SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    Form 10-Q


                Quarterly Report Under Section 13 or 15(d) of the
                         Securities Exchange Act of 1934

(Mark One)

[X] Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange
    Act of 1934

     For the quarterly period ended    September 30, 2004    or
                                     ---------------------

[ ] 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  1-6844
                       --------
                               CALPROP CORPORATION
             (Exact name of registrant as specified in its charter)


       California                                              95-4044835
--------------------------------------------------------------------------------
   (State or other jurisdiction of                           (I.R.S. Employer
   incorporation or organization)                            Identification No.)

   13160 Mindanao Way, Suite 180, Marina Del Rey, California       90292
------------------------------------------------------------     ---------
   (Address of principal executive offices)                      (Zip Code)

   (Registrant's telephone number, including area code)  (310) 306-4314
                                                       ------------------

                                 Not Applicable
              (Former name, former address and former fiscal year,
                          if changed since lastreport.)

    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
                                             ---   ---
Number of shares outstanding of each of Registrant's classes of common stock, as
of December 10, 2004:

                                                              Number of Shares
Title of Each Class                                           Outstanding
-------------------                                           -----------

Common Stock, no par value                                      9,737,205


<PAGE>

                               CALPROP CORPORATION

                                     Part I

                         Item I - Financial Information

Important Note: For the reasons discussed in Item 4 "Controls and Procedures",
this Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 is
being filed on a delayed basis concurrently with the Company's Form 10-Q for the
quarters ended March 31, 2004 and June 30, 2004 and should be read in
conjunction with these reports.


                                       2
<PAGE>

                               CALPROP CORPORATION

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)

                                     ASSETS

<TABLE>
<CAPTION>
                                                  September 30,     December 31,
                                                      2004             2003
                                                  -----------       -----------
<S>                                                <C>              <C>
Investment in real estate
  Real estate under development                    $4,102,488       $13,175,441
  Assets held for sale                                      0         8,864,917
                                                  -----------       -----------
    Total investment in real estate                 4,102,488        22,040,358

Other assets:
  Cash and cash equivalents                            66,328           190,770
  Other assets                                        967,163         1,292,744
                                                  -----------       -----------
     Total other assets                             1,033,491         1,483,514
                                                  -----------       -----------

    Total assets                                   $5,135,979       $23,523,872
                                                  ===========       ===========
</TABLE>

                     The accompanying notes are an integral
                       part of these financial statements.


                                       3
<PAGE>

                               CALPROP CORPORATION

                CONDENSED CONSOLIDATED BALANCE SHEETS (continued)
                                   (Unaudited)

                      LIABILITIES AND STOCKHOLDERS' DEFICIT

<TABLE>
<CAPTION>
                                                                               September 30,     December 31,
                                                                                   2004              2003
                                                                               ------------      ------------
<S>                                                                             <C>               <C>
Liabilities:
  Trust deeds and notes payable                                                    $140,075        $4,365,703
  Related-party notes                                                            13,276,040        16,482,631
                                                                               ------------      ------------
     Total trust deeds, notes payable and related-party notes                    13,416,115        20,848,334
  Liabilities of assets held for sale                                                     0         7,720,608
  Accounts payable and accrued liabilities                                        1,854,269         2,521,487
  Warranty reserves                                                                 658,045           686,376
                                                                               ------------      ------------
     Total liabilities                                                           15,928,429        31,776,805
                                                                               ------------      ------------

Stockholders' deficit:
  Common stock - no par, $1 stated value
    Authorized - 20,000,000 shares; Issued and outstanding - 9,737,205 and
    10,239,105 shares at September 30, 2004 and
    December 31, 2003, respectively                                               9,737,205        10,239,105
  Additional paid-in capital                                                     25,920,151        25,850,776
  Stock purchase loans                                                                    0          (549,084)
  Accumulated deficit                                                           (46,449,806)      (43,793,730)
                                                                               ------------      ------------
     Total stockholders' deficit                                                (10,792,450)       (8,252,933)
                                                                               ------------      ------------

                                                                                 $5,135,979       $23,523,872
                                                                               ============      ============
</TABLE>

                     The accompanying notes are an integral
                       part of these financial statements.


