-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Vx5J7baR3cenMzeoYI7xtONH3mxbc2f2/NtZK1yjfYLCXV8p/81/Ij7+k8jEUSei XIi0oqizJeCBasP/VtG/lQ== 0001135432-02-000336.txt : 20020920 0001135432-02-000336.hdr.sgml : 20020920 20020920142259 ACCESSION NUMBER: 0001135432-02-000336 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20020731 FILED AS OF DATE: 20020920 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANZA CAPITAL INC CENTRAL INDEX KEY: 0000926844 STANDARD INDUSTRIAL CLASSIFICATION: FINANCE SERVICES [6199] IRS NUMBER: 841273503 STATE OF INCORPORATION: NV FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-24512 FILM NUMBER: 02768684 BUSINESS ADDRESS: STREET 1: 3200 BRISTOL STREET STREET 2: SUITE 710 CITY: COSTA MESA STATE: CA ZIP: 92626 BUSINESS PHONE: 7148662100 MAIL ADDRESS: STREET 1: 3200 BRISTOL STREET STREET 2: SUITE 710 CITY: COSTA MESA STATE: CA ZIP: 92626 FORMER COMPANY: FORMER CONFORMED NAME: E NET CORP/NV DATE OF NAME CHANGE: 19990513 FORMER COMPANY: FORMER CONFORMED NAME: E-NET COM CORP DATE OF NAME CHANGE: 20000127 FORMER COMPANY: FORMER CONFORMED NAME: E NET FINANCIAL CORP DATE OF NAME CHANGE: 19990920 FORMER COMPANY: FORMER CONFORMED NAME: E-NET FINANCIAL COM CORP DATE OF NAME CHANGE: 20000317 10QSB 1 doc1.txt SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JULY 31, 2002 [ ] TRANSITION REPORT UNDER 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 Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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. -- APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes No. APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date. As of September 16, 2002, there were 42,559,328 shares of common stock issued and outstanding. TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (check one): Yes _____ No X . --- ANZA CAPITAL, INC. TABLE OF CONTENTS ----------------- PART I Item 1 Financial Statements Item 2 Management's Discussion and Analysis or Plan of Operations PART II Item 1 Legal Proceedings Item 2 Changes in Securities and Use of Proceeds Item 3 Defaults Upon Senior Securities Item 4 Submission of Matters to a Vote of Security Holders Item 5 Other Information Item 6 Exhibits and Reports on Form 8-K 2 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 3 ANZA CAPITAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET
July 31, 2002 -------------- ASSETS Current Assets: Cash and cash equivalents . . . . . . . . . . . . . . . . . . $ 1,264,534 Commissions and accounts receivable . . . . . . . . . . . . . 1,626,499 Loans held for sale . . . . . . . . . . . . . . . . . . . . . 2,549,246 Advances to employees . . . . . . . . . . . . . . . . . . . . 138,269 Prepaid and other current assets. . . . . . . . . . . . . . . 55,850 -------------- Total current assets . . . . . . . . . . . . . . . . . . . . . 5,634,398 Property and equipment, net of accumulated depreciation of $172,278. . . . . . . . . . . . . . . . . . . 120,242 Goodwill, net of accumulated amortization and impairments of $1,385,049 . . . . . . . . . . . . . . . . 425,247 -------------- 6,179,887 ============== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable. . . . . . . . . . . . . . . . . . . . . . . 830,820 Commissions payable . . . . . . . . . . . . . . . . . . . . . 1,610,707 Warehouse line of credit. . . . . . . . . . . . . . . . . . . 2,494,456 Accrued liabilities . . . . . . . . . . . . . . . . . . . . . 115,904 Total current liabilities. . . . . . . . . . . . . . . . . . . 5,051,887 -------------- Convertible notes payable to related party . . . . . . . . . . 342,865 Interest payable on notes to related parties . . . . . . . . . 46,902 Other liabilities. . . . . . . . . . . . . . . . . . . . . . . 49,178 -------------- Total liabilities. . . . . . . . . . . . . . . . . . . . . . . 5,490,832 -------------- Stockholders' equity: Class C convertible preferred stock, no par value; liquidation value of $100.00 per share; 17,160 shares issued and outstanding. . . . . . . . . . . . . 1,716,000 Class A convertible preferred stock, no par value; liquidation value of $0.50 per share; 500,000 shares authorized; 472,306 shares outstanding. . . . . . . . . . . . . . . . . 236,153 Common stock, $0.001 par value; 100,000,000 shares authorized; 45,309,332 issued and 42,559,322 outstanding . . . . . . . . . . . . . . . . . . . . . . . . . 42,559 Additional paid-in capital . . . . . . . . . . . . . . . . . . 12,316,840 Accumulated deficit. . . . . . . . . . . . . . . . . . . . . . (13,595,497) Deferred stock compensation. . . . . . . . . . . . . . . . . . (27,000) -------------- Total stockholders' equity . . . . . . . . . . . . . . . . . . 689,055 -------------- $ 6,179,887 ==============
See accompanying footnotes 4 ANZA CAPITAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
Three Three Months Ended Months Ended July 31, 2001 July 31, 2002 -------------- -------------- Revenues: Broker commissions. . . . . . . . . . . . . $ 4,880,634 $ 10,956,287 Other . . . . . . . . . . . . . . . . . . . 165,396 363,059 -------------- --------------- 5,046,030 11,319,346 -------------- --------------- Cost and expenses: Broker Commissions . .. . . . . . . . . . . 3,332,546 7,999,523 Other 88,769 270,285 -------------- -------------- Gross profit. . . . . . . . . . . . . . . . 1,624,715 3,049,538 Operating expenses: General and administrative. . . . . . . . . 1,281,580 1,930,687 Salaries and wages. . . . . . . . . . . . . 507,125 878,317 Non-recurring loss on settlements . . . . . 61,494 - -------------- -------------- Total costs and expenses. . . . . . . . . 1,850,199 2,809,004 -------------- -------------- Operating income (loss) . . . . . . . . . . (225,484) 240,534 Interest expense . . . . . . . . . . . . . . (43,470) (28,667) Other income . . . . . . . . . . . . . . . . 6,432 16,983 -------------- -------------- Net income (loss) . . . . . . . . . . . . $ (262,522) $ 228,850 ============== ============== Earnings per common share: Basic: Weighted average number of common shares. 26,414,775 42,386,704 -------------- -------------- Net earnings (loss) per common share. . . $ (0.01) $ 0.01 -------------- -------------- Diluted: Weighted average number of common shares. 26,414,775 131,141,203 -------------- -------------- Net earnings (loss) per common share. . . $ (0.01) $ 0.00 -------------- --------------
See accompanying footnotes 5 ANZA CAPITAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Three Months Ended Ended July 31, 2001 July 31, 2002 -------------- -------------- Cash flows from operating activities: Net income (loss). . . . . . . . . . . . . . . . . . . . . . $ (262,522) $ 228,850 Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation . . . . . . . . . . . . . . . . . . . . . . . . 5,001 10,438 Non-recurring loss on settlements. . . . . . . . . . . . . . 61,494 - Stock compensation to consultants and employees. . . . . . . 320,473 1,080 Amortization of discounts on loans . . . . . . . . . . . . . 14,108 10,242 Amortization of deferred stock compensation. . . . . . . . . 80,439 30,958 Changes in operating assets and liabilities: Increase in commissions and accounts receivable. . . . . . (134,628) (298,041) Increase in loans held for sale. . . . . . . . . . . . . . (1,096,675) (1,479,546) Decrease (increase) in other current assets. . . . . . . . 18,510 (12,179) (Decrease) increase in accounts payable. . . . . . . . . . (23,776) 497,880 Increase in commissions payable. . . . . . . . . . . . . . 224,590 401,267 Increase (decrease) accrued liabilities. . . . . . . . . . (85,056) 19,481 -------------- -------------- Net cash used in operating activities. . . . . . . . . . . . . (878,042) (589,570) Cash flows from investing activities: Acquisitions of property and equipment . . . . . . . . . . . (12,527) (16,572) Increase in due from employees . . . . . . . . . . . . . . . (44,750) (51,336) -------------- -------------- Net cash used in investing . . . . . . . . . . . . . . . . . (57,277) (67,908) Cash flows from financing activities: Payments on bridge loan. . . . . . . . . . . . . . . . . . . - (199,100) Proceeds from issuance of bridge loan. . . . . . . . . . . . 200,000 - Advances from warehouse line of credit . . . . . . . . . . . 1,073,920 1,449,580 Repurchase of A Preferred. . . . . . . . . . . . . . . . . . - (7,257) Dividends on A Preferred . . . . . . . . . . . . . . . . . . - (9,743) Payment on capital lease obligation. . . . . . . . . . . . . - (19,319) -------------- -------------- Net cash provided by financing activities. . . . . . . . . . 1,273,920 1,214,161 Net increase in cash . . . . . . . . . . . . . . . . . . . . . 338,601 556,683 Cash at beginning of period. . . . . . . . . . . . . . . . . . 92,886 707,851 -------------- -------------- Cash at end of period. . . . . . . . . . . . . . . . . . . . . $ 431,487 $ 1,264,534 ============== ============== Non-cash financing activities: Debt reduction through the issuance of common stock. . . . . $ 459,000 - ============== ============== Warrants issued for bridge-loan issue costs. . . . . . . . . $ 132,345 - ============== ============== Conversion of C Preferred to common stock. . . . . . . . . . $ 515,925 $ 34,359 ============== ============== Supplemental cash flow information: Cash paid for interest . . . . . . . . . . . . . . . . . . . . $ - $ 27,937 ============== ============== Income tax was not significant during the periods presented
