experiencing growth, and some remain in recession. The Company does not anticipate any worsening of the financial condition of its overall customer base, but believes that there may be further shakeouts of weaker carriers in economically troubled regions.

A growing concern arises from the fact that much of the recent growth in demand for regional aircraft in developing countries has arisen from mineral and natural resource exploitation operations by Chinese enterprises in these countries. A future, sustained major downturn in the Chinese domestic economy that reduces demand for imported raw materials could have a significant negative impact on the demand for business and regional aircraft in these developing countries, including in some of markets in which the Company does, or seeks to do, business.

Furthermore, any further upheavals due to instability in the European Union ("EU") due to "Brexit" and potential future departures of other countries from the EU could have a negative impact on intra-European carriers and the current "open-sky" policies under which they operate freely within the EU. Losing open-sky flight rights could have a significant negative impact on the health of the Company's European lessees and, as a result, the financial performance and condition of the Company.

In addition, the increased strength of the US dollar may make it more expensive for the Company's lessees to convert their local currencies to the US dollars used to pay their US dollar-denominated lease payments. Finally, if a major flu outbreak occurs, or more terrorist attacks involving aircraft or airports occur, passengers may avoid air travel altogether, and global air travel worldwide could be significantly affected. This would have an adverse impact on many of the Company's customers.

Airline reductions in capacity in response to lower passenger loads have resulted in reduced demand for aircraft and aircraft engines and a corresponding decrease in market lease rental rates and aircraft values for many aircraft types. This reduced market value could affect the Company's results if the market value of an asset or assets in the Company's portfolio falls below carrying value, and the Company determines that a write-down of the value on its balance sheet is appropriate. Furthermore, if older, expiring leases are replaced with leases at decreased lease rates, the lease revenue from the Company's 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 certain regions of the world more than others. As the Company's portfolio is not entirely globally diversified, a localized downturn in one of the key regions in which the Company leases assets could have a significant adverse impact on the Company. The Company's significant sources of operating lease revenue by region are summarized in "Outlook - Operating Segments," above.

- 13 -

International Risks. The Company leases assets in overseas markets. Leases with foreign lessees, however, may present different risks than those with domestic lessees. Most of the Company's expected growth is outside of North America.

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. An economic downturn in a particular country or region may impact a foreign lessee's ability to make lease payments, even if the U.S. and other foreign economies remain stable.

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. In addition, if the Company undertakes certain obligations under a lease to contribute to a repair or improvement and if the work is performed in a foreign jurisdiction and paid for in foreign currency, currency fluctuations resulting in a weaker dollar between the time such agreement is made and the time payment for the work is made may result in an unanticipated increase in U.S. dollar-denominated cost for the Company.

Even with U.S. dollar-denominated lease payment provisions, the Company could still be affected by a devaluation of the lessee's local currency and a stronger U.S. dollar that would make it more difficult for a lessee to meet its U.S. dollar-denominated payments, increasing the risk of default of that lessee, particularly if its revenue is primarily derived in the local currency.

Foreign lessees that operate internationally may also face restrictions on repatriating foreign revenue to their home country. This could create a cash flow crisis for an otherwise profitable carrier, affecting its ability to meet its lease obligations. Foreign lessees may also face restrictions on payment of obligations to foreign vendors, including the Company, which may affect their ability to timely meet lease obligations to the Company.

Foreign lessees are not subject to U.S. bankruptcy laws, although there may be debtor protection similar to U.S. bankruptcy laws available in some jurisdictions. Certain countries do not have a central registration or recording system which can be used to locally record 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. In any event, collection and enforcement may be more difficult and complicated in foreign countries.

Finally, ownership of a leased asset operating in a foreign country and/or by a foreign carrier may subject the Company to additional tax liabilities that are not present with aircraft operated in the United States. Depending on the jurisdiction, laws governing such tax liabilities may be complex, not well formed or not uniformly enforced. In such jurisdictions, the Company may decide to take an uncertain tax position based on the best advice of the local tax experts it engages, which position may be challenged by the taxing authority. If the taxing authority later assesses a liability, the Company may be required to pay penalties and interest on the assessed amount, which penalties and interest would not give rise to a corresponding foreign tax credit on the Company's U.S. tax return.

Interest Rate Risk. The Credit Facility carries a floating interest rate based upon short-term interest rate indices. Lease rates typically, but not always, move over time with interest rates, but market demand and numerous other asset-specific factors also affect lease rates. Because the Company's typical lease rates are fixed at lease origination, interest rate changes during the lease term have no effect on existing lease rental 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 decreased net income as additional interest expense outpaces revenue growth. Further, even if significant lease origination occurs following such rate increases, other contemporaneous aircraft market forces may result in lower or flat rental rates, thereby decreasing net income.

Concentration of Lessees and Aircraft Type. For the month ended February 28, 2017, the Company's four largest customers accounted for a total of approximately 76% of the Company's monthly lease revenue. A lease default by or collection problem with one or a combination of any of these significant customers could have a disproportionate negative impact on the Company's financial results and borrowing base under the Credit Facility, 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. In addition, if the Company's revenues become overly concentrated in a small number of lessees, the Company could fail to comply with certain financial covenants in its Credit Facility related to customer concentration. In the event of any non-compliance that is not cured in the time permitted under the Credit Facility, the Company would need to seek waivers or amendment of the applicable covenants if such compliance failure is not timely cured. Any default under the Credit Facility, if not cured in the time permitted under the Credit Facility or waived by the lenders, could result in foreclosure upon any or all of the assets of the Company.

The Company's aircraft portfolio is currently focused on a small number of aircraft types and models compared to the variety of aircraft used in the commercial air carrier market. A change in the desirability and availability of any of the particular types and models of aircraft owned by the Company could affect valuations of such aircraft, and would have a disproportionately significant impact on the Company's portfolio value. Such aircraft type concentration would diminish if the Company acquires assets of other types. Conversely, acquisition of additional aircraft of types currently owned by the Company will increase the Company's risks related to its concentration of those aircraft types.

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Investment in New Aircraft Types. The Company intends to continue to focus solely on regional aircraft. Although the Company has traditionally invested in a limited number of types of turboprop aircraft, the Company has also acquired several types of regional jet aircraft, and may continue to seek acquisition opportunities for new types and models of aircraft used in the Company's targeted customer base of regional air carriers. Acquisition of aircraft types not previously acquired by the Company entails greater ownership risk due to the Company's lack of experience managing those assets. The Company believes, however, that the overall industry expertise of JMC's personnel and its technical resources should permit the Company to effectively manage such new aircraft types. Further, the broadening of the asset types in the aircraft portfolio may have a benefit of diversifying the Company's portfolio (see "Factors That May Affect Future Results – Concentration of Lessees and Aircraft Type," above).

Engine Leasing Risk. Because the Company believes that engine leasing, absent a long-term triple net lease, is inherently riskier than aircraft leasing, the Company does not focus on this segment. The Company, however, currently has four engines in its portfolio, making up 4% of the Company's total net book value of aircraft and aircraft engines held for lease. The Company may from time to time lease one or more of these engines to lessees under industry standard short-term engine leases that place the risk of an engine failure not caused by lessee negligence or foreign object damage upon the lessor. It is not economically practicable for an engine lessor to insure against that risk. If an engine failure occurs and is not covered by a manufacturer's warranty or is not otherwise caused by circumstances that the lessee is required to cover, the Company's investment in the engine could be a significant loss or the Company might incur a significant maintenance expense.

