<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, 1996

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

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

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

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

           226 Bailey Avenue, Suite 101
              Fort Worth, Texas                           76107
     (Address of principal executive office)            (Zip Code)

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

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

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

   Indicate by check mark whether the registrant (1) has filed all reports 
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes  X   No 
                                               ---     ---

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

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

       The aggregate market value of the voting stock held by non-affiliates of
       the registrant as of December 10, 1996 was $15,131,909.

       The number of shares outstanding of the registrant's common stock, $.05
       par value, as of December 10, 1996 was 6,543,528.

                      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 1997
       Stockholders' meeting filed with the Commission pursuant to Regulation
       14A - Parts I and III.

                                       1
<PAGE>
 
                              BUFFTON CORPORATION

                          1996 FORM 10-K ANNUAL REPORT

                               TABLE OF CONTENTS

<TABLE> 
<CAPTION> 
 
PART I                                                                                PAGE
------                                                                                ----
<S>                  <C>                                                              <C>  

     Item 1.         Business.......................................................   3
     Item 2.         Properties.....................................................   6
     Item 3.         Legal Proceedings..............................................   7
     Item 4.         Submission of Matters to a Vote of Security Holders............   7

 
PART II
-------
 
     Item 5.         Market for the Registrant's Common Stock and Related
                      Stockholder Matters...........................................   8
     Item 6.         Selected Financial Data........................................   9
     Item 7.         Management's Discussion and Analysis of Operations
                      and Financial Condition.......................................  10
     Item 8.         Financial Statements and Supplementary Data....................  16
     Item 9.         Changes in and Disagreements with Accountants on Accounting
                      and Financial Disclosure......................................  16
 

PART III
--------
 
     Item 10.        Directors and Executive Officers of the Registrant.............  17
     Item 11.        Executive Compensation.........................................  17
     Item 12.        Security Ownership of Certain Beneficial Owners
                      and Management................................................  17
     Item 13.        Certain Relationships and Related Transactions.................  17
 

PART IV
-------

     Item 14.        Exhibits, Financial Statement Schedules, and Reports
                      on Form 8-K...................................................  18

     Signatures      ...............................................................  20
</TABLE> 

                                       2
<PAGE>
 
                                PART I
                                ------

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

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

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

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

Effective January 1, 1994, the Company entered into a purchase and sale
agreement with Entertainment Centers of America, Inc. (ECA) to acquire certain
entertainment facilities in New Orleans, Louisiana (Bourbon Street Hospitality)
of ECA in exchange for the Company's outstanding note receivable from and equity
interest in ECA approximating $2,641,000 as well as 600,000 shares of its common
stock and $159,000 in cash. The market value of the 600,000 shares was $824,000
at the date of the acquisition. Bourbon Street Hospitality originally consisted
of operations located at 701 Bourbon Street, 735 Bourbon Street and 441 Bourbon
Street and American Food Classics, Inc. (AFC) and are included in BFX
Hospitality Group, Inc. (Hospitality Group). During 1994, the Company closed 735
Bourbon Street. During 1996 the Company sold the operations located at 441
Bourbon Street.

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

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

By approval of the Company's Board of Directors in December 1994, in a
transaction effective January 1, 1995, the Company sold the operations of Flo
Control, Inc. (Flo Control), headquartered in Burbank, California. The purchaser
of these operations was Mr. Russell J. Sarno, President of Flo Control and a
board member of the Company. Mr. Sarno purchased virtually all of the assets of
Flo Control for $3,100,000 in cash and assumed $800,000 of Flo Control's
liabilities. As a condition of the sale, Mr. Sarno agreed to purchase Flo
Control's 95% ownership interest in the Florida Realty Joint Venture for
$150,000 in cash and assume the non-recourse mortgage approximating $2.3 
million. In connection with these transactions, Flo Control's secondary
containment product line was sold to Mr. Pat Hopkins, an unrelated third party,
for a $500,000 note. The note is secured by the assets

                                       3
<PAGE>
 
sold and the personal guaranty of an unrelated third party individual. As a
result of the above transactions, the Company recognized a loss on disposal of
$2,314,000, net of income tax benefit, during fiscal 1995. The sale of Flo
Control was accounted for as a discontinued operation. The cash proceeds from
the sale were used to reduce the Company's outstanding debt with its lender. In
addition, the sale of Flo Control's 95% interest in the Florida Realty Joint
Venture, eliminated the ongoing monthly expense of the Flo Control lease.

In 1995 the Company established Buffton Realty Ventures, a commercial real
estate operation, to engage in acquiring properties offering unique
opportunities for profit. During August 1995, the Company acquired 100 Main
Street, a commercial office building located in Fort Worth, Texas. The property,
approximately 44,000 square feet, is 100% occupied with two tenants under lease.
Lease rentals are $438,000 annually. The total cost of the property was
approximately $1,650,000.

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 and
375,000 shares of the Company's common stock. 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 and the refinancing of a $1,600,000
bank term loan. Under this agreement, the Company has guaranteed, until March
15, 1997, a sales price of $2.05 per share for any of this stock that may be
sold. At September 30, 1996, no liability had been 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 each respective period, are as follows:

<TABLE>
<CAPTION>
 
                                                              Year Ended September 30,
                                                              ------------------------           
                                                             1996                  1995
                                                             ----                  ----           
                                                      (In thousands, except per share amounts)
<S>                                                        <C>                   <C>
 
       Revenues...................................         $25,973               $21,670
       Net income from continuing operations......           1,437                 1,389
       Primary income per average common share....             .22                   .22
       Fully diluted income per common share......             .21                   .22
 
</TABLE>

Financial Information About Industry Segments
---------------------------------------------

The Company's operations are conducted primarily in the United States by two
principal business segments. Electronic Products involves the manufacture of
filter surge suppressors and power distribution systems. Hospitality Group
includes involves the operation of food and beverage establishments, a hotel and
commercial real estate. Information concerning the Company's industry segments
is included in Note 11 of the Consolidated Financial Statements.

                                       4
<PAGE>
 
Narrative Description of Business
---------------------------------

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

Electronic Products:

Current Technology, Inc. (Current Technology)

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

Hospitality Group:

BFX Hospitality Group, Inc. (Hospitality Group)

The Hospitality Group owns and operates food and beverage facilities in Fort
Worth, Texas (Lucile's), Houston, Texas, (Cabo) and New Orleans, Louisiana,
(Cat's Meow) as well as a hotel in Fort Worth (Stockyards Hotel). Lucile's, A
Stateside Bistro, opened in April, 1993 and offers a variety of menu items
centered around classic American dishes. Cabo, The Original "Mix Mex" Grill,
opened in December 1994 offers Mexican food with Central and South American
influences and has a distinctive and colorful "diner look" decor. Cat's Meow
offers highly produced, high energy karoake and includes talented MC's and DJ's.
In addition, the Company established Buffton Realty Ventures in 1995.


Sources and Availability of Raw Material
----------------------------------------

During 1996, raw parts and part assemblies required in the Electronic Products
segment were plentiful. Under present conditions, an adequate supply of these
materials should be available. No long-term contracts are in effect, thus, the
Company has maximum flexibility to purchase advantageously according to its
volume needs.


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

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


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

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

                                       5
<PAGE>
 
Environmental and Other Governmental Regulations
------------------------------------------------

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


Seasonal Aspects of the Business
--------------------------------

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


Backlog
-------

The Company's Electronic Products backlog at September 30, 1996 was $5,290,000.
Substantially all backlog orders have estimated shipment dates within the fiscal
year ending September 30, 1997.

Employees
---------

The Company and its subsidiaries employed approximately 208 full-time and 83
part-time employees as of September 30, 1996, none of which were represented by
unions. Relations with employees are satisfactory.


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

General
-------

The Company and its subsidiaries have facilities with remaining primary lease
terms ranging from one to five years at annual rentals of approximately
$533,000. All leases provide for one or more renewal terms. All premises are in
good condition, adequate and appropriate for the operations presently being
conducted by both of the Company's business segments. The manufacturing location
in Irving, Texas is not operating at maximum capacity and, therefore, management
believes that no expansion of its existing facility will be required in the next
year.

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

Electronic Products
-------------------

Current Technology leases its headquarters and manufacturing operations space.
This facility located in Irving, Texas consists of approximately 43,000 square
feet of space. 