                                       4
<PAGE>

                               CALPROP CORPORATION

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                               Three Months Ended                  Nine Months Ended
                                                                  September 30,                      September 30,
                                                         ------------------------------------------------------------------
                                                              2004             2003              2004              2003
                                                         ------------      ------------      ------------      ------------
<S>                                                        <C>              <C>                <C>              <C>
Development operations:
  Real estate sales                                        $1,177,412        $5,569,748        $9,081,536       $17,734,926
  Cost of real estate sales                                 1,366,683         5,597,084        10,647,812        18,037,389
                                                         ------------      ------------      ------------      ------------
Loss from development operations before
  recognition of impairment of real estate                   (189,271)          (27,336)       (1,566,276)         (302,463)

Recognition of impairment of real estate under
  development                                                       0                 0                 0        (4,686,150)
                                                         ------------      ------------      ------------      ------------
Loss from development operations                             (189,271)          (27,336)       (1,566,276)       (4,988,613)

Other income:
  Gain on sale of investment in real estate venture                 0                 0                 0         2,000,000
  Gain on sale of land                                         81,391                 0         1,310,214                 0
  Interest and miscellaneous                                   30,652           174,254            91,983           306,907
                                                         ------------      ------------      ------------      ------------
Total other income                                            112,043           174,254         1,402,197         2,306,907

Other expenses:
  General and administrative                                  590,442           307,787         1,437,117         1,257,560
  Interest                                                    292,290           438,330         1,101,509         1,015,846
                                                         ------------      ------------      ------------      ------------
Total other expenses                                          882,732           746,117         2,538,626         2,273,406

Minority interests                                                  0                 0                 0               764
                                                         ------------      ------------      ------------      ------------

Loss from continuing operations before provision for
income taxes                                                 (959,960)         (599,199)       (2,702,705)       (4,955,876)
Provision for income taxes                                          0                 0                 0         6,535,343
                                                         ------------      ------------      ------------      ------------
Loss from continuing operations                              (959,960)         (599,199)       (2,702,705)      (11,491,219)
Discontinued operations:
 (Loss) income from discontinued operations                        (7)         (594,143)           46,629        (2,132,371)
                                                         ------------      ------------      ------------      ------------
Net loss                                                    ($959,967)      ($1,193,342)      ($2,656,076)     ($13,623,590)
                                                         ============      ============      ============      ============
</TABLE>

                     The accompanying notes are an integral
                       part of these financial statements.


                                       5
<PAGE>

                               CALPROP CORPORATION

           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (continued)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                    Three Months Ended         Nine Months Ended
                                                                       September 30,              September 30,
                                                                 ---------------------------------------------------
                                                                   2004          2003          2004          2003
                                                                 --------      --------      --------      --------
<S>                                                                <C>           <C>           <C>           <C>
Loss from continuing operations per common share - basic           ($0.10)       ($0.06)       ($0.27)       ($1.12)
                                                                 ========      ========      ========      ========
Loss from continuing operations per common share -  diluted        ($0.10)       ($0.06)       ($0.27)       ($1.12)
                                                                 ========      ========      ========      ========
Loss from discontinued operations per common share - basic          $0.00        ($0.06)        $0.00        ($0.21)
                                                                 ========      ========      ========      ========
Loss from discontinued operations per common share - diluted        $0.00        ($0.06)        $0.00        ($0.21)
                                                                 ========      ========      ========      ========
Net loss per common share - basic                                  ($0.10)       ($0.12)       ($0.27)       ($1.33)
                                                                 ========      ========      ========      ========
Net loss per common share- diluted                                 ($0.10)       ($0.12)       ($0.27)       ($1.33)
                                                                 ========      ========      ========      ========
</TABLE>

                     The accompanying notes are an integral
                       part of these financial statements.


                                       6
<PAGE>

                               CALPROP CORPORATION

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                        Nine Months Ended
                                                                           September 30,
                                                                   ------------------------------
                                                                       2004              2003
                                                                   ------------      ------------
<S>                                                                 <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net loss                                                       ($2,656,076)     ($13,623,590)
     Adjustments to reconcile net loss to net
       cash provided by operating activities:
       Minority interests                                                     0               764
       Recognition of impairment of real estate under
         development                                                          0         4,686,150
       Recognition of impairment of rental property                           0         2,183,865
       Gain on sale of land                                          (1,310,214)                0
       Gain on sale of investment in real estate venture                      0        (2,000,000)
       Gain on forgiven debt                                           (306,701)         (392,575)
       Gain on sale of rental property                                 (135,083)                0
       Loss on sale of property and equipment                            29,726             1,312
       Depreciation and amortization                                     14,820           177,187
       Provision for  warranty reserves                                  30,000            45,000
       Interest accrued for executive stock purchase loans              116,559           (15,876)
       Deferred income taxes                                                  0         6,535,343
     Increase (decrease) in cash and cash equivalents
       attributable to changes in operating assets
       and liabilities:
       Other assets                                                     195,231           (92,118)
       Accounts payable and accrued liabilities                        (709,282)         (820,809)
       Warranty reserves                                                (58,331)         (107,950)
       Real estate under development                                 10,383,167         6,014,277
                                                                   ------------      ------------

