<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 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 Identification No.)
of incorporation or organization)
1440 CHAPIN AVENUE, SUITE 310
BURLINGAME, CALIFORNIA 94010
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (650) 340-1880
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: NONE
Check whether the Issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
YES [X] NO [ ]
Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is not contained herein, and no disclosure will 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-KSB or any
amendment to this Form 10-KSB. [X]
Revenues for the issuer's most recent fiscal year. $226,890
On March 27, 1998 the aggregate market value of the Shares of Common Stock held
by non-affiliates (computed by reference to the price at which the shares were
sold) was $0.
As of March 27, 1998 the Issuer has 243,420 Shares of Common Stock issued and
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: None
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
<PAGE> 2
PART I
ITEM 1: BUSINESS
AeroCentury IV, Inc. (the "Company") was incorporated in the state of
California on February 27, 1997 ("Inception"). The Company was formed solely for
the purpose of offering up to $10,000,000 in 10% Secured Promissory Notes
("Notes") (the "Offering"). Capitalized terms not defined in this report are
defined in the Prospectus for the Offering and are incorporated herein by
reference to the Prospectus. The proceeds of the Offering are being used to
purchase Income Producing Assets ("Income Producing Assets"). The Company
anticipates that these assets will consist mainly of aircraft, aircraft engines,
aircraft parts or other transportation industry equipment subject to operating
or full payout leases with third parties.
All of the Company's outstanding common stock is owned by JetFleet(TM)
Management Corp. ("JMC"), a California corporation formed in January 1994 (the
"Sponsor"). JMC is also the management company for the Company pursuant to the
Management Agreement between JMC and the Company. JMC has ultimate
responsibility and authority for the selection of Income Producing Assets to be
acquired by the Company and the management, leasing, re-leasing and/or
subsequent sale of the Income Producing Assets. JMC also manages the aircraft
portfolios of JetFleet III and AeroCentury Corp. ("ACY"), affiliated
corporations involved in business similar to that of the Company's.
The sole director of the Company is Neal D. Crispin, Chief Operating
Officer. The officers of the Company are Neal D. Crispin, President, Marc J.
Anderson, Senior Vice President, Frank Duckstein, Vice President and Glenn
Roberts, Secretary.
The revenue generated from the Income Producing Assets is used to fund
interest payments on the Notes, reinvestment in additional Income Producing
Assets and, after May 1, 2003, deposits to a sinking fund account established to
facilitate repayment of principal of the Notes on their maturity (or such
earlier time if the Company decides to make prepayments on the principal of the
Notes). At the maturity date of the Notes, the Company will pay off the
outstanding principal using proceeds of the resale of the Company's Income
Producing Assets, the funds in the Sinking Fund Account and/or proceeds of
third-party lender refinancing.
The Company received Securities and Exchange Commission ("SEC")
clearance for the Offering on May 21, 1997. The Offering was terminated in
August 1997, after $4,869,000 in Notes were sold.
Aircraft and aircraft engines
The Company owns interests in a Shorts SD3-60-100 aircraft, serial
number 3606 ("S/N 3606"), a Shorts SD3-60-100, serial number 3676 ("S/N 3676"),
and a Pratt & Whitney JT8D-9A aircraft engine, serial number. 674452B (the
"Engine").
The Shorts SD3-60-100 is a twin-engine turboprop aircraft, carrying 36
passengers. The Company owns a 50% undivided interest in S/N 3676 and the entire
undivided interest in S/N 3606. Both are on lease with a regional United Kingdom
passenger airline. The remaining undivided interest in S/N 3676 is owned by
JetFleet III.
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The Engine is used on a McDonnell Douglas DC-9 aircraft operated by a
regional passenger airline serving Mexico and the United States. The Engine is
subject to a 60 month term expiring on November 4, 2002, with the seller which
in turn subleases the Engine. The seller's lease obligations are secured by an
assignment of its rights under the sublease, including the guaranty of sublease
obligations by the operator's parent corporation.
