<PAGE>

           This Form 10-Q consists of 14 sequentially numbered pages.

                                    FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

             -------------------------------------------------------

               QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934


                For the quarterly period ended September 30, 1999
                                               ------------------

                         Commission file number 0-17189
                                                -------

                      CALIFORNIA COASTAL COMMUNITIES, INC.
                      ------------------------------------
             (Exact name of registrant as specified in its charter)


             Delaware                                      02-0426634
             --------                                      ----------
    (State or other jurisdiction of                     (I.R.S. Employer
    incorporation or organization.)                    Identification No.)


           6 Executive Circle, Suite 250
                Irvine, California                            92614
                ------------------                            -----
     (Address of principal executive offices)               (Zip Code)

Registrant's telephone number, including area code: (949) 250-7700


         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days:

                                    Yes X   No
                                       ---    ---

         Indicate by check mark whether the Registrant has filed all documents
and reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.

                                    Yes X   No
                                       ---    ---

The number of shares of Common Stock outstanding at November 1, 1999 was
10,058,589.

<PAGE>

                      CALIFORNIA COASTAL COMMUNITIES, INC.

                                    FORM 10-Q

                    FOR THE QUARTER ENDED SEPTEMBER 30, 1999

                                    I N D E X
                            --------------------------
<TABLE>
<CAPTION>
                                                                                                           PAGE NO.
                                                                                                           --------
<S>                                                                                                        <C>
PART I - Financial Information:

           Item 1 -    Financial Statements

                       Balance Sheets -
                       December 31, 1998 and September 30, 1999...................................................3

                       Statements of Operations -
                       Three Months and Nine Months Ended September 30, 1998 and 1999.............................4

                       Statements of Cash Flows -
                       Nine Months Ended September 30, 1998 and 1999..............................................5

                       Notes to Financial Statements..............................................................6


           Item 2 -    Management's Discussion and Analysis of Financial
                       Condition and Results of Operations.......................................................11


           Item 3 -    Quantitative and Qualitative Disclosures About
                       Market Risk...............................................................................13


PART II - Other Information:

           Item 1 - Legal Proceedings............................................................................14

           Item 4 - Submission of Matters to a Vote of Security Holders......................................... 14

           Item 6 - Exhibits and Reports on Form 8-K.............................................................14


SIGNATURE........................................................................................................14

</TABLE>

                                       2
<PAGE>

                      CALIFORNIA COASTAL COMMUNITIES, INC.

                                 BALANCE SHEETS
                                 --------------

                                  (in millions)
<TABLE>
<CAPTION>
                                                                   December 31,              September 30,
                                                                        1998                     1999
                                                                       ------                   ------
     ASSETS
<S>                                                                <C>                       <C>
Cash and cash equivalents ....................................       $  26.6                   $  11.1
Restricted cash...............................................          --                         3.3
Real estate held for development or sale......................           3.2                       9.7
Land held for development.....................................         137.3                     138.8
Other assets..................................................           7.1                       6.2
                                                                      ------                    ------

                                                                     $ 174.2                   $ 169.1
                                                                      ------                    ------
                                                                      ------                    ------

      LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:
     Accounts payable and accrued liabilities.................       $   1.7                   $   3.0
     Project debt.............................................          --                         5.0
     Other liabilities........................................          29.8                      28.9
                                                                      ------                    ------

     Total liabilities........................................          31.5                      36.9
                                                                      ------                    ------


Stockholders' equity:
     Common stock ............................................            .6                        .5
     Capital in excess of par value...........................         138.4                     130.2
     Retained earnings........................................           3.7                       1.5
                                                                      ------                    ------

     Total stockholders' equity...............................         142.7                     132.2
                                                                      ------                   -------

                                                                     $ 174.2                   $ 169.1
                                                                      ------                    ------
                                                                      ------                    ------
</TABLE>


               See the accompanying notes to financial statements.

                                       3
<PAGE>

                      CALIFORNIA COASTAL COMMUNITIES, INC.

                            STATEMENTS OF OPERATIONS
                            ------------------------
                     (in millions, except per share amounts)
<TABLE>
<CAPTION>
                                                            Three Months Ended                Nine Months Ended
                                                               September 30,                    September 30,
                                                            1998          1999               1998           1999
                                                            ----          ----              -----          -----
<S>                                                      <C>          <C>                  <C>          <C>
Revenues...........................................      $   --       $    --              $  2.1       $    --

Costs of sales.....................................          --            --                 1.8            --
                                                            -----         -----              -----          ----

   Gross operating margin..........................          --            --                  .3            --

General and administrative expenses................           .9           1.0                2.8            2.6
Interest expense...................................           .3            .3                1.0             .8
Other income, net..................................          (.2)          (.3)               (.7)          (1.1)
                                                            -----         -----              -----          ----

