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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 endedMarch 31, 2007
 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
  o o þ
 APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
 Not applicable




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##### 



APPLICABLE ONLY TO CORPORATE ISSUERS
 Not applicable
 CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
 Index to Form 10-Q
 Item No.
    
    PagePART I FINANCIAL INFORMATIONItem 1. Financial Statements:Statements of Net Assets in Liquidation (liquidation
basis) at March 31, 2007 (unaudited) and December 31, 2006
    
    
    3Statement of Changes in Net Assets in Liquidation
(liquidation basis) (unaudited) for the three months ended
March 31, 2007
    
    
    4Statement of Discontinued Operations (going concern basis)
(unaudited) for the three months ended March 31, 2006
    
    
    5Statements of Cash Flows (unaudited) for the three months
ended March 31, 2007 (liquidation basis) and 2006 (going
concern basis)
    
    
    6Notes to Financial Statements
    
    
    7  10Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    10  11Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    11Item 4. Controls and Procedures
    
    
    11  12PART II OTHER INFORMATIONOther Information
    
    
    12SIGNATURES
    
    
    13CERTIFICATION Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
    
    
    14-16Certification Pursuant to Section 302Certification Pursuant to Section 906Section 302 Certification of Chief Executive Officer and Chief Financial OfficerSection 906 Certification of Chief Executive Officer and Chief Financial Officer
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Captec Franchise Capital Partners L.P. IV
 
 Statements of Net Assets in Liquidation 
(Liquidation Basis)
 March 31,
    
    
    December 31,2007
    
    
    2006AssetsCash and cash equivalents
    
    $
    1,111,877
    
    
    $
    1,428,894Investment in leases:Operating leases, net
    
    
    
    
    
    
    892,200Financing leases, net
    
    
    
    
    
    
    770,560Unbilled rent, net
    
    
    
    
    
    
    3,503Accounts receivable
    
    
    
    
    
    
    3,460Total assets
    
    
    1,111,877
    
    
    
    3,098,617Liabilities and Net Assets in LiquidationLiabilities:Reserve for estimated costs during
liquidation period
    
    
    294,285
    
    
    
    368,140Total liabilities
    
    
    294,285
    
    
    
    368,140Net assets in liquidation
    
    $
    817,592
    
    
    $
    2,730,477
 
 The accompanying notes are an integral part of the financial statements. 3




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Captec Franchise Capital Partners L.P. IV
 
 Statement of Changes in Net Assets in Liquidation 
(Liquidation Basis)
 Net assets in liquidation  December 31, 2006
    
    $
    2,730,477Adjustments relating to adoption of liquidation basis of accountingDistributions to limited partners
    
    
    (2,001,500
    )Net change in net assets in liquidation
    
    
    88,615Net assets in liquidation  March 31, 2007
    
    $
    817,592
 
 The accompanying notes are an integral part of the financial statements. 4




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Captec Franchise Capital Partners L.P. IV
 
 Statement of Discontinued Operations

(Going Concern Basis)
 For the threemonths endedMarch 31, 2006Operating revenue:Rental income
    
    $
    133,358Finance income
    
    
    29,475Total operating revenue
    
    
    162,833Operating costs and expenses:Depreciation
    
    
    20,102General and administrative
    
    
    76,815Total operating costs and expenses
    
    
    96,917Income from discontinued operations before other income
    
    
    65,916Other income:Interest and other income
    
    
    9,297Total other income
    
    
    9,297Net Income from discontinued operations
    
    $
    75,213Net income from discontinued operations allocable to general partner
    
    $
    752Net income from discontinued operations allocable to limited partners
    
    $
    74,461Net income from discontinued operations per limited partnership unit
    
    $
    2.57Weighted average number of limited partnership
units outstanding
    
    
    28,975
 
 The accompanying notes are an integral part of the financial statements. 5




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Captec Franchise Capital Partners L.P. IV
 
 Statements of Cash Flows
 Liquidation
    
    
    Going ConcernBasis
    
    
    Basis2007
    
    
    2006Cash flows from operating activities:Change in net assets in liquidation from operating activity
    
    $
    88,615
    
    
    $
    Adjustment of real estate investments and other assets to net
realizable value
    
    
    (32,238
    )
    
    
    Change in reserve for estimated costs during liquidation period
    
    
    (8,660
    )
    
    
    Cash payments made against reserve
    
    
    (65,195
    )
    
