-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QXilPLyyv7YZtn+HTNUwOPOHVjLB8uW83ewlx5GEqZ3l2PlpN/1eldZeW0ieFleL v0gKisG1HQq0QPPs55yz/g== 0001206774-03-000914.txt : 20031231 0001206774-03-000914.hdr.sgml : 20031231 20031231143503 ACCESSION NUMBER: 0001206774-03-000914 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20030630 FILED AS OF DATE: 20031231 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CALPROP CORP CENTRAL INDEX KEY: 0000016496 STANDARD INDUSTRIAL CLASSIFICATION: OPERATIVE BUILDERS [1531] IRS NUMBER: 954044835 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06844 FILM NUMBER: 031080328 BUSINESS ADDRESS: STREET 1: 13160 MINDANAO WAY STREET 2: STE 180 CITY: MARINA DEL REY STATE: CA ZIP: 90292 BUSINESS PHONE: 3103064314 MAIL ADDRESS: STREET 1: 13160 MINDANAO WAY STREET 2: STE 180 CITY: MARINA DEL REY STATE: CA ZIP: 90292 10-Q 1 d13729.txt SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 (Mark One) |X| Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 30, 2003 or |_| Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _________________ to _________________ Commission File Number 1-6844 CALPROP CORPORATION (Exact name of registrant as specified in its charter) California 95-4044835 ---------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 13160 Mindanao Way, Suite 180, Marina Del Rey, California 90292 --------------------------------------------------------- ----- (Address of principal executive offices) (Zip Code) (Registrant's telephone number, including area code) (310) 306-4314 ------------------ Not Applicable (Former name, former address and former 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 | | NO |X| Number of shares outstanding of each of Registrant's classes of common stock, as of December 19, 2003: Number of Shares Title of Each Class Outstanding - ------------------- ----------- Common Stock, no par value 10,239,105 CALPROP CORPORATION Part I Item I - Financial Information Set forth is the unaudited quarterly report for the quarters ended June 30, 2003 and 2002, for Calprop Corporation. The information set forth reflects all adjustments which were, in the opinion of management, necessary for a fair presentation. CALPROP CORPORATION CONSOLIDATED BALANCE SHEETS (Unaudited) ASSETS June 30, December 31, 2003 2002 ----------- ------------ Investment in Real Estate (Notes 5 and 6) Real estate under development $13,308,057 $24,166,829 Rental property, (net of accumulated depreciation of $268,125 and $121,875, respectively) 9,700,000 11,182,886 ----------- ----------- Total investment in real estate 23,008,057 35,349,715 Other Assets: Cash and cash equivalents 1,574,686 3,444,541 Deferred tax assets (Note 2) 6,535,343 Other assets 728,197 745,347 ----------- ----------- Total other assets 2,302,883 10,725,231 ----------- ----------- Total assets $25,310,940 $46,074,946 =========== =========== (Continued) The accompanying notes are an integral part of these financial statements. 3 CALPROP CORPORATION CONSOLIDATED BALANCE SHEETS (Unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, December 31, 2003 2002 ------------ ------------ Liabilites: Trust deeds and notes payable $ 14,420,211 $ 19,726,186 Related-party notes 13,865,168 13,987,634 ------------ ------------ Total trust deeds, notes payable and related-party notes 28,285,379 33,713,820 Accounts payable and accrued liabilities 1,824,436 2,724,856 Deposit 2,000,000 Warranty reserves 758,050 757,550 ------------ ------------ Total liabilities 30,867,865 39,196,226 ------------ ------------ Stockholders' equity: Common stock, no par value Authorized - 20,000,000 shares Issued and outstanding - 10,239,105 and 10,235,305 shares at June 30, 2003 and December 31, 2002, respectively 10,239,105 10,235,305 Additional paid-in capital 25,850,776 25,849,446 Deferred compensation (28,600) (28,600) Stock purchase loans (538,384) (527,858) Accumulated deficit (41,079,822) (28,649,573) ------------ ------------ Total stockholders' (deficit) equity (5,556,925) 6,878,720 ------------ ------------ $ 25,310,940 $ 46,074,946 ============ ============
(Concluded) The accompanying notes are an integral part of these financial statements. 4 CALPROP CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Six Months Ended June 30, June 30, ------------------------------------------------------------ 2003 2002 2003 2002 ------------ ------------ ------------ ------------ Development operations: Real estate sales $ 7,592,899 $ 43,058,399 $ 12,165,178 $ 64,350,669 Cost of real estate sales 7,337,347 42,305,392 12,440,305 63,502,888 ------------ ------------ ------------ ------------ Income (loss) from development operations before recognition of impairment of real estate 255,552 753,007 (275,127) 847,781 Recognition of impairment of real estate under development (4,686,150) (1,832,225) (4,686,150) (1,832,225) ------------ ------------ ------------ ------------ Loss from development