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

                                    FORM 10-K

      |X|   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
            EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2001        Commission File Number 1-6844

                               CALPROP CORPORATION

Incorporated in California                    I.R.S. Employer Identification No.
13160 Mindanao Way, #180                                  95-4044835
Marina Del Rey, California  90292
(310) 306-4314

Securities Registered Pursuant to Section 12(b) of the Act: None

Securities Registered Pursuant to Section 12(g) of the Act: Common Stock, no par
value

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this form 10-K or any amendment to this
Form 10-K X .

State the aggregate market value of the voting stock held by non-affiliates of
the registrant. The aggregate market value shall be computed by reference to the
price at which the stock was sold or the average bid and asked prices of such
stock, as of a specified date within 60 days prior to the date of filing.

                         $1,726,560 at February 26, 2002

Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.

               10,254,005 Shares Outstanding at February 26, 2002

                      Documents Incorporated by reference:

Portions of the registrant's definitive Proxy Statement for 2002 Annual Meeting
of Shareholders are incorporated by reference into Part III of this report.

<PAGE>

                                     PART I

ITEM 1. Business

General

      Calprop Corporation ("Calprop") designs, constructs, and sells
single-family detached homes and townhomes as part of condominiums or planned
unit developments in California and Colorado. The Company selects and acquires
the site, secures construction financing and constructs and sells homes. The
Company also sells improved lots in California and Colorado. The Company selects
projects of varying types in several local markets in an effort to reduce the
risks inherent in the residential housing industry. To enable the Company to
adapt to the changing market conditions and to control its overhead expenses,
the Company performs its construction activities through independent
subcontractors under the direction of on-site construction supervisors employed
by the Company rather than employing a permanent construction work force. The
Company does not generally finance the purchase of its homes, but has done so in
the past to facilitate sales and may do so in the future to the extent it is
feasible, if market conditions require such financing. In addition to the
continuing emphasis on single-family construction, the Company also designs,
constructs, and leases apartments and townhomes in Southern and Northern
California.

      During 2001, the Company was primarily engaged in the development of lots,
and the construction and marketing of single-family detached homes and
townhomes. As of December 31, 2001, the Company had five residential housing
projects in various stages of development, consisting of 242 homes and townhomes
under construction (60 were in escrow), 143 lots under development, and 18 model
homes used in selling the various types of housing developed. The Company's
products range from homes for first-time buyers to custom homes. In addition to
the construction and sale of single-family and multifamily housing, the Company
was engaged in the development of apartments and townhomes available for lease.
As of December 31, 2001, the Company had two projects under development,
consisting of 131 units available for lease and 119 units under construction.

Residential Housing Industry

      The residential housing industry includes several hundred developers and
home builders of various sizes and capabilities. The development process starts
with the acquisition of a raw parcel of land. The developer prepares preliminary
plans, environmental reports and obtains all necessary governmental approvals,
including zoning and conditional use permits before subdividing the land into
final tract maps and approved development plans. The subdivided parcel is then
graded and the infrastructure of roads, sewers, storm drains, and public
utilities are added to develop finished lots. Building permits are obtained and
housing is constructed, and then sold or rented. Residential housing is
constructed in a variety of types, including single-family detached homes
(ranging from the less expensive "first-time buyer" homes to the medium priced
"trade-up" homes to the more expensive "custom" homes), patio-homes (adjacent
homes with party walls), condominiums (owner-occupied multifamily housing), and
multifamily rental housing (apartments, retirement homes and other types of
nonowner occupied multifamily housing). Any of these types can be built as part
of a planned unit development with common areas such as green belts, swimming
pools and other recreational facilities for common use by occupants.

      The Company's Strategy

      The Company's strategy has been to acquire land in or near major urban
centers in California and Colorado and to construct single-family housing for
resale. The Company does not specialize in the construction of a specific type
or design of housing and does not limit its operation to any specific location.
The Company usually acquires project sites which are zoned and subdivided so
that the Company can construct and sell single-family housing in a relatively
short period of time, usually two to three years. The Company will also acquire
raw land that is not zoned or subdivided for investment or for development by
processing it through the entitlement process to obtain zoning and other permits
necessary for


                                       2
<PAGE>

development into single-family housing and other urban uses.

Future Projects

      As the Company intends to continue specializing in the construction and
sale of single-family and multifamily housing, the Company is continually
considering potential projects for development. In addition to the construction
and sale of single-family and multifamily housing, the Company has entered the
market to construct and lease single-family and multifamily housing. This market
would provide consistent cash flow in the cyclical industry of real estate
development. During 1999, the Company purchased land in the Northern California
area for the construction of apartments. The Company also entered into a ground
lease agreement for land for the construction of townhomes in the Southern
California area for lease. The following discussion is the process which the
Company follows to acquire land, entitle, market and build residential housing
projects.

Land Acquisition and Construction

      In considering the purchase of land for the construction of housing, the
Company takes various factors into account, including, among others, population
growth patterns, availability of utilities and community services such as water,
gas, electricity, sewer, transportation and schools, the estimated absorption
rate for new housing, estimated costs of construction and success of the
Company's past projects in and familiarity with the area.

      The Company's long-term strategy is to acquire or option project sites
which are properly zoned and subdivided so that the Company can construct and
sell single-family housing in a relatively short period of time, usually less
than three years, after acquiring the land. Larger projects are constructed in
phases, and the Company determines the number of homes in each phase based upon
the estimated costs of construction and estimated sales schedule. The division
of a project into phases may also be required by the project construction
lender. Although a construction and marketing schedule is established for all
phases at the commencement of a project, the precise timing of construction of
each phase depends on the rate of sales of homes in previous phases.

      In certain instances, the Company purchases land which is not
substantially ready for construction. Depending on the stage of development of
the parcel, the Company might be required to obtain necessary entitlements to
subdivide the parcel of land; these entitlements include environmental
clearances, zoning, subdivision mapping, permits and other governmental
approvals. After the entitlement process the Company would then develop the land
through grading lots and streets, and building the infrastructure of water,
sewer, storm drains, utilities, curbs, streets, and possibly amenities, such as
parks, pools and recreational facilities.

      The Company acts as its own general contractor, and its supervisory
employees coordinate all work on a project. The services of independent
architectural, design, engineering and other consulting firms are engaged to
assist in the pre-construction aspects of the project. The Company's
construction activities are conducted through independent subcontractors, under
fixed-price contracts, operating in conformity with plans, specifications and
detailed drawings furnished by the Company and under the direction of on-site
construction supervisors employed by the Company. Generally, the Company
solicits bids from several potential subcontractors and awards a contract for a
single phase of a project based on the subcontracting bid as well as the
Company's knowledge of the subcontractor's work and reputation. Subcontracting
enables the Company to retain the necessary flexibility to react to changes in
the demand for housing, and to utilize the management strengths, specialization
capabilities, equipment and facilities of its subcontractors without large
capital investments of its own.

      The Company does not have long-term contractual commitments with any of
its subcontractors, consultants or suppliers of materials. The Company selects
subcontractors who it believes will perform the required work in a timely manner
and whose quality of workmanship meets the Company's standards. Although some
subcontractors employ unionized labor, the Company has not signed a master labor
agreement or experienced any significant delays in construction as a result of
strikes or stoppages; however, there can be no assurances that the Company will
not experience such delays in the future.

      The Company secures raw materials, fixtures and furnishings directly or
through its subcontractors from customary trade sources. Although certain
products have been in short supply from time to time, such shortages have not
impaired the Company's ability to conduct its business in the past and are not
expected to do so in the foreseeable future.

Marketing

      The Company's marketing department coordinates the design of the homes to
be built and the interior design of model units and the design and preparation
of advertising materials. The Company builds,


                                       3
<PAGE>

landscapes and furnishes model units for public display. After each project is
sufficiently completed so as to permit retail sales to begin, the Company
selects a realtor or realty company to market homes which are under construction
or completed.

Warranties

      The Company provides a one-year express warranty against defects in
workmanship and materials to purchasers of homes in its projects. In addition,
California and Colorado law provides the Company's customers certain implied
warranties, the scope and duration of which exceed the Company's express
warranties. The Company requires its subcontractors to indemnify the Company in
writing and requires the insurance of the subcontractor to provide that the
Company is a primary insured and an additional insured from its subcontractors
for liabilities arising from their work, except for liability arising through
the sole negligence or willful misconduct of the Company or from defects in
designs furnished by the Company. Nevertheless, the Company is primarily liable
to its customers for breach of warranty. The Company has builder's product
liability insurance coverage which it believes to be adequate in light of the
Company's claims history.

      Schedule II to the financial statements sets forth the Company's warranty
reserves which the Company believes are adequate. Normal warranty costs are
accrued at the close of escrow and held on a project until two years after the
project is completed and all completion bonds posted with governmental agencies
are released.

Financing

      Generally, the Company acquires a project site for a purchase price paid
with cash or a combination of cash and short-term acquisition financing secured
by the project site. The amount and terms of financing vary from project to
project.

      After final working drawings from architects are prepared, the Company
obtains a construction loan, secured by the portion of the project site to which
the loan relates. The Company's construction loans are used to finance projected
construction costs. In order to obtain the construction loan, the Company must
repay all acquisition financing or obtain a reconveyance of that portion of the
project site which is used to secure the construction loan. The construction
loan is due and payable shortly after completion of the construction being
financed. The Company repays construction financing from the proceeds of project
unit sales. The construction financing provides for release of individual lots
for sale during the term of the financing upon partial repayment of principal in
a specified amount per lot. All cash sales proceeds in excess of the specified
release amount are retained by the Company. If the Company experienced a delay
in unit sales following construction and was unable to extend the term of its
construction financing, the Company would be required to repay the construction
financing or obtain other financing in order to hold the unsold units until
market conditions improved. Although the Company does not arrange third-party
financing for its customers, it has provided secured purchase money financing
from time to time to the extent required by market conditions. In addition, the
Company in the future may also subsidize home purchasers, as an alternative to
providing direct financing, by "buying down" the interest rate on loans from
lending institutions, the extent and amount of which would depend upon
prevailing market conditions and interest rate levels at the time.

      The Company usually receives the full sales price for its homes in cash at
the closing of purchase escrows. Most of the Company's home purchasers obtain
conventional financing from independent financial institutions. Depending upon
the price range of the homes in a particular project and the prevailing mortgage
market in the area, the financing obtained by the Company's qualifying home
purchasers may be insured either by the Federal Housing Administration ("FHA")
or guaranteed by the Veterans Administration ("VA"). As a result of government
regulations, FHA and VA financing of the purchase of homes from the Company is
limited because, among other things, the loan amount may not exceed certain
specified levels.

Competition

      The home building industry is highly competitive, particularly in the
large urban areas of California. In each of the areas in which it operates, the
Company competes in terms of location, design, quality, price and available
mortgage financing with numerous other residential construction firms, including
large national and regional firms, many of which have greater financial
resources than the Company. The Company believes that no single competitor
dominates any single market area served by the Company.

      For projects in master planned developments, the Company's units are
adjacent to those of other builders and usually marketed at the same time
through participation in joint advertising programs. While this often increases
direct competition for the Company, it also attracts a larger group of potential
purchasers than would be the case if the Company advertised by itself.


                                       4
<PAGE>

Business Risks

      The development, construction and sale of single-family homes generally
are subject to various risks, including, among others, possible changes in the
governmental structure of the project locality, possible shortages of suitable
undeveloped land at reasonable prices, unfavorable general and local economic
conditions such as employment conditions and income levels of the general
population, adverse local market conditions resulting from such unfavorable
economic conditions or competitive overbuilding, increases in prevailing
interest rates, increases in real estate taxes and the cost of materials and
labor, and the availability of construction financing and home mortgage
financing attractive to home purchasers. In addition, the demand for residential
housing depends in part on the tax consequences of home ownership to home
purchasers. There have been various tax legislation proposals before Congress
over the past few years which could reduce the tax advantages currently
associated with home ownership. There can be no assurances that any such
legislation, if enacted, would not adversely impact the residential housing
industry in general or the Company's business and results of operations.

      The Company's business in particular depends upon the successful
completion of construction and sale of homes on established schedules.
Construction and sale schedules may be adversely affected by a variety of
factors which are not within the Company's control, including the factors
described above, inclement weather conditions, earthquakes, labor and material
shortages and strikes. Although the Company has not experienced any serious
labor or material shortages in recent years, the residential housing industry
from time to time experiences serious labor and material shortages.

Governmental Regulations

      The residential housing industry is also subject to increasing
environmental, building, zoning and real estate sales regulation by various
federal, state and local governmental authorities. Such regulations affect home
building by specifying, among other things, the type and quality of building
material which must be used, certain aspects of land use and building design, as
well as the manner in which the Company conducts its sales, lending activities
and other dealings with its customers. For example, the Federal Consumer Credit
Protection Act requires, among other things, certain disclosures to purchasers
about finance charges in credit transactions, such as sales financed by the
Company. California law requires that full information concerning certain
subdivisions be filed with the California Real Estate Commissioner, and in such
instances no sales may be made to the public until the Commissioner has issued a
public report which is delivered to purchasers. Because the Company's
competitors are also subject to the foregoing regulation, the Company believes
that it is not placed at a competitive disadvantage, except to the extent that
competitors with greater financial resources and greater volume of development
activity may more readily withstand longer delays and increased costs in the
development of projects.

