<PAGE>   1
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 2O549
                                      
                                  FORM 10-Q

(Mark one)

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

For the quarterly period ended    September 30, 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 of Common Stock as of September 30, 1998.


                                       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, 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 September 30, 1998 and September 30, 1997, the results of
its operations for the three month periods ended September 30, 1998 and
September 30, 1997, and the changes in its cash flows for the three-month
periods ended September 30, 1998 and September 30, 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 months ended
September 30, 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.


                                       2
<PAGE>   3
                    BAYOU INTERNATIONAL, LTD. AND SUBSIDIARY

                           Consolidated Balance Sheets
                        September 30, 1998, June 30, 1998

                             and September 30, 1997
                             (in Australian Dollars)

                                 (000's omitted)
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                              Sept 30    June 30    Sept 30
                                                               1998       1998       1997
<S>                                                          <C>        <C>        <C>
                                     ASSETS
Current Assets:

Cash                                                               1          1          1
Accounts Receivable, net                                        --         --         --
Investments                                                     --         --         --
                                                             -------    -------    -------
Total Current Assets                                               1          1          1
                                                             -------    -------    -------
Other Assets:

Investments                                                    4,516      4,516       --
Property and Equipment, net                                     --         --         --
Goodwill, 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                                                 221        229        153
                                                             -------    -------    -------
Total Current Liabilities                                        221        229        153
                                                             -------    -------    -------
Long-Term Debt                                                 3,740      3,585      3,219
Net Liabilities of Discontinued Operations                      --         --          426
                                                             -------    -------    -------
Total Liabilities                                              3,961      3,814      3,798

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)      (697)
Retained Deficits                                            (18,414)   (18,267)   (24,080)
                                                             -------    -------    -------
Total Stockholders' Equity (Deficit)                             557        704     (3,797)
                                                             -------    -------    -------
Total Liabilities and Stockholders' Equity                     4,518      4,518          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 September 30, 1998, Year ended June 30, 1998

                    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
                                                            1998       1998       1997
                                                          --------   -------    --------
<S>                                                       <C>        <C>        <C>
Revenues                                                     --         --         --
                                                          -------    -------    -------
Costs and Expenses:

Interest Expense                                               77        290         68
Legal, Accounting & Professional                               15        145         29
Administrative                                                 55        109         14
                                                          -------    -------    -------
                                                              147        544        111
                                                          -------    -------    -------
Loss from Operations                                         (147)      (544)      (111)
Gain on disposal of Subsidiary                               --        5,899       --
Foreign Currency Exchange Gain (Loss)                        --        1,381        247
                                                          -------    -------    -------
                                                             --        7,280        247
                                                          -------    -------    -------
Profit (Loss) before Income Tax                              (147)     6,736        136

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

Net Profit (Loss) from Continuing Operations                 (147)     6,736        136

Discontinued Operations

Net Loss from Discontinued Operations                        --         (952)      (165)
                                                          -------    -------    -------
Net Profit (Loss)                                            (147)     5,784        (29)
                                                          =======    =======    =======
Earnings Per Common Equivalent Share

From Continued Operations                                     .00       0.14        .00
From Discontinued Operations                                  .00      (0.02)       .00
                                                          -------    -------    -------
Total                                                         .00       0.12        .00
                                                          -------    -------    -------
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, 1998 and June 30, 1998,
                      September 30, 1997 and June 30, 1997,

                   and September 30, 1996, and June 30, 1996.
                             (in Australian Dollars)

                                 (000's omitted)
                                   (Unaudited)



<TABLE>
<CAPTION>
                                                                                         Cumulative      Retained
                                       Common Stock       Treasury Stock   Paid-In-      Translation     Earnings
                                  Shares        Amount       at Cost       Capital       Adjustment      (Deficit)
<S>                             <C>             <C>       <C>              <C>           <C>             <C>
Balance June 30, 1996             46,942         9,388          --           11,592           (70)       (22,791)

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

Foreign Currency Translation        --            --            --             --              30           --
                                ----------------------------------------------------------------------------------

Balance September 30, 1996        46,942          9,38          --           11,592           (40)       (23,165)

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

Foreign Currency Translation        --            --            --             --            (395)          --
                                ----------------------------------------------------------------------------------

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

Net Income three months
ending 9-30-97                      --            --            --             --            --              (29)

Foreign Currency Translation        --            --            --             --            (262)          --
                                ----------------------------------------------------------------------------------

