<PAGE>   1


                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 2O549

                                    FORM 1O-Q

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
(Mark one)

[x]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the quarterly period ended    September 30 1997     or
                               -----------------------

[  ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR l5(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from ______________  to ______________
Commission File Number 0-16097

                            BAYOU INTERNATIONAL, LTD.
             (Exact name of Registrant as specified in its charter)

               Delaware                                              98-0079697
(State or other jurisdiction of                                 (IRS Employer
incorporation or organisation)                               Identification No.)

        Level 8, 580 St. Kilda Road, Melbourne, Victoria, 3004 Australia
               (Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code        0ll (613) 9276-7888

Securities registered pursuant to Section 12(b) of the Act :

      Title of each class                                  Name of each exchange
                                                            on  which registered

               N/A                                                  N/A

           Securities registered pursuant to Section 12(g) of the Act:
                     Common Stock, par value $.15 per share
                                (Title of Class)

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 the past 90 days.
                           Yes   x                            No
                              _______                           _______

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

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

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. There were 46,941,789
outstanding shares on Common Stock, as of the latest practicable date. There
were 46,941,789 outstanding shares of Common Stock as of September 30, 1997.


                                       1
<PAGE>   2
                                     PART 1

                              FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

         INTRODUCTION TO INTERIM FINANCIAL STATEMENTS.

         The interim financial statements included herein have been prepared by
Bayou International, Ltd. (the "Company") without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission (The "Commission").
Certain information and footnote disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations, although
the Company believes that the disclosures are adequate to make the information
presented not misleading. These interim financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended June 30, 1997.

         In the opinion of management, all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the financial position
of the Company as of September 30, 1997 and September 30, 1996, the results of
its operations for the three month periods ended September 30, 1997 and
September 30, 1996, and the changes in its cash flows for the three-month
periods ended September 30, 1997 and September 30, 1996, have been included. The
results of operations for the interim periods are not necessarily indicative of
the results for the full year.

         UNLESS OTHERWISE INDICATED, ALL FINANCIAL INFORMATION
         PRESENTED IS IN AUSTRALIAN DOLLARS.




                                       2
<PAGE>   3
                    BAYOU INTERNATIONAL, LTD. AND SUBSIDIARY
                           Consolidated Balance Sheets
                        September 30, 1997, June 30, 1997
                             and September 30, 1996
                             (in Australian Dollars)
                                 (000's omitted)
                                   (Unaudited)
                                     ASSETS

<TABLE>
<CAPTION>
                                                    Sept 30          June 30           Sept 30
                                                     1997             1997              1996
                                                     ----             ----              ----
<S>                                               <C>               <C>               <C>
Current Assets:
    Cash                                          $     62          $     53          $    113
    Accounts Receivable, net                            71                63                54
    Investments                                         --                --                 3
                                                  --------          --------          --------

        Total Current Assets                           133               116               170
                                                  --------          --------          --------

Other Assets:
    Property and Equipment, net                         49                51                52
    Goodwill, net                                       --                --               400
                                                  --------          --------          --------

        Total Other Assets                              49                51               452
                                                  --------          --------          --------

             Total Assets                         $    182          $    167          $    622
                                                  ========          ========          ========

                                       LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
    Bank Overdraft                                $     --          $     --          $     --
    Short-Term Notes                                    69                --                --
    Accounts Payable and
        Accrued Expenses                               413               406               305
                                                  --------          --------          --------

        Total Current Liabilities                      482               406               305
                                                  --------          --------          --------

Long-Term Debt                                       3,497             2,999             2,289
                                                  --------          --------          --------

        Total Liabilities                            3,979             3,405             2,594
                                                  --------          --------          --------

Stockholders' Equity (Deficit):
    Common Stock:  $0.20 par value
        50,000,000 shares authorized,
        46,941,789 issued and outstanding            9,388             9,388             9,388
    Additional Paid-in-Capital                      11,592            11,592            11,592
    Cumulative Translation Adjustments                (685)             (427)              (47)
    Retained Deficits                              (24,092)          (23,791)          (22,905)
                                                  --------          --------          --------

        Total Stockholders' Deficit                 (3,797)           (3,238)           (1,972)
                                                  --------          --------          --------

             Total Liabilities and
                Stockholders' Equity              $    182          $    167          $    622
                                                  ========          ========          ========
</TABLE>



