Captec Franchise Capital Partners LP Iii 10QSB 2003 Q1 Quarterly report (small business)

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

Form 10-QSB

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period endedMarch 31, 2003

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: 33-77510-C

CAPTEC FRANCHISE CAPITAL PARTNERS L.P. III
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of incorporation or organization)

38-3160141
(IRS Employer Identification Number)

24 Frank Lloyd Wright Drive, Lobby L, 4^th Floor
P.O. Box 544, Ann Arbor, Michigan 48106-0544
(Address of principal executive offices, including zip code)

(734) 994-5505
(Issuer’s telephone number)

Not Applicable
(Former name, former address and former fiscal year, if changed since last year)

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 No      

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

Transitional Small Business Disclosure Format (check one) Yes      No  X 

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION
Item 1. Financial Statements
	Balance Sheets, March 31, 2003 and December 31, 2002
	Statements of Operations for the three months ended March 31, 2003 and 2002
	Statements of Changes in Partners’ Capital for the three months ended March 31, 2003
	Statements of Cash Flows for the three months ended March 31, 2003 and 2002
	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 Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
906 Certification of CEO/CFO

CAPTEC FRANCHISE CAPITAL PARTNERS L.P. III

Index to Form 10-QSB

Item No.		Page
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements:
	Balance Sheets, March 31, 2003 and December 31, 2002	3
	Statement of Operations for the three months ended March 31, 2003 and 2002	4
	Statement of Changes in Partners’ Capital for the three months ended March 31, 2003	5
	Statement of Cash Flows for the three months ended March 31, 2003 and 2002	6
	Notes to Financial Statements	7-8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	9-10
Item 3.	Controls and Procedures	10-11
PART II	OTHER INFORMATION
	Other Information	11
SIGNATURES		12
CERTIFICATION	Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002	13

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CAPTEC FRANCHISE CAPITAL PARTNERS L.P. III

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Captec Franchise Capital Partners L.P. III
Balance Sheets

			March 31,		December 31,
			2003		2002
			(Unaudited)
Cash and cash equivalents			$	199,456	$	286,511
Restricted cash				547,017		499,863
Investment in leases:
	Operating leases, net			17,215,289		17,285,384
	Financing leases, net			731,013		807,542
	Impaired financing leases, net			12,693		12,693
Accounts receivable				50,578		47,762
Unbilled rent, net				1,360,814		1,299,690
Due from related parties				9,043		5,733
Deferred financing costs, net				274,798		286,745
		Total assets	$	20,400,701	$	20,531,923
Liabilities and Partners’ Capital
Liabilities:
	Notes payable		$	7,817,386	$	7,864,328
	Accounts payable and accrued expenses			72,328		110,819
	Security deposits held on leases			31,960		31,960
		Total liabilities		7,921,674		8,007,107
Partners’ capital:
Limited partners’ capital accounts				12,470,511		12,519,242
General partner’s capital account				8,516		5,574
		Total partners’ capital		12,479,027		12,524,816
		Total liabilities and partners’ capital	$	20,400,701	$	20,531,923

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

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Captec Franchise Capital Partners L.P. III
Statements of Operations
for the three months ended March 31, 2003 and 2002
(Unaudited)

			2003		2002
Operating revenue:
	Rental income		$	551,479	$	552,796
	Finance income			14,052		20,369
		Total operating revenue		565,531		573,165
Operating costs and expenses:
	Interest expense			176,479		180,275
	Depreciation			70,095		70,095
	General and administrative			40,029		19,513
	Provision for impaired financing leases			—		36,000
		Total operating costs and expenses		286,603		305,883
		Income from operations		278,928		267,282
Other income:
	Gain on sale of equipment			6,177		—
	Interest income			173		—
	Other			8,933		887
		Total other income		15,283		887
Net income				294,211		268,169
Net income allocable to general partner				2,942		2,682
Net income allocable to limited partners			$	291,269	$	265,487
Net income per limited partnership unit			$	14.82	$	13.42
Weighted average number of limited partnership units outstanding				19,653		19,776

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

4

Captec Franchise Capital Partners L.P. III
Statements of Changes in Partners’ Capital
for the three months ended March 31, 2003
(Unaudited)

