REUNION RESOURCES CO, 10-K405, 1996-04-01

REUNION RESOURCES CO
10-K405, 1996-04-01
DRILLING OIL & GAS WELLS

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM 10-K

[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 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 RESOURCES COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 76-0404108
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)

62 SOUTHFIELD AVE.
ONE STAMFORD LANDING
STAMFORD, CONNECTICUT 06902
(ADDRESS, INCLUDING ZIP CODE, OF PRINCIPAL EXECUTIVE OFFICES)

(203) 324-8858
(TELEPHONE NUMBER, INCLUDING AREA CODE)

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE ON WHICH
TITLE OF EACH CLASS REGISTERED
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<S> <C>
Common Stock, $.01 par value The Pacific Stock Exchange Incorporated
NASDAQ Small-Cap. Market
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE

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 February 20, 1996, the registrant had 3,855,085 shares of Common Stock
issued and outstanding. As of February 20, 1996, the aggregate market value of
the voting stock held by non-affiliates of the registrant (computed by
reference to the average of the high and low sales prices on the NASDAQ Small-
Cap. Market) was approximately $9,889,000.

DOCUMENTS INCORPORATED BY REFERENCE

Part III, Items 10 through 13 are incorporated from the Company's definitive
proxy statement to be filed within 120 days after the close of the Company's
fiscal year.

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

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REUNION RESOURCES COMPANY

TABLE OF CONTENTS OF FORM 10-K

PART I

<TABLE>
<CAPTION>
ITEM
NO. PAGE
---- ----
<C> <S> <C>
1. BUSINESS........................................................... 2
General............................................................ 2
Plastic Products and Services...................................... 3
Real Estate and Agricultural Operations............................ 4
Discontinued Operations............................................ 5
Environmental Protection........................................... 6
Employees.......................................................... 7
2. PROPERTIES......................................................... 7
Plastic Products Segment........................................... 7
Real Estate and Agricultural Properties............................ 8
Properties Held for Sale........................................... 8
Other Properties................................................... 8
3. LEGAL PROCEEDINGS.................................................. 8
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................ 10

PART II

5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS........................................................... 10
6. SELECTED FINANCIAL DATA............................................ 11
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS............................................. 12
8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA........... 16
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.............................................. 16

PART III

10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT................. 17
11. EXECUTIVE COMPENSATION............................................. 17
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT..... 17
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................... 17

PART IV

14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.... 18
SIGNATURES......................................................... 19
</TABLE>

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PART I

ITEM 1. BUSINESS

GENERAL

The Company, through its wholly owned subsidiary Oneida Rostone Corp.
("ORC"), manufactures high volume, precision plastic products and provides
engineered plastics services. ORC's Oneida division, acquired in September
1995, designs and produces injection molded parts and provides secondary
services such as hot stamping, welding, printing, painting and assembly of
such products. In addition, Oneida designs and builds custom molds at its tool
shops in order to produce component parts for specific customers. ORC's
Rostone division, acquired in February 1996, compounds and molds thermoset
polyester resins. The Company is also engaged in real estate development and
wine grape agricultural operations in Napa County, California.

During the five year period ended December 31, 1995, the Company, through
its subsidiaries, was also engaged in exploring for, developing, producing and
selling crude oil and natural gas in the United States. In November 1995, the
Company's Board of Directors resolved to pursue the sale of the Company's oil
and gas assets and discontinue the Company's oil and gas operations. See
"Discontinued Operations." Until 1993, the Company had also, through its
subsidiaries, (i) provided contract workover services in the Gulf of Mexico,
(ii) explored for, developed, produced and sold crude oil and natural gas in
Canada and (iii) engaged in the management of oil and gas partnerships. Each
of these three lines of business were either discontinued or sold in 1993.

General information about each of the Company's principal business segments
is set forth below under the captions "Plastic Products and Services", "Real
Estate and Agricultural Operations" and "Discontinued Operations." Certain
financial information regarding the principal business segments of the Company
is included in Item 8 of this report under Note 17 of the Consolidated
Financial Statements. Information concerning the discontinued operations is
set forth in Note 3 to the Consolidated Financial Statements.

BGO and certain of its subsidiaries emerged in December 1988 from a
reorganization in bankruptcy (the "Reorganization") under Chapter 11 of the
United States Bankruptcy Code. Before the Reorganization, BGO was organized
under Delaware law, as successor by statutory reorganization to a California
corporation organized in 1929. Pursuant to the Reorganization, BGO was
reorganized in January 1989, as a Pennsylvania corporation, as successor by
statutory merger with the Delaware corporation. Effective June 29, 1993, the
Articles of Incorporation of BGO were amended to effect a plan of
recapitalization (the "Recapitalization") pursuant to which, among other
things, (i) each then outstanding share of common stock, par value $.01 per
share, of BGO ("Old Buttes"), was converted automatically and without further
action by stockholders into 1/300th share of new common stock, par value $.01
per share (the "Reverse Split"), of Old Buttes (as so recapitalized, "New
Buttes"); (ii) all fractional interests in shares of Old Buttes resulting from
the Recapitalization are to be settled in cash at the last sale price of Old
Buttes shares on the Pacific Stock Exchange on the last trading day before the
effective date of the Recapitalization; (iii) following the effective date of
the Recapitalization, New Buttes distributed 14 additional shares of New
Buttes for each one new share issued (or issuable) in the Recapitalization, in
payment of a stock distribution payable to the holders of record of New Buttes
shares on the day after the effective date of the Recapitalization (thereby
effecting a fifteen-for-one forward stock split). BGO was then merged into
Reunion, a Delaware corporation.

Reunion has recently proposed to its stockholders that Reunion merge with
and into its wholly owned subsidiary, Reunion Industries, Inc. ("RII"),
pursuant to a merger agreement dated November 14, 1995. RII's Certificate of
Incorporation, which would survive such a merger, authorizes the issuance of
20,000,000 shares of

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common stock, par value $.01 per share, and 10,000,000 shares of "blank check"
preferred stock, par value $.01 per share and includes certain capital stock
transfer restrictions (the "Transfer Restrictions") which are designed to
prevent any person or group of persons from becoming a 5% shareholder of RII
and to prevent an increase in the percentage stock ownership of any existing
person or group of persons that constitutes a 5% shareholder by prohibiting
and voiding any transfer or agreement to transfer stock to the extent that it
would cause the transferee to hold such a prohibited ownership percentage. The
Transfer Restrictions are intended to help assure that the Company's
substantial net operating loss carry forwards will continue to be available to
offset future taxable income by decreasing the likelihood of an "ownership
change" for federal income tax purposes. Shareholders of the Company will vote
on the merger of the Company into RII at a special meeting of shareholders to
be held April 19, 1996.

PLASTIC PRODUCTS AND SERVICES

On September 14, 1995, the Company acquired (the "Oneida Acquisition")
Oneida Molded Plastics Corp. ("Oneida"). On February 2, 1996, Rostone
Corporation ("Rostone") merged with and into Oneida (the "Rostone
Acquisition") and the surviving corporation changed its name to Oneida Rostone
Corp. Oneida and Rostone will operate as divisions of ORC.

Oneida

Founded in 1964, ORC's Oneida division is a full service plastic injection
molder which manufactures high volume, precision plastic products and provides
engineered plastics services. Oneida designs and produces injection molded
parts and provides secondary services such as hot stamping, welding, printing,
painting and assembly of such products. Oneida's principal products consist of
specially designed and manufactured components for office equipment; business
machines; computers and peripherals; telecommunications, packaging and
industrial equipment; and recreational and consumer products.

Oneida designs and manufactures most of its products by injection molding to
a customer's specifications. In most cases, Oneida obtains a contract to
produce a specified number of custom designed products using custom built
molds. The customer either provides its own molds or has Oneida design and
build or obtain from a supplier the molds necessary to produce the products.
In either case, the customers generally own the molds. The custom molds
produced by Oneida are manufactured at one of its two tool shops, which are
located in Clayton, North Carolina and Phoenix, New York. Oneida has three
injection molding facilities, which are located in Oneida and Phoenix, New
York and Clayton, North Carolina.

The markets in which Oneida competes have sales in excess of $6 billion per
year. These markets are highly competitive. Oneida's principal competitors are
international companies with multi-plant operations based in the United
States, Germany, France and Japan, as well as approximately 3,800 independent
companies located in the United States engaged in the custom molding business.
Most of these companies are privately owned and have sales volume ranging from
$3 million to $7 million per year. In addition, approximately one-half of the
total injection molding market is supplied by in-house molding shops. Oneida
competes on the basis of price, customer service and product quality.

Sales of Oneida's products are made through a network of independent
manufacturer's representatives working from 14 separate regional offices
throughout the eastern United States. Oneida pays commissions between two and
five percent of sales, based upon volume. Oneida has a decentralized sales
organization that keeps close contact with customers. During 1995, 1994 and
1993, one customer, Xerox Corporation, was responsible for more than 10% of
Oneida's net sales. Sales to Xerox were approximately 46% of Oneida's sales
during the period subsequent to the Oneida Acquisition, and receivables from
Xerox were approximately 45% of Oneida's accounts receivable at December 31,
1995. The loss of this customer could have a material adverse effect on the
results of operations of Oneida. In addition to its core customer, Xerox
Corporation, Oneida has approximately 200 customers in the various industries
described above. Oneida has recently obtained additional customers in the
business machines and medical products industries. The Company believes that
these new customers provide further growth opportunities for Oneida.

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The principal raw materials used by Oneida are thermoplastic polymers. These
materials are available from a number of suppliers. Prices for these materials
are affected by changes in market demand, and there can be no assurances that
prices for these and other raw materials used by Oneida will not increase in
the future. Oneida's contracts with its customers generally provide that such
price increases can be passed through to the customers.

Oneida's backlog orders believed firm at December 31, 1995 and December 31,
1994 were approximately $15.4 million and $10.1 million, respectively,
substantially all of which are expected to ship within a year.

The majority of Oneida's engineering work is related to meeting design
requirements and specifications of its customers that require customized
products and developing greater production efficiencies. To meet these
objectives, Oneida has engineering personnel at each of its manufacturing
locations. Oneida's business is not materially dependent on any patents,
licenses or trademarks.

ROSTONE

Founded in 1927, ORC's Rostone division specializes in precision thermoset
plastic molded parts for original equipment manufacturers in the electrical,
transportation, appliance and office equipment industries. Rostone is also a
compounder of proprietary fiberglass reinforced polyester materials used in a
number of customer applications.

Rostone manufacturers its thermoset products through the use of custom
molds. These customer owned molds are either provided by the customer or
designed and built by Rostone to produce parts to customer specifications. All
operations are conducted from one facility in Lafayette, Indiana.

Rostone competes in a market with a limited number of privately owned
competitors and in-house molders on the basis of price, product specifications
and customer service. Rostone sells its products and services primarily
through a network of independent manufacturers' representatives with coverage
primarily in the eastern and midwestern United States.

The principal raw materials used by Rostone are styrene, polyester resins,
fiberglass, and commercial phenolics. These materials are available from a
number of suppliers. However, prices and availability of these materials are
affected by changes in market demand, and there can be no assurances that
prices for these and other raw materials used by Rostone will not increase in
the future. If shortages occur, as occurred for fiberglass during 1994 and
1995, Rostone exercises its flexibility to engineer new products to provide
its customers a cost effective alternative to the material in short supply.

Rostone's backlog of firm orders released for production was $2.6 million at
December 31, 1995. Rostone has historically tracked backlog based only on
production releases received rather than on the entire customer order. Rostone
expects, as normal course of business, to ship all orders within one year of
receipt.

Research and development at Rostone is focused on the development of
proprietary thermoset materials under the trade name "Rosite". Rostone
compounds a wide range of Rosite materials to satisfy its customers various
needs. Rostone also provides services in meeting customers' design
requirements and specifications of their customized products. Other than
"Rosite," Rostone's business is not materially dependent on any patents,
licenses or trademarks.

REAL ESTATE AND AGRICULTURAL OPERATIONS

The Company's real estate and agricultural operations consist primarily of
investments in The Juliana Preserve (the "Preserve") and in certain real
estate controlled by the Preserve. The Preserve is a California general
partnership, formed on October 1, 1994 by Juliana Vineyards and Crescent Farms
Company (wholly owned subsidiaries of the Company), together referenced herein
as "Juliana", and Freedom Vineyards, Inc., a California corporation ("Freedom
Vineyards"), to jointly farm, manage, develop and ultimately dispose of the
combined interest of all the parties. The joint venture controls real estate
located within the official boundaries

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of the Napa Valley American Viticultural Area, the premier grape growing
region of North America. Prior to the joint venture's formation, Juliana
engaged in wine grape vineyard development and the growing and harvesting of
wine grapes for the premium table wine market. The joint venture will continue
to engage in wine grape agriculture until the existing vineyard parcels are
sold. In forming the joint venture, the parties effectively contributed their
ownership interests in the real estate and agricultural operations in exchange
for undivided ownership interests in the joint venture of 71.7% to Juliana and
28.3% to Freedom Vineyards, based on independent appraisals of their
respective interests. Although Juliana has a 71.7% interest in the net income
and net assets of the joint venture, it has a 50% voting interest in matters
concerning the operation, development and ultimate disposition of the
property. The properties now controlled by the Juliana Preserve were
originally acquired by Juliana in 1974 and at December 31, 1995 consisted of
approximately 4,735 acres, of which approximately 2,000 acres are suitable for
wine grape production and of which 414 acres are currently in production.
Freedom Vinyards obtained its interest in 1993 when the Company conveyed 720
acres to Freedom Vinyards in satisfaction of $13.2 million of indebtedness.
Although the Company has given effective control of this property to the
Juliana Preserve, the Company retains legal title. Juliana is obligated for
indebtedness of $2.5 million, payable to an insurance company, which is fully
collateralized by land and vineyards.

In January 1995, the Preserve entered into a Development and Marketing
Agreement with Juliana Pacific, Inc., a California corporation and an
affiliate of Pacific Union Company ("Pacific Union"), to develop the Preserve
into a master-planned estate-oriented residential community encompassing the
entire vineyard. Pacific Union is an experienced, well-established real estate
developer based in San Francisco. Among its projects are the Meadowood resort
and the Merryvale Winery in St. Helena, California and the Rancho San Carlos
development near Monterey, California. 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.

The joint venture does not hold a significant position in the wine grape
market. Prices received on the sale of wine grapes may fluctuate widely,
depending upon supply, demand and other factors. The Napa Valley wine grape
industry is extremely competitive based on quality, quantity, price and the
ability to supply premium grapes consistently over a period of years. The
market for agricultural lands is competitive and subject to uncontrollable
factors such as fluctuations in interest rates, availability of credit to
potential buyers and land use restrictions. The joint venture is subject to
various regulations regarding the use and application of insecticides and
fungicides, safety and environmental hazards under the Occupational Safety and
Health Act, and employment of aliens and immigrants. The joint venture's
vineyard operation is subject to the regulation of the United States Bureau of
Alcohol, Tobacco and Firearms ("BATF"), regarding appellation of origin
labeling practices. Present regulations allow the Company's vineyard crop to
be sold under the "Napa Valley" appellation.

Agricultural operations are subject to substantial risks, including seasonal
production, adverse weather conditions, variability of rainfall, insects,
blights and diseases. The vineyard has an extensive water system developed for
irrigation and frost protection consisting of a primary reservoir connected to
satellite reservoirs and frost ponds for storage and distribution of water.
The vineyards of Napa and Sonoma Counties, including those of the Preserve,
are currently affected with infestations of phylloxera, an organism which
attacks and ultimately destroys grapevine rootstock. Of the 414 acres of
Preserve vineyard remaining in production, 181 acres are planted with
rootstock believed to be resistant to phylloxera. Other than plantings and
interplantings completed in 1995 and prior years, the Preserve has no plans to
replace vines affected by phylloxera.

DISCONTINUED OPERATIONS

U.S. OIL AND GAS OPERATIONS

Through November 1995, the Company was engaged in exploring for, developing,
producing and selling crude oil and natural gas in the United States through
the Company's wholly owned subsidiary, Reunion Energy Company ("REC", formerly
Buttes Resources Company). During 1995, REC operated oil and gas properties in
California, Louisiana and Texas and had interests in properties operated by
others in five additional states. The

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properties produced a total of approximately 1.8 Bcf of natural gas and 189,000
barrels of oil during 1995. 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 has engaged an
investment bank specializing in oil and gas transactions to assist in the sale
of the oil and gas operations. On February 20, 1996, the Company entered into a
letter of intent sell REC, including substantially all of its oil and gas
assets, to a third party for a total price of approximately $11.9 million. The
Company is presently negotiating a definitive agreement based on this letter of
intent which is expected to provide that the purchase price is to be paid by
$10.2 million in cash at the closing and a $1.7 million 6-month note with
interest at 12%. The transaction is subject to the completion of due diligence
and financing and to the satisfaction of customary closing conditions, and is
expected to close in the second quarter of 1996. Upon completion of this
transaction, the Company will have substantially completed the disposal of its
discontinued oil and gas operations.

Through 1993, the Company's oil and gas partnership management operations
were conducted through its wholly owned subsidiary, Buttes Energy Company
("BEC"). The partnerships managed by BEC had interests in approximately 996
wells in seven states. The Company did not own a significant direct or indirect
interest in any of these properties, but a subsidiary of BEC operated 261 of
the wells. The Company received fees from the partnerships which partially
offset the expenses incurred by the Company in managing them. The Company also
received overhead reimbursements for supervising the operations of the
properties which it operated. On December 22, 1993, the Company sold all of the
common stock of BEC to TDP Energy Company for approximately $2.1 million in
cash. Upon consummation of the sale, the Company was no longer engaged in the
partnership management business.