operations (4,430,598) (1,079,218) (4,961,277) (984,444) Income from investment in real estate venture (Note 5) 185,022 109,253 Other income: Rental (Note 6) 258,745 512,527 Gain on sale of investment in real estate venture (Note 5) 2,000,000 Interest and miscellaneous 12,261 190,251 31,301 252,299 Management fee (Note 5) 207,182 ------------ ------------ ------------ ------------ Total other income 271,006 190,251 2,543,828 459,481 Other expenses: Rental operating (Note 6) 163,187 275,277 Recognition of impairment of rental property (Note 6) 1,342,316 1,342,316 General and administrative 467,112 521,006 952,155 1,076,452 Depreciation 71,138 142,275 Interest 379,930 764,670 ------------ ------------ ------------ ------------ Total other expenses 2,423,683 521,006 3,476,693 1,076,452 Minority interests (Note 4) 764 235 ------------ ------------ ------------ ------------ Loss before provision for income taxes (6,583,275) (1,224,951) (5,894,906) (1,492,397) Provision for income taxes (Note 2) 6,260,318 6,535,343 ------------ ------------ ------------ ------------ Net loss ($12,843,593) ($ 1,224,951) ($12,430,249) ($ 1,492,397) ============ ============ ============ ============ Basic net loss per share (Note 3) ($1.25) ($0.12) ($1.21) ($0.15) ====== ====== ====== ====== Diluted net loss per share (Note 3) ($1.25) ($0.12) ($1.21) ($0.15) ====== ====== ====== ======
The accompanying notes are an integral part of these financial statements. 5 CALPROP CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended June 30, ---------------------------- 2003 2002 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net loss ($12,430,249) ($ 1,492,397) Adjustments to reconcile net loss to net cash provided by operating activities: Gain on sale of joint venture interest (2,000,000) Minority interests 764 235 Recognition of impairment of real estate under development 4,686,150 1,832,225 Recognition of impairment of rental property 1,342,316 Income from investment in real estate venture (109,253) Loss on sale of property and equipment 1,312 Depreciation and amortization 167,309 21,315 Provision for warranty reserves 33,000 175,105 Deferred income taxes 2,208,081 Change in assets and liabilities: Other assets (81) (82,999) Deferred tax assets 6,535,343 Receivable from affiliates 621,478 Accounts payable and accrued liabilities (900,420) (3,611,319) Warranty reserves (32,500) (84,952) Additions to real estate under development (6,268,447) (28,320,496) Cost of real estate sales 12,440,305 63,502,888 Accrued interest for executive stock purchase loans (10,526) (10,723) ------------ ------------ Net cash provided by operating activities 3,564,276 34,649,188 CASH FLOWS FROM INVESTING ACTIVITIES: Investment in rental property (5,680) Proceeds from sale of property and equipment 1,000 Capital expenditures (6,140) (5,482) ------------ ------------ Net cash used by investing activities (10,820) (5,482) CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings under related-party notes 1,663,977 Payments under related-party notes (122,466) (9,776,494) Borrowings under trust deeds and notes payable 4,480,825 24,992,491 Payments under trust deeds and notes payable (9,786,800) (50,065,718) Repayment of stock purchase loans 26,535 Common stock 5,130 ------------ ------------ Net cash used in financing activities (5,423,311) (33,159,209) ------------ ------------ Net (decrease) increase in cash and cash equivalents (1,869,855) 1,484,497 Cash and cash equivalents at beginning of period 3,444,541 2,079,471 ------------ ------------ Cash and cash equivalents at end of period $ 1,574,686 $ 3,563,968 ============ ============ SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid (refunded) during the period for: Interest, net of amount capitalized $764,670 Income taxes ($55,998) $47,351
(Concluded) The accompanying notes are an integral part of these financial statements 6 CALPROP CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS PERIODS ENDED JUNE 30, 2003 AND 2002 (Unaudited) Note 1: Basis of presentation and significant accounting policies The unaudited, condensed, consolidated financial statements included herein have been prepared by the registrant pursuant to the instructions to Quarterly Report on Form 10-Q required to be filed with the Securities and Exchange Commission and do not include all information and footnote disclosure required by accounting principles generally accepted in the United States of America for complete financial statements. The accompanying financial statements have not been audited by independent auditors in accordance with auditing standards generally accepted in the United States of America, but in the opinion of management, such financial statements include all adjustments, consisting only of normal recurring adjustments necessary to present fairly the financial position of Calprop Corporation ("the Company") and its results of operations. The condensed financial