SCNV ACQUISITION CORP, 424B3, 1998-07-01

SCNV ACQUISITION CORP
424B3, 1998-07-01
MOTORS & GENERATORS

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<PAGE>
1,041,044 Units
SCNV ACQUISITION CORP.

1,041,044 Shares of Common Stock and
Class A Redeemable Warrants to Purchase
1,041,044 Shares of Common Stock

Each Unit offered hereby consists of one share of common stock, $.01 par
value (the "Common Stock"), and one Class A Redeemable Warrant (the "Warrants")
of SCNV Acquisition Corp. (the "Company"). The securities comprising the Units
will become detachable and separately transferable on the date that is three
months after their issuance, unless earlier detached pursuant to an agreement
between the Company and the Underwriter. Each Warrant entitles the registered
holder thereof to purchase one share of Common Stock at a price of $7.50,
subject to adjustment in certain circumstances, at any time commencing June 29,
1999 through and including June 28, 2003. The Warrants are redeemable by the
Company at any time after becoming exercisable, upon notice of not less than 30
days, at a price of $.01 per Warrant, provided that the average of the closing
bid quotations of the Common Stock on any ten consecutive trading days ending
within five days prior to the day on which the Company gives notice has been at
least $10.00 per share (subject to adjustment). See "Description of
Securities."

Prior to this offering there has been no public market for the Units,
Common Stock or Warrants and there can be no assurance that any such market will
develop. For a discussion of the factors considered in determining the offering
price of the Units and the exercise price of the Warrants, see "Underwriting."
The Units, and, once separately transferable, the Common Stock and Warrants,
will be quoted on the OTC Electronic Bulletin Board under the symbols "SAQCU,"
"SAQC" and "SAQCW," respectively. The OTC Electronic Bulletin Board System is an
unorganized, inter-dealer, over-the-counter market which provides significantly
less liquidity than a national securities exchange or The Nasdaq Stock Market,
and quotes for securities included on the OTC Electronic Bulletin Board are not
listed in the financial sections of newspapers as are those for securities
listed on a national securities exchange or The Nasdaq Stock Market. See "Risk
Factors - No Assurance of Public Market; Arbitrary Offering Price; Possible
Volatility of Market Price of Units, Common Stock and Warrants."
-------------------------------
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK
AND IMMEDIATE SUBSTANTIAL DILUTION AND SHOULD NOT BE PURCHASED BY INVESTORS WHO
CANNOT AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS"
COMMENCING ON PAGE 11 OF THIS PROSPECTUS AND "DILUTION."

-------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
================================================================================
Price Underwriting Proceeds
to Discounts and to
Public Commissions(1) Company(2)
- --------------------------------------------------------------------------------
Per Unit .......... $ 5.75 $ .575 $ 5.175
- --------------------------------------------------------------------------------
Total (3) ......... $5,986,003 $598,600 $5,387,403
================================================================================
(1) The Company has agreed to pay to the Underwriter a 3% nonaccountable
expense allowance and to sell to the Underwriter an option (the
"Underwriter's Unit Purchase Option") to purchase up to 104,104 Units. The
Company has also agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses, including the nonaccountable expense allowance
in the amount of $179,580 ($206,517 if the Underwriter's over-allotment
option is exercised in full), estimated at $680,000, payable by the
Company.
(3) The Company has granted to the Underwriter an option, exercisable within 45
days from the date of this Prospectus, to purchase up to an additional
156,156 additional Units on the same terms set forth above, solely for the
purpose of covering over-allotments, if any. If the Underwriter's
over-allotment option is exercised in full, the total price to public,
underwriting discounts and commissions and proceeds to Company will be
$6,883,900, $688,390 and $6,195,510, respectively. See "Underwriting."

<PAGE>

The Units are being offered, subject to prior sale, when, as and if
delivered to and accepted by the Underwriter and subject to approval of certain
legal matters by counsel and to certain other conditions. The Underwriter
reserves the right to withdraw, cancel or modify the offering and to reject any
order in whole or in part. It is expected that delivery of certificates
representing the Units will be made against payment therefor at the offices of
the Underwriter on or about July 8, 1998.
-------------------------------

Patterson Travis, Inc.
The date of this Prospectus is June 29, 1998
<PAGE>

---------------------
AVAILABLE INFORMATION

As of the date of this Prospectus, the Company will become subject to the
reporting requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and, in accordance therewith, will file reports, proxy
statements and other information with the Securities and Exchange Commission
(the "Commission"). The Company intends to furnish its stockholders with annual
reports containing audited financial statements and such other periodic reports
as the Company deems appropriate or as may be required by law.
---------------------

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS,
IN THE OVER-THE-COUNTER MARKET OR OTHERWISE, WHICH STABILIZE, MAINTAIN OR
OTHERWISE AFFECT THE PRICES OF THE UNITS, COMMON STOCK AND WARRANTS.
SPECIFICALLY, THE UNDERWRITER MAY OVER-ALLOT IN CONNECTION WITH THE OFFERING
AND MAY BID FOR AND PURCHASE UNITS, SHARES OF COMMON STOCK AND WARRANTS IN THE
OPEN MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
---------------------

SPECIAL STANDARDS FOR SECURITIES SOLD IN CALIFORNIA

Each California Investor must have an annual gross income of at least
$65,000 and a net worth exclusive of home, furnishings and automobiles of at
least $250,000 or, in the alternative, a net worth exclusive of home,
furnishings and automobiles of at least $500,000. In addition, an investor's
total purchase may not exceed 10% of such investor's net worth. The exemption
for secondary trading available under California Corporation Code 25104(H) will
be withheld.

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<PAGE>
PROSPECTUS SUMMARY

The following summary is qualified in its entirety by reference to the
more detailed information and financial statements, including the notes
thereto, appearing elsewhere in this Prospectus. Each prospective investor is
urged to read this Prospectus in its entirety. Unless otherwise indicated, all
pro forma share and per share data and information in this Prospectus give
retroactive effect to (i) a .7130438-for-1 reverse split of Common Stock
effected prior to the date of this Prospectus, and (ii) the acquisition, upon
the consummation of this offering (the "Acquisition"), by the Company of all of
the issued and outstanding capital stock of Solmecs Corporation N.V. (which,
together with its wholly-owned subsidiary Solmecs (Israel) Ltd., shall, unless
the context otherwise requires, be referred to herein as "Solmecs") in
consideration of 499,701 shares of the Company's Common Stock. All as adjusted
share and per share data and information in this Prospectus assumes no exercise
of the Underwriter's over-allotment option to purchase up to 156,156 additional
Units. Information contained herein regarding Solmecs has been provided by
Solmecs and has also been derived from the periodic reports filed with the
Commission by Solmecs' parent corporation, Bayou International, Ltd. ("Bayou").

This Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ materially from the
results discussed in these forward-looking statements. Factors that might cause
these possible differences include, but are not limited to, those discussed in
the "Risk Factors" section of this Prospectus.

All references to "dollars" or "$" in this Prospectus are to United States
dollars, and all references to "Shekels" or "NIS" are to New Israeli Shekels.
All currency conversions in this Prospectus reflect the exchange rate of NIS
into dollars as of March 31, 1998, which was 3.597 NIS to $1.00 or 1 NIS to
$.278.

The Company

SCNV Acquisition Corp. (the "Company") was organized to select, develop
and commercially exploit proprietary technologies, in various stages of
development, invented primarily by scientists who have recently immigrated to
Israel from, and by scientists and institutions in, Russia and other countries
that formerly comprised the Soviet Union. In furtherance of this goal, the
Company will acquire Solmecs Corporation N.V., a Netherlands Antilles company,
the operations of which are located in Israel, which owns certain technologies
developed by such scientists in the past and actively seeks to identify such
technologies for exploitation. The technologies of Solmecs and technologies
identified by Solmecs for exploitation are in various stages of development and
include technologies that have begun to be commercialized as well as
technologies that the Company believes are ready for commercialization in the
near future.

The Company intends to implement a four-step process with respect to the
development of proprietary technologies which it has identified. Initially the
Company, through its scientific, engineering and administrative personnel, will
seek to identify and analyze a number of proposed advanced technologies with
potential commercial viability. The Company will then assess the costs of
further research and development (including the building and testing of
prototypes, if required), seek to obtain intellectual property rights in viable
technologies, develop a business plan detailing the exploitation of such
technologies from the research and development phase through product
commercialization, develop and, in some instances, implement financing
strategies to further such business development plan, and suggest and, in some
cases, assemble a team of scientists and engineers most suitable for
implementation of such business plan. Upon completion of the business plan for
each project, the Company may seek to manufacture and market the project
itself, enter into strategic alliances for such commercialization, or sell or
license the proprietary information and know-how to third parties in
consideration of technology transfer or license fees. See "Business-Strategy."