Hospitality Group
-----------------

The Hospitality Group leases the facility in New Orleans, Louisiana for its
entertainment operations. The facility has 5,400 square feet. The operation's
restaurant in Fort Worth, Texas leases approximately 5,000 square feet of space,
while the operation's restaurant in Houston, Texas leases approximately 3,000
square feet of space.

The real estate for the hotel located in Fort Worth, Texas is owned.

                                       6
<PAGE>
 
During August 1995, the Company, through Buffton Realty Ventures, acquired 100
Main Street, a commercial office building located in Fort Worth, Texas. The
property, approximately 44,000 square feet, is 100% occupied with two tenants
under lease. Lease rentals are $438,000 annually.


Corporate Offices
-----------------

The Company leases approximately 3,500 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, 1996.

                                       7
<PAGE>
 
                                    PART II
                                    -------

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

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

<TABLE>
<CAPTION>
 
Fiscal 1996                                           High      Low
                                                      ----      --- 
<S>                                                  <C>      <C>
   October 1 - December 31.......................    $2.31    $ 1.50
   January 1 - March 31..........................     2.38      1.75
   April 1 - June 30.............................     2.38      1.75
   July 1 - September 30.........................     2.50      1.56
                             
   Fiscal 1995                                        High      Low
                                                      ----      ---
   October 1 - December 31.......................    $1.81    $ 1.31
   January 1 - March 31..........................     1.87      1.06
   April 1 - June 30.............................     1.81      1.38
   July 1 - September 30.........................     2.44      1.38
</TABLE>

The number of named stockholders of common stock as of September 30, 1996 was
approximately 1,550 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.

                                       8
<PAGE>
 
<TABLE>
<CAPTION>
 
ITEM 6 - SELECTED FINANCIAL DATA
--------------------------------
                                                                              September 30,
                                                        -----------------------------------------------------
For the year ended                                       1996       1995        1994        1993        1992
------------------                                      ------     ------      ------      ------      ------
                                                                (In thousands, except per share amounts)
<S>                                                    <C>        <C>         <C>         <C>         <C>
Net revenues.......................................    $25,175    $19,187     $30,432     $35,879     $33,449
                                                       =======    =======     =======     =======     =======
                                                                              
Income (loss) from continuing operations (a).......    $ 1,394    $ 1,304     $ 2,002     $   398     $(1,551)
Income (loss) from discontinued operation..........          -     (2,513)        (94)       (134)     (3,402)
                                                       -------    -------     -------     -------     -------
                                                                              
Net income (loss)..................................    $ 1,394    $(1,209)    $ 1,908     $   264     $(4,953)
                                                       =======    =======     =======     =======     =======
                                                                              
Primary income (loss) per average common share:                               
  Continuing operations............................    $   .22    $   .24     $   .39     $   .09     $  (.35)
  Discontinued operation...........................          -       (.46)       (.02)       (.03)       (.76)
                                                       -------    -------     -------     -------     -------
                                                                              
  Net income (loss)................................    $   .22    $  (.22)    $   .37     $   .06     $ (1.11)
                                                       =======    =======     =======     =======     =======
                                                                              
Fully diluted income (loss) per common share:                                 
  Continuing operations............................    $   .21    $   .24     $   .39     $   .09     $  (.35)
  Discontinued operation...........................          -       (.46)       (.02)       (.03)       (.76)
                                                       -------    -------     -------     -------     -------
                                                                              
  Net income (loss)................................    $   .21    $  (.22)    $   .37     $   .06     $ (1.11)
                                                       =======    =======     =======     =======     =======
At year end                                                                   
-----------
                                                                              
Working capital....................................    $ 3,743    $ 2,824     $ 7,149     $ 8,126     $ 8,910
Current assets.....................................      6,917      5,429      11,125      16,636      16,336
Total assets.......................................     23,164     17,224      25,070      31,168      30,644
Long-term debt.....................................      2,493          -       5,507       9,855      10,198
Total liabilities..................................      5,671      2,605       9,813      18,643      18,516
Stockholders' equity...............................     17,493     14,619      15,257      12,525      12,128
Current ratio......................................       2.18       2.08        2.80        1.95        2.20
Book value per share...............................       2.60       2.57        2.89        2.68        2.67
Total liabilities to equity ratio..................        .32        .18         .64        1.49        1.53
</TABLE>

(a) Income from continuing operations in 1994 includes a net gain of $1,050,000
    on the sale of the cable assembly plants in West Springfield, Massachusetts
    and Gardena, California.

                                       9
<PAGE>
 
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANCIAL
-------------------------------------------------------------------------
         FINANCIAL CONDITION
         -------------------


General Information

At September 30, 1996, the Company consists of operations in two principal
segments as discussed in Part I, Item 1 - Business. During the years ended
September 30, 1995 and 1996, the Company entered into acquisition and
disposition transactions as follows:

By approval of the Company's Board of Directors in December 1994, in a
transaction effective January 1, 1995, the Company sold the operations of Flo
Control, Inc. (Flo Control), headquartered in Burbank, California. The purchaser
of these operations was Mr. Russell J. Sarno, President of Flo Control and a
board member of the Company. See Liquidity and Capital Resources in this section
and Note 2 of Notes to Consolidated Financial Statements for details of the
sale.

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 Liquidity and Capital Resources
in this section and Note 2 of Notes to Consolidated Financial Statements for
details of the acquisitions.

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.

                                       10
<PAGE>
 
Results of Continuing Operations

1996 versus 1995

Consolidated net revenues in 1996 increased 31% compared to 1995. Electronic
Products revenues increased 31%. This increase was primarily due to sales to a
customer for power distribution modules incorporating surge suppression for
integration into the customer's sorter equipment. Management expects sales
levels in fiscal 1997 for this customer to remain constant or slightly increase
over 1996 levels. Hospitality group revenues increased 36% in 1996 compared to
1995 due to the inclusion of the results of operations of Cabo and SYH effective
January 1, 1996. Revenues for the hospitality group are expected to increase in
fiscal 1997 as Cabo and SYH will contribute a full twelve months of operations
versus nine months in fiscal 1996. Additionally, a second Cabo location and a
destination food and beverage restaurant at SYH is expected to open during the
third quarter of fiscal 1997. The expected increases in hospitality group
revenues will be partially offset by the sale of 441 Bourbon Street in fiscal
1996.

Consolidated total costs and expenses during 1996 increased 28% compared to
1995. Consolidated costs of sales increased 43% during 1996 compared to the
prior year. As a percent of related revenue, these costs were 33% during 1996
versus 31% a year earlier. Electronic products cost of sales during 1996 periods
increased 54% compared to 1995. These costs as a percent of revenue were 40% in
1996 compared to 34% in 1995. The increase in absolute dollars was due to
increased sales and the increase in costs as a percent of revenue is due to a
greater percentage of sales of products related to sorter equipment in 1996,
which have a lower gross margin than the power siftor line. Cost of sales
related to the Hospitality Division during 1996 periods increased 18%. This
increase is due to the inclusion of the results of operations of Cabo and SYH
effective January 1, 1996.

Consolidated selling, general and administrative expenses for 1996 increased 19%
compared to 1995. The absolute dollar increase in these expenses is due to
increased sales levels incurred during 1996. Electronic products selling,
general and administrative expenses for 1996 increased 3% compared to 1995 due
to an increase in commissions and certain other costs directly correlated to an
increase in revenues. The expenses associated with the Hospitality Division for
1996 periods increased 47% compared to 1995. This increase is due to the
inclusion of the results of operations of Cabo and SYH effective January 1,
1996.

Consolidated depreciation and amortization expense increased 33% during 1996
compared to 1995, primarily as a result of the previously discussed acquisition
of Cabo and SYH as well as the purchase of a commercial office building in late
fiscal 1995. The increase in interest expense to $235,000 for 1996 from $124,000
in 1995 is primarily due to the refinancing of a $1,600,000 bank term loan
assumed in connection with the acquisition of SYH and the borrowing of
$1,200,000 in March 1996 from an insurance company, secured by a deed of trust
on a commercial office building located in Fort Worth, Texas.