CANADIAN OIL AND GAS OPERATIONS

The Company's Canadian operations were primarily conducted through its wholly
owned subsidiary, Northern Enterprises (Canada) Ltd. ("NECL"), which was
headquartered in Calgary, Alberta. These operations consisted of oil and gas
producing properties in Alberta, Saskatchewan and British Columbia, and
exploratory acreage in Alberta and British Columbia. On May 14, 1993, the
Company sold substantially all of the assets of NECL to Mannville Oil & Gas
Ltd., a Canadian Corporation ("Mannville"). Mannville paid approximately $7.4
million in cash and assumed approximately $3.1 million of indebtedness and
other liabilities of NECL. As a result of this transaction, the Company was no
longer engaged in the oil and gas business in Canada.

OFFSHORE CONTRACT WORKOVER OPERATIONS

ENVIRONMENTAL PROTECTION

Various federal, state and local laws and regulations including, without
limitation, laws and regulations concerning the containment and disposal of
hazardous waste, oil field waste and other waste materials, the use of storage
tanks, the use of insecticides and fungicides and the use of underground
injection wells directly or indirectly affect the Company's operations. In
addition, environmental laws and regulations typically impose "strict
liability" upon the Company for certain environmental damages. Accordingly, in
some situations, the Company could be liable for clean up costs even if the
situation resulted from previous conduct of the Company that was lawful at the
time or from improper conduct of, or conditions caused by, previous property
owners, lessees or other persons not associated with the Company or events
outside the control of the Company. Such clean up or costs associated with
changes in environmental laws and regulations could be substantial and could
have a materially adverse effect on the Company's consolidated financial
position, results of operations or cash flows.

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The Company's plastic products and service business routinely uses chemicals
and solvents, some of which are classified as hazardous substances. The
Company's oil and gas business and related activities routinely involve the
handling of significant amounts of waste materials, some of which are
classified as hazardous substances. The Company's vineyard operations
routinely use fungicides and insecticides, the handling, storage and use of
which is regulated under the Federal Insecticide, Fungicide and Rodenticide
Act, as well as California laws and regulations.

Except as described in the following paragraph, the Company believes it is
currently in material compliance with existing environmental protection laws
and regulations and is not involved in any significant remediation activities
or administrative or judicial proceedings arising under federal, state or
local environmental protection laws and regulations. In addition to management
personnel who are responsible for monitoring environmental compliance and
arranging for remedial actions that may be required, the Company has also
employed outside consultants from time to time to advise and assist the
Company's environmental compliance efforts with respect to its oil and gas
properties. Except as described in the following paragraph, the Company is not
aware of any conditions or circumstances relating to environmental matters
that will require significant capital expenditures by the Company or that
would result in material adverse effects on its businesses.

REC, as operator of the properties, is in process of environmental
remediation of certain oil and gas properties in Calcasieu Parish, Louisiana
under a remediation plan approved by the Louisiana Office of Conservation.
Approximately $0.5 million has been expended as of December 31, 1995, and REC
estimates that the remaining cost of cleanup will be approximately $0.6
million. Based on its working interests in the properties, REC has recorded
$0.4 million for its share of the cost incurred and has accrued an additional
$0.4 million for its share of the estimated remaining cost.

EMPLOYEES

At December 31, 1995, the Company employed 411 full time employees, of whom
378 were employed in the plastic products segment, 21 were employed in oil and
gas operations, 6 were employed in agricultural operations and 6 were
corporate personnel. The Company also employs hourly employees in its
agricultural operations, the number of whom varies throughout the year.

ORC's Rostone division, acquired in February 1996, employees 340 full time
employees of whom 291 are represented by the International Brotherhood of
Electrical Workers, AFL-CIO under a collective bargaining agreement expiring
March 2, 1997. The Company is not a party to any other collective bargaining
agreements.

ITEM 2. PROPERTIES

PLASTICS PRODUCTS SEGMENT

The Company's properties used in the plastic products segment are as
follows:

<TABLE>
<CAPTION>
LEASE
SQUARE LAND EXPIRATION
DIVISION LOCATION FEET ACRES TITLE DATE USE
- -------- ------------- ------- ----- ------- ---------- --------------------------------
<S> <C> <C> <C> <C> <C> <C>
Oneida Oneida, NY 84,000 3.5 Owned * -- Manufacturing and Administrative
Phoenix, NY 28,000 -- Leased 1/01/99 Manufacturing and Administrative
Phoenix, NY 20,000 2.0 Owned * -- Manufacturing
Clayton, NC 35,000 -- Leased 6/30/98 Manufacturing and Administrative
Rostone Lafayette, IN 168,000 20.0 Owned * -- Manufacturing and Administrative
</TABLE>
- --------
* Subject to mortgages in connection with ORC's credit facility with Congress
Financial Corporation (see Note 10 of the Notes to the Consolidated
Financial Statements).

The Company believes that these facilities are suitable and adequate for
ORC's use.

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REAL ESTATE AND AGRICULTURAL PROPERTIES

For information concerning the Company's real estate and agricultural
properties see Item 1. "Business--Real Estate and Agricultural Operations".
The Company maintains an office facility on its vineyard property.

PROPERTIES HELD FOR SALE

The Company owns interests in oil and gas properties in California, Texas
and Louisiana with estimated reserves aggregating approximately 609 thousand
barrels of oil and 29.5 billion cubic feet of gas. REC also leases an office
in Meridian, California which is used for its oil and gas operations. As
described in Item 1 "Business-- Discontinued Operations," the Company is
pursuing the sale of its oil and gas assets.

The Company owns an approximate 55% undivided interest in approximately
5,400 acres on Padre Island, located off the coast of Texas near Corpus
Christi. The Company has a contract to sell its interest in this property for
approximately $2.0 million which is expected to close in the second quarter of
1996.

The Company holds title to or recordable interests in federal and state
leases totaling approximately 55,000 acres near Moab, Utah, known as Ten Mile
Potash. Sylvinite, a potash mineral, is the principal mineral of interest and
occurrence in the Ten Mile Potash property. To date, Ten Mile Potash has not
yielded any significant revenues from mining operations or any other
significant revenues, and the Company is pursuing the sale or farmout of these
interests.

The Company leases a yard facility in Morgan City, Louisiana which was
previously used in the Company's workover operations and is presently
subleased to a third party for a minimal profit.

OTHER PROPERTIES

Effective April 1, 1996, the Company will sublease, from Stanwich Partners,
Inc. ("SPI"), approximately 1,500 square feet of office space in Stamford,
Connecticut for its corporate offices. Three of the Company's directors and
officers are officers, directors and/or shareholders of SPI. Management
believes the terms of this sublease are at least as favorable to the Company
as would be the case in an arm's length transaction (see Item 13--"Certain
Relationships and Related Transactions").

The Company leases offices in Houston, Texas which are used for REC's oil
and gas operations and were used for its corporate offices. In connection with
the sale of REC, the Company is attempting to find one or more subtenants for
this space for the duration of the lease term expiring in May 1998.

ITEM 3. LEGAL PROCEEDINGS

Certain litigation in which the Company is involved is described below.

On September 28, 1993, Fred Berry, a consulting geologist, filed suit
against REC and Reunion ("Defendants") in the Superior Court of California,
Sacramento County, California. The complaint alleged: (i) breach of fiduciary
duty; (ii) breach of a purported joint venture agreement; and (iii) breach of
the covenant of good faith and fair dealing. The complaint sought declaratory
relief arising out of a purported joint venture agreement between the
plaintiff and REC, and damages of $51,296,568.70, including: $50 million for
natural gas, at $1.00 per Mcf, which the plaintiff alleges would have been
found and recovered; $1,250,000 for the loss of use of results of an aerial
magnetic survey paid for by REC; and $46,568.70 on disputed invoices. The
plaintiff also sought punitive damages. After completion of limited discovery
by both plaintiff and defendants, the Defendants and the plaintiff settled
this litigation in December 1995 for a payment by the Company of $20,000 and
the return of the disputed data to the plaintiff.

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Houston Division, naming the California Regional Water Quality Control Board
("Water Board"), the State Water Resources Control Board, the California
Environmental Protection Agency, and various executive officers and directors
of those boards and agency as defendants, seeking to determine the
dischargeability of the Water Board's claims that BGO was responsible for
proposed remediation work to stop erosion at the former Gambonini mine site
(the "Gambonini Site") in Marin County, California. During the period 1964 to
1969, BGO leased the Gambonini Site for the purpose of mining mercury. In 1970
BGO terminated the mineral lease, mining operations and occupancy of the site
and completed site remediation including stabilization, revegetation and
hauling a portion of the mining waste back to the mining pit and compacting
and removing the remaining waste. The remediation was accomplished under the
supervision, and ultimate approval, of the Marin County Department of Public
Works. The defendants contend that as a result of major storm events in 1982,
a dam built to retain mining material and storm water runoff breached,
releasing mining material and other debris into a local stream. On June 24,
1991, the Water Board first notified BGO of the alleged problems at the
Gambonini Site and of its intent to impose obligations for cleanup of the
Gambonini Site and BGO's alleged responsibilities relating to the site. In
August and September of 1991, BGO responded to the June 24, 1991 notice by
confirming its position that the Water Board's claims, if any, had been
discharged as a result of the Company's Chapter 11 bankruptcy reorganization
in 1988 and that the discharge language and injunctive provisions of the
Confirmation Order during the bankruptcy proceedings were dispositive of the
claim. On April 29, 1993, the Water Board issued a Cleanup Order directing the
landowner and BGO to prepare and implement various plans to prevent storm
water pollution and a surface mining closure plan. In a Memorandum Opinion and
Judgment (the "Order") entered on September 30, 1994, the Bankruptcy Court
allowed the Water Board to file a late claim against BGO's bankruptcy estate
and prohibited any attempts to liquidate its claims against BGO, other than
through the late filing of a proof of claim. In March 1995, the Water Board
filed an unsecured claim seeking $2.7 million. In October 1995, the Company
reached a tentative settlement with the Water Board requiring a payment of
$128,000 by the Company and release by the Water Board of any further action
against the Company. The Company expects this settlement to be finalized
during the second quarter of 1996.

The Company filed suit in the 125th Judicial District Court of Harris
County, Texas against Bargo Energy Company ("Bargo") and its general partners,
Chisos Corporation, Austin Resources Corporation, Shearwave, Inc., Brazos Oil
& Gas Corporation, and Schroder Oil Financing & Investment Company, on January
16, 1996 for damages and relief arising out of Bargo's repudiation of its
agreement to purchase all outstanding shares of the capital stock of REC.
Bargo had agreed to pay the Company $15.1 million for REC's capital stock,
subject to certain potential adjustments in the purchase price as set forth in
the Stock Purchase Agreement between the Company and Bargo and timely
deposited $0.5 million with a contractual escrow agent in accordance with the
terms of the Stock Purchase Agreement. The Company has alleged in its
complaint that Bargo tortiously interfered with a prospective stock purchase
agreement with another purchaser of the Company's stock, and then wrongfully
repudiated its agreement to purchase REC's stock. The Company also asserts
claims against Bargo for breach of contract and breach of duty of good faith
and fair dealing, and seeks damages under these theories of liability. Bargo
has also filed suit against the Company claiming that the Company, its
investment bankers, and certain individuals fraudulently misrepresented
information and fraudulently induced Bargo into signing the Stock Purchase
Agreement. Bargo also asserts claims for breach of contract and warranty,
return of its escrow, and seeks unspecified damages under these theories of
liability. The cases have now been consolidated in the 334th Judicial District
Court of Harris County, Texas. The case is at a very early stage, with the
Company having recently served discovery requests on Bargo. The Company has
filed a motion to align the Company as the proper plaintiff in the
consolidated cases.

The Company and its subsidiaries are the defendants in a number of other
lawsuits and administrative proceedings which have arisen in the ordinary
course of business of the Company and its subsidiaries. The Company believes
that any material liability which can result from any of such lawsuits or
proceedings has been properly reserved for in the Company's financial
statements or is covered by indemnification in favor of the Company or its
subsidiaries, and therefore the outcome of these lawsuits or proceedings, or
the matters referred to above, will not have a material adverse effect on the
Company's consolidated financial position, results of operations or cash
flows.

9
<PAGE>

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted to a vote of security holders during the fourth
quarter of the year ended December 31, 1995.

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

The Company's Common Stock is traded in the over-the-counter market and is
listed on the NASDAQ Small-Cap. Market (RUNR). The Common Stock is also listed
on the Pacific Stock Exchange (RUN).

As of February 20, 1996, there were 1,681 holders of record of the Company's
Common Stock with an aggregate of 3,855,085 shares outstanding. Included in
these amounts are 560 shareholders of record holding an aggregate of 1,027,084
shares of BGO Common Stock (43,800 post Reverse Split shares) which have not
been exchanged for Reunion Common Stock pursuant to the Recapitalization.

The table below reflects the high and low bid and ask prices on the NASDAQ
Small-Cap. Market and the high and low sales prices on the Pacific Stock
Exchange for the quarterly periods in the two years ended December 31, 1995:

<TABLE>
<CAPTION>
NASDAQ SMALL-CAP. MARKET
---------------------------
PACIFIC STOCK
EXCHANGE
BID ASK SALES PRICES
------------- ------------- -------------
QUARTER ENDED HIGH LOW HIGH LOW HIGH LOW
- ------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
1994
March 31............................ $6.500 $5.375 $6.750 $5.500 $6.625 $5.375
June 30............................. $7.125 $5.500 $7.500 $5.750 $7.250 $5.625
September 30........................ $7.000 $5.375 $7.250 $5.750 $7.000 $5.625
December 31......................... $5.375 $5.000 $5.750 $5.250 $5.500 $4.875
1995
March 31............................ $5.750 $4.875 $6.250 $5.250 $6.125 $5.125
June 30............................. $5.000 $4.375 $5.500 $4.750 $5.125 $4.500
September 30........................ $6.250 $4.500 $6.625 $4.750 $6.375 $4.500
December 31......................... $6.250 $4.500 $6.500 $4.875 $6.250 $4.750
</TABLE>

No cash dividends have been declared or paid during the past three years
with respect to the Common Stock of the Company. The Board of Directors of the
Company currently follows a policy of retaining any earnings for operations
and for the expansion of the business of the Company. Therefore, the Company
anticipates that it will not pay any cash dividends on the Company's Common
Stock in the foreseeable future.

10
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1995 1994 1993 1992 1991
-------- ------- ------- ------- -------
(1)(2) (1)(3) (1)(4) (1)(5) (1)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
OPERATIONS DATA
Operating Revenues............... $ 10,855 $ 1,619 $ 760 $ 2,460 $ 1,991
Income (Loss) From:
Continuing Operations.......... (3,581) (660) (4,117) (2,856) (820)
Discontinued Operations........ (10,389) (3,430) 9,471 220 10,354
Extraordinary Gain............. -- -- 7,742 -- --
-------- ------- ------- ------- -------
Net Income (Loss).............. $(13,970) $(4,090) $13,096 $(2,636) $ 9,534
======== ======= ======= ======= =======
Income (Loss) Per
Common Share and Common
Share Equivalent From:
Continuing Operations.......... $ (.94) $ (.17) $ (1.10) $ (.82) $ (.24)
Discontinued Operations........ (2.71) (.91) 2.52 .06 2.99
Extraordinary Gain............. -- -- 2.06 -- --
-------- ------- ------- ------- -------
Net Income(Loss)............... $ (3.65) $ (1.08) $ 3.48 $ (.76) $ 2.75
======== ======= ======= ======= =======
BALANCE SHEET DATA
Total Assets..................... $ 51,935 $51,639 $55,238 $63,410 $69,219
Long-term Obligations............ $ 7,947 $ 2,693 $ 3,332 $ 6,989 $23,754
Shareholders' Equity............. $ 31,254 $44,624 $48,707 $34,017 $37,196
Weighted Average Common Shares
Outstanding..................... 3,832 3,794 3,762 3,469 3,469
Cash Dividends per Common Share.. $ -0- $ -0- $ -0- $ -0- $ -0-
</TABLE>
- --------
(1) During 1995, the Company's Board of Directors resolved to pursue the sale
of the Company's oil and gas assets and discontinue the Company's oil and
gas operations. The Selected Financial Data for prior years have been
reclassified to present the oil and gas operations as discontinued
operations. See Item 1 "Business--Discontinued Operations," Item 7
"Management's Discussion and Analysis of Financial Condition and Results
of Operations--Discontinued Operations" and Note 3 of the Notes to the
Consolidated Financial Statements.
(2) Includes the results of operations of Oneida subsequent to the Oneida
Acquisition on September 14, 1995. Includes a $7.0 million impairment
charge against the Company's oil and gas properties and a $3.8 million
charge for the expected loss on disposal of the oil and gas operations.
See Notes 2 and 3 of the Notes to the Consolidated Financial Statements.
(3) Includes a $3.2 million impairment charge against the Company's oil and
gas properties, a $2.1 million gain on the sale of mineral properties, the
results of operations of acquired producing gas properties after May 1,
1994 and a change in the Company's proportionate share of agricultural
revenues and expenses. See Notes 3, 7 and 8 of the Notes to the
Consolidated Financial Statements.
(4) Includes the results of operations of the Company's Canadian operations
and partnership management operations through the dates of disposition, a
change in the Company's proportionate share of agricultural revenues and
expenses and a $1.6 million write down of agricultural assets. See Notes 3
and 7 of the Notes to the Consolidated Financial Statements.
(5) Includes results of operations of the Company's contract workover
operations through the date of disposition. See Note 3 of the Notes to the
Consolidated Financial Statements.