           Net cash provided by operating activities                  5,593,816         2,590,980
                                                                   ------------      ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
     Investment in rental property                                            0            (5,680)
     Capital expenditures                                                (7,962)           (6,140)
     Proceeds from sale of rental property                            9,000,000                 0
     Proceeds from sale of property and equipment                        93,766             1,000
                                                                   ------------      ------------
           Net cash provided by (used in) investing activities        9,085,804           (10,820)
                                                                   ------------      ------------
</TABLE>

                     The accompanying notes are an integral
                       part of these financial statements


                                       7
<PAGE>

                               CALPROP CORPORATION

           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                 Nine Months Ended
                                                                   September 30,
                                                         ------------------------------
                                                              2004             2003
                                                         ------------      ------------
<S>                                                       <C>                <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
     Borrowings under related-party notes                   3,988,196           786,660
     Payments under related-party notes                    (6,888,086)         (123,010)
     Borrowings under trust deeds and notes payable         3,543,592        16,700,976
     Payments under trust deeds and notes payable         (15,447,764)      (22,339,552)
     Common stock                                                   0             5,130
                                                         ------------      ------------
               Net cash used in financing activities      (14,804,062)       (4,969,796)
                                                         ------------      ------------
     Net decrease in cash and cash equivalents              ($124,442)       (2,389,636)
     Cash at beginning of period                              190,770         3,444,541
                                                         ------------      ------------
     Cash at end of period                                    $66,328        $1,054,905
                                                         ============      ============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
     Cash paid (refunded) during the period for:
       Interest, net of amount capitalized                 $1,594,970          $195,968
       Income taxes                                                $0          ($45,131)
</TABLE>

                     The accompanying notes are an integral
                       part of these financial statements


                                       8
<PAGE>

                               CALPROP CORPORATION

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

Note 1:  Basis of presentation and going concern consideration

         The unaudited, condensed, consolidated financial statements included
         herein have been prepared by the registrant pursuant to the
         instructions for Quarterly Reports on Form 10-Q required to be filed
         with the Securities and Exchange Commission ("SEC") and do not include
         all information and footnote disclosure required by accounting
         principles generally accepted in the United States of America for
         complete financial statements. The accompanying financial statements
         have not been audited by independent auditors in accordance with
         auditing standards generally accepted in the United States of America,
         but in the opinion of management, such financial statements include all
         adjustments, consisting only of normal recurring adjustments, necessary
         to present fairly the financial position of Calprop Corporation ("the
         Company") and its results of operations. The condensed financial
         statements should be read in conjunction with the financial statements
         and the notes thereto included in the registrant's latest Annual Report
         on Form 10-K.

         The accompanying condensed consolidated financial statements have been
         prepared assuming the Company will continue as a going concern. During
         the nine months ended September 30, 2004 and the year ended December
         31, 2003, the Company has incurred net losses of approximately $2.7
         million and $15.1 million, respectively. At September 30, 2004, the
         Company has cumulative losses of approximately $46.4 million, a
         stockholders' deficit of approximately $10.8 million and diminishing
         financial resources. These conditions raise substantial doubt about the
         Company's ability to continue as a going concern. The accompanying
         condensed consolidated financial statements do not include any
         adjustments that might result from the outcome of this uncertainty.

         In order to obtain cash to continue the Company's operations and
         maintain viability as a going concern, most of the land held for
         development and an option to purchase property in Riverside County,
         California (discussed in Item 2 of this Report under the caption
         "Liquidity and capital resources") either has been or may be sold
         instead of being developed as originally intended. Based on its
         agreements with its lenders, the Company believes that it will have
         sufficient liquidity to finance its single remaining construction
         project through 2005 using funds generated from operations and funds
         available under its existing bank loan commitment for that project.

         Management's plan with respect to managing cash flow includes the
         following components: pay off debt that is coming due in 2004 and 2005,
         minimize operating expenses, and maintain control over costs. With
         regard to debt coming due, management plans to pay off most of the
         loans through cashflow from operations and expects to extend any
         remaining related party loans until funds are made available. With
         regard to minimizing operating expenses, management plans to achieve
         this by continuing to closely examine overhead items. Management
         anticipates that the funds generated from operations and borrowings
         from its existing loan commitments will be adequate to allow the
         Company to continue operations and complete its only current
         residential development and construction project in 2005.

         The results of operations for the three and nine months ended September
         30, 2004 may not be indicative of the operating results for the year
         ending December 31, 2004.