The Company's strategy is to identify and exploit innovative technologies
which represent advances over existing products or technologies. The Company
believes that Russian scientists have developed advanced inventions and
techniques in certain areas of research, including metallurgy, coating and thin
film

3
<PAGE>

technology, semiconductors, environmental technologies (such as water
purification and desalination), and energy technologies (including conversion
and conservation), as well as use of renewable energies (such as
photo-voltaics, which involves the direct conversion of solar energy into
electricity).

Although Solmecs has been in operation since 1980, Solmecs has not
generated any meaningful revenues to date and the Company does not expect to
generate any meaningful revenues until such time, if ever, as it successfully
commercializes one or more of Solmecs' existing or future technologies or non-
Solmecs technologies or sells proprietary rights relating to one or more of
such technologies. See "Risk Factors-Losses By Solmecs Since Inception; Limited
Revenues; Report of Solmecs' Independent Auditors Raises Subtantial Doubt About
Solmecs' Ability to Continue as a Going Concern."

Although the Company believes that certain products that it will acquire
by virtue of the Acquisition or has identified, such as a hot-water tank
control/display system and extra smooth rubber gaskets, are at or near the
commercialization stage, there can be no assurance that the Company will be
able to acquire rights to products it does not own or successfully manufacture
or market any products. There can be no assurance that any technologies
developed or acquired by the Company will be commercially viable, that markets
for products derived from such technologies will not be limited or that the
Company will generate meaningful revenues from their commercial exploitation or
ever achieve profitable operations. See "Risk Factors."

The Company was organized under the laws of the State of Delaware on May
19, 1997. Unless the context otherwise requires, references herein to the
"Company" include Solmecs Corporation N.V., a registered company in the
Netherlands Antilles, and its wholly-owned subsidiary Solmecs (Israel) Ltd., an
Israeli corporation. The Company's principal executive offices are located in
Israel at Omer Industrial Park, P.O. Box 3026, Omer, Israel, 84965, and its
telephone number is (972) 7-690-0950.

The Offering

Securities offered....... 1,041,044 Units, each Unit consisting of one share
of Common Stock and one Warrant. The securities
comprising the Units will become detachable and
separately transferable on the date that is three
months after their issuance, unless earlier detached
pursuant to an agreement between the Company and the
Underwriter. See "Description of Securities."

Common Stock to be
outstanding after the
offering(1)............. 2,082,088 shares

Warrants

Number to be outstanding
after the offering(2).. 1,041,044 Warrants

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<PAGE>

Exercise terms.......... Exercisable commencing June 29, 1999, each to
purchase one share of Common Stock at a price of
$7.50, subject to adjustment in certain
circumstances. See "Description of Securities--
Redeemable Warrants."

Expiration date......... June 28, 2003.

Redemption.............. Redeemable by the Company, at any time after
becoming exercisable, upon notice of not less than
30 days, at a price of $.01 per Warrant, provided
that the average of the closing bid quotation of the
Common Stock on any ten trading days ending within
five days prior to the day on which the Company
gives notice has been at least $10.00 per share
(subject to adjustment). The Warrants will be
exercisable until the close of business on the date
fixed for redemption. See "Description of
Securities--Redeemable Warrants."

Use of Proceeds.......... The Company intends to use the net proceeds of
this offering for market research and marketing
activities, research and development, establishment
of manufacturing capabilities, repayment of
indebtedness, acquisition of intellectual property
rights, costs relating to the acquisition of Solmecs
and the balance for working capital and general
corporate purposes. See "Use of Proceeds."

Risk Factors............. The securities offered hereby are speculative and
involve a high degree of risk and immediate
substantial dilution and should not be purchased by
investors who cannot afford the loss of their entire
investment. See "Risk Factors" and "Dilution."

OTC Electronic
Bulletin Board
symbols(3).............. Units -- SAQCU
Common Stock -- SAQC
Warrants -- SAQCW

- -------------
(1) Does not include (i) 1,041,044 shares of Common Stock reserved for issuance
upon exercise of the Warrants; (ii) an aggregate of 208,208 shares of
Common Stock reserved for issuance upon exercise of the Underwriter's Unit
Purchase Option and the Warrants included therein; and (iii) 200,000
shares of Common Stock reserved for issuance upon exercise of options
available for future grant under the Company's 1997 Stock Option Plan (the
"Plan"). See "Management -- 1997 Stock Option Plan," and "Underwriting."

(2) Does not include any warrants referred to in clause (ii) of Note 1 above.

(3) See "Risk Factors -- No Assurance of Public Market; Arbitrary Offering
Price; Possible Volatility of Market Price of Units, Common Stock and
Warrants."
---------------------------------

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<PAGE>

SUMMARY FINANCIAL DATA

The balance sheet data as of June 30, 1997, has been derived from the
Financial Statements included elsewhere herein, which have been audited by
Arthur Andersen LLP, independent public accountants. The balance sheet data as
of March 31, 1998, is derived from the unaudited financial statements of the
Company, which are also included elsewhere herein. The unaudited financial
information reflects all adjustments (consisting only of normal recurring
adjustments) that the Company considers necessary for a fair statement of the
financial data for such period. The Pro Forma Financial information should be
read in conjunction with the unaudited Pro Forma Financial Statements of the
Company and Solmecs, the Financial Statements of Solmecs for the years ended
June 30, 1996 and 1997, that have been audited by Luboshitz Kasierer & Co.
(member firm of Arthur Andersen), and the unaudited Financial Statements of
Solmecs for the nine months ended March 31, 1997 and 1998. These financial
statements, including the notes thereto, appear elsewhere in this Prospectus.
In management's opinion, all material adjustments necessary to reflect the
effects of the Acquisition have been made in the Pro Forma Financial
Statements. The unaudited Pro Forma consolidated statements of operations are
not necessarily indicative of what the actual results of operations of the
Company would have been assuming the Acquisition had been completed as of July
1, 1995, July 1, 1996 and July 1, 1997, respectively, nor is it necessarily
indicative of the results of operations for future periods. The results of the
Pro Forma operations for the nine months ended March 31, 1997 and 1998, are not
necessarily indicative of results to be expected for any future period. The
following selected financial data are qualified by the more detailed Financial
Statements included elsewhere in this Prospectus and should be read in
conjunction with such Financial Statements and the discussion under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," included elsewhere in this Prospectus.

Statements of Operation Data:

<TABLE>
<CAPTION>
Pro Forma(1) Pro Forma(1)
Year Ended June 30, Nine Months Ended March 31,
----------------------------- -----------------------------
1996 1997 1997 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues ............................... $ 75,057 $ 57,276 $ 42,911 $ 38,876
Research and development costs ......... 347,318 276,259 219,595 187,143
Cost of services performed by
subcontractors ....................... -- -- -- 26,056
Cost of merchandise purchased .......... 17,420 48,638 37,337 5,257
Marketing, general and administrative
expenses ............................. 493,614 383,219 267,771 353,823
Operating loss ......................... (783,295) (650,840) (481,792) (533,403)
Net loss ............................... (688,629) (661,324) (486,935) (535,697)
Net loss per share ..................... $ (.66) $ (.64) $ (.47) $ (.51)
Weighted average number of shares
outstanding .......................... 1,041,044 1,041,044 1,041,044 1,041,044
</TABLE>

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<PAGE>

Balance Sheet Data:
<TABLE>
<CAPTION>
June 30, 1997 March 31, 1998
--------------- ----------------------------------------------
Actual Actual Pro forma(1) As adjusted(2)
--------------- ----------- -------------- ---------------
<S> <C> <C> <C> <C>
Total assets .............................. $25,000 $266,200 $ 450,520 $4,410,061
Working capital (deficit) ................. 25,000 7,592 (505,705) 4,101,698
Current liabilities ....................... -- 258,608 839,047 191,185
Long-term liabilities ..................... 17,408 -- 229,220 229,220
Stockholders' equity (deficiency) ......... 7,592 7,592 (617,747) 3,989,656
</TABLE>
- -------------
(1) The unaudited Pro Forma financial information reflects the combined
financial position and the results of the Company and Solmecs as if the
Acquisition had been effective as of March 31, 1998, July 1, 1995, July 1,
1996 and July 1, 1997, respectively, without giving effect to the
Offering. Such pro forma information gives effect to (i) the acquisition
by the Company, upon consummation of this Offering, of Solmecs in
consideration of the issuance to Bayou of 499,701 shares of Common Stock
accounted for as a purchase; (ii) the write-off of acquired research and
development in process of $3,498,619 (the "R&D Write-Off"); (iii) the
forgiveness (the "Loan Forgiveness") by Bayou of a loan to Solmecs, of
which $5,082,897 was outstanding as of March 31, 1998; (iv) the return of
Bayou's shares held by Solmecs (the "Bayou Share Return"); and (v) the
payment of $170,000 and $120,000 for fiscal years 1996 and 1997,
respectively, and $90,000 for the nine months ended March 31, 1998, to
officers in connection with employment agreements. See Pro Forma Financial
Information.