Financial assets
As discussed in Note 7 to the accompanying financial statements, the
Company is permitted by the prospectus to invest in Financial Assets, including
indebtedness secured by Equipment. On March 4, 1998 the Company loaned $866,667
to ACY in connection with ACY's purchase of a Shorts SD3-60 aircraft. ACY issued
a secured promissory note (the "ACY Note") to the Company in the amount of the
loan, which is secured by a perfected first lien security interest in the
aircraft. The ACY Note bears interest at the rate of 12% per annum, payable
monthly in arrears. The Note is due on March 31, 1999, but may be prepaid
without penalty at any time.
ITEM 2: PROPERTIES
The Company does not own or lease any real property, plant or materially
important physical properties other than equipment under operating lease as set
forth in Item 1.
The Company maintains its principal office at 1440 Chapin Avenue, Suite
310, Burlingame, California, 94010. All office facilities are provided by JMC
without reimbursement by the Company.
ITEM 3: LEGAL PROCEEDINGS
The Company is not involved in any legal proceedings.
ITEM 4: SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS
None.
2
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PART II
ITEM 5: MARKET FOR THE COMPANY'S UNITS AND RELATED SECURITYHOLDER MATTERS
General
There is no established trading market for the Notes and the Notes are
not listed on any securities exchange.
Number of Security Holders
Number of holders of Notes
("Noteholders") as of March 27, 1998: 353
Dividends
The Company has not declared a dividend on Common Stock since Inception.
The Company intends to retain earnings, if any, to pay interest on the Notes, to
acquire additional aircraft assets, and to fund repayment of the Note principal
upon the maturity date of the Notes. Future dividend policy is subject to the
discretion of the Board of Directors and will depend upon a number of factors,
including future earnings, capital requirements, and the financial condition of
the Company.
ITEM 6: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Although the Company was formed during February 1997, it had no
significant operations until the third quarter of 1997. Management's discussion
and analysis, therefore, addresses changes in capital resources and results of
operations for the period from Inception (February 7, 1997) to December 31,
1997.
Capital Resources and Liquidity
At the end of 1997, the Company had cash balances of $1,944,123. A
portion of this amount was held for the interest payment made to the Noteholders
in February, 1998 and for normally recurring expenses. The remainder was held
for investment in additional Income Producing Assets.
Since Inception, the Company's capital has come in the form of equity
contributions from JMC, proceeds from the Offering and rental revenue from the
Income Producing Assets purchased using those proceeds. 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 Unitholders
and to the extent expenses exceed cash flows from leases.
The Company currently has available adequate reserves to meet its
immediate cash requirements.
If inflation in the general economy becomes significant, it may affect
the Company inasmuch as the residual values and rates on re-leases of its
aircraft may increase as the costs of similar assets increase. However, the
Company's
3
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revenues from existing leases would not increase, as such rates are generally
fixed for the terms of the leases without adjustment for inflation. At the same
time, any significant inflation in the general economy may cause an increase in
professional fees.
If interest rates increase significantly, the lease rates that the
Company can obtain on future leases with be expected to increase as the cost of
capital is a significant factor in the pricing of lease financing. Leases
already in place, for the most part, would not be affected by changes in
interest rates.
Results of Operations
The Company uses substantially all its operating cash flow to make
interest payments to its Noteholders. 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.
ITEM 7: FINANCIAL STATEMENTS
4
<PAGE> 6
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of AeroCentury IV, Inc.
We have audited the accompanying balance sheet of AeroCentury IV, Inc., a
development stage California corporation, as of December 31, 1997 and the
related statements of operations, shareholder's equity and cash flows for the
period from Inception (February 7, 1997) to December 31, 1997. These 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 generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
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 financial statements referred to above present fairly, in
all material respects, the financial position of AeroCentury IV, Inc., at
December 31, 1997 and the related statements of operations, shareholder's equity
and cash flows for the period from Inception (February 7, 1997) to December 31,
1997, in conformity with generally accepted accounting principles.