Note 2:  Summary of significant accounting policies

         Earnings per share - Basic earnings (loss) per common share are
         computed by dividing net income (loss) by the weighted average number
         of common shares outstanding during the period. Diluted earnings (loss)
         per common share incorporate the dilutive effect of common stock
         equivalents on an average basis during the period. The Company's common
         stock equivalents currently include stock options.

         Employee stock plans - The Company complies with the disclosure-only
         provisions of Statement of Financial Accounting Standards ("SFAS") No.
         123, "Accounting for Stock-Based Compensation," as amended by SFAS No.
         148. The Company applies Accounting Principles Board No. 25 and related


                                       9
<PAGE>

         interpretations in accounting for its stock option plans, adjusted for
         stock dividends, and, accordingly, no compensation cost has been
         recognized because stock options granted under the plans were at
         exercise prices which were equal to or above the market value of the
         underlying stock on the date of grant. Had compensation expenses been
         determined as provided by SFAS No. 123 using the Black-Scholes
         option-pricing model for the three and nine months ended September 30,
         2004, the pro forma effect on the Company's net income (loss) and per
         share amounts would be immaterial.

         Recent accounting pronouncements - In January 2003, the FASB issued
         FASB Interpretation No. 46, "Consolidation of Variable Interest
         Entities" ("FIN 46"). FIN 46 clarifies the application of Accounting
         Research Bulletin No. 51, "Consolidated Financial Statements" and
         provides guidance on the identification of entities for which control
         is achieved through means other than voting rights ("variable interest
         entities" or "VIEs") and how to determine when and which business
         enterprise should consolidate the VIE. This new model for consolidation
         applies to an entity in which either: (1) the equity investors (if any)
         lack one or more characteristics deemed essential to a controlling
         financial interest or (2) the equity investment at risk is insufficient
         to finance that entity's activities without receiving additional
         subordinated financial support from other parties. In December 2003,
         the FASB published a revision to FIN 46 ("FIN 46R") to clarify some of
         the provisions of the interpretation and defer the effective date of
         implementation for certain entities. On February 1, 2003, the Company
         adopted the provisions of this interpretation, which did not have a
         material effect on the Company's results of operations or financial
         condition.

Note 3:  Earnings per share

         The following table sets forth the computation of basic and diluted net
         loss per share:
<TABLE>
<CAPTION>
                                                                      Three Months Ended          Nine Months Ended
                                                                         September 30,              September 30,
                                                                   ------------------------   --------------------------
                                                                     2004          2003          2004           2003
                                                                   ----------   -----------   -----------   ------------
<S>                                                                 <C>         <C>           <C>           <C>
Loss from continuing operations                                     ($959,960)    ($599,199)  ($2,702,705)  ($11,491,219)
Income (loss) from discontinued operations                                 (7)    ($594,143)       46,629     (2,132,371)
                                                                   ----------   -----------   -----------   ------------

Numerator for basic and diluted net loss per share                  ($959,967)  ($1,193,342)  ($2,656,076)  ($13,623,590)
                                                                   ==========   ===========   ===========   ============
Denominator for basic net loss per share (weighted                  9,737,205    10,239,105     9,982,472     10,238,672
average outstanding shares)
   Effect of dilutive stock options                                         0             0             0              0
                                                                   ----------   -----------   -----------   ------------
Weighted average shares for dilutive net loss per share             9,737,205    10,239,105     9,982,472     10,238,672
                                                                   ==========   ===========   ===========   ============
Loss from continuing operations per common share - basic               ($0.10)       ($0.06)       ($0.27)        ($1.12)
                                                                   ==========   ===========   ===========   ============
Loss from continuing operations per common share - diluted             ($0.10)       ($0.06)       ($0.27)        ($1.12)
                                                                   ==========   ===========   ===========   ============

Loss from discontinued operations per common share - basic              $0.00        ($0.06)        $0.00         ($0.21)
                                                                   ==========   ===========   ===========   ============
Loss from discontinued operations per common share - diluted            $0.00        ($0.06)        $0.00         ($0.21)
                                                                   ==========   ===========   ===========   ============

Net loss per common share - basic                                      ($0.10)       ($0.12)       ($0.27)        ($1.33)
                                                                   ==========   ===========   ===========   ============
Net loss per common share - diluted                                    ($0.10)       ($0.12)       ($0.27)        ($1.33)
                                                                   ==========   ===========   ===========   ============
</TABLE>


                                       10
<PAGE>

Note 4:  Assets and liabilities held for sale; discontinued operations

         During 2003, management approved a plan of action to sell the operating
         assets of its wholly owned entity, PWA Associates, LLC ("PWA"). As a
         result, the rental property held by PWA was reclassified as held for
         sale and the Company ceased recording depreciation with respect to that
         property as of the date the plan was approved. The sale of PWA occurred
         on March 12, 2004 at a gross sales price of $9 million. The Company
         recognized a gain of $135,083 on the PWA sale.