    
    Net Income
    
    
    
    
    
    
    75,213Adjustments to net income:Depreciation
    
    
    
    
    
    
    20,102Increase in unbilled rent
    
    
    
    
    
    
    3,579Decrease in accounts receivable
    
    
    3,460
    
    
    
    Decrease in due to related parties
    
    
    
    
    
    
    (13,936
    )Decrease in accounts payable
    
    
    
    
    
    
    (28,872
    )Net cash (used in) provided by operating activities
    
    
    (14,018
    )
    
    
    56,086Cash flows from investing activities:Net proceeds from sale of financing lease
    
    
    795,218
    
    
    
    Net proceeds from sale of real estate
    
    
    895,703
    
    
    
    Principal collections on financing leases
    
    
    7,580
    
    
    
    9,025Net cash provided by investing activities
    
    
    1,698,501
    
    
    
    9,025Cash flows from financing activities:Distributions to limited partners
    
    
    (2,001,500
    )
    
    
    Net cash used in financing activities
    
    
    (2,001,500
    )
    
    
    Net (decrease) increase in cash and cash equivalents
    
    
    (317,017
    )
    
    
    65,111Cash and cash equivalents, beginning of period
    
    
    1,428,894
    
    
    
    896,164Cash and cash equivalents, end of period
    
    $
    1,111,877
    
    
    $
    961,275
 
 The accompanying notes are an integral part of the financial statements. 6




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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, the
general partnership interest was immediately transferred to GP4 Asset Acquisition.
Therefore, as of September 11, 2003, 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 March 31, 2007, 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.
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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 quarter; (ii) certain limited
partners have elected to receive monthly distributions versus quarterly distributions which
creates timing differences between comparative calculations, (iii) the calculation ignores
the timing of repurchases, and (iv) liquidating distributions are determined based on the
tax account balances of the partners per the Partnership agreement.Effective November 8, 2004, the limited partners consented to a Plan of Liquidation and
Dissolution, which involves the dissolution of the Partnership, the liquidation of its
assets and the winding up of its affairs. As a result, the general partner is authorized
to liquidate the assets of the Partnership and distribute the net proceeds from such
liquidation after the repayment of all debt in accordance with the partnership agreement.
The Partnership is undertaking steps to liquidate and dispose of its assets in accordance
with the Plan of Liquidation and Dissolution. Effective February 8, 2007, the Partnership
has liquidated all of its real assets in accordance with the Plan of Liquidation and
Dissolution.On December 18, 2006, the Partnership entered into a contract to sell the last remaining
asset of the Partnership. Effective with the execution of the contract, and in accordance
with generally accepted accounting principles, the Partnership adopted the liquidation
basis of accounting as of the close of business on December 18, 2006. Under the
liquidation basis of accounting, assets are stated at their estimated net realizable value
and liabilities are stated at their estimated settlement amounts. These estimates are and
will be periodically reviewed and adjusted as appropriate. A Statement of Net Assets in
Liquidation and a Statement of Changes in Net Assets in Liquidation are the principal
financial statements presented under the liquidation basis of accounting. Under the
liquidation basis of accounting, the Partnership is required to estimate and accrue the
costs associated with implementing and completing the plan of liquidation. These amounts
can vary significantly due to, among other things, the timing and amounts associated with
the discharging known and contingent liabilities and the costs associated with cessation of
the Partnerships operations including an estimate of costs subsequent to that date (which
would include reserve contingencies for the appropriate statutory periods). As a result,
the Partnership has accrued the projected costs, including miscellaneous wind-down costs,
expected to be incurred during the projected period required to complete the liquidation of
the Partnership. These projections could change materially and will be adjusted from time
to time as projections and assumptions change.Under the liquidation basis of accounting, the carrying amounts of the last remaining real
estate assets were adjusted to their estimated net realizable values and liabilities,
including the estimated costs associated with implementing the liquidation, which were
adjusted to estimated settlement amounts. The net realizable value of the remaining assets
were based on contract sales price, less costs associated with the sale and closing of the
transactions. Cash balances, accounts receivable and accounts payable are presented at
face value.The sales of the remaining two real assets were completed on January 22, 2007 and February
8, 2007. The Partnership made a liquidating distribution in the first quarter of 2007 of
approximately $2,000,000 which included proceeds from the 2007 sales. The timing and
amount of any additional future final liquidating distribution, if any, will depend on the
extent to which reserves for current or future liabilities are required. Accordingly,
there can be no assurance that will be any further distributions after the liquidating
distribution mentioned above. It is anticipated that the final distribution, if any, of
the Partnership will occur by the end of the second quarter of 2007.Prior to December 18, 2006, the Partnerships financial statements are presented on the
going concern basis of accounting.The statement of net assets in liquidation (liquidation basis) of the Partnership as of
March 31, 2007, the statement of changes in net assets in liquidation (liquidation basis)
for the three months
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ended March 31, 2007, the statement of discontinued operations for the
three months ended March 31, 2006 (going concern basis) and the statements of cash flows
for the periods ending March 31, 2007 (liquidation basis) and 2006 (going concern basis)
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, 2006 filed with the United States Securities and
Exchange Commission on March 29, 2007.2.
    
