BUFFTON CORP, 10-K, 1995-12-27

BUFFTON CORP
10-K, 1995-12-27
ELECTRONIC COMPONENTS, NEC

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<PAGE>

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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 September 30, 1995

___ 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 1-9822

BUFFTON CORPORATION
(Exact Name of Registrant as Specified in Its Charter)

Delaware 75-1732794
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)

226 Bailey Avenue, Suite 101
Fort Worth, Texas 76107
(Address of principal executive office) (Zip Code)
(817) 332-4761
Registrant's Telephone Number, Including Area Code:

Securities registered pursuant to Section 12(b) of the Act:
None

Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
Common stock, $.05 par value American Stock Exchange

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 ___
---

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. ___

State the aggregate market value of the voting stock held by non-affiliates
of the registrant.

The aggregate market value of the voting stock held by non-affiliates of
the registrant as of December 5, 1995 was $9,828,374.

The number of shares outstanding of the registrant's common stock, $.05 par
value, as of December 5, 1995 was 5,685,378.
Documents Incorporated By Reference

Portions of the following documents are incorporated by reference into the
indicated part or parts of this report:

Definitive proxy statement of the registrant relating to the 1996
Stockholders' meeting filed with the Commission pursuant to Regulation
14A - Parts I and III.

1
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BUFFTON CORPORATION
-------------------

1995 FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I PAGE
- ------ ----
<S> <C> <C>
Item 1. Business................................................... 3
Item 2. Properties................................................. 5
Item 3. Legal Proceedings.......................................... 6
Item 4. Submission of Matters to a Vote of Security Holders........ 6

PART II
- -------

Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters....................................... 7
Item 6. Selected Financial Data.................................... 7
Item 7. Management's Discussion and Analysis of Operations
and Financial Condition................................... 8
Item 8. Financial Statements and Supplementary Data................ 13
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure................................... 13

PART III
- --------

Item 10. Directors and Executive Officers of the Registrant......... 14
Item 11. Executive Compensation..................................... 14
Item 12. Security Ownership of Certain Beneficial Owners
and Management............................................ 14
Item 13. Certain Relationships and Related Transactions............. 14

PART IV
- -------

Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K............................................... 15

Signatures ........................................................... 17
</TABLE>

2
<PAGE>

PART I
------

ITEM 1 - BUSINESS
- -----------------

GENERAL DEVELOPMENT OF BUSINESS
- -------------------------------

Buffton Corporation (the registrant and Company) is a Delaware corporation and
was incorporated on December 17, 1980.

The Company is principally engaged in the manufacture of filter surge
suppressors and power distribution systems and the operation of food and
beverage establishments. See Financial Information About Industry Segments, page
4.

Effective January 1, 1994, the Company entered into a purchase and sale
agreement with Entertainment Centers of America, Inc. (ECA) to acquire certain
entertainment facilities in New Orleans, Louisiana (Bourbon Street Hospitality)
of ECA in exchange for the Company's outstanding note receivable from and equity
interest in ECA approximating $2,641,000 as well as 600,000 shares of its common
stock and $159,000 in cash. The market value of the 600,000 shares was $824,000
at the date of the acquisition. The agreement provided for the transfer of
235,000 shares of the 600,000 shares of the Company's common stock to be issued
to the owners and certain creditors of ECA and its subsidiaries. The agreement
also stipulated that the proceeds received from the sale of the Company's stock
by one noteholder would equal a minimum of $265,000 or the Company would be
required to deliver additional shares to make up such deficiency between the
sale proceeds and the stipulated minimum amount. No deficiency occurred;
therefore, the Company was not required to deliver additional shares.

In addition to the above described transactions with ECA, the Company had a note
receivable from ECA at January 1, 1994 aggregating $400,000 and advances of
$320,000. The Company also had an option to purchase the stock of American Food
Classics, Inc. (AFC) from ECA at the greater of fair market value, to be
determined by an independent appraisal, or $300,000. The Company exercised its
option January 1, 1994 and exchanged its note receivable from and advances to
ECA for the stock of AFC. The note receivable and advances approximated the fair
market value of the AFC stock at the date of exchange. AFC operates an American
Bistro Restaurant, Lucile's, located in Fort Worth, Texas. After the January 1,
1994 transactions, the Company no longer held an interest in ECA.

Bourbon Street Hospitality originally consisting of 701 Bourbon Street, 735
Bourbon Street and 441 Bourbon Street and AFC are collectively referred to as
BFX Hospitality Group, Inc. (Hospitality Group). During 1994, the Company closed
735 Bourbon Street. There was no change in the carrying value of assets as the
assets were transferred for use in the other Bourbon Street Hospitality
locations.

Effective February 28, 1994, Contex Electronics, Inc. (Contex), a wholly owned
subsidiary of the Company, sold all of the operating assets and liabilities of
MoldCon, Inc. (MoldCon) and Tri-Tec Engineering Corporation (Tri-Tec), two of
its wholly owned subsidiaries. The sales price for the assets was $9,277,000 in
cash plus the assumption of certain liabilities by the buyer. The net proceeds
from the disposition were used to reduce bank debt approximately $5,000,000 and
for short-term investments. During June 1994, Contex shut down its remaining
cable assembly plant in Vestal, New York and sold certain inventory, customer
contracts and certain machinery and equipment to The JPM Company. The remaining
assets, primarily trade accounts receivable, were liquidated.

3
<PAGE>

sold and the personal guaranty of an unrelated third party individual. As a
result of the above transactions, the Company recognized a loss on disposal of
$2,314,000, net of income tax benefit, during its current fiscal year. The sale
of Flo Control was accounted for as a discontinued operation. The cash proceeds
from the sale were used to reduce the Company's outstanding debt with its
lender. In addition, the sale of Flo Control's 95% interest in the Florida
Realty Joint Venture eliminated the ongoing monthly expense of the Flo Control
lease.

The Company recently established Buffton Realty Ventures, a commercial real
estate operation, to engage in acquiring properties offering unique
opportunities for profit. During August 1995, the Company acquired 100 Main
Street, a commercial office building located in Fort Worth, Texas. The property,
approximately 44,000 square feet, is 100% occupied with two tenants under lease.
Lease rentals are $437,000 annually. The purchase price for the property was
approximately $1,653,000.

FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
- ---------------------------------------------

The Company's operations are conducted primarily in the United States by two
principal business segments. Electronic Products involves the manufacture of
filter surge suppressors and power distribution systems. Hospitality Group
includes the operation of food and beverage establishments and commercial real
estate. Information concerning the Company's industry segments is included in
Note 10 of the Consolidated Financial Statements.

NARRATIVE DESCRIPTION OF BUSINESS
- ---------------------------------

The Company's subsidiaries have separate marketing, manufacturing, engineering
and administrative staffs.

ELECTRONIC PRODUCTS:

CURRENT TECHNOLOGY, INC. (CURRENT TECHNOLOGY)

Current Technology was acquired January 1, 1989. Current Technology designs,
manufactures and markets electronic filter/surge suppression products (TVSS),
power supply/power conversion products and custom power distribution systems.
The TVSS products are designed to reduce the adverse effects of electrical
disturbances on sensitive solid state electronics such as computer-based
systems, point-of-sale systems, medical imaging equipment (MRI/CAT), robotics,
telecommunication equipment, industrial control systems and other applications.
These products are sold nationally through well-defined channels of
distribution, utilizing the services of independent sales representatives with
specific geographic responsibility. Current Technology also relies upon the
services of a select group of international distributors in a limited number of
foreign markets. The primary markets served are the medical, factory automation,
data processing/office automation and telecommunication industries. During
September 1995, Current Technology moved its headquarters and manufacturing
operations to a larger facility in Irving, Texas.

HOSPITALITY GROUP:

BFX HOSPITALITY GROUP, INC.

The Company owns and operates entertainment, food and beverage facilities in New
Orleans, Louisiana and Fort Worth, Texas. The New Orleans operations consist of
two entertainment facilities at 701 Bourbon Street and 441 Bourbon Street with
karaoke entertainment concepts. The Fort Worth operation, Lucile's, acquired
through AFC, is an American Bistro featuring a wide variety of menu items. In
addition, during 1995 the Company established Buffton Realty Ventures, a
commercial real estate operation.

4
<PAGE>

SOURCES AND AVAILABILITY OF RAW MATERIAL
- ----------------------------------------

During 1995, raw parts and part assemblies required in the Electronic Products
segment were plentiful. Under present conditions, an adequate supply of these
materials should be available. No long-term contracts are in effect, thus, the
Company has maximum flexibility to purchase advantageously according to its
volume needs.

COMPETITION
- -----------

Both industry segments of the Company are in highly competitive markets. There
are numerous manufacturers of filter/surge suppressors and power distribution
systems which compete with the Company's operations. There are many food and
beverage establishments located in the same geographical area as the Company's
operations which compete for the same customer base. Many of the competitors of
each of the segments have resources greater than the Company.

PATENTS AND LICENSES
- --------------------

The Company owns patents covering certain technology applying to its surge
suppressors and power distribution systems. There are no other patents,
trademarks, franchises or concessions which are materially significant.

ENVIRONMENTAL AND OTHER GOVERNMENTAL REGULATIONS
- ------------------------------------------------

See Item 7 - Management's Discussion and Analysis of Operations and Financial
Condition - "Liquidity and Capital Resources".

SEASONAL ASPECTS OF THE BUSINESS
- --------------------------------

The Company's two operating segments are not materially impacted by seasonality.

BACKLOG
- -------

The Company's Electronic Products backlog at September 30, 1995 was $6,130,000.
Substantially all backlog orders have estimated shipment dates within the fiscal
year ending September 30, 1996.

EMPLOYEES
- ---------

The Company and its subsidiaries employed approximately 155 full-time employees
as of September 30, 1995, none of which were represented by unions. Many of the
Hospitality Group employees are part time. Relations with employees are
satisfactory.

ITEM 2 - PROPERTIES
- -------------------

GENERAL
- -------

The Company and its subsidiaries have facilities with remaining primary lease
terms ranging from one to five years at annual rentals of approximately
$640,000. All leases provide for one or more renewal terms. All premises are in
good condition, adequate and appropriate for the operations presently being
conducted by both of the Company's business segments. The manufacturing location
in Irving, Texas is not operating at maximum capacity and, therefore, management
has no current plans for expansion of its existing facility in the next year.