Reliance on JMC. All management of the Company is performed by JMC under a Management Agreement between the Company and JMC that expires in August of 2025 and provides for an asset-based management fee. JMC is not a fiduciary of the Company or its stockholders. The Company's Board of Directors (the "Board") has ultimate control and supervisory responsibility over all aspects of the Company and owes fiduciary duties to the Company and its stockholders. The Board has no control over the internal operations of JMC, but the Board does have the ability and responsibility to manage the Company's relationship with JMC and the performance of JMC's obligations to the Company under the Management Agreement, as it would have for any third party service provider to the Company. While JMC may not owe any fiduciary duties to the Company by virtue of the Management Agreement, all of the officers of JMC are also officers of the Company, and in that capacity owe fiduciary duties to the Company and its stockholders. In addition, an officer of the Company holds significant ownership positions in the Company and JHC, the parent company of JMC, and JHC is the Company's largest shareholder. Therefore, the economic interests of the Company should be aligned with the interests of JHC and JMC, and JMC should have substantial incentive to make financial decisions as the management company for the Company that are in the best interests of the Company.

The 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. A director of the Company is also a director of JMC and, as discussed above, the officers of the Company are also officers of JMC, and one such officer holds significant ownership positions in both the Company and JHC, the holding company for JMC. Consequently, the director 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.

Management Fee Structure. All decisions regarding acquisitions and disposal of aircraft from the Company's portfolio are made by JMC. JMC is paid a management fee based on the net asset value of the Company's portfolio. It may also receive a one-time asset acquisition fee upon purchase of an asset by the Company, and a one-time remarketing fee in connection with the sale or re-lease of an asset. Optimization of the results of the Company depends on timing of the acquisition, lease yield on the acquired assets, and re-lease or sale of its portfolio assets. Under the current management fee structure, a larger volume of acquisitions generates acquisition fees and also increases the periodic management fee by increasing the size of the aircraft portfolio. Since the Company's current business strategy involves continued growth of its portfolio, with the intention to buy and hold assets until the appropriate time to sell them, a compensation structure that results in greater compensation with an increased portfolio size is consistent with that strategy. The compensation structure does, nonetheless, create a situation where a decision by JMC for the Company to forego an asset transaction deemed to be an unacceptable business risk due to the lessee or the aircraft type is in conflict with JMC's own short-term pecuniary interest. As a result, the compensation structure could act to incent greater risk-taking by JMC in asset acquisition decision-making. However, because JMC's sole business and source of revenue arises from and is expected to continue arising from acting as the management company for the Company, the long-term financial health and viability of the Company are important to JMC's own long-term health and viability. Therefore, in assessing risk-taking in the Company's acquisition transactions, JMC's and the Company's motivations are closely aligned, as JMC is incented to make asset acquisitions that are expected to contribute to the long-term viability of the Company. In addition, the Company has established objective target guidelines for yields on acquired assets and the Company's Board, including a majority of the outside independent directors, must approve any acquisition that involves a new asset type. While the Company currently believes the foregoing are effective mitigating factors against undue compensation-incented risk-taking by JMC, there is no assurance that such mechanisms can entirely and effectively eliminate such risk.

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, maximum aircraft age, 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.

- 15 -

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. A "triple net lease" is a lease under which, in addition to monthly rental payments, the lessee is generally responsible for the taxes, insurance and maintenance and repair of the aircraft arising from the use and operation of the aircraft during the term of the lease. Although the United States Aviation Act may provide some protection with respect to the Company's aircraft assets, it is unclear to what extent such statutory protection would be available to the Company with respect to its assets that are operated in foreign countries where such provisions of the United States Aviation Act may not apply.

The Company's leases generally require a lessee to insure against likely risks of loss or damage to the leased asset, and liability to passengers and third parties pursuant to industry standard insurance policies and require lessees to provide insurance certificates documenting the policy periods and coverage amounts. The Company tracks receipt of the certificates and calendars their expiration dates. Prior to the expiration of an insurance certificate, if a replacement certificate has not been received, the Company reminds the lessee of its obligation to provide current insurance certificates to avoid a default under the lease.

Despite these requirements and procedures, there may be certain cases where the loss is not entirely covered by the lessee or its insurance. The possibility of such an event is remote, but any such uninsured loss with respect to the equipment or insured loss for which insurance proceeds are inadequate might result in a loss of invested capital in and any profits anticipated from, such equipment, as well as a potential claim directly against the Company.

Compliance with Future Environmental Regulations. Compliance with future environmental regulations may harm the Company's business. Many aspects of aircraft operations are subject to increasingly stringent environmental regulations, and growing concerns about climate change may result in the imposition by the U.S and foreign governments of additional regulation of carbon emissions, aimed at either requiring adoption of technology to reduce the amount of carbon emissions or putting in place a fee or tax system on carbon emitters. It is likely that any such regulation will be directed at the Company's customers, as operators of aircraft, or at the Company, as owners of aircraft. Under the Company's triple-net lease arrangements, the Company would likely shift responsibility for compliance to its lessees, but there might be some costs of regulation that the Company could not shift and would itself have to bear. Although it is not expected that the costs of complying with current environmental regulations will have a material adverse effect on the Company's financial position, results of operations, or cash flows, no assurance can be given that the costs of complying with environmental regulations adopted in the future will not have such an effect.

Cyber-Security Risks. The Company believes that it has sufficient cyber-security measures in place commensurate with the risks to the Company of a successful cyber-attack or breach of security. The Company believes that its main vulnerability to a cyber-attack would be interruption of the Company's email communications internally and with third parties, loss of customer and lease archives, and loss of document sharing between the Company's offices and remote workers. Such an attack could temporarily impede the efficiency of the Company's operations; however, the Company believes that sufficient replacement mechanisms exist in the event of such an interruption that there would not be a material adverse financial impact on the Company's business.

Possible Volatility of Stock Price. The market price of the Company's common stock is subject to fluctuations following developments relating 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, or arising from other investor sentiment unknown to the Company. Because the Company has a relatively small capitalization of approximately 1.6 million shares outstanding, there is a correspondingly limited amount of trading and float of the Company's shares. Consequently, the Company's stock price is more sensitive to a single large trade or a small number of simultaneous trades along the same trend than a company with larger capitalization and higher trading volume and float.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

This report does not include information described under Item 305 of Regulation S-K pursuant to the rules of the Securities and Exchange Commission that permit "smaller reporting companies" to omit such information.

Item 8. Financial Statements and Supplementary Data.

(a) Financial Statements and Schedules

(1) Financial statements for the Company:

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of December 31, 2016 and 2015

Consolidated Statements of Operations for the Years Ended December 31, 2016 and 2015

Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 2016 and 2015

Consolidated Statements of Cash Flows for the Years Ended December 31, 2016 and 2015

Notes to Consolidated Financial Statements

(2) Schedules:

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

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

AeroCentury Corp.

Burlingame, California

We have audited the accompanying consolidated balance sheets of AeroCentury Corp. (the "Company") as of December 31, 2016 and 2015 and the related consolidated statements of operations, stockholders' equity, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of AeroCentury Corp. at December 31, 2016 and 2015, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

/s/ BDO USA, LLP

San Francisco, California

March 9, 2017

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Item 8. Financial Statements and Supplementary Data.

AeroCentury Corp.