(2) Gives effect to the sale of 1,041,044 Units offered hereby and the
anticipated application of the estimated net proceeds therefrom, including
the repayment of indebtedness in the amount of $429,254 and payment of
costs of the Acquisition in the amount of $100,000.

7
<PAGE>

THE COMPANY

The Company's strategy is to identify and exploit innovative technologies
which represent advances over existing products or technologies. The Company
plans to implement its strategy through a four-step process:

o Identify potential business opportunities. The Company's personnel
consist of scientific and engineering experts with numerous relationships
with scientists who have recently immigrated from the former Soviet Union,
as well as with scientists, universities, research institutes and
industries in the former Soviet Union. The Company intends to utilize such
relationships in order to form a database of proposals of advanced
technologies and inventions from which viable projects will be selected
for acquisition and development. The Company intends to hire financial
experts with such relationships after the consummation of this offering.
The Company will, where appropriate, seek to obtain intellectual property
rights to the technologies and inventions that it identifies for
development.

o Assess project scientific and commercial viability. The Company, through
the use of specialized scientific and marketing experts, will conduct
tests on proposals compiled in the Company's database, including market
analysis and assessment of the cost and time required for research,
development and commercialization. The Company may also construct
prototypes in order to test technical feasibility.

o Create a business plan. Projects that demonstrate market and technical
feasibility will be developed into business and commercialization plans
ready for implementation. The plans created by the Company will recommend
scientific, financial and marketing personnel suited for each project and
will present a complete timeline, budget and description of project
implementation from the research and development phase through end-user
marketing. In addition, where appropriate, the Company intends to apply
for patents or copyrights and will seek to obtain other proprietary
protection for the technologies.

o Commercialize technologies. Upon completion of the business plan, the
Company will achieve the manufacture and marketing of the technologies in
one of a number ways, including: the Company may develop, manufacture and
market the technology in house; the Company may choose to enter into
strategic alliances with companies with substantially greater capital and
expertise in the development, manufacture and marketing of certain
products or technologies; and the Company may sell or license the
technologies and proprietary rights to third parties in consideration of
technology transfer or license fees.

8
<PAGE>

The Company believes that Russian scientists have developed advanced
inventions and techniques in certain areas of research, including metallurgy,
coating and thin film technology, semiconductors, environmental technologies
(such as water purification and desalination), and energy technologies
(including conversion and conservation), as well as use of renewable energies
(such as photo-voltaics, which involves the direct conversion of solar energy
into electricity).

Upon the consummation of this offering, the Company will complete the
Acquisition, pursuant to which the Company will acquire, in a tax free
transaction, all of the issued and outstanding capital stock of Solmecs,
currently a wholly-owned subsidiary of Bayou International, Ltd. ("Bayou").
Bayou is a public company the Common Stock of which is traded in the
over-the-counter market. The current management of Bayou has not participated
in the organization of the Company and is not expected to play any role in the
management of the Company following the completion of this offering. Solmecs
was organized in 1980 to engage in the research, development and
commercialization of high efficiency, low pollution products in the energy
conversion and conservation fields. Solmecs currently seeks to select, acquire
and commercially exploit proprietary technologies, primarily invented by
scientists in the former Soviet Union. From 1980 until the mid-1990's Solmecs
was primarily engaged in the development of Liquid Metal Magnetohydrodynamics
("LMMHD") energy conversion, a process developed approximately 20 years ago by
Professor Herman Branover, a Soviet emigre to Israel who is the President and a
director of the Company. The LMMHD energy conversion technology which is
currently being utilized in a developmental stage power plant facility,
generates electric power (and, in most cases, steam) by utilizing a
non-conventional process in which an electro-conducting fluid (such as molten
lead) is forced through a magnetic field. The Company believes that power
generation facilities utilizing LMMHD energy conversion technology will have a
lower installed capital cost and higher efficiency than conventional steam
turbo- generator plants, resulting in lower electricity costs and reduced
pollutive effects. A study conducted in 1990 by an independent consultant on
behalf of Solmecs, confirmed the Company's beliefs with respect to the lower
installed costs and higher efficiency resulting from an LMMHD-based facility.
The Company believes that the further development and commercialization of
LMMHD power technology is consistent with its intent to develop advanced
technologies featuring competitive advantages over existing products. Although
the LMMHD power technology has been in development since the late 1970's, it
has not yet reached commercialization. In order to achieve commercialization of
such technology, the Company will be required to build a commercial scale
demonstration plant, which will involve a significant capital expenditure. The
Company intends to commence building such a plant within the next few years,
provided that it will be able to obtain the necessary funds for such project.
Such funds will not be available from the proceeds of this offering.

The Company intends to apply the expertise and know-how in
Magnetohydrodynamic ("MHD") phenomena accumulated by Solmecs in the development
of LMMHD power technology to the development of new industrial processes. For
example, Solmecs, in cooperation with a scientist in Russia, has identified a
potential use of MHD phenomena in the growth of mono-crystals, which are among
the critical components of the electronic chip industry. The Company believes
that the use of constant and alternate magnetic fields for influencing the
process of mono-crystal growth will result in larger, higher quality (i.e.
fewer dislocations) crystals. It is believed that this will substantially
increase the commercial value of such mono-crystals. The Company intends to
apply this method initially to mono-crystals of silicon and subsequently to
mono-crystals of gallium-arsenide and cadmium-telluride, which the Company
believes may serve as alternatives to silicon chips (chips based on
mono-crystals of silicon) in the computer and electronics industries.

The Company also intends to: (i) manufacture and market solar/electrical
hot-water tank control/display systems developed and tested by Solmecs; (ii)
market Russian-manufactured photo-voltaic cells for use in the conversion of
solar energy; and (iii) market plasma-chemically treated extra smooth rubber
gaskets developed and currently produced by a company in the former Soviet
Union for the aviation industry. Solmecs is currently in the process of
marketing such photo-voltaic cells and the Company believes that marketing
activities with respect to the solar/electric hot-water tank control/display
system and the plasma-chemically treated extra smooth rubber gaskets, both of
which are at or near the commercialization stage, could begin immediately after
the Acquisition. Two recent surveys performed for Solmecs demonstrate the
commercial viability of the hot-water tank control/display system in the French
and Israeli markets, respectively. In addition, the Company has identified
approximately a dozen projects in the viability testing stage, including those
involving Solmecs technologies and those not involving such technologies, in
which the Company may seek to invest. These projects

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<PAGE>

include new types of centrifugal pumps with provisions for substantial savings
of energy; new methods of prediction of dispersion of contaminants in the
atmosphere; and extraction of carbon-dioxide from combustion gases. In
addition, Solmecs currently sells its consulting and development services to
industry and research institutions in the fields of LMMHD technology and liquid
metal engineering. Such services are currently being provided by Solmecs to the
Israeli Dead Sea Works Industry (LMMHD technology for magnesium handling). The
Company has recently been approached by the Nuclear Center of United Europe
("CERN"), located in Geneva, Switzerland to provide its expertise in molten
lead energy conversion in the development of a safe nuclear power plant which
will generate power from the burning of nuclear waste. The Company and CERN are
currently in discussions relating to such services and have not arrived at any
understanding to date.

Although Solmecs has been in operation since 1980, Solmecs has not
generated any meaningful revenues to date and the Company does not expect to
generate any meaningful revenues for the foreseeable future and until such
time, if ever, as it successfully commercializes one or more of Solmecs'
existing or future technologies or other technologies or sells proprietary
rights relating to one or more of such technologies. Although the Company
believes that certain products that it will acquire by virtue of the
Acquisition or has identified, such as the hot-water tank control/display
system and the extra smooth rubber gaskets, are at or near the
commercialization stage, there can be no assurance that the Company will be
able to acquire rights to products it does not own or successfully manufacture
or market any products. In addition, while the Company will seek to implement
its four-step strategy involving identification of advanced technologies,
assessment of commercial viability, creation of a business plan and marketing
and commercialization with respect to the early stage technologies it will
acquire and develop in the future, there can be no assurance that the Company
will be able to successfully acquire or develop such technologies on
commercially reasonable terms, or at all. There can be no assurance that any
technologies developed or acquired by the Company will be commercially viable,
that markets for products derived from such technologies will not be limited or
that the Company will generate meaningful revenues from their commercial
exploitation or ever achieve profitable operations.

