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

                                    FORM 1O-Q

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

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

For the quarterly period ended December 31 1996 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 :

<TABLE>
<CAPTION>
    Title of each class                               Name of each exchange
                                                      on  which registered
<S>          <C>                                              <C>
             N/A                                              N/A
</TABLE>

           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, 1996
<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, 1996.

      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, 1996 and December 31, 1995, the results of its
operations for the three and six month periods ended December 31, 1996 and
December 31, 1995, and the changes in its cash flows for the six month periods
ended December 31, 1996 and December 31, 1995, 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, 1996 and June 30, 1996
                              and December 31, 1995
                             (in Australian Dollars)
                                 (000's omitted)
                                   (Unaudited)
                                     ASSETS

<TABLE>
<CAPTION>
                                            Dec 31        June 30        Dec 31
                                             1996          1996           1995
                                             ----          ----           ----
<S>                                        <C>           <C>           <C>     
Current Assets:
   Cash                                    $     48      $     73      $     54
   Accounts Receivable, net                      51            53           138
   Investments                                    3             3             2
                                           ------------------------------------

     Total Current Assets                       102           129           194
                                           ------------------------------------
Other Assets:
   Property and Equipment, net                   54            55            59
   Goodwill, net                                266           533           799
                                           ------------------------------------

   Total Other Assets                           320           588           858
                                           ------------------------------------

         Total Assets                      $    422      $    717      $  1,052
                                           ====================================

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
   Bank Overdraft                          $   --        $   --        $     30
Accounts Payable and
     Accrued Expenses                           281           346           310
                                           ------------------------------------

     Total Current Liabilities                  281           346           340

Long-Term Debt                                2,478         1,998         1,547
                                           ------------------------------------

     Total Liabilities                        2,759         2,344         1,887

Stockholders' Equity (Deficit):
   Common Stock:  $0.20 par value
     50,000,000 shares authorized,
     46,941,789 issued and outstanding        9,388         9,388         9,388
   Additional Paid-in-Capital                11,592        11,592        11,592
   Retained Deficits                        (23,317)      (22,607)      (21,815)
                                           ------------------------------------

     Total Stockholders' Deficit              (2337)       (1,627)         (835)
                                           ------------------------------------
         Total Liabilities and
           Stockholders' Equity            $    422      $    717      $  1,052
                                           ====================================
</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 1996 and 1995 and
                   Six Months Ended December 31, 1996 and 1995
                                 (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
                                                      1996           1995          1996           1995
                                                      ----           ----          ----           ----
<S>                                                <C>            <C>            <C>            <C>     
Revenues:
   Other Income                                    $      7       $    154       $     12       $    156
                                                   -----------------------------------------------------

                                                       --             --               12            156
Costs and Expenses:
   Management Fee                                      --                6           --                6
   Interest Expense                                      64             50            124             86
   Legal, Accounting & Professional                      23             18             45             20
   Depreciation & Amortization                            3              5              6              8
   Administrative                                        71            271            113            457
   Research & Development                                76             26            164             34
                                                   -----------------------------------------------------

                                                        237            376            452            611
                                                   -----------------------------------------------------

Loss from Operations                                   (230)          (222)          (440)          (455)

   Diminution of Asset Value                           --             --             --             --
   Gain (Loss) on Disposition of Assets                --                8           --                8
   Foreign Currency Exchange Gain (Loss)                (23)            53            (54)          (265)
   Bad Debt (Expense) Recovery                         --               81           --               81
                                                   -----------------------------------------------------

                                                        (23)           142            (54)          (176)
                                                   -----------------------------------------------------
Loss before Income Tax and
     Amortization of Goodwill                          (253)           (80)          (494)          (631)

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

Income (Loss) before Amortization of Goodwill          (253)           (80)          (494)          (631)

   Amortization of Goodwill                            (134)          (133)          (267)          (266)
                                                   -----------------------------------------------------

Net Income (Loss)                                  $   (387)      $   (213)          (761)          (897)
                                                   -----------------------------------------------------

Earnings Per Common Equivalent Share               $   (.01)      $   (.01)      $   (.02)      $   (.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, 1996 and June 30, 1996
                              and December 31, 1995
                             (in Australian Dollars)
                                 (000's omitted)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                                Retained
                                                       Common Stock        Paid-In-             Earnings
                                               Shares        Amount       Capital (Deficit)
                                               ------        ------       -----------------
<S>                                           <C>           <C>             <C>                 <C>      
Balance June 30, 1994                         46,942        $  9,388        $ 11,592            $(19,580)
                                                                                             
   Net Income six months                                                                     
     ending 12-31-94                            --              --              --                  (915)
                                                                                             
        Foreign Currency Translation            --              --              --                   313
                                              ----------------------------------------------------------
                                                                                             
Balance December 31, 1994                     46,942           9,388          11,592             (20,182)
                                                                                             
   Net Income six months                                                                     
     ending 6-30-95                             --              --              --                  (544)
                                                                                             
   Foreign Currency Translation                 --              --              --                  (439)
                                              ----------------------------------------------------------
                                                                                             