See accompanying footnotes 6 NOTES TO INTERIM FINANCIAL STATEMENTS NOTE 1. UNAUDITED INTERIM FINANCIAL STATEMENTS The interim financial data as of July 31, 2002, for the three months ended July 31, 2002 and 2001 are 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, 2002, and the results of their operations and their cash flows for the three months ended July 31, 2002 and 2001. The results of operations are not necessarily indicative of the operations, which may result for the year ending April 30, 2003. Also, in the opinion of management, all disclosures required on Form 10-QSB were fully furnished with exception of the per segment information required by Statement of Financial Accounting Standards No. 131 (SFAS 131), "Disclosures about Segments of an Enterprise and Related Information " issued by the Financial Accounting Standards Board (FASB). Management omitted this information since this information was not readily available and American Residential Funding, Inc.'s ("AMRES") loan brokering business represents approximately 97% of the Company's revenues and related expenses. However, management determined that the omission of this information is insignificant to the overall presentation of the Company's financial position and will provide this information only in the annual financial report in the Company's Form 10-KSB. NOTE 2. RECLASSIFICATIONS Certain prior year amounts have been reclassified for comparative purposes. NOTE 3. IMPACT OF RECENTLY ISSUED ACCOUNTING STATEMENTS In July 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations. This statement provides accounting and reporting standards for costs associated with the retirement of long-lived assets. This statement requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred. When the liability is initially recorded, the entity capitalizes a cost by increasing the carrying amount of the related long-lived asset. Over time, the liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, an entity either settles the obligation for its recorded amount or incurs a gain or loss upon settlement. The Company will be required to adopt this statement no later than May 1, 2003. The Company is currently assessing the impact of this statement on its results of operations, financial position and cash flows. In October 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. This statement replaces SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. However it retains the fundamental provisions of SFAS No. 121 for recognition and measurement of the impairment of long-lived assets to be held and used and for measurement of long-lived assets to be disposed of by sale. This statement applies to all long-lived assets, including discontinued operations, and replaces the provisions of APB Opinion No. 30, Reporting Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, for the disposal of segments of a business. This statement requires that those long-lived assets be measured at the lower of carrying amount or fair value less cost to sell, whether reported in continuing operations or in discontinued operations The adoption of the provision of SFAS 144 did not have a material impact on the results of operations or the financial position of ANZA, since its transfer of financial assets are considered complete at the time of transfer. 7 In May 2002, the FASB issued SFAS No. 145, "Rescission of FASB No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections" (SFAS 145). SFAS 145 updates, clarifies and simplifies certain existing accounting pro- nouncements. Currently, SFAS 145 impacts ANZA only with respect to the rescission of SFAS 4. Prior to the issuance of SFAS 145, SFAS 4 required all gains and losses from extinguishment of debt to be aggregated and, if material, classified as an extraordinary item, net of related income tax effect. As a result of the rescission of SFAS 4, the criteria in APB No. 30 will now be used to classify those gains and losses. SFAS 145 is required to be adopted for fiscal years beginning after May 2002. The Company has elected to early adopt the provisions of SFAS 145, and as such reported all gains on settlements of debt as components of operating income and losses. For the three months ended July 31, 2001, the Company had non-recurring losses from settlements of $61,494. Such amounts have been reflected as a component of other income. The Company did not have any extraordinary items during the three months ended July 31, 2002. In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." The standard requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. Costs covered by the standard include lease termination costs and certain employee severance costs that are associated with a restructuring, discontinued operation, plant closing, or other exit or disposal activity. This statement is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. Management is currently assessing the impact of this statement on its result of operations, financial position and cash flows. NOTE 4. GOODWILL For purchase business combinations completed prior to June 30, 2001, the net carrying amount of goodwill is $425,247 ($250,000 related to Titus and $175,247 related to Expidoc). Management estimated that the sale of Titus would net ANZA at least $250,000, net of costs to sell. Management assessed the fair value of the management company and the REIT based on management's belief that an existing management company of an established REIT could be sold for $250,000, based on discussions with knowledgeable persons, as well as the costs to establish, to obtain required approvals in the state of California and to maintain a REIT. Management believes that the primary intangible asset of Expidoc is goodwill. Because of the relative immateriality of the carrying value of the Expidoc goodwill, management did not believe that an appraisal was necessary to determine what amount, if any, should be allocated to intangible assets with definite lives. Management believes the enterprise value of Expidoc exceeds the carrying value of goodwill as of July 31, 2002. NOTE 5. EARNINGS PER SHARE Anti-dilutive securities which are not included in the calculation of dilutive EPS for the three months ended July 31, 2002 which could be dilutive in future periods, include the C Preferred, A Preferred, Laguna warrants, and employee options convertible into approximately 88,754,499 shares of common stock. If all of these anti-dilutive securities were converted as of July 31, 2002, the Company could exceed its authorized number of common shares. However, management believes that based on certain restrictions within the agreements related to these anti-dilutive securities, primarily the C Preferred and restrictions on the C Preferred holders' ownership percentage in proportion to total shares outstanding, it is unlikely that a series of conversions could occur (based on the total common shares outstanding as of July 31, 2002) which could result in the Company exceeding its authorized shares. 