<PAGE>   1

                       Securities and Exchange Commission
                             Washington, D.C. 20549

                                    FORM lO-Q/A

                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    December 31 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 December 31, 1997
<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, 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 December 31, 1997 and December 31, 1996, the results of its
operations for the three and six month periods ended December 31, 1997 and
December 31, 1996, and the changes in its cash flows for the six month periods
ended December 31, 1997 and December 31, 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
                       December 31, 1997 and June 30, 1997
                              and December 31, 1996
                             (in Australian Dollars)
                                 (000's omitted)
                                   (Unaudited)
                                     ASSETS

<TABLE>
<CAPTION>
                                                 Dec 31     June 30      Dec 31
                                                   1997        1997        1996
                                               --------    --------    --------
<S>                                            <C>         <C>         <C>     
Current Assets:
   Cash                                        $     68    $     53    $     48
   Accounts Receivable, net                          84          63          51
   Investments                                       --          --           3
                                               --------------------------------
      Total Current Assets                          152         116         102
                                               --------------------------------
Other Assets:
   Property and Equipment, net                      106          51          54
   Goodwill, net                                     --          --         266
                                               --------------------------------
   Total Other Assets                               106          51         320
                                               --------------------------------
           Total Assets                        $    258    $    167    $    422
                                               ================================

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
Short Term Notes                               $    369    $     --    $     --
Accounts Payable and
      Accrued Expenses                              438         406         281
                                               --------------------------------
      Total Current Liabilities                     807         406         281

Long-Term Debt                                    3,602       3,267       2,730
                                               --------------------------------
      Total Liabilities                           4,409       3,673       3,011

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
   Additional Paid-in-Capital                    11,592      11,592      11,592
    Cumulative Translation Adjustments           (1,507)       (435)        (17)
   Retained Deficits                            (23,624)    (24,051)    (23,582)
                                               --------------------------------
      Total Stockholders' Deficit                (4,151)     (3,506)     (2,589)
                                               --------------------------------
           Total Liabilities and
             Stockholders' Equity              $    258    $    167    $    422
                                               ================================
</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 1997 and 1996 and
                   Six Months Ended December 31, 1997 and 1996
                                 (000's omitted)
                             (in Australian Dollars)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                               Three       Three        Six         Six
                                              Months      Months      Months      Months
                                               Ended       Ended       Ended       Ended
                                              Dec 31      Dec 31      Dec 31      Dec 31
                                                1997        1996        1997        1996
                                            --------    --------    --------    --------
<S>                                         <C>         <C>         <C>         <C>     
Revenues:
    Other Income                            $     39    $      7    $     45    $     12
                                            --------------------------------------------
                                                  39           7          45          12
Costs and Expenses:
    Management Fee                                --          --          --          --
    Interest Expense                              73          64         142         124
    Legal, Accounting & Professional              18          23          66          45
    Depreciation & Amortization                    3           3           6           6
    Amortization of Goodwill                      --         134          --         267
    Administrative                               197          71         344         113
    Research & Development                        54          76          74         164
                                            --------------------------------------------
                                                 345         371         632         719
                                            --------------------------------------------
Loss from Operations                            (306)       (364)       (587)       (707)

    Gain (Loss) on Disposition of Assets          --          --           1          --
    Foreign Currency Exchange Gain (Loss)        762         (23)      1,013         (54)
                                            --------------------------------------------
                                                 762         (23)      1,014         (54)
                                            --------------------------------------------
Income (Loss) before Income Tax                  456        (387)        427        (761)

    Provision for Income Tax                      --          --          --          --
                                            --------------------------------------------
Net Income (Loss)                                456        (387)        427        (761)
                                            --------------------------------------------
Earnings Per Common Equivalent Share        $    .01    $   (.01)   $    .01    $   (.02)
                                            ============================================
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, 1997 and June 30, 1997
                              and December 31, 1996
                             (in Australian Dollars)
                                 (000's omitted)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                            Common Stock    Paid-In-   Cumulative
                                         -----------------  Capital   Transalation   Retained
                                         Shares     Amount (Deficit)    Adjustment   Earnings
                                         ------     ------ ---------    ----------   --------
<S>                                      <C>         <C>       <C>          <C>      <C>     
Balance June 30, 1995                    46,942      9,388     11,592       (665)    (20,781)

    Net Income six months
      ending 12-31-95                        --         --         --         --        (897)

    Foreign Currency Translation             --         --         --        274          --
                                         ---------------------------------------------------
Balance December 31, 1995                46,942      9,388     11,592       (391)    (21,678)

    Net Income six months
      ending 6-30-96                         --         --         --                  (1113)

    Foreign Currency Translation             --         --         --        321          --
                                         ---------------------------------------------------
Balance June 30, 1996                    46,942      9,388     11,592        (70)    (22,791)

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

    Foreign Currency Translation             --         --         --         53          --
                                         ---------------------------------------------------
Balance December 31, 1996                46,942      9,388     11,592        (17)    (23,552)

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

    Foreign Currency Translation             --         --         --       (418)         --
                                         ---------------------------------------------------
Balance June 30, 1997                    46,942      9,388     11,592       (435)    (24,051)

