<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K/A
(Mark One)
[ X ] ANNUAL REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Transition period from to
-------------- ----------------
Commission file number 333-9371
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
---------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 38-3304096
--------------------------- ------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
<TABLE>
<S><C>
24 Frank Lloyd Wright Drive, Lobby L, 4th Floor, P.O. Box 544, Ann Arbor, Michigan 48106-0544
---------------------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (734) 994-5505
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: None
--------------
(Title of Class)
</TABLE>
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.
[ X ] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K 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. [X]
At December 31, 1997 subscriptions for 15,391.986 units of limited partnership
interest (the "Units") had been accepted, representing an aggregate amount of
$15,391,986. The aggregate sales price does not reflect market value and it
reflects only the price at which the Units were offered to the public.
Currently, there is no market for the Units and no market is expected to
develop.
DOCUMENTS INCORPORATED BY REFERENCE
A portion of the Prospectus of the Registrant dated December 23, 1996, as
supplemented and filed pursuant to Rule 424(b) under the Securities Act of 1933,
as amended, S.E.C. File No. 333-9371, and is incorporated by reference in Parts
I and III of this Annual Report on Form 10-K.
1
<PAGE> 2
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
ITEM 14-EXHIBITS, FINANCIAL STATEMENTS AND REPORTS
Due to information being transferred between computer applications, the
balance sheets submitted March 31, 1998 for the year ended December 31, 1997
were misstated.
As required, we are submitting the entire financial statements and
auditors' reports including the corrected balance sheets.
2
<PAGE> 3
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV PAGE
<S> <C>
REPORT OF INDEPENDENT ACCOUNTANTS........................................................................4
FINANCIAL STATEMENTS:
Balance Sheet ...................................................................................5
Statement of Operations..........................................................................6
Statement of Changes in Partners' Capital........................................................7
Statement of Cash Flows..........................................................................8
Notes to Financial Statements....................................................................9
<CAPTION>
CAPTEC FRANCHISE CAPITAL CORPORATION IV PAGE
REPORT OF INDEPENDENT ACCOUNTANTS.......................................................................15
FINANCIAL STATEMENTS:
Balance Sheet ..................................................................................16
Statement of Operations.........................................................................17
Statement of Changes in Stockholders' Equity....................................................18
Statement of Cash Flows.........................................................................19
Notes to Financial Statements...................................................................20
</TABLE>
3
<PAGE> 4
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Captec Franchise Capital Corporation IV
Managing General Partner of
Captec Franchise Capital Partners L.P. IV:
We have audited the accompanying balance sheet of Captec Franchise Capital
Partners L.P. IV as of December 31, 1997 and 1996 and the related statements of
operations, changes in partners' capital, and cash flows for the years then
ended. These financial statements are the responsibility of the Partnership'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 audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
financial statement amounts and disclosures. 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 Captec Franchise Capital
Partners L.P. IV as of December 31, 1997 and 1996, and the results of its
operations, changes in partners' capital and its cash flows for the years then
ended, in conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand
Detroit, Michigan
March 14, 1998
4
<PAGE> 5
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
BALANCE SHEET
December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 5,008,194 $ -
Investment in property under leases:
Operating leases, net 5,805,870 -
Financing leases, net 2,838,663 -
Prepaid expenses - 339
Accounts receivable 3,487 -
Unbilled rent 25,983 -
Due from related parties 49,381 -
------------ -----
Total assets $ 13,731,578 $ 339
============ =====
LIABILITIES & PARTNERS' CAPITAL
Liabilities:
Accounts payable $ 49,375 $ -
Due to related parties 129,683 -
Overdraft - 39
- -
------------ -----
Total liabilities 179,058 39
------------ -----
Partners' Capital:
Limited partners' capital accounts 13,547,060 100
General partners' capital accounts 5,460 200
------------ -----
Total partners' capital 13,552,520 300
------------ -----
Total liabilities & partners' capital $ 13,731,578 $ 339
============ =====
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE> 6
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
STATEMENT OF OPERATIONS
for the years ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Operating revenue:
Rental income $ 295,367 $ -
Finance income 201,314 -
--------- ---
Total operating revenue 496,681 -
--------- ---
Operating costs and expenses:
Depreciation 32,988 -
General and administrative 31,296 -
--------- ---
Total operating costs and expenses 64,284 -
--------- ---
Income from operations 432,397 -
--------- ---
Other income:
Interest income 92,048 -
Other 1,598 -
--------- ---
Total other income 93,646 -
--------- ---
Net income 526,043 -
Net income allocable to general partners 5,260 -
--------- -
Net income allocable to limited partners $ 520,783 $ -
========= ===
Net income per limited partnership unit $ 74.10 $ -
========= ===
Weighted average number of limited partnership
units outstanding 7,028 -
======== ===
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE> 7
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
for the years ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
Limited Limited General Total
Partners' Partners' Partners' Partners'
Units Accounts Accounts Capital
------- ----------- --------- -------
<S> <C> <C> <C> <C>
Balance July 30, 1996 - $ 100 $ 200 $ 300
Net income - - - -
------- ------------ -------- ------------
Balance, December 31, 1996 - 100 200 300
Issuance of 15,392 limited partnership
units, net 15,392 13,385,077 13,385,077
Distributions - ($23.32 per unit) - (358,900) - (358,900)
Net income - 520,783 5,260 526,043
------- ------------ -------- ------------
Balance, December 31, 1997 15,392 $ 13,547,060 $ 5,460 $ 13,552,520
======= ============ ======== ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE> 8
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
STATEMENT OF CASH FLOWS
for the year ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 526,043 $ -
Adjustments to net income:
Depreciation 32,987 -
Decrease (increase) in prepaids 339 (339)
Increase in unbilled rent (25,983) -
Increase in accounts receivable (3,487) -
Increase in accounts payable 49,336 39
----------- -
Net cash provided by operating activities 579,235 (300)
----------- -----
Cash flows from investing activities:
Purchase of real estate for operating leases (5,838,857) -
Purchase of equipment for financing leases (3,051,499) -
Reduction of net investment in financing leases 212,836 -
----------- -
Net cash used in investing activities (8,677,520) -
----------- -----
Cash flows from financing activities:
(Increase) in due from related parties (49,381) -
Increase in due to related parties 129,683 -
Issuance of limited partnership units 15,380,902 -
Offering costs (1,995,825) -
Distributions to limited partners (358,900) -
----------- -
Net cash provided by financing activities 13,106,479 -
----------- -----
Net (decrease) increase in cash and cash equivalents 5,008,194 (300)
Cash and cash equivalents, beginning of period - 300
----------- -----
Cash and cash equivalents, end of period $ 5,008,194 $ -
=========== =====
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE> 9
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
NOTES TO FINANCIAL STATEMENTS
1. THE PARTNERSHIP AND ITS SIGNIFICANT ACCOUNTING PRINCIPLES:
Captec Franchise Capital Partners L.P. IV (the "Partnership"), a Delaware
limited partnership, was organized on July 23, 1996 for the purpose of
acquiring income-producing commercial real properties and equipment
leased on a "triple net" or "double net" basis, primarily to operators of
national and regional chain franchised fast food and family style
restaurants, as well as other national and regional retail chains.
The general partners of the Partnership are Captec Franchise Capital
Corporation IV (the "Corporation"), a wholly owned subsidiary of Captec
Financial Group, Inc. ("Captec"), and Patrick L. Beach, an individual,
hereinafter collectively referred to as the Sponsor. Patrick L. Beach is
also the Chairman of the Board of Directors, President and Chief
Executive Officer of the Corporation and Captec. The General Partners
have each contributed $100 in cash to the Partnership as a capital
contribution.
The Partnership commenced a public offering of limited partnership
interests ("Units") on December 31, 1996. A minimum of 2,000 Units and a
maximum of 30,000 Units, priced at $1,000 per Unit, were offered on a
"best efforts, part or none" basis. The Partnership broke impound on
March 5, 1997, at which time funds totaling $2,015,500 were released from
escrow and the Partnership immediately commenced operations. At December
31, 1997, the Partnership had accepted subscriptions for 15,392 Units,
and funds totaling $15,380,902.
