<PAGE>
 
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                                 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 SEPTEMBER 30, 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 1-7726


                           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)

                           REUNION RESOURCES COMPANY
             2801 POST OAK BOULEVARD, SUITE 400, HOUSTON, TX 77056
        (Former name, former address and former fiscal year if changed)

     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  September 30, 1996, the Registrant had  3,855,100  shares of common
                      stock, par value $.01, outstanding.

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<PAGE>
 
                               TABLE OF CONTENTS


                                                                          PAGE
                                                                          ----
PART I.  FINANCIAL INFORMATION
 
Item 1.  Financial Statements
 
         Consolidated Balance Sheets -  September 30, 1996 (Unaudited)
          and December 31, 1995                                              2
 
         Consolidated Statements of Operations (Unaudited)                   4
          Three Months and Nine months Ended  September 30, 1996 and 1995
 
         Consolidated Statements of Cash Flows (Unaudited)                   5
          Nine Months Ended September  30, 1996 and 1995                    
 
         Notes to Consolidated Financial Statements (Unaudited)              6
 
Item 2.  Management's Discussion and Analysis of Financial Condition
          and Results of Operations                                         11
 
PART II.  OTHER INFORMATION

Item 6.   Exhibits and Reports on Form 8-K                                 17

SIGNATURE                                                                  18

                                       1
<PAGE>
 
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
 
                           REUNION  INDUSTRIES, INC.
 
                          CONSOLIDATED BALANCE SHEETS
                                (In Thousands)
<TABLE>
<CAPTION>
                                                       September 30   December 31,
                                                           1996           1995
                                                       ------------- --------------
                                                        (Unaudited)
<S>                                                    <C>            <C>
ASSETS
 
Current Assets
 Cash and Cash Equivalents                                  $ 5,145        $   529
 Accounts Receivable, Less Allowance for
  Doubtful Accounts of $461  and $315, respectively           7,640          4,792
 Inventories                                                  4,175          2,560
 Customer Tooling-in-Process                                    473            855
 Note Receivable from Sale of Oil & Gas Operations            2,200              0
 Prepaid Expenses and Other Current Assets                    1,499          1,389
                                                            -------        ------- 
  Total Current Assets                                       21,132         10,125
                                                            -------        ------- 
Property, Plant and Equipment---- Net                        26,324         20,224
                                                            -------        ------- 
Other Assets
 Net Assets of Discontinued Oil and Gas Operations               93         11,590
 Goodwill                                                     8,595          4,591
 Investment in Joint Venture                                  2,135          2,129
 Assets Held for Sale                                           138          2,185
 Other                                                        1,428          1,091
                                                            -------        ------- 
                                                             12,389         21,586
                                                            -------        ------- 
                                                            $59,845        $51,935
                                                            =======        ======= 
</TABLE>

         See Accompanying Notes to Consolidated Financial Statements.

                                       2
<PAGE>
 
                           REUNION INDUSTRIES, INC.
 
                          CONSOLIDATED BALANCE SHEETS
                                (In Thousands)

<TABLE> 
<CAPTION> 
                                                         September 30  December 31
                                                             1996         1995
                                                         ------------- ------------
                                                          (Unaudited)
<S>                                                      <C>           <C>
      LIABILITIES AND SHAREHOLDERS' EQUITY
 
Current Liabilities
   Current Portion of Long-Term Debt                          $ 6,610      $ 4,279
  Accounts Payable                                              5,272        3,376
  Advances From Customers                                       1,397        1,574
  Other Current Liabilities                                     3,755        2,886
                                                              -------      -------
     Total Current Liabilities                                 17,034       12,115
 
Long-Term Debt                                                  7,554        3,132
Long-Term Debt - Related Parties                                1,145        4,815
Other Liabilities                                               2,296          619
                                                              -------      -------
     Total Liabilities                                         28,029       20,681
                                                              -------      -------
Commitments and Contingencies
 
Shareholders' Equity
 
    Common Stock  ($.01 par value; 20,000 authorized;
      9/30/96 - 3,855 issued and outstanding
     12/31/95 - 4,112 issued; and 3,855 outstanding                38           40
 Additional Paid-in Capital                                    29,242       31,037
 Retained Earnings (Since January 1, 1989)                      2,536        1,975
 Less Treasury Shares, at cost  (257 shares)                        -       (1,798)
                                                              -------      -------
     Total Shareholders' Equity                                31,816       31,254
                                                              -------      -------
                                                              $59,845      $51,935
                                                              =======      =======
</TABLE>

         See Accompanying Notes to Consolidated Financial Statements.