    Net Income six months
      ending 12-31-96                        --         --         --         --         427

    Foreign Currency Translation             --         --         --     (1,072)         --
                                         ---------------------------------------------------
Balance December 31, 1997                46,942   $  9,388   $ 11,592   $ (1,507)   $(23,624)
                                         ===================================================
</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
                             (in Australian Dollars)
                                 (000's omitted)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                   3 Months       Year   3 Months
                                                      Ended      Ended      Ended
                                                     Dec 31    June 30     Dec 31
                                                       1997       1997       1996
                                                     ------    -------     ------
<S>                                                 <C>        <C>        <C>     
Cash Flows from Operating Activities:
    Net Income (Loss)                               $   427    $(1,260)   $  (761)
    Adjustments:
      Foreign Currency Translation                   (1,072)      (365)        53
      Depreciation and Amortization                       6        545        273
      (Gain) Loss on Disposition of Assets               --          2         --
      Diminution of Value                                --         --         --
      Change Net of Effects of Subsidiary
         Acquisitions:
           Accounts Receivable                          (21)       (10)         2
           A/P and Accrued Liabilities                   32         60        (65)
                                                    -----------------------------
         Net Cash Provided (Used) by
             Operating Activities                      (628)    (1,028)      (498)
                                                    -----------------------------
Cash Flow from Investing Activities:
    Capital Expenditures, Net                           (61)        (8)        (5)
    Net Proceeds from Investments                        --         (1)        --
                                                    -----------------------------
         Net Cash Provided (Used) in
             Investing Activities                       (61)        (7)        (5)
                                                    -----------------------------
Cash Flows from Financing Activities:
    Net Borrowing under Credit
      Line Arrangements                                  --         --         --
    Net Borrowing from Affiliates                       299      1,015        478
    Net Borrowings                                      405         --         --
                                                    -----------------------------
         Net Cash Provided by
             Financing Activities                       704      1,015        478
                                                    -----------------------------
Net Increase (Decrease) in Cash                          15        (20)       (25)
Cash at Beginning of Year                                53         73         73
                                                    -----------------------------
Cash at End of Year                                 $    68    $    53    $    48
                                                    =============================
Supplemental Disclosures:
    Common Stock Issued in Lieu of
      Debt Repayment                                $    --    $    --    $    --
    Interest Paid (Net Capitalized)                 $   142    $   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
                      December 31, 1997, June 30, 1997 and
                                December 31, 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 December 31, 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 for general and administrative and research
            and development cost.

(2)  Accounts Receivable

      Accounts Receivable at December 31,1997, June 30, 1997 and December 31,
      1996 includes:

<TABLE>
<CAPTION>
                                                  (in Australian Dollars)
                                                      (000's omitted)
                                            -----------------------------------
                                            Dec 31       June 30         Dec 31
                                              1997          1997           1996
                                            ------       -------         ------
<S>                                          <C>           <C>            <C>  
           Miscellaneous Receivables         $  84         $  63          $  51
             Less Allowance for
               Doubtful Account                 --            --             --
                                            -----------------------------------

                 Net                         $  84         $  63          $  51
                                            ===================================
</TABLE>

(3)  Investment Securities

      The following is a summary of Investment Securities at December 31, 1997,
      June 30, 1997 and December 31, 1996:

<TABLE>
<CAPTION>
                                                  (in Australian Dollars)
                                                      (000's omitted)
                                            -----------------------------------
                                            Dec 31       June 30         Dec 31
                                              1997          1997           1996
                                            ------       -------         ------
<S>                                          <C>           <C>            <C>  
           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
                      December 31, 1997, June 30, 1997 and
                                December 31, 1996

(4)  Property

      Property at December 31, 1997, June 30, 1997 and December 31, 1996
            includes:

<TABLE>
<CAPTION>
                                                  (in Australian Dollars)
                                                      (000's omitted)
                                            -----------------------------------
                                            Dec 31       June 30         Dec 31
                                              1997          1997           1996
                                            ------       -------         ------
<S>                                         <C>           <C>           <C>   
           Office Furniture & Equipment     $ 266         $ 185         $  173
           Motor Vehicles                      45            40             38
                                            -----------------------------------
                                              311           225            211
           Less Accumulated Depreciation     (205)         (174)          (157)
                                            -----------------------------------
                                            $ 106         $  51         $   54
                                            ===================================
</TABLE>

(5)  Short Term and Long Term Debt

      The following is a summary of Bayou's borrowing arrangements as of
            December 31, 1997, June 30, 1997 and December 31, 1996.