The Acquisition will take place simultaneously with the consummation of
this offering pursuant to an acquisition agreement (the "Acquisition
Agreement") entered into on June 5, 1998 between Bayou, Solmecs and the
Company. Bayou, the current parent and sole shareholder of Solmecs, will
receive 499,701 shares of the Company's Common Stock in connection with the
Acquisition. Such shares will be issued to Bayou in a private placement and
have not been registered in this offering.

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<PAGE>

RISK FACTORS

The securities offered hereby are speculative and involve a high degree of
risk. Prospective investors should carefully consider the following risk
factors before making an investment decision.

Except for the historical information contained herein, the discussion in
this Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
discussed herein. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed in "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business" as well as those discussed elsewhere in this
Prospectus.

1. Research and Development Company; Report of Company's Independent
Auditors Raises Substantial Doubt About the Company's Ability to Continue as a
Going Concern. The Company intends to engage in the research and development of
several potential products identified or to be identified, and, upon
consummation of the Acquisition, the further development and commercialization
of products and technologies owned by Solmecs. Historically, only a limited
number of early stage development companies successfully complete the research
and development of commercially viable technologies. There can be no assurance
that Solmecs's existing technologies will be commercially viable, that the
Company will be successful in acquiring rights to promising technologies, that
markets utilizing the Company's technologies will not be limited or that the
Company will generate meaningful revenues from the commercial exploitation of
the Company's early stage technologies or ever achieve profitable operations.
The Company's independent public accountants have included an explanatory
paragraph in their report on the Company's financial statements stating that
the fact that the Company is dependent upon its ability to raise resources to
finance its operations raises substantial doubt about the Company's ability to
continue as a going concern. See "Business" and Financial Statements.

2. Recent Organization. Upon the closing of this offering, the Company
will own all of the capital stock of Solmecs, which has been in operation since
1980 and has not generated significant revenues to date. Moreover, management of
the Company after the Acquisition will be substantially the same as management
of Solmecs prior to the Acquisition. The Company itself was organized in May
1997 and, since its inception, the Company has been engaged principally in
organizational activities, including developing a business plan, and negotiating
an agreement relating to the Acquisition. Other than the operations of Solmecs,
the Company has no relevant operating history upon which an evaluation of its
performance and prospects can be made. Therefore, the Company will be subject to
the risks, expenses, delays, problems and difficulties frequently encountered in
the establishment of a new business. The Company does not expect to generate any
meaningful revenues for the foreseeable future and until such time, if ever, as
it successfully commercializes one or more of Solmecs' existing or future
technologies or other technologies or sells proprietary rights relating to one
or more of such technologies. Although the LMMHD power technology has been in
development since the late 1970's, it has not yet reached commercialization. In
order to achieve commercialization of such technology, the Company will be
required to build a commercial scale demonstration plant, which will involve a
significant capital expenditure. The Company intends to commence building such
a plant within the next few years, provided that it will be able to obtain
the necessary funds for such project. Such funds will not be available from the
proceeds of this offering. See "Business".

3. Losses by Solmecs Since Inception; Limited Revenues; Report of Solmecs'
Independent Auditors Raises Substantial Doubt About Solmecs' Ability to
Continue as a Going Concern. Solmecs has incurred significant losses since its
inception, resulting in an accumulated deficit of $13,898,573 at March 31,
1998, and losses are continuing through the date of this Prospectus. The rate
of loss is expected to increase after the Acquisition as the Company's
activities increase and losses are expected to continue for the foreseeable
future and until such time, if ever, as the Company is able to achieve
sufficient levels of revenue from the commercial exploitation of the Company's
technologies to support its operations. As of March 31, 1998, Solmecs had a
stockholders' deficit of $5,708,236 and a working capital deficit of $513,297.
In addition, Solmecs' independent public accountants have included an
explanatory paragraph in their report on Solmecs' financial statements stating
that certain factors create a substantial doubt about Solmecs' ability to
continue as a going concern. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources," "Business" and Financial Statements.

4. Significant Capital Requirements. The Company's capital requirements
will be significant. The Company is dependent upon the proceeds of this
offering to finance the operations of the Company, including the

11
<PAGE>

costs of market research and marketing activities, continued research and
development efforts, establishing manufacturing capabilities and the
acquisition of intellectual property rights. The Company anticipates, based on
management's internal forecasts and assumptions relating to its operations
(including assumptions regarding the timing and progress of the Company's
technologies), that the net proceeds of this offering will be sufficient to
satisfy the Company's contemplated cash requirements for at least 12 months
following the consummation of this offering. In the event that the Company's
plans change, its assumptions change or prove inaccurate, or if the proceeds of
this offering prove to be insufficient to fund operations, the Company could be
required to seek additional financing.

5. Dependence Upon Proceeds to Fund Research and Development Activities;
Need for Significant Additional Financing. Based on the results of preliminary
assessment activity to be performed on several potential projects identified or
to be identified by the Company, the Company intends to engage in research and
development of two such projects in the first year and four projects in the
second year (which may include an additional year's work on one or both of the
first year's projects) and believes that a number of such projects will enter
the commercialization stage during such two-year period. See "Business --
Technologies Currently Developed by Solmecs" and "-- Future Technologies and
Products." Completion of the research, development and commercialization of the
Company's technologies or any potential application of such technologies will
require significant additional effort, resources and time including funding
substantially greater than the proceeds of this offering and otherwise
currently available to the Company. Moreover, the proceeds received in this
offering may be insufficient to satisfy the scheduled projects, requiring the
Company to seek additional financing. The Company has no current arrangements
with respect to, or sources of, additional financing, and it is not anticipated
that existing stockholders will provide any portion of the Company's future
financing requirements. There can be no assurance that additional financing
will be available to the Company when needed, on commercially reasonable terms,
or at all. The inability to obtain additional financing would have a material
adverse effect on the Company, including possibly requiring the Company to
curtail or cease its operations. In addition, any additional equity financing
may involve substantial dilution to the interests of the Company's then
existing stockholders. See "Use of Proceeds," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business."

6. Uncertainty of Feasibility of Company's Technologies and Product
Development. Many of the technologies identified by the Company are and will be
emerging innovative technologies. While marketing surveys performed on behalf
of Solmecs with respect to the hot water tank display/control system and
limited sales of photovoltaic cells and rubber gasket treatments have indicated
that these technologies are feasible and commercially viable, research efforts
relating to the balance of the technologies identified by the Company are at
best in the early stage, and the Company is unable, at this time, to determine
the feasibility of such technologies or the commercial viability of any
potential applications. Research and development efforts remain subject to all
of the risks associated with the development of new products based on emerging
and innovative technologies, including, without limitation, unanticipated
technical or other problems and the possible insufficiency of the funds
allocated to complete such development, which could result in delay of research
or development or substantial change or abandonment of research and development
activities. In addition, with technologies as complex as those in which the
Company is or will be engaged, technical problems and difficulties may arise
resulting in delays and causing the Company to incur additional expenses which
would have a material adverse effect on the Company. There can be no assurance
that the Company's efforts will result in the commercialization of any of the
Company's current or future technologies. The inability to successfully
complete research and development of such technologies, or delays in the
completion of the research and development of such technologies for use in
potential applications, particularly after the incurrence of significant
expenditures, would have a material adverse effect on the Company. See
"Business."

7. New Technologies; Uncertainty of Market Acceptance of the Company's
Technologies. The Company will be subject to all the risks and uncertainties
associated with developing early-stage technologies. The potential size, timing
and viability of market opportunities targeted by the Company are uncertain.
The Company's success will be dependent upon successfully completing the
research and development as well as the commercial exploitation of such
technologies. Market acceptance of the Company's current or future technologies
will also depend upon such technologies providing benefits comparable to other
current technologies. Many potential licensees of the Company's technologies
may manufacture products utilizing competing technologies and

<PAGE>

may, therefore, be reluctant to redesign their products or manufacturing
processes to incorporate the Company's current or future technologies. There
can be no assurance that the Company's current or future technologies will be
viable for any commercial applications and, if viable, that potential licensees
will utilize the Company's technologies. Additionally, even if the completion
of the research and development of the Company's technologies results in
commercially viable applications, there can be no assurance that the Company
will recover its research and development costs in the foreseeable future. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business."

