10-K/A 1 fm10ka.txt FORM 10-K/A SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-KSB/A-1 For Annual and Transition Reports to Section 13 or 15(d) of the Securities Exchange Act of 1934 [X] Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the fiscal year ended December 31, 2001 Commission file number 333-71091 IBF VI - Secured Lending Corporation (Exact Name of Registrant as Specified in its Charter) Delaware 52-2139510 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 1733 Connecticut Avenue, N.W. Washington, D.C. 20009 (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, Including Area Code: (202) 588-7500 Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which Registered None N/A Securities registered pursuant to Section 12(g) of the Act: None 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 for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No X Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. /x/ State issuer's revenues for its most recent fiscal year $342,682 State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of a specified date within the past 60 days. The Current Interest Subordinated Bonds and the Accretion Subordinated Bonds are not traded in any market. Therefore, the Current Interest Subordinated Bonds and the Accretion Subordinated Bonds had neither a market selling price nor an average bid or asked price within the 60 days prior to the date of this filing. State the number of shares outstanding of each of the issuer's classes of common equity as of the latest practicable date. 1000 shares of Common Stock. Transitional Small Business Disclosure Format (check one): Yes No X ----- Documents incorporated by reference. None. TABLE OF CONTENTS Page Part I Item 1. Description of Business........................................ 3 Item 2. Description of Property......................................... 12 Item 3. Legal Proceedings............................................... 12 Item 4. Submission of Matters to a Vote of Security Holders............. 12 Part II Item 5. Market for Common Equity and Related Stockholder Matters........ 12 Item 6. Management's Discussion and Analysis or Plan of Operation....... 12 Item 7. Financial Statements............................................ 15 Item 8. Changes in and Disagreements with Accountants on Accounting And Financial Disclosure.................................... 15 Part III Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act........... 15 Item 10. Executive Compensation.......................................... 18 Item 11. Security Ownership of Certain Beneficial Owners and Management.. 18 Item 12. Certain Relationships and Related Transactions.................. 18 Item 13. Exhibits, List and Reports on Form 8-K.......................... 19 SIGNATURES................................................................ 20 Item 1. Description of Business General We make or purchase loans secured by real estate or other property and invest in commercial and real estate-related obligations. At least 80% of our assets are commercial or residential mortgage loans, which we refer to as "real estate assets." Our remaining assets generally will be other types of loans and other interests in real estate, which we refer to as "other assets." References in this report to "we," "us," "IBF VI" or the "Company" mean IBF - VI Secured Lending Corporation and its subsidiaries, unless the context indicates otherwise. Our objective is to purchase and originate loans and acquire assets that will produce an above-market rate of return. We attempt to obtain this rate of return through a combination of origination fees, stated interest, discount fees and leverage. This strategy requires that, among other things, we originate or acquire non-conforming loans, distressed loans and subordinated interests in pools of loans and enter into leverage, all of which typically involve a high degree of risk. Our management has broad discretion in selecting the investments we will acquire or make. Our Assets As of December 31, 2001, we owned the following assets: o a loan having an estimated fair value of $1,135,367; o a loan having an estimated fair value of $1,349,907; and o a pool of mortgage loans having an estimated fair value of $38,105,552. For additional information concerning these assets see "Business - Our Assets." The following describes the types of assets we may originate or acquire; our actual asset mix at any given time will vary based on the amount of cash available for us to invest and the investment opportunities available to us. Real Estate Assets Our real estate assets may include mortgage loans secured by commercial real estate. With respect to these assets: o we may originate the loans or acquire existing loans; o the loans may be first or second mortgage loans; o the loans may be non-performing (which means that the borrower is not currently meeting its obligations under the loan)or performing; and o the borrowers under the loans may be unable to obtain credit from traditional lenders. We may also acquire pools of mortgage loans secured by residential real estate. With respect to these assets: o we will acquire pools of existing loans originated by third parties; o the loans may be first or second mortgage loans; and o the loans will typically be made to borrowers of varying credit ratings. Other Assets Our other assets may include any of the following: o subordinate interests in residential or commercial mortgage-backed securities; our interests will be subordinate to those of other holders, meaning that we are at greater risk of default by the borrowers in the underlying mortgages; o "mezzanine" investments that are subordinated to senior mortgage loans; these may be in the form of a loan secured by a junior lien on a commercial or residential property, an equity interest in the borrower, or preferred equity securities of a borrower; o construction loans; o mortgage loans secured by foreign real estate; o other mortgage-backed securities; or o commercial loans secured by non-real estate property. Financing We may engage in various forms of financing in connection with the acquisition and ownership of our assets, including: o issuance through a subsidiary of collateralized mortgage bonds, which are bonds secured by our mortgage loans; o entering reverse repurchase agreements, which are agreements by which we sell assets to a third party and agree that we may repurchase the assets at an agreed upon date for a fixed price; or o borrowing from banks or other lenders. Key Terms We use a number of financial terms to describe our business in this report, including the following: o An affiliate is a person or entity that directly or through an intermediary controls, is controlled by, or is under common control with, another person or entity. o Hedging means attempting to offset the risks of one kind of asset or liability by taking a position in one or more other assets or liabilities that react in an opposite manner to the first asset or liability under various circumstances, such as a rise in interest rates. o Leverage is borrowing and other forms of indebtedness, including debt securities. o Mezzanine investments are investments that are subordinate to senior indebtedness and senior to equity, and are secured by either a second lien on the property that is subject to the senior indebtedness and/or a direct ownership interest in the borrower. o A securitization involves bundling a group of loans into an investment entity and selling securities of that entity to investors. o A tranche is a class of security issued in a securitization; each securitization may include more than one tranche of securities each having different investment characteristics and rights to the assets held by the investment entity. Our Management IBF Management Corp. ("IBF Management"), one of our affiliates, manages our business. Our officers and directors, and those of IBF Management, manage the investments of other entities with similar investment objectives and are subject to conflicts of interest. Please read the information in this report under - Directors and Executive Officers, to learn more about the background of IBF Management BUSINESS General We make or purchase loans secured by real estate or other property and invest in commercial and real estate-related obligations. At least 80% of our assets are commercial or residential mortgage loans, which we refer to as "real estate assets." Our remaining assets generally will be other types of loans and other interests in real estate, which we refer to as "other assets." The following describes the types of assets we may originate or acquire; our actual asset mix at any given time will vary based on the amount of cash available for us to invest and the investment opportunities available to us. Real Estate Assets Residential Mortgage Loans We may purchase pools of first and junior lien residential mortgage loans made to high credit borrowers and to credit impaired borrowers. The residential loans will be originated by