Loss from continuing operations before
   income taxes....................................         (1.0)         (1.0)              (2.8)          (2.3)

Provision (benefit) for income taxes...............          --            --                 (.4)            .1
                                                            -----         -----              -----          ----

Loss from continuing operations....................         (1.0)         (1.0)              (2.4)          (2.4)

Discontinued operations:
   Income from operations, net of
      income taxes of $0, $0, $.2 and $0,
      respectively.................................          --            --                  .5            --
   Gain on disposition, net of income
        taxes (refunds) of $0, ($.2), $3.3 and
        ($.2), respectively........................          --             .2                7.2             .2
                                                            -----         -----              -----          ----

Net income (loss)..................................        $(1.0)        $ (.8)             $ 5.3          $(2.2)
                                                            -----         -----              -----          ----
                                                            -----         -----              -----          ----

Earnings (loss) per common share - basic and diluted:
   Continuing operations...........................        $(.08)        $(.10)             $(.20)        $ (.22)
   Discontinued operations.........................          --            .02                .64            .02
                                                            -----         -----              -----          ----
Earnings (loss) per common share - basic and diluted       $(.08)        $(.08)             $ .44         $ (.20)
                                                            -----         -----              -----          ----
                                                            -----         -----              -----          ----
</TABLE>


               See the accompanying notes to financial statements.

                                       4
<PAGE>

                      CALIFORNIA COASTAL COMMUNITIES, INC.

                            STATEMENTS OF CASH FLOWS
                            ------------------------

                                  (in millions)
<TABLE>
<CAPTION>
                                                                                     Nine Months Ended
                                                                                        September 30,
                                                                                    1998             1999
                                                                                    ----             ----
<S>                                                                               <C>              <C>
Cash flows from operating activities:
      Net income (loss)......................................................     $   5.3          $  (2.2)
      Adjustments to reconcile to cash provided (used)
         by operating activities:
         Non-cash interest expense...........................................         1.0               .5
         Interest income on restricted cash..................................         --               (.1)
         Deferred income taxes...............................................         (.5)             --
         Gain on sale of discontinued operation..............................        (7.2)             --
         Gains on asset sales................................................         (.3)             --
         Proceeds from asset sales, net......................................         2.0              --
         Investments in real estate held for development or sale.............         (.4)            (6.5)
         Investments in land held for development............................        (3.0)            (1.5)
         Decrease (increase) in other assets.................................         (.8)              .9
         Decrease in accounts payable, accrued
           and other liabilities.............................................        (2.4)             (.1)
                                                                                    ------           -----

              Cash used by operating activities of
                   continuing operations.....................................        (6.3)            (9.0)
                                                                                    ------           -----

              Cash used by operating activities of
                  discontinued operations....................................       (28.1)             --
                                                                                    ------           -----

Cash flows from investing activities:
      Proceeds from sale of discontinued operation...........................        33.3              --
                                                                                    ------           -----

Cash flows from financing activities:
      Borrowings of project debt.............................................         --               5.0
      Deposits of restricted cash............................................         --              (3.2)
      Issuance of restricted stock...........................................         1.1              --
      Repurchases of common stock............................................         --              (8.3)
                                                                                    ------           -----

              Cash provided (used) by financing activities
                  of continuing operations...................................         1.1             (6.5)
                                                                                    ------           -----

              Cash provided by financing activities
                  of discontinued operations.................................        24.6              --
                                                                                    ------           -----

Net increase (decrease) in cash and cash equivalents.........................        24.6            (15.5)

Cash and cash equivalents - beginning of period..............................         7.2             26.6
                                                                                    ------           -----

Cash and cash equivalents - end of period....................................       $31.8           $ 11.1
                                                                                    ------           -----
                                                                                    ------           -----
</TABLE>


               See the accompanying notes to financial statements.

                                       5
<PAGE>

                      CALIFORNIA COASTAL COMMUNITIES, INC.

                          NOTES TO FINANCIAL STATEMENTS


NOTE 1 - BASIS OF PRESENTATION

         The accompanying financial statements have been prepared by California
Coastal Communities, Inc. and its consolidated subsidiaries (the "Company"),
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. The Company believes that the disclosures are adequate to make the
information presented not misleading when read in conjunction with the Financial
Statements and Notes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 1998 and the current year's previously
issued Quarterly Reports on Form 10-Q. The financial information presented
herein reflects all adjustments, which are, in the opinion of management,
necessary for a fair presentation of the results for the interim periods
presented. The results for interim periods are not necessarily indicative of the
results to be expected for the full year. This report contains forward looking
statements. Readers are cautioned that any such forward looking statements are
not guarantees of future performance and involve risks and uncertainties that
actual events or results may differ materially from those described herein as a
result of various factors, including without limitation, the factors discussed
generally in this report.