8 NOTE 6. BRIDGE FINANCING On June 27, 2001, the Company obtained a short-term bridge loan in the amount of $225,000, with a stated rate of interest at 7% per annum. ANZA also executed a warrant agreement, which entitled Laguna Pacific to acquire up to $225,000 worth of ANZA 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. For accounting purposes, ANZA was required to allocate the proceeds received to the value of the warrant and the bridge loan using the relative fair value method and the resulting warrant value is reflected as an increase in additional paid-in capital and a corresponding reduction (discount) to the face value of the note. The relative value of the warrant amounted to $132,341, and such amount was reflected as a discount to the note. The discount on the note was amortized over the term of the note of March 27, 2002, using the effective interest method. ANZA paid $25,000, plus interest, near the due date. Management of ANZA sought relief, since the general partners of Laguna did not perform under certain terms of the agreement. On or about June 27, 2002, ANZA entered into a settlement agreement and general mutual release with Laguna Pacific (the "Laguna Settlement"). As consideration under the Settlement, ANZA repaid the $200,000 note, plus $9,000 in accrued interest, and the note was cancelled. Subsequent to the Laguna Settlement, a dispute has arisen regarding whether or not the Laguna Settlement included and consequently canceled the warrants. Management is currently in discussions with Laguna Pacific regarding this matter and may reach a second settlement agreement which may result in the issuance of additional shares of common stock to Laguna Pacific. NOTE 7. EMPLOYMENT AGREEMENTS On June 1, 2001, ANZA entered into an employment agreement with Vincent Rinehart, its chief executive officer. Under the terms of the agreement, ANZA is to pay a salary equal to $275,000 per year, subject to an annual increase of 10% commencing January 1, 2002, plus an automobile allowance of $1,200 per month and other benefits, including life insurance. The agreement is for a term of five years and provides for a severance payment in the amount of $500,000 and immediate vesting of all stock options in the event his employment is terminated for any reason, including cause. In addition, ANZA granted options to acquire 2,500,000 shares of ANZA common stock at $0.08 per share, which shall vest monthly over a three-year period. The options are subject to an anti-dilution provision in the event of future issuances of common stock or a reverse stock split. The holder in no event can own more than 20% of the issued and outstanding common stock in the event of a reverse stock split. The options are exercisable at the fair market value at the date of the grant of $0.08 per share. Using the variable method in accordance with Accounting Principles Board Opinion No. 25, no expense was recognized from the issuance of the options. ANZA is also a party to other employment agreements in the normal course of business. On April 1, 2002, AMRES entered into an employment agreement with Jeff Hemm, president, for the term of three years. Under the terms of the agreement, AMRES is to pay a salary equal to $168,000 per year, subject to an monthly increase or decrease based on the number of loans closed during the quarter, plus an automobile allowance of $800 per month and other benefits, including life insurance. In addition, he was granted options to acquire 1,000,000 shares of AMRES common stock at $0.005 per share, which shall vest over twelve months period. 9 NOTE 8. 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 144a of the Exchange Act of 1933, the Company discounts the closing ask prices by 10% to value its common stock transactions. At various dates from May 1, 2001 through July 31, 2001, the Company issued 2,400,000 shares of common stock, valued at $390,500 to various consultants. Consulting services performed, and included in general and administrative expenses, during the three months ended July 31, 2001 are summarized below: Three Months Ended July 31, 2001 Costs Shares Incurred Issued Financial and Internal Accounting Services $ 75,750 $ 450,000 Mergers Acquisitions Consulting 191,000 1,125,000 Bravorealty Start-up Costs 105,000 700,000 Information Technology Consulting 14,000 100,000 Legal Services 4,750 25,000 ---------- ---------- Total $ 390,500 $2,400,000 ========== ========== On May 10, 2002, the Company issued 30,000 shares of its restricted common stock to an employee as an incentive. The shares were valued at $1,080 and recorded as compensation expense during the quarter. No shares were issued to consultants in during the three months ended July 31, 2002. SERIES A CONVERTIBLE PREFERRED STOCK During the three months ended July 31, 2002, ANZA repurchased 14,513 shares of A Preferred for $7,257. Also during the quarter, the Company declared and distributed $9,743 of dividends relating to the A Preferred. At the same time, the Company clarified the terms of the A Preferred and filed an amendment to its certificate of designation. SERIES C CONVERTIBLE PREFERRED STOCK On May 14, 2002, Class C Preferred stockholders exercised their option and converted 299 shares of Class C Preferred stock into 1,189,931 of ANZA's restricted common stock. The number of shares received upon conversion was determined based on the conversion discount specified in the agreement of 17.5%, taking into account the dividends, which were due on the Class C Preferred shares. The beneficial conversion feature embedded in the Class C Preferred was originally charged to ANZA's accumulated deficit at the date of issuance since the right to convert into common stock at a discount was the same date. No expense was associated with the transaction. C Preferred stock dividend totaling $4,459 were charged to the Company's accumulated deficit during the three months ended July 31, 2002. 10 ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION OVERVIEW The Company is an independent financial services company, whose primary source of revenue is American Residential Funding "AMRES", a wholly owned subsidiary. AMRES offers loan originators a "net-branch" opportunity, in which AMRES provides licensing, accounting and lender approvals in over 40 states. They maintain a web site, www.amres.net, which contains detailed information on AMRES, as well as provides Net Branches with various corporate services. Currently over 300 net-branches nationwide are operating, in addition to four Corporate owned branches in 4 counties in Southern California. Further growth is anticipated, both from commissioned and corporate marketing staff. Loan processing, mortgage banking and acquisitions will provide additional revenues sources. Expidoc.com has seen increased revenue over the last several quarters, averaging over 400 loan document signings a month through their network of notaries in all 50 states. Expidoc has achieved profitability the last three fiscal quarters. By adding staff, and implementing a new marketing initiative, Expidoc should continue to improve its operations and maintain near term profitability. Revenues at Expidoc.com are expected to continue to increase as Expidoc.com has become a preferred signer for Ditech.com. This status with Ditech.com, and their confidence in Expidoc.com's ability has translated into a consistent increase in the number of orders received monthly. BravoRealty (69% owned subsidiary) has established joint venture branches in four locations. In addition, BravoRealty has initiated a net branch of AMRES inside Bravo, and has experienced an increase in revenues from home loans brokered. Bravorealty has established the documentation, licensing, marketing materials and operations to sell "Bravo Real Estate Network" franchises. Management is still evaluating its options for franchising and has no immediate plans to implement this strategy. BravoRealty has incurred a small operating loss for the current quarter. Titus Real Estate, LLC, operates as the manager of Titus REIT, a real estate investment trust. Current shareholders of the REIT have requested the selling of assets in order to return their original investment. To date, all ten properties have been sold. It is the intent of the management of the Company to repay its initial investors, operate the REIT at minimal levels, and raise new capital for Titus REIT when the market permits, although no estimate can be made as to when that might be. The Company believes the long term benefits of a REIT compliment the Company's business plan. Titus Real Estate, LLC, did not generate any revenue during the current quarter. We have never achieved an annual profit. However, our revenues continue to increase, and we have been successful through various strategies in reducing our outstanding debt. We have achieved profitability in recent quarters and as a result management believes that we may achieve profitability in the current fiscal year. CRITICAL ACCOUNTING POLICIES Anza's consolidated financial statements and related public financial infor- mation are based on the application of accounting principles generally accepted in the United States ("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 loan losses on loans held for sale, which have been historically and favorably low. These significant estimates also include our evaluation of impairments of intangible assets (see further discussion below). In addition, the recover- ability 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. 