##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q

|               |  |                                                                                  
|-------------- |  | ---------------------------------------------------------------------------------
|X IN BALLOTBOX |  | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

|                               |  |                   
|------------------------------ |  | ------------------
|For the quarterly period ended |  | September 30, 2002

OR

|               |  |                                                                                   
|-------------- |  | ----------------------------------------------------------------------------------
|OPEN BALLOTBOX |  | 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

38-3304095

24 Frank Lloyd Wright Drive, Lobby L, 4th Floor
P.O. Box 544, Ann Arbor, Michigan 48106-0544

(734) 994-5505

Not Applicable

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 such shorter period that the
registrant was required to file such reports), and (2) has been subject to filing requirements for the past 90
days. Yes X IN BALLOT BOX No OPEN BALLOT BOX

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of
the Exchange Act after the distribution of securities under a plan confirmed by court: Not applicable

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuers classes of common equity, as of the latest
practicable date: Not applicable





---

TABLE OF CONTENTS



|                                                                                              |                                                                                         |  |  |  |  |  |  | 
|--------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I FINANCIAL INFORMATION                                                                 
|Item 1. Financial Statements:                                                                
|                                                                                              | Balance Sheets, September 30, 2002 and December 31, 2001                               
|                                                                                              | Statement of Operations for the three and nine months ended September 30, 2002 and 2001
|                                                                                              | Statement of Changes in Partners Capital for the nine months ended September 30, 2002 
|                                                                                              | Statement of Cash Flows for the nine months ended September 30, 2002 and 2001          
|                                                                                              | Notes to Financial Statements                                                          
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|Item 3. Controls and Procedures                                                              
|PART II OTHER INFORMATION                                                                    
|                                                                                              | Other Information                                                                      
|SIGNATURES                                                                                   
|Certification of CEO Pursuant to Section 906                                                 



---



##### Table of Contents









CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV

Index to Form 10-Q

|           |  |                                                                                         |  |        
|---------- |  | --------------------------------------------------------------------------------------- |  | -------
|Item No.   |  |                                                                                         |  | Page   
|           |  |                                                                                         |  |        
|          
|PART I     |  | FINANCIAL INFORMATION                                                                   |  |        
|          
|Item 1.    |  | Financial Statements:                                                                   |  |        
|          
|           |  | Balance Sheets, September 30, 2002 and December 31, 2001                                |  | 3      
|          
|           |  | Statement of Operations for the three and nine months
ended September 30, 2002 and 2001 |  | 4      
|          
|           |  | Statement of Changes in Partners Capital for the nine months
ended September 30, 2002  |  | 5      
|          
|           |  | Statement of Cash Flows for the nine months
ended September 30, 2002 and 2001           |  | 6      
|          
|           |  | Notes to Financial Statements                                                           |  | 7 - 8  
|          
|Item 2.    |  | Managements Discussion and Analysis of Financial Condition
and Results of Operations   |  | 9 - 11 
|          
|Item 3.    |  | Controls and Procedures                                                                 |  | 11     
|          
|PART II    |  | OTHER INFORMATION                                                                       |  |        
|           |  | Other Information                                                                       |  | 12 - 13
|          
|SIGNATURES |  |                                                                                         |  | 14     

