UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
COMMISSION FILE NUMBER: 333-22239
AEROCENTURY IV, INC.
(Exact name of small business issuer as specified in its charter)
CALIFORNIA 94-3260392
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1440 CHAPIN AVENUE, SUITE 310 94010
BURLINGAME, CALIFORNIA (Zip Code)
(Address of principal executive office)
Issuer's telephone number, including area code: (650) 696-3900
Indicate by check mark whether the issuer: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to the filing
requirements for the past 90 days. Yes /X/ No / /
On November 12, 1997, 140,800 shares of common stock were
outstanding.
Transitional Small Business Disclosure Format
(check one): Yes / / No /X/
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AEROCENTURY IV, INC.
(A Development Stage California Corporation)
Balance Sheet
September 30, 1997
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
<BTB>
<S> <C>
Current assets:
Cash $ 2,605,393
Notes receivable 945,197
Rent receivable 10,740
Accounts receivable 1,863
----------
3,563,193
Aircraft under operating lease, net of
accumulated depreciation of $7,733 549,067
Debt issue costs, net of accumulated
amortization of $8,777 532,643
----------
$ 4,644,903
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Payable to affiliates $ 26,890
Interest payable 60,793
-----------
Total current liabilities 87,683
Medium-term secured promissory notes 4,388,000
-----------
Total liabilities 4,475,683
-----------
Common stock, no par value,
1,000,000 shares authorized,
140,800 issued and outstanding 243,420
Accumulated deficit (74,200)
Total shareholders' equity 169,220
4,644,903
===========
<FN>
See accompanying notes.
</TABLE>
AEROCENTURY IV, INC.
(A Development Stage California Corporation)
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
For the Period
from Inception
For the Quarter Ended (February 7, 1997)
September 30, 1997 to September 30, 1997
------- -------
<BTB>
<S> <C> <C>
Revenues:
Rent income $ 32,220 $ 32,220
Interest income 21,829 21,829
------ ------
54,049 54,049
Expenses:
Depreciation expense 7,733 7,733
Amortization expense 8,777 8,777
Management fees 24,345 26,890
Interest expense 72,618 74,173
General and administrative 10,017 10,676
------- -------
123,490 128,249
------- -------
Net loss $ (69,441) $ (74,200)
======== ========
Weighted average common shares 89,617 41,437
======== ========
Loss per common share $ (0.78) $ (1.79)
======== ========
<FN>
See accompanying notes.
</TABLE>
AEROCENTURY IV, INC.
(A Development Stage California Corporation)
Statements of Cash Flows
For the Period from Inception
(February 7, 1997) to September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
<BTB>
<S> <C>
Net cash provided by operating activities $ 17,390
Investing activities -
Purchase of interests in aircraft (556,800)
Loans secured by aircraft (945,197)
-----------
(1,501,997)
Financing activities:
Proceeds from issuance of medium-term
secured promissory notes 4,388,000
Debt issue costs (438,800)
Proceeds from issuance of common stock 140,800
-----------
Net cash provided by financing activities 4,090,000
-----------
Net increase in cash 2,605,393
Cash, beginning of period -
-----------
Cash, end of period $ 2,605,393
===========
<FN>
See accompanying notes.
</TABLE>
AEROCENTURY IV, INC.
(A Development Stage California Corporation)
Notes to Financial Statements
September 30, 1997
(Unaudited)
1. Basis of Presentation
AeroCentury IV, Inc. (the "Company") was incorporated in
the state of California on February 7, 1997 ("Inception").
All of the Company's outstanding stock is owned by JetFleet
Management Corp. ("JMC"), a California corporation formed in
January 1994. JMC is an integrated aircraft management,
marketing and financing business, and also manages, on behalf
of their general partners and shareholders, the aircraft
assets of JetFleet Aircraft, L.P. and JetFleet Aircraft
II, L.P. and JetFleet III. The accompanying unaudited
financial statements reflect all adjustments (consisting of
only normal recurring accruals) which are, in the opinion of
the Company, necessary for a fair presentation of the
financial results. The results of operations of such period
is not necessarily indicative of results of operations for a
full year.
2. Organization and Capitalization
The Company was formed solely for the purpose of
acquiring Income Producing Assets. The Company anticipates
that these assets will be Equipment, consisting mainly of
aircraft, aircraft engines, aircraft parts subject to
operating or full payout leases with third parties.