The initial Limited Partner of the Partnership was Patrick L. Beach. As
of December 31, 1996, Mr. Beach had contributed $100 to the capital of
the Partnership and had received 0.1 Unit. During 1997, upon admission to
the Partnership of other Limited Partners, the initial Limited Partner
may withdraw from the Partnership, and his 0.1 Unit shall be redeemed for
$100.
Allocation of profits, losses and cash distributions from operations and
cash distributions from sale or refinancing are made pursuant to the
terms of the Partnership Agreement. Profits and losses from operations
are allocated among the limited partners based upon the number of Units
owned. In no event will the General Partners be allocated less than one
percent of profits and losses in any year.
9
<PAGE> 10
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
NOTES TO FINANCIAL STATEMENTS
Following is a summary of the Partnership's significant accounting
policies:
A. CASH EQUIVALENTS: The Partnership considers all highly liquid
investments purchased with an original maturity of three months or
less to be cash equivalents.
1. THE PARTNERSHIP AND ITS SIGNIFICANT ACCOUNTING PRINCIPLES, CONTINUED:
B. RENTAL INCOME FROM OPERATING LEASES: The Partnership's operating
leases have scheduled rent increases which occur at various dates
throughout the lease terms. The Partnership recognizes the total
rent, as stipulated by the lease agreement, as income on a
straight-line basis over the term of each lease. To the extent rental
income on the straight-line basis exceeds rents billable per the
lease agreement, an amount is recorded as unbilled rent.
C. LAND AND BUILDING SUBJECT TO OPERATING LEASES: Land and buildings
subject to operating leases are stated at cost less accumulated
depreciation. Buildings are depreciated on the straight-line method
over their estimated useful lives (40 years).
D. NET INVESTMENT IN FINANCING LEASES: Leases classified as financing
leases are stated as the sum of the minimum lease payments plus the
unguaranteed residual value accruing to the benefit of the lessor,
less unearned income. Unearned income is amortized to income over the
lease term so as to produce a constant periodic rate of return on the
net investment in the lease.
E. NET INCOME PER LIMITED PARTNERSHIP INTEREST: Net income per limited
partnership interest is calculated using the weighted average number
of limited partnership units outstanding during the period and the
limited partners' allocable share of the net income.
F. INCOME TAXES: No provision for income taxes is included in the
accompanying financial statements, as the Partnership's results of
operations are passed through to the partners for inclusion in their
respective income tax returns.
G. ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
10
<PAGE> 11
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
NOTES TO FINANCIAL STATEMENTS
2. DISTRIBUTIONS:
Cash flows of the Partnership are allocated ninety-nine percent (99%) to
the limited partners and one percent (1%) to the Sponsor, except that the
Sponsor's share is subordinated to a ten percent (10%) per annum
cumulative, non-compounded preferred return to the limited partners. Net
sale or refinancing proceeds of the Partnership will be allocated ninety
percent (90%) to the limited partners and ten percent (10%) to the Sponsor,
except that the Sponsor's share will be subordinated to a ten and one-half
percent (10.5%) per annum cumulative, non-compounded return on their
Adjusted Investment plus return of the original contributions to the
limited partners.
Distributions of cash flow from operations are paid quarterly in arrears.
3. RELATED PARTY TRANSACTIONS AND AGREEMENTS:
Organization and offering expenses, excluding selling commissions, are paid
initially by the General Partners and/or their affiliates and are
reimbursed by the Partnership in an amount equal to up to three percent
(3%) of the gross proceeds of the offering (less any amounts paid directly
by the Partnership). In addition, the Sponsor and/or its affiliates are
paid a non-accountable expense allowance by the Partnership in an amount
equal to two percent (2%) of the gross proceeds of the offering. The
Sponsor and/or its affiliates were reimbursed $710,310 during the twelve
month period ended December 31, 1997. These costs were treated as capital
issuance costs and have been netted against the limited partners' capital
accounts.