5
<PAGE>

The Company owns a manufacturing facility located in Vestal, New York. The
127,000 square foot facility is situated on approximately 14 acres. In
conjunction with the 1991 sale of National Pipe Company, the buyer, LCP National
Plastics, Inc. signed a ten year lease agreement with the Company and is
presently occupying sixty percent of the facility. Annual rental for this lease
is approximately $310,000 plus real estate taxes and insurance. With the shut
down of the Contex cable assembly plant in Vestal, New York in June 1994, the
remaining forty percent of the facility is presently vacant. The Company is
actively seeking a lessee for the remainder of the facility.

ELECTRONIC PRODUCTS
- -------------------

Current Technology moved its headquarters and manufacturing operations to a
larger facility in Irving, Texas during September 1995. This new facility
consists of approximately 43,000 square feet of space.

HOSPITALITY GROUP
- -----------------

The Hospitality Group leases two facilities in New Orleans, Louisiana for its
entertainment operations. One of the facilities has approximately 6,400 square
feet of space and the other has approximately 5,400 square feet. The operation's
restaurant in Fort Worth, Texas leases approximately 5,000 square feet of space.

During August 1995, the Company, through Buffton Realty Ventures, acquired 100
Main Street, a commercial office building located in Fort Worth, Texas. The
property, approximately 44,000 square feet, is 100% occupied with two tenants
under lease. Lease rentals are $437,000 annually.

CORPORATE OFFICES
- -----------------

The Company leases approximately 3,000 square feet of space at 226 Bailey Avenue
in Fort Worth, Texas for its corporate headquarters.

ITEM 3 - LEGAL PROCEEDINGS
- --------------------------

The Company is a party to various legal actions which are in the aggregate
immaterial, and due to the nature of the Company's business, it could be a party
in other legal or administrative proceedings arising in the ordinary course of
business. While occasional adverse settlements or resolutions may occur and
negatively impact earnings in the year of settlement, it is the opinion of
management that their ultimate resolution will not have a materially adverse
effect on the Company's financial position.

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

No matters were submitted for a vote to security holders during the fourth
quarter of the fiscal year ended September 30, 1995.

6
<PAGE>

PART II
-------

ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
- -------------------------------------------------------------------------
MATTERS
-------

The Company's common stock is traded on the American Stock Exchange, under the
common stock ticker symbol "BFX". The quarterly trading range of common stock
follows:

<TABLE>
<CAPTION>
FISCAL 1995 HIGH LOW
---- ---
<S> <C> <C>
October 1 - December 31................... $1.81 $1.31
January 1 - March 31...................... 1.87 1.06
April 1 - June 30......................... 1.81 1.38
July 1 - September 30..................... 2.44 1.38

FISCAL 1994 HIGH LOW
---- ---
October 1 - December 31................... $1.69 $1.19
January 1 - March 31...................... 3.25 1.19
April 1 - June 30......................... 2.44 1.19
July 1 - September 30..................... 1.75 1.19
</TABLE>

The number of named stockholders of common stock as of September 30, 1995 was
approximately 1,620 as recorded by the transfer agent and registrar.

There are no restrictions on declaration or payment of dividends; however, no
dividends have been paid on common stock to date. The Company intends to
maintain a policy of retaining earnings for use in the development of the
business.

Continental Stock Transfer & Trust Company, 2 Broadway, New York, N.Y. 10004, is
the transfer agent and registrar for the Company's common stock.

ITEM 6 - SELECTED FINANCIAL DATA
- --------------------------------

<TABLE>
<CAPTION>
September 30,
--------------------------------------------------------
FOR THE YEAR ENDED 1995 1994 1993 1992 1991
- ------------------ -------- -------- -------- -------- --------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Net revenues.................................. $ 19,187 $ 30,432 $ 35,879 $ 33,449 $ 29,726
======== ======== ======== ======== ========

Income (loss) from continuing operations (a).. $ 1,304 $ 2,002 $ 398 $ (1,551) $ (3,163)
Income (loss) from discontinued operation..... (2,513) (94) (134) (3,402) 917
-------- -------- -------- -------- --------

Net income (loss)............................. $ (1,209) $ 1,908 $ 264 $ (4,953) $ (2,246)
======== ======== ======== ======== ========

Income (loss) per average common share:
Continuing operations....................... $ .24 $ .39 $ .09 $ (.35) $ (.82)
Discontinued operation...................... (.46) (.02) (.03) (.76) .23
-------- -------- -------- -------- --------

Net income (loss)........................... $ (.22) $ .37 $ .06 $ (1.11) $ (.59)
======== ======== ======== ======== ========

AT YEAR END
- -----------

Working capital (b)........................... $ 2,824 $ 7,149 $ 8,126 $ 8,910 $ 81
Current assets................................ 5,429 11,125 16,636 16,336 23,916
Total assets.................................. 17,224 25,070 31,168 30,644 41,644
Long-term debt................................ - 5,507 9,855 10,198 -
Total liabilities............................. 2,605 9,813 18,643 18,516 26,035
Stockholders' equity.......................... 14,619 15,257 12,525 12,128 15,609
Total liabilities to equity ratio............. .18 .64 1.49 1.53 1.67
</TABLE>

(a) Income from continuing operations in 1994 includes a net gain of $1,050,000
on the sale of the cable assembly plants in West Springfield, Massachusetts
and Gardena, California.
(b) Working Capital in 1991 included $14,833,000 representing outstanding
balance of the Company's revolving loan agreement which was due April 1,
1992.

7
<PAGE>

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

GENERAL INFORMATION

At September 30, 1995, the Company consists of operations in two principal
segments as discussed in Part I, Item 1 - Business. During the years ended
September 30, 1994 and 1995, the Company entered into acquisition and
disposition transactions as follows:

Effective January 1, 1994, the Company acquired Bourbon Street Hospitality and
the stock of AFC from ECA. Bourbon Street Hospitality consisted of entertainment
facilities in New Orleans, Louisiana located at 701 Bourbon Street, 735 Bourbon
Street and 441 Bourbon Street. AFC operates Lucile's, an American Bistro
restaurant concept located in Fort Worth, Texas.

Effective February 28, 1994, Contex sold all of the operating assets and
liabilities of MoldCon and Tri-Tec.

Unaudited pro forma results of operations for the acquisitions and dispositions
discussed above as if the transactions had occurred at the beginning of each
respective period are as follows:

<TABLE>
<CAPTION>
Years Ended
September 30,
---------------------------------------
1994 1993
-------- --------
(In thousands, except per share amounts)
<S> <C> <C>
Revenues $ 32,639 $ 28,703
Net income (loss) 743 (692)
Income (loss) per average common share .15 (.15)
</TABLE>

The above pro forma results of operation exclude the $1,050,000 gain on the sale
of MoldCon and Tri-Tec in 1994.

During 1994, the Hospitality Group closed the facility at 735 Bourbon Street.
This location represented .09% of total consolidated assets and 1% of total
consolidated net revenues as of and for the year ended September 30, 1994. The
closing improved cash flow since this location had been operating at a loss.
There was no change to the carrying value of assets as they were transferred for
use in the other Bourbon Street Hospitality locations.

By approval of the Company's Board of Directors in December 1994, in a
transaction effective January 1, 1995, the Company sold the operations of Flo
Control, Inc. (Flo Control), headquartered in Burbank, California. The purchaser
of these operations was Mr. Russell J. Sarno, President of Flo Control and a
board member of the Company. Mr. Sarno purchased virtually all of the assets of
Flo Control for $3,100,000 in cash and assumed $800,000 of Flo Control's
liabilities. As a condition of the sale, Mr. Sarno agreed to purchase Flo
Control's 95% ownership interest in the Florida Realty Joint Venture for
$150,000 in cash and assume the related non-recourse mortgage approximating $2.3
million. In connection with these transactions, Flo Control's secondary
containment product line was sold to Mr. Pat Hopkins, an unrelated third party,
for a $500,000 note. The note is secured by the assets sold and the personal
guaranty of an unrelated third party individual. As a result of the above
transactions, the Company recognized a loss on disposal of $2,314,000, net of
income tax benefit, during its current fiscal year. The sale of Flo Control was
accounted for as a discontinued operation. The cash proceeds from the sale were
used to reduce the Company's outstanding debt with its lender. In addition, the
sale of Flo Control's 95% interest in the Florida Realty Joint Venture
eliminated the ongoing monthly expense of the Flo Control lease.

8
<PAGE>

1995 VERSUS 1994

RESULTS OF CONTINUING OPERATIONS

Consolidated net revenues in 1995 decreased 37% compared to 1994. Electronic
Products revenues declined 52% during 1995 compared to 1994. The Electronic
Products revenues in 1994 were impacted by the sale of the cable assembly plants
in West Springfield, Massachusetts and Gardena, California effective February
28, 1994 and the shut down of the cable assembly plant in Vestal, New York in
June of 1994. Revenue for the three plants in 1994 was $14,019,000. The
Company's power surge suppressor manufacturing operations revenues increased 10%
during 1995 compared to 1994. This operation's revenues increased primarily due
to the sale of products in the power siftor line and to a lesser extent to the
sale of new products and products in the power supply line. Sales in the power
siftor line increased due to improved product acceptance in the market place.
This operation also benefited from improvement in the sales representation force
throughout the operation's marketing area. Management believes that the
Electronic Products segment is well positioned for continued revenue growth
after obtaining, in late 1995, a $3,500,000 purchase contract from Electrocom
Automation, L.P., for the manufacture of power distribution modules for
integration into Electrocom's Digital Bar Code Sorter (DBCS) equipment. Shipment
terms under the contract continue through October 1996. Hospitality Group
revenues increased 33% in 1995 compared to 1994. These revenues increased
partially due to inclusion for a full year in 1995 compared to nine months in
1994. This increase was led by the continued popularity of The Cat's Meow
facility located at 701 Bourbon Street. In addition, the successful 1995 Mardi
Gras Festival was also instrumental in improving revenues for the Bourbon Street
Hospitality locations despite having closed the 735 Bourbon Street location
during 1994. 735 Bourbon Street had generated minimal revenues for the Company.
During late 1995 the Company remodeled the 441 Bourbon Street location as well
as changed the overall karaoke theme of the location. Management believes that
these changes will appeal to a larger customer base and thus improve the
revenues generated at this location.

