<PAGE>
 
                                 UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                  ------------------------------------------

                                   FORM 10-Q

[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
      EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997

                                       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 1-7726


                           REUNION INDUSTRIES, INC.
            (Exact name of registrant as specified in its charter)

           DELAWARE                                     06-1439715
(State or other jurisdiction of                      (I.R.S. Employer
 incorporation or organization)                   Identification Number)

                              62 SOUTHFIELD AVENUE
                        ONE STAMFORD LANDING  SUITE 208
                               STAMFORD, CT 06902
                    (Address of principal executive offices)

                                 (203) 324-8858
              (Registrant's telephone number, including area code)


     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
                                 -----       -----


 As of May 1, 1997 the Registrant had 3,855,100 shares of common stock, par
value $.01, outstanding.
<PAGE>
 
                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION                                        PAGE
                                                                    -----
<S>     <C>                                                         <C>
 
Item 1. Financial Statements
 
        Consolidated Balance Sheets - March 31, 1997 (Unaudited)      
          and December 31, 1996                                       2
 
        Consolidated Statements of Operations (Unaudited)             
          Three Months Ended March 31, 1997 and 1996                  4
 
        Consolidated Statements of Cash Flows (Unaudited)             
          Three Months Ended March 31, 1997 and 1996                  5 
 
        Notes to Consolidated Financial Statements (Unaudited)        6
 
Item 2. Management's Discussion and Analysis of Financial              
          Condition and Results of Operations                         8

PART II.  OTHER INFORMATION

Item 6.   Exhibits and Reports on Form 8-K                           11

SIGNATURE                                                            12
</TABLE> 

                                       1
<PAGE>
 
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements

                           REUNION  INDUSTRIES, INC.

                          CONSOLIDATED BALANCE SHEETS
                                (In Thousands)

<TABLE>
<CAPTION>
                                                         March 31,   December 31,
                                                           1997          1996
                                                       ------------  -------------
                                                        (Unaudited)
<S>                                                     <C>             <C>
 
ASSETS
 
Current Assets
   Cash and Cash Equivalents                               $ 2,884        $ 1,407
   Accounts Receivable, Less Allowance for
      Doubtful Accounts of $ 510 and $ 434, respectively    15,313         12,747
   Inventories                                               7,729          7,381
   Customer Tooling-in-Process                                 988          1,107
   Note Receivable from Sale of Oil & Gas Operations             -          2,200
   Other Current Assets                                        242            443
                                                           -------        -------
      Total Current Assets                                  27,156         25,285
                                                           -------        -------
Property, Plant and Equipment---- Net                       25,001         24,333
                                                           -------        -------
Other Assets
   Goodwill                                                  9,589          9,766
   Assets of Discontinued Agricultural Operations           14,063         14,139
   Other Assets Held for Sale                                  401            401
   Other                                                     1,650          1,252
                                                           -------        -------
                                                            25,703         25,558
                                                           -------        -------
                                                           $77,860        $75,176
                                                           =======        =======
</TABLE>

          See Accompanying Notes to Consolidated Financial Statements

                                       2
<PAGE>
 
                           REUNION INDUSTRIES, INC.

                          CONSOLIDATED BALANCE SHEETS
                                (In Thousands)

<TABLE> 
<CAPTION> 
                                                             March 31,  December 31,
                                                                1997       1996
                                                            ----------  ------------
                                                            (Unaudited)
          LIABILITIES AND SHAREHOLDERS' EQUITY
<S>                                                           <C>          <C>      
Current Liabilities                                                                 
  Current Portion of Long-Term Debt                            $12,527      $10,865 
  Accounts Payable                                               9,991        9,459 
  Advances From Customers                                        1,557        1,922 
  Other Current Liabilities                                      6,312        5,175 
                                                               -------      ------- 
    Total Current Liabilities                                   30,387       27,421 
                                                                                    