VOCKER KRISTOFFERSON AND CO.
March 24, 1998
San Mateo, California
5
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AEROCENTURY IV, INC.
(A Development Stage California Corporation)
Balance Sheet
December 31, 1997
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash $ 1,944,123
Rent receivable 32,220
Accounts receivable 4,619
-----------
Total current assets 1,980,962
Aircraft under operating lease, net of
accumulated depreciation of $37,353 2,534,558
Debt issue costs, net of accumulated
amortization of $27,923 561,597
-----------
Total assets $ 5,077,117
===========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable - trade $ 5,000
Interest payable 81,150
-----------
Total current liabilities 86,150
Medium-term secured notes 4,869,000
-----------
Total liabilities 4,955,150
Preferred stock, no par value,
100,000 shares authorized,
no shares issued and outstanding --
Common stock, no par value,
500,000 shares authorized, 243,420
shares issued and outstanding 243,420
Accumulated deficit (121,453)
-----------
Total shareholder's equity 121,967
-----------
Total liabilities and shareholder's equity $ 5,077,117
===========
</TABLE>
See accompanying notes.
6
<PAGE> 8
AEROCENTURY IV, INC.
(A Development Stage California Corporation)
Statement of Operations
For the period from Inception (February 7, 1997)
to December 31, 1997
<TABLE>
<S> <C>
Revenues:
Rent income $ 155,302
Interest income 71,588
---------
226,890
---------
Expenses:
Depreciation expense 37,353
Amortization expense 27,923
Interest expense 195,992
Professional fees 6,975
Management fees 51,235
General and administrative 28,865
---------
348,343
---------
Net loss $(121,453)
=========
Weighted average common
shares outstanding 98,929
=========
Net loss per common share $ (1.23)
=========
</TABLE>
See accompanying notes.
7
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AEROCENTURY IV, INC.
(A Development Stage California Corporation)
Statement of Shareholder's Equity
For the period from Inception (February 7, 1997)
to December 31, 1997
<TABLE>
<CAPTION>
Total
Preferred Common Accumulated Shareholder's
Stock Stock Deficit Equity
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Issuance of 243,420
shares of common stock $ -- $ 243,420 $ -- $ 243,420
Net loss for the period -- -- (121,453) (121,453)
---------- ---------- ---------- ----------
Balance, December 31, 1997 $ -- $ 243,420 $ (121,453) $ 121,967
========== ========== ========== ==========
</TABLE>
See accompanying notes.
8
<PAGE> 10
AEROCENTURY IV, INC.
(A Development Stage California Corporation)
Statement of Cash Flows
For the period from Inception (February 7, 1997)
to December 31, 1997
<TABLE>
<S> <C>
Operating activities:
Net loss $ (121,453)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation of aircraft 37,353
Amortization of organization costs 27,923
Change in operating assets
and liabilities:
Rent receivable (32,220)
Accounts receivable (4,619)
Accounts payable - trade 5,000
Interest payable 81,150
-----------
Net cash used in operating activities (6,866)
Investing activity -
Purchase of interests in aircraft (2,571,911)
-----------
Net cash used in investing activities (2,571,911)
Financing activities:
Proceeds from issuance of
medium-term secured notes 4,869,000
Debt issue costs (486,900)
Proceeds from issuance of common stock 140,800
-----------
Net cash provided by financing activities 4,522,900
-----------
Net increase in cash 1,944,123
Cash, beginning of period --
-----------
Cash, end of period $ 1,944,123
===========
Supplemental disclosures of cash flow information:
Cash paid during the period for: 1997
-----------
Interest (net of amount capitalized) $ 121,959
Income taxes 800
</TABLE>
Supplemental schedule of noncash investing and financing activities:
JMC contributed $102,620 of the total it has paid for debt issue costs as a
common stock investment in the Company.
