Edgar Filing: ANZA CAPITAL INC

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

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JULY 31, 2004

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from _______________ to _______________.

COMMISSION FILE NUMBER O-24512

ANZA CAPITAL, INC.
(Exact name of registrant as specified in its charter)

NEVADA 88-1273503
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

3200 BRISTOL STREET, SUITE 700
COSTA MESA, CA 92626
(Address of principal executive offices) (Zip Code)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (714) 866-2100

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 whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes No X
--- ---

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 September 1, 2004,
there were 9,496,346 shares of common stock issued and 5,358,846 shares of
common stock outstanding.

ANZA CAPITAL, INC.

TABLE OF CONTENTS
-----------------

PART I

ITEM 1 Financial Statements . . . . . . . . . . . . . . . . . . . . 3

ITEM 2 Management's Discussion and Analysis . . . . . . . . . . . .16

ITEM 3 Quantitative and Qualitative Disclosures About Market Risk .23

ITEM 4 Controls and Procedures. . . . . . . . . . . . . . . . . . .23

PART II

ITEM 1 Legal Proceedings. . . . . . . . . . . . . . . . . . . . . .24

ITEM 2 Changes in Securities and Use of Proceeds. . . . . . . . . .24

ITEM 3 Defaults Upon Senior Securities. . . . . . . . . . . . . . .24

ITEM 4 Submission of Matters to a Vote of Security Holders. . . . .25

ITEM 5 Other Information. . . . . . . . . . . . . . . . . . . . . .25

ITEM 6 Exhibits and Reports on Form 8-K . . . . . . . . . . . . . .25

PART I

This Quarterly 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 FINANCIAL STATEMENTS

ANZA CAPITAL, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

July 31, 2004 April 30, 2004
(Unaudited)

ASSETS
Current assets:
Cash and cash equivalents $ 2,773,212 $ 2,204,525
Commissions receivable 1,338,972 2,028,232
Loans held for sale, net 7,467,923 3,650,911
Prepaids and other current assets 56,824 19,898
--------------- ----------------
Total current assets $ 11,636,931 $ 7,903,566

Property and equipment, net 229,753 244,152
Other assets 102,875 121,744
--------------- ----------------
Total assets $ 11,969,559 $ 8,269,462
--------------- ----------------

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 120,796 $ 215,151
Commissions payable 3,109,067 2,919,264
Warehouse line of credit 7,286,626 3,606,866
Accrued liabilities 586,123 980,465
Other liabilities 342,501 74,535
--------------- ----------------
Total liabilities $ 11,445,113 $ 7,796,281
--------------- ----------------

Commitments and contingencies

Stockholders' equity:
Preferred stock, 2,500,000 shares authorized:
Class D convertible preferred stock, no par value; liquidation
value of $126.81 per share; 15,000 shares authorized; 8,201.5
shares outstanding 1,040,222 1,040,222
Class F convertible preferred stock, no par value; liquidation
value of $16.675 per share; 25,000 shares authorized, 18,800
shares issued and outstanding 313,490 313,490
Common stock, $0.001 par value; 100,000,000 shares
authorized; 4,869,096 shares issued and 4,869,096 shares
outstanding as of July 31, 2004 and April 30, 2004 4,870 4,870
Additional paid in capital 13,650,274 13,650,274
Accumulated deficit (14,484,410) (14,535,675)
--------------- ----------------
Total stockholders' equity $ 524,446 $ 473,181
--------------- ----------------

Total liabilities and stockholders' equity $ 11,969,559 $ 8,269,462
=============== ================

See accompanying notes

ANZA CAPITAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

Three Months Ended
--------------------------------
July 31, 2004 July 31, 2003
--------------- ---------------

Revenues:
Broker commissions $ 13,377,202 $ 18,393,906
Sales of loans, net 118,826 239,160
Notary and other 127,906 960,277
--------------- ---------------
13,623,934 19,593,343
--------------- ---------------

Cost of revenues:
Broker commissions 8,953,172 13,365,223
Notary and other 118,717 552,606
--------------- ---------------
9,071,889 13,917,829
--------------- ---------------

Gross profit 4,552,045 5,675,514
--------------- ---------------

Operating expenses:
General and administrative 1,790,986 2,643,215
Salaries and wages 2,271,541 2,649,937
Selling and marketing 461,763 116,845
--------------- ---------------
4,524,290 5,409,997
--------------- ---------------

Operating income 27,755 265,517

Interest expense (49,753) (72,800)
Interest income 73,263 129,268
--------------- ---------------
Net income $ 51,265 $ 321,985
=============== ===============

Earnings per common share:

Basic:
Weighted average number of common shares 4,869,096 4,829,960
Net income per common share $ 0.01 $ 0.07

Diluted:
Weighted average number of common shares 8,046,316 8,006,380
Net income per common share $ 0.01 $ 0.04

See accompanying notes

ANZA CAPITAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

Three Months Three Months
Ended Ended
July 31, 2004 July 31, 2003
--------------- ---------------

Cash flows from operating activities:
Net income $ 51,265 $ 321,985
Adjustments to reconcile net income to net cash used
in operating activities:
Depreciation 17,899 12,685
Changes in operating assets and liabilities:
Decrease (Increase) in commissions and accounts receivable 689,260 (699,847)
Increase in loans held for sale, net (3,817,012) (5,882,310)
Increase in prepaids and other current assets (18,057) (16,728)
(Decrease) Increase in accounts payable (94,356) 426,779
Increase in commissions payable 189,803 1,628,417
(Decrease) Increase in accrued and other liabilities (126,376) 154,526
--------------- ---------------

Net cash used in operating activities (3,107,574) (4,054,493)
--------------- ---------------

Cash flows from investing activities:
Acquisitions of property and equipment (3,500) (40,833)
--------------- ---------------

Net cash provided by (used in) investing activities (3,500) (40,833)
--------------- ---------------

Cash flows from financing activities:
Advances from warehouse line of credit, net 3,679,761 5,846,832
Repurchase of E Preferred - (23,849)
Dividends on E Preferred - (6,152)
--------------- ---------------

Net cash provided by financing activities 3,679,761 5,816,831
--------------- ---------------