Consolidated Balance Sheets

ASSETS
	December 31,			December 31,
	2016			2015
Assets:
Cash and cash equivalents	$	2,194,400		$	2,721,000
Accounts receivable, including deferred rent of $604,800 and $359,200 at December 31, 2016 and December 31, 2015, respectively		4,046,100			5,693,500
Finance leases receivable		17,468,300			11,895,600
Aircraft and aircraft engines held for lease, net of accumulated depreciation of $32,639,600 and $31,074,600 at December 31, 2016 and December 31, 2015, respectively		192,799,800			155,258,100
Assets held for sale		1,998,100			5,228,400
Prepaid expenses and other		229,400			228,400
Total assets	$	218,736,100		$	181,025,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses	$	1,218,100		$	1,138,400
Notes payable and accrued interest, net of unamortized debt issuance costs of $1,999,900 and $2,814,000 at December 31, 2016 and December 31, 2015, respectively		125,837,900			107,621,600
Maintenance reserves		29,424,100			13,230,000
Accrued maintenance costs		965,000			382,300
Security deposits		3,933,200			3,212,600
Unearned revenues		1,903,900			1,957,400
Deferred income taxes		12,830,500			12,204,200
Income taxes payable		123,200			-
Total liabilities		176,235,900			139,746,500
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.001 par value, 2,000,000 shares authorized, no shares issued and outstanding		-			-
Common stock, $0.001 par value, 10,000,000 shares authorized, 1,629,999 shares issued, 1,566,699 outstanding		1,600			1,600
Paid-in capital		14,780,100			14,780,100
Retained earnings		28,222,600			27,000,900
		43,004,300			41,782,600
Treasury stock at cost, 63,300 shares		(504,100	)		(504,100	)
Total stockholders' equity		42,500,200			41,278,500
Total liabilities and stockholders' equity	$	218,736,100		$	181,025,000

The accompanying notes are an integral part of these statements.

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AeroCentury Corp.

Consolidated Statements of Operations

	For the Years Ended December 31,
	2016			2015
Revenues and other income:
Operating lease revenue, net	$	24,464,500		$	25,467,200
Finance lease revenue		868,100			489,700
Net gain on disposal of assets		2,149,600			6,790,700
Net gain on sales-type finance leases		1,216,700			5,179,200
Maintenance reserves revenue, net		-			589,000
Other income		17,400			17,900
		28,716,300			38,533,700
Expenses:
Depreciation		9,139,700			9,062,100
Interest		5,339,700			6,141,400
Management fees		5,216,400			5,581,400
Maintenance		3,285,700			4,660,600
Professional fees, general and administrative and other		1,667,600			1,187,700
Provision for impairment in value of aircraft		1,226,800			1,282,300
Bad debt expense		835,800			-
Insurance		309,200			409,600
Other taxes		(276,600	)		187,300
		26,744,300			28,512,400
Income before income tax provision		1,972,000			10,021,300
Income tax provision		750,300			3,583,700
Net income	$	1,221,700		$	6,437,600
Earnings per share:
Basic	$	0.78		$	4.17
Diluted	$	0.78		$	4.17
Weighted average shares used in earnings per share computations:
Basic		1,566,699			1,544,285
Diluted		1,566,699			1,544,285

The accompanying notes are an integral part of these statements.

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AeroCentury Corp.

Consolidated Statements of Stockholders' Equity

For the Years Ended December 31, 2016 and 2015

	Common Stock		Paid-in Capital		Retained Earnings		Treasury Stock			Total
Balance, December 31, 2014	$	1,600	$	14,780,100	$	20,563,300	$	(504,100	)	$	34,840,900
Net income		-		-		6,437,600		-			6,437,600
Balance, December 31, 2015		1,600		14,780,100		27,000,900		(504,100	)		41,278,500
Net income		-		-		1,221,700		-			1,221,700
Balance, December 31, 2016	$	1,600	$	14,780,100	$	28,222,600	$	(504,100	)	$	42,500,200

The accompanying notes are an integral part of these statements.

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AeroCentury Corp.

Consolidated Statements of Cash Flows

	For the Years Ended December 31,
	2016			2015
Operating activities:
Net income	$	1,221,700		$	6,437,600
Adjustments to reconcile net income to net cash
provided by operating activities:
Net gain on disposal of assets		(2,149,600	)		(6,790,700	)
Net gain on sales-type finance leases		(1,216,700	)		(5,179,200	)
Depreciation		9,139,700			9,062,100
Provision for impairment in value of aircraft		1,226,800			1,282,300
Non-cash interest		879,000			1,394,000
Deferred income taxes		626,300			3,582,900
Changes in operating assets and liabilities:
Accounts receivable		400,100			(2,363,100	)
Finance leases receivable		(668,200	)		(44,700	)
Income taxes receivable		-			(25,000	)
Prepaid expenses and other		(10,200	)		168,500
Accounts payable and accrued expenses		(152,400	)		(359,500	)
Accrued interest on notes payable		(35,400	)		(155,000	)
Maintenance reserves and accrued costs		698,700			3,977,100
Security deposits		780,500			(745,700	)
Unearned revenue		481,000			315,200
Taxes payable		123,200			-
Net cash provided by operating activities		11,344,500			10,556,800
Investing activities:
Proceeds from sale of aircraft and aircraft engines held for lease, net of re-sale fees		2,918,400			11,100,600
Proceeds from sale of assets held for sale, net of re-sale fees		3,422,800			3,616,400
Proceeds from insurance		18,886,700			-
Purchases of aircraft and aircraft engines		(54,357,600	)		(1,333,700	)
Net cash (used in)/provided by investing activities		(29,129,700	)		13,383,300
Financing activities:
Issuance of notes payable – Credit Facility		31,300,000			-
Repayment of notes payable – Credit Facility		(31,600,000	)		(23,000,000	)
Debt issuance costs		(65,000	)		(59,600	)
Issuance of notes payable – special purpose financing		19,609,900			-
Repayment of notes payable – special purpose financing		(1,986,300	)		-
Net cash provided by/(used in) financing activities		17,258,600			(23,059,600	)
Net (decrease)/increase in cash and cash equivalents		(526,600	)		880,500
Cash and cash equivalents, beginning of year		2,721,000			1,840,500
Cash and cash equivalents, end of year	$	2,194,400		$	2,721,000

During the years ended December 31, 2016 and 2015, the Company paid interest totaling $4,581,400 and $5,037,900, respectively. During the years ended December 31, 2016 and 2015, the Company paid income taxes totaling $800 and $25,800, respectively.

The accompanying notes are an integral part of these statements.

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AeroCentury Corp.

Notes to Consolidated Financial Statements

December 31, 2016

1. Organization and Summary of Significant Accounting Policies

(a) The Company and Basis of Presentation

AeroCentury Corp., a Delaware corporation incorporated in 1997, typically acquires used regional aircraft and engines for lease to foreign and domestic regional carriers.

In August 2016, AeroCentury Corp. formed two wholly-owned subsidiaries, ACY 19002 Limited ("ACY 19002") and ACY 19003 Limited ("ACY 19003") for the purpose of acquiring aircraft using a combination of cash and financing separate from the parent's credit facility. Financial information for AeroCentury Corp., ACY 19002 and ACY 19003 (collectively, the "Company") is presented on a consolidated basis in accordance with accounting principles generally accepted in the United States of America ("GAAP") based upon the continuation of the business as a going concern. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. All intercompany balances and transactions have been eliminated in consolidation. Certain prior year's amounts have been reclassified to conform to the current year's presentation. These changes did not impact the previously report revenue, net income, stockholders' equity or cash flows.