Balance September 30, 1997        46,942         9,388          --           11,592          (697)       (24,080)

Net Income nine
months ending 6-30-1998             --            --            --             --            --            5,813

Foreign Currency Translation                                    --             --          (1,292)          --

Acquisition of Treasury Stock,
at cost, 50,000 shares              --            --             (20)          --            --             --
                                ----------------------------------------------------------------------------------

Balance June, 30, 1998            46,942         9,388           (20)        11,592        (1,989)       (18,267)

Net Income three
months ending 9-30-1998             --            --            --             --            --             (147)
                                ----------------------------------------------------------------------------------

Balance September 30, 1998        46,942         9,388           (20)        11,592        (1,989)       (18,414)
</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, 1998

                       Year Ended June 30, 1998 and Three
                         Months Ended September 30, 1997

                             (in Australian Dollars)
                                 (000's omitted)

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                            3 Months       Year       3 Months
                                                              Ended       Ended         Ended
                                                             Sept 30     June 30       Sept 30
                                                              1998         1998         1997
                                                            --------     -------      --------
<S>                                                         <C>          <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

Net Income (loss) from Continuing Operations                  (147)       6,736          136
Adjustments:
Foreign Currency Translation                                  --         (1,554)        (262)
(Gain) Loss on Disposition of Assets                          --         (5,899)        --
Change Net of Effects of Subsidiary                           --           --           --
Acquisitions:

Accounts Receivable                                           --           --           --
A/P and Accrued Liabilities                                     (8)          89           (6)
                                                            ------       ------       ------
Net Cash Provided (Used) in Continuing Operations             (155)        (628)        (132)

Net Cash Provided by (Used In) Discontinued Operations        --             63          (87)
                                                            ------       ------       ------

Net Cash Provided by (Used In) Operating Activities           (155)        (565)        (219)
                                                            ------       ------       ------
CASH FLOW FROM INVESTING ACTIVITIES:

Investments in Treasury Stock                                 --            (20)        --
Investments in Subsidiary                                     --             (1)        --
                                                            ------       ------       ------

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

CASH FLOWS FROM FINANCING ACTIVITIES:

Borrowing from Affiliates                                      155          586          219
New Borrowing                                                 --           --           --
                                                            ------       ------       ------
Net Cash Provided by Financing Activities                      155          586          219
                                                            ------       ------       ------

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                                                --           --           --
Paid (Net Capitalized)                                          77          290           68
Income Tax Paid                                               --           --           --
</TABLE>


                                       6
<PAGE>   7
                    BAYOU INTERNATIONAL, LTD. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements
                      September 30, 1998, June 30, 1998 and

                               September 30, 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
     September 30, 1998.

     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 September 30,1998, June 30, 1998 and September 30,
     1997 includes:

<TABLE>
<CAPTION>
                                                         (in Australian Dollars)
                                                             (000's omitted)
                                                Sept 30          June 30           Sept 30
                                                 1998             1998              1997
<S>                                             <C>              <C>               <C>
Miscellaneous Receivables                         --               --               --
Less Allowance for
Doubtful Account                                  --               --               --

Net                                               --               --               --


(3)  INVESTMENT SECURITIES

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

     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>

     The investment using this cost method is carried at cost. Dividends
     received from the investment carried at cost are included in other income.
     Dividends received in excess of the Company's proportionate share of
     accumulated earnings ("return of capital dividend") are applied as a
     reduction of the cost of the investment.


                                       7
<PAGE>   8
                    BAYOU INTERNATIONAL, LTD. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements
                      September 30, 1998, June 30, 1998 and

                               September 30, 1997

(4)  PROPERTY

     Property at September 30, 1998, June 30, 1998 and September 30, 1997
     includes:

<TABLE>
<CAPTION>
                                                  (in Australian Dollars)
                                                      (000's omitted)
                                                                                Sept 30          June 30           Sept 30
                                                                                 1998             1998              1997
<S>                                                                             <C>              <C>               <C>
Office Furniture & Equipment                                                      --               --                --
Motor Vehicles                                                                    --               --                --
                                                                                 -----            -----             -----
Less Accumulated Depreciation                                                                      --                --
                                                                                 -----            -----             -----


(5)  SHORT TERM AND LONG TERM DEBT

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

     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.              3,740            3,585             3,219

     Total Long-Term                                                             3,740            3,585             3,219

     Short-Term

     Overdraft arrangement with
     balance accruing interest                                                    --               --                --

     Notes Payable - Affiliates                                                   --               --                --