8. Limited Marketing and Manufacturing Capabilities or Experience;
Dependence Upon Strategic Relationships. The Company has limited marketing
capabilities and resources or manufacturing capabilities. Therefore, the
Company's prospects will be significantly affected by its ability to market the
Company's technologies, sublicense the Company's technologies or successfully
develop strategic alliances with third parties for incorporation of the
Company's technologies into products manufactured by others. Informing
potential acquirers, licensees and other strategic partners of the benefits of
the Company's technologies and establishing satisfactory strategic alliances
will require significant financial and other resources. In addition, strategic
alliances may require financial or other commitments by the Company. There can
be no assurance that the Company will be able, for financial or other reasons,
to enter into strategic alliances on commercially acceptable terms, or at all.
Failure to do so would have a material adverse effect on the Company. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business."

9. Risks Associated with the Acquisition; Limited Recourse Against
Solmecs' Stockholder; Possible Liability to Bayou Stockholders. Pursuant to the
Acquisition Agreement, Bayou, the current sole stockholder of Solmecs and a
publicly-traded company, will receive 499,701 shares of Common Stock in
connection with the Acquisition. The common stock of Solmecs owned by Bayou
represents substantially all of Bayou's assets. The current market value of the
common stock of Bayou is substantially lower than the market value, based on
the offering price of $5.75 per share, of the shares of Common Stock to be
issued to Bayou in this offering. Bayou, as the sole stockholder of Solmecs,
has limited the representations and warranties that it is making to its actual
knowledge, which is defined in the Acquisition Agreement as the actual
knowledge of the officers and directors of Bayou without independent
investigation. Moreover, Bayou's liability for such representations and
warranties and its indemnification of the Company is limited to the value
(determined at the time that indemnification is sought) of the 499,701 shares
of Common Stock of the Company that Bayou will receive in connection with the
Acquisition. Consequently, the Company will have no recourse against Bayou for
claims in excess of the value of such shares. In addition, nearly all of such
representations and warranties will survive for only 18 months after the
consummation of the Acquisition. The sale of the shares of Solmecs by Bayou to
the Company constitutes a sale by Bayou of substantially all of its assets,
requiring a vote of the stockholders of Bayou. Inasmuch as a majority of the
outstanding shares of Bayou are held by a few holders, such holders will be
able to consent to such action without a stockholders meeting. If the minority
stockholders in Bayou were not satisfied with the consideration paid to Bayou
for substantially all of its assets, such stockholders could seek to assert a
claim against the Company as successor to substantially all of the business of
Bayou. There can be no assurance that the acquisition will not result in
liability to the Company.

10. Uncertainty of Intellectual Property Rights. The Company does not
currently have rights with respect to certain technologies which have been
identified by the Company for exploitation and which are described herein.
There can be no assurance that the Company will be able to successfully
negotiate the acquisition of intellectual property rights including licenses,
with respect to such technologies, on commercially reasonable terms, or at all.
Failure to do so could have a material adverse effect on the Company. In
addition, certain of such technologies and other technologies which the Company
may identify for exploitation in the future have been developed by scientists
and institutions in the former Soviet Union. Any acquisitions of intellectual
property rights or licenses from such scientists and institutions will be
subject to uncertainties with respect to the enforceability of intellectual
property rights and other agreements in the former Soviet Union. Solmecs
currently owns five Israeli patents relating to the LMMHD technology. All of
such patents have corresponding patents registered in the United States (one in
the name of Ben-Gurion University of the Negev Research and Development
Authority), and a number of such patents have corresponding patents registered
in one or more other countries, including Australia, Canada, France, Germany,
Great Britain, Italy and Japan. In addition, Solmecs owns a United States
patent, not registered elsewhere, relating to the LMMHD technology, and an

13
<PAGE>

Israeli patent, not registered elsewhere, relating to a device for voltage
conversion which can be used in conjunction with the LMMHD technology. Three of
such patents expire during the next five years, beginning in April 1999. The
Company does not believe that the expiration of such patents will have a
material adverse effect on the Company's business; however, no assurance can be
given in that regard. Pursuant to a 1981 agreement between Solmecs and Ben
Gurion University and B.G. Negev Technology and Applications Ltd. ("BGU"), BGU
agreed to assign to Solmecs all of its right, title and interest in and to the
patents and know-how to the LMMHD technology in return for which Solmecs made
an initial payment of $100,000 and agreed to pay royalties of 1.725% of the
sales price of all commercially produced systems, and 11.5% of income received
from licensing of the LMMHD technology. In addition, Solmecs has agreed to pay
the inventor of technology incorporated in its hot water tank control and
display systems certain royalties on sales of products incorporating such
technology and/or the sale or licensing of such technology. The Company
anticipates that it will file additional patent applications to protect future
inventions conceived or innovative technologies obtained. There can be no
assurance that patents to be applied for will be obtained or that any such
current or future patents will afford the Company commercially significant
protection of the Company's technologies. In addition, the patent laws of other
countries may differ from those of Israel and the United States as to the
patentability of the Company's technologies and the degree of protection
afforded. Other companies and institutions may independently develop equivalent
or superior technologies and may obtain patent or similar rights with respect
thereto. Although the Company believes that technologies to be acquired by the
Company have been independently researched and developed and that such
technologies do not infringe upon the rights of others, there can be no
assurance that such technologies or other technologies to be developed by the
Company in the future do not and will not infringe on the patents or other
intellectual property of others. In the event of infringement, the Company
could, under certain circumstances, be required to obtain a license or modify
its methods or other aspects of the Company's current technologies. There can
be no assurance that the Company will be able to do so in a timely manner, upon
acceptable terms and conditions, or at all. Failure to do any of the foregoing
could have a material adverse effect on the Company. There can also be no
assurance that the Company will have the financial or other resources necessary
to enforce or defend a patent infringement action or that the Company will
elect to enforce an action in a timely manner. Moreover, if products
incorporating the Company's technologies are found to infringe upon the patent
or other intellectual property rights of others, the Company could, under
certain circumstances, become liable for damages, which could have a material
adverse effect on the Company.

The Company may also seek to rely on proprietary know-how and trade
secrets and employ various methods to protect concepts, ideas and documentation
of its technologies. However, such methods may not afford complete protection,
and there can be no assurance that others will not independently develop
similar know-how or obtain access to the Company's know-how, trade secrets,
concepts, ideas and documentation. See "Business -- Intellectual Property."

11. Competition; Technological Obsolescence. The products that will be
based on the Company's technologies will likely be used in highly competitive
industries. Numerous domestic and foreign companies are seeking to research,
develop and commercialize technologies similar to those of the Company, many of
which have greater name recognition and financial, technical, marketing,
personnel and research capabilities than the Company. There can be no assurance
that the Company's competitors will not succeed in developing technologies and
applications that are more cost effective, or have fewer limitations than, or
have other advantages as compared to, the Company's technologies. The markets
for the technologies and products to be developed or acquired by the Company
are characterized by rapid changes and evolving industry standards often
resulting in product obsolescence or short product life cycles. Accordingly,
the ability of the Company to compete will depend on its ability to complete
development and introduce to the marketplace, directly or through strategic
partners, in a timely manner its proposed products and technologies, to
continually enhance and improve such products and technologies, to adapt its
proposed products to be compatible with specific products manufactured by
others, and to successfully develop and market new products and technologies.
There can be no assurance that the Company will be able to compete
successfully, that its competitors or future competitors will not develop
technologies or products that render the Company's products and technologies
obsolete or less marketable or that

<PAGE>

the Company will be able to successfully enhance its proposed products or
technologies or adapt them satisfactorily. There can be no assurance that other
companies are not dedicated to identifying, obtaining and developing
technologies of scientists and engineers from the former Soviet Union. Any such
competitors may have greater financial, technical, marketing, personnel and
other resources than the Company. See "Business -- Competition."

12. Dependence on Key Personnel. The success of the Company will be
dependent on the personal efforts of Professor Herman Branover, the Company's
President, and Dr. Shaul Lesin, the Company's Executive Vice President.
Although the Company has entered into employment agreements with Professor
Branover and Dr. Lesin, the loss of the services of either of them could have a
material adverse effect on the Company's prospects. The Company has applied for
a key man life insurance policy with respect to Professor Branover. The success
of the Company is also dependent upon attracting and retaining qualified
technical personnel, particularly scientific, engineering and marketing
personnel, particularly a senior scientist in the area of monocrystal
technology. See "Business-Employees" and "Management."