unaffiliated third parties generally under guidelines that are primarily intended to evaluate the value and adequacy of the mortgaged property as collateral and the borrower's credit standing and repayment ability. The guidelines may or may not be less stringent than the standards generally acceptable to Freddie Mac and Fannie Mae with regard to the borrower's credit standing and repayment ability. Borrowers may have payment histories and debt ratios that would not satisfy Freddie Mac and Fannie Mae underwriting guidelines and may have a record of derogatory credit items such as outstanding judgments or prior bankruptcies. Any residential loan may generally be prepaid in full or in part at any time, although we will attempt to acquire loans that provide for the payment by the borrower of a prepayment charge in limited circumstances on certain full or partial prepayments made generally from one to five years from the date of execution of the related note. Our agreement with the originator will generally require the originator to make representations and warranties about the loans that, if breached, require the originator to repurchase any non-conforming loan. Commercial Mortgage Loans We may acquire or originate first and second lien commercial mortgage loans. A portion of these are expected to be institutional quality mortgage loans, meaning they will meet the institutional investor and rating agency criteria to serve as collateral for collateralized mortgage bonds. The purchase price of these loans is expected to be provided in large part from warehouse lines of credit and the issuance of collateralized mortgage bonds. We originate loans primarily secured by commercial real estate or other assets. Our targeted market includes borrowers that, because of time constraints, credit factors, desired loan amount, or other circumstances exceed the underwriting parameters offered by traditional lenders. We will obtain leads for these loans through institutions such as banks, general lenders of corporate obligations, mortgage lenders, and real estate and finance companies. We will primarily make loans secured by real estate, and secondarily loans secured by other assets. Before originating a loan, we perform a thorough review of the value of the collateral securing the loan and the borrower's ability to repay the loan. In addition to our own review, we may obtain independent appraisals of the related real property securing these mortgage loans. For loans secured by other personal property, we may rely on our own internal evaluation of the value of the collateral or obtain independent appraisals of the collateral. We will attempt to make secured loans with an above-market stated interest rate. We also charge a loan origination fee, which may be added to the principal amount financed. Therefore, the actual amount funded at the time the loan is originated is less than the principal amount of the loan on which we receive interest. Typically, repayment is made from the sale of the collateral or by a refinancing by the borrower. If one of these methods of repayment is not feasible, we attempt to restructure or refinance the loan. If restructuring or refinancing is not feasible, we seek ownership of the underlying collateral through sale, liquidation, or collection of the outstanding collateral. In appropriate circumstances, we may acquire performing and or non-conforming loans from government agencies, financial institutions and affiliates. Other Assets We intend to limit our investment in other assets to no more than 20% of our total assets. Other assets may include any of the following. Subordinate mortgage-backed securities We may purchase subordinate mortgage-backed securities in pools of loans that we did not acquire and securitize ourselves. Mortgage-backed securities are debt obligations of special purpose entities secured by mortgage loans. Mortgage-backed securities may be issued or sponsored by private originators of, or investors in, mortgage loans, including savings and loan associations, mortgage bankers, commercial banks, investment banks and other entities. In most mortgage loan securitizations, a series of mortgage-backed securities is issued in multiple classes in order to obtain investment-grade ratings for the senior classes and thus increase their marketability. Each class of mortgage-backed securities may be issued with a specific fixed or variable coupon rate and a stated maturity or final scheduled distribution date. Principal prepayments on the mortgage loans comprising the mortgage collateral may cause the mortgage-backed securities to be retired substantially earlier than their stated maturities or final scheduled distribution dates although, with respect to commercial mortgage loans, there generally are penalties for or limitations on the ability of the borrower to prepay the loan. Interest is paid or accrued on mortgage-backed securities on a periodic basis, typically monthly. The credit quality of mortgage-backed securities depends on the credit quality of the underlying mortgage collateral. Among the factors determining the credit quality of the underlying mortgage loans will be the ratio of the mortgage loan balances to the value of the properties securing the mortgage loans, the purpose of the mortgage loans, the amount and terms of the mortgage loans, the geographic diversification of the location of the properties and, in the case of commercial mortgage loans, the credit-worthiness of tenants. Moreover, the principal of and interest on the underlying mortgage loans may be allocated among the several classes of a mortgage-backed securities in many ways, and the credit quality of a particular class results primarily from the order and timing of the receipt of cash flow generated from the underlying mortgage loans. Subordinate mortgage-backed securities carry significant credit risks. Typically, in a "senior-subordinated" structure, the subordinate mortgage-backed securities provide credit protection to the senior classes by absorbing losses from loan defaults or foreclosures before those losses are allocated to senior classes. Moreover, typically, as long as the more senior tranches of securities are outstanding, all prepayments on the mortgage loans generally are paid to those senior tranches. In some instances, particularly with respect to subordinate mortgage-backed securities in commercial securitizations, the holders of subordinate mortgage-backed securities are not entitled to receive scheduled payments of principal until the more senior tranches are paid in full. Because of this structuring, subordinate mortgage-backed securities in a typical securitization have a substantially greater risk of non-payment than are those more senior tranches. Accordingly, the subordinate mortgage-backed securities are assigned lower credit ratings, or no ratings at all. Neither subordinate mortgage-backed securities nor the underlying mortgage loans are guaranteed by any governmental entities and, accordingly, have credit risks. As a result of the typical "senior-subordinated" structure, the subordinate mortgage-backed securities will be extremely sensitive to losses on the underlying mortgage loans. Mezzanine investments We may make investments that are subordinated to first lien mortgage loans on commercial and multifamily real estate or other collateral. For example, on a commercial property secured by a first lien mortgage loan with a principal balance equal to 70% of the value of the property, we could lend the owner of the property, typically a partnership, an additional 15% to 20% of the value of the property. Typically, the loan would be secured either by a second lien position on the property, or a partnership or other ownership interest in the owing entity. If the ownership interest is pledged, we would be in a position to take over the operation of the property in the event of a default on the loan. These types of mezzanine investments generally would provide us with the right to receive a stated interest rate on the loan balance and may also include a percentage of gross revenues from the property, payable to us on an ongoing basis, and/or a percentage of any increase in value of the property, payable upon maturity or refinancing of the loan. Mezzanine investments may also take the form of preferred equity, which would have a claim against both the operating cash flow and liquidation proceeds from the real estate assets. Before originating mezzanine investments, we perform certain credit underwriting to attempt to evaluate future performance of the collateral supporting the investment. Construction Loans We may provide construction loans on commercial property, taking a first lien mortgage to secure the debt. Foreign Real Estate Loans We may originate or acquire mortgage loans secured by real estate located outside the United States. Investing in mortgages located in foreign countries creates risks associated with the uncertainty of foreign laws, markets and risks related to currency conversion and possible