Consolidated total costs and expenses for 1995 decreased 39% compared to the
prior year. Consolidated costs of sales declined 66% during 1995 compared to
1994. As a percent of revenues these costs were 31% in 1995 versus 56% in 1994.
Electronic Products costs of sales declined 74% during 1995 versus 1994. The
decline in the Electronic Products costs of sales in 1995 resulted primarily
from the sale of the previously discussed cable assembly plants effective
February 28, 1994 and the shut down of the Vestal, New York plant in June 1994.
Costs of sales in the power surge suppressor operation decreased 9% during 1995
compared to 1994. Gross profit as a percentage of revenue in this operation was
66% in 1995 compared to 60% in 1994. Product mix which consisted primarily of
power siftor sales improved the overall gross profit. Management does not
anticipate that the DBCS sales under the previously mentioned Electrocom
contract, which historically have a lower gross margin, will materially affect
the overall gross profit of the Electronic Products group. Hospitality Group's
cost of sales increased 30% in 1995 compared to 1994 partially due to inclusion
for a full year in 1995 compared to nine months in 1994 and a higher volume of
sales. The gross profit margin associated with the Hospitality Group increased
slightly to 73% in 1995 from 72% in 1994.

Consolidated selling, general and administrative expenses increased 3% during
1995 compared to 1994. Electronic Products selling, general and administrative
expenses declined 18% during 1995 compared to the prior year. The decline during
1995 was primarily associated with the sale of the two cable assembly plants and
the shut down of the Vestal, New York plant as previously discussed. Selling,
general and administrative expenses associated with the Company's power surge
suppressor operation increased 15% during 1995 compared to 1994. This increase
was primarily attributable to an increase in commissions and certain other costs
directly correlated to the increase in revenues and an increase in costs
associated with the growth in this operation's work force during the year ended
September 30, 1995. Selling, general and administrative expenses of the
Hospitality Group increased 22% primarily due to inclusion for a full year in
1995 compared to nine months in 1994 partially offset by the closing of 735
Bourbon Street. Unallocated corporate expense increased 42% due to higher
director fees and bonuses paid to various management employees. Substantially
all of the director fees and bonuses were paid with the Company's common stock;
therefore, no significant outlay of cash was required.

9
<PAGE>

Consolidated depreciation and amortization expense decreased 20% during 1995
compared to 1994, primarily as a result of the previously discussed sale and
shut down of the Company's cable assembly plants.

Consolidated interest expense declined 61% in 1995 versus the prior year
primarily due to the Company's ability to repay a substantial portion of the
debt with its lender using the proceeds from the sale of Flo Control. In
addition, the Company was able to eliminate the Florida Realty Joint Venture
(FRJV) debt as a result of the sale of Flo Control's 95% interest in the FRJV,
thereby further reducing consolidated interest expense for 1995. At September
30, 1995, the Company had no bank debt outstanding. The Company anticipates that
it will be able to maintain a relatively low level of debt to support operations
and potential acquisitions and not experience a substantial increase in interest
expense in 1996.

During 1995, the Company reported income from continuing operations before
income taxes of $1,273,000 compared to $2,235,000 in 1994. The 1994 income
included a net gain of $1,050,000 on the sale of the cable assembly plants in
West Springfield, Massachusetts and Gardena, California. The Company's operating
income from continuing operations before income taxes, exclusive of the gain on
the sale of assets, was $1,185,000 in 1994. Operating profit associated with the
Company's power surge suppressor operation increased 55% over the 1994 level.
The Hospitality Group reported operating income of $244,000 in 1995 compared to
a loss of $202,000 in 1994. Operating income for the Hospitality Group was
bolstered by the closing of 735 Bourbon Street during 1994 which had been
operating at a loss.

Income tax rate on pre-tax income from continuing operations was a benefit of
(2.4%) in 1995. The 1995 rate is substantially lower than the federal statutory
rate of 34% as a result of favorable state tax developments that resulted in the
reversal of certain state tax reserves approximating $255,000. In addition, the
Company's improved profitability from continuing operations allowed for the
recognition of certain federal tax benefits aggregating $314,000. These benefits
had been reserved for through the valuation allowance in 1994 due to their
uncertainty of utilization. Management expects that the 1996 effective tax rate
will more closely represent the federal statutory rate.

The sale of Flo Control in 1995 resulted in a loss from discontinued operation
of $2,513,000, net of income tax benefit. The loss consists of a loss from
operations of $199,000, net of income tax benefit and a loss on disposal of
$2,314,000, net of income tax benefit.

1994 VERSUS 1993

RESULTS OF CONTINUING OPERATIONS

Consolidated net revenues in 1994 decreased 15% compared to 1993. Electronic
Products revenues declined 30% during 1994 compared to 1993. The Electronic
Products revenues in 1994 were impacted by the sale of the cable assembly plants
in West Springfield, Massachusetts and Gardena, California effective February
28, 1994. The Company's cable assembly plant located in New York reported a
decline in revenues during 1994 as a result of a decline in orders from a major
customer. During June 1994, the Company shut down the plant and sold certain
inventory, customer contracts and certain machinery and equipment to The JPM
Company. The Company liquidated the remaining assets. The Company's power surge
suppressor manufacturing operations revenues increased 36% during 1994 compared
to 1993. This operation's revenues increased due to the sale of new products and
a new contract for shipment of power supply products. Effective January 1, 1994,
the Company acquired the Hospitality Group. These revenues for the first nine
months of operations following the acquisition were $4,979,000 and are included
in the Company's consolidated revenues.

Consolidated total costs and expenses for 1994 decreased 17% compared to the
prior year. Consolidated costs of sales declined 32% during 1994 compared to
1993. As a percent of revenues these costs were 56% in 1994 versus 70% in 1993.
Consolidated cost of sales includes $1,398,000 of cost associated with
Hospitality Group acquired in January 1994. The gross profit margin associated
with Hospitality Group was approximately 72% which positively

10
<PAGE>

impacted the total consolidated gross profit margin in 1994. Electronic Products
costs of sales declined 37% during 1994 versus 1993. The decline in the
Electronic Products costs of sales in 1994 resulted primarily from the sale of
the previously discussed cable assembly plants effective February 28, 1994.
Costs of sales in the power surge suppressor operation increased 36% during 1994
compared to 1993. This increase was primarily associated with higher revenues.
Gross profit as a percentage of revenue in this operation was 60% in 1994 and
1993, however, gross profit increased 36% in absolute dollars.

Consolidated selling, general and administrative expenses increased 26% during
1994 compared to 1993. The increase was primarily due to the inclusion of
$3,293,000 of expenses associated with Hospitality Group acquired effective
January 1, 1994. Selling, general and administrative expenses for Hospitality
Group consist of all payroll, rent and all other operating expenses. Electronic
Products selling, general and administrative expenses declined 10% during 1994
compared to the prior year. The decline during 1994 was primarily associated
with the sale of the two cable assembly plants and the shut down of the Vestal,
New York plant as previously discussed. Selling, general and administrative
expenses associated with the Company's power surge suppressor operation
increased 24% during 1994 compared to 1993. This increase was primarily related
to higher volume of revenue.

Consolidated depreciation and amortization expense decreased 10% during 1994
compared to 1993, primarily as a result of the previously discussed sale and
shut down of the Company's cable assembly plants.

Consolidated interest expenses declined 31% in 1994 versus the prior year
primarily due to a lower debt level.

The Company's provision for income taxes for 1994 is below the statutory 34%
rate primarily as a result of the utilization of capital loss carryforwards to
offset capital gains generated from the sale of MoldCon and Tri-Tec.

During 1994, the Company reported income from continuing operations before
income taxes of $2,235,000 compared to $523,000 in 1993. The 1994 income
included a net gain of $1,050,000 on the sale of the cable assembly plants in
West Springfield, Massachusetts and Gardena, California. The Company's operating
income before income taxes, exclusive of the gain on the sale of assets, was
$1,185,000 in 1994 representing a 127% increase over 1993. This improvement was
associated with increased revenues in the Company's power surge suppressor
operation. The increased profitability was primarily associated with the sale of
new products and new contracts for shipment of power supply products. The
Company's cable assembly operations reported a significant decline in profits
for the five month period prior to the sale compared to the same period in the
prior year. The profitability associated with the cable assembly operation in
West Springfield, Massachusetts reported a sharp decline during the first
quarter of fiscal 1994 which continued into the second quarter.

IMPACT OF INFLATION

From October 1992 to September 1995, inflation did not have a material impact on
the Company's operations.

LIQUIDITY AND CAPITAL RESOURCES

During March 1992, the United States Environmental Protection Agency (EPA),
issued a Record of Decision (ROD) with respect to the Company's Superfund Site
in Vestal, New York. An Administrative Order for Remedial Design and Remedial
Action was issued on October 1, 1992. The ROD required the Company to construct
a water treatment facility at the site and to pump contaminated ground water
from bedrock and overburden extraction wells for 15 to 30 years until
remediation goals were met. In December 1992, the Company's environmental
consultants prepared and submitted a Remedial Design Work Plan (RDWP) to the
EPA. The EPA issued comments on the RDWP on October 1, 1993, and a revised RDWP
was submitted to EPA on October 21, 1993. During February 1994, the Company
received comments from the EPA with respect to the revised RDWP and the
Company's environmental consultants submitted a response. The EPA approved the
revised RDWP in October 1994. On November 14, 1994, engineering design and
related fieldwork was begun in order to meet the specifications of the revised
RDWP.

11
<PAGE>

During fiscal 1995, $430,000 was incurred for work related to the engineering
design. These costs were capitalized when incurred because the remedy would
prevent further environmental contamination with respect to the contaminated
ground water being pumped from the extraction wells and improve the property
compared with its condition when acquired by the Company. Due to concerns about
the correctness of the remedy provided for in the ROD, additional field work was
performed and in June 1995, an RDWP Addendum was prepared and submitted to the
EPA. The Company received comments from the EPA regarding this Addendum, and the
Company's environmental consultants submitted a response shortly thereafter.

