BFX HOSPITALITY GROUP INC, 10-K, 1999-12-21

BFX HOSPITALITY GROUP INC
10-K, 1999-12-21
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, 1999

___ 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

BFX HOSPITALITY GROUP, INC.
(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)

Registrant's Telephone Number, Including Area Code:
(817) 332-4761

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 15, 1999 was $2,074,976

The number of shares outstanding of the registrant's common stock, $.05 par
value, as of December 15, 1999 was 3,968,866

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 1999
Stockholders' meeting filed with the Commission pursuant to Regulation 14A
- Parts I and III.

1
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BFX HOSPITALITY GROUP, INC.

1999 FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS
<TABLE>
<CAPTION>

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

PART II
- -------

Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters........................................ 6
Item 6. Selected Financial Data.................................... 7
Item 7. Management's Discussion and Analysis of Operations
and Financial Condition.................................. 8
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. 11
Item 8. Financial Statements and Supplementary Data................ 11
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure................................. 11

PART III
- --------

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

PART IV
- -------

Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K.............................................. 13

Signatures............................................................. 15
</TABLE>

2
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PART I
------

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

General Development of Business
- -------------------------------

BFX Hospitality Group, Inc (the registrant and Company) is a Delaware
corporation and was incorporated on December 17, 1980. In May 1997, the
Company's stockholders approved a proposal at the Annual Meeting of the
Stockholders to change the name of the Company from Buffton Corporation to BFX
Hospitality Group, Inc. The change became effective on July 8, 1997 upon filing
of an Amended and Restated Certificate of Incorporation.

At September 30, 1999, the Company owns and operates food service, lodging and
entertainment facilities in Texas and Louisiana.

In April 1997, the Company acquired all of the outstanding stock, in a tax free
exchange, of Hotels of Distinction (HOD), a hotel management company, from Alan
Tremain, O.B.E. and Jean-Claude Mathot in exchange for 300,000 shares of the
Company's common stock. In addition, Mr. Tremain became Chairman of the Board
of the Company and Mr. Mathot became President and Chief Operating Officer of
the Company. Because HOD had no assets or management contracts at the date of
purchase, the transaction, in substance, represented payment for employment
services. As a result, the Company expensed $824,000, the estimated fair market
value of the stock in 1997. In connection with the transaction, Non-Qualified
Stock Option Agreements were entered into with Mr. Tremain and Mr. Mathot, each
agreement granting options covering 250,000 shares of the Company's common stock
at an exercise price of $3.00 per share, approximately $0.25 per share in excess
of the fair market value at the date of grant. The options terminated upon
termination of employment by Mr. Tremain and Mr. Mathot as described below.

In June 1998, Mr. Tremain tendered his resignation as Chairman of the Board of
the Company effective June 26, 1998. In September 1998, Mr. Mathot tendered his
resignation as President and Chief Operating Officer of the Company effective
September 30, 1998. In accordance with their employment agreements, Mr. Tremain
and Mr. Mathot received $100,000 and $175,000, respectively, in severance
compensation. Also pursuant to their employment agreements, which required the
Company to purchase any common stock held by Mr. Tremain and Mr. Mathot at the
greater of fair market value or their cost, the Company purchased 280,000 shares
of the Company's common stock from Mr. Tremain for $700,000 and 260,000 shares
of the Company's common stock from Mr. Mathot for $656,000. As a result of
these transactions, the Company recorded an expense of $744,000 during fiscal
1998.

In May 1997, the Company's shareholders approved the sale of the Company's
electrical product segment, Current Technology, Inc. (CTI), to Danaher
Corporation. The sale was completed on June 3, 1997. Danaher purchased the
assets of CTI for $26,090,000 in cash and assumed approximately $1,300,000 in
liabilities. The Company incurred expenses of approximately $1,402,000
associated with the sale, including payments to Walter D. Rogers, then president
of CTI and a director of the Company, of $500,000 pursuant to an agreement with
the Company and $250,000 as consideration for agreeing to include non-
competition and non-disclosure provisions in his employment agreement with
Danaher. As a result of the above transactions, the Company recognized a gain
on disposal of $13,003,000, net of taxes.

Narrative Description of Business
- ---------------------------------

BFX Hospitality Group, Inc.

BFX Hospitality Group, Inc. ("BFX") owns and operates food service, lodging and
entertainment facilities in Texas and Louisiana, through three wholly owned
subsidiaries, American Food Classics, Inc., Boutique Inns, Inc. and BFX-LA, Inc.
d/b/a Bourbon Street Hospitality.

American Food Classics, Inc. ("AFC") was organized in 1992 to develop, own and
operate food service concepts that, once proven, can be expanded to multiple
locations throughout the United States as well as internationally. AFC
presently owns and operates Cabo, The Original "Mix Mex" Grill ("Cabo"), opened
in December 1994 in Houston, Texas, offering fish tacos, habanero shrimp and
other Mexican food with Central and South American influences. Cabo was
acquired by AFC in January 1996. Cabo is an upscale taqueria with a distinctive
"diner look" decor. A second Cabo unit opened in leased space in the downtown
Houston historical district in April 1998. A third Cabo unit opened in leased
space in downtown Fort Worth's Sundance Square in December 1998.

3
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AFC also owns and operates Lucile's, A Stateside Bistro ("Lucile's"), opened in
April 1993, in Fort Worth, Texas. Lucile's offers a variety of menu items
centered around classic regional American dishes. Lucile's decor is a warm,
comfortable, traditional atmosphere. AFC will look to replicate Lucile's as a
destination food service concept.

Boutique Inns, Inc. owns and operates the Stockyards Hotel. The Stockyards
Hotel is located in the historic Northside of Fort Worth, Texas and offers
guests 52 uniquely designed sleeping rooms that reflect the old West of the
early 1900's, over 3,500 square feet of meeting space and full service catering
for corporate meetings, wedding receptions and family reunions. H3 Ranch, a
5,000 square foot steakhouse concept, located in the hotel's first floor space
opened August 1998. Included in the Stockyards Hotel real estate are two valet
parking lots totaling 1.3 acres.

Bourbon Street Hospitality ("BSH") owns and operates Cat's Meow, an
entertainment facility at 701 Bourbon Street in New Orleans, Louisiana. Cat's
Meow was opened in 1989 and was acquired by BSH in January 1994. Cat's Meow is
housed in an historic French Quarter Building with approximately 3,000 square
feet. The building has a courtyard and second floor balcony. Cat's Meow has
attracted nationwide popularity and is considered one of the highest grossing
facilities per square foot in the United States. Entertainment features highly
produced karoake and includes MC's and DJ's with a variety of music.

Competition
- -----------

The hospitality industry is intensely competitive with respect to price,
service, location and food quality, and there are many well-established
competitors with substantially greater financial and other resources than the
Company. Some of the Company's competitors have been in existence for a
substantially longer period than the Company and may be better established in
the markets where the Company's restaurants or lodging establishments will or
may be located. The hospitality business is often affected by changes in
consumer tastes, national, regional or local economic conditions, demographic
trends, traffic patterns and the type, number and location of competing
restaurants or lodging establishments. In addition, factors such as inflation,
increased food, labor and employee benefit costs and the availability of
experienced management and hourly employees may also adversely affect the
hospitality industry in general and the Company in particular.

Patents and Licenses
- --------------------

The Company owns trademarks relating to certain of its hospitality group
operations. There are no other patents, trademarks, franchises or concessions
that 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 is not materially impacted by seasonality.

Employees
- ---------

The Company and its subsidiaries employed approximately 290 full-time and 114
part-time employees as of September 30, 1999, none of which were represented by
unions. Relations with employees are satisfactory.

4
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ITEM 2 - PROPERTIES
- -------------------

General
- -------

The Company and its subsidiaries have facilities with remaining primary lease
terms ranging from one to ten years at annual base rentals of approximately
$419,000. 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 the Company. 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 100% of the facility. Annual rental for this
lease is approximately $390,000 plus real estate taxes, insurance and all
repairs.