taxation by foreign jurisdictions. Other Mortgage-Backed Securities We may create or acquire interest-only securities that have characteristics of subordinate mortgage-backed securities, known as subordinate interest-only securities. A subordinate interest-only security is entitled to no payments of principal. Moreover, interest on a subordinate interest-only security often is withheld in a reserve fund or spread account and is used to fund required payments of principal and interest on the more senior classes. Once the balance in the spread account reaches a certain level, interest on the subordinate interest-only security is paid to its holders. These subordinate interest-only securities provide credit support to the senior classes, and thus bear substantial credit risk. Moreover, because a subordinate interest-only security receives only interest payments, its yield is extremely sensitive to changes in the weighted average life of the class, which in turn is dictated by the rate of prepayments, including as a result of defaults, on the underlying loans. Some subordinate mortgage-backed securities may generate taxable income to us that bears no relationship to the actual economic income attributable to the subordinate interest-only securities. We may invest not only in classes of subordinate interest-only securities but also in other classes of mortgage-backed securities. Other Commercial Loans We may originate or acquire commercial loans secured by non-real estate assets. These loans typically will be underwritten based on the asset collateral value, the borrower's payment history and financial condition, and operating cash flow available for debt service. Our Assets As of December 31, 2001, we owned the following assets. Best Western Note We hold a note having a fair value of $1,135,367 (including unrealized appreciation of $50,667) as of December 31, 2001. The borrower owns and operates a Best Western hotel in Orlando, Florida, and the loan is secured by an assignment of the controlling interest in the entity that owns the property and of the management contract with the manager of the property. We purchased the loan from an affiliate in September 2001 for $1,084,700. This loan is subordinate to a first deed of trust in the amount of $3,053,044, matures on June 22, 2002 and bears interest at a rate of 12% per annum. In addition, we are entitled to receive 50% of cash flow from operations of the owner until we have received a 20% rate of return; the amount necessary to achieve that rate of return will be accrued during periods in which it is not paid. After we receive that return, and until the property is sold, we are entitled to receive 40% of cash flow from operations of the property. A 19.9% equity interest in the borrower is held for the benefit of the company. In January 2002, the Company exercised its remedies under the Loan and Security Agreement and related documents to assume control of Ganesh Hospitality, the entity that owns the Best Western. In this regard the Company removed the existing officers and directors and replaced them with the president of the Company. The Company also obtained an injunction prohibiting the former controlling parties of Ganesh from interfering with the operations of the property. The Company removed the existing property management company and installed Crossroads Hospitality Management Company as the new management company. Homewood Suites Note We hold a note having a fair value of $1,349,907 (including unrealized appreciation of $246,958) as of December 31, 2001. The borrower is developing a Homewood Suites hotel in Del Mar, California and the loan is secured by a Second Deed of Trust and other collateral. This loan matures on May 31, 2002 and bears interest at a rate of 25% per annum. We purchased this loan from an affiliate in December 2000 for a purchase price of $870,261. The borrower is a consultant to one of our affiliated companies and is actively involved with the asset management of hospitality properties Mortgage Loan Pool In November 2001, we, together with affiliates, purchased a pool of mortgage loans from Credit Suisse First Boston Mortgage Securities Corp. for an aggregate purchase price of $498.6 million. Our share of the loans, which had a fair value of $38,105,552 at December 31, 2001, is held by a wholly owned subsidiary. The mortgage loans are secured by first deeds of trust on residential property. The combined loan-to-value ratios (based on the appraised values of the mortgaged properties at the time of origination) of the loans held by our subsidiary is approximately 80%. The average principal balance on these mortgage loans is $125,347, and 100% of the loans are secured by first liens. We financed the acquisition of our portion of the pool of mortgage loans through the issuance of bonds by our subsidiary to institutional investors. The outstanding bond liability at December 31, 2001 was $37,802,615 and they pay interest at a floating rate based on LIBOR plus a fixed premium (which varies depending on the tranche of bonds purchased). Interest on the bonds is payable out of the interest and principal payments received from the pool of mortgages; accordingly, the bonds do not have a fixed maturity date. The bonds are secured by the principal and interest payable on the mortgages (net of certain expenses) and are non-recourse to us (meaning that the bondholders may not look to our other assets for payment in the event of a default). Our proceeds from this investment will consist of payments of interest and principal on the mortgage loans less interest and principal payments under the bonds. Leverage And Borrowing We intend to leverage a substantial amount of our assets through the issuance of collateralized mortgage bonds, reverse repurchase agreements, warehouse lines of credit, bank credit facilities, mortgage loans on real estate and other borrowings. We will do this when there is an expectation that the leverage will enhance our overall rate of return. Leverage creates an opportunity for increased income but, at the same time, creates additional risks. To the extent the revenues derived from assets acquired with borrowed funds exceed the interest expense we have to pay, our net income may be greater than if borrowing had not been used. Conversely, if the revenues from the assets acquired with borrowed funds are not sufficient to cover the cost of borrowing, our net income will be less than if borrowing had not been used. Collateralized Mortgage Bonds and Warehouse Lines Of Credit We may originate or purchase mortgage loans and through a subsidiary issue collateralized mortgage bonds. During the period in which we are acquiring mortgage loans for these bond issuances, we are likely to borrow funds secured by the related loans under warehouse lines of credit. We have not yet established any of these types of credit lines. The principal balance of the collateral will typically exceed the principal balance of the collateralized mortgage bonds. While the debt is outstanding, our ability to dispose of the loans will be limited. Once the collateralized mortgage bonds are paid in full, we will have unlimited ability to dispose of or refinance the loans. Reverse Repurchase Agreements We may enter into reverse repurchase agreements, which are agreements under which we would sell assets to a third party with the commitment that we may repurchase the assets at a fixed price on an agreed date. Reverse repurchase agreements may be characterized as loans to us from the other party that are secured by the underlying assets. The repurchase price reflects the purchase price plus an agreed market rate of interest. Bank Credit Facilities We intend to borrow money through various bank credit facilities, which will have varying fixed or adjustable interest rates and varying maturities. We have not yet established any bank credit facilities. Risk Management Risks During Accumulation Period and Hedging During the accumulation period during which we own mortgage loans but have not yet issued mortgage-backed securities backed by the loans, we will retain all risks related to ownership of the loans. To address some of these risks, we may engage in a variety of interest rate management techniques for the purpose of managing the effective maturity or interest rate of our assets or liabilities. These techniques also may be used to attempt to protect against declines in the market value of our assets resulting from general trends in debt markets or to change the duration of or interest rate risk associated with our borrowings. Any transaction of this type has risks, and may limit the potential earnings on our investment in real estate related assets. These techniques may include puts and calls on securities or indices of securities, Eurodollar futures contracts and options on Eurodollar futures contracts, interest rate swaps or other transactions of this type. We may also use hedging techniques to mitigate potential risks, and not for speculative purposes. For example, with respect