NOTE 2 - RECAPITALIZATION

         On September 2, 1997, the Company completed its recapitalization (the
"Recapitalization") which became effective pursuant to a prepackaged plan of
reorganization that was confirmed by the U.S. Bankruptcy Court for the District
of Delaware on August 19, 1997. The prepackaged plan was filed by the Company,
excluding all of its subsidiaries and affiliates, contemporaneously with a
voluntary petition for relief under Chapter 11 of the bankruptcy code on July
14, 1997. The Recapitalization had previously received over 95% approval of each
class of stock and bondholders that voted through a public solicitation process
in June 1997. On September 2, 1997, the effective date of the Recapitalization,
the Company adopted the provisions of Statement of Position No. 90-7, "Financial
Reporting by Entities in Reorganization Under the Bankruptcy Code" ("Fresh-Start
Reporting") as promulgated by the American Institute of Certified Public
Accountants in November 1990. Accordingly, all assets and liabilities were
revalued to reflect their reorganization value, approximating their fair value
at the effective date of the Recapitalization. In addition, the accumulated
deficit of the Company was eliminated and its capital structure recast in
conformity with the Recapitalization, and as such, the Company has recorded the
effects of the Recapitalization and Fresh-Start Reporting as of the effective
date.

         The Recapitalization provided for a restructuring of the Company's
capital structure. The only impaired parties under the Recapitalization were the
holders of (a) the Company's 12% Senior Subordinated Pay-In-Kind Debentures due
March 15, 2002 ("Senior Debentures"), (b) the Company's 12% Subordinated
Pay-In-Kind Debentures due March 15, 2002 ("Subordinated Debentures")
(collectively, the "Debentures"), (c) liquidated, non-contingent claims, and (d)
equity securities of the Company. The prepackaged plan did not alter the
Company's obligations to its other creditors, including its trade creditors,
customers, employees, holders of contingent and unliquidated claims, holders of
guaranty claims, and parties to contracts with the Company.


NOTE 3 - EARNINGS PER COMMON SHARE

         The Company computes earnings per share in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings per Share". For the nine
months ended September 30, 1998 and 1999 the weighted average common shares
outstanding were 12.0 million and 10.9 million, respectively. For the three
months ended September 30, 1998 and 1999, the weighted average common shares
outstanding were 12.0 million and 10.1 million, respectively. The weighted
average common shares outstanding reflect the issuance, effective May 6, 1998,
of 100,000 shares to the Company's Chief Executive Officer under a restricted
stock grant and the repurchase of .5 million and 1.23 million shares by the
Company in December 1998 and June 1999, respectively in unsolicited private
transactions at below market prices. In addition, effective after the close of
business on June 18, 1999, the Company repurchased 192,143 shares of its common
stock from odd-lot holders at $6.51 per share in conjunction with a reverse and
forward split transaction, approved by the Company's shareholders at the 1999
Annual Meeting. In summary, the Company has repurchased an aggregate of


                                       6
<PAGE>

approximately 1.9 million shares, representing approximately 16% of the
Company's outstanding shares, at an aggregate cost of $11.2 million (an average
of $5.88 per share) between December 1998 and June 1999. Earnings per share,
assuming dilution, is computed using the weighted average number of common
shares outstanding and the dilutive effect of potential common shares
outstanding.


NOTE 4 - DISPOSITION

         In April 1998, the Company completed the sale of its commercial
development business to Koll Development Company LLC ("KDC") and NorthStar
Capital Investment Corp. for (1) $33.3 million in cash, which included
approximately $3.3 million for 1998 activity, and (2) the assumption by KDC of
all liabilities related to the business. The Company realized an after-tax gain
of approximately $7.2 million ($10.5 million pretax) from this transaction in
the second quarter of 1998. Accordingly, the historical results of such business
are reflected as discontinued operations in the Company's statements of
operations. The continuing operations of the Company reflect its residential
business. Revenues and net income related to discontinued operations were $28.1
million and $.5 million, respectively for the nine months ended September 30,
1998, through the date of sale. Gain from discontinued operations for the 1999
periods reflect income tax refunds for overpayment of 1998 alternative minimum
taxes.


NOTE 5 - RESTRICTED CASH

         Restricted cash as of September 30, 1999 reflects collateral for a
letter of credit obtained by the Company to secure certain indemnity obligations
under a tax sharing agreement with a former affiliate.