11 Fair Value of Assets Acquired and Liabilities Assumed in Purchase Combinations and Review for Impairments The purchase combinations we evaluate and complete, require us to estimate the fair value of the assets acquired and liabilities assumed in the combinations. These estimates of fair value may be based on independent appraisal or our business plan for the entities acquired including planned redundancies, restructuring, use of assets acquired and assumptions as to the ultimate resolution of obligations assumed for which no future benefit will be received. Should actual use of assets or resolution of obligations differ from our estimates, revisions to the estimated fair values would be required. If a change in estimate occurs after one year of the acquisition, the change would be recorded in our statement of operations. Valuation Of Long-Lived And Intangible Assets The recoverability of these assets requires considerable judgment and is evaluated on an annual basis or more frequently if events or circumstances indicate that the assets may be impaired. As it relates to goodwill and indefinite life intangible assets, we apply the impairment rules in accordance with SFAS No. 142. As required by SFAS No. 142, the recoverability of these assets is subject to a fair value assessment, which includes several significant judgments regarding financial projections and comparable market values. As it relates to definite life intangible assets, we apply the impairment rules as required by SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and Assets to Be Disposed Of" which also requires significant judgment and assumptions related to the expected future cash flows attributable to the intangible asset. The impact of modifying any of these assumptions can have a significant impact on the estimate of fair value and, thus, the recoverability of the asset. In fiscal 2001, our impairments were quite large due to the rescission of LoanNet and impairment of Titus. During fiscal 2002, we determined that the residual value of Expidoc and Titus companies exceeded the carrying value of goodwill totaling $425,247 and, accordingly, no impairment of goodwill was charged during 2002, or in the current quarter. 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 regularly 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 2002, we estimated the allowance on net deferred tax assets to be one-hundred percent of the net deferred tax assets. 12 RESULTS OF OPERATIONS, THREE MONTHS ENDED JULY 31, 2002 COMPARED TO THE THREE MONTHS ENDED JULY 31, 2001. Revenues Revenues increased by $6,273,316, or 124.3%, to $11,319,346 for the three months ended July 31, 2002, compared to $5,046,030 for the three months ended July 31, 2001. The growth in revenues is primarily attributable to the expansion and growth of AMRES primarily through the brokering of loans. AMRES accounted for over 97% of consolidated revenues for both periods. AMRES, as did most of the mortgage industry, benefited greatly from the decline in interest rates over the last twelve months. Typically, as interest rates fall, the refinance market heats up expanding the market of interested borrowers beyond those borrowing for the purchase of their primary residence. AMRES benefited from this market upturn, as they had the capacity in terms of people and infrastructure to accommodate the additional business. Management believes that a significant increase in interest rates could slow the rapid growth the Company has experienced over the last two fiscal years. More significantly, the growth of the net branch program at AMRES was the major contributor to the growth in revenue. AMRES' net branch program comprised approximately 300 branches as of July 31, 2002, compared to 150 branches as of July 31, 2001. For the three months ended July 31, 2002, the total revenue associated with the Net Branches was approximately $8.35 Million, compared to total revenue associated with the Net Branches of $3.6 Million for the three months ended July 31, 2001. The Net Branch program is expected to continue to be a primary growth vehicle for ANZA in the future. In addition, the mortgage banking division of AMRES is expected to continue its expansion over the next several months, including applying to FannieMae as a seller/servicer. Revenues for Expidoc also increased significantly, $156,685 for the period ended July 31, 2002 compared to $56,817 for the period ended July 31, 2001. The increase is primarily a result of Expidoc.com refocusing its market strategy to secure higher volume customers as compared to servicing many low-volume customers. This change in focus is evidenced by the securing of business with such customers as Ditech.com. Management believes this to be the best strategy to focus on, as it allows Expidoc to both benefit from economies of scale and provide the highest level of service to its customer base. Management realizes that the loss of any one significant customer could have a material negative impact on the growth and profitability of Expidoc. BravoRealty became operational in January of 2001. For the three months ended July 31, 2002, revenues amounted to $206,374 compared with revenues of approximately $102,310 for the period ending July 31, 2001. Management believes that BravoRealty can be a significant growth vehicle for the company in the future, as evidenced by the steady increase in the number of real estate sales' listings and closed transactions generated by BravoRealty over the last twelve months. Further, management believes that with its continued growth pattern and the addition of four corporate real estate offices and twelve additional sales persons, the prospect for profitability in the next fiscal year is obtainable. There were no revenues from Titus during the three months ended July 31, 2002 and revenue from Titus for the three months ended July 31, 2001 were insignificant. 13 Costs and Expenses Commissions are paid to loan agents on funded loans. Commissions increased by $4,666,977 or 140%, for the three months ended July 31, 2002, to $7,999,523 from $3,332,546 for the three months ended July 31, 2001. This increase is primarily related to the increased revenues discussed above. As a percentage of revenue, the commissions increased by 4.7%, to 73% compared to 68.3% for the three months ended July 31, 2002 and the three months ended July 31, 2001, respectively. This increase is directly associated with the proportional increase in Net Branch revenue as a percentage of total revenue as the Company earns a flat percentage of revenues associated with the net branches, as compared to revenues associated with the corporate branches in which the Company earns a higher commission split once certain revenue targets are achieved. Gross profit increased by $1,424,823 or 88% for the three months ended July 31, 2002 to $3,049,538 from $ 1,624,715 for the three months ended July 31, 2001. Compensation Expense Compensation expense totaled $878,317 for the three months ended July 31, 2002, compared to $507,125 for the three months ended July 31, 2001. The increase of $371,192 is directly related to the expansion of AMRES operations. General and Administrative Expenses General and administrative expenses totaled $1,930,687 for the three months ended July 31, 2002, compared to $1,281,580 for the three months ended July 31, 2001. This increase of $649,107 can be attributed primarily to the business growth of the operating subsidiaries, namely AMRES, as additional personnel, office space and other administrative costs are required to handle the expansion. The Company elected early adoption of Statement 142 and as such, did not record any goodwill amortization for the three months ended July 31, 2002 or July 31, 2001. In the previous fiscal year, the Company funded a portion of its operating costs through the use of its common stock paid to outside consultants. During the three months ended July 31, 2001, costs paid in the form of stock to outside consultants totaled approximately $390,500 representing approximately 2,400,000 shares of stock. In addition, the Company recorded an additional $20,295 in cash compensation to outside consultants for the three months ended July 31, 2001. As the Company has begun to generate positive cash flow from operations, management has decided to limit the use of stock paid to consultants. As such, no stock was issued to outside consultants during the three months ended July 31, 2002. Consulting expenses recorded for the three months ended July 31, 2002 amounted to $8,333, relating to the amortization of stock issued in the previous fiscal year. All consulting expenses were included in General and Administrative Expenses for the periods ended July 31, 2002 and 2001. Non-Recurring Settlement Expense As part of the Global settlement in June of 2001, the company recorded settlement expense of $61,494 relating to the excess value of shares issued as part of the global settlement compared to the net reduction in debt and interest relief received in the settlement. There were no non-recurring settlement expenses incurred for the three months ended July 31, 2002. 