      Although the strategy of the Company is to build homes on land which is
already subdivided, zoned and improved with utilities, the Company occasionally
undertakes projects which entail the subdivision of partially improved land. In
such cases the Company is required to obtain the approval of numerous
governmental authorities regulating such matters as permitted land uses and
levels of population density, access to utility services such as water and waste
disposal, and the dedication of acreage for open space, parks, schools and other
community purposes. Furthermore, changes in prevailing local circumstances or
applicable law, including moratoria, zoning changes and other governmental
actions, can require additional approvals or modification of approvals
previously obtained. As a result of such regulation, the time between the
original acquisition and the commencement and completion of a project can
increase significantly. Furthermore, the commencement or completion of a project
could be precluded entirely, in which case the Company would sustain a
substantial loss on the project.

Employees

      The Company has approximately forty four full-time employees, including
six executive officers, twenty three persons in its finance, marketing and
operations departments, and fifteen field superintendents and general laborers.
The Company also employs temporary and part-time laborers from time to time as
necessary. None of the Company's employees is currently represented by a
collective bargaining unit. The Company compensates its employees with salaries
and fringe benefits that it believes are competitive with the building industry
and the local economy. The Company believes that relations with its employees
generally are excellent.

Licensing

      The Company is licensed by the State of California as a general building
contractor, and this license is essential to its operations. This license must
be renewed every two years. The Company's current license expires in July 2002
and the Company expects to renew its license on or before expiration.


                                       5
<PAGE>

ITEM 2. Properties

Current projects

      The table below sets forth certain information relating to the Company's
current projects as of December 31, 2001 and certain information relating to the
Company's development operations during the previous twelve months.

<TABLE>
<CAPTION>
                                           Units sold   Units under     Units      Units sold    Remaining
                                            12 months   construction  completed    subject to    units to
                                              ended        as of        as of     construction   construct
                                            12/31/01    12/31/01 (1)   12/31/01      as of         as of
Project                                                                             12/31/01     12/31/01
                                          -------------------------------------------------------------------
<S>                                            <C>          <C>           <C>          <C>         <C>
Units Held For Sale

1.   Montserrat Classics                       43            56           --           24            6
2.   Mockingbird Canyon                        14            12           --           9            --
3.   Parkland Farms                            20            --           --           --           --
4.   Parc Metropolitan                         140          152           --           21           12
5.   High Ridge Court                          26            24           --           4            54
6.   Saddlerock                                 6            16           --           2            71
7.  Mission Gorge                              --            --           --           --           --
                                          -------------------------------------------------------------------
Total                                          249          260           --           60           143
                                          ===================================================================
Total inventory units as of 12/31/01                                                                403
                                                                                               ==============
</TABLE>

(1)   Units under construction includes units sold subject to construction and
      18 model units

Units Held For Lease

<TABLE>
<S>                                           <C>           <C>         <C>           <C>          <C>
8.  Parcwest                                  --            --           --           --           68
9.  Andalucia, (formerly McGuire Luxury       --            --          131           --           51
      Apartments) (2)
                                          -------------------------------------------------------------------
Total                                                                   131                        119
                                          ===================================================================
</TABLE>

(2)   The Company owns a 25% interest in the project

Backlog- As noted in the above table, the total number of units sold subject to
construction ("backlog") at December 31, 2001, was 60 units, with gross revenues
of such backlog equal to $22,232,000. As of March 10, 2002, the backlog was 108
units, representing $40,400,000 compared to a backlog of 117 units representing
$43,900,000 as of March 11, 2001. See also "Management Discussion and Analysis
of Financial Condition and Results of Operations" for additional discussion of
Real Estate Sales for 2000 and 1999.

1. Montserrat Classics (Murrieta, Riverside County, California)

      The Montserrat Classics project consists of 105 lots. The Company is
building single-family homes averaging 2,280 to 3,411 square feet with average
sales prices before lot premiums or sales incentives of $244,900 to $304,900. As
of December 31, 2001, the Company had 6 lots under development, 53 units under
construction (24 were in escrow), and three models.

      The project is located about 75 miles southeast of Los Angeles along
Highway 15.

      The Company has an acquisition/construction loan with the Curci-Turner
Company ("Curci") on the entire 105 lots of the project. The loan permits
borrowing by the Company of $3,450,000 on this project and bears interest at
12%. The loan contains a profit sharing provision in the amount of 50% of "net


                                       6
<PAGE>

proceeds" as defined in the agreement. As of December 31, 2001, $2,304,234 of
the principal of this loan was outstanding.

      The Company's construction loan on the 52 units in the first and second
phase of construction was secured in 2000 from Comerica Bank, formerly Imperial
Bank. The loan permits borrowing by the Company of $12,465,000 and bears
interest at the prime rate plus 1.0%. As of December 31, 2001, the outstanding
principal of this loan was $115,694, and the Company had available $253,344. The
Company believes these funds are adequate to complete the construction of the
first two phases of construction.

      The Company's construction loan on the remaining 53 units, phases three
through five was secured in 2001 from Comerica Bank. The loan permits borrowing
by the Company of $11,824,400 and bears interest at the prime rate plus 1.0%. As
of December 31, 2001, the outstanding principal of this loan was $4,353,913 and
the Company had available $7,542,883. The Company believes these funds are
adequate to complete the construction of the last three phases of construction.

2. Mockingbird Canyon (Unincorporated Territory of Riverside County, California)

      The Mockingbird Canyon project consists of 31 lots. The project consists
of single-family homes averaging 3,694 to 4,137 square feet with average sales
prices before lot premiums or sales incentives of $409,900 to $449,900. As of
December 31, 2001, the Company had 12 units under construction (nine were in
escrow).

      The project is located about 60 miles east of Los Angeles and 30 miles
south of San Bernardino along Interstate 91.

      The Company has an acquisition/construction loan with the Curci on the
entire 31 lots of the project. The loan permits borrowing by the Company of
$3,500,000 on this project and bears interest at 12%. The loan contains a profit
sharing provision in the amount of 50% of "net proceeds" as defined in the
agreement. As of December 31, 2001, $1,927,405 of the principal of this loan was
outstanding.

      The Company's construction loan on the entire 31 units was secured in 2000
from Comerica Bank. The loan permits borrowing by the Company of $10,000,000 and
bears interest at the prime rate plus 1.0%. As of December 31, 2001, the
outstanding principal of this loan was $2,234,407, and the Company had available
$605,315. The Company believes these funds are adequate to complete the
construction of the project.

3. Parkland Farms (Healdsburg, Sonoma County, California)

      The Parkland Farms project, formerly Parkland Hills, consisted of 115
units of single-family detached housing. The Company closed escrow on all units
as of December 31, 2001.

      The project was located about 75 miles north of San Francisco along
highway 101.

      In 1998, the Company formed Parkland Farms Development Co., LLC, a
California limited liability company, ("Parkland") with an officer of the
Company. In September, 1998, 115 lots in the Parkland Farms project were
acquired by Parkland. The profits and losses of Parkland were distributed
between the members as follows: 1% to Partner and 99% to the Company.

      The Company had an acquisition/construction loan with the Curci on the
entire 115 lots of the project. The loan permited borrowing by the Company of
$4,808,201 on this project and bore interest at 12%. The loan contained a profit
sharing provision in the amount of 50% of "net proceeds" as defined in the
agreement. As of December 31, 2000, the loan had been paid in its entirety.

      The Company's construction loan on the 45 units in the first and second
phase of construction was secured in 1998 from Comerica Bank. The loan permited
borrowing by the Company of $14,679,000 and bore interest at the prime rate plus
1.0%. As of December 31, 2000, the loan had been paid in its entirety.

      The Company's construction loan on the remaining 70 units, phases three
through five was secured in 1999 from Comerica Bank. The loan permited borrowing
by the Company of $15,628,616 and bore interest at the prime plus 1.0%. As of
December 31, 2001, the loan had been paid in its entirety.

4. Parc Metropolitan

      The Parc Metropolitan project consists of three separate
projects/products, Product A, Product B, and Product C for a total of 382 units.

      Product A consists of 130 townhomes. The project consists of two models
ranging from 1,404 to


                                       7
<PAGE>

1,764 square feet with base sales prices before lot premiums or sales incentives
of $405,900 to $513,000.

      Product B consists of 108 townhomes. The project consists of six models
ranging from 1,012 to 1,369 square feet with base sales prices before lot
premiums or sales incentives of $354,900 to $423,900.

      Product C consists of 144 townhomes. The project consists of two models
ranging from 1,353 to 1,534 square feet with base sales prices before lot
premiums or sales incentives of $395,900 to $458,900.

      As of December 31, 2001, the Company had 12 lots under development, 142
units under construction (21 were in escrow), and ten models.

      The project is located approximately 45 miles south of San Francisco along
highway 880 in the Silicon Valley area.

      In 1998, the Company formed RGCCLPO Development Co., LLC, a California
limited liability company, ("RGCCLPO") with RGC. In September, 1998, 382 lots in
the Metropolitan project were acquired by RGCCLPO. The profits and losses of
RGCCLPO were distributed between the members as follows: 50% to RGC and 50% to
the Company. During 1999, the Company acquired RGC's 50% partnership interest in
RGCCLPO to attain 100% ownership as of December 31, 1999.

      The Company acquired the land through seller financing with Ford Motor
Company and Ford Motor Land Development Corporation on the entire 382 lots and
the land for the Parcwest Apartments project. The original note balance of
$12,850,000 bore interest at 9%. As of December 31, 2001, the loan had been paid
in its entirety.

      The Company's acquisition and development loan on the entire 382 lots of
the project was secured in 1998 from Lowe Enterprises Residential Advisors,
("Lowe"). The loan permited borrowing by the Company of $9,700,000 and bore
interest at the prime plus 2.0%. After repayment of principal and interest, Lowe
received, as participating interest, a 27% IRR calculated on an annual basis. In
December of 2001, the loan was refinanced and secured with Curci for $4,500,000.
The loan bears interest at 20%. As of December 31, 2001, $3,000,000 of the
principal of this loan was outstanding.

      The Company's construction loan on the first phase of construction for
Product A was secured from Comerica Bank in 1998. The loan permited borrowing by
the Company of $13,773,142 on this project and bore interest at the bank's
reference rate plus 1.0%. As of December 31, 2001, the loan had been paid in its
entirety.

      The Company's construction loan on the first phase of construction for
Product B was secured from Comerica Bank in 1999. The loan permited borrowing by
the Company of $10,604,352 on this project and bore interest at the bank's
reference rate plus 1.0%. As of December 31, 2001, the loan had been paid in its
entirety.

      The Company's construction loan on the first phase of construction for
Product C was secured from Comerica Bank in 1999. The loan permited borrowing by
the Company of $12,342,388 on this project and bore interest at the bank's
reference rate plus 1.0%. As of December 31, 2001, the loan had been paid in its
entirety.

      The Company's construction loan on the second phase of construction for
Product A was secured from Comerica Bank in 2000. The loan permits borrowing by
the Company of $13,612,993 on this project and bears interest at the bank's
reference rate plus 1.0%. As of December 31, 2001, the outstanding principal of
this loan was $2,481,030, and the Company had available $105,972. The Company
believes these funds are adequate to complete the construction of the second
phase of construction.

      The Company's construction loan on the second phase of construction for
Product B was secured from Comerica Bank in 2000. The loan permits borrowing by
the Company of $10,661,232 on this project and bears interest at the bank's
reference rate plus 1.0%. As of December 31, 2001, the outstanding principal of
this loan was $6,941,911 and the Company had available $1,907,948. The Company
believes these funds are adequate to complete the construction of the second
phase of construction.

      The Company's construction loan on the second phase of construction for
Product C was secured from Comerica Bank in 2000. The loan permits borrowing by
the Company of $12,897,860 on this project and bears interest at the bank's
reference rate plus 1.0%. As of December 31, 2001, the outstanding principal of
this loan was $2,778,339.

      The Company's construction loan on the third phase of construction for
Product A was secured from Comerica Bank in 2001. The loan permits borrowing by
the Company of $15,900,000 on this project and bears interest at the bank's
reference rate plus 1.0%. As of December 31, 2001, the outstanding principal


                                       8
<PAGE>

of this loan was $11,908,642, and the Company had available $4,080,397. The
Company believes these funds are adequate to complete the construction of the
third phase of construction.

      The Company's construction loan on the third phase of construction for
Product C was secured from Comerica Bank in 2001. The loan permits borrowing by
the Company of $9,321,000 on this project and bears interest at the bank's
reference rate plus 1.0%. As of December 31, 2001, the outstanding principal of
this loan was $6,972,545, and the Company had available $2,063,112. The Company
believes these funds are adequate to complete the construction of the third
phase of construction.

5. High Ridge Court

      The High Ridge Court project, formerly Hunters Chase, consists of 170
units of single-family detached housing. The project consists of three models
ranging from 1,238 to 1,884 square feet with base sales prices before lot
premiums or sales incentives of $213,900 to $233,900. As of December 31, 2001,
the Company had 54 lots under development, 21 units under construction (4 were
in escrow), and three models.

      The project is located approximately 3 miles west of I-25 in the city of
Thornton.

      The Company has an acquisition loan with the Curci on the entire 170 lots
of the project. The loan permits borrowing by the Company of $4,250,000 on this
project and bears interest at 12%. The loan contains a profit sharing provision
in the amount of 50% of "net proceeds" as defined in the agreement. As of
December 31, 2001, $2,414,492 of the principal of this loan was outstanding.