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


                                       3
<PAGE>   4
                    BAYOU INTERNATIONAL, LTD. AND SUBSIDIARY
                      Consolidated Statements of Operations
         Three Months Ended September 30, 1997, Year ended June 30, 1997
                    and Three Months Ended September 30, 1997
                                 (000's omitted)
                             (in Australian Dollars)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                   3 Months            Year          3 Months
                                                    Ended              Ended           Ended
                                                   Sept 30            June 30         Sept 30
                                                     1997               1997            1996
                                                   --------           -------         --------
<S>                                               <C>               <C>               <C>
Revenues:
    Sales                                         $     --          $     66          $     --
    Other Income                                         6                11                 5
                                                  --------          --------          --------
                                                         6                77                 5
Costs and Expenses:
    Cost of Sales                                       --                63                --
    Management Fee                                      --                --                --
    Interest Expense                                    69               259                60
    Legal, Accounting & Professional                    48                89                22
    Depreciation & Amortization                          3                12                 3
    Administrative                                     147               639                42
    Research & Development                              20                72                88
                                                  --------          --------          --------
                                                       287             1,134               215
                                                  --------          --------          --------

Loss from Operations                                  (281)           (1,057)             (210)

    Reversal of Writeoff                              (272)               --                --
    Gain (Loss) on Disposition of Assets                 1                (2)               --
    Foreign Currency Exchange Gain (Loss)              251               332               (31)
                                                  --------          --------          --------

                                                       (20)              330               (31)
                                                  --------          --------          --------
Loss before Income Tax and
        Amortization of Goodwill                      (301)             (727)             (241)

Provision for Income Tax                                --                --                --
                                                  --------          --------          --------

Loss before Amortization of Goodwill                  (301)             (727)             (241)

    Amortization of Goodwill                            --              (533)             (133)
                                                  --------          --------          --------

Net Loss                                          $   (301)         $ (1,260)         $   (374)
                                                  ========          ========          ========

Earnings Per Common Equivalent Share              $   (.01)         $   (.03)         $   (.01)
                                                  ========          ========          ========

Weighted Number of Common
        Equivalent Shares Outstanding               46,942            46,942            46,942
                                                  ========          ========          ========
</TABLE>


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


                                       4
<PAGE>   5
                    BAYOU INTERNATIONAL, LTD. AND SUBSIDIARY
                Consolidated Statements of Stockholders' Equity
                     September 30, 1997 and June 30, 1997,
                     September 30, 1996 and June 30, 1996,
                   and September 30, 1995, and June 30, 1995.
                             (in Australian Dollars)
                                 (000's omitted)
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                   Common Stock                             Cumulative     Retained
                                              ----------------------         Paid-In-       Translation     Earnings
                                              Shares          Amount          Capital       Adjustment     (Deficit)
                                              ------          ------          --------       --------      ---------- 
<S>                                           <C>            <C>             <C>              <C>          <C>
Balance June 30, 1995                         46,942          $9,388           $11,592         $(644)        (20,521)


     Net Income three months
        ending 9-30-95                             -               -                 -                          (684)

Foreign Currency Translation                       -               -                 -            339              -
                                           ---------      ----------         ---------        -------     ----------

Balance Sept 30, 1995                         46,942           9,388            11,592           (305)       (21,205)

     Net Income nine months
        ending 6-30-96                             -               -                 -              -         (1,326)

Foreign Currency Translation                       -               -                 -            229              -
                                           ---------      ----------         ---------       --------      ---------

Balance June 30, 1996                         46,942           9,388            11,592            (76)       (22,531)

     Net Income three months
        ending 9-30-96                             -               -                 -              -           (374)

Foreign Currency Translation                       -               -                 -             29              -
                                           ---------      ----------         ---------       --------      ---------

Balance September 30, 1996                    46,942           9,388            11,592            (47)       (22,905)

     Net Income nine months
        ending 6-30-97                             -               -                 -              -          (886)

Foreign Currency Translation                       -               -                 -          (380)              -
                                           ---------      ----------         ---------       --------      ---------

Balance June 30, 1997                         46,942           9,388            11,592           (427)       (23,791)

     Net Income three months
        ending 9-30-97                             -               -                 -              -          (301)

Foreign Currency Translation                       -               -                 -           (258)            -
                                           ---------      ----------         ---------       --------      ---------
                                                                             