9
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AEROCENTURY IV, INC.
(A Development Stage California Corporation)
Notes to Financial Statements
1. Summary of Significant Accounting Policies
Basis of presentation
AeroCentury IV, Inc. (the "Company") was incorporated in the state of
California on February 7, 1997 ("Inception"). The Company was formed solely for
the purpose of acquiring Income Producing Assets. The Company offered up to
$10,000,000 in $1,000 Secured Promissory Notes maturing on April 30, 2005 (the
"Notes") pursuant to a prospectus dated May 21, 1997 (the "Prospectus"). All of
the Company's outstanding common stock is owned by JetFleet Management Corp.
("JMC"), a California corporation formed in January 1994. JMC is the management
company for the Company, and also manages AeroCentury Corp., a Delaware
corporation ("ACY"), and JetFleet III, a California corporation, which are
affiliates of the Company and which have objectives similar to the Company's.
Neal D. Crispin, the President of the Company, holds the same position with JMC
and owns a significant amount of the common stock of JMC. CMA Consolidated, Inc.
("CMA"), an affiliated California corporation owned by Mr. Crispin, provides
certain accounting and investor-related services for the Company. The Company
also has significant transactions with Gill Aviation Ltd.
Aircraft and aircraft engines under operating leases
The Company's interests in aircraft are recorded at cost, which include
acquisition costs (see Note 2). Depreciation is computed using the straight-line
method over each aircraft's estimated economic life to its estimated residual
value.
Debt issue costs
Pursuant to the terms of the Prospectus, the Company paid an
Organization and Offering Expense Reimbursement to JMC in cash in an amount up
to 2.0% of Aggregate Gross Offering Proceeds for reimbursement of certain costs
incurred in connection with the organization of the Company and the Offering
(the "Reimbursement").
To the extent that JMC incurred expenses in excess of the 2.0% cash
limit, such excess expenses were repaid to JMC in the form of Common Stock
issued by the Company at a price of $1.00 per share (the "Excess Stock"). 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 capitalized the Reimbursement paid by the Company and
amortizes such costs over the life of the Notes (approximately eight years).
10
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AEROCENTURY IV, INC.
(A Development Stage California Corporation)
Notes to Financial Statements
1. Summary of Significant Accounting Policies (continued)
Assets subject to lien
The Company's obligations under the Notes are secured by a security
interest in all of the Company's right, title and interest in the Income
Producing Assets acquired by the Company.
Income taxes
The Company follows the liability method of accounting for income taxes
as required by the provisions of Statement of Financial Accounting Standards No.
109 - Accounting for Income Taxes.
Cash balances
As of December 31, 1997, the Company maintained $1,906,034 of its cash
balances in a money market account held by a regional brokerage firm, which is
not federally insured. The carrying amount approximates fair value because of
the short-term maturity of these instruments.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
2. Aircraft and Aircraft Engines Under Operating Leases
Aircraft and aircraft engines
The Company owns a 100% interest in a Shorts SD3-60-100, serial number
S/N 3606 ("S/N 3606"), a 50% undivided interest in a Shorts SD-360, serial
number S/N 3676 ("S/N 3676") and a Pratt & Whitney JT8D-9A aircraft engine,
serial number 674452B (the "Engine").
The Company invested approximately $2,600,000, including reimbursement
for chargeable acquisition costs and brokerage fees of approximately $322,000,
in aircraft assets during 1997.
Aircraft and aircraft engines leases
S/N 3606 and S/N 3676 are subject to similar 48-month leases with a
British regional airline.
The Engine is used on a McDonnell Douglas DC-9 aircraft operated by a
regional passenger airline serving Mexico and the United States. The Engine is
subject to a 60 month term expiring on November 4, 2002, with the seller which
in turn subleases the Engine. The seller's lease obligations are secured by an
assignment of its rights under the sublease, including the guaranty of sublease
obligations by the operator's parent corporation.