to indebtedness, we may use these techniques to limit, fix or cap the interest rate on variable interest rate indebtedness. We may utilize interest rate swaps, options on interest rate swaps, treasury-locks, options on treasuries and interest rate caps or floors, to protect the value of fixed rate mortgage loans originated and held for securitization. Insurance We will try to obtain, or cause the borrowers on our loans to obtain, insurance coverage of the type and in the amount customarily obtained by owners of properties similar to the commercial properties and residential properties securing its loans. However, borrowers may not comply with our requirements and there are certain types of losses, generally of a catastrophic nature, such as earthquakes, floods and hurricanes, that may be uninsurable or too costly to justify insuring. If uninsured losses occur on the security for our loans and investments, we may suffer losses and have difficulties achieving our earnings objectives. Commercial Mortgage Loan Risk Management Property values and net operating income derived from commercial properties are volatile and commercial mortgage loans may be adversely affected by a number of factors and risks, including: o larger loan balances; o dependency on successful operation of the property securing the mortgage and tenants operating businesses in that property for repayment; and o loan terms that often require little or no amortization and, instead, provide for balloon payments at stated maturity. We will utilize commercial loan underwriting guidelines to mitigate some of the risks of commercial mortgage lending. However, many of the risks associated with commercial lending may not be within our control or readily assessable and, therefore, the underwriting guidelines may not protect us from losses. Purchase Of Loans From Affiliates And Loans Made To Affiliates We may purchase loans and investments from our affiliates and make loans to our affiliates. The price at which mortgage loans and other investments will be purchased from affiliates will be based on whether the price is fair and the investment otherwise is suitable and in our best interests. To determine whether the price of an investment from an affiliate or otherwise is fair, IBF Management may consider a number of factors, including: o appraised value as determined by an independent appraiser, o pricing of comparable transactions between the affiliate and third parties, and o brokers' opinions as to value. It is our policy that loans made to affiliates will not exceed 10% of our assets combined with those of our wholly owned subsidiaries. Loans we make to affiliates will be underwritten pursuant to the same guidelines and on financial terms that are no less favorable to us than loans made to unaffiliated third parties. Item 2. Description of Property The Company does not presently hold title to any real estate and does not lease any real estate. Item 3. Legal Proceedings On December 20, 2001, the Securities and Exchange Commission commenced a formal investigation of IBF VI, our parent company and certain of our affiliates. IBF VI, our parent and our affiliates believe that we have not violated the federal securities laws and are cooperating fully with the investigation. We understand that the Staff of the SEC intends to recommend that the Commission authorize an enforcement action against us that would allege that we are subject to the Investment Company Act of 1940 and other matters relating to disclosure. We believe that an action by the SEC would be without merit and we are in discussions with the Staff in an effort to persuade it that such an action is not warranted. While the Commission may or may not follow any recommendation of the Staff, if an action were to be instituted against IBF VI, our parent or our affiliates, our business could be materially adversely affected. The Company has been unable to reach a settlement with the SEC in connection with the investigation due, in large part, to the fact that the SEC has indicated that a settlement would require the appointment of a receiver. In light of the nature of our assets, we believe that this course would lead to recovery of only a limited portion of asset value and thus would be detrimental to our investors. Accordingly, on June 7, 2002, IBF VI, our parent company, and an affiliated company filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code. The bankruptcy filings have been undertaken to preserve investor value. The entities have sufficient liquidity, and have not experienced a material adverse change in the quality of their overall asset base. The petitions were filed in the United States Bankruptcy Court for the Southern District of New York (our Case No. 02-41591). No trustee, receiver, fiscal agent or similar officer has been appointed with respect to IBF VI, our parent, or our affiliate, which continue to operate their businesses as debtors in possession. Item 4. Submission of Matter to a Vote of Security Holders None. Part II Item 5. Market for Common Equity and Related Stockholder Matters There is no market for our equity securities. All of our common stock is owned by InterBank Funding Corporation. Item 6. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion of our financial condition and results of operations should be read in conjunction with the audited financial statements and notes thereto appearing elsewhere in this report. Overview We make or purchase loans secured by real estate or other property and invest in commercial and real estate-related obligations. Revenue generated in this business includes: o interest income on our loans; o income from participation features in our loans, such as a share of cash flow from the operations of the borrower or a share of gain on the sale of real estate securing the loan; o origination fees and other fees we generate in connection with our lending activity; and o gain on sale of or foreclosure on assets. The significant expenses incurred in connection with this business may include: o our cost of borrowing, primarily interest we pay on our obligations; and o losses incurred in connection with our lending activity in the event of a default by a borrower. Our Statements of Operations and Cash Flows for the year ended December 31, 2001, have been revised from those included in our 10-KSB previously filed with the Commission to report amounts previously included in Interest Income and Consulting Fees as Unrealized Appreciation of Loan Value. The following discussion has been revised to reflect this new method of reporting. The revisions had no effect on our net loss, stockholders' equity, and total assets. For additional information on these revisions, see footnotes 1 and 2 of our Notes to Financial Statements included in this report. Results of Operations We had not conducted significant operations through December 31, 2000, having raised our initial proceeds from our bond offering and acquired our first loan in December 2000. For the year ended December 31, 2000, we had no revenue and reported a net loss of $47,513. This loss reflected general and administrative expenses relating to our organization and the registration of our bond offering. Because operating results for 2000 were not significant, we do not provide a comparison of 2001 results with 2000 results. Accordingly, the following discussion generally addresses only our results of operations for the year ended December 31, 2001. During the year ended December 31, 2001, we reported revenue of $342,682. This consisted of interest income of $320,961 and fee income of $21,721. Interest income was comprised of $28,490 of interest on our outstanding loans receivable and $3,383 of interest earned on cash deposits. The remaining $289,088 was interest earned on our share of the pool of residential mortgage loans we acquired jointly with affiliates. Interest income reflects only a partial year of ownership of one of our loans receivable, which we acquired in September 2001, and the pool of mortgage loans, which we acquired in November 2001. Fee income consisted of fees charged to borrowers in connection with our loans receivable. Our principal operating expense during the year was interest expense in the amount of $484,130. This consisted of interest in the amount of $258,127 we paid on our outstanding subordinated bonds and $226,003, which was our share of interest paid on mortgage backed bonds issued to finance the acquisition of the pool of residential mortgage loans. We incurred servicer fee and other securitization expense of $24,913. This was comprised of the companies share (7.58%) of the total servicer and securitization expense pool. We incurred an amortization expense in the amount of $167,757. This non-cash expense primarily reflects the amortization of debt issuance costs relating to our public bond offering. These costs are amortized over the life of the offering. General and administrative expenses for 2001 were $17,577, as compared with expenses of $43,750 for 2000. Expenses incurred