                                       3
<PAGE>
 
                           REUNION INDUSTRIES, INC.
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (Unaudited)
                     (In Thousands, Except Per Share Data)
 
<TABLE>
<CAPTION>
                                                                 Three Months Ended                   Nine Months Ended       
                                                                   September 30,                        September 30,   
                                                           -----------------------------        ---------------------------
                                                              1996               1995             1996              1995
                                                            --------           ---------        --------          ---------
<S>                                                         <C>                 <C>              <C>              <C>
Operating Revenue                                                                                                          
     Plastic Products                                        $14,041            $ 1,804          $42,285          $  1,804 
                                                             -------            -------          -------          --------
                                                              14,041              1,804           42,285             1,804 
                                                                                                                           
Operating Costs and Expenses                                                                                               
     Plastic Products - Cost of Sales                         11,744              1,524           35,245             1,524 
     Agriculture - Operating Costs                                73                 90              225               159 
     Selling, General and Administrative                       2,028              1,803            5,992             3,221 
                                                             -------            -------          -------          --------
                                                              13,845              3,417           41,462             4,904 
                                                             -------            -------          -------          --------
 Operating Profit (Loss)                                         196             (1,613)             823            (3,100)
                                                             -------            -------          -------          --------
Other Income and (Expense)                                                                                                 
     Interest Expense                                           (517)              (128)          (1,746)             (249)
     Other, Including Interest Income                            176                 27              301               142 
                                                             -------            -------          -------          --------
                                                                (341)              (101)          (1,445)             (107)
                                                             -------            -------          -------          --------
Loss From Continuing Operations Before                                                                                     
    Income Taxes                                                (145)            (1,714)            (622)           (3,207)
                                                                                                                           
    Income Tax Expense                                           (15)                 -              (65)                - 
                                                             -------            -------          -------          --------
Loss From Continuing Operations                                 (160)            (1,714)            (687)           (3,207)
                                                                                                                           
Income (Loss) From Discontinued Oil and Gas                                                                                
 Operations                                                        _             (1,430)           1,248            (7,079)
                                                             -------            -------          -------          --------
Net Income (Loss)                                            $  (160)           $(3,144)         $   561          $(10,286)
                                                             =======            =======          =======          ========
Net Income (Loss) Per Common Share and                                                                                     
    Common Share Equivalent -- Primary and                                                                                 
     Fully Diluted                                                                                                         
    Loss From Continuing Operations                          $ (0.04)           $ (0.45)         $ (0.17)         $  (0.84)
    Income (Loss)  From Discontinued Operations                    -              (0.37)            0.32             (1.85)
                                                             -------            -------          -------          --------
    Net Income  (Loss)                                       $ (0.04)           $ (0.82)         $  0.15          $  (2.69)
                                                             -------            -------          -------          --------
Weighted Average Number of Common Shares                                                                                   
     and Common Share Equivalents Outstanding                  3,855              3,845            3,855             3,825  
                                                             =======            =======          =======          ========
</TABLE>

          See Accompanying Notes to Consolidated Financial Statements

                                       4
<PAGE>
 
                           REUNION INDUSTRIES, INC.

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

<TABLE>
<CAPTION>

                                                                   Nine Months Ended
                                                                      September 30,
                                                                   -------------------
                                                                     1996       1995
                                                                   ---------  --------
<S>                                                                 <C>       <C>
Cash Flows From Operating Activities:
 Net Income (Loss)                                                  $    561  $(10,286)
 Adjustments to Reconcile Net Income (Loss) to Net Cash
  Provided By Operating Activities
   Impairment of Oil and Gas Properties                                    -     6,979
   Depreciation, Depletion and Amortization                            1,594     1,889
   Extension of Warrants to Purchase Common Stock                                  478
    Other                                                                  _      (107)
                                                                    --------  --------
                                                                       2,155    (1,047)
 Changes in Assets and Liabilities:
   (Increase) Decrease in Accounts Receivable                            569     1,238
   (Increase) Decrease in  Inventory                                     272       241
   (Increase) Decrease in Other Current Assets                           339      (690)
   Increase (Decrease) in Current Liabilities                         (1,122)    1,347
   Other                                                                 (64)      (33)
                                                                    --------  --------
Net Cash Provided by Operating Activities                              2,149     1,056
 
Cash Flows From Investing Activities:
 Acquisition of Rostone Net of Cash Acquired                            (118)        -
 Acquisition of Oneida Molded Plastics Corp.                               -    (3,398)
 Sale of Discontinued Operations                                       9,042         -
 Sale of  Real Estate                                                  2,073         -
 Exploration and Development of Oil and Gas Properties                     -    (4,371)
 Investment In and Advances to The Juliana Preserve                       (6)     (805)
 Capital Expenditures                                                   (833)      (12)
 Other                                                                     -       128
                                                                    --------  --------
Net Cash Provided by (Used in) Investing Activities                   10,158    (8,458)
 