NOTE 6 - LAND HELD FOR DEVELOPMENT

         The Company owns approximately 340 acres located in Orange County,
California adjacent to the Pacific Ocean and the Bolsa Chica wetlands (which
were sold by the Company to the State of California as described below),
surrounded by the City of Huntington Beach and approximately 35 miles south of
downtown Los Angeles. The Company's holdings include approximately 200 acres to
be developed on a mesa north of the Bolsa Chica wetlands ("Warner Mesa"),
approximately 100 acres on, or adjacent to, the Huntington mesa and
approximately 40 acres of lowlands which were acquired by the Company in
September 1997.

         The planned community at Warner Mesa is expected to offer a broad mix
of home choices, including primarily single-family homes. A Local Coastal
Program ("LCP") for development of up to 3,300 homes (up to 2,500 on Warner Mesa
and up to 900 on the Bolsa Chica lowlands, which were subsequently sold as
discussed below) was approved by the Orange County Board of Supervisors in
December 1994 and by the California Coastal Commission (the "Coastal
Commission") in January 1996.

         In February 1997, the Company completed the sale of its approximately
880-acre Bolsa Chica lowlands, which had previously been planned for the
development of up to 900 homes and wetlands restoration, to the California State
Lands Commission for $25 million. Under an interagency agreement among various
state and federal agencies, these agencies have agreed to restore the Bolsa
Chica wetlands habitat utilizing escrowed funds from the Ports of Los Angeles
and Long Beach.

         In March 1996, a lawsuit (the "Coastal Act Lawsuit") was filed
challenging the approvals of the Coastal Commission. The judgment in the Coastal
Act Lawsuit was entered by the trial court in August 1997, and required the
Coastal Commission to reconsider the filling of a 1.7 acre pond on Warner Mesa
("Warner Pond") and development of any homes in the Bolsa Chica wetlands. The
August 1997 judgment was appealed by both the project opponents and the Company
as discussed below. In October 1997, in response to the trial court's decisions,
the Coastal Commission approved modifications to the LCP which eliminated the
filling of Warner Pond and thereby reduced the maximum number of homes to be
built from 2,500 to no more than 1,235 homes on Warner Mesa. The Orange County
Board of Supervisors subsequently accepted the Coastal Commission's October 1997
suggested modifications. However, in March 1998, the trial court ruled that the
Coastal Commission should not have narrowed the scope of public comments during
the Coastal Commission's October 1997 hearing, and ordered the Coastal
Commission to hold a third hearing on the LCP.


                                       7
<PAGE>

         In October 1997, opponents of the Warner Mesa project appealed the
trial court's August 1997 decision on the basis that the trial court should have
reversed the Coastal Commission's January 1996 approval allowing relocation of
certain raptor habitat. On April 16, 1999, the California Court of Appeal
overturned the August 1997 judgment of the trial court with respect to the
raptor habitat. The appellate court ruled that, under the Coastal Act, the
Coastal Commission should not have allowed the removal and relocation of this
raptor habitat. The court order instructing the Coastal Commission on how to
proceed in response to this decision was issued in June 1999.

         The Company anticipates that the Coastal Commission will once again
approve modifications to the LCP, in response to the courts' decisions, which
protect the environment and allow the Company to reasonably develop its
property. Upon approval by the Coastal Commission, such modifications would
require approval by the Orange County Board of Supervisors, followed by
certification of the LCP by the Coastal Commission. The Company was recently
informed by the staff of the Coastal Commission that the Commission will not be
prepared to hold its hearing on modifications to the LCP for Warner Mesa in
November 1999. The Company currently anticipates that such hearing will now be
held during the second week of January 2000, which would allow processing of
secondary permits and the commencement of infrastructure construction on Warner
Mesa during the third quarter of 2000. The Company does not believe that the
Coastal Commission process will ultimately prevent it from developing the
planned community at Warner Mesa; however, there can be no assurance in that
regard or that further litigation or administrative delay will not result.

         During the second quarter of 1999, the Company obtained approval of a
site plan for 16 homes on approximately five acres of Warner Mesa, which is in
the City of Huntington Beach (whereas the rest of the Company's Warner Mesa
property is in an unincorporated area within the County of Orange). The project,
known as "Sandover", is in full compliance with existing zoning requirements and
does not require any approvals outside the City of Huntington Beach. A tentative
tract map and the related environmental assessment for the Sandover project were
approved by the City's Planning Commission in April 1999. These approvals were
appealed by the Bolsa Chica Land Trust ("BCLT") to the City Council which
affirmed such approvals in June 1999. On July 7, 1999, the BCLT filed a lawsuit
in Orange County Superior Court, alleging that the approvals by the Huntington
Beach City Council did not comply with the California Environmental Quality Act
("CEQA"). BCLT asserted that the City should have prepared an Environmental
Impact Report, rather than a mitigated negative declaration, to analyze
potential impacts of the Sandover project. This lawsuit was heard on September
8, 1999 and the court found in favor of the City and the Company. While BCLT may
appeal the trial court's decision, construction is underway and the Company
expects to open model homes in the spring of 2000.

