<PAGE>
 
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549

                                   Form 10-Q


 X   Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
--- 
     Act of 1934 For the quarterly period ended June 30, 1997 or

     Transition report pursuant to Section 13 or 15(d) of the Securities
--- 
     Exchange Act of 1934 

     For the transition period from ________ to __________
    
     Commission file number 1-9822

                           BFX HOSPITALITY GROUP, INC.
             -----------------------------------------------------
             (Exact Name of Registrant as Specified in its Charter)

            Delaware                                  75-1732794
---------------------------------------  --------------------------------------
(State or Other Jurisdiction of           (IRS Employer Identification No.)
Incorporation or Organization)

             226 Bailey Avenue, Suite 101, Fort Worth, Texas 76107
             -----------------------------------------------------
             (Address and zip code of principal executive offices)

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

                              Buffton Corporation
        ---------------------------------------------------------------
        (Former Name, Former Address and Former Fiscal Year, If Changed
                              Since Last Report)

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 
    ---     ---

                    APPLICABLE ONLY TO ISSUERS INVOLVED IN
                       BANKRUPTCY PROCEEDINGS DURING THE
                             PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.

Yes       No    
    ---     ---
                     APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

                                         Number of shares outstanding at:
           Class                                August 2, 1997
 --------------------------              --------------------------------
Common stock, $.05 par value                        7,677,828

                                       1
<PAGE>
 
                          BFX HOSPITALITY GROUP, INC.

                                     Index
                                     -----



 
                                                                            Page
                                                                            ----
 
Part I - Financial Information............................................     3
 
Item 1 - Financial Statements.............................................     3
 
Consolidated Condensed Balance Sheets June 30, 1997 (Unaudited)
  and September 30, 1996..................................................     3
 
Consolidated Condensed Statements of Operations (Unaudited)
  Three Months Ended June 30, 1997 and 1996...............................     4
 
Consolidated Condensed Statements of Operations (Unaudited)
  Nine Months Ended June 30, 1997 and 1996................................     5
 
Consolidated Condensed Statements of Cash Flow (Unaudited)
  Nine Months Ended June 30, 1997 and 1996................................     6
 
Supplemental Disclosures of Cash Flow Information (Unaudited).............     6
 
Notes to Consolidated Condensed Financial Statements (Unaudited)..........     7
 
Item 2 - Management's Discussion and Analysis of Financial Condition and
  Results of Operations...................................................    12
 
Part II - Other Information...............................................    16
 
Signatures................................................................    17
 

                                       2
<PAGE>
 
                          BFX HOSPITALITY GROUP, INC.
                                        
                     Consolidated Condensed Balance Sheets
                     -------------------------------------
<TABLE>
<CAPTION>
 
                                                                        June 30,    September 30,
                                                                          1997           1996
                                                                       ----------   -------------
                                                                       (Unaudited)
                                                                             (In thousands)
<S>                                                                       <C>             <C>
                    Assets
                    ------
Current assets:
  Cash and cash equivalents                                               $25,581         $ 1,659
  Receivables, net of allowance for
    doubtful accounts of $35,000 at September 30, 1996...............       1,962           3,370
  Inventories........................................................          76           1,396
  Prepaid and other current assets...................................         149             492
                                                                          -------         -------
    Total current assets.............................................      27,768           6,917
                                                                          -------         -------
 
Property, plant and equipment, at cost:
  Land, building and improvements....................................      10,915          12,257
  Less:  Accumulated depreciation and amortization...................      (2,648)         (2,626)
                                                                          -------         -------
   Net property, plant and equipment.................................       8,267           9,631
                                                                          -------         -------
 
Patents, net of accumulated amortization of
   $1,529,000........................................................           -           1,451
Goodwill, net of amortization of $1,117,000 and
   $845,000, respectively............................................       3,849           4,120
Long-term notes receivable...........................................           -             540
Other assets.........................................................         356             505
                                                                          -------         -------
                                                                          $40,240         $23,164
                                                                          =======         =======
       Liabilities and Stockholders' Equity
       ------------------------------------
Current liabilities:
  Current portion of long-term debt..................................     $   187         $   187
  Accounts payable...................................................         400           1,152
  Accrued liabilities................................................       5,804           1,524
  Income taxes.......................................................       4,827             311
                                                                          -------         -------
   Total current liabilities.........................................      11,218           3,174
 
