ACY Aerocentury Corp

INFORMATION STATEMENT

PURSUANT TO SECTION 14(C) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

GENERAL INFORMATION

This Information Statement is furnished to the stockholders of AeroCentury Corp., a Delaware corporation (“AeroCentury,” “our,” “we,” “us,” or the “Company”), in connection with our prior receipt of approval by written consents, in lieu of a special meeting, of the holders of in excess of a majority of our voting stock authorizing the Board of Directors of AeroCentury, to file an amendment to the Certificate of Incorporation of AeroCentury (the “Amendment”) to effectuate the forward stock split (the “Forward Stock Split”) of the issued and outstanding shares of common stock on a 5-for-1 basis; and increase the number of shares of common stock authorized for issuance from 13,000,000 to 40,000,000 (the “Increase” and together with the Forward Stock Split, the “Actions”).  On November __, 2021, AeroCentury obtained the approval of the Forward Stock Split and the Increase by written consent of the stockholders that are the record owners of ________ shares of common stock which represent an aggregate ___% of the voting power as of November ___, 2021.

The Actions cannot be effectuated until twenty (20) days after the mailing of this Information Statement and will be effected after we file the Certificate of Amendment to the Certificate of Incorporation (the “Amendment”) with the Secretary of State of the State of Delaware, which is necessary to effectuate the Forward Stock Split and the Increase. A copy of the Amendment effecting the Forward Stock Split and the Increase is attached to this Information Statement as Exhibit B.  The number of authorized shares of all classes of stock will not be reduced as a result of the Forward Stock Split and the Forward Stock Split will not reduce the number of outstanding shares of our preferred stock.

The Board of Directors also reserves the right, notwithstanding stockholder approval and without further action by stockholders, to not proceed with the Actions if the Board of Directors, in its sole discretion, determines that the Actions are no longer in our best interests and that of our stockholders. 

The date on which this Information Statement will be sent to stockholders will be on or about December __, 2021.

This Information Statement is being furnished to all record holders of our common stock as of the close of business on November ___, 2021, which is the record date set in connection with this Information Statement.

The Board of Directors, and persons owning a majority of the outstanding voting securities of the Company, have adopted, ratified and approved the Actions pursuant to the Delaware General Corporation Law (the “DGCL”) and no other stockholder approval is required or necessary. 

Only one (1) Information Statement is being delivered to multiple stockholders sharing an address, unless we have received contrary instructions from one or more of the stockholders. We will undertake to deliver promptly upon written or oral request a separate copy of the Information Statement to a stockholder at a shared address to which a single copy of the Information Statement was delivered. You may make a written or oral request by sending a written notification to our principal executive offices stating your name, your shared address, and the address to which we should direct the additional copy of the Information Statement or by calling our principal executive offices at (650) 340-1888. If multiple stockholders sharing an address have received one copy of this Information Statement and would prefer us to mail each stockholder a separate copy of future mailings, you may send notification to or call our principal executive offices. Additionally, if current stockholders with a shared address received multiple copies of this Information Statement and would prefer us to mail one copy of future mailings to stockholders at the shared address, notification of that request may also be made by mail or telephone call to our principal executive offices.

VOTE REQUIRED FOR ACTIONS

Pursuant to AeroCentury’s Second Amended and Restated Bylaws (“Bylaws”) and the DGCL, a vote by the holders of at least a majority of the Company’s outstanding votes is required to amend the Second Amended and Restated Certificate of Incorporation (“Certificate of Incorporation”) to effect the Forward Stock Split and the Increase. The Company’s Certificate of Incorporation does not authorize cumulative voting. As of the record date, the shares entitled to notice and vote consisted of 4,416,811 shares of common stock outstanding (excluding treasury shares) and no shares of preferred stock issued and outstanding.    The Consenting Stockholders are the record holders of shares of common stock, which represents approximately _______ percent (___%) of the issued and outstanding votes with respect to the Company’s shares of common stock as of the record date.  The Consenting Stockholders approved the Amendment, the Forward Stock Split and the Increase described herein in a written consent, dated November __, 2021.