The Partnership paid to Participating Dealers, including affiliates of the
general partners, selling commissions in an amount equal to eight percent
(8%) of the purchase price of all Units placed by them directly. An
additional one percent (1%) of the purchase price was paid to Participating
Dealers on all Units placed by them until the minimum number of Units were
sold (2,015.5). The additional one percent (1%) was paid out of the
non-accountable expense allowance. There were $1,223,946 of selling
commissions paid or incurred during the twelve month period ended December
31, 1997. These costs were treated as capital issuance costs and have been
netted against the limited partners' capital accounts. The Sponsor has also
guaranteed payment of organization and offering expenses which exceed 13%,
including selling commissions, of the gross proceeds of the offering.
11
<PAGE> 12
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
NOTES TO FINANCIAL STATEMENTS
An acquisition fee is charged, not to exceed the lesser of: (i) four
percent (4%) of gross proceeds plus an additional .0677% for each 1% of
indebtedness incurred in acquiring properties and/or equipment but in no
event will acquisition fees exceed five percent (5%) of the aggregate
purchase prices of properties and equipment; or (ii) compensation
customarily charged in arm's length transactions by others rendering
similar services. The Partnership paid the Sponsor $341,936 in acquisition
fees during the twelve month period ended December 31, 1997, and expects to
pay an additional $68,351 once the Partnership has obtained the maximum
leverage. Of this amount $117,365 was capitalized into net investment in
financing leases and $224,571 was capitalized into land and building
subject to operating leases.
The Partnership has entered into an asset management agreement with the
Sponsor and its affiliates, whereby the Sponsor provides various property
and equipment management services for the Partnership.
A subordinated asset management fee is charged, in an amount equal to one
percent (1%) of the gross rental revenues derived from the properties and
equipment. Payment of the asset management fee is subordinated to receipt
by the limited partners of annual distributions equal to a cumulative,
non-compounded return of ten percent (10%) per annum on their Adjusted
Investment. There was $6,297 paid or incurred to the General Partners
during the twelve month period ended December 31, 1997.
3. RELATED PARTY TRANSACTIONS AND AGREEMENTS, CONTINUED:
An equipment liquidation fee limited to the lesser of three percent (3%) of
the sales price or customary fees for similar services will be paid in
conjunction with asset liquidation services. There were no equipment
liquidations during the twelve month period ended December 31, 1997.
The Partnership Agreement provides for the Sponsor to receive a real estate
liquidation fee limited to the lesser of three percent (3%) of the gross
sales price or fifty percent (50%) of the customary real estate commissions
in the event of a real estate liquidation. This fee is payable only after
the limited partners have received distributions equal to a cumulative,
non-compounded return of ten and one-half percent (10.5%) per annum,
cumulative non-compounded preferred return on their Adjusted Investment
capital plus distributions of sale or refinancing proceeds equal to 100% of
their original contributions. There were no real estate liquidations during
the twelve month period ended December 31, 1997.
12
<PAGE> 13
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
NOTES TO FINANCIAL STATEMENTS
The Partnership has agreed to indemnify the Sponsor and their affiliates
against certain costs paid in settlement of claims which might be sustained
by them in connection with the Partnership. Such indemnification is limited
to the assets of the Partnership and not the limited partners.
4. LAND AND BUILDING SUBJECT TO OPERATING LEASES:
The net investment in operating leases as of December 31, 1997 is comprised
of the following:
<TABLE>
<CAPTION>
<S> <C>
Land $ 2,676,582
Building and improvements 3,162,276
------------
Less accumulated depreciation 5,838,858
(32,988)
------------
Total $ 5,805,870
============
</TABLE>
The following is a schedule of future minimum lease payments to be
received on the operating leases as of December 31, 1997.