statements should be read in conjunction with the financial statements and the notes thereto included in the registrant's latest Annual Report on Form 10-K, particularly with regard to disclosures relating to major accounting policies. Based on its agreements with its lenders, the Company believes that it will have sufficient liquidity to finance its construction projects in 2003 through funds generated from operations, funds available under its existing bank commitments, funds generated from new lending institutions, and, if necessary, funds that could be obtained by using its internally financed real estate development in process as collateral for additional loans. Management's plan, with respect to managing cash flow includes the following components: pay off debt that is coming due in 2003, minimize operating expenses, and maintain control over costs. With regard to the debt coming due in 2003, management expects to extend the maturity dates of various loans and pay the remaining loans off through cashflow from operations, prior to their maturity date. With regard to minimizing operating expenses, management plans to achieve this by continuing to closely examine overhead items. Management anticipates that the funds generated from operations, including borrowings from existing loan commitments, will be adequate to allow the Company to continue operations throughout 2003. The results of operations for the three months ended June 30, 2003 may not be indicative of the operating results for the year ending December 31, 2003. Note 2: Income taxes As of December 31, 2002, the Company had gross deferred tax assets of $11,065,083 offset by a deferred tax asset valuation allowance of $11,065,083. The Company has assessed its past earnings history and trends, sales backlog, budgeted sales, and expiration dates of net operating loss carryforwards and has determined that it is more likely than not that the $11,065,083 of deferred tax assets will not be realized. As a result, the Company increased the valuation allowance by $6,535,343 during the three months ended June 30, 2003. As of June 30, 2003, the Company had net operating loss carryforwards for federal and state income tax purposes of approximately $23,776,000 and $9,301,000, respectively. For federal tax purposes, net operating loss carryforwards expire from 2013 through 2022. For state tax purposes, net operating loss carryforwards expire from 2005 through 2008. 7 Note 3: Earnings per share The following table sets forth the computation of basic and diluted net loss income per share:
Three Months Ended Six Months Ended June 30, June 30, --------------------------------------------------------- 2003 2002 2003 2002 --------------------------------------------------------- Net loss ($12,843,593) ($1,224,951) ($12,430,249) ($1,492,397) --------------------------------------------------------- Numerator for basic and diluted net loss per share ($12,843,593) ($1,224,951) ($12,430,249) ($1,492,397) ========================================================= Denominator for basic net loss per share (weighted average outstanding shares) 10,239,105 10,254,005 10,238,451 10,254,005 Effect of dilutive stock options --------------------------------------------------------- Weighted average shares for dilutive net income per share 10,239,105 10,254,005 10,238,451 10,254,005 ========================================================= Basic net loss per share ($1.25) ($0.12) ($1.21) ($0.15) ========================================================= Diluted net loss per share ($1.25) ($0.12) ($1.21) ($0.15) =========================================================
Note 4: Consolidation The Company has consolidated the financial statements of the following entities:
--------------------------------------------------------------------------------------------------------------------------- Entity Ownership interest at Development June 30, 2003 --------------------------------------------------------------------------------------------------------------------------- Colorado Pacific Homes, Inc. 100% Real estate in the state of Colorado DMM Development, LLC ("DMM") 67% Cierra del Lago and Antares projects, California Parkland Farms Development Co., LLC 99% 115 lots in Healdsburg, California ("Parkland") RGCCLPO Development Co., LLC ("RGCCLPO") 100% 382 lots in Milpitas, California PWA Associates, LLC 100% 68-unit apartment project in Milpitas, California ---------------------------------------------------------------------------------------------------------------------------