    LAND AND BUILDING SUBJECT TO OPERATING LEASES:As of March 31, 2007 the Partnership has liquidated all of its land and buildings subject
to operating leases.LeasesReal Estate Leases:All of the properties were subject to triple net leases pursuant to
which the tenant was responsible for all expenses related to the cost of operating the
Properties, including real estate taxes, insurance, maintenance and repair costs.
Certain of the leases provided the tenant with one or more options to renew the lease upon
expiration of the base term at predetermined or market rental rates.The real property located in Riverdale, Georgia was sold on January 22, 2007 for a purchase
price of $900,000 pursuant to a contract of sale which was executed on September 12, 2006.
There were no debt retirement costs associated with the disposition of this property. In
connection with the sale, the Partnership terminated the lease with Blockbuster
Entertainment Corp on November 30, 2006.3.
    
    NET INVESTMENT IN FINANCING LEASES:As of March 31, 2007 the Partnership has liquidated all of its net investment in financing
leases.Net investment in financing leases at December 31, 2006 includes one building used as a
retail store that is subject to a long-term ground lease and in prior years included
equipment used in restaurant operations which are leased on a triple-net basis. Leases
classified as financing leases are stated as the sum of the minimum lease payments plus the
unguaranteed residual value accruing to the benefit of the lessor, less unearned income.
Unearned income is amortized to income over the lease term so as to produce a constant
periodic rate of return on the net investment in the lease. Direct origination costs are
deferred and amortized over the life of the lease as an adjustment to yield. The
Partnership periodically reviews its financing lease portfolio for impairment whenever
events or changes in circumstances indicate that the carrying value of a lease may not be
recoverable. If impairment is indicated, a loss reserve is calculated based on the
estimated amounts recoverable. The lease was sold on February 8, 2007 for a purchase price
of $900,000. On December 19, 2006, under the liquidation method of accounting, the
Partnership decreased its investment in this financing lease by approximately $108,000,
which represented the estimated net loss realized on the sale of this asset in February
2007. Upon final completion of the sale, the Partnership realized approximately $32,200 in
excess of the December 19, 2006 estimated proceeds.
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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 When used in this discussion, the words, intends, anticipates, expects, and similar
expressions are intended to identify forward-looking statements. Forward-looking
statements are subject to certain risks and uncertainties, some of which are beyond the
Partnerships control, which could cause actual results to differ materially from those
projected. Such risks and uncertainties include the following: under the liquidation basis
of accounting, the Partnership is required to estimate and accrue the costs associated with
implementing and completing the plan of liquidation. These amounts can vary significantly
due to, among other things, the timing and amounts associated with the discharging known
and contingent liabilities and the costs associated with cessation of the Partnerships
operations including an estimate of costs subsequent to that date (which would include
reserve contingencies for the appropriate statutory periods). As a result, the Partnership
has accrued the projected costs, including miscellaneous wind-down costs, expected to be
incurred during the projected period required to complete the liquidation of the
Partnership. These projections could change materially and will be adjusted from time to
time as projections and assumptions change. Any statements contained in this report or any
documents incorporated herein by reference that are not statements of historical fact may
be deemed to be forward-looking statements. You should not place undue reliance on these
forward-looking statements, which speak only as of the date of this report. The Partnership
disclaims, except as may be required by law, any obligations to update or release revisions
to these forward-looking statements to reflect events or circumstances after the date of
this report or to reflect the occurrence of unanticipated events.RESULTS OF OPERATIONSThree Months Ended March 31, 2007During the three months ended March 31, 2007, net assets in liquidation decreased by
approximately $1,913,000. The decrease is due to distributions to limited partners of
approximately $2,001,500 in March 2007 offset by a decrease in estimated future liabilities
of approximately $8,700 associated with implementing the liquidation of the Partnership,
interest income of approximately $29,600, higher proceeds than estimated of approximately
$32,200 from the sale of the financing lease, and contract payments of approximately
$18,100 on the finance lease prior to sale. Also, during the three months ended March 31,
