SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 Form 10-K
 
 
 
 For the fiscal year ended April 30, 2004
 
 OR
 
 
 
 For the transition period from _______________ to _______________.
 
 
 Commission file number O-24512
 
 
 Anza Capital, Inc.
 (Exact name of registrant as specified in its charter)
 
 Nevada
(State or other jurisdiction of
incorporation or organization)
88-1273503
(I.R.S. Employer
Identification No.)3200 Bristol Street, Suite 700
Costa Mesa, CA
(Address of principal executive offices)
92626
(Zip Code) 
 Registrants telephone number, including area code (714) 866-2100
 
 
 Securities registered pursuant to Section 12(b) of the Act:
 
 Title of each class

Name of each exchange on which registeredNone

None 
 
 Securities to be registered pursuant to Section 12(g) of the Act:
 
 Common Stock, par value $0.001
 (Title of class)
 
 
 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  X No .


Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not 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-K or any amendment to this Form 10-K. [ ]







Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).


Yes  No X.





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 last sold, or the average bid and asked price of such common equity, as of the last business day of the registrants most recently completed second fiscal quarter. $1,466,021 based on $0.452, the average of the closing bid and ask price for the common stock on October 31, 2003.





Applicable only to issuers involved in bankruptcy proceedings during the preceding five years:





Indicate by check mark whether the registrant filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes No .





Applicable only to corporate issuers





Indicate the number of shares outstanding of each of the issuers classes of common equity, as of the latest practicable date. As of July 15, 2004, there were 9,756,346 shares of common stock issued and 5,618,846 shares of common stock outstanding.





Documents Incorporated by Reference





List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus filed pursuant to rule 424(b) or (c) of the Securities Act of 1933. The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1980). None.


























ANZA CAPITAL, INC.





TABLE OF CONTENTS





PART I


ITEM 1
BUSINESS
1ITEM 2
PROPERTIES
11ITEM 3
LEGAL PROCEEDINGS
11ITEM 4
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
13PART IIITEM 5
MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
14ITEM 6
SELECTED FINANCIAL DATA
17ITEM 7
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
17ITEM 7A
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
32ITEM 8
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
33ITEM 9
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
33ITEM 9A
CONTROLS AND PROCEDURES
33ITEM 10
DIRECTORS AND EXECUTIVE OFICERS OF THE REGISTRANT
34ITEM 11
EXECUTIVE COMPENSATION
36ITEM 12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
38ITEM 13
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
41ITEM 14
PRINCIPAL ACCOUNTANTS FEES AND SERVICES
42ITEM 15
EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
43












PART I
 
 This Annual Report includes forward-looking statements within the meaning of the Securities Exchange Act of 1934 (the Exchange Act). These statements are based on management's beliefs and assumptions, and on information currently available to management. Forward-looking statements include the information concerning possible or assumed future results of operations of the Company set forth under the heading Managements Discussion and Analysis of Financial Condition or Plan of Operation. Forward-looking statements also include statements in which words such as expect, anticipate, intend, plan, believe, estimate, consider or similar expressions are used.
 
 Forward-looking statements are not guarantees of future performance. They involve risks, uncertainties and assumptions. The Companys future results and shareholder values may differ materially from those expressed in these forward-looking statements. Readers are cautioned not to put undue reliance on any forward-looking statements.
 
 ITEM 1  BUSINESS
 
 Business Overview
 
 We are a holding company which currently operates through six (6) subsidiaries, namely American Residential Funding, Inc., a Nevada corporation (AMRES), ExpiDoc.com, Inc., a California corporation (Expidoc), Titus Real Estate LLC, a California limited liability company (Titus Real Estate), Bravo Realty.com, a Nevada corporation (Bravorealty.com), Bravo Real Estate, Inc. (Bravo Real Estate Network), and AMRES Direct, Inc.
 
 General
 
 Anza Capital, Inc. (ANZA) is a financial services company whose primary subsidiary, American Residential Funding, Inc. (AMRES), provides home financing through loan brokerage and banking. Another subsidiary, Expidoc.com, previously arranged for notaries to perform loan document signing services for lenders, but operations of Expidoc were closed down in January, 2004. Bravo Real Estate Services, Inc. was in the process of launching a real estate brokerage franchise business, but operations have ceased. Bravo Realty.com has had limited operations in the last two years and Titus Real Estate LLC is currently non-operational.
 
 AMRES
 
 Loan Making
 
 AMRES is primarily a loan broker, arranging during the fiscal year ended April 30, 2004 an average of greater than $150,000,000 per month in home loans. AMRES, through its agents in some 125 branches (an average of 1-8 agents in each branch) is licensed in 34 states to originate loans. AMRES has a $10,000,000 warehouse line of credit with which to directly fund loans. Currently, less than 5% of total loan volume is funded this way, although this percentage is expected to increase in future periods. AMRES, through its loan agents, locates prospective borrowers from real estate brokers, home developers, and marketing to the general public. After taking a loan application, AMRES processes the loan package, including obtaining credit and appraisal reports. AMRES then presents the loan to one of approximately 420 approved lenders, who then approve the loan, draw loan documents, and fund the loan. AMRES receives a commission for each brokered loan, less what is paid to each agent.
 
 1
  Loan Standards
 
 Mortgage loans arranged by AMRES are generally loans with fixed or adjustable rates of interest, secured by first mortgages, deeds of trust or security deeds on residential. Generally, mortgage loans having a loan-to-value ratio in excess of 80% will be covered by a Mortgage Insurance Policy, FHA Insurance Policy or VA Guaranty insuring against default of all or a specified portion of the principal amount thereof.
 
 The mortgage loans are generally one-to-four-family mortgage loans, which are permanent loans (as opposed to construction or land development loans) secured by mortgages on non-farm properties, including attached or detached single-family or second/vacation homes, one-to-four-family primary residences and condominiums or other attached dwelling units, including individual condominiums, row houses, townhouses and other separate dwelling units even when located in buildings containing five or more such units. Each mortgage loan may be secured by an owner-occupied primary residence or second/vacation home, or by a non-owner occupied residence. The mortgaged property may be a mobile home.
 
 In general, no mortgage loan is expected to have an original principal balance less than $30,000. While most loans will be less than $700,000, loans of any size may be brokered to unaffiliated third-party mortgage lenders.
 
 Credit, Appraisal and Underwriting Standards
 
 Each mortgage loan must (i) be an FHA-insured or VA-guaranteed loan meeting the credit and underwriting requirements of such agency, or (ii) meet the credit, appraisal and underwriting standards established by the lender for which the loan is brokered or sold. A lender's underwriting standards are intended to evaluate the prospective mortgagor's credit standing and repayment ability, and the value and adequacy of the proposed mortgaged property as collateral. The various lenders underwriting standards generally follow guidelines acceptable to FNMA (Fannie Mae) and FHLMC (Freddie Mac). The lenders underwriting policies may be varied in appropriate cases, especially in sub-prime loans.
 
 Mortgage Software and Technology
 
 AMRES currently uses loan origination software developed by an independent third party. The software allows the routing of pertinent information to the automated underwriting systems employed by Fannie Mae and Freddie Mac, the primary secondary-market purchasers of mortgages, and the automated systems of independent lenders such as IndyMac.
 
 AMRES has developed a fully automated online system to help us better serve our branches. The software allows our branches to upload loans and submit them directly to DU, DO and LP without the use of any third party loan origination software.
 
 Discussion of Other Operations
 
 ExpiDoc 3⁄4 Nationwide Notary Services
 
 ExpiDoc was an Internet-based nationwide notary service that specialized in providing mortgage brokers and bankers with a solution to assist with the final step of the loan process: notarizing signatures of the loan documents. ExpiDoc provided its clients with real-time access to the status of their documents, 24 hours a day, 7 days a week. ExpiDoc's proprietary software executed both the front office notary coordination and the back office administration. During its business period, ExpiDoc employed 5 people, all located in Costa Mesa. In January 2004, due to a sharp decline in demand for its services driven primarily by the decreased business from DiTech.com, we discontinued operations at ExpiDoc.
 
 2
  Bravorealty.com and Bravo Real Estate, Inc.
 
 Bravorealty.com, which is not affiliated with the now non-operational Bravo Real Estate, Inc. is a real estate brokerage that was incorporated in May 2000 and began operations in January 2001. AMRES owns 69% of Bravorealty.com, with the balance owned by Vincent Rinehart (15%), David Villarreal (15%), and Kevin Gadawski (1%). Bravorealty.coms business model targets real estate agents as its customers and offers 100% commission retention for the agent, while charging a minimal fixed fee per closed transaction. For the year ended April 30, 2003, Bravorealty.com generated approximately $589,000 in gross revenue and netted a loss of approximately $5,000. For the year ended April 30, 2004, gross revenues were $597,902 with a net loss of $22,647.
 
 In 2003, we reviewed the business model of Bravorealty.com and Brave Real Estate, Inc. and determined that a franchise type model for Bravo Real Estate, Inc. would provide us the best opportunity to grow our real estate business quicker and with a higher degree of profitability. As such, during 2003 and 2004 we attempted to launch Bravo Real Estate Network, a franchise-type real estate brokerage division of Bravo Real Estate, Inc. It was anticipated that the majority of the Bravorealty.com agents would be transitioned to Bravo Real Estate Network.
 
 
 Under our franchise model, Bravo Real Estate, Inc. will collect an initial franchise fee, as well as an ongoing percentage of the gross commissions earned, anticipated to be collected at the closing of escrow on each transaction. In addition, we will also require that a small percentage of each transaction be set aside for target marketing in each specific region (newspaper advertisements, homes for sale brochures, etc.) Initially, we plan to recruit ten agents in each of our target markets, namely Los Angeles/South Bay, San Diego, Orange County, San Fernando Valley, Inland Empire, Bakersfield/Fresno/Sacramento and the Bay area. The startup franchise fee for these agents is estimated to be approximately $4,000. As we increase our agent base beyond these initial agents, we anticipate that the startup franchise fee will increase.
 
 We believe there are many benefits for prospective agents. First the initial franchise fee for a more mature brand name is typically in the range of $25,000. Second, we will be able to offer our prospective agents all of the tools they require to grow their business, including, but not limited to, recruiting and training materials, internet presence through our website (each agent will have their own web page) and high quality selling and marketing brochures which may otherwise be unavailable to them due to the added benefit we offer in purchasing through economies of scale.
 
 Titus Real Estate
 
 Titus Real Estate is the management company of Titus REIT. Titus REIT sold its last property and has distributed the final proceeds to the REIT shareholders, and thus Titus Real Estate is now non-operations.
 
 3
  AMRES Direct, Inc.
 
 AMRES Direct, Inc., formerly Red Carpet Holdings, Inc., was recently activated to focus on direct-to-consumer marketing. The company is obtaining licenses and lenders at this time, and has no revenue or business.
 
 Sales and Marketing
 
 We have marketed and sold our mortgage brokerage services primarily through a direct sales force of loan agents totaling between 20 and 40 persons throughout the year based in Costa Mesa, California, as well as over 525 loan agents at branch locations. We maintain 3 Company-leased offices in Southern California and more than 125 branch offices in 34 states.
 