DMM: The Company is entitled to receive two-thirds of the profits of DMM, and the other owner, RGC Courthomes, Inc. ("RGC"), is entitled to receive the remaining one-third of the profits. Parkland: Pursuant to the operating agreement of Parkland, the Company is entitled to receive ninety-nine percent of the profits of Parkland, and the other member, an officer of the Company, is entitled to receive the remaining one percent of the profits. During the six months ended June 30, 2003, $2,931 of the total loss of $3,695 incurred by the entities related to the minority interest was not allocated to the minority interest because the minority interest had a deficit interest in those entities. The Company does not reflect the deficit for the minority interest because the minority owners are not responsible for losses incurred beyond their equity. The unrecognized minority interest in deficit of the Company as of June 30, 2003 and December 31, 2002 8 was $71,290 and $68,359, respectively. As a result, the Company has no minority interest as of June, 30, 2003 and December 31, 2002. Note 5: Real estate under development Investment of real estate venture-In 1999, the Company formed RGC Carmel Country Associates, LLC, a California limited liability company, ("RGC Carmel") with RGC to develop, construct and lease a 181 townhome project. The profits and losses of RGC Carmel were distributed between the members as follows: 50% to RGC and 50% to the Company. During 2000, RGC Carmel admitted additional members in the following proportions: The John L. Curci Trust as to a 12.5% interest, The Janet Curci Living Trust No. Il as to a 12.5% interest, and an officer of the Company as to a 25% interest in exchange for financing for the project as follows: $2,000,000 in equity and $2,000,000 in notes payable. As a result, the Company's interest in RGC Carmel was reduced to 25%, which is accounted for under the equity method of accounting. During 2002, the Company transferred .5% of its interest in RGC Carmel to Calprop Andalucia, a 100% wholly owned subsidiary of the Company. In January 2003, the Company sold the remaining 24.5% of its interest in RGC Carmel to related parties in the following proportions: The Janet Curci Living Trust No. II as to a 6.125% interest, JAMS Management as to a 6.125% interest, and an officer of the Company as to a 12.25% interest. The Company's interest was sold for $2,000,000 in cash, which was received in 2002 and resulted in recording a deposit of $2,000,000 as of December 31, 2002. The gain on sale of investment in joint venture is recognized in the first quarter of 2003. The gain equals the proceeds received of $2,000,000 as the Company had no basis in the investment sold. As a result, the Company's interest in RGC Carmel was reduced to .5%. The Company recognized management fees of $207,182 for the six months ended June 30, 2002 related to the joint venture. Note 6: Rental property During the third quarter of 2002, the Company completed construction of a 68-unit apartment project and the related costs recorded as real estate under development were transferred to rental property. The Company started leasing the apartment during the third quarter of 2002. As of June 30, 2003, the apartment project was 98.5% leased and stabilized its operations. Based upon such operations, the Company tested the project for recoverability and determined the carrying amount of the project was not fully recoverable and recorded an impairment loss of $1,342,316; the amount by which the carrying amount of the project exceeded its estimated fair value as determined by a third party appraiser. Rental property at June 30 is summarized as follows: Land $1,500,000 Building and improvements 9,810,441 Impairment write-down (1,342,316) ---------------- Total rental property 9,968,125 Accumulated depreciation (268,125) ---------------- Rental property, net $9,700,000 ================ Depreciation expense for building and improvements for the six months ended June 30, 2003 was $146,250. 9 Note 7: Segment Disclosure The Company's reportable segments consist of two types of real estate properties for which management internally evaluates operating performance and financial results: residental homes for sale and residental rental property for lease. The Company also has certain corporate level activities including accounting, finance, and management information systems, which are not considered separate segments. The Company evaluates the performance of its segments based upon contribution to income. The following table provides financial information regarding revenues from customers, loss and total assets for the Company's business segments and also provides a reconciliation to the Company's consolidated total:
Three Months Ended June 30, 2003 ------------------------------------------------ Revenues Contribution to Assets Loss ------------------------------------------------ Residential homes $7,592,899 ($4,897,710) $15,610,940 Rental property 258,745 (1,246,758) 9,700,000 ------------------------------------------------ 7,851,644 (6,144,468) 25,610,940 Interest and other, net 12,261 (6,699,125) ------------------------------------------------ $7,863,905 ($12,843,593) $25,310,940 ================================================
