<PAGE>

           This Form 10-Q consists of 15 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 June 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 June 30, 1999 was
10,058,589.



<PAGE>

                      CALIFORNIA COASTAL COMMUNITIES, INC.

                                    FORM 10-Q

                       FOR THE QUARTER ENDED JUNE 30, 1999

                                    I N D E X

<TABLE>
<CAPTION>
                                                                                                           Page No.
Part I - Financial Information:
           <S>         <C>                                                                                 <C>
           Item 1 -    Financial Statements

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

                       Statements of Operations -
                       Three Months and Six Months Ended June 30, 1998 and 1999...................................4

                       Statements of Cash Flows -
                       Six Months Ended June 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
</TABLE>
Part II - Other Information:
<TABLE>
<CAPTION>
           <S>      <C>                                                                                     <C>
           Item 1 - Legal Proceedings............................................................................13

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

           Item 5 - Other Information............................................................................14

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

SIGNATURE........................................................................................................15
</TABLE>

                                       2
<PAGE>

                      CALIFORNIA COASTAL COMMUNITIES, INC.

                                 BALANCE SHEETS

                                  (in millions)
<TABLE>
<CAPTION>
                                                                  December 31,                  June 30,
                                                                      1998                        1999
                                                                  ------------               ------------
     ASSETS
<S>                                                                  <C>                       <C>
Cash and cash equivalents ....................................       $  26.6                   $  12.5
Restricted cash...............................................          --                         3.3
Real estate held for development or sale......................           3.2                       6.7
Land held for development.....................................         137.3                     138.5
Other assets..................................................           7.1                       6.2
                                                                      ------                    ------

                                                                     $ 174.2                   $ 167.2
                                                                     =======                   =======

      LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:
     Accounts payable and accrued liabilities.................       $   1.7                   $   1.6
     Project debt.............................................          --                         3.7
     Other liabilities........................................          29.8                      28.9
                                                                      ------                    ------

     Total liabilities........................................          31.5                      34.2
                                                                      ------                    ------


Stockholders' equity:
     Common stock ............................................            .6                        .5
     Capital in excess of par value...........................         138.4                     130.2
     Retained earnings........................................           3.7                       2.3
                                                                      ------                    ------

     Total stockholders' equity...............................         142.7                     133.0
                                                                      ------                   -------

                                                                     $ 174.2                   $ 167.2
                                                                     =======                   =======
</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     Three Months     Six Months        Six Months
                                                         Ended           Ended             Ended           Ended
                                                     June 30, 1998   June 30, 1999     June 30, 1998    June 30, 1999
                                                     -------------   -------------     -------------    -------------

<S>                                                  <C>             <C>               <C>              <C>
Revenues...........................................      $   1.7      $    --              $  2.1       $    --

Costs of sales.....................................          1.7           --                 1.8            --
                                                            ----          ----               ----           ----

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

General and administrative expenses................           .8            .8                1.9            1.6
Interest expense...................................           .4            .1                 .7             .5
Other income, net..................................          (.5)          (.5)               (.5)           (.8)
                                                             ----         -----              -----          ----

Loss from continuing operations before
   income taxes....................................          (.7)          (.4)              (1.8)          (1.3)

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

Loss from continuing operations....................          (.3)          (.5)              (1.4)          (1.4)

Discontinued operations:
   Income (loss) from operations, net of
      income taxes of $.2, $0, $.2 and $0,
      respectively.................................          (.6)          --                  .5            --
   Gain on disposition, net of income
        taxes of $3.3..............................          7.2           --                 7.2            --
                                                            ----          ----               ----           ----

Net income (loss)..................................        $ 6.3         $ (.5)             $ 6.3          $(1.4)
                                                           =====         ======             =====          =====


Earnings (loss) per common share - basic and diluted:
   Continuing operations...........................        $(.02)        $(.05)            $ (.12)        $ (.12)
   Discontinued operations.........................          .55           --                 .65            --
                                                           -----         -----              -----          -----
Earnings (loss) per common share - basic and diluted       $ .53         $(.05)             $ .53         $ (.12)
                                                           ======        ======             =====         =======
</TABLE>



               See the accompanying notes to financial statements.