On August 24, 1995, the Company and its legal and environmental consultants met
with officials of the EPA and agreed on additional fieldwork deemed necessary by
the EPA to support the Company's position regarding the RDWP Addendum. At this
meeting, officials of the EPA agreed the remedy needed to be modified and that
certain requirements under the existing ROD needed to be eliminated or reduced
in scope. Since this meeting, additional fieldwork provided for in the RDWP
Addendum has been conducted at the site and resulted in the formulation of a
revised remedy. On December 19, 1995, the Company, and its legal and
environmental consultants presented to the EPA the RDWP Addendum and the
recommended changes to the ROD in the form of a revised remedy. The revised
remedy was favorably received by the EPA and will be reviewed. The revised
remedy eliminates certain requirements of the existing ROD and significantly
reduces the time period for remediation. Initial estimates of the revised remedy
indicate capital costs of approximately $800,000 to $900,000, and ongoing
maintenance costs of approximately $200,000 to $250,000 in the aggregate. The
capital costs would be incurred over a one to two year period after the ROD is
amended with the ongoing maintenance costs being incurred over a five year
period after capital cost completion. There is no guaranty that the EPA will
agree totally with the proposed revised remedy. It is anticipated that the RDWP
Addendum can be finalized by February 1996, and a revised ROD issued during the
Company's third quarter and design of the capital portion of the revised remedy
begun thereafter.

By approval of the Company's Board of Directors in December 1994, in a
transaction effective January 1, 1995, the Company sold the operations of Flo
Control, Inc. (Flo Control), headquartered in Burbank, California. The purchaser
of these operations was Mr. Russell J. Sarno, President of Flo Control and a
board member of the Company. Mr. Sarno purchased virtually all of the assets of
Flo Control for $3,100,000 in cash and assumed $800,000 of Flo Control's
liabilities. As a condition of the sale, Mr. Sarno agreed to purchase Flo
Control's 95% ownership interest in the Florida Realty Joint Venture for
$150,000 in cash and assume the non-recourse mortgage approximating $2.3
million. In connection with these transactions, Flo Control's secondary
containment product line was sold to Mr. Pat Hopkins, an unrelated third party,
for a $500,000 note. The note is secured by the assets sold and the personal
guaranty of an unrelated third party individual. As a result of the above
transactions, the Company recognized a loss on disposal of $2,314,000, net of
income tax benefit, during its current fiscal year. The sale of Flo Control was
accounted for as a discontinued operation. The cash proceeds from the sale were
used to reduce the Company's outstanding debt with its lender. In addition, the
sale of Flo Control's 95% interest in the Florida Realty Joint Venture
eliminated the ongoing monthly expense of the Flo Control lease.

The Company recently established Buffton Realty Ventures, a commercial real
estate operation, to engage in acquiring properties offering unique
opportunities for profit. During August 1995, the Company acquired 100 Main
Street, a commercial office building located in Fort Worth, Texas. The property
is 100% occupied with two tenants under lease. Lease rentals are $437,000
annually. The purchase price for the property was approximately $1,653,000 and
was funded with cash held by the Company. No pro forma financial information is
presented due to immateriality.

The Company believes that its current borrowing availability, combined with cash
flow from operations, is adequate to fund the Company's current operating needs
and its projected growth over the next twelve months. The Company has a
$2,000,000 revolving line of credit with its lender which expires March 3, 1996,
all of which is available for borrowing at September 30, 1995. Upon maturity the
Company anticipates renewing this line of credit.

The Company's operating activities used cash of $171,000, primarily from net
loss of $1,209,000 and increases in accounts receivable and inventory of
$1,146,000 and $958,000, respectively, offset by the $3,068,000 loss on the sale
of Flo Control as discussed previously. The increases in accounts receivable and
inventory are primarily

12
<PAGE>

attributable to the Company's power surge suppressor manufacturing operations
which experienced a 10% increase in revenues during 1995. Current inventory
levels will be sufficient to meet customers' demands.

The Company invested $1,210,000 in machinery, equipment, furniture, fixtures,
and enhancements to existing property during 1995, exclusive of the $1,653,000
paid for 100 Main Street.

ACCOUNTING CHANGES

IMPAIRMENT OF ASSETS

In March 1995, the Financial Accounting Standards Board issued FAS 121 on
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of." This statement requires companies to investigate potential
impairments of long-lived assets, certain identifiable intangibles, and
associated goodwill on an exception basis, when there is evidence that events or
changes in circumstances have made recovery of an asset's carrying value
unlikely. Upon adoption, the Company will evaluate the carrying amount of its
long-lived assets by estimating future cash flows expected to result from the
use of such assets and their eventual disposition. If future cash flows
(undiscounted and without interest charges) are less than the carrying amount of
the assets, an impairment loss will be recorded. The impairment loss is to be
measured as the amount by which the carrying amount of the asset exceeds the
fair value of the asset. The Company is required to adopt this statement by
October 1, 1996; however, such adoption is not expected to have a material
impact on the Company's results of operations or financial condition.

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- -----------------------------------------------------

The financial statements and supplementary data are included under item 14(a)(1)
and (2) of this report.

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

No changes in accountants or disagreements with accountants on accounting and/or
financial disclosure have arisen.

13
<PAGE>

PART III
--------

ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------------------------------

The information required by this item with respect to Directors of the Company
appears in the "Election of Directors" and "Executive Officers of the Company"
sections of the definitive proxy statement of the Company relating to the
Company's 1996 Annual Meeting of Stockholders to be filed with the Commission
pursuant to Regulation 14A.

ITEM 11 - EXECUTIVE COMPENSATION
- --------------------------------

The information required by this item appears in the "Remuneration of Directors
and Officers" section of the definitive proxy statement of the Company relating
to the Company's 1996 Annual Meeting of Stockholders to be filed with the
Commission pursuant to Regulation 14A.

ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -------------------------------------------------------------------------

The information required by this item appears in the "Security Ownership" and
"Election of Directors" sections of the definitive proxy statement of the
Company relating to the Company's 1996 Annual Meeting of Stockholders to be
filed with the Commission pursuant to Regulation 14A.

ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------

In accordance with Rule G(3) of the General Instructions, the information
required by this item will be included under the caption, "Transactions with
Management and Others" in the definitive proxy statement of the Company relating
to the Company's 1996 Annual Meeting of Stockholders to be filed with the
Commission pursuant to Regulation 14A.

14
<PAGE>

PART IV
-------

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

(a) The following documents are filed as a part of this report:

1. Financial Statements - The financial statements listed in the
--------------------
"Index to Consolidated Financial Statements and Financial
Statement Schedule" described at F-1.

2. Financial Statement Schedule - The financial statement schedule
----------------------------
listed in the "Index to Consolidated Financial Statements and
Financial Statement Schedule" described at F-1.

3. Exhibits - Refer to (c) below.
--------

(b) Reports on Form 8-K.
--------------------

None

3.1 Certificate of Incorporation (Exhibit 3.1 to Form S-1
Registration Statement No. 2-71057 and incorporated herein by
reference).

3.2 By-laws (Exhibit 3.2 to Form S-1 Registration Statement No. 2-
71057 and incorporated herein by reference).

3.3 Certificate of Amendment to the Certificate of Incorporation
Creating Classified Board of Directors, eliminating a
Stockholder's right to call a special meeting, and adopting a
fair price supermajority provision dated February 21, 1989
(Exhibit 4.4 to Form 10-Q for the quarter ended March 31, 1989
and incorporated herein by reference).

3.4 Restated by-laws of Buffton Corporation dated February 21, 1989
(Exhibit 4.5 to Form 10-Q for the quarter ended March 31, 1989
and incorporated herein by reference).

4 Rights Agreement (Exhibit 1 to Form 8-K dated June 23, 1988 and
incorporated herein by reference).

10 Agreement for Sale of Assets from Flo Control, Inc. dated as of
January 20, 1995, by and among Buffton Corporation, a Delaware
corporation, Flo Control, Inc., a Delaware corporation
("Seller") and F.C. Acquisition, Inc., a California corporation
("Buyer") incorporated herein by reference to Form 8-K dated
January 20, 1995.

10.1 Agreement for sale of Florida Realty Joint Venture interests
from Flo Control, Inc., dated January 20, 1995 by and among
Buffton Corporation, a Delaware corporation, Flo Control, Inc. a
Delaware corporation, ("Seller") and F.L.C. Property
Acquisition, Inc., a California corporation ("Buyer")
incorporated herein by reference to Form 8-K dated January 20,
1995.

15
<PAGE>

10.2 Agreement for Sale of Secondary Containment Assets from Flo
Control, Inc., dated January 20, 1995, by and among Buffton
Corporation, a Delaware corporation, Flo Control, Inc., a
Delaware corporation ("Seller") and Patrick Hopkins and Flo-Safe
Systems, Inc. a Wisconsin corporation ("Buyer") incorporated
herein by reference to Form 8-K dated January 20, 1995.

10.3 Second Amendment to Accounts Financing Agreement dated January
20, 1995 by and among Congress Financial Corporation, Current
Technology, Inc., Electro-Mech, Inc., and Flo Control, Inc.
incorporated herein by reference to Form 8-K dated January 20,
1995.

10.4 Second Amended and Restated Revolving Credit Note incorporated
herein by reference to Form 8-K dated January 20, 1995.

10.5 Rights Amendment Agreement dated November 15, 1995 incorporated
herein by reference to Form 8-K dated November 15, 1995.

21 Subsidiaries of the Company

23 Consent of Independent Accountants

27 Financial Data Schedule

16
<PAGE>

SIGNATURES

Pursuant to the requirements or Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

BUFFTON CORPORATION Date
---------------------

By: /s/ Robert H. McLean December 22, 1995
---------------------------------- ---------------------
Robert H. McLean, President and
Chief Executive Officer

Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the Company
and in the capacity and on the dates indicated.

/s/ Robert H. McLean December 22, 1995
---------------------------------- ---------------------
Robert H. McLean, President and Chief
Executive Officer; Chairman of the
Board of Directors (Principal
Executive Officer)

/s/ Robert Korman December 22, 1995
---------------------------------- ---------------------
Robert Korman, Vice President and
Chief Financial Officer

/s/ Hampton Hodges December 22, 1995
---------------------------------- ---------------------
Hampton Hodges, Director

/s/ John M. Edgar December 22, 1995
---------------------------------- ---------------------
John M. Edgar, Director

/s/ H. T. Hunnewell December 22, 1995
---------------------------------- ---------------------
H. T. Hunnewell, Director

/s/ Russell J. Sarno December 22, 1995
---------------------------------- ---------------------
Russell J. Sarno, Director

/s/ Bruno D'Agostino December 22, 1995
---------------------------------- ---------------------
Bruno D'Agostino, Director

/s/ Walter D. Rogers, Jr. December 22, 1995
---------------------------------- ---------------------
Walter D. Rogers, Director

17
<PAGE>

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

AND FINANCIAL STATEMENT SCHEDULE

<TABLE>
<CAPTION>
CONSOLIDATED FINANCIAL STATEMENTS: PAGE
--------------------------------- ----

<S> <C>
Report of Independent Accountants F-2

Consolidated Statements of Operations F-3

Consolidated Balance Sheets F-4

Consolidated Statements of Cash Flow F-5

Consolidated Statements of Changes in Stockholders' Equity F-6

Notes to Consolidated Financial Statements F-7

FINANCIAL STATEMENT SCHEDULE:
----------------------------
<S> <C>
Schedule IX - Valuation and Qualifying Accounts F-19
</TABLE>

Schedules other than the ones listed above have been omitted since they are
either not required, not applicable, or the required information is shown
in the financial statements or related notes.