         Upon completion of the Company's Recapitalization as discussed in Note
2, the Company applied the principles required by Fresh-Start Reporting and the
carrying value of land held for development (Warner Mesa) was adjusted to fair
value as of September 2, 1997, after consideration of the October 1997 Coastal
Commission action discussed above. The estimation process involved in the
determination of fair value is inherently uncertain since it requires estimates
as to future events and market conditions. Such estimation process assumes the
Company's ability to complete development and dispose of its real estate
properties in the ordinary course of business based on management's present
plans and intentions. Economic, market, environmental and political conditions
may affect management's development and marketing plans. In addition, the
implementation of such development and marketing plans could be affected by the
availability of future financing for development and construction activities.
Accordingly, the ultimate fair values of the Company's real estate properties
are dependent upon future economic and market conditions, the availability of
financing, and the resolution of political, environmental and other related
issues.


NOTE 7 - PROJECT DEBT

         In January 1999, Signal Landmark, a subsidiary of the Company, entered
into a construction loan agreement with a commercial bank to finance
construction of infrastructure and the first 45 homes at phase II of the
Company's 112-home Rancho San Pasqual project in Escondido, California. The loan
is secured by a deed of trust on the Rancho San Pasqual project and requires
principle repayments upon sale of homes, with any remaining amount due in
January 2000, subject to extension at Signal Landmark's option for up to two
additional six-month periods. The loan provides a facility of $14.3 million at
an interest rate of prime plus three-fourths percent. As of September 30, 1999
approximately $5.0 million was drawn on this facility. As of September 30, 1999
approximately $.3 million of construction period interest was capitalized to the
project.


                                       8
<PAGE>

NOTE 8 - OTHER LIABILITIES

         In November 1994, the Company guaranteed approximately $4.8 million of
capital contribution notes due to AV Partnership. The notes were intended to be
primarily payable out of positive net cash flow generated by the Company's
partnership interest, however the Company has not received any financial return
from this partnership. In 1996, certain information came to the Company's
attention concerning the enforceability of the Company's guarantee of the $4.8
million of capital contribution notes. Since that time, the Company has been
attempting to negotiate a settlement of its dispute with the partnership, which
has resulted in numerous extensions of the maturity of the notes beyond the
original date in April 1999. Following the expiration of the last extension on
October 31, 1999, the Company and the partnership commenced litigation regarding
the enforceability of the guarantee. While the Company intends to vigorously
pursue this litigation, the Company has conservatively provided a reserve for
the contingent obligation on the capital contribution notes, including accrued
interest thereon, of $6.9 million and $7.1 million at December 31, 1998 and
September 30, 1999, respectively, which is included in other liabilities.


NOTE 9 - INCOME TAXES

         Upon completion of the Recapitalization on September 2, 1997, the
Company experienced an "ownership change" under Section 382 of the Internal
Revenue Code (the "Code") as a result of the increase in the percentage of the
Company's stock by value held by certain persons (including creditors who
exchanged debt for stock) of more than 50 percentage points at any time during a
three-year period. Subsequent to an ownership change, the Company's annual use
of its net operating losses ("NOLs") is generally limited to the value of the
Company's equity immediately before the ownership change multiplied by the
long-term tax-exempt rate. However, Section 382(l)(5) of the Code, the
"bankruptcy exception", provides that if the ownership change occurs through a
bankruptcy, such as the Company's Recapitalization which utilized a prepackaged
plan, and if the continuing shareholders and "qualifying creditors" before the
ownership change own at least 50% of the Company's stock after the ownership
change, the general limitations of Section 382 will not apply. "Qualifying
creditors" generally must have held their debt at least 18 months before the
prepackaged plan was filed on July 14, 1997, or the debt must have arisen in the
ordinary course of the Company's business.

         The Company believes that it qualified for the "bankruptcy exception"
of Section 382(l)(5). Under this exception, the Company was required to reduce
its NOLs by (i) the amount of interest accrued on any debt exchanged for stock
in the bankruptcy proceeding during the year of the proceeding and the three
prior taxable years and (ii) an additional amount required to make the total
reduction equal to the amount of cancellation of indebtedness income realized.
Accordingly, the Company's NOLs of approximately $271 million as of September 2,
1997 were reduced by approximately $79 million, resulting in remaining available
NOLs of approximately $192 million after reflecting the settlement with the IRS
discussed below. As reduced, the Company's NOL carryovers are fully deductible
against post-reorganization income, subject to the general rules regarding
change of ownership and expiration of NOLs. The NOLs available as of September
30, 1999 are approximately $192 million after reflecting activity since
September 2, 1997 and the settlement with the IRS discussed below.