<TABLE>
<S> <C>
1998 $ 607,570
1999 607,570
2000 611,235
2001 616,366
2002 632,662
Thereafter 6,180,051
------------
Total $ 9,255,454
============
</TABLE>
13
<PAGE> 14
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
NOTES TO FINANCIAL STATEMENTS
5. NET INVESTMENT IN FINANCING LEASES:
The net investment in financing leases as of December 31, 1997 is
comprised of the following:
<TABLE>
<S> <C>
Minimum lease payments to be received $ 3,714,592
Estimated residual value 81,372
------------
Gross investment in financing leases 3,795,964
Less unearned income (957,301)
Net investment in financing leases $ 2,838,663
============
</TABLE>
The following is a schedule of future minimum lease payments to be
received on the financing leases as of December 31, 1997:
<TABLE>
<S> <C>
1998 $ 640,331
1999 639,982
2000 639,982
2001 639,982
2002 514,635
Thereafter 639,680
------------
Total $ 3,714,592
============
</TABLE>
6. SUBSEQUENT EVENT:
Based upon the results of operations for the three month period ended
December 31, 1997, the Partnership will distribute $350,000, of which
$284,706 was distributed to its limited partners on January 15, 1998 and
the remaining $65,294 will be distributed to those limited partners who
elected to receive distributions on a monthly basis on February 13, 1998
and March 13, 1998.
14
<PAGE> 15
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Captec Franchise Capital Corporation IV:
We have audited the accompanying balance sheet of Captec Franchise Capital
Corporation IV as of December 31, 1997 and 1996, and the related statements of
operations, changes in stockholders' equity, and cash flows for the years then
ended. These financial statements are the responsibility of the Corporation'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 audit to obtain
reasonable assurance about whether the financial statements are free from
material misstatement. An audit includes examining, on a test basis, evidence
supporting financial statement amounts and disclosures. 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 Captec Franchise Capital
Corporation IV as of December 31, 1997 and 1996, and the results of its
operations, changes in stockholders' equity and its cash flows for the years
then ended, in conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand
Detroit, Michigan
March 14, 1998
15
<PAGE> 16
CAPTEC FRANCHISE CAPITAL CORPORATION IV
BALANCE SHEET
December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
ASSETS
Cash $ 1,748 $ 1,407
Investment in partnership 2,730 100
Reimbursable organizational & offering expenses, net 15,594 29,048
Receivable from affiliate 19,766 1,697
Other assets 15,005 16,038
------- -------
Total assets $ 54,843 $ 48,290
========= ========
LIABILITIES & STOCKHOLDERS' EQUITY
Total liabilities:
Accounts payable $ 51,213 $ 37,022
Payable to affiliates - 10,268
Income tax payable 894 -
-------- --------
Total liabilities 52,107 47,290
-------- --------
Stockholders' equity:
Common stock, no par value; 60,000 shares authorized,
1,000 shares issued and outstanding - -
Paid-in capital 1,000 1,000
Retained earnings 1,736 -
-------- --------
Total stockholders' equity 2,736 1,000
-------- --------
Total liabilities & stockholders' equity $ 54,843 $ 48,290
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE> 17
CAPTEC FRANCHISE CAPITAL CORPORATION IV
STATEMENT OF OPERATIONS
for the years ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Investment income from partnership $ 2,630 $ -
-------- -------
Net income before taxes 2,630 -
Income tax provision 894 -
-------- -------
Net income $ 1,736 $ -
======== =======
</TABLE>
The accompanying notes are an integral part of the financial statements
17
<PAGE> 18
CAPTEC FRANCHISE CAPITAL CORPORATION IV
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
for the years ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
----- ------- -------- -----
<S> <C> <C> <C> <C>
Balance, January 1, 1996 $ - $ 1,000 $ - $ 1,000
Net Income - - - -
---- ------- ------- -------
Balance, December 31, 1996 - 1,000 - 1,000
Net income - - 1,736 1,736
---- ------- ------- -------
Balance, December 31, 1997 $ - $ 1,000 $ 1,736 $ 2,736
==== ======= ======= =======
</TABLE>
18
<PAGE> 19
CAPTEC FRANCHISE CAPITAL CORPORATION IV
STATEMENT OF CASH FLOWS
for the years ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,736 $ -
Adjustments to net income:
Undistributed income from partnership (2,630) (100)
Increase in income tax payable 894 -
Decrease (increase) in other assets 1,033 (16,038)
Increase in accounts payable 14,191 37,022
------- -------
Net cash provided by operating activities 15,224 20,884
------- -------
Cash flows from financing activities:
Issuance of common stock - 1,000
Decrease in reimbursable offering expense and payable to affiliate, net (14,883) (20,477)
------- -------
Net cash provided by financing activities (14,883) (19,477)
------- -------
Net increase (decrease) in cash 341 1,407
Cash, beginning of year 1,407 -
------- -------
Cash, end of period $ 1,748 $ 1,407
======== =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE> 20
CAPTEC FRANCHISE CAPITAL CORPORATION IV
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION:
Captec Franchise Capital Corporation IV (the "Corporation") is a Michigan
corporation organized on July 22, 1996. The Corporation was formed for
the purpose of serving as the managing general partner of Captec
Franchise Capital Partners L.P. IV (the "Partnership"), a Delaware
limited partnership.
