<PAGE>




                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

               (Mark One)

                 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR
                     15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

                 For the quarterly period ending OCTOBER 2, 1999

                                       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 1-3834

                        CONTINENTAL MATERIALS CORPORATION
          -------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

          Delaware                                    36-2274391
---------------------------------            ---------------------------------
 (State or other jurisdiction of            (I.R.S. Employer Identification No.)
  incorporation or organization)

  225 West Wacker Drive, Suite 1800, Chicago, Illinois            60606
------------------------------------------------------         -----------
(Address of principal executive office)                        (Zip Code)

                                 (312) 541-7200
              ----------------------------------------------------
              (Registrant's telephone number, including area code)


              ----------------------------------------------------
                     (Former name, former address and former
                       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
                             -----       ---

Number of common shares outstanding at November 10, 1999  -- 1,969,817

                THE EXHIBIT FILED WITH THIS REPORT IS ON PAGE 11


<PAGE>


                         PART I - FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS

                        CONTINENTAL MATERIALS CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                       OCTOBER 2, 1999 and JANUARY 2, 1999
                                   (Unaudited)
                        (000's omitted except share data)

<TABLE>
<CAPTION>
                                                      OCTOBER 2,          JANUARY 2,
                                                         1999               1999
                                                      -----------       -----------
<S>                                                   <C>                <C>
                 ASSETS
Current assets:
   Cash and cash equivalents                           $    141           $  7,120
   Receivables, net                                      18,893             16,821
   Inventories:
     Finished goods                                       7,144              6,761
     Work in process                                      1,221              1,176
     Raw materials and supplies                           6,112              4,113
   Prepaid expenses                                       3,130              2,695
                                                       --------           --------
      Total current assets                               36,641             38,686
                                                       --------           --------

Property, plant and equipment, net                       26,326             22,105
                                                       --------           --------
Other assets:
   Investment in mining partnership                         100                100
   Other                                                  2,830              2,726
                                                       --------           --------
                                                       $ 65,897           $ 63,617
                                                       --------           --------
                                                       --------           --------
                  LIABILITIES
Current liabilities:
   Bank loan payable                                   $    800           $     --
   Current portion of long-term debt                      2,576              2,526
   Accounts payable and accrued expenses                 17,748             16,695
   Income taxes                                             783              1,271
                                                       --------           --------
      Total current liabilities                          21,907             20,492
                                                       --------           --------

Long-term debt                                            3,122              4,284
Deferred income taxes                                     1,457              1,670
Other long-term liabilities                               2,161                933

                  SHAREHOLDERS' EQUITY
Common shares, $0.25 par value; authorized
   3,000,000; issued 2,574,264                              643                663
Capital in excess of par value                            1,899              3,484
Retained earnings                                        40,272             35,901
Treasury shares, 594,163 and 508,434, at cost            (5,564)            (3,810)
                                                       --------           --------
                                                         37,250             36,238
                                                       --------           --------
                                                       $ 65,897           $ 63,617
                                                       --------           --------
                                                       --------           --------

</TABLE>


                             See accompanying notes

                                        2


<PAGE>



                        CONTINENTAL MATERIALS CORPORATION
           CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
         FOR THE THREE MONTHS ENDED OCTOBER 2, 1999 AND OCTOBER 3, 1998
                                   (Unaudited)
                    (000's omitted except per share amounts)

<TABLE>
<CAPTION>

                                                      OCTOBER 2,        OCTOBER 3,
                                                        1999               1998
                                                    ------------      ------------
<S>                                                   <C>               <C>

Net sales                                             $ 33,426           $ 29,069
                                                      --------           --------

Costs and expenses:
   Cost of sales (exclusive of depreciation,
     depletion and amortization)                        25,367             21,642
   Depreciation, depletion and amortization              1,377              1,045
   Selling and administrative                            4,035              3,817
                                                      --------           --------
                                                        30,779             26,504
                                                      --------           --------


Operating income                                         2,647              2,565

Interest                                                  (136)              (154)
Equity loss from mining partnership                        (21)                (7)
Other income, net                                           46                189
                                                      --------           --------

Income before income taxes                               2,536              2,593

