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 March 31, 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) (310) 306-4314
                                --------------

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

    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:

<TABLE>
<CAPTION>
                                                              Number of Shares
Title of Each Class                                              Outstanding
-------------------                                              -----------
<S>                                                               <C>
Common Stock, no par value                                        9,737,205
</TABLE>


                                       1
<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 March 31, 2004 is being
filed on a delayed basis concurrently with the Company's Form 10-Q for the
quarters ended June 30, 2004 and September 30, 2004 and should be read in
conjunction with these reports. Portions of the information contained herein
regarding management's plans and a proposal made to the board of directors that
the Company become a privately held company are described as of the date hereof,
rather than as of the end of the period covered by this report.


                                       2
<PAGE>

                               CALPROP CORPORATION

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)

                                     ASSETS

<TABLE>
<CAPTION>
                                             March 31,                December 31,
                                                  2004                        2003
                                      -----------------           -----------------
<S>                                        <C>                         <C>
Investment in real estate
  Real estate under development            $13,023,130                 $13,175,441
  Assets held for sale                               0                   8,864,917
                                      -----------------           -----------------
    Total investment in real estate         13,023,130                  22,040,358

Other assets:
  Cash and cash equivalents                     75,255                     190,770
  Other assets                                 983,461                   1,292,744
                                      -----------------           -----------------
     Total other assets                      1,058,716                   1,483,514
                                      -----------------           -----------------

     Total assets                          $14,081,846                 $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>
                                                           March 31,                December 31,
                                                                2004                        2003
                                                    -----------------           -----------------
<S>                                                       <C>                         <C>
Liabilities:
  Trust deeds and notes payable                           $1,034,571                  $4,365,703
  Related-party notes                                     15,511,325                  16,482,631
                                                    -----------------           -----------------
     Total trust deeds, notes payable and                 16,545,896                  20,848,334
     related-party notes
  Liabilities of assets held for sale                              0                   7,720,608
  Accounts payable and accrued liabilities                 5,905,422                   2,521,487
  Warranty reserves                                          691,488                     686,376
                                                    -----------------           -----------------
     Total liabilities                                    23,142,806                  31,776,805
                                                    -----------------           -----------------

Stockholders' deficit:
  Common stock, no par, $1 stated value
    Authorized - 20,000,000 shares;
    Issued and outstanding - 10,239,105 shares
    at March 31, 2004 and December 31, 2003               10,239,105                  10,239,105
  Additional paid-in capital                              25,850,776                  25,850,776
  Stock purchase loans                                      (554,376)                   (549,084)
  Accumulated deficit                                    (44,596,465)                (43,793,730)
                                                    -----------------           -----------------
     Total stockholders' deficit                          (9,060,960)                 (8,252,933)
                                                    -----------------           -----------------

                                                         $14,081,846                 $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
                                                                     March 31,
                                                         ---------------------------------
                                                               2004              2003
                                                         ---------------   ---------------
<S>                                                          <C>               <C>
Development operations:
  Real estate sales                                          $3,656,711        $4,572,279
  Cost of real estate sales                                   4,517,144         5,102,958
                                                         ---------------   ---------------

Loss from development operations                               (860,433)         (530,679)

Other income:
  Gain on sale of investment in real estate venture                   0         2,000,000
  Gain on sale of land                                          797,910                 0
  Interest and miscellaneous                                     54,281            65,742
                                                         ---------------   ---------------
Total other income                                              852,191         2,065,742

Other expenses:
   General and administrative                                   477,246           481,865
   Interest                                                     364,436           308,378
                                                         ---------------   ---------------
Total other expenses                                            841,682           790,243

Minority interests                                                                    764
                                                         ---------------   ---------------
(Loss) income from continuing operations before                (849,924)          744,056
provision for income taxes
Provision for income taxes                                            0           275,025
                                                         ---------------   ---------------
(Loss) income from continuing operations                       (849,924)          469,031
Discontinued operations:
Income (loss) from discontinued operations                       47,189           (55,687)
                                                         ---------------   ---------------