Balance September 30, 1997                   $46,942          $9,388           $11,592          $(685)      $(24,092)
                                           =========      ==========         =========       ========      =========

</TABLE>
              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                       5
<PAGE>   6
                    BAYOU INTERNATIONAL, LTD. AND SUBSIDIARY
                      Consolidated Statements of Cash Flows
                      Three Months Ended September 30, 1997
                       Year Ended June 30, 1997 and Three
                         Months Ended September 30, 1996
                             (in Australian Dollars)
                                 (000's omitted)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                           3 Months          Year           3 Months
                                                             Ended            Ended            Ended
                                                            Sept 30         June 30          Sept 30
                                                             1997             1997            1996
                                                           --------        --------        ---------
<S>                                                          <C>            <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net Loss                                                $(301)         $(1,260)         $(374)
     Adjustments:
        Foreign Currency Translation                          (258)            (351)            29
        Depreciation and Amortization                            3              545            136
                (Gain) Loss on Disposition of Assets            --                2             --
         Diminution of Value                                    --               --             --
        Reversal of Writeoff                                   272               --             --
        Change Net of Effects of Subsidiary
           Acquisitions:
             Accounts Receivable                                (8)             (10)            (1)
             A/P and Accrued Liabilities                         7               60            (41)
                                                             -----          -------          -----
             Net Cash Provided (Used) by
                Operating Activities                          (285)          (1,014)          (251)
                                                             -----          -------          -----
CASH FLOW FROM INVESTING ACTIVITIES:
     Capital Expenditures, Net                                  (1)              (8)            --
     Net Proceeds from Investments                              --                1             --
                                                             -----          -------          -----
           Net Cash Provided (Used) in
                Investing Activities                            (1)              (7)            --
                                                             -----          -------          -----

CASH FLOWS FROM FINANCING ACTIVITIES:
     Net Borrowing under Credit
        Line Arrangements                                       --               --             --
     Net Borrowing from Affiliates                             219            1,001             --
     Net Borrowings                                             76               --            291
                                                             -----          -------          -----
           Net Cash Provided by
                Financing Activities                           295            1,001            291
                                                             -----          -------          -----
Net Increase (Decrease) in Cash                                  9              (20)            40
Cash at Beginning of Year                                       53               73             73
                                                             -----          -------          -----
Cash at End of Year                                          $  62          $    53          $ 113
                                                             =====          =======          =====
Supplemental Disclosures:
     Common Stock Issued in Lieu of
        Debt Repayment                                       $  --          $    --          $  --
     Interest Paid (Net Capitalized)                         $  69          $   256          $  --
     Income Tax Paid                                         $  --          $    --          $  --
</TABLE>
              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                       6
<PAGE>   7
                    BAYOU INTERNATIONAL, LTD. AND SUBSIDIARY
                   Notes to Consolidated Financial Statements
                      September 30, 1997, June 30, 1997 and
                               September 30, 1996


(1)  ORGANIZATION

         Bayou International, Ltd. (Bayou) is incorporated in the State of
             Delaware. The principal shareholder of Bayou is Edensor Nominees
             Proprietary Limited (Edensor), an Australian corporation. Edensor
             owned 42.7% of Bayou as of September 30, 1997.

         Bayou's subsidiary is Solmecs Corporation N.V. (Solmecs), which it
             acquired controlling interest of, on September 3, 1987 and complete
             ownership on January 2, 1992.

         Bayou is primarily engaged in the research and development of high
             efficiency, low pollution or pollution-free products and
             technologies in the energy conversion and conservation fields
             through its 100%-owned subsidiary, Solmecs. All revenue is from
             contracted services provided by Solmecs. Almost all of Bayou's
             operating expenses are of a general and administrative and research
             and development nature.