Provision for income taxes                                 938                908
                                                      --------           --------

   Net income                                            1,598              1,685

Retained earnings, beginning of period                  38,674             33,094
                                                      --------           --------
Retained earnings, end of period                      $ 40,272           $ 34,779
                                                      --------           --------
                                                      --------           --------

Basic earnings per share                              $    .80           $    .79
                                                      --------           --------
                                                      --------           --------

     Average shares outstanding                          1,994              2,144
                                                      --------           --------
                                                      --------           --------

Diluted earnings per share                            $    .78           $    .77
                                                      --------           --------
                                                      --------           --------

     Average shares outstanding                          2,043              2,194
                                                      --------           --------
                                                      --------           --------

</TABLE>
                             See accompanying notes

                                        3



<PAGE>


                        CONTINENTAL MATERIALS CORPORATION
           CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
          FOR THE NINE MONTHS ENDED OCTOBER 2, 1999 AND OCTOBER 3, 1998
                                   (Unaudited)
                    (000's omitted except per share amounts)


<TABLE>
<CAPTION>
                                                      OCTOBER 2,          OCTOBER 3,
                                                         1999               1998
                                                     ------------       ------------
<S>                                                   <C>                <C>
Net sales                                              $ 89,011           $ 80,810
                                                       --------           --------

Costs and expenses:
    Cost of sales (exclusive of depreciation,
     depletion and amortization)                         66,184             61,088
    Depreciation, depletion and amortization              3,707              3,094
    Selling and administrative                           12,020             11,026
                                                       --------           --------
                                                         81,911             75,208
                                                       --------           --------

Operating income                                          7,100              5,602

Interest                                                   (352)              (538)
Equity loss from mining partnership                         (42)               (45)
Other income, net                                           232                360
                                                       --------           --------

Income before income taxes                                6,938              5,379

Provision for income taxes                                2,567              1,883
                                                       --------           --------

Net income                                                4,371              3,496

Retained earnings, beginning of period                   35,901             31,283
                                                       --------           --------

Retained earnings, end of period                       $ 40,272           $ 34,779
                                                       --------           --------
                                                       --------           --------

Basic earnings per share                               $   2.12           $   1.63
                                                       --------           --------
                                                       --------           --------

     Average shares outstanding                           2,059              2,148
                                                       --------           --------
                                                       --------           --------

Diluted earnings per share                             $   2.08           $   1.59
                                                       --------           --------
                                                       --------           --------

     Average shares outstanding                           2,105              2,196
                                                       --------           --------
                                                       --------           --------
</TABLE>

                             See accompanying notes

                                        4


<PAGE>



                       CONSOLIDATED MATERIALS CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
          FOR THE NINE MONTHS ENDED OCTOBER 2, 1999 AND OCTOBER 3, 1998
                                   (Unaudited)
                                 (000's omitted)

<TABLE>
<CAPTION>
                                                              OCTOBER 2,       OCTOBER 3,
                                                                1999             1998
                                                            -----------       -----------
<S>                                                          <C>               <C>
Net cash provided by operating activities                     $ 4,511           $ 8,135

Investing activities:
   Capital expenditures                                        (7,793)           (4,636)
   Proceeds from sale of property and equipment                    16                37
   Investment in mining partnership                               (42)              (45)
                                                              -------           -------
Net cash used in investing activities                          (7,819)           (4,644)
                                                              -------           -------

Financing activities:
   Borrowings under revolving credit facility                     800                --
   Capital lease obligation                                       203                --
   Repayment of long term debt                                 (1,315)           (1,900)
   Proceeds from exercise of stock options                        118                --
   Payment to acquire treasury stock                           (1,887)             (238)
   Payment to purchase and cancel stock                        (1,590)               --
                                                              -------           -------
Net cash used in financing activities                          (3,671)           (2,138)
                                                              -------           -------

Net (decrease) increase in cash and cash equivalents           (6,979)            1,353
Cash and cash equivalents:
   Beginning of period                                          7,120             1,524
                                                              -------           -------

   End of period                                              $   141           $ 2,877
                                                              -------           -------
                                                              -------           -------