Cash Flows From Financing Activities:
 Increase in Revolver Borrowings                                         393         -
 Proceeds from Issuance of Debt Obligations                            6,644         -
 Payments of Debt Obligations                                        (14,728)     (324)
 Proceeds From Exercise of Common Stock Options                            -        73
                                                                    --------  --------
Net Cash Used in Financing Activities                                 (7,691)     (251)
 
Increase (Decrease) in Cash and Cash Equivalents                       4,616    (7,653)
 
Cash and Cash Equivalents at Beginning of Period                         529     9,225
                                                                    --------  --------
 
Cash and Cash Equivalents at End of Period                          $  5,145  $  1,572
                                                                    ========  ========
</TABLE>

          See Accompanying Notes to Consolidated Financial Statements

                                       5
<PAGE>
 
                   REUNION INDUSTRIES, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   (UNAUDITED)
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)


NOTE 1.   CONSOLIDATED FINANCIAL STATEMENTS

PRINCIPLES OF CONSOLIDATION

     The consolidated financial statements include the accounts of Reunion
Industries, Inc. ("RII")  (the successor by merger effective April 19, 1996 to
Reunion Resources Company, see Note 6) 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.  The consolidated
financial statements for  September 30, 1996 include the financial statements of
Rostone Corporation which was acquired by the Company on February 2, 1996 (See
Note 2 - Business Acquisitions).

FINANCIAL STATEMENTS AT SEPTEMBER 30, 1996

     The Consolidated Balance Sheet at  September 30, 1996, and the Consolidated
Statements of Operations and Cash Flows for the three and nine  months ended
September 30, 1996 and 1995 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, 1995 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, 1995.

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  and nine
months ended September 30,  1996 and 1995, 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 purchase price payable to the stockholders of Rostone is an
amount up to $4,001 as follows:  (i) $1 in 1996, (ii) up to $2,000 in 1997 if
Rostone achieves specified levels of earnings before interest and taxes (as
provided in the merger agreement ) for 1996 and (iii) up to $2,000 in 1998 if
Rostone achieves specified levels of earnings before interest and taxes for
1997.  In addition, the Company incurred approximately $435 in acquisition
related costs.  Based on Rostone's earnings through September 30, 1996 the
Company does not expect to pay any additional purchase price in 1997.

      The Rostone acquisition is being accounted for using the purchase method,
with the purchase price of $436, including acquisition costs, allocated to the
assets acquired and liabilities assumed based upon their respective estimated
fair values at the date of acquisition.  The excess of purchase price over the
net assets acquired ("Goodwill", approximately $4,535)  is being amortized on a
straight-line basis over 15 years.  Any additional consideration paid in future
years will increase Goodwill and will be amortized on the same basis. The
estimated fair values of assets and liabilities acquired in the Rostone
acquisition are summarized as follows:

                                       6
<PAGE>
 
                   REUNION INDUSTRIES, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   (UNAUDITED)


Cash                                              $    318
Accounts Receivable                                  3,417
Inventories                                          1,887
Other Current Assets                                    67
Property, Plant and Equipment                        6,445
Other Assets                                            43
Goodwill                                             4,535
Accounts Payable and Other Current Liabilities      (3,980)
Long-term Debt                                     (10,774)
Other liabilities                                   (1,522)
                                                  --------
  Total                                           $    436
 
ONEIDA

     On September 14, 1995, the Company acquired all of the outstanding
preferred and common stock of Oneida from a subsidiary of  Chatwins Group, Inc.
("Chatwins"), a related party.     The acquisition was accounted for as a
purchase and the results of Oneida's operations are included in the Company's
consolidated financial statements from the date of the acquisition, September
14, 1995.
 
PRO FORMA RESULTS
 
     The following pro forma results of operations for the three and nine
months ended September 30, 1996 and 1995 have been prepared assuming the
acquisitions of Rostone and of Oneida had occurred as of January 1, 1995. 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 January 1, 1995.

 
<TABLE>
<CAPTION>
 
                                         THREE MONTHS ENDED                      NINE  MONTHS ENDED
                                            SEPTEMBER 30,                           SEPTEMBER 30,
                                   ------------------------------            ---------------------------
                                      1996                  1995              1996                1995
                                   --------              --------            -------             -------
<S>                                <C>                   <C>                 <C>                 <C>

Revenues                            $14,041              $16,761             $44,611             $48,946
 
Income (Loss) From Operations       $   196              $  (574)            $   896             $   173
 
Net Income (Loss)                   $  (160)             $(2,967)            $   521             $(9,026)
 
Earnings per Common Share and
    Per Common Share Equivalent     $ (0.04)             $ (0.77)            $  0.14             $ (2.36)
 
</TABLE>

                                       7
<PAGE>
 
                   REUNION INDUSTRIES, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   (UNAUDITED) 

NOTE 3.  SALE OF REUNION ENERGY COMPANY

     On April 2, 1996, the Company entered into an agreement to sell its
subsidiary Reunion Energy Company ("REC"), including substantially all of its
oil and gas assets, to Tri-Union Development Corp. ("Tri-Union") a subsidiary of
Tribo Petroleum Corporation for a total price of approximately $11,375. On May
24, 1996 the Company completed the sale of REC for proceeds of $8,000 cash and a
$2,200 six month note bearing interest at 12%. The purchase price received for
REC's stock reflected adjustments for intercompany cash transfers by REC to the
Company and certain expenditures by REC between January 1 and the May 24, 1996
closing date.