During 1996, the Company reported income from continuing operations before
income taxes of $2,205,000 compared to $1,273,000 in 1995. Operating profit
associated with the Company's power surge suppressor operation increased 58%
over the 1995 level. The Hospitality Group reported operating income of $149,000
in 1996 compared to $244,000 in 1995. Operating income for the Hospitality Group
was hindered by the poor operating results of 441 Bourbon Street which was sold
in July 1996 at a price approximating net book value.

Income tax rate on pre-tax income from continuing operations was 36.8% in 1996
compared to a benefit of (2.4%) in 1995. The 1995 rate is substantially lower
than the federal statutory rate of 34% as a result of favorable state tax
developments that resulted in the reversal of certain state tax reserves
approximating $255,000 and the recognition of certain federal tax benefits
aggregating $314,000.

                                       11
<PAGE>
 
1995 versus 1994

Consolidated net revenues in 1995 decreased 37% compared to 1994. Electronic
Products revenues declined 52% during 1995 compared to 1994. The Electronic
Products revenues in 1994 were impacted by the sale of the cable assembly plants
in West Springfield, Massachusetts and Gardena, California effective February
28, 1994 and the shut down of the cable assembly plant in Vestal, New York in
June of 1994. Revenue for the three plants in 1994 was $14,019,000. The
Company's power surge suppressor manufacturing operations revenues increased 10%
during 1995 compared to 1994. This operation's revenues increased primarily due
to the sale of products in the power siftor line. Sales in the power siftor line
increased due to improved product acceptance in the market place. Hospitality
Group revenues increased 33% in 1995 compared to 1994. These revenues increased
primarily due to inclusion for a full year in 1995 compared to nine months in
1994.

Consolidated total costs and expenses for 1995 decreased 39% compared to the
prior year. Consolidated costs of sales declined 66% during 1995 compared to
1994. As a percent of revenues these costs were 31% in 1995 versus 56% in 1994.
Electronic Products costs of sales declined 74% during 1995 versus 1994. The
decline in the Electronic Products costs of sales in 1995 resulted primarily
from the sale of the previously discussed cable assembly plants effective
February 28, 1994 and the shut down of the Vestal, New York plant in June 1994.
Costs of sales in the power surge suppressor operation decreased 9% during 1995
compared to 1994. Gross profit as a percentage of revenue in this operation was
66% in 1995 compared to 60% in 1994. Product mix which consisted primarily of
power siftor sales improved the overall gross profit. Hospitality Group's cost
of sales increased 30% in 1995 compared to 1994 partially due to inclusion for a
full year in 1995 compared to nine months in 1994 and a higher volume of sales.

Consolidated selling, general and administrative expenses increased 3% during
1995 compared to 1994. Electronic Products selling, general and administrative
expenses declined 18% during 1995 compared to the prior year. The decline during
1995 was primarily associated with the sale of the two cable assembly plants and
the shut down of the Vestal, New York plant as previously discussed. Selling,
general and administrative expenses associated with the Company's power surge
suppressor operation increased 15% during 1995 compared to 1994. This increase
was primarily attributable to an increase in commissions and certain other costs
directly correlated to the increase in revenues and an increase in costs
associated with the growth in this operation's work force during the year ended
September 30, 1995. Selling, general and administrative expenses of the
Hospitality Group increased 22% primarily due to inclusion for a full year in
1995 compared to nine months in 1994 partially offset by the closing of 735
Bourbon Street. Unallocated corporate expense increased 42% due to higher
director fees and bonuses paid to various management employees.

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

Consolidated interest expense declined 61% in 1995 versus the prior year
primarily due to the Company's ability to repay a substantial portion of the
debt with its lender using the proceeds from the sale of Flo Control. In
addition, the Company was able to eliminate the Florida Realty Joint Venture
(FRJV) debt as a result of the sale of Flo Control's 95% interest in the FRJV,
thereby further reducing consolidated interest expense for 1995. At September
30, 1995, the Company had no bank debt outstanding.

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

                                       12
<PAGE>
 
$202,000 in 1994. Operating income for the Hospitality Group was bolstered by
the closing of 735 Bourbon Street during 1994 which had been operating at a
loss.

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

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


Impact of Inflation

From October 1993 to September 1996, inflation did not have a material impact on
the Company's operations.

Liquidity and Capital Resources

During March 1992, the United States Environmental Protection Agency (EPA),
issued a Record of Decision (ROD) with respect to the Company's Superfund Site
in Vestal, New York. An Administrative Order for Remedial Design and Remedial
Action was issued on October 1, 1992. The ROD 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 fiscal 1996 and 1995, $238,000 and $430,000, 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. However, the EPA has not approved any changes to the remedy and
amended the ROD.

Additional fieldwork provided for in the RDWP Addendum has been conducted at the
site and resulted in the formulation of a revised remedy. On December 19, 1995,
the Company and its legal and environmental consultants presented to the EPA the
RDWP Addendum and the recommended changes to the ROD in the form of a revised
remedy. The revised remedy was favorably received by the EPA and is currently
being reviewed. 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. Initial estimates
of the revised

                                       13
<PAGE>
 
remedy indicate initial costs of approximately $800,000 to $900,000, and ongoing
maintenance costs of approximately $200,000 to $250,000 in the aggregate. The
costs would be incurred over a one to two year period after the ROD is amended
with the ongoing maintenance costs being incurred over a five year period after
initial cost completion. If the EPA amends the ROD and adopts the revised
remediation treatment, the Company would, at the date of amendment, expense the
estimated future costs of implementing this alternative as well as all prior
costs incurred, approximating $668,000 through September 30, 1996, associated
with the implementation of the original ROD. On July 16, 1996, the Company and
its legal and environmental representatives met with the EPA to review the EPA's
written response to the revised remedy presented in December 1995. As a result
of this meeting, a review of a more cost efficient remedy is being discussed
with the EPA. The EPA now estimates that a revised ROD can be issued by early
1997.

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

The Company established Buffton Realty Ventures, a commercial real estate
operation, to engage in acquiring properties offering unique opportunities for
profit. During August 1995, the Company acquired 100 Main Street, a commercial
office building located in Fort Worth, Texas. The property is 100% occupied with
two tenants under lease through August 2000. Lease rentals are $438,000
annually. The purchase price for the property was approximately $1,650,000 and
was funded with cash held by the Company. No pro forma financial information is
presented due to immateriality.

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 and
375,000 shares of the Company's common stock (with an estimated fair market
value of $656,000). 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 $788,000) and the
refinancing of a $1,600,000 bank term loan. Under this agreement, the Company
has guaranteed, until March 15, 1997, a sales price of $2.05 per share for any
of this stock that may be sold. At September 30, 1996, no liability had been
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. In
fiscal 1997, the Company currently plans to open a second Cabo unit in downtown
Houston and to develop a destination food and beverage operation at the SYH at
an estimated total cost of approximately $1 million.
       

                                       14
<PAGE>
 
Unaudited proforma results from continuing operations, as if the acquisitions
had occurred at the beginning of each respective period, are as follows:

<TABLE>
<CAPTION>
                                                         Year Ended September 30,
                                                         ------------------------
                                                            1996         1995
                                                         ----------   -----------
                                                 (In thousand, except per share amounts)
<S>                                                        <C>          <C>
                                                 
       Revenues...............................             $25,973      $21,670
       Net income from continuing operations..               1,437        1,389
       Primary income per average common share                 .22          .22
       Fully diluted income per common share..                 .21          .22
</TABLE>

In March 1996, one of the Company's subsidiaries entered into a one year
financing agreement with a bank to replace its existing line of credit. The
commitment consists of a $2,000,000 revolving line of credit, all of which was
available for borrowing at September 30, 1996, and is secured by the accounts
receivable and inventory of the subsidiary. The loan provides for interest to be
paid monthly at a floating rate equal to the established prime rate.

In March 1996, the Company borrowed $1,200,000 from an insurance company. The
note is secured by a deed of trust on a commercial office building located in
Fort Worth, Texas. The note bears interest at 7.75%, payable in 119 monthly
installments of $9,852 with a final payment of $831,000 due April 1, 2006.

Effective July 1, 1996, the Company sold one of its entertainment facilities
located in New Orleans, Louisiana. The proceeds of $464,000, consisting of cash
and a note receivable for $350,000, approximated the net book value of the
assets that were sold.

