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 September 28, 1996

                                 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             (I.R.S. Employer
                  of                         Identification No.)
     incorporation or organization)        


         225 West Wacker Drive, 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 October 25, 1996  1,103,211

                                
<PAGE>                                

                                
                                
                 PART I - FINANCIAL INFORMATION
                                
Item 1.   Financial Statements

                CONTINENTAL MATERIALS CORPORATION
              CONDENSED CONSOLIDATED BALANCE SHEETS
            SEPTEMBER 28, 1996 and DECEMBER 30, 1995
                           (Unaudited)
                (000's omitted except share data)
                                
<TABLE>
<CAPTION>
   
                                         SEPTEMBER 28,      DECEMBER 30,
                                              1996              1995
<S>                                      <C>                <C> 
          ASSETS                                                     
Current assets:                                                    
 Cash and cash equivalents               $     --           $  1,074
 Receivables, net                          14,174             12,158
 Inventories:                                                      
  Finished goods                            8,284              8,038
  Work in process                           2,114              2,282
  Raw materials and supplies                4,339              4,337
 Prepaid expenses                           2,988              2,206
                                         --------           --------
   Total current assets                    31,899             30,095
                                         --------           --------
                                                                   
Property, plant and equipment, net         14,694             14,613
                                                                    
Other assets:                                                       
 Investment in mining partnership             750              1,500
 Other                                        838              1,015
                                         --------           --------
                                         $ 48,181           $ 47,223
                                         ========           ========
                                                                       
          LIABILITIES                                                
Current liabilities:                                                 
 Bank loan payable                       $    900           $  2,300
 Current portion of long-term debt          1,000              1,011
 Accounts payable and accrued expenses     12,287             11,443
 Income taxes                                 501                 31
                                         --------           --------
   Total current liabilities               14,688             14,785
                                         --------           --------
                                                   
Long-term debt                              2,500              3,000
Deferred income taxes                       2,157              2,157
                                                                         
          SHAREHOLDERS' EQUITY                                            
Common shares, $0.50 par value; authorized                                 
 3,000,000; issued 1,326,588                  663                663
Capital in excess of par value              3,484              3,484
Retained earnings                          27,659             25,818
Treasury shares, 223,377, at cost          (2,970)            (2,684)
                                         --------           --------
                                           28,836             27,281
                                         --------           --------
                                         $ 48,181           $ 47,223
                                         ========           ========
</TABLE>
                                
                                
                                
                                
                     See accompanying notes
                                2
                                
<PAGE>                                
                                
                CONTINENTAL MATERIALS CORPORATION
   CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
 FOR THE THREE MONTHS ENDED SEPTEMBER 28, 1996 AND SEPTEMBER 30, 1995
                           (Unaudited)
            (000's omitted except per share amounts)

<TABLE>
<CAPTION>

                                          SEPTEMBER 28,   SEPTEMBER 30,
                                              1996            1995
                                                                 
<S>                                       <C>             <C>          
Net sales                                 $ 21,718        $ 18,183
                                                                     
Costs and expenses:                                              
 Cost of sales (exclusive of                                     
  depreciation and depletion)               16,058          13,288
 Depreciation and depletion                    666             569
 Selling and administrative                  3,142           3,455
                                          --------        --------
                                            19,866          17,312
                                          --------        --------
                                                                  
Operating income                             1,852             871
                                                                  
Interest                                      (112)           (215)
Equity loss from mining partnership           (350)           (229)
Other income                                   124             371
                                          --------        --------
                                                                  
Income before income taxes                   1,514             798
                                                               
Provision for income taxes                     464             303
                                          --------        --------
                                                                
Net income                                   1,050             495
                                                                 
Retained earnings, beginning of period      26,609          24,694
                                          --------        --------
Retained earnings, end of period          $ 27,659        $ 25,189
                                          ========        ========
                                                                 
Net income per share                      $    .95        $    .44
                                          ========        ========
                                               
Average shares outstanding                   1,103           1,131
                                          ========        ========


</TABLE>







                     See accompanying notes
                                3
                                
<PAGE>                                
                                
                                
                CONTINENTAL MATERIALS CORPORATION
   CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
 FOR THE NINE MONTHS ENDED SEPTEMBER 28, 1996 AND SEPTEMBER 30, 1995
                           (Unaudited)
            (000's omitted except per share amounts)