AMENDMENT TO CERTIFICATE OF INCORPORATION TO EFFECT A
FORWARD STOCK SPLIT AT A RATIO OF FIVE-FOR-ONE

On November __, 2021, our Board of Directors and the Consenting Stockholders adopted and approved a written resolution to approve a forward split of all issued and outstanding shares of common stock, at a ratio of 5-for-1, or the Forward Stock Split, which will be effected by filing the Amendment with the Secretary of State of the State of Delaware.

A table illustrating the effects of the Forward Stock Split and the Increase is as follows:

The Board of Directors also reserves the right, notwithstanding stockholder approval and without further action by stockholders, to not proceed with the Forward Stock Split if the Board of Directors, in its sole discretion, determines that the Forward Stock Split is no longer in our best interests and that of our stockholders.  The Board of Directors may consider a variety of factors in determining whether or not to implement the Forward Stock Split, including, but not limited to, overall trends in the stock market, recent changes and anticipated trends in the per share market price of the common stock, business and transactional developments, and our actual and projected financial performance.

Though the Forward Stock Split will not change the number of authorized shares of common stock, the Board of Directors and the Consenting Stockholders have also approved a resolution to effect an amendment to our Certificate of Incorporation to increase the number of authorized shares of common stock from 13,000,000 to 40,000,000, as discussed in more detail below.  Each of our stockholders will hold the same percentage of common stock outstanding immediately following the Forward Stock Split as such stockholder held immediately prior to the Forward Stock Split.

Purpose

The Board of Directors believes that it is in the best interests of AeroCentury to implement the Forward Stock Split as it may increase liquidity in the trading of AeroCentury’s common stock. Our Board of Directors believes that the absence of a substantial market for our shares is a disincentive for investors to acquire our stock. The Forward Stock Split will substantially increase the number of shares of common stock that trade on the NYSE AMEX, which might increase liquidity for AeroCentury’s shares and may provide greater incentive for investors to acquire AeroCentury’s common stock. It is believed that if the common stock is more accessible to a larger number of investors then smaller investors may be more interested in AeroCentury and trading its shares. The current low number of issued and outstanding shares of common stock of AeroCentury may not appeal to brokerage firms because many brokerage firms are reluctant to recommend stock to their clients or to act as market-makers for issuers who do not have a sufficient number of shares of common stock issued and outstanding. However, there are no assurances that the Forward Stock Split will have the desired effect.

Certain Risks Associated with the Forward Stock Split

There can be no assurance that the total projected market capitalization of AeroCentury’s common stock after the Forward Stock Split will be equal to or greater than the total projected market capitalization before the Forward Stock Split or that the per share price of AeroCentury’s common stock following the Forward Stock Split will be reduced.

There can be no assurance that the market price per new share of AeroCentury common stock after the Forward Stock Split will remain constant in proportion to the increase in the number of shares of AeroCentury common stock outstanding before the Forward Stock Split.

Accordingly, the total market capitalization of AeroCentury’s common stock after the Forward Stock Split may be lower than the total market capitalization before the Forward Stock Split and, in the future, the market price of AeroCentury’s common stock following the Forward Stock Split may not be lower than the market price prior to the Forward Stock Split.

There can be no assurance that the Forward Stock Split will result in a per share price that will attract investors.

A decline in the market price for AeroCentury’s common stock after the Forward Stock Split may result in a greater percentage decline than would occur in the absence of a Forward Stock Split, and the liquidity of AeroCentury’s common stock could be adversely affected following a Forward Stock Split.

The market price of AeroCentury’s common stock will also be based on AeroCentury’s performance and other factors, some of which are unrelated to the number of shares outstanding.  If the forward stock split is effected and the market price of AeroCentury’s common stock declines, the percentage decline as an absolute number and as a percentage of AeroCentury’s overall market capitalization may be greater than would occur in the absence of a forward stock split. 