Supplemental disclosures of cash flow items:
Cash paid during the nine months for:
   Interest                                                   $   490           $   543
   Income taxes                                                 3,505             1,218
</TABLE>


                             See accompanying notes

                                        5


<PAGE>


                        CONTINENTAL MATERIALS CORPORATION
                  SECURITIES AND EXCHANGE COMMISSION FORM 10-Q
            NOTES TO THE QUARTERLY CONSOLIDATED FINANCIAL STATEMENTS
                          QUARTER ENDED OCTOBER 2, 1999
                                   (Unaudited)

1.   The unaudited interim consolidated financial statements included herein are
     prepared pursuant to the rules and regulations for reporting on Form 10-Q.
     Accordingly, certain information and footnote disclosures normally
     accompanying the annual financial statements have been omitted. The interim
     financial statements and notes should be read in conjunction with the
     consolidated financial statements and notes thereto included in the
     Company's latest annual report on Form 10-K. In the opinion of management,
     the consolidated financial statements include all adjustments (none of
     which were other than normal recurring adjustments) necessary for a fair
     statement of the results for the interim periods.

2.   The provision for income taxes is based upon the estimated effective tax
     rate for the year.

3.   Operating results for the first nine months of 1999 are not necessarily
     indicative of performance for the entire year. Historically, sales of
     construction materials are higher in the second and third quarters.
     Overall, sales of heating and air conditioning products have not shown
     strong seasonal fluctuations in recent years although product mix has
     historically yielded higher gross profit margins in the fourth quarter.
     (See Note 12 of Notes to Consolidated Financial Statements in the Company's
     1998 Annual Report.)

4.   The following is a reconciliation of the calculation of basic and diluted
     earnings per share (EPS) for the three and nine months ended October 2,
     1999 and October 3, 1998. Amounts in thousands except per share data.


<TABLE>
<CAPTION>
                                                Three months ended                            Nine months ended
                                     -----------------------------------------     -----------------------------------------
                                                                   Per-share                                     Per-share
                                       Income         Shares        earnings         Income         Shares        earnings
                                     ------------    ----------    -----------     ------------    ----------    -----------
<S>                                     <C>            <C>             <C>            <C>             <C>           <C>
     October 2, 1999
     Basic EPS                           $1,598         1,994           $ .80          $4,371          2,059         $ 2.12
                                                                   -----------                                   -----------
                                                                   -----------                                   -----------
     Effect of dilutive options              --            49                             --              46
                                     ------------    ----------                    ------------    ----------
     Diluted EPS                         $1,598         2,043           $ .78          $4,371          2,105         $ 2.08
                                     ------------    ----------    -----------     ------------    ----------    -----------
                                     ------------    ----------    -----------     ------------    ----------    -----------

     October 3, 1998
     Basic EPS                           $1,685         2,144           $ .79          $3,496          2,148         $ 1.63
                                                                   ===========                                   ===========
     Effect of dilutive options              --            50                             --              48
                                     ------------    ----------                    ------------    ----------
     Diluted EPS                         $1,685         2,194           $ .77          $3,496          2,196         $ 1.59
                                     ------------    ----------    -----------     ------------    ----------    -----------
                                     ------------    ----------    -----------     ------------    ----------    -----------
</TABLE>

     Following the market close on June 7,1999, the Company effected a 1-for-50
     reverse stock split immediately followed by a 100-for-1 forward stock
     split. Shares and Earnings per share figures for all periods shown in the
     table, reflect this split.

5.   The following table presents information about reported segments for the
     nine month and three month periods ended October 2, 1999 and October 3,
     1998 along with the items necessary to reconcile the segment information to
     the totals reported in the financial statements (amounts in thousands).