     The Company used $5,014 of the aggregate $8,000 cash paid by Tri-Union to
pay related party indebtedness. This included $3,664 owed by ORC to Chatwins, a
38% shareholder of the Company, and $1,350 owed by the Company to Charles E.
Bradley, Sr., the Company's President and Chief Executive Officer. Mr. Bradley
is the Chairman of the Board and the majority shareholder of Chatwins.


NOTE 4.   INVENTORIES

     Inventories, principally for ORC's plastic products business, consisted of
the following:
 
                        SEPTEMBER 30, 1996  DECEMBER 31, 1995
                        ------------------  -----------------
 
     Raw  Materials                 $2,038             $1,307
     Work-in process                 1,328              1,036
     Finished Goods                    809                217
                                    ------             ------
         Total                      $4,175             $2,560
                                    ======             ======
 

NOTE  5.  SEVERANCE AND EXIT COSTS

     During the year ended December 31, 1995, the Company recorded a provision
for severance and related benefit costs of $1,115 relating to 26 employees to be
terminated and a provision for exit costs of $175 relating to the remaining term
of its Houston office lease. These costs were recorded in connection with the
Company's closing of its Houston administrative office and relocating its
corporate headquarters to Connecticut.   During the three  months ended March
31, 1996, the Company paid $384 in severance and related benefits costs in
connection with employees terminated in January 1996. The office closure was
completed during the  second quarter of 1996 and the Company wrote off
approximately $86 of  surplus furniture and fixtures.   During the three months
ended June 30, 1996, the Company paid $197 in  severance and related benefit
costs in connection with employees terminated in May, 1996. As a result of the
final terms agreed upon  with the purchaser of REC, certain provisions recorded
in 1995 were reversed during  the second quarter of 1996 resulting in an offset
to SG&A expense of $276. During the three months ended September 30, 1996 the
Company paid $121  in severance and related benefit costs.  The Company expects
to pay the remaining  balance of the severance and exit cost accruals as
follows:  approximately $44 during the remainder of 1996 and $179  in 1997.

                                       8
<PAGE>
 
                   REUNION INDUSTRIES, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   (UNAUDITED)


NOTE  6.  MERGER

     On April 19, 1996, Reunion Resources Company was merged with and into RII
following  approval by shareholders of a merger agreement dated November 14,
1995. RII's certificate  of incorporation, which survives the merger, authorizes
the issuance of  20,000 shares of common stock, par value $.01 per share, and
10,000 shares of "blank check" preferred stock, par  value $.01 per share, and
includes certain capital stock transfer restrictions which are intended to help
assure that the Company's substantial net operating loss carryforwards will
continue to be available to offset future taxable income by decreasing the
likelihood of an "ownership change" for federal income tax purposes.


NOTE 7.  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.  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 intends to
appeal 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
the three  months ended June 30, 1996 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 has recorded an accrual for $307  concerning the 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.

     In September 1995, the Company amended its 1991 and 1992 Federal tax
returns to request a refund of Alternative Minimum Tax ("AMT") previously paid.
The refund is included in Current Assets in the Consolidated Balance Sheet in
the amount of $750. The refund resulted from the carryback of a capital loss
originating from the sale of Reunion common stock owned by a subsidiary of the
Company. The IRS is in the process of auditing the refund request. Based on the
nature of IRS agents correspondence and information requests, the Company
expects a formal IRS agent's report will be issued denying the refund
application (the "IRS Denial"). The Company intends to appeal the case to the
IRS appeals division upon receipt of the IRS Denial. Although management
believes it has provided a reasonable amount of documentation and technical
arguments in support of its claim, the ultimate outcome of any appeal will be
subject to the resolution of significant legal and factual issues by the appeals
division or by a court. The Company has not recorded a provision for the
possible denial of the AMT refund claim because the ultimate outcome of this
matter cannot presently be determined.

                                       9
<PAGE>
 
                   REUNION INDUSTRIES, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   (UNAUDITED) 

 
NOTE 8.  SUBSEQUENT EVENTS

     On  October 21, 1996, the Company,  through its ORC subsidiary, acquired a
27.5% interest in Data Packaging Limited ("DPL") for a cash payment of  $700.
ORC has also  entered into an agreement to acquire, subject to certain lender
consents,  an additional 68% interest in DPL for $2,800, payable in cash of
$1,050 and an unsecured  $1,750 10% three year note.    DPL, headquartered in
Mullingar, Ireland, is a custom injection molder serving customers in the
computer and business equipment industries.  DPL's revenues and operating profit
for the fiscal year ended April 30, 1996 were approximately $15,100 and $900
respectively.