From May 21, 1997 through September 30, 1997, the Company
raised $4,388,000 in $1,000 10% Secured Promissory Notes
("the Notes") maturing on April 30, 2005 (the "Offering"),
pursuant to a prospectus dated May 21, 1997 (the
"Prospectus"). The Notes bear an annual interest rate of
10.00% from issuance through April 30, 2005. The Company may
prepay all or a portion of the outstanding principal of the
Notes at any time beginning May 1, 2000.
JMC has incurred certain costs in connection with the
organization of the Company and the Offering. The Company
has paid an Organization and Offering Expense Reimbursement
(the "Reimbursement") to JMC in an amount up to 2.0% of
Aggregate Offering Proceeds. To the extent that JMC incurs
expenses in excess of the 2.0% cash limit, such excess
expenses will be repaid to JMC in the form of Common Stock
issued by the Company at a price of $1.00 per share. In no
event will the Reimbursement exceed $200,000. The amount of
Excess Stock that the Company can issue is limited according
to the amount of Aggregate Gross Offering Proceeds raised by
the Company. The Company capitalizes the Reimbursement paid
by the Company and amortizes such costs over the life of the
Notes (approximately 8 years).
On September 30, 1997 the Company issued 102,620 shares
of common stock to JMC at a price of $1.00 per share as
reimbursement for Organization and Offering Expenses incurred
by JMC in excess of the 2.0% cash reimbursement.
3. Aircraft Under Operating Lease
The Company owns a 50% interest in a Shorts SD-360
aircraft, serial number 3676 ("S/N 3676"), which is subject
to a 48-month lease with a regional carrier in the United
Kingdom.
The Company invested approximately $557,000, including
reimbursement for chargeable acquisition costs and brokerage
fees of approximately $73,500, in aircraft assets during the
period from Inception through September 30, 1997.
AEROCENTURY IV, INC.
(A Development Stage California Corporation)
Notes to Financial Statements
September 30, 1997
(Unaudited)
4. Medium-term secured promissory notes
The Offering closed on October 3, 1997. During the
period from Inception through September 30, 1997, the Company
accepted subscriptions for $4,388,000 of Gross Offering
Proceeds and, pursuant to the Prospectus, issued Notes
totaling such amount.
5. Secured Notes Receivable
On July 25, 1997 and September 25, 1997, the Company
loaned $100,000 and $845,197 to JMC in connection with the
purchase of a second Shorts SD-360 aircraft, serial number
3656 ("S/N 3606"). The notes receivable from JMC bear
interest in a fixed amount equal to the monthly rent received
for the aircraft. The Company has an option to purchase the
aircraft from JMC on or before December 31, 1997. (See
Subsequent Event, below).
6. Related Party Transactions
The Company's Income Producing Asset portfolio is managed
and administered under the terms of a management agreement
with JMC. Under this agreement, on the last day of each
calendar quarter, JMC receives a quarterly management fee
equal to 0.5% of the Company's Aggregate Gross Proceeds
received through the last day of such quarter. During the
period from Inception through September 30, 1997, the Company
accrued a total of $26,890 in management fees due JMC.
Capital Management Associates ("CMA"), an affiliate of
JMC, provides certain administrative services to the Company.
The Company does not reimburse CMA for those services. JMC
may pay a portion of its management fee to CMA in connection
with services rendered for the Company.
JMC may receive a brokerage fee for locating assets for
the Company, provided that such fee is not more than the
customary and usual brokerage fee that would be paid to an
unaffiliated party for such a transaction and provided that
the total of the Aggregate Purchase Price plus the brokerage
fee does not exceed the fair market value of the asset based
on appraisal. During the period from Inception through
September 30, 1997, the Company paid JMC a total of $67,667
in brokerage fees to JMC and reimbursed JMC for $5,800 in
Chargeable Acquisition Expenses.
As discussed in Note 2, the Company reimburses JMC for
certain costs incurred in connection with the organization of
the Company and the Offering. During the period from
Inception through September 30, 1997, the Company paid
$87,760 to JMC.