During fiscal 1996, the Company purchased 183,350 shares of its common stock at
a cost of $356,000. The shares are recorded as Treasury Stock and will be
available for employee stock plans and other corporate requirements.

The Company invested $1,613,000 in machinery, equipment, furniture, fixtures,
and enhancements to existing property during 1996, as well as invested
$1,212,000 for Cabo and SYH.

The Company's operating activities provided cash of $3,653,000, reflecting
improved operations resulting from the disposition of Flo Control.

The Company believes that its current cash on hand ($1,659,000 at September 30,
1996), current borrowing availability and expected cash flow from operations, is
adequate to fund the Company's current operating needs and its projected growth
for Cabo and SYH during fiscal 1997.

Accounting Changes

Impairment of Assets

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

                                       15
<PAGE>
 
Accounting for Stock-Based Compensation

In October 1995, the FASB issued FAS No. 123, "Accounting for Stock-Based
Compensation" ("FAS 123"), which is effective for fiscal years beginning after
December 15, 1995. Effective October 1, 1996, the Company will adopt FAS 123
which establishes financial accounting and reporting standards for stock-based
employee compensation plans. The pronouncement defines a fair value based method
of accounting for an employee stock option or similar equity instrument and
encourages all entities to adopt that method of accounting for all of their
employee stock option compensation plans. However, it also allows an entity to
continue 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" ("APB 25"). Entities electing
to remain with the accounting in APB 25 must make proforma disclosures of net
income and earnings per share as if the fair value based method of accounting
defined in FAS 123 had been applied. The Company will continue to account for
stock-based employee compensation plans under the intrinsic method pursuant to
APB 25 and will make the disclosures in its footnotes as required by FAS 123.

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.

                                       16
<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 1997 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 1997 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 1997 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 1997 Annual Meeting of Stockholders to be filed with the
Commission pursuant to Regulation 14A.

                                       17
<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 November 15, 1995 reporting changes to the
               Company's Rights Agreement

   (c)    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).

          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.

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

                                       18
<PAGE>
 
               10.2   Agreement for sale of Florida Realty Joint Venture
                      interests from Flo Control, Inc., dated January 20, 1995
                      by and among Buffton Corporation, a Delaware corporation,
                      Flo Control, Inc. a Delaware corporation, ("Seller") and
                      F.L.C. Property Acquisition, Inc., a California
                      corporation ("Buyer") incorporated herein by reference to
                      Form 8-K dated January 20, 1995.

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

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

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

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

               11     Statement of Computation of Earnings Per Share

               21     Subsidiaries of the Company

               23     Consent of Independent Accountants

               27     Financial Data Schedule

                                      19
<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.

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


  By: /s/ Robert H. McLean                                   December 13, 1996
      -------------------------------------                ---------------------
      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 13, 1996
      -------------------------------------                ---------------------
      Robert H. McLean, President and Chief
      Executive Officer; Chairman of the
      Board of Directors (Principal
      Executive Officer)


      /s/ Robert Korman                                      December 13, 1996
      -------------------------------------                ---------------------
      Robert Korman, Vice President and
      Chief Financial Officer


      /s/ Bruno D'Agostino                                   December 13, 1996
      -------------------------------------                ---------------------
      Bruno D'Agostino, Director


      /s/ John M. Edgar                                      December 13, 1996
      -------------------------------------                ---------------------
      John M. Edgar, Director


      /s/ Hampton Hodges                                     December 13, 1996
      -------------------------------------                ---------------------
      Hampton Hodges, Director


      /s/ H.T. Hunnewell                                     December 13, 1996
      -------------------------------------                ---------------------
      H.T. Hunnewell, Director


      /s/Walter D. Rogers, Jr.                               December 13, 1996
      -------------------------------------                ---------------------
      Walter D. Rogers, Jr., Director


      /s/ Russell J. Sarno                                   December 13, 1996
      -------------------------------------                ---------------------
      Russell J. Sarno, Director
 

                                       20
<PAGE>
 
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                        AND FINANCIAL STATEMENT SCHEDULE

Consolidated Financial Statements:                                         Page
---------------------------------                                          ----
                                                                           
    Report of Independent Accountants                                       F-2
                                                                           
    Consolidated Statements of Operations                                   F-3
                                                                           
    Consolidated Balance Sheets                                             F-4
                                                                           
    Consolidated Statements of Cash Flow                                    F-5
                                                                           
    Consolidated Statements of Changes in Stockholders' Equity              F-6
                                                                           
    Notes to Consolidated Financial Statements                              F-7
                                                                           
                                                                           
Financial Statement Schedule:                                              
----------------------------                                               
                                                                           
    Schedule IX -   Valuation and Qualifying Accounts                       F-20



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

                                      F-1
<PAGE>
 
                       REPORT OF INDEPENDENT ACCOUNTANTS



To the Stockholders and Board of Directors of Buffton Corporation

In our opinion, the consolidated financial statements listed in the index
appearing on page F-1 present fairly, in all material respects, the financial
position of Buffton Corporation and its subsidiaries at September 30, 1996 and
1995, and the results of their operations and their cash flows for each of the
three years in the period ended September 30, 1996, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.



/s/ Price Waterhouse LLP


Fort Worth, Texas
November 15, 1996

                                      F-2
<PAGE>
 
                              BUFFTON CORPORATION

                     Consolidated Statements of Operations


<TABLE> 
<CAPTION> 
                                                                  For the Years Ended September 30,
                                                                  --------------------------------
                                                                    1996       1995        1994
                                                                   ------     ------      ------ 
                                                               (In thousands, except per share amounts)
<S>                                                                <C>        <C>         <C>

      Net revenues.............................................    $25,175    $19,187     $30,432
      Net gain on sale of certain operating assets.............          -          -       1,050
                                                                   -------    -------     -------
                                                                    25,175     19,187      31,482
                                                                   -------    -------     ------- 

      Costs and expenses:
        Cost of goods sold (exclusive of depreciation).........      8,402      5,890      17,080
        Selling, general and administrative....................     13,052     10,939      10,649
        Depreciation and amortization..........................      1,281        961       1,202
        Interest...............................................        235        124         316
                                                                   -------    -------     -------
 
        Total costs and expenses...............................     22,970     17,914      29,247
                                                                   -------    -------     -------
 
      Income from continuing operations before income taxes....      2,205      1,273       2,235
      Income tax provision (benefit)...........................        811        (31)        233
                                                                   -------    -------     -------
      Income from continuing operations........................      1,394      1,304       2,002
                                                                   -------    -------     -------
 
      Discontinued operation:
        Loss from operations, net of income tax benefits of
        $107,000 and $49,000, respectively.....................          -       (199)        (94)
        Loss on disposal, net of income tax benefit
        of $754,000............................................          -     (2,314)          -
                                                                   -------    -------     -------
 
        Loss from discontinued operation.......................          -     (2,513)        (94)
                                                                   -------    -------     -------
 
      Net income (loss)........................................    $ 1,394    $(1,209)    $ 1,908
                                                                   =======    =======     ======= 

      Primary income (loss) per average common share:
        Continuing operations..................................    $   .22    $   .24     $   .39
        Discontinued operation.................................          -       (.46)       (.02)
                                                                   -------    -------     ------- 
        Net income (loss)......................................    $   .22    $  (.22)    $   .37
                                                                   =======    =======     ======= 
 
        Weighted average common shares outstanding.............      6,441      5,465       5,120 
                                                                   =======    =======     ======= 
 
Fully diluted income (loss) per common share:
        Continuing operations..................................    $   .21    $   .24     $   .39
        Discontinued operation.................................          -       (.46)       (.02)
                                                                   -------    -------     ------- 
        Net income (loss)......................................    $   .21    $  (.22)    $   .37
                                                                   =======    =======     ======= 
 
        Fully diluted common shares outstanding................      6,649      5,465       5,120
                                                                   =======    =======     ======= 
</TABLE>

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

                                      F-3
<PAGE>
 
                              BUFFTON CORPORATION

                          Consolidated Balance Sheets

                                    Assets
<TABLE>
<CAPTION>
                                                                                     September 30,
                                                                                 ------------------------
                                                                                     1996          1995
                                                                                 -------------    -------
                                                                                      (In thousands)
<S>                                                                              <C>              <C>
     Current assets:
      Cash and cash equivalents..............................................          $ 1,659    $     7
      Accounts receivable, less allowance for doubtful accounts of
       $35,000 and $75,000, respectively.....................................            3,370      2,893
      Inventories............................................................            1,396      2,031
      Prepaid and other current assets.......................................              492        498
                                                                                       -------    -------
 