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AEROCENTURY IV, INC.
(A Development Stage California Corporation)
Notes to Financial Statements
2. Aircraft and Aircraft Engines Under Operating Leases (continued)
Future minimum rents
The following is a schedule of future gross minimum rental payments by
year under the existing leases:
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1998 $ 566,640
1999 566,640
2000 566,640
2001 448,500
2002 150,000
-----------
$ 2,298,420
===========
</TABLE>
Detail of investment
The following schedule provides an analysis of the Company's investment
in aircraft under operating leases and the related accumulated depreciation for
the year ended December 31, 1997:
<TABLE>
<CAPTION>
Accumulated
Cost Depreciation Net
---------- ---------- ----------
<S> <C> <C> <C>
Additions $2,571,911 $ (37,353) $2,534,558
---------- ---------- ----------
Balance,
December 31, 1997 $2,571,911 $ (37,353) $2,534,558
========== ========== ==========
</TABLE>
4. Medium-term secured Notes
As mentioned above, the Company raised funds through the Offering from
May 1997 to August 1997. During 1997, the Company accepted subscriptions for
4,869 Notes aggregating $4,869,000 in Gross Offering Proceeds. Pursuant to the
Prospectus, the Company subsequently issued $4,869,000 in Notes due April 30,
2005. The Notes bear interest at an annual rate of 10.00% which is due and
payable on a quarterly basis, in arrears, on the first business day of November,
February, May and August. The carrying amount of the notes payable approximates
fair value.
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AEROCENTURY IV, INC.
(A Development Stage California Corporation)
Notes to Financial Statements
5. Income taxes
The components of the provision for income taxes for the year ended
December 31, 1997 were as follows:
<TABLE>
<S> <C>
Current tax provision
Federal $ --
State 800
--------
Current tax provision 800
Deferred tax provision
Federal 41,294
State 7,086
--------
Deferred tax provision 49,180
Valuation allowance (48,380)
--------
Total provision for income taxes $ 800
========
</TABLE>
The difference between income tax expense (benefit) and the amount
computed by applying the statutory U.S. federal income tax rate then in effect
consist of the following:
<TABLE>
<S> <C>
Statutory U.S. federal income tax expense / (benefit) $(41,294)
State franchise tax, net of federal benefit (7,086)
Valuation allowance 48,380
--------
Actual tax expense / (benefit) $ --
========
</TABLE>
The tax effects of temporary differences and carryforwards that give
rise to deferred tax assets consist of the following:
<TABLE>
<S> <C>
Other $ (545)
Net operating loss carryforward (47,835)
Valuation allowance 48,380
--------
Net current and noncurrent deferred tax assets $ --
========
</TABLE>
As of December 31, 1997 the Company has approximately $120,000 of
federal operating loss carryforwards which begin to expire in 2012.
For income tax purposes, the treatment of organization and offering
costs is consistent with treatment for financial accounting purposes.
As a result of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes", the Company is required to recognize deferred tax
assets and liabilities resulting from temporary differences and operating loss
and tax credit carryforwards. For the current year the Company has not
recognized a deferred tax asset for its current year operating loss because
based on the available evidence, it is not more likely than not that all of the
deferred tax asset will be realized. In accordance with the requirements of FAS
109, the Company has recognized a valuation allowance for the deferred tax asset
sufficient to reduce it to the amount more likely than not to be realized.
13
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AEROCENTURY IV, INC.
(A Development Stage California Corporation)
Notes to Financial Statements
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. In 1997, the Company accrued a total of
$51,235 in management fees due JMC.
As mentioned above, CMA 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. The total of
the Aggregate Purchase Price plus the brokerage fee cannot exceed the fair
market value of the asset based on appraisal. JMC may also receive reimbursement
of Chargeable Acquisition Expenses incurred in connection with a transaction
which are payable to third parties. During 1997, the Company paid JMC a total of
$299,000 in brokerage fees and reimbursed JMC for $22,900 for Chargeable
Acquisition Expenses.