11
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

OVERVIEW

On September 14, 1995, the Company acquired Oneida, which manufactures
precision plastic products and provides engineered plastics services (see Item
1--"Business"). 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. 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 has engaged an investment bank specializing in
oil and gas transactions to assist in the sale of the oil and gas operations.
On February 20, 1996, the Company entered into a letter of intent to sell REC,
including substantially all of its oil and gas assets, to a third party for a
total price of approximately $11.9 million. The Company is presently
negotiating a definitive agreement based on this letter of intent which is
expected to provide that the purchase price is to be paid by $10.2 million in
cash at the closing and a $1.7 million 6-month note with interest at 12%. The
transaction is subject to the completion of due diligence and financing and to
the satisfaction of customary closing conditions, and is expected to close in
the second quarter of 1996. Upon completion of this transaction, the Company
will have substantially completed the disposal of its discontinued oil and gas
operations.

The Company recognized a net loss of $14.0 million in 1995 compared to a net
loss of $4.1 million in 1994 and net income of $13.1 million in 1993. 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--1995 COMPARED TO 1994

The Company recognized a loss from continuing operations of $3.6 million in
1995 compared to a loss of $0.7 million in 1994. The 1995 loss included
charges of $1.1 million for severance costs and $0.2 million for office
closure costs recognized in connection with the Company's decision to close
its Houston headquarters office and discontinue its oil and gas operations and
a $0.5 million charge related to the extension of the exercise period for two
warrants to purchase the Company's Common Stock. The 1994 loss included a $2.1
million gain on the sale of certain mineral properties.

PLASTICS PRODUCTS SEGMENT: The Oneida Acquisition on September 14, 1995
represented the Company's entry into a new operating segment, plastic
products. Revenues and operating income of the plastic products segment were
$10.9 million and $0.6 million, respectively, in the three and one-half months
subsequent to the Oneida Acquisition.

On a pro forma basis, as if the Oneida Acquisition had occurred as of
January 1, 1994, revenues increased $6.3 million to $37.1 million in 1995 from
$30.8 million in 1994. This 20% increase in revenues is attributable to an
increase in sales of molded plastic products as a result of increased demand
from existing customers, for both existing programs and programs new to
Oneida, and from new customers. During the early part of 1995, Oneida began
shipping production quantities of parts under programs that were in
development during 1994 for customers in the office equipment,
telecommunications, consumer products and recreational products industries.
Tooling sales were approximately $3.6 million in 1995 and $3.2 million in
1994. Oneida's backlog totaled $15.4 million at December 31, 1995 compared to
$10.1 million at December 31, 1994.

On a pro forma basis, cost of sales totaled $31.0 million, or 83.6% of net
sales, in 1995 compared to $26.0 million, or 84.4% of net sales in 1994.
Oneida benefited from participation in a reduced rate electricity program that
lowered utility costs at one of its molding facilities and from reductions in
direct labor resulting from

12
<PAGE>

improved efficiency and a different sales mix. These factors were partially
offset by an increase in the material content as a percentage of sales due to
the change in sales mix. As a result of the increase in sales, gross margins
on a pro forma basis improved to $6.1 million, or 16.4% of net sales, from
$4.8 million, or 15.6% on net sales, in 1994.

Selling, general and administrative expenses were $3.6 million on a pro
forma basis in 1995, $0.1 million less than in 1994 despite the increased
sales because of continuing cost control activities by management. Although
based on different purchase accounting allocations before and after the Oneida
Acquisition, goodwill amortization was $0.2 million in each year. Operating
income on a pro forma basis was $2.3 million, or 6.2% of net sales, in 1995
compared to $0.9 million, or 3.0% of net sales in 1994.

AGRICULTURE SEGMENT: As of October 1, 1994, the Company's participation in
the agriculture segment is through its investment in the Juliana Preserve
joint venture (see Item 1--"Business--Real Estate and Agricultural
Operations"). Although the Company has a 71.7% interest in the net income and
net assets of the joint venture, it has a 50% voting interest in matters
concerning the operation, development and ultimate disposition of the
property. Accordingly, the Company accounts for its investment in the joint
venture on the equity method. The Company recognized income of $0.2 million in
1995 based on its 71.7% interest in the Juliana Preserve's results of
operations, offset by $0.3 million of depreciation on agricultural real estate
and equipment owned by the Company but used by the joint venture.

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 $3.6 million in 1995 compared to $2.4 million in 1994. The 1995
expenses included charges of $1.1 million for severance costs and $0.2 million
for office closure costs recognized in connection with the Company's decision
to close its Houston headquarters office and discontinue its oil and gas
operations. Substantially all of these costs are expected to be paid during
the first and second quarters of 1996. The 1995 expenses also included a $0.5
million noncash charge related to the extension of the exercise period for two
warrants to purchase the Company's Common Stock.

OTHER INCOME AND (EXPENSE): Interest expense was $0.5 million in 1995
compared to $0.3 million as a result of interest on Oneida debt subsequent to
the Oneida Acquisition. On a pro forma basis, as if the Oneida Acquisition had
occurred as of January 1, 1994, interest expense was approximately $1.2
million in 1994 and $1.2 million in 1995. The Company recognized gains of $0.2
million in 1995 and $2.1 million in 1994 on the sales of certain mineral
properties.

RESULTS OF CONTINUING OPERATIONS--1994 COMPARED TO 1993

The Company recognized a loss from continuing operations of $0.7 million in
1994 compared to a loss of $4.1 million in 1993. The 1994 loss included a $2.1
million gain on the sale of certain mineral properties. The 1993 loss included
a $1.6 million charge for impairment of agricultural assets based on the
appraised value of the Company's acreage in contemplation of forming the joint
venture.

AGRICULTURAL SEGMENT: The results of agricultural operations for the two
years ended December 31, 1994 and 1993 differ significantly because of the
changes in Juliana's share of ownership in the vineyards and decreased
productivity of the vineyards resulting from phylloxera (see Item 1--
"Business--Real Estate and Agricultural Operations"). Although decreasing for
the entire vineyard, the Company's share of agricultural revenues and
operating expenses increased $0.9 million and $0.6 million, respectively, for
1994, as compared to 1993. Pursuant to the letter of intent between the
Company and Freedom Vineyards which ultimately resulted in the Juliana
Preserve joint venture, the Company's share of revenues and expenses,
beginning with the 1994 crop year, increased to 71.7%. Sharing of revenues and
expenses for the 1993 crop year was based on the parties' owned interests in
producing vines.

Total vineyard revenue decreased $0.4 million, or 15%, in 1994 compared to
1993. A decrease of approximately 900 tons of grapes sold, from approximately
3,500 tons in 1993 to approximately 2,600 tons in

13
<PAGE>

1994, contributed $0.7 million to this decline and was partially offset by an
increase of $0.3 million attributable to higher average prices. The decline in
production is wholly attributable to the infestation of phylloxera.
Approximately 179 acres of vineyard farmed in 1993 were determined to be
uneconomical to farm in 1994. These vineyards produced approximately 877 tons
of grapes in 1993.

Total vineyard operating costs decreased 10% from $2.3 million in 1993 to
$2.1 million in 1994. This decrease was attributable to farming fewer acres
than were farmed in 1993. Operating costs on a percentage basis did not
decrease as much as revenues due to the fixed nature of certain costs,
principally field supervision, overhead and property taxes.

OTHER INCOME AND (EXPENSE): Interest expense decreased from $1.0 million in
1993 to $0.3 million in 1994 as a result of reduced debt. This decrease is
primarily due to the elimination of $13.2 million of debt in 1993 by conveying
720 acres of vineyard property to the bank (See Note 7 of the Notes to the
Consolidated Financial Statements). The Company recognized a gain of $2.1
million in 1994 on the sales of certain mineral properties.

INCOME TAX BENEFIT: The Company recognized a tax benefit of $0.8 million in
1993 as a result of a capital loss from the sale of treasury stock which was
carried back to claim refunds of alternative minimum taxes previously paid.
The Company has filed amended federal income tax returns to claim these
refunds, which have not yet been received (see note 14 of the Notes to the
Consolidated Financial Statements).

DISCONTINUED OPERATIONS

As described in Item 1 "Business--Discontinued Operations," the Company
discontinued its Canadian oil and gas operations, partnership management
operations and contract workover operations in 1993 and its U. S. oil and gas
operations in 1995. The Company recognized a loss from discontinued operations
of $10.4 million in 1995 compared to a loss of $3.4 million in 1994 and $9.5
million income in 1993. The Company follows 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 in 1995
and $3.2 million in 1994 to reduce the carrying value of the investment in oil
and gas properties to the "full cost ceiling." The 1995 loss also includes a
$3.8 million charge to reduce the carrying value of the investment in oil and
gas properties to their realizable value in connection with the Company's
decision to discontinue the oil and gas operations and pursue the sale of
these assets. Before these valuation charges, the Company realized income from
the discontinued oil and gas operations of $0.4 million on revenues of $5.7
million in 1995 and a loss of $0.2 million on revenues of $5.9 million in
1994. Revenues from oil increased $0.7 million as a result of a 17% increase
in production (to 189,000 barrels) and 10% increase in average prices.
Revenues from natural gas decreased $0.8 million as a result of a 6% decrease
in volume (to 1,771 MMcf) and a 19% decrease in average prices. Operating
costs decreased $0.1 million from $6.5 million in 1994 to $6.4 million in
1995. The 1995 loss from discontinued operations also included $0.9 million
from settlement of certain litigation. The 1993 income from discontinued
operations included income of $5.9 million from the contract workover
operations, $3.1 million from the Canadian oil and gas operations and $0.5
million from the partnership management operations.

LIQUIDITY AND CAPITAL RESOURCES

SUMMARY OF 1995 ACTIVITIES

Cash and cash equivalents totaled $0.5 million at December 31, 1995. During
the year ended December 31, 1995, cash decreased $8.7 million, with $3.0
million provided by operations, $9.5 million used in investing activities,
$1.5 million used in financing activities and $0.7 million reclassified to Net
Assets of Discontinued Operations.

14
<PAGE>

INVESTING ACTIVITIES: As described above, the Company completed the Oneida
Acquisition in September 1995 and entered the plastic products industry
segment. The purchase price for the acquisition, including acquisition costs,
totaled $3.4 million, which was funded entirely from the Company's cash
balances. Capital expenditures were $5.0 million in 1995, including $4.9
million in the discontinued oil and gas operations. Advances to the Juliana
Preserve joint venture were $1.2 million.

FINANCING ACTIVITIES: Principal payments reduced long-term obligations by
$3.4 million in 1995, including $1.5 million to an affiliate. Proceeds from
new borrowings totaled $1.7 million, including $1.4 million from an affiliate.

OPERATING ACTIVITIES: Net cash provided by operating activities was $3.0
million in 1995, including $3.0 million provided by the discontinued oil and
gas operations.

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 $1.6 million in 1996. Debt service requirements for Reunion's
debt, excluding ORC, total $0.6 million. 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 the discontinued oil and gas operations and other assets
held for sale. Until the oil and gas assets are sold, as discussed below,
these assets are expected to generate sufficient cash flow to fund the
Company's corporate cash requirements during 1996.

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 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 are not expected to be sufficient for Reunion's corporate
operating and debt service requirements.

On February 20, 1996, the Company entered into a letter of intent to sell
REC, including substantially all of its oil and gas assets, to a third party
for a total price of approximately $11.9 million. The Company is presently
negotiating a definitive agreement based on this letter of intent which is
expected to provide that the purchase price is to be paid by $10.2 million in
cash at the closing and a $1.7 million 6-month note with interest at 12%. The
transaction is subject to the completion of due diligence and financing and to
the satisfaction of customary closing conditions, and is expected to close in
the second quarter of 1996. In addition, the Company has a contract for the
sale of certain real estate in Texas for $2.0 million, which is expected to
close during the second quarter of 1996, and is pursuing the sale or farmout
of its mineral interests in Utah. To the extent that any of these transactions
are accomplished, the Company has agreed with certain affiliates that the debt
owed them by ORC and Reunion, respectively, totaling $4.8 million plus accrued
interest, will be repaid from the proceeds. Although there can be no
assurances that any or all of these transactions will be completed, management
believes that the Company will have sufficient resources to meet its corporate
obligations as they become due.

ORC: On February 2, 1996, on connection with the Rostone Acquisition, ORC
entered into a new credit facility with Congress (see Item 1--"Business" and
Note 10 of the Notes to the Consolidated Financial Statements). 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 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 1996.

15
<PAGE>

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 farmings 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 1996.

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Company's consolidated financial statements are set forth beginning at
Page F-1.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

On October 26, 1995, the Company's Board of Directors engaged Price
Waterhouse LLP ("PW") as principal accountant to audit the Company's
consolidated financial statements for the year ending December 31, 1995. PW
has been the independent accountant for Oneida, which was acquired by the
Company on September 14, 1995, since 1988. Because Oneida was expected to
represent more than 50% of the revenues for 1995 and a significant percentage
of the Company's assets at year end, the Board concluded that it should engage
PW as principal accountant for the Registrant.

Arthur Andersen LLP ("AA"), which had served as the Registrant's principal
accountant since 1992, was not reappointed by the Company's Board of Directors
as principal accountant but continues to serve as independent accountants for
the Company's discontinued oil and gas operations.

The audit reports of AA on the Company's financial statements for 1994 and
1993 did not contain an adverse opinion, nor were such reports qualified or
modified as to uncertainty, audit scope or accounting principles. During the
Registrant's two most recent fiscal years and subsequent interim periods
preceding the replacement of AA, the Registrant had no disagreements with AA
on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure. During the Registrant's two most
recent fiscal years and subsequent interim periods preceding the retention of
PW, neither the Registrant nor any one on the Registrant's behalf consulted PW
regarding any matter.

16
<PAGE>

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT*

ITEM 11. EXECUTIVE COMPENSATION*

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT*

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS*
- --------
* Items 10, 11, 12 and 13 are incorporated by reference to the Registrant's
Definitive Proxy Statement to be filed with the Commission pursuant to
Regulation 14A under the Securities Exchange Act of 1934 within 120 days
after the close of the Registrant's fiscal year.

17
<PAGE>

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) Documents included in this report:

The following consolidated financial statements and financial statement
schedules of Reunion Resources Company and its subsidiaries are included in
Part II, Item 8:

1. FINANCIAL STATEMENTS

Reports of Independent Public Accountants
Consolidated Balance Sheets--December 31, 1995 and 1994
Consolidated Statements of Operations--Years Ended December 31, 1995, 1994
and 1993
Consolidated Statements of Cash Flows--Years Ended December 31, 1995, 1994
and 1993
Consolidated Statements of Shareholders' Equity--Years Ended December 31,
1995, 1994 and 1993
Notes to Consolidated Financial Statements

2. FINANCIAL STATEMENT SCHEDULES

Schedule II--Valuation and Qualifying Accounts and Reserves

Other schedules have been omitted because they are either not required, not
applicable, or the information required to be presented is included in the
Company's financial statements and related notes.

3. EXHIBITS

See pages E-1 through E-2 for a listing of exhibits filed with this report
or incorporated by reference herein.

(b) Current Reports on Form 8-K

During the last quarter of the year ended December 31, 1995, the Company
filed the following Current Reports on Form 8-K:

<TABLE>
<CAPTION>
REPORT DATE ITEM REPORTED
----------- -------------
<S> <C>
October 26, 1995 Changes in Registrant's Certifying Accountant
September 14, 1995 Acquisition of Oneida Molded Plastics Corporation
(Amendment No. 1 filed
November 14, 1995)
November 21, 1995 Agreement for Disposition of Oil and Gas Assets
</TABLE>

18
<PAGE>

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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.

Dated: March 27, 1996

REUNION RESOURCES COMPANY

/s/ Charles E. Bradley
By:__________________________________
Charles E. Bradley
President

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATE INDICATED:

Dated: March 27, 1996

/s/ Charles E. Bradley
By: _________________________________
Charles E. Bradley
Director, President and Chief
Executive Officer
(Principal Executive Officer)

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

/s/ Thomas N. Amonett
By: _________________________________
Thomas N. Amonett
Director

/s/ Thomas L. Cassidy
By: _________________________________
Thomas L. Cassidy
Director

/s/ Franklin Myers
By: _________________________________
Franklin Myers
Director

19
<PAGE>

REUNION RESOURCES COMPANY

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
REPORTS OF INDEPENDENT PUBLIC ACCOUNTANTS
Price Waterhouse LLP..................................................... F-2
Arthur Andersen LLP...................................................... F-3
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets.............................................. F-4
Consolidated Statements of Operations.................................... F-6
Consolidated Statements of Cash Flow..................................... F-7
Consolidated Statements of Shareholders' Equity.......................... F-8
Notes to Consolidated Financial Statements............................... F-9
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and
Shareholders of Reunion Resources Company:

In our opinion, based upon our audit and the report of other auditors, the
accompanying consolidated balance sheet and the related consolidated statement
of operations, of cash flows and of shareholders' equity present fairly, in all
material respects, the financial position of Reunion Resources Company and its
subsidiaries at December 31, 1995, and the results of their operations and
their cash flows for the year then ended, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audit. We did not audit the combined
financial statements of oil and gas operations of Reunion Energy Company and
Reunion Operating Company, wholly-owned subsidiaries of Reunion Resources
Company, which statements reflect net assets of $11,563,000 at December 31,
1995 and excess of expenses over revenues of $10,393,000 for the year then
ended. Those statements were audited by other auditors whose report thereon has
been furnished to us, and our opinion expressed herein, insofar as it relates
to the amounts included for oil and gas operations of Reunion Energy Company
and Reunion Operating Company, is based solely on the report of the other
auditors. We conducted our audit of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audit and the report of other auditors
provide a reasonable basis for the opinion expressed above.

PRICE WATERHOUSE LLP

Stamford, Connecticut
March 27, 1996

F-2
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and
Shareholders of Reunion Resources Company:

We have audited the accompanying balance sheet of Reunion Resources Company
(a Delaware corporation) and subsidiaries as of December 31, 1994, and the
related statements of operations, shareholders' equity and cash flows for each
of the two years in the period ended December 31, 1994, as reclassified for
discontinued operations--see Note 3. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Reunion Resources Company
and subsidiaries as of December 31, 1994, and the results of its operations
and its cash flows for the two years then ended in conformity with generally
accepted accounting principles.