         Assets held for sale is summarized as follows:
<TABLE>
<CAPTION>
                           September 30, 2004    December 31, 2003
<S>                                <C>                  <C>
Land                               $        0           $1,500,000
Building and improvements, net                           7,364,917
                                   ----------           ----------

Assets held for sale               $        0           $8,864,917
                                   ==========           ==========
</TABLE>

         Depreciation expense for building and improvements for the nine months
         ended September 30, 2004 and 2003 was $0 and $146,250, respectively.

         Liabilities of assets held for sale is summarized as follows:
<TABLE>
<CAPTION>
                                        September 30, 2004     December 31, 2003
<S>                                             <C>                   <C>
Trust deeds and notes payable                   $        0            $7,678,544
Accounts payable and accrued liabilities                                  42,064
                                                ----------            ----------
Liabilities of assets held for sale
                                                $        0            $7,720,608
                                                ==========            ==========
</TABLE>

         In accordance with SFAS No. 144 "Accounting for the Impairment or
         Disposal of Long-Lived Assets," the net income (loss) of assets held
         for sale is reflected in the condensed consolidated statements of
         operations as discontinued operations for all periods presented. The
         following table summarizes the components of discontinued operations:

<TABLE>
<CAPTION>
                                                      Nine Months Ended
                                                        September 30,
                                              --------------------------------
                                                  2004                 2003
                                              -----------          -----------
<S>                                              <C>                  <C>
Revenues:
Rental income                                    $167,197             $758,973
Gain on sale of rental property                   135,083                    0
Gain on forgiven debt                             306,701              392,575
Interest and miscellaneous                          3,966               14,929
                                              -----------          -----------
  Total revenues                                  612,947            1,166,477
                                              -----------          -----------
Expenses:
Rental operating                                  253,213              492,859
General and administrative                          1,191                3,573
Depreciation                                            0              146,250
Interest                                          311,914              472,301
Recognition of impairment loss of rental
property                                                0            2,183,865
                                              -----------          -----------
  Total expenses                                  566,318            3,298,848
                                              -----------          -----------
Income (loss) from discontinued operations        $46,629          ($2,132,371)
                                              ===========          ===========
</TABLE>


                                       11
<PAGE>

Note 5: Contingency

         The Company has entered into an agreement to sell its contractual
         option rights to purchase property in Riverside County, California.
         Sale of the option is contingent upon the recording of the final map
         for the property which is expected to occur in December 2004. In the
         event that required governmental approvals are not obtained and the
         final map cannot be recorded, the Company will be obligated to
         reimburse the buyer for $2,375,000 in proceeds which was paid to the
         previous owner to close the purchase of the property.

Note 6:  Other

         On May 14, 2004, executive stock purchase loans issued in March 1998
         with a face value of $425,625 were cancelled. The value was
         recategorized as authorized and unissued common stock of the Company,
         and accrued interest of approximately $117,000 pertaining to these
         loans was forgiven.


Item 2   Management's Discussion and Analysis of Financial Condition and Results
         of Operations

         The following discussion relates to the condensed consolidated
financial statements of the Company and should be read in conjunction with the
financial statements and notes thereto appearing elsewhere in this report.
Statements contained in this "Management's Discussion and Analysis of Financial
Condition and Results of Operations" that are not historical facts may be
forward-looking statements. Such statements are subject to certain risks and
uncertainties, which could cause actual results to differ materially from those
projected. You are cautioned not to place undue reliance on these
forward-looking statements.

         The Company has decreased its portfolio of real estate holdings
substantially over the last twelve months in an effort to reduce its operations
and repay debt in response to the Company's weakened financial condition and
resulting need to conserve cash. The Company's chairman of the board and chief
executive officer, who is also the Company's single largest stockholder, has
proposed to the Company's board of directors that they consider a transaction in
which he and certain other current stockholders would become the Company's sole
stockholders, with cash to be paid to the Company's other stockholders. See
"Proposed going private transaction."