(b) Use of Estimates

The Company's consolidated financial statements have been prepared in accordance with GAAP. The preparation of consolidated financial statements in conformity with GAAP 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 consolidated 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 consolidated financial statements are the residual values and useful lives of the assets, the amount and timing of cash flows associated with each asset that are used to evaluate whether assets are impaired, accrued maintenance costs, accounting for income taxes, and the amounts recorded as allowances for doubtful accounts.

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

(d) Aircraft Capitalization and Depreciation

The Company's interests in aircraft and aircraft engines are recorded at cost, which includes acquisition costs. Since inception, the Company has typically purchased only used aircraft and aircraft engines. It is the Company's policy to hold aircraft for approximately twelve years unless market conditions dictate otherwise. Therefore, depreciation of aircraft is initially computed using the straight-line method over the anticipated holding period to an estimated residual value based on appraisal. For an aircraft engine held for lease as a spare, the Company estimates the length of time that it will hold the aircraft engine based upon estimated usage, repair costs and other factors, and depreciates it to the appraised residual value over such period using the straight-line method.

The Company periodically reviews plans for lease or sale of its aircraft and aircraft engines and changes, as appropriate, the remaining expected holding period for such assets. Estimated residual values are reviewed and adjusted periodically, based upon updated estimates obtained from an independent appraiser. Decreases in the fair value of aircraft could affect not only the current value, discussed below, but also the estimated residual value.

Assets that are held for sale are not subject to depreciation and are separately classified on the balance sheet. Such assets are carried at the lower of their carrying value or estimated fair values, less costs to sell.

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(e) Fair Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs, to the extent possible. The fair value hierarchy under GAAP is based on three levels of inputs.

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis

The carrying amount of the Company's money market funds included in cash and cash equivalents was $1,348,100 and $1,946,600 at December 31, 2016 and December 31, 2015, respectively. The fair value of the Company's money market funds would be categorized as Level 1 under the GAAP fair value hierarchy.

As of December 31, 2016 and December 31, 2015, there were no liabilities that were required to be measured and recorded at fair value on a recurring basis.

Assets Measured and Recorded at Fair Value on a Nonrecurring Basis

The Company determines fair value of long-lived assets held and used, such as aircraft and aircraft engines held for lease and assets held for sale, by reference to independent appraisals, quoted market prices (e.g., offers to purchase) and other factors. An impairment charge is recorded when the Company believes that the carrying value of an asset will not be recovered through future net cash flows and that the asset's carrying value exceeds its fair value.

Assets held for lease

The Company recorded impairment charges on its assets held for lease of $905,600 and $147,500 in 2016 and 2015, respectively.

Assets held for sale

During 2016, the Company recorded impairment charges of $321,200 on three assets prior to their sale during the year. During 2015, the Company recorded impairment charges of $1,134,800, related to five of its assets held for sale. The fair values of such assets as of December 31, 2015 were $3,689,100. The fair value of such assets would be categorized as Level 3 under the GAAP fair value hierarchy.

Fair Value of Other Financial Instruments

The Company's financial instruments, other than cash and cash equivalents, consist principally of finance leases receivable, amounts borrowed under its credit facility (the "Credit Facility") and notes payable under special purpose financing. The fair value of accounts receivable, finance leases receivable, accounts payable and the Company's maintenance reserves and accrued maintenance costs approximates the carrying value of these financial instruments.

Borrowings under the Company's Credit Facility bear floating rates of interest that reset periodically to a market benchmark rate plus a credit margin. The Company believes the effective interest rate under the Credit Facility approximates current market rates for such indebtedness at the balance sheet date, and therefore that the outstanding principal and accrued interest of $110,183,600 and $110,435,600 at December 31, 2016 and December 31, 2015, respectively, approximate their fair values on such dates. The fair value of the Company's outstanding balance of its Credit Facility would be categorized as Level 3 under the GAAP fair value hierarchy.

The amounts payable under the Company's special purpose financing are payable through the fourth quarter of 2020 and bear a fixed rate of interest, as described in Note 6(b) to the consolidated financial statements. The outstanding balance of such financing approximates the fair value of such notes at December 31, 2016. Such fair value would be categorized as Level 3 under the GAAP fair value hierarchy.

- 24 -

(f) Impairment of Long-lived Assets

The Company reviews assets for impairment when there has been an event or a change in circumstances indicating that the carrying amount of a long-lived asset may not be recoverable. In addition, the Company routinely reviews all long-lived assets for impairment semi-annually. Recoverability of an asset is measured by comparison of its carrying amount to the future estimated undiscounted cash flows (without interest charges) that the asset is expected to generate. Estimates are based on currently available market data and independent appraisals and are subject to fluctuation from time to time. If these estimated future cash flows are less than the carrying value of an asset at the time of evaluation, any impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value. Fair value is determined by reference to independent appraisals and other factors considered relevant by management. Significant management judgment is required in the forecasting of future operating results that are used in the preparation of estimated future undiscounted cash flows and, if different conditions prevail in the future, material write-downs may occur. As discussed in (e) Fair Value Measurements above, the Company recorded impairment provisions totaling $1,226,800 and $1,282,300 in 2016 and 2015, respectively.

(g) Deferred Financing Costs and Commitment Fees

Costs incurred in connection with debt financing are deferred and amortized over the term of the debt using the effective interest method or, in certain instances where the differences are not material, using the straight-line method. Costs incurred in connection with the Company's Credit Facility are deferred and amortized using the straight-line method. Commitment fees for unused funds are expensed as incurred.

(h) 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 lease term. 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.

(i) Taxes

As part of the process of preparing the Company's consolidated financial statements, management estimates 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 GAAP purposes. These differences result in deferred tax assets and liabilities, which are included in the balance sheet. Management also assesses 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 establishes a valuation allowance. To the extent the Company establishes a valuation allowance or changes the allowance in a period, the Company reflects the corresponding increase or decrease within the tax provision in the 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.

The Company accrues non-income based sales, use, value added and franchise taxes as other tax expense in the statements of operations.

(j) Revenue Recognition, Accounts Receivable and Allowance for Doubtful Accounts

Revenue from leasing of aircraft assets pursuant to operating leases is recognized on a straight-line basis over the terms of the applicable lease agreements. Deferred payments are recorded as accrued rent when the cash rent received is lower than the straight-line revenue recognized. Such receivables decrease over the term of the applicable leases. Interest income is recognized on finance leases based on the interest rate implicit in the lease and the outstanding balance of the lease receivable. Maintenance reserves retained by the Company at lease-end are recognized as maintenance reserves revenue.

In instances where collectability is not reasonably assured, the Company recognizes revenue as cash payments are received. The Company estimates and charges to income a provision for bad debts based on its experience with each specific customer, the amount and length of payment arrearages, and its analysis of the lessee's overall financial condition. If the financial condition of any of the Company's customers deteriorates, it could result in actual losses exceeding any estimated allowances.

The Company had no allowance for doubtful accounts at December 31, 2016 and 2015.

(k) Comprehensive Income

The Company does not have any comprehensive income other than the revenue and expense items included in the statements of operations. As a result, comprehensive income equals net income for the years ended December 31, 2016 and 2015.