<TABLE>
<CAPTION>

                                          SEPTEMBER 28,  SEPTEMBER 30,
                                             1996           1995
                                                
<S>                                       <C>            <C>
Net sales                                 $ 66,694       $ 53,729
                                                
Costs and expenses:                             
 Cost of sales (exclusive of                    
  depreciation and depletion)               50,387         41,995
 Depreciation and depletion                  1,995          1,750
 Selling and administrative                  9,924          9,639
                                          --------       --------
                                            62,306         53,384
                                          --------       --------      
                                                
Operating income                             4,388            345
                                                
Interest                                      (441)          (644)
Equity loss from mining partnership         (1,495)          (345)
Other income                                   337            728
                                          --------       --------      
Income before income taxes                   2,789             84
                                                
Provision for income taxes                     948             32
                                          --------       --------
Net income                                   1,841             52
                                                                 
Retained earnings, beginning of period      25,818         25,137
                                          --------       --------
Retained earnings, end of period          $ 27,659       $ 25,189
                                          ========       ========
                                                
Net income per share                      $   1.66       $    .05 
                                          ========       ========
                                                                
Average shares outstanding                   1,106          1,131
                                          ========       ========


</TABLE>






                     See accompanying notes
                                4
                                
                                
<PAGE>                                
                                
                CONTINENTAL MATERIALS CORPORATION
         CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 FOR THE NINE MONTHS ENDED SEPTEMBER 28, 1996 AND SEPTEMBER 30, 1995
                           (Unaudited)
                         (000's omitted)
                                
                                
<TABLE>
<CAPTION>
                                
                                                    SEPTEMBER   SEPTEMBER
                                                     28, 1996    30, 1995
                                                                        
<S>                                                 <C>         <C>
Net cash provided (used) by operating activities    $  3,878    $ (2,824)
                                                                       
Investing activities:                                                   
 Capital expenditures                                 (2,073)     (2,209)
 Proceeds from sale of property and equipment             63         672
 Investment in mining partnership                       (745)       (746)
 Other                                                    --         (27)
                                                    --------    --------
Net cash used in investing activities                 (2,755)     (2,310)
                                                                          
Financing activities:                                                     
 (Repayments) borrowings under revolving                                 
   credit facility                                    (1,400)      3,100
 Long-term borrowings                                     --         500
 Repayment of long-term debt                            (511)       (710)
 Payment to acquire treasury stock                      (286)       (126)
                                                    --------    --------
Net cash (used) provided by financing activities      (2,197)      2,764
                                                                           
Net decrease in cash and cash equivalents             (1,074)     (2,370)
                                                                        
Cash and cash equivalents:                                               
 Beginning of year                                     1,074       2,778
                                                    --------    --------
 End of period                                      $    --     $    408
                                                    ========    ========    
                                                                        
Supplemental disclosures of cash flow items:                            
Cash paid during the nine months for:                                   
 Interest                                           $    500    $    633
 Income taxes                                            490         179





</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 SEPTEMBER 28, 1996
                           (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.  This rate was revised during
  the quarter ended September 28, 1996.

3.Operating results for the first nine months of 1996 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 11 of Notes to Consolidated Financial
  Statements in the Company's 1995 Annual Report.)

4.On October 21, 1996 the Company purchased the assets of Valco,
  Inc.'s (Valco's) Pueblo, Colorado ready-mix concrete and
  aggregates operation for approximately $5,300,000 in cash
  including $500,000 for a noncompetition agreement with Valco
  and one of its shareholders.  Additionally, the Company
  entered into a long-term lease to mine aggregates from
  properties in Pueblo owned by Valco.  These transactions will
  expand the area serviced by the Company's ready-mix and
  aggregates operations in central and southern Colorado as well
  as provide additional aggregate reserves.

5.Concurrent with the purchase, the Company signed an Amended
  and Restated Revolving Credit and Term Loan Agreement (the
  Agreement) with its existing lending banks.  The new term loan
  of $8,500,000 was used to fund the Valco transaction and to
  refinance the $3,500,000 loan previously outstanding.  The new
  term loan is payable in increasing semi-annual principal
  installments with final payment of all then unpaid principal
  on June 15, 2001.  The loan bears interest at prime or an
  adjusted LIBOR rate.  The Agreement also provides for a
  $13,500,000 line of credit through June 15, 1998.  Other terms
  and conditions of the loan agreement are similar to the prior
  agreement.