  On  September 20, 1996, the Company, through its  ORC subsidiary, reached a
non-binding agreement on the principal terms for the acquisition of the assets
and business of Quality Molded Products, Inc. of Siler City, North Carolina.


                                       10
<PAGE>
 
                   REUNION INDUSTRIES, INC. AND SUBSIDIARIES

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

     On September 14, 1995, the Company acquired Oneida, which manufactures
precision plastic products and provides engineered plastics services.   As a
result of the Oneida acquisition, the Company's principal operations are in the
plastic products industry.  On February 2, 1996, the Company completed the
Rostone acquisition which added new customers and products to the plastic
products segment.   In addition to the DPL  and  the proposed Quality Molded
Products acquisitions, 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 is also engaged in real estate
development and wine grape agricultural operations in Napa County, California.

     In November 1995, the Company's Board of Directors resolved to pursue the
sale of the Company's oil and gas assets and to discontinue the Company's oil
and gas operations.  The Company engaged an investment bank specializing in oil
and gas transactions to assist in the sale of the oil and gas operations. On May
24, 1996, the Company sold its wholly owned subsidiary REC, including
substantially all of REC's oil and gas assets, to Tri-Union for a total price of
approximately $11.4 million.   The purchase price was  paid by $8.0 million in
cash at the closing , as adjusted  for cash advances from REC prior to the
closing, and a $2.2 million 6-month note with interest at 12%.  Upon completion
of this transaction, the Company  has substantially  discontinued oil and gas
operations.

     The  Company recognized a net loss of $0.2  million  and  net income of
$0.6  million., respectively, for the three months and nine months ended
September  30, 1996  compared to a net loss of $3.1 million and $10.3 million
for the three months and nine months  ended September 30, 1995.   The following
discussion  of  Results of  Continuing Operations describes the Company's
continuing operations in plastic products and agriculture separately from
discontinued operations.

RESULTS OF CONTINUING OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 1996
-------------------------------------

     The Company recognized a loss  from continuing operations of $0.2 million
for the three months ended September  30,  1996 compared to a loss of $1.7
million in 1995.  The 1996 results include the plastic products segment, which
the Company entered in September 1995.

     PLASTIC PRODUCTS SEGMENT:  The Oneida acquisition on September 14, 1995
represented the Company's entry into a new  operating segment,  plastic
products.  The Rostone acquisition in February 1996 increased operations in this
segment. Revenues and operating profit of the plastic products segment were
$14.0 million and $0.8 million, respectively,  for the three months ended
September  30, 1996, compared to revenues and operating profit of $1.8 million
and $0.1 million for the last two weeks of September 1995.

     On a pro forma basis, as if the Oneida and Rostone acquisitions had
occurred as of January 1, 1995, revenues decreased $ 2.7 million to $14.0
million for the three months ended September 30, 1996 from $16.7 million in the
three months ended September 30, 1995. This 16% decrease in revenues is
attributable primarily to decreased sales of thermoplastic products due to
departures of select parts programs and customer delays in bringing scheduled
new parts programs into production. Lower sales to existing customers reflect a
general growth slowdown in the market as well as customers withdrawing programs
to their own captive molding facilities. The Company's tooling sales,
historically a leading indicator of future sales, remain strong. Tooling sales
increased $0.2 million or 13% to $1.8 million for the three months ended
September 30, 1996. Plastic products segment backlog totaled $ 15.3 million at
September 30, 1996. This compares to backlog, on a pro forma basis, of $18.0
million at December 31, 1995 and $18.0 million at September 30, 1995.

     On a pro forma basis, cost of sales totaled $11.7 million, or 83.6% of net
sales, for the three months ended September 30, 1996 compared to $14.1 million,
or 84.4% of net sales, for the three months ended September 30, 1995. The
plastic products segment continued to benefit from participation in reduced rate
electricity programs and from reductions in direct labor resulting from improved
efficiency. These factors were offset by higher material

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                   REUNION INDUSTRIES, INC. AND SUBSIDIARIES

content as a percentage of sales due to the change in sales mix. As a result of
the decrease in sales, gross margins on a pro forma basis declined to $2.3
million, or 16.4% of net sales, from $2.6 million, or 15.6% of net sales, in
1995.

     Selling, general and administrative expenses were $1.5 million on a pro
forma basis for the three months ended September 30, 1996, equal to  pro forma
expenses for the three months ended September 30, 1995. Operating income  on a
pro forma basis was $0.8 million, or 5.7% of net sales, for the three months
ended September 30, 1996 compared to $1.2  million, or 6.8% of net sales, for
the comparable prior year 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
$ 0.5 million for the three months ended September 30, 1996 compared to $ 1.6
million for the three months ended September 30, 1995. The expenses for the
three months ended September 30, 1995 include a $1.1 million severance charge
recorded in conjunction with the Company's decision to close its Houston office
and sell its oil and gas assets.