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(l) Finance Leases

As of December 31, 2016, the Company had five aircraft finance leases that contain lessee purchase options at prices substantially below the assets' estimated residual values at the exercise date for the options. Consequently, the Company considers the purchase options to be bargain purchase options and has classified the leases as sales-type finance leases for financial accounting purposes. The Company reports the discounted present value of (i) future minimum lease payments (including the bargain purchase option) and (ii) any residual value not subject to a bargain purchase option as a finance lease receivable on its balance sheet and accrues interest on the balance of the finance lease receivable based on the interest rate inherent in the applicable lease over the term of the lease. For sales-type finance leases, the Company recognizes as a gain or loss the amount equal to (i) the net book value of the aircraft less (ii) the net investment in sales-type finance leases plus any initial direct costs and lease incentives.

The Company recognized interest earned on finance leases as "finance lease revenue" in the amount of $868,100 and $489,700 in 2016 and 2015, respectively.

(m) Maintenance Reserves and Accrued Maintenance Costs

Maintenance costs under the Company's triple net leases are generally the responsibility of the lessees. Most of the Company's leases require payment of maintenance reserves, which are based upon lessee-reported usage and billed monthly, and are intended to accumulate and be applied by the Company toward reimbursement of most or all of the cost of the lessees' performance of certain maintenance obligations under the leases. Such reimbursements reduce the associated maintenance reserve liability.

Maintenance reserves are characterized as either refundable or non-refundable depending on their disposition at lease-end. The Company retains non-refundable maintenance reserves at lease-end, even if the lessee has met all of its obligations under the lease, including any return conditions applicable to the leased asset, while refundable reserves are returned to the lessee under such circumstances. Any reserves retained by the Company at lease end are recorded as revenue at that time.

Accrued maintenance costs include (i) maintenance for work performed for off-lease aircraft, which is not related to the release of maintenance reserves received from lessees and which is expensed as incurred and (ii) lessor maintenance obligations assumed and recognized as a liability upon acquisition of aircraft subject to a lease with such provisions.

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(n) Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No. 2014-09 that created the new Topic 606 ("Topic 606") in the Accounting Standards Codification ("ASC"). Topic 606 also included numerous conforming additions and amendments to other Topics within the ASC. Topic 606 established new rules that affect the amount and timing of revenue recognition for contracts with customers, but does not affect lease accounting and reporting. As such, adoption of these provisions will not affect the Company's lease revenues but may affect the reporting of other of the Company's revenues. On August 12, 2015, the FASB deferred the effective date of the provisions included in Topic 606 to years commencing after December 15, 2017. Topic 606 can be adopted early for years commencing after December 15, 2016, and may be reflected using either a full retrospective method or a simplified method that does not recast prior periods but does disclose the effect of the adoption on the current period consolidated financial statements. The Company has not yet determined either the potential impact on its consolidated financial statements or the method it will elect to use in connection with the adoption of the changes included in Topic 606.

In August 2014, the FASB issued ASU 2014-15, "Presentation of Financial Statements - Going Concern," which added Subtopic 205-40 to the ASC ("Subtopic 205-40"). Subtopic 205-40 requires management to determine whether substantial doubt exists concerning the reporting entity's ability to continue as a going concern, in which case certain disclosures will be required. Subtopic 205-40 affects financial statement presentation but not methods of accounting, and is effective on a prospective basis for annual periods ending after December 15, 2016 and each reporting period thereafter, although early adoption is permitted. The Company adopted this standard in 2016 and it did not have a material impact on the consolidated financial statements.

In January 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-01, Financial Instruments - Overall - Recognition and Measurement of Financial Assets and Financial Liabilities, which added and amended several ASC Subtopics ("ASU 2016-01"). ASU 2016-01 affects recognition, measurement and disclosures concerning financial instruments, including changes to (i) accounting for equity investments, (ii) accounting for financial liabilities accounted for under the fair value option, (iii) measurement of fair value of financial assets and liabilities based on the exit price notion in ASC 820, and (iv) presentation and disclosure requirements for financial instruments. ASU 2016-01 is effective on a prospective basis for annual periods beginning after December 15, 2017 and each reporting period thereafter. The Company does not have any equity investments or financial liabilities accounted for under the fair value option, and does not anticipate acquiring or incurring any in the foreseeable future. The Company has not yet determined the impact of adopting ASU 2016-01 with respect to whether application of the exit price notion to measurement of the fair value of its receivables and liabilities will alter the future amount disclosed in its consolidated financial statements, but it does not believe that adoption of the provisions of ASU 2016-01 will have a substantial effect on its balance sheet or statement of operations.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) ("ASU 2016-02"). ASU 2016-02 is effective for public companies for years beginning after December 15, 2018, although early adoption is permitted. ASU 2016-02 substantially modifies lessee accounting for leases, requiring that lessees recognize lease assets and liabilities for leases extending beyond one year. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement.

The new standard requires a lessor to classify leases as sales-type, finance or operating. A lease will be treated as a sale if it transfers all of the risks and rewards, as well as control of the underlying asset, to the lessee. If risks and rewards are conveyed without the transfer of control, the lease is treated as a financing. If the lessor does not convey risks and rewards or control, an operating lease results. A modified retrospective transition approach is required for lessors for sales-type, direct financing, and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available.

The Company has reviewed those agreements under which it is the lessor, and believes that the accounting for its existing operating and sales-type leases will not be affected by adoption of Topic 842, nor does it expect classification of its future leases to be significantly affected by adoption. The Company does expect that certain pre-lease costs that are currently capitalized and amortized over operating lease terms or offset against gain on sale in sales-type leases will instead be expensed when incurred under the new standards, but since such future amounts will be based on future facts and circumstances, the Company cannot determine the future effect of such requirement. The Company does not expect to adopt Topic 842 early, and does expect to elect practical expedients in connection with its adoption, including not re-evaluating lease classification or capitalized initial direct costs on existing leases.

The Company is not an obligor under any agreements that would be considered leases under Topic 842, and so would be unaffected with respect to adoption of such Topic with respect to lessee accounting.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments -- Credit Losses (Topic 326) ("ASU 2016-13"), which will modify accounting for credit losses on most financial assets measured at amortized cost, including net investment in leases. Unlike current accounting, which delays credit loss recognition until a probable loss is incurred, the new model will use a current expected credit loss ("CECL") model that will estimate future credit losses over the entire term of the financial instrument. As such, it is generally expected that adoption of the CECL model will result in earlier recognition of credit losses than current GAAP. The Company will be required to adopt ASU 2016-13 for its yearly and interim periods beginning after December 15, 2019, although adoption in the preceding year and periods is permitted. The Company has not yet estimated the impact of adoption of this standard on its consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230) ("ASU 2016-15"), which is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. ASU 2016-15 addresses how the following cash transactions are presented: (1) debt prepayment or debt extinguishment costs; (2) settlement of zero-coupon debt instruments; (3) contingent consideration payments made after a business combination; (4) proceeds from the settlement of insurance claims; (5) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; (6) distributions received from equity method investments; and (7) beneficial interests in securitization transactions. It also addresses how to present cash flows with aspects of multiple classifications. ASU 2016-15 is effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, provided that all of the amendments are adopted in the same period. The Company has not yet estimated the impact of adoption of this standard on its consolidated financial statements.

