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 March 31, 2001 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.
  Employerincorporation
  or organization.)
  Identification
  No.)6 Executive Circle, Suite 250Irvine, 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: YesxNoo 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. YesxNoo The number of shares of Common Stock outstanding at
April 30, 2001 was 10,058,589.   CALIFORNIA COASTAL COMMUNITIES, INC.

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2000

I N D E X

Part
  I-
  Financial Information:Item 1 -
  Consolidated Financial StatementsConsolidated Balance Sheets
  - December 31, 2000 and March 31, 2001Consolidated
  Statements of Operations - Three Months Ended March 31, 2000 and 2001Consolidated
  Statements of Cash Flows - Three Months Ended March 31, 2000 and 2001Notes to Consolidated
  Financial StatementsItem 2 -
  Management's
  Discussion and Analysis of FinancialCondition
  and Results of OperationsItem 3 -
  Quantitative
  and Qualitative Disclosures AboutMarket
  RiskPart II
  Other Information:Item 1 -
  Legal ProceedingsItem 6 -
  Exhibits
  and Reports on Form 8-KSIGNATURE

CALIFORNIA COASTAL
COMMUNITIES, INC.

CONSOLIDATED BALANCE
SHEETS

(in millions)



December 31, 2000
  March
  31, 2001(Unaudited)ASSETSCash and cash
  equivalents
  $6.9
  $8.9Restricted cash
  1.9
  1.9Real estate held for
  current development or sale
  21.4
  17.1Land held for future
  development
  142.0
  143.1Other assets
  6.5
  5.6$178.7
  $176.6LIABILITIES AND STOCKHOLDERS'
  EQUITYLiabilities:Accounts payable and accrued
  liabilities
  $4.0
  $2.8Project debt
  9.0
  6.4Other liabilities
  23.1
  23.0Total liabilities
  36.1
  32.2Commitments
  and contingenciesStockholders' equity:Common stock
  .5
  .5Capital in excess of par value
  134.4
  135.1Retained earnings
  7.7
  8.8Total stockholders' equity
  142.6
  144.4$178.7
  $176.6





See
the accompanying notes to consolidated financial statements.

CALIFORNIA
COASTAL COMMUNITIES, INC.

CONSOLIDATED
STATEMENTS OF OPERATIONS

(unaudited)

(in
millions, except per share amounts)

Three Months EndedMarch 31,2000
  2001Revenues
  $
  $12.0Costs of sales
  
  10.0Gross operating margin
  
  2.0Selling, general and
  administrative expenses
  .9
  .8Interest expense
  .1
  .1Income
  from unconsolidated joint venture
  (.5)
  (.6)Other income, net
  (1.2)
  (.2)Income
  before income taxes
  .7
  1.9Provision for income
  taxes:Income taxes  equivalent benefit
  credited to capital in excess of par
  .3
  .7Income taxes  alternative minimum
  tax
  
  .1Total provision for income
  taxes
  .3
  .8Net income
  $.4
  $1.1Earnings per common
  share - basic and diluted
  $.04
  $.11





See the accompanying notes to consolidated
financial statements.

CALIFORNIA
COASTAL COMMUNITIES, INC.

CONSOLIDATED
STATEMENTS OF CASH FLOWS(unaudited)
(in millions)

Three Months EndedMarch 31,2000
  2001Cash
  flows from operating activities:Net income
  $.4
  $1.1Adjustments to reconcile to cash usedby operating activities:Non-cash interest expense
  .1
  .1Deferred income taxes
  .3
  .7Gains on sales of real estate
  held for current development or sale
  
  (2.0)Proceeds from asset sales, net
  
  11.9Changes in assets and liabilities:Investments in real estate
  held for current development or sale
  (4.7)
  (5.6)Investments in land held for
  future development
  (1.2)
  (1.1)Decrease in other assets
  .4
  .9Decrease in accounts payable,
  accrued and other liabilities, net
  (.4)
  (1.4)Cash provided by (used
  in) operating activities
  (5.1)
  4.6Cash flows from investing
  activities:Maturity of short-term investments
  3.0
  Cash provided by
  investing activities
  3.0
  Cash flows from
  financing activities:Borrowings of project debt
  5.4
  5.0Repayments of project debt
  
  (7.6)Return of interest income from
  restricted cash
  .2
  Cash provided by (used
  in) financing activities
  5.6
  (2.6)Net
  increase in cash and cash equivalents
  3.5
  2.0Cash and cash equivalents
  - beginning of period
  5.8
  6.9Cash and cash
  equivalents - end of period
  $9.3
  $8.9





See
the accompanying notes to consolidated financial statements.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 these unaudited consolidated financial statements reflect all
material adjustments (consisting only of normal recurring adjustments) and
disclosures necessary for the fair presentation of the results of operations
and statements of financial position 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, 2000. 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.