Net (loss) income                                             ($802,735)         $413,344
                                                         ===============   ===============
</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
                                                                                  March 31,
                                                                             ----------------------
                                                                              2004            2003
                                                                             -------         ------
<S>                                                                          <C>             <C>
(Loss) income from continuing operations per common share - basic            ($0.08)         $0.05
                                                                             =======         ======
(Loss) income from continuing operations per common share - diluted          ($0.08)         $0.05
                                                                             =======         ======
Loss from discontinued operations per common share - basic                   $ 0.00         ($0.01)
                                                                             =======         ======
Loss from discontiinued operations per common share - diluted                $ 0.00         ($0.01)
                                                                             =======         ======
Net (loss) income per common share - basic                                   ($0.08)         $0.04
                                                                             =======         ======
Net (loss) income per common share - diluted                                 ($0.08)         $0.04
                                                                             =======         ======
</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>
                                                                              Three Months Ended
                                                                                 March 31,
                                                                       ------------------------------
                                                                           2004              2003
                                                                       ------------      ------------
<S>                                                                      <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net (loss) income                                                    ($802,735)         $413,344
     Adjustments to reconcile net (loss) income to net
         cash provided by (used in) operating activities:
         Minority interests                                                       0               764
         Gain on sale of land                                              (797,910)                0
         Gain on sale of investment in real estate venture                        0        (2,000,000)
         Gain on forgiven debt                                             (306,701)                0
         Gain on sale of rental property                                   (135,083)                0
          Loss on sale of property and equipment                             29,726             1,312
          Depreciation and amortization                                       6,954            83,699
         Provision for  warranty reserves                                    12,000            12,000
         Deferred income taxes                                                    0           211,169
         Interest accrued for executive stock purchase loans                 (5,292)           (5,234)
     Increase (decrease) in cash and cash equivalents
         attributable to changes inoperating assets
         and liabilities:
         Other assets                                                       178,837           (13,024)
         Accounts payable and accrued liabilities                         3,341,871          (395,519)
         Warranty reserves                                                   (6,888)          (12,981)
         Real estate under development                                      950,221         1,661,870
                                                                       ------------      ------------
              Net cash provided by (used in) operating activities         2,465,000           (42,600)
                                                                       ------------      ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
     Investment in rental property                                                0            (5,388)
     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        9,093,766            (4,388)
                                                                       ------------      ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
     Borrowings under related-party notes                                   190,413                 0
     Payments under related-party notes                                    (855,018)                0
     Borrowings under trust deeds and notes payable                         667,196         2,146,271
     Payments under trust deeds and notes payable                       (11,676,872)       (3,603,162)
     Common stock                                                                 0             5,130
                                                                       ------------      ------------
               Net cash used in financing activities                    (11,674,281)       (1,451,749)
                                                                       ------------      ------------
     Net decrease in cash                                                  (115,515)       (1,498,749)
     Cash at beginning of period                                            190,770         3,444,541
                                                                       ------------      ------------
     Cash at end of period                                                  $75,255        $1,945,792
                                                                       ============      ============
</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>
                                                           Three Months Ended
                                                                March 31,
                                                       ------------------------------
                                                            2004            2003
                                                       ------------------------------
<S>                                                        <C>            <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
     Cash paid (refunded) during the period for:
       Interest, net of amount capitalized                 $364,436        $384,740
       Income taxes                                               0       ($73,486)
</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 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 three months ended March 31, 2004 and the year ended December 31,
         2003, the Company has incurred net losses of approximately $0.8 million
         and $15.1 million, respectively. At March 31, 2004, the Company has
         cumulative losses of approximately $44.6 million, a stockholders'
         deficit of approximately $9.1 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 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 agreement 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 months ended March 31, 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

                                        9
<PAGE>

         Compensation," as amended by SFAS No. 148. The Company applies
         Accounting Principles Board No. 25 and related 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 months ended March 31, 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) income per share:
<TABLE>
<CAPTION>
                                                                                  Three Months Ended
                                                                                       March 31,
                                                                        -----------------------------------------
                                                                              2004                      2003
                                                                        ---------------           ---------------
<S>                                                                          <C>                       <C>
Income (loss) from continuing operations                                      ($849,924)                 $469,031
Income (loss) from discontinued operations                                       47,189                   (55,687)
                                                                        ---------------           ---------------

Numerator for basic and diluted net (loss) income per share                   ($802,735)                 $413,344
                                                                        ===============           ===============
Denominator for basic net (loss) income per share                            10,239,105                10,239,105
(weighted average outstanding shares) Effect of dilutive stock options                0                    18,228
                                                                        ---------------           ---------------
Weighted average shares for dilutive net income per share                    10,239,105                10,257,333
                                                                        ===============           ===============
(Loss) income from continuing operations per common share - basic                ($0.08)                    $0.05
                                                                        ===============           ===============
(Loss) income from continuing operations per common share - diluted              ($0.08)                    $0.05
                                                                        ===============           ===============

Loss from discontinued operations per common share - basic                        $0.00                    ($0.01)
                                                                        ===============           ===============
Loss from discontinued operations per common share - diluted                      $0.00                    ($0.01)
                                                                        ===============           ===============

Net (loss) income per common share - basic                                       ($0.08)                    $0.04
                                                                        ===============           ===============
Net (loss) income per common share - diluted                                     ($0.08)                    $0.04
                                                                        ===============           ===============
</TABLE>


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


                                       10
<PAGE>

         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>
                                      March 31, 2004     December 31, 2003
                                      --------------     -----------------
<S>                                      <C>                <C>
Land                                            $0          $1,500,000
Building and improvements, net                  $0          $7,364,917
                                        ----------          ----------

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

         Depreciation expense for building and improvements for the three months
         ended March 31, 2004 and 2003 was $0 and $73,125, respectively.

