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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
 þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2005
 OR
 o
    
    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
  Delaware
 38-3304096
 th  P.O. Box 544, Ann Arbor, Michigan 48106-0544
 (734) 994-5505
 Not Applicable
 þ o
 APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
 Not applicable
 APPLICABLE ONLY TO CORPORATE ISSUERS
 Not applicable




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CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
 Index to Form 10-Q
  
 Item No.
    
    
    PagePART I
    FINANCIAL INFORMATIONItem 1.
    Financial Statements:Balance Sheets, June 30, 2005 and December 31, 2004
    
    
    3Statements of Discontinued Operations for the three and six months
ended June 30, 2005 and 2004
    
    
    4Statement of Changes in Partners Capital for the six months
ended June 30, 2005
    
    
    5Statements of Cash Flows for the six months
ended June 30, 2005 and 2004
    
    
    6Notes to Financial Statements
    
    
    7  10Item 2.
    Managements Discussion and Analysis of Financial Condition
 and Results of Operations
    
    
    10  13Item 3.
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    14Item 4.
    Controls and Procedures
    
    
    14PART II
    OTHER INFORMATIONOther Information

    
    
    15SIGNATURES
    
    
    
    16CERTIFICATION
    Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
    
    
    17  19Certification Pursuant to Section 302Certification Pursuant to 18 U.S.C. Section 1350
  2




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CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
 
 PART I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 Captec Franchise Capital Partners L.P. IV
 
 Balance Sheets
 June 30,
    
    December 31,2005
    
    2004(Unaudited)AssetsCash and cash equivalents
    
    $
    9,591,610
    
    
    $
    143,463Restricted cash
    
    
    
    
    
    
    333,006Assets Held for Sale:Operating leases, net
    
    
    9,881,725
    
    
    
    25,905,039Financing leases, net
    
    
    1,242,458
    
    
    
    1,326,425Unbilled rent, net
    
    
    148,743
    
    
    
    1,075,996Other Assets
    
    
    
    
    
    
    258,339Due from Related Parties
    
    
    1,310
    
    
    
    Accounts receivable
    
    
    21,602
    
    
    
    178,011Total assets
    
    $
    20,887,448
    
    
    $
    29,220,279Liabilities and Partners CapitalLiabilities Held for Sale:Notes payable
    
    $
    3,485,025
    
    
    $
    13,597,961Accounts payable and accrued expenses
    
    
    59,466
    
    
    
    171,715Due to related parties
    
    
    
    
    
    
    10,969Total liabilities
    
    
    3,544,491
    
    
    
    13,780,645Partners capital:Limited partners capital accounts
    
    
    17,322,237
    
    
    
    15,444,197General partners capital account
    
    
    20,720
    
    
    
    (4,563
    )Total partners capital
    
    
    17,342,957
    
    
    
    15,439,634Total liabilities and partners capital
    
    $
    20,887,448
    
    
    $
    29,220,279
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Captec Franchise Capital Partners L.P. IV
 
 Statements of Discontinued Operations
 Three months ended
    
    Six months endedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Operating revenue:Rental income
    
    $
    573,131
    
    
    $
    734,507
    
    
    $
    1,276,928
    
    
    $
    1,526,661Finance income
    
    
    31,525
    
    
    
    37,389
    
    
    
    64,132
    
    
    
    76,659Total operating revenue
    
    
    604,656
    
    
    
    771,896
    
    
    
    1,341,060
    
    
    
    1,603,320Operating costs and expenses:Interest expense
    
    
    223,509
    
    
    
    295,926
    
    
    
    512,246
    
    
    
    608,460Depreciation
    
    
    
    
    
    
    121,239
    
    
    
    
    
    
    
    247,915Debt retirement costs
    
    
    1,360,589
    
    
    
    
    
    
    
    1,360,589
    
    
    
    209,010General and administrative
    
    
    83,582
    
    
    
    181,819
    
    
    
    189,509
    
    
    
    304,844Total operating costs and expenses
    
    
    1,667,680
    
    
    
    598,984
    
    
    
    2,062,344
    
    
    
    1,370,229Income (loss) from discontinued
operations before other income
    
    
    (1,063,024
    )
    
    
    172,912
    
    
    
    (721,284
    )
    
    
    233,091Other income :Gain on sale of equipment
    
    
    
    
    
    
    8,040
    
    
    
    1,997
    
    
    
    8,040Gain on sale of real estate
    
    
    3,231,936
    
    
    
    17,811
    
    
    
    3,231,936
    
    
    
    261,545Interest and other income
    
    
    15,324
    
    
    
    4,881
    
    
    
    15,674
    
    
    