during 2000 were higher because of costs relating to our organization during that year. For the year ended December 31, 2001, we reported Unrealized Appreciation of Loan Value of $271,210, compared with no amount reported for the year ended December 31, 2000. This amount reflects the appreciation in the fair value of our loans as determined by our management. Liquidity And Capital Resources Our principal sources of cash are interest income and fees generated from our lending and investment activity, proceeds of our offering of bonds to investors, interest on our cash pending its use in our business, borrowings collateralized by our mortgage loans and other real estate related assets, and capital contributions by our parent company. Our principal uses of cash are the funding of loans we originate, the cost of loans and other investments we purchase, interest payable on borrowings we use to fund the acquisition of loans and other investments, and interest payable on our outstanding bonds. In December 2000, our sources of cash included the initial net proceeds of our bond offering in the approximate amount of $500,000 and capital contributions by our parent company in the approximate amount of $1.1 million. In late December 2000 we used cash in the amount of $870,621 to purchase a loan. Because of our limited operations during 2000, we did not receive any interest or other income on our assets and did not pay any interest on our outstanding bonds. Cash used in operations for the year was approximately $10,000. During 2001 we received net proceeds of approximately $5.9 million from the sale of bonds to investors. In September 2001, we used cash in the amount of $1,084,700 to purchase a loan. In November 2001, we and certain of our affiliates through subsidiaries purchased a pool of mortgage loans for an aggregate purchase price of $498.6 million. Our share of the purchase price was $37,769,000, which we funded by a contribution of $338,194 we made to our subsidiary and borrowings by the subsidiary collateralized by the mortgage loans held by the subsidiary. The borrowings by our subsidiary are not guaranteed by or otherwise recourse to us. During 2001, operations generated EBITDA in the amount of approximately $533,000. Adding Interest and Amortization costs to EBITDA, the Company sustained a net loss of $118,455. As of December 31, 2001, we had cash in the approximate amount of $2.6 million. Based upon the amount of bonds and other interest-bearing obligations outstanding as of that date, we estimate that our debt service obligations for 2002 will be approximately $750,000. While cash flow from operations alone may not be sufficient to fund obligations, we believe that cash flow from operations, and existing liquidity should be sufficient to fund our obligations. As discussed under "Legal Proceedings," we and our affiliated companies are currently subject to an investigation by the Securities and Exchange Commission. As a result of the investigation, we suspended our bond offering as of January 31, 2002 and placed in escrow approximately $ 1,778,000 of gross proceeds from sales of bonds that occurred between December 17, 2001 and January 31, 2002 In addition, we have incurred significant costs in connection with the investigation, primarily fees to attorneys and other advisors. As a result, our ability to fund growth in our operations and meet our obligations has been adversely affected. On June 7, 2002, we filed a voluntary petition under Chapter 11 of the United States Bankruptcy Code. See "Legal Proceedings." While we intend to develop a plan of reorganization, implementation of any such plan is subject to numerous uncertainties. As a result, we are unable to predict the terms of such a plan or the effect of our filing under the Bankruptcy Code on our business or the holders of our Notes. As indicated in our auditor's report appearing elsewhere in this report, the uncertainties inherent in the bankruptcy process raise substantial doubt about our ability to continue as a going concern. Our plan to overcome this uncertainty includes two principal components. First, we intend to attempt to negotiate a resolution of the SEC's investigation that will enable us to continue our business in a manner that will protect the interests of our investors. Second, we intend to develop a plan of reorganization satisfactory to our creditors, including our investors, that also achieves this objective. Both of these undertakings are complex and will require negotiation with numerous other parties, however, and as a result their implementation will be subject to numerous uncertainties. Accordingly, we are unable to predict the terms of any potential settlement with the SEC or plan of reorganization at this time or their effect upon our business or the holders of our Notes. Forward-Looking Statements Some of the information in this report may include forward-looking statements. You can identify these statements by phrases such as "will likely result," "may," "are expected to," "is anticipated," "estimate," "projected," "intends to" or other similar words. Forward-looking statements are not guarantees of future performance and have certain risks and uncertainties, including but not limited to the following: o market conditions and real estate values in the areas where our loans are made; o credit risk related to our borrowers; o our dependence on securitizations and short-term warehouse loan facilities; o our dependence on debt financing to fund our operations; o changes in interest rates; o our ability to implement an effective hedging strategy; o the geographic concentration of our loans; and o our ability to continue to raise capital through the issuance of bonds. The risks could cause our actual results to differ materially from those presently anticipated. When considering forward-looking statements, you should keep these factors in mind as well as the other cautionary statements in this report. You should not place undue reliance on any forward-looking statement. Item 7. Financial Statements Our financial statements appear on pages F-1 through F-11 of this report. Item 8. Changes in and Disagreements with Accountants on Accounting Financial Disclosure None. Item 9. Directors and Executive Officers, Promoters and Control Persons; Compliance with Section 16(A) of the Exchange Act We do not have any full time employees and do not pay salaries to our executive officers. All personnel services required for our operations are provided by IBF Management. IBF Management is a Delaware corporation in which Simon A. Hershon is the sole stockholder. Since 1977, InterBank Funding Corp., our parent company ("IBF") and its affiliates (including IBF Management) have provided a wide variety of financial advisory services to businesses, institutions and individuals in the finance, real estate and hospitality industries. These companies offer strategic advisory services, investment and merchant banking, private placements and public offerings, and equity and mezzanine financing. We have entered into a management agreement with IBF Management for a term expiring on the maturity or redemption of all of our outstanding bonds. IBF Management will be primarily involved in three activities: o underwriting, originating and acquiring mortgage loans and other commercial and real estate related assets; o asset/liability management, financing, management and disposition of loans, including credit and prepayment risk management, collection of payments, enforcement of remedies, foreclosure and property disposition and related services; and o capital management, including oversight of our capital raising and investor relations activities. In conducting these activities, IBF Management formulates operating strategies for us, arranges for the acquisition of assets by us, monitors the performance of our loans and provides certain administrative and managerial services in connection with our operation. IBF Management is required to prepare regular reports for us that review our acquisitions of assets, portfolio composition and characteristics, credit quality, performance and compliance with the policies approved by us. At all times, IBF Management will be required to follow our direction and oversight and perform the functions and have the authority set forth in the management agreement. IBF Management will be responsible for our day-to-day operations and will perform the activities relating to our assets and operations as may be appropriate. We have the right at any time during the term of the management agreement to terminate the management agreement without the payment of any termination fee upon, among other things, a material breach by IBF Management of any provision contained in the management agreement that remains uncured at the end of the applicable cure period. The management agreement may not be assigned by either party without the consent of the other party. Our business will be managed by the officers and directors of IBF Management and its affiliates. The following persons are our officers and directors and those of IBF Management: Name Age Position Simon A. Hershon.................. 