Balance June 30, 1995                          6,942           9,388          11,592             (21,165)
                                                                                             
   Net Income six months                                                                     
     ending 12-31-95                            --              --              --                  (897)
                                                                                             
        Foreign Currency Translation            --              --              --                   247
                                              ----------------------------------------------------------
                                                                                             
Balance December 31, 1995                     46,942           9,388          11,592             (21,815)
                                                                                             
   Net Income six months                                                                     
     ending 6-30-96                             --              --              --                 (1113)
                                                                                             
        Foreign Currency Translation            --              --              --                   321
                                              ----------------------------------------------------------
                                                                                             
Balance June 30, 1996                         46,942           9,388          11,592             (22,607)
                                                                                             
   Net Income six months                                                                     
     ending 12-31-96                            --              --              --                  (761)
                                                                                             
        Foreign Currency Translation            --              --              --                    51
                                              ----------------------------------------------------------
                                                                                             
Balance December 31, 1996                     46,942        $  9,388        $ 11,592            $(23,317)
                                              ==========================================================
</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, 1996 and 1995
                          and Year Ended June 30, 1996
                             (in Australian Dollars)
                                 (000's omitted)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                         3 Months          Year           3 Months
                                                           Ended           Ended            Ended
                                                          Dec 31          June 30          Dec 31
                                                           1996            1996             1995
                                                           ----            ----             ----
<S>                                                      <C>             <C>             <C>     
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net Loss                                              $  (761)        $(2,010)        $  (897)
   Adjustments:
     Foreign Currency Translation                             51             568             247
     Depreciation and Amortization                           273             547             274
             (Gain) Loss on Disposition of Assets           --                (6)             (8)
     Diminution of Value                                    --                (2)           --
     Provision for Bad Debt                                 --                79            --
     Change Net of Effects of Subsidiary
       Acquisitions:
         Accounts Receivable                                   2              33             (52)
         A/P and Accrued Liabilities                         (65)           (335)           (371)
                                                         ---------------------------------------
       Net Cash Provided (Used) by
           Operating Activities                             (500)         (1,126)           (807)
                                                         ---------------------------------------
CASH FLOW FROM INVESTING ACTIVITIES:
   Capital Expenditures, Net                                  (5)             (7)             22
   Net Proceeds from Investments                            --                (2)             52
                                                         ---------------------------------------
       Net Cash Provided (Used) in
           Investing Activities                               (5)             (9)             74

CASH FLOWS FROM FINANCING ACTIVITIES:
   Net Borrowing under Credit
     Line Arrangements                                      --               (73)            (43)
   Net Borrowing from Affiliates                             480           1,210            (759)
   Net Borrowings                                           --              --              --
                                                         ---------------------------------------
       Net Cash Provided by
           Financing Activities                              480           1,137            (716)
                                                         ---------------------------------------


Net Increase (Decrease) in Cash                              (25)              2             (17)
Cash at Beginning of Year                                     73              71              71
                                                         ---------------------------------------
Cash at End of Year                                      $    48         $    73         $    54
                                                         =======================================
Supplemental Disclosures:
   Common Stock Issued in Lieu of
     Debt Repayment                                      $  --           $  --           $  --
   Interest Paid (Net Capitalized)                       $  --           $     5         $  --
   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, 1996, June 30, 1996 and
                                December 31, 1995


(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, 1996.

      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 31,1996, June 30, 1996 and December 31,
      1995 includes:
<TABLE>
<CAPTION>
                                    (in Australian Dollars)
                                        (000's omitted)

                               Dec  31     June 30      Dec 31
                                 1996        1996        1995
                                 ----        ----        ----
<S>                              <C>         <C>         <C> 
Miscellaneous Receivables        $ 51        $ 53        $138
  Less Allowance for
    Doubtful Account              --          --          --
                                 ----------------------------

      Net                        $ 51        $ 53        $138
                                 ============================
</TABLE>


(3)  INVESTMENT SECURITIES

      The following is a summary of Investment Securities at December 31, 1996,
      June 30, 1996 and December 31, 1995:

<TABLE>
<CAPTION>
                                      (in Australian Dollars)
                                          (000's omitted)

                                     Dec 31   June 30   Dec 31
                                      1996     1996       1995
                                      ----     ----       ----
<S>                                    <C>       <C>       <C>
Trading Securities:
  Marketable Equity
    Securities, at cost                $1        $1        $1
  Gross Unrealized Gains                2         2         1
  Gross Unrealized Losses               -         -         -
                                       -----------------------
  Marketable Equity Securities,
    at fair value                      $3        $3        $2
                                       ======================
</TABLE>

                                       7
<PAGE>   8
                    BAYOU INTERNATIONAL, LTD. AND SUBSIDIARY
                   Notes to Consolidated Financial Statements
                      December 31, 1996, June 30, 1996 and
                                December 31, 1995


(4)  PROPERTY

      Property at December 31, 1996, June 30, 1996 and December 31, 1995
includes:

<TABLE>
<CAPTION>
                                       (in Australian Dollars)
                                            (000's omitted)

                                     Dec 31       June 30        Dec 31
                                      1996         1996           1995
                                      ----         ----           ----
<S>                                  <C>           <C>           <C>  
Office Furniture & Equipment         $ 173         $ 170         $ 213
Motor Vehicles                          38            38            76
                                     ---------------------------------

                                       211           208           289
Less Accumulated Depreciation         (157)         (153)         (230)
                                     ---------------------------------

                                     $  54         $  55         $  59
                                     =================================
</TABLE>


(5)  SHORT TERM AND LONG TERM DEBT

       The following is a summary of Bayou's borrowing arrangements as of
            December 31, 1996, June 30, 1996 and December 31, 1995.

