<PAGE>

           This Form 10-Q consists of 13 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 March 31, 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

      Former name, address and fiscal year, if changed since last report.

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

                                    Yes X   No 
                                       ---    ---

         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 April 30, 1999 was
11,477,610.





<PAGE>



                      CALIFORNIA COASTAL COMMUNITIES, INC.

                                    FORM 10-Q

                      FOR THE QUARTER ENDED MARCH 31, 1999

                                    I N D E X


<TABLE>
<CAPTION>
                                                                                              Page No.
                                                                                              --------
<S>                                                                                           <C>
PART I - Financial Information:

           Item 1 -    Financial Statements


                       Balance Sheets -
                       December 31, 1998 and March 31, 1999..........................................3

                       Statements of Operations -
                       Three Months Ended March 31, 1998 and 1999....................................4

                       Statements of Cash Flows -
                       Three Months Ended March 31, 1998 and 1999....................................5

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


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


PART II - Other Information:


           Item 1 - Legal Proceedings...............................................................13

           Item 6 - Exhibits and Reports on Form 8-K................................................13


SIGNATURE...........................................................................................13
</TABLE>



                                       2

<PAGE>



                      CALIFORNIA COASTAL COMMUNITIES, INC.

                                 BALANCE SHEETS

                                  (in millions)



<TABLE>
<CAPTION>
                                                           DECEMBER 31, 1998       MARCH 31, 1999
                                                           -----------------       --------------
<S>                                                        <C>                     <C>
     ASSETS

Cash and cash equivalents ...................                  $ 26.6                  $ 21.8
Restricted cash .............................                    --                       3.2
Real estate held for development or sale ....                     3.2                     4.3
Land held for development ...................                   137.3                   137.9
Other assets ................................                     7.1                     6.5
                                                               ------                  ------

                                                               $174.2                  $173.7
                                                               ------                  ------
                                                               ------                  ------
     LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:

     Accounts payable and accrued liabilities                  $  1.7                  $  1.7
     Project debt ...........................                    --                       1.4
     Other liabilities ......................                    29.8                    28.8
                                                               ------                  ------

     Total liabilities ......................                    31.5                    31.9
                                                               ------                  ------
Stockholders' equity:

     Common stock ...........................                      .6                      .6
     Capital in excess of par value .........                   138.4                   138.4
     Retained earnings ......................                     3.7                     2.8
                                                               ------                  ------

     Total stockholders' equity .............                   142.7                   141.8
                                                               ------                  ------

                                                               $174.2                  $173.7
                                                               ======                  ======
</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
                                                                       ENDED                  ENDED
                                                                   MARCH 31, 1998         MARCH 31, 1999
                                                                   --------------         --------------
<S>                                                                <C>                    <C>
Revenues ............................................                  $  .4                   $--

Costs of Sales ......................................                     .1                    --   
                                                                       -----                   -----

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

General and administrative expenses .................                    1.1                      .8
Interest expense ....................................                     .3                      .4
Other income, net ...................................                   --                       (.3)
                                                                       -----                   -----

Loss from continuing operations before
     income taxes ...................................                   (1.1)                    (.9)

Provision for income taxes ..........................                   --                      --   
                                                                       -----                   -----

Loss from continuing operations .....................                   (1.1)                    (.9)

Income from discontinued operations, net
     of income taxes of $0 ..........................                    1.1                    --   
                                                                       -----                   -----

Net loss ............................................                  $--                     $ (.9)
                                                                       -----                   -----
                                                                       -----                   -----

Earnings (loss) per common share - basic and diluted:
    Continuing operations ...........................                  $(.09)                  $(.08)
    Discontinued operations .........................                    .09                    --   
                                                                       -----                   -----

                                                                       $--                     $(.08)
                                                                       -----                   -----
                                                                       -----                   -----
</TABLE>





              See the accompanying notes to financial statements.

                                       4
<PAGE>


                      CALIFORNIA COASTAL COMMUNITIES, INC.