<TABLE>
<CAPTION>
                                                          (in Australian Dollars)
                                                              (000's omitted)
                                                    -----------------------------------
                                                    Dec 31       June 30         Dec 31
        Long-Term                                     1997          1997           1996
        ---------                                   ------       -------         ------
<S>                                                <C>           <C>            <C>   
        Loan from Affiliate of Solmecs.  
           Loan is interest free and has 
           no fixed maturity date.                    308           268            252
        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.                    3,294         2,999          2,478
                                                   -----------------------------------
           Total Long-Term                          3,602         3,267          2,730
                                                   -----------------------------------
        Short-Term
        ----------

        Overdraft arrangement with
           balance accruing interest                   --            --             --
        Notes Payable - Affiliates                    369            --             --
                                                   -----------------------------------
           Total Short-Term                           369            --             --
                                                   -----------------------------------
             Total                                 $3,971        $3,267         $2,730
                                                   ===================================
</TABLE>


                                       8
<PAGE>   9

                    BAYOU INTERNATIONAL, LTD. AND SUBSIDIARY
                   Notes to Consolidated Financial Statements
                      December 31, 1997, June 30, 1997 and
                                December 31, 1996

(6)  Affiliate Transactions

      Bayou advances to and receives advances from various affiliates. All
            advances between consolidated affiliates are eliminated on
            consolidation. At December 31, 1997, Bayou had no outstanding
            advances to or from unconsolidated affiliated companies. $175,000,
            $125,000 and $69,000 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
                      December 31, 1997, June 30, 1997 and
                                December 31, 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 December 31, 1997, this liability amounted to approximately
            $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 December 31, 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 December 31, 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 $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 December
            31, 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. In the event that the sale
            of Solmecs is consummated, of which there can be no assurance, the
            Company intends to seek other business activities for the Company,
            which may be in the fields of energy conversion and conservation
            and/or other industries, including the mineral exploration industry.
            It is the policy of the Board of Directors of the Company that the
            Company will not engage in any activities the scope and nature of
            which would subject the Company to the registration and reporting
            requirements of the Investment Company Act of 1940.

      In the event that the sale of Solmecs is consummated, of which there
            can be no assurance, Bayou intends to seek other business
            activities, which may be in the fields of energy conversion and
            conservation and/or other industries, including the mineral
            exploration industry. It is the policy of the Board of Directors of
            Bayou that it will not engage in any activities the scope and nature
            of which would subject the Company to the registration and reporting
            requirements of the Investment Company Act of 1940.


                                       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, 1996 A$1.00 = U.S. $.7940
        6 months ended December 31, 1997 A$1.00 = U.S. $.6503

RESULTS OF OPERATION

Six  Months Ended December 31, 1997 vs. Six Months Ended December  31 1996.

Net revenue from commercial activities amounted to A$45,000 for the six months
ended December 31, 1997 compared to A$12,000 for the six months ended December
31, 1996. The major reason for the change was income from the Dead Seas Project
during the six months ended December 31, 1997.

Costs and expenses decreased from A$719,000 in the six months ended December 31,
1996 to A$632,000 in the six months ended December 31, 1997. The decrease is a
net result of:

a)    an increase in interest expense from A$124,000 for the six months ended
      December 31, 1996 to A$142,000 for the six months ended December 31, 1997
      as a result of the increase in long term debt of the Company.

b)    the increase in legal accounting and professional expense from A$45,000
      for the six months ended December 31, 1996 to A$66,000 for the six months
      ended December 31, 1997 due to costs involved with the proposed disposal
      of Solmecs Corporation N.V.

c)    the increase in administrative costs including salaries from A$113,000 in
      the six months ended December 31, 1996 to A$344,000 in the six months
      ended December 31, 1997 due to the reorganisation of the operations
      whereby the administration of Solmecs (Israel) Ltd was moved from
      Ben-Gurion University to Omer Industrial Park to provide greater
      accommodation for research and development and administration together
      with associated costs.

d)    the decrease in research & development from A$164,000 in the six months
      ended December 31, 1996 to A$74,000 in the six months ended December 31,
      1997 due to a reallocation of certain costs to administration.

e)    the decrease in amortisation of goodwill from A$267,000 for the six months
      ended December 31, 1996 to A$nil for the six months ended December 31,
      1997 as a result of goodwill associated with the acquisition of Solmecs in
      1987 being fully amortised.

As a result of the foregoing, the loss from operations decreased from A$707,000
for the six months ended December 31, 1996 to A$587,000 for the six months ended
December 31, 1997.

The Company realised a foreign exchange gain of A$1,013,000 for the six months
ended December 31, 1997 compared to a foreign currency exchange loss of A$54,000
for the six months ended December 31, 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.

Net income was A$427,000 for the six months ended December 31, 1997 compared to
a net loss of A$761,000 for the six months ended December 31, 1996.


                                       11
<PAGE>   12

Liquidity and Capital Resources

As of December 31, 1997 the Company had short term obligations of A$807,000
comprising accounts payable and accrued expenses and owed an amount of
A$3,294,000 to Chevas Pty Ltd of which the President and the Chief Executive
Officer of the Company Mr. J I Gutnick is a Director. A company associated with
the party who are negotiating the purchase of Solmecs has provided loan funds to
Solmecs amounting to A$308,000. These funds are interest free.

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 1998 and 1999.

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. As noted above a company associated with the party
who are negotiating the purchase of Solmecs have provided loan funds to Solmecs
to enable operation to continue. However, there can be no assurance that this
party will continue to provide these funds.

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 six
          months ended December 31, 1997.

Item 5.   OTHER INFORMATION


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

Dated: May 7, 1998           By:


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


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