2. Finance Leases Receivable

During 2016, the Company leased three turboprop aircraft pursuant to sales-type finance leases and recorded related gains totaling $1,208,100. The Company also recorded gains totaling $8,600 related to the lessee's exercise of its purchase options under two sales-type finance leases. During 2015, the Company leased three turboprop aircraft pursuant to sales-type finance leases and recorded related gains totaling $4,262,800. The Company also amended and extended the leases for two aircraft that had been subject to operating leases, which were reclassified as sales-type finance leases, for which the Company recorded gains totaling $916,400 during 2015.

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At December 31, 2016 and December 31, 2015, the net investment included in sales-type finance leases receivable were as follows:

	December 31, 2016			December 31, 2015
Gross minimum lease payments receivable	$	20,829,200		$	14,074,500
Less unearned interest		(3,360,900	)		(2,178,900	)
Finance leases receivable	$	17,468,300		$	11,895,600

As of December 31, 2016, minimum future payments receivable under sales-type finance leases were as follows:

Years ending

2017	$	3,459,600
2018		3,663,600
2019		4,939,600
2020		2,727,600
2021		3,660,800
Thereafter		2,378,000
	$	20,829,200

3. Aircraft and Aircraft Engines Held for Lease or Sale

(a) Assets Held for Lease

At December 31, 2016 and December 31, 2015, the Company's aircraft and aircraft engines held for lease consisted of the following:

	December 31, 2016					December 31, 2015
Type	Number owned		% of net book value			Number owned		% of net book value
Turboprop aircraft		12		23	%		16		45	%
Regional jet aircraft		12		73	%		8		49	%
Engines		4		4	%		5		6	%

During 2016 and 2015, the Company used cash of $54,357,600 and $1,333,700, respectively, for the purchase and capital improvement of aircraft and engines. At the time of purchase, the Company received $17,179,300 of maintenance reserves related to two aircraft; such reserves are reflected as a deduction in the amount of cash used for purchases and related acquisition costs in the investing activities section of the Company's statement of cash flows for the year ended December 31, 2016.

In April 2016, one of the Company's turboprop aircraft was involved in an accident and was declared a total loss by the lessee's insurer. The Company received insurance proceeds of $17,640,000 in May 2016 and recorded a gain of $2,146,500. In 2015, the Company accrued a receivable for $1,246,700 of insurance proceeds related to damage sustained on another aircraft in 2015 and received the proceeds in 2016.

During 2015, the Company recorded net gains totaling $5,713,600 from the sale of two turboprop aircraft.

During 2016, the Company extended the leases for six of its assets held for lease. The Company also leased two assets that had been off lease at December 31, 2015 and an aircraft that was returned during 2016.

Six of the Company's assets held for lease, comprised of four turboprop aircraft and two engines, were off lease at December 31, 2016, representing 7% of the net book value of the Company's aircraft and engines held for lease. As discussed in Note 13, the Company sold one of the turboprop aircraft under a sales-type finance lease in January 2017. As discussed in Note 13, the Company has a signed lease and deposit for another of the turboprop aircraft and expects to deliver the aircraft during the first quarter of 2017.

As of December 31, 2016, minimum future lease revenue payments receivable under noncancelable operating leases were as follows:

Years ending

2017	$	26,505,700
2018		22,727,900
2019		22,299,700
2020		19,665,200
2021		12,343,000
Thereafter		30,908,100
	$	134,449,600

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(b) Assets Held for Sale

Assets held for sale at December 31, 2016 consist of a turboprop aircraft and three turboprop airframes being sold in parts.

During 2016 and 2015, the Company received $175,300 and $313,800, respectively, from the sale of parts belonging to the airframes, which proceeds reduced the airframe's carrying values. During 2016, the Company received an amount in excess of the carrying value for one of the airframes, and recorded a gain of $3,100.

During 2016, the Company sold four regional aircraft that had been held for sale at December 31, 2015, as well as a spare engine that had been written down by $246,200 to its net sales price and classified as held for sale. The Company recorded impairment charges totaling $75,000 for two of the aircraft, based on a reduced sale price.

During 2015, the Company sold a turboprop aircraft and a regional jet aircraft that had been held for sale at December 31, 2014 and recorded gains totaling $1,077,100.

4. Operating Segments

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

Approximately 17% and 16% of the Company's operating lease revenue was derived from lessees domiciled in the United States during 2016 and 2015, respectively. All revenues relating to aircraft leased and operated internationally are denominated and payable in U.S. dollars.

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

	For the Years Ended December 31,
Operating Lease Revenue	2016		2015

Europe and United Kingdom	$	9,999,900	$	7,181,600
North America		6,840,500		6,519,100
Africa		4,430,300		5,096,300
Asia		1,800,400		3,783,000
Australia		1,140,000		1,097,000
Central and South America		253,400		1,790,200
	$	24,464,500	$	25,467,200

	December 31,
Net Book Value of Aircraft and Aircraft Engines Held for Lease	2016		2015

Europe and United Kingdom	$	105,088,300	$	44,368,100
North America		42,824,300		42,162,900
Africa		21,724.400		27,234,800
Off lease		13,113,200		7,443,200
Asia		6,463,700		27,132,800
Australia		3,585,900		4,376,300
Central and South America		-		2,540,000
	$	192,799,800	$	155,258,100

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5. Concentration of Credit Risk

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

For the year ended December 31, 2016 the Company had three significant customers, which individually accounted for 21%, 17% and 17%, respectively, of lease revenue. For the year ended December 31, 2015 the Company had three significant customers, which individually accounted for 17%, 16% and 15%, respectively, of lease revenue.

At December 31, 2016, the Company had receivables from two customers totaling $2,663,400 representing 78% of the Company's total accounts receivable. In early 2017, the Company received payments totaling $1,356,000 related to these receivables.

At December 31, 2015, the Company had a receivable of $1,201,800 for an approved insurance claim related to one of the Company's turboprop aircraft that was held for sale. The Company received the insurance proceeds in early 2016. At December 31, 2015, the Company also had receivables from three customers totaling $2,719,700 representing 51% of the Company's total accounts receivable. During 2016, the Company received payments totaling $1,820,300 related to these receivables. The Company reversed accruals in the amount of $247,100 for maintenance reserves that had not been recorded as income and wrote off the remaining $652,300 as bad debt expense.

6. Notes Payable and Accrued Interest

At December 31, 2016 and December 31, 2015, the Company's notes payable and accrued interest consisted of the following:

	December 31, 2016			December 31, 2015
Credit Facility:
Principal	$	110,100,000		$	110,400,000
Unamortized debt issuance costs		(1,999,900	)		(2,814,000	)
Accrued interest		83,600			35,600
Special purpose financing:
Principal		17,623,600			-
Accrued interest		30,600			-
	$	125,837,900		$	107,621,600

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(a) Credit facility

The Company's $150 million Credit Facility is provided by a syndicate of banks and is secured by all of the assets of the Company, including its aircraft and engine portfolio. The Credit Facility, which expires on May 31, 2019, can be expanded to a maximum of $180 million. The Company was in compliance with all covenants under the Credit Facility at December 31, 2016 and December 31, 2015.

The unused amount of the Credit Facility was $39,900,000 and $39,600,000 as of December 31, 2016 and December 31, 2015, respectively.

The weighted average interest rate on the Credit Facility was 4.15% and 3.80% at December 31, 2016 and December 31, 2015, respectively.