(2)  ACCOUNTS RECEIVABLE

         Accounts Receivable at September 30,1997, June 30, 1997 and September
         30, 1996 includes:
<TABLE>
<CAPTION>
                                                                                             (in Australian Dollars)
                                                                                                 (000's omitted)
                                                                                       Sept 30         June 30     Sept 30
                                                                                         1997           1997         1996
                                                                                      ---------        -------     -------
<S>                                                                                   <C>               <C>           <C>
Miscellaneous Receivables                                                                  $ 71         $ 63         $ 54
  Less Allowance for
    Doubtful Account                                                                         --           --           --
                                                                                           ----         ----         ----

      Net                                                                                  $ 71         $ 63         $ 54
                                                                                           ====         ====         ====


(3) INVESTMENT SECURITIES

         The following is a summary of Investment Securities
         at September 30, 1997, June 30, 1997 and September
         30, 1996:


             Trading Securities:
               Marketable Equity
                 Securities, at cost                                                       $ --         $ --         $  1
               Gross Unrealized Gains                                                        --           --            2
               Gross Unrealized Losses                                                       --           --           --
                                                                                           ----         ----         ----

               Marketable Equity Securities,
                 at fair value                                                             $ --         $ --         $  3
                                                                                           ====         ====         ====
</TABLE>


                                       7
<PAGE>   8
                    BAYOU INTERNATIONAL, LTD. AND SUBSIDIARY
                   Notes to Consolidated Financial Statements
                      September 30, 1997, June 30, 1997 and
                               September 30, 1996


(4)  PROPERTY

         Property at September 30, 1997, June 30, 1997 and September 30, 1996
         includes:

<TABLE>
<CAPTION>
                                                                                (in Australian Dollars)
                                                                                    (000's omitted)
                                                                       Sept 30          June 30           Sept 30
                                                                        1997              1997             1996
                                                                       -------          -------          --------
<S>                                                                  <C>               <C>               <C>
             Office Furniture & Equipment                                  191          $   185           $   169
             Motor Vehicles                                                 41               40                38
                                                                       -------          -------          --------
                                                                           232              225               207
             Less Accumulated Depreciation                               (183)             (174)             (155)
                                                                      --------          -------           -------

                                                                       $    49          $    51           $    52
                                                                       =======          =======           =======


(5)  SHORT TERM AND LONG TERM DEBT

         The following is a summary of Bayou's borrowing
         arrangements as of September 30, 1997, June 30, 1997
         and September 30, 1996.


         Long-Term

         Loan to Subsidiary originally made in 1985.  Assumed
             forgiven in 1993.  Forgiveness has been reversed.
             Loan bears no interest and no fixed maturity date.           $278           $    -           $     -
         Loan from corporations affiliated
             with the President of Bayou.
             Interest accrues at the ANZ
             Banking Group Limited rate + 1%
             for overdrafts over $100,000.
             Repayment of loan not required
             before June 30, 1998.                                       3,219            2,999             2,289
                                                                         -----           ------            ------

             Total Long-Term                                             3,497            2,999             2,289
                                                                         -----           ------            ------

         Short-Term

         Overdraft arrangement with
             balance accruing interest                                       -                -                 -
         Notes Payable - Affiliates                                         69                -                 -
                                                                         -----           ------            ------

             Total Short-Term                                               69                -                 -
                                                                         -----           ------            ------

               Total                                                   $ 3,566          $ 2,999           $ 2,289
                                                                       =======          =======           =======
</TABLE>


                                       8
<PAGE>   9
                    BAYOU INTERNATIONAL, LTD. AND SUBSIDIARY
                   Notes to Consolidated Financial Statements
                      September 30, 1997, June 30, 1997 and
                               September 30, 1996


(6)  AFFILIATE TRANSACTIONS

         Bayou advances to and receives advances from various affiliates. All
             advances between consolidated affiliates are eliminated on
             consolidation. At September 30, 1997, Bayou had no outstanding
             advances to or from unconsolidated affiliated companies. $147,000,
             $125,000 and $64,000 of accounts payable for the years shown is due
             to an affiliated management company.


(7)  GOING CONCERN

         The accompanying consolidated financial statements have been prepared
             in conformity with generally accepted accounting principles, which
             contemplates continuation of Bayou and Solmecs as going concerns.
             However, both Bayou and Solmecs have sustained recurring losses. In
             addition, neither Bayou or Solmecs have any net working capital and
             both have retained stockholders' deficits, which raises substantial
             doubts as to their ability to continue as going concerns.

         Bayou anticipates that it will be able to defer repayment of certain of
             its short term loan commitments until it has sufficient liquidity
             to enable these loans to be repaid or other arrangements to be put
             in place.

         In  addition Bayou has historically relied on loans and advances from
             corporations affiliated with the President of Bayou. Based on
             discussions with these affiliate companies, Bayou believes this
             source of funding will continue to be available.