       Total current assets..................................................            6,917      5,429
 
     Property, plant and equipment, net......................................            9,631      5,467
 
     Patents, net of accumulated amortization of $1,529,000
       and $1,358,000, respectively..........................................            1,451      1,617
     Goodwill, net of amortization of $845,000 and $666,000, respectively....            4,120      3,503
     Deferred income taxes...................................................                -        590
     Long-term notes receivable..............................................              540        350
     Other assets, net.......................................................              505        268
                                                                                       -------    -------
                                                                                       $23,164    $17,224
                                                                                       =======    =======
                                         Liabilities and Stockholders' Equity
     Current liabilities:
      Current portion of long-term debt......................................          $   187    $     -
      Accounts payable.......................................................            1,152      1,001
      Accrued liabilities....................................................            1,524      1,368
      Income taxes...........................................................              311        236
                                                                                       -------    -------
       Total current liabilities.............................................            3,174      2,605
 
     Long-term debt..........................................................            2,493          -
     Deferred income taxes...................................................                4          -
 
     Stockholders' equity:
      Preferred stock $.01 par value; 5,000,000 shares authorized;
       no shares issued and outstanding......................................                -          -
      Common stock $.05 par value; 30,000,000 shares authorized;
       outstanding shares 6,726,878 and 5,685,378, respectively..............              337        284
      Additional paid-in capital.............................................           14,354     12,571
      Retained earnings......................................................            3,158      1,764
      Treasury stock, at cost, 183,350 shares................................             (356)         -
                                                                                       -------    -------
                                                                                        17,493     14,619
     Commitments and contingencies (Note 2 and 12)...........................
                                                                                       -------    -------
                                                                                       $23,164    $17,224
                                                                                       =======    =======
 
</TABLE>

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

                                      F-4
<PAGE>
 
                              BUFFTON CORPORATION

                      Consolidated Statements of Cash Flow


<TABLE>
<CAPTION>
                                                                    For the Years Ended September 30,
                                                                   ------------------------------------
                                                                     1996          1995         1994
                                                                   ---------    ----------    ---------
                                                                              (In thousands)
<S>                                                                <C>          <C>           <C>
 
  Cash flows from operating activities:
    Net income (loss)..........................................     $ 1,394       $(1,209)     $ 1,908
    Adjustments to reconcile net income (loss) to net cash
     provided by (used for) operating activities:
     Depreciation..............................................         704           594        1,424
     Amortization..............................................         577           564          662
     Deferred income taxes.....................................         594          (920)         102
      Bad debt provision.......................................          40           (84)          (3)
     Net (gain) loss on sale of assets.........................           -         3,068       (1,050)
     Issuance of common stock in payment for services..........         139           571            -
     Change in components of current assets and liabilities
       (exclusive of acquisitions and dispositions):
       Accounts receivable.....................................        (662)       (1,137)        (269)
       Inventories.............................................         639          (958)        (387)
       Prepaid and other.......................................           -          (536)          80
       Accounts payable........................................          34           191         (438)
       Accrued liabilities.....................................         119          (297)      (2,238)
       Income taxes payable....................................          75           (18)         152
                                                                    -------       -------      -------
  Net cash provided by (used for) operating activities.........       3,653          (171)         (57)
                                                                    -------       -------      -------
 
  Cash flows from investing activities:
   Additions to property, plant and equipment..................      (1,613)       (1,337)      (1,257)
   Proceeds from sale of operating assets......................         100         3,750        9,461
   Acquisitions................................................      (1,212)       (1,653)        (159)
   Additions to other assets...................................           -           (55)           -
                                                                    -------       -------      -------
 
  Net cash provided by (used for) investing activities.........      (2,725)          705        8,045
                                                                    -------       -------      -------
 
  Cash flows from financing activities:
    Additions to debt..........................................       1,200             -          600
    Repayments of debt.........................................        (120)       (3,723)      (5,842)
    Treasury stock purchases...................................        (356)            -            -
                                                                    -------       -------      -------
 
  Net cash provided by (used for) financing activities.........         724        (3,723)      (5,242)
                                                                    -------       -------      -------
 
  Net increase (decrease) in cash..............................       1,652        (3,189)       2,746
 
  Cash at beginning of year....................................           7         3,196          450
                                                                    -------       -------      -------
 
  Cash at end of year..........................................     $ 1,659       $     7      $ 3,196
                                                                    =======       =======      =======
</TABLE>

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

                                      F-5
<PAGE>
 
                              BUFFTON CORPORATION

           Consolidated Statements of Changes in Stockholders' Equity

             For the Years Ended September 30, 1996, 1995, and 1994

<TABLE>
<CAPTION>
                                                             Additional
                                                   Common     Paid-in      Treasury     Retained
                                                   Stock      Capital        Stock      Earnings      Total
                                                   ------    ----------    ---------    ---------    --------
<S>                                                <C>       <C>           <C>          <C>          <C>

     Balance at September 30, 1993.............     $ 234       $11,226    $      -      $ 1,065     $12,525
 
     Issuance of 600,000 shares of $.05 par
      value common stock for acquisition.......        30           794           -            -         824
 
     Net income................................         -             -           -        1,908       1,908
                                                     ----       -------    --------     --------     -------
 
     Balance at September 30, 1994.............       264        12,020           -        2,973      15,257
 
     Issuance of 407,356 shares of $.05 par
      value common stock for payment of
      services.................................        20           551           -            -         571
 
     Net loss..................................         -             -           -       (1,209)     (1,209)
                                                     ----       -------    --------     --------     -------
 
     Balance at September 30, 1995.............       284        12,571           -        1,764      14,619
 
     Issuance of 951,500 shares of $.05 par
      value common stock for acquisitions......        48         1,649           -            -       1,697
 
     Issuance of  90,000 shares of $.05 par
      value common stock for services..........         5           134           -            -         139
 
     Purchase of 183,350 shares of $.05
     par value common stock....................         -             -        (356)           -        (356)
 
     Net income................................         -             -           -        1,394       1,394
                                                     ----       -------    --------     --------     -------
 
     Balance at September 30, 1996.............     $ 337       $14,354    $   (356)     $ 3,158     $17,493
                                                     ====        ======    ========      =======     =======
</TABLE>


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

                                      F-6
<PAGE>
 
                              BUFFTON CORPORATION

                   Notes to Consolidated Financial Statements
                       September 30, 1996, 1995 and 1994


Note 1 - Summary of Significant Accounting Policies

Business

Buffton Corporation (the Company) is principally engaged in the manufacture of
filter surge suppressors and power distribution systems and the operation of
food and beverage and lodging establishments. 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.


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.


Inventories

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


Property, plant and equipment

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

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

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

                                      F-7
<PAGE>
 
Impairment of Long-Lived Assets

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

Accounting for Stock-Based Compensation

In October 1995, the FASB issued FAS No. 123, "Accounting for Stock-Based
Compensation" ("FAS 123"), which is effective for fiscal years beginning after
December 15, 1995. Effective October 1, 1996, the Company will adopt FAS 123
which establishes financial accounting and reporting standards for stock-based
employee compensation plans. The pronouncement defines a fair value based method
of accounting for an employee stock option or similar equity instrument and
encourages all entities to adopt that method of accounting for all of their
employee stock option compensation plans. However, it also allows an entity to
continue 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" ("APB 25"). Entities electing
to remain with the accounting in APB 25 must make proforma disclosures of net
income and earnings per share as if the fair value based method of accounting
defined in FAS 123 had been applied. The Company will continue to account for
stock-based employee compensation plans under the intrinsic method pursuant to
APB 25 and will make the disclosures in its footnotes as required by FAS 123.

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, 1996, 1995 and 1994 approximated was $185,000, $215,000 and $249,000,
respectively.

Net income (loss) per share

Primary net income (loss) per share has been computed on the basis of the
weighted average number of common shares outstanding; the effect of outstanding
stock options is immaterial for purposes of calculating primary net income
(loss) per share for 1996, 1995 and 1994. Fully diluted net income (loss) per
share for fiscal 1996 includes an additional 208,000 shares relating to
outstanding stock options calculated using the treasury stock method. The effect
of outstanding stock options was immaterial for purposes of calculating fully
diluted net income (loss) per share for 1995 and 1994.