Cat's Meow leases the facility in New Orleans, Louisiana for its entertainment
and beverage operations. The facility has 3,000 square feet. Lucile's in Fort
Worth, Texas leases approximately 5,000 square feet of space. The first Cabo
unit in Houston, Texas leases approximately 3,000 square feet of space, the
second Cabo unit in Houston, Texas leases approximately 8,000 square feet of
space and the third Cabo unit in Fort Worth, Texas leases approximately 4,500
square feet of space.

The real estate for the Stockyards Hotel located in Fort Worth, Texas is owned
and offers 52 guestrooms and approximately 3,500 square feet of meeting space
and catering capabilities. H3 Ranch is a 5,000 square foot steakhouse concept
located in the hotel's first floor space. Included in the Stockyards Hotel real
estate are two valet parking lots totaling 1.3 acres.

The Company leases approximately 5,000 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, 1999.

5
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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 1999 High Low
----- -----
<S> <C> <C>
October 1 - December 31......... $2.00 $1.06
January 1 - March 31............ 1.94 1.06
April 1 - June 30............... 1.50 1.06
July 1 - September 30........... 1.50 0.75

Fiscal 1998 High Low
----- -----
October 1 - December 31......... $4.13 $2.25
January 1 - March 31............ 3.00 2.13
April 1 - June 30............... 2.44 1.75
July 1 - September 30........... 2.25 1.38
</TABLE>

The number of named stockholders of common stock as of September 30, 1999 was
approximately 1,519 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.

6
<PAGE>

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

<TABLE>
<CAPTION>
September 30,
---------------------------------------------------
For the year ended 1999 1998 1997 1996 1995
- ------------------ --------- --------- --------- -------- --------
(In thousands, except per share and ratio amounts)
<S> <C> <C> <C> <C> <C>
Net revenues................................ $ 17,212 $ 11,513 $ 10,518 $ 9,298 $ 6,946
========= ========= ========= ======== ========

Loss from continuing operations (a)......... $ (1,785) $ (2,509) $ (7,854) $ (921) $ (156)
Income (loss) from discontinued operations.. - - 14,512 2,315 (1,053)
--------- --------- --------- -------- --------

Net income (loss)........................... $ (1,785) $ (2,509) $ 6,658 $ 1,394 $ (1,209)
========= ========= ========= ======== ========

Basic and diluted earnings per share:
Continuing operations..................... $ (.44) $ (.47) $ (1.13) $ (.14) $ (.03)
Discontinued operations................... - - 2.09 .36 (.19)
--------- --------- --------- -------- --------

Net income (loss)......................... $ (.44) $ (.47) $ .96 $ .22 $ (.22)
========= ========= ========= ======== ========
</TABLE>

(a) Effective June 3, 1997, the Company sold the assets of Current Technology,
Inc. (CTI) to Danaher Corporation. The sale of CTI represented the
discontinuation of the Electronic Products line of business. As a result, the
selected financial data shows the effects if the sale of CTI had occurred at the
beginning of fiscal 1995 and had been reported as discontinued operations.

At year end
- -----------

<TABLE>
<S> <C> <C> <C> <C> <C>
Working capital....................................... $ 1,224 $ 3,184 $10,797 $ 3,743 $ 2,824
Current assets........................................ 4,326 6,840 16,563 6,917 5,429
Total assets.......................................... 18,993 22,810 28,084 23,164 17,224
Long-term debt........................................ 937 1,075 1,212 2,493 -
Total liabilities..................................... 5,609 7,431 6,978 5,671 2,605
Stockholders' equity.................................. 13,384 15,379 21,106 17,493 14,619
Current ratio......................................... 1.39 1.87 2.87 2.18 2.08
Book value per share.................................. 3.35 3.71 3.53 2.67 2.57
Total liabilities to equity........................... .42 .48 .33 .32 .18
Number of outstanding shares, net of treasury shares.. 3,999 4,149 5,975 6,544 5,685
</TABLE>

7
<PAGE>

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

General Information

At September 30, 1999, the Company owned and operated food service, lodging and
entertainment facilities in Texas and Louisiana as discussed in Part I,
Item 1 - Business. Effective June 3, 1997, the Company sold the assets of
Current Technology, Inc. (CTI) to Danaher Corporation. See Note 3 of Notes to
Consolidated Financial Statements for details of the sale.

Factors That May Affect Future Results

Certain matters discussed herein are forward-looking statements about the
business, financial condition and prospects of the Company. The actual results
could differ materially from those indicated by such forward-looking statements
because of various risks and uncertainties. Such risks and uncertainties may
include, but are not limited to regional and national economic conditions,
changes in customer demand for products offered by the Company, and other
matters that may adversely affect the availability of products and pricing,
state and federal regulatory environment, possible future acquisitions or
dispositions, amendments to the Record of Decision issued by the Environmental
Protection Agency (see Liquidity and Capital Resources), resolution of the Year
2000 issue and other risks indicated in the Company's previous filings with the
Securities and Exchange Commission. The Company cannot control these risks and
uncertainties, and in many cases, cannot predict the risks and uncertainties
that could cause its actual results to differ materially from those indicated by
the forward-looking statements.

Results of Continuing Operations

1999 versus 1998

Net revenues in 1999 increased 50% compared to 1998 due to the opening of the
second Cabo unit in Houston, Texas (Cabo Travis) in April 1998, the opening of
the H3 Ranch restaurant located in the SYH in August 1998 and the opening of the
third Cabo unit in Fort Worth, Texas (Cabo Fort Worth) in December 1998.

Costs of goods sold (which consists primarily of food and beverage costs) during
1999 increased 55% compared to 1998. As a percent of related revenue, these
costs were 24% during 1999 versus 23% a year earlier. The absolute increase is
due to increased revenues discussed above. The increase in costs as a percentage
of revenues is due to the decreased percentage of sales from SYH which have a
lower cost of goods sold than the Company's other concepts.

Selling, general and administrative expenses for 1999 increased 3% compared to
1998. Selling, general and administrative expenses in fiscal 1998 included costs
associated with the resignations of Messrs. Tremain and Mathot from Hotels of
Distinction. Eliminating those costs from 1998 results in an increase in
selling, general and administrative expenses between the two years of 12%. This
increase is primarily attributable to the inclusion of the results of operations
of Cabo Travis, H3 Ranch and Cabo Fort Worth from their respective opening dates
in fiscal 1998 and 1999.

During the fourth quarter of fiscal 1999, the Company determined that certain
events and changes in circumstances indicated that the expected future cash
flows (undiscounted and without interest charges) from the operation of certain
Cabo restaurants would not be sufficient to recover the net book value of such
assets. The Company's analysis indicated that a $1,854,000 write-down for Cabo
Shepherd and Cabo Fort Worth was necessary. The shopping center in which Cabo
Shepherd is located has experienced a decline in customer base resulting in
significant available space for lease in the center. The change has resulted in
reduced revenues at Cabo Shepherd causing operating losses and negative cash
flow. The Company does not believe the management of the shopping center will be
able to revitalize the shopping center in the near future. As a result,
leasehold improvements and goodwill were written down by $174,000 and $680,000,
respectively. When Cabo Fort Worth was opened in December 1998, certain aspects
of the Cabo concept were not well received by customers in the market, resulting
in higher than expected operating costs and negative cash flow. While the
Company has made changes in the Cabo Fort Worth unit, management does not
believe that future cash flows will be adequate to recover the net book value of
assets at this restaurant. As a result, leasehold improvements were written down
by $1,000,000.

Depreciation and amortization expense during 1999 increased 38% compared to 1998
due to the opening of the second Cabo unit in April 1998, capital improvements
made at SYH resulting in the opening of the H3 Ranch restaurant in August 1998
and the opening of Cabo Fort Worth, December 1998.

8
<PAGE>

The decrease in interest income to $138,000 for 1999 from $632,000 in 1998 is
due to the reduction in cash balances due to investing and financing activities
in fiscal 1998 and 1999.

The decrease in interest expense to $92,000 for 1999 from $120,000 in 1998 is
primarily due to the reduction of a mortgage loan balance under the terms of the
Company's note agreement.