The Company completed its
recapitalization (the "Recapitalization") which became effective on
September 2, 1997, pursuant to a prepackaged plan of reorganization which was
confirmed by the U.S. Bankruptcy Court for the District of Delaware. 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 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. 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.

Note 2
 Significant Accounting Policies

Earnings
Per Common Share

For the three months ended March
31, 2000 and 2001, the weighted average common shares outstanding were 10.1
million. 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.

New
Accounting Pronouncements

In June 1998, the Financial
Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"), which
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. SFAS 133 was adopted on January 1, 2001 as
required. The Company does not currently hold derivatives or engage in hedging
activities; therefore, the adoption of this standard did not have a material
effect on the Company.

Impairment
of Long-Lived Assets

The Company assesses the impairment
of land held for future development and other long-lived assets in accordance
with Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long–Lived Assets and Long–Lived Assets to Be
Disposed Of" ("SFAS 121"), which requires an impaired asset
to be written down to fair value. Long-lived assets are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. As provided by SFAS 121, impairment is
evaluated by comparing an assets carrying value to the undiscounted estimated
cash flows expected from the assets operations and eventual disposition. If
the sum of the undiscounted estimated future cash flows is less than the
carrying value of the asset, an impairment loss is recognized based on the fair
value of the asset. If an impairment occurs, the fair value of an asset for
purposes of SFAS 121 is deemed to be the amount a willing buyer would pay a
willing seller for such asset in a current transaction. On September 2, 1997,
the Company completed its recapitalization pursuant to court confirmation of a
Prepackaged Plan of Reorganization, and the Company applied the principles
required by the American Institute of Certified Public Accountants SOP 90-7,
"Financial Reporting by Entities in Reorganization Under the Bankruptcy
Code" ("Fresh-Start Reporting") and the carrying value of real
estate properties was adjusted to fair value (Note 1). Following the Coastal
Commissions November 2000 suggested modifications to the Bolsa Chica Local
Coastal Program to limit development to only 65 acres of the Companys 208 acre
Bolsa Chica Mesa (see Note 4), the Company evaluated this assets carrying
value. Since the undiscounted estimated future cash flows from the upper bench
of the Bolsa Chica Mesa and the Companys additional 285 acres at Bolsa Chica
exceed its carrying value, there has been no impairment.

Note 3
 Restricted Cash

Restricted cash as of March 31,
2001 reflects a mortgage-backed security recorded at amortized cost, maturing
in June 2001.  The security is held as
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 4 - Land Held for Future Development

The
Company owns approximately 350 acres located
in Orange County, California overlooking the Pacific Ocean and the
Bolsa Chica wetlands (which were sold by the Company to the State of California
in 1997), surrounded by the City of Huntington Beach and approximately 35 miles south of downtown Los Angeles. The Companys holdings include 208 acres on a mesa north of the Bolsa Chica wetlands ("Bolsa
Chica Mesa"), approximately 100 acres
on, or adjacent to, the Huntington Mesa and 42 acres of lowlands which were
acquired by the Company in September 1997.

The planned community at Bolsa
Chica 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 2,500 homes on the Bolsa Chica Mesa 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
October 1997, in response to a trial court decision in connection with a
lawsuit which challenged the 1996 approvals of the Coastal Commission (the
"Coastal Act Lawsuit"), 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
the Bolsa Chica Mesa. The Orange County Board of Supervisors subsequently
accepted the Coastal Commissions suggested modifications.