Long-Term Debt                                                  13,765       14,190 
Long-Term Debt - Related Parties                                 1,385        1,385 
Other Liabilities                                                3,158        3,236 
                                                               -------      ------- 
          Total Liabilities                                     48,695       46,232 
                                                               -------      ------- 
Commitments and Contingencies                                                       
                                                                                    
Shareholders' Equity                                                                
                                                                                    
  Common Stock  ($.01 par value; 20,000 authorized;                          
   3,855 issued and outstanding)                                    38           38 
  Additional Paid-in Capital                                    29,242       29,242 
  Retained Earnings (Since January 1, 1989)                        (12)        (307)
  Foreign Currency Translation Adjustments                        (103)         (29)
                                                               -------      ------- 
    Total Shareholders' Equity                                  29,165       28,944 
                                                               -------      ------- 
                                                               $77,860      $75,176 
                                                               =======      =======  
</TABLE>

          See Accompanying Notes to Consoldiated Financial Statements

                                       3
<PAGE>
 
                           REUNION INDUSTRIES, INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (Unaudited)
                     (In Thousands, Except Per Share Data)

<TABLE>
<CAPTION>
 
 
                                                            Three Months Ended
                                                                March 31,     
                                                           ---------------------
                                                              1997      1996  
                                                           ---------- ----------
<S>                                                         <C>       <C>     
 
   Net Sales                                                 $24,672   $13,952
 
   Cost of Sales                                              20,839    11,766
                                                             -------   -------
   Gross Profit                                                3,833     2,186
 
   Selling, General and Administrative Expenses                2,861     2,079
                                                             -------   -------
   Operating Profit                                              972       107
 
   Other Income and (Expense)
       Interest Expense                                         (754)     (550)
       Other, Including Interest Income                          129        27 
                                                             -------   -------
                                                                (625)     (523)
                                                             -------   -------
   Income (Loss) From Continuing Operations Before
    Income Taxes                                                 347      (416)
 
       Income Tax Expense                                        (52)       (4)
                                                             -------   -------
   Income (Loss) From Continuing Operations                      295      (420)
 
   Loss From Discontinued Operations                               -     (122)
                                                             -------   -------
   Net Income (Loss)                                         $   295   $  (542)
                                                             =======   =======
   Net Income (Loss) Per Common Share and
    Common Share Equivalent -- Primary and Fully Diluted
 
       Income (Loss) From Continuing Operations              $  0.07   $ (0.11)
       Loss  From Discontinued Operations                          -     (0.03)
                                                             -------   -------
          Net Income  (Loss)                                 $  0.07   $ (0.14)
                                                             =======   =======
   Weighted Average Number of Common Shares
     and Common Share Equivalents Outstanding
       Primary and Fully Diluted                               3,949     3,855
                                                             =======   =======
</TABLE>

         See Accompanying Notes to Consolidated Financial Statements.

                                       4
<PAGE>
 
                           REUNION INDUSTRIES, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)
                                (In Thousands)

<TABLE> 
<CAPTION> 
                                                                                 Three Months Ended
                                                                                     March 31,
                                                                                --------------------
                                                                                   1997       1996
                                                                                ---------   --------
<S>                                                                              <C>        <C>
 
Cash Flows From Operating Activities:
   Net Income (Loss)                                                               $   295  $  (542)
   Adjustments to Reconcile Net Income (Loss) to Net Cash (Used in)
     Provided by Operating Activities
        Depreciation and Amortization                                                  879      477
                                                                                   -------  -------
                                                                                     1,174      (65)
   Changes in Assets and Liabilities:
        (Increase) Decrease in Accounts Receivable                                  (2,566)      38
        (Increase) Decrease in  Inventory                                             (348)     153
        Decrease in Other Current Assets                                               320      323
        Increase in Accounts Payable                                                   532      432
        Increase in Other Current Liabilities                                          772      377
        Other                                                                         (869)    (205)
                                                                                   -------  -------
Net Cash (Used in) Provided by Operating Activities                                   (985)   1,053
 