2



---



##### Table of Contents






Captec Franchise Capital Partners L.P. IV
Balance Sheet

|                                     |                                       |                                         |            |            |            |                          |            |            |              |  |  | 
|------------------------------------ | ------------------------------------- | --------------------------------------- | ---------- | ---------- | ---------- | ------------------------ | ---------- | ---------- | ------------ |  |  | 
|                                     |                                       |                                         |            |            |            | (Unaudited)September 30, |            |            | December 31, | 
|                                     |                                       |                                         |            |            |            | 2002                     |            |            | 2001         | 
|Assets                              
|Cash and cash equivalents            |                                       | $                                       | 1,194,657  |            |            | $                        | 1,257,402  |           
|Restricted cash                      |                                       |                                         | 212,915    |            |            |                          | 203,445    |           
|Investment in property under leases: |                                       |                                         |            |            |            |                          |            |           
|                                     | Operating leases, net                 |                                         |            | 29,032,636 |            |                          |            | 29,400,369 |             
|                                     | Financing leases, net                 |                                         |            | 2,891,332  |            |                          |            | 3,993,432  |             
|                                     | Impaired financing leases, net        |                                         |            | 210,542    |            |                          |            | 210,542    |             
|Accounts receivable                  |                                       |                                         | 44,221     |            |            |                          | 20,697     |           
|Unbilled rent, net                   |                                       |                                         | 1,210,417  |            |            |                          | 1,044,659  |           
|Due from related parties             |                                       |                                         | 82,017     |            |            |                          | 3,667      |           
|Deferred financing costs, net        |                                       |                                         | 395,662    |            |            |                          | 455,515    |           
|                                     |                                       |                                         |            |            |            |                         
|                                     |                                       | Total assets                            |            | $          | 35,274,399 |                          |            | $          | 36,589,728   | 
|                                     |                                       |                                         |            |            |            |                         
|Liabilities and Partners Capital   
|Liabilities:                         |                                       |                                         |            |            |            |                          |            |           
|                                     | Notes payable                         |                                         | $          | 14,451,470 |            |                          | $          | 14,678,290 |             
|                                     | Accounts payable and accrued expenses |                                         |            | 146,272    |            |                          |            | 166,359    |             
|                                     | Due to related parties                |                                         |            | 23,600     |            |                          |            | 84,174     |             
|                                     |                                       |                                         |            |            |            |                         
|                                     |                                       | Total liabilities                       |            |            | 14,621,342 |                          |            |            | 14,928,823   | 
|                                     |                                       |                                         |            |            |            |                         
|Partners capital:                   |                                       |                                         |            |            |            |                          |            |           
|Limited partners capital            |                                       |                                         | 20,624,287 |            |            |                          | 21,645,283 |           
|General partners capital            |                                       |                                         | 28,770     |            |            |                          | 15,622     |           
|                                     |                                       |                                         |            |            |            |                         
|                                     |                                       | Total partners capital                 |            |            | 20,653,057 |                          |            |            | 21,660,905   | 
|                                     |                                       |                                         |            |            |            |                         
|                                     |                                       | Total liabilities and partners capital |            | $          | 35,274,399 |                          |            | $          | 36,589,728   | 
|                                     |                                       |                                         |            |            |            |                         

The accompanying notes are an integral part of the financial statements.

3



---



##### Table of Contents






Captec Franchise Capital Partners L.P. IV
Statement of Operations
(Unaudited)