         Other than the arrangements noted above, Bayou has not confirmed any
             other arrangements for ongoing funding. As a result Bayou may be
             required to raise funds by additional debt or equity offerings in
             order to meet its cash flow requirements during the forthcoming
             year.


(8)  COMMITMENTS

         Solmecs has entered into the following commitments:

         (a)  B.G. Negev Technology and Application Ltd. (AP) and the Ben Gurion
              University of the Negev - The Research and Development Authority
              (RDA), jointly and severally (APRDA):

         In  accordance with an agreement dated November 5, 1981, between
             Solmecs, Ben-Gurion University and APRDA, Solmecs' subsidiary is
             continuing research and development (R&D) projects which were
             previously carried out by APRDA on the campus of Ben-Gurion
             University. It was further agreed that the University would enable
             the projects to continue on its campus in consideration for a fee
             for the use of the facilities.


                                       9
<PAGE>   10
                    BAYOU INTERNATIONAL, LTD. AND SUBSIDIARY
                   Notes to Consolidated Financial Statements
                      September 30, 1997, June 30, 1997 and
                               September 30, 1996


(8)  COMMITMENTS (CONTINUED)

         Solmecs owns the patents connected with these projects and agreed to
             pay royalties to APRDA at the rate of 1.75% on sales of products
             and at the rate of 11.5% on income from licensing fees.

         Solmecs also agreed to assume the obligations of APRDA to pay royalties
             to the Ministry of Energy on products developed from these R&D
             projects for its participation in the research and development cost
             of APRDA. As of June 30, 1997, this liability amounted to
             approximately US$308,000 (including linkage to the Consumer Price
             Index and interest at 4% per annum). Subsequent to the repayment of
             the liability, Solmecs is to pay royalties to the Ministry of
             Energy (ME) at a reduced rate.

         Through September 30, 1997, there were no sales or income on which
             royalties were payable to APRDA or the ME.

         (b)  International Lead Zinc Research Organization (ILZRO)

         In  connection with a research contract with ILZRO, Solmecs' subsidiary
             agreed to pay ILZRO a fee for any lead used in future production by
             the subsidiary. The total fee commitment is limited to
             US$1,864,000. Through September 30, 1997, the subsidiary has not
             used any lead for which it is required to pay fees.

         (c)  Chief Scientist of the Government of Israel

         For the period from 1981 to 1991, Solmecs' subsidiary received
             participation from the Chief Scientist of US$2,274,420 towards the
             cost of a research and development project. In return, the
             subsidiary is required to pay royalties at the rate of 2% of sales
             of know-how or products derived from the project. Through September
             30, 1997, no royalties were payable.

(9) SUBSEQUENT EVENTS

        In   March 1997, Bayou commenced negotiations with SCNV Acquisition Corp
             ("SCNV") for the sale of Bayou's subsidiary Solmecs to SCNV. A
             letter of intent was signed on May 5, 1997 and agreements to effect
             the sale are in the process of being negotiated. It is intended
             that, as part of the sale of Solmecs, Bayou will acquire a 24%
             interest in SCNV.

        The  sale of Solmecs is subject to the approval of shareholders of
             Bayou. Following the signing of formal contracts for the sale of
             Solmecs, Bayou will prepare and distribute an Information
             Memorandum for the purpose of seeking shareholder approval.


                                       10
<PAGE>   11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

FUND COSTS CONVERSION

The consolidated statements of income and other financial and operating data
contained elsewhere herein and the consolidated balance sheets and financial
results have been reflected in Australian dollars unless otherwise stated.

The following table shows the average rate of exchange of the Australian dollar
as compared to the US dollar during the periods indicated:

         3 months ended Sept 30, 1996 A$1.00 = U.S. $0.7901
         3 months ended Sept 30, 1997 A$1.00 = U.S. $0.7196


RESULTS OF OPERATION

THREE MONTHS ENDED SEPTEMBER 30, 1997 VS. THREE MONTHS ENDED SEPTEMBER 30, 1996.

Revenue of A$6,000 for the three months ended September 30, 1997 compared to A
$5,000 for the three months ended September 30 1996.