      The Company's acquisition and development loan for the remaining three
phases of the project was secured in 1999 from First American Bank Texas. The
loan permitted borrowing by the Company of $2,041,000 and bore interest at the
prime rate plus 1.0%. As of December 31, 2001, the loan had been paid in its
entirety.

      The Company's revolving construction loan on the entire 170 lots of the
project was secured in 1998 from First American Bank Texas. The revolving loan
permits the Company to have a maximum outstanding balance of $5,000,000 for the
construction of the High Ridge and Saddlerock projects. The loan bears interest
at the prime rate plus 1.0%. During 2001, the Company paid the revolving
construction loan in its entirety and secured a construction loan on the third
and fourth phase with Imperial Capital Bank. The loan permits borrowing by the
Company of $9,340,000 on this project and bears interest at the bank's reference
rate plus 1.0%. As of December 31, 2001, the outstanding principal of this loan
was $1,343,973 and the Company had available $6,771,494. The Company believes
these funds are adequate to complete the construction of the third and fourth
phase of construction.

6. Saddlerock

      The Saddlerock project consists of 94 units of single-family detached
housing . The project consists of two models ranging from 1,899 to 2,900 square
feet with base sales prices before lot premiums or sales incentives of $289,900
to $356,900. As of December 31, 2001, the Company had 71 lots under development,
14 units under construction (2 were in escrow), and two models.

      The project is located adjacent to highway E470 approximately 7 miles east
of I-25 in the city of Aurora.

      The Company has an acquisition/construction loan with Curci on the entire
94 lots of the project. The loan permits borrowing by the Company of $3,000,000
on this project and bears interest at 12%. The loan contains a profit sharing
provision in the amount of 50% of "net proceeds" as defined in the agreement. As
of December 31, 2001, $2,595,711 of the principal of this loan was outstanding.

      The Company's acquisition and development on the entire 94 lots of the
project was secured in 1998 from First American Bank Texas. The loan permitted
borrowing by the Company of $2,606,800 and bore interest at the prime rate plus
1.0%. As of December 31, 2000, the loan had been paid in its entirety.

      The Company's revolving construction loan on the entire 94 lots of the
project was secured in 1998 from First American Bank Texas. The revolving loan
permitted the Company to have a maximum outstanding balance of $5,000,000 for
the construction of the Saddlerock and High Ridge projects. The loan bore
interest at the prime rate plus 1.0%. During 2000, the construction loan for the
remaining units was refinanced and secured with Comerica Bank. The loan permits
borrowing by the Company of $13,538,913 on this project and bears interest at
the bank's reference rate plus 1.0%. As of December


                                       9
<PAGE>

31, 2001, the outstanding principal of this loan was $6,253,911 and the Company
had available $5,125,689. The Company believes these funds are adequate to
complete the construction of the remaining units under construction.

7. Mission Gorge (San Diego, San Diego County, California)

      In 1987, the Company purchased approximately 200 acres of land in San
Diego. The previous owners, as a part of a group of property owners, had entered
into an option agreement with another developer to acquire the group's property,
upon obtaining an Amended Community Plan for the community in which the property
is located. At the present time, the Amended Community Plan has not been
completed. The Company is actively pursuing alternative land development
opportunities.

      The Company formed Mission Gorge, LLC, a California limited liability
company, with the Curci-Turner, LLC for the purposes of developing the 200 acres
of the Mission Gorge project. The net proceeds are to be divided equally, as
defined in the operating agreement, among the two members, Calprop and
Curci-Turner, LLC. In December 2000, the Curci-Turner, LLC made a distribution
of its 50% interest to the members of Curci-Turner, LLC in the following
proportions: The John L. Curci Trust as to a 25% interest and The Janet Curci
Living Trust No. Il as to a 25% interest.

8. Parcwest

      The Parcwest project consists of a 68-unit affordable apartment adjacent
to the Parc Metropolitan project. The 68 units are currently under construction
in which no units are available for lease.

      The project is located approximately 45 miles south of San Francisco along
highway 880 in the Silicon Valley area.

      In 1999, the Company formed PWA Associates, LLC, a California limited
liability company, ("PWA") with RGC Associates, LLC (RGC Associates). In
December, 1999, land for the 68-unit apartment in the Parcwest project was
acquired by PWA. The profits and losses of PWA were distributed between the
members as follows: 50% to RGC Associates and 50% to the Company. In May of
2001, the Company acquired RGC's 50% partnership interest in PWA to attain 100%
ownership as of December 31, 2001.

      The Company has an acquisition loan with the City of Milpitas. The loan
permits borrowing by the Company of $1,000,000 on this project and bears
interest at 6.35%. As of December 31, 2001, $1,000,000 of the principal of this
loan was outstanding.

      The Company's construction loans were secured from Comerica Bank in 2001.
The loans permit borrowing by the Company of $6,816,000 and $1,061,670 on this
project and bears interest at the bank's reference rate plus 1.0% and 5.5%,
respectively. As of December 31, 2001, the outstanding principal balances of the
loans are $2,215,417 and $992,417, respectively and the Company had available
$4,422,216 and $69,253, respectively. The Company believes these funds are
adequate to complete the construction.

9. Andalucia, formerly McGuire Luxury Apartments (San Diego, California)

      The Andalucia project, owned by RGC Carmel Country Associates, LLC, a
California limited liability company, ("RGC Carmel"), consists of 182 units of
single-family attached housing for lease. The Company entered into a 55 year
ground lease agreement with an option to extend 20 additional years and the
right of first refusal to purchase the land. As of December 31, 2001, the
Company had 131 units completed, of which 74 were leased.

      The project is located about 20 miles north of San Diego along Interstate
5.

      In 1999, the Company formed RGC Carmel with RGC. The profits and losses of
RGC Carmel were distributed between the members as follows: 50% to RGC and 50%
to the Company. During 2000, RGC Carmel admitted additional members in the
following proportions: The John L. Curci Trust as to a 12.5% interest, The Janet
Curci Living Trust No. Il as to a 12.5% interest, and an officer of the Company
as to a 25% interest. As a result, the Company's interest in RGC Carmel was
reduced to 25%.

ITEM 3. Legal Proceedings


                                       10
<PAGE>

      There are no pending legal proceedings to which the Company is a party or
to which any of its properties are subject other than routine litigation
incidental to the Company's business, none of which is considered by the Company
to be material to its business or operations.

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

      No matters were submitted to a vote of Company's security holders during
the fourth quarter of 2001.

                                     PART II

ITEM 5. Market for the Registrant's Common Equity and Related Stockholder
Matters

      Transactions in the Company's common stock, its only class of common
equity security, are quoted on the OTC Bulletin Board under the symbol CLPO.

<TABLE>
<CAPTION>
                               First             Second            Third            Fourth
                              Quarter            Quarter          Quarter          Quarter
                              -------            -------          -------          -------
<S>                           <C>                <C>               <C>             <C>
2001 stock price
  range-
    High                      $ 1.28             $ 1.49            $ 1.55          $ 1.10
    Low                         1.06               1.09              1.01            .76

2000 stock price
  range-
    High                      $ 1.53             $ 1.37            $ 1.50          $ 1.31
    Low                         1.19               1.25              1.25            1.00
</TABLE>

As of February 26, 2002, there were 475 record holders of common stock.

Dividends:        There have been no cash dividends declared in the past two
                  years, nor was there a stock dividend declared during 2001 or
                  2000. The dividend policy, whether cash or stock, is reviewed
                  by the Board of Directors on an annual basis. During 2001,
                  there were no restrictions, as a result of a loan or other
                  agreement, limiting the Company's ability to issue a dividend.


                                       11
<PAGE>

ITEM 6. Selected Financial Data

      The following data should be read in conjunction with the financial
statements of the Company and the related notes thereto which are included
elsewhere in this Form 10K and in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations," which is also
included elsewhere in this Form 10K.

                FOR THE FIVE YEAR PERIOD ENDED DECEMBER 31, 2001

<TABLE>
<CAPTION>
                                            2001          2000          1999            1998           1997
<S>                                      <C>           <C>            <C>             <C>            <C>
SALES AND OPERATING REVENUE              $90,614,622   $64,238,615    $52,598,849     $33,071,722    $22,908,649

NET INCOME (LOSS)                          3,326,106     3,627,940      (752,582)      $5,368,006    (1,620,211)

BASIC INCOME (LOSS) PER
     COMMON SHARE                              $0.32         $0.35        $(0.07)           $0.54        $(0.18)

DILUTED INCOME (LOSS) PER
     COMMON SHARE                              $0.32         $0.35        $(0.07)           $0.52        $(0.18)

AS OF DECEMBER 31:

TOTAL ASSETS                             $98,967,700  $108,609,523    $87,817,643     $72,521,889    $30,956,802

LONG TERM OBLIGATIONS                     $7,979,090    $1,000,000    $17,201,168     $24,037,842    $14,267,931
</TABLE>


                                       12
<PAGE>

ITEM 7. Management's Discussion and Analysis of Financial Condition and Results
        of Operations

      The following discussion relates to the 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 began experiencing difficulties due to the downturn in the
California real estate market during the second quarter of 1990, and through
1996 the Company continued to be impacted by the general economic downturn. In
response to these conditions the Company began utilizing marketing programs
which included price reductions and incentives to potential buyers. During 1997
however, the California real estate market began to experience a recovery. In
general, the Company's products were well received, exemplified by an increase
in the number of units sold subject to construction ("backlog") at December 31,
2001, 2000, and 1999 of 60, 128, and 88 units, respectively compared to 33 units
as of 1996. Additionally, the Company's real estate sales increased from
$52,598,849 in 1999 to $64,238,615 in 2000, and to $90,614,622 in 2001. The
increase in real estate sales between 1999, 2000, and 2001 is primarily
attributable to an increase in units available for sale resulting from an
increase in production. Units decreased from 226 in 1999 to 219 in 2000, and
increased to 249 in 2001.

      The Company increased its gross profit before impairment to $7,943,613 in
2001 from $5,676,912 in 2000. As a percentage of real estate sales, gross profit
before impairment decreased by 0.07 percentage points to 8.77% in 2001 compared
to 8.84% in 2000. The Company increased its gross profit before impariment to
$5,676,912 in 2000 from $2,356,734 in 1999. As a percentage of real estate
sales, gross profit before impairment increased by 4.36 percentage points to
8.84% in 2000 compared to 4.48% in 1999. The significant increase of gross
profit before impairment as a percentage of gross revenues during 2000 results
from the increase in the number of home sales in the higher profit margin
projects Parc Metropolitan and Parkland Farms compared to the lower profit
margin projects Summertree Park and Antares primarily sold in 1999. In addition,
the Cierra Del Lago project which completed construction in early 1998 and all
homes were sold in the third quarter of 1998 had incurred warranty costs of
approximately $615,000 recognized in 1999.

      The 2001 impairment loss on the Mockingbird Canyon project is primarily a
result of the slow absorption rate. The sales price was not sufficient to offset
the increased marketing and sales incentives, production overhead and interest
costs and as a result the Company recorded an impairment loss on real estate
under development of $2,018,088 during the third quarter of 2001. The Company
has 12 units remaining as of December 31, 2001, 9 of which have been sold. The
1999 impairment loss on the Summertree Park, Elk Grove project is primarily a
result of the introduction of two new product lines during the second quarter of
1999 to increase the absorption rate and these were primarily sold during the
third quarter. The increase in sales price was not sufficient to offset the
increased direct construction cost, marketing and sales incentives, production
overhead and interest costs and as a result the Company recorded an impairment
loss on real estate under development of $2,519,521 during the third quarter of
1999. The Company closed escrow on all units as of December 31, 2000.

Results of operations

      The Company had income before income taxes of $3,497,848 in 2001, income
before benefit for income taxes of $3,486,452 in 2000, and a loss before benefit
for income taxes of $2,435,955 in 1999. The income in 2001 and 2000 is primarily
due to increase in profit from operations as the Company began selling homes in
its Parc Metropolitan project. The net loss suffered in 1999 is primarily a
reflection of the recognition of asset impairment of the Summertree Park, Elk
Grove project in the amount of $2,519,521.

      Real estate sales increased to $90,614,622 in 2001 from $64,238,615 in
2000, up 41%. Real estate sales were $52,598,849 in 1999. In 2001, the Company
sold 249 homes, with an average sales price of $363,914. In 2000, the Company
sold 219 homes, with an average sales price of $293,327. In 1999, the


                                       13
<PAGE>

Company sold 226 homes, with an average sales price of $232,738.

      The overall gross profit percentage before recognition of impairment loss
of the Company was 8.8%, 8.8%, and 4.5% in 2001, 2000, and 1999, respectively.

      General and administrative expenses were $2,924,795 in 2001 and $2,637,496
in 2000, up 10.9%. General and administrative expenses were $2,309,225 in 1999.
The increase in 2001 from 2000 is the result of an increase in payroll costs,
and increased accounting costs due to the growth of the Company.

      The provision for income taxes of $171,742 in 2001 includes the
utilization of unrecognized deferred income tax benefit of $1,187,934 to offset
current year income taxes. Benefit for income taxes of $141,488 in 2000 includes
the utilization of unrecognized deferred income tax benefit of $1,538,994 to
offset 2000 income taxes. The remaining benefit for income taxes of $141,488
represents the net refund resulting from a claim filed for the carryback of
losses related to certain qualifying expenses incurred in 1994. Benefit for
income taxes in 1999 of $1,683,373 includes the utilization of unrecognized
deferred income tax benefit of $871,775 to recognize a deferred tax asset. The
recognized deferred tax asset is based upon expected utilization of net
operating loss carryforwards.