|                                                                 |                            |                                    |         |                    |         |   |                   |         |         |      |           |           |           |   |           |           |           | 
|---------------------------------------------------------------- | -------------------------- | ---------------------------------- | ------- | ------------------ | ------- | - | ----------------- | ------- | ------- | ---- | --------- | --------- | --------- | - | --------- | --------- | --------- | 
|                                                                 |                            |                                    |         | Three months ended |         |   | Nine months ended |        
|                                                                 |                            |                                    |         | September 30,      |         |   | September 30,     |        
|                                                                 |                            |                                    |         |                    |         |   |                   |        
|                                                                 |                            |                                    |         | 2002               |         |   | 2001              |         |         | 2002 |           |           | 2001      |  
|                                                                 |                            |                                    |         |                    |         |   |                   |         |         |      |           |           |           |  
|Operating revenue:                                               |                            |                                    |         |                    |         |   |                   |         |         |      |           |           |           |   |           |          
|                                                                 | Rental income              |                                    | $       | 840,954            |         |   | $                 | 840,954 |         |      | $         | 2,522,862 |           |   | $         | 2,522,862 |          
|                                                                 | Finance income             |                                    |         | 72,891             |         |   |                   | 105,404 |         |      |           | 245,276   |           |   |           | 354,236   |          
|                                                                 |                            |                                    |         |                    |         |   |                   |         |         |      |           |          
|                                                                 |                            | Total operating revenue            |         |                    | 913,845 |   |                   |         | 946,358 |      |           |           | 2,768,138 |   |           |           | 2,877,098 | 
|Operating costs and expenses:                                    |                            |                                    |         |                    |         |   |                   |         |         |      |           |           |           |   |           |          
|                                                                 | Interest expense           |                                    |         | 314,943            |         |   |                   | 304,761 |         |      |           | 953,600   |           |   |           | 908,878   |          
|                                                                 | Depreciation               |                                    |         | 122,243            |         |   |                   | 120,738 |         |      |           | 367,733   |           |   |           | 362,215   |          
|                                                                 | General and administrative |                                    |         | 47,240             |         |   |                   | 35,401  |         |      |           | 133,431   |           |   |           | 91,162    |          
|                                                                 |                            |                                    |         |                    |         |   |                   |         |         |      |           |          
|                                                                 |                            | Total operating costs and expenses |         |                    | 484,426 |   |                   |         | 460,900 |      |           |           | 1,454,764 |   |           |           | 1,362,255 | 
|                                                                 |                            |                                    |         |                    |         |   |                   |         |         |      |           |          
|                                                                 |                            | Income from operations             |         |                    | 429,419 |   |                   |         | 485,458 |      |           |           | 1,313,374 |   |           |           | 1,514,843 | 
|Other income:                                                    |                            |                                    |         |                    |         |   |                   |         |         |      |           |           |           |   |           |          
|                                                                 | Interest and other income  |                                    |         | 453                |         |   |                   | 6,411   |         |      |           | 453       |           |   |           | 5,971     |          
|                                                                 | Other income               |                                    |         |                   |         |   |                   |        |         |      |           | 990       |           |   |           |          |          
|                                                                 |                            |                                    |         |                    |         |   |                   |         |         |      |           |          
|                                                                 |                            | Total other income                 |         |                    | 453     |   |                   |         | 6,411   |      |           |           | 1,443     |   |           |           | 5,971     | 
|                                                                 |                            |                                    |         |                    |         |   |                   |         |         |      |           |          
|Net income                                                       |                            |                                    | 429,872 |                    |         |   | 491,869           |         |         |      | 1,314,817 |           |           |   | 1,520,814 |          
|Net income allocable to general partner                          |                            |                                    | 4,299   |                    |         |   | 4,919             |         |         |      | 13,148    |           |           |   | 15,208    |          
|                                                                 |                            |                                    |         |                    |         |   |                   |         |         |      |           |          
|Net income allocable to limited partners                         |                            | $                                  | 425,573 |                    |         | $ | 486,950           |         |         | $    | 1,301,669 |           |           | $ | 1,505,606 |          
|                                                                 |                            |                                    |         |                    |         |   |                   |         |         |      |           |          
|Net income per limited partnership unit                          |                            | $                                  | 14.49   |                    |         | $ | 16.51             |         |         | $    | 44.31     |           |           | $ | 50.98     |          
|                                                                 |                            |                                    |         |                    |         |   |                   |         |         |      |           |          
|Weighted average number of limited partnership
units outstanding |                            |                                    | 29,371  |                    |         |   | 29,486            |         |         |      | 29,378    |           |           |   | 29,532    |          

The accompanying notes are an integral part of the financial statements.

4



---



##### Table of Contents






Captec Franchise Capital Partners L.P. IV
Statement of Changes in Partners Capital
for the nine months ended September 30, 2002
(Unaudited)

|                                        |  |           |        |   |           |   |            |           |  |   |           |  |  |   |            |  
|--------------------------------------- |  | --------- | ------ | - | --------- | - | ---------- | --------- |  | - | --------- |  |  | - | ---------- | -
|                                        |  | Limited   |        |   | Limited   |   |            | General   |  |   | Total     | 
|                                        |  | Partners' |        |   | Partners' |   |            | Partner's |  |   | Partners' | 
|                                        |  | Units     |        |   | Accounts  |   |            | Accounts  |  |   | Capital   | 
|                                        |  |           |        |   |           |   |            |           |  |   |           | 
|Balance, December 31, 2001              |  |           | 29,391 |   |           | $ | 21,645,283 |           |  | $ | 15,622    |  |  | $ | 21,660,905 |  
|Distributions  ($78.52 per unit)       |  |           |       |   |           |   | (2,306,836 | )         |  |   |          |  |  |   | (2,306,836 | )
|Repurchase of limited partnership units |  |           | (20    | ) |           |   | (15,829    | )         |  |   |          |  |  |   | (15,829    | )
|Net income                              |  |           |       |   |           |   | 1,301,669  |           |  |   | 13,148    |  |  |   | 1,314,817  |  
|                                        |  |           |        |   |           |   |            |           |  |   |           | 
|Balance, September 30, 2002             |  |           | 29,371 |   |           | $ | 20,624,287 |           |  | $ | 28,770    |  |  | $ | 20,653,057 |  
|                                        |  |           |        |   |           |   |            |           |  |   |           | 

The accompanying notes are an integral part of the financial statements.