Net increase in cash 568,687 1,721,505
Cash at beginning of period 2,204,525 2,755,659
--------------- ---------------

Cash at end of period $ 2,773,212 $ 4,477,164
=============== ===============

Non-cash financing activities:
=============== ===============
Issuance of preferred stock of subsidiary for marketable
Securities $ - $ 800,000
=============== ===============
Supplemental cash flow information:
Cash paid for interest $ 49,753 $ 70,800
=============== ===============
Income taxes were not significant during the periods presented

See accompanying notes

NOTES TO INTERIM FINANCIAL STATEMENTS

NOTE 1. UNAUDITED INTERIM FINANCIAL STATEMENTS

The interim financial data as of July 31, 2004 is unaudited; however, in the
opinion of management, the interim data includes all adjustments, consisting of
normal recurring adjustments, necessary to present fairly the Company's
consolidated financial position as of July 31, 2004, and the results of their
operations and their cash flows for the three months ended July 31, 2004 and
2003. The results of operations are not necessarily indicative of the
operations, which may result for the year ending April 30, 2005. Also, in the
opinion of management, all disclosures required on Form 10-Q were fully
furnished. The Company's annual report on Form 10-K for the year ended April
30, 2004 should be read in connection with this quarterly report.

NOTE 2. GOING CONCERN

In connection with the audit of the consolidated financial statements for the
year ended April 30, 2004, the Company received a report from its independent
auditors that included an explanatory paragraph describing uncertainty as to the
Company's ability to continue as a going concern, which contemplated that assets
and liabilities would be settled at amounts in the normal course of business.
ANZA incurred a loss from operations during the year ended April 30, 2004 and
had an accumulated deficit as of April 30, 2004. In addition, AMRES is a
defendant in a significant amount of litigation for which the outcome is
uncertain. In some cases, management believes losses are covered by insurance.
ANZA's industry in recent years has experienced increase competition. In
addition, interest rates have increased during the past 12 months, having a
slowing effect on the industry. Management's immediate plans are to reduce
spending through management level pay decreases and the management of expenses.
Management is also hopeful that the AMRES mortgage banking division will expand;
however, for the mortgage banking division to continue operating, AMRES needs to
comply with its line of credit covenants, which it is currently in default. If
ANZA continues to experience losses, management will require additional working
capital through debt or equity sources. At present, although Anza has completed
a transaction to improve its net worth, it has no other commitments for
long-term financing. There are no assurances that management will be successful
in its plans. These factors raise substantial doubt about the Company's ability
to continue as a going concern. The accompanying consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

NOTE 3. SIGNIFICANT CUSTOMER CONCENTRATION

For the three months ended July 31, 2004 and 2003, three investors accounted for
eighty percent of the purchases of loans held for sale and accounted for eighty
percent of the revenues from the mortgage banking business.

NOTE 4 . SEGMENT DISCLOSURE

Segments were determined based on services provided by each segment.
Performance of the segments is evaluated on net income. For the three months
ended July 31, 2004 and 2003, management has provided the following information
with respect to its operating segments (in thousands).

Revenues Net Income Assets
2004 2003 2004 2003 2004 2003
------- ------- ------- ------ ------- -------

Loan brokering $13,377 $18,394 $ 21 $ 107 $ 4,164 $ 8,353
Mortgage banking 119 239 30 (34) 7,622 13,378
Notary Services 0 810 0 243 0 457
Real Estate Brokerage 128 150 0 1 3 8
------- ------- ------- ------ ------- -------

$13,624 $19,593 $ 51 $ 317 $11,789 $22,196
======= ======= ======= ====== ======= =======

Corporate 5 5 371
------ ------- -------

Total $ 322 11,794 $22,567
====== ======= =======

NOTE 5. IMPACT OF RECENTLY ISSUED ACCOUNTING STATEMENTS

In December 2002, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 148, Accounting for
Stock-Based Compensation-Transition and Disclosure ("SFAS 148") which addresses
financial accounting and reporting for recording expenses for the fair value of
stock options. SFAS 148 provides alternative methods of transition for a
voluntary change to fair value-based method of accounting for stock-based
employee compensation. Additionally, SFAS 148 requires more prominent and more
frequent disclosures in financial statements about the effects of stock-based
compensation. The provisions of SFAS 148 are effective for fiscal years ending
after December 15, 2002, with early application permitted in certain
circumstances. The interim disclosure provisions are effective for financial
reports containing financial statements for interim periods beginning after
December 15, 2002. ANZA has elected to continue to apply the intrinsic
value-based method of accounting as allowed by APB No. 25 for employee
stock-based compensation. The disclosure effects of SFAS 148 are not
significant to the Company for quarters presented since minimal activity
occurred in 2004 and no grants were made to employees during the quarter.

In November 2002, the FASB issued Interpretation No. 45, Guarantors Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others ("FIN 45"). FIN 45 elaborates on the existing disclosure
requirements for most guarantees, including loan guarantees such as standby
letters of credit. It also requires that at all times a company issues a
guarantee, ANZA must recognize an initial liability for the fair market value of
the obligations it assumes under that guarantee and must disclose that
information in its interim and annual financial statements. The initial
recognition and measurement provisions of FIN 45 apply on a prospective basis to
guarantees issued or modified after December 31, 2002. ANZA will apply the
provisions of FIN 45 to any guarantees issued after December 31, 2002. As of
July 31, 2004, ANZA, had certain guarantees relating to its mortgage banking
operations which are not considered significant. Such guarantees, and ANZA s
potential liability for those guarantees were satisfied soon after the quarter.
ANZA did not incur any costs or expense in satisfying these guarantees.