     OTHER INCOME AND (EXPENSE): Interest expense was $0.5 million for the three
months ended September 30, 1996 compared to $0.1 million for the three months
ended September 30, 1995 as a result of interest on ORC debt. On a pro forma
basis, as if the Oneida and Rostone acquisitions had occurred as of January 1,
1995, interest expense was $ 0.7 million  for the three months ended September
30, 1995.

NINE  MONTHS ENDED SEPTEMBER 30, 1996
-------------------------------------

     The Company recognized a loss from continuing operations of $0.7 million
for the nine months ended September 30, 1996 compared to a loss of $3.2
million in the first nine months of 1995. The 1996 results include the
plastic products segment, which the Company entered in September 1995.

     PLASTIC PRODUCTS SEGMENT:  The Oneida acquisition on September 14, 1995
represented the Company's entry into a new  operating segment, plastic
products. The Rostone acquisition in February 1996 increased operations in this
segment. Revenues and operating profit of the plastic products segment were
$42.3 million and $2.5 million, respectively for  first  nine  months ended
September 30, 1996, compared to revenues and operating profit of $1.8 million
and $0.1 million for the last two weeks of September 1995.

     On a pro forma basis, as if the Oneida and Rostone acquisitions had
occurred as of January 1, 1995, revenues decreased $ 4.3 million to $44.6
million  for the  nine  months ended September 30, 1996 from $48.9 million in
the nine months ended September 30, 1995. This 9% decrease in revenues is
attributable primarily to decreased sales of plastic products due to departures
of select parts programs and customer delays in bringing scheduled new parts
programs into production. Lower sales to existing customers reflects a general
growth slowdown in the market as well as customers withdrawing programs to their
own captive molding facilities. The Company's tooling sales, historically a
leading indicator of future sales, remain strong. Tooling sales increased $0.4
million, or 9%, to $4.7 million for the nine months ended September 30, 1996
compared to $4.3 million in the prior year period. Plastic products segment
backlog totaled $15.3 million at September 30, 1996. This compares to backlog,
on a pro forma basis, of $18.0 million at December 31, 1995 and $ 18.0
million at September 30, 1995.

     Pro forma cost of sales totaled $37.2 million, or  83.5% of net sales, for
the nine  months ended September 30, 1996 compared to $40.9 million, or 83.6%
of net sales for the  nine months ended September 30, 1995.  The segment
continued to benefit from participation in reduced rate electricity programs and
from reductions in direct labor resulting from improved efficiency. These
factors were offset by higher material content as a percentage of sales due to
the change in sales mix.  As a result of the decrease in sales,  pro forma gross
margins  declined to $7.4 million, or 16.5% of net sales in 1996 from $8.0
million, or 16.4% of net sales, in 1995.

     Selling, general and administrative expenses were $4.8 million, on a pro
forma basis, for the nine months ended September 30, 1996, $0.2 million greater
than in the nine months ended September 30, 1995. This increase results
primarily from increased payroll and benefit related costs. Pro forma operating
income was $2.5 million, or 5.7% of net sales, for the nine months ended
September 30, 1996 compared to $3.4 million, or 6.9% of net sales, for the
comparable prior year period.

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                   REUNION INDUSTRIES, INC. AND SUBSIDIARIES

     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
$1.4 million for the nine months ended September 30, 1996 compared to $ 3.2
million for the nine months ended September 30, 1995. The expenses for the
nine  months ended September 30, 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 and are net of  $0.3 million
in reversals of certain charges for office closing and severance accrued in
1995.  The expenses for the nine months ended September 30, 1995 include a $0.5
million charge related to the extension of the exercise period for certain
warrants and a $1.1 million severance charge recorded in conjunction with  the
Company's decision to close its Houston office and sell its oil and gas assets.

     OTHER INCOME AND (EXPENSE): Interest expense was $1.7 million for the nine
months ended September 30, 1996 compared to $0.2 million for the nine  months
ended September 30, 1995 as a result of interest on ORC debt.  On a pro forma
basis, as if the Oneida and Rostone acquisitions had occurred as of January 1,
1995, interest expense was  $1.9 million for the  nine  months ended September
30, 1995.


RESULTS OF DISCONTINUED OPERATIONS

     The Company discontinued its U. S. oil and gas operations during the year
ended December 31, 1995.  A provision was recorded during the year ended
December 31, 1995 to record estimated results of operations through the date of
disposition and the estimated loss on disposal.  On May 24, 1996, the Company
completed the sale of its REC subsidiary for proceeds of $8.0 million cash and a
$2.2 million note due November 25, 1996.   The Company retained  certain
Louisiana oil and gas properties because of litigation concerning environmental
contamination.