5



---



##### Table of Contents






Captec Franchise Capital Partners L.P. IV
Statement of Cash Flows
for the nine months ended September 30, 2002 and 2001
(Unaudited)

|                                                     |                                                                               |                                                              |            |            |          |   |            |            |          |  
|---------------------------------------------------- | ----------------------------------------------------------------------------- | ------------------------------------------------------------ | ---------- | ---------- | -------- | - | ---------- | ---------- | -------- | -
|                                                     |                                                                               |                                                              |            | 2002       |          |   | 2001       |           
|                                                     |                                                                               |                                                              |            |            |          |   |            |           
|Cash flows from operating activities:                |                                                                               |                                                              |            |            |          |   |            |           
|                                                     | Net Income                                                                    |                                                              | $          | 1,314,817  |          |   | $          | 1,520,814  |         
|                                                     | Adjustments to net income:                                                    |                                                              |            |            |          |   |            |            |         
|                                                     |                                                                               | Depreciation                                                 |            |            | 367,733  |   |            |            | 362,215  |  
|                                                     |                                                                               | Amortization of debt issuance costs                          |            |            | 59,853   |   |            |            | 44,640   |  
|                                                     |                                                                               | Loss on sale of equipment                                    |            |            |         |   |            |            | 258      |  
|                                                     |                                                                               | Increase in unbilled rent                                    |            |            | (165,758 | ) |            |            | (207,871 | )
|                                                     |                                                                               | Increase in accounts receivable                              |            |            | (23,524  | ) |            |            | (28,467  | )
|                                                     |                                                                               | (Decrease) increase in accounts payable and accrued
expenses |            |            | (20,087  | ) |            |            | 72,374   |  
|                                                     |                                                                               | (Increase) decrease in due from related parties              |            |            | (78,350  | ) |            |            | 966      |  
|                                                     |                                                                               | Decrease in due to related parties                           |            |            | (60,574  | ) |            |            | (233,959 | )
|                                                     |                                                                               | Increase in restricted cash                                  |            |            | (9,470   | ) |            |            | (77,385  | )
|                                                     |                                                                               |                                                              |            |            |          |  
|Net cash provided by operating activities            |                                                                               |                                                              | 1,384,640  |            |          |   | 1,453,585  |           
|                                                     |                                                                               |                                                              |            |            |          |  
|Cash flows from investing activities:                |                                                                               |                                                              |            |            |          |   |            |           
|                                                     | Purchase and construction advances for properties
subject to operating leases |                                                              |            |           |          |   |            | (14,000    | )       
|                                                     | Proceeds from sale of equipment                                               |                                                              |            | 180,983    |          |   |            |           |         
|                                                     | Principal collections on financing leases                                     |                                                              |            | 921,117    |          |   |            | 935,253    |         
|                                                     |                                                                               |                                                              |            |            |          |  
|Net cash provided by investing activities            |                                                                               |                                                              | 1,102,100  |            |          |   | 921,253    |           
|                                                     |                                                                               |                                                              |            |            |          |  
|Cash flows from financing activities:                |                                                                               |                                                              |            |            |          |   |            |           
|                                                     | Proceeds from issuance of notes payable                                       |                                                              |            |           |          |   |            | 703,000    |         
|                                                     | Repayments of notes payable                                                   |                                                              |            | (226,820   | )        |   |            | (148,930   | )       
|                                                     | Repurchase of limited partnership units                                       |                                                              |            | (15,829    | )        |   |            | (115,442   | )       
|                                                     | Distributions to limited partners                                             |                                                              |            | (2,306,836 | )        |   |            | (2,405,002 | )       
|                                                     | Distributions to general partner                                              |                                                              |            |           |          |   |            |           |         
|                                                     |                                                                               |                                                              |            |            |          |  
|Net cash used in financing activities                |                                                                               |                                                              | (2,549,485 | )          |          |   | (1,966,374 | )         
|                                                     |                                                                               |                                                              |            |            |          |  
|Net (decrease) increase in cash and cash equivalents |                                                                               |                                                              | (62,745    | )          |          |   | 408,464    |           
|Cash and cash equivalents, beginning of period       |                                                                               |                                                              | 1,257,402  |            |          |   | 78,837     |           
|                                                     |                                                                               |                                                              |            |            |          |  
|Cash and cash equivalents, end of period             |                                                                               | $                                                            | 1,194,657  |            |          | $ | 487,301    |           
|                                                     |                                                                               |                                                              |            |            |          |  

The accompanying notes are an integral part of the financial statements.