	Limited		Limited			General		Total
	Partners’		Partners’			Partner’s		Partners’
	Units		Accounts			Account		Capital
Balance, December 31, 2002		19,653	$	12,519,242		$	5,574	$	12,524,816
Distributions — ($17.30 per limited partnership unit)		—		(340,000	)		—		(340,000	)
Net income		—		291,269			2,942		294,211
Balance, March 31, 2003		19,653	$	12,470,511		$	8,516	$	12,479,027

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

5

Captec Franchise Capital Partners L.P. III
Statements of Cash Flows
for the three months ended March 31, 2003 and 2002
(Unaudited)

			2003			2002
Cash flows from operating activities:
	Net Income		$	294,211		$	268,169
	Adjustments to net income:
		Depreciation		70,095			70,095
		Amortization of debt issuance costs		11,948			11,948
		Gain on sale of equipment		(6,177	)		—
		Provision for impaired financing leases		—			36,000
		Increase in unbilled rent		(61,124	)		(33,072	)
		Increase in accounts receivable		(2,816	)		(8,763	)
		Decrease in accounts payable and accrued expenses		(38,491	)		(18,013	)
		Increase in restricted cash		(47,154	)		(46,980	)
		Increase in due from related parties		(3,310	)		(3,509	)
		Increase in due to related parties		—			(12,850	)
Net cash provided by operating activities				217,182			263,025
Cash flows from investing activities:
	Net proceeds from sale of equipment			24,075			—
	Principal payments on financing leases			58,630			62,362
Net cash provided by investing activities				82,705			62,362
Cash flows from financing activities:
	Repayments of notes payable			(46,942	)		(43,172	)
	Distributions to limited partners			(340,000	)		(690,446	)
	Distributions to general partner			—			—
Net cash used in financing activities				(386,942	)		(733,618	)
Net decrease in cash and cash equivalents				(87,055	)		(408,231	)
Cash and cash equivalents, beginning of year				286,511			781,658
Cash and cash equivalents, end of year			$	199,456		$	373,427

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

6

CAPTEC FRANCHISE CAPITAL PARTNERS L.P. III
NOTES TO FINANCIAL STATEMENTS

1.	THE PARTNERSHIP AND ITS SIGNIFICANT ACCOUNTING PRINCIPLES:
	Captec Franchise Capital Partners L.P. III (the “Partnership”), a Delaware limited partnership, was formed on February 18, 1994 for the purpose of acquiring income-producing commercial real properties and equipment leased on a “triple net” basis, primarily to operators of national and regional franchised businesses.
	The initial General Partners of the Partnership were Captec Franchise Capital Corporation III (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 Realty”), an affiliate, acquired the General Partnership interests of the Partnership. In December 2001, Captec Net Lease Realty 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 GP3 Asset Acquisition, LLC (“GP3 Asset Acquisition”), which is wholly-owned by Mr. Beach and is an affiliate of Captec. The limited partners of the Partnership 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, GP3 Asset Acquisition has assumed all of the General Partner’s obligations and liabilities prescribed under the terms of the Partnership Agreement.
	The Partnership commenced a public offering (the “Offering”) of up to 20,000 units (the “Units”) of limited partnership interests, priced at $1,000 per Unit, by means of a Registration Statement on Form SB-2, under the Securities Act of 1933, as amended, which was declared effective by the Securities and Exchange Commission on August 12, 1994. The Partnership accepted subscriptions for the minimum number of Units on March 24, 1995 and immediately commenced operations. The Offering reached final funding in August 1996 having received subscriptions for the entire 20,000 Units. Since 1997, 347 Units have been repurchased by the Partnership pursuant to the terms of the Repurchase Plan set forth in the Partnership’s August 12, 1994 prospectus with respect to the Offering. At March 31, 2003, the Partnership had 19,653 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 the Partnership’s properties; (iv) generation of increased income and protection against inflation through contractual escalation of base rents or participation in gross revenues of tenants of the Partnership’s 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 are made pursuant to the terms of the Partnership Agreement. Profits and losses from operations are allocated among the limited partners based upon the number of Units owned.
	Net income per limited partnership interest is calculated using the weighted average number of limited partnership Units outstanding during the period and the limited partners’ allocable share of the net income.
	Distributions per limited partnership Unit is calculated using the actual distributions disbursed during the period to the weighted average number of limited partnership Units during the period. Actual individual limited partner distributions realized 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, and (iii) the calculation ignores the timing of repurchases.
	The balance sheet of the Partnership as of March 31, 2003, the statements of operations and cash flows for the periods ending March 31, 2003 and March 31, 2002 and the statement of changes in partners’ capital for the period ending March 31, 2003 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-