                                      F-8
<PAGE>
 
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 prior years' amounts have been reclassified to conform with the 1996
presentation.


Note 2 - Acquisitions and Dispositions

Effective January 1, 1994, the Company entered into a purchase and sale
agreement with Entertainment Centers of America, Inc. (ECA) to acquire certain
entertainment facilities located in the New Orleans, Louisiana (Bourbon Street
Hospitality) of ECA in exchange for the Company's outstanding note receivable
from and equity interest in ECA approximating $2,641,000 as well as 600,000
shares of its common stock and $159,000 in cash. The market value of the 600,000
shares was $824,000 at the date of the acquisition. The assets acquired
consisted of cash, inventory, leasehold interests and improvements, sound,
light, video and bar equipment and certain other assets, including prepaids.
Liabilities assumed by a subsidiary of the Company consisted of trade accounts
payable, other accrued liabilities in ordinary course of business and debt
outstanding at January 1, 1994. The total purchase price was $4,192,000
including liabilities assumed of $568,000.

In addition to the above described transactions with ECA, the Company had a note
receivable from ECA at January 1, 1994 aggregating $400,000 and advances of
$320,000. The Company also had an option to purchase the stock of AFC from ECA
at the greater of fair market value, to be determined by an independent
appraisal, or $300,000. The Company exercised its option January 1, 1994 and
exchanged its note receivable from and advances to ECA for the stock of AFC. The
note receivable and advances approximated the fair market value of the AFC stock
at the date of exchange. The total purchase price was $832,000 including
liabilities assumed of $112,000 consisting primarily of ordinary trade payables.
AFC operates an American Bistro restaurant , Lucile's, located in Fort Worth,
Texas. After the January 1, 1994 transactions, the Company no longer held an
interest in ECA.

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

<TABLE> 
<CAPTION> 
                                                       Year Ended
                                                   September 30, 1994
                                                   --------------------
                                         (In thousand, except per share amounts)
 
<S>                                                       <C>          
Revenues....................................              $42,882      
Income (loss) from continuing operations....                1,889      
Income (loss) per average common share......                  .37       
</TABLE>

Bourbon Street Hospitality, originally consisting of 701 Bourbon Street, 735
Bourbon Street and 441 Bourbon Street, and American Food Classics, Inc. (AFC)
are included in BFX Hospitality Group, Inc. (Hospitality Group). During 1994,
the Company closed the 735 Bourbon Street facility. During 1996, the Company
sold the operations located at 441 Bourbon Street. The proceeds of $464,000,
consisting of cash and a note receivable of $350,000, approximated the book
value of the assets that were sold. There was no change to the carrying value of
assets that were not sold as they were transferred for use in the other Bourbon
Street Hospitality location.

                                      F-9
<PAGE>
 
Effective February 28, 1994, Contex Electronics, Inc., a wholly owned subsidiary
of the Company, sold all of the operating assets and liabilities of MoldCon,
Inc. (MoldCon) and Tri-Tec Engineering Corporation (Tri-Tec), two of its wholly
owned subsidiaries. The sales price for the assets was $9,277,000 in cash plus
the assumption of certain liabilities by the buyer. The net proceeds from the
disposition were used to reduce bank debt approximating $5,000,000 and for 
short-term investments. The assets sold consisted primarily of trade accounts
receivable, inventory, machinery, equipment and furniture and fixtures.
Liabilities assumed by the Buyer consisted of trade accounts payable and other
accrued liabilities in the ordinary course of business. The assets and
liabilities related to the manufacture of molded internal and external cable
assemblies and internal wiring harnesses. After deducting applicable selling
expenses, the Company reported a pretax gain of $1,050,000 on the sale. Revenue
and operating profit of the businesses sold were $10,243,000 and $146,000,
respectively, during fiscal 1994.

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

By approval of the Company's Board of Directors in December 1994, in a
transaction effective January 1, 1995, the Company sold the operations of Flo
Control, Inc. (Flo Control), headquartered in Burbank, California. The purchaser
of these operations was Mr. Russell J. Sarno, President of Flo Control and a
board member of the Company. Mr. Sarno purchased virtually all of the assets of
Flo Control for $3,100,000 in cash and assumed $800,000 of Flo Control's
liabilities. As a condition of the sale, Mr. Sarno agreed to purchase Flo
Control's 95% ownership interest in the Florida Realty Joint Venture for
$150,000 in cash and assume the related non-recourse mortgage approximating $2.3
million. In connection with these transactions, Flo Control's secondary
containment product line was sold to Mr. Pat Hopkins, an unrelated third party,
for a $500,000 note. The note bears interest at 8% per annum. Payments are due
semiannually and continue through December 31, 1999 in the amount of $50,000
plus earned interest. The note is secured by the assets sold and the personal
guaranty of an unrelated third party individual. As a result of the above
transactions, the Company recognized a loss on disposal of $2,314,000, net of
income tax benefit, during fiscal 1995. The sale of Flo Control was accounted
for as a discontinued operation. The cash proceeds from the sale were used to
reduce the company's outstanding debt with its lender. Revenues for Flo Control
were as follows (In thousands):

                         1995...........  $  2,435
                         1994...........    10,987

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. Revenue
generated from this property for fiscal 1996 approximated $438,000.

At September 30, 1996, future minimum rentals for non-cancellable leases
associated with this building were as follows (in thousands):

                         1997...........  $     438
                         1998...........        438
                         1999...........        438
                         2000...........        365
                                              -----
      
                                         $    1,679
                                              =====

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

                                      F-10
<PAGE>
 
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 $788,000) and the refinancing of a $1,600,000
bank term loan. Under this agreement, the Company has guaranteed, until March
15, 1997, a sales price of $2.05 per share for any of this stock that may be
sold. At September 30, 1996, no liability had been 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 each respective period, are as follows:

<TABLE>
<CAPTION>
                                                                        Year Ended September 30,         
                                                                       --------------------------        
                                                                         1996               1995         
                                                                       -------            -------        
<S>                                                                    <C>                <C>            
                                                                                                         
       Revenues........................................                $25,973            $21,670        
       Net income from continuing operations...........                  1,437              1,389        
       Primary income per average common share.........                    .22                .22        
       Fully diluted income per common share...........                    .21                .22        
                                                                                                         
     Note 3 - Inventories                                                                                
                                                                                                         
     The components of inventories are as follows:                                                       
                                                                               September 30,               
<CAPTION> 
                                                                        --------------------------       
                                                                          1996               1995         
                                                                        -------            -------       
                                                                             (In thousands)              
 <S>                                                                    <C>                <C>           
          Raw materials................................                 $ 1,140            $ 1,450       
          Work in process..............................                      86                323       
          Finished goods...............................                     170                258       
                                                                        -------            -------       
                                                                                                         
             Total inventories.........................                 $ 1,396            $ 2,031       
                                                                        =======            =======       
 
     Note 4 - Property, Plant and Equipment
 
     Major classes of property, plant and equipment consist of the following:
<CAPTION> 

                                                                              September 30,            
                                                                        --------------------------     
                                                                          1996               1995      
                                                                        -------            -------     
                                                                              (In thousands)           
<S>                                                                     <C>                <C>         
          Building and improvements....................                 $ 9,290            $ 5,377     
          Machinery and equipment......................                     568                394     
          Furniture and fixtures.......................                   1,724              1,233     
                                                                        -------            -------     
                                                                                                       
                                                                         11,582              7,004     
          Less accumulated depreciation                                                                
           and amortization............................                   2,626              2,062     
                                                                        -------            -------     
                                                                          8,956              4,942     
          Land.........................................                     675                525     
                                                                        -------            -------     
                                                                                                       
             Net property, plant and equipment.........                 $ 9,631            $ 5,467     
                                                                        =======            =======     
</TABLE>

                                      F-11
<PAGE>
 
Note 5 - Long-Term Debt

In January, 1996, the Company refinanced a $1,600,000 bank term loan assumed in
the acquisition of the Stockyards Hotel which is secured by a deed of trust on
the hotel property. The note currently bears interest at the established prime
rate; however, this rate can increase, subject to certain financial ratios, to a
maximum of 1% above the prime rate. The note is payable in 59 monthly
installments of $13,350 plus accrued interest, with the balance due on January
19, 2001. At September 30, 1996, the balance owed on this debt was $1,493,000.