THREE MONTHS ENDED SEPTEMBER 30, 1996
-------------------------------------

     The Company recognized a loss from discontinued operations of $1.4 million
for the three months ended September  30, 1995. The Company followed the full
cost method of accounting for oil and gas properties and, as a result of
substantial decreases in prices received for natural gas, recognized impairment
losses of $1.5 million during the three months ended September  30, 1995 to
reduce the carrying value of the investment in oil and gas properties to the
"full cost ceiling." Before these valuation charges, the Company realized income
from the discontinued oil and gas operations of $0.1 million on revenues of $1.5
million for the three months ended September 30, 1995.  The Company recorded no
activity from discontinued operations during the three months ended September
30, 1996.

NINE   MONTHS ENDED  SEPTEMBER  30, 1996
----------------------------------------

     Results of discontinued operations during 1996, prior to the disposition on
May 24,  1996, were approximately break even on revenues of $2.1 million. An
additional loss from discontinued operations of $0.4 million was recorded in the
nine  months ended September 30, 1996 reflecting the purchase price adjustment
resulting from the retention of the  Louisiana properties and a $0.1 million
provision for taxes resulting from the California tax audit discussed below.
This loss was offset by a $1.6 million gain from an insurance reimbursement,
resulting in net income from discontinued operations of $1.2 million for the
nine months ended September 30, 1996.   The Company recognized a loss from
discontinued operations of $7.1 million for the nine  months ended September 30,
1995. The Company followed the full cost method of accounting for oil and gas
properties and, as a result of substantial decreases in prices received for
natural gas, recognized impairment losses of $7.0 million during the  nine
months ended September 30, 1995 to reduce the carrying  value of the investment
in oil and gas properties to the "full cost ceiling." Before these valuation
charges, the Company realized  a loss  from the discontinued oil and gas
operations of $ 0.1  million on revenues of $4.3 million for the  nine months
ended September 30, 1995.

                                       13
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                   REUNION INDUSTRIES, INC. AND SUBSIDIARIES

LIQUIDITY AND CAPITAL RESOURCES

SUMMARY OF 1996 ACTIVITIES

     Cash and cash equivalents totaled $5.1 million at September   30, 1996.
Cash  increased $4.6 million during the nine  months ended September 30, 1996,
with $2.1 million provided by operations, $10.2 million provided by investing
activities, and  $7.7  million used in financing activities.

     INVESTING ACTIVITIES:  As described above, the Company completed the
Rostone acquisition in February, 1996.  The purchase price for the acquisition,
including acquisition costs, totaled $0.4 million which was funded
from the  Company's cash balances.   Capital expenditures were $0.8 million.
The sale of discontinued REC operations as discussed below generated cash of
approximately $9.0 million.  This included $8.0 million cash at closing plus an
additional $1.0 million, net of transaction costs, transferred to  the Company
prior to closing. In August 1996, the Company closed the sale of its Padre
Island, Texas real estate for net proceeds of $2.1 million.

     FINANCING ACTIVITIES: Principal payments reduced long-term obligations by
$9.8 million in the nine  months ended September 30, 1996.  In addition the
Company used proceeds from the sale of REC as discussed below to pay $4.9
million in related party indebtedness.  Proceeds from new borrowings totaled
$6.6  million.

     OPERATING ACTIVITIES:  Net cash provided by operating activities was $2.1
million in the nine months ended September 30, 1996.

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, for ORC and for the Juliana Preserve.

     CORPORATE:  Management estimates that corporate expenses, including
salaries and benefits, professional fees and other public company costs, will
approximate $ 0.5 million for the remainder of 1996 and $1.8 million in 1997.
Approximately $0.1 million and $0.2 million of severance and exit costs
related to the closure of the Company's Houston administrative office, accrued
in 1995, are expected to be paid during the remainder of 1996 and in 1997,
respectively.   The Company's source of funds for these requirements and for
future acquisitions, other than cash balances and additional borrowings, are
from payments by ORC permitted under a secured credit facility as described
below and from proceeds from the sale of  discontinued oil and gas operations
and other assets held for sale.  During 1996, the Company sold certain real
estate in Texas for net proceeds of $2.1 million and is pursuing the  sale or
farmout of its mineral interests in Utah.

     ORC's credit facility with Congress Financial Corporation ("Congress")
limits payments to  the Company by ORC.  If certain levels of availability (as
defined in the loan agreements) are maintained, ORC is permitted to pay the
Company management fees of up to $0.3 million per year and tax sharing payments
of up to 50% of the tax savings realized by ORC because of the Company'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 the Company. In any event, the
maximum amount of such payments is not expected to be sufficient for the
Company's corporate operating and debt service requirements.