Long - term debt.....................................................       2,353           2,493
Deferred income taxes................................................           4               4
                                                                          -------         -------
   Total liabilities.................................................      13,575           5,671
                                                                          -------         -------
 
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......................................         390             337
  Additional paid-in capital.........................................      16,328          14,354
  Retained earnings..................................................      10,206           3,158
  Treasury stock, at cost, 109,050 and 183,350, shares respectively..        (259)           (356)
                                                                          -------         -------
 
   Total stockholders' equity........................................      26,665          17,493
                                                                          -------         -------
                                                                          $40,240         $23,164
                                                                          =======         =======
</TABLE>
See accompanying notes to unaudited Consolidated Condensed Financial Statements.

                                       3
<PAGE>
 
                          BFX HOSPITALITY GROUP, INC.

          Consolidated Condensed Statements of Operations (Unaudited)
          -----------------------------------------------------------
<TABLE>
<CAPTION> 

                                                                    Three Months
                                                                   Ended June 30,
                                                              -------------------------
                                                                1997             1996
                                                              --------         -------- 
                                                              (In thousands, except per
                                                                   share amounts)

<S>                                                           <C>              <C> 
Net revenues.............................................     $  2,646         $  2,602
                                                              --------         --------   
                                                                                
Cost of goods sold (exclusive of depreciation)...........          551              589
Selling, general and administrative......................       12,065            2,099
Depreciation and amortization............................          218              253
                                                              --------         -------- 
   Total operating costs and expenses                           12,834            2,941
                                                              --------         -------- 
                                                                                
Net loss from continuing operations before other income                         
 and income taxes........................................      (10,188)            (339)
                                                              --------         -------- 
                                                                                
Other income (expense):                                                         
  Interest income........................................          112               24
  Interest expense.......................................          (56)             (59)
                                                              --------         -------- 
                                                                    56              (35)
                                                              --------         -------- 
                                                                                
Loss from continuing operations before income taxes......      (10,132)            (374)
Income tax benefit.......................................       (3,026)            (135)
                                                              --------         -------- 
Loss from continuing operations..........................       (7,106)            (239)
                                                              --------         -------- 
                                                                                
Discontinued operations:                                                        
 Income from operations, net of income tax expense                              
  of $267,000 and $339,000 respectively..................          437              577
 Gain on disposal, net of income tax expense                                    
  of $7,252,000..........................................       13,003                -
                                                              --------         -------- 
Income from discontinued operations......................       13,440              577
                                                              --------         -------- 
                                                                                
Net income...............................................     $  6,334         $    338
                                                              ========         ========
                                                                                
                                                                                
Income (loss) per average common share:                                         
Continuing operations....................................     $   (.93)        $   (.04)
Discontinued operations..................................         1.76              .09
                                                              --------         -------- 
                                                                                
Net income...............................................     $    .83         $    .05
                                                              ========         ========
                                                                                
Weighted average common shares outstanding...............        7,658            6,727
                                                              ========         ========
                                                          
</TABLE>
                                        


See accompanying notes to unaudited Consolidated Condensed Financial Statements.

                                       4
<PAGE>
 
                          BFX HOSPITALITY GROUP, INC.

          Consolidated Condensed Statements of Operations (Unaudited)
          -----------------------------------------------------------

<TABLE> 
<CAPTION> 

                                                                 Nine Months
                                                                Ended June 30,
                                                           -------------------------
                                                             1997             1996
                                                           --------          -------  
                                                           (In thousands, except per
                                                                  share amounts)
<S>                                                        <C>               <C> 
Net revenues.............................................  $  7,993          $ 6,951
                                                           --------          -------
                                                                     
Cost of goods sold (exclusive of depreciation)...........     1,703            1,585
Selling, general and administrative......................    16,251            5,537
Depreciation and amortization............................       736              734
                                                           --------          -------
   Total operating costs and expenses                        18,690            7,856
                                                           --------          -------
                                                                     
Net loss from continuing operations before other income              
  and income taxes.......................................   (10,697)            (905)
                                                           --------          -------
                                                                     
Other income (expense):                                              
  Interest income........................................       181               60
  Interest expense.......................................      (164)             (86)
                                                           --------          -------
                                                                 17              (26)
                                                           --------          -------
                                                                     