F-1
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Stockholders and Board of Directors of Buffton Corporation

In our opinion, the consolidated financial statements listed in the index
appearing on page F-1 present fairly, in all material respects, the financial
position of Buffton Corporation and its subsidiaries at September 30, 1995 and
1994, and the results of their operations and their cash flows for each of the
three years in the period ended September 30, 1995, 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 audits. We conducted our
audits 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
audits provide a reasonable basis for the opinion expressed above.

/s/ Price Waterhouse LLP

Fort Worth, Texas
November 14, 1995

F-2
<PAGE>

BUFFTON CORPORATION
-------------------

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
For the Years Ended September 30,
-------------------------------------
1995 1994 1993
-------- -------- --------
(In thousands, except per share amounts)

<S> <C> <C> <C>
Net revenues............................................ $19,187 $30,432 $35,879
Net gain on sale of certain operating assets............ - 1,050 -
-------- -------- --------
19,187 31,482 35,879
-------- -------- --------

Costs and expenses:
Cost of goods sold (exclusive of depreciation)......... 5,890 17,080 25,103
Selling, general and administrative.................... 10,939 10,649 8,450
Depreciation and amortization.......................... 961 1,202 1,343
Interest............................................... 124 316 460
-------- -------- --------

Total costs and expenses................................ 17,914 29,247 35,356
-------- -------- --------

Income from continuing operations before income taxes... 1,273 2,235 523
Income tax provision (benefit).......................... (31) 233 125
-------- -------- --------
Income from continuing operations....................... 1,304 2,002 398
-------- -------- --------

Discontinued operation:
Loss from operations, net of income tax benefits of
$107,000, $49,000 and $70,000, respectively........... (199) (94) (134)
Loss on disposal, net of income tax benefit $754,000... (2,314) - -
-------- -------- --------

Loss from discontinued operation....................... (2,513) (94) (134)
-------- -------- --------

Net income (loss)....................................... $(1,209) $ 1,908 $ 264
======== ======== ========

Income (loss) per average common share:
Continuing operations.................................. $ .24 $ .39 $ .09
Discontinued operation................................. (.46) (.02) (.03)
-------- -------- --------
Net income (loss)...................................... $ (.22) $ .37 $ .06
======== ======== ========

Weighted average common shares outstanding.............. 5,465 5,120 4,570
======== ======== ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-3
<PAGE>

BUFFTON CORPORATION
-------------------

CONSOLIDATED BALANCE SHEETS

ASSETS
<TABLE>
<CAPTION>
September 30,
--------------------------
1995 1994
-------- --------
(In thousands)
<S> <C> <C>
Current assets:
Cash and cash equivalents............................................ $ 7 $ 3,196
Accounts receivable, less allowance for doubtful accounts of
$75,000 and $150,000, respectively.................................. 2,893 3,541
Inventories.......................................................... 2,031 4,044
Prepaid and other current assets..................................... 498 344
-------- --------

Total current assets................................................ 5,429 11,125

Property, plant and equipment, net.................................... 5,467 8,082

Patents, net of accumulated amortization of $1,358,000
and $1,206,000, respectively........................................ 1,617 1,818
Goodwill, net of amortization of $666,000 and $302,000, respectively.. 3,503 3,811
Deferred income taxes................................................. 590 -

Long-term note receivable............................................. 350 -
Other assets, net..................................................... 268 234
-------- --------
$ 17,224 $ 25,070
======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt.................................... $ - $ 518
Accounts payable..................................................... 1,001 1,610
Accrued liabilities:
Payroll and commissions............................................. 980 961
Bonuses............................................................. 158 100
Other............................................................... 230 533
Income taxes......................................................... 236 254
-------- --------
Total current liabilities........................................... 2,605 3,976

Long-term debt........................................................ - 5,507
Deferred income taxes................................................. - 330

Stockholders' equity:
Preferred stock $.01 par value; 5,000,000 shares authorized;
no shares issued and outstanding.................................... - -
Common stock $.05 par value; 30,000,000 shares authorized;
outstanding shares 5,685,378 and 5,278,022, respectively............ 284 264
Additional paid-in capital........................................... 12,571 12,020
Retained earnings.................................................... 1,764 2,973
-------- --------
14,619 15,257
Commitments and contingencies (Note 11)...............................
-------- --------
$ 17,224 $ 25,070
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.

F-4
<PAGE>

BUFFTON CORPORATION
-------------------

CONSOLIDATED STATEMENTS OF CASH FLOW

For the Years Ended September 30,
------------------------------------
1995 1994 1993
------- -------- --------
(In thousands)

<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)............................................... $(1,209) $1,908 $ 264
Adjustments to reconcile net income (loss) to net cash
provided by (used for) operating activities:
Depreciation................................................... 594 1,424 1,622
Amortization................................................... 564 662 570
Deferred income taxes.......................................... (920) 102 44
Bad debt provision............................................. (84) (3) 12
Net (gain) loss on sale of assets.............................. 3,068 (1,050) -
Issuance of common stock in payment for services............... 571 - -
Change in components of current assets and liabilities
(exclusive of acquisitions and dispositions):
Accounts and note receivable.................................. (1,137) (269) 344
Inventories................................................... (958) (387) (1,306)
Prepaid and other............................................. (536) 80 121
Accounts payable.............................................. 191 (438) 1,233
Accrued liabilities........................................... (297) (2,238) (191)
Income taxes payable.......................................... (18) 152 33
------- ------- -------
Net cash provided by (used for) operating activities.............. (171) (57) 2,746
------- -------- -------

Cash flows from investing activities:
Additions to property, plant and equipment..................... (1,337) (1,257) (1,205)
Proceeds from sale of operating assets......................... 3,750 9,461 10
Acquisitions................................................... (1,653) (159) -
Advances to and investments in Hospitality Group entities...... - - (1,194)
Additions to other assets...................................... (55) - -
------ -------- --------

Net cash provided by (used for) investing activities.............. 705 8,045 (2,389)
------ -------- --------

Cash flows from financing activities:
Additions to debt.............................................. - 600 360
Repayments of debt............................................. (3,723) (5,842) (1,203)
Treasury stock purchases....................................... - - (16)
------ -------- --------

Net cash used for financing activities............................ (3,723) (5,242) (859)
------- -------- --------

Net increase (decrease) in cash................................... (3,189) 2,746 (502)

Cash at beginning of year......................................... 3,196 450 952
------ -------- --------

Cash at end of year............................................... $ 7 $ 3,196 $ 450
====== ======== ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-5
<PAGE>

BUFFTON CORPORATION
-------------------

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

For the Years Ended September 30, 1995, 1994 and 1993

<TABLE>
<CAPTION>
Additional
Common Paid-in Retained
Stock Capital Earnings Total
-------- ---------- -------- ------
(In thousands)
<S> <C> <C> <C> <C>
Balance at September 30, 1992........... $ 227 $11,100 $ 801 $12,128

Issuance of 149,970 shares of $.05 par
value common stock for payment of
obligations........................... 8 141 - 149

Purchases and cancellation of 15,000
shares of $.05 par value common stock.. (1) (15) - (16)

Net income.............................. - - 264 264

------ ------- ------- -------
Balance at September 30, 1993........... 234 11,226 1,065 12,525

Issuance of 600,000 shares of $.05 par
value common stock for acquisition..... 30 794 - 824

Net income.............................. - - 1,908 1,908
------ ------- ------- -------

Balance at September 30, 1994........... 264 12,020 2,973 15,257

Issuance of 407,356 shares of $.05 par
value common stock for payment of
services............................... 20 551 - 571

Net loss................................ - - (1,209) (1,209)
------ ------- ------- -------

Balance at September 30, 1995........... $ 284 $12,571 $ 1,764 $14,619
====== ======= ======= =======
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-6
<PAGE>

BUFFTON CORPORATION
-------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995, 1994 AND 1993

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CONSOLIDATION

These consolidated financial statements include all of the assets, liabilities,
revenues, and costs and expenses of Buffton Corporation (the Company) and its
wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated.

INVENTORIES

Inventories are stated at the lower of cost (first in, first out) or market.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are recorded at cost and depreciated by the
straight-line method over estimated useful lives of three to thirty years.

Maintenance and repairs are charged to income as incurred. The Company
capitalizes renewals and betterments which significantly enhance the value or
extend the useful life of an asset. Upon the sale or retirement of depreciable
assets, the cost and related accumulated depreciation are removed from the
accounts, and the resulting gain or loss is credited to or charged against
income.

ADVERTISING COST

The Company's advertising expenditures of continuing operations are expensed in
the period the advertising first occurs. Advertising expense for fiscal years
ended September 30, 1995, 1994 and 1993 approximated $215,000, $249,000 and
$162,000, respectively.

INTANGIBLES

Patents are carried at the Company's cost as determined at acquisition and are
being amortized on a straight-line basis over their remaining legal lives.

Goodwill represents the excess of cost over net assets acquired and is being
amortized on a straight line basis over fifteen years. Annually, the Company
evaluates the carrying value of goodwill by reviewing estimated recoverability
from future operations of the associated assets to which it relates.
Recoverability is assessed based upon future cash flows (undiscounted and
without interest charges) to be generated by related assets. Impairments are
recognized to the extent that the carrying value of goodwill exceeds such
estimated future cash flows.

INCOME TAXES

The Company adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" (FAS 109), on a prospective basis effective
October 1, 1993. Prior to the adoption of FAS 109, the Company accounted for

F-7
<PAGE>

income taxes under FAS 96. Like FAS 96, FAS 109 requires recognition of
deferred tax assets and liabilities for expected future tax consequences of
temporary differences between the book and tax basis of assets and liabilities,
and other tax attributes. However, FAS 109 does allow the recognition of
deferred tax assets for deductible temporary differences and carryforwards. The
new standard also provides valuation allowances for the amount of tax assets not
expected to be realized. The adoption of FAS 109 had no material effect on the
consolidated financial statements.