14 Interest Expense Interest expense was $28,667 as of July 31, 2002, compared to $43,470 as of July 31, 2001. This decrease is associated with a reduction in the total balance of notes payable during the period. The reduction in notes payable is primarily a result of the Global Settlement executed on June 26, 2001 and due to re-payments made on all other outstanding notes over the last twelve months. Net Income The Company's generated a net profit for the three and months ended July 31, 2002 of $228,850 or $0.01 per share. For the three months ended July 31, 2001, the Company recorded a net loss of $262,522 or $0.01 per share. In the prior period, the Company incurred significant non-cash expenses associated with, among other things, stock issued to outside consultants and costs incurred with the Global Settlement. Management believes that these non-cash charges should be minimal in future periods affording the Company the ability to produce net income in the future. LIQUIDITY AND CAPITAL RESOURCES Cash Flows Net cash used in operating activities was $589,570 and $878,042 for the three months ending July 31, 2002 and 2001, respectively. Net loss decreased significantly between the periods from a loss of $262,522 for the period ending July 31, 2001, to a profit of $228,850 for the period ending July 31, 2002. Non-cash expenses relating to the issuance of stock for services, depreciation and amortization and amortization of debt discounts totaled $52,718 and $481,515 for the three months ended July 31, 2002 and 2001, respectively. Increase in loans held for sale of $1,479,546 was also a significant contributor to the cash used in operating activities for the three months ending July 31, 2002. Our mortgage loans held for sale increased approximately $1,479,000 to approximately $2,549,000, as a result of our rapid growth during the three months ended July 31, 2002. The cash we used to fund our loans is reflected as a reduction to our operating cash flows discussed above (see cash flows financing activities below for discussion of our warehouse line of credit which provided the cash to fund our loans). Our mortgage loans held for sale represent mortgage loans originated and held by AMRES, pending sale, to interim and permanent investors. We sell loans AMRES originates, typically within 30 days of origination, rather than hold them for investment. We sell loans to institutional loan buyers under existing contracts. AMRES sells the servicing rights to its loans at the time it sells those loans. Typically, AMRES sells the loans with limited recourse to it. This means that, with some exceptions, we reduce our exposure to default risk at the time we sell the loan, except that it may be required to repurchase the loan if AMRES breaches the representations or warranties that it makes in connection with the sale of the loan, in the event of an early payment default, or if the loan does not comply with the underwriting standards or other requirements of the ultimate investor. In the event AMRES is required to repurchase a loan, we will assess the impact of losses, which result from a repurchased loan. To date, AMRES has not repurchased a loan as a result of its origination practices. In the event we are required to purchase a significant amount of loans during a short period of time, our financial condition, results of operations and cash flows could be adversely affected. 15 Net cash used in investing activities was $ 67,908 and $57,277 for the three months ended July 31, 2002 and 2001, respectively. The difference is mainly due to an increase in due to employees in the three months ended July 31, 2002, and 2001. Net cash provided by financing activities was $1,214,161 and $1,273,920 for the three months ended July 31, 2002 and July 31, 2001 respectively. Cash provided by financing for both periods relates primarily to advances on the Company's warehouse line of credit associated with its mortgage banking operations ($1,449,580 and $1,073,920 for the three months ended July 31, 2002 and 2001, respectively). The warehouse line of credit is secured by first and second trust deed mortgages. The Company is current in servicing its obligations as they become due. In the previous fiscal years, the Company used its common stock to provide compensation for outside services that were required. It is the belief of management, that beginning the current quarter, little or no common stock will be issued for services. The Company's stockholders equity increased from a deficit of $201,358 as of July 31, 2001 to an equity of $689,055 as of July 31, 2002 primarily due to the issuance of common stock in relief of debt. Management is pleased with the current direction and financial improvement of the Company. The operating subsidiaries are expanding in tough economic times. AMRES and Expidoc.com are currently profitable. BravoRealty is performing as projected, requiring budgeted initial investment in capital prior to ramping up to full operations. The cash flow of the Company has markedly improved, with cash on hand ending July 31, 2002 of $1,264,534 versus $431,487 the prior period. Short-term debt is manageable. The Company has reduced the balance of the convertible note due our Chief Executive with an original balance of $485,446, due in December 2002. The remaining balance of $360,446 of the note with a carrying balance of $332,623, net of discounts, will convert into common stock, or extend the maturity date for one year. The $1,716,000 in convertible C Preferred most likely will continue to convert to common stock. Significant debt has been eliminated, and no current obligations are delinquent. It is our opinion, baring some significant adverse change in our business, that the Company should continue to grow and continue to increase its profitability. The Company has generated a net income over the last nine months. Management plans to continue its growth plans to generate revenues sufficient to meet its cost structure. Management believes that these actions will afford the Company the ability to fund its daily operations and service its remaining debt obligations primarily through the cash generated by operations; however, there are no assurances that management's plans will be successful. Our independent accountants modified their report, with an explanatory paragraph, stating that the audited financial statements of Anza Capital, Inc. for the period ending April 30, 2002 have been prepared assuming the company will continue as a going concern. They note that the Company's continued existence is dependent upon its ability to generate sufficient cash flows from operations to support its daily operations as well as provide sufficient resources to retire existing liabilities and obligations on a timely basis. No adjustments have been made to the carrying value of assets or liabilities as a result of these uncertainties. 16 Except for historical information, the materials contained in this Management's Discussion and Analysis are forward-looking (within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934) and involve a number of risks and uncertainties. These include the Company's historical losses, the need to manage its growth, general economic downturns, intense competition in the financial services and mortgage banking industries, seasonality of quarterly results, and other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission. Although forward-looking statements in this Quarterly Report reflect the good faith judgment of management, such statements can only be based on facts and factors currently known by the Company. Consequently, forward-looking statements are inherently subject to risks and uncertainties, actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. Readers are urged to carefully review and consider the various disclosures made by the Company in this Annual Report, as an attempt to advise interested parties of the risks and factors that may affect the Company's business, financial condition, and results of operations and prospects. 17 PART II ITEM 1 LEGAL PROCEEDINGS In the ordinary course of business, the Company is 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 the financial condition and/or results of operations of the Company. However, in the opinion of the Company's management, matters currently pending or threatened against the Company are not expected to have a material adverse effect on the financial position or results of operations of the Company. ITEM 2 CHANGES IN SECURITIES On May 14, 2002, we issued 30,000 shares of common stock, restricted in accordance with Rule 144, to an employee as a performance incentive. The issuance was exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, and the employee was a sophisticated investor as evidenced by our management during his employment. On May 14, 2002, Rice Opportunity Fund, LLC (formerly known as Dotcom Fund LLC) converted 299 shares of Series C Convertible Preferred Stock into 1,189,931 shares of our common stock, restricted in accordance with Rule 144. The issuance was exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, and the shareholder was an accredited investor. ITEM 3 DEFAULTS UPON SENIOR SECURITIES There have been no events which are required to be reported under this Item. 