As discussed in Note 1, the Company reimburses JMC for certain costs
incurred in connection with the organization of the Company and the Offering. In
1997, the Company paid $97,380 to JMC. In addition, during 1997, JMC contributed
$102,620 of the total it paid for organization and offering expenses as a common
stock investment in the Company. JMC purchased 130,800 shares of common stock in
the Company at a price of $1.00 per share on August 6, 1997.
7. Subsequent Events
As provided in the prospectus for the Offering, the Company may invest
in Financial Assets, including indebtedness secured by Equipment. On March 4,
1998 the Company loaned $866,667 to ACY in connection with ACY's purchase of a
Shorts SD-360 aircraft. ACY issued a secured promissory note (the "ACY Note") to
the Company in the amount of the loan, which is secured by a perfected first
lien security interest in the aircraft. The ACY Note bears interest at the rate
of 12% per annum, payable monthly in arrears. The Note is due on March 31, 1999,
but may be prepaid without penalty at any time.
14
<PAGE> 16
ITEM 8: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
FINANCIAL DISCLOSURE
None
PART III
ITEM 9: DIRECTORS AND EXECUTIVE OFFICERS
General
Pursuant to a Management Agreement between the Company and JMC, JMC is
responsible for most management decisions, has responsibility for supervising
the Company's day-to-day operations, including compliance with legal and
regulatory requirements, and is responsible for cash management and
communications between the Company and the holders of Bonds and Preferred Stock.
The Management Agreement authorizes JMC, in its sole discretion, to acquire,
hold title to, sell, lease, re-lease or otherwise dispose of Income Producing
Assets or any interest therein, on behalf of the Company when and upon such
terms as JMC determines to be in the best interests of the Company, subject to
certain limitations set forth in the Prospectus.
Directors and Officers
The directors, executive officers and key employees of the Company and
JMC, each of whom serves until his successor is elected and qualified, are as
follows:
<TABLE>
<CAPTION>
Name Position Held
---- -------------
<S> <C>
Neal D. Crispin President, Chairman of the Board of Directors and
Chief Financial Officer of the Company
Marc J. Anderson Senior Vice President of the Company
Frank Duckstein Vice President of the Company
Glenn Roberts Secretary of the Company
Sidney F. Gage Member of JMC's Advisory Board
</TABLE>
Neal D. Crispin, age 52, President and Chairman of the Board of
Directors. He is also President and Director of JMC and Chief Executive Officer
and Chairman of the Board of Directors of CMA Consolidated, Inc. ("CMA") and its
two subsidiaries. Prior to forming CMA, Mr. Crispin was vice president - finance
of an oil and gas company. Previously, Mr. Crispin had been associated with
Arthur Young & Co., Certified Public Accountants. Prior to joining Arthur Young
& Co., Mr. Crispin served as a management consultant, specializing in financial
consulting. Mr. Crispin is the husband of Toni M. Perazzo, a Director and
Officer of JMC. He received a Bachelors degree in Economics from the University
of California, Santa Barbara and a Masters degree in Business Administration
(specializing in Finance) from the University of California at Berkeley. Mr.
Crispin, a certified public accountant, is a member of the American Institute of
Certified Public Accountants and the California Society of Certified Public
Accountants.
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<PAGE> 17
Marc J. Anderson, age 61, Senior Vice President is also Senior Vice
President of JMC. Mr. Anderson is in charge of portfolio management and aircraft
marketing and financing. Prior to joining the Company, Mr. Anderson spent seven
years as Senior Vice President-Marketing for PLM International, a transportation
equipment leasing company which is also the sponsor of syndicated investment
programs. While at PLM, he established the company's first aircraft marketing
group, closing in excess of 150 aircraft transactions representing over $400
million. He was responsible for the acquisition, modification, leasing and
remarketing of all aircraft. During his tenure, Mr. Anderson had an average
on-lease record of 96%. Previously, he was with two aircraft manufacturers where
he was responsible for customer contracting, negotiation and documentation of
sales agreements and leases and in obtaining debt and lease financing. Prior to
that, Mr. Anderson was with several airlines in various roles of increasing
responsibility.