 Our sales efforts are headquartered primarily in our Costa Mesa, California office. Once a branch is opened, a branch manager supervises a licensed branch office and its employees, and receives all of the profits of that branch, after all relevant expenses and corporate fees have been collected. AMRES provides accounting, licensing, legal, compliance and lender access for each branch, retaining a percentage of commission generated by loan correspondents at each branch. The branch managers must follow all guidelines set forth by AMRES as well as all regulations of various government agencies and in most cases are independently responsible for the expenses incurred at the branch level, including personnel expenses. However, both State and Federal regulations are increasingly shifting various liabilities to AMRES.
 
 Competition
 
 We face intense competition in the origination, brokering and banking of our mortgage loans. Such competition can be expected from banks, savings and loan associations and other entities, including real estate investment trusts. Many of our competitors have significantly more assets and greater financial resources than us. In addition, there may be other competitors that we have not identified. We can make no representations or assurances that there will not be increased competition or that our projections will ever be realized. Competition among companies similar to AMRES that are seeking to acquire or establish branches, continues to intensify.
 
 Proprietary Rights and Licensing
 
 We may rely on a combination of trademark laws, trade secrets, confidentiality procedures and contractual provisions with its employees, consultants and business partners to protect our proprietary rights. We may seek to protect our electronic mortgage product delivery systems, documentation and other written materials under trade secret and copyright laws, which afford only limited protection. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our systems or to obtain and use information that we regard as proprietary. While we are not aware that any of our systems infringe upon the proprietary rights of third parties, there can be no assurance that third parties will not claim infringement by us with respect to current or future products.
 
 In addition, we rely on certain software that we license from third parties, including software that is used in conjunction with our mortgage products delivery systems. There can be no assurance that such firms will remain in business, that they will continue to support their products or that their products will otherwise continue to be available to us on commercially reasonable terms. The loss or inability to maintain any of these software or data licenses could result in delays or cancellations of loans being brokered or banked.
 
 4
  Environmental Matters
 
 We have not been required to perform any investigation or clean up activities, nor have we been subject to any environmental claims. There can be no assurance, however, that this will remain the case in the future.
 
 Trade Names and Service Marks
 
 We devote substantial time, effort, and expense toward developing name recognition and goodwill for our trade names for our operations. We intend to maintain the integrity of our trade names, service marks and other proprietary names against unauthorized use and to protect the licensees use against claims of infringement and unfair competition where circumstances warrant. Failure to defend and protect such trade name and other proprietary names and marks could adversely affect our sales of licenses under such trade name and other proprietary names and marks. We know of no current materially infringing uses. We have filed for trademark protection for the AMRES logo and the American Residential Funding name.
 
 Employees
 
 As of July 15, 2004, we employed a total of approximately 822 persons. Of the total, 55 officers and employees were employed at the principal executive offices of the Company in Costa Mesa, California, all of whom were engaged in Finance and Administration. In addition, we employ approximately 767 individuals through our Branch operations, 216 of which were engaged in loan administration and 551 of which were engaged in loan production. None of our employees is represented by a labor union with respect to his or her employment.
 
 Historical Changes in Business Strategy and Changes in Control
 
 Anza Capital, Inc. (Anza or the Company) was incorporated in the State of Nevada on August 18, 1988 as Solutions, Incorporated. Since that time, we have undergone a series of name changes as follows: Suarro Communications, Inc., e-Net Corporation, e-Net Financial Corp., e-Net.Com Corporation, e-Net Financial.Com Corporation, and finally, effective on January 2, 2002, Anza Capital, Inc.
 
 We have undergone two recapitalizations. In November 1999, our outstanding common stock underwent a two-for-one forward split. Effective in April 2003, (a) our preferred stockholders exchanged their Series A and Series C preferred stock for newly created Series E and Series D preferred stock, respectively, (b) our President exchanged cancelled options and converted debt into common stock and newly created Series F preferred stock, and (c) our common stock underwent a one-for-twenty reverse stock split, resulting in a decrease in our outstanding common stock from 99,350,000 shares to 4,967,500 shares. Please see further discussion of the recapitalization under Recapitalization.
 
 
 On April 12, 2000, we closed the acquisition of AMRES and Bravo Real Estate. Pursuant to the Amended and Restated Purchase Agreement, we issued 375,000 shares (adjusted to reflect the 1-for-20 reverse stock split effective on April 21, 2003) of our common stock to EMB, representing nearly 40% of our then issued and outstanding common stock, paid $1,595,000 cash, and issued a promissory note in the initial amount of $2,405,000, and AMRES and Bravo Real Estate became our wholly owned subsidiaries. As of April 30, 2001, the remaining principal balance of the promissory note was $1,055,000, and the note was cancelled in its entirety effective June 27, 2001, (see discussion of Global Settlement below). AMRES was the acquirer for financial reporting purposes. Since Bravo Real Estate had no operations or net assets, our management determined that a nominal value of $1,000 be attributed to its name. The fair value attributable to the 375,000 (adjusted to reflect the 1-for-20 reverse stock split effective on April 21, 2003) of our common stock on April 12, 2000 was $3,838,000 based on the fair value of assets acquired. Because the purchase was accounted for as a reverse acquisition, the $4.0 million in cash and notes issued to EMB were treated as a deemed distribution with a charge to our accumulated deficit. On April 12, 2000, James E. Shipley, the former CEO of EMB, was elected our Chairman of the Board of Directors and Vincent Rinehart was elected our President, Chief Executive Officer, and a director. Bravo Real Estate has not sold any franchises and is attempting to become an operating subsidiary.
 
 5
 Mr. Shipley was the CEO, President, and a less than 5% owner of EMB at the time of our acquisition of AMRES and Bravo from EMB. Mr. Shipley resigned as Chairman of EMB and became our Chairman in April 2000 (replacing Mr. Roth as our Chairman), and then resigned as our chairman and one of our officers on December 31, 2000, when Mr. Rinehart became our Chairman.
 
 Mr. Rinehart was never an officer or director of EMB, but was the owner of 100,000 shares (adjusted to reflect the 1-for-20 reverse stock split effective on April 21, 2003) of EMB common stock, making him less than a 10% owner of EMB at the time of the sales in April 2000, and continues as one of our officers and directors, as well as an officer of all of our wholly-owned subsidiaries.
 
 On April 12, 2000, in accordance the provisions of the Certificate of Designations, Preferences and Rights of Class B Convertible Preferred Stock, AMRES Holding/Rinehart demanded that its B Preferred be repurchased by us for an aggregate of one million dollars. On April 20, 2000, we agreed with AMRES Holding/Rinehart and Mr. Presta to amend the Titus Purchase Agreement to provide for the return of 100,000 shares of our Class B preferred stock issued to AMRES Holding and Mr. Presta upon the issuance of 50,000 shares (adjusted to reflect the 1-for-20 reverse stock split effective on April 21, 2003) of our common stock to them.
 
 On May 24, 2000, Michael Roth and Jean Oliver, the sole remaining officers and directors of prior management, resigned their remaining positions with us. On that date, Mr. Presta, an executive officer and director of Titus Real Estate, was elected as our Secretary and as one of our directors.
 
 Bridge Financing
 
 On June 27, 2001, we entered into an Investment Agreement and related documents with Laguna Pacific Partners, LLP. Under the terms of the agreements, in exchange for $225,000 received by us from Laguna Pacific, we:
 
 (i)  executed a promissory note in favor of Laguna Pacific in the principal sum of $200,000, bearing interest at the rate of 7% per annum, secured by all of our assets, and payable on the earlier of nine months from its issuance date or the date our common stock is listed on the NASDAQ Small Cap market. The purpose of this bridge financing was to finance the proposed start-up of Anza Properties and to provide us with working capital;
 
 6
  (ii)  executed a Warrant Agreement which entitled Laguna Pacific to acquire up to $225,000 worth of our common stock for the total purchase price of $1.00, calculated at 70% of the closing stock price on the date immediately preceding the exercise date. The issuance of the warrant was negotiated between us and Laguna Pacific.
 
 Other than as set forth above, we have no affiliation with Laguna Pacific or any of their respective officers or directors. Mr. Ehrlich was the general partner of Laguna Pacific and has passed away.
 
 During the year ended April 30, 2002, we repaid an initial $25,000 borrowed from Laguna Pacific. In June 2002, we entered into a Settlement Agreement and General Mutual Release with Laguna Pacific. As consideration under the settlement, we repaid the $200,000 note, 150,000 shares (adjusted to reflect the 1-for-20 reverse stock split effective on April 21, 2003) of our common stock, plus accrued interest, and the note and warrants were cancelled.
 
 Subsequent to the Laguna Settlement, a dispute arose regarding whether or not the Laguna Settlement included and consequently canceled the warrants. On October 25, 2002, the board of directors authorized the issuance of 150,000 shares (adjusted to reflect the 1-for-20 reverse stock split effective on April 21, 2003) of the Companys common stock upon exercise of the Laguna warrant. The stock was valued at the fair market value on the date the settlement was executed of $0.60 per share, less a 10% reduction based on the Rule 144 restriction. The value of the 150,000 shares issued to Laguna was determined to be $81,000. The value of the warrant immediately prior to the settlement was determined to be equal to the original relative value of the warrant, since no economic changes impacted the value of the warrant since the date of issuance. During the twelve months ended April 30, 2003, management recorded a gain on the settlement as other income in the amount of $51,543.
 
 
 Formation of Anza Properties, Inc.
 
 Also on June 27, 2001, in transactions related to the agreements with Laguna Pacific, we formed a wholly-owned subsidiary, Anza Properties, Inc., a Nevada corporation (Anza Properties) capitalized with $75,000 from the proceeds of the bridge loan, which:
 
 (i)  executed a Bond Term Sheet with us outlining the proposed terms of an offering to raise up to $5,000,000. The purpose of this offering was to obtain capital on behalf of Anza Properties to acquire income producing real estate. This real estate would then provide us with improved cash flow and net worth, on a consolidated basis;
 
 (ii)  entered into an Employment Agreement with Thomas Ehrlich beginning 30 days from the date of the agreement and ending upon the earlier to occur of the liquidation of the real estate portfolio to be owned by Anza Properties or the completion of our listing on t he NASDAQ Small Cap market. The Employment Agreement provided for a salary of $20,000 per month, payable only by Anza Properties and specifically not guaranteed by us. Mr. Ehrlich was to serve as Anza Properties Vice President and be a director thereof. In connection with the Employment Agreement, we executed a Stock Option Agreement which entitled Ehrlich to acquire up to 100,000 shares (adjusted to reflect the 1-for-20 reverse stock split effective on April 21, 2003) of our common stock at the closing price on the date of the Option Agreement, vesting equally over the 12 months following the date of the Employment Agreement, and exercisable only in the event Anza Properties is successful in raising a minimum of $2,000,000 in a contemplated $5,000,000 bond offering, and the holders thereof converting at least $2,000,000 of the bonds into our equity (any amounts less than $2,000,000 will be applied, pro-rata, to the total options exercisable under the Option Agreement). Mr. Ehrlich was to be involved in the identification of potential investment opportunities, the acquiring of capital, and the operation of Anza Properties;
 
 7
  (iii)  entered into a Consulting Agreement with Lawrence W. Horwitz to provide services to Anza Properties. The Consulting Agreement provided for compensation of $20,000 to be paid on its date of execution, and $5,000 per month for 8 months beginning September 1, 2001, guaranteed by us. In addition, we executed a Stock Option Agreement that entitled Horwitz to acquire up to 50,000 shares (adjusted to reflect the 1-for-20 reverse stock split effective on April 21, 2003) of our common stock on terms identical to those of Ehrlich, described above. Mr. Horwitz is a licensed California attorney. Mr. Horwitz is providing legal services to us and Anza Properties.
 