Liquidity and capital resources

      As of December 2001, the Company has loans outstanding to financial
institutions, secured by the development projects' trust deeds, with rates
ranging from prime to prime plus 5.5% and maturing March 2002 through July 2029.
As of December 31, 2001, the outstanding balances owing on these loans totaled
$51,990,779.

      As of December 31, 2001, the Company had remaining loan commitments from
banks and financial institutions of approximately $32,947,600, which may be
drawn down by the Company upon the satisfaction of certain conditions. The
Company continues to seek joint venture partners and additional financing to
fund its operations.

      As of December 31, 2001, the Company does not have any material
commitments for future capital expenditures.

      Related-Party Notes - The Company has the following notes payable to Curci
at December 31, 2001 and 2000. A principal of Curci is a stockholder of the
Company. Under the terms of certain of the notes payable, Curci participates in
"Net Proceeds" from certain projects, as defined in the loan agreement, which is
comparable to net profit:

<TABLE>
<CAPTION>
     Project                  Profit share             December 31,               December 31,
                                                           2001                        2000
---------------------        ---------------          ---------------            ----------------
<S>                               <C>                    <C>                         <C>
Secured loans:
  High Ridge Court                50%                    $2,414,492                  $3,084,491
  Saddlerock                      50%                     2,595,711                   2,600,000
  Mockingbird Canyon              50%                     1,927,405                   2,608,912
  Montserrat Classics             50%                     2,304,234                   3,450,000
  Parc Metropolitan                0%                     3,000,000
                                                        -----------                 -----------
                                                         12,241,842                  11,743,403
Unsecured loans                                           8,366,236                   2,129,357
                                                        -----------                 -----------
                                                        $20,608,078                 $13,872,760
                                                        ===========                 ===========
</TABLE>

      During 1999, the Company purchased RGC's fifty percent ownership in
RGCCLPO. Consideration for the purchase consisted of issuance of a note payable
for $2,000,000 and payment of cash of $1,000,000. Outstanding balances as of
December 31, 2001 and 2000 were $1,000,000 and $2,000,000, respectively.

      During 1996, the Company converted its Preferred Stock to Common Stock and
the accrued Preferred Stock dividend due to an officer of the Company and a
related party of $581,542 and $472,545, respectively, was exchanged for notes
with interest payable at 10%. As of December 31, 2001, the outstanding principal
due an officer of the Company and a related party on these notes was $581,542
and $462,330, respectively. As of December 31, 2000, $581,542 and $462,330 was
outstanding.

      Included in notes payable to related parties is a note payable to Mission
Gorge, LLC which bear interest at 12%. Outstanding balances as of December 31,
2001 and 2000 were $2,030,399 and $2,000,000, respectively.

      Included in notes payable to related parties are notes payable to an
officer which bear interest at 12%.


                                       14
<PAGE>

Outstanding balances as of December 31, 2001 and 2000 were $557,211 and
$1,045,611, respectively.

      The Company has other loans from related parties, which provide for
interest at 10% per annum and in which certain loans are due on demand. As of
December 31, 2001 and 2000 these loans totaled $980,000 and $740,000,
respectively.

      As of December 31, 2001, the Company had seven remaining projects in
various stages of development. During 2001, the Company had six producing
revenues from completed homes and apartments: Parkland Farms, Creekside Estates,
Parc Metropolitan, High Ridge Court, Saddlerock, Montserrat Classics, and
McGuire Luxury Apartments. As of December 31, 2001, the Parkland Farms project
was completed and all homes were closed in escrow. The remaining project,
Parcwest Apartments is in the initial stages of construction. The Company enters
2001 with 242 homes under construction, of which 60 are sold, and 18 model
units. The Company has an inventory of 143 lots under development. In addition,
the Company has 131 units available for lease and 119 apartment units under
construction.

      Based on its agreements with its lenders, the Company believes that it
will have sufficient liquidity to finance its construction projects in 2002
through funds generated from operations, funds available under its existing bank
commitments, funds generated from new lending institutions, and, if necessary,
funds that could be obtained by using its internally financed real estate
development in process as collateral for additional loans.

      Management's plan, with respect to managing cash flow includes the
following components: pay off debt that is coming due in 2002, minimize
operating expenses, and maintain control over costs. With regard to the debt
coming due in 2002, management expects to extend the maturity dates of various
loans and pay the remaining loans off through cashflow from operations, prior to
their maturity date. 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, including
borrowings from existing loan commitments, will be adequate to allow the Company
to continue operations throughout 2002.


                                       15
<PAGE>

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

      The table below represents the contractual balances of our financial
instruments at the expected maturity dates as well as their fair value at
December 31, 2001. The expected maturity categories take into consideration
actual amortization of principal and does not take into consideration
reinvestment of cash. The weighted average interest rate for various liabilities
presented are actual as of December 31, 2001.

<TABLE>
<CAPTION>
                                                              Principal maturing in:                                   Fair value
                                     ------------------------------------------------------------------
                                                                                                                       December 31,
                                         2002          2003         2004     2005    2006    Thereafter       Total       2001
                                     ===============================================================================================
<S>                                  <C>            <C>          <C>         <C>     <C>    <C>           <C>           <C>
Interest rate sensitive liabilities

Variable rate borrowings             $49,533,160    $1,343,973   $       --                 $        --   $50,877,133   $50,877,133

   Average interest rate                   8.75%         8.00%                                                  8.73%

Fixed rate borrowings                 20,698,089       540,000    5,095,117                   1,000,000    27,333,206    27,075,129

   Average interest rate                  13.86%        10.00%       15.00%                       6.35%        13.72%
                                     -----------------------------------------------------------------------------------------------
                                     $70,231,249    $1,883,973   $5,095,117                  $1,000,000   $78,210,339   $77,952,262
                                     ===============================================================================================
Weighted average interest rate            10.25%         8.57%       15.00%                       6.35%        10.47%
                                     ===============================================================================================
</TABLE>

      The table below represents the contractual balances of our financial
instruments at the expected maturity dates as well as their fair value at
December 31, 2000. The expected maturity categories take into consideration
actual amortization of principal and does not take into consideration
reinvestment of cash. The weighted average interest rate for various liabilities
presented are actual as of December 31, 2000.

<TABLE>
<CAPTION>
                                                            Principal maturing in:                                     Fair value
                                        ---------------------------------------------------------------
                                                                                                                      December 31,
                                           2001       2002       2003     2004      2005    Thereafter       Total        2000
                                        ============================================================================================
<S>                                     <C>           <C>        <C>      <C>       <C>     <C>           <C>           <C>
Interest rate sensitive liabilities

Variable rate borrowings                $62,983,574                                         $        --   $62,983,574   $62,983,574

   Average interest rate                     10.63%                                                            10.63%

Fixed rate borrowings                    23,060,157                                           1,000,000    24,060,157    24,060,157

   Average interest rate                     11.50%                                               6.35%        11.28%
                                        --------------------------------------------------------------------------------------------
                                        $86,043,731                                          $1,000,000   $87,043,731   $87,043,731
                                        ============================================================================================
Weighted average interest rate               10.86%                                               6.35%        10.81%
                                        ============================================================================================
</TABLE>


                                       16
<PAGE>

Effects of inflation

      Real estate has long been considered a hedge against inflation, and
inflation has often contributed to dramatic growth in property values. During
normal markets, the Company has been able to pass increased costs of materials
and labor to its buyers by increasing its sales prices. However, growth in
property values slowed or reversed during 1996 and 1997 in California, thus
preventing the Company from increasing sales prices to cover increased costs. In
1998, 1999, 2000, and 2001 due to the strength and stability of the economy, the
real estate market has experienced increases in sales price and the number of
home buyers.


                                       17
<PAGE>

ITEM 8. Financial Statements and Supplementary Data

   Page No.       Financial Statements:
   --------       ---------------------

      23          Independent Auditors' Report

      24          Consolidated Balance Sheets as of December 31, 2001 and 2000

      25          Consolidated Statements of Operations For Each of the Three
                  Years Ended December 31, 2001

      26          Consolidated Statements of Stockholders' Equity For Each of
                  the Three Years Ended December 31, 2001

      27          Consolidated Statements of Cash Flows For Each of the Three
                  Years Ended December 31, 2001

      29          Notes to Consolidated Financial Statements

                  FINANCIAL STATEMENT SCHEDULE:

      42          II - Valuation and Qualifying Accounts --Three Years Ended
                  December 31, 2001

                  Schedules other than listed above are omitted because they are
                  not applicable, not required, or the information required to
                  be set forth therein is included in the financial statements
                  or the notes thereto.

ITEM 9. Disagreements on Accounting and Financial Disclosure

      None.


                                       18
<PAGE>

                                    PART III

      Items 10, 11, 12 and 13 are incorporated by reference from the Company's
definitive proxy statement to be filed within 120 days after the close of the
calendar year with the Commission, pursuant to Regulation 14A.

                                     PART IV

ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a) (1) and (2) For a listing of financial statements and schedules, reference
is made to Item 8 included in this Form 10-K.

      (3) The Exhibits listed on the accompanying Index to Exhibits immediately
      following Schedule II are filed as part of this report. Exhibits 10.1
      through 10.4 are compensatory plans.

(b) Reports on Form 8-K -

      A Current Report on Form 8-K dated March 26, 2001 was filed with the
Securities and Exchange Commission (the "Commission") and included under item
7(a) its audited consolidated financial statements for the year ended December
31, 2000 and unaudited consolidated financial statements for the quarter ended
December 31, 2000, and under item 7(c) a press release announcing Calprop
Corporations' 2000 annual and fourth quarter results.

      A Current Report on Form 8-K dated May 15, 2001 was filed with the
Securities and Exchange Commission (the "Commission") and included under item
7(a) its unaudited consolidated financial statements for the quarter ended March
31, 2001, and under item 7(c) a press release announcing Calprop Corporations'
first quarter results.

      A Current Report on Form 8-K dated July 23, 2001 was filed with the
Securities and Exchange Commission (the "Commission") to announce an agreement
for a new $5 million, three-year working capital loan to be used primarily for
land acquisitions to support the company's growth programs.

      A Current Report on Form 8-K dated August 8, 2001 was filed with the
Securities and Exchange Commission (the "Commission") and included under item
7(a) its unaudited consolidated financial statements for the quarter ended June
30, 2001, and under item 7(c) a press release announcing Calprop Corporations'
second quarter results.

      A Current Report on Form 8-K dated November 14, 2001 was filed with the
Securities and Exchange Commission (the "Commission") and included under item
7(a) its unaudited consolidated financial statements for the quarter ended
September 30, 2001, and under item 7(c) a press release announcing Calprop
Corporations' third quarter results.


                                       19
<PAGE>

                                   SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) 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
----------------------------
(Registrant)


/s/ Victor Zaccaglin                           March 27, 2002
----------------------------                 ------------------
Victor Zaccaglin,                                   Date
Chairman of the Board
  and Chief Executive Officer

      Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.


/s/ Mark F. Spiro                              March 27, 2002
----------------------------                 ------------------
Mark F. Spiro                                       Date
Vice President/Secretary and
Treasurer (Chief Financial
and Accounting Officer)

/s/ Ronald S. Petch                            March 27, 2002
----------------------------                 ------------------
Ronald S. Petch,                                    Date
President

/s/ E. James Murar                             March 27, 2002
----------------------------                 ------------------
E. James Murar                                      Date
Director

/s/ Mark T. Duvall                             March 27, 2002
----------------------------                 ------------------
Mark T. Duvall                                      Date
Director

/s/ John L. Curci                              March 27, 2002
----------------------------                 ------------------
John L. Curci                                       Date
Director

/s/ Victor Zaccaglin                           March 27, 2002
----------------------------                 ------------------
Victor Zaccaglin                                    Date
Chairman of the Board
Chief Executive Officer


                                       20
<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors
and Stockholders of Calprop Corporation:

      We have audited the accompanying consolidated balance sheets of Calprop
Corporation and subsidiaries (the "Company") as of December 31, 2001 and 2000,
and the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the three years in the period ended December 31, 2001.
Our audits also included the financial statement schedule listed in the Index at
Item 8. These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on the financial statements and financial statement schedule based on
our audits.

      We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

      In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Calprop Corporation and
subsidiaries as of December 31, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2001 in conformity with accounting principles generally accepted in
the United States of America. Also, in our opinion, such financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.