    5,049Total other income
    
    
    3,247,260
    
    
    
    30,732
    
    
    
    3,249,607
    
    
    
    274,634Net Income from discontinued operations
    
    
    2,184,236
    
    
    
    203,644
    
    
    
    2,528,323
    
    
    
    507,725Net income from discontinued operations allocable to general partner
    
    $
    21,842
    
    
    $
    2,036
    
    
    $
    25,283
    
    
    $
    5,077Net income from discontinued operations allocable to limited partners
    
    $
    2,162,394
    
    
    $
    201,608
    
    
    $
    2,503,040
    
    
    $
    502,648Net income from discontinued operations per limited partnership unit
    
    $
    74.63
    
    
    $
    6.96
    
    
    $
    86.39
    
    
    $
    17.30Weighted average number of limited partnership
units outstanding
    
    
    28,975
    
    
    
    28,975
    
    
    
    28,975
    
    
    
    29,065
 The accompanying notes are an integral part of the financial statements.
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Captec Franchise Capital Partners L.P. IV
 
 Statement of Changes in Partners Capital
 Limited
    
    Limited
    
    General
    
    TotalPartners
    
    Partners
    
    Partners
    
    PartnersUnits
    
    Accounts
    
    Account
    
    CapitalBalance, December 31, 2004
    
    
    28,975
    
    
    $
    15,444,197
    
    
    $
    (4,563
    )
    
    $
    15,439,634Distributions  ($21.57
per limited partnership
unit)
    
    
    
    
    
    
    (625,000
    )
    
    
    
    
    
    
    (625,000
    )Net income
from discontinued operations
    
    
    
    
    
    
    2,503,040
    
    
    
    25,283
    
    
    
    2,528,323Balance, June 30, 2005
    
    
    28,975
    
    
    $
    17,322,237
    
    
    $
    20,720
    
    
    $
    17,342,957
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Captec Franchise Capital Partners L.P. IV
 
 Statements of Cash Flows
 2005
    
    2004Cash flows from operating activities:Net income from discontinued operations
    
    $
    2,528,323
    
    
    $
    507,725Adjustments to net income:Depreciation
    
    
    
    
    
    
    247,915Amortization of debt issuance costs
    
    
    25,749
    
    
    
    51,752Gain on sale of equipment
    
    
    (1,997
    )
    
    
    (8,040
    )Gain on sale of real estate
    
    
    (3,231,936
    )
    
    
    (261,545
    )Loss on investments in financing leases
    
    
    9,961
    
    
    
    Increase in unbilled rent
    
    
    (194,230
    )
    
    
    (23,288
    )Decrease in accounts receivable
    
    
    9,410
    
    
    
    169,351Decrease in accounts payable and accrued
expenses
    
    
    (82,347
    )
    
    
    (53,132
    )Increase in due from related parties
    
    
    (1,310
    )
    
    
    (Decrease) increase in due to related parties
    
    
    (10,969
    )
    
    
    786Decrease (increase) in restricted cash
    
    
    333,006
    
    
    
    (43,620
    )Net cash (used in) provided by operating activities
    
    
    (616,340
    )
    
    
    587,904Cash flows from investing activities:Proceeds from sale of equipment
    
    
    15,000
    
    
    
    40,200Proceeds from sale of real estate
    
    
    20,786,225
    
    
    
    3,848,836Payment of lease commissions
    
    
    (59,805
    )
    
    
    Principal collections on financing leases
    
    
    61,003
    
    
    
    112,393Net cash provided by investing activities
    
    
    20,802,423
    
    
    
    4,001,429Cash flows from financing activities:Repayments of notes payable
    
    
    (10,112,936
    )
    
    
    (1,174,817
    )Repurchase of limited partnership units
    
    
    
    
    
    
    (124,716
    )Distributions to limited partners
    
    
    (625,000
    )
    
    
    (2,352,990
    )Net cash used in financing activities
    
    
    (10,737,936
    )
    
    
    (3,652,523
    )Net increase in cash and cash equivalents
    
    
    9,448,147
    
    
    
    936,810Cash and cash equivalents, beginning of period
    
    
    143,463
    
    
    