(b) Special purpose financing

In August 2016, the Company acquired two regional jet aircraft using cash and financing separate from its Credit Facility. The financing resulted in note obligations of $9,805,600 and $9,804,300, which are being paid from a portion of the rent payments on the related aircraft leases through October 3, 2020 and November 7, 2020, respectively, and which bear interest at the rate of 4.455%. The borrower under each note obligation is the special purpose entity that owns each aircraft. The notes are collateralized by the aircraft and are recourse only to the special purpose entity borrower and its aircraft asset, subject to standard exceptions for this type of financing. Payments due under the notes consist of quarterly principal and interest. The combined balance of the notes payable and accrued interest on these notes at December 31, 2016 was $17,654,200.

7. Contingencies

In the ordinary conduct of the Company's business, the Company is subject to lawsuits, arbitrations and administrative proceedings from time to time. The Company believes that the outcome of any existing or known threatened proceedings, even if determined adversely, should not have a material adverse effect on the Company's business, financial condition, liquidity or results of operations.

8. Stockholder Rights Plan

In December 2009, 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 December 18, 2009 and the Company entered into a rights agreement dated December 1, 2009 in connection therewith. The rights become exercisable only upon the occurrence of certain events specified in the rights agreement, including the acquisition of 15% of the Company's outstanding common stock by a person or group in certain circumstances. Each right allows the holder, other than an "acquiring person," to purchase one one-hundredth of a share (a unit) of Series A Preferred Stock at an initial purchase price of $97.00 under circumstances described in the rights agreement. The purchase price, the number of units of preferred stock and the type of securities issuable upon exercise of the rights are subject to adjustment. The rights expire at the close of business December 1, 2019 unless earlier redeemed or exchanged. Until a right is exercised, the holder thereof, as such, has no rights as a stockholder of the Company, including the right to vote or to receive dividends.

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9. Income Taxes

The items comprising the income tax provision are as follows:

	For the Years Ended December 31,
	2016		2015
Current tax provision:
Federal	$	-	$	-
State		800		800
Foreign		123,200		-
Current tax provision		124,000		800
Deferred tax provision:
Federal		581,200		3,539,900
State		45,100		43,000
Deferred tax provision		626,300		3,582,900
Total income tax provision	$	750,300	$	3,583,700

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

	For the Years Ended December 31,
	2016		2015

Income tax provision at statutory federal income tax rate	$	670,500	$	3,407,200
State tax provision, net of federal benefit		45,200		44,300
Non-deductible expenses		34,600		-
Prior year withholding tax adjustment		-		132,200
Total income tax provision	$	750,300	$	3,583,700

Temporary differences and carry-forwards that give rise to a significant portion of deferred tax assets and liabilities as of December 31, 2016 and 2015 were as follows:

	December 31,
	2016			2015
Deferred tax assets:
Maintenance reserves	$	6,846,800		$	1,121,600
Current and prior year tax losses		4,016,000			313,200
Foreign tax credit		77,700			-
Alternative minimum tax credit		45,500			45,500
Deferred maintenance, bad debt allowance and other		62,100			34,700
Deferred tax assets		11,048,100			1,515,000
Deferred tax liabilities:
Accumulated depreciation on aircraft and aircraft engines		(23,012,800	)		(12,965,900	)
Deferred income		(865,800	)		(753,300	)
Net deferred tax liabilities	$	(12,830,500	)	$	(12,204,200	)

The current year federal operating loss carryovers of approximately $11 million will be available to offset taxable income in future years through 2036. The current year state operating loss carryovers of approximately $80,000 will be available to offset taxable income in future years through 2036. The Company expects to utilize the net operating loss carryovers remaining at December 31, 2016 in future years.

During the year ended December 31, 2016, the Company had pre-tax income from domestic sources of approximately $1.6 million and pre-tax income from foreign sources of approximately $388,000. The Company had no pre-tax income from foreign sources during the year ended December 31, 2015.

The foreign tax credit carryover will be available to offset federal tax expense in future years through 2026. The alternative minimum tax credit will be available to offset federal tax expense in excess of the alternative minimum tax in future years and does not expire.

At December 31, 2016 and December 31, 2015, the Company had no material uncertain tax positions.

The Company accounts for interest related to uncertain tax positions as interest expense, and for income tax penalties as tax expense.

All of the Company's tax years remain open to examination other than as barred in the various jurisdictions by statutes of limitation.

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10. Computation of Earnings Per Share

Basic and diluted earnings per share are calculated as follows:

	For the Years Ended December 31,
	2016		2015
Net income	$	1,221,700	$	6,437,600
Weighted average shares outstanding for the period		1,566,699		1,544,285
Dilutive effect of warrants		-		-
Weighted average diluted shares used in calculation of diluted earnings per share		1,566,699		1,544,285
Basic earnings per share	$	0.78	$	4.17
Diluted earnings per share	$	0.78	$	4.17

Basic earnings per common share is computed using net income and the weighted average number of common shares outstanding during the period. Diluted earnings per common share are computed using net income and the weighted average number of common shares outstanding, assuming dilution. Weighted average common shares outstanding, assuming dilution, include potentially dilutive common shares outstanding during the period. Potentially dilutive common shares include the assumed exercise of warrants using the treasury stock method. As discussed in Note 12, the warrants were exercised on December 16, 2015 and 23,442 shares of Common Stock were issued to the warrantholders.

11. Related Party Transactions

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 also receives an acquisition fee for locating assets for the Company. Acquisition fees are included in the cost basis of the asset purchased. JMC may receive a remarketing fee in connection with the re-lease or sale of the Company's assets. Remarketing fees are amortized over the applicable lease term or included in the gain or loss on sale.

- 33 -

Fees incurred during 2016 and 2015 were as follows:

	For the Years Ended December 31,
	2016		2015
Management fees	$	5,204,500	$	5,581,400
Acquisition fees		1,124,200		-
Remarketing fees		284,500		871,600

12. Warrants

As part of a previous subordinated debt financing, which was fully repaid in December 2011, the Company issued warrants to purchase up to 81,224 shares of the Company's common stock at $8.75 per share. The warrants were exercised on December 16, 2015 on a "cashless" basis, resulting in the issuance on that date of 23,442 net shares of Common Stock to the exercising holders of the warrants.

13. Subsequent Events

In January 2017, the Company sold, pursuant to a sales-type finance lease, a turboprop aircraft that was off lease at December 31, 2016 and recorded a gain of $297,400.

In February 2017, the Company signed a lease and received a deposit for one of its turboprop aircraft that was off lease at December 31, 2016 and expects to deliver the aircraft during the first quarter of 2017.

- 34 -

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

CEO and CFO Certifications. Attached as exhibits to this Annual Report on Form 10-K (the "Report") are certifications of the Company's Chief Executive Officer (the "CEO") and the Company's Chief Financial Officer (the "CFO"), which are required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (the "Section 302 Certifications"). This section of the Report includes information concerning the evaluation of disclosure controls and procedures referred to in the Section 302 Certifications and this should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.

Evaluation of the Company's Disclosure Controls and Procedures. Disclosure controls and procedures (the "Disclosure Controls") are controls and other procedures that are designed to ensure 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 rules and forms of the Securities and Exchange Commission (the "SEC") and 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.

The Company's management, with the participation of the CEO and CFO, evaluated the effectiveness of the design and operation of the Company's Disclosure Controls and concluded that the Company's Disclosure Controls were effective as of December 31, 2016.