NOTE 6. LOANS HELD FOR SALE

Loans held for sale consist of conventional uninsured mortgages originated by
the Company, with various interest rates. Details of the loans are as follows:

July 31, 2004 April 30, 2004
----------------------------- ---------------------------------------
(Unaudited)

Number Total Loan Number of Total Loan Average
Loans Range of Loans Amount Loans Amount Interest Rate
-------------------------- -------- ------------ --------- ------------ --------------

20,000 to $100,000 7 312,478 6.04% 14 720,375 8.69%
100,001 to $200,000 4 584,404 6.55% 2 312,000 7.00%
200,001 to $300,000 14 3,493,060 4.63% 4 1,129,350 6.19%
300,001 to $400,000 2 703,826 3.38% 1 360,500 5.50%
Over $400,000 4 2,374,155 4.81% 1 1,158,250 13.87%
-------- ------------ --------- ------------
31 $ 7,467,923 22 $ 3,680,475
------------ ------------
Deferred Fees net of cost (120,173) (29,564)
------------ ------------
$ 7,347,750 $ 3,650,911
------------ ------------

NOTE 7. WAREHOUSE LINE OF CREDIT

The Company maintains a $10,000,000 warehouse line of credit which expires on
March 31, 2005. The agreement is personally guaranteed by ANZA's chief
executive officer. The credit agreement calls for various ratios and net worth
requirements, minimum utilization requirements, and limits the warehouse period
to 45 days for any specific loan. The interest rate is adjustable, based upon a
published prime rate, plus an additional 1% to 3% and is payable monthly. The
rate varies depending on the type of loan (conforming or non-conforming) with
higher rates on non-conforming loans. The line of credit is collateralized by
the company's loans held for sale.

As of the quarter end, the company is not in compliance with certain debt
covenants in relation to this line of credit. The lending institution has not
formally issued a waiver for these violations. The final determination is
contingent on the lending institution's review of the July 31, 2004 Form10-Q.

NOTE 8. ACCRUED LIABILITIES

Accrued liabilities consist of the following :

July 31, 2004 April 30, 2004
(unaudited)

Accrued salary and benefits $ 104,301 $ 161,610
Accrued loss contingencies 340,463 633,500
Accrued professional fees 0 61,557
Accrued dividends 108,888 108,888
Accrued other liabilities 12,084 -
Accrued interest 20,387 14,910
--------------- ---------------
$ 586,123 $ 980,465
=============== ===============

NOTE 9. EARNINGS PER COMMON SHARE

Dilutive securities which are included in the calculation of dilutive earnings
per common share for the three months ended July 31, 2004, include the Series D
Convertible Preferred Stock, and the Series F Convertible Preferred Stock,
convertible into approximately 3,176,420 shares of common stock.

NOTE 10. STOCKHOLDERS' EQUITY

From time to time, the Company's board of directors authorizes the issuance of
common stock. The Company values shares of common stock based on the closing
ask price of the securities on the date the directors approve such issuance. In
the event the Company issues common stock subject to transferability
restrictions under Rule 144 of the Exchange Act of 1933, the Company discounts
the closing ask prices by 10% to value its common stock transactions. No such
issuances occurred for either period presented.

NOTE 11. CONTINGENCIES

Indemnifications

On December 9, 2002, the Company received notification from HUD requesting
indemnification on up to 23 loans brokered by a former loan officer of the
Company. AMRES executed and provided an indemnification agreement to HUD, as
requested. On February 13, 2003, HUD notified AMRES that (i) without the loans
originated by this particular loan officer, AMRES' default and claim rate would
be an acceptable level to HUD, and (ii) as a result of the termination of that
loan officer, and the execution of the indemnification agreement, the matter was
closed.

During the year ended April 30, 2004, the Company received two demands for
payment from HUD on claims totaling approximately $170,000. The first demand
involved losses on five properties and the second demand involved losses on an
additional property. All six properties were part of the original 23 properties
referred to above. The Company carries errors and omissions insurance coverage,
however, the Company received notification from their errors and omissions
insurance carrier that their claim for coverage was denied. As a result of this
denial, the Company estimated that their total liability under the
indemnification agreement is approximately $200,000. The estimate is based upon
the $170,000 in demands from HUD on the six loans, and an estimated liability of
$30,000 relating to an additional loan under the indemnification agreements
which are currently in default and no demand has been made. On May 20, 2004, HUD
accepted the Company's offer to make 10 monthly payments of $17,025 to HUD in
satisfaction of the six properties referenced above. Subsequent to year-end, the
Company began making the payments. As of April 30, 2004, the $200,000
provision, an increase of $145,000 from the prior year-end, is included in
accrued liabilities on the year end balance sheet. Management has accrued
$30,000 for one additional property. Two additional properties are in default
and any potential liability cannot be determined at this time, two other
properties are in default but the proceeds from the sale of the properties are
in excess of the loan, three properties are performing and eight properties are
paid have been paid in full, and one property is covered (has been settled)
under the Oaktree litigation.

State Audits

The Company is subject to certain state audits, which are typical in this
industry. Often these audits uncover instances of non-compliance with various
state licensing requirements. These

instances of non-compliance may also translate into a particular state levying a
fine or penalty against the Company. During the year ended April 30, 2004, the
Company resolved actions with the states of Arizona, Kansas, Nevada and Virginia
paying settlements totaling $93,800. The Company also underwent audits in the
states of Maryland and Washington and ultimately resolved the two states audits
by paying $24,000 in refunds to borrowers and fines.

At the present time, the Company is not aware of any pending actions by any
state licensing agency, and is aware of only one pending state audit, that being
Georgia, and does not anticipate that there will be any findings.
Oaktree Litigation

In March 2003, the Company was served with a lawsuit brought by Oaktree Funding
Corporation ("Oaktree") against nineteen defendants, including the Company, the
appraiser, escrow company, notary public, and borrowers involved in six (6)
different loan transactions brokered by the Company and funded by Oaktree. The
Complaint alleges, among other things, that the defendants committed fraud,
breach of contract, negligent misrepresentation, RICO violations, and unfair
business practices. The Complaint requests damages in excess of $1,500,000,
plus attorneys' fees, interest, penalties, and punitive damages.

As of April 30, 2003, the Company recorded a provision of $140,000 related to
the belief of the Company and of legal counsel that this was the maximum
exposure attributable to this lawsuit. Subsequent to April 30, 2004, although
the Company believed the case lacked merit, the Company agreed to mediation and
on June 14, 2004, the matter settled in mediation for a total potential exposure
to the Company of $46,500. Of this amount, the Company agreed to pay $31,500 up
front and indemnify Oaktree for up to an additional $15,000 on three additional
properties. The Company has maintained its cross action and will attempt to
recover its losses from the remaining cross defendants. Based on the mediation,
the Company decreased their initial provision of $140,000 to $46,500 a decrease
of $96,500, which has been reflected as a decrease to provision for loss on the
statement of operations for the year ended April 30, 2004. As of April 30, 2004,
the $46,500 is included in accrued liabilities on the balance sheet.