IMPAIRMENT OF ASSETS

In March 1995, the Financial Accounting Standards Board issued FAS 121 on
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed of." This statement requires companies to investigate potential
impairments of long-lived assets, certain identifiable intangibles, and
associated goodwill on an exception basis, when there is evidence that events or
changes in circumstances have made recovery of an asset's carrying value
unlikely. Upon adoption, the Company will evaluate the carrying
amount of its long-lived assets by estimating future cash flows expected to
result from the use of such assets and their eventual disposition. If future
cash flows (undiscounted and without interest charges) are less than the
carrying amount of the assets, an impairment loss will be recorded. The
impairment loss is to be measured as the amount by which the carrying amount of
the asset exceeds the fair value of the asset. The Company is required to adopt
this statement by October 1, 1996; however, such adoption is not expected to
have a material impact on the Company's results of operations or financial
condition.

NET INCOME (LOSS) PER SHARE

Net income (loss) per share has been computed on the basis of the weighted
average number of common shares outstanding.

RECLASSIFICATIONS

Certain prior years' amounts have been reclassified to conform with the 1995
presentation.

CASH AND CASH EQUIVALENTS

For purposes of the Consolidated Statements of Cash Flow, cash and cash
equivalents consist of cash in banks and cash investments in immediately
available interest bearing accounts.

NOTE 2 - ACQUISITIONS AND DISPOSITIONS

Effective January 1, 1994, the Company entered into a purchase and sale
agreement with Entertainment Centers of America, Inc. (ECA) to acquire certain
entertainment facilities located in the New Orleans, Louisiana (Bourbon Street
Hospitality) of ECA in exchange for the Company's outstanding note receivable
from and equity interest in ECA approximating $2,641,000 as well as 600,000
shares of its common stock and $159,000 in cash. The market value of the 600,000
shares was $824,000 at the date of the acquisition. The agreement provided for
the transfer of 235,000 shares of the 600,000 shares of the Company's common
stock to be issued to the owners and certain creditors of ECA and its
subsidiaries. The agreement also stipulated that the proceeds received from the
sale of the Company's stock by one noteholder would equal a minimum of $265,000
or the Company would be required to deliver additional shares to make up such
deficiency between the sale proceeds and the stipulated minimum amount. No
deficiency occurred; therefore, the Company was not required to deliver
additional shares. The assets acquired consisted of cash, inventory, leasehold
interests and improvements, sound, light, video and bar equipment and certain
other assets, including prepaids. Liabilities assumed by a subsidiary of the
Company consisted of trade accounts payable, and other accrued liabilities in
ordinary course of business and debt outstanding at January 1, 1994. The total
purchase price was $4,192,000 including liabilities assumed of $568,000.

F-8
<PAGE>

American Food Classics, Inc. (AFC) from ECA at the greater of fair market
value, to be determined by an independent appraisal, or $300,000. The Company
exercised its option January 1, 1994 and exchanged its note receivable from and
advances to ECA for the stock of AFC. The note receivable and advances
approximated the fair market value of the AFC stock at the date of exchange. The
total purchase price was $832,000 including liabilities assumed of $112,000
consisting primarily of ordinary trade payables. AFC operates an American Bistro
restaurant, Lucile's, located in Fort Worth, Texas. After the January 1, 1994
transactions, the Company no longer held an interest in ECA.

The 1994 acquisitions were accounted for under purchase accounting and
the results of operations were consolidated beginning with the effective dates.
Excess of purchase price over fair value of net tangible assets acquired was
$4,113,000 at effective date of the acquisitions and is included in Goodwill in
the accompanying Consolidated Balance Sheet. Unaudited pro forma results from
continuing operations as if the acquisitions had occurred at the beginning of
each respective period, are as follows:

<TABLE>
<CAPTION>
Years Ended
September 30,
------------------------------------
1994 1993
-------- --------
(In thousands, except per share amounts)
<S> <C> <C>
Revenues $ 42,882 $ 50,478
Net Income (loss) from continuing operations 1,889 (114)
Income (loss) per average common share .37 ( .02)
</TABLE>

Bourbon Street Hospitality, originally consisting of 701 Bourbon Street, 735
Bourbon Street and 441 Bourbon Street, and AFC are collectively referred to as
BFX Hospitality Group, Inc. (Hospitality Group). During 1994, the Company closed
the 735 Bourbon Street facility. There was no change to the carrying value
of assets as the assets were transferred for use in the other Bourbon Street
Hospitality locations.

Effective February 28, 1994, Contex Electronics, Inc., a wholly owned subsidiary
of the Company, sold all of the operating assets and liabilities of MoldCon,
Inc. (MoldCon) and Tri-Tec Engineering Corporation (Tri-Tec), two of its wholly
owned subsidiaries. The sales price for the assets was $9,277,000 in cash plus
the assumption of certain liabilities by the buyer. The net proceeds from the
disposition were used to reduce bank debt approximately $5,000,000 and for
short-term investments. The assets sold consisted primarily of trade accounts
receivable, inventory, machinery, equipment and furniture and fixtures.
Liabilities assumed by the Buyer consisted of trade accounts payable and other
accrued liabilities in the ordinary course of business. The assets and
liabilities related to the manufacture of molded internal and external cable
assemblies and internal wiring harnesses.

After deducting applicable selling expenses, the Company reported a pretax gain
of $1,050,000 on the sale. The results of operations, relative to the businesses
sold, for the five months are included in the Company's statements of income for
1994. Revenue and operating profit of the businesses sold are as follows (in
thousands):

<TABLE>
<CAPTION>
Years Ended
September 30,
------------------------
1994 1993
-------- --------
(Five months)

<S> <C> <C>
Revenue $ 10,243 $ 21,775
Operating profit 146 876
</TABLE>

During June 1994, the Company shutdown its Contex cable assembly plant in
Vestal, New York and sold certain inventory, customer contracts and certain
machinery and equipment to The JPM Company. The remaining assets, primarily
trade accounts receivable, were liquidated.

F-9
<PAGE>

liabilities. As a condition of the sale, Mr. Sarno agreed to purchase Flo
Control's 95% ownership interest in the Florida Realty Joint Venture for
$150,000 in cash and assume the related non-recourse mortgage approximating $2.3
million. In connection with these transactions, Flo Control's secondary
containment product line was sold to Mr. Pat Hopkins, an unrelated third party,
for a $500,000 note. The note bears interest at 8% per annum. Payments are due
semiannually beginning June 30, 1995 and continuing through December 31, 1999 in
the amount of $50,000 plus earned interest. The note is secured by the assets
sold and the personal guaranty of an unrelated third party individual. As a
result of the above transactions, the Company recognized a loss on disposal of
$2,314,000, net of income tax benefit, during its current fiscal year. The sale
of Flo Control was accounted for as a discontinued operation. The cash proceeds
from the sale were used to reduce the company's outstanding debt with its
lender. Revenues for Flo Control were as follows in thousands):

Through its commercial real estate operation, Buffton Realty Ventures, the
Company acquired an office building located in Fort Worth, Texas during August
1995. The purchase price for the property was approximately $1,653,000 of which
$1,253,000 and $400,000 is included in the "Building and Improvements" and
"Land" components, respectively, of Property, Plant and Equipment in Note 4.
Rental income generated from this property for fiscal 1995 approximated $55,200.

At September 30, 1995, future minimum rentals for non-cancellable leases
associated with this building were as follows (in thousands):

<TABLE>
<S> <C>
1996............................. $ 437
1997............................. 437
1998............................. 437
1999............................. 437
2000 and beyond.................. 364
------
$2,112
======
</TABLE>

NOTE 3 - INVENTORIES

The components of inventories are as follows:

<TABLE>
<CAPTION>
September 30,
--------------------
1995 1994
------ ------
(In thousands)

<S> <C> <C>
Raw materials......................... $1,450 $1,741
Work in process....................... 323 282
Finished goods........................ 258 2,021
------ ------

Total inventories................ $2,031 $4,044
====== ======
</TABLE>

F-10
<PAGE>

NOTE 4 - PROPERTY, PLANT AND EQUIPMENT

Major classes of property, plant and equipment consist of the following:

<TABLE>
<CAPTION>
September 30,
--------------------
1995 1994
------ ------
(In thousands)
<S> <C> <C>
Building and improvements................. $5,377 $5,604
Machinery and equipment................... 394 6,811
Furniture and fixtures.................... 1,233 1,188
Construction in progress.................. - 443
------ ------

Less accumulated depreciation 7,004 14,046
and amortization.........................
2,062 6,457
------ ------
Land...................................... 4,942 7,589
525 493
------ ------
Net property, plant and equipment....
$5,467 $8,082
====== ======
</TABLE>
NOTE 5 - LONG-TERM DEBT

Long-term debt at September 30, 1994 consists of the following (in thousands):

<TABLE>
<S> <C>
Revolving loan agreement $2,883
Term loan 683
Real estate mortgage 2,302
Other 157
------
6,025
Less current portion long-term debt 518
------
$5,507
======
</TABLE>

At September 30, 1994, the Company's total commitment to its lender was
$5,000,000, consisting of a $4,000,000 revolving line of credit and a $1,000,000
term loan of which $3,566,000 was outstanding. Both loans provided for interest
to be paid monthly at a floating rate of 2 1/2% over the established prime rate
(10- 1/4% at September 30, 1994). Access to the revolving line of credit was
based upon various formulas relating to accounts receivable and inventories.
The principal amount of the term loan was payable in 24 equal installments which
commenced April 1, 1994 in the amount of $27,777 per month, with the remaining
balance of $350,000 due and payable on March 1, 1996. The credit commitment was
secured by virtually all of the remaining assets of the Company.

Approximately $2.5 million of the proceeds from the sale of Flo Control were
used to reduce the Company's debt to its lender. The financing agreement with
its lender was amended to provide for a thirteen month commitment commencing
February 1, 1995. The total commitment consists of a $2,000,000 revolving line
of credit, all of which was available for borrowing at September 30, 1995. The
loan provides for interest to be paid monthly at a floating rate of 2 1/2% over
the established prime rate. At September 30, 1995, there was no debt owed to the
Company's lender.

The real estate mortgage is associated with the Florida Realty Joint Venture 95%
owned by Flo Control, a wholly owned subsidiary of the Company. See Note 9. The
promissory note dated February 27, 1987, accrued interest at 10.2% per annum and
was payable in monthly installments of $21,447. The promissory note was secured
by a mortgage and security agreement. The Company did not guarantee payment of
the note. The Florida Realty Joint Venture was sold effective January 1, 1995
and the purchaser assumed the related mortgage. See Note 2.