In March 1996, one of the Company's subsidiaries entered into a one year
financing agreement with a bank to replace its existing line of credit. The
commitment consists of a $2,000,000 revolving line of credit, all of which was
available for borrowing at September 30, 1996, and is secured by the accounts
receivable and inventory of the subsidiary. The terms of the finance agreement
provide for interest to be paid monthly at a floating rate equal to the
established prime rate. The agreement also provides for a commitment fee of
0.25% per annum of the unused portion of the facility.

In March 1996, the Company borrowed $1,200,000 from an insurance company. The
note is secured by a deed of trust on a commercial office building located in
Fort Worth, Texas. The note bears interest at 7.75%, payable in 119 monthly
installments of $9,852 with a final payment of $831,000 due April 1, 2006. At
September 30, 1996, the balance owed on this debt was $1,187,000.

The prime rate at September 30, 1996 was 8.25%.

At September 30, 1996, future principal payments on long-term debt are due as
follows:

<TABLE> 
               <S>                                              <C> 
               1997..............................               $  187
               1998..............................                  189
               1999..............................                  191
               2000..............................                  194
               2001 and thereafter...............                1,919
                                                                ------
                                                                $2,680
                                                                ======
</TABLE> 

Note 6 - Accrued Liabilities

Accrued liabilities are comprised of the following:

<TABLE> 
<CAPTION> 
 
                                                             September 30
                                                      -------------------------
                                                        1996             1995
                                                      --------         --------
                                                           (In thousands)
          <S>                                         <C>              <C> 
          Accrued commissions............             $    653         $    537
          Accrued payroll................                  232              443
          Accrued bonus..................                  270              158
          Other..........................                  369              230
                                                      --------         --------
                                                      $  1,524         $  1,368
                                                      ========         ========
</TABLE> 

                                      F-12
<PAGE>
 
Note 7 - Income Taxes

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

<TABLE> 
<CAPTION> 
                                                                                   Years Ended September 30,
                                                                     -----------------------------------------------------------
                                                                       1996                    1995                       1994
                                                                     --------                --------                   --------
                                                                                           (In thousands)
<S>                                                                  <C>                     <C>                        <C>
Current:
   Federal.......................................................    $     47                $    (72)                  $      -
   State.........................................................         170                     100                         82
Deferred federal.................................................         594                    (412)                       641
Decrease in valuation allowance..................................           -                    (508)                      (539) 
                                                                     --------                --------                   --------
                                                                     $    811                $   (892)                     $ 184
                                                                     ========                ========                   ========

The income tax provision (benefit) is categorized as follows:
<CAPTION> 
                                                                                   Years Ended September 30,
                                                                     -----------------------------------------------------------
                                                                       1996                    1995                       1994
                                                                     --------                --------                   --------
                                                                                           (In thousands)
  <S>                                                                <C>                     <C>                        <C>
   Continuing operations.........................................    $    811                $    (31)                  $    233
   Discontinued operations.......................................           -                    (861)                       (49)
                                                                     --------                --------                   --------
                                                                     $    811                $   (892)                  $    184
                                                                     ========                ========                   ========
</TABLE>

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

<TABLE>
<CAPTION>
                                                                     September 30,
                                                               ----------------------
                                                                  1996          1995
                                                                 ------        ------
               <S>                                             <C>             <C>
               Gross deferred tax liabilities                               
               ------------------------------                               
               Depreciation                                    $  396          $  357
               Other                                                -               -
                                                               ------          ------
                                                                  396             357
                                                               ------          ------
               Gross deferred tax assets                                    
               -------------------------                                    
               Capital loss carryforwards                         271             271
               Alternative minimum tax credit                               
                carryforwards                                     272             424
               General business credit carryforwards               88               -
               Consolidated operating loss carryforward             -             413
               Inventory costs                                     20              10
               Bad debt reserves                                   12              26
               Other                                                -              74
                                                               ------          ------
                                                                  663           1,218
               Valuation allowance                               (271)           (271)
                                                               ------          ------
                                                                  392             947
                                                               ------          ------
               Deferred income tax (benefit) liability         $    4          $ (590)
                                                               ======          ======
</TABLE>

As a result of the disposition of Flo Control (see Note 2) with its historical
losses and the improved profitability of the Company's continuing operations,
the Company reduced its valuation allowance by approximately $314,000 in 1995.

                                      F-13
<PAGE>
 
The Company has tax credits of approximately $360,000 which may be offset
against future income taxes payable. Additionally, the Company has a capital
loss carryforward of $797,000 which expires in 1997. The Company maintained its
valuation allowance associated with the capital loss carryforward since the
carryforward period is limited and its potential future use is restricted.

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

<TABLE>
<CAPTION>
                                                                                 Years Ended September 30,
                                                                     ---------------------------------------------
                                                                       1996               1995              1994
                                                                     ---------          --------          --------
<S>                                                                  <C>                <C>               <C>
                                                                                                         
Tax  provision (benefit)  at federal statutory rate.........          $    750           $   446           $   782 
State income taxes, net of                                                                               
 federal income tax benefit.................................               112                66                54
Adjustments to valuation allowance for                                                                   
 deferred tax assets........................................                 -              (314)             (539)
Reversal of income tax accrual..............................                 -              (255)                -
Other, net..................................................               (51)               26               (64) 
                                                                      --------           -------           -------
                                                                      $    811           $   (31)          $   233  
                                                                      ========           =======           =======
</TABLE>

Note 8 - Stockholders' Equity

Stock options

The Company currently maintains an Employee Incentive Stock Option Plan
(Employee Plan), which allows certain employees and officers of the Company,
other than officers serving on the Board of Directors to acquire or increase
their proprietary interest in the success of the Company and encourage such
individuals to remain in the employ of the Company. A total of 100,000 shares of
the Company's common stock can be issued under the Employee Plan. 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. At
September 30, 1996, there were no shares available for grant; 20,000 options
were available at September 30, 1995.

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 nonqualified 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
terminates on December 31, 1996.

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 may 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 non-qualified 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. 
At September 30, 1996 and 1995 there were no shares available for grant.

                                      F-14
<PAGE>
 
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
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 non-
qualified 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. At September 30, 1996 there were no shares available 
for grant.

A summary of outstanding options are as follows:

<TABLE>
<CAPTION>
                                                                Number of Shares
                                     -------------------------------------------------------------------
                                     Incentive    Other Non-      1989 Equity       1996 Equity
                                       Stock      Qualified         Partici-         Partici-
                                      Options      Options        pation Plan       pation Plan      Total
                                     ---------   ----------       -----------       -----------    ---------
<S>                                  <C>          <C>             <C>               <C>            <C>
Options outstanding
  September 30, 1994.............            -             -                -                -             -
                                                                                                     
  Issued.........................           80             -              500                -           580
                                     ---------    ----------       ----------        ---------      --------
                                                                                                     
Options outstanding                                                                                  
  September 30, 1995.............           80             -              500                -           580
                                                                                                     
  Issued.........................           20           150                -              300           470
                                     ---------    ----------       ----------        ---------      --------
                                                                                                     
Options outstanding                                                                                  
  September 30, 1996.............          100           150              500              300         1,050
                                     =========    ==========       ==========        =========      ======== 
                                                                                                     
Options currently exercisable                                                                        
  September 30, 1996.............           16           150              500              260           926
                                     =========    ==========       ==========        =========      ======== 
                                                                                                     
Price range at                                                                                       
  September 30, 1996.............         1.50          2.00             1.50             1.62-       
                                                                                          1.94
</TABLE>

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

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

Note 9 - 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, 1996, 1995 and 1994 were $71,000, $65,000, and $60,000,
respectively.