                                       4

<PAGE>

                      CALIFORNIA COASTAL COMMUNITIES, INC.

                            STATEMENTS OF CASH FLOWS

                                  (in millions)
<TABLE>
<CAPTION>
                                                                            Six Months               Six Months
                                                                                Ended                     Ended
                                                                          June 30, 1998              June 30, 1999
                                                                          -------------              -------------
<S>                                                                       <C>                        <C>
Cash flows from operating activities:
      Net income (loss)................................................       $   6.3                  $  (1.4)
      Adjustments to reconcile to cash provided (used)
         by operating activities:
         Non-cash interest expense.....................................            .7                       .4
         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.......           (.1)                    (3.5)
         Investments in land held for development......................          (2.4)                    (1.2)
         Decrease (increase) in other assets...........................           (.7)                      .9
         Decrease in accounts payable, accrued
           and other liabilities.......................................          (2.6)                    (1.4)
                                                                               -------                   ------

              Cash used by operating activities of
                   continuing operations...............................          (4.8)                    (6.3)
                                                                                ------                   ------

              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.......................................          --                        3.7
      Deposits of restricted cash......................................          --                       (3.2)
      Issuance of restricted stock.....................................           1.1                       --
      Repurchases of common stock......................................          --                       (8.3)
                                                                                ----                     ------

              Cash (used) provided by financing activities
                  of continuing operations.............................           1.1                     (7.8)
                                                                                -----                    ------

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

Net increase (decrease) in cash and cash equivalents...................          26.1                    (14.1)

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

Cash and cash equivalents - end of period..............................        $ 33.3                    $12.5
                                                                               ======                    ======
</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 Report
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 six
months ended June 30, 1998 and 1999 the weighted average common shares
outstanding were 11.9 million and 11.3 million, respectively. For the three
months ended June 30, 1998 and 1999, the weighted average common shares
outstanding were 12.0 million and 11.1 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) over the last seven months. 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 (loss) related to
discontinued operations were $.9 million and $(.6) million, respectively, for
the three months ended June 30, 1998 and $28.1 million and $.5 million,
respectively for the six months ended June 30, 1999, through the date of sale.

NOTE 5 - RESTRICTED CASH

         Restricted cash as of June 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 currently anticipates that the Coastal Commission
will hold a hearing and approve modifications to the LCP for Warner Mesa in
November 1999, which would allow processing of secondary permits and the
commencement of infrastructure construction on Warner Mesa during the middle
of next year. 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.

         The Company recently 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 asserts that the City should have
prepared an Environmental Impact Report, rather than a mitigated negative
declaration, to analyze potential impacts of the Sandover project. The
Company believes this lawsuit is without merit, and will vigorously defend
its right to develop this property. Grading operations began at the site on
July 29, 1999, which is the same date that the court denied BCLT's motion for
a temporary restraining order. On August 11, 1999 the court also denied BCLT's
motion for a preliminary injunction. A hearing on the merits of the case is
scheduled for September 8, 1999.

         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 June
30, 1999 approximately $3.7 million was drawn on this facility. For the six
months ended June 30, 1999 approximately $.1 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 are primarily
payable out of positive net cash flow generated by the Company's partnership
interest and were due in April 1999 based on the original terms. The maturity
of these notes has been extended to August 31, 1999. The Company does not
expect to receive a financial return from this partnership and in 1995
reserved for its contingent obligation on the $4.8 million of capital
contribution notes. 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. While the Company intends to
dispute the enforceability of the guarantee, 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 June 30, 1999, respectively, which is included in
other liabilities.

NOTE 9 - INCOME TAXES

         Upon completion of the Recapitalization, 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 qualifies for the "bankruptcy
exception" of Section 382(l)(5). Under this exception, the Company is
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 have been 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 will be fully
deductible against post-reorganization income provided there is not a second
ownership change as discussed below, and subject to the general rules
regarding expiration of NOLs. The NOLs available as of June 30, 1999 are
approximately $190 million after reflecting activity since September 2, 1997
and the settlement with the IRS discussed below.