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 Laguna Pacific Settlement - --------------------------- On June 27, 2001, we entered into an Investment Agreement and related documents with Laguna Pacific Partners, LP. 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; (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. 18 During the year ended April 30, 2002, we repaid an initial $25,000 borrowed from Laguna Pacific. On or about June 27, 2002, we entered into a Settlement Agreement and General Mutual Release with Laguna Pacific (the "Laguna Settlement"). As consideration under the settlement, we repaid the $200,000 note, plus $9,000 in accrued interest, and the note was cancelled. Subsequent to the Laguna Settlement, a dispute has arisen regarding whether or not the Laguna Settlement included and consequently cancelled the warrants. We are currently in discussions with Laguna Pacific regarding this matter and may reach a second settlement agreement which may result in the issuance of additional shares of common stock to Laguna Pacific. Certificate of Designation for Series A Preferred - ------------------------------------------------------- On August 15, 2002, we filed a Certificate of Amendment of Certificate of Designation of the Rights, Preferences, Privileges and Restrictions, which have not been set forth in the Certificate of Incorporation or in any Amendment Thereto, of the Class A Convertible Preferred Stock of Anza Capital, Inc. (the "Certificate"), for the purpose of clarifying certain rights and privileges relating to our Series A Convertible Preferred Stock. No new shares of stock were issued in connection with the filing. ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 4.1 Certificate of Amendment of Certificate of Designation of the Rights, Preferences, Privileges and Restrictions, which have not been set forth in the Certificate of Incorporation or in any Amendment Thereto, of the Class A Convertible Preferred Stock of Anza Capital, Inc. 10.1 Settlement Agreement and General Release between Anza Capital, Inc. and Laguna Pacific Partners, LP dated on or about June 27, 2002 99.1 Certification as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (b) Reports on Form 8-K None. 19 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. /s/ Vincent Rinehart Dated: September 20, 2002 -------------------------------- By: Vincent Rinehart Its: President, Chairman, Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, and Director /s/ Scott A. Presta Dated: September 20, 2002 -------------------------------- By: Scott A. Presta Its: Director 20 EX-4.1 3 doc2.txt CERTIFICATE OF AMENDMENT OF CERTIFICATE OF DESIGNATION OF THE RIGHTS, PREFERENCES, PRIVILEGES AND RESTRICTIONS, WHICH HAVE NOT BEEN SET FORTH IN THE CERTIFICATE OF INCORPORATION OR IN ANY AMENDMENT THERETO, OF THE CLASS A CONVERTIBLE PREFERRED STOCK OF ANZA CAPITAL, INC. The undersigned, Vincent Rinehart, does hereby certify that: A. He is the duly elected and acting President, CEO, and Secretary of Anza Capital, Inc., a Nevada corporation (the "Company"). B. Pursuant to the Unanimous Written Consent of the Board of Directors of the Company dated March 1, 2002, the Board of Directors duly adopted the following resolutions: WHEREAS, the Certificate of Incorporation of the Company, as amended, authorizes a class of stock designated as Preferred Stock, no par value (the "Preferred Class"), comprising one million (1,000,000) shares and provides that the Board of Directors of the Company may fix the terms, including any dividend rights, dividend rates, conversion rights, voting rights, rights and terms of any redemption, redemption price or prices, and liquidation preferences, if any, of the Preferred Class; WHEREAS, the Board of Directors of the Company has previously established a series of preferred stock consisting of 100,000 shares and designated as the "Class A Convertible Preferred Stock," the rights, preferences, privileges and restrictions of which are set forth in a Certificate of Designations, Preferences and Rights of Class A Convertible Preferred Stock of E-Net Financial.com Corporation dated February 11, 2000; WHEREAS, none of the Class A Convertible Preferred Stock is issued or outstanding, and thus the approval of a majority of the Class A Convertible Preferred Stock was not required to be obtained, and no class or series of stock is senior to the Class A Convertible Preferred Stock as to the payment of distributees upon dissolution of the corporation, regardless of any limitations or restrictions on the voting power of that class or series. WHEREAS, the Board of Directors believes it is in the best interests of the Company to restate the rights, preferences, privileges, restrictions and other matters relating to the Class A Convertible Preferred Stock, now consisting of 500,000 shares, as set forth in this Certificate of Amendment of Certificate of Designation of the Rights, Preferences, Privileges and Restrictions, which have not been set forth in the Certificate of Incorporation or in any Amendment thereto, of the Class A Convertible Preferred Stock of Anza Capital, Inc; NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby fix and determine the rights, preferences, privileges, restrictions and other matters relating do the Class A Convertible Preferred Stock as follows: 1. Definitions. For purposes of this Certificate of Designation, the ------------ following definitions shall apply: 1.1 "Board" shall mean the Board of Directors of the Company. 1.2 "Company" shall mean Anza Capital, Inc., a Nevada corporation. 1.3 "Common Stock" shall mean the Common Stock, $0.001 par value per share, of the Company. 1.4 "Common Stock Dividend" shall mean a stock dividend declared and paid on the Common Stock that is payable in shares of Common Stock. 1.5 "Distribution" shall mean the transfer of cash or property by the Company to one or more of its stockholders without consideration, whether by dividend or otherwise (except a dividend in shares of Company's stock). 1.6 "Original Issue Date" shall mean the date on which the first share of Series A Convertible Preferred Stock is issued by the Company. 1.7 "Original Issue Price" shall mean $0.50 per share for the Series A Convertible Preferred Stock. 1.8 "Series A Convertible Preferred Stock" shall mean the Series A Convertible Preferred Stock, no par value per share, of the Company. 1.9 "Subsidiary" shall mean any corporation or limited liability company of which at least fifty percent (50%) of the outstanding voting stock or membership interests, as the case may be, is at the time owned directly or indirectly by the Company or by one or more of such subsidiary corporations: 2. Dividend Rights. ---------------- 2.1 Cash Dividends. In each calendar month, the holders of the then outstanding Series A Convertible Preferred Stock shall be entitled to receive, not later than thirty (30) days following the end of the previous applicable month, out of any funds and assets of the Company legally available therefor, noncumulative dividends in an amount equal to twelve percent (12%) per annum. No dividends (other than a Common Stock Dividend) shall be paid, and no Distribution shall be made, with respect to the Common Stock unless dividends in such amount shall have been paid or declared and set apart for payment to the holders of the Series A Convertible Preferred Stock simultaneously. 3. Liquidation Rights. The Series A Convertible Preferred Stock shall -------------------- have the same liquidation preference as the Common Stock. 