Loss from continuing operations before income taxes......   (10,680)            (931)
Income tax benefit.......................................    (3,216)            (406)
                                                           --------          -------
Loss from continuing operations..........................    (7,464)            (525)
                                                           --------          -------
                                                                     
Discontinued operations:                                             
 Income from operations, net of income tax expense                   
  of $933,000 and $815,000, respectively.................     1,509            1,389
 Gain on disposal, net of income tax expense                         
  of $7,252,000..........................................    13,003               -
                                                           --------          -------
Income from discontinued operations......................    14,512            1,389
                                                           --------          -------
                                                                     
Net income...............................................  $  7,048          $   864
                                                           ========          =======
                                                                     
                                                                     
Income (loss) per average common share:                              
Continuing operations....................................  $  (1.07)         $  (.08)
Discontinued operations..................................      2.08              .22
                                                           --------          -------
                                                                     
Net income...............................................  $   1.01          $   .14
                                                           ========          =======
                                                                     
Weighted average common shares outstanding...............     6,976            6,360
                                                           ========          =======
 
</TABLE>

See accompanying notes to unaudited Consolidated Condensed Financial Statements.

                                       5
<PAGE>
 
                          BFX HOSPITALITY GROUP, INC.
                          ---------------------------

          Consolidated Condensed Statements of Cash Flow (Unaudited)
          ----------------------------------------------------------
<TABLE> 
<CAPTION> 

                                                            Nine Months
                                                        Ended June 30, 1997
                                                        -------------------
                                                         1997         1996
                                                        -------     -------
                                                          (In thousands)
                                                   
                                                   
<S>                                                     <C>         <C>
Net cash provided by operating activities.........      $    49     $ 1,347
                                                        -------     -------
                                                                 
Cash flows from investing activities:                            
  Additions to property, plant and equipment......         (566)     (1,005)
  Net proceeds from sale of operating assets......       24,744           -
  Additions to other assets.......................            -        (339)
  Acquisitions, net of cash acquired..............            -      (1,007)
                                                        -------     -------
Net cash provided by investing activities.........       24,178      (2,351)
                                                        -------     -------
                                                                 
Cash flows from financing activities:                            
  Additions to long-term debt.....................            -       1,200
  Repayments of long-term debt....................         (140)        (72)
  Treasury stock purchases........................         (165)          -
                                                        -------     -------
Net cash provided by financing activities.........         (305)      1,128
                                                        -------     -------
                                                                 
Net increase in cash..............................       23,922         124
Cash and cash equivalents at beginning of period..        1,659           7
                                                        -------     -------
                                                                 
Cash and cash equivalents at end of period........      $25,581     $   131
                                                        =======     =======
 
</TABLE>

               Supplemental Disclosures of Cash Flow Information
               -------------------------------------------------


Supplemental cash flow information (unaudited):
<TABLE>
<CAPTION>
                                                      Nine Months
                                                     Ended June 30,
                                                   ------------------
                                                   1997      1996
                                                   -----  -----------
                                                     (In thousands)
<S>                                                <C>    <C>
Cash paid for:                                
  Interest...................................      $ 164   $       99
  Income taxes...............................        324           52
                                              
Noncash investing and financing activities:   
  Fair value of assets acquired..............              $    4,660
  Liabilities assumed........................                   1,754
  Stock issued...............................                   1,804
                                                          -----------
  Cash paid..................................                   1,102
  Less:  Cash acquired.......................                      95
                                                          -----------
  Net cash paid for acquisitions.............             $     1,007
                                                          ===========
 
</TABLE>
See accompanying notes to unaudited Consolidated Condensed Financial Statements.

                                       6
<PAGE>
 
                          BFX HOSPITALITY GROUP, INC.
                                        
        Notes to Consolidated Condensed Financial Statements (Unaudited)
        ----------------------------------------------------------------


Note A
------

          In May 1997, the Company's stockholders approved a proposal at the
Annual Meeting of 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 Amended and Restated Certificate of Incorporation.

          In the opinion of management, the accompanying consolidated condensed
financial statements contain all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the financial position of BFX
Hospitality Group, Inc. (the Company), as of June 30, 1997, the results of its
operations for the three and nine month periods ended June 30, 1997 and 1996 and
its cash flows for the nine month periods ended June 30, 1997 and 1996.

          The accounting policies followed by the Company are set forth in Note
1 to the Company's financial statements in the 1996 Buffton Corporation Annual
Report on Form 10-K/A.