In response to the April 1999 Court
of Appeals decision in the Coastal Act Lawsuit which prohibited relocation of
a 14-acre grove of dying eucalyptus trees which serves as raptor habitat, on
November 16, 2000, the Coastal Commission held another public hearing on the
LCP and approved suggested modifications to the LCP which would limit
development to only 65 acres of the Bolsa Chica Mesa (the "Upper
Mesa"). The Coastal Commissions latest suggested modifications would
prohibit the Company and other landowners from development on the approximately
140-acre remainder of the Bolsa Chica Mesa (the "Lower Mesa"). On
January 12, 2001 the Companys subsidiaries filed a complaint in Orange County
Superior Court challenging the Coastal Commissions November 2000 suggested modifications
to the Countys Bolsa Chica LCP. The complaint includes causes of action for
violation of the Companys constitutional rights of equal protection and due
process, and for a public taking of its private property without compensation
in contravention of the U.S. and California Constitutions. The complaint
alleges that the Coastal Commission arbitrarily abandoned decades of prior
approvals which would have permitted development on the entire Bolsa Chica
Mesa. On February 28, 2001, the Orange County Superior Court ordered that the
case be reassigned to San Diego Superior Court based on the request of the
Coastal Commission. Due to the uncertainty of the litigation process, the
Company cannot predict how long it will take to pursue its claims, or the
probability for success.

On May 8, 2001, the County of
Orange declined to consider the Coastal Commissions November 2000 suggested
modifications. In their response to the Coastal Commission, the County stated
that the Commission's suggested modifications were infeasible and unacceptable.
In particular, the County noted that the Commission's suggested modifications
would remove 140 acres of viable residentially-zoned land from the County's
plan.

While the Company vigorously
pursues its litigation to obtain entitlement for residential construction on
the Lower Mesa, it is also pursuing approval of permits for development of the
Upper Mesa. After review of environmental, economic, marketing, construction
and political considerations, the Company is currently planning to apply for
permits to build approximately 400 single family homes on the Upper Mesa.  However, the Company is continuing to
evaluate alternative development plans which could result in higher density
development. If a plan is approved by the County of Orange in early 2002, the
Company could then seek approval from the Coastal Commission during the second
quarter of 2002 and expect to commence infrastructure construction on the Upper
Mesa during the third quarter of 2002 provided that County and Coastal Commission
approvals are obtained on a timely basis, followed by the start of home
construction during the first quarter of 2003. The Company does not believe
that the Coastal Commission process will ultimately prevent it from developing
a planned community at Bolsa Chica, however, there can be no assurance in that
regard, or as to the number of acres the Company would be permitted to develop,
or that further litigation or administrative delay will not result.

The estimation process involved in
the determination of 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.
At such time as the Companys home-building activities at Bolsa Chica commence,
the Company would be required to account for such property at the lower of cost
or market, which may necessitate a write-down of its carrying value.
Accordingly, the ultimate values of the Companys land held for future
development are dependent upon future economic and market conditions, the
availability of financing, and the resolution of political, environmental and
other related issues. The development of the Companys Bolsa Chica Mesa project
is dependent upon various governmental approvals, results of litigation and
economic factors. Accordingly, the amount ultimately realized from such project
may differ materially from current estimates, as well as the projects carrying
value.



Note 5
- Project Debt

In March 2000, Signal Landmark, a
subsidiary of the Company, entered into a construction loan agreement with a
commercial bank to finance the construction of infrastructure and 16 homes at
the Companys Sandover project on the Bolsa Chica Mesa. The $9 million loan
facility, secured by a deed of trust on the Sandover project, required
principal repayments upon the sale of homes. As of March 31, 2001,
approximately $8.4 million was drawn on this facility, and repayments upon the
sale of homes aggregated $6.2 million, resulting in a remaining balance of
approximately $2.2 million. The interest rate of prime plus three-fourths
percent was 8.75% as of March 31, 2001, and the loan was repaid in full on
April 4, 2001. Construction period interest capitalized to the project was
approximately $.1 million for each of the three months ended March 31, 2000 and
2001.

Following the full repayment in January
2001 of an earlier construction loan, in March 2001, Signal Landmark entered
into an additional construction loan agreement with a commercial bank to
finance construction of final phases and the model homes at the Companys
112-home Rancho San Pasqual project in Escondido, California. The $6 million
loan facility is secured by a deed of trust on the Rancho San Pasqual project
and requires principal repayments upon the sale of homes. The loan bears an
interest rate of prime plus three-fourths percent (8.75% at March 31, 2001),
and matures on September 19, 2001. As of March 31, 2001, approximately $4.2
million had been drawn on this facility. For the three months ended March 31,
2000 and 2001, approximately $.5 million and less than $.1 million, respectively,
of construction period interest was capitalized to the project.