Results of operations

         The Company has only one remaining development and construction
project, the High Ridge Court project in Thornton, Colorado. Real estate sales
for the three months ended September 30, 2004 decreased 79% to $1,177,412
compared to $5,569,748 in the corresponding prior year period. Real estate sales
for the nine months ended September 30, 2004 decreased 49% to $9,081,536
compared to $17,734,926 in the corresponding prior year period. This decrease in
real estate sales was due to a decrease in the quantity of homes sold, lower
sales prices resulting from decreased market demand, and the higher cost of
building homes. In the third quarter of 2004 the Company sold five homes at an
average sales price of $235,482, compared to 12 homes sold in the third quarter
of 2003 at an average sales price of $256,124. In the first nine months of 2004,
the Company sold 38 homes with an average sales price of $238,987. In the first
nine months of 2003, the Company sold 45 homes with an average sales price of
$338,637 plus 50 finished lots for $2,496,260. As a result of the preceding, the
Company had a loss from development operations of $1,566,276 in the first nine
months of 2004 as compared to a loss of $302,463 in the corresponding prior year
period.

         Sales of land, primarily from the Rohnert Park and Mission Gorge
projects, have resulted in a gain of $1,310,214 during the nine months ended
September 30, 2004. During the corresponding prior year period, the Company sold
24.5% of its 25.0% interest (retaining a 0.5% interest) in RGC Carmel Country,
LLC (the "Joint Venture") to related parties, and recorded a gain of $2,000,000
on the sale. The Company remained liable, on a contingent basis through a
guarantee, with respect to a mortgage loan payable by the Joint Venture until
the property was sold in September 2004.

         General and administrative expenses increased to $590,442 for the third
quarter of 2004 compared to $307,787 in the corresponding prior year period.
These expenses increased to $1,437,117 for the nine months ended September 30,
2004 compared to $1,257,560 in the corresponding prior year period. The increase


                                       12
<PAGE>

resulted from the payout of severance costs to key employees who resigned or
terminated employment with the Company in the third quarter of 2004. Due to the
net operating loss carryforward available from the prior year and the net loss
incurred year-to-date, a provision for income taxes has not been recorded in
2004.

         The Company developed and constructed a 68-unit affordable apartment
complex, the Parc West Apartment Homes located in Milpitas, California.
Construction was completed in August 2002, and the Company then leased the units
until the property was sold on March 12, 2004. In accordance with SFAS No. 144
"Accounting for the Impairment or Disposal of Long-Lived Assets," the net income
(loss) of this asset held for sale is reflected in the condensed consolidated
statement of operations as discontinued operations for all periods presented.

Liquidity and capital resources

         As of September 30, 2004, the Company had one remaining loan
commitment, from a financial institution, of approximately $1,711,000, which may
be drawn down by the Company upon the satisfaction of certain conditions for use
in connection with its development project described below.

         As of September 30, 2004, the Company had one revenue generating
project, High Ridge Court. As of September 30, 2004, the Company had 12 homes
under construction in this project of which five were in escrow to be sold (in
"backlog"), plus one unsold model unit. Comparatively, the Company had a backlog
of eight units as of September 30, 2003. The gross revenues of such backlog was
$1,163,000 and $2,179,000 as of September 30, 2004 and 2003, respectively.

         The Company has entered into an agreement to sell its contractual
option rights to purchase property in Riverside County, California. Sale of the
option for $9,400,000 is contingent upon the recording of the final subdivision
map for the property which is expected to occur in December 2004. Of this
amount, $3,000,000 will be held back and released when the lots are in
blue-topped condition, which is expected to occur during the first quarter of
2005. In the event that required governmental approvals are not obtained and the
final map cannot be recorded, the Company will be obligated to reimburse the
buyer for $2,375,000 in proceeds which was paid to the previous owner to close
the purchase of the property. If this transaction is completed as planned, the
Company expects to record a net gain of approximately $8,300,000 on the
transaction. It is expected that this gain would substantially reduce the
Company's curent deficit in stockholders equity. It cannot be stated with
certainty, however, that the transaction will be completed as planned, nor is
there any assurance that the Company will not incur other significant losses
that would offset the positive effect on stockholders equity of any such gain.

         The Company has approximately 20 acres of undeveloped land in Riverside
County, California which may be sold or developed. Also, the Company is in
escrow to purchase approximately 24 acres of unimproved land in Murietta,
California for which it is in the process of seeking to obtain governmental
approvals to develop the land into single family homes. If such entitlements are
obtained, and if equity and debt funding can be obtained, the Company plans to
develop the Murietta property or a substantial portion thereof during 2005.

         In order to obtain cash to continue the Company's operations and
maintain viability as a going concern, most of the land held for development and
an option to purchase property in Riverside County, California either has been
or may be sold instead of being used as originally intended. Based on its
agreements with its lenders, the Company believes that it will have sufficient
liquidity to finance its single remaining construction project through 2005
using funds generated from operations, including funds to be received from sale
of the option discussed above, and funds available under its existing bank
commitment.

