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 September 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
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Commission File Number 1-6844
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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 1 - Financial Information
------------------------------
Set forth is the unaudited quarterly report for the quarters ended
September 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
------
September 30, December 31,
2003 2002
----------------- -----------------
Investment in Real Estate (Notes 5 and 6)
Real estate under development $13,465,638 $24,166,829
Assets held for sale 8,950,000 11,214,659
----------------- -----------------
Total investment in real estate 22,415,638 35,381,488
Other Assets:
Cash and cash equivalents 1,054,905 3,444,541
Deferred tax assets (Note 2) 6,535,343
Other assets 718,807 713,574
----------------- -----------------
Total other assets 1,773,712 10,693,458
----------------- -----------------
Total assets $24,189,350 $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' (DEFICIT) EQUITY
----------------------------------------------
September 30, December 31,
2003 2002
----------------- -----------------
Liabilites:
Liabilities of assets held for sale (Note 6) $ 7,769,035 $ 8,291,256
Trust deeds and notes payable 6,387,610 11,784,923
Related-party notes 14,258,709 13,987,634
----------------- -----------------
Total trust deeds, notes payable and related-party notes 20,646,319 25,772,557
Accounts payable and accrued liabilities 1,835,012 2,374,863
Deposit 2,000,000
Warranty reserves 694,600 757,550
----------------- -----------------
Total liabilities 30,944,966 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 September 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 (543,734) (527,858)
Accumulated deficit (42,273,163) (28,649,573)
----------------- -----------------
Total stockholders' (deficit) equity (6,755,616) 6,878,720
----------------- -----------------
$ 24,189,350 $ 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 Nine Months Ended
September 30, September 30,
------------------------------------------------------------------
2003 2002 2003 2002
--------------- --------------- -------------- -------------
Development operations:
Real estate sales $5,569,748 $21,678,306 $17,734,926 $86,028,975
Cost of real estate sales 5,597,084 22,626,112 18,037,389 86,129,000
--------------- --------------- -------------- -------------
Loss from development operations before recognition
of impairment of real estate (27,336) (947,806) (302,463) (100,025)
Recognition of impairment of real estate under
development (2,639,468) (4,686,150) (4,471,693)
--------------- --------------- -------------- -------------
Loss from development operations (27,336) (3,587,274) (4,988,613) (4,571,718)
Income from investment in real estate venture (Note 5) 109,253
Other income:
Gain on sale of investment in real estate venture
(Note 5) 2,000,000
Interest and miscellaneous 174,254 88,646 306,907 339,827
Management fee (Note 5) 10,931 218,113
--------------- --------------- -------------- -------------
Total other income 174,254 99,577 2,306,907 557,940
Other expenses:
General and administrative 307,787 777,491 1,257,560 1,851,936
Interest 438,330 113,642 1,015,846 113,642
--------------- --------------- -------------- -------------
Total other expenses 746,117 891,133 2,273,406 1,965,578
Minority interests (Note 4) 764 235
--------------- --------------- -------------- -------------
Loss from continuing operations before provision
for income taxes (599,199) (4,379,830) (4,955,876) (5,870,338)
Provision for income taxes (Note 2) 6,535,343
--------------- --------------- -------------- -------------
Loss from continuing operations (599,199) (4,379,830) (11,491,219) (5,870,338)
Discontinued operations (Notes 6 and 7):
Loss from discontinued operations (including
impairment of $841,549 and $2,183,865 for the
three and nine months ended September 30, 2003 (594,143) (329,222) (2,132,371) (331,111)
--------------- --------------- -------------- -------------
Loss from discontinued operations (594,143) (329,222) (2,132,371) (6,201,449)
--------------- --------------- -------------- -------------
Net loss ($1,193,342) ($4,709,052) ($13,623,590) ($ 6,201,449)
=============== =============== ============== =============
(continued)
The accompanying notes are an integral part of these financial statements.
5
Loss from continuing operations per common share - basic ($0.06) ($0.43) ($1.12) ($0.57)
======= ======= ======= =======
Loss from continuing operations per common share - diluted ($0.06) ($0.43) ($1.12) ($0.57)
======= ======= ======= =======
Loss from discontinued operations per common share - basic ($0.06) ($0.03) ($0.21) ($0.04)
======= ======= ======= =======
Loss from discontiinued operations per common share - diluted ($0.06) ($0.03) ($0.21) ($0.04)
======= ======= ======= =======
Net loss per common share - basic ($0.12) ($0.46) ($1.33) ($0.61)
======= ======= ======= =======
Net loss per common share - diluted ($0.12) ($0.46) ($1.33) ($0.61)
======= ======= ======= =======
(concluded)
The accompanying notes are an integral part of these financial statements.