Income tax benefit rate on the pre-tax loss from continuing operations was 33%
in 1999 versus 34% in 1998. The 1999 benefit rate is lower due to increased
state income taxes in 1999.

1998 versus 1997

Net revenues in 1998 increased 9% compared to 1997 due to the opening of Cabo
Travis in Houston, Texas in April 1998. Revenues are expected to increase in
fiscal 1999 as the third Cabo unit opened in the first quarter of fiscal 1999
and additional Cabo units are planned to open during fiscal 1999.

Costs of goods sold (which consists primarily of food and beverage costs) during
1998 increased 18% compared to 1997. As a percent of related revenue, these
costs were 23% during 1998 versus 22% a year earlier. The absolute increase is
due to increased revenues discussed above. The increase in costs as a percentage
of revenues is due to the decreased percentage of sales from SYH which have a
lower cost of goods sold than the Company's other concepts.

Selling, general and administrative expenses for 1998 decreased 17% compared to
1997. The primary reasons for the decrease are the expenses incurred in 1997
associated with the acquisition of HOD ($824,000), bonuses to the Company's
management as a result of the sale of CTI ($850,000), the reserve for collection
of certain notes receivable ($635,000) and professional fees incurred as a
result of litigation with certain shareholders ($500,000). In addition, selling,
general and administrative expenses were impacted by the inclusion of the
results of operations of Cabo Travis and H3 Ranch from their respective opening
dates in fiscal 1998 and the exclusion of the results of operations of the Main
Street office building sold during fiscal 1997.

In 1997, the Company accrued environmental remediation expenses of $3,500,000
representing estimated future costs of implementing the remedy and reimbursement
of monies spent by the EPA at the site. In addition, all prior costs incurred,
approximating $867,000 through April 30, 1997, associated with the
implementation of the original Record of Decision, were expensed. See Liquidity
and Capital Resources for further details.

Depreciation and amortization expense during 1998 increased 12% compared to 1997
due to the opening of the second Cabo unit in April 1998 and capital
improvements made at SYH.

The increase in interest income to $632,000 in 1998 from $485,000 in 1997 is due
to increased cash balances as a result of the sale of CTI in June 1997. The
decrease in interest expense to $120,000 in 1998 from $193,000 is primarily due
to assumption of debt by the purchaser of a building sold by the Company in
1997.

Income tax benefit rate on the pre-tax loss from continuing operations was 34%
in 1998 compared to a benefit of 31% in 1997. The 1997 benefit rate is lower
than the federal statutory rate primarily as a result of the non-deductible
expense of $824,000 associated with the acquisition of HOD in April 1997.

Liquidity and Capital Resources

Fiscal year ended September 30, 1999 -

The Company's cash decreased $2,306,000 from $5,342,000 at September 30, 1998 to
$3,036,000 at September 30, 1999. The Company's operating activities used cash
of $186,000 during fiscal 1999 compared to $2,089,000 during fiscal 1998. Adding
back the fiscal 1999 non-cash items included in the income statement to the net
loss of $1,785,000 results in cash from operating activities of $1,301,000. This
was used primarily to reduce certain working capital items, primarily accrued
liabilities of $1,011,000. Accruals associated with the EPA and HOD terminations
declined $180,000 and $831,000, respectively, as such amounts were paid during
fiscal 1999.

Cash used for investing activities of $1,725,000 related primarily to the
construction of Cabo Sundance, which opened during the first quarter of fiscal
1999.

Cash used for financing activities of $395,000 was primarily the result of the
Company purchasing 162,000 shares of its common stock at a total cost of
$257,000 (average cost of $1.59 per share). The shares are recorded as treasury
stock and will be available for employee stock plans and other corporate
requirements.

9
<PAGE>

At September 30, 1999, the Company's only debt relates to a bank term loan
assumed in the acquisition of the Stockyards Hotel with annual commitments of
$138,000. The Company incurred approximately $600,000 during the first quarter
of fiscal 1999 to complete the construction on the Company's third Cabo unit
opened in downtown Fort Worth, Texas. Management anticipates incurring
$1,200,000 in fiscal 2000 in the initial phase of implementing the agreed-upon
remedy for its EPA superfund site.

During 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. 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. Due to
concerns about the correctness of the remedy provided for in the ROD, the
Company performed additional fieldwork and, in 1995, the EPA agreed the remedy
needed to be modified. After additional discussions with the EPA, a revised ROD
was issued in July 1997. The revised ROD eliminates certain provisions of the
original ROD and primarily includes the removal and treatment of contaminated
soil. At September 30, 1997, the Company had accrued environmental remediation
expenses of $3,550,000. In June 1998, the Company signed a Consent Decree with
the EPA in regard to the implementation of the agreed-upon remedy and on-going
monitoring of the property. In addition, the Company reimbursed the EPA $550,000
for monies spent by the EPA at the Company's Superfund Site over a ten-year
period from October 1987 through April 1997. At September 30, 1999, the Company
has a total liability accrued of $2,770,000 representing the estimated future
costs of implementing the agreed-upon remedy. The Company anticipates
approximately $1,200,000 to be incurred during the next 12 months.

The Company's management believes that its current cash flows from operations is
adequate to fund the Company's current operating needs, make annual payments
under the mortgage note payable of $138,000, fund anticipated capital
expenditures, as well as, its projected growth over the next twelve months.

Year 2000

The Company has assessed all systems that could potentially be affected by the
Year 2000 Issue, including facility systems, POS systems, telephone hardware and
software, out-sourced services and suppliers. The Company has not required
significant replacements of its computer systems and has installed upgrades as
needed. The total cost of the upgrades and replacements have not been material.
The Company has tested all upgrades and replacements to ensure their compliance.

In addition to the assessment of its systems, the Company is working with its
key suppliers and other third parties with which it has a material relationship
to determine that such parties are achieving compliance with respect to the Year
2000 Issue in those systems affecting the Company's operations. Although the
Company believes that such persons are working diligently to properly address
the Year 2000 Issue, the Company cannot guarantee that these third parties will
be compliant in a timely manner, or that a failure to be compliant by another
company would not have a material adverse effect on the Company.

Though the Company is not able to estimate the full impact of any potential
failure of its systems as a result of the Year 2000 Issue, the Company believes
that its operations are such that a contingency plan based primarily on manual
processing of information will be adequate for the Company to continue
operations.

Impact of Inflation

From October 1996 to September 1999, inflation did not have a material impact on
the Company's operations.

10
<PAGE>

ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- --------------------------------------------------------------------

Not applicable.

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.

11
<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 2000 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 2000 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 2000 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 2000 Annual Meeting of Stockholders to be filed with the
Commission pursuant to Regulation 14A.

12
<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.
--------------------

Report dated October 27, 1997 reporting acquisition of stock from
Robert H. McLean

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).

3.5 Restated by-laws of Buffton Corporation dated April 7, 1997
incorporated herein by reference to Form 10-Q dated March 31,
1997.

3.6 Amended and Restated Certificate of Incorporation of Buffton
Corporation changing name of Company to BFX Hospitality Group
incorporated by reference to Form 10-Q dated June 30, 1997.

4 Rights Amendment Agreement (Exhibit 1 to Form 8-K dated February
11, 1999 and incorporated herein by reference).

10 Asset Purchase Agreement dated January 19, 1996 incorporated
herein by reference to Form 8-K dated January 19, 1996.

10.1 Rights Amendment Agreement dated February 26, 1999 incorporated
herein by reference to Form 8-K dated February 11, 1999.

10.2 Asset Purchase Agreement of Current Technology, Inc. incorporated
herein by reference to the Definitive Proxy Statement dated April
23, 1997.

10.3 Asset Purchase Agreement between Main Street Realty, Inc. and 100
Main Realty Ltd., a limited partnership controlled by Robert H.
McLean, CEO of the Company, dated July 1, 1997 incorporated
herein by reference to Form 10-K dated September 30, 1998.

13
<PAGE>

21 Subsidiaries of the Company

23 Consent of Independent Accountants

27 Financial Data Schedule

14
<PAGE>

Signatures

Pursuant to the requirements of 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.