Principal Effects of the Forward Stock Split

In addition to those risk factors noted above, the Forward Stock Split will have the following effects:

General Corporate Change – (i) one (1) share of common stock owned by a stockholder would be equal to five (5) shares of common stock, and (ii) the number of shares of AeroCentury’s common stock issued and outstanding will be increased proportionately based on the Forward Stock Split.

As approved and effected, the Forward Stock Split will be effected simultaneously for all of AeroCentury’s common stock.  The Forward Stock Split does not materially affect the proportionate equity interest in AeroCentury of any holder of common stock or the relative rights, preferences, privileges or priorities of any such stockholder.

Fractional Shares - Stockholders will not receive fractional shares as a result of the Forward Stock Split. Instead, all shares will be rounded up to the next whole share. No cash will be paid to any holders of fractional interests.

Authorized Shares - The Forward Stock Split will not change the number of authorized shares of common stock of AeroCentury, as stated in AeroCentury’s Certificate of Incorporation prior to the filing of the Amendment, however, the Increase will change the number of authorized shares of common stock.

Accounting Matters - The Forward Stock Split will not affect the par value of AeroCentury’s common stock.  As a result, as of the effective time of the Forward Stock Split, the stated capital on AeroCentury’s balance sheet attributable to AeroCentury’s common stock will be increased proportionately based on the Forward Stock Split ratio, and the additional paid-in capital account will be credited with the amount by which the stated capital is increased.  The per share net income or loss and net book value of AeroCentury’s common stock will be restated because there will be a greater number shares of AeroCentury’s common stock outstanding.

Procedure for Effecting the Forward Stock Split and Exchange of Stock Certificates

Upon effectiveness of the Forward Stock Split, each outstanding share of AeroCentury will automatically be converted on the effective date at the applicable Forward Stock Split ratio. It will not be necessary for stockholders of AeroCentury to exchange their existing stock certificates.

Certain of our registered holders of common stock may hold some or all of their shares electronically in book-entry form with our transfer agent. These stockholders do not have stock certificates evidencing their ownership of our common stock.  They are, however, provided with a statement reflecting the number of shares registered in their accounts.  If a stockholder holds registered shares in book-entry form with our transfer agent, no action needs to be taken to receive post-Forward Stock Split shares. If a stockholder is entitled to post-Forward Stock Split shares, a transaction statement will automatically be sent to the stockholder’s address of record indicating the number of shares of common stock held following the Forward Stock Split.

EXISTING STOCK CERTIFICATES SHOULD NOT BE SENT TO THE COMPANY OR THE
TRANSFER AGENT BEFORE THE EFFECTIVE DATE OF THE FILING OF THE PROPOSED
AMENDMENTS TO THE CERTIFICATE OF INCORPORATION.

Until the stockholder forwards a completed letter of transmittal, together with stock certificate(s) representing such stockholder’s shares of pre-forward stock split common stock to the transfer agent and receives in return a new stock certificate representing shares of post-forward stock split common stock, such stockholder’s pre-forward stock split common stock shall be deemed equal to the number of whole shares of post-forward stock split common shares to which such stockholder is entitled as a result of the Forward Stock Split and the Increase.

Federal Income Tax Consequences of the Forward Stock Split

The following is a general summary of certain material U.S. federal income tax consequences of the Forward Stock Split.  It does not purport to be a complete discussion of all of the possible federal income tax consequences of the Forward Stock Split. It is included for general information only and is not tax advice. Furthermore, it does not address any state, local or foreign income or other tax consequences.  Also, it does not address the tax consequences to holders that are subject to special tax rules, such as banks, insurance companies, regulated investment companies, personal holding companies, foreign entities, non-resident alien individuals, broker-dealers and tax-exempt entities.  The general discussion is based on the provisions of the United States federal income tax law as of the date hereof, which is subject to change retroactively as well as prospectively.  This general summary also assumes that the shares of common stock held prior to the Forward Stock Split were, and the shares of common stock held after the Forward Stock Split will be, held as a “capital asset,” as defined in the Internal Revenue Code of 1986, as amended (i.e., generally, property held for investment).  The tax treatment of a stockholder may vary depending upon the particular facts and circumstances of such stockholder.  Each stockholder is urged to consult with such stockholder’s own tax advisor with respect to the tax consequences of the Forward Stock Split.