Note B
------

          The results of operations for the three and nine month periods ended
June 30, 1997 are not necessarily indicative of the results to be expected for
the full year.


Note C
------

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

          In February 1997, the Financial Accounting Standards Board ("FASB")
issued Financial Accounting Standard No. 128, Earnings per Share ("FAS 128"),
which is effective for financial statements issued for periods ending after
December 15, 1997, including interim periods. Effective December 31, 1997, the
Company will adopt FAS 128, which establishes standards for computing and
presenting earnings per share ("EPS"). The statement requires dual presentations
of basic and diluted EPS on the face of the income statement for entities with
complex capital structures and requires a reconciliation of the numerator and
denominator of the basic EPS calculation to the numerator and denominator of the
diluted EPS calculation.  Basic EPS excludes the effect of potentially dilutive
securities while diluted EPS reflects the potential dilution that would have
occurred if securities or other contracts to issue common stock had been
exercised, converted or resulted in the issuance of common stock that would have
then shared in the earnings of the entity.  Had the Company already adopted the
provision of this statement, there would have been no impact on the EPS amounts
presented.

                                       7
<PAGE>
 
Note D
------

          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 $25,500,000 in cash and assumed approximately $1,300,000 in
liabilities.  Danaher also will pay the Company approximately $648,000 based on
a purchase price adjustment based on the Net Tangible Assets, as defined in the
sales agreement at the closing date.  This amount is expected to be received
during the fourth quarter of fiscal 1997 and is recorded as a receivable in the
Company's Consolidated Condensed Balance Sheet.  The Company also 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 his employment contract, 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.  The sale of CTI was accounted for as a discontinued operation.


Note E
------

          In April 1997, the Company acquired all of the outstanding stock 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 has no assets or management contracts at the date of
purchase, the transaction, in substance, represents payment for employment
services.  As a result, the Company expensed $825,000, the estimated fair market
value of the stock, during the quarter ending June 30, 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 $.25 per share in excess of the fair market value at the date of
grant.  The options are fully vested and must be exercised, if at all, within
five years of the date of grant.  The options terminate upon termination of
employment by the employee or a termination by the Company for cause.


Note F
------

          Effective January 1, 1996, the Company entered into an agreement to
purchase the assets of Cabo Tacobar One, Ltd., a Mexican restaurant concept with
Central and South American influences located in Houston, Texas, for $589,000 in
cash, 375,000 shares of the Company's common stock (with an estimated fair
market value of $656,000), and a one year option to purchase an additional
150,000 shares of the Company's common stock at a price of $2.00 per share.
Additionally, the Company issued 76,500 shares of its common stock for
commissions incurred in connection with the acquisition which resulted in
increased acquisition costs of $153,000.  Excess of purchase price over fair
value of net tangible assets acquired, recorded as Goodwill, approximates
$1,300,000 and is being amortized on a straight line basis over 15 years.
Effective January 1, 1996, the Company also entered into an agreement to
purchase the assets and assume certain liabilities of the Stockyards Hotel,
located in Fort Worth, Texas, for $500,000 in cash, 450,000 shares of the
Company's common stock (with an estimated fair market value of 

                                       8
<PAGE>
 
$788,000) and the refinancing of a $1,600,000 bank term loan. Under this
agreement, the Company guaranteed, until March 15, 1997, a sales price of $2.05
per share for any of this stock that may be sold. No liability was incurred
under the guarantee agreement. These acquisitions were accounted for under
purchase accounting and are included in the Company's results of operations
beginning on the acquisitions' effective date of January 1, 1996.

          Unaudited proforma results from continuing operations, as if the
acquisitions had occurred at the beginning of fiscal 1996 are as follows:

                                                Nine Months Ended
                                                     June 30,
                                                       1996
                                                     -------

     Revenues.....................................   $ 7,749
     Net loss from continuing operations..........      (482)
     Primary income per average common share......      (.08)


Note G
------

          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 requires 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 the 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.

          During the nine months ended June 30, 1997 and 1996, $199,000 and 
$229,000, respectively, were 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 fieldwork 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.

                                       9
<PAGE>
 
          Additional fieldwork provided for in the RDWP Addendum was 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. On July 16, 1996, the Company and its legal and environmental
representatives met with the EPA to review the EPA's written response to this
revised remedy. The revised remedy would eliminate certain requirements of the
existing ROD and would primarily include removing and treating contaminated
soil, significantly reducing the time period for remediation.