Note 6
 Income Taxes

The Internal Revenue Code (the
"Code") generally limits the availability of net operating losses
("NOLs") if an ownership change occurs within any three-year period
under Section 382. If the Company were to experience an ownership change, the
Companys annual use of its NOLs would generally be limited to the value of the
Companys equity immediately 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 the Recapitalization (a Section 382(l)(5)
protected ownership change), 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 40%. The federal NOLs available as of March 31, 2001 are
approximately $196 million, which expire beginning in 2005.

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 $197 million of tax loss carryforwards as
of that date. 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 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.

In 1995, 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 adjustments proposed by the IRS, 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 was disallowed. The Company utilized $8.1 million of NOL
carryback from 1992 to 1991 in connection with its refund claim. 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 less than $.1 million during the three months ended
March 31, 2000 and 2001.

Note 7 - Commitments and Contingencies

The Company and its predecessors
have, through a variety of transactions effected since 1986, disposed of
several assets and businesses, many of which are unrelated to the Company's
current operations. By operation of law or contractual indemnity provisions,
the Company has retained liabilities relating to certain of these assets and
businesses.  May of such liabilities are
supported by insurance or by indemnities from certain of the Company's predecessors
and currently or previously affiliated companies.  The Company believes its balance sheet reflects adequate reserves
for these matters.

ITEM 2 -           MANAGEMENT'S
DISCUSSION AND ANALYSIS OFFINANCIAL
CONDITION AND RESULTS OF OPERATIONSGeneral

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; and (ii) single-family residential construction in Southern
California. Once the residential land owned by the Company is entitled, the
Company may build homes, 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. During 2001, the Company will focus its
immediate efforts to (i) obtain approval from the County of Orange and the
California Coastal Commission ("Coastal Commission") for  development permits for the 65-acre upper
bench of the Bolsa Chica Mesa ("Upper Mesa") project, as further
described in Note 4 to the Companys Financial Statements; (ii) vigorously
pursue litigation (the Coastal Commission Lawsuit) challenging the Coastal
Commissions November 2000 suggested modifications to the Countys Local
Coastal Program ("LCP") which would prohibit development on the 140-acre
lower bench of the Bolsa Chica Mesa ("Lower Mesa"); and
(iii) prepare to commence infrastructure construction on the Upper Mesa in
the third quarter of 2002 provided that County and Coastal Commission approvals
are obtained on a timely basis; 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 strategic
goals.

During 2000 and the first quarter
of 2001, the Company generated significant gross operating margins and cash
flows from home-building activities on assets other than Bolsa Chica. The
Company currently has on-going Southern California projects in Huntington
Beach, Escondido and Yucaipa, and a significant venture interest in a project
in San Diego. These home-building projects are expected to generate significant
gross operating margins and cash flows in the second and third quarters of
2001. However, the Company expects that its current inventory of entitled land available
for home-building projects will be fully developed during the next six months,
except for completion of the Yucaipa project. Due to delays in approvals for
home-building at Bolsa Chica, continuation of home-building operations during
2002 is dependent upon acquisition of suitable, entitled residential lots
within the Southern California area.

Bolsa Chica is the Companys
principal asset. It has required and continues to require significant
investments for entitlement and land development activities. Due to the
November 2000 Coastal Commission approval of suggested modifications to the LCP
which would limit residential development to only 65 acres on the Upper Mesa,
the Company is faced with further delays in implementing its plans for
residential development on the Bolsa Chica Mesa. While the Company vigorously
pursues its litigation to obtain entitlement for residential construction on
the Lower Mesa, it is also pursuing approval of development permits on the
Upper Mesa. After review of environmental, economic, marketing, construction
and political considerations, the Company is currently planning to apply to the
County of Orange for permits to build approximately 400 single family homes on
the Upper Mesa.  However, the Company is
continuing to evaluate alternative development plans which could result in
higher density development. If a plan is approved by the County of Orange in
early 2002, the Company could then seek approval from the Coastal Commission in
the second quarter of 2002 and expect to commence infrastructure construction
on the Upper Mesa during the third quarter of 2002 provided that County and
Coastal Commission approvals are obtained on a timely basis, followed by the
start of home construction during the first quarter of 2003. The Company does
not believe that the Coastal Commission process will ultimately prevent it from
developing a planned community at Bolsa Chica, however, there can be no
assurance in that regard, or as to the number of acres the Company will be
permitted to develop, or that further litigation or administrative delay will
not result.