    694,742Cash and cash equivalents, end of period
    
    $
    9,591,610
    
    
    $
    1,631,552
 The accompanying notes are an integral part of the financial statements.
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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 initial general partners of the Partnership were Captec Franchise Capital Corporation
IV (the Corporation), a wholly-owned subsidiary of Captec Financial Group, Inc.
(Captec), an affiliate, and Patrick L. Beach, the Chairman of the Board of Directors,
President and Chief Executive Officer of the Corporation and Captec. In August 1998, Captec
Net Lease Realty, Inc. (Captec Net Lease), an affiliate, acquired the general partnership
interest of the Partnership. In December 2001, Captec Net Lease merged with and into
Commercial Net Lease Realty, Inc. (Commercial Net Lease). In connection with the merger,
Commercial Net Lease agreed to sell and assign its general partnership interest in the
Partnership to GP4 Asset Acquisition, LLC (GP4 Asset Acquisition), which is wholly-owned
by Mr. Beach and is an affiliate of Captec. Effective January 15, 2002, the limited
partners consented to the transfer of the general partnership interest. On September 11,
2003, the Partnerships secured lender consented to the transfer of the general partnership
interest to GP4 Asset Acquisition. Upon receipt of the secured lenders consent, GP4 Asset
Acquisition became the general partner of the Partnership.The Partnership commenced a public offering (the Offering) of up to 30,000 limited
partnership units (the Units), priced at $1,000 per Unit, registered under the Securities
Act of 1933, as
amended, by means of a Registration Statement filed on Form S-11, which was declared
effective by the Securities and Exchange Commission on December 23, 1996. The Partnership
accepted subscriptions for the minimum number of Units on March 5, 1997 and immediately
commenced operations. The Offering was fully subscribed in December 1998. Since 1999, 1,025
Units have been repurchased by the Partnership pursuant to the terms of the Repurchase Plan
set forth in the Partnerships December 23, 1996 prospectus with respect to the Offering.
At June 30, 2005, the Partnership had 28,975 Units issued and outstanding.The principal investment objectives of the Partnership are: (i) preservation and protection
of capital; (ii) distribution of cash flow generated by the Partnerships leases; (iii)
capital appreciation of Partnership properties; (iv) generation of increased income and
protection against inflation through escalation of base rents or participation in gross
revenues of tenants of Partnership properties; and (v) deferred taxation of cash
distributions to the limited partners.Allocation of profits, losses and cash distributions from operations and cash distributions
from sale or refinancing activities 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.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.Distributions per limited partnership Unit are calculated using the actual distributions
disbursed during the period and the weighted average number of limited partnership Units
outstanding during the period. Actual individual limited partner distributions may vary
from this calculation as a result of a variety of factors including: (i) actual
distributions are computed based on quarterly operating results and outstanding limited
partnership units, which are disbursed in the subsequent
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2.
    
    LAND AND BUILDING SUBJECT TO OPERATING LEASES:The net investment in operating leases as of June 30, 2005 is comprised of the following:
 Land
    
    $
    2,501,100Building and improvements
    
    
    8,483,98710,985,087Less accumulated depreciation
    
    
    (1,103,362
    )Total
    
    $
    9,881,725
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3.
    
    NET INVESTMENT IN FINANCING LEASES:The net investment in financing leases as of June 30, 2005 is comprised of the following:
 Minimum lease payments to be received
    
    $
    1,966,687Less unearned income
    
    
    (724,229
    )Net investment in financing leases
    
    $
    1,242,458
 4.
    
    NOTES PAYABLE:In December 1998, the Partnership entered into a $6.4 million term note. The note had a
10-year term, was collateralized by certain properties that had a carrying value of
approximately $11.6 million subject to operating leases, and bore interest at a rate of
8.13% per annum. Using the proceeds from the sale of twelve properties on June 3, 2005,
the Partnership defeased all remaining amounts payable under this note. The Partnership
incurred approximately $841,000 of yield maintenance costs and $46,000 of professional fees
related to the defeasance.In March 1999, the Partnership entered into an additional $3.3 million term note. The note
had a 10-year term, was collateralized by properties that had a carrying value of
approximately $3.4 million subject to operating leases, and bore interest at a rate of 8.5%
per annum. In March 2004, the Partnership defeased approximately $466,000 of this note
payable with proceeds from the sale of a property. Using the proceeds from the sale of
twelve properties on June 3, 2005, the Partnership defeased all remaining amounts payable
under this note. The Partnership incurred approximately $427,000 of yield maintenance
costs and $46,000 of professional fees related to the defeasance.In October 2000, the Partnership assumed a $3.75 million term note, collateralized by a
certain property that has a carrying value of approximately $4.6 million. The note has a
10-year term, and bears interest at a rate of 8.35% per annum. At June 30, 2005, the
remaining principal balance outstanding under this note was approximately $3,485,000.In November 2001, the Partnership entered into a $1.5 million term note. In June 2004, the
Partnership sold a property subject to an operating lease that secured this note. Using
proceeds from the sale, the note was paid down to a balance of $874,000, and the maturity
date was extended to July 2006. The remaining principal balance on the note was secured by
a property subject to an operating lease that had a carrying value of $1.5 million, and
bore interest at a rate of prime plus 2% per annum. Using the proceeds from the sale of
twelve properties on June 3, 2005, the Partnership prepaid the remaining amounts payable
under this note.In April 2003, the Partnership entered into an $862,500 term note. The note had a 5-year
term, was collateralized by a property subject to an operating lease that had a carrying
value of $1.1 million, and bore interest at a rate of 6.25%, per annum. Using the proceeds
from the sale of twelve properties on June 3, 2005, the Partnership prepaid the remaining
amounts payable under this note.In April 2003, the Partnership entered into a $57,500 unsecured revolving note. The note
initially had a 2-year term and bore interest at a variable rate equivalent to the Wall
Street Journal (WSJ) prime rate plus 1/2%. The interest rate was adjusted monthly for
changes in the WSJ prime rate. In April 2005, the maturity date on the note was extended
to April 2006. All other terms and conditions on the note remained unchanged. Using the
proceeds from the sale of twelve properties on June 3, 2005, the Partnership prepaid the
remaining amounts payable under this note.
 9