4. Conversion Rights. ------------------ (a) Conversion of Preferred Stock. Each share of Series A Convertible Preferred Stock shall be convertible, at the option of the holder thereof at any time, into that number of fully paid and nonassessable shares of Common Stock of the corporation described in section 4(b) below. (b) Determination of Number of Shares of Common Stock Upon Conversion. The number of shares of Common Stock into which each share of Series A Convertible Preferred Stock may be converted shall be determined by dividing the Original Issue Price by the Conversion Price (determined as hereinafter provided) in effect at the time of conversion. (c) Determination of Initial Conversion Price. The conversion price per share (the "Conversion Price") at which shares of Common Stock shall initially be issuable upon conversion of the Series A Convertible Preferred Stock shall be ninety percent (90%) of the price of the last trade made in the Company's common stock the previous day. (d) Procedures for Exercise of Conversion Rights. The holders of any shares of Series A Convertible Preferred Stock may exercise their conversion rights as to all such shares or any part thereof by delivering to the corporation during regular business hours, or at such other place as may be designated by the corporation, the certificate or certificates for the shares to be converted, duly endorsed for transfer to the corporation (if required by the corporation), accompanied by written notice stating that the holder elects to convert such shares. Conversion shall be deemed to have been effected on the date when such delivery is made, and such date is referred to herein as the "Conversion Date." As promptly as practicable after the Conversion Date, the corporation shall issue and deliver to or upon the written order of such holder, at such office or other place designated by the corporation, a certificate or certificates for the number of full shares of Common Stock to which such holder is entitled and a check for cash with respect to any fractional interest in a share of Common Stock as provided in section 4(e) below. The holder shall be deemed to have become a shareholder of record on the Conversion Date, and the applicable Conversion Price shall be the Conversion Price in effect on the Conversion Date. Upon conversion of only a portion of the number of shares of Series A Convertible Preferred Stock represented by a certificate surrendered for conversion, the corporation shall issue and deliver to or upon the written order of the holder of the certificate so surrendered for conversion, at the expense of the corporation, a new certificate covering the number of shares of Series A Convertible Preferred Stock representing the unconverted portion of the certificate so surrendered. (e) No Fractional Shares. No fractional shares of Common Stock or scrip shall be issued upon conversion of shares of Series A Convertible Preferred Stock. If more than one share of Series A Convertible Preferred Stock shall be surrendered for conversion at any one time by the same holder, the number of full shares of Common Stock issuable upon conversion thereof shall be computed on the basis of the aggregate number of shares of Series A Convertible Preferred Stock so surrendered. Instead of any fractional shares of Common Stock which would otherwise be issuable upon conversion of any shares of Series A Convertible Preferred Stock, the corporation shall pay a cash adjustment in respect of such fractional interest equal to the fair market value of such fractional interest as determined by the corporation's Board of Directors. (f) Status of Common Stock Issued Upon Conversion. All shares of Common Stock which may be issued upon conversion of the shares of Series A Convertible Preferred Stock will upon issuance by the corporation be validly issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issuance thereof. (g) Status of Converted Preferred Stock. In case any shares of Series A Convertible Preferred Stock shall be converted pursuant to this section 4, the shares so converted shall be canceled and shall not be issuable by the corporation. 5. Intentionally Left Blank. -------------------------- 6. Redemption and Call. The Series A Convertible Preferred Stock shall ------------------- not be redeemable or callable. 7. Notices. Any notices required by the provisions of this Certificate ------- of Designation to be given to the holders of shares of Series A Convertible Redeemable Preferred Stock shall be deemed given if deposited in the United States mail, postage prepaid, and addressed to each holder of record at its address appearing on the books of the Corporation. 8. Voting Provisions. The Series A Convertible Preferred Stock ------------------ shall have no voting rights. IN WITNESS WHEREOF, the Company has caused this Certificate of Designation of Series A Convertible Preferred Stock to be duly executed by its President and attested to by its Secretary and has caused its corporate seal to be affixed hereto effective as of March 1, 2002. By: /s/ Vincent Rinehart --------------------------------------------- Vincent Rinehart, President and Secretary EX-10.1 4 doc3.txt SETTLEMENT AGREEMENT SETTLEMENT AGREEMENT AND GENERAL RELEASE This Settlement Agreement and General Release ("Agreement") is entered into effective this ___ day of June, 2002 by and between Anza Capital, Inc. a Nevada corporation ("Anza"), and Laguna Pacific Partners, LP, ("Laguna"). Anza and Laguna shall each be referred to as a "Party" and collectively as the "Parties." RECITALS WHEREAS, on or about June 27, 2001, Laguna loaned $200,000 to Anza, which is evidenced by an Investment Agreement dated June 27, 2001, executed by e-Net (now Anza) and Laguna, and a Secured Promissory Note dated June 27, 2001, copies of which are attached hereto as Exhibit A ("the Loan"); WHEREAS, a dispute has arisen between the Parties regarding concerning the repayment of the Loan, (the "Dispute"); NOW, THEREFORE, for good and adequate consideration, the receipt of which is hereby acknowledged, without admitting or denying any wrongdoing by any Party hereto, the Parties wish to resolve the Dispute in full and therefore, covenant, promise and agree as follows: AGREEMENT 1. Anza agrees to pay Laguna a total of $209,000, payable in full upon final execution of this Agreement. 2. Laguna agrees to accept the sum in Section 1 as full and complete payment of any and all obligations and amounts due to Laguna arising under the Loan, including interest, and in settlement of the Dispute. Additionally, Laguna has agreed to release any and all collateral Laguna holds as security for the repayment of the Loan, including releasing any and all interest Laguna holds in Anza or any of Anza's subsidiaries and the cancellation of any and all security instruments, including any UCC-1 Financing Statements Laguna may have filed to evidence its security interest in Anza or any of Anza's subsidiaries. Pursuant to this Agreement, Laguna agrees to return to Anza any and all Anza and Anza's subsidiary stock certificates that Laguna possesses and supply Anza with proof that any and all security instruments, including UCC-1 Financing Statements, that Laguna filed with any local or state agency, have been cancelled. 3. Effective on the date hereof, both Anza and Laguna (the "Parties"), and their respective agents, affiliates, divisions, predecessors, successors and assigns, hereby release the other Party, and each and all of their present and former agents, officers, directors, attorneys, and employees, from and against any and all claims, agreements, contracts, covenants, representations, obligations, losses, liabilities, demands and causes of action which it may now or hereafter have or claim to have against that Party, as a result of the Loan or the Dispute. This release of claims and defenses shall not alter the prospective duties between the Parties under this Agreement. 4. The Parties acknowledge and agree that this release applies to all claims that one Party may have against the other Party arising out of, or pertaining to, the Loan or the Dispute, including, but not limited to, causes of action, injuries, damages, claims for costs or losses to a Party's person and property, real or personal, whether those injuries, damages, or losses are known or unknown, foreseen or unforeseen, or patent or latent. The Parties agree not to file any complaints, causes of action, or grievances with any governmental, state or county entity against the other Party arising out of, or pertaining to the Loan or the Dispute. .. 5. Each Party expressly agrees and understands that the above releases will be effective as of the date of this Agreement and any Party's sole remedy against any other Party regarding the Dispute will be for breach of this Agreement. 