                                        6



<PAGE>

<TABLE>
<CAPTION>
                                   Heating and Air       Construction                     Unallocated
                                     Conditioning         Materials        All Other       Corporate          Total
                                     ------------         ---------        ---------       ---------          -----
<S>                                     <C>                <C>              <C>              <C>           <C>
1999
------
Nine Months
-----------
Revenues from external
customers                                $ 39,393           $49,482          $ 109            $   27        $89,011
Operating income                            3,661             5,588             32            (2,181)         7,100
Assets                                     28,785            34,775            160             2,177         65,897

Three Months
------------
Revenues from external
customers                                  13,424            19,941             37                24         33,426
Operating income                            1,636             1,716             10              (715)         2,647

1998
----
Nine Months
-----------
Revenues from external
customers                                $ 36,054           $44,647          $ 109             $  --        $80,810
Operating income                            2,121             5,429             31            (1,979)         5,602
Assets                                     23,366            31,357            707             3,930         59,360

Three Months
------------
Revenues from external
customers                                  13,314            15,718             37                --         29,069
Operating income                            1,368             1,920             10              (733)         2,565
</TABLE>

There are no differences in the basis of segmentation or in the basis of
measurement of segment profit or loss from the last annual report.


ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
           RESULTS OF OPERATION

       FINANCIAL CONDITION (SEE PAGES 2 AND 4)

       Operations for the first nine months of 1999 generated $4,511,000 in cash
       compared to $8,135,000 in 1998. The diminished cash flow is mainly
       attributed to an increase in inventories reflecting the build up in the
       heating and air conditioning segment as a result of abnormally low levels
       of furnaces at 1998 year-end.

       The Company estimates that its short-term line of credit (of which
       $800,000 was outstanding at October 2, 1999) will be adequate to meet its
       cash requirements for the foreseeable future. Historically, the Company's
       borrowings against the short-term line peak during the second quarter and
       decline over the remainder of the year.

       OPERATIONS - COMPARISON OF QUARTER ENDED OCTOBER 2, 1999 TO QUARTER ENDED
       OCTOBER 3, 1998 (SEE PAGE 3)

       Consolidated net sales increased $4,357,000 (15%). The construction
       materials segment accounted for virtually all of the increase, $4,223,000
       (26.9%) as the construction activity along the Front Range in southern
       Colorado remained very strong and projects delayed by April's inclement
       weather were brought current. The heating and air conditioning


                                        7
<PAGE>

       segment accounted for the remainder of the increase with mixed results in
       its product lines. The fan coil and furnace lines both registered strong
       sales increases. A record sales volume in July 1998 due to extremely hot
       weather coupled with an unseasonably cool 1999 summer lead to a
       significant decline in evaporative cooler sales in the third quarter of
       1999.

       Consolidated cost of sales (exclusive of depreciation, depletion and
       amortization) as a percentage of sales increased from 74.5% to 75.9%. The
       increase was entirely due to the construction materials segment where
       accounting adjustments to fringe benefits and raw material costs were
       made in the third quarter.

       Selling and administrative expenses increased $218,000 (5.7%) but
       declined as a percentage of sales from 13.1% to 12.1%. The decline in
       percentage is related to the increase in sales.

       Depreciation, depletion and amortization expense increased due to the
       high level of capital expenditures in the last twelve months.

       Interest expense declined reflecting the lower levels of outstanding debt
       and a lower average interest rate.

       OPERATIONS - COMPARISON OF NINE MONTHS ENDED OCTOBER 2, 1999 TO NINE
       MONTHS ENDED OCTOBER 3, 1998 (SEE PAGE 4)

       Net sales rose $8,201,000 (10.1%). The increase in the heating and air
       conditioning segment, $3,339,000 was due to the reasons noted above. The
       $4,835,000 increase in the construction materials segment can be
       attributed to mild winter weather and the continuing high level of
       construction activity along the Front Range in southern Colorado.

       Consolidated cost of sales (exclusive of depreciation, depletion and
       amortization) as a percentage of sales decreased from 75.5% to 74.4%. The
       decrease was realized by the heating and air conditioning segment and is
       due to the increased sales and cost containment measures.

       Selling and administrative expenses increased $994,000 (9.0%) but
       remained relatively constant as a percentage of sales at 13.5% during
       1999 and 13.6% during 1998. The effect of increased sales was partially
       offset by costs associated the introduction of a new combination cooling
       and heating product earlier in the year.

       Depreciation, depletion and amortization expense increased due to the
       above reason.

       Interest expense declined due to the reason noted above.