 (iv)  entered into an Operating Agreement with us concerning the operations of Anza Properties. The Operating Agreement specifies in material part that Vince Rinehart will be the President of Anza Properties, that Mr. Rinehart and Mr. Ehrlich will be the directors, that the signatures of both Mr. Rinehart and Mr. Ehrlich will be required on all checking accounts, and that the assets of Anza Properties cannot be encumbered without the express written consent of Mr. Rinehart and Mr. Ehrlich.
 
 See our Notes to the Consolidated Financial Statements for accounting treatment of options and warrants issued above.
 
 The purpose of Anza Properties was primarily to improve our net worth by acquiring income producing real estate.
 
 Due to the death of Mr. Thomas Ehrlich in March 2002, all operational and fundraising efforts associated with Anza Properties have been permanently discontinued. The Bond Term Sheet, Employment Agreement with Mr. Ehrlich, Stock Option Agreements with Mr. Ehrlich and Horwitz, and Operating Agreement have all been subsequently cancelled. Anza Properties remains our wholly-owned subsidiary.
 
 Global Settlement
 
 As part of the acquisition of AMRES, we were obligated to file a registration statement with the Securities and Exchange Commission for the purpose of registering 375,000 shares (adjusted to reflect the 1-for-20 reverse stock split effective on April 21, 2003) of our common stock issued to EMB. Additionally, we were obligated to pay the sum of $4,000,000 under the terms of a promissory note issued to EMB.
 
 In an unrelated transaction, Williams de Broe (Wdb) loaned the sum of $700,000 to EMB, which remained unpaid at the time of the Global Settlement. In connection with a revision of the agreement between EMB and Williams de Broe, our then-chairman (Mr. Shipley) executed a document on our behalf in favor of Williams de Broe, which Williams de Broe believed acted as our guarantee of EMBs obligation. We disputed this assertion.
 
 In order to settle the outstanding disputes among all the parties, on June 26, 2001, we entered into a settlement agreement with EMB Corporation, AMRES Holding LLC, Vincent Rinehart, and Williams de Broe (the Global Settlement). As part of the Global Settlement:
 
 8
  (i)  we issued to EMB 75,000 shares (adjusted to reflect the 1-for-20 reverse stock split effective on April 21, 2003) of restricted common stock as consideration for EMBs waiver of its registration rights for 375,000 shares (adjusted to reflect the 1-for-20 reverse stock split effective on April 21, 2003) of our common stock already held by EMB. The shares were valued at $2.80 (adjusted to reflect the 1-for-20 reverse stock split effective on April 21, 2003) per share based on a 10% discount from the closing price on the date of the agreement. We recorded a settlement expense of $229,500 with regard to this issuance. We issued to EMB a promissory note in the principal amount of $103,404, which represents the reduced amount due to EMB by us under a promissory note previously issued in connection with the AMRES acquisition, after giving effect to a principal reduction offset for amounts owed by EMB to Wdb, but which were satisfied by us (see below). The note bears interest at the rate of 10% per annum and is convertible into our common stock;
 
 (ii)  we issued to Wdb 150,000 shares (adjusted to reflect the 1-for-20 reverse stock split effective on April 21, 2003) of our restricted common stock valued at $459,000 as consideration for Wdbs release of all claims against us arising under our purported guarantee of EMBs obligation to Wdb. The parties agreed that the amount be credited as additional consideration to apply to the EMB notes payable. We received relief of debt to EMB in the amount of $624,766, but do not expect to receive any reimbursement from EMB;
 
 (iii)  EMB acknowledges its obligations to pay all outstanding leases covering equipment and/or furniture now in our possession as contemplated by the agreement;
 
 (iv)  EMB assigns its rights to all of our note payable totaling $485,446 to AMRES Holdings LLC, owned by Vincent Rinehart. The note bears interest at 10% per annum. This note is convertible into shares of our common stock based on 80% of the closing stock price on the date of the conversion. We assigned a value of approximately $60,681 to the beneficial conversion feature imbedded in this note. The entire principal balance, together with accrued interest, shall be due and payable, in full, on December 15, 2002.
 
 (v)  EMB forgave principal and interest totaling $168,006. The balance of $103,404 convertible notes was issued, bearing interest at 10% per annum. On January 17, 2002, AMRES purchased the note, plus $6,291 in accrued interest, from EMB for the sum of $40,000, of which $25,000 was paid immediately and the balance of $15,000 was paid on June 1, 2002.
 
 Termination of Homelife, Inc. Merger Transaction
 
 On October 7, 2002, we issued a press release announcing the execution of a Reorganization Agreement with Homelife, Inc. The Reorganization Agreement requires the approval of each of our common and preferred shareholders. Under the terms of the Agreement, our current management team would have assumed the management responsibilities of the surviving company, which would have consisted of Anzas current assets and subsidiaries and HomeLifes Red Carpet Real Estate trademark and operations.
 
 On February 27, 2003, due to a number of factors including but not limited to changing market conditions, the failure of Homelife to fulfill one or more of its obligations under the agreement, and the extended period of time it would take to complete the reorganization, we notified Homelife of our intent to terminate the Reorganization Agreement. On March 12, 2003, we entered into a Mututal Release Agreement with all the parties to the Agreement which terminated the Reorganization Agreement between the parties.
 
 9
  Recapitalization
 
 In the fourth quarter of the 2003 fiscal year, we underwent a series of transactions, which were undertaken as part of a plan of recapitalizing the Company so as to better position it for growth and acquisitions. In each transaction with the Series A and Series C preferred stockholders, the stockholders exchanged their preferred stock for a new class of preferred stock that the Board of Directors believed was less burdensome to the Company, primarily because of its more favorable conversion provisions. In the transaction involving the exchange of debt, the Company was able to materially reduce its debt load. These transactions, in conjunction with the 1-for-20 reverse stock split that was effective April 21, 2003, are believed by management to have positioned the Company for increased liquidity in its common stock, which will allow the Company to more easily raise capital and engage in acquisitions. The transactions specifically undertaken were:
 
 (a)  a Stock Exchange Agreement dated February 28, 2003, by and between Anza Capital, Inc. and Keyway Investments, Ltd. Under the terms of the agreement, Keyway exchanged 4,006 shares of Series C Convertible Preferred Stock for (i) 409,075 shares (after giving effect to the 1-for-20 reverse stock split effective April 21, 2003) of common stock, (ii) 2,003 shares of newly created Series D Convertible Preferred Stock, and (iii) warrants to acquire 183,168 shares (after giving effect to the 1-for-20 reverse stock split effective April 21, 2003) of common stock, exercisable for a period of five years, with each one-third at an exercise price of $0.50, $0.75, and $0.90 per share, respectively.
 
 (b)  a Stock Exchange Agreement dated February 28, 2003 by and between Anza Capital, Inc. and EURAM Cap Strat. A Fund Limited. Under the terms of the Agreement, EURAM exchanged 4,051 shares of Series C Convertible Preferred Stock for (i) 413,670 shares (after giving effect to the 1-for-20 reverse stock split effective April 21, 2003) of common stock, (ii) 2,025.5 shares of newly created Series D Convertible Preferred Stock, and (iii) warrants to acquire 185,226 shares (after giving effect to the 1-for-20 reverse stock split effective April 21, 2003) of common stock, exercisable for a period of five years, with each one-third at an exercise price of $0.50, $0.75, and $0.90 per share, respectively.
 
 (c)  a Stock Exchange Agreement dated February 28, 2003 by and between Anza Capital, Inc. and The dotCom Fund, LLC. Under the terms of the agreement, dotCom Fund exchanged 2,195 shares of Series C Convertible Preferred Stock for (i) 224,144 shares (after giving effect to the 1-for-20 reverse stock split effective April 21, 2003) of Common Stock, (ii) 1,097.5 shares of newly created Series D Convertible Preferred Stock, and (iii) warrants to acquire 100,362 shares (after giving effect to the 1-for-20 reverse stock split effective April 21, 2003) of common stock, exercisable for a period of five years, with each one-third at an exercise price of $0.50, $0.75, and $0.90 per share, respectively.
 
 (d)  a Stock Exchange Agreement dated February 28, 2003 by and between Anza Capital, Inc. and Cranshire Capital, L.P. Under the terms of the agreement, Cranshire exchanged 6,151 shares of Series C Convertible Preferred Stock for (i) 628,113 shares (after giving effect to the 1-for-20 reverse stock split effective April 21, 2003) of common stock, (ii) 3,075.5 shares of newly created Series D Convertible Preferred Stock, and (iii) warrants to acquire 281,244 shares (after giving effect to the 1-for-20 reverse stock split effective April 21, 2003) of common stock, exercisable for a period of five years, with each one-third at an exercise price of $0.50, $0.75, and $0.90 per share, respectively.
  10
  
 (e)  a Stock Exchange Agreement dated February 28, 2003, by and between Anza Capital, Inc. and Barbara Dunster. Under the terms of the agreement, Dunster exchanged 347,643 shares of Series A Convertible Preferred Stock for 173,822 shares of newly created Series E Convertible Preferred Stock.
 
 (f)  a Stock Exchange Agreement dated February 28, 2003, by and between Anza Capital, Inc. and the Staron Family Trust. Under the terms of the agreement, Staron exchanged 86,911 shares of Series A Convertible Preferred Stock for 43,456 shares of newly created Series E Convertible Preferred Stock.
 
 (g)  a Debt Exchange Agreement dated February 28, 2003, by and between Anza Capital, Inc. and Vincent Rinehart. Under the terms of the agreement, Rinehart (i) cancelled options to acquire 2,500,000 shares of common stock and (ii) converted an aggregate of $433,489 in principal and interest under a promissory into (y) 300,000 shares (after giving effect to the 1-for-20 reverse stock split effective April 21, 2003) of common stock, and (z) 18,800 shares of newly created Series F Convertible Preferred Stock.
 
 ITEM 2  PROPERTIES
 
 Our principal place of business is in Costa Mesa, California, where we lease an approximately 18,100 square foot facility for approximately $367,000 per annum (subject to usual and customary adjustments), under a written lease which terminates in June 2008. This location houses our corporate finance, administration, and sales and marketing functions. AMRES leases 1,253 square feet of space at this same facility on a month-to-month basis for $2,631.
 