First Franklin Litigation

On December 10, 2003, First Franklin Financial Corporation filed claim against
the Company in the Superior Court of the State of California for the County of
Orange, alleging a breach of written mortgage purchase agreement. The original
claim amount was for approximately $108,000. On May 4, 2004, the Company settled
the matter with First Franklin for $52,500. Based on the settlement, the Company
recorded a provision of $52,500 during the year ended April 30, 2004, which is
included in accrued liabilities on the balance sheet. The Company paid the
settlement in full on May 5th, 2004.

Former Employees

In October 2003, a former employee filed a lawsuit against the Company, Anza
Capital Corp and its Chief Executive Officer. The Complaint alleges breach of
contract and fraud arising out 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. A trial date has been set for November 1,
2004. The Company believes the case lacks merit and is defending the claim
vigorously.

In November 2003, a former employee filed a lawsuit against the Company, Anza
Capital Corp and its Chief Executive Officer. The Complaint alleges breach of
contract and fraud arising out

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.
A trial date has been set for October 18, 2004. The Company believes the case
lacks merit and is defending it vigorously.

On January 23, 2004, a former employee filed claim against the Company in the
Superior Court of California, for the County of Orange. The Complaint alleges
breach of oral contract and complaint for damages arising out of the plaintiff's
employment with the Company, and requests damages in excess of $50,000 plus
attorney's fees, interest, penalties and punitive damages. The Company believes
this case lacks merit and is defending vigorously.

The Company is vigorously defending these lawsuits although the Company believes
that the actions lack merit. The Company has filed an answer to the complaints.
The cases are in the beginning stages of discovery but a prediction cannot be
made as to the outcome of these cases. As such, the Company has not recorded a
provision for losses in the accompanying consolidated financial statements
related to these three actions since they are not probable or estimatable.

Other Actions

On November 6, 2003, a borrower filed claim against the Company in the Superior
Court of California, City and County of Alameda. The defendants alleged in the
complaint are Dae Won & Associates, Inc., Dae W. Yoon, the Company, and Kathy
Pan a loan officer of the Company. Our San Francisco Branch Office employs Ms.
Pan. The complaint alleges fraudulent inducement of contract, rescission,
conversion and negligence. This claim is for a total amount of $121,000. Ms.
Pan vehemently denies any liability and/or responsibility to the plaintiff and
has hired an attorney to respond to the complaint on her behalf. The Company
will vigorously defend this lawsuit, as the Company believes that this case
lacks merit.

In April of 2004, the Company was named in two lawsuits in Michigan regarding
foreclosure actions on two loans originated by two former employees of the
Company in Michigan. The Company was also recently contacted by a bank, another
Michigan lender regarding potential problems with up to 22 loans originated by
the Company's employees in Michigan. As of the date of this disclosure, the
Company has agreed to settle the matters for a total of $8,000.

In May of 2004 a borrower filed suit against the Company, a branch manager and
an individual, for allegations of fraud amongst other causes of action. The suit
alleges that an individual named Paul Robertson deceived the borrowers who were
seeking a construction loan to build a house on a vacant lot. The plaintiffs
claim that they never received the house or the funds to construct the house and
are seeking "compensatory damages exceeding $75,000.00" and "punitive damages
exceeding $75,000.00". The plaintiffs are also seeking "reasonable attorneys'
fees and costs. The Company is defending on the grounds that Robertson was not
their agent and to the extent that he and the agent were somehow defrauding
borrowers, it was being done outside of the course and scope of any agency
relationship with the Company. The Company believes that the case lacks merit
and is defending vigorously.

In June 2004 a lawsuit was filed against the Company's wholly-owned subsidiary
American Residential Funding, Inc. ("AMRES") by the an Orange County, California
landlord. The suit alleges that AMRES breached a building lease and claims
damages for the entire term of the lease through August 2007 of $886,332.44.
AMRES recently filed an Answer to the Complaint and a Cross-Complaint against a
former Branch Manager and his business associate who signed the lease in
question purporting to be officers of the corporation. AMRES believes that this
matter

lacks merit and will litigate the case vigorously to hold the proper parties
accountable for any damages that are due the plaintiff.

The Company is subject to a limited number of claims and actions, which arise in
the ordinary course of business. The litigation process is inherently
uncertain, and it is possible that the resolution of the Company's existing and
future litigation may adversely affect the Company's financial position, results
of operations and cash flows.

Settlements

On May 14, 2004, the Company settled a matter with a leasing company related to
a lease that a terminated branch entered into and failed to complete. The
settlement amount of $19,000 was accrued as on April 30, 2004, and was paid
during the quarter.

On June 1, 2004, the Company agreed to settle a claim by a lender who sought
recovery on two loans involving alleged misrepresentation by the borrowers. The
claims were for amounts of approximately $200,000. The Company executed a
settlement agreement for a total amount of $120,000, with an initial payment of
$60,000 and subsequent monthly payments of $10,000 for six months. The $120,000
is accrued in the financial statements as of April 30, 2004. During the quarter
the Company paid the $60,000 and began making the monthly payments.

On May 28, 2004, the Company settled a claim from a borrower for alleged
overcharges by one of the Company's former branches located in Kansas. The
total settlement was $32,500.00, of which the company was responsible for
$18,250. The $32,500 is accrued in the financial statements as of April 30,
2004.

A lender requested that the Company reimburse them for two loans in which went
into default and were subsequently sold for a $150,000 loss. The loans were
brokered by branch of the Company. On July 19, 2004, the Company settled with
the lender agreeing to make monthly payments on the amount of $10,000 starting
August 1, 2004 until a total of $138,000 is paid. The Company accrued the
$138,000 and is included in the financials for the year ended April 30, 2004.