Crispin Koehler Securities, a member of the National
Association of Securities Dealers, Inc. and a related party
of JMC, served as underwriter of the Offering and, as such,
received retail commissions and underwriter, due diligence
and marketing fees, portions of which were paid to third
parties. The Company paid Crispin Koehler Securities a total
of $351,040 in commissions and underwriter, due diligence and
marketing fees during the period from Inception through
September 30, 1997.
6. Subsequent Event
On October 31, 1997 the Company exercised its option to
purchase S/N 3606 from JMC. In connection with the purchase,
the Company paid JMC a brokerage fee of $135,333 and
reimbursed JMC for $11,600 of Chargeable Acquisition
Expenses. Management is seeking investment opportunities for
the remaining proceeds raised in the Offering.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Capital Resources and Liquidity
At September 30, 1997, the Company had cash balances of
$2,605,393. This amount was held for the interest payments
to the Noteholders, for the purchase of aircraft and for
normal recurring expenses.
Since Inception, the Company's source of capital has come
in the form of contributions from JMC and proceeds from the
Offering. The Company's liquidity will vary in the future,
increasing to the extent cash flows from operations exceed
expenses, and decreasing as interest payments are made to the
Noteholders and to the extent expenses exceed cash flows from
leases.
AeroCentury IV currently has available adequate reserves
to meet its immediate cash requirements. Management is
seeking opportunities to invest approximately $700,000 in
additional income producing assets.
Cash flow from operations of $17,390 for the period from
Inception through September 30, 1997 included recording
payables of $26,890 and $60,793 for management fees and
interest expense, respectively. Such accruals were partially
offset by recording receivables of $12,603.
Results of Operations
The Company recorded net losses of ($69,441) or ($0.78)
per common share for the quarter ended September 30, 1997 and
($74,200) or ($1.79) for the period from Inception through
September 30, 1997. The Company had no significant
operations until the third quarter of 1997.
As discussed in Note 2, the Company capitalizes and
amortizes the Reimbursement paid to JMC. Amortization
expense during the period from Inception through September
30, 1997 was $8,777. Depreciation on the aircraft purchased
to date is calculated using the straight-line method over a
period of twelve years to estimated residual value.
Depreciation totalled $7,733 during the period Inception
through September 30, 1997.
Pursuant to the Prospectus, management fees equal to 0.5%
of the Gross Offering Proceeds accepted by the Company
through September 30, 1997 were accrued as payable to JMC.
Such fees totalled $24,545 and $26,890 for the quarter ended
September 30, 1997 and the period from Inception through
September 30, 1997, respectively.
Since the Company plans to acquire Income Producing
Assets which are subject to triple net leases (the lessee
pays operating and maintenance expenses, insurance and
taxes), the Company does not anticipate that it will incur
significant operating expenses in connection with ownership
of its Income Producing Assets as long as they remain on
lease.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized on November 12, 1997.
<TABLE>
<CAPTION>
AEROCENTURY IV, INC.
<BTB>
<S> <C>
By: /s/ Neal D. Crispin
-------------------
Neal D. Crispin
Title: President
</TABLE>
Pursuant to the requirements of the Securities Act of
1934, this report has been signed below by the following
persons in the capacities indicated on November 12, 1997.
<TABLE>
<CAPTION>
Signature Title
<BTB>
<S> <C> <C>
/s/ Neal D. Crispin
--------------------
Neal D. Crispin President and Chairman of the
Board of Directors of the
Registrant
Chief Financial Officer
</TABLE>
EXHIBIT INDEX
Exhibit No. Description Page No.
- ------------ ------------ ---------
EX-27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 2,605,393
<SECURITIES> 0
<RECEIVABLES> 957,800
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,563,193
<PP&E> 556,800
<DEPRECIATION> (7,733)
<TOTAL-ASSETS> 4,644,903
<CURRENT-LIABILITIES> 87,683
<BONDS> 4,388,000
<COMMON> 243,420
0
0
<OTHER-SE> (74,200)
<TOTAL-LIABILITY-AND-EQUITY> 4,644,903
<SALES> 0
<TOTAL-REVENUES> 54,049
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 50,872
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 72,618
<INCOME-PRETAX> (69,441)
<INCOME-TAX> 0
<INCOME-CONTINUING> (69,441)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (69,441)
<EPS-PRIMARY> (0.78)
<EPS-DILUTED> (0.78)
</TABLE>