                            STATEMENTS OF CASH FLOWS

                                  (in millions)

<TABLE>
<CAPTION>
                                                                              THREE MONTHS             THREE MONTHS
                                                                                  ENDED                     ENDED
                                                                             MARCH 31, 1998           MARCH 31, 1999
                                                                             --------------           --------------
<S>                                                                          <C>                      <C>
Cash flows from operating activities:
      Net loss .................................................                  $--                     $ (.9)
      Adjustments to reconcile to cash provided (used)
         by operating activities:
         Non-cash interest expense .............................                     .3                      .3
         Gains on asset sales ..................................                    (.3)                   --
         Proceeds from asset sales, net ........................                     .3                    --
         Investments in real estate held for development or sale                   --                      (1.1)
         Investments in land held for development ..............                   (1.5)                    (.6)
         Decrease in other assets ..............................                   --                        .6
         Increase (decrease) in accounts payable, accrued
           and other liabilities ...............................                    1.7                    (1.3)
                                                                                  -----                   -----

              Cash provided (used) by operating activities
                   of continuing operations ....................                     .5                    (3.0)
                                                                                  -----                   -----

              Cash used by operating activities of
                  discontinued operations ......................                  (16.7)                   --   
                                                                                  -----                   -----

Cash flows from financing activities:
      Borrowings of project debt ...............................                   --                       1.4
      Deposit of restricted cash ...............................                   --                      (3.2)
                                                                                  -----                   -----

              Cash used by financing activities
                  of continuing operations .....................                   --                      (1.8)
                                                                                  -----                   -----

              Cash provided by financing activities
                  of discontinued operations ...................                   15.2                    --   
                                                                                  -----                   -----

Net decrease in cash and cash equivalents ......................                   (1.0)                   (4.8)

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

Cash and cash equivalents - end of period ......................                  $ 6.2                   $21.8
                                                                                  -----                   -----
                                                                                  -----                   -----
</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. The financial information presented
herein reflects all adjustments, including Fresh-Start Reporting adjustments as
discussed below, 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 (LOSS) PER COMMON SHARE

         The Company computes earnings per share in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings per Share". For the three
months ended March 31, 1998 and 1999, the weighted average common shares
outstanding were 11.9 million and 11.5 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 490,000 shares by the Company in December
1998. 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.



                                       6
<PAGE>

         On April 8, 1999 the Company entered into an option agreement with
Wheelabrator Technologies Inc. ("Wheelabrator") to repurchase approximately 1.23
million shares of the Company's common stock at an exercise price of $5.75 per
share, or approximately $7.1 million, in an unsolicited private transaction.
Under the terms of the agreement, either party has the right to cause the
purchase and sale of the shares to occur at any time during the exercise period
between June 1 and June 30, 1999.

         The following pro forma condensed balance sheet as of March 31, 1999
gives effect to the repurchase of the 1.23 million shares of the Company's
common stock under the Wheelabrator option, as if the transaction had occurred
on March 31, 1999 (in millions, except per share amounts):

<TABLE>
<CAPTION>
                                                         HISTORICAL      ADJUSTMENTS        PRO FORMA
                                                         ----------      -----------        ---------
         <S>                                             <C>             <C>                <C>
         Assets:
              Cash and cash equivalents..............     $  21.8          $   (7.1)         $  14.7
              All other assets.......................       151.9              --              151.9
                                                          -------          --------          -------

                                                          $ 173.7          $   (7.1)         $ 166.6
                                                          -------          --------          -------
                                                          -------          --------          -------

         Total liabilities...........................     $  31.9          $   --            $  31.9
         Stockholders' equity........................       141.8              (7.1)           134.7
                                                          -------          ---------         -------

                                                          $ 173.7          $   (7.1)         $ 166.6
                                                          -------          --------          -------
                                                          -------          --------          -------

         Shares outstanding..........................        11.5              (1.2)            10.3
         Book value per share........................     $ 12.33                            $ 13.08
</TABLE>

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 $6.1 million ($10.5 million pretax) from this transaction in
the second quarter of 1998. Accordingly, the historical results of such business
are reflected as discontinued operations in the Company's statements of
operations. The continuing operations of the Company reflect its residential
business. Revenues and net income related to discontinued operations were $27.2
million and $1.1 million, respectively, for the three months ended March 31,
1998.


NOTE 5 - RESTRICTED CASH

Restricted cash as of March 31, 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.



                                       7
<PAGE>

         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.

         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 is not expected to be issued until July 1999. 
Therefore, the Company does not expect the Coastal Commission to be prepared 
to hold a hearing on modifications to the LCP for Warner Mesa prior to 
October 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 obtaining Coastal Commission approval of modifications to the LCP 
by the end of this year, which would allow processing of secondary permits 
and the commencement of infrastructure construction on Warner Mesa during the 
second quarter 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 is also processing 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 for the Sandover
project was approved by the City's Planning Commission on April 27, 1999. The
related environmental assessment was also approved by the City's Planning
Commission but appealed by the Bolsa Chica Land Trust to the City Council, which
is expected to review such appeal in June, 1999. The Company currently expects
to begin construction of this 16-unit project in the third quarter of 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.