13. Currency Exchange Risks Associated with International Sales and
Israeli Operations. Because most of the Company's revenues may be derived in
currencies other than NIS, while a significant portion of the Company's
expenses are expected to be incurred in NIS, the Company may be adversely
affected by fluctuations in currency exchange rates. The dollar cost of the
Company's operations in Israel is influenced by the timing of, and the extent
to which, any increase in the rate of inflation in Israel over the rate of
inflation in the United States is not offset by the devaluation of the NIS in
relation to the dollar. The Company's dollar costs in Israel will increase if
inflation in Israel exceeds the devaluation of the NIS against the dollar or if
the timing of such devaluation lags behind inflation in Israel. Over time, the
NIS has been devalued against the dollar, generally reflecting inflation rate
differentials. Although during 1997 the rate of devaluation of the NIS against
the dollar exceeded the rate of inflation in Israel, for the several years
preceding 1997 the rate of inflation in Israel exceeded the rate of devaluation
of the NIS against the dollar. Likewise, the Company's operations could be
adversely affected if it is unable to guard against currency fluctuations in
the future. To date, the Company has not engaged in hedging transactions. In
the future, the Company may enter into currency hedging transactions to
decrease the risk of financial exposure from fluctuations in the exchange rate
of the dollar against the NIS; however, no assurance can be given that the
Company will enter into such transactions or that such measures will adequately
protect the Company from material adverse effects due to the impact of
inflation in Israel.

14. Control of the Company. Upon the consummation of this offering, the
current stockholders of the Company together with the sole stockholder of
Solmecs will beneficially own, in the aggregate, 50% of the outstanding shares
of Common Stock (assuming no exercise of the Underwriter's overallotment
option, or the Warrants) and will therefore be able to exert considerable
influence over the Company. However, other than the Acquisition Agreement
relating to the Acquisition, which provides for the initial make-up of the
Company's Board of Directors following the Acquisition, there is no agreement
or understanding between Bayou, the sole stockholder of Solmecs, and the
remaining stockholders and management of the Company as to the control or
management of the Company following the consummation of this offering. See
"Management," "Principal Stockholders" and "Certain Transactions."

15. Lack of Independent Directors, Board Committees. The Company's Board
of Directors consists of two people, one of whom is the President and Chief
Executive Officer as well as the principal of a major stockholder of the
Company and one of whom is the Chairman of the Board and a Director of Solmecs
and a major stockholder of the Company. The Board does not currently contain
any independent Directors and there are no audit or compensation committees
currently in place. Upon the consummation of the Offering and Acquisition, each
of the Underwriter and a major stockholder shall have the right to designate
one member to the Company's Board of Directors, and it is anticipated that the
Board of Directors will elect a fifth member of the Board. There is no
assurance, however, that any of such designees shall be independent of the
Company or its affiliates or associates. Accordingly, the Board of Directors
may be in a position to control the actions and decisions of the Company
without the benefit of input from independent Directors. See "Management."

16. Broad Discretion in Application of Proceeds; Benefit to Related
Parties. Approximately $457,400 (10%) of the estimated net proceeds of this
offering has been allocated to working capital and general corporate

15
<PAGE>

purposes. Accordingly, the Company's management will have broad discretion as
to the application of such proceeds. Additionally, a portion of the proceeds of
this offering allocated to working capital will be used to pay the salaries of
executive officers (which are anticipated to be approximately $300,000 per
year). See "Use of Proceeds," "Certain Transactions" and Pro Forma Financial
Information.

17. Immediate and Substantial Dilution. This offering involves an
immediate and substantial dilution of $3.83 per share (or 67%) between the
adjusted net tangible book value per share after the offering and the initial
public offering price of $5.75 (assuming none of the initial public offering
price is attributed to the Warrant included in the Unit). See "Dilution."

18. No Dividends. The Company has not paid any cash dividends to date and
does not expect to pay cash dividends in the foreseeable future. See
"Description of Securities -- Dividends."

19. Shares Eligible for Future Sale. Upon consummation of this offering,
the Company will have 2,082,088 shares of Common Stock outstanding (assuming no
exercise of the Warrants or outstanding options or warrants), of which the
1,041,044 shares of Common Stock offered hereby will be freely tradable without
restriction or further registration under the Securities Act of 1933, as
amended (the "Securities Act"). All of the remaining 1,041,044 shares of Common
Stock outstanding are "restricted securities," as that term is defined under
Rule 144 promulgated under the Securities Act. All of such restricted
securities may become eligible for sale pursuant to Rule 144 commencing 90 days
from the date of this offering. Notwithstanding the foregoing, all of the
holders of such shares have agreed not to sell such shares for a period of 24
months from the date of this Prospectus without the Underwriter's prior written
consent. The Company has granted certain demand and "piggy-back" registration
rights to the Underwriter with respect to the securities issuable upon exercise
of the Underwriter's Unit Purchase Option and the Acquisition Agreement
provides certain registration rights to Bayou with respect to the shares it
will receive in the Acquisition. No prediction can be made as to the effect, if
any, that sales of shares of Common Stock or even the availability of such
shares for sale will have on the market prices prevailing from time to time.
The possibility that substantial amounts of Common Stock may be sold in the
public market may adversely affect the prevailing market price for the Units,
Common Stock and Warrants and could impair the Company's ability to raise
capital through the sale of its equity securities. See "Shares Eligible for
Future Sale" and "Underwriting."

20. No Assurance of Public Market; Arbitrary Offering Price; Possible
Volatility of Market Price of Units, Common Stock and Warrants. Prior to this
offering, there has been no public trading market for the Units, Common Stock
or Warrants. There can be no assurance that a regular trading market for the
Units, Common Stock or Warrants will develop after this offering or that, if
developed, it will be sustained. Moreover, the initial public offering price of
the Units and the exercise price of the Warrants have been determined by
negotiations between the Company and the Underwriter and, as such, are
arbitrary in that they do not necessarily bear any relationship to the assets,
book value or potential earnings of the Company or any other recognized
criteria of value and may not be indicative of the prices that may prevail in
the public market. The market prices of the Company's securities following this
offering may be highly volatile as has been the case with the securities of
other emerging companies. Factors such as the Company's operating results and
announcements by the Company or its competitors may have a significant impact
on the market price of the Company's securities. In addition, in recent years,
the stock market has experienced a high level of price and volume volatility
and market prices for the stock of many companies have experienced wide price
fluctuations which have not necessarily been related to the operating
performance of such companies. Although the Units, and, once separately
transferable, the Common Stock and Warrants, will be quoted on the OTC
Electronic Bulletin Board, there can be no assurance that a regular trading
market for the securities will develop after this Offering or that, if
developed, it will be sustained. The OTC Electronic Bulletin Board is an
unorganized, inter-dealer, over-the-counter market which provides significantly
less liquidity than a national securities exchange or The Nasdaq Stock Market,
and quotes for securities included in the OTC Electronic Bulletin Board are not
listed in the financial sections of newspapers as they are for securities
listed on a national securities exchange and The Nasdaq Stock Market.
Therefore, prices for securities traded solely on the OTC Electronic Bulletin
Board may be difficult to obtain and purchasers of the Units may be unable to
resell the securities offered hereby at or near their original offering price
or at any price.

Although it has no obligation to do so, the Underwriter intends to make a
market in the Units, Common Stock and Warrants and may otherwise effect
transactions in the Units, Common Stock and Warrants. If the

16
<PAGE>

Underwriter makes a market in the Units, Common Stock or Warrants, such
activities may exert a dominating influence on the market and such activity may
be discontinued at any time. The prices and liquidity of the Units, Common
Stock and Warrants may be significantly affected to the extent, if any, that
the Underwriter participates in such market. See "Underwriting."

21. Risks Relating to Low-Priced Stocks; Possible Adverse Effects of
"Penny Stock" Rules on Liquidity for the Company's Securities. The Securities
and Exchange Commission (the "Commission") has adopted regulations which
generally define "penny stock" to be any equity security that is not traded on
a national securities exchange or Nasdaq and that has a market price of less
than $5.00 per share or an exercise price of less than $5.00 per share, subject
to certain exceptions. If the securities offered hereby are included in the OTC
Electronic Bulletin Board and are trading at less than $5.00 per security at
any time following the effective date of this offering, trading in such
securities will be subject to the requirements of such "penny stock"
regulations which require, among other things, the delivery, prior to any penny
stock transaction, of a disclosure schedule explaining the penny stock market
and the risks associated therewith, and which impose various sales practice
requirements on broker-dealers who sell penny stocks to persons other than
established customers and accredited investors (generally institutions or
individual investors with assets in excess of $1,000,000 or an individual
annual income exceeding $200,000 or, together with the investor's spouse, a
joint income of $300,000). For these types of transactions, the broker-dealer
must make a special suitability determination for the purchaser and have
received the purchaser's written consent to the transaction prior to sale. The
broker-dealer must also disclose the commission payable to both the
broker-dealer and the registered representative, current quotations for the
securities and, if the broker-dealer is the sole market-maker, the
broker-dealer must disclose this fact and the broker-dealer's presumed control
over the market. The additional burdens imposed upon broker-dealers by such
requirements may discourage broker-dealers from effecting transactions in the
Company's securities, which could severely limit the market price and liquidity
of such securities and the ability of purchasers in this offering to sell their
securities of the Company in the secondary market.