 AMRES leases additional facilities: Long Beach, California (month-to-month, $3,564 per month); and Riverside, California (term expiring in 2006, $2,599 per month).
 
 All HUD licensed branches, which represent over 13 of the more-than 125 total branches, are required by HUD to have branch expenses paid by AMRES. This is accomplished by using revenues in each AMRES branch bank account. The management agreement between the branch manager and AMRES requires prior approval of any obligations of AMRES exceeding $500. Office rent and similar liabilities are to be month-to-month obligations. In the course of ongoing internal audits, AMRES has found breaches of either AMRES or HUD requirements in the operation of specific branches, and has moved aggressively to take corrective action.
 
 We believe that our current facilities will be adequate to meet our needs, and that we will be able to obtain additional or alternative space when and as needed on acceptable terms.
 
 We may also hold real estate for sale from time to time as a result of our foreclosure on mortgage loans that may become in default. As of April 30, 2004, no such real estate is owned.
 
 ITEM 3  LEGAL PROCEEDINGS
 
 Oaktree Funding
 
 In March 2003, our wholly-owned subsidiary, American Residential Funding, was served with a lawsuit brought by Oaktree Funding Corporation, in the Superior Court of the State of California, County of San Bernardino, case number RCV 070427. Nineteen (19) defendants were named in the action, including AMRES, the appraiser, escrow company, notary public, and borrowers involved in six (6) different loan transactions brokered by AMRES and funded by Oaktree. The Complaint alleged, among other things, that the defendants committed fraud, breach of contract, negligent misrepresentation, RICO violations, and unfair business practices. The Complaint requested damages in excess of $1,500,000, plus attorneys fees, interest, penalties, and punitive damages. On June 14, 2004, we settled this matter and agreed to pay $31,500 and to indemnify Oaktree for up to an additional $15,000 on three (3) of the six (6) properties. We have maintained our cross-complaint and will attempt to recover our losses from the remaining cross-defendants.
 
 11
  Former Employees
 
 In October 2003, a lawsuit was filed against the Company, its wholly-owned subsidiary American Residential Funding, and its Chairman and CEO Vince Rinehart by a former employee Leigh Dimarco in the Superior Court of the State of California, County of Orange, case number 03CC12686. The Complaint alleges breach of contract and fraud arising our of the plaintiffs employment with the Company, and requests damages in excess of $2,000,000, plus attorneys fees, interest, penalties, and punitive damages. We are vigorously defending this lawsuit because we believe it lacks merit. We have answered, discovery is underway, and a trial date has been set for October 18, 2004 in this matter.
 
 In November 2003, a lawsuit was filed against the Company, its wholly-owned subsidiary American Residential Funding, and its Chairman and CEO Vince Rinehart by a former employee Jeff Hemm in the Superior Court of the State of California, County of Orange, case number 03CC13305. The Complaint alleges breach of contract and fraud arising our of the plaintiffs employment with the Company, and requests damages in excess of $5,000,000, plus attorneys fees, interest, penalties, and punitive damages. We are vigorously defending this lawsuit because we believe it lacks merit. We have answered, discovery is underway, and a trial date has been set for November 1, 2004 in this matter.
 
 Re-Opening of Matter with The Department of Housing and Urban Development
 
 On December 9, 2002, we received notification from HUD requesting indemnification on up to 23 loans brokered by a former loan officer of AMRES. We executed and provided an Indemnification Agreement to HUD as requested. On February 13, 2003, HUD notified us that (i) without the loans originated by this particular loan officer, AMRES default and claim rate would be at an acceptable level to HUD, and (ii) as a result of our termination of that loan officer, and the indemnification agreement, the matter was closed.
 
 During the quarter ended January 31, 2004, we received a demand from HUD under the indemnification agreement on two (2) claims, covering six (6) properties, for a total of approximately $170,000. Our errors and omissions insurance carrier denied coverage for this matter. On May 20, 2004, we agreed to make ten (10) monthly payments of $17,025 each to HUD in satisfaction of our obligations under the indemnification agreement.
 
 12
  Other Proceedings
 
 In the ordinary course of business, we are from time to time involved in various pending or threatened legal actions. The litigation process is inherently uncertain and it is possible that the resolution of such matters might have a material adverse effect upon our financial condition and/or results of operations. The aggregate amount of all claims from the various other legal proceedings pending against us is approximately $417,000. In the opinion of our management, other than as set forth herein, matters currently pending or threatened against us are not expected to have a material adverse effect on our financial position or results of operations.
 
 ITEM 4  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
 There have been no events that are required to be reported under this Item.
 
 13 PART II
 
 ITEM 5  MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
 Market Information






Fiscal Year
Ended
April 30,

Period

Bid PricesHigh

Low2003

First Quarter

$ 0.90

$ 0.42Second Quarter

$ 0.60

$ 0.30Third Quarter

$ 1.20

$ 0.30Fourth Quarter

$ 0.25

$ 0.0152004

First Quarter

$ 1.03

$ 0.25Second Quarter

$ 0.76

$ 0.25Third Quarter

$ 0.48

$ 0.25Fourth Quarter

$ 0.30

$ 0.212005

First Quarter (through June 30, 2004)

$ 0.21

$ 0.15




The Securities Enforcement and Penny Stock Reform Act of 1990 requires additional disclosure relating to the market for penny stocks in connection with trades in any stock defined as a penny stock. The Commission has adopted regulations that generally define a penny stock to be any equity security that has a market price of less than $5.00 per share, subject to a few exceptions that we do not meet. Unless an exception is available, the regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the risks associated therewith.
 
 Holders
 
 As of July 15, 2004, there were 9,756,346 shares of our common stock issued, and 5,618,846 shares of our common stock outstanding and held by 76 holders of record. As of July 15, 2004, there were 8,201.5 shares of Series D Convertible Preferred Stock outstanding and held by three shareholders of record, and 18,800 shares of Series F Convertible Preferred Stock outstanding and held by one shareholder of record.
 
 14
  Dividend Policy
 
 We have not paid any dividends on our common stock and do not expect to do so in the foreseeable future. We intend to apply our earnings, if any, in expanding our operations and related activities. The payment of cash dividends on our common stock in the future will be at the discretion of the Board of Directors and will depend upon such factors as earnings levels, capital requirements, our financial condition and other factors deemed relevant by the Board of Directors.
 
 Holders of our Series D Convertible Preferred Stock are entitled to receive a 7% annual dividend, payable each calendar quarter. We have the option of paying this dividend in cash, or in common stock at the average of the closing bid price for the last ten trading days of the applicable quarter. On April 30, 2004, we declared a total of 224,386 shares of our common stock as payment of dividends through that date.  The shares were issued subsequent to April 30, 2004.
 
 Holders of our Series F Convertible Preferred Stock are entitled to receive a dividend each fiscal quarter equal to 1.75 shares of our common stock for each share of Series F Convertible Preferred Stock. We have the option of paying this dividend in cash based on the closing bid price of our common stock for the last ten trading days of the applicable quarter. On April 30, 2004, we declared a total of 164,500 shares of our common stock as payment of dividends through that date.  The shares were issued subsequent to April 30, 2004.
 
 Securities Authorized for Issuance Under Equity Compensation Plans
 
 2000 Stock Compensation Program
 
 In December 1999, our Board of Directors approved the 2000 Stock Compensation Program (the 2000 Plan), as amended. A total of 440,000 shares (after giving effect to the 1-for-20 reverse stock split effective April 21, 2003) of common stock are reserved for issuance under the 2000 Plan, all of which have been issued. Unless terminated sooner, the 2000 Plan will terminate automatically in December of 2004.
 
 2003 Omnibus Securities Plan
 
 On February 28, 2003, our Board of Directors approved the Anza Capital, Inc. 2003 Omnibus Securities Plan. The Plan offers selected employees, directors, and consultants an opportunity to acquire our common stock, and serves to encourage such persons to remain employed by us and to attract new employees. The plan allows for the award of stock and options, up to 750,000 shares (after giving effect to the 1-for-20 reverse stock split effective April 21, 2003) of our common stock. On May 1 of each year, the number of shares in the 2003 Securities Plan shall automatically be adjusted to an amount equal to ten percent (10%) of the outstanding stock of the Company on April 30 of the immediately preceding year. On May 4, 2004, pursuant to this provision, our Board of Directors increased the number of shares available under the plan by 936,746 shares. During the fiscal year ended April 30, 2004, we issued 400,000 shares under the plan, and subsequent to the year-end 260,000 of the shares were returned. As of the date of this Annual Report, there are 796,746 shares available for issuance under the plan.
 
 As of April 30, 2004, the plan information for both the 2000 Stock Compensation Program and the 2003 Omnibus Securities Plan is as follows:
 
 15
  Plan Category
Number of Securities to beissued upon exercise of
outstanding options, warrants and rights


(a)
Weighted-average exercise price
of outstanding options, warrants
and rights


(b)
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
(c)Equity compensation plans
approved by security holders
****
-0-
N/A
536,746Equity compensation plans not approved by security holders
****
-0-
N/A
-0-Total
-0-
N/A
536,746
 
 Recent Sales of Unregistered Securities




16




ITEM 6  SELECTED FINANCIAL DATA
 
 Anza Capital, Inc.

For the year ended April 30, (in 000s)2004
2003
2002
2001
2000 (1)Statement of Operations Data:Total revenues




$
63,059


57,843


26,273


10,991


4,689Total cost of revenue





48,485


43,208


17,701


7,527


3,411Gross profit





14,574


14,635


8,572


3,463


1,277Total operating expenses





15,681


13,718


8,890


9,858


3,059Operating income (loss)





(1,106
)

916


(318
)

(6,394
)

(1,781
)Income (loss) from continuing operations





(1,183
)

736


(454
)

(6,573
)

(1,796
)Net income (loss)





(1,122
)

902


(442
)

(6,573
)

(1,796
)Net income (loss) per common share from continuing operations





(0.24
)

0.27


(0.25
)

(0.31
)

(0.22
)Net income (loss) per basic common share





(0.23
)

0.32


(0.24
)

(0.31
)

(0.22
)Balance Sheet Data:Current assets




$
7,903


12,871


3,236


1,080


694Total assets





8,269


13,343


3,775


1,607


4,871Current liabilities





7,796


11,412


2,921


1,455


3,500Total liabilities





7,796


11,412


3,330


2,791


3,640Total stockholders equity (deficit)





473


1,931


445


(1,184
)

1,230Total dividends per common share





-


-


-


-


-


(1)
 
 ITEM 7  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
 
  
  
 17
  OVERVIEW
 
  
 · American Residential Funding, Inc., a Nevada Corporation (AMRES) provides home financing through loan brokerage and banking.
 
 · Bravo Realty.com, a Nevada Corporation (Bravo), is a real estate sales company focused solely in California. Bravo has had limited operations over the last two years.
 