Cost and expenses increased from A$215,000 for the three months ended September
30, 1996 to A$287,000 for the three months ended September 30, 1997. The
increase is a net result of:

     a)  an increase in interest expense from A$60,000 for the three months
         ended September 30, 1996 to A$69,000 for the three months ended
         September 30, 1997.

     b)  an increase in legal, accounting and professional from A$22,000 for the
         three months ended September 30, 1996 to A$48,000 for the three months
         ended September 30, 1997 due to additional professional fees in regard
         to the Solmecs Prospectus.

     c)  the increase in administrative costs from A$42,000 in the three months
         ended September 30, 1996 to A$147,000 in the three months ended
         September 30, 1997 due to foreign travel increase for scientific and
         business trips.

     (d) a decrease in research and development from A$88,000 in the three
         months ended September 30, 1996 to A$20,000 in the three months ended
         September 30, 1997.

As a result of the foregoing the loss from operations amounted to $A281,000 for
the three months ended September 30, 1997 compared to A$210,000 for the three
months ended September 30, 1996.

The Company incurred a foreign exchange gain of A$251,000 for the three months
ended September 30, 1997 compared to a foreign exchange loss of A$31,000 for the
three months ended September 30, 1996 caused by the movement in the Australian
dollar versus the U.S. dollar. All of the Company's loan accounts are
denominated in U.S. dollars.

Loss before amortization of goodwill amounted to A$301,000 for the three months
ended September 30, 1997 compared to A$241,000 for the three months ended
September 30, 1996.

The Company incurred a net loss of A$301,000 for the end three months ended
September 30, 1997 compared to a loss of A$374,000 for the end three months
ended September 30, 1996.


                                       11
<PAGE>   12
LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 1997 the Company had short term obligations of A$482,000
comprising accounts payable and accrued expenses and owed an amount of
A$3,218,620 to Chevas Pty Ltd of which the President and the Chief Executive
Officer of the Company Mr. J I Gutnick is a Director. The Company has long term
obligations of A$116,038 at September 30, 1997 as a disputed claim due to Ben
Gurion University.

The Company anticipates that it will be able to defer repayment of certain of
its short term loan commitments until it has sufficient liquidity to enable
these loans to be repaid which there can be no assurance. In addition the
Company has historically relied upon loans and advances from affiliates to meet
a significant portion of the Company's cash flow requirements which the Company
believes based on discussions with such affiliates will continue to be available
during fiscal 1997 and 1998.

The Company will still be required to fund Solmecs in order to complete the
development of the next stage of the LMMHD project together with other projects
that Solmecs is developing.

Other than the arrangements above the Company has not confirmed any further
arrangements for ongoing funding. As a result the Company may be required to
raise funds from additional debt or equity offerings and/or increase the
revenues from operations in order to meet its cash flow requirements during the
forthcoming year.


CAUTIONARY SAFE HARBOR STATEMENT UNDER THE UNITED STATES PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995.

Certain information contained in this Form 10-Q is forward looking information
within the meaning of the Private Securities Litigation Act of 1995 (the "Act")
which became law in December 1995. In order to obtain the benefits of the "safe
harbor" provisions of the act for any such forwarding looking statements, the
Company wishes to caution investors and prospective investors about significant
factors which among others have affected the Company's actual results and are in
the future likely to affect the Company's actual results and cause them to
differ materially from those expressed in any such forward looking statements.
This Form 10-Q report contains forward looking statements relating to future
financial results. Actual results may differ as a result of factors over which
the Company has no control including the strength of the domestic and foreign
economies, slower than anticipated completion of research and development
projects and movements in the foreign exchange rate. Additional information
which could affect the Company's financial results is included in the Company's
Form 10-K on file with the Securities and Exchange Commission.


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<PAGE>   13
                                     PART II


Item 1.         LEGAL

                Not Applicable

Item 6.         EXHIBITS AND REPORTS ON FORM 8-K

                The Company did not file any Report on Form 8-K during the three
                months ended September 30, 1997.

Item 5.         OTHER INFORMATION

                Mr Hayden Barry resigned as a Director on October 15, 1997 and
                Mr David Simcox was appointed as a Director of the Company on
                October 15, 1997.


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<PAGE>   14
                                  (FORM 10-Q)

SIGNATURES

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

                                    BAYOU INTERNATIONAL, LTD.

                                    By: /s/ David H. Simcox
                                       -----------------------------
                                            David H. Simcox
                                            Director


Dated: November 13, 1997            By: /s/ Peter Lee
                                       -----------------------------
                                            Peter Lee
                                            Director, Assistant
                                            Secretary and Chief
                                            Financial Officer
                                            (Principal Financial Officer)

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