The Corporation is a wholly owned subsidiary of Captec Financial Group,
Inc. ("Captec"). Captec has paid $1,000 in cash to the Corporation for
the purchase of 1,000 shares of common stock of the Corporation. As a
general partner of the Partnership, the Corporation has contributed $100
to the capital of the Partnership. Patrick L. Beach is also a general
partner of the Partnership and is the Chairman of the Board of Directors,
President and Chief Executive Officer of the Corporation and Captec. Each
general partner has a 0.5 percent share in the Partnership's net income
or loss.
The Partnership undertook a public offering of limited partnership
interests ("Units") in 1997. A minimum of 2,000 Units and a maximum of
30,000 Units, priced at $1,000 per Unit, will be offered on a "best
efforts, part or none" basis. As of December 31, 1997, the Partnership
had accepted subscriptions for 15,380.902 Units and funds totaling
$15,380,902.
Affiliates of the Corporation are expected to provide various services to
the Partnership and will be paid certain fees for such services as
specified in the Partnership Agreement.
Following is a summary of the Corporation's significant accounting
principles:
A. INCOME TAXES: The Corporation reports its income for federal
income tax purposes in the consolidated tax return of Captec.
Income taxes are allocated by Captec to the Corporation on the
separate return basis. The Corporation's income tax expense
reflected in the statement of operations and that computed by
applying the statutory federal income tax rate are approximately
equal. Deferred income taxes, for financial reporting purposes,
are not material.
B. ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
C. RECLASSIFICATIONS: Certain 1996 financial statement amounts have
been reclassified to conform to the 1997 presentation.
20
<PAGE> 21
CAPTEC FRANCHISE CAPITAL CORPORATION IV
NOTES TO FINANCIAL STATEMENTS
2. OPERATIONS:
The Corporation's only source of revenue in 1997 and 1996 was from its
investment in the Partnership. See the accompanying financial statements
of the Partnership.
3. RELATED PARTY TRANSACTIONS:
Organization and offering expenses related to the offering of Units are
prepaid by the Corporation and reimbursed by the Partnership in an amount
equal to up to three percent (3%) of the gross proceeds of the offering
(less any amounts paid directly by the Partnership). The Corporation is
also reimbursed by the Partnership for a non-accountable expense
allowance in an amount equal to two percent (2%) of the gross proceeds of
the offering. During 1997 the Corporation was reimbursed indirectly
through payments made in the amount of $500,699 by LP IV to Captec on
behalf of the Corporation.
The Corporation receives advances from Captec in order to have sufficient
funds for the prepayment of organization and offering and non-accountable
expenses made on behalf of the Partnership. As the Corporation receives
reimbursements of such prepaid expenses, the advances to Captec are
repaid.
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<PAGE> 22
Pursuant to the requirements 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.
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
By: Captec Franchise Capital Corporation IV
Managing General Partner of
Captec Franchise Capital Partners L.P. IV
By: /s/ W. Ross Martin
-----------------------------
W. Ross Martin
Chief Financial Officer and Sr. Vice
President a duly authorized officer
Date: June 23, 1998
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