Six Months Ended June 30, 2003 ------------------------------------------------ Revenues Contribution to Assets Loss ------------------------------------------------ Residential homes $12,165,178 ($5,913,432) $15,610,940 Rental property 512,527 (1,105,066) 9,700,000 ------------------------------------------------ 12,677,705 (7,018,498) 25,310,940 Interest and other, net 2,031,301 (5,411,751) ------------------------------------------------ $14,709,006 ($12,430,249) $25,310,940 ================================================
During the six months of 2002, the Company operated under one reportable segment of residential homes for sale. Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion relates to the consolidated financial statements of the Company and should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this report. Statements contained in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" that are not historical facts may be forward-looking statements. Such statements are subject to certain risks and uncertainties, which could cause actual results to differ materially from those projected. You are cautioned not to place undue reliance on these forward-looking statements. 10 Liquidity and capital resources As of June 30, 2003, the Company had remaining loan commitments from financial institutions of approximately $8,640,000, which may be drawn down by the Company upon the satisfaction of certain conditions. The Company continues to seek joint venture partners and additional financing to fund its operations. As of June 30, 2003, the Company had two remaining projects in various stages of development (High Ridge Court and Saddlerock). During 2003, the Company had three projects producing revenues from completed homes and townhomes: Parc Metropolitan, High Ridge Court and Saddlerock. As of June 30, 2003, the Company has 40 homes under construction, of which 6 are in escrow to be sold, and 4 model units. Additionally, the Company has an inventory of 78 lots under development of which 50 are contracted to sell (see below). In addition, the Company has a 68-unit apartment building that is substantially leased as of June 30, 2003 which also contributed to revenues for the six month period. As of June 30, 2003, the Company had 6 units in escrow ("backlog") compared with a backlog of 56 units as of June 30, 2002. The gross revenues of such backlog was $1,714,000 and $19,517,000 as of June 30, 2003 and 2002, respectively. Based on its agreements with its lenders, the Company believes that it will have sufficient liquidity to finance its construction projects in 2003 through funds generated from operations, funds available under its existing bank commitments, funds generated from new lending institutions, and, if necessary, funds that could be obtained by using its internally financed real estate development in process as collateral for additional loans. Management's plan, with respect to managing cash flow includes the following components: pay off debt that is coming due in 2003, minimize operating expenses, and maintain control over costs. With regard to the debt coming due in 2003, management expects to extend the maturity dates of various loans and pay the remaining loans off through cashflow from operations, prior to their maturity date. With regard to minimizing operating expenses, management plans to achieve this by continuing to closely examine overhead items. Management anticipates that the funds generated from operations, including borrowings from existing loan commitments, will be adequate to allow the Company to continue operations throughout 2003. Results of operations Real estate sales for the three months ended June 30, 2003 decreased 467% to $7,592,899 from $43,058,399 for the three months ended June 30, 2002. For the six months ended June 30, 2003, real estate sales decreased 429% to $12,165,178 from $64,350,669 in the year-earlier period. The decrease in real estate sales for the three and six months periods in 2003 was primarily due to the low volume of inventory of completed homes available for sale in 2003 compared to completed homes available for sale in 2002. In the second quarter of 2003, the Company sold 21 homes with an average sales price of $361,500, a 438% decrease in the volume of home sales compared to 113 homes with an average sales price of $381,050 for the second quarter of 2002. During the six months of 2003, the Company sold 33 homes with an average sales price of $368,600, a 418% decrease in the volume of home sales compared to 171 homes with an average sales price of $376,000 for the six months of 2002. The Company had income from development operations before recognition of impairment of real estate of $255,552 in the second quarter of 2003 as compared to income of $753,007 in the second quarter of 2002. For the six months ended June 30, 2003, the Company had a loss from development operations before recognition of impairment of real estate