6



---



##### Table of Contents






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 upon formation 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, the general partnership interest of the Partnership was acquired
by Captec Net Lease Realty, Inc., an affiliate. In December 2001, Captec Net Lease Realty, Inc. merged
with and into Commercial Net Lease Realty, Inc. In connection with the merger, Commercial Net Lease
Realty agreed to sell and assign its general partnership interest in the Partnership to GP4 Asset
Acquisition, LLC, which is wholly-owned by Mr. Beach and is an affiliate of Captec. The Limited
Partners have consented to the transfer of the general partner interest. In accordance with the terms of
an agreement with Commercial Net Lease, immediately upon the closing of the merger and until such time
as the consent of the Partnerships secured lender is obtained, GP4 Asset Acquisition has assumed all of
the General Partners obligations and liabilities under the terms of the Partnership Agreement.
|  
|   |  | The Partnership commenced a public offering of 30,000 limited partnership interests (units), priced at
$1,000 per unit, on December 31, 1996. The Partnership commenced operations on March 5, 1997. At
December 31, 1998, the Partnership had accepted subscriptions for all 30,000 units. During 1999 the
Partnership repurchased a total of 117 units for $105,399, or approximately $901 per unit on average. In
2000, the Partnership repurchased a total of 258 units for $230,362, or approximately $893 per unit on
average. In 2001, the Partnership repurchased a total of 234 units for $189,450, or approximately $810
per unit on average. In April 2002, the Partnership repurchased a total of 20 units for $15,829, or
approximately $791 per unit on average. At September 30, 2002, the Partnership had 29,371 units issued
and outstanding.                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|   |  | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|  
|   |  | The balance sheet of the Partnership as of September 30, 2002, the statements of operations and cash
flows for the period ending September 30, 2002 and September 30, 2001 and the statements of changes in
partners capital for the period ending September 30, 2002 have not been audited. In the opinion of
management, these unaudited financial statements contain all adjustments necessary to present fairly the
financial position and results of operations and cash flows of the Partnership for the periods then
ended. Results of operations for the interim periods are not necessarily indicative of results for the
full year. These unaudited financial statements should be read in conjunction with the financial
statements and notes thereto included in the Partnerships annual report on Form 10-K for the year ended
December 31, 2001 filed with the United States Securities and Exchange Commission (the COMMISSION) on
March 29, 2002.                                                                                                                                                                                                                                                                                                

7



---



##### Table of Contents



CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
NOTES TO FINANCIAL STATEMENTS (continued)

|   |  |                                                                                               
|-- |  | ----------------------------------------------------------------------------------------------
|2. |  | LAND AND BUILDING SUBJECT TO OPERATING LEASES:                                                
|  
|   |  | The net investment in operating leases as of September 30, 2002 is comprised of the following:

|                              |  |   |            |  
|----------------------------- |  | - | ---------- | -
|Land                          |  | $ | 11,197,200 |  
|Building and improvements     |  |   | 19,549,581 |  
|                              |  |   |           
|                              |  |   | 30,746,781 |  
|Less accumulated depreciation |  |   | (1,714,145 | )
|                              |  |   |           
|Total                         |  | $ | 29,032,636 |  
|                              |  |   |           

|   |  |                                                                                               
|-- |  | ----------------------------------------------------------------------------------------------
|3. |  | NET INVESTMENT IN FINANCING LEASES:                                                           
|  
|   |  | The net investment in financing leases as of September 30, 2002 is comprised of the following:

|                                      |  |   |            |  
|------------------------------------- |  | - | ---------- | -
|Minimum lease payments to be received |  | $ | 3,932,217  |  
|Estimated residual value              |  |   | 183,485    |  
|                                      |  |   |           
|Gross investment in financing leases  |  |   | 4,115,702  |  
|Less unearned income                  |  |   | (1,213,091 | )
|Less direct origination costs         |  |   | (11,279    | )
|                                      |  |   |           
|Net investment in financing leases    |  | $ | 2,891,332  |  
|                                      |  |   |           