          In April 1997, the EPA issued a proposed plan setting forth the 
expedited remedy discussed above which was finalized in July 1997. As a result,
during the quarter ending June 30, 1997, the Company expensed $3,000,000, the
estimated net present value of the future costs of implementing this alternative
remedy. Additionally, all prior costs incurred, approximating $870,000 through
April 30, 1997, associated with the implementation of the original ROD, were
expensed.

          During the quarter ended June 30, 1997, the Company was told that the
 EPA plans to seek reimbursement for monies spent by the EPA at the Company's
Vestal, New York property. The amount of the costs accrued by the EPA over
approximately ten years, from October 1987 through April 1997, is unclear at
this time. The EPA has continued to recalculate its costs and has revised its
estimate upward, as recently as July 11, 1997, when it indicated that its
adjusted past costs approximated $1,245,000. The EPA's amount does not include
interest, which the EPA has indicted that it will seek from the Company. The EPA
also has stated that it is prepared to conduct negotiations with the Company's
about these costs, including considering applying its Orphan Share Policy. That
policy may be used by the EPA to reduce the amount of costs required to be paid,
when parties liable are no longer in existence. Robintech, Inc., which owned and
operated the Vestal property until 1982, when it sold the property to the
Company, is no longer in existence. If EPA applies the Orphan Share Policy, the
costs EPA seeks from the Company could be reduced by approximately 70 percent.
The EPA has informed the Company that its Orphan Share Policy is applicable only
if the Company enters into a consent decree with EPA and the Justice Department.
Although the Company has not agreed to pay the EPA's costs and will vigorously
contest any such claim by the EPA, the Company has accrued $500,000 for future
EPA claims.



Note H
------

          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 material
adverse effect on the Company's financial position.

                                       10
<PAGE>
 
Note I
------

          On March 21, 1997, Robert H. McLean, Chief Executive Officer and 
Director of the Company, Robert Korman, Chief Financial Officer 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
in the principal amount of the respective purchase price payable one year from
date of exercise and bearing interest of 8% per annum, both principal and
interest payable at maturity. The notes are recorded as a receivable in the
Company's Consolidated Condensed Balance Sheet. For financial statement
purposes, there is no gain or loss incurred in this transaction; however, the
Company will receive a tax deduction of approximately $756,000.

                                       11
<PAGE>
 
                          BFX HOSPITALITY GROUP, INC.
                                        
PART I - FINANCIAL INFORMATION
------------------------------

Item 2. - Management's Discussion and Analysis of Financial Condition and
          Results of Operations


GENERAL INFORMATION

          At June 30, 1997, the Company consists of operations in the 
hospitality industry. During the year ended September 30, 1996 and the nine
months ended June 30, 1997, the Company entered into the following acquisition
and disposition transactions.

          Effective January 1, 1996, the Company entered into agreements to 
purchase the assets of Cabo Tacobar One, Ltd. (Cabo), located in Houston, Texas
and to purchase the assets and assume certain liabilities related to the
Stockyards Hotel (SYH), located in Fort Worth, Texas. See Note E of Notes to
Consolidated Condensed Financial Statements for details of the acquisitions.

          In April 1997, the Company entered into an agreement to acquire the 
Stock of Hotels of Distinction, Inc. (HOD). See Note E of Notes to Consolidated
Condensed Financial Statements for details of the acquisition.

          Effective June 1, 1997, the Company sold the operations of Current
Technology, Inc. (CTI), headquartered in Irving, Texas. See Note D of Notes to
Consolidated Condensed 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) 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 OPERATIONS

          Revenues for the 1997 three month period increased 2% compared to 
1996 due to increased revenues at Cat's Meow (primarily due to increased
tourists in New Orleans as well as a menu price increase of approximately 6%)
and Cabo (due to expansion in May 1996) offset by reduction in revenues by sale
of River Rat's in July 1996. Revenues for the 1997 nine month period increased
15%, due to the inclusion of the results of operations of Cabo and SYH effective
January 1, 1996.

                                       12
<PAGE>
 
          Consolidated costs of sales during the 1997 three and six month 
periods versus 1996 decreased 6% and increased 7%. As a percent of related
revenue, these costs were 21% during both the 1997 three and six months periods
versus 23% a year earlier. The increase in absolute dollars was due to increased
sales and the decrease in costs as a percent of revenue is due to increased
operating efficiencies.