ARTHUR ANDERSEN LLP

Houston, Texas
March 22, 1995

F-3
<PAGE>

REUNION RESOURCES COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31,
---------------
ASSETS 1995 1994
------ ------- -------
<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents.................................... $ 529 $ 9,225
Accounts Receivable, Less Allowance for Doubtful Accounts of
$315 and $215, respectively................................. 4,792 2,702
Inventories.................................................. 2,560 --
Customer Tooling-in-process.................................. 855 --
Other Current Assets......................................... 1,389 450
------- -------
Total Current Assets....................................... 10,125 12,377
------- -------
Property, Plant and Equipment--Net............................. 20,224 34,230
------- -------
OTHER ASSETS
Net Assets of Discontinued Oil and Gas Operations............ 11,590 --
Goodwill..................................................... 4,591 --
Investment in Joint Venture.................................. 2,129 1,007
Assets Held for Sale......................................... 2,185 2,166
Other........................................................ 1,091 1,859
------- -------
21,586 5,032
------- -------
$51,935 $51,639
======= =======
</TABLE>

See Accompanying Notes to Consolidated Financial Statements.

F-4
<PAGE>

REUNION RESOURCES COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31,
----------------
LIABILITIES AND SHAREHOLDERS' EQUITY 1995 1994
------------------------------------ ------- -------
<S> <C> <C>
CURRENT LIABILITIES
Current Portion of Long-term Debt.......................... $ 4,279 $ 569
Accounts Payable........................................... 3,376 2,141
Other Current Liabilities.................................. 2,886 866
Advances From Customers.................................... 1,574 --
------- -------
Total Current Liabilities................................ 12,115 3,576
Long-Term Debt............................................... 3,132 2,693
Long-Term Debt--Related Parties.............................. 4,815 --
Other Liabilities............................................ 619 746
------- -------
Total Liabilities........................................ 20,681 7,015
------- -------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common Stock ($.01 par value; 8,000 authorized; 4,112 and
4,055 issued; 3,855 and 3,798 outstanding, respectively).. 40 40
Additional Paid-in Capital................................. 31,037 30,437
Retained Earnings (Since January 1, 1989).................. 1,975 15,945
Less Treasury Shares, at cost (257 shares)................. (1,798) (1,798)
------- -------
Total Shareholders' Equity............................... 31,254 44,624
------- -------
$51,935 $51,639
======= =======
</TABLE>

See Accompanying Notes to Consolidated Financial Statements.

F-5
<PAGE>

REUNION RESOURCES COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1995 1994 1993
-------- ------- -------
<S> <C> <C> <C>
OPERATING REVENUE
Plastic Products................................ $ 10,855 $ -- $ --
Agriculture..................................... -- 1,619 760
-------- ------- -------
10,855 1,619 760
OPERATING COSTS AND EXPENSES
Plastic Products--Cost of Sales................. 9,251 -- --
Agriculture--Operating Costs.................... 291 1,667 1,174
Impairment of Agricultural Assets............... -- -- 1,600
Selling, General and Administrative............. 4,648 2,433 2,154
-------- ------- -------
14,190 4,100 4,928
-------- ------- -------
Operating Loss.................................... (3,335) (2,481) (4,168)
-------- ------- -------
Other Income and (Expense)
Interest Expense................................ (508) (269) (1,042)
Gain on Sale of Property........................ 169 2,124 --
Other, Including Interest Income................ 93 (34) 343
-------- ------- -------
(246) 1,821 (699)
-------- ------- -------
Loss From Continuing Operations Before Income
Taxes............................................ (3,581) (660) (4,867)
Income Tax Benefit.............................. -- -- 750
-------- ------- -------
Loss From Continuing Operations................... (3,581) (660) (4,117)
-------- ------- -------
INCOME (LOSS) FROM DISCONTINUED OPERATIONS
Oil and Gas Operations.......................... (6,559) (3,495) 3,585
Drilling and Workover Operations................ -- 65 5,886
Loss on Disposal of Oil and Gas Operations...... (3,830) -- --
-------- ------- -------
(10,389) (3,430) 9,471
-------- ------- -------
Income (Loss) Before Extraordinary Gain........... (13,970) (4,090) 5,354
Extraordinary Gain on Debt Extinguishment......... -- -- 7,742
-------- ------- -------
Net Income (Loss)................................. $(13,970) $(4,090) $13,096
======== ======= =======
NET INCOME (LOSS) PER COMMON SHARE AND COMMON
SHARE EQUIVALENT--PRIMARY AND FULLY DILUTED
Loss from Continuing Operations................. $ (.94) $ (.17) $ (1.10)
Income (Loss) from Discontinued Operations...... (2.71) (.91) 2.52
Extraordinary Gain on Debt Extinguishment....... -- -- 2.06
-------- ------- -------
Net Income (Loss)............................... $ (3.65) $ (1.08) $ 3.48
======== ======= =======
WEIGHTED AVERAGE NUMBER OF COMMON SHARES AND
COMMON SHARE EQUIVALENTS OUTSTANDING
Primary and Fully Diluted....................... 3,832 3,794 3,762
======== ======= =======
</TABLE>

See Accompanying Notes to Consolidated Financial Statements.

F-6
<PAGE>

REUNION RESOURCES COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1995 1994 1993
-------- ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss)................................ $(13,970) $(4,090) $13,096
Adjustments to Reconcile Net Income (Loss) to Net
Cash Provided From (Used In) Operating
Activities:
Depreciation, Depletion and Amortization........ 2,889 2,923 3,638
Goodwill Amortization........................... 108 -- --
Impairment of Assets............................ 6,980 3,183 1,600
Provision for Loss on Sales of Assets........... 3,974 -- --
Provision for Severance and Office Closure...... 1,290 -- --
Extension of Warrants to Purchase Common Stock.. 477 -- --
Gain on Sale of Property, Plant and Equipment... (133) (2,139) (6,322)
Extraordinary Gain on Debt Extinguishment....... -- -- (7,742)
Deferred Income Tax Benefit..................... -- -- (1,782)
Other........................................... 17 99 (13)
-------- ------- -------
1,632 (24) 2,475
Changes in Assets and Liabilities:
(Increase) Decrease in Accounts Receivable...... 1,656 (1,270) 2,231
Decrease in Other Current Assets................ 859 500 171
Increase (Decrease) in Current Liabilities...... (935) 692 (1,236)
Other........................................... (203) (130) 291
-------- ------- -------
Net Cash Provided by (Used in) Operating
Activities........................................ 3,009 (232) 3,932
-------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Oneida Molded Plastics Corp....... (3,415) -- --
Acquisition of Oil and Gas Properties............ -- (4,936) (184)
Purchase of Partnership Management Business...... -- -- (1,978)
Sale of Partnership Management Business.......... -- -- 1,377
Exploration and Development of Oil and Gas
Properties...................................... (4,915) (2,681) (809)
Investment in and Advances to Joint Venture...... (1,157) (231) --
Sale of Property, Plant and Equipment............ 536 2,027 17,072
Other Capital Expenditures....................... (115) (680) (679)
Other............................................ (394) 156 113
-------- ------- -------
Net Cash Provided by (Used in) Investing
Activities........................................ (9,460) (6,345) 14,912
-------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Issuance of Debt................... 1,708 625 248
Repayments of Debt............................... (3,382) (844) (6,900)
Proceeds From Exercise of Common Stock Options... 123 7 250
Net Proceeds from Sale of Treasury Stock......... -- -- 844
Repurchase of Fractional Interests Resulting from
Reverse Stock Split............................. -- -- (127)
-------- ------- -------
Net Cash Used in Financing Activities.............. (1,551) (212) (5,685)
-------- ------- -------
Increase (Decrease) in Cash and Cash Equivalents... (8,002) (6,789) 13,159
Cash and Cash Equivalents at Beginning of Period... 9,225 16,014 2,855
Less Cash Reclassified to Net Assets of
Discontinued Operations........................... (694) -- --
-------- ------- -------
Cash and Cash Equivalents at End of Period......... $ 529 $ 9,225 $16,014
======== ======= =======
</TABLE>

See Accompanying Notes to Consolidated Financial Statements.

F-7
<PAGE>

REUNION RESOURCES COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------
1995 1994 1993
--------------- --------------- ----------------
SHARES AMOUNTS SHARES AMOUNTS SHARES AMOUNTS
------ ------- ------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCK, PAR VALUE $.01
PER SHARE
Beginning Balance.......... 4,055 $ 40 4,051 $ 40 78,463 $ 784
Adjustment to Record 1 for
300 Reverse Stock Split... -- -- -- -- (78,202) (782)
Retirement of Old Buttes
Common Stock.............. -- -- -- -- (261) (3)
Issuance of New Buttes
Stock..................... -- -- -- -- 260 3
15 for 1 Stock Split of New
Buttes Shares............. -- -- -- -- 3,641 37
Exercise of Stock Options.. 57 -- 4 -- 160 1
Expiration of Fractional
Interests in Unexchanged
Securities................ -- -- -- -- (10) --
----- ------- ----- ------- ------- -------
Ending Balance............. 4,112 40 4,055 40 4,051 40
----- ------- ----- ------- ------- -------
ADDITIONAL PAID-IN CAPITAL
Beginning Balance.......... 30,437 30,430 29,436
Recapitalization
Adjustments............... -- -- 745
Extension of Exercise
Period of Warrants........ 477 -- --
Exercise of Stock Options.. 123 7 249
------- ------- -------
Ending Balance............. 31,037 30,437 30,430
------- ------- -------
RETAINED EARNINGS
Beginning Balance.......... 15,945 20,035 7,649
Loss on Sale of Treasury
Stock..................... -- -- (710)
Net Income (Loss).......... (13,970) (4,090) 13,096
------- ------- -------
Ending Balance............. 1,975 15,945 20,035
------- ------- -------
CUMULATIVE CURRENCY
TRANSLATION ADJUSTMENTS
Beginning Balance.......... -- -- (627)
Current Year Adjustments... -- -- 627
------- ------- -------
Ending Balance............. -- -- --
------- ------- -------
LESS TREASURY SHARES
Beginning Balance.......... (257) (1,798) (257) (1,798) (8,631) (3,225)
Net Effect of
Recapitalization.......... -- -- -- -- 8,199 --
Fractional Share Interests
Repurchased and Retired... -- -- -- -- -- (127)
Private Placement Sale of
Treasury Shares........... -- -- -- -- 200 1,554
Expiration of Unexchanged
Securities................ -- -- -- -- (25) --
----- ------- ----- ------- ------- -------
Ending Balance............. (257) (1,798) (257) (1,798) (257) (1,798)
----- ------- ----- ------- ------- -------
Total Shareholders' Equity... 3,855 $31,254 3,798 $44,624 3,794 $48,707
===== ======= ===== ======= ======= =======
</TABLE>

See Accompanying Notes to Consolidated Financial Statements.

F-8
<PAGE>

REUNION RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1995

(AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Businesses

Reunion Resources Company ("Reunion") is the successor by merger, effective
June 29, 1993, of Buttes Gas & Oil Co. ("BGO"). As used herein, the term
"Company" refers to Reunion, its predecessors and its subsidiaries unless the
context indicates otherwise. The Company, through its wholly owned subsidiary
Oneida Rostone Corp. ("ORC") manufactures high volume, precision plastic
products and provides engineered plastics services. The Company is also
engaged in real estate development and wine grape agricultural operations in
Napa County, California. The Company was previously primarily engaged in oil
and gas production in the United States; this business was discontinued in
1995 (see Note 3).

ORC's Oneida division was acquired in September 1995 (the "Oneida
Acquisition," see Note 2) and its Rostone division was acquired in February
1996 (the "Rostone Acquisition," see Note 2). Oneida's customers are primarily
manufacturers of capital goods and consumer products. Rostone's customers are
primarily manufacturers of electrical equipment and appliances. Oneida had
sales to a single customer which represented approximately 46% of sales
subsequent to the Oneida Acquisition and which represented approximately 45%
of Oneida's accounts receivable at December 31, 1995. Accounts receivable at
December 31,1995 include no significant geographic concentrations of credit
risk. The Company performs ongoing credit evaluations of its customers and
generally does not require collateral.

Principles of Consolidation

The consolidated financial statements include the accounts of Reunion and
its majority owned subsidiaries. All intercompany transactions and accounts
are eliminated in consolidation. In November 1995, the Company's Board of
Directors resolved to pursue the sale of the Company's oil and gas assets and
discontinue the Company's oil and gas operations. Accordingly, these are
presented as discontinued operations (see Note 3). Information presented in
the footnotes is based on continuing operations unless the context indicates
otherwise. The Company accounts for its investment in the Juliana Preserve
using the equity method (see Note 7).

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Significant estimates with regard to these financial statements include the
estimate of the recoverable value of businesses and other assets held for sale
(see Notes 3 and 8).

Revenue Recognition

Revenue is recognized as products are delivered and services are provided to
customers. Revenues and costs associated with the production of customer tools
are deferred until the tools are completed and delivered to the customer.
These revenue and cost deferrals are classified as Advances from Customers and
Customer Tooling-in-Process, respectively, in the consolidated balance sheets.

F-9
<PAGE>

REUNION RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995

Cash and Cash Equivalents

Cash equivalents include time deposits, certificates of deposit and all
highly liquid instruments with maturities when purchased of three months or
less.

Restricted cash balances aggregating $361 and $360 at December 31, 1995 and
1994, respectively, have been included in Other Current Assets, Net Assets of
Discontinued Operations, Assets Held for Sale or Other Assets, based on the
nature of the underlying obligation collateralized. Such balances primarily
relate to regulatory operating deposits and performance bonds.

Inventories

Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out method. Work-in-process and finished goods
include material costs, labor costs and manufacturing overhead.

Property, Plant and Equipment

Property and equipment is recorded at cost, including cost as determined by
the allocation of the purchase price in business acquisitions accounted for
using the purchase method. Expenditures for major renewals and improvements
are capitalized while expenditures for maintenance and repairs not expected to
extend the life of an asset are charged to expense when incurred. Depreciation
of property, plant and equipment is provided on the straight-line method over
their expected useful lives. Gains or losses are recognized when property and
equipment is sold or otherwise disposed of.

Goodwill

Goodwill recorded as a result of business acquisitions is being amortized
using the straight-line method over 15 years. The Company periodically
evaluates whether circumstances indicate the remaining carrying value of
goodwill may not be recoverable, using estimates of future cash flows over the
estimated remaining life of the goodwill. If such evaluation indicates that
the value has been impaired, a loss is recognized.

Long-Lived Assets and Impairment

The Company adopted the provisions of Statement of Financial Accounting
Standards No. 121 "Accounting for the Impairment of Long-lived Assets and for
Long-Lived Assets to be Disposed Of" in the fourth quarter of 1995. The
Company reviews long-lived assets for impairment whenever circumstances
indicate that the carrying amount of the asset may not be recoverable, and
recognizes an impairment loss when the future cash flows expected to be
generated by the asset are less than the carrying amount of the asset. Long-
lived assets held for sale, other than assets to be disposed of in connection
with disposal of a discontinued business segment, are reported at the lower of
carrying amount or fair value less cost to sell. The effect of adopting this
standard in 1995 was not material to the financial statements.

Environmental Policies

Environmental expenditures that relate to current operations are either
expensed or capitalized depending on the nature of the expenditure.
Expenditures relating to conditions caused by past operations that do not
contribute to current or future revenue generation are expensed. Liabilities
are recorded when environmental assessments and/or remediation actions are
probable, and the costs can be reasonably estimated (see Note 16.)

F-10
<PAGE>

REUNION RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995

Income Taxes

The Company provides deferred income taxes for all temporary differences
between financial and income tax reporting using the liability method.
Deferred taxes are determined based on the estimated future tax effect of
differences between the financial statement and tax bases of assets and
liabilities given the provisions of enacted tax laws. A valuation allowance is
recorded for net deferred tax assets if it is more likely than not that such
assets will not be realized. The Company has significant net operating loss
and investment tax credit carryforwards for tax purposes, a portion of which
may expire unutilized (see Note 14).

Earnings Per Share

Earnings per Common Share and Common Share Equivalent--Primary and Fully
Diluted is computed based on the weighted average number of common and common
equivalent shares outstanding during the period. Common equivalent shares
include shares issuable upon exercise of the Company's stock options and
warrants (see Notes 12 and 13).

Common equivalent shares relating to options and warrants to purchase common
stock were not included in the weighted average number of shares for the years
ended December 31, 1995 and 1994 because their effect would have been anti-
dilutive. For the year ended December 31, 1993, the common equivalent shares
deemed to be outstanding (using the treasury stock method) in calculating
primary and fully diluted earnings per common share and common share
equivalent were approximately 203,400 and 207,400, respectively, based on the
weighted average outstanding stock options and warrants of approximately
280,300, an average market price of $5.69 for the twelve months ended December
31, 1993 (used in calculating primary earnings per share) and a closing market
price on December 31, 1993 of $6.00 (used in calculating fully diluted
earnings per share).

Supplemental Cash Flow Information:

<TABLE>
<CAPTION>
1995 1994 1993
---- ---- -------
<S> <C> <C> <C>
Supplemental disclosure of cash flow information:
Cash paid for interest during the periods.................. $716 $270 $ 530
Cash paid for income taxes during the periods.............. -- -- ----
Supplemental disclosure of non-cash investing and financing
activities:
Assets acquired through capital leases..................... 253 -- ----
Restructuring of vineyard indebtedness upon conveyance of
agricultural property subject to deed of trust (see Note
7)........................................................ -- -- 13,169
Conveyance of agricultural property subject to deed of
trust and related indebtedness (see Note 7)............... -- -- 5,427
Purchasers assumption of Canadian bank debt and other
liabilities (see Note 3).................................. -- -- 3,125
</TABLE>

Reclassifications

Certain amounts in prior period statements have been reclassified to conform
with current year presentation.