DELOITTE & TOUCHE LLP

Los Angeles, California
March 27, 2002


                                       21
<PAGE>

                               CALPROP CORPORATION
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
Assets                                                                                    December 31,
                                                                        --------------------------------------------
                                                                                          2001                 2000
                                                                        --------------------------------------------
<S>                                                                                <C>                  <C>
REAL ESTATE UNDER DEVELOPMENT (Notes 3 and 6)                                      $88,789,252          $98,816,458
                                                                        --------------------------------------------

OTHER ASSETS:
    Cash and cash equivalents                                                        2,079,471            2,394,310
    Deferred tax asset (Note 7)                                                      6,535,343            6,535,343
    Other assets (Note 4)                                                              774,882              863,412
    Receivable from affiliates (Note 5)                                                788,752
                                                                        --------------------------------------------
          Total other assets                                                        10,178,448            9,793,065
                                                                        --------------------------------------------
     Total assets                                                                  $98,967,700         $108,609,523
                                                                        ============================================
Liabilities and Stockholders' Equity

TRUST DEEDS AND NOTES PAYABLE (Note 6)                                             $51,990,779          $66,341,488
RELATED-PARTY NOTES (Note 6)                                                        26,219,560           20,702,243
                                                                        --------------------------------------------
     Total trust deeds, notes payable and related-party notes                       78,210,339           87,043,731
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Note 6)                                    5,334,450            9,316,681
WARRANTY RESERVES                                                                      670,115              546,984
PAYABLE TO AFFILIATES (Note 5)                                                                              272,011
                                                                        --------------------------------------------
     Total liabilities                                                              84,214,904           97,179,407
                                                                        --------------------------------------------

MINORITY INTERESTS (Note 1)
                                                                        --------------------------------------------
COMMITMENTS AND CONTINGENCIES (Note 10)
STOCKHOLDERS' EQUITY (Note 9):
     Common stock, no par value; $1 stated value, 20,000,000 shares
         authorized, 10,254,005 and 10,290,535 shares issued and
         outstanding at December 31, 2001 and 2000, respectively                    10,254,005           10,290,535
     Additional paid-in capital                                                     25,845,986           25,849,961
     Deferred Compensation (Note 8)                                                   (51,000)            (105,525)
     Stock Purchase Loans (Note 8)                                                   (537,179)            (519,733)
     Accumulated deficit                                                          (20,759,016)         (24,085,122)
                                                                        --------------------------------------------
          Total equity                                                              14,752,796           11,430,116
                                                                        --------------------------------------------
                                                                                   $98,967,700         $108,609,523
                                                                        ============================================
</TABLE>

                 See notes to consolidated financial statements


                                       22
<PAGE>

                               CALPROP CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                Year Ended December 31,
                                                                    ---------------------------------------------------
                                                                                2001             2000             1999
                                                                    ---------------------------------------------------
<S>                                                                      <C>              <C>              <C>
DEVELOPMENT OPERATIONS (Note 3):
     Real estate sales                                                   $90,614,622      $64,238,615      $52,598,849
     Cost of real estate sales (Note 6)                                   82,671,009       58,561,703       50,242,115
                                                                    ---------------------------------------------------
                                                                           7,943,613        5,676,912        2,356,734
     Recognition of impairment of real estate under
          development (Note 3)                                           (2,018,088)                       (2,519,521)
                                                                    ---------------------------------------------------
        Income (loss) from development operations                          5,925,525        5,676,912        (162,787)

Loss from investment in real estate venture (Note 3)                       (118,764)

Other income:
    Interest and miscellaneous                                               186,835          230,643          107,610
    Management fee (Note 5)                                                  542,818
                                                                    ---------------------------------------------------
       Total other income                                                    729,653          230,643          107,610

Other expenses:
    General and administrative                                             2,924,795        2,637,496        2,309,225
    Interest expense (Note 6)                                                115,096                            70,304
                                                                    ---------------------------------------------------
       Total other expenses                                                3,039,891        2,637,496        2,379,529

Minority interests                                                           (1,325)        (216,393)            1,249
                                                                    ---------------------------------------------------

Income (loss) before provision (benefit) for income taxes                  3,497,848        3,486,452      (2,435,955)
Provision (benefit) for income taxes (Note 7)                                171,742        (141,488)      (1,683,373)
                                                                    ---------------------------------------------------

NET INCOME (LOSS)                                                         $3,326,106       $3,627,940       $(752,582)
                                                                    ===================================================

BASIC NET INCOME (LOSS) PER SHARE (Note 9)                                     $0.32            $0.35          $(0.07)
                                                                    ===================================================
DILUTED NET INCOME (LOSS) PER SHARE (Note 9)                                   $0.32            $0.35          $(0.07)
                                                                    ===================================================
</TABLE>

                 See notes to consolidated financial statements


                                       23
<PAGE>

                               CALPROP CORPORATION
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                   FOR THE THREE YEARS ENDED DECEMBER 31, 2001

<TABLE>
<CAPTION>
                                    Common        Stock
                                  -------------------------   Additional     Deferred       Stock                         Total
                                                               Paid-In         Comp-       Purchase    Accumulated    Stockholders'
                                    Shares       Amount        Capital       ensation       Loans        Deficit         Equity
                                  --------------------------------------------------------------------------------------------------
<S>                               <C>          <C>            <C>             <C>         <C>          <C>              <C>
BALANCE,
January 1, 1999                   10,284,135   $10,284,135    $25,851,130     $(241,130)  $(474,134)   $(26,960,480)     $8,459,521

     Net loss                                                                                              (752,582)       (752,582)

   Cancellation of shares
         under 1989 stock
         incentive plan (Note 8)     (13,400)      (13,400)                       9,200                                      (4,200)

     Issuance of shares
         upon option exercise         23,000        23,000         (1,169)                                                   21,831

     Accrual of interest under
         stock purchase loans                                                               (22,800)                        (22,800)
         (Note 8)

    Amortization of deferred
         compensation (Note 8)                                                   61,603                                      61,603
                                  --------------------------------------------------------------------------------------------------
BALANCE,
December 31, 1999                 10,293,735    10,293,735     25,849,961      (170,327)   (496,934)    (27,713,062)      7,763,373

     Net income                                                                                           3,627,940       3,627,940

   Cancellation of shares
         under 1989 stock
         incentive plan (Note 8)      (3,200)       (3,200)                       3,200

     Accrual of interest under
         stock purchase loans                                                               (22,799)                        (22,799)
         (Note 8)

    Amortization of deferred
         compensation (Note 8)                                                   61,602                                      61,602
                                  --------------------------------------------------------------------------------------------------
BALANCE,
December 31, 2000                 10,290,535    10,290,535     25,849,961      (105,525)   (519,733)    (24,085,122)     11,430,116

     Net income                                                                                           3,326,106       3,326,106

    Cancellation of shares
         under 1989 stock
         incentive plan (Note 8)      (2,300)       (2,300)                       2,300

      Purchase of Company's
        common stock                 (34,230)      (34,230)        (3,975)                                                  (38,205)

     Accrual of interest under
         stock purchase loans                                                               (22,626)                        (22,626)
         (Note 8)

     Repayment of stock
        purchase loan (Note 8)                                                                5,180                           5,180

    Amortization of deferred
         compensation (Note 8)                                                   52,225                                      52,225
                                  --------------------------------------------------------------------------------------------------
BALANCE,
December 31, 2001                 10,254,005   $10,254,005    $25,845,986     $ (51,000)  $(537,179)   $(20,759,016)    $14,752,796
                                  ==================================================================================================
</TABLE>

                 See notes to consolidated financial statements


                                       24
<PAGE>

                               CALPROP CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                          Years Ended December 31,
                                                                        ---------------------------------------------------------
                                                                                  2001                 2000                 1999
                                                                        ---------------------------------------------------------
<S>                                                                       <C>                  <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES
     Net income (loss)                                                    $  3,326,106         $  3,627,940         $   (752,582)
     Adjustments to reconcile net income (loss) to net cash used
       in operating activities:

          Minority interests                                                    (1,325)            (216,393)               1,249
          Loss from investment in real estate venture                          118,764
          Amortization of deferred compensation                                 52,225               61,602               61,603
          Depreciation and amortization                                         45,807               64,093               59,511
          Deferred income taxes                                                                     (35,343)          (1,700,000)
          Recognition of impairment of real estate under
            development                                                      2,018,088                                 2,519,521
          Provision for warranty reserves                                      332,899              283,732              456,283
     Change in assets and liabilities
         Other assets                                                           49,277              (44,421)              34,284
         Receivable from affiliates                                           (788,752)
         Accounts payable and accrued liabilities                           (3,982,231)           2,925,060            1,335,611
         Warranty reserves                                                    (209,768)             (95,035)            (382,619)
         Payable to affiliates                                                (272,011)             229,970
         Additions to real estate under development                        (74,779,330)         (78,265,329)         (66,550,230)
         Cost of real estate sales                                          82,671,009           58,561,703           50,242,115
         Accrued interest for executive stock purchase loans                   (22,626)             (22,799)             (22,800)
                                                                        ---------------------------------------------------------
               Net cash provided by (used in) operating activities           8,558,132          (12,925,220)         (14,698,054)
                                                                        ---------------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES
     Capital expenditures                                                       (6,554)             (41,895)             (85,695)
                                                                        ---------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
     Borrowings under related-party notes                                   12,280,542            5,650,000           10,970,840
     Payments under related-party notes                                     (6,763,225)          (9,807,789)          (6,981,094)
     Borrowings under trust deeds and notes payable                         67,603,361           80,797,103           59,300,047
     Payments under trust deeds and notes payable                          (81,954,070)         (62,671,754)         (48,608,415)
     Purchase of Company's common stock                                        (38,205)
     Distributions to joint venture partners                                                        (11,798)            (100,000)
     Repayment of stock purchase loans                                           5,180
     Proceeds from issuance of common stock                                                                               17,631
                                                                        ---------------------------------------------------------
          Net cash (used in) provided by financing activities               (8,866,417)          13,955,762           14,599,009
                                                                        ---------------------------------------------------------
     Net (decrease) increase in cash and cash equivalents                     (314,839)             988,647             (184,740)
     Cash and cash equivalents at beginning of the year                      2,394,310            1,405,663            1,590,403
                                                                        ---------------------------------------------------------
     Cash and cash equivalents at end of the year                         $  2,079,471         $  2,394,310         $  1,405,663
                                                                        =========================================================
</TABLE>

                 See notes to consolidated financial statements


                                       25
<PAGE>

                               CALPROP CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                       Years Ended December 31,
                                                                          ----------------------------------------------
                                                                                    2001           2000            1999
                                                                          ----------------------------------------------
<S>                                                                             <C>           <C>            <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
     Cash paid (received) during the year for:

          Interest (net of amount capitalized)                                  $347,016      $      --      $   57,524

          Income taxes (refund)                                                 $229,315      $(116,380)     $   21,727

NON-CASH INVESTING AND FINANCING ACTIVITIES:
     Issuance of note payable in exchange for interest in joint venture                                      $2,000,000
</TABLE>

                 See notes to consolidated financial statements


                                       26
<PAGE>

                               CALPROP CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE THREE YEARS ENDED DECEMBER 31, 2001

(1)   Organization

            Nature of operations - Calprop Corporation ("the Company"), a
            California Corporation, constructs and sells single-family detached
            and attached homes and townhomes as part of condominiums or planned
            unit developments in California and Colorado. As of December 31,
            2001, the Company had five residential housing projects in various
            stages of development, consisting of 242 homes under construction
            (60 were in escrow), 143 lots under development, and 18 model homes
            used in selling the various types of housing developed. The
            Company's products range from homes for first-time buyers to custom
            homes. In addition to the construction and sale of single-family and
            multifamily housing, the Company was engaged in the development of
            apartments and townhomes available for lease. As of December 31,
            2001, the Company had two projects under development, consisting of
            131 units available for lease and 119 units under construction.

            Basis of presentation - The accompanying financial statements
            include the accounts of Calprop Corporation and all its
            subsidiaries. All significant intercompany transactions and balances
            have been eliminated in consolidation. Such statements have been
            prepared in accordance with accounting principles generally accepted
            in the United States of America.

            The Company has consolidated the financial statements of the
            following entities:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
                Entity                       Ownership interest at                           Development
                                              December 31, 2001
-----------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>                        <C>
Colorado Pacific Homes, Inc. ("CPH")                 100%                       Real estate in the state of Colorado

DMM Development, LLC ("DMM")                          67%                       Cierra del Lago and Antares projects,
                                                                                California

Montserrat II, LLC ("Mont II")                        99%                       Montserrat Estate project, California

Parkland Farms Development Co., LLC                   99%                       115 lots in Healdsburg, California
("Parkland")

RGCCLPO Development Co., LLC                         100%                       382 lots in Milpitas, California
("RGCCLPO")

PWA Associates, LLC ("PWA")                          100%                       68-unit apartment in Milpitas, California
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

            CPH: The Company was entitled to receive eighty percent of the
            profits of CPH, and the other partner, an officer of CPH, was
            entitled to receive the remaining twenty-percent of the profits.
            During November 2001, Calprop obtained all of the officer's
            ownership interest in CPH.

            DMM: The Company is entitled to receive two-thirds of the profits of
            DMM, and the other owner, RGC Courthomes, Inc. ("RGC"), is entitled
            to receive the remaining one-third of the profits.

            Mont II: Pursuant to the operating agreement of Mont II, income was
            allocated first to PICal Housing Associates, L.P. ("PICaL") to
            obtain the return of its capital. Subsequent income is allocated 99%
            to the Company, and the other member, an officer of the Company, is
            entitled to receive the remaining one percent of the profits.

            Parkland: Pursuant to the operating agreement of Parkland, Calprop
            is entitled to receive ninety-nine percent of the profits of
            Parkland, and the other member, an officer of the Company, is
            entitled to receive the remaining one percent of the profits.

            RGCCLPO: Pursuant to the operating agreement of RGCCLPO, Calprop was
            entitled to receive fifty percent of the profits of RGCCLPO, and the
            other member, RGC, was entitled to receive the remaining
            fifty-percent of the profits. During December 1999, Calprop
            purchased all of RGC's ownership interest in RGCCLPO.