Cash Flows From Investing Activities:
   Collection of Note Receivable from Sale of Oil and Gas Business                   2,200        -
   Acquisition of Rostone Net of Cash Acquired                                           -     (118)
   Change in Net Assets of Discontiued Operations                                        -    1,256
   Investment In and Advances to The Juliana Preserve                                    -       (6)
   Capital Expenditures                                                               (975)    (296)
                                                                                   -------  -------
Net Cash Provided by Investing Activities                                            1,225      836
 
Cash Flows From Financing Activities:
   Increase in Revolver Borrowings                                                   1,336    3,612
   Proceeds from Issuance of Debt Obligations                                          713      500
   Payments of Debt Obligations                                                       (812)  (6,284)
                                                                                   -------  -------
Net Cash Provided by (Used in) Financing Activities                                  1,237   (2,172)
 
Increase (Decrease) in Cash and Cash Equivalents                                     1,477     (283)
 
Cash and Cash Equivalents at Beginning of Period                                     1,407      529
                                                                                   -------  -------
Cash and Cash Equivalents at End of Period                                         $ 2,884  $   246
                                                                                   =======  =======
</TABLE>

          See Accompanying Notes to Consolidated Financial Statements

                                       5
<PAGE>
 
                   REUNION INDUSTRIES, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

               (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)

NOTE 1.   CONSOLIDATED FINANCIAL STATEMENTS

PRINCIPLES OF CONSOLIDATION

     The consolidated financial statements include the accounts of Reunion
Industries, Inc. ("RII")  and its majority owned subsidiaries.  As used herein,
the term "Company" refers to RII, its predecessors and its subsidiaries, unless
the context indicates otherwise.  All intercompany transactions and accounts are
eliminated in consolidation.

FINANCIAL STATEMENTS AT MARCH 31, 1997

     The Consolidated Balance Sheet at  March 31, 1997, and the Consolidated
Statements of Operations and Cash Flows for the three months ended  March 31,
1997 and 1996 included herein are unaudited; however, in the opinion of
management of the Company, they reflect all adjustments necessary to present
fairly the results for the interim periods. Such results are not necessarily
indicative of results to be expected for the year.   The Consolidated Balance
Sheet at December 31, 1996 has been derived from the audited financial
statements at that date.   For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's Annual
Report on  Form 10-K for the year ended December 31, 1996.

EARNINGS PER SHARE

     Earnings per Common Share and Common Share Equivalent are computed based on
the weighted average number of common and common equivalent shares outstanding
during each period.  Common equivalent shares include shares issuable upon
exercise of the Company's stock options and warrants. For the three  months
ended March 31, 1996, common equivalent shares relating to options and warrants
to purchase common stock were not included in the weighted average number of
shares because their effect would have been anti-dilutive.

NOTE 2.  BUSINESS ACQUISITIONS

ROSTONE

         On February 2, 1996, the Company acquired Rostone Corporation
("Rostone") which was merged with and into the Company's subsidiary, Oneida
Molded Plastics Corp. ("Oneida").  The surviving corporation changed its name to
Oneida Rostone Corp. ("ORC").  The Rostone acquisition was accounted for using
the purchase method, and the results of Rostone's operations are included in the
Company's consolidated financial statements from the date of the acquisition,
February 2, 1996.

DATA PACKAGING LIMITED

     On October 21, 1996, DPL Acquisition Corp. ("DPLAC"), a wholly-owned
subsidiary of ORC, acquired a 27.5% interest in Data Packaging Limited ("DPL"),
a Bermuda corporation operating in Ireland.   On November 18, 1996, DPLAC
acquired an additional 68% of the outstanding stock of DPL.  Together, these
transactions represent the "DPL Acquisition."

     The remaining 4.5% of the outstanding stock of DPL is owned by Forbairt, an
agency of the Irish government, and is accounted for as a minority interest in
the accompanying financial statements.    The DPL Acquisition was accounted for
using the purchase method and the results of DPL's operations are included in
the consolidated financial statements from the date of acquisition.