F-11
<PAGE>

REUNION RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995

2. BUSINESS ACQUISITIONS

Oneida

On September 14, 1995, the Company acquired all of the outstanding preferred
and common stock of Oneida Molded Plastics Corp. ("Oneida") from a subsidiary
of Chatwins Group, Inc. ("Chatwins"), a related party (see Note 15). The
purchase price totaled approximately $3,415, including $3,107 paid to
Chatwins, which was funded entirely from internal cash reserves of the
Company. Oneida's liabilities on the closing date included a $4,268 note
payable to a bank and $4,933 payable to Chatwins. The Chatwins amount was
restructured as a 10% note due September 17, 1997 (the "Chatwins Note"). The
Company agreed to prepay the Chatwins Note if and to the extent that it
realized proceeds from the sale of its oil and gas and other assets (see Note
3).

The acquisition was accounted for as a purchase, with the purchase price
allocated to the assets acquired and liabilities assumed based upon their
respective estimated fair values at the date of acquisition. The fair values
of assets and liabilities acquired, based on certain estimates and on
appraisals, actuarial and other studies obtained, are summarized as follows:

<TABLE>
<S> <C>
Accounts Receivable............................................. $ 5,333
Inventories..................................................... 2,784
Customer Tooling-in-process..................................... 1,415
Other Current Assets............................................ 135
Property, Plant and Equipment................................... 6,495
Other Assets.................................................... 10
Goodwill........................................................ 4,699
Accounts Payable and Other Current Liabilities.................. (12,116)
Long-term Debt.................................................. (4,652)
Other liabilities............................................... (688)
--------
Total......................................................... $ 3,415
</TABLE>

The results of Oneida's operations are included in the consolidated
financial statements from the date of the acquisition. The following
(unaudited) pro forma results of operations for the years ended December 31,
1995 and 1994 have been prepared assuming the acquisition had occurred as of
January 1, 1994. These pro forma results are not necessarily indicative of the
results of future operations or of results that would have occurred had the
acquisition been consummated as of January 1, 1994:

<TABLE>
<CAPTION>
(UNAUDITED)
1995 1994
-------- -------
<S> <C> <C>
Revenues.............................................. $ 37,080 $32,389
Loss From Continuing Operations....................... $ (2,791) $ (988)
Net Loss.............................................. $(13,180) $(4,418)
Loss per Common Share and Common Share Equivalent..... $ (3.44) $ (1.16)
</TABLE>

Rostone

On February 2, 1996, the Company acquired Rostone Corporation ("Rostone")
which was merged with and into 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

F-12
<PAGE>

REUNION RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995
before interest and taxes for 1997. In addition, the Company incurred
approximately $375 in acquisition related costs.

The acquisition will be accounted for as a purchase, with the purchase price
allocated to the assets acquired and liabilities assumed based upon their
respective values at the date of acquisition. The Company is in the process of
obtaining certain evaluations, estimations, appraisals and actuarial and other
studies for the purposes of determining these values.

The results of Rostone's operations will be included in the consolidated
financial statements from the date of acquisition in 1996. The following
(unaudited) pro forma results of operations for the year ended December 31,
1995 have been prepared assuming the acquisition had occurred as of January 1,
1995 and include the results of Oneida on a pro forma basis for 1995 as
presented above. These pro forma results are not necessarily indicative of the
results of future operations or of results that would have occurred had the
acquisition been consummated as of January 1, 1995:

<TABLE>
<CAPTION>
(UNAUDITED)
1995
-----------
<S> <C>
Revenues...................................................... $ 65,390
Loss From Continuing Operations............................... $ (2,563)
Net Loss...................................................... $(12,952)
Loss per Common Share and Common Share Equivalent............. $ (3.38)
</TABLE>

3. DISCONTINUED OIL AND GAS OPERATIONS

Through November 1995, the Company was engaged in exploring for, developing,
producing and selling crude oil and natural gas in the United States through
the Company's wholly owned subsidiary, Reunion Energy Company ("REC"). 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 has engaged an investment bank specializing in oil and
gas transactions to assist in the sale of the oil and gas operations. On
February 20, 1996, the Company entered into a letter of intent to sell REC,
including substantially all of its oil and gas assets, to a third party for a
total price of approximately $11,900. The Company is presently negotiating a
definitive agreement based on this letter of intent which is expected to
provide that the purchase price is to be paid by $10,200 in cash at the
closing and a $1,700 6-month note with interest at 12%. The transaction is
subject to the completion of due diligence and financing and to the
satisfaction of customary closing conditions, and is expected to close in the
second quarter of 1996. Upon completion of this transaction, the Company will
have substantially completed the disposal of its discontinued oil and gas
operations.

Based on the agreement described above, the Company has estimated that its
loss from disposition of the discontinued oil and gas operations will be
approximately $3,830 and has recognized this loss in discontinued operations
in 1995. During 1995, the Company incurred $1,666 of costs to replug a well
that had originally been plugged and abandoned in 1994 and that had
subsequently been found to be leaking. The Company submitted a claim with its
insurance companies for recovery of these costs, which claim was initially
denied. The Company has provided additional information to the insurance
companies and believes that at least a portion of the claim will ultimately be
paid. However, the Company has not anticipated any recovery on this claim in
determining the estimated loss from disposition of the oil and gas operations.
Under the terms of the agreement to sell REC, this claim is retained by the
Company and, as a result, any recovery will result in an adjustment of the
loss from disposition in the period that such recovery is received.

F-13
<PAGE>

REUNION RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995

During 1995, REC received a payment of $874 in partial settlement of a take-
or-pay contract dispute with a purchaser which has been in litigation for
several years. The Company had not previously recorded income for this amount
due to the uncertainty of the outcome of the litigation. Upon receipt of the
settlement, the Company recognized $874 as income in 1995, which is included
in "Loss from discontinued operations."

Through 1993, the Company's partnership management operations were conducted
through its wholly owned subsidiary, Buttes Energy Company ("BEC"). On
December 22, 1993, the Company sold all of the common stock of BEC for
approximately $2,150 in cash. Upon consummation of the sale, the Company was
no longer engaged in the partnership management business.

The Company's Canadian operations were primarily conducted through its
wholly owned subsidiary, Northern Enterprises (Canada) Ltd. ("NECL"). On May
14, 1993, the Company sold substantially all of the assets of NECL for
approximately $7,400 in cash and the assumption of approximately $3,100 of
indebtedness and other liabilities of NECL. As a result of this transaction,
the Company was no longer engaged in the oil and gas business in Canada.

The Company discontinued its offshore contract workover operations effective
December 31, 1992. These operations were conducted through a majority owned
subsidiary, Dolphin Titan International, Inc. ("Dolphin"). Effective January
27, 1993, Dolphin entered into agreements to charter its three offshore jackup
workover rigs. On August 27, 1993, the Company sold the rigs to the lessee for
$8,000 in cash and the Company recognized a gain of approximately $2,700. In
November 1993, Dolphin was merged into Buttes Drilling-C Company, a wholly
owned subsidiary of the Company, through a statutory merger. As a result, the
Company recognized a gain of approximately $450 from the extinguishment of a
previously recorded minority interest. Prior to the merger, Dolphin had
repurchased 8.5% of the minority owned shares for $82. In December 1993, the
Company determined that previously recorded provisions for income taxes
payable to a foreign entity were no longer necessary and, accordingly,
recognized a gain of approximately $1,032 from the write-off of this
liability. These gains are included in net income from discontinued
operations.

Revenues from the discontinued oil and gas operations were $5,748, $5,886
and $9,228 for the three years ended December 31, 1995, 1994 and 1993,
respectively.

4. INVENTORIES

Inventories at December 31, 1995 consisted of the following:

<TABLE>
<S> <C>
Raw materials...................................................... $1,307
Work-in-process.................................................... 1,036
Finished goods..................................................... 217
------
Total............................................................ $2,560
======
</TABLE>

5. OTHER CURRENT ASSETS

Other current assets at December 31, 1995 and 1994 consisted of the
following:

<TABLE>
<CAPTION>
1995 1994
------ ----
<S> <C> <C>
Federal Alternative Minimum Tax Refund Receivable (Note 12). $ 750 $ --
Receivable from the Juliana Preserve (Note 7)............... 359 134
Other....................................................... 280 316
------ ----
Total..................................................... $1,389 $450
====== ====
</TABLE>

F-14
<PAGE>

REUNION RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995

6. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment at December 31, 1995 and 1994 consisted of the
following:

<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Proved oil and gas properties (full cost method)........ $ -- $34,502
Agricultural land and equipment......................... 15,020 15,024
Machinery and equipment................................. 5,335 896
Buildings and improvements.............................. 1,419 --
Land and improvements................................... 96 --
------- -------
21,870 50,422
Accumulated depletion, depreciation and amortization (1,646) (16,192)
------- -------
Property, plant and equipment--net.................... $20,224 $34,230
======= =======
</TABLE>

7. INVESTMENT IN THE JULIANA PRESERVE

The Company's agricultural operations consist primarily of an investment in
The Juliana Preserve (the "Preserve") and in certain real estate and equipment
controlled by the Preserve. The Preserve is a California general partnership,
formed on October 1, 1994 between Juliana Vineyards and Crescent Farms Company
(wholly owned subsidiaries of the Company), together referred to herein as
"Juliana", and Freedom Vineyards, Inc., a California corporation ("Freedom
Vineyards"), to jointly farm, manage and develop and ultimately dispose of the
combined interest of all the parties. In forming the joint venture, each party
effectively gave control of its ownership interest in agricultural real estate
and wine grape vineyards located in Napa County, California in exchange for
undivided ownership interests in the joint venture of 71.7% to Juliana and
28.3% to Freedom Vineyards, based on appraisals of their respective interests.
Although Juliana has a 71.7% interest in the net income and net assets of the
joint venture, it has only a 50% voting interest in matters concerning the
operation, development and ultimate disposition of the property, and therefore
accounts for its investment on the equity method.

The properties now controlled by the Juliana Preserve were originally
acquired by Juliana in 1974 and at December 31, 1995 consisted of
approximately 4,735 acres, of which approximately 2,000 acres are suitable for
wine grape production and of which 414 acres are currently in production.
Freedom Vineyards obtained its interest in 1993 when the Company conveyed 720
acres to Freedom Vineyards in satisfaction of $13,169 of indebtedness.
Although the Company has given effective control of this property to the
Preserve, it retains legal title. Accordingly, the property is presented as
Property, Plant and Equipment in the accompanying balance sheet, and the
Company's investment in the Preserve is presented as Investment in Joint
Venture.

In January 1995, the Preserve entered into a Development and Marketing
Agreement with Juliana Pacific, Inc., a California corporation and an
affiliate of Pacific Union Company ("Pacific Union"), to develop the 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
$3,000 of development financing for this project.

Juliana is obligated on indebtedness of $2,494 payable to an insurance
company, which is collateralized by land and vineyards (see Note 10).

F-15
<PAGE>

REUNION RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995

At December 31, 1995 and 1994, Juliana has receivables from the Preserve of
$359 and $134, respectively, for advances made for farming costs (see Note 5).

The Company recognized income of $182 in 1995 (included in Other, Including
Interest Income) based on its 71.7% interest in the Preserve's results of
operations, offset by $291 of depreciation on the real estate and equipment
owned by the Company and used by the Preserve. The costs to produce a crop are
accounted for by deferring them until the annual grape harvest is substantially
complete, normally in September of each year. When harvest is completed all
deferred crop costs are matched against revenue. Revenue is recognized when the
wine grapes are delivered to the winery. At fiscal year-end the costs incurred
from end of harvest to fiscal year-end pertaining to the succeeding year's crop
are deferred. Deferral of crop costs depends on a continuing evaluation
throughout the crop year of the projected volume of the coming harvest measured
against negotiated long-term and short-term grape sales contracts with the
wineries. Deferral of crop costs ceases at the point that a loss on the crop
becomes evident.

Based on the appraised value in 1993 of the Company's acreage, and in
contemplation of forming the joint venture, the Company reduced the carrying
value of Juliana's interest in such assets by recording a writedown of $1,600
in 1993.

8. ASSETS HELD FOR SALE

The Company owns an approximate 55% undivided interest in approximately 5,400
acres on Padre Island, located off the coast of Texas near Corpus Christi. The
Company has a contract to sell its interest in this property for approximately
$2,047, net of commissions and other closing costs. The Company recorded a
provision of $60 in the fourth quarter of 1995 to reduce the carrying value of
this property to $2,047.

The Company holds title to or recordable interests in federal and state
leases totaling approximately 55,000 acres near Moab, Utah, known as Ten Mile
Potash. Sylvanite, a potash mineral, is the principal mineral of interest and
occurrence in the Ten Mile Potash property. To date, Ten Mile Potash has not
yielded any significant revenues, and the Company is pursuing the sale or
farmout of these interests. The carrying value for these properties is $138,
which the Company believes is realizable from the sale of these interests.

On November 1, 1994, the Company sold its interest in a 5,000 acre
undeveloped titanium mineral deposit in Southwestern Colorado known as
"Powderhorn", to Teck Resources, Inc., a Colorado corporation and a subsidiary
of Teck Corporation, a Canadian corporation, for $2,000 cash and retained a
perpetual non-participating royalty of one half of one percent (0.5%). During
1993 and 1994, the Company sold its interests in a number of patented silver
claims in Colorado to two individual investors for approximately $350 in cash
and promissory notes. The notes bear interest at 8% per annum and have varying
payment and maturity terms. These notes were sold in 1995. As a result of these
transactions, the Company recognized gains totaling $2.1 million during 1994.

F-16
<PAGE>

REUNION RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995

9. OTHER CURRENT LIABILITIES

Other current liabilities at December 31, 1995 and 1994 consisted of the
following:

<TABLE>
<CAPTION>
1995 1994
------ ----
<S> <C> <C>
Accrued salaries, vacation and benefits...................... $ 782 $595
Accrued severance and office closing costs................... 1,200 --
Accrued interest............................................. 38 7
Accrued interest--related parties............................ 80 --
Other accruals and current liabilities....................... 786 264
------ ----
Total...................................................... $2,886 $866
====== ====
</TABLE>

In connection with the Company's discontinuing its oil and gas operations
(Note 3) and the proposed merger of Reunion into Reunion Industries, Inc.
(Note 12), the Company has decided to close its Houston administrative office
and relocate its corporate headquarters to Connecticut. In connection with
these actions, the Company will incur severance costs to employees pursuant to
the Company's involuntary severance policy and will remain liable for the
remaining term of its office lease. The Company has recorded, in Selling,
General and Administrative Expense, 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 related to the remaining term of the office
lease, net of expected sublease recoveries. Substantially all of these costs
are expected to be paid in the first and second quarters of 1996. The office
closure should be completed during the second quarter of 1996.

10. DEBT

Debt at December 31, 1995 and 1994 consisted of the following:

<TABLE>
<CAPTION>
1995 1994
------- ------
<S> <C> <C>
Congress Revolver......................................... $ 3,306 $ --
Congress Term Loan........................................ 224 --
Other Oneida Debt......................................... 1,196 --
Notes Payable to an Insurance Company..................... 2,494 2,652
Recourse Note............................................. 191 610
Related Party Debt........................................ 4,815 --
------- ------
Total Debt.............................................. $12,226 $3,262
======= ======
Current Portion of Long-Term Debt......................... $ 4,279 $ 569
Long-Term Debt............................................ 3,132 2,693
Long-Term Debt--Related Parties........................... 4,815 --
------- ------
Total Debt.............................................. $12,226 $3,262
======= ======
</TABLE>

CONGRESS CREDIT FACILITY

At the time of the Oneida Acquisition, Oneida had a credit facility with
Congress Financial Corporation ("Congress") which provided for up to $5,000 of
borrowings under a term loan in the original amount of $3,000 ($416 balance at
the date of the Oneida Acquisition) and borrowings under a revolving loan
based on the eligible balances, as defined, of Oneida's accounts receivable
and inventory ($3,852 balance at the date of Oneida Acquisition). Interest on
borrowings under the credit facility was payable monthly at the prime rate, as
defined,

F-17
<PAGE>

REUNION RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995
plus 2.5% (11.25% at December 31, 1995), subject to an additional 3% default
increment. In addition, Oneida was required to pay an annual facility fee of
$50 and quarterly audit fees as defined. The loans were secured by
substantially all of Oneida's assets and were subject to early termination
fees. The original term of the facility expired August 1, 1994 and was being
renewed on a year-by-year basis. In addition, at December 31, 1995, Oneida was
not in compliance with certain financial covenants contained in the loan
agreement relating to levels of capital expenditures. Accordingly, the
balances due under the credit facility have been classified as current
liabilities at December 31, 1995.

On February 2, 1996, in connection with the Rostone Acquisition (Note 2),
ORC entered into a new credit facility with Congress. The new credit facility
provides for maximum borrowings of $16,000 under a term loan in the original
amount of $6,600 and revolving loans of up to $9,400, subject to the eligible
balances of accounts receivable and inventory. Interest is payable monthly at
prime rate plus 2.25% (11.0% initially) in the case of term loans and 2.00%
(10.75% initially) in the case of revolving loans, subject to an additional 2%
default increment. In addition, the new credit facility includes a closing fee
of $110, monthly servicing fees of $10, an unused credit line fee of 0.5% and
quarterly audit fees. The loans are secured by substantially all of the assets
of ORC. The financing agreement includes certain financial covenants requiring
the maintenance of minimum levels of working capital and of net worth, as
defined, and certain covenants limiting other indebtedness, dividends and
distributions and transactions with affiliates. The new credit facility
expires February 2, 1999 unless renewed by the lender. Accordingly, the term
loan, net of current portion, will be classified as long-term debt. The
revolver loans will be classified as current liabilities.

