4
and a tax savings of twice the amount of cash invested in the
second year.
Under the lease agreements entered into by the partnerships,
the partnerships were required to pay both a fixed rent and a
variable rent during the first 2 lease years. The offering
memoranda for Series 98 and Series 124 include summaries of lease
payments and cash-flow analyses for the partnerships. The first
part of the cash-flow analyses reflected the projected cash
generated on the initial printings of the book properties based
on net sales, the gross retail sales less the distributors
discount, less rent. These analyses projected cash to
partnership totaling $67,528 and $99,672 for Series 98 and Series
124, respectively. The analyses, however, failed to reduce cash
for the fixed rent payments. In the first 2 years, fixed rents
totaling $1,242,500 and $1,702,500 were payable by Series 98 and
Series 124, respectively. Further, the offering summaries warned
that although a cash-flow analysis was included in the offering
materials, no representations or warranties were intended or
should have been inferred as to any economic return. The
Offering Memorandum disclosed that the capital contributions of
the partners would be used in part to pay the fixed rents in the
first 2 years.
The Private Placement Memorandum for Series 98 stated:
In order for the Partnership to realize sufficient
revenues from sales of the Books (after the payment of
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Last modified: May 25, 2011