|   |  |                                                                                                                                                                                                                                                 
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4. |  | NOTES PAYABLE:                                                                                                                                                                                                                                  
|  
|   |  | In December 1998, the Partnership entered into a $6.4 million term note. The note has a ten-year term,
is collateralized by certain properties subject to operating leases, and bears interest at a rate of
8.13% per annum.                    
|  
|   |  | In March 1999, the Partnership entered into an additional $3.3 million term note. The note has a
ten-year term, is collateralized by certain properties subject to operating leases, and bears interest
at a rate of 8.5% per annum.            
|  
|   |  | In October 2000, the Partnership assumed a $3.7 million term note in connection with a property
acquisition. The note has a ten-year term, and bears interest at a rate of 8.35% per annum.                                                     
|  
|   |  | In November 2001, the Partnership entered into an additional $1.5 million term note. The note has a
two-year term, is collateralized by certain properties subject to operating leases, and bears interest
at a rate of prime plus 2% per annum.
|  
|   |  | Debt issuance costs of $622,434 in the aggregate were incurred in connection with the issuance of the
notes, and are being amortized to interest expense using the straight-line method over the term of the
notes.                             

8



---



##### Table of Contents






CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
PART I  FINANCIAL INFORMATION

|        |  |                                                                                      
|------- |  | -------------------------------------------------------------------------------------
|ITEM 2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Quarterly Report or Form 10-Q contains forward-looking statements which represent the Partnerships
beliefs or expectations with respect to matters, which may arise in the future. Any statements in the Form 10-Q,
which are not statements of historical fact, may be deemed to be forward-looking statements. When used in this
discussion, words such as intends, anticipates, expects, will, could, estimate and similar
expressions are intended to identify forward-looking statements. Such statements are subject to certain risks
and uncertainties, which could cause actual results to differ materially from those, discussed herein. Such
risks and uncertainties, some of which are beyond the Partnerships control, include the following: (i) tenant
defaults in making rent payments, (ii) fire or other casualty may interrupt the cash flow from a property, (iii)
properties may not be able to be leased at the assumed rental rates, (iv) unexpected expenses may be incurred and
(v) properties may not be able to be sold at the presently anticipated prices and/or times.

RESULTS OF OPERATIONS

Three Months Ended September 30, 2002.During the three months ended September 30, 2002 total operating revenue
decreased 3.4% to approximately $914,000 as compared to approximately $946,000 for the three months ended
September 30, 2001. Rental revenue from operating leases for the three months ended September 30, 2002 remained
unchanged at $840,954. Earned income from financing leases for the three months ended September 30, 2002
decreased 30.8% to approximately $73,000 as compared to approximately $105,000 for the three months ended
September 30, 2001 due to the amortization of principal balances and the January 2002 suspension of income on an
impaired equipment lease.

Operating expenses increased 5.1% to approximately $484,000 for the three months ended September 30, 2002 as
compared to approximately $461,000 for the three months ended September 30, 2001. Total operating expenses for
the three months ended September 30, 2002 is comprised of approximately $122,000 of depreciation expense, $47,000
of general and administrative expenses and $315,000 of interest expense. The increase in operating expenses for
the three months ended September 30, 2002 as compared to the three months ended September 30, 2001 is due to a
full period of depreciation for properties leased in preceding periods and increased interest expense resulting
from the $1.5 million term note that the Partnership entered into in November 2001. The note was used to fund
property purchases and provide cash for future property acquisitions.

The other income of approximately $6,000 for the three months ended September 30, 2001 was due to late fees and interest income.

As a result of the foregoing, the Partnerships net income decreased 12.6% to $430,000 for the three months ended
September 30, 2002 as compared to $492,000 for the three months ended September 30, 2001.

Nine Months Ended September 30, 2002.During the nine months ended September 30, 2002 total operating revenue
decreased 3.8% to approximately $2,768,000 as compared to approximately $2,877,000 for the nine months ended
September 30, 2001. Rental revenue from operating leases for the nine months ended September 30, 2002 remained
unchanged at $2,522,862. Earned income from financing leases for the nine months ended September 30, 2002
decreased 30.8% to approximately $245,000 as compared to

9



---



##### Table of Contents



CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
PART I  FINANCIAL INFORMATION

approximately $354,000 for the nine months ended September 30, 2001 due to the amortization of principal balances
and the January 2002 suspension of income on an impaired equipment lease.

Operating expenses increased 6.8% to approximately $1,455,000 for the nine months ended September 30, 2002 as
compared to approximately $1,362,000 for the nine months ended September 30, 2001. Total operating expenses for
the nine months ended September 30, 2002 is comprised of approximately $368,000 of depreciation expense, $133,000
of general and administrative expenses and $954,000 of interest expense. The increase in operating expenses for
the nine months ended September 30, 2002 as compared to the nine months ended September 30, 2001 is due to a full
period of depreciation for properties leased in preceding periods and increased interest expense resulting from
the $1.5 million term note that the Partnership entered into in November 2001. The note was used to fund
property purchases and provide cash for future property acquisitions.