NOTE 12. SUBSEQUENT EVENTS

On September 17, 2004, the Company entered into a Securities Exchange Agreement
(the "Agreement") and Escrow Agreement with an unrelated party (the "Party").
Under the terms of the Agreement, the Company exchanged 500,000 shares of its
newly created Series G Convertible Preferred Stock (the "Series G") and warrants
to purchase 2,000,000 shares of the Company's common stock for 1,000,000 shares
of common stock of Cash Technologies, Inc. ("TQ Shares"), a publicly traded
company.

The initial value of the TQ Shares was approximately $1,320,000 at the inception
of the Agreement. The Company is required to make certain adjustments as
follows to the value of the TQ Shares:

Within 10 business days of the end of each calendar quarter, beginning with the
quarter ended December 31, 2004 (each, a "Supplemental TQ Share Valuation
Date"), the escrow agent will update the value of the TQ Shares held in escrow
by multiplying the average closing price for the 30 days before the end of the
applicable quarters times the number of TQ Shares then held in escrow, and then
adding the value of any cash or other assets (valued in the same manner as the

TQ Shares, or otherwise at their fair market value) then held in escrow (the
"Supplemental TQ Shares Value").

If the Supplemental TQ Shares Value exceeds $1,000,000, then either (i) upon the
receipt of a written request from the Party, that number of TQ Shares may be
released from escrow to the Party so that the Supplemental TQ Share Value is
approximately $1,000,000, or (ii) upon the mutual consent of the Company and the
Party, the Company will issue additional shares of the Series G equal to the
then-Supplemental TQ Share Value. In the event that any of the TQ Shares have
been previously released from escrow, and the Supplemental TQ Share Value is
subsequently less than $1,000,000, upon the receipt of a written request from
the Company, the Party will re-deposit that number of TQ Shares (up to the
original 1,000,000 TQ Shares), or cash or other assets acceptable to the
Company, with the escrow agent so that the Supplemental TQ Share Value is
approximately $1,000,000.

If the Supplemental TQ Share Value is less than $1,000,000, and all of the TQ
Shares are already held in escrow, then upon the receipt of a written request
from the Company, that number of the Series G will be released from escrow to
the Company so that the original issue price of the Series G then held in escrow
will be approximately equal to the Supplemental TQ Share Value. If, on a
subsequent Supplemental TQ Share Valuation Date, the Supplemental TQ Share Value
exceeds $1,000,000, then the Company will have the choice of re-depositing any
withdrawn Series G to bring the Supplemental TQ Share Value back to $1,000,000,
or adjusting the number of TQ Shares as set forth above.

Additionally, the Agreement has certain rescission rights as follows:

Upon the receipt of notice by the Party of any claim or demand, not currently
known to them, that is reasonably likely to have an effect on the warehouse line
of credit, the TQ Shares, and/or the Series G then held in escrow, or if the
Company fails to make a dividend payment on the Series G within 10 days of its
due date, or if there is a change in control of the Company, then the Party may
rescind the Agreement. Upon rescission of this Agreement, the escrow agent will
return any TQ Shares (or other assets) held in escrow to the Party, and any
Series G held in escrow to the Company.

The Company may rescind this Agreement at any time after the date which is 6
months after the Closing Date (the "Exclusion Period") by providing 30 days
advance written notice to the Party (the "Anza Termination Notice Period").
However, if the Company rescinds the Agreement during the 30-day period
immediately following the Exclusion Period, the Company is limited to rescinding
the transaction only with respect to one-half of the then-outstanding Series G.
The Exclusion Period and the Anza Termination Notice Period is waived for the
Company if the Party exercises a conversion of the Series G. After the
expiration of the Anza Termination Notice Period (if applicable), the escrow
agent will return any TQ Shares held in escrow to the Party, and any Series G
held in escrow to the Company.

The Agreement calls for the various parties to deposit their consideration with
an escrow agent, until such a time as either (i) all of the Series G are
converted into shares of the Company's common stock, or (ii) the escrow is
terminated in accordance with the Agreement, as noted above. In either case,
the warrants are transferred to the Party within two days from depositing in the
escrow.

The Series G, par value $0.001 per share, with original issue price of $2.00 per
share, have non-cumulative dividends at 12% per annum, payable when declared.
The Series G are immediately

convertible into shares of the Company's common stock, subject to certain
adjustments, at a price equal to the lesser of $0.08 per share or 80% of the
30-day average closing bid price for the 30 trading days prior to the date the
Company receives a conversion notice. All outstanding shares of the Series G
are automatically converted into the Company's common stock on September 17,
2009, 5 years after the original issue date.

The warrants to purchase up to 2,000,000 shares of the Company's common stock
have an exercise price of $0.10 per share and expire in 5 years.

ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS

OVERVIEW

We are a holding company that currently operates primarily through two (2)
active subsidiaries.

- 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

- EXPIDOC.COM, a California Corporation (EXPIDOC) arranges 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 (Ditech.com) ceased using Expidoc as a third party
provider of notary services. This event may have a significant impact on
our profitability in future periods as Expidoc contributed in-excess of
$127,000 net profit during the first three fiscal quarters of the prior
year. We are still assessing our options to proceed with Expidoc, however,
we determined that the remaining goodwill related to our acquisition of
Expidoc was impaired, and thus recorded an impairment charge in the amount
of $175,247 during January of 2004. If we are unable to operate Expidoc in
future periods at similar revenue levels, we will become even more
dependant on AMRES to generate revenue and profits.

- 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.

As shown below, AMRES has consistently provided the majority of our
consolidated revenue. The industry in which AMRES operates can be highly
volatile and is largely dependent on interest rates.

Percentage of Total Revenues by Service

% YTD Revenue % YTD Revenue
-------------- --------------
July 31, 2004 July 31, 2003
-------------- --------------

Loan Brokering 98.3% 94.2%
Mortgage Banking .9% .0
Notary Services 0.0% 5.0%
Real Estate Brokerage 0.8% .8%

Total 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 40% of our total loan production. This, coupled with
seasonal declines, is the primary reason for our revenue declines in recent
quarters compared to prior periods.

Traditionally, we have experienced increases in our business during the
spring and summer when home sales are at their highest levels. Loan production
in our highest month of July 2003 totaled 1,394 loans. Loan production has
dropped to an average of 600 loans per month as of July 31, 2004.