                                       8
<PAGE>

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 March 31, 1999
approximately $1.4 million was drawn on this facility. For the three months
ended March 31, 1999 approximately $.1 million of construction period interest
was capitalized to the project.


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 July 6, 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 guaranties, 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
March 31, 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 March 31, 1999 are
approximately $189 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,



                                       9
<PAGE>

1997. The Company estimates that after giving effect to the expected repurchase
of approximately 1.23 million shares from Wheelabrator in June 1999, it will
have experienced a cumulative ownership shift as computed in accordance with
Section 382 of approximately 31%.

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

         Cash payments for federal, state and local income taxes were
approximately $.1 million and $.9 million during the three months ended March
31, 1998 and 1999, respectively.



                                       10
<PAGE>

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

GENERAL

         The Company is a residential land development and homebuilding company
with properties located primarily in Southern California. The principal
activities of the Company and its consolidated subsidiaries include: (i)
obtaining zoning and other entitlements for land it owns and improving the land
for residential development; (ii) single-family residential construction in
Southern California; and (iii) providing residential real estate development
services to third parties. Once the residential land owned by the Company is
entitled, the Company may sell unimproved land to other developers or
homebuilders; sell improved land to homebuilders; or participate in joint
ventures with other developers, investors or homebuilders to finance and
construct infrastructure and homes. In April 1998, the Company sold its
commercial development business as further described in Note 4 to the Company's
Financial Statements, and accordingly the financial statements have been
reclassified to present the commercial development business as discontinued
operations. During 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 aniticipates 
obtaining Coastal Commission approval, which would allow infrastructure 
construction to commence in the second quarter of next year, there can be no 
assurance in that regard.

         Real estate held for development or sale and land held for development
(real estate properties) are carried at fair value as of September 2, 1997,
following adoption of Fresh-Start Reporting as discussed in Note 2, as adjusted
by subsequent activity. The Company's real estate properties are subject to a
number of uncertainties which can affect the fair values of those assets. These
uncertainties include litigation or appeals of regulatory approvals (as
discussed above) and availability of adequate capital, financing and cash flow.
In addition, future values may be adversely affected by increases in property
taxes, increases in the costs of labor and materials and other development
risks, changes in general economic conditions, including higher mortgage
interest rates, and other real estate risks such as the demand for housing
generally and the supply of competitive products. Real estate properties do not
constitute liquid assets and, at any given time, it may be difficult to sell a
particular property for an appropriate price. 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. 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, stock repurchases and general and administrative expenses.


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<PAGE>

FINANCIAL CONDITION

    MARCH 31, 1999 COMPARED WITH DECEMBER 31, 1998

         The $4.8 million decrease in cash and cash equivalents primarily
reflects the $3.2 million deposit of restricted cash, 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 March 31, 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 $1.1 million increase in real estate held for development or sale
represents infrastructure costs for the Company's 112-home Rancho San Pasqual
project in Escondido, California.

         The $.6 million increase in land held for development reflects
investment in the Warner Mesa project during the first quarter.

         Other assets decreased by $.6 million as a result of collection of a
receivable and amortization of prepaid costs.

         The $1.0 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 MARCH 31, 1999 COMPARED WITH THE THREE MONTHS ENDED 
MARCH 31, 1998

         The Company reported no revenues for the first quarter of 1999,
compared with revenues from continuing operations of $.4 million for the first
quarter of 1998. Revenues and related costs of sale in the 1998 period reflect
only the sale of 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 general and administrative expenses from $1.1 million
in the 1998 period to $.8 million in the 1999 period primarily reflects the
reduction in overhead costs which occurred in conjunction with the sale of the
Company's commercial development business in April 1998.

         Interest expense includes $.3 million of noncash interest expense in
each period on (i) discounted liabilities under Fresh-Start Reporting and (ii)
capital contribution notes due to a partnership.

         The $.3 million in other income, net for the three months ended March
31, 1999 primarily reflects interest income. The absence of other income, net
for the three months ended March 31, 1998 primarily reflects amortization of
Reorganization value in excess of net assets, offset by interest income.

         The benefits for deferred income taxes for the three months ended March
31, 1998 and 1999 have been offset by corresponding valuation allowances.


ITEM 3 -     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         None.



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<PAGE>

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.


ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

         (a)    Exhibits:

         27.1     Financial Data Schedule.

         (b)      Reports on Form 8-K:

                  No reports on Form 8-K were filed during the three months
ended March 31, 1999.


                                    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 14, 1999                    By   /s/ Sandra G. Sciutto
     --------------                       ------------------------
                                          SANDRA G. SCIUTTO
                                          Senior Vice President and
                                          Chief Financial Officer


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