6
CALPROP CORPORATION
-------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(Unaudited)
Nine Months Ended
September 30,
--------------------------------
2003 2002
--------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($13,623,590) ($ 6,201,449)
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 4,471,693
Recognition of impairment of rental property 2,183,865
Income from investment in real estate venture (109,253)
Loss on sale of property and equipment 1,312
Depreciation and amortization 177,187 79,695
Provision for warranty reserves 45,000 237,105
Deferred income taxes 6,535,343
Change in assets and liabilities:
Other assets (92,118) (46,665)
Receivable from affiliates 783,276
Accounts payable and accrued liabilities (820,809) (2,402,766)
Warranty reserves (107,950) (155,416)
Additions to real estate under development (12,023,112) (37,441,312)
Cost of real estate sales 18,037,389 86,129,000
Accrued interest for executive stock purchase loans (15,876) (16,077)
--------------------------------
Net cash provided by operating activities 2,983,555 45,328,066
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in rental property (5,680)
Proceeds from sale of property and equipment 1,000
Capital expenditures (6,140) (14,611)
-------------------------------
Net cash used by investing activities (10,820) (14,611)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under related-party notes 394,085 1,663,977
Payments under related-party notes (123,010) (12,245,903)
Borrowings under trust deeds and notes payable 16,700,976 29,459,073
Payments under trust deeds and notes payable (22,339,552) (61,160,201)
Repayment of stock purchase loans 30,748
Common stock 5,130
--------------------------------
Net cash used in financing activities (5,362,371) (42,252,306)
--------------------------------
Net (decrease) increase in cash and cash equivalents (2,389,636) 3,061,149
Cash and cash equivalents at beginning of period 3,444,541 2,079,471
--------------------------------
Cash and cash equivalents at end of period $ 1,054,905 $ 5,140,620
================================
(Continued)
The accompanying notes are an integral
part of these financial statements
7
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid (refunded) during the period for:
Interest, net of amount capitalized $1,021,806 195,968
Income taxes ($55,998) ($45,131)
(Concluded)
The accompanying notes are an integral
part of these financial statements
8
CALPROP CORPORATION
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
PERIODS ENDED SEPTEMBER 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 nine months ended September 30, 2003
may not be indicative of the operating results for the year ending
December 31, 2003.
Note 2: Income taxes
------------
As of September 30, 2003, 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 second quarter in 2003.
As of December 31, 2002, 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.
9
Note 3: Earnings per share
------------------
The following table sets forth the computation of basic and diluted
net loss per share:
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------------------------------------
2003 2002 2003 2002
---------------------------------------------------------
Net loss from continuing operations ($599,199) ($4,379,830) ($11,491,219) ($5,870,338)
Discontinued operations (594,143) (329,222) (2,132,371) (331,111)
---------------------------------------------------------
Numerator for basic and diluted net loss per share ($1,193,342) ($4,709,052) ($13,623,590) ($6,201,449)
=========================================================
Denominator for basic net loss per share
(weighted average outstanding shares) 10,239,105 10,254,005 10,238,672 10,254,005
Effect of dilutive stock options
---------------------------------------------------------
Weighted average shares for dilutive net income per share 10,239,105 10,254,005 10,238,672 10,254,005
=========================================================
Loss from continuing operations per common share - basic ($0.06) ($0.43) ($1.12) ($0.57)
=========================================================
Loss from continuing operations per common share - diluted ($0.06) ($0.43) ($1.12) ($0.57)
=========================================================
Loss from discontinued operations per common share - basic ($0.06) ($0.03) ($0.21) ($0.04)
=========================================================
Loss from discontinued operations per common share - diluted ($0.06) ($0.03) ($0.21) ($0.04)
=========================================================
Net loss per common share - basic ($0.12) ($0.46) ($1.33) ($0.61)
=========================================================
Net loss per common share - diluted ($0.12) ($0.46) ($1.33) ($0.61)
=========================================================
Note 4: Consolidation
-------------
The Company has consolidated the financial statements of the following
entities:
---------------------------------------------------------------------------------------------------------------------------
Entity Ownership interest at Development
Septemer 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.
10
During the nine months ended September 30, 2003, $2,461 of the total
loss of $3,225 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 September 30, 2003 and December 31, 2002 was $70,820 and
$68,359, respectively. As a result, the Company has no minority
interest as of September 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 was 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
in 2003 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 nine months
ended September 30, 2002 related to the joint venture.
Note 6: Assets and liabilities held for sale
------------------------------------
During the three months ended September 30, 2003, management approved
a plan of action to sell the operating assets of PWA. As a result, the
rental property has been classified as held for sale and depreciation
has ceased as of the date the plan was approved. Operations of PWA are
classifed as discontinued operations in the consolidated statements of
operations. The apartment project is currently in escrow with a gross
sales price of $9,000,000 (see Note 7).
Assets held for sale at September 30 is summarized as follows:
Land $1,500,000
Building and improvements, net 7,450,000
------------
Assets held for sale, net $8,950,000
============
Depreciation expense for building and improvements for the nine months
ended September 30, 2003 was $146,250.