                                       6
<PAGE>
 
                   REUNION INDUSTRIES, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

               (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)

QUALITY MOLDED PRODUCTS

     On November 18, 1996, ORC acquired (the "QMP Acquisition") substantially
all of the assets and the business and assumed certain liabilities of Quality
Molded Products, Inc. ("QMP").   The QMP Acquisition was accounted for using the
purchase method, and the results of QMP's operations are included in the
consolidated financial statements from the date of acquisition.

PRO FORMA RESULTS

     The following unaudited pro forma results of operations for the three
months ended March 31, 1996  have been prepared assuming the acquisitions of
Rostone, DPL and QMP had occurred as of January 1, 1996. These pro forma results
are not necessarily indicative of the results of future operations or of results
that would have occurred had the acquisitions been consummated as of that date.

<TABLE>
<CAPTION>
                                               THREE MONTHS
                                                   ENDED 
                                              MARCH 31, 1996
                                             ----------------
<S>                                              <C>    
 
     Revenues..............................      $23,239   
     Income (Loss) From Continuing 
      Operations...........................         (478)
     Net Income (Loss).....................      $  (600)
     Loss per Common Share and Common 
      Share Equivalent.....................      $  (.16)
 
</TABLE>

 NOTE 3.  INVENTORIES

  Inventories consisted of the following:

<TABLE>
<CAPTION>
 
 
                             MARCH 31, 1997  DECEMBER 31, 1996
                             --------------  -----------------
<S>                          <C>             <C>
 
          Raw  Materials             $4,314             $3,719
          Work-in process             1,219              1,170
          Finished Goods              2,196              2,492
                                     ------             ------
                  Total              $7,729             $7,381
                                     ======             ======
 
</TABLE>

NOTE 4.  CONTINGENCIES

     In early 1996, the State of  California Franchise Tax Board initiated  an
audit of the Company's  franchise tax returns for the years 1991, 1992 and 1993.
In  October 1996, the Company received a formal notice of assessment from the
taxing authority in the aggregate amount of $716 plus interest.  Of this amount,
$645 results from the auditor's conclusion that income from gain on sales of
certain Canadian assets in 1991 should be reclassified from nonbusiness to
business income.   The  Company believes its classification of such income was
correct, and has  appealed  the assessment of tax.   If the Company's positions
prevail on this issue, management believes that the amounts due would not exceed
amounts previously paid or provided for.   No additional  accruals have been
made for  any amounts that may be due if the Company does not prevail   because
the  outcome cannot be determined.   The Company  recorded a provision for  $85
in 1996 for certain other adjustments proposed.

                                       7
<PAGE>
 
                   REUNION INDUSTRIES, INC. AND SUBSIDIARIES


     In connection with the sale of Reunion Energy Company ("REC"),  the Company
retained certain oil and gas properties in Louisiana because of litigation
concerning environmental matters. The Company is in the process of environmental
remediation under a plan approved by the Louisiana Office of Conservation. The
Company has recorded an accrual of $533 for its proportionate share of the
remaining estimated costs to remediate the site based on plans and estimates
developed by the environmental consultants hired by the Company. Owners of a
portion of the property have objected to the Company's proposed cleanup
methodology and have filed suit to require additional procedures. The Company is
contesting this litigation, and believes its proposed clean up methodology is
well within accepted industry practice for remediation efforts of a similar
nature. No accrual has been made for any additional costs of possible
alternative clean up methods because the nature and dollar amount of such
alternative cannot presently be determined.


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

GENERAL
 
     The Company's principal operations are in the plastic products industry.
During 1996 the Company completed the Rostone, DPL and QMP Acquisitions which
added new customers and products to the plastic products segment. The Company is
considering additional acquisitions to increase its customer base and expand its
product offerings and service capabilities in the plastics industry. In
addition, the Company may consider acquisitions in other industries.