         If the Company were to experience another ownership change within
two years of the September 2, 1997 effective date of the Recapitalization, as
the result of a 50 percentage point change in ownership, the second ownership
change would not qualify for Section 382(l)(5) treatment and the use of all
remaining NOLs would be disallowed. Pursuant to Section 382(l)(5)(D), the
Section 382 Limitation from and after the second ownership change would be
zero, and thus would eliminate the availability of any remaining unused
portion of the $192 million of NOLs which existed as of September 2, 1997.
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%.

         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
                                       9

<PAGE>

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 $.9 million during the six months ended June
30, 1998 and 1999, respectively.

                                       10
<PAGE>


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


           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 1999, 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 November of this year,
which would allow infrastructure construction to commence in the middle 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. Recently, 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.

                                       11

<PAGE>

Except for the effect of the gain on disposition of the commercial
development business in 1998, the Company expects to report losses or
insignificant income until such time as sales can commence at Warner Mesa.
Historically, sources of capital have included bank lines of credit, specific
property financings, asset sales and available internal funds. The Company
has substantial cash on hand to fund project development costs for Warner
Mesa and general and administrative expenses. In addition, the Company
expects that its Rancho San Pasqual project and Fairbanks Highlands joint
venture will begin generating positive cash flow in the fourth quarter of 1999
and the first quarter of 2000, respectively.

FINANCIAL CONDITION

    JUNE 30, 1999 COMPARED WITH DECEMBER 31, 1998

         The $14.1 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 June 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 $3.1 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.

         The $1.2 million increase in land held for development reflects
investment in the Warner Mesa project during the first half of 1999.

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

         The $.9 million decrease in other liabilities primarily reflects the
payment of federal income taxes discussed above, and the 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 JUNE 30, 1999 COMPARED WITH THE THREE MONTHS ENDED
JUNE 30, 1998

         The Company reported no revenues for the second quarter of 1999,
compared with revenues from continuing operations of $1.7 million for the
second quarter of 1998. Revenues and related costs of sale in the 1998 period
reflect only the sale of the final 35 lots in phase I of the Company's Rancho
San Pasqual project. The Company does not expect to report any revenues until
the fourth quarter of 1999, 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 $.5 million for the three months ended June 30,
1999 primarily reflects interest income and recovery of legal expenses
related to settled construction defects litigation. The $.5 million in other
income for the three months ended June 30, 1998 primarily reflects interest
income.

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

                                       12

<PAGE>

    SIX MONTHS ENDED JUNE 30, 1999 COMPARED WITH THE SIX MONTHS ENDED
    JUNE 30, 1998

         The Company reported no revenues for the first six months of 1999,
compared with revenues from continuing operations of $2.1 million for the
first six 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 Naples,
Florida. The Company does not expect to report any revenues until the fourth
quarter of 1999, 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 $.8 million for the six months ended June 30,
1999 primarily reflects interest income and recovery of legal expenses
related to settled construction defects litigation. The $.5 million in other
income, net for the six months ended June 30, 1998 primarily reflects
interest income.

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

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 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.

                           PART II - OTHER INFORMATION

ITEM 1 - Legal Proceedings

                 See Note 6 of "Notes to Financial Statements" included herein,
                 and "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.

                                       13

<PAGE>

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

                  The Annual Meeting of the Company's stockholders was held on
                  May 18, 1999. A quorum of common stock was present in person
                  or by proxy. The following proposals were approved by the
                  requisite vote of the Company's stockholders entitled to
                  vote, as follows:

                  Proposal No. 1: THE DIRECTOR PROPOSAL. The Company's director
                  proposal recommended election of five directors to a one year
                  term (the "Director Proposal"). Set forth below is a table of
                  how the votes were cast for each nominee. Such votes
                  constituted the affirmative votes for the Director Proposal,
                  including all nominees, by the holders of approximately 99.7%
                  of the outstanding Common Stock represented in person or by
                  proxy at the Annual Meeting, at which the holders of a
                  majority of the outstanding shares were present in person or
                  by proxy to constitute a quorum.
<TABLE>
<CAPTION>
                         Name                              Votes Cast "For Nominee"         Votes "Withheld"
                        ------                            --------------------------       ------------------
                  <S>                                     <C>                              <C>
                  Phillip R. Burnaman II                         8,959,660                        20,853
                  David J. Matlin                                8,959,783                        20,730
                  Raymond J. Pacini                              8,959,934                        20,579
                  Thomas W. Sabin, Jr.                           8,960,094                        20,419
                  J. Thomas Talbot                               8,960,068                        20,445
</TABLE>
                  Proposal No. 2: THE REVERSE AND FORWARD SPLIT PROPOSAL. The
                  holders of Common Stock cast 8,940,154 votes for and 34,824
                  votes against the Company's proposal to approve two
                  amendments to the Company's Amended and Restated Certificate
                  of Incorporation to effect a 1:100 reverse stock split,
                  immediately followed by a 100:1 forward stock split (the
                  "Reverse and Forward Split Proposal"). There were 6,335
                  abstentions and no broker non-votes by the holders of shares
                  of Common Stock with respect to the Reverse and Forward Split
                  Proposal. Such votes constituted the affirmative vote for the
                  Reverse and Forward Split Proposal by the holders of
                  approximately 99.5% of the outstanding Common Stock
                  represented in person or by proxy at the Annual Meeting, at
                  which the holders of a majority of the outstanding shares
                  were present in person or by proxy to constitute a quorum.

                  Proposal No. 3: THE AUDITOR PROPOSAL. The holders of Common
                  Stock cast 8,968,763 votes for and 9,770 votes against the
                  Company's proposal to ratify the appointment of Deloitte &
                  Touche, LLP as the Company's independent auditors for the
                  fiscal year ending December 31, 1999 (the "Auditor
                  Proposal"). There were 2,780 abstentions and no broker
                  non-votes by the holders of shares of Common Stock with
                  respect to the Auditor Proposal. Such votes constituted the
                  affirmative vote for the Auditor Proposal by the holders of
                  approximately 99.9% of the outstanding Common Stock
                  represented in person or by proxy at the Annual Meeting, at
                  which the holders of a majority of the outstanding shares
                  were present in person or by proxy to constitute a quorum.

ITEM 5 -          OTHER INFORMATION

                  Stockholders wishing to bring a proposal before the
                  Registrant's 2000 Annual Meeting of Stockholders (but not
                  wishing to include such proposal in the Registrant's Proxy
                  Statement) must cause written notice of such proposal to be
                  received by the Secretary of the Registrant at its principal
                  executive offices no later than December 11, 2000.

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

         (a)    Exhibits:

         27.1     Financial Data Schedule.

         (b)      Reports on Form 8-K:

                  Current report on Form 8-K dated April 9, 1999, attaching a
                  press release announcing that the Registrant had entered into
                  an option agreement with Wheelabrator Technologies Inc.
                  ("WTI") for the repurchase of approximately 11% of the
                  Registrant's outstanding shares of common stock held by WTI.

                                       14

<PAGE>
                  Current report on Form 8-K dated April 19, 1999 attaching a
                  press release describing the results of the California Court
                  of Appeal's ruling adverse to the Registrant which will
                  require the Registrant to seek further approval from the
                  California Coastal Commission with respect to the Warner Mesa
                  project.

                  Current report on Form 8-K dated June 21, 1999, attaching a
                  press release announcing that on June 18, 1999 the Registrant
                  completed its previously announced reverse and forward common
                  stock splits, which resulted in 192,413 odd-lot shares being
                  cashed-out at a pre-split price of $6.51 per share.


                                    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  August 12, 1999                 By     /s/  Sandra G. Sciutto
      ----------------                     ------------------------
                                           SANDRA G. SCIUTTO
                                           Senior Vice President and
                                           Chief Financial Officer

                                       15