Other Oneida Debt

Other Oneida debt includes capitalized equipment lease obligations, economic
development loans, small business loans and loans from former owners. Some of
these obligations are secured by equipment or other assets of Oneida. These
obligations vary in terms and conditions and bear interest rates ranging from
5% to 18% at December 31, 1995.

Notes Payable to an Insurance Company

Notes payable to an insurance company consist of three notes. The first note
is payable monthly with principal payments amortized based on a 20-year rate
and due in full in 1998. The interest rate is 6.7% per annum and will be
adjusted to future market rates in January 1997. This note is collateralized
by a first lien on certain Juliana land parcels. The second note is payable
semiannually with fixed principal payments and interest at 7.75% per annum and
is due in full in January 1997. This note is collateralized by a first lien on
a certain Juliana land parcel. The third note is payable monthly with an
interest rate of 7.75% per annum and is due in full in January 1997. This note
is collateralized by a first lien on a certain Juliana land parcel.

Recourse Note

The restated recourse note of Reunion dated February 17, 1989 was payable to
the paying agent as trustee for the Reunion Class 6 Creditors, as designated
by the Company's Chapter 11 bankruptcy reorganization in 1988. The note was
collateralized by promissory notes receivable (including the ongoing proceeds
therefrom), Company interests in undeveloped land and the stock of certain
wholly owned agricultural subsidiaries, including Juliana.

Principal was payable in mandatory prepayments based on proceeds, if any,
from the collateral, or otherwise in quarterly installments through February
1996. Interest accrued at 10% per annum, payable quarterly in arrears. All
payments made were applied to current maturities then to the next succeeding
principal payments due under the note. The note was fully repaid in February
1996.

F-18
<PAGE>

REUNION RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995

Related Party Debt

At the time of the Oneida Acquisition, Oneida owed Chatwins (a related
party, see Note 15) $4,933 for cash advances, interest and other charges. This
balance was restructured as a 10% note payable September 14, 1997. On November
2, 1995, Reunion advanced $1,550 to Oneida which in turn paid $1,550 to
Chatwins in partial repayment of this note. The remaining balance of the note
is subordinated to ORC's obligations to Congress under the new credit facility
except that, if certain conditions are met, regularly scheduled monthly
interest payments may be paid when due and principal may be paid out of equity
investments or subordinated loans that may be advanced by Reunion to ORC. The
Company has agreed with Chatwins that, should the Company sell any of its
material assets, it will make advances to ORC in an amount equal to the
proceeds of such sale of assets to prepay the note until it is fully repaid,
including interest.

On November 1 and 2, 1995, Charles E. Bradley, the Company's President and
Chief Executive Officer (see Note 15), made loans aggregating $1,350 to the
Company, which was in turn advanced to Oneida for payment to Chatwins as
described above. The Company issued notes for this amount to Mr. Bradley
bearing interest at 10% and payable on September 14, 1997. The Company has
agreed with Mr. Bradley that, should the Company sell any of its material
assets, it will use any proceeds of such sale of assets which remain after
prepaying the note to Chatwins to prepay the notes to Mr. Bradley until they
are fully repaid, including interest.

Interest on this related party debt totaling $80 is included in Interest
Expense in 1995.

Maturities

The aggregate amounts of debt maturities are as follows:

<TABLE>
<S> <C>
1996.............................................................. $ 4,279
1997.............................................................. 5,770
1998.............................................................. 1,783
1999.............................................................. 144
2000.............................................................. 120
Thereafter........................................................ 130
-------
Total........................................................... $12,226
=======
</TABLE>

Short-Term Borrowings

In August 1995, Juliana and Freedom obtained a short-term loan from
Washington Federal, in anticipation of closing the development loan, to
provide temporary funding for development activities of the Preserve (see Note
7). This loan was fully repaid in November 1995 from the initial borrowing
under the development loan.

In June 1994, Juliana obtained a short-term borrowing facility from a
California bank to provide crop financing for its share of vineyard expenses.
Interest on the loan was calculated based on the bank's Base Rate, which
varies from time to time, and was initially established at 10.5% per annum.
The loan was secured by the proceeds to Juliana's interest in certain grape
purchase contracts and matured on February 15, 1995. During 1994, Juliana
borrowed a total of $625, all of which was repaid prior to December 31, 1994.

In March 1994, the Company entered into a $25,000 revolving credit agreement
with a bank, secured by REC's interest in producing oil and gas properties in
California, Michigan and Texas. The agreement provided for an initial
borrowing base of $4,500, to be redetermined semiannually until maturity on
January 1, 1997. Interest was at 1.25% above the bank's base rate. The Company
terminated this agreement in August 1995. No amounts were borrowed under this
facility.

F-19
<PAGE>

REUNION RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995

11. EMPLOYEE BENEFITS

Pension Plan

ORC sponsors a defined benefit pension plan which covers substantially all
Oneida employees. Benefits under the pension plan are based on years of service
and average compensation for the five highest consecutive years. Annually,
Oneida contributes the minimum amount required by applicable regulations.
Assets of the pension plan are principally invested in fixed income and equity
securities. Contributions are intended to provide for benefits attributed to
employees' service to-date and for those benefits expected to be earned from
future service.

The following table sets forth the net periodic pension cost for the period
subsequent to the Oneida Acquisition:

<TABLE>
<CAPTION>
PERIOD FROM
SEPTEMBER 14, 1995
TO
DECEMBER 31, 1995
------------------
<S> <C>
Net Periodic Pension Cost:
Service cost......................................... $ 58
Interest cost on projected benefit obligation........ 40
Net amortization and deferral of gains and losses.... 47
Actual return on plan assets......................... (70)
----
Net periodic pension expense (credit).................. $ 75
====
</TABLE>

The following table sets forth the funded status of the pension plan at
December 31, 1995 based on the most recent actuarial valuation, which was
September 30, 1995:

<TABLE>
<S> <C>
Funded Status of Defined Benefit Pension Plan:
Actuarial present value of vested benefit obligation............ $1,313
======
Accumulated benefit obligation.................................. $1,334
Effect of projected future compensation levels.................. 281
------
Projected benefit obligation for service rendered to date....... 1,615
Plan assets at fair value....................................... 1,483
------
Projected benefit obligation in excess of plan assets........... 132
Unrecognized net gain........................................... 451
------
Accrued pension cost............................................ $ 583
======
</TABLE>

A discount rate of 8.5% was used to determine the projected benefit
obligation. The assumed rate of compensation increases used was 4.0% and the
expected rate of return on plan assets used was 9.0%.

Deferred Compensation Plan

In April 1992, the Company initiated a 401(k) retirement savings plan for
eligible employees. Employees of Reunion and its subsidiaries other than ORC
are eligible to participate. The plan allows participating employees to elect
to contribute up to 18% of their salaries, with the Company making matching
contributions of 25% of each employee's contribution, not to exceed 6% of
salary. The Company's contributions to the plan in each of the three years
ended December 31, 1995 were not material.

F-20
<PAGE>

REUNION RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995

Postretirement Benefits Other Than Pensions

As of December 31, 1995, the Company did not sponsor, contribute to, or
participate in any postretirement benefit plans except for pension plan and
the deferred compensation plan described above. Rostone, acquired in February
1996 (see Note 2), provides certain post retirement medical benefits under its
collective bargaining agreement.

Postemployment Benefits

Other than unemployment compensation benefits required by law, the Company
does not provide postemployment benefits to former or inactive employees. The
estimated future cost of unemployment compensation benefits is accrued as
employee services are provided.

12. SHAREHOLDERS' EQUITY

Name Change, Recapitalization and Reincorporation

The Company is authorized to issue 8,000,000 shares of common stock, par
value $.01 per share. Reunion has recently proposed to its stockholders that
Reunion merge with and into its wholly owned subsidiary, Reunion Industries,
Inc. ("RII"), pursuant to a merger agreement dated November 14, 1995. RII's
Certificate of Incorporation, which would survive such a merger, authorizes
the issuance of 20,000,000 shares of common stock, par value $.01 per share,
and 10,000,000 shares of "blank check" preferred stock, par value $.01 per
share and includes certain capital stock transfer restrictions (the "Transfer
Restrictions") which are designed to prevent any person or group of persons
from becoming a 5% shareholder of RII and to prevent an increase in the
percentage stock ownership of any existing person or group of persons that
constitutes a 5% shareholder by prohibiting and voiding any transfer or
agreement to transfer stock to the extent that it would cause the transferee
to hold such a prohibited ownership percentage. The Transfer Restrictions are
intended to help assure that the Company's substantial net operating loss
carry forwards will continue to be available to offset future taxable income
by decreasing the likelihood of an "ownership change" for federal income tax
purposes.

Reunion is the successor by merger, effective June 29, 1993 in a one-for-one
exchange of stock, to Buttes Gas & Oil Company ("BGO") following BGO's
Recapitalization. Effective June 29, 1993, the Articles of Incorporation of
BGO were amended to effect a plan of recapitalization (the "Recapitalization")
pursuant to which, among other things, (i) each then outstanding share of
common stock of par value $.01 per share of BGO ("Old Buttes"), was converted
automatically and without further action by stockholders into 1/300th share of
new common stock, par value $.01 per share, (the "Reverse Split") of Old
Buttes (as so recapitalized, "New Buttes"), (ii) all fractional interests in
shares of Old Buttes resulting from the Recapitalization are to be settled in
cash at the last sale price of Old Buttes shares on the Pacific Stock Exchange
on the last trading date next preceding the effective date of the
Recapitalization, (iii) following the effective date of the Recapitalization,
New Buttes distributed 14 additional shares of New Buttes for each one new
share issued (or issuable) in the Recapitalization, in payment of a stock
distribution payable to the holders of record of New Buttes shares on the day
after the effective date of the Recapitalization (thereby effecting a 15-for-
one forward stock split), (iv) the Company's corporate name was changed from
Buttes Gas & Oil Co. to Reunion Resources Company, (v) the number of
authorized shares of Common Stock was reduced from 200 million to eight
million, and (vi) the Articles of Incorporation provision prohibiting the
transfer of more than 4.75% of the Company's outstanding common stock without
board approval was eliminated.

As a result of these transactions, the authorized, issued and outstanding
shares of the Company decreased. The Company had estimated, at December 31,
1993, the number of whole shares eliminated as the result of the

F-21
<PAGE>

REUNION RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995
purchase of fractional shares in the Recapitalization to be approximately
453,000 Old Buttes shares (or 1,510 post Reverse Split shares) at an estimated
cost aggregating $127.

At the Company's annual meeting of shareholders on June 29, 1993, the
stockholders of the company approved the Reincorporation of the Company in the
State of Delaware, which was effected through the merger of New Buttes, with
and into the Company's wholly owned subsidiary, Reunion Resources Company, a
Delaware corporation. In connection with the Reincorporation, which was
effective on June 29, 1993, each outstanding share of New Buttes common stock,
par value $.01 per share, was automatically converted into one substantially
identical share of Reunion Resources Company (Delaware) common stock, par
value $.01 per share.

Adjustments to Treasury Stock

On December 14, 1993, Buttes Drilling-C Company sold, through a private
placement, 200,000 shares of the Company's common stock for $4.40 per share,
resulting in proceeds of approximately $844, after deducting offering
expenses, to be used for general corporate purposes. These shares had been
accounted for in consolidation as treasury stock and carried, in the
accounting records, at an average cost of $7.77 per share. As a result of
selling the shares at less than carrying cost, the Company charged the excess
of approximately $710 to retained earnings. In addition, the sale of these
shares generated a capital loss for income tax purposes. The Company has filed
amended federal income tax returns to carry the capital loss back to prior
years' returns and claim $750 in refunds of alternative minimum taxes.

On December 23, 1993, the exchange rights of the holders of the pre-
bankruptcy Buttes Common and Preferred Stock and both the 16.5% and 10.25%
Debentures to receive Old Buttes stocks in exchange for such securities
pursuant to the Old Buttes bankruptcy reorganization plan expired.
Approximately 25,000 shares reserved for these issues have been recorded as a
component of treasury stock.

Adjustments to Additional Paid-in Capital

Paid-in capital was increased $123, $7 and $249 in 1995, 1994 and 1993,
respectively, from the exercise of stock options (see Note 13). In 1995, $477
was credited to additional paid-in capital as a result of extending the
expiration date of two warrants (see Note 15). In 1993, adjustments to
additional paid-in capital included $745 from the Recapitalization discussed
above.

Dividends

No dividends have been declared or paid during the past three years with
respect to the common stock of the Company. Cash dividends are limited by the
availability of funds, including limitations on dividends and other transfers
to Reunion by ORC contained in ORC's lending agreements (see Note 10).

13. STOCK OPTIONS AND WARRANTS

Effective July 1, 1992, the Board of Directors of the Company approved the
adoption of the 1992 Nonqualified Stock Option Plan (the "1992 Option Plan").
The 1992 Option Plan, as amended, authorized the grant of options and sale of
five million shares of common stock of the Company to key employees, directors
and consultants. No option granted under the 1992 Option Plan may be exercised
prior to six months from its date of grant or remain exercisable after ten
years from the grant date. In August 1992, the Board of Directors granted
options to purchase 4,220,000 common shares at $.0781 per share, determined
from the average market price of the 90 days preceding the effective date, to
its four directors and a consultant to the Board of Directors.

F-22
<PAGE>

REUNION RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995
The options became exercisable for two years after July 1, 1993. In
conjunction with the Recapitalization and Reverse Split (see Note 12), the
authorized and outstanding options were reduced to 250,000 and 211,000,
respectively, and the exercise price of the outstanding options was increased
to $1.562 per share.

In addition, during 1992 the Company's Board of Directors approved the
issuance of warrants to a director and to a consultant to the Board of
Directors to purchase an aggregate of three million shares of the Company's
common stock at $.0781 per share, determined from the average market price of
the 90 days preceding the effective date. The warrants became exercisable for
two years on July 1, 1993. In conjunction with the Recapitalization and
Reverse Split (see Note 12), the outstanding warrants were reduced to 150,000
at an exercise price of $1.562. In June 1995 the expiration date of these
warrants was extended to June 30, 1999 (see Note 15).

Effective September 28, 1993, the Board of Directors of the Company approved
the adoption of the 1993 Incentive Stock Option Plan (the "1993 Option Plan")
for the granting of options or awards covering up to 250,000 shares of the
Company's common stock to officers and other key employees. Under the terms of
the 1993 Option Plan, the compensation committee of the Board of Directors is
authorized to grant (i) stock options (nonqualified or incentive), (ii)
restricted stock awards, (iii) phantom stock options, (iv) stock bonuses and
(v) cash bonuses in connection with grants of restricted stock or stock
bonuses. In December 1993, the Company granted 80,000 incentive stock options
to certain key employees at an exercise price of $6.00 per share. The options
originally vested 50% in December 1994 and 50% in December 1995 and remain
exercisable until December 1996. In January 1995, the Company granted 62,750
incentive stock options to certain key employees at an exercise price of $5.00
per share. The options originally vested 50% in January 1996 and 50% in
January 1997 and remain exercisable until December 1999. As a result of
Chatwins' acquisition of its common stock ownership in June 1995 (see Note
15), all of the outstanding options under the 1993 Option Plan became
immediately exercisable.

Changes in options and warrants outstanding under the Company's plans were
as follows, as adjusted to reflect the result of the Recapitalization and
Reverse Split:

<TABLE>
<CAPTION>
1995 1994 1993
------- ------- --------
<S> <C> <C> <C>
Outstanding, Beginning of Year................ 269,500 281,000 361,000
Granted ($5.00--$6.00)........................ 62,750 ---- 80,000
Exercised ($1.562--$5.00)..................... (56,500) (4,500) (160,000)
Cancelled ($5.00--$6.00)...................... (20,000) (7,000) --
------- ------- --------
Outstanding, End of Year...................... 255,750 269,500 281,000
------- ------- --------
Available for Grant, End of Year.............. 173,250 216,000 209,000
======= ======= ========
</TABLE>

F-23
<PAGE>

REUNION RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995

14. TAXES ON INCOME

As a result of continuing losses and the existence of significant net
operating loss carryovers, the Company incurred no income tax liability or
benefit during 1995 or 1994. The Company recognized a current federal tax
benefit of $750 in 1993 as a result of a capital loss carryback (see Note 12).
As of December 31, 1995, the Company had net operating loss ("NOL") and
investment tax credit ("ITC") carryforwards for federal income tax purposes
totaling approximately $215,700 and $2,800, respectively. The NOL and ITC
carryforwards expire as follows:

The Company's ability to use these NOL's to offset future taxable income
would be limited if an "ownership change" were to occur for federal income tax
purposes. As described in Note 12, the Company has proposed the merger of
Reunion into RII which is intended to decrease the likelihood of such an
ownership change occurring.

Significant components of the Company's deferred tax position at December
31, 1995 and 1994 are as follows (in thousands):

<TABLE>
<CAPTION>
1995 1994
-------- -------
<S> <C> <C>
Deferred tax liabilities:
Excess tax depreciation and bases differences of assets.... $ (349) $(1,061)
Other...................................................... (250) (99)
-------- -------
Total deferred tax liabilities........................... (599) (1,160)
-------- -------
Deferred tax assets:
NOL and ITC carryforwards.................................. 76,136 88,409
Other...................................................... 902 589
-------- -------
Total deferred tax assets................................ 77,038 88,998
-------- -------
Net deferred tax assets...................................... 76,439 87,838
Valuation allowance.......................................... $(76,439) (87,838)
-------- -------
$ -0- $ -0-
======== =======
</TABLE>

The Company has continued to incur operating losses since emerging from
bankruptcy in 1988, and there can be no assurance that the Company will be
able to utilize the net operating and capital loss carryforwards in excess of
that required to offset temporary differences which will result in future
taxable income. Therefore, the Company has provided a valuation allowance for
the net deferred tax asset. This valuation allowance decreased $11,399 during
1995, including $10,605 transferred to Net Assets of Discontinued Operations,
and decreased $599 during 1994.