     On May 24, 1996 the Company completed the sale of REC to Tri-Union for
proceeds of $8.0 million in cash as adjusted for certain cash transfers from REC
from January 1, 1996 through the May 24 closing, and a $2.2 million six month
note bearing interest at 12%. Pursuant to existing agreements, the Company used
$5.0 million of the aggregate $8.0 million cash paid by Tri-Union to pay related
party indebtedness. This included approximately $3.6 million owed by CGI, a 38%
shareholder of the Company, and approximately $1.3 million owed by the Company
to Charles E. Bradley, Sr., the Company's President and Chief Executive Officer.
Mr. Bradley is the Chairman of the Board and the majority shareholder of CGI.

     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. The new credit facility
provides for maximum borrowings of $16.0 million under a term loan in the
original amount of $6.6 million and revolving loans based on the eligible
balances of accounts receivable and

                                       14
<PAGE>
 
                   REUNION INDUSTRIES, INC. AND SUBSIDIARIES

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, during the next twelve months.

     THE JULIANA PRESERVE: In January 1995, the Juliana Preserve entered into
the Development and Marketing Agreement with Juliana Pacific, Inc. to develop
the Juliana Preserve into a master-planned estate-oriented residential community
encompassing the entire vineyard. The joint venture agreement contemplates that
development costs associated with the project will be financed solely from the
assets of the joint venture, including the sale of such assets, or by
development financing.  In October 1995, the joint venture entered into a loan
agreement with Washington Federal Savings, the parent of Freedom Vineyards, to
provide $3.0 million of development financing for this project.  Based on plans
and projections prepared by Juliana Pacific and approved by the joint venture
partners, and on projections of farming costs and capital requirements for the
1996 crop year, the Company believes that it will not be required to commit any
additional resources to the Juliana Preserve for either development or farming
activities during the next twelve  months. Approximately $0.6 million of debt
collateralized by certain real estate in the Juliana Preserve matures in January
1997.  The Company is presently negotiating an extension of this debt.

     ACQUISITIONS: On  September 20, 1996, the Company, through its  ORC
subsidiary, reached a non-binding agreement on the principal terms for the
acquisition of the assets and business of Quality Molded Products, Inc. of Siler
City, North Carolina.  

     On October 21, 1996 the Company, through its ORC subsidiary, acquired a
27.5% interest in Data Packaging Limited ("DPL") for a cash payment of payment
of $0.7 million. ORC has entered into an agreement to acquire, subject to
certain lender consents, an additional 68% interest in DPL for $2.8 million,
payable in cash of $1.05 million and an unsecured $1.75 million 10% three year
note.

     The Company expects to fund these acquisitons from its cash balances and
from borrowed funds.


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 intends to appeal 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  $0.1 million in the three  months ended June 30, 1996 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
has recorded an accrual for $0.3 million concerning the 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.


                                       15
<PAGE>
 
                   REUNION INDUSTRIES, INC. AND SUBSIDIARIES



     In September 1995, the Company amended its 1991 and 1992 Federal tax
returns to request a refund of Alternative Minimum Tax ("AMT") previously paid.
The refund is included in Current Assets in the Consolidated Balance Sheet in
the amount of $0.8 million. The refund resulted from the carryback of a capital
loss originating from the sale of Reunion common stock owned by a subsidiary of
the Company. The IRS is in the process of auditing the refund request. Based on
the nature of IRS agent's correspondence and information requests, the Company
expects a formal IRS agent's report will be issued denying the refund
application (the "IRS Denial"). The Company intends to appeal the case to the
IRS appeals division upon receipt of the IRS Denial. Although management
believes it has provided a reasonable amount of documentation and technical
arguments in support of its claim, the ultimate outcome of any appeal will be
subject to the resolution of significant legal and factual issues by the court.
The Company has not recorded a provision for the possible denial of the AMT
refund claim because the ultimate outcome of this matter cannot presently be
determined.

                                       16
<PAGE>


                   REUNION INDUSTRIES, INC. AND SUBSIDIARIES
 
PART II - OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

        (A) EXHIBIT

        10.1 Loan and Security Agreement dated February 2, 1996 between Congress
             Financial Corporation as lender and Oneida Rostone Corp. and Oneida
             Molded Plastics Corp. of North Carolina as borrowers.

        10.2 Amendment No. 1 to Loan and Security Agreement dated October 21,
             1996 modifying original Loan and Security Agreement dated
             February 2, 1996 between Congress Financial Corporation as lender
             and Oneida Rostone Corp. and Oneida Molded Plastics Corp. of North
             Carolina as borrowers.

         27  Financial Data Schedule

         (B) CURRENT REPORTS ON FORM 8-K

         During the quarter ended September 30, 1996, the Company filed no
reports on Form 8-K:

                                       17
<PAGE>
 
                   REUNION INDUSTRIES, INC. AND SUBSIDIARIES


                                   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: November  13, 1996

                                       18