<TABLE>
<CAPTION>
                                              (in Australian Dollars)
                                                   (000's omitted)
                                          Dec 31       June 30        Dec 31
Long-Term                                  1996          1996          1995
---------                                  ----          ----          ----
<S>                                       <C>           <C>           <C>   
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, 1997                   $2,478        $1,998        $1,547
                                          ----------------------------------

   Total Long-Term                         2,478         1,998         1,547
                                          ----------------------------------
Short-Term

Overdraft arrangement with
   balance accruing interest                --            --              30
Notes Payable - Affiliates                  --            --            --
                                          ----------------------------------

   Total Short-Term                         --            --              30
                                          ----------------------------------

     Total                                $2,478        $1,998        $1,577
                                          ==================================
</TABLE>

                                       8
<PAGE>   9
                    BAYOU INTERNATIONAL, LTD. AND SUBSIDIARY
                   Notes to Consolidated Financial Statements
                      December 31, 1996, June 30, 1996 and
                                December 31, 1995


(6)  AFFILIATE TRANSACTIONS

      Bayou advances to and receives advances from various affiliates. All
         advances between consolidated affiliates are eliminated on
         consolidation. At December 31, 1996, Bayou had no outstanding advances
         to or from unconsolidated affiliated companies.


(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, 1996, June 30, 1996 and
                                December 31, 1995


(8)  COMMITMENTS (CONTINUED)

      Solmecs owns the patents connected with these projects and agreed to pay
         royalties to APRDA on sales of products and 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, 1996, this liability amounted to approximately $306,000
         (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, 1996, 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 $1,864,000. Through
         December 31, 1996, 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, 1996, no royalties were payable.

                                       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, 1995 A$1.00 = U.S. $.7440
      6 months ended December 31, 1996 A$1.00 = U.S. $.7940


RESULTS OF OPERATION

SIX  MONTHS ENDED DECEMBER 31, 1996 VS. SIX MONTHS ENDED DECEMBER  31 1995.

Net revenue from commercial activities of A$12,000 for the six months ended
December 31, 1996 compared to A$156,000 for the six months ended December 31,
1995. The major reason for the change was the reduction in income from the ILZRO
Project during the six months ended December 31, 1996.

Costs and expenses decreased from A$611,000 in the six months ended December 31,
1995 to A$452,000 in the six months ended December 31, 1996. The decrease is a
net result of:

a)    an increase in interest expense from A$86,000 for the six months ended
      December 31, 1995 to A$124,000 for the six months ended December 31, 1996
      as a result of the increase in long term debt of the Company.

b)    the increase in legal accounting and professional expense from A$20,000
      for the six months ended September 30, 1995 to A$45,000 for the six months
      ended December 31, 1996 due to payments to former professional advisors
      and the transfer of the administration office in Israel from Jerusalem to
      Beer-Sheva.

c)    the decrease in administrative costs including salaries from A$457,000 in
      the six months ended December 31, 1995 to A$113,000 in the six months
      ended December 31, 1996 due to the reorganisation of the operations
      whereby the administration was moved from Jerusalem to Beer-Sheva for the
      purpose of reducing administration costs.

d)    the increase in research & development from A$34,000 in the six months
      ended December 31, 1995 to A$164,000 in the six months ended December 31,
      1996 due to the development of the boiler project.

As a result of the foregoing, the loss from operations decreased from A$455,000
for the six months ended December 31, 1995 to A$440,000 for the six months ended
December 31, 1996.

The Company realised a foreign exchange loss of A$54,000 for the six months
ended September 30 1996 compared to a foreign currency exchange loss of
A$265,000 for the six months ended December 31, 1995 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.

Amortization of goodwill amounted to A$267,000 for the six months ended December
31, 1996 compared to A$266,000 for the six months ended December 31, 1995.

The Company incurred a net loss of A$761,000 for the six months ended December
31, 1996 compared to a loss of A$897,000 for the six months ended December 31,
1995.

                                       11
<PAGE>   12
LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 1996 the Company had short term obligations of A$281,000
comprising accounts payable and accrued expenses and owed an amount of
A$2,478,000 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 1997 and 1998.

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

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


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

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

                                       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, 1996.

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:    , 1997        By: /s/ PETER LEE
                            -----------------------------
                                Peter Lee
                                Director, Assistant Secretary and Chief
                                Financial Officer
                                (Principal Financial Officer)

                                       14