F-24
<PAGE>

REUNION RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995

The Company files a consolidated U.S. federal income tax return and its U.S.
subsidiaries file combined or separate company income tax returns in states in
which they conduct business. The Company also has a U.S. subsidiary which
files a tax return in Canada and certain Canadian provinces. The Company's
consolidated federal income tax returns have not been examined by the Internal
Revenue Service (the "IRS") during the last five years. However, the IRS is
currently auditing the Company's claim for refund of $750 of alternative
minimum tax as a result of the capital loss carryback referred to above.
Certain of the Company's U.S. subsidiaries' separate company tax returns have
been examined by the IRS, the results of which yielded no material adjustments
to the returns as filed.

15. RELATED PARTY TRANSACTIONS

Chatwins and Affiliates

On June 20, 1995, Chatwins acquired 1,450,000 shares of the Company's Common
Stock from Parkdale Holdings Corporation N. V. ("Parkdale") (the "Chatwins
Acquisition"), resulting in the ownership by Chatwins of approximately 38% of
the Common Stock outstanding. In connection with this transaction, Parkdale
and Franklin Myers, a director of the company, entered into 3-year standstill
agreements with Chatwins regarding the purchase, sale and transfer of Company
securities and gave Chatwins 3-year proxies to vote all of their respectively-
owned shares of the Company's common stock. As a result of these transactions,
Chatwins has voting control of approximately 45% of the Company's outstanding
Common Stock. Chatwins also acquired a warrant to purchase 75,000 shares of
the Company's Common Stock for $1.562 per share (the "Chatwins Warrant").

Charles E. Bradley, Sr., a Director of the Company since June 20, 1995 and
the President and Chief Executive Officer of the Company since October 26,
1995, is the Chairman and a Director of Chatwins and the beneficial owner of
approximately 68% of the outstanding common stock of Chatwins. Thomas L.
Cassidy, a Director of the Company since June 20, 1995 is also a Director of
Chatwins.

On June 28, 1995, Chatwins proposed to the Board of Directors of the Company
and the Board of Directors subsequently resolved that the Company extend the
exercisability of the Chatwins Warrant and a similar warrant owned by Mr.
Myers (the "Myers Warrant"). The Chatwins Warrant and the Myers Warrant had
been scheduled to terminate by their terms on July 1, 1995. These warrants now
expire on June 30, 1999. Contemporaneously with the Chatwins Acquisition,
Myers agreed not to exercise the Myers Warrant until June 21, 1998.

On September 14, 1995 the Company purchased from Chatwins Holdings, Inc.
("CHI"), a wholly-owned subsidiary of Chatwins, all of the issued and
outstanding common stock and preferred stock of Oneida (the "Oneida
Acquisition"). The aggregate purchase price paid to CHI for the shares totaled
$3,107 which was funded entirely from internal cash reserves of the Company.
Oneida's liabilities at the time of the Oneida Acquisition included $4,933
payable to Chatwins. The stock purchase agreement between the Company and
Chatwins requires the Company to cause Oneida to repay the indebtedness to
Chatwins ("the "Oneida/Chatwins Debt") plus interest thereon at 10% per annum
from September 1, 1995 on or before September 14, 1997, or earlier from the
net proceeds, if any, of the sale of the Company's other material assets.
Interest is payable monthly. The financial terms of the Oneida transaction
were determined based on Oneida's financial position and results of operations
at and for the six months ended June 30, 1995. The terms of the transaction
were approved by the unanimous vote of the directors of the Company at the
time with Messrs. Bradley and Cassidy abstaining.

On February 2, 1996, Rostone was merged with and into Oneida (the "Rostone
Acquisition") pursuant to a Merger Agreement (the "Rostone/Oneida Agreement")
and Oneida, as the surviving corporation, changed its

F-25
<PAGE>

REUNION RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995
name to Oneida Rostone Corp. ("ORC"). The purchase price payable by ORC under
the Rostone/Oneida Agreement 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 Rostone/Oneida Agreement) for the calender year 1996 and (iii) up to
$2,000 in 1998 if Rostone achieves specified levels of earnings before
interest and taxes for the calendar year 1997. Under the terms of ORC's credit
facility with Congress (see Note 10), all such payments may only be made from
equity contributions the Company may provide to ORC. The financial terms of
the transaction were determined based on Rostone's financial position and
results of operations for the fiscal year ended December 31, 1994 and for the
eleven months ended November 30, 1995. The terms of the Rostone Acquisition
were approved by the unanimous vote of the directors of the Company, including
by all disinterested directors. In the Rostone Acquisition, ORC acquired 100%
of the preferred and common stock of Rostone from CGI Investment Corp.
("CGII") a company owned 51% by Stanwich Partners, Inc. ("SPI") and 49% by
Chatwins. Mr. Bradley, Mr. Poole and Richard L. Evans, Executive Vice
President, Chief Financial Officer and Secretary of the Company, are officers,
directors and/or shareholders of SPI. Prior to the Rostone Acquisition certain
officers of Oneida were also serving as officers of Rostone and CGII.

In connection with the Oneida Acquisition and the Rostone Acquisition, the
Company hired Prudential Securities Incorporated ("Prudential") to act as its
financial advisor and to provide opinions as to the fairness of the
consideration paid by the Company in connection with each of the Oneida
Acquisition (the "Oneida Consideration") and the Rostone Acquisition (the
"Rostone Merger Consideration"). Prudential has issued its opinions, dated
September 7, 1995 and January 15, 1996, respectively, that, as of such dates,
the Oneida Consideration and the Rostone Merger Consideration paid by the
Company were fair to the Company from a financial point of view.

As of December 31, 1995 and February 2, 1996 the outstanding balance,
including interest, of the Oneida/Chatwins Debt was $3,523 and $3,554,
respectively, which continues as an obligation of ORC and is subordinated to
the prior payment of indebtedness owing by ORC to Congress except that if
certain conditions are met, regularly scheduled monthly interest payments may
be paid when due and principal may be paid out of equity or subordinated loans
that may be advanced by the Company to ORC.

Prior to the Rostone Acquisition, Rostone was indebted to CGII pursuant to a
$250 promissory note dated May 21, 1993. The note, which had an outstanding
balance of $368 (principal and accrued interest) on February 2, 1996 and
continues as an obligation of ORC, is subordinated to the prior payment of
indebtedness owing by ORC to Congress except that if certain conditions are
met, regularly scheduled monthly interest payments may be paid when due.

Prior to the Rostone Acquisition, Rostone was the lessee of certain
equipment beneficially owned by Chatwins and Mr. Bradley. Chatwins and Mr.
Bradley share the risks and benefits under the lease pro rata in proportion to
the purchase price of the equipment paid to the equipment manufacturer by each
(57% for Chatwins and 43% for Mr. Bradley). At any time during the lease term
Rostone (ORC) may purchase the equipment upon the payment of the amount which,
when combined with its prior lease payments, will return to Chatwins and Mr.
Bradley the amounts paid by each of them to the manufacturer plus interest
thereon at 13.5% per annum, compounded monthly from the date of each co-
venturer's payment to the equipment manufacturer. Chatwins and Mr. Bradley's
rights to payment under the lease are subordinated to the prior payment of
indebtedness owing by ORC to Congress except that if certain conditions are
met, regularly scheduled monthly lease payments may be made when due and the
amount due on exercise of ORC's purchase option may be paid out of the
proceeds of purchase money financing provided by a non-affiliate of ORC and
permitted under the terms of the Congress credit facility.

F-26
<PAGE>

REUNION RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995

As described in Note 10, Mr. Bradley made loans totaling $1,350 to the
Company, which the Company then used as part of a $1,550 loan it advanced to
Oneida evidenced by a 10% promissory note of Oneida payable November 2, 1997.
Oneida used these funds to repay a portion of the Oneida/Chatwins Debt. The
Company issued two notes to Mr. Bradley for the $1,350 he advanced, each
bearing interest at a rate of 10% per annum and each due and payable on
September 14, 1997. According to the terms of these notes, should the Company
sell any of its material assets it will prepay the notes in an amount equal to
the proceeds of such sale which remain (if any), after the Company loans to
ORC a portion of the net proceeds of such sale in an amount sufficient to
permit ORC to repay the Oneida/Chatwins Debt. The Company's rights to payment
under the $1,550 note issued by ORC are subordinated to the prior payment of
indebtedness owing by ORC to Congress, except that if certain conditions are
met, regularly scheduled monthly interest payments may be paid when due.

To facilitate the closing of the Rostone Acquisition and the Loan Facility,
Mr. Bradley entered into several financial arrangements with Congress and an
existing creditor to Rostone. To induce Congress to consummate the Congress
credit facility, Mr. Bradley guaranteed the obligations of ORC and its
subsidiary under the Congress credit facility subject to a cap of $4,000,
which cap declines over time to $2,000. Mr. Bradley will receive a credit
support fee from ORC and subsidiary in an aggregate amount equal to one
percent (1%) per annum of the amount guaranteed, payable monthly. Mr.
Bradley's rights to payment of the monthly installments of the credit support
fee are subordinated to the prior payment of indebtedness owing by ORC to
Congress, except that if certain conditions are met, the monthly installments
may be paid when due. As a further inducement to Congress Mr. Bradley entered
into an environmental indemnity agreement pursuant to which Mr. Bradley agrees
to indemnify Congress against liabilities that may arise from environmental
problems that may be associated with ORC's existing properties and to
reimburse Congress for certain investigatory and cleanup costs that Congress
may incur should Congress request that those activities be performed by ORC
and should ORC fail to perform them.

To induce an existing creditor of Rostone to permit the Rostone Acquisition
and Congress credit facility to be consummated, Mr. Bradley agreed to purchase
from this creditor 50% of the $2,034 owing to him by Rostone on February 2,
1996 if this indebtedness was restated to provide for quarterly amortization
over a two year period with interest at 10% per annum payable quarterly
subject, however, to a subordination agreement with Congress. As a result of
this transaction, Mr. Bradley and the creditor each holds a note from ORC in
the amount of $1,017 bearing interest at 10% per annum which is subordinated
to the prior payment of indebtedness owing by ORC to Congress, except that if
certain conditions are met, regularly scheduled payments of interest may be
paid when due.

At December 31, 1995, Oneida had fees payable to Mr. Bradley and SPI
totaling $114, included in Other Liabilities, relating to various guarantees
of Oneida debt. Subsequent to the Oneida Acquisition, $30 of such fees are
included in Interest Expense.

Parkdale and Myers

Parkdale became the Company's largest stockholder in 1988 in connection with
reorganization financing provided by it to facilitate the Company's discharge
from bankruptcy. From July 1992 until June 20, 1995, Mr. Myers represented
Parkdale's ownership interest in the Company through an agreement giving him
voting and investment control over Parkdale's stockholdings. Mr. Myers served
as a director of the Company during this period and was retained by the
Company as a consultant until January 1, 1995 at an annual fee of $150.

Boreta

In 1992, the former Board of Directors approved a $300 five year, unsecured
loan to John Boreta, the former President of the Company. The loan bears
interest at the London Interbank Offering Rate as it may vary from

F-27
<PAGE>

REUNION RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995
time to time, and accrued interest is payable annually on each December 31
through 1996 and on April 10, 1997 when the loan matures. The loan is included
in Other Assets.

16. COMMITMENTS AND CONTINGENCIES

Legal Proceedings

On May 28, 1993, BGO filed a Complaint for Determination of Dischargeability
of Claim and for Declaratory and Injunctive Relief in the United States
Bankruptcy Court for the Southern District of Texas, Houston Division, naming
the California Regional Water Quality Control Board ("Water Board"), the State
Water Resources Control Board, the California Environmental Protection Agency,
and various executive officers and directors of those boards and agency as
defendants, seeking to determine the dischargeability, under the Company's
bankruptcy plan, of the Water Board's claim that BGO was responsible for
proposed remediation work to stop erosion at the former Gambonini mine site
(the Gambonini Site) in Marin County, California (see Part I, Item 3. Legal
Proceedings). In a Memorandum Opinion and Judgment (the "Order") entered on
September 30, 1994, the Bankruptcy Court allowed the Water Board to file a
late claim against BGO's bankruptcy estate and prohibited any attempts to
liquidate its claims against BGO, other than through the late filing of a
proof of claim. In March 1995, the Water Board filed an unsecured claim
seeking $2,700. In October 1995, the Company reached a tentative settlement
with the Water Board requiring a payment of $128 by the Company and release by
the Water Board of any further action against the Company. The Company expects
this settlement to be finalized during the second quarter of 1996, and has
recorded an accrual for the amount of the expected settlement.

The Company and its subsidiaries are the defendants in a number of other
lawsuits and administrative proceedings, which have arisen in the ordinary
course of business of the Company and its subsidiaries. The Company believes
that any material liability which can result from any of such lawsuits or
proceedings has been properly reserved for in the Company's financial
statements or is covered by indemnification in favor of the Company or its
subsidiaries, and therefore the outcome of these lawsuits or proceedings, or
the matters referred to above, will not have a material adverse effect on the
Company's consolidated financial position, results of operations or cash
flows.

Environmental Protection

Various U.S. federal, state and local laws and regulations including,
without limitation, laws and regulations concerning the containment and
disposal of hazardous waste, oil field waste and other waste materials, the
use of storage tanks, the use of insecticides and fungicides and the use of
underground injection wells directly or indirectly affect the Company's
operations. In addition, environmental laws and regulations typically impose
"strict liability" upon the Company for certain environmental damages.
Accordingly, in some situations, the Company could be liable for clean up
costs even if the situation resulted from previous conduct of the Company that
was lawful at the time or from improper conduct of, or conditions caused by,
previous property owners, lessees or other persons not associated with the
Company or events outside the control of the Company. Such clean up or costs
associated with changes in environmental laws and regulations could be
substantial and could have a materially adverse effect on the Company's
consolidated financial position, results of operations or cash flows.

F-28
<PAGE>

REUNION RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995
substances. The Company's vineyard operations routinely use fungicides and
insecticides, the handling, storage and use of which is regulated under the
Federal Insecticide, Fungicide and Rodenticide Act, as well as California laws
and regulations.

Except as described in the following paragraph, the Company believes it is
currently in material compliance with existing environmental protection laws
and regulations and is not involved in any significant remediation activities
or administrative or judicial proceedings arising under federal, state or
local environmental protection laws and regulations. In addition to management
personnel who are responsible for monitoring environmental compliance and
arranging for remedial actions that may be required, the Company has also
employed outside consultants from time to time to advise and assist the
Company's environmental compliance efforts with respect to its oil and gas
properties. Except as described in the following paragraph, the Company has
not recorded any accruals for environmental costs.

REC, as operator of the properties, is in process of environmental
remediation of certain oil and gas properties in Calcasieu Parish, Louisiana
under a remediation plan approved by the Louisiana Office of Conservation.
Approximately $513 has been expended as of December 31, 1995, and REC
estimates that the remaining cost of cleanup will be approximately $563. Based
on its working interests in the properties, REC has recorded $380 for its
share of the cost incurred and has accrued an additional $362 for its share of
the estimated remaining cost. The Company was not required to make any
substantial capital expenditures for pollution control purposes during 1994 or
1993.

Operating Leases

At December 31, 1995, the Company's minimum rental commitments under
noncancellable operating leases for buildings and equipment, excluding the
Houston office lease for which provision has been made in connection with the
office closing (see Note 9), are as follows:

Oneida leases one property used in its manufacturing operations from an
individual who was the Company's former principal owner. Oneida is obligated
to pay all taxes, utilities, maintenance, repairs and insurance. This lease
expires in 1998, but is renewable by Oneida for an additional five-year term.
Rental expense was $67 during the three and one half months subsequent to the
Oneida Acquisition.

17. SEGMENT REPORTING

During 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 following segment information relates to the Company's
continuing operations. Prior year presentation has been restated to exclude
the discontinued oil and gas operations.

The Company operates in two segments: plastic products and agriculture.

The plastic products segment, which was acquired during 1995 (see Note 2),
manufactures high volume, precision plastic products and provides engineered
plastics services. The segment's Oneida division, acquired in

F-29
<PAGE>

REUNION RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995
September 1995, designs and produces injection molded parts and provides
secondary services such as hot stamping, welding, printing, painting and
assembly of such products. In addition, Oneida designs and builds custom molds
at its tool shops in order to preclude component parts for specific customers.
The segment's Rostone division, acquired in February 1996, compounds and molds
thermoset polyester resins.

The agriculture segment is engaged in real estate development and wine grape
agricultural operations in Napa County, California.

The following table sets forth key operating information for each business
segment included in continuing operations:

<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Operating Revenues
Plastic Products *................................. $10,855 $ -- $ --
Agriculture........................................ -- 1,619 760
------- ------- -------
Consolidated Total............................... 10,855 1,619 760
======= ======= =======
Operating Income (Loss)
Plastic Products *................................. 605 -- --
Agriculture........................................ (325) (53) (2,086)
Corporate General & Administrative................. (3,615) (2,428) (2,082)
------- ------- -------
Consolidated Total............................... (3,335) (2,481) (4,168)
======= ======= =======
Capital Expenditures
Plastics Products*................................. 347 -- --
Agriculture........................................ -- 610 342
Corporate.......................................... 29 -- 21
------- ------- -------
Consolidated Total............................... 376 610 363
======= ======= =======
Depreciation and Amortization
Plastic Products................................... 172 -- --
Agriculture........................................ 291 244 399
Corporate.......................................... 23 -- --
------- ------- -------
Consolidated Total............................... 486 244 399
======= ======= =======
Identifiable Assets
Plastic Products................................... 19,573 -- --
Agriculture........................................ 14,412 15,386 15,229
Oil and Gas........................................ -- 31,840 35,055
Investment in the Juliana Preserve................. 2,129 1,007 --
Net Assets of Discontinued Operations.............. 11,590 -- --
Corporate Assets................................... 4,231 3,406 4,954
------- ------- -------
Consolidated Total............................... $51,935 $51,639 $55,238
======= ======= =======
</TABLE>
- --------
* Three and one-half months subsequent to the Oneida Acquisition.