Frank Duckstein, age 44, Vice President is also Vice President of JMC.
Mr. Duckstein is responsible for market development and remarketing of aircraft
portfolios. Prior to joining the Company, Mr. Duckstein spent five years as
Director of Marketing for PLM International, a transportation equipment leasing
company. While at PLM, he was responsible for sales and remarketing, market
research and development, both domestically and internationally, of PLM's
corporate and commuter aircraft, as well as their helicopter fleet. Previously,
he was with international and regional airlines operating within Europe and the
U.S. with responsibility for operation, market development and sales. He was
involved in the development of several turn-key, start-up operations in Berlin,
Germany and the United States. Mr. Duckstein attended the Technical University
of Berlin, majoring in Economics.
Glenn Roberts, age 33, Secretary, is also the Controller of JMC. Mr.
Roberts has been employed by JMC and CMA since 1989. He has also served as
Manager of Investor Relations for several equipment leasing programs sponsored
by JMC and CMA and as a financial analyst for JMC. Mr. Roberts was previously
employed as a production manager for a database publishing firm specializing in
company and industry research reports.
Sidney F. Gage, age 54, Member of JMC Advisory Board. Mr. Gage has been
a partner of Gage & Baumgarten, a management consulting firm specializing in
strategic business planning, since 1980. Previously, he was Executive Vice
President and Director of Mission Resources, Inc., the managing general partner
of Mission Resource Partners, an oil and gas company on the American Stock
Exchange, and President of Mission Securities, Inc., its NASD broker-dealer
affiliate. Mr. Gage is also a member of the advisory board of Bakersfield Energy
Resources, Inc., a privately held oil and gas concern. He is a CPA with degrees
from the University of Notre Dame and the Stanford University Graduate School of
Business. Mr. Gage has served as a consultant to the CMA Group of companies
since 1990.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers, directors and persons who own more than 10% of the Company's
Units, to file with the Securities and Exchange Commission ("SEC") initial
reports of ownership and reports of changes in ownership of Units and other
equity securities of the Company. Officers and directors and 10% Unitholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
16
<PAGE> 18
To the Company's knowledge, based solely upon a review of Forms 3
furnished to the Company pursuant to Rule 16a-3(e) during 1996, no person who,
at any time during 1996, was an officer or director or beneficial owner of more
than 10% of the Units failed to file on a timely basis, as disclosed in the
above forms, reports required by Section 16(a) during 1996 or prior years.
ITEM 10: EXECUTIVE COMPENSATION
The Company has no employees. The following is a summary of the
compensation and reimbursements paid to the parent of the Company and related
parties by the Company for the years ended December 31, 1997.
Compensation
The Company's Income Producing Asset portfolio are 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 0.50% of the Company's Aggregate Gross Proceeds received
through the last day of such quarter. In 1997, the Company accrued a total of
$51,235 in management fees due JMC. As mentioned above, CMA provides certain
administrative services to the Company. The Company does not reimburse CMA for
those services. JMC may reallow 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. The total of
the Aggregate Purchase Price plus the brokerage fee shall not exceed the fair
market value of the asset based on appraisal. The Company paid JMC a total of
$299,000 in brokerage fees and reimbursed JMC for $22,900 in Chargeable
Acquisition Expenses during 1997.
The Company reimburses JMC for certain costs incurred in connection
with the organization of the Company and the Offering. In 1997, the Company paid
$97,380 to JMC. In addition, during 1997, JMC contributed $102,620 of the total
it paid for organization and offering expenses as a common stock investment in
the Company.