 Inactive Subsidiaries
 
 · Titus Real Estate LLC, a California limited liability company (Titus Real Estate) and Bravo Real Estate Services, Inc. (Bravo Real Estate Network) are currently non-operational.
 
 Discontinued Operations
 
 Expidoc.Com, a California Corporation (Expidoc) arranged for notaries to provide document-signing services for lenders across the country. Effective January 31, 2004, we suspended operations at Expidoc. This decision was a result of a sudden shift in customer mix, as Expidocs largest customer ceased using Expidoc as a third party provider of notary services. Expidoc generated  $60,913, $166,000 and $11,943 in net profits during the fiscal years ended April 30, 2004, 2003 and 2002, respectively. We have no plans to recommence business at Expidoc and as such, have classified it as a discontinued operation in the accompanying consolidated financial statements. In addition, during the current fiscal year, we recorded an impairment charge for all unamortized goodwill relating to Expidoc in the amount of $175,247.
 
 Continuing Operations
 
 As shown below, AMRES has consistently generated over 90% of our consolidated revenues. The industry in which AMRES operates is very competitive, and is dependent on a favorable interest-rate environment. Increases in interest rates can have a slowing effect on the number of new and refinance loans.
 
 18
  Percentage of Total Revenues by Service
 
 % YTD Revenue
April 30, 2004

% YTD Revenue
April 30, 2003

% YTD Revenue
April 30, 2002Broker Commissions
98.5 %

98.4 %

98.6 %Real Estate Services
1.0 %

.6%

.2%Sale of Loans
.5 %

.1.0%

1.2%Total
100 %

100 %

100 %
 
 
 The Mortgage Banking Association expects a decline in refinancing to $434 billion in 2004 versus $2.19 trillion in 2003. Brokerage activities are greatly influenced by changes in interest rates and comprise substantially all of the revenues of AMRES. As rates appear to have bottomed in late June 2003, AMRES has seen a significant drop in loan applications for refinancing compared to prior periods. Refinancing currently accounts for about 64% of our total loan production. This, coupled with seasonal declines, is the primary reason for our revenue declines in recent quarters when compared to prior periods.
 
 During the year ended April 30, 2004, we suffered net losses of $1,122,663 versus net income of $902,392during the year ended April 30, 2003. Loan production in our highest month of July 2003 totaled 1,394 loans. With loan production currently around 750 loans per month (as of April 2004), and without the effect of offsetting measures, business may drop to an estimated 600 loans per month or lower.
 
 We have slowed down the number of new branch additions due to an increase in quality standards, minimum volume requirements, and State preferences. At April 30, 2004, our branch count is approximately 121, down from approximately 200 at April 30, 2003. We continue to monitor all of our branches for probation and possible termination to continually ensure that we are focusing our resources on the most productive branches. AMRES has been fortunate to lure loan production officers from our competitors. As the mortgage industry contracts, AMRES will attempt to attract additional branches, production and staff from other firms in the industry. While our net worth does not allow any major acquisition efforts, we have made various contacts in our industry soliciting referrals of new business.
 
 As we continue to experience a significant slow down in the refinance business, and if we are unsuccessful in the business initiatives described above to expand our sources of revenue, we are prepared to take immediate actions to reduce our cost structure. If our total loan volume continues to decline, we will need fewer personnel to carry out the functions needed to support the loan process. Specifically, we would further reduce headcount in such areas as compliance, accounting and marketing. We are prepared to reduce our operating expenses by as much as 25%, if conditions warrant. If we are unable to generate additional sources of revenue, our results will continue to fluctuate and it may be difficult for us to curtail losses from operations. AMRES is establishing various business initiatives to reduce its reliance on the refinancing market. These initiatives include:
 
 · Expanding its mortgage banking operations, with emphasis on sub-prime lending, as there is a higher level of profitability delivered from banking these loans compared to brokering these loans. This initiative includes establishing a wholesale operation, which would allow AMRES to fund loans brokered by other companies.
 
 · Building strategic alliances with other business models such as loan lead generators, builders, labor unions, realtors and trade associations.
 
 19
  · Promoting more direct-to-consumer lending, through marketing, with products that are less sensitive to fluctuations in interest rates, such as home equity loans, construction loans and sub-prime loans. Areas we will explore for expansion include Loancomp.com, maxrelo.com, builder business, Lending Tree and joint ventures with other sources of loans such as debt counselors, realtor associations and affinity groups.
 
 · Continuing to solicit new branches to join our network, especially those branch operations that are purchase-home sensitive.
 
 ·
 
 
 
  
  
  
 20
   
  
 Loans Held for Sale
 
  
 Fair Value of Assets Acquired and Liabilities Assumed In Purchase Combinations and Review for Impairments
 
  
 Valuation of Long-Lived and Intangible Assets
 
  
 21
  Income Taxes
 
  
 RESULTS OF OPERATIONS FOR THE TWELVE MONTHS ENDED APRIL 30, 2004 COMPARED TO THE TWELVE MONTHS ENDED APRIL 30, 2003
 
 Introduction
 
  Year Ended
April 30, 2004


Year Ended
April 30, 2003


Dollar Change


% ChangeRevenues

$
63,059,520

$
57,843,518

$
5,216,002


9.0
%Gross Profit %


23.1
%

25.3
%

N/A


(2.6)
%G&A Expenses


12,863,232


10,486,962


2,376,270


22.7
%Selling and Marketing


2,201,119


2,859,830


(658,711
)

(23.0)
%Discontinued Operations


60,913


166,000


(105,087
)

(63.3)
%Net Income (Loss)


(1,122,663
)

902,392


(2,025,055
)

(224.4)
%


Revenues









22









Costs of Revenues















General and Administrative Expenses















Selling and Marketing Expense










23




Consulting Expenses










Goodwill Impairment










Non-Recurring Settlement Expense / Gain










Interest Expense










24




Income Taxes










Net Loss















Income from Discontinued Operations










RESULTS OF OPERATIONS FOR THE TWELVE MONTHS ENDED APRIL 30, 2003 COMPARED TO THE TWELVE MONTHS ENDED APRIL 30, 2002





Revenues










25



















Costs and Expenses










26




General and Administrative Expenses










Selling and Marketing Expense










Consulting Expenses










Provision for Loss on Brokered Loans















27









Impairment of Goodwill - Titus Real Estate










Non-Recurring Settlement Expense / Gain















28














Interest Expense










Income Taxes










Net Income










Discontinued Operations










29




LIQUIDITY AND CAPITAL RESOURCES





Cash Flows Twelve Months Ended April 30, 2004 Compared to the Twelve Months Ended April 30, 2003




















Cash Flows Twelve Months Ended April 30, 2003 Compared to the Twelve Months Ended April 30, 2002










30














Liquidity















Interest Rates










31




Seasonality










CRITICAL ACCOUNTING POLICIES










ITEM 7A  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK















32




ITEM 8  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA










Anza Capital, Inc.






Report of McKennon Wilson & Morgan LLP

F-1Consolidated Balance Sheet as of April 30, 2004 and 2003

F-2Consolidated Statements of Operations for the years endedApril 30, 2004, 2003, and 2002

F-3Consolidated Statements of Stockholders Equity (Deficit) for the years endedApril 30, 2004, 2003, and 2002

F-4Consolidated Statements of Cash Flows for the years endedApril 30, 2004, 2003, and 2002

F-7Notes to the Consolidated Financial Statements

F-9 to F-32  **Schedules**Report of McKennon WIlson & Morgan LLP on financial statement schedules

S-1Schedule of Valuation and qualifying accounts

S-2










ITEM 9  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE










ITEM 9A  CONTROLS AND PROCEDURES












|
|
|
|
|

PART III





ITEM 10  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT





Directors and Executive Officers












Name

Age

Position(s)Vincent Rinehart

54

Director, President, Chief Executive Officer, Secretary, and Principal Accounting OfficerL. Wade Svicarovich

59

Director







Vincent Rinehart





L. Wade Svicarovich















Compliance with Section 16(a) of the Securities Exchange Act of 1934










34















Name
No. of Late Reports
No. of Transactions
Reported Late
No. of
Failures to FileVincent Rinehart
1
1
-0-Mitchell P. Kopin (Cranshire Capital, L.P.)
3
3
-0-







Code of Ethics










Board Meetings and Committees

























35




ITEM 11  EXECUTIVE COMPENSATION





Executive Officers and Directors










2000 Stock Compensation Program

























2003 Omnibus Securities Plan










36




Board Compensation










Summary Compensation Table










Annual Compensation
Long Term CompensationAwards
PayoutsName and
Principal Position


Year


Salary
($)


Bonus
($)


Other Annual
Compensation
($)


Restricted Stock
Awards
($)


Securities Underlying Options SARs
(#)


LTIP Payouts
($)


All Other
Compensation
($)Vincent Rinehart


2004


329,452


-0-


14,400


-0-


-0-


-0-


-0-Pres., CEO,


2003


312,583


5,000


14,400


-0-


-0-


-0-


-0-Chairman


2002


290,000


5,000


24,000


-0-


125,000


-0-


-0-Scott A. Presta (1)


2004


-0-


-0-


-0-


-0-


-0-


-0-


-0-Director


2003


-0-


-0-


-0-


22,950


-0-


-0-


-0-2002


-0-


-0-


-0-


-0-


-0-


-0-


-0-Kenneth Arevalo (2)


2004


-0-


-0-


-0-


-0-


-0-


-0-


-0-Director


2003


-0-


-0-


-0-


13,500


-0-


-0-


-0-2002


-0-


-0-


-0-


-0-


-0-


-0-


-0-L. Wade Svicarovich


2004


-0-


-0-


-0-


-0-


-0-


-0-


-0-Director


2003


-0-


-0-


-0-


13,500


-0-


-0-


-0-2002


-0-


-0-


-0-


-0-


-0-


-0-


-0-





(1)  Mr. Scott Presta resigned as an officer and director of the company effective April 1, 2004.


(2)  Mr. Ken Arevalo resigned as a director of the company effective July 23, 2004.