If we are unable to generate additional sources of revenue, our quarterly
results will continue to fluctuate and it may be difficult for us to sustain
profitable 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, realtors and trade associations.

- 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, Loan.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."

- Reducing operating costs through efficiencies generated by new software and
operating systems.

We have experienced a slow-down in business during the last quarter, and
had to reduce staff and have cut avoidable costs significantly. 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.

In addition, we will continually monitor our branch performance, closing
under-producing branches to help control our expenses. If implemented, these
measures should offset any potential decline in revenues from loans brokered.
However, should we experience significant and rapid declines in loan volume; it
is unlikely that our cost containment measures will be able to completely offset
the impact of the potential lost revenue.

The AMRES mortgage banking platform, which will allow the transformation
from predominately a mortgage broker to a banker, is currently closing
approximately $4,000,000 loans monthly, versus over $150,000,000 in brokered
loans monthly for AMRES as a whole. This increase in banking, if managed
properly, could allow profitable operations at lower levels of volume. AMRES
mortgage banking currently has a staff of 6, and is expanding as quickly as loan
volume permits, and as quality control and additional experienced employees
allow. It is anticipated that monthly loan production could increase to
$30,000,000 in four to six months, when seasonal revenues are higher. AMRES
mortgage banking has established relationships with several investors to
purchase our funded loans, including IndyMac Bank, Countrywide Funding, and
others. AMRES has purchased software (DataTrac) to manage the mortgage banking
process, as well as software to provide our branches with automated underwriting
(LoanScore).

We have slowed down the number of new branch additions due to an increase
in quality standards, minimum volume requirements, and State preferences. Our
branch count is currently approximately 123, down from approximately 200 at July
31, 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.

AMRES recently established a corporate managed "direct to consumer" loan
production division (AMRES DIRECT). The corporate loan officers and processors
are purchasing internet leads from proven providers such as Lending Tree.com.
This division will attempt to generate loans directly from consumers through
various marketing initiatives and association with strategic affinity groups,
such as financial planners. This division is still in the early stages of its
development and it is too early to predict our likelihood of success in
increasing our loan production through this division.

We expect we may incur additional expenses from State compliance audits,
loans brokered with recourse back to AMRES, and unpaid branch liabilities.
While we believe we have set aside adequate reserves for these issues, there are
no guarantees, due to the very high volume of past loans.

CRITICAL ACCOUNTING POLICIES

Anza's consolidated financial statements and related public financial
information are based on the application of accounting principles generally
accepted in the United States of America ("GAAP"). GAAP requires the use of
estimates, assumptions, judgments and subjective interpretations of accounting
principles that have an impact on the assets, liabilities, revenue and expense
amounts reported. These estimates can also affect supplemental information
contained in the external disclosures of Anza, including information regarding
contingencies, risk and financial condition. Anza believes its use of estimates
and underlying accounting assumptions adhere to GAAP and are consistently and
conservatively applied. Valuations based on estimates are reviewed for
reasonableness and conservatism on a consistent basis throughout Anza. Primary
areas where financial information of Anza is subject to the use of estimates,
assumptions and the application of judgment include accounts receivable
allowances, and losses on loans held for sale and indemnifications associated
with loans brokered. In addition, we are subject to litigation in the normal
course of business. We assess the probability and financial exposure when
determining when a liability for losses should be recorded. These significant
estimates also

include our evaluation of impairments of intangible assets (see further
discussion below). In addition, the recoverability of deferred tax assets must
be assessed as to whether these assets are likely to be recovered by Anza
through future operations. We base our estimates on historical experience and
on various other assumptions that we believe to be reasonable under the
circumstances. Actual results may differ materially from these estimates under
different assumptions or conditions. We continue to monitor significant
estimates made during the preparation of our financial statements.

Revenue Recognition

Commissions generated from brokering loans are recognized at the date of
close. Loan origination fees and other fees are deferred net of costs upon the
sale of loans to third parties without recourse, and whereby ANZA has no
continuing involvement.

Loans Held for Sale

Mortgage loans held for sale represent mortgage loans originated and held
by AMRES, pending sale, to interim and permanent investors. AMRES sells loans
it originates, typically within 30 days of origination, rather than hold them
for investment. AMRES sells loans to institutional loan buyers under an existing
contract. AMRES sells the servicing rights to its loans at the time it sells
those loans. At the time a loan is sold, AMRES has no continuing interest since
servicing rights are transferred at the time of sale in accordance with
paragraph 5 of SFAS 140 "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities". Recourse provisions generally
relate to first payment defaults, or breach of representations and warranties,
or fraud, with respect to the loans sold. The recourse provision, because of
its very brief term (30 days), is not practical to value in accordance with
paragraph 6 of SFAS 140, since the value is minimal. In the event AMRES
management becomes aware of a default, the financial asset and liability are
reinstated and an assessment of the impact of losses is made.

Income Taxes

We recognize deferred tax assets and liabilities based on the differences
between the financial statement carrying amounts and the tax bases of assets and
liabilities. We review our deferred tax assets for recoverability and establish
a valuation allowance based upon historical losses, projected future taxable
income and the expected timing of the reversals of existing temporary
differences. During the year 2004 and 2003, we estimated the allowance on net
deferred tax assets to be one hundred percent (100%) of the net deferred tax
assets.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JULY 31, 2004 COMPARED TO THE
THREE MONTHS PERIOD ENDED JULY 31, 2003

Introduction

Interest rates have continued to put downward pressure on revenues. Our
cost containment measures have been unable to fully offset the impact of our
reduced revenues.

Quarter Quarter
Ended Ended Dollar %
July 31, 2004 July 31, 2003 Change Change
--------------- --------------- --------------- ---------

Revenues $ 13,623,934 $ 19,593,343 $ (5,969,409) (30.5%)
--------------- --------------- --------------- ---------
Gross Profit % 33.4% 29.0% N/A 15.2%
General and
Administrative 1,784,986 2,643,215 (858,229) (32.4%)
Salaries and Wages 2,271,541 2,649,937 (378,396) (14.3%)
Net Income (Loss) $ 51,265 $ 321,985 (270,720) (84.0%)

Revenues

Revenues decreased by $5,969,409 or 30.5% for the quarter ended July
31,2004 compared to the quarter ended July 31, 2003. The decrease in revenues
is directly related to the decline in the refinance market and the discontinued
operations of Expidoc.Com.