In addition to the Upper Mesa land,
the Company holds several other Bolsa Chica parcels aggregating approximately
285 acres which may be developed as residential lots or sold as park lands to
various governmental agencies, subject to the outcome of litigation against the
Coastal Commission and negotiations, if any, with potential purchasers of the
various parcels. The Company believes that those additional parcels represent
substantial value to be realized upon resolution of litigation and/or through
sales to third parties.

Real estate held for current
development or sale and land held for future development (real estate
properties) are carried at fair value as of September 2, 1997, following
adoption of Fresh-Start Reporting as discussed in Note 1, as adjusted by
subsequent activity. The Company's real estate properties are subject to a
number of uncertainties which can affect the 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 general demand for
housing 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 three years, the
robust economy of California has resulted in improvement in the real estate
market, and the number of potential purchasers interested in Southern
California residential properties has 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. In particular, the recent apparent slow-down in the national
economy and electricity shortages in California could put recessionary
pressures on the California economy and have a negative impact on the Southern
California housing 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. 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 construction on the Rancho San
Pasqual project and following the April repayment of the Sandover loan, is
utilizing internally generated cash to fund the Sandover, Yucaipa and Bolsa
Chica projects. The Companys cash on hand as of April 3, 2001 was
approximately $5.2 million, following the $3.75 million payment to settle
litigation with AV Partnership as agreed in January 2001. The Company believes
that its cash on hand, future sales proceeds and funds available under its
credit agreements will be sufficient to meet anticipated cash and capital
requirements, primarily project development costs for home-building projects
and Bolsa Chica, and general and administrative expenses, for the next 12
months. The Company expects that its Fairbanks Highlands joint venture, Rancho
San Pasqual and Sandover projects will generate positive cash flow aggregating
approximately $20 million during 2001, based on present economic conditions and
market assumptions.

Financial
Condition

March 31, 2001 Compared with December 31,
2000

The $2.0 million increase in cash
and cash equivalents primarily reflects net proceeds, after repayments of
project debt, from sales at the Rancho San Pasqual project, funding under
construction loans on the Companys Sandover and Rancho San Pasqual projects,
and cash distributions received from the Fairbanks Highlands joint venture,
partially offset by spending on project development costs, as well as other
activity presented in the Statements of Cash Flows.

Restricted cash as of March 31,
2001 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 $4.3 million decrease in real
estate held for current development or sale reflects $9.9 million charged to
cost of sales for deliveries of an aggregate of 20 homes at all three projects
during the quarter. These charges were partially offset by an aggregate of $5.6
million of infrastructure and home-building costs for the Companys 112-home
Rancho San Pasqual project in Escondido, California, the 16-home Sandover
project in Huntington Beach, California and the Yucaipa project.

The $1.1 million increase in land
held for future development reflects investment in the Bolsa Chica Mesa project
during the first three months of the year.

Other assets decreased by $.9
million, primarily reflecting cash distributions received in excess of
investment income from the Fairbanks Highlands joint venture.

Accounts payable and accrued
liabilities decreased by $1.2 million, to a balance of $2.8 million as of March
31, 2001, primarily reflecting decreased accounts payable for construction
activities at the Rancho San Pasqual project and a decrease in consulting costs
for the Bolsa Chica project.

The $2.6 million decrease in
project debt reflects aggregate repayments of $7.6 million made primarily in
conjunction with home deliveries at the Rancho San Pasqual and Sandover
projects, partially offset by $5.0 million borrowed under bank loans for
infrastructure and home construction costs at the Rancho San Pasqual and
Sandover projects.




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.

Three Months Ended March 31, 2001 Compared with the
Three Months Ended March 31, 2000

The Company reported revenues of
$12.0 million and gross operating profit of $2.0 million for the first quarter
of 2001, compared with no revenues or gross operating profit for the first
quarter of 2000. Revenues in the current period reflect deliveries of nine
homes at the Companys 112-home Rancho San Pasqual project in Escondido,
California, nine homes at the Sandover project on the Bolsa Chica Mesa in
Huntington Beach, California and the first two homes at the Yucaipa project.