11
Liabilities held for sale at September 30 is summarized as follows:
Trust deeds and notes payable $7,700,000
Accounts payable and accrued liabilities 69,035
------------
Liabilities held for sale $7,769,035
============
Note 7: Discontinued operations
-----------------------
In accordance with the SFAS 144 "Accounting for the Impairment or
Disposal of Long-Lived Assets," the net loss of assets held for sale
is reflected in the consolidated statement of operations as
discontinued operations for all periods presented. For the three and
nine months ended September 30, 2003 and 2002, discontinued operations
relates to an apartment project held for sale and currently in escrow
with a sales price of $9,000,000 (see Note 6). The following table
summarizes the income and expense components of discontinued
operations for the three and nine months ended September 30, 2003 and
2002:
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------------------------------------
2003 2002 2003 2002
--------------------------------------------------------------
Revenues:
Rental income $ 246,446 $43,771 $758,973 $43,771
Gain on forgiven debt 392,575 392,575
Interest and miscellaneous 3,887 3,592 14,929 4,709
--------------------------------------------------------------
Total revenues 642,908 47,363 1,166,477 48,480
--------------------------------------------------------------
Expenses:
Rental operating 217,582 217,494 492,859 220,500
Impairment loss 841,549 2,183,865
General and administrative 1,191 3,573
Depreciation 48,857 146,250 48,857
Interest 176,729 110,234 472,301 110,234
--------------------------------------------------------------
Total expenses 1,237,051 376,585 3,298,848 379,591
--------------------------------------------------------------
Loss from discontinued operations ($594,143) ($329,222) ($2,132,371) ($331,111)
==============================================================
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
12
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.
Liquidity and capital resources
- -------------------------------
As of September 30, 2003, the Company had remaining loan commitments from
financial institutions of approximately $7,183,000, 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 September 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 September
30, 2003, the Company has 39 homes under construction, of which 8 are in escrow
to be sold, and 3 model units. Additionally, the Company has an inventory of 18
lots under development. In addition, the Company has a 68-unit apartment
building that is substantially leased as of September 30, 2003 which also
contributed to revenues for the nine month period. During the third quarter of
2003, the apartment bulding was held for sale (see Note 6 and 7).
As of September 30, 2003, the Company had 8 units in escrow ("backlog")
compared with a backlog of 11 units as of September 30, 2002. The gross revenues
of such backlog was $2,179,000 and $4,275,000 as of September 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 September 30, 2003 decreased
74.3% to $5,569,748 from $21,678,306 for the three months ended September 30,
2002. For the nine months ended September 30, 2003, real estate sales decreased
79.4% to $17,734,926 from $86,028,975 in the year-earlier period. The decrease
in real estate sales for the three and nine 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 third quarter of
2003, the Company sold 12 homes with an average sales price of $256,124, a 80.6%
decrease in the volume of home sales compared to 62 homes with an average sales
price of 349,650 for the third quarter of 2002. In addition to the home sales
during the third quarter of 2003, the Company sold 50 lots under development in
the Saddlerock project for $2,496,260. During the nine months of 2003, the
Company sold 45 homes with an average sales price of $338,637, a 418% decrease
in the volume of home sales compared to 233 homes with an average sales price of
$369,223 for the nine months of 2002.
The Company had a loss from development operations before recognition of
impairment of real estate under development of $27,336 in the third quarter of
2003 as compared to a loss of $947,806 in the third quarter of 2002. For the
nine months ended September 30, 2003, the Company had a loss from development
operations before recognition of impairment of real estate under development of
$302,463 as compared to a loss of $100,025 for the nine months ended September
30, 2002.
13
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 Company
recorded a gain of $2,000,000 on the sale of the joint venture in 2003.
General and administrative expenses decreased to $307,787 in the three
months ended September 30, 2003 from $777,491 in the corresponding period. For
the nine months ended September 30, 2003, general and administrative expenses
decreased to $1,257,560 from $1,851,936 in the corresponding 2002 period. The
decrease is due to the focus efforts to decrease corporate overhead costs and a
decrease in sales volume.
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 September 30, 2003, the apartment building was
substantially leased. In accordance with the SFAS 144 "Accounting for the
Impairment or Disposal of Long-Lived Assets," the net loss of assets held for
sale is reflected in the consolidated statement of operations as discontinued
operations for all periods presented.
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 September 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 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.
14
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.
A Current Report on Form 8-K dated January 15, 2004 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 June 30, 2003, and under item 7(c) a press release announcing Calprop
Corporations' second quarter results.
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)
February 27, 2004
15
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: February 27, 2004
/s/ Victor Zaccaglin
---------------------
Victor Zaccaglin
Chairman of the Board
Chief Executive Officer
16
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: February 27, 2004
/s/ Mark F. Spiro
---------------------------------------
Mark F. Spiro
VicePresident/Secretary/Treasurer
(Chief Financial and Accounting Officer)
17
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: February 27, 2004
/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: February 27, 2004
/s/ Mark F. Spiro
----------------------------------------
Mark F. Spiro
VicePresident/Secretary/Treasurer
(Chief Financial and Accounting Officer)
18