54 CEO of IBF Management CEO and Director of IBF VI W. Thomas Fleming, III............ 58 President of IBF Management and President of IBF VI Ehud D. Laska..................... 51 Director of IBF VI Robert L. Olson................... 58 Chief Financial Officer of IBF VI Roger J. Lerner................... 48 Secretary of IBF VI The following is a description of the business experience of the principal officers and directors of IBF Management and its affiliates that provide services to us. Simon A. Hershon, CEO, IBF Management Corp. and InterBank Funding Corp. Simon Hershon serves as CEO of IBF Management and IBF, having founded the company in 1977. Mr. Hershon's education and professional experience combine to provide the firm's clientele with an in-depth understanding of institutional and corporate finance, real estate finance, and development and hospitality turnarounds. Mr. Hershon has been involved in a wide range of corporate and bond financings and provided advisory services in connection with one of Washington D.C.'s largest bankruptcies, totaling over $2 billion. He graduated from the U.S. Naval Academy and received both an MBA and a Doctorate in Business Administration from Harvard University, where he concentrated in finance and graduated with honors. W. Thomas Fleming, III, President, IBF Management Corp. and InterBank Funding Corp. Mr. Fleming serves as the President of IBF Management and IBF. With more than 30 years of professional experience in the financial services industry, Mr. Fleming has served in a variety of executive positions including President of the National Bank of Washington and Chief Financial Officer for First Boston Capital Group and Evans Financial Corporation. Mr. Fleming has extensive experience in credit policy, loan originations, loan underwriting, loan administration, problem loan work-outs, as well as loan systems and loan accounting. Mr. Fleming earned a Bachelor of Arts in Economics from Harvard and an MBA from the George Washington University. Roger J. Lerner, Executive Vice President, General Counsel, InterBank Funding Corp. Mr. Lerner heads the legal department, where he is responsible for overseeing corporate legal affairs. Mr. Lerner has more than twenty years of experience working in both the legal profession and with financial institutions. Before joining IBF, Mr. Lerner was a partner at the law firm of Kile, Goekjian, Lerner, & Reed, LLC. He also previously served as Assistant Director of Resolutions at the Resolution Trust Corporation (RTC), Regional Director of the Mergers and Acquisitions Division at the Federal Savings and Loan Insurance Corporation (FSLIC) and Executive Assistant to the General Counsel at the Pension Benefit Guaranty Corporation (PBGC). Mr. Lerner received his Bachelor of Arts in Political Science from The George Washington University in Washington, DC and his Juris Doctorate from Washington University in St. Louis. Ehud D. Laska, President, InterBank Capital Group, LLC. A founding partner of InterBank Capital Group, Mr. Laska specializes in building up companies through same industry consolidation and acquisitions. He has served on the Board of Directors of a number of private and public companies operating in a wide range of industries. Prior to joining the firm, he was a senior investment banker with CS/First Boston, Drexel Burnham Lambert, and Paine Webber. Mr. Laska is a graduate of the University of Massachusetts with High Honors and holds an MS in Engineering from Brown University and an MBA from Stanford University. Robert L. Olson, Chief Financial Officer, IBF VI. Mr. Olson has served as Chief Financial Officer of the Company since May 2000. Mr. Olson has over 20 years experience in developing financial controls and procedures for companies in various industries. Most recently, Mr. Olson served as Vice President of Finance for The Energy Grid, Inc., a start up company in the energy, gas and telecommunications industries, from March 1999 to May 2000. From September 1997 to March 1999, Mr. Olson served as Vice President of Finance for Global Intellicom, Inc., a publicly-traded technology firm. From June 1990 to September 1997, Mr. Olson served as Vice President of Finance for Trafalgar Ltd., a manufacturer, wholesaler and retailer of leather products. From 1977 to June 1990, Mr. Olson served as a Vice President of Finance or Chief Financial Officer for various companies involved primarily in retailing and manufacturing. Mr. Olson graduated from Long Island University with a Bachelor of Science in Accounting. Compensation No compensation will be paid by us to our officers. IBF Management will bear all costs of managing our business. IBF Management will receive an annual management fee payable on each quarter end for its services equal to 2% of the principal amount of our bonds then outstanding for providing all administrative and management support required to conduct our operations. The management fee will cover items such as wages and salaries of employees of IBF Management responsible for our daily operations, office space, and all overhead expenses. The management fee does not cover our legal and accounting fees, filing fees, investment transaction costs, taxes, officer and director liability insurance, and other administrative expenses. Item 10. Executive Compensation Not applicable. Item 11. Security Ownership of Certain Beneficial Owners and Management IBF, which is wholly owned by Simon A. Hershon, owns 100% of our outstanding common stock. Item 12. Certain Relationships and Related Transactions The following table describes the amount and nature of payments that may be made by us to InterBank and its affiliates. Payee Purpose IBF Management......................... Annual management fee (1) IBF Securities......................... Finder's fees for identification of selected broker-dealers Coleman & Company Securities, Inc.................... Finder's fees (2) (1) An amount equal to 2% of the bonds outstanding. (2) Coleman will receive out of the sales commission payable to the placement agent in our bond offering a finder's fee of 0.5% of the gross proceeds from the sale of bonds for its assistance in identifying selected broker-dealers. Coleman will also receive 7% of the gross sales price of all bonds sold by Coleman directly to investors in the offering, but it is not expected that sales by Coleman to investors will be material. We did not pay an annual management fee or any finder's fees or unaccountable expense reimbursements for the year ended December 31, 2000. We paid $37,970 to IBF Management as the annual management fee for the year ended December 31, 2001. We paid $207,550 to IBF Securities as finder's fees for the year ended December 31, 2001. We paid $30,155 as finder's fees to Coleman & Company Securities, Inc. for the year ended December 31, 2001. On December 29, 2000, we purchased a loan from IBF Collateralized Finance Corporation, an affiliate, for a purchase price of $870,621. On September 27, 2001, we purchased a loan from a predecessor of IBF Collateralized Finance Corporation for a purchase price of $1,084,700. During the year ended December 31, 2002, the Company loaned $1,345,000 to its parent. We will reimburse IBF Management for some or all of the legal and accounting fees, printing costs and marketing costs paid to third parties by IBF Management for services on our behalf. We may purchase loans from affiliates and make loans to affiliates of InterBank that meet our investment guidelines. Item 13. Exhibits, List and Reports on Form 8-K (a) Index of Exhibits *1 Underwriting Agreement *1.1 Selling Group Agreement *3 Certificate of Incorporation, as amended *3.1 Certificate of Amendment to Certificate of Incorporation *3.2 Certificate of Amendment to Certificate of Incorporation *3.3 Certificate of Amendment to Certificate of Incorporation *3.4 Bylaws *4 Proceeds Escrow Agreement *4.1 Indenture, with exhibits +4.2 First Supplemental Indenture *10 Management Agreement *23 Consent of Radin, Glass & Co., LLP *25 Form T-1, Statement of Eligibility under the Trust Indenture Act of 1939 * Previously filed as exhibits to the Registrant's Registration Statement on Form SB-2 (No. 333-71091) and incorporated by reference herein. + Previously filed as an exhibit to Post-Effective Amendment No. 3 to the Registrant's Registration Statement on Form SB-2 (No. 333-71091) and incorporated by reference herein. (b) Reports on Form 8-K Form 8-K filed May 20, 2002. 