22. Potential Adverse Effect of Warrant Redemption. The Warrants are
subject to redemption by the Company, at any time commencing on June 29, 1999,
upon notice of not less than 30 days, at a price of $.01 per Warrant, provided
that the average of the closing bid quotations of the Common Stock on any ten
consecutive trading days ending within five days prior to the day on which the
Company gives notice has been at least $10.00 per share (subject to
adjustment). Redemption of the Warrants could force the holders to exercise the
Warrants and pay the exercise price at a time when it may be disadvantageous
for the holders to do so, to sell the Warrants at the then current market price
when they might otherwise wish to hold the Warrants, or to accept the
redemption price, which is likely to be substantially less than the market
value of the Warrants at the time of redemption. See "Description of Securities
- -- Redeemable Warrants."

23. Possible Inability to Exercise Warrants. The Company intends to
qualify the sale of the securities offered hereby in a limited number of
states. Although certain exemptions in the securities laws of certain states
might permit the Warrants to be transferred to purchasers in states other than
those in which the Warrants were initially qualified, the Company will be
prevented from issuing Common Stock in such states upon the exercise of the
Warrants unless an exemption from qualification is available or unless the
issuance of Common Stock upon exercise of the Warrants is qualified. The
Company may decide not to seek or may not be able to obtain qualification of
the issuance of such Common Stock in all of the states in which the ultimate
purchasers of the Warrants reside. In such a case, the Warrants held by
purchasers will expire and have no value if such Warrants cannot be sold.
Accordingly, the market for the Warrants may be limited because of these
restrictions. Further, a current prospectus covering the Common Stock issuable
upon exercise of the Warrants must be in effect before the Company may accept
Warrant exercises. There can be no assurance the Company will be able to have a
prospectus in effect when this Prospectus is no longer current, notwithstanding
the Company's commitment to use its best efforts to do so. See "Description of
Securities -- Redeemable Warrants."

24. Indemnification of Directors and Officers. The Company's Certificate
of Incorporation provides for the Company to indemnify each Director and
officer of the Company to the fullest extent permitted by the Delaware General
Corporation Law. The foregoing provision may reduce the likelihood of
derivative litigation against Directors and may discourage or deter
stockholders or management from suing Directors for breaches of their duty of
care, even though such an action, if successful, might otherwise benefit the
Company and its stockholders. See "Management -- Limitation of Liability and
Indemnification Matters."

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<PAGE>

25. Speculative Nature of Warrants. The initial offering price of the
Units and the exercise price of the Warrants have been determined by
negotiations between the Company and the Underwriter and may not necessarily
bear any relationship to any established criteria of value. The market value of
the Units, Common Stock and Warrants following this offering is subject to a
high degree of uncertainty, and there can be no assurance that the market value
of the Units, Common Stock or Warrants following this offering will equal or
exceed the initial offering price of such securities. Purchasers of the
Warrants electing to exercise the Warrants will not have the opportunity to
profit from sales of the underlying shares unless the market price of the
Common Stock exceeds the exercise price (plus related transaction costs). There
can be no assurance that the market price of the Common Stock will ever exceed
the exercise price of the Warrants.

26. Possible Restrictions on Market Making Activities in the Company's
Securities. The Company believes that the Underwriter intends to make a market
in the Company's securities and may be responsible for a substantial portion of
the market making activities in such securities. Regulation M under the
Exchange Act may prohibit the Underwriter from engaging in any market-making
activities with regard to the Company's securities for the period from five
business days (or such other applicable period as Regulation M may provide)
prior to any solicitation by the Underwriter of the exercise of outstanding
Warrants until the termination (by waiver or otherwise) of any right that the
Underwriter may have to receive a fee for the exercise of Warrants following
such solicitation; and any period during which the Underwriter, or any
affiliated parties, participate in a distribution of any securities of the
Company for the account of the Underwriter or any such affiliate. As a result,
the Underwriter may be unable to provide a market for the Company's securities
during certain periods, including while the Warrants are exercisable. Any
temporary cessation of such market-making activities could have an adverse
effect on the liquidity for the Company's securities.

27. Risks Relating to Conducting Business Operations in Israel. The
Company's indirect subsidiary is incorporated under the laws of, and has its
offices and a significant portion of its operations (including all of its
product development activities) in, the State of Israel. The Company is,
therefore, directly influenced by the political, economic and security
conditions affecting Israel. Any major hostilities involving Israel, the
interruption or curtailment of trade between Israel and its trading partners,
or a significant downturn in the economic or financial condition of Israel
could have a material adverse effect on the Company's business, financial
condition, or results of operations. See "Conditions in Israel."

28. Risks Relating to Service and Enforcement of Legal Process. The
Directors and executive officers of the Company are not residents of the United
States. Substantially all of the assets of such persons and of the Company are
located outside the United States. As a result, it may not be possible for
investors to effect service of process within the United States upon such
persons or the Company or to enforce against them judgments of United States
courts predicated upon civil liability provisions of the United States federal
or state securities laws. Moreover, there is doubt as to the enforceability of
civil liabilities under the Securities Act and the Exchange Act in original
actions instituted in Israel. However, subject to certain limitations, Israeli
courts may enforce foreign final executory judgments, including those of the
United States, for liquidated amounts in civil matters obtained after due trial
before a court of competent jurisdiction (according to the rules of private
international law currently prevailing in Israel) that recognizes and enforces
similar Israeli judgments, provided that (i) adequate service of process has
been effected and the defendant has had a reasonable opportunity to defend;
(ii) such judgments or the enforcement thereof are not contrary to the law,
public policy, security or sovereignty of the State of Israel; (iii) such
judgments were not obtained by fraudulent means and do not conflict with any
other valid judgment in the same matter between the parties; and (iv) an action
between the same parties in the same matter is not pending in any Israeli court
at the time the lawsuit is instituted in the foreign court. The Company has
appointed Corporation Service Company, 1013 Centre Road, Wilmington, Delaware
19805-1297, as its agent in the United States upon which service of process
against it may be made for matters relating to this offering. None of the
Company's officers or directors has consented to service of process in the
United States or to the jurisdiction of any United States court.

18
<PAGE>
USE OF PROCEEDS

The net proceeds to the Company from the sale of the 1,041,044 Units
offered hereby are estimated to be $4,707,403 ($5,488,573 if the Underwriter's
over-allotment option is exercised in full). The Company expects to use the net
proceeds approximately as follows:

<TABLE>
<CAPTION>
Approximate
Approximate Percentage of
Application of Proceeds Dollar Amount Dollar Amount
- ----------------------- --------------- --------------
<S> <C> <C>
Market research and marketing activities(1) ............... $1,450,000 31%
Research and development(2) ............................... 1,020,000 22
Establishment of manufacturing capabilities(3) ............ 1,000,000 21
Repayment of indebtedness(4) .............................. 430,000 9
Acquisition of intellectual property rights(5) ............ 250,000 5
Cost of Acquisition(6) .................................... 100,000 2
Working capital and general corporate purposes(7) ......... 457,403 10
---------- --
Total .................................................. $4,707,403 100%
========== ===
</TABLE>

- ------------
(1) Represents estimated costs associated with commercial evaluation, including
a portion of salaries of scientists and engineers/technicians allocated to
market research and salaries of marketing and project evaluation
employees, as well as the cost of marketing surveys. Also includes
salaries of personnel performing direct marketing and other marketing
activities.

(2) Includes a portion of salaries of scientists and engineers/technicians
allocated to scientific research. Also includes estimated costs associated
with analysis, experimentation and development of technologies and
prototypes including: equipment, instrumentation and materials; the cost
of outside consultants; patent surveys and filings.

(3) Represents estimated cost associated with acquiring or leasing, and
equipping of factory facilities for initial production of products
resulting from two projects.

(4) Represents amounts advanced by Batei Sefer Limlacha, a stockholder of the
Company, to Solmecs prior to the consummation of the Acquisition and short
term bank borrowing, aggregating $429,254 outstanding at March 31, 1998.