37









OPTION/SAR GRANTS IN LAST FISCAL YEAR
(Individual Grants)Name
Number of Securities
Underlying
Options/SARs Granted
(#)
Percent of Total
Options/SARs Granted
to Employees In Fiscal
Year
Exercise or Base Price
($/Sh)
Expiration DateVincent Rinehart
125,000
100%
N/A
N/AScott A. Presta
-0-
N/A
N/A
N/AKenneth Arevalo
-0-
N/A
N/A
N/AL. Wade Svicarovich
-0-
N/A
N/A
N/A












AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUESName
Shares Acquired On
Exercise
(#)
Value Realized
($)
Number of Unexercised
Securities Underlying
Options/SARs at FY-End
(#)
Exercisable/Unexercisable
Value of Unexercised
In-The-Money
Option/SARs
at FY-End
($)
Exercisable/UnexercisableVincent Rinehart
N/A
N/A
N/A
N/AScott A. Presta
N/A
N/A
N/A
N/AKenneth Arevalo
N/A
N/A
N/A
N/AL. Wade Svicarovich
N/A
N/A
N/A
N/A










ITEM 12  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS












COMMON STOCKTitle of Class
Name and Address of
Beneficial Owner (1)
Amount and Nature of
Beneficial Ownership
Percent
of Class (2)Common
Stock
Vincent Rinehart
2,703,775 (3)
36.1%Common
Stock
L. Wade Svicaravich
25,000
< 1%Common
Stock
Keyway Investments, Ltd.
19 Mount Havlock
Douglas, Isle of Man
United Kingdom 1M1 2QG
1,518,456 (5)(6)
24.8%Common
Stock
Cranshire Capital, L.P.
c/o Downsview Capital, Inc.
666 Dundee Road, Suite 1901
Northbrook, Illinois 60062
909,063 (4)
15.1%Common
Stock
All officers and directors as a group
(3 persons)
2,753,775 (3)
36.7%







38




(1)  Unless otherwise noted, the address of each beneficial owner is c/o Anza Capital, Inc., 3200 Bristol Street, Suite 700, Costa Mesa, California 92626.





(2)  Unless otherwise indicated, based on 5,618,846 shares of common stock outstanding. Shares of common stock subject to options or warrants currently exercisable, or exercisable within 60 days, are deemed outstanding for purposes of computing the percentage of the person holding such options or warrants, but are not deemed outstanding for purposes of computing the percentage of any other person.





(3)  Includes 1,880,000 shares of common stock which may be acquired by Rinehart upon the conversion of 18,800 shares of Series F Convertible Preferred Stock. The shares of Series F Convertible Preferred Stock shall be voted equally with the common stock on all matters submitted to the shareholders, with the holder thereof having that number of votes equal to the number of shares of common stock which may be acquired upon conversion.





(4)  Includes 390,004 shares of common stock which may be acquired by Cranshire upon the conversion of 3,075.5 shares of Series D Convertible Preferred Stock. The shares of Series D Convertible Preferred Stock shall be voted equally with the common stock on all matters submitted to the shareholders, with the holder thereof having that number of votes equal to the number of shares of common stock which may be acquired upon conversion.





(5)  Includes 510,854 shares of common stock which may be acquired by Keyway upon the conversion of 4,028.5 shares of Series D Convertible Preferred Stock. The shares of Series D Convertible Preferred Stock shall be voted equally with the common stock on all matters submitted to the shareholders, with the holder thereof having that number of votes equal to the number of shares of common stock which may be acquired upon conversion.





(6)  Keyway Investments Ltd. has advised us that they beneficially own all of our securities owned of record by EURAM Cap Strat A Fund Limited.





39






PREFERRED STOCKTitle of Class
Name and Address of Beneficial Owner
Amount and Nature ofBeneficial Ownership
Percentof ClassSeries D
Preferred (1)
Keyway Investments, Ltd. (8)
19 Mount Havlock
Douglas, Isle of Man
United Kingdom 1M1 2QG
4,028.5
49.1% (2)Series D
Preferred (1)
Cranshire Capital, L.P.
c/o Downsview Capital, Inc.
666 Dundee Road, Suite 1901
Northbrook, Illinois 60062
3,075.5
37.5% (2)Series D
Preferred (1)
The dotCom Fund, LLC
666 Dundee Road, Suite 1901
Northbrook, Illinois 60062
1,097.5
13.4% (2)Series E Preferred (3)
Barbara Dunster
5319 Appian Way
Long Beach, California 90242
-0-
0%Series E Preferred (3)
Staron Family Trust
12139 Julius Avenue
Downey, California 90242
-0-
0%Series F Preferred (4)
Vincent Rinehart
c/o Anza Capital, Inc.
3200 Bristol Street, Suite 700
Costa Mesa, California 92626
18,800
100% (5)All officers and directors as a group
(4 persons)
18,800 (6)
100% (6)







(1)  Each share of Series D Convertible Preferred Stock (after giving effect to the 1-for-20 reverse stock split) (i) has a liquidation preference equal to $126.81 per share, (ii) is entitled to receive a quarterly non-cumulative dividend equal to 7% per annum, which may be paid in cash or in common stock at the discretion of the Company based on the average of the closing bid price for the last ten trading days of the applicable quarter, (iii) may be converted, after February 28, 2004, into 126.81 shares of Company common stock at the option of the holder, and (iv) is entitled to 126.81 votes on all matters submitted to the shareholders for approval.





(2)  Based on 8,201.5 shares of Series D Convertible Preferred Stock outstanding.





(3)  On April 1, 2004, we exercised our right to call all of the outstanding Series E Convertible Preferred Stock.





40




(4)  Each share of Series F Convertible Preferred Stock (after giving effect to the 1-for-20 reverse stock split) (i) has a liquidation preference (after the Series D and Series E Convertible Preferred Stock) equal to $16.675 per share, (ii) is entitled to a quarterly, non-cumulative dividend of 1.75 shares of Company common stock, which may be paid in cash at the Companys discretion based on the average of the closing bid price for the last ten trading days of the applicable quarter, (iii) may be converted, after February 28, 2004, into 100 shares of Company common stock at the option of the holder, and (iv) is entitled to 100 votes on all matters submitted to the shareholders for approval.





(5)  Based on 18,800 shares of Series F Convertible Preferred Stock outstanding.





(6)  Represents Series F Convertible Preferred Stock only.





(7)  Keyway Investments Ltd. has advised us that they beneficially own all of our securities owned of record by EURAM Cap Strat A Fund Limited.





ITEM 13  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS





Certain Relationships and Related Transactions



























41

































ITEM 14  PRINCIPAL ACCOUNTANT FEES AND SERVICES





Audit Fees






included in the Companys Form 10-Q or 10-QSB, as applicable.





42




Audit  Related Fees









Tax Fees










All Other Fees

















ITEM 15  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K





(a)  Exhibits







Item No.

Description3.1 (2)

Restated Articles of Incorporation, as filed with the Nevada Secretary of State on April 14, 2003.3.2 (2)

Second Restated Bylaws of Anza Capital, Inc.4.1 (2)

Certificate of Designation for Series D Convertible Preferred Stock4.2 (2)

Certificate of Designation for Series E Convertible Preferred Stock






43






4.3 (2)

Certificate of Designation for Series F Convertible Preferred Stock4.4 (5)

Amended and Restated Certificate of Designation for Series A Preferred Stock of American Residential Funding, Inc.10.1 (1)

Settlement Agreement dated June 26, 2001 by and between EMB Corporation, e-Net Financial.com Corporation, AMRES Holding LLC, Vincent Rinehart, and Williams de Broe.10.2 (1)

Limited Irrevocable Proxy dated June 27, 2001.10.3 (1)

Promissory Note dated June 27, 2001 executed by e-Net in favor of AMRES Holding LLC.10.4 (1)

Promissory Note dated June 27, 2001 executed by EMB Corporation in favor of Williams de Broe.10.5 (1)

Promissory Note dated June 27, 2001 executed by e-Net in favor of EMB Corporation (later terminated).10.6 (1)

Promissory Note dated June 27, 2001 executed by e-Net in favor of EMB Corporation.10.7 (1)

Redeemable Convertible 10% Promissory Note dated June 28, 2001 executed by e-Net in favor of EMB Corporation.10.8 (1)

Registration Rights Agreement dated June 27, 2001 executed by e-Net in favor of Williams de Broe.10.9 (1)

Investment Agreement dated June 27, 2001 by and between e-Net and Laguna Pacific Partners, LLP.10.10 (1)

Secured Promissory Note dated June 27, 2001 executed by e-Net in favor of Laguna Pacific Partners, LLP.10.11 (1)

Warrant Agreement dated June 27, 2001 by and between e-Net and Laguna Pacific Partners, LLP.10.12 (1)

Form of Warrant.10.13 (1)

Operating Agreement dated June 27, 2001 by and between e-Net and Anza Properties, Inc.10.14 (1)

ENET Bond Term Sheet by and between e-Net and Laguna Pacific Partners, LLP.10.15 (1)

Employment Agreement dated June 27, 2001 by and between Anza Properties, Inc. and Thomas Ehrlich.
  44
  10.16 (1)

Stock Option Agreement dated June 27, 2001 by and between e-Net and Thomas Ehrlich.10.17 (1)

Consulting Agreement dated June 27, 2001 by and between Anza Properties, Inc. and Lawrence W. Horwitz.10.18 (1)

Stock Option Agreement dated June 27, 2001 by and between e-Net and Lawrence W. Horwitz.10.19 (1)

Employment Agreement dated effective July 1, 2001 by and between e-Net and Vincent Rinehart.10.20 (3)

Mutual Release Agreement dated March 12, 2003 between the Company, Homelife, Inc., and related parties.10.21 (2)

Anza Capital, Inc. 2003 Omnibus Securities Plan10.22 (2)

Form of Incentive Stock Option Agreement relating to options granted under the Plan10.23 (2)

Form of Non Statutory Stock Option Agreement relating to options granted under the Plan10.24 (2)

Form of Common Stock Purchase Agreement relating to restricted stock granted under the Plan10.25 (2)

Stock Exchange Agreement dated February 28, 2003 with Keyway Investments, Ltd.10.26 (2)

Warrant Agreement No. 1 with Keyway Investments, Ltd.10.27 (2)

Warrant Agreement No. 2 with Keyway Investments, Ltd.10.28 (2)

Warrant Agreement No. 3 with Keyway Investments, Ltd.10.29 (2)

Stock Exchange Agreement dated February 28, 2003 with Cranshire Capital, L.P.10.30 (2)

Warrant Agreement No. 1 with Cranshire Capital, L.P.10.31 (2)

Warrant Agreement No. 2 with Cranshire Capital, L.P.10.32 (2)

Warrant Agreement No. 3 with Cranshire Capital, L.P.10.33 (2)

Stock Exchange Agreement dated February 28, 2003 with EURAM Cap Strat. A Fund Limited
   45
   10.34 (2)

Warrant Agreement No. 1 with EURAM Cap Strat. A Fund Limited10.35 (2)

Warrant Agreement No. 2 with EURAM Cap Strat. A Fund Limited10.36 (2)

Warrant Agreement No. 3 with EURAM Cap Strat. A Fund Limited10.37 (2)

Stock Exchange Agreement dated February 28, 2003 with the dotCom Fund, LLC10.38 (2)

Warrant Agreement No. 1 with the dotCom Fund, LLC10.39 (2)

Warrant Agreement No. 2 with the dotCom Fund, LLC10.40 (2)

Warrant Agreement No. 3 with the dotCom Fund, LLC10.41 (2)

Stock Exchange Agreement dated February 28, 2003 with Barbara Dunster10.42 (2)

Stock Exchange Agreement dated February 28, 2003 with the Staron Family Trust10.43 (2)

Debt Exchange Agreement dated February 28, 2003 with Vincent Rinehart10.44 (4)

Mutual Rescission of Securities Exchange Agreement dated December 18, 200331.1

Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer31.2

Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer32.1

Chief Executive Officer Certification Pursuant to 18 USC, Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2

Chief Financial Officer Certification Pursuant to 18 USC, Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.














