<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 2O549

                                    FORM 10-Q

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

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

For the quarterly period ended    December 31, 1998     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.)

             210 Kings Way South Melbourne, Victoria, 3205 Australia
               (Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code        0ll (613) 9234 - 1100


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 December 31, 1998.
<PAGE>   2
                                     PART 1

                              FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

         INTRODUCTION TO INTERIM FINANCIAL STATEMENTS.

         The interim financial statements included here in 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, 1998.

         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 December 31, 1998 and December 31, 1997, the results of its
operations for the three and six month periods ended December 31, 1998 and
December 31, 1997, and the changes in its cash flows for the six month periods
ended December 31, 1998 and December 31, 1997, have been included. The results
of operations for the interim periods are not necessarily indicative of the
results for the full year.

         The results of the Company's operations for the three and six months
ended December 31, 1998 were effected by the sale, on July 8, 1998 of the
Company's sole operating subsidiary, Solmecs Corporation N.V. ("Solmecs"), in
exchange for an approximate 24% interest in the acquiror. The results of
operations of Solmecs are presented in the consolidated financial statements as
discontinued operations. The results for previous periods have been restated
accordingly.

              UNLESS OTHERWISE INDICATED, ALL FINANCIAL INFORMATION
              PRESENTED IS IN AUSTRALIAN DOLLARS.
<PAGE>   3
                    BAYOU INTERNATIONAL, LTD. AND SUBSIDIARY
                           Consolidated Balance Sheets
                       December 31, 1998 and June 30, 1998
                              and December 31, 1997
                                   (Unaudited)
                                     ASSETS

<TABLE>
<CAPTION>
                                                                        A $000's          A $000's         A $000's
                                                                        Dec 31           June 30           Dec 31
                                                                          1998              1998             1997
                                                                    ----------         ---------         --------
<S>                                                                 <C>               <C>              <C>
Current Assets:
Cash                                                                         1                 1                1
Accounts Receivable, net                                                     -                 -                -
                                                                    ---------------------------------------------

Total Current Assets                                                         1                1                 1
                                                                    ---------------------------------------------
Other Assets:
Investments                                                              4,516            4,516                 -
Property and Equipment, net                                                  -                -                 -
Organisational Costs, net                                                    1                1                 -
                                                                    ---------------------------------------------

Total Other Assets                                                       4,517             4,517                -
                                                                    ---------------------------------------------

Total Assets                                                             4,518            4,518                 1
                                                                    =============================================

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
Short Term Notes                                                             -                 -                -
Accounts Payable and
Accrued Expenses                                                           228               229              182
                                                                    ---------------------------------------------

Total Current Liabilities                                                  228               229              182

Long-Term Debt                                                           3,836             3,585            3,294
Net Liabilities of Discontinued Operations                                   -                 -              676
                                                                    ---------------------------------------------

Total Liabilities                                                        4,064             3,814           4,152

Stockholders' Equity (Deficit):
Common Stock:  $0.20 par value
100,000,000 shares authorized,
46,941,789 issued and outstanding                                        9,388             9,388            9,388
less Treasury Stock at Cost, 50,000 shares                                 (20)              (20)               -
Additional Paid-in-Capital                                              11,592            11,592           11,592
Cumulative Translation Adjustments                                      (1,989)           (1,989)          (1,507)
Retained Deficits                                                      (18,517)          (18,267)         (23,624)
                                                                    ---------------------------------------------


Total Stockholders' Deficit                                                454               704           (4,151)
                                                                    ---------------------------------------------
Total Liabilities and
Stockholders' Equity                                                     4,518              4518                1
                                                                    =============================================
</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 December 31 1998 and 1997 and
                   Six Months Ended December 31, 1998 and 1997
                                   (Unaudited)

<TABLE>
<CAPTION>
                                               A $000's        A $000's      A $000's           A $000's
                                                  Three          Three            Six                Six
                                                  Months         Months         Months            Months
                                                  Ended          Ended           Ended            Ended
                                                 Dec 31         Dec 31          Dec 31           Dec 31
                                                   1998           1997            1998             1997
                                                -------      ---------       ---------          -------
Revenues:
<S>                                             <C>          <C>             <C>                  <C>
Other Income                                        --             --               --               --
                                                -------------------------------------------------------
Costs and Expenses:
Interest Expense                                    80             74              157              142
Legal, Accounting & Professional                     1              9               16               38
Administrative                                      22             21               77               35
                                                -------------------------------------------------------