F-30
<PAGE>

REUNION RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995

18. FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the fair value of
each class of financial instruments:

Cash and cash equivalents, accounts receivable and accounts payable. The
carrying amounts approximate fair value because of the short maturities of
these instruments.

Long term notes receivable. These notes, totaling approximately $497, were
issued by individuals in private transactions with the Company. One note, for
$300, bears interest at a variable rate and matures in April 1997. The other
notes, totaling $197, bear interest at 11% and mature in January 2000. It is
not practicable to estimate the fair value of these instruments because no
ready market exists for these instruments.

Long term debt. Approximately 50% of the Company's long term debt has
variable rates of interest and 10% bears interest at fixed rates approximating
current market rates. Accordingly, management estimates that the carrying
amounts approximate the fair value, approximately $7,411 at December 31, 1995
and $3,262 at December 31, 1994. Approximately 40% ($4,815) of the long term
debt is related party debt for which comparable instruments do not exist.
Accordingly, it is not practicable to estimate the fair value of this debt.
This debt bears interest at 10%, matures in September 1997 and is subject to
prepayment under certain circumstances (see Note 10).

19. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

Results of operations by quarter for the years ended December 31, 1995 and
1994 are set forth in the following table:

<TABLE>
<CAPTION>
1995 QUARTER ENDED
-----------------------------------
MARCH 31 JUNE 30 SEPT 30 DEC 31
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Operating Revenue.......................... $ -- $ -- $ 1,804 $ 9,051
Less Operating Costs and Expenses.......... 437 1,051 2,894 9,808
------- ------- ------- -------
Operating Loss............................. (437) (1,051) (1,090) (757)
Other Income and Expenses, Net............. 65 (70) (101) (140)
------- ------- ------- -------
Loss from continuing operations............ (372) (1,121) (1,191) (897)
Loss from discontinued operations.......... (3,877) (1,772) (1,953) (2,787)
------- ------- ------- -------
Net Loss................................... $(4,249) $(2,893) $(3,144) $(3,684)
======= ======= ======= =======
Loss Per Common Share and Common Share
Equivalent................................ $ (1.12) $ (.76) $ (.82) $ (.95)
======= ======= ======= =======
</TABLE>

Significant items included above which might affect comparability are as
follows:

<TABLE>
<S> <C> <C> <C> <C>
Continuing operations:
Provision for Severance and Exit Costs....... -- -- (1,115) (175)
Charge for extension of warrant exercise
period...................................... -- (477) -- --
Discontinued operations:
Impairment of oil and gas properties......... (3,858) (1,658) (1,464) --
Litigation settlement........................ -- -- -- 874
Provision for loss on disposal of oil and gas
operations.................................. -- -- -- (3,830)
</TABLE>

F-31
<PAGE>

REUNION RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995

<TABLE>
<CAPTION>
1994 QUARTER ENDED
--------------------------------
MARCH 31 JUNE 30 SEPT 30 DEC 31
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Operating Revenue............................ $ -- $ -- $ 1,619 $ --
Less Operating Costs and Expenses............ 662 902 2,015 521
----- ----- ------- ------
Operating Loss............................... (662) (902) (396) (521)
Other Income and Expenses, Net............... (23) 19 (30) 1,855
----- ----- ------- ------
Income (Loss) from continuing operations..... (685) (883) (426) 1,334
Loss from discontinued operations............ (111) (32) (3,187) (100)
----- ----- ------- ------
Net Income (Loss)............................ $(796) $(915) $(3,613) $1,234
===== ===== ======= ======
Income (Loss) Per Common Share and Common
Share Equivalent............................ $(.20) $(.24) $ (.95) $ .31
===== ===== ======= ======
</TABLE>

Significant items included above which might affect comparability are as
follows

<TABLE>
<S> <C> <C> <C> <C>
Continuing operations:
Gain on sale of mineral properties...................... -- -- -- 2,139
Discontinued operations:
Impairment of oil and gas properties.................... -- -- (3,183) --
</TABLE>

F-32
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE

To the Board of Directors
of Reunion Resources Company

Our audit of the consolidated financial statements referred to in our report
dated March 27, 1996 also included an audit of the Financial Statement
Schedule at December 31, 1995 and for the year then ended listed in item 14(a)
of this Form 10-K. In our opinion, this Financial Statement Schedule presents
fairly, in all material respects, the information set forth therein when read
in conjunction with the related consolidated financial statements.

PRICE WATERHOUSE LLP

Stamford, Connecticut
March 27, 1996

S-1
<PAGE>

REUNION RESOURCES COMPANY

SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

(AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
ADDITIONS
BALANCE ------------------
BEGINNING CHARGES TO BALANCE END
OF YEAR EARNINGS OTHER DEDUCTIONS(1) OF YEAR
--------- ---------- ------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Year ended December 31,
1995:
Deducted from asset
accounts:
Allowance for doubtful
accounts............. $ 215 $ 36 $ 283(2) $ (219)(3) $ 315
Reserve for excess and
obsolete inventory... -- 49 151(2) (62) 138
Deferred tax asset
valuation reserve.... 87,838 -- -- (11,399)(3) 76,439
------- ---- ------- -------- -------
Totals.............. $88,053 $ 85 $ 434 $(11,680) $76,892
Year ended December 31,
1994:
Deducted from asset
accounts:
Allowance for doubtful
accounts............. $ 206 $ 9 $ -- $ -- $ 215
Reserve for excess and
obsolete inventory... -- -- -- -- --
Deferred tax asset
valuation reserve.... 88,437 -- -- (599) 87,838
------- ---- ------- -------- -------
Totals.............. $88,643 $ 9 $ -- $ (599) $88,053
Year ended December 31,
1993:
Deducted from asset
accounts:
Allowance for doubtful
accounts............. $ 825 $157 $ -- $ (776)(3) $ 206
Reserve for excess and
obsolete inventory... -- -- -- -- --
Deferred tax asset
valuation reserve.... -- -- 88,437(4) -- 88,437
------- ---- ------- -------- -------
Totals.............. $ 825 $157 $88,437 $ (776) $88,643
</TABLE>
- --------
(1) Utilization of established reserves, net of recoveries
(2) Added with the acquisition of businesses
(3) Includes balances reclassified to discontinued operations and other
accounts
(4) Reflects the adoption of statement of Financial Accounting Standards No.
109 "Accounting for Income Taxes" on January 1, 1993

S-2
<PAGE>

EXHIBIT INDEX

<TABLE>
<C> <S>
2.1 --Definitive Proxy Statement dated June 7, 1993, relating to the
Predecessor's Annual Meeting of Shareholders to be held June 29, 1993.
Incorporated by reference to Exhibit 2.1 to Form 8-B dated
June 17, 1993.
2.2 --Merger Agreement by and between Reunion Resources Company and Reunion
Industries, Inc. Incorporated by reference to Exhibit 2.1 to
Registration Statement on Form S-4 (No. 33-64325).
3.1 --Certificate of Incorporation of Reunion Resources Company. Incorporated
by reference to Exhibit 3.1 to Form 8-B dated June 17, 1993.
3.2 --Certificate of Incorporation of Reunion Industries, Inc. Incorporated
by reference to Exhibit 3.1 to Registration Statement on Form S-4 (No.
33-64325).
3.3 --Bylaws of Reunion Resources Company, Incorporated by reference to
Exhibit 3.2 to Form 8-B dated June 17, 1993.
3.4 --Bylaws of Reunion Industries, Inc. Incorporated by reference to Exhibit
3.2 to Form 8-B dated June 17, 1993. (Effective following merger with
Reunion Resources Company.)
4.1 --Specimen Stock Certificate evidencing the Common Stock, par value $.01
per share, of Reunion Industries, Inc. Incorporated by reference to
Exhibit 4.1 to the Company's Registration Statement on Form S-4
(Registration No. 33-64325).

10.1 --Amended Agreement Re Water Rights dated January 17, 1989, between
Freedom Federal Savings and Loan Association and Pope Vineyards.
Incorporated by reference to Exhibit 4.14 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1988 (Commission File No.
1-7726).
10.2 --Water System Deed of Trust and Security Agreement between Pope
Vineyards, Freedom Federal Savings and Loan Association and Title
Insurance and Trust Company, Incorporated by reference to Exhibit 4.15
to the Company's Annual Report on Form 10-K for the year ended December
31, 1988 (Commission File No. 1-7726).
10.3 --Form of Operating Agreement dated March 24, 1989, between Buttes
Resources Company, as Operator, and PNB Securities Corporation,
California-Louisiana Production Co., The Bank of California, National
Association and Federal Deposit Insurance Corporation, as Non-Operators.
Incorporated by reference to Exhibit number 10.41 to the Company's
Annual Report on Form 10-K for the year ended
December 31, 1988 (Commission File No. 1-7726).
10.4 --Buttes Gas & Oil Co. 1992 Nonqualified Stock Option Plan. Incorporated
by reference to Exhibit 10.35 to the Company's Annual Report on Form 10-
K for the year ended December 31, 1992.
10.5 --Form of Stock Option Agreement for options issued pursuant to the 1992
Nonqualified Stock Option Plan. Incorporated by reference to Exhibit
10.36 to the Company's Annual Reports on Form 10-K for the year ended
December 31, 1992.
10.6 --Form of Warrants expiring June 30, 1995 to purchase an aggregate of
3,000,000 shares of Common Stock of Buttes Gas & Oil Co. Incorporated by
reference to Exhibit 10.37 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1992.
10.7 --Vineyard Management Agreement between Juliana Vineyards and Freedom
Vineyards, Inc. dated June 4, 1993, as amended. Incorporated by
reference to Exhibit number 4.26 to the Current Report on Form 8-K dated
June 25, 1993.
10.8 --Property Transfer Agreement and Escrow Instructions between Juliana
Vineyards and Freedom Vineyards, Inc. dated June 25, 1993. Incorporated
by reference to Exhibit number 4.26 to the Current Report on Form 8-K
dated June 25, 1993.
10.9 --Reunion Resources Company 1993 Incentive Stock Plan. Incorporated by
reference to Exhibit number 10.34 to the Company's Annual Report on From
10-K for the year ended December 31, 1993.
</TABLE>

E-1
<PAGE>

<TABLE>
<C> <S>
10.10 --Form of Stock Option Agreement for options issued pursuant to the 1993
Incentive Stock Plan. Incorporated by reference to Exhibit number 10.35
to the Company's Annual Report on Form 10-K for the year ended December
31, 1993.
10.11 --Purchase and Sale Agreement dated May 5, 1994, between Reunion Energy
Company and Santa Fe Minerals, Inc., relating to the purchase of Santa
Fe Minerals, Inc.'s interest in producing gas properties. Incorporated
by reference to Exhibit number 10.36 to the Company's Form 8-K dated
June 14, 1994.
10.12 --Joint Venture Agreement of The Juliana Preserve, a Joint Venture dated
as of October 1, 1994. Incorporated by reference to Exhibit number
10.39 to the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1994.
10.13 --Severance Agreement by and between Reunion Resources Company and
Thomas N. Amonett, dated November 16, 1994. Incorporated by reference
to Exhibit number 10.40 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1994.
10.14 --Severance Agreement by and between Reunion Resources Company and W.
Kyle Willis, dated November 16, 1994. Incorporated by reference to
Exhibit number 10.41 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1994.
10.15 --Development and Marketing Agreement by and between The Juliana
Preserve, A Joint Venture, and Juliana Pacific, Inc. dated January 1,
1995. Incorporated by reference to Exhibit number 10.42 to the
Company's Annual Report on Form 10-K for the year ended December 31,
1994.
10.16 --Arrangement letter between Reunion Resources Company and Petrie
Parkman & Co. dated January 19, 1995. Incorporated by reference to
Exhibit number 10.43 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1994.
10.17 --Stock Purchase Agreement dated September 14, 1995, between Reunion
Resources Company and Chatwins Holdings, Inc. relating to the purchase
of Oneida Molded Plastics Corporation. Incorporated by reference to
Exhibit 10.44 to the Company's Current Report on Form 8-K dated
September 14, 1995.
10.18 --Letter Agreement between Chatwins Group, Inc. and Reunion Resources
Company dated September 14, 1995. Incorporated by reference to Exhibit
10.45 to the Company's Current Report on Form 8-K dated September 14,
1995.
10.19 --Merger Agreement, dated as of December 22, 1995 (executed February 2,
1996) between Oneida Molded Plastics Corp. and Rostone Corporation.
Incorporated by reference to Exhibit 2.1 to the Company's Current
Report on Form 8-K dated February 2, 1996.
11.1 --Computation of Earnings Per Share.
16.1 --Letter from Arthur Andersen LLP regarding Change in Certifying
Accountant. Incorporated by reference to Exhibit 16.1 to the Company's
Current Report on Form 8-K dated October 26, 1995.
22.1 --List of subsidiaries and jurisdictions of organization. Incorporated
by reference to Exhibit 22.1 to the Company's Annual Report on Form 10-
K for the year ended December 31, 1994.
23.1 --Consent of Independent Public Accountants--Price Waterhouse LLP.
23.2 --Consent of Independent Public Accountants--Arthur Andersen LLP.
23.3 --Consent of Prudential Securities Incorporated. Incorporated by
reference to Exhibit 23.2 to the Company's Registration Statement on
Form S-4 (No. 33-64325).
27 --Financial Data Schedule
99.1 --Opinion of Arthur Andersen LLP, dated March 27, 1996.
99.2 --Opinion of Prudential Securities Incorporated, dated September 7,
1995. Incorporated by reference to Exhibit 99.1 to the Company's
Registration Statement on Form S-4 (No. 33-64325).
99.3 --Opinion of Prudential Securities Incorporated, dated January 15, 1996.
Incorporated by reference to Exhibit 99.2 to the Company's Registration
Statement on Form S-4 (No. 33-64325).
</TABLE>

E-2

<PAGE>

Exhibit 11.1

REUNION RESOURCES COMPANY

COMPUTATION OF EARNINGS PER SHARE
(In thousands, except per data)

<TABLE>
<CAPTION>
For the years ended December 31,
-------------------------------------------------------
1995 1994 1993
------ ------ ---------------------------
Fully
Primary Diluted
-------- -------
<S> <C> <C> <C> <C>
1. Weighted average common shares
outstanding 3,832 3,794 3,559 3,559

2. Net additional shares outstanding
assuming all stock options exercised
using the Treasury Stock Method (a) -- -- 203 207
------ ------ ------ ------

3. Average common shares and
common share equivalents
outstanding 3,832 3,794 3,762 3,766
====== ====== ====== ======

4. Net earnings (loss) per common
share and common share equivalent:
Loss from continuing operations $ (.94) $ (.17) $(1.10) $(1.10)
Income (loss) from discontinued
operations (2.71) (.91) 2.52 2.52
Extraordinary gain on debt
extinguishment -- -- 2.06 2.06
------ ------ ------ ------
Net income (loss) $(3.65) $(1.08) $ 3.48 $ 3.48
====== ====== ====== ======
</TABLE>
Notes:

(a) The 1995 and 1994 computation of common share equivalents excludes
anti-dilutive shares.

<PAGE>

Exhibit 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-3 (No. 33-77566) and
the incorporation by reference in the Registration Statement on Form S-8 (No.
33-77232) of Reunion Resources Company of our report dated March 27, 1996
appearing on page F-2 on this Form 10-K. We also consent to the incorporation by
reference of our report on the Financial Statement Schedule, which appears on
page S-1 of this Form 10-K.

PRICE WATERHOUSE LLP

Stamford, Connecticut
March 27, 1996

<PAGE>

Exhibit 23.2

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the incorporation of our
reports included in this Form 10-K into Reunion Resources Company's previously
filed Registration Statements on Form S-3 (No. 33-77566) and Form S-8 (No.
33-77232).

ARTHUR ANDERSEN LLP

Houston, Texas
March 27, 1996

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-K
FOR THE YEAR ENDED 12/31/95 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 529
<SECURITIES> 0
<RECEIVABLES> 5,107
<ALLOWANCES> 315
<INVENTORY> 2,560
<CURRENT-ASSETS> 10,125
<PP&E> 21,870
<DEPRECIATION> 1,646
<TOTAL-ASSETS> 51,935
<CURRENT-LIABILITIES> 12,115
<BONDS> 7,947
0
0
<COMMON> 40
<OTHER-SE> 31,214
<TOTAL-LIABILITY-AND-EQUITY> 51,935
<SALES> 10,855
<TOTAL-REVENUES> 10,855
<CGS> 9,542
<TOTAL-COSTS> 9,542
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 508
<INCOME-PRETAX> (3,581)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,581)
<DISCONTINUED> (10,389)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,970)
<EPS-PRIMARY> (3.65)
<EPS-DILUTED> (3.65)

</TABLE>

<PAGE>

Exhibit 99.1

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Shareholders of Reunion Energy Company and Reunion
Operating Company:

We have audited the combined statement of assets and liabilities directly
attributable to oil and gas operations (See Note 1) of Reunion Energy Company
and Reunion Operating Company (both Delaware corporations and collectively
referred to as "the Company") as of December 31, 1995, and the related combined
statements of revenues and expenses and cash flows for the year then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.

The accompanying financial statements omit those assets and liabilities and
revenues and expenses of the Company that are not directly attributable to its
oil and gas operations. Therefore, these financial statements are not intended
to be a complete presentation of the Company's assets and liabilities and
revenues and expenses.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the assets and liabilities directly attributable to oil
and gas operations of Reunion Energy Company and Reunion Operating Company as of
December 31, 1995, and their related revenues and expenses and cash flows for
the year then ended, in conformity with generally accepted accounting
principles.

ARTHUR ANDERSEN LLP

Houston, Texas
March 27, 1996