BFX HOSPITALITY GROUP, INC. Date
---------------------

By: /s/ Robert H. McLean December 21, 1999
------------------------------- ---------------------
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 21, 1999
--------------------------------------- ---------------------
Robert H. McLean, President,
Chief Executive Officer and Chairman of
the Board of Directors
(Principal Executive Officer)

/s/ Robert Korman December 21, 1999
--------------------------------------- ---------------------
Robert Korman, Vice President and
Chief Financial Officer

/s/ Bruno D'Agostino December 21, 1999
--------------------------------------- ---------------------
Bruno D'Agostino, Director

/s/ John M. Edgar December 21, 1999
--------------------------------------- ---------------------
John M. Edgar, Director

/s/ Hampton Hodges December 21, 1999
--------------------------------------- ---------------------
Hampton Hodges, Director

/s/ H.T. Hunnewell December 21, 1999
--------------------------------------- ---------------------
H.T. Hunnewell, Director

/s/Walter D. Rogers, Jr. December 21, 1999
--------------------------------------- ---------------------
Walter D. Rogers, Jr., Director

/s/ Russell J. Sarno December 21, 1999
--------------------------------------- ---------------------
Russell J. Sarno, Director

15
<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-8

Financial Statement Schedule:
- ----------------------------

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 BFX Hospitality Group, Inc.

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 BFX Hospitality Group, Inc. and its subsidiaries at September 30,
1999 and 1998, and the results of their operations and their cash flows for each
of the three years in the period ended September 30, 1999, in conformity with
accounting principles generally accepted in the United States. In addition, in
our opinion, the financial statement schedule listed in the index appearing on
page F-1 presents fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial
statements. These financial statements and financial statement schedule are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States, 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/ PricewaterhouseCoopers LLP

Fort Worth, Texas
November 15, 1999

F-2
<PAGE>

BFX HOSPITALITY GROUP, INC.

Consolidated Statements of Operations

<TABLE>
<CAPTION>
For the Years Ended September 30,
----------------------------------------
1999 1998 1997
-------- -------- --------
(In thousands, except per share amounts)
<S> <C> <C> <C>
Net revenues....................................................... $ 17,212 $ 11,513 $ 10,518
-------- -------- --------

Costs and expenses:
Cost of goods sold................................................ 4,185 2,698 2,277
Selling, general and administrative............................... 12,311 11,974 14,483
Write-down of long-lived assets................................... 1,854 - -
Expenses associated with revised EPA remedy....................... - - 4,417
Depreciation and amortization..................................... 1,590 1,150 1,030
-------- -------- --------

Total costs and expenses......................................... 19,940 15,822 22,207
-------- -------- --------

Net loss from continuing operations before other income (expense)
and income taxes................................................. (2,728) (4,309) (11,689)
-------- -------- --------

Other income (expense):
Interest income.................................................. 138 632 485
Interest expense................................................. (92) (120) (193)
-------- -------- --------
46 512 292
-------- -------- --------

Loss from continuing operations before income taxes................ (2,682) (3,797) (11,397)
Income tax benefit................................................. 897 1,288 3,543
-------- -------- --------
Loss from continuing operations.................................... (1,785) (2,509) (7,854)
-------- -------- --------

Discontinued operations:
Income from operations, net of income tax expense of
$933,000........................................................ - - 1,509
Gain on disposal, net of income tax expense
of $7,252,000................................................... - - 13,003
-------- -------- --------

Income from discontinued operations............................... - - 14,512
-------- -------- --------

Net income (loss).................................................. $ (1,785) $ (2,509) $ 6,658
======== ======== ========

Basic and diluted earnings per share:
Continuing operations............................................. $ (.44) $ (.47) $ (1.13)
Discontinued operation............................................ - - 2.09
-------- -------- --------
Net income (loss)................................................. $ (.44) $ (.47) $ .96
======== ======== ========

Weighted average basic and diluted common shares outstanding..... 4,018 5,349 6,957
======== ======== ========
</TABLE>

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

F-3
<PAGE>

BFX HOSPITALITY GROUP, INC.

Consolidated Balance Sheets

Assets
<TABLE>
<CAPTION>
September 30,
-------------------------
1999 1998
---------- ----------
(In thousands)
<S> <C> <C>
Current assets:
Cash and cash equivalents................................................ $ 3,036 $ 5,342
Accounts receivable...................................................... 286 128
Inventories.............................................................. 208 148
Income tax receivable.................................................... 698 1,102
Prepaid and other current assets......................................... 98 120
------- -------
Total current assets.................................................... 4,326 6,840
------- -------

Property, plant and equipment, net........................................ 10,407 11,084
------- -------

Goodwill, net of amortization of $1,929,000 and $1,567,000, respectively.. 2,355 3,397
Deferred income taxes..................................................... 1,824 1,419
Other assets, net......................................................... 81 70
------- -------

$18,993 $22,810
======= =======

Liabilities and Stockholders' Equity

Current liabilities:
Current portion of long-term debt........................................ $ 138 $ 138
Accounts payable......................................................... 418 578
Accrued liabilities...................................................... 1,012 1,843
Accrued EPA costs........................................................ 1,200 250
Income taxes............................................................. 334 847
------- -------
Total current liabilities............................................... 3,102 3,656

Long-term debt............................................................ 937 1,075
Accrued EPA costs......................................................... 1,570 2,700
------- -------
5,609 7,431
------- -------
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;
7,786,878 shares outstanding........................................... 389 389
Additional paid-in capital.............................................. 16,583 16,583
Retained earnings....................................................... 5,522 7,307
Treasury stock, at cost, 3,788,012 and 3,637,850
shares, respectively................................................... (9,110) (8,777)
Employee notes for stock purchases - (123)
------- -------
13,384 15,379
Commitments and contingencies (Note 12)..................................
------- -------

$18,993 $22,810
======= =======
</TABLE>

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

F-4
<PAGE>

BFX HOSPITALITY GROUP, INC.

Consolidated Statements of Cash Flow

<TABLE>
<CAPTION>
For the Years Ended September 30,
------------------------------------
1999 1998 1997
----------- ----------- ----------
(In thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)......................................... $(1,785) $ (2,509) $ 6,658
Adjustments to reconcile net income (loss) to net cash
used for operating activities:
Depreciation............................................ 1,228 789 764
Amortization............................................ 362 361 475
Deferred income taxes................................... (405) (586) (837)
Bad debt provision...................................... - - (35)
Net gain on sale of assets.............................. - - (20,301)
Write-down of long-lived assets......................... 1,854 - -
Accrued expenses associated with revised EPA remedy..... - - 4,417
Issuance of common stock in payment for services........ 47 114 412
Expenses associated with acquisition.................... - - 824
Change in components of current assets and liabilities
(exclusive of acquisitions and dispositions):
Accounts receivable.................................... (158) (62) 1,392
Inventories............................................ (60) (69) 143
Prepaid and other...................................... 11 385 256
Accounts payable....................................... (160) 278 (36)
Accrued liabilities.................................... (1,011) (221) 349
Income taxes........................................... (109) (569) 259
------- -------- --------
Net cash used for operating activities..................... (186) (2,089) (5,260)
------- -------- --------

Cash flows from investing activities:
Net additions to property, plant and equipment............ (1,725) (5,456) (450)
Proceeds from sale of operating assets.................... - - 25,194
Additions to other assets................................. - - (89)
------- -------- --------
Net cash provided by (used for) investing activities....... (1,725) (5,456) 24,655
------- -------- --------

Cash flows from financing activities:
Repayments of debt........................................ (138) (137) (161)
Exercise of stock options................................. - - 15
Treasury stock purchases.................................. (257) (3,332) (4,552)
------- -------- --------
Net cash used for financing activities..................... (395) (3,469) (4,698)
------- -------- --------

Net increase (decrease) in cash............................ (2,306) (11,014) 14,697

Cash at beginning of year.................................. 5,342 16,356 1,659
------- -------- --------

Cash at end of year........................................ $ 3,036 $ 5,342 $ 16,356
======= ======== ========
</TABLE>

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

F-5
<PAGE>

BFX HOSPITALITY GROUP, INC.