Bravorealty.com continues to generate only modest revenue and is operating
at near break even. Management continues to evaluate the business model for our
real estate services. Without a significant shift in the model and potential
additional capital outlay, Bravorealty is not expected to provide significant
revenue or profitability in future periods.

Costs of Revenues

Commissions are paid on loans funded. Commissions decreased by $4,412,051
or 33%, for the quarter ended July 31, 2004, to $8,953,172 from $13,365,223 for
the quarter ended July 31, 2003. Notary and other costs associated with
Expidoc.com and Bravorealty.com decreased by $433,889, or 79%. These decreases
are directly related to the decrease in revenue between the periods.

Consolidated gross profit decreased by $1,123,469, or 19.8% for the quarter
ended July 31, 2004 to $4,552,045 from $5,675,514 for the quarter ended July 31,
2003. As a percentage of revenue, the gross profit increased by approximately
3.0%. The decrease in the gross profit was attributable to the decrease in
gross revenue. The increase of the gross profit as a percentage of the revenue
was due to reduced commissions paid and increase in rebates from lenders.

General and Administrative Expenses

General and administrative expenses totaled $1,790,986 for the quarter
ended July 31, 2004, compared to $2,643,215 for the quarter ended July 31, 2003.
This decrease of $852,229 can be directly attributed to AMRES having fewer
branches in the current period (approximately 120) versus the comparable period
in prior year (approximately 200). As such, AMRES had fewer branches spending
rent, office supplies, telephone, utilities and other general and administrative
costs.

Salaries and Wages

Salaries and wages totaled $2,271,541in quarter ended July 31, 2004,
compared to $2,649,937 for the quarter ended July 31, 2003. The decrease of
$378,396 is directly related to the reduction of personnel as one of the
cost-cutting measures of AMRES.

Selling and Marketing Expense

Selling and marketing expense relates primarily to costs incurred for
prospecting activities to obtain new clients (borrowers). These costs include
acquiring "leads" which translate into funded loans. Selling and marketing
expenses for the quarter ended July 31, 2004 amounted to $461,763 compared to
$116,845 in the prior period. We may see increased spending in this area in
future periods as the marketplace for qualified borrowers becomes more and more
competitive.

Consulting Expenses

Consulting Expenses for this quarter increased by approximately $28,000
compared to the quarter ended April 30, 2004. This increase is attributed to
hiring consultants to set up quality branches nationwide. Consulting expenses
for this quarter is $184,412, prior quarter was 166,335. These contracts were
terminated in August. Consulting expenses are included as a part of general and
administrative expenses.

Interest Expense

Interest expense was $49,753 as of July 31, 2004, compared to $72,800 as of
July 31, 2003. Interest expense is primarily related to interest paid on our
warehouse line of credit. As of July 31, 2004, interest charged on our
warehouse line of credit was lesser than the interest charged during the quarter
ended July 31, 2003.

Income Taxes

Our income taxes have not been material during the periods presented
because of utilization of Anza's net operating loss carryforwards for federal
income tax reporting purposes. California suspended net operating losses usage
for fiscal 2003 and 2004. In 2003, we deducted losses associated with the
LoanNet transactions, as we sold our rights to the shares originally issued for
the exchange transaction in February 2000. The loss deduction amounted to
approximately $2.1 million. No deferred tax asset was previously recorded for
this loss deduction. The Company has no significant current or deferred income
tax expense during the periods presented.

Net Income

AMRES realized a net profit of $51,265 for the quarter ended July 31, 2004
compared to $321,985 for the quarter ended July 31, 2003. This was due to the
significant drop in production attributed to the decline in the refinance
market.

LIQUIDITY AND CAPITAL RESOURCES

Introduction

Our cash position remains strong with over $2.7 million on hand as of July
31, 2004. Our current assets exceed our current liabilities by $191,818.
However, if our revenues continue to decline and we are unable to offset the
declines by shedding overhead costs, our cash balances will decrease noticeably.
In addition, any significant changes to our estimates of exposure from
contingent liabilities could have a severe adverse effect on our liquidity and
capital resources

Cash Flows

Net cash used by operating activities was $3,107,574 and $4,054,493 for the
three months ended July 31, 2004 and 2003, respectively. For the three months
ended July 31, 2004, we recorded a net profit of $51,265 compared to a net
profit of $321,985 for the three months ended July 31, 2003. In both periods,
the increase in our loans held for sale was the primary contributor to the net
cash used by operating activities in the amount of $3,817,012 and $5,882,310 as
of July 31, 2004 and 2003, respectively. In addition, for the current three
months, a decrease in accounts receivable in the amount of $689,260 and a
decrease in accounts payable, commissions payable, and accrued and other
liabilities in the amount of $30,929 were contributors to the cash used by
operating activities.

Net cash used in investing activities was $3,500 for the three months ended
July 31, 2004 compared to cash used in investing activities of $40,833 for the
three months ended July 31, 2003. For the three months ended July 31, 2004, net
cash used in investing activities relates to the purchase of equipment in the
amount of $3,500.

Net cash provided by financing activities was $3,679,761 and $5,816,831 for
the three months ended July 31, 2004 and July 31, 2003, respectively. The most
significant contributor to the cash provided by financing activities during both
periods relates primarily to increase on our warehouse line of credit in the
amount of $3,679,761 and $5,846,832 for the three months ended July 31, 2004 and
2003, respectively.

Liquidity

Our cash on hand at July 31, 2004 amounted to $2,773,212 and our working
capital was $191,818. Our current obligations consist primarily of liabilities
generated in the ordinary course of business, which includes our warehouse line
of credit. We have no long-term debt which we need to service in the near term.