2007, the Partnership made payments of approximately $65,200 which were applied against its
reserve for estimated costs during the liquidation period.The real property located in Riverdale, Georgia was sold on January 22, 2007 for a purchase
price of $900,000 pursuant to a contract of sale which was executed on September 12, 2006.
There were no debt retirement costs associated with the disposition of this property. In
connection with the sale, the Partnership terminated the lease with Blockbuster
Entertainment Corp on November 30, 2006. On December 19, 2006, under the liquidation
method of accounting, the Partnership decreased its investment in the property by
approximately $3,000, which represented the net loss realized on the sale of this property.The financing lease located in Plano, Texas was sold on February 8, 2007 for a purchase
price of $900,000 pursuant to a contract of sale which was executed on December 18, 2006.
On December
19, 2006, under the liquidation method of accounting, the Partnership decreased its
investment in this financing lease by approximately $108,000, which represented the
estimated net loss realized on the sale of this asset upon sale in February 2007. Upon
final completion of the sale, the Partnership realized approximately $32,200 in excess of
the December 19, 2006 estimated proceeds.
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Three Months Ended March 31, 2006.During the three months ended March 31, 2006, total operating revenue was approximately
$162,800. Rental revenue from operating leases for the three months ended March 31, 2006
was approximately $133,400. Earned income from financing leases for the three months ended
March 31, 2006 was approximately $29,500.Operating expenses were approximately $96,900 for the three months ended March 31, 2006.
In accordance with FAS 144, the Partnership recognized $20,102 in depreciation expense in
the quarter ended March 31, 2006 for investment in operating leases. General and
administrative expenses were approximately $76,800, primarily professional fees for audit
and tax work and third party servicing costs.Other income for the quarter ended March 31, 2006 was approximately $9,300 due to interest
income earned on cash proceeds from the sale of assets.As a result of the foregoing, the Partnerships net income was approximately $75,200 for
the three months ended March 31, 2006.LIQUIDITY AND CAPITAL COMMITMENTSIn December 1996, the Partnership commenced its offering of up to 30,000 Units. 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.Effective November 8, 2004 the limited partners consented to the Plan of Liquidation and
Dissolution, which involves the dissolution of the Partnership, the liquidation of its
assets and the winding up of its affairs. As a result, the general partner is authorized
to liquidate the assets of the Partnership and distribute the net proceeds from such
liquidation after the repayment of all debt in accordance with the partnership agreement.
The Partnership is undertaking steps to liquidate and dispose of its assets in accordance
with the Plan of Liquidation and Dissolution. The sales of the remaining two real assets
were completed on January 22, 2007 and February 8, 2007. The Partnership made a
liquidating distribution in the first quarter of 2007 of approximately $2,000,000 which
included proceeds from the 2007 sales. The timing and amount of any additional future
final liquidating distribution, if any, will depend on the extent to which reserves for
current or future liabilities are required. Accordingly, there can be no assurance that
will be any further distributions after the liquidating distribution mentioned above. It
is anticipated that the final distribution, if any, of the Partnership will occur by the
end of the second quarter of 2007.
 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 The Partnerships assets at March 31, 2007 consists solely of cash, therefore, no market
risk exists.
 
 ITEM 4. 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 the 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, 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 disclosure.There have been no significant changes in the Partnerships internal controls over financial
reporting during the period covered by this report that have materially affected, or are
reasonably likely to materially affect, the Partnerships internal control over financial
reporting.
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PART II  OTHER INFORMATION
 ITEM 1. LEGAL PROCEEDINGS.
 ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
 ITEM 5. OTHER INFORMATION.
 ITEM 6. EXHIBITS.
  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 March 31, 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 March 31, 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
906 of the Sarbanes-Oxley Act of 2002
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SIGNATURES
  By:
    
    Captec Franchise Capital Partners L.P. IV
GP4 Asset Acquisition, LLCIts ManagerBy:
    
    /s/ Patrick L. BeachPatrick L. BeachPresidentDate:
    
    May 11, 2007
 13