                                                   103            104              250              215
                                                -------------------------------------------------------

Loss from Operations                              (103)          (104)            (250)            (215)

Gain (Loss) on Disposition of Assets                --             --               --               --
Foreign Currency Exchange Gain (Loss)               --            753               --            1,000
                                                -------------------------------------------------------
                                                    --            753               --            1,000
                                                -------------------------------------------------------

Income (Loss) before Income Tax                   (103)           649             (250)             785

Provision for Income Tax                            --             --               --               --
                                                -------------------------------------------------------
Net profit (Loss) from Continuing Operations      (103)           649             (250)             785
Discontinued Operations                             --           (193)              --             (358)
                                                -------------------------------------------------------
Net Loss from Discontinued Operations

Net Income (Loss)                                 (103)           456             (250)             427
                                                -------------------------------------------------------

Earnings Per Common Equivalent Share
From Continuing Operations                         .00            .01             (.01)             .02
From Discontinued Operation                        .00            .00              .00             (.01)
                                                -------------------------------------------------------

Total                                              .00            .01             (.01)             .01
                                                =======================================================
Weighted Number of Common
Equivalent Shares Outstanding                   46,942         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
                       December 31, 1998 and June 30, 1998
                              and December 31, 1997
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                     Common          Treasury   Paid in Capital      Cumulative     Retained
                                   Shares      Stock Amount     Stock at Cost          (Deficit)    Translation     Earnings
                                   ------      ------------     -------------          ---------     Adjustment     --------
                                                                                                     ----------

                                                   A $000's          A $000's          A $000's       A $000's      A $000's
<S>                              <C>           <C>              <C>             <C>                 <C>             <C>
Balance June 30, 1996              46,942             9,388                --             11,592           (70)       (22,791)

Net Income Six                         --                --                --                 --            --           (761)
months ending 12-31-96

Foreign Currency Translation-          --                --                --                 --            53             --
                                  -------------------------------------------------------------------------------------------

Balance December 31,1996           46,942             9,388                --             11,592           (17)       (23,552)

Net income six months ending           --                --                --                 --            --           (499)
6-30-97

Foreign currency translation           --                --                --                 --          (418)            --
                                  -------------------------------------------------------------------------------------------

Balance June 30, 1997              46,942             9,388                --             11,592          (435)       (24,051)

Net income six months ending           --                --                --                 --            --            427
12-31-97

Foreign Currency Translation           --                --                --                 --        (1,072)            --
                                  -------------------------------------------------------------------------------------------

Balance December 31, 1997          46,942             9,388                --             11,592        (1,507)       (23,624)

Net income six months ending                                                                                            5,357
6-30-98

Foreign Currency Translation           --                --                --                 --          (482)            --

Acquisition of Treasury Stock
at Cost, 50,000 Shares                 --                --               (20)                --            --             --
                                  -------------------------------------------------------------------------------------------

Balance June 30, 1998              46,492             9,388               (20)            11,592        (1,989)       (18,267)

Net Income six months ending
12-31-98                               --                --                --                 --            --           (250)

                                  -------------------------------------------------------------------------------------------

Balance December 31, 1998          46,492             9,388               (20)            11,592        (1,989)       (18,517)
                                  -------------------------------------------------------------------------------------------
</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
                   Six Months Ended December 31, 1997 and 1996
                          and Year Ended June 30, 1997
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                               A $000's        A $000's          A $000's
                                                                               3 Months            Year          3 Months
                                                                                 Ended           Ended             Ended
                                                                                 Dec 31         June 30            Dec 31
                                                                                   1998            1998              1997
                                                                                   ----            ----              ----

CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                                <C>          <C>              <C>
Net Income (Loss) from Continuing Operations                                       (250)           6,736              785
Adjustments:
Foreign Currency Translation                                                          -           (1,554)          (1,072)
Depreciation and Amortization                                                         -                -                -
(Gain) Loss on Disposition of Assets                                                  -           (5,899)               -
Diminution of Value                                                                   -                -                -
Change Net of Effects of Subsidiary
Acquisitions:
Accounts Receivable                                                                   -                -                -
A/P and Accrued Liabilities                                                          (1)              89               23
                                                                                   --------------------------------------

Net Cash Provided in Continuing Operations                                         (251)            (628)            (264)
Net Cash (Used in) Discontinued Operations                                            -               63              (30)
                                                                                   --------------------------------------
Net Cash Provided by  (Used in) Operating Activities                               (251)            (565)            (294)
                                                                                   --------------------------------------

CASH FLOW FROM INVESTING ACTIVITIES:
Investment in Treasury Stock                                                          -              (20)               -
Investment in Subsidiary                                                              -               (1)               -
                                                                                   --------------------------------------

Net Cash Provided (Used) in
Investing Activities                                                                 -              (21)                -
                                                                                   --------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Net Borrowing under Credit
Line Arrangements                                                                     -                -                -
Net Borrowing from Affiliates                                                       251              586              294
Net Borrowings                                                                         -               -                -
                                                                                   --------------------------------------

Net Cash Provided by
Financing Activities                                                                251              586              294
                                                                                   --------------------------------------

Net Increase (Decrease) in Cash                                                       -                -                -
Cash at Beginning of Year                                                             1                1                1
                                                                                   --------------------------------------
Cash at End of Year                                                                   1                1                1
                                                                                   ======================================
Supplemental Disclosures:
Common Stock Issued in Lieu of
Debt Repayment                                                                  $     -          $     -           $    -
Interest Paid (Net Capitalized)                                                 $   157          $   290           $  142
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
                      December 31, 1998, June 30, 1998 and
                                December 31, 1997


(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
December 31, 1997.

Bayou acquired a controlling interest on September 3, 1987 in former subsidiary,
Solmecs Corporation N.V. ("Solmecs") and 100% ownership on January 2, 1992.
Bayou sold its interest in Solmecs effective June 5, 1998.

During fiscal 1998, Bayou incorporated a further subsidiary, Bayou Australia Pty
Ltd, under the laws of Australia. Bayou Australia Pty Ltd has not traded at
September 30, 1998.


(2)  ACCOUNTS RECEIVABLE

Accounts Receivable at December 31,1998, June 30, 1998 and December 31, 1997
includes:

<TABLE>
<CAPTION>
                                                                      A $000's         A $000's          A $000's
                                                                        Dec 31          June 30            Dec 31
                                                                          1998           1998                1997
                                                                      --------       ----------          --------

<S>                                                                   <C>            <C>                 <C>
Miscellaneous Receivables                                                    -                 -                -
Less Allowance for
Doubtful Account                                                             -                 -                -
                                                                      --------------------------------------------
Net                                                                          -                 -                -
                                                                      ============================================
</TABLE>


(3)  INVESTMENT SECURITIES

The following is a summary of Investment Securities at December 31, 1998, June
30, 1998 and December 31, 1997:

<TABLE>
<S>                                                                  <C>                  <C>              <C>
Investment Cost Method                                                   4,516            4,516                 -
Trading Securities:
Marketable Equity
Securities, at cost                                                          -                 -                -
Gross Unrealized Gains                                                       -                 -                -
Gross Unrealized Losses                                                      -                 -                -
                                                                      -------------------------------------------
Marketable Equity Securities,
at fair value                                                             4,516             4,516               -
                                                                      ============================================
</TABLE>




                                                                               7
<PAGE>   8
                    BAYOU INTERNATIONAL, LTD. AND SUBSIDIARY
                   Notes to Consolidated Financial Statements
                      December 31, 1998, June 30, 1998 and
                                December 31, 1997

(4)  PROPERTY

Property at December 31, 1998, June 30, 1998 and December 31, 1997 includes:


<TABLE>
<CAPTION>
                                                                     A $000's          A $000's            A $000's
                                                                        Dec 31          June 30            Dec 31
                                                                          1998              1998             1997
                                                                      --------          --------         --------

<S>                                                                  <C>               <C>               <C>
Office Furniture & Equipment                                                 -                 -                -
Motor Vehicles                                                               -                 -                -
                                                                      -------------------------------------------

                                                                             -                 -                -
Less Accumulated Depreciation                                                -                 -                -
                                                                      -------------------------------------------
                                                                             -                 -                -
                                                                      ===========================================
</TABLE>


(5) SHORT TERM AND LONG TERM DEBT


The following is a summary of Bayou's borrowing arrangements as of December 31,
1998, June 30, 1998 and December 31, 1997.

<TABLE>
<S>                                                                   <C>                 <C>               <C>
Long-Term

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, 1999.                                                    3,836             3,585            3,294
                                                                       ------------------------------------------

Total Long-Term                                                          3,836             3,585            3,294
                                                                       ------------------------------------------
Short-Term

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

Total Short-Term                                                             -                 -                -

                                                                       ------------------------------------------
Total                                                                    3,836             3,585            3,294
                                                                       ==========================================
</TABLE>




                                                                               8
<PAGE>   9
                    BAYOU INTERNATIONAL, LTD. AND SUBSIDIARY
                   Notes to Consolidated Financial Statements
                      December 31, 1998, June 30, 1998 and
                                December 31, 1997


(6)  AFFILIATE TRANSACTIONS

Bayou advances to and receives advances from various affiliates. All advances
between consolidated affiliates are eliminated on consolidation. At December 31,
1998, Bayou had no outstanding advances to or from unconsolidated affiliated
companies. $220,000, $171,000 and $175,000 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 a going concern. However, Bayou has
sustained recurring losses. In addition, Bayou has no net working capital, which
raises substantial doubts as to its 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) SALE OF SOLMECS

Pursuant to a stock purchase agreement dated as of June 5, 1998, the Company
acquired 499,701 shares in SCNV Acquisition Corp ("SCNV"), representing
approximately 24% of the issued and outstanding share capital of SCNV, in return
for the whole of the share capital of Solmecs Corporation N.V., a Netherlands
Antilles company which prior to the exchange was formerly a wholly owned
subsidiary of the Company. The 499,701 shares has been valued at US$2,800,000 or
A$4,516,000 and will be accounted for using the cost method because the Company
does not exercise significant influences over SCNV's operating and financial
activities (see note 4). The sale resulted in a gain of $5,899,000 which is
included in other income.

SCNV is a Delaware corporation established May 1997 to select, develop and
commercially exploit proprietary technologies, in various stages of development,
invented primary by scientists who have been recently immigrated to Israel from
and by scientists and institutions in Russia and other countries that formerly
comprised the Soviet Union. Simultaneously with the SCNV stock acquisition by
the Company, SCNV completed an initial public offering of common stock and
warrants which resulted in gross proceeds of approximately US$5,900,000.

The Company has been granted certain demand and "piggyback" registration rights
with respect to the SCNV shares. Notwithstanding the foregoing, the Company has
agreed not to sell, grant options for sale of assign or transfer any of the SCNV
shares, for a period of 24 months from the closing of the ("Lock-up") agreement,
provided, however, that under certain circumstances, the Company shall have the
right to distribute the SCNV shares pro rata to its stockholders and provide
further that the recipients will take such shares subject to the remaining term
of the lock-up. The Company does not currently have any plans to distribute the
SCNV shares of its stockholders.

The sale of Solmecs Corporation N.V. has been accounted for in the consolidated
financial statements as discontinued operations for all periods presented. The
assets and liabilities of discontinued operations as of December 31, 1997 and
June 30, 1998, have been combined and reflected in the accompanying balance
sheet as net liabilities of discontinued operations.

The following is a summary of net assets and results of operations of Solmecs
Corporation N.V. as of December 31, 1997 and June 30, 1998 and for the periods
then ended.