We maintain a warehouse line of credit in the amount of $10,000,000.
Maintaining an adequate warehouse line of credit is critical to our growth plans
for our mortgage banking operations. Any significant reduction in the borrowing
limits or significant changes in terms could have a negative impact on our
ability to expand the mortgage banking operations at the pace and with the
degree of profitability we desire. Further, we have traditionally experienced
no defaults on loans funded through our mortgage banking operations. As we
continue to grow this segment of our business, our default rate on these loans
may increase. Any significant change in our default rate would have a negative
impact on our consolidated financial condition, results of operations and cash
flows.

As of the quarter end, we were not in compliance with certain debt
covenants. The lending institution has not formally issued a waiver for these
violations. The final determination is contingent upon the lending
institution's review of the July 31, 2004 Form 10-Q.

Interest Rates

We are vulnerable to increases in interest rates. Our business over the
past two years has increased due to mortgage refinancings which resulted from
declining interest rates. Interest rates appeared to have stabilized for the
near term, noting a decline in long-term rates in March 2004. The sub-prime
lending market is less vulnerable to increases in interest rates, because
interest

rates charges to these borrowers is significantly higher and less volatile to
changes in interest rates. Significant increases in interest rates could have
an adverse impact on our the financial condition, results of operations and cash
flows.

Seasonality

We experience slow loan production in the months of January through March
because of the low number of applications we receive in December and January
relative to the other months during the year. We historically have incurred
losses during the months of February and March because of seasonality.

ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest rate movements significantly impact our volume of closed loans and
represent the primary component of market risk to us. In a higher interest rate
environment, consumer demand for mortgage loans, particularly refinancing of
existing mortgages, declines. Interest rate movements affect the interest
income earned on loans held for sale, interest expense on the warehouse lines
payable, the value of mortgage loans held for sale and ultimately the gain on
sale of mortgage loans.

Our primary financial instruments are cash in banks and money market
instruments. We do not believe that these instruments are subject to material
potential near-term losses in future earnings from reasonably possible near-term
changes in market rates or prices. We do not have derivative financial
instruments for speculative or trading purposes. We are not currently exposed
to any material currency exchange risk.

ITEM 4 CONTROLS AND PROCEDURES

The Company's Chief Executive Officer and Chief Financial Officer (or those
persons performing similar functions), after evaluating the effectiveness of the
Company's disclosure controls and procedures (as defined in Rules 13a-14(c) and
15d-14(c) under the Securities Exchange Act of 1934, as amended) as of a date
within 90 days of the filing of this Quarterly report (the "Evaluation Date"),
have concluded that, as of the Evaluation Date, the Company's disclosure
controls and procedures were effective to ensure the timely collection,
evaluation and disclosure of information relating to the Company that would
potentially be subject to disclosure under the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder. There were no
significant changes in the Company's internal controls or in other factors that
could significantly affect the internal controls subsequent to the Evaluation
Date.

PART II

ITEM 1 LEGAL PROCEEDINGS

Existing Matters
-----------------

There are no changes to our description of the existing matters in our
Annual Report on Form 10-K for the year ended April 30, 2004.

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.

New Matters
------------

In June 2004 a lawsuit was filed against our wholly-owned subsidiary,
American Residential Funding, Inc. ("AMRES") by the Irvine Company. The action
was filed in the Superior Court of California in the County of Orange, case
number 04CC006842. The suit alleges that AMRES breached a building lease and
claims damages for the entire term of the lease through August 2007 of
$886,332.44. AMRES recently filed an Answer to the Complaint and a
Cross-Complaint against a former Branch Manager and his business associate who
signed the lease in question purporting to be officers of the corporation. We
believe that this matter lacks merit and will litigate the case vigorously to
hold the proper parties accountable for any damages that are due the plaintiff.

ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS

On April 30, 2004, we approved the issuance of 224,386 shares of our common
stock, restricted in accordance with Rule 144, to the three holders of our
Series D Convertible Preferred Stock as payment of dividends due through April
30, 2004. The issuances were exempt from registration pursuant to Section 4(2)
of the Securities Act of 1933, and shareholders were believed to be accredited
and/or sophisticated. The shares were issued in May 2004.

On April 30, 2004, we approved the issuance of 164,500 shares of our common
stock, restricted in accordance with Rule 144, to Vincent Rinehart, an officer
and director, as payment of dividends through April 30, 2004 on our Series F
Convertible Preferred Stock. The issuance was exempt from registration pursuant
to Section 4(2) of the Securities Act of 1933, and the shareholder was
accredited. The shares were issued in May 2004.

ITEM 3 DEFAULTS UPON SENIOR SECURITIES

We maintain a $10,000,000 warehouse line of credit which expires on March
31, 2005. The credit agreement calls for various ratios and net worth
requirements, minimum utilization requirements, and limits the warehouse period
to 45 days for any specific loan. The interest rate is adjustable, based upon a
published prime rate, plus an additional 1% to 3% and is payable monthly. The
rate varies depending on the type of loan (conforming or non-conforming) with
higher rates on non-conforming loans. The line of credit is collateralized by
the company's loans

held for sale. We are currently not in compliance with certain debt covenants
in relation to this line of credit. The lending institution has not formally
issued a waiver for these violations, although they have informed us that they
will review our quarterly financial results.

ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There have been no events which are required to be reported under this
Item.

ITEM 5 OTHER INFORMATION

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

ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

3.1 (1) Restated Articles of Incorporation, as filed with the Nevada
Secretary of State on April 14, 2003.

3.2 (1) Second Restated Bylaws of Anza Capital, Inc.

4.1 (1) Certificate of Designation for Series D Convertible
Preferred Stock

4.2 (1) Certificate of Designation for Series E Convertible Preferred
Stock

4.3 (1) Certificate of Designation for Series F Convertible Preferred
Stock

31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive
Officer

31.2 Rule 13a-14(a)/15d-14(a) Certification of Chief Financial
Officer

32.1 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.

(1) Incorporated by reference to our Current Report on Form 8-K dated
April 21, 2003 and filed with the Commission on April 22, 2003.

(b) Reports on Form 8-K

We did not file any Current Reports on Form 8-K during the quarter ended
July 31, 2004.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

Dated: September 17, 2004 /s/ Vincent Rinehart
--------------------------------------
By: Vincent Rinehart
Its: President, Chairman, Chief
Executive Officer, Chief
Financial Officer, Chief
Accounting Officer, and
Director