                                       27
<PAGE>

                               CALPROP CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE THREE YEARS ENDED DECEMBER 31, 2001

            PWA: Pursuant to the operating agreement of PWA, Calprop was
            entitled to receive fifty percent of the profits of PWA, and the
            other member, RGC, was entitled to receive the remaining
            fifty-percent of the profits. During May 2001, Calprop purchased all
            of RGC's ownership interest in PWA.

            During the year ended December 31, 2001, $7,060 of the total loss of
            $8,385 incurred by the entities related to the minority interest was
            not allocated to the minority interest because the minority interest
            had a deficit interest in the Company. The Company does not reflect
            the deficit for the minority interest because the minority owners
            are not responsible for losses incurred beyond their equity. The
            unrecognized minority interest in deficit of the Company as of
            December 31, 2001 and 2000 was $65,865 and $58,805, respectively. As
            a result, the Company has recorded minority interest of $0 as of
            December 31, 2001 and 2000.

(2)   Summary of Significant Accounting Policies

            Revenue and cost recognition - Revenue from real estate sales and
            related costs are recognized at the close of escrow, when title
            passes to the buyer. Cost of real estate sales is based upon the
            relative sales value of units sold to the estimated total sales
            value of the respective projects.

            The Company reviews the carrying value of its real estate
            developments for impairment whenever events or changes in
            circumstances indicate that the carrying amount of the asset may not
            be recoverable. If the sum of the expected future cash flows is less
            than the carrying amount of the asset, the Company recognizes an
            impairment loss. During 2001 and 1999, the Company recorded an
            impairment loss of $2,018,088 and $2,519,521, respectively (Note 3).

            Cash and cash equivalents - The Company considers readily marketable
            securities with a maturity of 90 days or less at the date of
            purchase to be cash equivalents.

            Income taxes - Deferred income tax assets and liabilities are
            computed for differences between the financial statement and income
            tax bases of assets and liabilities. Such deferred income tax asset
            and liability computations are based on enacted tax laws and rates
            applicable to periods in which the differences are expected to
            reverse. A valuation allowance is established, when necessary, to
            reduce deferred income tax assets to the amount expected to be
            realized.

            Office equipment and other - Office equipment and other is stated at
            cost less accumulated depreciation. Equipment is depreciated
            utilizing the straight-line method over its estimated useful life of
            five years.

            Warranty reserves - The Company provides a one-year warranty to
            purchasers of single-family homes. The Company accrues estimated
            warranty costs on properties as they are sold. Estimated warranty
            costs are based on actual warranty costs.

            In addition to the Company's one-year warranty, California and
            Colorado law provides the Company's customers certain implied
            warranties, the scope and duration of which exceed the Company's
            express warranties. The Company requires its subcontractors to
            indemnify the Company in writing and requires the insurance of the
            subcontractor to provide that the Company is a primary insured on
            their insurance policy and an additional insured from its
            subcontractors for liabilities arising from their work, except for
            liability arising through the sole negligence or willful misconduct
            of the Company or from defects in designs furnished by the Company.
            Nevertheless, the Company is primarily liable to its customers for
            breach of warranty. The Company has builder's product liability
            insurance coverage which it believes to be adequate in light of the
            Company's claims history.

            Employee stock plans - The Company adheres to APB Opinion No. 25 to
            account for its stock-based compensation awards to employees and
            discloses the required pro forma effect on net income and earnings
            per share consistent with SFAS No. 123, "Accounting for Stock-Based
            Compensation."

            Use of estimates - The preparation of financial statements in
            conformity with accounting principles generally accepted in the
            United States of America requires management to make estimates and


                                       28
<PAGE>

                               CALPROP CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE THREE YEARS ENDED DECEMBER 31, 2001

            assumptions that affect the reported amounts of assets and
            liabilities and disclosure of contingent assets and liabilities at
            the date of the financial statements and the reported amounts of
            revenues and expenses during the reporting period. Actual results
            could differ from those estimates.

            Segment information - The Company is in one business segment, the
            residential housing industry, and as a result, substantially all of
            the assets of the Company are devoted to that segment and
            accordingly the Company does not provide additional segment
            disclosure.

            Reclassifications - Certain prior year amounts have been
            reclassified to conform to the 2001 presentation.

            Fair value of financial instruments - Management believes the
            recorded value of notes payable to financial institutions
            approximate the fair market value as a result of variable interest
            rates and short-term durations. Management also believes that it is
            not practical to estimate the fair value of related-party notes.

            Recent accounting pronouncements - The Financial Accounting
            Standards Board issued Statement of Financial Accounting Standards
            ("SFAS") No. 133 "Accounting for Derivative Instruments and Hedging
            Activities" and No. 138 "Accounting for Certain Derivative
            Instruments and Certain Hedging Activities, an Amendment of FASB
            Statement No. 133" in June 1998 and June 2000, respectively. SFAS
            133 and 138 are effective for fiscal years beginning after June 15,
            2000 and require all derivatives to be recorded on the balance sheet
            at fair value. If the derivative instrument qualifies as a hedge,
            depending on the nature of the hedge, changes in fair value of the
            derivative will either be offset against the change in fair value of
            the hedge, depending on the nature of the hedge, changes in fair
            value of the derivative will either be offset against the change in
            fair value of the hedged assets, liabilities, or firm commitments
            through earnings or recognized in other comprehensive income until
            the hedge item is recognized in earnings. The ineffective portion of
            a derivative's change in fair value will be immediately recognized
            in earnings. The adoption of SFAS 133 and 138 did not have a
            material impact on the Company's financial position or results of
            operations.

            In July 2001, The Financial Accounting Standards Board ("FASB")
            issued two new pronouncements: Statement of Financial Accounting
            Standards ("SFAS") No. 141, "Business Combinations", and SFAS No.
            142, "Goodwill and Other Intangible Assets." SFAS 141 prohibits the
            use of the pooling-of-interest method for business combinations
            initiated after June 30, 2001 and also applies to all business
            combinations accounted for by the purchase method that are completed
            after June 30, 2001. There are also transition provisions that apply
            to business combinations completed before July 1, 2001, that were
            accounted for by the purchase method. SFAS 142 is effective for
            fiscal years beginning after December 15, 2001 and requires
            companies to cease amortizing goodwill that existed at June 30,
            2001. The amortization of existing goodwill will cease on December
            31, 2001. Any goodwill resulting from acquisitions completed after
            June 30, 2001. SFAS No. 142 also establishes a new method of testing
            goodwill for impairment on an annual basis or on an interim basis if
            an event occurs or circumstances change that would reduce the fair
            value of a reporting unit below its carrying value. These new
            standards are not expected to have a significant impact on the
            Company's financial position or its results of operations.

            On October 3, 2001, the FASB issued SFAS No. 144 "Accounting for the
            Impairment or Disposal of Long-Lived Assets." SFAS 144 supercedes
            SFAS 121 "Accounting for the Impairment of Long-Lived Assets and for
            Long-Lived Assets to Be Disposed Of." SFAS 144 applies to all
            long-lived assets (including discontinued operations) and
            consequently amends Accounting Principles Board Opinion No. 30 (APB
            30), Reporting Results of Operations Reporting the Effects of
            Disposal of a Segment of a Business. SFAS 144 develops one
            accounting model for long-lived assets that are to be disposed of by
            sale. SFAS 144 requires that long-lived assets that are to be
            disposed of by sale be measured at the lower of book value or fair
            value less cost to sell. Additionally, SFAS 144 expands the scope of
            discontinued operations to include all components of an entity with
            operations that (1) can be distinguished from the rest of the entity
            and (2) will be eliminated from the ongoing operations of the entity
            in a disposal transaction. SFAS 144 is effective for the Company for
            all financial statements


                                       29
<PAGE>

                               CALPROP CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE THREE YEARS ENDED DECEMBER 31, 2001

            issued in fiscal 2002. The Company has not yet determined the
            impact, if any, the adoption of SFAS No. 144 will have on its
            financial position or its results of operations.

(3)   Real Estate Under Development

      Real estate under development at December 31, 2001 and 2000 is summarized
      as follows:

<TABLE>
<CAPTION>
                                                              2001                           2000
                                                       -----------------------------------------------------------
                                                             Amount      Units/Lots         Amount     Units/Lots
                                                       -----------------------------------------------------------
<S>                                                        <C>                  <C>      <C>                  <C>
Single-family residences                                   $25,502,318          108      $28,208,788          100
Townhomes                                                   46,155,664          152       50,427,091          260
                                                       -----------------------------------------------------------
Total residences                                            71,657,982          260       78,635,879          360
Apartments and land under development                       14,132,077          211       17,165,345          360
                                                       -----------------------------------------------------------
Total real estate under development before
     investment in joint ventures                           85,790,059          471       95,801,224          720
Investment in joint ventures                                 2,999,193          182 (1)    3,015,234          182 (1)
                                                       -----------------------------------------------------------
Total real estate under development                        $88,789,252          653      $98,816,458          902
                                                       ===========================================================
</TABLE>

(1)   Reflects 100% of the units/lots in the project

      Investment in joint ventures represents the Company's investment in
      Mission Gorge, LLC and RGC Carmel Country Associates, LLC. Such
      investments are accounted for under the equity method of accounting.

      In 1996, Mission Gorge, LLC, a California limited liability company, was
      formed and the Company transferred its Mission Gorge property to the joint
      venture. In connection with the formation, the Curci-Turner Company
      ("Curci"), exchanged a $2,000,000 note receivable from the Company for a
      50% ownership interest in Mission Gorge, LLC. A principal of the
      Curci-Turner Company is a stockholder of the Company.

      In 1999, the Company formed RGC Carmel Country Associates, LLC, a
      California limited liability company, ("RGC Carmel") with RGC. The profits
      and losses of RGC Carmel were distributed between the members as follows:
      50% to RGC and 50% to the Company. During 2000, RGC Carmel admitted
      additional members in the following proportions: The John L. Curci Trust
      as to a 12.5% interest, The Janet Curci Living Trust No. Il as to a 12.5%
      interest, and an officer of the Company as to a 25% interest in exchange
      for financing for the project as follows: $2,000,000 in equity and
      $2,000,000 in notes payable. As a result, the Company's interest in RGC
      Carmel was reduced to 25%, which is accounted for under the equity method
      of accounting.

      During 2001, the Company advanced $60,000 to RGC Carmel and recorded a
      loss from investment in real estate venture of $118,764.


                                       30
<PAGE>

                               CALPROP CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE THREE YEARS ENDED DECEMBER 31, 2001

Development operations in 2001, 2000 and 1999 are summarized as follows:

<TABLE>
<CAPTION>
                                                         2001                      2000                     1999
                                                   ----------------------------------------------------------------------------
REAL ESTATE SALES:                                      Amount        Units       Amount       Units        Amount       Units
                                                   ----------------------------------------------------------------------------
<S>                                                   <C>               <C>     <C>              <C>      <C>              <C>
     Single-family residences                         $34,578,692       109     $36,056,559      141      $52,598,849      226

     Townhomes                                         56,035,930       140      28,182,056       78
                                                   ----------------------------------------------------------------------------
          Total Sales                                  90,614,622       249      64,238,615      219       52,598,849      226

COST OF REAL ESTATE SALES:

     Single-family residences                          32,548,574                34,607,881                49,576,788

     Townhomes                                         49,773,731                23,665,837                   198,089

     Apartments                                                                       4,253                    10,956

     Warranty                                             348,704                   283,732                   456,282
                                                   ---------------          ----------------         -----------------
          Total Cost of Sales                          82,671,009                58,561,703                50,242,115

 Recognition of impairment of real estate
     under development                                (2,018,088)                                         (2,519,521)
                                                   ---------------          ----------------         -----------------

Income (loss) from development operations              $5,925,525                $5,676,912                $(162,787)
                                                   ===============          ================         =================
</TABLE>

      The 2001 impairment loss on the Mockingbird Canyon project is primarily a
      result of the slow absorption rate. The sales price was not sufficient to
      offset the increased marketing and sales incentives, production overhead
      and interest costs and as a result the Company recorded an impairment loss
      on real estate under development of $2,018,088 during the third quarter of
      2001. The Company has 12 units remaining as of December 31, 2001.

      During 1999, the Company recorded an impairment loss on its Summertree
      Park, Elk Grove project of $2,519,521. The impairment loss on the
      Summertree Park, Elk Grove project was primarily a result of a slower
      absorption caused by a sagging real estate market in the Sacramento area
      since the inception of the project. The Company introduced two new product
      lines at the Summertree Park, Elk Grove project during the second quarter
      of 1999 to increase the absorption rate and these were primarily sold
      during the third quarter. The increase in sales price was not sufficient
      to offset the increased direct construction cost, marketing and sales
      incentives, production overhead and interest costs and as a result the
      Company recorded an impairment loss on real estate under development of
      $2,519,521 during the third quarter of 1999.