Note 10 - Related Party Transactions

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


Note 11 - Business Segments

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

<TABLE>
<CAPTION>
                                                                                Nonoperating
                                                                                     Gains,
                                                                                  Interest and
                                                                                  Unallocated
                                                  Electronic     Hospitality       Corporate
                                         Year      Products        Group            Expense        Total
                                         ----     ----------     -----------    ------------      -------
<S>                                     <C>       <C>           <C>             <C>               <C>
Net Sales (b)....................        1996       $15,788         $9,027         $   360        $25,175
                                         1995        12,056          6,623             331         19,010
                                         1994        25,056          4,979             346         30,381
                                                                                                 
Depreciation and amortization....        1996           312            845             124          1,281
                                         1995           293            550             118            961
                                         1994           618            443             141          1,202
                                                                                                 
Operating profit (loss)..........        1996         3,754            149          (1,698)         2,205
                                         1995         2,414            244          (1,385)         1,273
                                         1994         2,179           (227)            283(c)       2,235
                                                                                                 
Capital expenditures.............        1996           158          4,430             140          4,728
                                         1995           274          1,873             679          2,826
                                         1994           433             30              82            545
                                                                                                 
Identifiable assets (a)..........        1996         6,225         13,285           3,654         23,164
                                         1995         6,731          6,362           4,131         17,224
                                         1994         7,707          4,949           2,528         15,184
</TABLE>
     (a) Identifiable assets for 1994 excludes $9,886,000  relating to Flo
         Control, representing the Plastic Products segment, that was sold
         during 1995.
     (b) The Electronic Products segment had one customer that accounted for
         15.2% of consolidated net sales in 1996.
     (c) In 1994, operating loss was reduced by $1,050,000 representing gain on
         sale of assets and $217,000 representing settlement of litigation.

                                      F-16
<PAGE>
 
     Operating profit (loss), before income taxes, for each segment is the
     difference between operating revenues and operating costs and expenses
     attributable to the segment, and does not include nonoperating revenues and
     gains, general corporate expenses (unallocated general and administrative),
     interest expense or income taxes.  Intersegment transactions have been
     eliminated in the preceding table.  The difference between net sales for
     all segments and net revenue reported in the statements of operations is
     comprised of miscellaneous income recorded during the years.

     Corporate operating loss (income) includes the following:
<TABLE>
<CAPTION>
                                                                Years Ended September 30,
                                                      -----------------------------------------------
                                                       1996               1995                 1994
                                                      ------             ------               -------
                                                                     (In thousands)
          <S>                                         <C>       <C>                          <C>
          Interest expense........................    $  235             $  124               $   316             
          Other unallocated corporate expenses....     1,463              1,261                   668             
          Settlement of litigation................         -                  -                  (217)            
          Gain on sale of assets..................         -                  -                (1,050)            
                                                      ------             ------               -------             
                                                     $ 1,698            $ 1,385               $  (283)            
                                                     =======            =======               =======              
</TABLE>
     General corporate assets are principally fixed assets.


     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, 1996, 1995 and 1994 was $795,000, $645,000, and $1,197,000,
     respectively.

     At September 30, 1996, future minimum payments for non-cancellable
     operating leases for facilities and equipment with terms in excess of one
     year were as follows (in thousands):
<TABLE>
               <S>                                          <C>
               1997...................................      $  476
               1998...................................         408
               1999...................................         408
               2000...................................         305
               2001 and beyond........................       1,284
                                                           -------
                                                           $ 2,881
                                                           =======
</TABLE>

     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 

                                      F-17
<PAGE>
 
     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 fiscal 1996 and 1995, $238,000 and $430,000, 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.  However, the EPA has not approved
     any changes to the remedy and amended the ROD.

     Additional fieldwork provided for in the RDWP Addendum has been conducted
     at the site and resulted in the formulation of a revised remedy.  On
     December 19, 1995, the Company and its legal and environmental consultants
     presented to the EPA the RDWP Addendum and the recommended changes to the
     ROD in the form of a revised remedy.  The revised remedy was favorably
     received by the EPA is currently being reviewed.  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.  Initial estimates of the revised remedy
     indicate initial costs of approximately $800,000 to $900,000, and ongoing
     maintenance costs of approximately $200,000 to $250,000 in the aggregate.
     The costs would be incurred over a one to two year period after the ROD is
     amended with the ongoing maintenance costs being incurred over a five year
     period after initial cost completion.  If the EPA amends the ROD and adopts
     the revised remediation treatment, the Company would, at the date of
     amendment, expense the estimated future costs of implementing this
     alternative as well as all prior costs incurred, approximating $668,000
     through September 30, 1996, associated with the implementation of the
     original ROD.  On July 16, 1996, the Company and its legal and
     environmental representatives met with the EPA to review the EPA's written
     response to the revised remedy presented in December 1995.  The EPA now
     estimates that a revised ROD can be issued by early 1997.

     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.


     Note 13 - Supplemental Disclosures of Cash Flow Information
<TABLE>
<CAPTION>
 
Supplemental schedule of cash payments:
                                                     Years Ended September 30,
                                                     -------------------------
                                                       1996     1995    1994
                                                     -------   ------  -------
    <S>                                               <C>      <C>      <C>
    Cash paid for:
       Interest................................       $ 231    $ 249    $ 902
       Income taxes............................          44       58       20
 
</TABLE>

                                      F-18
<PAGE>
 
Supplemental schedule of noncash investing and financing activities:

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

<TABLE> 
        <S>                                                     <C> 
        Estimated fair value of assets acquired (including
         purchased goodwill)                                    $4,192
        Less:
         Note receivable and equity interest exchanged          (2,641)
         Liabilities assumed                                      (568)
         Market value of stock issued                             (824)
                                                                ------

        Cash paid                                               $  159
                                                                ======
</TABLE> 

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

<TABLE> 
        <S>                                                     <C> 
        Estimated fair value of assets acquired (including
         purchased goodwill)                                    $  832
        Less:
         Note receivable and advances exchanged                   (720)
         Liabilities assumed                                      (112)
                                                                ------

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

During the years ended September 30, 1996 and 1995, the Company issued 90,000
and 407,356 shares, respectively, of common stock to key employees and certain
officers and directors as payment for services and bonuses. The Company
recognized $139,000 and $571,000, respectively, as compensation related to the
issuance of the shares which amount represented fair market value at date of
issuance.

During the year ended September 30, 1996, the Company acquired the operating
assets of Cabo and acquired the assets and assumed certain liabilities of the
Stockyards Hotel. In connection with the acquisitions, the cash was paid as
follows:

<TABLE>
<CAPTION>
        <S>                                                    <C> 
        Noncash investing and financing activities
         Fair value of assets acquired
          (including purchased goodwill)                         $4,759
         Liabilities assumed                                     (1,754)
         Stock issued                                            (1,698)
                                                                 ------
         Cash paid                                                1,307
 
         Less:  cash acquired                                       (95)
                                                                 ------
         Net cash paid for acquisitions                          $1,212
                                                                 ======
</TABLE> 

                                      F-19
<PAGE>
 
                                                                     SCHEDULE IX
                                                                     -----------


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

                       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, 1996                   $   75          $   (25)      $  --          $    (15)      $   35
September 30, 1995                      150               84        (159)/(a)/          --           75
September 30, 1994 /(a)/                153              240          --              (243)         150
</TABLE> 

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

                                      F-20
<PAGE>
 
                              BUFFTON CORPORATION
                              -------------------


                                 1996 FORM 10-K

                                 EXHIBIT INDEX



Exhibits                                                                   Page
--------                                                                   ----

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

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

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

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

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

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

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

    10.2    Agreement for sale of Florida Realty Joint Venture interests
            from Flo Control, Inc., dated January 20, 1995 by and among
            Buffton Corporation, a Delaware corporation, Flo Control, Inc.
            a Delaware corporation, ("Seller") and F.L.C. Property
            Acquisition, Inc., a California corporation ("Buyer")
            incorporated herein by reference to Form 8-K dated January 20,
            1995.
<PAGE>
 
10.3    Agreement for Sale of Secondary Containment Assets from Flo
        Control, Inc., dated January 20, 1995, by and among Buffton
        Corporation, a Delaware corporation, Flo Control, Inc., a
        Delaware corporation ("Seller") and Patrick Hopkins and Flo-
        Safe Systems, Inc. a Wisconsin corporation ("Buyer")
        incorporated herein by reference to Form 8-K dated January 20,
        1995.

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

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

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

11      Statement of Computation of Earnings Per Share

21      Subsidiaries of the Company

23      Consent of Independent Accountants

27      Financial Data Schedule