7

	KSB for the year ended December 31, 2002 filed with the United States Securities and Exchange Commission on March 31, 2003.
2.	LAND AND BUILDING SUBJECT TO OPERATING LEASES:
	The net investment in operating leases as of March 31, 2003 and December 31, 2002 is comprised of the following:

	March 2003			December 2002
Land	$	7,695,896		$	7,695,896
Building and improvements		11,214,344			11,214,344
		18,910,240			18,910,240
Less accumulated depreciation		(1,694,951	)		(1,624,856	)
Total	$	17,215,289		$	17,285,384

3.	NET INVESTMENT IN FINANCING LEASES:
	The net investment in financing leases as of March 31, 2003 and December 31, 2002 is comprised of the following:

	March 2003			December 2002
Minimum lease payments to be received	$	824,745		$	897,429
Estimated residual value		30,736			48,736
Gross investment in financing leases		855,481			946,165
Less unearned income		(111,996	)		(121,994	)
Less direct origination costs		(12,472	)		(16,629	)
Net investment in financing leases	$	731,013		$	807,542

4.	NOTES PAYABLE:
	In November 1998, the Partnership entered into a $6.2 million term note. The note has a ten-year term, is collaterized by certain properties subject to operating leases, and bears interest at a rate of 8.37% per annum.
	In March 1999, the Partnership entered into an additional $2.0 million term note. The note has a ten-year term, is collaterized by certain properties subject to operating leases, and bears interest at a rate of 8.5% per annum.
	Debt issuance costs of approximately $477,909 in 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 ten-year term.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 described herein. Such risks and uncertainties, some of which are beyond the Partnership’s control, include, but are not limited to, the following: (i) the possibility that tenants and lessees may default in making rent payments, (ii) the risk of fire or other casualty interrupting cash flow from a property, (iii) the inability to enter into leases at the assumed rental rates, (iv) unexpected expenses, and (v) the inability to sell properties at anticipated prices and/or times.

As a result of these and other factors, the Partnership may experience material fluctuations in future operating results on a quarterly or annual basis, which could materially and adversely affect its business, financial condition and operating results. Any statements contained in this report or any document incorporated herein by reference that are not statements of historical fact may be deemed to be forward-looking statements. These statements by their nature involve substantial risks and uncertainties, some of which are beyond the Partnership’s control, and actual results may differ materially depending on a variety of important factors, many of which are also beyond the Partnership’s control. 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 OPERATIONS

Three Months Ended March 31, 2003

During the three months ended March 31, 2003 total operating revenue was approximately $566,000, as compared to $573,000 for the three months ended March 31, 2002. Rental revenue from operating leases for the three months ended March 31, 2003 was approximately $551,000, nearly unchanged as compared to approximately $553,000 for the three months ended March 31, 2002. Earned income from financing leases for the three months ended March 31, 2003 decreased 31.0% to approximately $14,000 as compared to approximately $20,000 for the three months ended March 31, 2002 as result of the amortization of the principal balances on the financing leases and the disposition of an equipment lease in the first quarter of 2003.

Operating expenses decreased 6.3% to approximately $287,000 for the three months ended March 31, 2003, as compared to approximately $306,000 for the three months ended March 31, 2002. The decrease is principally due to a decline of approximately $36,000 in charges related to a reserve for defaults on an impaired financing lease that occurred in prior years partially offset by an increase in general and administrative expenses of approximately $20,000 due to increased professional fees.

Other income for the three months ended March 31, 2003 increased by approximately $14,000, as compared with the same period in 2002, principally due to the sale of an equipment lease for net cash proceeds of approximately 24,000 in the 2003 period, resulting in a gain of approximately $6,000, and miscellaneous income from late charges of approximately $8,000.

As a result of the foregoing, the Partnership’s net income increased 9.7% to approximately $294,000 for the three months ended March 31, 2003, as compared to approximately $268,000 for the three months ended March 31, 2002.

The Partnership announced first quarter distributions of $344,000, of which $296,635 was distributed to its limited partners on April 15, 2003. The balance of $47,365 was distributed to limited partners who elected to receive distributions on a monthly basis on February 15, 2003 and March 15, 2003.