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

         In accordance with SFAS 144 "Accounting for the Impairment or Disposal
         of Long-Lived Assets," the net 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>
                                                         Three Months Ended
                                                              March 31,
                                                    ----------------------------
                                                         2004               2003
                                                    ---------          ---------
<S>                                                  <C>                <C>
Revenues:
Rental income                                        $167,197           $253,782
Gain on sale of rental property                       135,083                  0
Gain on forgiven debt                                 306,701                  0
Interest and miscellaneous                              3,966              6,999
                                                    ---------          ---------
  Total revenues                                      612,947            260,781
                                                    ---------          ---------
Expenses:
Rental operating                                      252,654            112,090
General and administrative                              1,191              1,191
Depreciation                                                0             73,125
Interest                                              311,913            130,062
                                                    ---------          ---------
  Total expenses                                      565,758            316,468
                                                    ---------          ---------
Income (loss) from discontinued operations            $47,189           ($55,687)
                                                    =========          =========
</TABLE>

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
         subdivision 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 mapping cannot be recorded,


                                       11
<PAGE>

         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:  Subsequent events

         On May 6, 2004, the Company sold the remainder of the Saddlerock
         project for a gross sales price of $1,390,000. There was no gain or
         loss on this transaction.

         On May 21, 2004, the Company sold the Mission Gorge property for a
         gross sales price of $6,849,679. As a result, the Company will record a
         gain on the sale of land of $431,703 in the second quarter of 2004.

         On June 18, 2004, the Company 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 mapping 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.

         All note obligations with maturity dates occurring before December 31,
         2004 have been extended to December 31, 2004.

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 two remaining development and construction projects:
High Ridge Court and Saddlerock. Real estate sales for the three months ended
March 31, 2004 decreased 20.0% to $3,656,711 from $4,572,279 for the three
months ended March 31, 2003. The decrease in real estate sales for the
three-month period in 2004 compared to 2003 was due to lower sales prices
resulting from decreased market demand. In the first quarter of 2004, the
Company sold 12 homes with an average sales price of $304,726. In the first
quarter of 2003, the Company sold 12 homes with an average sales price of
$381,023. The Company had a loss from development operations of $860,433 in the
first quarter of 2004 as compared to a loss of $530,679 in the first quarter of
2003.

         General and administrative expenses decreased to $477,246 in the three
months ended March 31, 2004 from $481,865 in the corresponding period. The
decrease is due to the focus efforts to decrease corporate overhead costs and a
decrease in sales volume. 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.


                                       12
<PAGE>

         Sale of land primarily from the Rohnert Park project has resulted in a
gain of $797,910 during the three months ended March 31, 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 the
mortgage loan payable by the Joint Venture until the property was sold in
September 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 March 31, 2004, the Company had one remaining loan commitment
from a financial institution of approximately $3,371,000, which may be drawn
down by the Company upon the satisfaction of certain conditions for use in
connection with its development projects described below.

         As of March 31, 2004, the Company has 35 homes under construction of
which 11 were in escrow to be sold, plus one model unit. Additionally, the
Company has an inventory of three lots under development. The Company had 11
units in escrow ("backlog") compared with a backlog of 16 units as of March 31,
2003. The gross revenues of such backlog was $2,877,000 and $5,375,000 as of
March 31, 2004 and 2003, respectively.

         The Company entered into an agreement in the the second quarter of 2004
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 current 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 entitlements are
obtained, and if equity and debt funding can be obtained, the Murietta property,
or a substantial portion thereof, will undergo development 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 developed as originally intended. Based on its
agreements with 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 loan
agreement for that project.

         The accompanying condensed consolidated financial statements have been
prepared assuming the Company will continue as a going concern. During the three
months ended March 31, 2004 and the year ended December 31, 2003, the Company
has incurred net losses of approximately $0.8 million and $15.1 million,
respectively. At March 31, 2004, the Company has cumulative losses of
approximately


                                       13
<PAGE>

$44.6 million, a stockholders' deficit of approximately $9.1 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 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 common 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. Zaccaglin 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 March 31, 2004 were as
follows:
<TABLE>
<CAPTION>
                                            Payments Due by Period
-----------------------------    ---------------------------------------------
                                      2004         2005-2006         Total
<S>                               <C>              <C>            <C>
Debt                              $11,302,714      $5,243,182     $16,545,896
Operating leases                      173,195         276,684         449,879
                                  -----------     -----------     -----------
Total contractual obligations     $11,475,909      $5,519,866     $16,995,775
                                  -----------     -----------     -----------
</TABLE>


         At March 31, 2004, we had scheduled maturities on existing debt of
$11,302,714 through December 31, 2004. Of this amount, $1,378,337 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


                                       14
<PAGE>

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, Mr. Zaccaglin, who is our chief executive
officer and is one of two substantial stockholders who have loaned money to the
Company 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 the Company 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 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 March 31, 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


                                       15
<PAGE>

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.

         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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