         The accompanying condensed consolidated financial statements have been
prepared assuming the Company will continue as a going concern. During the nine
months ended September 30, 2004 and the year ended December 31, 2003, the
Company has incurred net losses of approximately $2.7 million and $15.1 million,
respectively. At September 30, 2004, the Company has cumulative losses of
approximately $46.4 million, a stockholders' deficit of approximately $10.8
million and diminishing financial resources. These conditions raise substantial
doubt about the Company's ability to continue as a going concern. The
accompanying condensed consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

         Management's plan with respect to managing cash flow includes the
following components: pay off debt


                                       13
<PAGE>

that is coming due in 2004 and 2005, minimize operating expenses, and maintain
control over costs. With regard to debt coming due, management plans to pay off
most of the loans through cashflow from operations and expects to extend any
remaining related party loans until funds are made available. With regard to
minimizing operating expenses, management plans to achieve this by continuing to
closely examine overhead items. Management anticipates that the funds generated
from operations and borrowings from existing loan commitments will be adequate
to allow the Company to continue operations.

Proposed going private transaction

         Mr. Victor Zaccaglin, who is the Company's chairman of the board, chief
executive officer and single largest stockholder, has proposed to the Company's
board of directors that the Company become a privately held company. As
currently envisioned by Mr. Zaccaglin, the transaction would involve a tender
offer for outstanding Company stock by a corporation to be formed by Mr.
Zaccaglin and to which certain other existing Company stockholders would
contribute their Company shares, followed by a merger of that corporation with
the Company in which cash would be paid at the same amount per share as that
paid in the tender offer for any publicly held Company shares not tendered in
the tender offer. Mr. Zacaglin and the other stockholders expected to
participate in the merger currently own approximately 83% of the Company's
outstanding shares. No specific price has been proposed by Mr. Zaccaglin for the
acquisition of the Company's publicly held shares and there is no assurance that
any transaction will actually be commenced or completed.

         The Company has retained Duff & Phelps, LLC to provide financial advice
to the Company in connection with its consideration of a possible transaction
and to provide its opinion with respect to whether any specific transaction that
may ultimately be proposed by Mr. Zaccaglin is fair to the Company's public
stockholders from a financial point of view.

         Mr. Zaccaglin's proposal and the board of director's consideration of
that proposal are prompted by the Company's deteriorating financial condition,
the substantial continuing costs that will be incurred if the Company remains a
publicly traded company and uncertainty regarding the Company's continuing
viability on a long term basis unless it obtains additional equity capital.


Contractual obligations

         Our significant contractual obligations as of September 30, 2004 were
as follows:
<TABLE>
<CAPTION>
                                                   Payments Due by Period
-----------------------------    --------------------------------------------------------
                                     2004           2005            2006         Total
<S>                              <C>             <C>              <C>         <C>
Debt                             $11,292,993     $2,123,122             $0    $13,416,115
Operating leases                      26,103        169,471        145,159        340,733
                                 -----------    -----------    -----------    -----------
Total contractual obligations    $11,319,096     $2,292,593       $145,159    $13,756,848
                                 ===========    ===========    ===========    ===========
</TABLE>

         At September 30, 2004, we had scheduled maturities on existing debt of
$11,292,993 through December 31, 2004. Of this amount, $140,076 is due to a
financial institution and the balance is owed to related parties. Our ability to
make scheduled payments of principal or interest on or to refinance this
indebtedness depends on our future performance, which is subject to general
economic, financial, competitive and other factors beyond our control. We
believe our borrowing availability under our existing credit facility, our
operating cash flow, and proceeds from the planned sales of properties described
above should provide the funds necessary to meet our working capital
requirements in 2005 through the completion of our current remaining development
and construction project. We will need, however, to obtain new equity capital
and debt funding to be able to develop the Murietta property or to commence any
new development projects. Our recent operating results and significant deficit
in stockholders equity will make obtaining any such financing extremely
difficult and there is no assurance that such financing can be obtained. In this
connection, Victor Zaccaglin, who is our chief executive officer and is one of
two substantial stockholders who have loaned money to us for working capital and
other purposes (referred to herein as "related party loans") has indicated that
he does not currently intend to make loans or provide equity capital to us for
new projects. In addition, even if all currently anticipated sales of properties
are completed and our remaining development project is completed, we anticipate
that we will not be able to repay all of our existing related party indebtedness
and there is no


                                       14
<PAGE>

assurance that the related parties to whom such indebtedness is owed will
continue to extend the required repayment dates of such indebtedness.

         In the normal course of its business, the Company provides a one-year
express warranty against defects in the workmanship and materials to purchasers
of homes in its projects. Applicable California and Colorado law provides
additional implied warranties that extend beyond the Company's express one-year
warranties. The Company believes that it has established the necessary accruals
for any representations, warranties and guarantees.