     Total Short-Term                                                             --               --                --

     Total                                                                       3,740            3,585             3,219
</TABLE>


                                       8
<PAGE>   9
                    BAYOU INTERNATIONAL, LTD. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements
                      September 30, 1998, June 30, 1998 and

                               September 30, 1997

(6)  AFFILIATE TRANSACTIONS

     Bayou advances to and receives advances from various affiliates. All
     advances between consolidated affiliates are eliminated on consolidation.
     At September 30, 1998, Bayou had no outstanding advances to or from
     unconsolidated affiliated companies. $197,000, $171,000 and $163,000 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 as a going concern. However, Bayou
     sustained recurring losses. In addition, Bayou has no net working capital,
     which raises substantial doubts as to its ability to continue as a going
     concern.

     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 September 30, 1997 and June 30, 1998, have been combined and reflected
     in the accompanying balance sheet as net liabilities of discontinued
     operations.


                                       9
<PAGE>   10
                    BAYOU INTERNATIONAL, LTD. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements
                      September 30, 1998, June 30, 1998 and

                               September 30, 1997

(8)  SALE OF SOLMECS (CONTINUED)

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

<TABLE>
<CAPTION>
                                          A$000                 A$000'S
                                         JUNE 30,            SEPTEMBER 30,
                                           1998                  1997
<S>                                      <C>                 <C>
Cash                                           7                    61
Accounts receivable                          167                    71
Property and equipment, net                  185                    49
                                          ------                ------
TOTAL ASSETS                                 359                   181
                                          ------                ------

Accounts payable and

Accrued Expenses                           1,399                   329
Long-term Debt                             8,521                 7,335
                                          ------                ------
NET ASSETS                                (9,561)               (7,483)
                                          ------                ------


Sales                                         83                     6
Cost and Expenses                          1,035                   177
                                          ------                ------
Loss before Income Tax                      (952)                 (171)
Income Taxes                                --                    --
                                          ------                ------
NET PROFIT (LOSS)                           (952)                 (171)
                                          ------                ------
</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 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, 1997 A$1.00 = U.S. $0.7196
         3 months ended Sept 30, 1998 A$1.00 = U.S. $0.5930

RESULTS OF OPERATION

THREE MONTHS ENDED SEPTEMBER 30, 1998 VS. THREE MONTHS ENDED SEPTEMBER 30, 1997.

Cost and expenses increased from A$111,000 for the three months ended September
30, 1997 to A$147,000 for the three months ended September 30, 1998. The
increase is a net result of:

     a)  an increase in interest expense from A$68,000 for the three months
         ended September 30, 1997 to A$77,000 for the three months ended
         September 30, 1998 due to the increased level of borrowings.

     b)  a decrease in legal, accounting and professional from A$29,000 for the
         three months ended September 30, 1997 to A$15,000 for the three months
         ended September 30, 1998 as a result of the finalisation of the sale
         of Solmecs.

     c)  the increase in administrative costs from A$14,000 in the three months
         ended September 30, 1997 to A$55,000 in the three months ended
         September 30, 1998 primarily due to the costs in obtaining shareholder
         approval to the sale of Solmecs.

As a result of the foregoing the loss from operations amounted to A$147,000 for
the three months ended September 30, 1998 compared to A$111,000 for the three
months ended September 30, 1997.

The Company incurred a foreign exchange gain of A$247,000 for the three months
ended September 30, 1997 and had no comparative amount in the three months ended
September 30, 1998. All of the Company's loan accounts were denominated in U.S.
dollars. However, the loans were foregiven as part of the sale of Solmecs during
fiscal 1998.

Solmecs incurred a loss of A$165,000 during the three months ended September
30,1997 with no comparable amount in the current period.

The Company incurred a net loss of A$147,000 for the end three months ended
September 30, 1998 compared to a loss of A$29,000 for the three months ended
September 30, 1997.


                                       11
<PAGE>   12
LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 1998 the Company had short term obligations of A$221,000
comprising accounts payable and accrued expenses and has a long term debt of
A$3,740,000 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.

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 three
                months ended September 30, 1998.


                                       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 Isaac Gutnick
                                         ---------------------------------
                                             Joseph Isaac Gutnick
                                             President

Dated: December 16, 1998            By:  /s/ Peter James Lee
                                         ---------------------------------
                                             Peter James Lee
                                             Director, Secretary and Chief
                                             Financial Officer
                                             (Principal Financial Officer)


                                       14