     The Company and Chatwins Group, Inc. ("Chatwins") are considering the
merger of Chatwins with and into the Company following the third anniversary of
the acquisition by Chatwins, in June 1995, of approximately 38% of the Company's
outstanding common stock. However, this or any other transaction between
Chatwins and the Company in which Chatwins has an interest separate from that of
the Company will be subject to approval by the Boards of Directors of the
Company and of Chatwins and compliance by Chatwins with the covenants in its
financing agreements. There can be no assurance that any transaction will be
proposed or that any proposed transaction will be consummated.

     Discontinued operations consist of the Company's former oil and gas
operations, sold in 1996, and wine grape agricultural and real estate
development operations, held for sale since December 1996.

FORWARD LOOKING STATEMENTS

     This Form 10-Q contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934.  These forward-looking statements speak only as of the
date of this Form 10-Q, and the Company expressly disclaims any obligation or
undertaking to publicly release any updates or revisions to any forward-looking
statements contained herein.  Although the Company believes that its
expectations are based on reasonable assumptions, it cannot assure that the
expectations contained in such forward-looking statements will be achieved.
Such statements involve risks, uncertainties and assumptions which could cause
actual results to differ materially from those contained in such statements.
The Company's operations are affected by domestic and international economic
conditions which affect the volume and pricing of sales of business and consumer
goods, for which the Company produces components, the cost and availability of
materials, labor and other goods and services used in the Company's operations
and the cost of interest on the Company's debt.

                                       8
<PAGE>
                  REUNION INDUSTRIES, INC. AND SUBSIDIARIES

 
RESULTS OF CONTINUING OPERATIONS

THREE MONTHS ENDED MARCH 31, 1997

     The Company recognized income from continuing operations of $ 0.3 million
during the three months ended March 31, 1997 compared to a loss of $0.4 million
for the comparable prior year period.  The 1997 income reflects a full three
months of  results of each of the businesses acquired in February 1996 (Rostone)
and November 1996 (QMP and DPL)  described in Note 2  "Business Acquisitions".
The loss for the first three months of 1996 includes two months of Rostone's
results, acquired in February 1996 and does not include the results of QMP and
DPL acquired  later in the year.

     PLASTICS PRODUCTS SEGMENT: The Company, through its wholly owned subsidiary
ORC, manufactures high volume, precision plastic products and provides
engineered plastic services. Revenues and operating income of the plastic
products segment were $24.7 million and $1.4 million, respectively, for the for
the three months ended March 31, 1997. This compares to revenues and operating
profit of $14.0 million and $0.7 million, respectively, for the three months
ended March 31, 1996.

     Revenues increased $10.7 million to $24.7 million for the three months
ended March 31, 1997 from $14.0 million for the three months ended March 31,
1996. The majority of the 76.8% increase in revenues is attributable to the
business acquisitions competed during 1996. The remaining increase in revenues
contributed from the existing business is attributable to parts sales to new
customers combined with higher levels of sales to existing customers. The
Company's tooling sales, historically a leading indicator of future sales,
remain strong. Tooling sales for the three months ended March were $1.5 million,
comparable to sales of $1.5 million for the prior year period. Excluding
effects of acquisitions, tooling sales decreased by $0.3 million for the three
months ended March 31, 1997 compared to the prior year period. Plastic products
segment backlog totaled $ 24.7 million at March 31, 1997, compared to
backlog of $25.1 million at December 31, 1996 and backlog of $16.3 million at
March 31, 1996.

     Cost of sales totaled $20.8 million, or 84.5% of net sales, for the three
months ended March 31, 1997 compared to $11.8 million, or 84.3% of net sales for
the three months ended March 31, 1996. Excluding effects of acquisitions, cost
of sales in the Company's existing business remained consistent for the three
months ended March 31, 1997 versus 1996. As a result of the increase in sales,
gross margins increased to  $3.8 million, or 15.5% of net sales for the three
months ended March 31,  1997 from $2.2  million, or 15.7% of net sales in the
prior year period.