Consolidated Statements of Changes in Stockholders' Equity

For the Years Ended September 30, 1999, 1998, and 1997

<TABLE>
<CAPTION>
Employee
Additional Note for
Common Paid-in Treasury Retained Stock
Stock Capital Stock Earnings Purchases Total
----- ------- ----- -------- --------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1996............. $ 337 $14,354 $ (356) $ 3,158 $ - $17,493

Issuance of 300,000 shares of $.05
par value common stock for acquisition... 14 810 - - - 824

Issuance of 760,000 shares of $.05
par value common stock in exercise of
options.................................. 38 1,152 - - (1,190) -

Issuance of 200,000 shares of $.05
par value common stock from treasury
for services............................. - 12 400 - - 412

Issuance of 10,000 shares of $.05
par value common stock from treasury
in exercise of stock options............. - (6) 21 - - 15

Purchase of 1,839,000 shares of $.05
par value common stock................... - - (4,552) - - (4,552)

Tax benefit of exercise of stock options.. - 256 - - - 256

Net income................................ - - - 6,658 - 6,658
----- ------- ------- ------- ------- -------

Balance at September 30, 1997............. 389 16,578 (4,487) 9,816 (1,190) 21,106

Issuance of 45,000 shares of $.05
par value common stock from treasury
for services............................ - 5 109 - - 114

Reacquisition of 258,330 shares of $.05
par value common stock for repayment
of employee notes....................... - - (1,067) - 1,067 -

Purchase of 1,612,170 shares of $.05
par value common stock.................. - - (3,332) - - (3,332)

Net loss - - - (2,509) - (2,509)
----- ------- ------- ------ ------- -------

Balance at September 30, 1998 389 16,583 (8,777) 7,307 (123) 15,379
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
Employee
Additional Note for
Common Paid-in Treasury Retained Stock
Stock Capital Stock Earnings Purchases Total
----- ------- ----- -------- --------- -----
<S> <C> <C> <C> <C> <C> <C>
Issuance of 45,000 shares of $.05
par value common stock from treasury
for services.......................... - - 47 - - 47

Reacquisition of 33,021 shares of $.05
par value common stock for repayment
of employee notes..................... - - (123) - 123 -

Purchase of 162,141 shares of $.05
par value common stock................ - - (257) - - (257)

Net loss................................ - - - (1,785) - (1,785)
----- ------- ------- ------- --------- -------

$ 389 $16,583 $(9,110) $ 5,522 $ - $13,384
===== ======= ======= ======= ========= =======
</TABLE>

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

F-7
<PAGE>

BFX HOSPITALITY GROUP, INC.

Notes to Consolidated Financial Statements
September 30, 1999, 1998 and 1997

Note 1 - Summary of Significant Accounting Policies

Business

BFX Hospitality Group, Inc. (the Company) owns and operates food service,
lodging and entertainment facilities in Texas and Louisiana. These consolidated
financial statements include all of the assets, liabilities, revenues, and costs
and expenses of the Company and its wholly owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated.

In May 1997, the Company's stockholders approved a proposal at the Annual
Meeting of the Stockholders to change the name of the Company from Buffton
Corporation to BFX Hospitality Group, Inc. The change became effective on July
8, 1997 upon filing of an Amended and Restated Certificate of Incorporation.

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.

The weighted average interest rate was 5.05% at September 30, 1999 for cash
equivalents totaling $1,949,000.

Inventories

Inventories are stated at the lower of cost (first in, first out) or market and
consist primarily of food and beverage.

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 twenty-five 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.

Intangibles

Goodwill represents the excess of cost over net assets acquired and is being
amortized on a straight-line basis principally over fifteen years.

Impairment of Long-Lived Assets

The Company reviews 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. An impairment loss is recognized if the sum
of the expected future cash flows (undiscounted and without interest charges)
from the use of the asset is less than the net book value of the asset.
Generally, the amount of the impairment loss is measured as the difference
between the net book value of the assets and the estimated fair value.

F-8
<PAGE>

Stock-Based Compensation

The Company follows the disclosure only provisions of Financial Accounting
Standard No. 123, "Accounting for Stock-Based Compensation". However, the
Company continues to measure compensation cost for those plans using the
intrinsic value based method of accounting as prescribed by Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees".

Income taxes

The Company records deferred income taxes under the asset and liability method,
which 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, including tax loss and
credit carryforwards. The Company provides a valuation allowance for the amount
of tax assets not expected to be realized.

Advertising Cost

The Company's advertising expenditures are expensed in the period the
advertising first occurs. Advertising expense for fiscal years ended September
30, 1999, 1998 and 1997 approximated $230,000, $74,000 and $85,000,
respectively.

Earnings per share

Effective October 1, 1997, the Company adopted Statement of Financial Accounting
Standards No. 128, Earnings Per Share. This statement requires interim and
annual presentation of basic and diluted earnings per share ("EPS") by all
entities that have issued common stock or potential common stock if those
securities are traded in a public market. The objective of basic EPS is to
measure the performance of an entity over the reporting period. The objective of
diluted EPS is to measure the performance of an entity over the reporting period
while giving effect to all potentially dilutive common shares that were
outstanding during the period. This statement also requires a reconciliation of
the numerator and denominator of the basic EPS computation to the numerator and
denominator of the diluted EPS computation. EPS data for all prior periods have
been restated to conform with the provisions of this statement.

Pervasiveness of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, and related revenues and
expenses, and disclosure of gain and loss contingencies at the date of the
financial statements. Actual results could differ from those estimates.

Reclassifications

Certain amounts for fiscal 1998 and 1997 have been reclassified to conform with
the current year presentation.

F-9
<PAGE>

Note 2 - Impairment of Long-Lived Assets

The shopping center in which Cabo Shepherd is located has experienced a decline
in customer base resulting in significant available space for lease in the
center. The change has resulted in reduced revenues at Cabo Shepherd causing
operating losses and negative cash flow. The Company does not believe the
management of the shopping center will be able to revitalize the shopping center
in the near future. As a result, leasehold improvements and goodwill were
written down by $174,000 and $680,000, respectively.

When Cabo Fort Worth was opened in December 1998, certain aspects of the Cabo
concept were not well received by customers in the market, resulting in higher
than expected operating costs and negative cash flow. While the Company has made
changes in the Cabo Fort Worth unit, management does not believe that future
cash flows will be adequate to recover the net book value of assets at this
restaurant. As a result, leasehold improvements were written down by $1,000,000.

Note 3 - Discontinued Operations

Note 4 - Other Acquisitions and Dispositions

In April 1997, the Company acquired all of the outstanding stock, in a tax free
exchange, of Hotels of Distinction (HOD), a hotel management company, from Alan
Tremain, O.B.E. and Jean-Claude Mathot in exchange for 300,000 shares of the
Company's common stock. In addition, Mr. Tremain became Chairman of the Board of
the Company and Mr. Mathot became President and Chief Operating Officer of the
Company. Because HOD had no assets or management contracts at the date of
purchase, the transaction, in substance, represented payment for employment
services. As a result, the Company expensed $824,000, the estimated fair market
value of the stock in 1997. In connection with the transaction, Non-Qualified
Stock Option Agreements were entered into with Mr. Tremain and Mr. Mathot, each
agreement granting options covering 250,000 shares of the Company's common stock
at an exercise price of $3.00 per share, approximately $0.25 per share in excess
of the fair market value at the date of grant. The options terminated upon
termination of employment by Mr. Tremain and Mr. Mathot as described below.

In June 1998, Mr. Tremain tendered his resignation as Chairman of the Board of
the Company effective June 26, 1998. In September 1998, Mr. Mathot tendered his
resignation as President and Director of the Company effective September 30,
1998. In accordance with their employment agreements, Mr. Tremain and Mr. Mathot
received $100,000 and $175,000, respectively, in severance compensation. Also
pursuant to their employment agreements, which required the Company to purchase
any common stock held by Mr. Tremain and Mr. Mathot at the greater of fair
market value or his cost, the Company purchased 280,000 shares of the Company's
common stock from Mr. Tremain for $700,000 and 260,000 shares of the Company's
common stock from Mr. Mathot for $656,000. As a result of these transactions,
the Company recorded an expense of $744,000 during fiscal 1998.