                                       31
<PAGE>

                               CALPROP CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE THREE YEARS ENDED DECEMBER 31, 2001

(4)   Other Assets

      Other assets at December 31, 2001 and 2000 are as follows:

<TABLE>
<CAPTION>
                                              Interest Rate                Outstanding Balance
                                             ----------------  ---------------------------------------
                                                                           2001                2000
                                                               ---------------------------------------
<S>                                               <C>                     <C>                <C>
Trust deeds receivable                            11.75%                   $54,043            $55,859
Less reserve                                                              (30,000)           (30,000)
                                                               ---------------------------------------
Net trust deeds receivable                                                  24,043             25,859
Related-party receivable                                                                       70,000
Deposits in escrow                                                           1,000              1,000
Office equipment and other, net of
accumulated depreciation of $292,723 and
$246,916 as of December 31, 2001 and 2000,
respectively                                                               722,944            690,600
Prepaid expenses                                                            26,895             75,953
                                                               ---------------------------------------
Other assets                                                              $774,882           $863,412
                                                               =======================================
</TABLE>

(5)   Receivable from/Payable to Affiliate

      In 2000, the Company entered into an agreement to manage the project for a
      fee of $750,000. The fee is earned as units related to the project are
      completed. Management fee receivable and earned as of and for the year
      ended December 31, 2001 was $542,818.

      The Company also pays certain payroll costs on behalf of RGC Carmel for
      which it is reimbursed. The total amount receivable from and payable to
      RGC Carmel related to these costs were $235,934 and $272,011, respectively
      at December 31, 2001 and 2000, respectively.

(6)   Trust Deeds, Notes Payable and Related-Party Notes

      Trust deeds, notes payable and related party notes as of December 31, 2001
      and 2000 are as follows:

<TABLE>
<CAPTION>
                                                                                          Balance
                                                                              ---------------------------------
                                                                                    2001            2000
                                                                              ---------------------------------
<S>                                                                               <C>              <C>
Trust Deeds and Notes Payable:
Notes payable to financial institutions, secured by development projects'
trust deeds - variable interest rates ranging from prime to prime + 5.5%,
(4.75% and 9.50% at December 31, 2001 and 2000, respectively); maturing
March 2002 through July 2029                                                      $51,990,779      $66,341,488
                                                                              =================================
Related-Party Notes:
Notes payable to related parties, secured by development projects' trust
deeds - interest rates of 12% and 20%; maturing on demand through
December 2002                                                                     $15,272,241      $13,719,075
Notes payable to related parties, unsecured - interest rates of 10% to 20%;
maturing on demand through July 2004                                               10,947,319        6,983,168
                                                                              ---------------------------------
Total related party notes                                                          26,219,560       20,702,243
                                                                              ---------------------------------
Total trust deeds and related party notes                                         $78,210,339      $87,043,731
                                                                              =================================
</TABLE>


                                       32
<PAGE>

                               CALPROP CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE THREE YEARS ENDED DECEMBER 31, 2001

      As of December 31, 2001, the Company had remaining loan commitments from
      banks and financial institutions of approximately $32,947,600 which may be
      drawn down by the Company upon the satisfaction of certain conditions. The
      Company continues to seek joint venture partners and additional financing
      to fund its operations.

      During 2001, 2000 and 1999, the Company paid interest of $10,680,033,
      $6,471,996 and $3,362,242, respectively, on trust deeds and notes payable.
      The Company capitalized interest of approximately $10,680,033, $6,471,996
      and $3,362,242 for 2001, 2000 and 1999, respectively.

      Related-Party Notes - The Company has the following notes payable to Curci
      at December 31, 2001 and 2000. A principal of Curci is a stockholder of
      the Company. Under the terms of certain of the notes payable, Curci
      receives interest and participates in "Net Proceeds" from certain
      projects, as defined in the loan agreement, which is comparable to net
      profit:

<TABLE>
<CAPTION>
         Project                 Profit share                   December 31,                  December 31,
                                                                    2001                          2000
         --------                --------------                --------------                --------------
<S>                                   <C>                         <C>                           <C>
         Secured loans:
           High Ridge Court           50%                         $2,414,492                    $3,084,491

         Saddlerock                   50%                          2,595,711                     2,600,000

         Mockingbird Canyon           50%                          1,927,405                     2,608,912


         Montserrat Classics          50%                          2,304,234                     3,450,000

         Parc Metropolitan            0%                           3,000,000
                                                               --------------                --------------
                                                                  12,241,842                    11,743,403
         Unsecured loans                                           8,366,236                     2,129,357
                                                               --------------                --------------
         Total - Curci                                            $20,608,078                   $13,872,760
                                                               ==============                ==============
</TABLE>

      During the years ended December 31, 2001, 2000, and 1999, net
      participation proceeds expensed to cost of real estate sales in the
      accompanying consolidated statements of operations were $675,198,
      $514,105, and $391,960, respectively. Accrued participation proceeds
      included in accounts payable and accrued liabilities in the accompanying
      consolidated balance sheets at December 31, 2001 and 2000 was $475,615 and
      $906,065, respectively.

      Other Related Parties

      During 1999, the Company purchased RGC's fifty percent ownership in
      RGCCLPO. Consideration for the purchase consisted of issuance of a note
      payable for $2,000,000 and payment of cash of $1,000,000. Outstanding
      balances as of December 31, 2001 and 2000 were $1,000,000 and $2,000,000,
      respectively. The note was paid in its entirety in January 2002.

      During 1996, the Company converted its Preferred Stock to Common Stock and
      the accrued Preferred Stock dividend due to an officer of the Company and
      a related party of $581,542 and $472,545, respectively, was exchanged for
      notes with interest payable at 10%. As of December 31, 2001, the
      outstanding principal due on these notes was $581,542 and $462,330,
      respectively. As of December 31, 2000, $581,542 and $462,330 was
      outstanding. The notes mature from June 30, 2002 to December 31, 2002.

      Included in notes payable to related parties is a note payable to Mission
      Gorge, LLC which bears interest at 12%. The outstanding balance as of
      December 31, 2001 and 2000 was $2,030,399 and 2,000,000, respectively. The
      note matures on June 30, 2002.


                                       33
<PAGE>

                               CALPROP CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE THREE YEARS ENDED DECEMBER 31, 2001

      Included in notes payable to related parties are notes payable to an
      officer which bear interest at 12%. Outstanding balances as of December
      31, 2001 and 2000 were $557,211 and $1,045,611, respectively. The notes
      mature on December 31, 2002.

      As of December 31, 2001, the Company had loans, which bear for interest at
      10% and in which certain loans are due on demand from related parties. The
      remaining notes mature from September 1, 2002 to June 30, 2003. As of
      December 31, 2001 and 2000, these loans totaled $980,000 and $740,000,
      respectively.

      Aggregate future principal payments due on trust deeds payable, notes
      payable and related party notes are as follows:

Years Ended
December 31,
--------------------------------------------------------------------------------
 2002                                                               $70,231,249
 2003                                                                 1,883,973
 2004                                                                 5,095,117
 2005
 2006
Thereafter                                                            1,000,000
--------------------------------------------------------------------------------
Total                                                               $78,210,339
================================================================================

      During 2001, 2000 and 1999, the Company paid interest of $5,300,889,
      $2,432,635 and $2,124,618, respectively, on loans from related parties.
      The Company capitalized interest of approximately $5,185,793, $2,432,635
      and $2,054,314 for 2001, 2000 and 1999, respectively.

(7)   Income Taxes

      The provision (benefit) for income taxes consists of the following:

<TABLE>
<CAPTION>
                                                    Year Ended December 31,
                                          ---------------------------------------------
                                               2001          2000           1999
                                          ---------------------------------------------
<S>                                             <C>         <C>           <C>
 Current income tax expense                     $171,742      $35,343         $16,627
 Net deferred income tax benefit                              (35,343)     (1,700,000)
 Income tax refund                                           (141,488)
                                          ---------------------------------------------
Provision (benefit) for income taxes            $171,742    $(141,488)    $(1,683,373)
                                          =============================================
</TABLE>

      As of December 31, 2001, the Company had gross deferred tax assets of
      $7,940,166 offset by a deferred tax asset valuation allowance of
      $1,404,823. During the years ended December 31, 2001, 2000 and 1999, the
      Company reduced the deferred tax valuation allowance to recognize a
      deferred income tax benefit of $0, $35,343 and $1,700,000, respectively.
      The deferred tax benefit is based upon expected utilization of net
      operating loss carryforwards. The Company has assessed its past earnings
      history and trends, sales backlog, budgeted sales, and expiration dates of
      carryforwards and has determined that it is more likely than not that the
      $6,535,343 of deferred tax assets will be realized.

      As of December 31, 2001, the Corporation had net operating loss
      carryforwards for federal and state income tax purposes of approximately
      $15,520,000 and $0, respectively. For federal tax purposes the net
      operating loss carryforwards expire from 2007 through 2013.


                                       34
<PAGE>

                               CALPROP CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE THREE YEARS ENDED DECEMBER 31, 2001

         Benefit for income taxes in 2000 of $141,488 represents the net refund
         resulting from a claim filed for the carryback of losses related to
         certain qualifying expenses incurred in 1994.

         The deferred income tax assets, resulting from differences between
         accounting for financial statements purposes and tax purposes, less
         valuation allowance, are as follows:

<TABLE>
<CAPTION>
                                                  2001                2000
                                          -----------------------------------------
<S>                                                 <C>                 <C>
Inventory reserves                                    $691,666            $111,100
Warranty reserves and others                         1,629,800           1,630,800
State net operating loss                                                   366,200
Federal net operating loss                           5,618,700           7,020,000
                                          -----------------------------------------
                                                     7,940,166           9,128,100
Valuation allowance                                 (1,404,823)         (2,592,757)
                                          -----------------------------------------
                                                    $6,535,343          $6,535,343
                                          =========================================
</TABLE>

      The following is a reconciliation of the federal statutory rate to the
      Company's effective rate for 2001, 2000, and 1999:

<TABLE>
<CAPTION>
                                                     2001                        2000                       1999
                                         -----------------------------------------------------------------------------------
                                                  Amount   Percentage        Amount   Percentage         Amount  Percentage
                                         -----------------------------------------------------------------------------------
<S>                                           <C>                <C>     <C>              <C>       <C>              <C>
Statutory rate                                $1,189,268          34%    $1,185,394          34%      $(828,225)       (34)%
State franchise tax, net of federal tax
benefit                                          167,718         4.8%       208,884           6%         16,627         .7%
Change in valuation allowance                 (1,187,934)        (34%)   (1,538,994)      (44.1%)      (871,775)     (35.8%)
Other                                              2,690           0%        $3,228          .1%
                                         -----------------------------------------------------------------------------------
                                                $171,742         4.9%     $(141,488)         (4%)   $(1,683,373)     (69.1%)
                                         ===================================================================================
</TABLE>

(8)   Qualified and Non-Qualified Stock Option Plans

      The Company has three stock-based compensation plans, which are described
      below. The Company applies APB Opinion 25 and related Interpretations in
      accounting for its stock-based compensation. Accordingly, no compensation
      costs have been recognized for its fixed stock option plans during 2001,
      2000, and 1999. The compensation cost that has been charged against income
      for its stock incentive plan was $52,225 in 2001, $61,602 in 2000 and
      $61,203 in 1999. Had compensation costs for the Company's stock-based
      compensation plans been determined based on the fair value at the grant
      dates for awards under those plans consistent with SFAS No. 123, the
      Company's net income (loss) and income (loss) per share would have been
      adjusted to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                                          2001               2000               1999
                                                                          ----               ----               ----
<S>                                         <C>                       <C>                 <C>                <C>
Net income (loss):                          As reported               $3,326,106          $3,627,940         $(752,582)
                                            Pro forma                 $3,273,881          $3,505,121       $(1,047,863)

Diluted net income (loss) per share:        As reported                     $.32                $.35            $(0.07)
                                            Pro forma                       $.31                $.34            $(0.10)
</TABLE>


                                       35
<PAGE>

                               CALPROP CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE THREE YEARS ENDED DECEMBER 31, 2001

      The 1983 Stock Option Plan authorized an aggregate of 653,006 (adjusted
      for stock dividends) shares of common stock to be reserved for grant. The
      1983 Stock Option Plan expired in September, 1993. Changes in the 1983
      Stock Option Plan are summarized as follows:

<TABLE>
<CAPTION>
                                            2001                         2000                       1999
                                  --------------------------   -------------------------  --------------------------
                                                 Weighted-                    Weighted-                  Weighted-
                                                  Average                      Average                    Average
                                                 Exercise                     Exercise                   Exercise
                                      Shares       Price           Shares       Price         Shares       Price
                                  --------------------------   -------------------------  --------------------------
<S>                                      <C>      <C>                <C>      <C>                <C>      <C>
Outstanding, beginning of year           58,000   $2.93              58,000   $2.93              59,000   $2.92

Granted

Exercised                                                                                         (500)   $2.50

Canceled                                                                                          (500)   $2.50
                                  --------------------------   -------------------------  --------------------------
Outstanding, end of year                 58,000   $2.93              58,000   $2.93              58,000   $2.93
                                  ==========================   =========================  ==========================
Exercisable, end of year                 53,000                      48,000                      48,500
                                  ==============               =============              ==============
</TABLE>

      The 1993 Stock Option Plan, (amended by the shareholders May 20, 1999)
      authorizes an aggregate of 2,000,000 shares of the Company's common stock
      to be reserved for grant. The options fully vest a year from the date of
      grant. Changes in the 1993 Stock Option plan are summarized as follows:

<TABLE>
<CAPTION>
                                           2001                       2000                       1999
                                  -------------------------   -------------------------  -------------------------
                                                 Weighted-                   Weighted-                  Weighted-
                                                  Average                     Average                    Average
                                                 Exercise                    Exercise                   Exercise
                                      Shares       Price          Shares       Price         Shares       Price
                                  -------------------------   -------------------------  -------------------------
<S>                                     <C>       <C>              <C>       <C>              <C>        <C>
Outstanding, beginning of year          860,700   $1.27            866,800   $1.27             634,000   $1.14
Granted                                                                                        260,350   $1.56
Exercised                                                                                     (18,300)   $0.90
Canceled                                                           (6,100)   $1.55             (9,250)   $1.48
                                  -------------------------   -------------------------  -------------------------
Outstanding, end of year                 860,700   $1.27            860,700   $1.27             866,800   $1.27
                                  =========================   =========================  =========================
Exercisable, end of year                 860,700                    860,700                     607,950
                                  ===============             ==============             ===============
Available for grant, end of year         328,250                    328,250                     320,650
                                  ===============             ==============             ===============
</TABLE>

      The following table summarizes information about the outstanding options
      at December 31, 2001, from the Company's 1983 and 1993 stock option plans:

<TABLE>
<CAPTION>
                                     Options Outstanding                          Options Exercisable
                     -----------------------------------------------------  --------------------------------
                        Number       Weighted-Average    Weighted-Average       Number     Weighted-Average
     Range of         Outstanding        Remaining        Exercise Price     Exercisable    Exercise Price
  Exercise Prices     at 12/31/01    Contractual Life                        at 12/31/01
------------------   -----------------------------------------------------  --------------------------------
<S>                        <C>           <C>                  <C>                  <C>          <C>
  $0.69 to $0.96           298,000       3.8 years            $0.72                298,000      $0.72
  $1.00 to $1.88           562,700       7.1 years            $1.56                562,700      $1.56
  $2.50 to $3.00            58,000       0.1 years            $2.93                 53,000      $2.92
                     -----------------------------------------------------  --------------------------------
  $0.69 to $3.00           918,700       5.6 years            $1.37                913,700      $1.35
                     =======================================================================================
</TABLE>

      The 1989 Executive Long-Term Stock Incentive Plan , (amended by the
      shareholders May 23, 1996) authorizes an aggregate of 500,000 (adjusted
      for stock dividends) shares of the Company's common stock to be reserved
      for awards to key employees of the Company. The stock, once granted to the
      key employees, vests at 20 percent a year from the date of grant. The
      non-vested shares represent unearned compensation. The 1989 Executive


                                       36
<PAGE>

                               CALPROP CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE THREE YEARS ENDED DECEMBER 31, 2001

      Long-Term Incentive Plan expired in May, 1999. Changes in the 1989
      Executive Long-Term Stock Incentive plan are summarized as follows:

<TABLE>
<CAPTION>
                                                              2001               2000               1999
                                                ---------------------------------------------------------
<S>                                                        <C>                <C>                <C>
Issued shares, beginning of year                           419,080            422,280            435,680
Issued

Shares cancelled/returned at termination of                 (2,300)            (3,200)           (13,400)
employment
                                                ---------------------------------------------------------
Issued shares, end of year                                 416,780            419,080            422,280
                                                =========================================================
Vested, end of year                                        368,980            335,180            287,080
                                                =========================================================
Available for award, end of year                                --                 --                 --
                                                =========================================================
</TABLE>

      Included as a separate deduction of stockholder's equity is deferred
      compensation relating to this plan of $51,000 and $105,525 as of December
      31, 2001, and 2000, respectively.

      The 1992 Director Stock Option Plan authorizes an aggregate amount of
      100,000 shares to be granted. Each year, the directors that are members of
      the stock option committee are granted options to buy 7,500 shares at the
      market price at the date of grant, exercisable one year after grant, and
      expire 10 years after the grant date. During 2001, 2000, and 1999, 15,000
      shares, 15,000 shares and 15,000 shares, respectively, were granted under
      this plan at an exercise prices of $1.13, $1.27, and $1.63 per share,
      respectively. The exercise prices represent the market price at the date
      of grant. At December 31, 2001, 30,000 shares were outstanding related to
      this plan. In 1996, the Company issued warrants to purchase 150,000 shares
      of common stock. As of December 31, 2001, 150,000 warrants were
      outstanding.

      The weighted-average fair value of the options granted during 2001, 2000
      and 1999 is $0.46, $0.61 and $0.98, respectively. The fair value of each
      option was estimated on the date of grant using the Black-Scholes
      option-pricing model with the following weighted-average assumptions for
      2001, 2000 and 1999, respectively: risk-free interest rates of 6.5 percent
      for all years; dividend yield of zero percent for all years; expected
      lives of 5.0, 5.0, and 9.7 years; and volatility of 33, 44, and 28
      percent.

      For the year ended December 31, 1999, options were not included in the
      computation of diluted net loss per common share because the effect would
      be antidilutive to the net loss in the period. However, for the years
      ended December 31, 2001 and 2000, 601,700 and 579,700 options were not
      included in the computation of diluted net income because their exercise
      prices were higher than the average market price per share of common
      stock.

      On March 10, 1998, three officers and a director of the Company exercised
      options to purchase a total of 720,000 shares of common stock with a
      weighted-average exercise price of $0.8989 per share. The Company received
      $199,395 cash from an officer and received $447,813 in notes receivable
      from the remaining two officers and the director as a result of the
      exercise of these options. The notes receivable accrue interest at 4.987%
      and mature on March 10, 2001 and are guaranteed by the officers. The
      notes' maturity dates have been extended to March 10, 2004.

      On October 15, 1998, one officer of the Company exercised options to
      purchase a total of 10,000 shares of common stock with a weighted-average
      exercise price of $0.8125 per share. The Company received a note
      receivable for $8,125 from the officer as a result of the exercise of
      these options. The note receivable accrues interest at 4.987% and matures
      on October 15, 2001 and is guaranteed by the officer. The note's maturity
      date has been extended to October 15, 2002. During 2001, the officer
      partially repaid the note receivable. As of December 31, 2001, the
      outstanding note receivable balance is $2,945.

      As of December 31, 2001 and 2000, accrued interest for the stock purchase
      loans was $86,422 and $63,796 respectively. The stock purchase loans and
      related accrued interest are reflected as reductions in stockholder's
      equity.


                                       37
<PAGE>

                               CALPROP CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE THREE YEARS ENDED DECEMBER 31, 2001

(9)   Earnings Per Share

      The following table sets forth the computation of basic and diluted net
      income (loss) per common share:

<TABLE>
<CAPTION>
                                                                  2001            2000            1999
                                                             -----------------------------------------------
<S>                                                              <C>             <C>             <C>
      Numerator:

           Net income (loss)                                     $3,326,106      $3,627,940      $(752,582)
                                                             -----------------------------------------------
           Numerator for basic and diluted  net
      income (loss) per share                                     3,326,106       3,627,940       (752,582)
                                                             ===============================================

      Denominator for basic net income (loss)
      per share (weighted average outstanding shares)            10,281,879      10,290,816      10,289,852

           Effect of dilutive stock options                         128,327         170,753
                                                             -----------------------------------------------
      Denominator for dilutive net income (loss)
           per share (weighted average outstanding
      shares)                                                    10,410,206      10,461,569      10,289,852
                                                             ===============================================
      Basic net income (loss) per share                               $0.32           $0.35         $(0.07)
                                                             ===============================================
      Diluted net income per share                                    $0.32           $0.35         $(0.07)
                                                             ===============================================
</TABLE>

(10)  Commitments and Contingencies

      Legal - There are several legal actions and claims pending against the
      Company. Based on the advice of legal counsel, management believes that
      the ultimate liability, if any, which may result from any of these
      lawsuits will not materially affect the financial position or results of
      operations of the Company.

      Employee benefit plan - The Company has a 401(k) plan (the "Plan"), which
      allows eligible employees to contribute from 1 percent to 15 percent of
      their annual compensation, not to exceed statutory limits. Company
      matching is at management's discretion. The Company's contribution to the
      Plan for the years ended December 31, 2001, 2000, and 1999 was $119,926,
      $116,312, and $123,924, respectively.

      Leases - The Company has operating leases that expire through 2006. Future
      minimum rents is as follows:

             Year Ending December 31,                          Amount
                                                          -----------------
             2002                                                 $222,569
             2003                                                  216,665
             2004                                                 $205,854
             2005                                                  154,015
             2006                                                  122,669
             Thereafter
                                                          -----------------
                                                                  $921,772

      Rent expense for the years ended December 31, 2001, 2000 and 1999 was
      $239,304, $188,711, and $159,431, respectively.


                                       38
<PAGE>

                               CALPROP CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE THREE YEARS ENDED DECEMBER 31, 2001

(11)  Quarterly Financial Data - (unaudited)

      Year Ended December 31, 2001

<TABLE>
<CAPTION>
                                                        First          Second            Third          Fourth
                                             ------------------------------------------------------------------
<S>                                               <C>             <C>              <C>             <C>
Sales                                             $23,672,136     $26,757,550      $18,880,000     $21,304,936
                                             ==================================================================
Income from development operations                 $2,045,837      $2,380,158         $173,438      $1,326,092
                                             ==================================================================
Net income (loss)                                  $1,344,177      $1,724,075        $(833,428)     $1,091,282
                                             ==================================================================
Basic income (loss) per share                           $0.13           $0.17           $(0.08)          $0.11
                                             ==================================================================
Diluted income per share                                $0.13           $0.17           $(0.08)          $0.11
                                             ==================================================================

Year Ended December 31, 2000

<CAPTION>
                                                        First          Second            Third          Fourth
                                             ------------------------------------------------------------------
<S>                                                <C>            <C>              <C>             <C>
Sales                                              $7,583,363     $10,214,099      $16,525,836     $29,915,317
                                             ==================================================================
(Loss) income from development
  operations                                        $(322,839)       $813,142       $1,760,022      $3,426,587
                                             ==================================================================
Net (loss) income                                   $(573,085)       $194,656         $897,640      $3,108,729
                                             ==================================================================
Basic (loss) income per share                          $(0.06)          $0.02            $0.09           $0.30
                                             ==================================================================
Diluted income per share                               $(0.06)          $0.02            $0.09           $0.30
                                             ==================================================================
</TABLE>


                                       39
<PAGE>

                               CALPROP CORPORATION
                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                   For the three years ended December 31, 2001

<TABLE>
<CAPTION>
                                                                   Trust Deeds
                                                  Warranty         Receivable
                                                   Reserve           Reserve
                                              ------------------------------------
<S>                                                    <C>                <C>
Balance January 1, 1999                                $284,624           $50,000

     Additions charged to operations                    456,282               ---

     Reductions                                        (382,619)              ---
                                              ------------------------------------
Balance December 31, 1999                               358,287            50,000

     Additions charged to operations                    283,732               ---

     Reductions                                         (95,035)          (20,000)
                                              ------------------------------------
Balance December 31, 2000                               546,984            30,000

     Additions charged to operations                    332,899                ---

     Reductions                                        (209,768)              ---
                                              ------------------------------------
Balance December 31, 2001                              $670,115           $30,000
                                              ====================================
</TABLE>


                                       40
<PAGE>

                                Index to Exhibits

      3.1   Articles of Incorporation of the Company (Incorporated by reference
            to Exhibit 3.1 to the Company's Amendment No. 1 to Form S-1 filed
            with Securities Exchange Commission on July 3, 1994 bearing File
            #33-62516.)

      3.2   By-laws of the Company (Incorporated by reference to Exhibit 3.2 to
            the Company's Amendment No. 1 to Form S-1 filed with Securities
            Exchange Commission on July 3, 1994 bearing File #33-62516.)

      10.1  1983 Calprop Corporation Stock Option Plan (Incorporated by
            reference to the Company's Form S-8 Registration Statement (File No.
            2-86872), which became effective September 30, 1983.)

      10.2  1989 Executive Long-Term Stock Incentive Option Plan (Incorporated
            by reference to the Company's Form S-8 Registration Statement (File
            No. 33-33640), which became effective March 18, 1991.)

      10.3  1992 Directors Stock Option Plan (Incorporated by reference to the
            Company's Form S-8 Registration Statement (File No. 33-57226), which
            became effective January 18, 1993.)

      10.4  1993 Calprop Corporation Stock Option Plan (Incorporated by
            reference to Exhibit 10.3 to the Company's Amendment No. 1 to Form
            S-1 filed with Securities Exchange Commission on July 3, 1993
            bearing File #33-62516.)

      23    Independent Auditors' Consent

      42    Financial Data Schedule


                                       41
<PAGE>

                                   SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) 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
--------------------------
(Registrant)


/s/ Victor Zaccaglin                             March 27, 2002
--------------------------                      ----------------
Victor Zaccaglin,                                     Date
Chairman of the Board
  and Chief Executive Officer

      Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.


/s/ Mark F. Spiro                                 March 27, 2002
--------------------------                      ----------------
Mark F. Spiro                                         Date
Vice President/Secretary and
Treasurer (Chief Financial
and Accounting Officer)

/s/ Ronald S. Petch                               March 27, 2002
--------------------------                      ----------------
Ronald S. Petch                                       Date
President

/s/ E. James Murar                                March 27, 2002
--------------------------                      ----------------
E. James Murar                                        Date
Director

/s/ Mark T. Duvall                                March 27, 2002
--------------------------                      ----------------
Mark T. Duvall                                        Date
Director

/s/ John L. Curci                                 March 27, 2002
--------------------------                      ----------------
John L. Curci                                         Date
Director

/s/Victor Zaccaglin                               March 27, 2002
--------------------------                      ----------------
Victor Zaccaglin                                      Date
Chairman of the Board
Chief Executive Officer

                                       42