Crispin Koehler Securities (formerly CKS Securities, Incorporated), a
member of the National Association of Securities Dealers, Inc. and a related
party of JMC, serves 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 $389,520 in commissions and underwriter, due diligence and marketing
fees during 1997.
ITEM 11: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
No person is known to the Company to be the beneficial owner of more
than 5% of the Units. No officer or director of JMC or any of its related
parties beneficially owns any Units.
17
<PAGE> 19
Mr. Crispin and Ms. Perazzo collectively own the majority of the issued
and outstanding common stock of JMC. Richard D. Koehler, the President of
Crispin Koehler Securities, also owns a portion of JMC's common stock. JMC, in
turn, owns 100% of the issued and outstanding common stock of the Company.
ITEM 12: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Crispin Koehler Securities, the managing broker-dealer of the Offering,
is a wholly-owned subsidiary of Crispin Koehler Holding Corp. Crispin Koehler
Securities was formerly named CKS Securities, Incorporated, but changed its name
in connection with its sale by CMA Capital Corporation during 1996. Crispin
Koehler Holding Corp., in turn, is owned 9% and 91% by Messrs. Crispin and
Koehler, respectively. Crispin Koehler Securities has acted as the
dealer-manager with respect to the vast majority of the prior programs sponsored
by related parties of JMC.
CMA Consolidated, Inc., which provides certain administrative services
for the Company, is owned 100% by Mr. Crispin.
Over the term of the Offering, compensation has been paid to JMC for
non-accountable organization and offering costs, management fees, brokerage fees
and remarketing fees and to Crispin Koehler Securities for sales commissions,
investment banking and due diligence fees in accordance with the Prospectus
dated May 21, 1997.
18
<PAGE> 20
PART IV
ITEM 13: EXHIBITS AND FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K
(a) Financial Statements and Schedules
(1) Financial Statements for AeroCentury IV, Inc.
Report of Independent Auditors - Vocker Kristofferson and Co.
Balance Sheet as of December 31, 1997
Statement of Operations for the Period from Inception
(February 7, 1997) to December 31, 1997
Statement of Shareholder's Equity for the Period from Inception
(February 7, 1997) to December 31, 1997
Statement of Cash Flows for the Period from Inception
(February 7, 1997) to December 31, 1997
Notes to Financial Statements
(2) Schedules:
All schedules have been omitted since the required information
is presented in the financial statements or is not applicable.
(b) Reports on Form 8-K for the Fourth Quarter of 1997
None
(c) Exhibits
None
19
<PAGE> 21
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized on March 27, 1998.
AEROCENTURY IV, INC.
By:
By: /s/ Neal D. Crispin
-----------------------
Neal D. Crispin
Title: President
In accordance with the Exchange Act, this report has been
signed below by the following persons on behalf of the Registrant and in the
capacities indicated on March 27, 1998.
<TABLE>
<CAPTION>
Signature Title
------------------- -----------------------------
<S> <C>
/s/ Neal D. Crispin President and Chairman of the
Neal D. Crispin Board of Directors of the Registrant
Chief Financial Officer
</TABLE>
20
<PAGE> 22
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> FEB-07-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,944,123
<SECURITIES> 0
<RECEIVABLES> 36,839
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,980,962
<PP&E> 2,571,911
<DEPRECIATION> 37,353
<TOTAL-ASSETS> 5,077,117
<CURRENT-LIABILITIES> 86,150
<BONDS> 4,869,000
0
0
<COMMON> 243,420
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 5,077,117
<SALES> 0
<TOTAL-REVENUES> 226,890
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 152,351
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 195,992
<INCOME-PRETAX> (121,453)
<INCOME-TAX> 0
<INCOME-CONTINUING> (121,453)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (121,453)
<EPS-PRIMARY> (1.23)
<EPS-DILUTED> (1.23)
</TABLE>