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 $1,650,000. In July
1997, by approval of the Company's Board of Directors, the Company sold the
building to a limited partnership controlled by Robert H. McLean, Chief
Executive Officer of the Company, for cash proceeds of $506,000 and assumption
of the related mortgage approximating $1,169,000. A disinterested majority of
the Board of Directors approved the sale of the building at a price equal to the
average of three independent, fair market value MAI appraisals. The Company
realized a gain of approximately $46,000 upon completion of the sale.

F-10
<PAGE>

Note 5 - Property, Plant and Equipment

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

<TABLE>
<CAPTION>
September 30,
--------------------
1999 1998
-------- --------
(In thousands)
<S> <C> <C>
Building and improvements................. $ 10,937 $ 10,554
Equipment................................. 2,065 1,592
Furniture and fixtures.................... 1,474 1,365
-------- --------

14,476 13,511
Less accumulated depreciation
and amortization......................... (4,930) (3,702)
-------- --------
9,546 9,809
Land...................................... 589 406
Construction in progress.................. 272 869
-------- --------

Net property, plant and equipment...... $ 10,407 $ 11,084
======== ========
</TABLE>

Note 6 - Long-Term Debt

In January 1997, the Company refinanced a bank term loan assumed in the
acquisition of the Stockyards Hotel, which is collateralized by a deed of trust
on the hotel property. This note is payable in 119 monthly installments of
$11,442 plus accrued interest with the remaining principal due July 25, 2007.
The note bears interest at the established prime rate. At September 30, 1999 and
1998, the balance owed on this debt was $1,075,000 and $1,213,000 respectively.

The prime rate at September 30, 1999 was 8.25%.

At September 30, 1999, future principal payments on long-term debt are due as
follows:

<TABLE>
<S> <C>
2000................................. $ 138
2001................................. 138
2002................................. 138
2003................................. 138
2004 and thereafter.................. 523
--------
$ 1,075
========
</TABLE>

Note 7 - Accrued Liabilities

Accrued liabilities consist of the following:

<TABLE>
<CAPTION>
September 30
--------------------
1999 1998
-------- --------
(In thousands)
<S> <C> <C>
Accrued stock purchase.................... - 656
Accrued sales tax......................... 131 149
Accrued payroll........................... 97 122
Accrued bonus............................. 114 146
Accrued severance......................... - 175
Other..................................... 670 595
-------- --------
$ 1,012 $ 1,843
======== ========
</TABLE>

F-11
<PAGE>

Note 8 - Income Taxes

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

<TABLE>
<CAPTION>
Years Ended September 30,
-----------------------------------------------
1999 1998 1997
------- ------- -------
(In thousands)
<S> <C> <C> <C>
Current:
Federal...................................... $ (561) $ (756) $ 5,049
State........................................ 69 54 430
Deferred federal...................................... (405) (586) (837)
------- ------- -------
$ (897) $(1,288) $ 4,642
======= ======= =======
</TABLE>

The income tax provision (benefit) is categorized as follows:

<TABLE>
<CAPTION>
Years Ended September 30,
-----------------------------------------------
1999 1998 1997
------- ------- -------
(In thousands)
<S> <C> <C> <C>
Continuing operations................................. $ (897) $(1,288) $(3,543)
Discontinued operations............................... - - 8,185
------- ------- -------
$ (897) $(1,288) $ 4,642
======= ======= =======
</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:

<TABLE>
<CAPTION>
September 30,
-------------------------------
1999 1998
-------- --------
Gross deferred tax liabilities (In thousands)
------------------------------
<S> <C> <C>
Depreciation $ 142 $ 204
-------- --------

Gross deferred tax assets
-------------------------
EPA liability 942 1,190
Write-down of long-lived assets 630 -
Restaurant pre-opening expenses 308 252
Other 86 181
-------- --------
1,966 1,623
Valuation allowance - -
-------- --------
1,966 1,623
-------- --------
Net deferred tax asset $ 1,824 $ 1,419
======== ========
</TABLE>

The Company's consolidated income tax 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,
-----------------------------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Tax benefit at 34% federal statutory rate............. $ (912) $(1,291) $(3,875)
Loss of deduction from HOD stock received in
tax-free exchange.................................... - - 298
Other, net............................................ 15 3 34
------- ------- -------
$ (897) $(1,288) $(3,543)
======= ======= =======
</TABLE>

F-12
<PAGE>

Note 9 - Stockholders' Equity

Stock options

In September 1989, the Board of Directors adopted the Buffton Corporation Equity
Participation Plan (the "1989 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 1989 Plan, 500,000 shares of
the Company's stock could be issued. At February 3 and August 2, 1995, 450,000
options and 50,000 options, respectively, 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. The options were exercised during 1997. At September 30,
1999 there were no shares available for grant.

In August 1996, the Board of Directors adopted the Buffton Corporation Equity
Participation Plan (the "1996 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 1996 Plan, 300,000 shares of
the Company's stock may be issued. In August and September 1996, 260,000 non-
qualified options were granted to certain officers of the Company at an exercise
price of $1.62-$1.94 per share which was the fair market value at date of grant.
The options are fully vested and must be exercised within five years of the date
of grant. The options do not terminate upon termination of the officer's
employment and may be transferred by will or by the laws of descent and
distribution. The options may be exchanged for options that are substantially
equivalent in number, percentage of ownership and price (as it relates to book
value) in each of the Company's subsidiaries. Additionally, in September 1996,
40,000 options were granted under the 1996 Plan to certain employees of the
Company at an exercise price of $1.94 which was the fair market value at date of
grant. The term of the options is for six years and become exercisable at a rate
of 20% per year beginning one year after the date of grant. The options
terminate and become unexercisable upon termination of the employee, unless such
termination is without cause or is due to death or total and permanent
disability. In 1999, 10,000 options were cancelled after certain employees
terminated their employment. At September 30, 1999 there were no shares
available for grant.

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. 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, and December 26, 1995, 80,000 and 20,000 options,
respectively, 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 grants. In
1997, 40,000 options were cancelled after certain employees terminated their
employment. At September 30, 1999, there were no shares available for grant.

A summary of outstanding options issued under the above option plans is as
follows:

<TABLE>
<CAPTION>
Weighted Weighted Weighted
1989 Average 1996 Average Employee Average
Plan Exercise Plan Exercise Plan Exercise
Options Price Options Price Options Price
------- -------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding
September 30, 1996........... 500 $ 1.50 300 $ 1.73 100 $ 1.50
Exercised.................... 500 1.50 260 1.69 10 1.50
Cancelled.................... - - - - 40 1.50
------- -------- ------- -------- -------- --------

Options outstanding
September 30, 1998 and 1997.. - - 40 1.94 50 1.50
Cancelled.................... - - 10 1.94 - -
------- -------- ------- -------- -------- --------

Options outstanding
September 30, 1999........... - $ - 30 $ 1.94 50 $ 1.50
======= ======== ======= ======== ======== ========
Options currently exercisable
September 30, 1999........... - $ - 18 $ 1.94 37 $ 1.50
======= ======== ======= ======== ======== ========
</TABLE>

F-13
<PAGE>

In connection with the acquisition of Cabo, the Company granted 150,000 options
to purchase shares of its common stock to the Seller under a non-qualified stock
option agreement. The options were granted at an exercise price of $2.00 per
share, which was the fair market value at date of grant. The option agreement
terminated on December 31, 1996 unexercised. On January 1, 1997, in connection
with the execution of a consulting agreement with the Seller, the Company
granted 150,000 options to purchase shares of its common stock under a non-
qualified stock option agreement at an exercise price of $2.25 per share through
December 31, 1997 and at $2.50 per share through December 31, 1998. These
options expired on December 31, 1998 and were not renewed.

In connection with the acquisition of HOD, the Company entered into non-
qualified stock option agreements. See Note 4.