6. Section 1542 Release. It is understood and agreed by the Parties ----------------------- hereto that all rights under Section 1542 of the Civil Code of California, which provides as follows: "A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor," are hereby expressly waived. The Parties acknowledge, agree and understand the consequences of a waiver of Section 1542 of the California Civil Code and assumes full responsibility for any and all injuries, damages, losses or liabilities that may hereinafter arise out of or be related to matters released hereunder. Releasing Party understands and acknowledges that the significance and consequence of this waiver of Section 1542 of the Civil Code is that even if a Party should eventually suffer additional damages arising out of the subject matter hereof, it will not be permitted to make any claim for those damages. Furthermore, all Parties acknowledge that they intend these consequences even as to claims for damages that may exist as of the date of this Agreement but which the Parties do not know exist, and which, if known, would materially affect the Parties' decision to execute this Agreement, regardless of whether the Parties' lack of knowledge is the result of ignorance, oversight, error, negligence, or any other cause. 7. Each Party hereto will hold and will cause its agents, officers, directors, attorneys, employees, consultants and advisors to hold in strict confidence, unless compelled to disclose by judicial or administrative process or, in the opinion of its counsel, by other requirements of law, the terms of this Agreement and all other documents and information concerning any other Party furnished it by such other Party or its representatives in connection with the subject matter hereof or the underlying loan (except to the extent that such information can be shown to have been (i) previously known by the Party to which it was furnished, (ii) in the public domain through no fault of such Party, or (iii) later lawfully acquired from other sources by the Party to which it was furnished), and each Party will not release or disclose such information to any other person, except its auditors, attorneys, financial advisors, bankers and other consultants and advisors in connection with this Agreement. Each Party shall be deemed to have satisfied its obligation to hold confidential information concerning or supplied by the other Party if it exercises the same care as it takes to preserve confidentiality for its own similar information. 8. Each Party acknowledges and represents that, in executing this Agreement, such Party has not relied on any inducements, promises, or representations made by any Party or any party representing or serving such Party, unless expressly set forth herein. 9. This Agreement pertains to a disputed claim and does not constitute an admission of liability by any Party for any purpose, except as otherwise provided herein. 10. The representations and warranties contained in this Agreement are deemed to and do survive the execution hereof. 11. This Agreement may not be amended, canceled, revoked or otherwise modified except by written agreement subscribed by all of the Parties to be charged with such modification. 12. This Agreement shall be binding upon and shall inure to the benefit of the Parties hereto and their respective partners, employees, agents, servants, heirs, administrators, executors, successors, representatives and assigns. 13. All Parties hereto agree to pay their own costs and attorneys' fees except as follows: (a) In the event of any action, suit or other proceeding instituted to remedy, prevent or obtain relief from a breach of this Agreement, arising out of a breach of this Agreement, involving claims within the scope of the releases contained in this Agreement, or pertaining to a declaration of rights under this Agreement, the prevailing Party shall recover all of such Party's attorneys' fees and costs incurred in each and every such action, suit or other proceeding, including any and all appeals or petitions therefrom. (b) As used herein, attorneys' fees shall be deemed to mean the full and actual costs of any legal services actually performed in connection with the matters involved, calculated on the basis of the usual fee charged by the attorneys performing such services. 14. This Agreement and the rights of the parties hereunder shall be governed by and construed in accordance with the laws of the State of California including all matters of construction, validity, performance, and enforcement and without giving effect to the principles of conflict of laws. Venue for any action brought under this Agreement shall be in the appropriate court in Orange County, California. 15. The Parties agree and stipulate that each and every term and condition contained in this Agreement is material, and that each and every term and condition may be reasonably accomplished within the time limitations, and in the manner set forth in this Agreement. 16. The Parties agree and stipulate that time is of the essence with respect to compliance with each and every item set forth in this Agreement. 17. This Agreement sets forth the entire agreement and understanding of the Parties hereto and supersedes any and all prior agreements, arrangements and understandings related to the subject matter hereof. No understanding, promise, inducement, statement of intention, representation, warranty, covenant or condition, written or oral, express or implied, whether by statute or otherwise, has been made by any party hereto which is not embodied in this Agreement or the written statements, certificates, or other documents delivered pursuant hereto or in connection with the transactions contemplated hereby, and no Party hereto shall be bound by or liable for any alleged understanding, promise, inducement, statement, representation, warranty, covenant or condition not so set forth. 18. This Agreement may be executed in one or more counterparts, each of which when executed and delivered shall be an original, and all of which when executed shall constitute one and the same instrument. IN WITNESS WHEREOF, the Parties hereto, agreeing to be bound hereby, execute this Agreement upon the date first set forth above. "Anza" "Laguna" Anza Capital, Inc., Laguna Pacific Partners, LP, A Nevada corporation /s/ Vince Rinehart signer not known - -------------------------------- ------------------------------- By: Vince Rinehart By: Its: President Its: EX-99.1 5 doc4.txt 302 CERTIFICATION CERTIFICATION PURSUANT TO 18 USC, SECTION 1350, AS ADOPTED PURSUANT TO SECTIONS 302 AND 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Anza Capital, Inc. (the "Company") on Form 10-QSB for the quarter ended July 31, 2002 (the "Report"), as filed with the Securities and Exchange Commission on the date hereof, I, Vincent Rinehart, Chief Executive Officer and Chief Financial Officer of the Company, certify to the best of my knowledge, pursuant to 18 USC 1350, as adopted pursuant to Sec.302 and promulgated as 18 USC 1350 pursuant to Sec.906 of the Sarbanes-Oxley Act of 2002, that: 1. The Report referenced above has been read and reviewed by the undersigned. 2. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934. 3. The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. 4. Based upon my knowledge, the Report referenced above does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to makes the statements made, in light of the circumstances under which such statements were made, not misleading. 5. Based upon my knowledge, the financial statements, and other such financial information included in the Report, fairly present in all material respects the financial condition and results of operations of the Company as of, and for, the periods presented in the Report. 6. I acknowledge that the Chief Executive Officer and Chief Financial Officer: A. are responsible for establishing and maintaining "disclosure controls and procedures" for the Company; B. have designed such disclosure controls and procedures to ensure that material information is made known to us, particularly during the period in which the Report was being prepared; C. have evaulated the effectiveness of the Company's disclosure controls and procedures within 90 days of the date of the Report; and D. have presented in the Report our conclusions about the effectiveness of the disclosure controls and procedures based on the required evaluation. E. have disclosed to the issuer's auditors and to the audit committee of the Board of Directors of the Company (or persons fulfilling the equivalent function): (i) all significant deficiencies in the design or operation of internal controls which could adversely affect the Company's ability to record, process, summarize, and report financial data and have identified for the Company's auditors any material weaknesses in internal controls; and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer's internal controls; and F. have indicated in the Report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. /s/ Vincent Rinehart - ------------------------------------------ Vincent Rinehart Chief Executive Officer and Chief Financial Officer Dated: September 20, 2002 -----END PRIVACY-ENHANCED MESSAGE-----