Critical accounting policies

         In the preparation of our financial statements, we select and apply
accounting principles generally accepted in the United States of America. The
application of some of these generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts reported in
our financial statements and accompanying results. The accounting policies that
include significant estimates and assumptions are in the areas of valuing our
real estate under development and rental property and determining if any are
impaired.

We review our real estate under development and rental property for impairment
of value. This includes considering certain indications of impairment such as
significant declines in occupancy, other significant changes in property
operations, significant deterioration in the surrounding economy or
environmental problems. If such indications are present, we estimate the total
future cash flows from the property and compare the total future cash flows to
the carrying value of the property. If the total future cash flows are less than
the carrying value, we adjust the carrying value down to its estimated fair
value. Fair value may be based on third-party appraisals or our estimate of the
property's fair value.

Item 3   Quantitative and Qualitative Disclosure about Market Risk

         The Company's exposure to market risk has not materially changed from
what was reported on the Company's Form 10-K for the year ended December 31,
2003.

Item 4   Controls and Procedures

         The Company maintains disclosure controls and procedures that are
designed to ensure that information required to be disclosed in the Company's
reports required to be filed under the Securities Exchange Act of 1934, as
amended, is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms, and that
such information is accumulated and communicated to the Company's management,
including its Chief Executive Officer and Chief Accounting Officer, as
appropriate, to allow timely decisions regarding required disclosure.

         As of September 30, 2004, the end of the quarter covered by this
report, the Company carried out an evaluation under the supervision and with the
participation of the Company's management, including the Company's Chief
Executive Officer and Chief Accounting Officer, of the effectiveness of the
design and operation of the Company's disclosure controls and procedures. Based
on the foregoing, the Company's Chief Executive Officer and Chief Accounting
Officer concluded that the Company's disclosure controls and procedures were not
effective. Even though the Company's policies provide for adequate procedures
and controls to ensure that the relevant information is recorded, processed,
summarized and reported to the Company's management or other person involving
similar functions, the Company's procedures and mechanisms for outsourcing
personnel in particular situations is inadequate. The Company has concluded that
it lacks the necessary procedures and mechanism in place to compensate for
unexpected and/or extended leaves of any of its accounting and other relevant
employees, and has not had sufficient personnel to permit timely filing of the
Company's required reports with the SEC.

         The Company is in the process of taking corrective measures to rectify
the foregoing problem and ensure timely filing of its required reports under the
Securities Exchange Act of 1934. These corrective measures involve the cross
training of employees and planning for unanticipated situations where
outsourcing of personnel becomes necessary. In designing and evaluating the
disclosure controls and procedures, management recognizes that any controls and
procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives, and management
is required to apply its judgment in evaluating the cost-benefit relationship of
possible controls and procedures.


                                       15
<PAGE>

         Other than described above, there have been no significant changes in
the Company's internal controls or in other factors that could significantly
affect the internal controls subsequent to the date the Company completed its
evaluation.


                                     Part II
6   Exhibits and Reports on Form 8-K

(a) Exhibits -

                  In accordance with SEC Release No. 33-8212, the following
         exhibit is being furnished, and is not being filed as part of this
         Report or as a separate disclosure document, and is not being
         incorporated by reference into any Securities Act of 1933 registration
         statement:

                  31.1     Rule 13a-14(a)/15d-14(a) Certification of CEO

                  31.2     Rule 13a-14(a)/15d-14(a) Certification of CAO

                  32.      Certification of Chief Executive Officer and Chief
                           Accounting Officer pursuant to 18 U.S.C. Section
                           1350, as created by Section 906 of the Sarbanes-Oxley
                           Act of 2002.

(b) Reports on Form 8-K

                      A Current Report on Form 8-K dated June 22, 2004 was filed
         with the Securities and Exchange Commission to announce the sale of the
         Company's contractual rights to purchase approximately 60 acres of
         undeveloped land.

                      A Current Report on Form 8-K dated July 13, 2004 was filed
         with the Securities and Exchange Commission to announce the Company's
         change in certifying accountants.

                      A Current Report on Form 8-K dated August 26, 2004 was
         filed with the Securities and Exchange Commission to announce the
         resignation of the Company's Chief Financial Officer, who was also a
         director, and the appointment of his replacement in such positions.

                      A Current Report on Form 8-K dated October 29, 2004 was
         filed with the Securities and Exchange Commission to announce the
         resignation of a director of the Company.


                                   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.


                        CALPROP CORPORATION


                   By:   /s/ Henry Nierodzik    .
                        -------------------------
                        Henry Nierodzik
                        Chief Accounting Officer
                        December 10, 2004


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