     Selling, general and administrative expenses were $2.4  million for  the
three months ended March 31, 1997, compared to $1.5 million for the three months
ended March 31, 1996,  reflecting the businesses acquired in 1996. Operating
income was $ 1.4  million, or 5.7% of net sales, for the three months ended
March 31, 1997 compared to $0.7 million, or 5.0% of net sales in the comparable
1996 period.

     CORPORATE GENERAL AND ADMINISTRATIVE EXPENSE: Corporate general and
administrative expenses, consisting primarily of executive and administrative
salaries and benefits, professional fees and other public company costs, totaled
$0.4  million for the three months ended March 31, 1997 compared to $0.6 million
for the three months ended March 31, 1996. The expenses for the three months
ended March 31, 1996  included occupancy and office costs for both the Company's
previous headquarters in Houston, Texas, closed in May 1996, and its new
headquarters in Stamford, Connecticut.

     OTHER INCOME AND (EXPENSE): Interest expense was $0.8 million for the three
months ended March 31,1997 compared to $0.6 million as a result of interest on
ORC debt subsequent to the Rostone, QMP and DPL Acquisitions.

                                       9
<PAGE>
 
                   REUNION INDUSTRIES, INC. AND SUBSIDIARIES


DISCONTINUED OPERATIONS

     The Company resolved to sell  its Agricultural operations in December 1996
and recorded a provision in 1996 to record estimated losses on disposal and
estimated losses in 1997 through the date of disposition.  In May 1996, the
Company sold its REC subsidiary which substantially completed the disposition of
its oil and gas operations.  The Company retained certain Louisiana oil and gas
properties because of litigation concerning environmental contamination.

     Results  from discontinued operations  for the three months ended March 31,
1996 were a loss of $0.1 million consisting of interest expense and depreciation
from the Company's discontinued agricultural operations.


LIQUIDITY AND CAPITAL RESOURCES

SUMMARY OF 1997 ACTIVITIES

     Cash and cash equivalents totaled $2.9 million at March  31, 1997. During
the three months  ended March 31, 1997, cash increased $1.5 million, with $0.9
million used  by operations, $1.2 million provided by investing activities and
$1.2 million provided by  financing activities.

     INVESTING ACTIVITIES: Capital expenditures were $1.0 million, and the
Company received $2.2 million, plus interest, in final payment on the sale of
the REC subsidiary.

     FINANCING ACTIVITIES: Principal payments reduced long-term obligations by
$0.8 million in the three months ended March  31, 1997.   Proceeds from new term
loan borrowings totaled $0.7 million. Proceeds from net revolving loan
borrowings totaled $1.3 million.

     OPERATING ACTIVITIES: Net cash used in operating activities was $0.9
million in 1997.

FACTORS AFFECTING FUTURE LIQUIDITY

     Because of various restrictions included in the Company's loan
arrangements, management must separately consider liquidity and financing for
corporate requirements, ORC and discontinued operations.

     CORPORATE: Management estimates that corporate expenses, including salaries
and benefits, professional fees and other public company costs, will approximate
$1.6 million in 1997. The Company's source of funds for these requirements and
for future acquisitions, other than from additional borrowings, are from
permitted payments by ORC and from cash generated by the operations or sale of
discontinued operations and other assets held for sale.

     ORC's credit facility with Congress Financial Corporation ("Congress")
limits payments to Reunion by ORC. If certain levels of availability (as defined
in the loan agreements) are maintained, ORC is permitted to pay Reunion
management fees of up to $0.3 million, dividends on preferred stock of up to
$0.6 million, and tax sharing payments of up to 50% of the tax savings realized
by ORC because of Reunion's net operating loss carryovers. There can be no
assurances that ORC will be able to maintain the required levels of availability
and be permitted to make the management fee and tax sharing fee payments to
Reunion. In any event, the maximum amount of such payments is not expected to be
sufficient for Reunion's corporate operating and debt service requirements.

                                       10
<PAGE>
 
                   REUNION INDUSTRIES, INC. AND SUBSIDIARIES


     In February 1997, the Company received repayment on the $2.2 million note,
including interest thereon, from the sale of REC.