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
   RESULTS OF OPERATIONS
 Three Months Ended June 30, 2005.
  10




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Six Months Ended June 30, 2005.
   11




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LIQUIDITY AND CAPITAL COMMITMENTS
        12




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Disclosure of Contractual Obligations
 Payment due by periodMoreContractual
    
    
    
    
    
    Less than
    
    1-3
    
    3-5
    
    than 5Obligations
    
    Total
    
    1 year
    
    years
    
    years
    
    yearsLong-term
Debt
Obligation
    
    $
    3,485,025
    
    
    $
    64,171
    
    
    $
    156,509
    
    
    $
    183,806
    
    
    $
    3,080,539
 13




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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   
 ITEM 4. CONTROLS AND PROCEDURES
   14




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PART II  OTHER INFORMATION
 ITEM 1.
    
    LEGAL PROCEEDINGS. NoneITEM 2.
    
    CHANGES IN SECURITIES AND USE OF PROCEEDS. NoneITEM 3.
    
    DEFAULTS UPON SENIOR SECURITIES. None.ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. NoneITEM 5.
    
    OTHER INFORMATION. NoneITEM 6.
    
    EXHIBITSThe following exhibits are included herein or incorporated by reference:
 Number
    
    Exhibit2
    
    Plan of Liquidation and Dissolution (Incorporated by reference to the
Registrants Definitive Proxy Statement on Schedule 14A, filed on September 21, 2004)4
    
    Amended Agreement of Limited Partnership of Registrant. (Incorporated by
reference to the Registrants Definitive Proxy Statement on Schedule 14A, filed on
September 21, 2004 and the corresponding exhibit in the Registrants Form 10-K for the
year ended December 31, 1998)10.1
    
    Promissory Note dated November 28, 1998 between Registrant and National
Realty Funding L.C. (Incorporated by reference to the corresponding exhibit in the
Registrants Form 10-K for the year ended December 31, 1998)10.2
    
    Promissory Note dated June 30, 1999 between Registrant and National Realty
Funding L.C. (Incorporated by reference to the corresponding exhibit in the
Registrants Form 10-Q for the quarter ended June 30, 1999)31
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 200232
    
    Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section
of the Sarbanes-Oxley Act of 2002
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SIGNATURES
  By:
    
    Captec Franchise Capital Partners L.P. IVGP4 Asset Acquisition, LLCIts ManagerBy:
    
    /s/ Patrick L. BeachPatrick L. BeachPresidentDate:
    
    August 15, 2005
 16




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EXHIBIT INDEX
 Number
    
    Exhibit2
    
    Plan of Liquidation and Dissolution (Incorporated by reference to the
Registrants Definitive Proxy Statement on Schedule 14A, filed on September 21, 2004)4
    
    Amended Agreement of Limited Partnership of Registrant. (Incorporated by
reference to the Registrants Definitive Proxy Statement on Schedule 14A, filed on
September 21, 2004 and the corresponding exhibit in the Registrants Form 10-K for the
year ended December 31, 1998)10.1
    
    Promissory Note dated November 28, 1998 between Registrant and National
Realty Funding L.C. (Incorporated by reference to the corresponding exhibit in the
Registrants Form 10-K for the year ended December 31, 1998)10.2
    
    Promissory Note dated June 30, 1999 between Registrant and National Realty
Funding L.C. (Incorporated by reference to the corresponding exhibit in the
Registrants Form 10-Q for the quarter ended June 30, 1999)31
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 200232
    
    Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section
of the Sarbanes-Oxley Act of 2002
 17