On July 1, 1997, the Company's Board of Directors approved a non-qualified stock
option agreement with Robert H. McLean, Chairman of the Board and Chief
Executive Officer of the Company. Under the agreement, 300,000 options were
issued to purchase shares of the Company's stock at an exercise price of $3.00
(approximately $0.25 per share in excess of the fair market value at the date of
issuance). On March 1, 1999, these options were cancelled.

In December 1997, the Board of Directors adopted the BFX Hospitality Group, Inc.
1997 Employee Stock Option Plan (the "1997 Plan") which was approved by the
stockholders of the Company in February 1998. The total number of options to
purchase shares that may be granted is 200,000 shares. The maximum number of
options that may be granted to an employee in a year is 25,000. At the date of
grant, the Board of Directors will determine if the option is an incentive
option or a non-qualified option. On July 2, 1998, the Company's Board of
Directors approved an incentive stock option agreement pursuant to the terms of
the 1997 Plan with Robert Korman, Chief Financial Officer of the Company. Under
the agreement, 25,000 options were issued to purchase shares of the Company's
stock at an exercise price of $3.00 (approximately $0.87 per share in excess of
the fair market value at the date of issuance). On March 1, 1999, these options
were cancelled.

On February 10, 1999, the Company's Board of Directors approved an incentive
stock option agreement pursuant to the terms of the 1997 Plan with Robert
Korman, Chief Financial Officer of the Company. Under the agreement, 25,000
options were issued to purchase shares of the Company's stock at an exercise
price of $1.50 (which was the fair market value at date of grant). The options
are fully vested and must be exercised within five years of the date of
issuance. The options do not terminate upon termination of Mr. Korman's
employment and may be transferred by will or by the laws of descent and
distribution. In addition, 60,000 shares were granted to certain employees of
the Company at an exercise price of $1.50 per share, which was the fair market
value at the date of the grant. The term of the options is for six years and
become exercisable at a rate of 20% per year beginning one year after the date
of grant. The options terminate and become unexercisable upon termination of the
employee, unless such termination is without cause or is due to death or total
and permanent disability. At September 30, 1999, there were 115,000 shares
available for grant under the 1997 Plan.

F-14
<PAGE>

A summary of outstanding options issued under the above agreements is as
follows:

<TABLE>
<CAPTION>
Weighted Weighted
Other Non- Average 1997 Average
Qualified Exercise Plan Exercise
Options Price Options Price
---------- -------- ------- --------
<S> <C> <C> <C> <C>
Options outstanding
September 30, 1996........... 150 $ 2.00 - $ -

Issued....................... 950 2.88 - -
Exercised.................... - - - -
Cancelled.................... 150 2.00 - -
---------- -------- ------- --------

Options outstanding
September 30, 1997........... 950 2.88 - -

Issued......................... - - 25 3.00

Cancelled...................... 500 3.00 - -
---------- -------- ------- --------
Options outstanding
September 30, 1998........... 450 2.83 25 3.00

Issued......................... - - 85 1.50

Cancelled...................... 450 2.83 25 3.00
---------- -------- ------- --------

Options outstanding
September 30, 1999........... - $ - 85 $ 1.50
========== ======== ======= ========

Options currently exercisable
September 30, 1999........... - $ - 25 $ 1.50
========== ======== ======= ========
</TABLE>

The following table summarizes all stock options outstanding and exercisable at
September 30,1999:

<TABLE>
<CAPTION>
Outstanding Exercisable
--------------------------------------- ----------------------
Exercise Weighted Weighted Weighted
Price Average Average Average
Range Shares Remaining Life Exercise Price Shares Exercise Price
----- ------ -------------- -------------- ------ --------------
<S> <C> <C> <C> <C> <C>
$1.50-1.94 165,000 5.0 $1.58 80,000 $1.60
</TABLE>

The Company applies APB Opinion 25, "Accounting for Stock Issued To Employees",
and related interpretations in accounting for options granted under the Plans.
Accordingly, no compensation cost has been recognized at the grant date for
options issued at fair market value. Had compensation cost for the Company's
stock option plan been determined based on the fair value at grant date for
awards in fiscal 1999, 1998 and 1997 in accordance with the provisions of FAS
123, "Accounting for Stock-Based Compensation", the Company's net income (loss)
and diluted earnings per share would have been adjusted to the pro forma amounts
indicated below (in thousands, except per share amount):

<TABLE>
<CAPTION>
Fiscal 1999 Fiscal 1998 Fiscal 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net income (loss), as reported $(1,785) $(2,509) $6,658
Net income (loss), pro forma (1,806) (2,533) 5,716
Diluted earnings per share, as reported (0.44) (0.47) 0.96
Diluted earnings per share, pro forma (0.45) (0.47) 0.82
</TABLE>

F-15
<PAGE>

The fair value of each option grant is calculated on the date of grant using the
Black Scholes option-pricing model based upon the following assumptions:

<TABLE>
<CAPTION>
Fiscal 1999 Fiscal 1998 Fiscal 1997
------------ ------------ ------------
<S> <C> <C> <C>
Expected volatility 50% 60% 45%
Risk-free interest rate 6% 6% 6%
Expected lives 5-6 years 5 years 1-5 years
Dividend yield 0% 0% 0%
</TABLE>

The weighted average fair value of options granted during fiscal 1999, 1998 and
1997 was $.92, $1.03 and $1.00, respectively.

Employee notes for stock purchases

On March 21, 1997, Robert H. McLean, Robert Korman and Walter D. Rogers, then
President of CTI and a Director of the Company, exercised outstanding options to
purchase 500,000 shares at $774,000, 110,000 shares at $169,400 and 150,000
shares at $247,000, respectively. The fair market value at the date of exercise
was $2.56 per share. Pursuant to the terms of their stock option agreements,
each paid the purchase price by executing a promissory note, with full recourse,
in the principal amount of the respective purchase price payable one year from
date of exercise. The notes are recorded as a reduction of stockholders' equity
in the Company's accompanying Consolidated Balance Sheet. The Company received a
tax benefit of approximately $256,000, which has been credited directly to paid
in capital.

In October 1997, pursuant to the terms of their respective note agreements, Mr.
McLean and Mr. Korman tendered to the Company 187,409 and 41,017 shares,
respectively, of the Company's stock to repay their loans. The shares were
tendered on October 8, 1997 at a value of $4.13 per share, which was the closing
price per share of the Company's common stock on that date.

In October 1997, pursuant to the terms of his note agreement, Mr. Rogers
tendered to the Company 29,904 shares of its common stock owned by Mr. Rogers in
payment of one-half of the principal balance of the note in the amount of
$123,500. Mr. Rogers tendered the shares on October 8, 1997 at a value of $4.13
per share, which was the closing price per share of the Company's common stock
on that date. The Company also amended the note described above, as of October
21, 1997, to (i) extend the due date for the principal sum of $26,500 until
February 3, 2000; (ii) extend the due date for the principal sum of $97,000
until September 6, 2001; (iii) eliminate any interest charges prior to maturity;
and (iv) provide for the payment of the note by the delivery of shares of the
Company's common stock valued at the greater of book or market value. On June
25, 1999, pursuant to the terms of this agreement, Mr. Rogers tendered to the
Company 33,021 shares of its common stock in payment for the remainder of his
principal balance of his note balance in the amount of $123,500.

Subsequent Events

In October 1999, the Company's Board of Directors approved an incentive stock
option agreement pursuant to the terms of the 1997 Plan with Robert Korman,
Chief Financial Officer of the Company. Under the agreement, 25,000 options were
issued to purchase shares of the Company's stock at an exercise price of $1.00
(which was the fair market value at date of grant). The options are fully vested
and must be exercised within five years of the date of issuance. The options do
not terminate upon termination of Mr. Korman's employment and may be transferred
by will or by the laws of descent and distribution. In addition, 40,000 shares
were granted to certain employees of the Company at an exercise price of $1.00
per share, which was the fair market value at the date of the grant. The term of
the options is for six years and become exercisable at a rate of 20% per year
beginning one year after the date of grant. The options terminate and become
unexercisable upon termination of the employee, unless such termination is
without cause or is due to death or total and permanent disability.