46




























(b)  Reports on Form 8-K










47




SIGNATURES
















Dated:
August 12, 2004

Anza Capital, Inc./s/ Vincent RinehartBy: Vincent RinehartIts: President and Chief Executive Officer



















Dated:
August 12, 2004

/s/ Vincent RinehartBy: Vincent RinehartIts: President, Chairman, Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, Secretary, and Director











Dated:
August 12, 2004

/s/ L. Wade SvicarovichBy: L. Wade SvicarovichIts: Director








48









REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM






































/s/ McKennon, Wilson & Morgan LLPIrvine, CaliforniaAugust 11, 2004


F - 1









ANZA CAPITAL, INC. AND SUBSIDIARIES


CONSOLIDATED BALANCE SHEET S


April 30, 2004
April 30, 2003ASSETSCurrent assets:Cash and cash equivalents (Note 3)

$
2,204,525

$
2,755,659Commissions and accounts receivable


2,028,232


2,512,741Loans held for sale, net (Note 4)


3,650,911


7,526,022Prepaids and other current assets


19,898


76,748Total current assets


7,903,566


12,871,170Property and equipment, net (Note 5)


244,152


253,723Goodwill,  (Note 6)


-


195,247Other assets


121,744


22,879$
8,269,462

$
13,343,019LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
215,151

$
489,434Accrued liabilities (Note 8)


980,465


532,337Warehouse line of credit (Note 7)


3,606,866


7,514,209Commissions payable


2,919,264


2,687,511Other current liabilities


74,535


188,517Total current liabilities


7,796,281


11,412,008Commitments and Contingencies (Note 11)Stockholders equity (Note 12):Preferred stock, 2,500,000 shares authorized:Series D convertible preferred stock, no par value; liquidation
value of $126.81 per share; 15,000 shares authorized; 8,201.5
shares outstanding as of April 30, 2004 and 2003


1,040,222


1,040,222Series E convertible preferred stock, no par value; liquidation
value of $1.00 per share; 250,000 shares authorized; zero
and 217,278 shares issued and outstanding as of April 30, 2004
and 2003, respectively


-


217,278Series F convertible preferred stock, no par value; liquidation
value of $16.675 per share; 25,000 shares authorized, 18,800
shares issued and outstanding as of April 30, 2004 and 2003


313,490


313,490Common stock, $0.001 par value; 100,000,000 shares
authorized; 9,007,460 and 4,967,460 shares issued at
April 30, 2004 and  3003, respectively, and
4,869,896 and 4,829,896 shares outstanding as of April 30, 2004
and 2003, respectively


4,870


4,830Additional paid-in capital


13,650,274


13,639,114Accumulated deficit


(14,535,675
)

(13,283,923
)Total stockholders equity


473,181


1,931,011$
8,269,462

$
13,343,019





See accompanying notes to these consolidated financial statements





F - 2









ANZA CAPITAL, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF OPERATIONS








Year EndedApril 30, 2004
April 30, 2003
April 30, 2002Revenues:Brokerage
$
62,142,504

$
56,918,172

$
25,893,805Sales of loans, net

319,114


336,784


61,247Real estate services and other

597,902


588,562


318,82563,059,520


57,843,518


26,273,877Cost of revenues:Brokerage

47,933,581


42,698,822


17,465,121Real estate services and other

551,451


509,594


236,57348,485,032


43,208,416


17,701,694Gross profit

14,574,488


14,635,102


8,572,183Operating expenses:General and administrative

12,863,232


10,486,962


5,969,490Selling and marketing

2,201,119


2,859,830


2,764,686Provision for litigation

421,800


300,000


-Non-recurring settlement expenses, net

-


(78,543
)

156,614Impairment of goodwill

195,247


150,000


-15,681,398


13,718,249


8,890,790Operating income (loss)

(1,106,910
)

916,853


(318,607
)Interest expense

(37,155
)

(146,572
)

(178,917
)Other income (expense), net

(39,511
)

(33,889
)

42,868Income (loss) from continuing operations
$
(1,183,576
)
$
736,392

$
(454,656
)Income from discontinued operations
$
60,913

$
166,000

$
11,943Net income (loss)
$
(1,122,663
)
$
902,392

$
(442,713
)Earnings (loss) per common share:Basic:4,866,681


2,777,656


1,813,675Net income (loss) per common share from continuing operations
$
(0.24
)
$
0.27

$
(0.24
)Net income (loss) per common share from discontinued operations
$
0.01

$
0.05

$
0.01Net income (loss) per basic common share
$
(0.23
)
$
0.32

$
(0.24
)Diluted:Weighted average number of common shares

4,866,681


6,132,434


1,813,675Net income (loss) per common share from continuing operations
$
(0.24
)
$
0.12

$
(0.25
)Net income per common share from discontinued operations
$
0.01

$
0.03

$
0.01Net income (loss) per diluted common share
$
(0.23
)
$
0.15

$
(0.24
)





See accompanying notes to these consolidated financial statements





F - 3









ANZA CAPITAL, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)


FOR THE YEARS ENDED APRIL 30, 2002, 2003, AND 2004





A Preferred

C Preferred

D PreferredShares
Amount

Shares
Amount

Shares
AmountBalances, April 30, 2001

-
$ -

20,000
$  2,000,000

-
$    -Shares issued for contract buyoutShares issued as payment on loan payableShares issued to consultantsShares issued as part of Global SettlementValue of beneficial conversion feature on AMRES holding noteIssuance of Series A convertible preferred

500,000
250,000Repurchase of Series A convertible preferred and distribution of dividends

(13,180)
(6,590)Amortization of deferred stock compensationConversion of Series C convertible preferred




(2,541)
(254,100)Shares issued in settlement with consultantValue of options granted to an employeeValue of warrants granted in connection with debtNet LossBalances, April 30, 2002

486,820
243,410

17,459
1,745,900

-
-Shares issued to employees and directorsShares issued to consultantsAmortization of deferred compensationConversion of Series C convertible preferred




(1,056)
(105,600)Repurchase of Series A convertible preferred

(52,266)
(26,132)Restructuring of Series A convertible preferred into Series E convertible preferred

(434,554)
(217,278)Restructuring of Series C convertible preferred into Series D convertible preferred




(16,403)
(1,640,300)

8,201.5
1,040,222Value of warrants ascribed to Series D convertible preferredRestructuring of AMRES holding noteIssuance of Laguna settlement sharesCancellation of Laguna warrantsNet incomeBalances, April 30, 2003

-
-

-
-

8,201.5
1,040,222Repurchase of Series E convertible preferredShares issued to consultantDividends  Series E convertible preferredDividends  Series F convertible preferredLiquidation of Series E convertible preferred through exchange of interest on secured notes receivableNet incomeBalances as of April 30, 2004

-
$-

-
$ -

8,201.5
$  1,040,222





See accompanying notes to these consolidated financial statements








F - 4


ANZA CAPITAL, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)


FOR THE YEARS ENDED APRIL 30, 2002, 2003 AND 2004 (CONT)





E Preferred

F Preferred

Common StockShares
Amount

Shares
Amount

Shares
AmountBalances, April 30, 2001


-
$  -

-
$  -

1,181,744
$  1,182Shares issued for contract buyout








20,000
20Shares issued as payment on loan payable








16,250
16Shares issued to consultants








275,000
275Shares issued as part of Global Settlement








225,000
225Value of beneficial conversion feature on AMRES holding noteIssuance of Series A convertible preferredRepurchase of Series A Convertible preferred and distribution of dividendsAmortization of deferred stock compensationConversion of Series C convertible preferred








283,976
284Shares issued in settlement with consultant








65,000
65Value of options granted to an employeeValue of warrants granted in connection with debtNet LossBalances, April 30, 2002


-
-

-
-

2,066,970
2,067Shares issued to employees and directors








199,000
199Shares issued to consultants








152,500
153Amortization of deferred compensationConversion of Series C convertible preferred








286,426
286Repurchase of Series A convertible preferredRestructuring of Series A convertible preferred into Series E convertible preferred


217,278
217,278Restructuring of Series C Convertible Preferred into Series D Convertible Preferred








1,675,000
1,675Value of warrants ascribed to Series D convertible preferredRestructuring of AMRES holding note





18,800
313,490

300,000
300Issuance of Laguna settlement shares








150,000
150Cancellation of Laguna warrantsNet incomeBalances, April 30, 2003


217,278
217,278

18,800
313,490

4,829,896
4,830Repurchase of Series E convertible preferred


(92,278)
(92,278)Shares Issued to Consultant








40,000
40Dividends  Series E convertible preferredDividends  Series F convertible preferredLiquidation of Series E convertible preferred through exchange of interest on secured notes receivable


(125,000)
(125,000)Net lossBalances as of April 30, 2004


-
$  -

18,800
$  313,490

4,869,896
$  4,870





See accompanying notes to these consolidated financial statements.








F - 5


ANZA CAPITAL, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)


FOR THE YEARS ENDED APRIL 30, 2002, 2003 AND 2004 (CONT)








Additional


Deferred

AccumulatedPaid-in Capital


Compensation

Deficit

TotalBalances, April 30, 2001

$  10,141,637


$  (26,133)

$  (13,301,068)

$ (1,184,382)Shares issued for contract buyout

57,580






57,600Shares issued as payment on loan payable

57,022






57,038Shares issued to consultants

645,275


(20,833)



624,717Shares issued as part of Global Settlement

688,275






688,500Value of beneficial conversion feature on AMRES holding note

60,681






60,681Issuance of Series A convertible preferred






(36,126)

213,874Repurchase of Series A convertible preferred and distribution of dividends






(6,410)

(13,000)Amortization of deferred stock compensation




26,133



26,133Conversion of Series C convertible preferred

277,644




(23,828)

-Shares issued in settlement with consultant

220,935






221,000Value of options granted to an employee

40,500


(37,125)



3,375Value of warrants granted in connection with debt

132,345






132,345Net loss






(442,713)

(442,713)Balances, April 30, 2002

12,321,894


(57,958)

(13,810,145)

445,168Shares issued to employees and directors

84,131






84,330Shares issued to consultants

85,247






85,400Amortization of deferred compensation




57,958



57,958Conversion of Series C convertible preferred

122,664




(17,050)

300Repurchase of Series A convertible preferred






(21,995)

(48,127)Restructuring of Series A preferred into Series E convertible preferred








-Restructuring of Series C preferred into Series D convertible preferred

902,825




(337,125)

(32,703)Value of warrants ascribed to Series D convertible preferred

39,346






39,346Restructuring of AMRES holding note

161,700






475,490Issuance of Laguna settlement shares

53,850






54,000Cancellation of Laguna warrants

(132,543)






(132,543)Net income






902,392

902,392Balances, April 30, 2003

13,639,114


-

(13,283,923)

1,931,011Repurchase of Series E convertible preferred








(92,278)Shares Issued to Consultant

11,160






11,200Dividends  Series E convertible preferred






(20,201)

(20,201)Dividends  Series F convertible preferred






(108,888)

(108,888)Liquidation of Series E convertible preferred through exchange of interest on secured notes receivable








(125,000)Net loss






(1,122,663)

(1,122,663)Balances as of April 30, 2004

$  13,650,274


$ -

$  (14,535,675)

$  473,181


See accompanying notes to these consolidated financial statements.