of $275,127 as compared to income of $847,781 for the six months ended June 30, 2002. The significant decrease of income from development operations during the second quarter of 2003 and six months ended June 30, 2002 resulted from the Company selling homes with previous impairment write-downs. During the second quarter of 2003, the Company recorded an impairment loss on real estate under development of $4,232,281 in the Saddlerock project. The project consisted of 94 homes with five product lines in 11 Aurora, Colorado. The lack of demand of the product lines resulted in a slower absortion rate. The Company introduced three new product lines and converted certain upgrades as standards to increase the absorption rate. The introduction of the new product lines increased direct construction cost, marketing, production overhead and interest costs. In addition to increased costs, due to the slow absorption rate, the Company entered into escrow to sell 50 developed lots and as a result the Company recorded an impairment loss on real estate under development. These lots are expected to close in August of 2003. Additionally, during the second quarter of 2003, the Company recorded an impairment loss on real estate under development of $453,869 in the High Ridge Court project which is located in Thorton, Colorado as the absortion rate was slower than anticipated. The decrease in absorption rate increased marketing, production and interest costs and as a result the Company recorded an impairment. The Company developed and constructed a 68-unit affordable apartment, the Parc West Apartment Homes located in Milpitas, California, adjacent to the Parc Metropolitan project. Construction was completed in August 2002 and the 68 units were available for lease. As of June 30, 2003, the apartment building was substantially leased. For the three months ended June 30, 2003, the apartment generated $258,745 of rental income and $163,187 of rental operating expenses. For the six months ended June 30, 2003, the apartment generated $512,527 of rental income and $275,277 of rental operating expenses. As of June 30, 2003, the apartment project was 98.5% leased and stabilized its operations. Based upon such operations, the Company tested the project for recoverability and determined the carrying amount of the project was not fully recoverable and recorded an impairment loss of $1,342,316; the amount by which the carrying amount of the project exceeded its estimated fair value as determined by a third party appraiser. In January 2003, the Company sold its 24.5% interest in RGC Carmel Country, LLC, the ("Joint Venture") to related parties. The Joint Venture consisted of 181 townhomes available for lease in San Diego. The Company's basis in the Joint Venture was $0. The proceeds from the sale, in the amount of $2,000,000, was received in 2002 and was recorded as a deposit at December 31, 2002. The gain was recorded in January 2003. General and administrative expenses decreased to $467,112 in the three months ended June 30, 2003 from $521,006 in the corresponding period. For the six months ended June 30, 2003, general and administrative expenses decreased to $952,155 from $1,076,452 in the corresponding 2002 period. The decrease is due to the focus efforts to decrease corporate overhead costs and a decrease in sales volume. Item 3 Quantitative and Qualitative Disclosure about Market Risk The Company's exposure to market risk has not materially changed from what was reported on the Company's Form 10-K for the year ended December 31, 2002. Item 4 Controls and Procedures The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's reports required to be filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure, except during the period from August 2003 - December 2003 where the accounting department was short of the required personnel needed to file its required reports timely. The Company is in the process of taking corrective measures to ensure timely filing of its required reports under the Securitites Exchange Act of 1934. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. As of June 30, 2003, the end of the quarter covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive 12 Officer and the Company's Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based on the foregoing, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective. There have been no significant changes in the Company's internal controls or in other factors that could significantly affect the internal controls subsequent to the date the Company completed its evaluation. Part II 6 Exhibits and Reports on Form 8-K (a) Exhibits - In accordance with SEC Release No. 33-8212, the following exhibit is being furnished, and is not being filed as part of this Report or as a separate disclosure document, and is not being incorporated by reference into any Securities Act of 1933 registration statement: 31.1 Rule 13a-14(a)/15d-14(a) Certification of CEO 31.2 Rule 13a-14(a)/15d-14(a) Certification of CFO 32. Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002. (b) Reports on Form 8-K A Current Report on Form 8-K dated June 20, 2003 was filed with the Securities and Exchange Commission (the "Commission") and included under item 7(a) its unaudited consolidated financial statements for the quarter ended March 31, 2003, and under item 7(c) a press release announcing Calprop Corporations' first quarter results. 13 SIGNATURES 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. CALPROP CORPORATION By: /s/ Mark F. Spiro . --------------------------------------------- Mark F. Spiro Vice President/Secretary/Treasurer (Chief Financial and Accounting Officer) December 19, 2003 14 EX-31.1 3 d13729_ex31-1.txt Exhibit 31.1 CERTIFICATION OF CEO PURSUANT TO SECTION 302 OF SARBANES-OXLEY ACT OF 2002 I, Victor Zaccaglin, certify that: 1. I have reviewed this Quarterly Report on Form 10-Q of Calprop Corporation, a California corporation (the "Registrant"); 2. Based on my knowledge, this Quarterly Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Quarterly Report; 3. Based on my knowledge, the financial statements, and other financial information included in this Quarterly Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Quarterly Report; 4. The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and we have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Quarterly Report is being prepared; and b. Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this Quarterly Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such valuation; and c. Disclosed in this Quarterly Report any changes the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting. 5. The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of Registrant's board of directors (or persons performing the equivalent function): a. All significant deficiencies and material weaknesses in the design or operation of internal controls which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal controls over financial reporting Date: December 19, 2003 /s/ Victor Zaccaglin --------------------------- Victor Zaccaglin Chairman of the Board Chief Executive Officer EX-31.2 4 d13729_ex31-2.txt Exhibit 31.2 CERTIFICATION OF CFO PURSUANT TO SECTION 302 OF SARBANES-OXLEY ACT OF 2002 I, Mark F. Spiro, certify that: 1. I have reviewed this Quarterly Report on Form 10-Q of Calprop Corporation, a California corporation (the "Registrant"); 2. Based on my knowledge, this Quarterly Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Quarterly Report; 3. Based on my knowledge, the financial statements, and other financial information included in this Quarterly Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Quarterly Report; 4. The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and we have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Quarterly Report is being prepared; and b. Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this Quarterly Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such valuation; and c. Disclosed in this Quarterly Report any changes the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting. 5. The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of Registrant's board of directors (or persons performing the equivalent function): a. All significant deficiencies and material weaknesses in the design or operation of internal controls which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal controls over financial reporting Date: December 19, 2003 /s/ Mark F. Spiro -------------------------------------- Mark F. Spiro VicePresident/Secretary/Treasurer (Chief Financial and Accounting Officer) EX-32 5 d13729_ex32.txt Exhibit 32. Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. ss. 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Calprop Corporation (the "Company") hereby certifies, to his knowledge, that: (i) the accompanying Quarterly Report on Form 10-Q of the Company for the quarterly period ended June30, 2003 (the "Report") fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and (ii) the information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: December 19, 2003 /s/ Victor Zaccaglin ---------------------------------------- Victor Zaccaglin Chairman of the Board Chief Executive Officer Pursuant to 18 U.S.C. ss. 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Calprop Corporation (the "Company") hereby certifies, to his knowledge, that: (i) the accompanying Quarterly Report on Form 10-Q of the Company for the quarterly period ended June 30, 2003 (the "Report") fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and (ii) the information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: December 19, 2003 /s/ Mark F. Spiro ---------------------------------------- Mark F. Spiro VicePresident/Secretary/Treasurer (Chief Financial and Accounting Officer) -----END PRIVACY-ENHANCED MESSAGE-----