Other long-term debt in 1994 consisted of $107,000, primarily equipment notes,
associated with Hospitality Group and $50,000 payable to the former owner of
Current Technology for a non-compete agreement.

F-11
<PAGE>

NOTE 6 - INCOME TAXES

The provision (benefit) for income taxes includes the following:

<TABLE>
<CAPTION>
Years Ended September 30,
---------------------------------------------
1995 1994 1993
------- ------- -------
(In thousands)
<S> <C> <C> <C>
Current:
Federal........................................ $ (72) $ - $ 1
State.......................................... 100 82 10
Deferred federal....................................... (412) 641 44
Decrease in valuation allowance........................ (508) (539) -
-------- ------- ---------
$ (892) $ 184 $ 55
======== ======= =========

The income tax provision (benefit) is categorized as follows:
Years Ended September 30,
--------------------------------------------
1995 1994 1993
------- ------- ------
(In thousands)

Continuing operations.......................... $ (31) $ 233 $ 125
Discontinued operation......................... (861) (49) (70)
------- ------- ------
$ (892) $ 184 $ 55
======= ======= ======
</TABLE>

Deferred tax assets and liabilities are recognized for temporary differences
between the financial reporting basis and the tax basis of the Company's assets
and liabilities. Deferred tax liabilities and assets are comprised of the
following (in thousands):

<TABLE>
<CAPTION>
September 30, September 30,
1995 1994
------------- -------------
<S> <C> <C>
Gross deferred tax liabilities
------------------------------
Depreciation $ 357 $ 656
Other - 189
------- ------
357 845
------- ------
Gross deferred tax assets
-------------------------
Capital loss carryforwards 356 356
Alternative minimum tax credit
carryforwards 424 314
Preacquisition tax operating loss
carryforwards -- 566
Consolidated operating loss carryforward 413 -
Real estate impairment reserves - 102
Inventory costs 10 7
Bad debt reserves 26 16
Debt financing fees - 7
Other 74 11
------- ------
1,303 1,379
Valuation allowance (356) (864)
------- ------
947 515
------- ------
Deferred income tax (benefit) liability $ (590) $ 330
======= ======
</TABLE>

As a result of the disposition of Flo Control in 1995 (see Note 2) with its
historical losses and the improved profitability of the Company's continuing
operations, the Company reduced its valuation allowance by approximately
$314,000 in 1995. The Company believes it is now more likely than not that the
tax benefits associated with the alternative minimum tax credit will now be
realized. The Company maintained its valuation allowance associated with the
capital loss carryforward since the carryforward period is limited and its
potential future use is restricted.

F - 12
<PAGE>

During the year ended September 30, 1994, the Company's valuation allowance was
reduced $539,000 primarily as a result of utilization of capital loss carryover
to offset capital gain generated by the sale of MoldCon and Tri-Tec.

The Company has a consolidated tax operating loss carryforward of approximately
$1.2 million which, if not utilized, will expire in fiscal year 2010. The
Company has alternative minimum tax credits of approximately $424,000 which may
be offset against future income taxes payable. Additionally, the Company has a
capital loss carryforward of $1,047,000 which expires in 1997.

The Company's consolidated income tax expense (benefit) from continuing
operations differs from that amount calculated by applying the federal
statutory rate for the following reasons (in thousands):

<TABLE>
<CAPTION>
Years Ended September 30,
------------------------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Tax provision (benefit) at federal statutory rate......... $ 446 $ 782 $ 183
State income taxes, net of
federal income tax benefit............................... 66 54 7
Adjustments to valuation allowance for
deferred tax assets...................................... (314) (539) -
Unrecognized (utilization of) capital loss
related to sale of B & D................................. - - (105)
Utilization of a subsidiary's net
operating loss carryforward.............................. - - 34
Reversal of income tax accrual............................ (255) - -
Other, net................................................ 26 (64) 6
------ ----- ------
$ (31) $ 233 $ 125
====== ===== ======
</TABLE>

NOTE 7 - STOCKHOLDERS' EQUITY

STOCK OPTIONS

The Company currently maintains an Employee Incentive Stock Option Plan
(Employee Plan), which allows certain employees and officers of the Company,
other than officers serving on the Board of Directors to acquire or increase
their proprietary interest in the success of the Company and encourage such
individuals to remain in the employ of the Company. A total of 100,000 shares of
the Company's common stock can be issued under the Employee Plan.

Under the Employee Plan or stock option agreements issued thereunder, stock
options issued are subject to certain terms and conditions. Options granted must
be exercised within ten years of the date of such grant or within five years, if
an option is granted to an employee who owns in excess of 10% of all outstanding
common stock of the Company. Generally options are not exercisable until the
employee has been continuously employed by the Company for one year. Options
terminate and become unexercisable upon the termination of the employee, unless
such termination is without cause or is due to death or total and permanent
disability. On August 2, 1995, 80,000 options were granted to certain employees
of the Company at an exercise price of $1.50 per share which was the fair market
value at date of grant. At September 30, 1995 and 1994, there were 20,000 and
100,000 shares, respectively, available for grant.

The Company also grants options to purchase shares of its common stock to
selected employees under nonqualified stock option agreements.

In September 1989, the Board of Directors adopted the Buffton Corporation Equity
Participation Plan (the "Plan") to afford key employees the opportunity to
purchase shares of the Company's common stock as a reward for past performance
and an incentive for future performance. Under the Plan, 500,000 shares of the
Company's stock may be issued. Options granted must be exercised within five
years of the date of such grant. At February 3, 1995, 500,000

F - 13
<PAGE>

options were granted to certain officers of the Company at an exercise price of
$1.50 per share which was the fair market value at date of grant. At September
30, 1995 there were no shares available for grant. At September 30, 1994 there
were 500,000 shares available for grant.

A summary of outstanding options are as follows:

<TABLE>
<CAPTION>
Number of Shares
----------------------------------------------------------------------
Incentive Other Non- Equity
Stock Qualified Partici-
Options Options pation Plan Total
----------- ----------- ------------ ---------
(In thousands)
<S> <C> <C> <C> <C>
Options outstanding
September 30, 1993............ 30 5 450 485
Cancelled..................... (30) (5) (450) (485)
----- ------ ---- -----
Options outstanding
September 30, 1994............ - - - -
Issued........................ 80 - 500 580
----- ------ ---- -----
Options outstanding
September 30, 1995............ 80 - 500 580
===== ====== ==== =====
Options currently exercisable
September 30, 1995............ - - 450 450
===== ====== ==== =====

Price range at
September 30, 1995............ $1.50 $ - $1.50
</TABLE>

PREFERRED RIGHTS

On June 23, 1988, the Company declared a dividend of one Preferred Share
Purchase Right (the Right) on each outstanding share of common stock. Under
certain conditions, each Right may be exercised to purchase one one-hundredth
share of Series A Junior Participating Preferred Stock at a purchase price of
$28.50, subject to adjustment. The Rights may only be exercised 10 days after
public announcement that a third party has acquired or obtained the right to
acquire 20% or more of the Company's common stock or has commenced a tender
offer to acquire more than 30% of the Company's common stock. On November 15,
1995, the Company amended its Rights Agreement to provide for exercise of the
Rights 10 days after public announcement that a third party has acquired or
obtained the right to acquire 15% or more of the Company's common stock or has
commenced a tender offer to acquire more than 15% of the Company's common stock.
The Rights, which do not have voting rights, expire on July 5, 1998 and may be
redeemed by the Company at a price of $.01 per Right at any time prior to their
becoming exercisable.

Once the Rights become exercisable should the Company be the surviving company
after certain transactions, each holder of a Right will thereafter have the
right, upon exercise, to receive common stock of the Company having a value of
two times the exercise price of the Right. However, Rights acquired by a person
or group acquiring 15%, as amended, or more of the Company's common stock prior
to such transaction will be null and void. Similarly, once the Rights become
exercisable, should the Company not be the surviving company after certain
transactions, each holder of a Right will thereafter have the right, upon
exercise, to receive common stock of the acquiring Company having a value equal
to two times the exercise price of the Right.

F - 14
<PAGE>

NOTE 8 - EMPLOYEE BENEFIT PLANS

The Company has established a Defined Contribution Plan ("the Plan") written in
conformity with Section 401(k) of the Internal Revenue Code covering all
employees subject to certain eligibility requirements. Under the Plan the
Company contributes to a trust based upon a specified percentage of employees
voluntary salary redirection elections. The amounts charged against income for
the years ended September 30, 1995, 1994 and 1993 were $65,000, $60,000, and
$30,000, respectively.

NOTE 9 - RELATED PARTY TRANSACTIONS

By approval of the Company's Board of Directors in December 1994, in a
transaction effective January 1, 1995, the Company sold the operations of Flo
Control, headquartered in Burbank, California. The purchaser of these
operations was Mr. Russell J. Sarno, President of Flo Control and a board member
of the Company. Mr. Sarno purchased virtually all of the assets of Flo Control
for $3,100,000 in cash and assumed $800,000 of Flo Control's liabilities. As a
condition of the sale, Mr. Sarno agreed to purchase Flo Control's 95% ownership
interest in the Florida Realty Joint Venture for $150,000 in cash and assume
the related non-recourse mortgage approximating $2.3 million.

NOTE 10 - BUSINESS SEGMENTS

The Company's operations are conducted primarily in the United States by two
principal business segments. Electronic Products involves the manufacture of
electronic filter surge suppressors and power distribution systems. Hospitality
Group involves the operation of food and beverage establishments and commercial
real estate. See Note 2 for information regarding the 1995 sale of Flo Control
representing the Plastic Products segment and the 1994 sale of two cable
assembly plants and the shutdown of one cable assembly plant included in the
Electronic Products segment. The following table, adjusted to reflect the
discontinuance of the Company's Plastic Products segment, sets forth certain
information regarding the Company's operations in its two segments (in
thousands):

<TABLE>
<CAPTION>
Non Operating
Gains,
Unallocated
Electronic Hospitality Corporate
Year Products Group Expense Total
---- ---------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C>
Net Sales (b)...................... 1995 $ 12,056 $ 6,623 $ 331 $ 19,010
1994 25,056 4,979 346 30,381
1993 35,548 - 303 35,851

Depreciation and amortization...... 1995 293 550 118 961
1994 618 443 141 1,202
1993 1,214 - 129 1,343

Operating profit (loss)............ 1995 2,414 244 (1,385) 1,273
1994 2,179 (227) 283(c) 2,235
1993 2,133 - (1,610) 523

Capital expenditures............... 1995 274 1,873 679 2,826
1994 433 30 82 545
1993 471 - 94 565

Identifiable assets (a)............ 1995 6,731 6,362 4,131 17,224
1994 1994 7,707 4,949 2,528 15,184
1993 15,351 - 5,627 20,978
</TABLE>

F - 15
<PAGE>

(a) Identifiable assets for 1994 and 1993 excludes $9,886,000 and $10,190,000,
respectively,relating to Flo Control, representing the Plastic Products
segment, that was sold during 1995.
(b) The Electronic Products segment had one customer that accounted for 16.3% of
consolidated net sales in 1993.
(c) In 1994, operating loss was reduced by $1,050,000 representing gain on sale
of assets and $217,000 representing settlement of litigation.