F - 6






ANZA CAPITAL, INC.


AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH FLOWS







Twelve Months
Ended
April 30, 2004
Twelve Months
Ended
April 30, 2003
Twelve Months
Ended
April 30, 2002Cash flows from operating activities:Net income (loss)

$
(1,122,663
)
$
902,392

$
(442,713
)Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities:Depreciation


90,185


48,054


33,408Loss on disposal of assets


45,409


-


-Stock-based compensation


11,200


169,730


842,306Impairment of goodwill


195,247


150,000


-Gain on settlement of obligations


-


(78,543
)

-Amortization of discounts on loans


-


30,726


165,203Amortization of deferred stock compensation


-


57,958


26,133Provision for losses on brokered loans


-


300,000


-Changes in operating assets and liabilities:Decrease (increase) in commissions and
accounts receivable


484,509


(1,184,282
)

(864,335
)Decrease (increase) in loans held for sale,
Net


3,950,712


(6,531,923
)

(712,350
)Decrease (increase) in prepaid and other
current assets


56,850


(26,560
)

40,932(Increase) decrease in advances toemployees


-


80,417


(21,683
)(Decrease) increase in accounts payable


(462,800
)

453,190


(288,982
)Increase in commissions payable


231,753


1,478,072


949,127Increase in accrued liabilities


339,242


80,000


-Increase in accrued interest expense


-


58,552


69,671Increase in other current liabilities


(75,601
)

49,367


18,300Net cash provided by (used in) operatingactivities


3,744,043


(3,962,850
)

(184,983
)Cash flows from investing activities:Acquisitions of property and equipment


(126,023
)

(187,668
)

(40,331
)Issuance of secured note receivable


(200,000
)

-


-Proceeds from sale of portion of secured
note receivable


50,000


-


-Other assets


(73,867
)

(22,879
)

11,307Net cash used in investing activities


(349,890
)

(210,547
)

(29,024
)







F - 7




ANZA CAPITAL, INC.


AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH FLOWS (CONT)





Cash flows from financing activities:Proceeds (payments) on bridge loan, net


-


(200,000
)

117,252(Repayments) advances on warehouse line of credit, net


(3,907,344
)

6,469,333


704,034Payments on notes payable and capital leases


74,534


-


(193,188
)Proceeds from issuance of Series A convertible
Preferred stock


-


-


213,874Repurchase of Series A convertible preferred stock


-


-


(6,590
)Dividends on Series A convertible preferred stock


-


-


(6,410
)Repurchase of Series E convertible preferred stock


(92,278
)

(26,133
)

-Dividends on Series E convertible preferred stock


(20,199
)

(21,995
)

-Net cash (used in) provided by financingactivities


(3,945,287
)

6,221,205


828,972Net increase (decrease) in cash and cash equivalents


(551,134
)

2,047,808


614,965Cash and cash equivalents at beginning of period


2,755,659


707,851


92,886Cash and cash equivalents at end of period

$
2,204,525

$
2,755,659

$
707,851Non-cash financing activities:Exchange of Series E convertible preferred stock for
interest in secured note receivable

$
125,000

$
-

$
-Settlement of debt with issuance of common stock

$
-

$
54,000

$
63,440Conversion of Series C convertible preferred stock tocommon stock

$
-

$
122,950

$
254,100Exchange of Series A convertible preferred stock to
Series E convertible preferred stock

$
-

$
217,277

$
-Exchange of Series C convertible preferred to Series Dconvertible preferred, common stock and accrueddividends

$
-

$
736,596

$
-Warrants issued for bridge financing

$
-

$
-

$
132,345Supplemental cash flow information:Cash paid for interest

$
37,155

$
27,937

$
44,597Income taxes were not significant during the periods presented








See accompanying notes to these consolidated financial statements







F - 8




ANZA CAPITAL, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



































As of April 30, 2003As Originally Filed
As Reclassified
DifferenceLoans held for sale, net

$
7,601,623

$
7,526,022

$
(75,601
)Accounts payable


677,951


489,434


(188,517
)Other current liabilities

$
75,601

$
188,517

$
112,916







Twelve Months Ended April 30, 2003As Originally Filed
As Reclassified
DifferenceSalaries and wages

$
7,070,421

$
-

$
(7,070,421
)General and administrative expenses


7,777,806


10,486,962


2,709,156Broker commissions


38,734,044


42,698,822


3,964,778Selling and marketing

$
2,463,343

$
2,859,830

$
396,487





F - 9







Twelve Months Ended April 30, 2002As Originally Filed
As Reclassified
DifferenceSalaries and wages

$
2,119,487

$
-

$
(2,119,487
)General and administrative expenses


5,060,687


5,969,490


908,803Broker Commissions

$
16,254,437

$
17,465,121

$
1,210,684

















































F - 10







































F - 11



















































F - 12



























































F - 13
































































F - 14

















































F - 15




April 30, 2004


April 30, 2003Loans Range

Number
of Loans


Total Loan
Amount


Average Interest Rate


Number of
Loans


Total Loan
Amount


Average Interest Rate$10,000 to $100,000

14

$
720,375


8.69
%

9

$
533,712


9.33
%$100,001 to $200,000

2


312,000


7.00
%

11


1,677,968


5.89
%$200,001 to $300,000

4


1,129,350


6.19
%

5


1,181,350


5.63
%$300,001 to $400,000

1


360,500


5.50
%

4


1,356,800


5.63
%Over $400,000

1


1,158,250


13.87
%

6


2,851,793


5.81
%22


3,680,475





35


7,601,623Deferred fees, net of costs




(29,564
)







(75,601
)$
3,650,911







$
7,526,022




















2004
2003Equipment$
382,961

$
315,303Furniture and fixtures


51,713


45,957434,674


361,260Less: accumulated depreciation


(190,522
)

(107,537
)244,152


253,723































F - 16














April 30, 2004
April 30, 2003Accrued loss contingencies

$
633,500

$
300,000Accrued salaries and benefits


161,610


143,645Accrued professional fees


61,557


71,210Accrued dividends


108,888


-Accrued interest


14,910


17,482$
980,465

$
532,337




















F - 17











































Years Ending April 302005
$
366,8362006

384,3052007

393,0422008

393,0422009

131,013$
1,668,238















F - 18
















































F - 19






















































F - 20











































F - 21













Year EndedApril 30,2005


521,6262006


282,818$
804,444













































F - 22


































F - 23















































F - 24

















Year Ended April 30, 2002Costs
Incurred


Shares
IssuedFinancial and Internal Accounting Services

$
79,250


23,750Mergers Acquisitions Consulting


267,600


101,250Bravo Realty Start-up Costs


198,500


85,000Information Technology Consulting


14,000


5,000Legal Services


86,200


60,000Total

$
645,550


275,000




















Year Ended April 30, 2003Costs
Incurred


Shares
IssuedIncentives - Employees and Directors

$
84,330


199,000Consulting - Legal


85,400


152,500Total

$
169,730


351,500










F - 25














2003 Securities Plan















stock options (including incentive stock options and non-qualified stock options);restricted stock awards;unrestricted stock awards; andperformance stock awards.










F - 26








Options issued to employees:Options


Range of  Exercise  Prices


Weighted Average Exercise Price


Weighted  Average Fair Value of Options GrantedOutstanding, April 30, 2001


-


-


-


-Granted


275,000

$
0.10-3.40

$
2.00

$
1.40Canceled


(100,000
)
$
3.40

$
3.40

$
2.40Exercised


-


-


-


-Outstanding, April 30, 2002


175,000

$
0.10-1.60

$
1.20

$
1.00Granted


-


-


-


-Canceled


(175,000
)
$
0.10-1.60

$
1.20

$
1.00ExercisedApril 30, 2003 and 2004


-



















F - 27






Warrants issused to non-employeesOptions


Range of  Exercise  Prices


Weighted Average Exercise Price


Weighted  Average Fair Value of Options GrantedOutstanding, April 30, 2001


24,234

$
60.00-134.60


83.20


57.00Granted


50,000

$
3.40

$
2.00

$
2.40Canceled


(50,000
)
$
3.40

$
3.40

$
2.40Exercised


-


-


-


-Outstanding, April 30, 2002


24,234

$
60.00-134.60

$
83.20

$
57.00Granted


750,000

$
0.50-0.90


0.72


0.05Canceled


(24,243
)
$
60.00-134.60

$
83.20

$
57.00Exercised


-


-


-


-OutstandingApril 30, 2003 and 2004


750,000

$
0.50-0.90

$
0.72

$
0.05


































F - 28






















































F - 29
















Revenues
Net Income (Loss)
Assets2004
2003
2002
2004
2003
2002
2004
2003
2002Loan Brokering

$
62,143

$
56,918

$
25,894

$
(1,213
)
$
554

$
(66
)
$
4,444

$
4,749

$
2,497Mortgage banking


319


337


61


319


337


61


3,651


7,601


1,070Real estate brokerage


598


589


319


(23
)

(5
)

(205
)

4


6


2$
63,060

$
57,844

$
26,274

$
(917
)
$
886

$
(210
)
$
8,099

$
12,356

$
3,569Corporate$
(267
)

(150
)
$
(226
)
$
170

$
696

$
169Discontinued operations










$
61

$
166

$
12

$
-

$
291

$
38Total










$
(1,123
)
$
902

$
(424
)
$
8,269

$
13,343

$
3,776






















F - 30












































Note payable

$ 1,055,000Accrued interest

160,856Total due to EMB prior to settlement


1,215,856Less:Value of 150,000 shares to WdB


(459,000
)Payable to AMRES Holdings LLC


(485,446
)Debt and interest relief


(168,006
)Balance due to EMB after settlement

$
103,404





F - 31









Value of 75,000 shares to EMB

$
229,500Debt and interest relief


(168,006
)Total loss

$
61,494

























April 30, 2004


April 30, 2003


April 30, 2002Net sales

$
1,224,099

$
1,219,982

$
348,177Income from discontinued operations

$
60,913

$
166,000

$
11,943















F - 32




REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 ON FINANCIAL STATEMENT SCHEDULE
 
 
 
   
  
 
 
  
    S - 1


Anza Capital, Inc.
 Schedule I - Valuation and Qualifying Accounts
 (in thousands)
 
 Description

Valuation Allowance on Tax AssetsBalances April 30, 2001

$
2.1Increase in valuation allowance


2.2Balances April 30, 2002


4.3Increase in valuation allowance


0.7Balances April 30, 2003


5.0Increase in valuation allowance


0.7Balances April 30, 2004

$
5.7
  S - 2