No gain or loss should be recognized by a stockholder upon the Forward Stock Split.  The aggregate tax basis of the shares of common stock received in the Forward Stock Split will be the same as the stockholder’s aggregate tax basis in the shares of common stock before the Forward Stock Split.  The stockholder’s holding period for the shares issued upon the Forward Stock Split will include the period during which the stockholder held the shares prior to the Forward Stock Split.

AeroCentury’s view regarding the tax consequences of the Forward Stock Split is not binding on the Internal Revenue Service or the courts.  Accordingly, each stockholder should consult with his or her own tax advisor with respect to all of the potential tax consequences to him or her of the Forward Stock Split.

AMENDMENT TO THE CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED COMMON STOCK

On November __, 2021, the Board of Directors and the Consenting Stockholders adopted and approved a resolution to effect an amendment to our Certificate of Incorporation to increase the number of shares of authorized Common Stock from 13,000,000 to 40,000,000, or the Increase.

Currently, AeroCentury has 13,000,000 shares of common stock authorized, of which 4,416,811 shares are outstanding (excluding treasury shares).  As a result of the Increase, AeroCentury will have 40,000,000 shares of common stock authorized for issuance, of which 17,915,945 will be available for issuance after giving effect to a 5-for-1 Forward Stock Split, referenced below.   

The issuance by us of common stock could dilute both the equity interests and the earnings per share of existing holders of our common stock. Such dilution may be substantial, depending upon the amount of shares issued.

The Board of Directors also reserves the right, notwithstanding stockholder approval and without further action by stockholders, to not proceed with the Increase if the Board of Directors, in its sole discretion, determines that the Increase is no longer in our best interests and that of our stockholders.

ANTI-TAKEOVER EFFECTS

Any additional issuance of common stock could, under certain circumstances, have the effect of delaying or preventing a change in control of AeroCentury by increasing the number of outstanding shares entitled to vote and by increasing the number of votes required to approve a change in control of AeroCentury.  Shares of common stock could be issued, or rights to purchase such shares could be issued, to render more difficult or discourage an attempt to obtain control of AeroCentury by means of a tender offer, proxy contest, merger or otherwise.  The ability of the Board of the Directors to issue such additional shares of common stock could discourage an attempt by a party to acquire control of AeroCentury by tender offer or other means.  Such issuances could therefore deprive stockholders of benefits that could result from such an attempt, such as the realization of a premium over the market price that such an attempt could cause.  Moreover, the issuance of such additional shares of common stock to a person’s interests aligned with that of the Board of Directors could make it more difficult to remove incumbent managers and directors from office even if such change were to be favorable to stockholders generally. The Increase is not being undertaken in response to any effort of which our Board of Directors is aware to enable anyone to accumulate shares of our common stock or gain control of AeroCentury.

The Board of Directors believes that it is advisable and in the best interests of AeroCentury to have available additional authorized but unissued shares of common stock in an amount adequate to provide for AeroCentury’s future needs. The purpose of the Increase is to grant us the flexibility to issue our equity securities in the manner best suited for the Company, or as may be required by the capital markets.  The unissued shares of common stock will be available for issuance from time to time as may be deemed advisable or required for various purposes, including the issuance of shares in connection with financing or acquisition transactions.

AeroCentury has (i) no present plans or commitments for the issuance or use of the proposed additional shares of common stock in connection with any financing, and (ii) no present plans, proposals or arrangements, written or otherwise, at this time to issue any of the additional authorized shares of common stock in connection with a merger, share exchange or acquisition or any other transaction.