                                6
                                
<PAGE>                                
                                
   Item 2.  Management's Discussion and Analysis of Financial
               Condition and Results of Operation
                                
                                
  Financial Condition (See pages 2 and 5)

  Operations for the first nine months of 1996 provided
  $3,878,000 in cash compared to using $2,824,000 in 1995.
  Improved earnings accounted for approximately $1,789,000 of
  the difference.  Additionally, cash flows improved due to a
  planned reduction in accounts payable and accruals in the
  prior year of over $3,000,000 compared to an increase of
  $1,300,000 in the current year.  The current year growth in
  payables and accruals was the result of the increased level of
  business.
  
  The Company estimates that its short-term line of credit (of
  which $900,000 was outstanding at September 28, 1996) will be
  adequate to meet its cash requirements for the foreseeable
  future.  See also the discussion of the line of credit in Note
  5 of the accompanying Notes to the Quarterly Consolidated
  Financial Statements.  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 September 28, 1996 to
  Quarter Ended September 30, 1995 (See page 3)
  
  Consolidated net sales increased $3,535,000 (19.4%) as both
  industry segments showed strong growth. Sales of the
  construction materials segment were up $2,344,000 (26.6%) as
  construction activity in the Colorado Springs, Colorado area
  increased from the prior year.  Improved furnace sales at
  Williams Furnace, as well as several large fan coil contracts,
  lead to the $1,191,000 (12.8%) improvement in the heating and
  air-conditioning segment.
  
  Selling and administrative expenses decreased $313,000 (9.1%)
  while declining as a percentage of sales from 19.0% to 14.5%.
  The decrease is attributable to the inclusion of non-recurring
  litigation related costs and the accrual of compensation for
  the Company's former president in the prior year.
  
  Other income for the prior year includes a $300,000 gain on
  the sale of the Company's interest in Oracle Ridge surface
  rights to Union Copper, Inc., the majority partner of Oracle
  Ridge Mining Partners.
  
  
  
  
  
  
  
  
  
  
  
  
                                7


<PAGE>
  
  
  Operations  -  Comparison of Nine Months  Ended  September  28,
  1996 to Nine Months Ended September 30, 1995 (See page 4)
  
  Net sales increased $12,965,000 (24.1%).  The heating and air-
  conditioning segment reported an increase of $5,167,000
  (16.8%) as sales rose at both Williams Furnace and Phoenix
  Manufacturing attributable to new customers and the reasons
  noted above.  The  increase in the construction materials
  segment, $7,798,000 (25.4%) was due to the reasons noted
  above.
  
  Consolidated cost of sales (exclusive of depreciation and
  depletion) as a percentage of sales improved from 78.2% to
  75.5% due to higher sales volume and production levels
  combined with cost improvements at all locations.
  
  Selling and administrative expenses increased $285,000 (3.0%)
  while the percentage of sales declined from 17.9% to 14.9%.
  The dollar increase is attributable to the higher sales volume
  while the percentage decline is due to the fixed nature of
  many of the expenses.
  
  The equity loss from mining partnership includes a first
  quarter write-down in the carrying value of the investment of
  $628,000.  The project remains shut down.  The remaining value
  of $750,000 carried on the balance sheet is management's best
  estimate of the investment's current market value.
  
  Other income in the prior year included gains on the sale of
  Oracle Ridge surface rights and the sale of real property in
  Colorado Springs.
  
  Historically, the Company has experienced operating losses
  during the first quarter.  The subsequent quarters have
  historically improved over the first quarter's operating
  results.  This trend is expected to continue as sales of
  construction materials are generally higher in the second and
  third quarters while sales of heating and air-conditioning
  products, although not showing strong seasonality, experience
  product mix changes that yield higher gross profits in the
  fourth quarter.
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
                                8

<PAGE>

   PART  II Other Information  -



   Item 6.  Exhibits and Reports on Form 8-K

            (a)  Exhibits:                                  
                                                           
                 Exhibit 11:  Computation of per share earnings
                                                                
                 Exhibit 27:  Financial data schedule       

            (b)  Registrant filed no reports on Form 8-K during
                 the quarter ended September 28, 1996.




                            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:  October 25, 1996          By:   /S/ Joseph J. Sum
      ----------------------        ----------------------
                                     Joseph J. Sum, Vice President
                                     and Chief Financial Officer



















                                9