     As result of the above transactions, management believes that the Company
will have sufficient resources to meet its corporate obligations as they become
due over the next twelve months.

     ORC: On February 2, 1996, in connection with the Rostone Acquisition, ORC
entered into a new credit facility with Congress which was amended in November
1996 in connection with the QMP Acquisition. The credit facility as amended
provides for maximum borrowings of $20.0 million under a term loan in the
original amount of $7.7 million and revolving loans based on the eligible
balances of accounts receivable and inventory. Management believes that ORC's
cash flow from operations, together with this credit facility and permitted
levels of capital and operating leases, will be sufficient for  ORC's operating
requirements, including capital expenditures and debt service over the next
twelve months.  At March 31, 1997 ORC had $2.0 million in revolving credit
availability.


     DISCONTINUED OPERATIONS: In connection with the decision to discontinue the
agricultural operations, the Company has halted real estate development
activities and, as of April 2, 1997, has canceled its development agreement with
Pacific Union. Based on projections of farming costs and capital requirements
for the 1997 crop year, the Company believes that the only liquidity
requirements for the discontinued agricultural operations prior to their sale
will be approximately $0.3 million for debt service, which the Company expects
to fund from its cash balances.


RESOLUTION OF STRIKE

     On April 15, 1997 ORC experienced a strike by approximately 280 employees 
at its Rostone division in Lafayette, Indiana.  The striking employees, who were
working under a collective bargaining agreement which expired March 2, 1997, 
represent approximately 25% of ORC's full time employees.  On May 14, 1997 the 
Rostone division employees ratified a new three-year contract and returned to 
work.  During the four-week strike, management continued production with 
salaried and temporary workers and took other actions to mitigate its effects.


CONTINGENCIES AND UNCERTAINTIES

     In early 1996, the State of California Franchise Tax Board initiated an
audit of the Company's franchise tax returns for the years 1991, 1992 and 1993.
In October 1996, the Company received a formal notice of assessment from the
taxing authority in the aggregate amount of $0.7 million. Of this amount, $0.6
million results from the auditor's conclusion that income from gain on sales of
certain Canadian assets in 1991 should be reclassified from nonbusiness to
business income. The Company believes its classification of such income was
correct, and has appealed the assessment of tax. If the Company's positions
prevail on this issue, management believes that the amounts due would not exceed
amounts previously paid or provided for. No additional accruals have been made
for any amounts that may be due if the Company does not prevail because the
outcome cannot be determined. The Company recorded a provision of $0.1 million
for certain other adjustments proposed.

     In connection with the sale of REC, the Company retained certain properties
in Louisiana because of litigation concerning environmental matters. The Company
is in the process of environmental remediation under a plan approved by the
Louisiana Office of Conservation. The Company has recorded an accrual of $0.5
million for its proportionate share of the remaining estimated costs to
remediate the site based on plans and estimates developed by the environmental
consultants hired by the Company. Owners of a portion of the property have
objected to the Company's proposed cleanup methodology and have filed suit to
require additional procedures. The Company is contesting this litigation, and
believes its proposed clean up methodology is well within accepted industry
practice for remediation efforts of a similar nature. No accrual has been made
for any additional costs of possible alternative clean up methods because the
nature and dollar amount of such alternative cannot presently be determined.

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<PAGE>
 
                   REUNION INDUSTRIES, INC. AND SUBSIDIARIES


PART II - OTHER INFORMATION

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

      (A) EXHIBIT

          11  Earnings Per Share
          27  Financial Data Schedule

      (B) CURRENT REPORTS ON FORM 8-K

      During the quarter ended  March 31, 1997, the Company filed no reports on
Form 8-K.


                                   SIGNATURE


  Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

 
                              REUNION INDUSTRIES, INC.
                              (Registrant)


                              By /s/ Richard L. Evans
                                 ----------------------------------
                                 Richard L. Evans
                                 Executive Vice President and 
                                 Chief Financial Officer 
                                 (Principal Financial and Accounting Officer)



  Date:   May 15, 1997

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