       YEAR 2000 COMPLIANCE

       The year 2000 issue relates to the way computer hardware and software
       define calendar dates; many use only two digits to represent the year
       which could cause failures or miscalculations. In addition, many systems
       and equipment that are not typically thought of as "computer-related"
       (referred to as "non-IT") contain imbedded hardware or software that may
       include a time element. The Year 2000 issue can arise at any point in the
       Company's supply, manufacturing, processing, distribution and financial
       chains. As a result, the Company is at risk of disruptions to its
       business operations from possible miscalculations or system failures
       occurring not only in its own equipment and software, but those occurring
       in any business or governmental entity that the Company relies on for
       goods or services.


                                        8

<PAGE>

       The Company completed a study in early 1998 with the assistance of
       external consultants, to evaluate the Company's current internal
       information and financial systems. The Company concluded that the
       majority of the existing systems were not Year 2000 compliant. We have
       therefore undertaken to implement a Year 2000 compliant enterprise
       resource planning (ERP) system to replace all non-compliant systems as
       well as to modernize and integrate all of the Company's systems. The
       majority of the hardware utilized by the Company, including all that may
       be Year 2000 non-compliant, has been replaced. Work on the project began
       in the second quarter of 1998 and is expected to be completed during the
       fourth quarter of 1999. To date the concrete dispatch, general ledger,
       accounts payable, accounts receivable and payroll packages have been
       implemented. Sales order processing has been implemented at one location
       and is running parallel at the other two locations with "go-live"
       scheduled prior to year-end. The manufacturing and procurement modules
       are in the final stages of testing and are scheduled to be implemented
       prior to year-end. Contingency plans have been investigated and are
       believed to be adequate should the scheduled implementation be delayed.

       The cost of the entire project is currently estimated at $4,000,000
       including hardware, software, consulting fees and other out-of-pocket
       expenses. Approximately $3,600,000 has been incurred to date. Funding was
       furnished by a lease of approximately $1,650,000 with the balance
       provided by operating cash flow. The cost of the project is not expected
       to have a significant negative impact on the Company's future financial
       results.

       A review was also been undertaken to assess and correct Year 2000 issues
       affecting both our products and non-IT systems and equipment used in our
       businesses. At the present time, the Company has not identified any
       products that would not be Year 2000 compliant.

       We rely on third party suppliers for raw materials, water, utilities,
       transportation and other key services. Interruption to any of their
       operations due to Year 2000 issues could affect the operations of our
       Company. We have initiated efforts to ascertain the level of preparedness
       of this group. We have found some of these entities less willing to
       provide information concerning their state of readiness. Alternative
       sources of raw materials and certain other services have been identified,
       where possible, to help mitigate any impact due to disruptions at any of
       our key suppliers. While we believe that the steps we have taken should
       reduce the adverse effect on our Company of any such disruptions, the
       interdependent nature of the Company and its suppliers, service
       providers, utilities and governmental agencies is such that a disruption
       at one or more suppliers could have material adverse consequences.

       We are also dependent upon our customers for sales and cash flow. Year
       2000 interruptions in our customers' operations could result in reduced
       sales, increased inventory or receivable levels and cash flow reductions.
       While these events are possible, we believe our customer base is broad
       enough to minimize the affects to our Company of system disruptions at
       some customers' operations. We are, however, taking steps to contact and
       monitor the status of our larger customers as a means of determining
       risks and alternatives.

       At this time, we have not learned of any potential exposures from
       external, non-compliant third party suppliers or customers.

                                        9

<PAGE>

    PART II - OTHER INFORMATION

    Item 6.   EXHIBITS AND REPORTS ON FORM 8-K

                (a)  Exhibits:

                Exhibit 27:  Financial data schedule

                (b)  Registrant filed no reports on Form 8-K during the quarter
                     ended October 2, 1999.



                                    SIGNATURE

Pursuant to the requirement 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.

                                         CONTINENTAL MATERIALS CORPORATION

Date:        November 12, 1999            By:   /s/ Joseph J. Sum
        ---------------------------            ---------------------------------
                                               Joseph J. Sum, Vice President
                                               and Chief Financial Officer

                                       10