          Consolidated selling, general and administrative expenses for the 1997
three and six month periods increased 475% and 194%, respectively, compared to
1996.  The primary reason for the increase was the expense associated with
acquisition of Hotels of Distinction, the charge incurred as a result of the
amended Record of Discussion regarding the Company's Vestal, New York superfund
site, bonus to the Company's management as a result of the sale of CTI, the
reserve for  collection of certain notes receivable and certain concept
development expenditures.  See liquidity and capital resource for further
details.

          The increase in interest income to $181,000 for the 1997 nine month 
period from $60,000 in 1996 and to $112,000 for the 1997 three month period from
$24,000 in 1996 is due to the interest income earned on the proceeds of the CTI
sale.

          The increase in interest expense to $164,000 for the 1997 nine month
period from $86,000 in 1996 is primarily due to the refinancing of a $1,600,000
bank term loan assumed in connection with the acquisition of SYH offset by the
reduction of debt outstanding under a line of credit with a bank. Interest
expense for the 1997 three month period approximated the 1996 amount.

          During the three months ended June 30, 1997, the Company reported a 
loss from continuing operations before income taxes of $10,132,000 versus a loss
of $374,000 in 1996. This increased loss is due to increased selling, general
and administrative losses discussed above. During the nine months ended June 30,
1997, the Company reported a loss from continuing operations before income taxes
of $10,680,000 versus $931,000 in 1996.


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 requires 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 the 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.

          During the nine months ended June 30, 1997 and 1996, $199,000 and 
$229,000, respectively, were 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 

                                       13
<PAGE>
 
correctness of the remedy provided for in the ROD, additional fieldwork 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.

          Additional fieldwork provided for in the RDWP Addendum was 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. On July 16, 1996, the Company and its legal and environmental
representatives met with the EPA to review the EPA's written response to this
revised remedy. The revised remedy would eliminate certain requirements of the
existing ROD and would primarily include removing and treating contaminated
soil, significantly reducing the time period for remediation.

          In April 1997, the EPA issued a proposed plan setting forth the 
expedited remedy discussed above which was finalized in July 1997. As a result,
during the quarter ending June 30, 1997, the Company expensed $3,000,000, the
estimated net present value of the future costs of implementing this alternative
remedy. Additionally, all prior costs incurred, approximating $870,000 through
April 30, 1997, associated with the implementation of the original ROD, were
expensed.

          During the quarter ended June 30, 1997, the Company was told that 
the EPA plans to seek reimbursement for monies spent by the EPA at the Company's
Vestal, New York property. The amount of the costs accrued by the EPA over
approximately ten years, from October 1987 through April 1997, is unclear at
this time. The EPA has continued to recalculate its costs and has revised its
estimate upward, as recently as July 11, 1997, when it indicated that its
adjusted past costs approximated $1,245,000. The EPA's amount does not include
interest, which the EPA has indicted that it will seek from the Company. The EPA
also has stated that it is prepared to conduct negotiations with the Company's
about these costs, including considering applying its Orphan Share Policy. That
policy may be used by the EPA to reduce the amount of costs required to be paid,
when parties liable are no longer in existence. Robintech, Inc., which owned and
operated the Vestal property until 1982, when it sold the property to the
Company, is no longer in existence. If EPA applies the Orphan Share Policy, the
costs EPA seeks from the Company could be reduced by approximately 70 percent.
The EPA has informed the Company that its Orphan Share Policy is applicable only
if the Company enters into a consent decree with EPA and the Justice Department.
Although the Company has not agreed to pay the EPA's costs and will vigorously
contest any such claim by the EPA, the Company has accrued $500,000 for future
EPA claims.

          In April 1997, the Company acquired all of the outstanding stock 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 has no assets or management contracts at the date of
purchase, the transaction, in substance, represents payment for employment
services. As a result, 

                                       14
<PAGE>
 
the Company expensed $825,000, the estimated fair market value of the stock,
during the quarter ending June 30, 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 $.25 per
share in excess of the fair market value at the date of grant. The options are
fully vested and must be exercised, if at all, within five years of the date of
grant. The options terminate upon termination of employment by the employee or a
termination by the Company for cause.