Operating profit (loss), before income taxes, for each segment is the difference
between operating revenues and operating costs and expenses attributable to the
segment, and does not include nonoperating revenues and gains, general corporate
expenses (unallocated general and administrative), interest expense or income
taxes. Intersegment transactions have been eliminated in the preceding table.
The difference between net sales for all segments and net revenue reported in
the statements of operations is comprised of miscellaneous income recorded
during the years.

Corporate operating loss (income) includes the following:

<TABLE>
<CAPTION>
1995 1994 1993
------ -------- ------
(In thousands)
<S> <C> <C> <C>
Interest expense...................... $ 124 $ 316 $ 460
Other unallocated corporate expenses.. 1,261 451 1,150
Gain on sale of assets................ - (1,050) -
------ ------- ------
$1,385 $ (283) $1,610
====== ======= ======
</TABLE>

General Corporate assets are principally fixed assets.

NOTE 11 - COMMITMENTS AND CONTINGENCIES

The Company has various leases for real property and equipment. In addition to
rental payments, certain leases provide that the Company pay taxes, insurance
and other operating expenses applicable to the leased property. Rental expense
under operating leases for the years ended September 30, 1995, 1994 and 1993 was
$645,000, $1,197,000, and $1,214,000, respectively.

At September 30, 1995, future minimum payments for non-cancellable operating
leases for facilities and equipment with terms in excess of one year were as
follows (in thousands):

<TABLE>
<CAPTION>
<S> <C>
1996....................................... $ 660
1997....................................... 529
1998....................................... 356
1999....................................... 347
2000 and beyond............................ 1,303
------
$3,195
======
</TABLE>

Payments under operating leases for facilities are expected to be $641,000
during 1996.

F - 16
<PAGE>

NOTE 12 - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

<TABLE>
<CAPTION>
SUPPLEMENTAL SCHEDULE OF CASH PAYMENTS:
Years Ended September 30,
--------------------------------------
1995 1994 1993
------- -------- ---------
<S> <C> <C> <C>
Cash paid for:
Interest.......................... $ 249 $ 902 $1,076
Income taxes...................... 58 20 (253)
</TABLE>

F - 17
<PAGE>

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:

During the year ended September 30, 1993, the market value of stock issued in
lieu of cash pursuant to a non-competition agreement with the former owner of
Current Technology was $50,000.

During the year ended September 30, 1994, the Company acquired the operating
assets and certain liabilities of the New Orleans operations of ECA effective
January 1, 1994. In connection with the acquisition, liabilities were assumed
as follows (In thousands):

<TABLE>
<S> <C>
Estimated fair value of assets acquired (including
purchased goodwill) $4,192
Less:
Note receivable and equity interest exchanged (2,641)
Cash paid (159)
Market value of stock issued (824)
------

Liabilities assumed $ 568
======
</TABLE>

During the year ended September 30, 1994, the Company acquired all of the
outstanding capital stock of AFC effective January 1, 1994. In connection with
the acquisition, liabilities were assumed as follows (In thousands):

<TABLE>
<S> <C>
Estimated fair value of assets acquired (including
purchased goodwill) $ 832
Less:
Note receivable and advances exchanged (720)
-----

Liabilities assumed $ 112
=====
</TABLE>

Effective January 1, 1995, the Company disposed of the Florida Realty Joint
Venture in conjunction with the sale of Flo Control (see Note 2) and the
purchaser assumed the related $2.3 million mortgage.

During the year ended September 30, 1995, the Company issued 407,356 shares of
common stock to key employees and certain officers and directors as payment for
services and bonuses. The Company recognized $571,000 as compensation related to
the issuance of the shares which amount represented fair market value at date of
issuance.

F - 18
<PAGE>

SCHEDULE IX
-----------
<TABLE>
<CAPTION>
BUFFTON CORPORATION
-------------------

VALUATION AND QUALIFYING ACCOUNTS

Balance Charged to Charged to Balance
at beginning costs and ther at end
Description of period expenses accounts Deductions of period
- ------------------------------ ----------- ---------- ----------- ---------- ---------
(In thousands)
<S> <C> <C> <C> <C> <C>
Reserve for estimated losses
on accounts receivable - trade:

September 30, 1995 $ 150 $ 84 $ (159) /(a)/ $ - $ 75

September 30, 1994 /(a)/ 153 240 - (243) 150

September 30, 1993 /(a)/ 141 151 - (139) 153
</TABLE>

(a) Includes amounts associated with Flo Control (see Note 2).

F - 19
<PAGE>

BUFFTON CORPORATION
-------------------

1995 FORM 10-K

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBITS Page
-------- ----
<S> <C> <C>
3.1 Certificate of Incorporation (Exhibit 3.1 to Form S-1 Registration
Statement No. 2-71057 and incorporated herein by reference).

3.2 By-laws (Exhibit 3.2 to Form S-1 Registration Statement No. 2-71057
and incorporated herein by reference).

3.3 Certificate of Amendment to the Certificate of Incorporation
Creating Classified Board of Directors, eliminating a Stockholder's
right to call a special meeting, and adopting a fair price
supermajority provision dated February 21, 1989 (Exhibit 4.4 to
Form 10-Q for the quarter ended March 31, 1989 and incorporated
herein by reference).

3.4 Restated by-laws of Buffton Corporation dated February 21, 1989
(Exhibit 4.5 to Form 10-Q for the quarter ended March 31, 1989 and
incorporated herein by reference).

4 Rights Agreement (Exhibit 1 to Form 8-K dated June 23, 1988 and
incorporated herein by reference).

10 Agreement for Sale of Assets from Flo Control, Inc. dated as of
January 20, 1995, by and among Buffton Corporation, a Delaware
corporation, Flo Control, Inc., a Delaware corporation ("Seller")
and F.C. Acquisition, Inc., a California corporation ("Buyer")
incorporated herein by reference to Form 8-K dated January 20,
1995.

10.1 Agreement for sale of Florida Realty Joint Venture interests from
Flo Control, Inc., dated January 20, 1995 by and among Buffton
Corporation, a Delaware corporation, Flo Control, Inc. a Delaware
corporation, ("Seller") and F.L.C. Property Acquisition, Inc., a
California corporation ("Buyer") incorporated herein by reference
to Form 8-K dated January 20, 1995.

10.2 Agreement for Sale of Secondary Containment Assets from Flo
Control, Inc., dated January 20, 1995, by and among Buffton
Corporation, a Delaware corporation, Flo Control, Inc., a Delaware
corporation ("Seller") and Patrick Hopkins and Flo-Safe Systems,
Inc. a Wisconsin corporation ("Buyer") incorporated herein by
reference to Form 8-K dated January 20, 1995.

</TABLE>
<PAGE>

<TABLE>
<S> <C>
10.3 Second Amendment to Accounts Financing Agreement dated January 20,
1995 by and among Congress Financial Corporation, Current
Technology, Inc., Electro-Mech, Inc., and Flo Control, Inc.
incorporated herein by reference to Form 8-K dated January 20,
1995.

10.4 Second Amended and Restated Revolving Credit Note incorporated
herein by reference to Form 8-K dated January 20, 1995.

10.5 Rights Amendment Agreement dated November 15, 1995 incorporated
herein by reference to Form 8-K dated November 15, 1995.

21 Subsidiaries of the Company

23 Consent of Independent Accountants

27 Financial Data Schedule
</TABLE>

<PAGE>

BUFFTON CORPORATION
-------------------

EXHIBIT 21

The following schedule lists the subsidiaries of Buffton Corporation as of
September 30, 1995:

<TABLE>
<CAPTION>
Corporate Name Organization Ownership Percent
- -------------- ------------ -----------------
<S> <C> <C>
Buffton Corporation Delaware Parent
Current Technology, Inc. Delaware 100%
BFX Hospitality Group, Inc. Nevada 100
Main Street Realty, Inc. Nevada 100
American Food Classics, Inc. Nevada 100
Lucile's Stateside Bistro-Texas, Inc . Texas 100
BFX-LA, Inc. Louisiana 100
Cat's Meow, Inc. Louisiana 100
St. Louis & Bourbon E. C., Inc. Louisiana 100
</TABLE>

<PAGE>

Exhibit 23

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. 33-59585 and
33-62993) of Buffton Corporation of our report dated November 14, 1995 appearing
on page F-2 of this Form 10-K.

/s/ Price Waterhouse LLP

PRICE WATERHOUSE LLP

Fort Worth, Texas
December 22, 1995

<PAGE>

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEPTEMBER
30, 1995 FORM 10-K 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> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<CASH> 7
<SECURITIES> 0
<RECEIVABLES> 2,968
<ALLOWANCES> (75)
<INVENTORY> 2,031
<CURRENT-ASSETS> 5,429
<PP&E> 7,529
<DEPRECIATION> (2,062)
<TOTAL-ASSETS> 17,224
<CURRENT-LIABILITIES> 2,605
<BONDS> 0
<COMMON> 284
0
0
<OTHER-SE> 14,335
<TOTAL-LIABILITY-AND-EQUITY> 17,224
<SALES> 19,187
<TOTAL-REVENUES> 19,187
<CGS> 5,890
<TOTAL-COSTS> 17,914
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 124
<INCOME-PRETAX> 1,273
<INCOME-TAX> (31)
<INCOME-CONTINUING> 1,304
<DISCONTINUED> (2,513)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,209)
<EPS-PRIMARY> (.22)
<EPS-DILUTED> (.22)

</TABLE>