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. IBF VI - SECURED LENDING CORPORATION By: /s/ SIMON A. HERSHON ------------------------------------ Simon A. Hershon Chief Executive Officer IBF VI - Secured Lending Corporation and Subsidiary CONTENTS -------------------------------------------------------------------------------- Page Report of Independent Auditors F-1 FINANCIAL STATEMENTS Balance Sheets F-2 Statements of Operations F-3 Statement of Changes in Stockholders' Equity F-4 Statements of Cash Flows F-5 Notes To Financial Statements F-6-11 REPORT OF INDEPENDENT AUDITORS The Board of Directors and Stockholders IBF VI - Secured Lending Corporation and Subsidiary Washington, DC We have audited the accompanying balance sheets of IBF VI - Secured Lending Corporation and Subsidiary as of December 31, 2001 and 2000, and the related statement of operations, changes in stockholders' equity, and cash flow for each of the years then ended. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of IBF VI - Secured Lending Corporation and Subsidiary at December 31, 2001 and 2000, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 11 to the financial statements, on June 7, 2002, the Company filed a voluntary petition for reorganization under Chapter 11 of the United States Bankruptcy Code. The uncertainties inherent in the bankruptcy process raise substantial doubt about the Company's ability to continue as going concern. The Company is currently operating its business as debtors in possession. If no reorganization plan is approved, it is possible that the Company's assets may be liquidated. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amount and classification of liabilities that may result from the outcome of these uncertainties. /s/ Radin Glass & Co., LLP Certified Public Accountants New York, New York March 2, 2002, except for Note 11 as to which the date is June 7, 2002. IBF VI - Secured Lending Corporation and Subsidiary Balance Sheets December 31, 2001 and 2000

IBF VI - Secured Lending Corporation and Subsidiary Statements of Operations For the Years Ended December 31, 2001 and 2000

IBF VI - Secured Lending Corporation and Subsidiary Statements of Changes in Stockholders' Equity For the Years Ended December 31, 2001 and 2000

IBF VI - Secured Lending Corporation and Subsidiary Statements of Cash Flows For the Years Ended December 31, 2001 and 2000

1. Description of the Company: On June 8, 1998, IBF VI - Secured Lending Corporation (the "Company" or "IBF VI") was formed to engage in the business of making and purchasing loans secured by real estate related obligations and holding and disposing of such assets. The Company is wholly-owned by InterBank Funding Corporation (the "Parent"). Both the Company and its Parent are located in Washington, D.C. The accompanying Statements of Operations and Cash Flows for the year ended December 31, 2001 have been revised to report amounts previously included in Interest Income and Consulting Fee as Unrealized Appreciation of Loan Value to better report the Company's investment activities. The revisions have no effects on the Company's net loss, stockholders' equity and total assets. Amounts reflected are presented on the following table:

2. Summary of Significant Accounting Policies: Basis of Presentation: The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, IBF VI- Asset Securitization Corp., after elimination of intercompany accounts and transactions. The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States. Certain prior year amounts have been reclassified to conform with current period presentation. Development Stage Enterprise: The Company had previously reported its financial statements as a Development Stage Enterprise as the Company had not yet commenced its planned principal operations. During the year ended December 31, 2000, due to the fact that the Company commenced its planned principal operations and the completion of its registration statement with the Securities and Exchange Commission (see Note 5), the Company believes it should no longer report its financial statements as a Development Stage Enterprise. Cash: During the normal course of business, the Company may have cash in the bank in excess of $100,000 which exceeds the FDIC insurance limits and is therefore uninsured. At December 31, 2001 and 2000, cash included $823,000 and $500,000 in an escrow account, which was non-interest bearing and was released to the Company in January 2002 and January 2001, respectively. In connection with the SEC investigation (see Note 9), a further amount of approximately $1,778,000 was put in an other escrow account subsequent to year end. These amounts are to be returned to the Company upon the favorable resolution of the SEC investigation. Debt Issuance Costs: Debt issuance costs represent costs incurred in connection with the Company's public offering of subordinated bonds. Such costs are capitalized and are being amortized over the life of the bonds. Investment Valuation: The Company's investments, as set forth in Notes 3 and 4, include securitized mortgage loans and commercial loans. These investments are not readily marketable and are not listed on an exchange or quoted in an open market. These investments are stated at fair value as determined by the Company's management. In determining fair value, management considers relevant qualitative and quantitative information available. This includes such factors as the financial condition and operating results of each company, the economic and market conditions affecting its operations, and any subsequent events or financing transactions that may be indicative of change in value. The fair value assigned to the investments described above are based on available information and do not necessarily represent amounts that might ultimately be realized, since such amounts depend on future circumstances. Investment valuation is conducted by management annually and more often if circumstances warrant. Unrealized appreciation or depreciation on investments as a result of changes to management's estimate of investment fair value is recorded in the statement of operations. Realized gains and losses include those amounts that result from the disposal/sale of investments, as well as loan charge-offs and recoveries. Interest earned on mortgage and commercial loans is accrued at the contractual rate and credited to income based upon the principal amount outstanding. It is the policy of management to discontinue the accrual of interest and reverse previously accrued but unpaid interest in the event that the quality of the credit has deteriorated to the extent that collectibility of all interest and/or principal cannot be reasonably expected. Collections of interest and principal on loans in non-accrual status and considered impaired are generally applied as a reduction to the outstanding principal. Once future collectibility has been established, interest income may be recognized on a cash basis. Discounts and premiums on purchased loans are amortized to income using the interest method over the expected term of the purchased loans. Concentrations of Credit Risk: Credit risk represents the accounting loss that would be recognized at the reporting date if counterparties failed completely to perform as contracted. Concentrations of credit risk that arise from financial instruments exist for groups of customers or counterparties when they have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions. The Company's loans are subject to higher levels of credit risk than traditional loans. Significant work or effort on the part of management may be required in the collection process of some of the corporation's exposures. Accounting for Long-Lived Assets: The Company reviews long-lived assets, certain identifiable assets and any goodwill related to those assets for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recoverable. At December 31, 2001 and 2000, the Company believes that there has been no impairment on its long-lived assets. Reporting of Segments: The Company adopted SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information". SFAS No. 131 establishes the criteria for determining an operating segment and establishes the disclosure requirements for reporting information about operating segments. The Company has determined that under SFAS No. 131, it operates in one segment of service. Income Taxes: The Company files a consolidated income tax return with its Parent. Income tax has been provided as if the Company was a separate entity and such tax provision is paid to the Parent. 3. Loans Receivable, at Fair Value: At December 31, 2001 and 2000, loans receivable is valued at cost which is approximately equal to the fair value based upon independent appraisals. Loans receivable consists of the following:

4. Mortgage Loans/Securitization Bonds: On November 27, 2001, a wholly owned subsidiary of the Company, along with certain affiliates invested in a pool of mortgages subject to various debt instruments. The Company invested $338,194 (including other costs of $48,009) representing approximately 7.58% of the investment of the Company and its affiliates. The investments are in approximately 3,000 residential mortgages with an average balance of approximately $160,000 with the highest balance under $1,000,000. The mortgages include conventional, adjustable-rate, fully amortizing and balloon, first lien residential mortgage loans, with original terms to a stated maturity of up to 30 years. The mortgage loans were originated generally in accordance with underwriting guidelines that are less stringent than Fannie Mae and Freddie Mac guidelines. As a result, such mortgage loans are likely to experience higher rates of delinquency, foreclosure and bankruptcy than mortgage loans underwritten in accordance with higher standards. All loans are serviced by unrelated servicers. Such loans are carried at original cost, less unrealized depreciation in loan value of $26,414, representing estimated bad debts incurred, such carrying cost approximates fair value. The subsidiary, which records its 7.58% of all assets and liabilities of the mortgage pools, is consolidated in the financial statements. The accounting for the transaction is governed by SFAS 140, "Accounting for Transfers and Servicing or Financial Assets and Extinguishments of Liabilities" which requires consolidation of the subsidiary if the Company relinquishes all control; as the Company has retained the right to buy back the mortgages under certain circumstances, it has consolidated the subsidiary. The Company is not obligated under the pool's debt instruments, accordingly its financial exposure is limited to its investment. A summary of the balances involved is the following:

Mortgage loans at December 31, 2001 consist of the following:

Securitization bonds at December 31, 2001 consist of the following:

Because of the financing structure whereby the financing, other than Class AIO, returns pass through rates from approximately 2.33% to 4.89% while the mortgages generally provide returns of not less than 6.1% per annum and not more than 15.0% per annum, the Class AIO return was predicted at approximately 24%. As the Class AIO certificates are interest only and dependent on LIBOR interest rates, default rates, repayment rates, etc., it is not possible to predict repayment rates or return over the life of the investment. However, as of March 31, 2002, approximately four months into this investment, the mortgages are performing as anticipated. The maturity of the mortgage loans is dependent on projected prepayments and ultimate maturity of the mortgages. The debt used to finance the mortgages is repayable on repayment of the mortgages. It is not practicable to forecast the repayment dates of the Class AIO investment. 5. Subordinated Bonds/Public Offering: During the year ended December 31, 2000, the Company commenced a $50,000,000 subordinated bond offering. The minimum principal amount of bonds is $5,000 for all investors, except for individual retirement accounts and Keogh Plans, for which the minimum purchase is $2,000. The bonds may be subordinated to future senior indebtedness of the Company. The bonds are redeemable at the option of the Company after June 30, 2001. The subordinated bonds bear interest at 10.75% per annum, paid monthly or quarterly or reinvested on a quarterly basis and due on December 31, 2006. The redemption price of the bond will be equal to 100% of the principal amount of the bond plus any related accrued or accreted interest through the date of redemption. At December 31, 2001 and 2000, total subordinated bonds consist of principal of $6,412,000 and $500,000 with accrued interest of $68,938 and $3,763, respectively. 6. Due from Parent: During the year ended December 31, 2001, the Company loaned $1,345,000 to the Parent. Such loans are non-interest bearing and have no definitive repayment terms. 7. Income Taxes: No provision has been made in the accompanying financial statements for income tax expense as a result of the current operating loss and net operating loss carryforwards. Differences between income tax benefits computed at the Federal statutory rate (34%) and reported income taxes for years ended December 31, 2001 and 2000 are primarily attributable to the net operating loss carryforwards. 8. Related Party Transactions: IBF Management Corp. ("IBF Management") and InterBank Consultants, Inc. ("IB Consultants"), affiliates of the Parent, provide to the Company certain administrative and support services for a fee. The annual management fee will pay for certain costs of operating the Company for which IBF Management is responsible. Total management fee incurred during the year ended December 31, 2001 was $37,970. In addition, the Company paid finder fees to other affiliates. During the development stage, overhead costs incurred by the Company were absorbed by IBF Management, as required under the subordinated bond agreement. IBF Management computed the portion of its payroll, rent equipment leases and other expense applicable to the Company. Such amount was treated as an expense in the financial statements and a concomitant contribution to the Company's capital. Total amount applicable to the Company was $43,750 for the year ended December 31, 2000. 9. SEC Investigation: On December 20, 2001, the Securities and Exchange Commission commenced a formal investigation of IBF VI, its parent and certain of its affiliates. IBF VI and its affiliates believe that they have not violated the federal securities laws and are cooperating fully with the investigation. The IBF VI understands that the Staff of the SEC intends to recommend that the Commission authorize an enforcement action against the Company that would allege that they are a 1940 Act Company and other issues relating to disclosure. The Company believes that an action by the SEC would be without merit and the Company is in discussions with the Staff in an effort to persuade it that such an action is not warranted. While the Commission may or may not follow any recommendation of the Staff, if an action were to be instituted against IBF VI or its affiliates, the Company's business could be materially adversely affect. 10. Accounting Developments: In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities", which requires that all derivative financial instruments be recognized as either assets or liabilities in the balance sheet. SFAS No. 133, which was effective for the first quarter of 2001, has not had a material impact on the Company's results of operations, financial position or cash flows. In July 2001, FASB issued SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires business combinations initiated after June 30, 2001 to be accounted for using the purchase method of accounting, and broadens the criteria for recording intangible assets separate from goodwill. SFAS No. 142 requires the use of a non-amortization approach to account for purchased goodwill and certain intangibles, effective January 1, 2002. The Company does not believe that the adoption of these pronouncements will have a material impact on its financial statements. FASB also recently issued SFAS No. 143, "Accounting for Asset Retirement Obligations" and SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 143 requires the recognition of a liability for the estimated cost of disposal as part of the initial cost of a long-lived asset. SFAS No. 144 supersedes SFAS No. 121 to supply a single accounting approach for measuring impairment of long-lived assets, including segment of a business accounted for as a discontinued operation or those to be sold or disposed of other than by sale. The Company believes that adopting these pronouncements on its financial statements will not have a material impact on its financial statements. 11. Subsequent Event (Unaudited): Chapter 11 Filing: As a result of the SEC investigation (see Note 9), the Company suspended its bond offering as of January 31, 2002. Since the Company is unable to settle with the SEC on its investigation, and the bond offerings are unable to resume, the Company will have difficulties in meeting its obligations and to fund its operations. Accordingly, on June 7, 2002, the Company filed a voluntary petition with the United States Bankruptcy Court under the provisions of Chapter 11 of the Bankruptcy Code. The petition was filed in the United States Bankruptcy Court for the Southern District of New York (Case No. 02-41591). No trustee, receiver fiscal agent or similar officer has been appointed with respect to the Company, its parent or any affiliate, which continue to operate their businesses as debtors in possession. The accompanying financial statements do not include any adjustments that might result from the outcome of this event. Loans Receivable - Best Western: In January 2002, the Company exercised its remedies under the Loan and Security Agreement and related documents to assume control of Ganesh Hospitality, the entity that owns the Best Western (see Note 3). In this regard the Company removed the existing officers and directors and replaced them with the president of the Company. The Company also obtained an injunction prohibiting the former controlling parties of Ganesh from interfering with the operations of the property. The Company removed the existing property management company and installed Crossroads Hospitality Management Company as the new property management company.

IBF VI GUARANTEED INCOME FUND 10-K/A