         The Company remains subject to the general rules regarding a change of
ownership under Section 382 of the Code, which limit the availability of NOLs if
an ownership change occurs within any three-year period. If the Company were to
experience another ownership change, the use of all remaining NOLs would
generally be subject to an annual limitation equal to the value of the Company's
equity before the ownership change, multiplied by the long-term tax-exempt rate.
The first date upon which the Company experienced an ownership shift subsequent
to September 2, 1997 was June 16, 1998. The Company estimates that after giving
effect to various transactions by stockholders who hold a 5% or greater interest
in the Company, and the Company's repurchase of an aggregate of approximately
1.9 million shares in December 1998 and June 1999, it has experienced a
cumulative ownership shift as computed in accordance with Section 382 of
approximately 38%.

         In response to an unsolicited written consent from a majority of its
stockholders, the Company amended its certificate of incorporation on October
14, 1999 in order to preserve the ability of the Company to utilize its $192
million of tax loss carryforwards ("NOLs"). Since the Company's use of its NOLs
would be severely restricted if it experiences an ownership change of 50% or
more, the Company's majority stockholders requested that the Board of Directors
enact the amendments, which have been determined to be in the best interest of
the Company and its stockholders. The amendments prohibit future purchases of
the Company's common stock by persons who would become new 5% holders, and also
prohibit current holders of over 5% from increasing their positions, except in
certain permissible circumstances which would not jeopardize the Company's
ability to use its NOLs. While these amendments reduced the Company's risk of an


                                       9
<PAGE>

ownership change occurring due to the acquisition of shares by 5% stockholders,
the risk remains that an ownership change could result from the sale of shares
by existing 5% stockholders.

         The Internal Revenue Service ("IRS") proposed material audit
adjustments with respect to the tax returns of the Company and its consolidated
subsidiaries, including formerly affiliated entities, for the years ended
December 31, 1989, 1990 and 1991. The IRS proposed adjustments, if upheld, could
have resulted in Federal tax liability, before interest, of approximately $17
million and disallowance of up to $132 million of NOL carryforwards. The Company
disagreed with the positions taken by the IRS and filed protests with the IRS to
contest the proposed adjustments. In December 1998, the Company executed a
settlement agreement with the IRS with respect to the proposed adjustments
described above. As a result of this agreement, in February 1999 the Company
paid $759,000 (which includes $280,000 of tax and $479,000 of interest through
January 1999), net of the Company's refund claim for 1992 NOL carrybacks of
approximately $1.6 million, in full settlement of such claims. Under this
settlement agreement approximately $10 million of the Company's NOL
carryforwards has been disallowed. The Company utilized $8.1 million of NOL
carryback from 1992 to 1991 in connection with its refund claim. There can be no
assurance that the refund claim will be upheld. The Company has reviewed the
extent of potential accompanying state tax liability adjustments and does not
believe that any such adjustments would have a material impact on the Company's
financial statements.

         Cash payments for federal, state and local income taxes were
approximately $.1 million and $1.2 million during the nine months ended
September 30, 1998 and 1999, respectively.




                                       10
<PAGE>

 ITEM 2 -            MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

         The Company is a residential land development and homebuilding company
with properties located primarily in Southern California. The principal
activities of the Company and its consolidated subsidiaries include: (i)
obtaining zoning and other entitlements for land it owns and improving the land
for residential development; (ii) single-family residential construction in
Southern California; and (iii) providing residential real estate development
services to third parties. Once the residential land owned by the Company is
entitled, the Company may sell unimproved land to other developers or
homebuilders; sell improved land to homebuilders; or participate in joint
ventures with other developers, investors or homebuilders to finance and
construct infrastructure and homes. In April 1998, the Company sold its
commercial development business as further described in Note 4 to the Company's
Financial Statements, and accordingly the financial statements have been
reclassified to present the commercial development business as discontinued
operations. During the balance of 1999 and 2000, the Company will focus its
immediate efforts to (i) obtain approval from the California Coastal Commission
("Coastal Commission") for modifications to the Local Coastal Program ("LCP")
for the Warner Mesa project in accordance with the courts' decisions as further
described in Note 6; (ii) complete the secondary permitting for development of
Warner Mesa; and (iii) commence infrastructure construction on Warner Mesa as
soon as possible; however, the Company may also consider other strategic and
joint venture opportunities. There can be no assurance that the Company will
accomplish, in whole or in part, all or any of these goals.