          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 $25,500,000 in cash and assumed approximately $1,300,000 in
liabilities. Danaher also will pay the Company approximately $648,000 based on a
purchase price adjustment based on the Net Tangible Assets, as defined in the
sales agreement at the closing date. This amount is expected to be received
during the fourth quarter of fiscal 1997 and is recorded as a receivable in the
Company's Consolidated Condensed Balance Sheet. The Company also 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 his employment contract, 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. The sale of CTI was accounted for as a discontinued operation.

          In February 1997, the Company began construction on a second Cabo 
unit to be located in the historical district of downtown Houston, Texas. The
unit is expected to open during the fourth quarter of fiscal 1997. The Company
has signed a lease for its third Cabo location in Fort Worth, Texas and
anticipates this restaurant will be open in the first quarter of fiscal 1998.
Plans for a new restaurant are being finalized and it is expected to open during
the first quarter of fiscal 1998. Capital expenditures for these three projects
are expected to approximate $2,750,000 and are expected to be funded from
existing cash and operating cash flow.

          Although the Company has $25,581,000 in cash at June 30, 1997, certain
commitments will reduce this amount significantly by December 31, 1997. The
principle commitments the Company will owe include, in September 1997,
approximately $5,000,000 in federal income taxes, approximately $2,750,000 in
capital commitments for the opening of three restaurants, and 3,500,000 for the
implementation of the remedy for its superfund site in Vestal, New York. The
cash balance, if all commitments are funded by December 31, 1997, would be
approximately $13,000,000.

                                       15
<PAGE>
 
                          BFX HOSPITALITY GROUP, INC.
                                        


PART II - OTHER INFORMATION
---------------------------

Item 1. -  Legal Proceedings

           None


Item 4.    Submission of Matters to a Vote of Security-Holders
           ---------------------------------------------------

           On May 16, 1997, the 1997 Annual Meeting of Stockholders of the
           Company was held. Following is a brief description of the matters
           voted upon at the meeting and a tabulation of the voting therefor:

           Election of Directors
           ---------------------

           The following persons were elected directors of the Company based on
           the number of votes set forth opposite their respective names:
<TABLE>
<CAPTION>
 
                                          Number of Votes
                                      -----------------------
                     Nominee             For          Not For
              ---------------------   ---------       -------
              <S>                     <C>             <C>          
              Alan Tremain            6,441,178       207,094
              Hampton Hodges          6,493,318       154.954
              Walter D. Rogers, Jr.   6,497,078       155,194

</TABLE> 
 
           The remaining directors and their respective date their term expires
           are as follows: 
           Bruno D'Agostino (1998), John M. Edgar (1998), H. T. Hunnewell 
           (1999), Robert H. McLean (1998), Jean-Claude Mathot (1999) and 
           Russell J. Sarno (1999).

           Authorization of sale of CTI
           ----------------------------

           A proposal to authorize the sale of CTI to Danaher Corporation was
           approved with 4,940,945 votes cast for, 26,653 votes cast against and
           10,247 votes abstained.

           Proposed name change of Company
           -------------------------------

           A proposal that an Amended and Restated Certificate of Incorporation
           of the Company to (a) effect a change of the name of the Company to
           "BFX Hospitality Group, Inc." and (b) restate the Company's existing
           Certificate of Incorporation was approved with 4,889,503 votes cast
           for, 73,370 votes cast against and 13,272 votes abstained.

                                       16
<PAGE>
 
Item 6. - Exhibits and Reports on Form 8-K

          (a)   Exhibits

                Amended and Restated Certificate of Incorporation of Buffton
                Corporation.

          (b)   Reports on Form 8-K

                Report dated April 7, 1997 reporting amendment to the Bylaws 
                of the Company.

                Report dated June 3, 1997 reporting completion of Sale of 
                Current Technology, Inc.

                                       17
<PAGE>
 
                          BFX HOSPITALITY GROUP, INC.
                                        
                                  SIGNATURES
                                  ----------

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



                                           BFX HOSPITALITY GROUP, INC.
                                           (Registrant)



                                           By:  /s/ Robert H. McLean
                                                ----------------------------
                                                    Chief Executive Officer
 
August 11, 1997
---------------



                                           By:  /s/ Robert Korman
                                                ----------------------------
                                                    Vice President and
                                                    Chief Financial Officer


August 11, 1997
---------------

                                       18