Other income was approximately $1,400 for the nine months ended September 30, 2002 as compared to approximately $6,000 for the nine months ended September 30, 2001. Other income for the nine months ended
September 30, 2002 was due to interest income. Other income for the nine
months ended September 30, 2001 was due to late fees and interest income.

As a result of the foregoing, the Partnerships net income decreased 13.6% to $1,315,000 for the nine months
ended September 30, 2002 as compared to $1,521,000 for the nine months ended September 30, 2001.

Distributions.The Partnership announced third quarter distributions of $750,000, of which $652,111 was
distributed to its limited partners on October 15, 2002 and the remaining $97,889 will be distributed to those
limited partners who elected to receive distributions on a monthly basis.

LIQUIDITY AND CAPITAL COMMITMENTS

The Partnership commenced an offering of up to 30,000 units registered under the Securities Act of 1934, as
amended, by means of a Registration Statement filed on Form S-11 that 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 reached final funding in December 1998
with subscriptions for the entire 30,000 units. Net proceeds after offering expenses were approximately $26.1
million.

In December 1998, the Partnership entered into a $6.4 million term note. The Partnership entered into an
additional $3.3 million term note in March 1999. Proceeds from the notes were used to acquire additional
properties. The notes have a ten-year term, are collateralized by certain properties subject to operating leases,
and bear interest at rates ranging from 8.13% to 8.5% per annum. Debt issuance costs of approximately $595,000
incurred in connection with the issuance of the notes are being amortized into interest expense over the life of
the notes using the straight-line method.

The Partnership purchased one net leased real estate property in October 2000 and assumed a $3.75 million term
note in connection with the acquisition. The note has a ten-year term and bears interest at the rate of 8.35% per
annum.

In November 2001, the Partnership entered into an additional $1.5 million term note. The note has a two-year
term, is collateralized by certain properties subject to operating leases and bears interest at the rate of prime
plus 2% per annum. Proceeds from this note were used to repay approximately $700,000 of short-term borrowings and to provide working
capital intended to be used to fund unit repurchases and potential
property acquisitions.

10



---



##### Table of Contents



CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
PART I  FINANCIAL INFORMATION

As of September 30, 2002, the Partnership had invested $31.9 million in 21 net leased real estate properties and
$6.2 million in 19 equipment packages. One equipment lease during the third quarter of 2002 was sold for total
proceeds of $159,770. As of September 30, 2002, the Partnership has not made any commitments to purchase
additional properties, but will continue to consider property purchases to the extent that it has capital
available to invest.

The Partnership has one impaired equipment lease at September 30, 2002, with a recorded investment of $210,542,
net of a related allowance of $65,000. The net investment in the impaired lease represents the estimated net
proceeds that the Partnership expects to receive. Rental payments on this lease are delinquent by more than 90
days, and income accrual has been suspended by the Partnership. The tenant, a Dennys restaurant franchisee,
filed for Chapter 11 bankruptcy protection in September 2001 and subsequently converted to a Chapter 7 filing in
May 2002. The restaurant in which the equipment is located is a leased facility and the restaurant is currently
being operated by the landlord. It is anticipated that the restaurants operations will be sold and that, as a
result, the restaurant in which the leased equipment is located will remain in operation. However, if no buyer
is found, the restaurant could close and the Partnership could be forced to liquidate the equipment, which could
result in an additional investment writedown. There is no definitive timetable for resolution of this default.

The Partnership expects that only limited amounts of liquid assets will be required for existing properties since
its property and equipment leases require lessees to pay all taxes, assessments, maintenance, repairs and
casualty and other insurance premiums thereby minimizing the Partnerships operating expenses and capital
requirements. The Partnership expects that the cash flow to be generated by the Partnerships property and
equipment leases will provide adequate liquidity and capital resources to pay operating expenses and provide
distributions to limited partners.




|        |  |                        
|------- |  | -----------------------
|ITEM 3. |  | CONTROLS AND PROCEDURES

Mr. Beach, acting in his capacity as the principal executive officer of GP4 Asset Acquisition, is ultimately
responsible for the disclosure controls and procedures of the Partnership. Disclosure controls and procedures
are established and maintained by the Partnership to ensure that information required to be disclosed by the
Partnership in the reports that it files or submits pursuant to the Securities Exchange Act of 1934, as amended
(the Act), is recorded, processed, summarized and reported within the time periods specified in the
Commissions rules and forms. Mr. Beach has evaluated the effectiveness of the Partnerships disclosure controls
and procedures as of a date within 90 days prior to the filing date of this report (the Evaluation Date), and
has determined that the Partnerships disclosure controls and procedures effectively communicate the information
required to be disclosed by the Partnership in the reports it files or submits under the Act in a manner that
allows timely decisions regarding such required disclosure.