The Increase will provide us with shares of common stock which would permit us to issue additional shares of capital stock that could dilute the ownership of the holders of our common stock by one or more persons seeking to effect a change in the composition of our Board of Directors or contemplating a tender offer or other transaction for the combination of AeroCentury with another company. 

Other than the Increase and Forward Stock Split, our Board of Directors does not currently contemplate the adoption of any other amendments to our Certificate of Incorporation that could be construed to affect the ability of third parties to take over or change the control of AeroCentury.  While it is possible that management could use the additional authorized shares of common stock to resist or frustrate a third-party transaction that is favored by a majority of the independent stockholders, we have no intent, plans or proposals to use the newly created stock as an anti-takeover mechanism or to adopt other provisions or enter into other arrangements that may have anti-takeover consequences.

While the Increase may have anti-takeover ramifications, our Board of Directors believes that the financial flexibility offered by such corporate actions will outweigh the disadvantages.  To the extent that these corporate actions may have anti-takeover effects, third parties seeking to acquire us may be encouraged to negotiate directly with our Board of Directors, enabling us to consider the proposed transaction in a manner that best serves the stockholders’ interests.

The Increase is not intended to have any anti-takeover effect and is not part of any series of anti-takeover measures contained in any debt instruments or the Certificate of Incorporation or the Bylaws of AeroCentury in effect on the date of this Information Statement.  However, AeroCentury stockholders should note that the availability of additional authorized and unissued shares of common stock could make any attempt to gain control of AeroCentury or the Board of Directors more difficult or time consuming and that the availability of additional authorized and unissued shares might make it more difficult to remove management.  AeroCentury is not aware of any proposed attempt to take over AeroCentury or of any attempt to acquire a large block of AeroCentury’s stock.  AeroCentury has no present intention to use the increased number of authorized common stock for anti-takeover purposes.

EFFECTIVE DATE FOR ACTIONS

Under Rule 14c-2, promulgated pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Forward Stock Split and the Increase cannot be effective until at least twenty (20) days after this Information Statement is first mailed to our stockholders. After the foregoing twenty (20) days, we plan to file the Amendment with the Secretary of State of the State of Delaware to effectuate the Actions. The effective date of the Actions will be the effective date set forth in the Amendment. We anticipate the effective date to be on or about January __, 2022.

The information contained in this Information Statement constitutes the only notice we will be providing to our stockholders.

DISSENTER’S RIGHTS OF APPRAISAL

The DGCL does not provide for dissenter’s rights in connection with the proposed amendments to the Certificate of Incorporation.

VOTING SECURITIES AND CONSENTING STOCKHOLDERS

The Board of Directors fixed the close of business on November __, 2021 as the record date for the determination of the common stockholders entitled to vote and notice of the action by written consent.

As of such record date, we had: (i) 13,000,000 shares of common stock authorized with a par value of $0.001, of which 4,416,811 shares of common stock with $0.001 par value were outstanding (excluding treasury shares), and (ii) 2,000,000 shares of preferred stock authorized with a par value of $0.001, of which none were issued and outstanding.   Immediately after the Increase there will be 40,000,000 shares of common stock authorized and after giving effect to the Forward Stock Split and reserves needed for convertible securities there will be 4,416,811 shares of common stock available for issuance.   The holders of shares of Common Stock are entitled to one (1) vote per share on matters to be voted upon by stockholders.

Dividends on the common stock are declared by the Board of Directors. Payment of dividends on the common stock in the future, if any, may be subordinate to the preferred stock, must comply with the provisions of the DGCL and will be determined by the Board of Directors. In addition, the payment of any such dividends will depend on the Company’s financial condition, results of operation, capital requirements and such other factors as the Board of Directors deems relevant.

The Consenting Stockholders have consented to the actions required to adopt the Amendment to authorize the Forward Stock Split and the Increase.  This written consent of the Consenting Stockholders was sufficient to provide the necessary stockholder approval of such Actions.