         Historically, the Company has not been able to generate significant
gross operating margins or cash flows from operating activities due to the
nature of its principal assets. The substantial majority of the Company's assets
is residential land which has required significant investments before the land
could be sold to homebuilders or developed in joint ventures. In addition, the
relatively high book value of these assets has resulted in sales approximating
break-even. Pursuant to Fresh Start Reporting, implementation of the
Recapitalization through the prepackaged plan resulted in a write-down of Warner
Mesa to fair value in September 1997 (which will reduce future costs of sales)
and therefore, once the administrative and legal delays are overcome and the
entitlement process is completed, the Company expects to begin generating
profits from the Warner Mesa project. However, with the April 16, 1999 Court of
Appeal's decision which requires a third hearing before the Coastal Commission
to approve modifications to the LCP, the Company is faced with further delays in
implementing its plans for residential development on Warner Mesa. While the
Company currently anticipates obtaining Coastal Commission approval in January
2000, which would allow infrastructure construction to commence in the third
quarter of next year, there can be no assurance in that regard.

         Real estate held for development or sale and land held for development
(real estate properties) are carried at fair value as of September 2, 1997,
following adoption of Fresh-Start Reporting as discussed in Note 2, as adjusted
by subsequent activity. The Company's real estate properties are subject to a
number of uncertainties which can affect the fair values of those assets. These
uncertainties include litigation or appeals of regulatory approvals (as
discussed above) and availability of adequate capital, financing and cash flow.
In addition, future values may be adversely affected by increases in property
taxes, increases in the costs of labor and materials and other development
risks, changes in general economic conditions, including higher mortgage
interest rates, and other real estate risks such as the demand for housing
generally and the supply of competitive products. Real estate properties do not
constitute liquid assets and, at any given time, it may be difficult to sell a
particular property for an appropriate price. During the last two years, the
strengthened economy of California has resulted in improvement in the real
estate market, and the number of potential purchasers and capital sources
interested in Southern California residential properties appears to have
increased, resulting in improved prices. However, there can be no assurance
regarding the continued health of the California economy and the strength and
longevity of current conditions affecting the residential real estate market.

 LIQUIDITY AND CAPITAL RESOURCES

         The principal assets in the Company's portfolio are residential land
which must be held over an extended period of time in order to be developed to a
condition that, in management's opinion, will ultimately maximize the return to
the Company. Consequently, the Company requires significant capital to finance
its real estate development operations. Except for the effect of the gain on
disposition of the commercial development business in 1998, the Company expects
to report losses until such time as home sales commence in 2000. Historically,
sources of capital have included bank lines of credit, specific property
financings, asset sales and available internal funds. The Company is utilizing
project debt to fund the Rancho San Pasqual construction and expects to close a
construction loan for the Sandover project in the fourth quarter of 1999. The
Company has substantial cash on hand to fund project development costs for
Warner Mesa and general


                                       11
<PAGE>

and administrative expenses. In addition, the Company expects that its Rancho
San Pasqual project and Fairbanks Highlands joint venture will begin
contributing to income and generating positive cash flow in the first quarter of
2000.

FINANCIAL CONDITION

    SEPTEMBER 30, 1999 COMPARED WITH DECEMBER 31, 1998

         The $15.5 million decrease in cash and cash equivalents primarily
reflects the repurchase of shares of the Company's stock for an aggregate of
approximately $8.3 million, the $3.2 million deposit of restricted cash
described below, along with spending on project development costs for Warner
Mesa and the payment of federal income taxes related to the settlement of IRS
audits for the years ended December 31, 1989, 1990 and 1991, as discussed in
Note 9, as well as other activity presented in the Statements of Cash Flows.

         Restricted cash as of September 30, 1999 reflects collateral for a
letter of credit obtained by the Company to secure certain indemnity obligations
under a tax sharing agreement with a former affiliate.

         The $6.5 million increase in real estate held for development or sale
primarily represents infrastructure costs for the Company's 112-home Rancho San
Pasqual project in Escondido, California and its 16-home Sandover project in
Huntington Beach, California.

         The $1.5 million increase in land held for development reflects
investment in the Warner Mesa project during the first three quarters of 1999.

         Other assets decreased by $.9 million as a result of amortization of
prepaid costs and collection of a receivable.

         The $1.3 million increase in accounts payable and accrued liabilities
reflects the increase in on-going construction activity for the Company's Rancho
San Pasqual and Sandover projects.

         The $.9 million decrease in other liabilities primarily reflects the
payment of federal income taxes discussed above, and payment on a claim related
to a joint venture interest sold in 1992.

RESULTS OF OPERATIONS

         The nature of the Company's business is such that individual
transactions often cause significant fluctuations in operating results from year
to year. Furthermore, the restatement of assets and liabilities to reflect fair
value as of September 2, 1997 under Fresh-Start Reporting will reduce future
costs of sales for Warner Mesa, while increasing interest expense related to
discounted liabilities.

    THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED WITH THE THREE MONTHS ENDED
SEPTEMBER 30, 1998

         Other income, net of $.3 million for the three months ended September
30, 1999 primarily reflects interest income and settlement of certain
litigation. The $.2 million in other income, net for the three months ended
September 30, 1998 primarily reflects interest income.

         The benefit for income taxes for the three months ended September 30,
1998 and 1999 has been offset by a corresponding valuation allowance.

         Gain from discontinued operations for the 1999 period reflects income
tax refunds for overpayment of 1998 alternative minimum taxes.

    NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED WITH THE NINE MONTHS ENDED
SEPTEMBER 30, 1998

         The Company reported no revenues for the first nine months of 1999,
compared with revenues from continuing operations of $2.1 million for the first
nine months of 1998. Revenues and related costs of sale in the 1998 period
reflect only the sales of the final 35 lots in phase I of the Company's Rancho
San Pasqual project and an industrial building in


                                       12
<PAGE>

Naples, Florida. The Company does not expect to report any revenues until the
first quarter of 2000, when the delivery of homes is scheduled to commence at
its 112-home Rancho San Pasqual project in Escondido, California.

         The decrease in interest expense primarily reflects the Company's
decision to stop accruing for interest expense on capital contribution notes due
to a partnership effective April 1999 (see Note 8).

         Other income, net of $1.1 million for the nine months ended September
30, 1999 primarily reflects interest income, recovery of legal expenses related
to settled construction defects litigation and settlement of certain other
litigation. The $.7 million in other income, net for the nine months ended
September 30, 1998 primarily reflects interest income.

         The benefit for income taxes for the nine months ended September 30,
1999 has been offset by a corresponding valuation allowance.

         Gain from discontinued operations for the 1999 period reflects income
tax refunds for overpayment of 1998 alternative minimum taxes.


ITEM 3 -     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      None.

YEAR 2000 COMPLIANCE

      The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any computer programs
that have time-sensitive software may recognize a date using "00" as the year
1900 rather than the year 2000. This could result in a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions or engage in similar
normal business activities.

      The Company completed its accounting software conversion to programs that
are Year 2000 compliant in 1998 at a cost of less than $50,000. The Company
completed its third party inquiries regarding Year 2000 compliance in mid-1999
and did not identify any deficiencies requiring action. There can be no
guarantee that the systems of other companies on which the Company's systems
rely will be timely converted and would not have an adverse effect on the
Company's systems. The total cost of the Year 2000 project has been expensed as
incurred and did not have a material adverse effect on the Company's results of
operations.

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

         Certain of the foregoing information as well as certain information set
forth in Part II of this report under the heading "Legal Proceedings" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" is forward looking in nature and involves risks and uncertainties
that could significantly impact the ability of the Company to achieve its
currently anticipated goals and objectives. These risks and uncertainties
include, but are not limited to litigation or appeals of regulatory approvals
(including ongoing litigation and administrative proceedings in the Coastal Act
Lawsuit related to the Company's principal asset, Warner Mesa), injunctions
prohibiting implementation of approved development plans pending the outcome of
litigation, and availability of adequate capital, financing and cash flow. In
addition, future values may be adversely affected by increases in property
taxes, increases in the costs of labor and materials and other development
risks, changes in general economic conditions, including higher mortgage
interest rates, and other real estate risks such as the demand for housing
generally and the supply of competitive products. Real estate properties do not
constitute liquid assets and, at any given time, it may be difficult to sell a
particular property for an appropriate price. Other significant risks and
uncertainties are discussed in the Company's Annual Report on Form 10-K for the
year ended December 31, 1998.


                                       13
<PAGE>

                           PART II - OTHER INFORMATION

ITEM 1 -          LEGAL PROCEEDINGS

                  See Note 6 of "Notes to Financial Statements" included herein,
                  and in the Reports on Form 10-Q for the quarterly periods
                  ended March 31, 1999 and June 30, 1999; and see "Item 1 -
                  Business Corporate Indemnification Matters" and "Item 3 -
                  Legal Proceedings" in the Company's Annual Report on Form 10-K
                  for the year ended December 31, 1998.

ITEM 4 -          SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

                  Incorporated by reference to the Company's Current Report on
                  Form 8-K dated October 14, 1999.

ITEM 6 -          EXHIBITS AND REPORTS ON FORM 8-K

         (a)    Exhibits:

         27.1     Financial Data Schedule.

         (b)      Reports on Form 8-K:

                  None.


                                    SIGNATURE


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



                                        CALIFORNIA COASTAL COMMUNITIES, INC.



Date  November 5, 1999                  By      /s/  Sandra G. Sciutto
      ----------------                       ------------------------
                                             SANDRA G. SCIUTTO
                                             Senior Vice President and
                                             Chief Financial Officer


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