There have been no significant changes in the Partnerships internal controls or in other factors that could
significantly affect these controls subsequent to the Evaluation Date, including, but not limited to, any
corrective actions with regard to significant deficiencies and material weaknesses

11



---



##### Table of Contents









CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
PART II  OTHER INFORMATION

|        |  |                                                             |  | 
|------- |  | ----------------------------------------------------------- |  | 
|ITEM 1. |  | LEGAL PROCEEDINGS.   None.                                  |  | 
|       
|ITEM 2. |  | CHANGES IN SECURITIES.   None.                              |  | 
|       
|ITEM 3. |  | DEFAULTS UPON SENIOR SECURITIES.   None.                    |  | 
|       
|ITEM 4. |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS   None. |  | 
|       
|ITEM 5. |  | OTHER INFORMATION.   None                                   |  | 

12



---



##### Table of Contents



CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
PART II  OTHER INFORMATION

|        |  |                                 
|------- |  | --------------------------------
|ITEM 6. |  | EXHIBITS AND REPORTS ON FORM 8-K



| |                                                                             
| | ----------------------------------------------------------------------------
| | (a) The following exhibits are included herein or incorporated by reference:

|       |  |                                                                                                                                                                                                                        
|------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number |  | Exhibit                                                                                                                                                                                                                
|       |  |                                                                                                                                                                                                                        
|      
|4.1    |  | Amended Agreement of Limited Partnership of Registrant. (Incorporated by reference to
the corresponding exhibit in the Registrants Form 10-K for the year ended December
31, 1998)                                    
|      
|10.1   |  | Promissory Note dated December 17, 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)     
|      
|99.1   |  | Certification of CEO Pursuant to Section 906                                                                                                                                                                           



| |                         
| | ------------------------
| | (b) Reports on Form 8-K:



| |                                                                                  
| | ---------------------------------------------------------------------------------
| | There were no reports filed on Form 8-K for the quarter ended September 30, 2002.

13



---



##### Table of Contents






SIGNATURES

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:                                       |  | GP4 Asset Acquisition, LLC
Its Manager         
|
| | By:                                       |  | /s/ Patrick L. BeachPatrick L Beach
Sole Member
|
| | Date:                                     |  | November 14, 2002                              

14



---



##### Table of Contents



CERTIFICATIONS





I, Patrick L. Beach, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Captec
Franchise Capital Partners L.P. IV;2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); andc) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; andb) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.Date:     November
14, 2002             By:        Patrick L. BeachPresident, GP4 Asset Acquisition, LLC
                                                  (Signature and Title)

The foregoing certification is as required by Section 302(a) of the
Sarbanes-Oxley Act of 2002 and amended Rules 13a-14 and 15d-14 of the Securities
Exchange Act of 1934, which state that the wording of such certification may not
be changed in any respect, even if such change would appear inconsequential in
nature. GP4 Asset Acquisition, LLC is a single member limited liability company,
the sole member of which is a limited liability company of which Patrick L.
Beach is the sole and managing member. As a result, neither the Partnership or
GP4 Asset Acquisition, LLC has a board of directors or audit committee and
Patrick L. Beach is only certifying officer and is ultimately responsible for
establishing and maintaining the registrant's disclosure controls.

15



---



##### Table of Contents



EXHIBIT INDEX

|       |  |                                                                                                                                                                                                                        
|------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number |  | Exhibit                                                                                                                                                                                                                
|       |  |                                                                                                                                                                                                                        
|      
|4.1    |  | Amended Agreement of Limited Partnership of Registrant. (Incorporated by reference to
the corresponding exhibit in the Registrants Form 10-K for the year ended December
31, 1998)                                    
|      
|10.1   |  | Promissory Note dated December 17, 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)     
|      
|99.1   |  | Certification of CEO Pursuant to Section 906