                                                                               9
<PAGE>   10
<TABLE>
<CAPTION>
                                                                           A$000'S                      A$000'S
                                                                          JUNE 30,                 DECEMBER 31,
                                                                              1998                         1997

<S>                                                                       <C>                      <C>
     Cash                                                                        7                           67
     Accounts receivable                                                       167                           84
     Property and equipment, net                                               185                          106
                                                                           ------------------------------------
     TOTAL ASSETS                                                              359                          257
                                                                           ------------------------------------


     Accounts payable and
     Accrued Expenses                                                        1,399                          625
     Long-term Debt                                                          8,521                        8,117
                                                                           ------------------------------------
     NET ASSETS                                                             (9,561)                      (8,742)
                                                                           ------------------------------------



     Sales                                                                      83                           45
     Cost and Expenses                                                       1,035                          403
                                                                           ------------------------------------
     Loss before Income Tax                                                   (952)                        (358)
     Income Taxes                                                                -                            -
                                                                           ------------------------------------

     NET PROFIT (LOSS)                                                        (952)                        (358)
                                                                           ------------------------------------
</TABLE>

(9) INCOME TAXES

Bayou files its income tax returns on an accrual basis. Bayou has carry forward
losses of approximately US$14 million as of June 30, 1998 which expire in the
years 1999 through 2012. Due to the uncertainty as to realization of these
losses, no benefit has been recorded.


                                                                              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 here in 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:

         6 months ended December 31, 1997 A$1.00 = U.S. $.6503
         6 months ended December 31, 1998 A$1.00 = U.S. $.6115

RESULTS OF OPERATION

SIX  MONTHS ENDED DECEMBER 31, 1997 VS. SIX MONTHS ENDED DECEMBER  31 1998.

Costs and expenses decreased from A$215,000 in the six months ended December 31,
1997 to A$250,000 in the six months ended December 31, 1998. The decrease is a
net result of:

a)       an increase in interest expense from A$142,000 for the six months ended
         December 31, 1997 to A$157,000 for the six months ended December 31,
         1998 as a result of the increase in long term debt of the Company.

b)       the decrease in legal accounting and professional expense from A$38,000
         for the six months ended December 31, 1997 to A$16,000 for the six
         months ended December 31, 1998. The amount for the six months ended
         December 31, 1997 included substantial costs in regard to the disposal
         of Solmecs Corporation N.V.

c)       the increase in administrative costs including salaries from A$35,000
         in the six months ended December 31, 1997 to A$77,000 in the six months
         ended December 31, 1998 which relate to costs incurred in providing
         information to shareholders in respect to the sale of Solmecs
         Corporation N.V.

As a result of the foregoing, the loss from operations increased from A$215,000
for the six months ended December 31, 1997 to A$250,000 for the six months ended
December 31, 1998.

The Company realised a foreign exchange gain of nil for the six months ended
December 31, 1998 compared to a foreign currency exchange loss of A$1,000,000
for the six months ended December 31, 1997 caused by the movement in the
Australian dollar versus the U.S. dollar. All of the Company's loan accounts
were denominated in U.S. dollars however, these loans were foregiven as part of
the sale of Solmecs Corporation N.V.

A loss was incurred on the discontinued operations of Solmecs Corporation N.V.
for the six months ended December 31, 1997 with no comparable amount for the six
months ended December 31, 1998..

The net loss was A$250,000 for the six months ended December 31, 1998 compared
to a net income of A$427,000 for the six months ended December 31, 1997.


LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 1998 the Company had short term obligations of A$228,000
comprising accounts payable and accrued expenses and owed an amount of
A$3,836,000 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 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 1999 and 2000.


                                                                              11
<PAGE>   12
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.



                                                                              12
<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 six
                months ended December 31, 1998.

Item 5.         OTHER INFORMATION




                                                                              13
<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/ Joseph I. Gutnick
                            --------------------------------------
                            Joseph I. Gutnick
                            Chairman of the Board, President and
                            Chief Executive Officer
                            (Principal Executive Officer)

Dated:  February 22, 1999  By:


                            /s/ Peter Lee
                            --------------------------------------------------
                            Peter Lee, Director, Assistant Secretary and Chief
                            Financial Officer
                            (Principal Financial Officer)



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