In October 1999, the Company's Board of Directors approved non-qualified stock
option agreements with Robert H. McLean, Chairman of the Board and Chief
Executive Officer of the Company and Robert Korman, Chief Financial Officer.
Under the agreement, 300,000 and 25,000 options, respectively were issued to
purchase shares of the Company's stock at an exercise price of $1.00 (which was
the fair market value at the date of grant). The options are fully vested and
must be exercised within five years of the date of issuance. The options do not
terminate upon termination of employment and may be transferred by will or by
the laws of descent and distribution.

F-16
<PAGE>

Note 10 - 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 a discretionary amount to a trust each year. The amounts
charged against income for the Company's contribution for the years ended
September 30, 1999, 1998 and 1997 were $74,000, $40,000 and $30,000,
respectively.

Note 11 - Disclosures About Fair Value of Financial Instruments

The Company's financial instruments include cash and cash equivalents,
receivables, accounts payable, accrued liabilities and amounts outstanding under
a certain debt agreement. Management believes the fair values of these
instruments approximate the related carrying values as of September 30, 1999
because of their short-term nature and/or variable interest rates.

Note 12 - 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, 1999, 1998 and 1997 was
$543,000, $439,000 and $467,000, respectively.

At September 30, 1999, future minimum payments for non-cancelable operating
leases for facilities and equipment with terms in excess of one year were as
follows (in thousands):

<TABLE>
<S> <C>
2000..................................... $ 357
2001..................................... 357
2002..................................... 357
2003..................................... 327
2004 and thereafter...................... 1,545
------
$2,943
======
</TABLE>

F-17
<PAGE>

Note 13 - Settlement of Shareholder Litigation

In August 1997, the Company announced the settlement of its litigation against
Steel Partners II, LP, which held 655,300 shares of the Company's stock, and
Ryback Management Corporation, which held 974,000 shares through Linder Mutual
Funds (which is managed by Ryback). The Company had alleged, among other things,
that Steel, Ryback and others had been operating as a "group" under section
13(d) of the Securities Exchange Act. Under the terms of the settlement,
Ryback's shares of the Company's common stock were purchased by the Company for
total consideration of $2,240,200; Steel's shares of the Company's common stock
were purchased for total consideration of $1,638,250, a figure which includes
the reimbursement of certain expenditures incurred by Steel Partners. The
1,629,300 shares of the Company's common stock held by Steel and Ryback were
thus acquired for total consideration of $3,878,450, or $2.38 per share, the
approximate fair market value at that time. In addition, the defendants agreed
that for a period of ten years none of them or their affiliates or associates
will, among other things, purchase the Company's securities, solicit proxies
with respect to the Company's voting securities, or form or participate in any
group with respect to the Company's securities.

Note 14 - Supplemental Disclosures of Cash Flow Information

Supplemental schedule of cash payments:

<TABLE>
<CAPTION>
Years Ended September 30,
-------------------------
1999 1998 1997
------ ------ ------
(In thousands)
<S> <C> <C> <C>
Cash paid for:
Interest.......................... $ 92 $ 120 $ 193
Income taxes...................... 385 112 5,218
</TABLE>

Supplemental schedule of noncash investing and financing activities:

During the years ended September 30, 1999, 1998 and 1997, the Company issued
45,000 (all from treasury), 45,000 (all from treasury) and 500,000 (including
200,000 shares from treasury), respectively, of common stock to key employees
and certain officers and directors as payment for services and bonuses. The
Company recognized $47,000, $114,000 and $1,237,000, respectively, as
compensation related to the issuance of the shares which amount represented fair
market value at date of issuance.

In April 1997, the Company acquired all the outstanding stock, in a tax free
exchange, of Hotels of Distinction in exchange for 300,000 shares of the
Company's common stock.

In October 1997, Mr. McLean, Mr. Korman and Mr. Rogers tendered to the Company
187,409, 41,017 and 29,904 shares, respectively, of the Company's stock to repay
their loans of $774,000, $169,400 and $123,500, respectively.

In July 1999, Mr. Rogers tendered to the Company 33,021 shares of the Company's
stock to repay his loan of $123,500.

F-18
<PAGE>

SCHEDULE IX
-----------

BFX HOSPITALITY GROUP, INC.
---------------------------

Valuation and Qualifying Accounts

<TABLE>
<CAPTION>
Balance Charged to Charged to Balance
at beginning costs and other 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, 1997 $ 35 $ - $ (35)/(a)/ $ - -

Reserve for estimated losses
on notes receivable:

September 30, 1997 - 635 - (635) -
</TABLE>

Includes amounts associated with CTI (see Note 2).

F-19
<PAGE>

BFX HOSPITALITY GROUP, INC.
---------------------------

1999 FORM 10-K

EXHIBIT INDEX

Exhibits
- --------

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).

3.5 Restated by-laws of Buffton Corporation dated April 7, 1997
incorporated herein by reference to Form 10-Q dated March 31, 1997.

3.6 Amended and Restated Certificate of Incorporation of Buffton
Corporation changing name of Company to BFX Hospitality Group
incorporated by reference to Form 10-Q dated June 30, 1997.

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

10 Asset Purchase Agreement dated January 19, 1996 incorporated herein by
reference to Form 8-K dated January 19, 1996.
<PAGE>

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

10.2 Asset Purchase Agreement of Current Technology, Inc. incorporated
herein by reference to the Definitive Proxy Statement dated April 23,
1997.

10.3 Asset Purchase Agreement between Main Street Realty, Inc. and 100 Main
Realty Ltd., a limited partnership controlled by Robert H. McLean, CEO
of the Company, dated July 1, 1997 incorporated herein by reference to
Form 10-K dated September 30, 1998.

21 Subsidiaries of the Company

23 Consent of Independent Accountants

27 Financial Data Schedule

<PAGE>

BFX HOSPITALITY GROUP, INC.
---------------------------

EXHIBIT 21

The following schedule lists the active subsidiaries of BFX Hospitality Group,
Inc. as of September 30, 1999:

<TABLE>
<CAPTION>
Corporate Name Organization Ownership Percent
- -------------- ------------ -----------------
<S> <C> <C>
BFX Hospitality Group, Inc. Delaware Parent
BFX Holdings, Inc. Nevada 100
American Food Classics, Inc. Nevada 100
Lucile's Stateside Bistro-Texas, Inc. Texas 100
Cabo Restaurant Company Nevada 100
Cabo-Shepherd, Inc. Texas 100
Cabo-Travis, Inc. Texas 100
Cabo-Fort Worth #1, Inc. Texas 100
BFX-LA, Inc. Louisiana 100
Cat's Meow, Inc. Louisiana 100
Boutique Inns, Inc. Nevada 100
Stockyards Hotel, Inc. Texas 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 our report dated November 15, 1999 appearing on page F-2 of BFX
Hospitality Group, Inc's Form 10-K for the year ended September 30, 1999. We
also consent to the reference to us under the heading "Experts" in such
Prospectus.

/s/ PricewaterhouseCoopers LLP

PRICEWATERHOUSECOOPERS LLP

Fort Worth, Texas
December 21, 1999

<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 3,036
<SECURITIES> 0
<RECEIVABLES> 286
<ALLOWANCES> 0
<INVENTORY> 208
<CURRENT-ASSETS> 0
<PP&E> 10,407
<DEPRECIATION> 4,930
<TOTAL-ASSETS> 18,993
<CURRENT-LIABILITIES> 3,102
<BONDS> 0
0
0
<COMMON> 389
<OTHER-SE> 12,995
<TOTAL-LIABILITY-AND-EQUITY> 18,993
<SALES> 17,212
<TOTAL-REVENUES> 17,212
<CGS> 4,185
<TOTAL-COSTS> 19,940
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 92
<INCOME-PRETAX> (2,682)
<INCOME-TAX> 897
<INCOME-CONTINUING> (1,785)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,785)
<EPS-BASIC> (.44)
<EPS-DILUTED> (.44)

</TABLE>