Management's Annual Report on the Company's Internal Control Over Financial Reporting. Internal control over financial reporting ("Internal Control") is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes policies and procedures that (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements. The Company's management is responsible for establishing and maintaining adequate Internal Control. Because of its inherent limitations, any system of internal control over financial reporting, no matter how well designed, may not prevent or detect misstatements due to the possibility that a control can be circumvented or overridden or that misstatements due to error or fraud may occur that are not detected. Also, because of changes in conditions, internal control effectiveness may vary over time.

Management evaluated the Company's Internal Control based on the framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework (2013) and concluded that the Company's Internal Control was effective as of December 31, 2016. This report does not include an attestation report on Internal Control by the Company's independent registered public accounting firm since the Company is a smaller reporting company under the rules of the SEC.

Changes in Internal Control Over Financial Reporting. No change in Internal Control occurred during the fiscal quarter ended December 31, 2016 that has materially affected, or is reasonably likely to materially affect, the Company's Internal Control.

Item 9B. Other Information.

None.

- 35 -

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The information required by this item is included under (i) "Proposal 1: Election of Directors" as it relates to members of the Company's Board of Directors, including the Company's Audit Committee and the Company's Audit Committee financial experts, any changes to procedures by which security holders may recommend nominees to the Company's Board of Directors, (ii) "Information Regarding the Company's Directors and Officers" as it relates to the Company's executive officers, and (iii) "Section 16(a) Beneficial Ownership Reporting Compliance" as it relates to information concerning Section 16(a) beneficial ownership reporting compliance, in the Company's definitive proxy statement ("Proxy Statement"), to be filed in connection with the Company's 2017 Annual Meeting of Stockholders, and is incorporated herein by reference.

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

Item 11. Executive Compensation.

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

Item 12. Security Ownership of Certain Beneficial Owners and Management and

Related Stockholder Matters.

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

Item 13. Certain Relationships and Related Transactions, and Director Independence.

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

Item 14. Principal Accountant Fees and Services.

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

- 36 -

PART IV

Item 15. Exhibits.

(b) Exhibits

Exhibit Number	Description
3.1	Amended and Restated Bylaws of the Company, incorporated herein by reference to Exhibit 3.1 of the Company's Report on Form 8-K, filed with the Securities and Exchange Commission on November 22, 2016
10.25	Policy of Sale Agreement between ACY SN 19002 Limited ("ACY 19002") and Aviacion RCII LLC, A.I.E ("Aviacion"), dated August 4, 2016, incorporated herein by reference to Exhibit 10.25 to the Company's Report on Form 10-Q for the Quarter ended June 30, 2016 filed with the Securities and Exchange Commission on August 11, 2016 (the "3Q 2016 10-Q")
10.26	Policy of Sale Agreement between ACY SN 19003 Limited ("ACY 19003") and Aviacion dated August 4, 2016, incorporated herein by reference to Exhibit 10.26 to the 3Q 2016 10-Q
10.27	Senior Loan Agreement between ACY 19002 and Export Development Canada ("EDC"), dated August 4, 2016, incorporated herein by reference to Exhibit 10.27 to the 3Q 2016 10-Q
10.28	Senior Loan Agreement between ACY 19003 and EDC, dated August 4, 2016, incorporated herein by reference to Exhibit 10.28 to the 3Q 2016 10-Q
10.29	Deed of Guarantee between the Company and EDC, dated August 4, 2016, with respect to ACY 19002, incorporated herein by reference to Exhibit 10.29 to the 3Q 2016 10-Q
10.30	Deed of Guarantee between the Company and EDC, dated August 4, 2016, with respect to ACY 19003, incorporated herein by reference to Exhibit 10.30 to the 3Q 2016 10-Q
10.31	Aircraft Sale and Purchase Agreement, between the Company and GOAL Verwaltungsgesellschaft MbH & Co. Projekt Nr. 32KG, dated September 15, 2016, incorporated herein by reference to Exhibit 99.1 to the Company's Report on Form 8-K/A, filed with the SEC on September 21, 2016
10.32	Aircraft Sale and Purchase Agreement, between the Company and GOAL Verwaltungsgesellschaft MbH & Co. Projekt Nr. 33KG, dated September 15, 2016, incorporated herein by reference to Exhibit 99.2 to the Company's Report on Form 8-K/A, filed with the SEC on September 21, 2016
31.1	Certification of Toni M. Perazzo, Interim 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 Toni M. Perazzo, Interim 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
101.INS	XBRL Instance Document
101.SCH	XBRL Schema Document
101.CAL	XBRL Calculation Linkbase Document
101.LAB	XBRL Label Linkbase Document
101.PRE	XBRL Presentation Linkbase Document
101.DEF	XBRL Definition Linkbase Document

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

Item 16. Form 10-K Summary.

None.

- 37 -

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

AEROCENTURY CORP.

/s/ Toni M. Perazzo

Toni M. Perazzo

Senior Vice President-Finance and

Chief Financial Officer

Date March 9, 2017

POWER OF ATTORNEY

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

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated.

Signature	Title	Dated

/s/ Michael G. Magnusson	President of the Registrant (Principal Executive Officer)	March 9, 2017
Michael G. Magnusson
/s/ Toni M. Perazzo	Director and Senior Vice President-Finance and Secretary of the Registrant (Principal Financial and Accounting Officer)	March 9, 2017
Toni M. Perazzo
/s/ Evan M. Wallach	Director and Chairman of the Board of Directors of the Registrant	March 9, 2017
Evan M. Wallach
/s/ Roy E. Hahn	Director	March 9, 2017
Roy E. Hahn
/s/ David P. Wilson	Director	March 9, 2017
David P. Wilson

- 38 -

CORPORATE INFORMATION

Officers and Directors

Michael G. Magnusson

President

Toni M. Perazzo

Director, Chief Financial Officer, Secretary, and

Senior Vice President - Finance

Christopher B. Tigno

General Counsel

Roy E. Hahn, Director, Audit Committee Chair

Managing Director of Marbridge Group, LLC

Evan M. Wallach, Chairman of the Board

President and Chief Executive Officer of

Global Airfinance Corporation

David P. Wilson, Director

Retired Senior Vice President of

GE Capital Aviation Services

Transfer Agent and Registrar

Continental Stock Transfer and Trust Company

17 Battery Place, 8th Floor

New York, NY 10004

Legal Counsel

Morrison & Foerster LLP

755 Page Mill Road

Palo Alto, CA 94304

Registered Independent Public Accountants

BDO USA, LLP

One Bush Street, Suite 1800

San Francisco, CA 94104

Corporate Headquarters

AeroCentury Corp.

1440 Chapin Ave., Suite 310

Burlingame, CA 94010

Annual Meeting

The Annual Meeting of Stockholders will be held at:

The Hiller Aviation Museum

601 Skyway Road

San Carlos, CA, on May 3, 2017 at 12:00 P.M.

Form 10-K

The Company's Annual Report on Form 10-K

for 2016 may be obtained by writing:

AeroCentury Corp.

1440 Chapin Ave., Suite 310

Burlingame, CA 94010

Stock Price and Shareholder Data

The Company's common stock is traded on

the NYSE MKT exchange under

the symbol ACY.

[Outside Back Cover]

[Graphics Omitted]

AeroCentury Corp.

1440 Chapin Ave., Suite 310

Burlingame, CA 94010

650-340-1888

Fax 650-696-3929

www.aerocentury.com

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