The increase in income from
unconsolidated joint ventures in the three months ended March 31, 2001 as
compared to the first quarter of 2000 reflects the Companys share of profits
from deliveries of seven homes at Fairbanks Highlands during the current
period, as compared with deliveries of four homes in the comparable period of
last year.

The decrease in other income, net
from $1.2 million in the 2000 period to $.2 million in the three months ended
March 31, 2001 primarily reflects the absence of recognition in the 2000 period
of $1.1 million of non-recurring other income from a January 2000 transaction
whereby the Company donated approximately 160 acres of its land in Michigan,
and certain other assets, in exchange for an assumption of certain liabilities
and certain indemnities related to a superfund site. The Company believes its
liabilities, if any, with respect to this superfund site have been discharged
as a result of this transaction.

For the three months ended March
31, 2000 and 2001, pursuant to Fresh-Start reporting, a deferred income tax
provision of $.3 and $.7 million, respectively, is reflected in the statement
of operations, while the offsetting realization of a tax benefit from
utilization of pre-Reorganization NOL is reflected by increasing the Companys
capital in excess of par value.

ITEM 3  -               QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

None.

Safe
Harbor Statement Under the Private Securities Litigation Reform Act of 1995

Certain of the foregoing
information contains forward-looking statements that relate to future events or
the Company's future financial performance. 
These statements involve known and unknown risks, uncertainties and
other factors which may cause the Company's actual results, performance or
achievements to be materially different from any future results, performances
or achievements expressed or implied by the forward-looking statements.  In some cases, you can identify
forward-looking statements by terminology such as "may",
"will", "should", "expects", "plans",
"anticipates", "believes", "estimates",
"predicts", "potential", "continue", or the negative
of such terms or other comparable terminology. 
These forward-looking statements include, but are not limited to,
statements about the Company's plans, objectives, goals, expectations and
intentions, the number and types of homes and number of acres of land that the
Company may develop and sell, outcomes of litigation, regulatory approval
processes or administrative proceedings (including, but not limited to ongoing
litigation and administrative proceedings in the Coastal Commission Lawsuit
related to the Company's principal asset, the Bolsa Chica Mesa), the Company's
ability to continue relationships with current or future partners, the
Company's ability to expend resources to comply with environmental regulations
and local permitting requirements, the effect of certain costs, contractual
obligations and tax liabilities, both known and unknown, on the Company's
business, results of operations and financial condition, the condition and
adequacy of the Company's properties, the Company's ability to estimate cash
flow projections due to uncertainties in valuing real property, the Company's
ability to acquire residential lots in order to continue home-building
operations, the adequacy of capital, financing and cash flow required to
continue the Company's operations and land development activities, the future
condition of the real estate market in Southern California, and other
statements contained herein that are not historical facts.

PART II - OTHER
INFORMATION

ITEM 1 -           Legal Proceedings

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, 2000.

ITEM
6 -           Exhibits and Reports on
Form 8-K

(a)    Exhibits:10.1
  Agreement
  of Settlement, Compromise, and Release between AV Partnership and AV
  Development Corporation and the Registrant and Subsidiaries, dated as of
  March 27, 2001.10.2
  Extension
  and Modification of Employment Agreement between the Registrant and Mr.
  Raymond J. Pacini, dated as of April 30, 2001.10.3
  Extension and
  Modification of Employment Agreement between the Registrant and Ms. Sandra G.
  Sciutto, dated as of April 30, 2001.10.4
  Extension and
  Modification of Independent Contractor Consulting Agreement among the
  Registrant, GSSW-REO, L.C., a Texas limited liability company and Thomas W.
  Sabin, Jr., dated as of April 30, 2001.(b)
  Reports on Form 8-K:(1)
  Current
  report on Form 8-K dated January 12, 2001 attaching a press release
  announcing that the subsidiaries of the Registrant had commenced litigation
  challenging the California Coastal Commissions suggested modifications to
  the Bolsa Chica Local Coastal Program which would limit development of the
  230-acre Bolsa Chica Mesa to only 65 acres.(2)
  Current Report on Form
  8-K dated March 30, 2001 attaching a press release announcing the
  Registrants fourth quarter and year-end financial results. The press release
  also includes certain preliminary cash flow projections for the Registrants
  Bolsa Chica Upper Mesa Development Plan.



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   May 15, 2001
  By  /s/ 
  Sandra G. SciuttoSANDRA G.
  SCIUTTOSenior Vice President andChief Financial Officer