9

LIQUIDITY AND CAPITAL COMMITMENTS

The Partnership commenced the Offering of up to 20,000 Units, priced at $1,000 per Unit, on August 12, 1994. The Partnership accepted subscriptions for the minimum number of Units on January 24, 1995, and immediately commenced operations. The Offering reached final funding on August 12, 1996, having received subscriptions for the entire 20,000 Units and funds totaling $20,000,000. Net proceeds after Offering expenses were $17.4 million.

In November 1998, the Partnership entered into a $6.2 million term note. The Partnership entered into an additional $2.0 million term note in March 1999. Proceeds from the notes were used to acquire additional properties and equipment. The notes have a 10-year term, are collateralized by certain properties subject to operating leases, and bear interest at rates of 8.37% and 8.5% per annum, respectively. Debt issuance costs of approximately $478,000 incurred in connection with the issuance of the notes are being amortized over the life of the notes to interest expense using the straight-line method.

As of March 31, 2003, the Partnership had invested $18.9 million in 14 net leased real estate properties and $1.7 million in 6 performing equipment leases. The remaining net investment in the Partnership’s leased equipment is approximately $731,000, after cumulative principal collections of approximately $1.0 million. Inclusive of the above amount, the Partnership has received approximately $3.1 million of aggregate principal collections on its financing leases during the life of those investments. The Partnership also has a net investment of approximately $13,000 in a repossessed equipment package, net of an allowance for loss of approximately $169,000. As of March 31, 2003, the Partnership has not made any commitments to purchase additional properties or equipment, nor does it intend to make any such commitments.

The Partnership annually considers written requests to repurchase Units pursuant to the terms of the repurchase plan set forth in the Partnership’s prospectus with respect to the Offering. Since 1997, a total of 347 Units have been repurchased by the Partnership. During 1997, the Partnership repurchased a total of 37 Units for $31,450, or an average of $850 per Unit. In 1999 the Partnership repurchased a total of 79 Units for $59,625, or an average of $755 per Unit. During 2000, the Partnership repurchased 42 Units for $28,432, or an average of $677 per Unit and, in 2001, the Partnership repurchased 66 Units for $42,839, or an average of $649 per Unit. During 2002, the Partnership repurchased 123 Units for $74,789, or an average of $608 per Unit. The Partnership expects to fund any future Unit repurchases out of working capital reserves and Net Sale or Refinancing Proceeds, but may also fund such repurchases out of Cash Flow. The Partnership is not obligated to accept Unit repurchase requests if the General Partner determines that such purchases would impair the capital or operation of the Partnership and the Partnership may suspend or cancel the Repurchase Plan at any time in its sole discretion.

The Partnership expects that only limited amounts of liquid assets will be required for existing properties since its property and equipment leases require tenants and lessees to pay all taxes and assessments, maintenance and repairs and insurance premiums, including casualty insurance, thereby minimizing the Partnership’s operating expenses and capital requirements. The General Partner expects that the cash flow to be generated by the Partnership’s properties and equipment 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 GP3 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 rules and forms of the United States Securities and Exchange Commission. Mr. Beach has evaluated the effectiveness of the Partnership’s disclosure controls and procedures as of a date within 45 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 report it files or submits under the Act in a manner that allows timely decisions regarding such disclosure.

10

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.

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

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

Number	Exhibit
4	Amended Agreement of Limited Partnership of Registrant. (Incorporated by reference to the corresponding exhibit in the Registrant’s Form 10-KSB 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-KSB 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-QSB for the quarter ended March 31, 1999)
99	Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(b) Reports on Form 8-K:

There were no reports filed on Form 8-K for the quarter ended March 31, 2003.

11

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.

By:	Captec Franchise Capital Partners L.P. III GP3 Asset Acquisition, LLC Its Manager
By:	/s/ Patrick L. Beach Patrick L. Beach President
Date:	May 15, 2003

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CERTIFICATIONS

I, Patrick L. Beach, certify that:

1. I have reviewed this annual report on Form 10-QSB of Captec Franchise Capital Partners L.P. III;

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 45 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

     c) 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; and

     b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. 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: May 15, 2003

By: /s/ Patrick L. Beach
Patrick L. Beach
President, GP3 Asset Acquisition, LLC

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. GP3 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 GP3 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.

13

EXHIBIT INDEX

EXHIBIT NO.	DESCRIPTION
99	Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.