(5) Represents estimated cost associated with the acquisition of licenses
and/or rights to centrifugal pump technology and carbon dioxide extraction
technology.

(6) Represents estimated costs associated with the acquisition of Solmecs.

(7) Working capital will be used, among other things, to pay salaries of the
Company's executive officers (which is anticipated to be approximately
$300,000 per year), rent, trade payables, professional fees and other
operating expenses. See "Management," "Certain Transactions" and Pro Forma
Financial Information.

If the Underwriter exercises its over-allotment option in full, the
Company will realize additional net proceeds of $781,170, which will be added
to the Company's working capital.

The allocation of the net proceeds from this offering set forth above
represents the Company's best estimate based upon its currently proposed plans
and assumptions relating to its operations and certain assumptions regarding
general economic conditions. If any of these factors change, the Company may
find it necessary or advisable to reallocate some of the proceeds within the
above-described categories or to use portions thereof for other purposes.

The Company anticipates, based on management's internal forecasts and
assumptions relating to its operations (including assumptions regarding the
timing and progress of the Company's technologies), that the net proceeds of
this offering will be sufficient to satisfy the Company's contemplated cash
requirements for at least 12 months following the consummation of this
offering. In the event that the Company's plans change, its assumptions change
or prove inaccurate, or if the proceeds of this offering prove to be
insufficient to fund operations, the Company could be required to seek
additional financing. Based on the results of preliminary assessment

19
<PAGE>
activity to be performed on several potential projects identified or to be
identified by the Company, the Company intends to engage in research and
development of two such projects in the first year and four projects in the
second year (which may include an additional year's work on one or both of the
first year's projects) and believes that a number of such projects will enter
the commercialization stage during such two-year period. Completion of the
research, development and commercialization of the Company's technologies or
any potential application of such technologies will require significant
additional effort, resources and time including funding substantially greater
than the proceeds of this offering and otherwise currently available to the
Company. Moreover, the proceeds received in this offering may be insufficient
to satisfy the scheduled projects, requiring the Company to seek additional
financing. The Company has no current arrangements with respect to, or sources
of, additional financing, and it is not anticipated that existing stockholders
will provide any portion of the Company's future financing requirements. There
can be no assurance that additional financing will be available to the Company
when needed, on commercially reasonable terms, or at all.

Proceeds not immediately required for the purposes described above will be
invested principally in United States government securities, short-term
certificates of deposit or money market funds.

DILUTION

The difference between the initial public offering price per share of
Common Stock and the adjusted net tangible book value per share after this
offering constitutes the dilution to investors in this offering. Net tangible
book value per share of Common Stock on any given date is determined by
dividing the net tangible book value of the Company (total tangible assets less
total liabilities) on that date, by the number of shares of Common Stock
outstanding on that date.

As of March 31, 1998, the net tangible book value of the Company was
$(258,608) or $(.48) per share of Common Stock. After giving effect to the
Acquisition, R&D Write-Off, Loan Forgiveness and Bayou Share Return, the pro
forma net tangible book value of the Company as of March 31, 1998 would have
been $(883,947) or $(.85) per share. After giving effect to the sale of the
1,041,044 Units being offered hereby (less underwriting discounts and
commissions and estimated expenses of this offering), the adjusted net tangible
book value of the Company as of March 31, 1998 would have been $3,989,656 or
$1.92 per share, representing an immediate increase in net tangible book value
of $2.77 per share of Common Stock to existing stockholders and an immediate
dilution of $3.83 per share (67%) to new investors (assuming none of the
initial public offering price is attributed to the Warrant included in the
Unit). The following table illustrates this dilution to new investors on a per
share basis:
<TABLE>
<S> <C> <C>
Public offering price ........................................ $ 5.75
Net tangible book value before Acquisition, R&D Write-Off,
Loan Forgiveness and Bayou Share Return .................. $(.48)
Decrease attributable to Acquisition, R&D Write-Off,
Loan Forgiveness and Bayou Share Return .................. (.37)
-----
Pro forma net tangible book value before offering ......... (.85)
Increase attributable to new investors .................... 2.77
-----
Adjusted net tangible book value after offering .............. 1.92
------
Dilution to new investors .................................... $ 3.83
======
</TABLE>

20
<PAGE>
The following table sets forth, with respect to existing stockholders on a
pro forma basis, giving effect to the Acquisition, and new investors in this
offering, a comparison of the number of shares of Common Stock issued by the
Company, the percentage of ownership of such shares, the total cash
consideration paid, the percentage of total cash consideration paid and the
average price per share.
<TABLE>
<CAPTION>
Total Cash Consideration
Shares Purchased Paid
----------------------- ------------------------
Average
Price
Number Percent Amount Percent Per Share
----------- --------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
Existing stockholders (pro forma) ......... 1,041,044 50.0% $ 12,589 .2% $ .01
New investors ............................. 1,041,044 50.0% 5,986,003 99.8% $ 5.75
--------- ----- ---------- -----
Total ................................... 2,082,088 100.0% $5,998,592 100.0%
========= ===== ========== =====
</TABLE>

The above tables assume no exercise of the Underwriter's over-allotment
option. If such option is exercised in full, the new investors will have paid
$6,883,900 for 1,197,200 shares of Common Stock, representing approximately
99.8% of the total consideration for 53.5% of the total number of shares of
Common Stock outstanding.

CAPITALIZATION

The following table sets forth the capitalization of the Company as of
March 31, 1998, (i) on an actual basis, (ii) on a pro forma basis, giving
effect to (a) the acquisition by the Company of Solmecs in consideration of the
issuance to Bayou of 499,701 shares of Common Stock, accounted for as a
purchase, (b) the write-off of acquired research and development in process of
$3,498,619, (c) the forgiveness by Bayou of a loan to Solmecs, of which
$5,082,897 was outstanding as of March 31, 1998, and (d) the return of Bayou's
shares held by Solmecs, and (iii) as adjusted to give effect to the sale of the
1,041,044 Units offered hereby and the anticipated application of the estimated
net proceeds therefrom.

<TABLE>
<CAPTION>
March 31, 1998
------------------------------------------------
Actual Pro Forma (1) As Adjusted (2)
----------- --------------- ----------------
<S> <C> <C> <C>
Short Term Debt ....................................... $110,108 $ 539,362 $ --
======== =========== ============
Long term debt ........................................ -- $ 200,000 $ 200,000
-------- ----------- ------------
Stockholders' equity (deficiency):
Common stock, $.01 par value, 10,000,000 autho-
rized, 541,343 outstanding, 1,041,044 pro forma(1),
2,082,088 as adjusted(2) .......................... 5,413 10,410 20,820
Additional paid-in-capital ......................... 2,179 2,870,462 7,567,455
Accumulated deficit ................................ -- (3,498,619) (3,598,619)
-------- ----------- ------------
Total stockholders' equity (deficiency) ............... 7,592 (617,747) 3,989,656
-------- ----------- ------------
Total capitalization .................................. $ 7,592 ($ 417,747) $ 4,189,656
======== =========== ============
</TABLE>

- ------------
(1) Does not include (i) 1,041,044 shares of Common Stock reserved for issuance
upon exercise of the Warrants; (ii) an aggregate of 208,208 shares of
Common Stock reserved for issuance upon exercise of the Underwriter's Unit
Purchase Option and the Warrants included therein; and (iii) 200,000
shares of Common Stock reserved for issuance upon exercise of options
available for future grant under the Plan. See "Management - 1997 Stock
Option Plan," and "Underwriting."

(2) Gives effect to the sale of the 1,041,044 Units offered hereby and the
application of the estimated net proceeds therefrom, including the
repayment of indebtedness in the amount of $429,254 and the payment of
costs of the Acquisition in the amount of $100,000.

21
<PAGE>
SELECTED FINANCIAL DATA

The balance sheet data as of June 30, 1997, has been derived from the
Financial Statements included elsewhere herein which have been audited by
Arthur Andersen LLP, independent public accountants. The balance sheet data as
of March 31, 1998, is derived from the unaudited financial statements of the
Company, which are also included elsewhere herein. The unaudited financial
information reflects all adjustments (consisting only of normal recurring
adjustments) that the Company considers necessary for a fair statement of the
financial data for such period. The Pro Forma Financial information should be
read in conjunction with the unaudited Pro Forma Financial Statements of the
Company and Solmecs, the Financial Statements of Solmecs for the years ended
June 30, 1996 and 1997, that have been audited by Luboshitz Kasierer & Co.
(member firm of Arthur Andersen), and the unaudited Financial Statements of
Solmecs for the nine months ended March 31, 1997 and 1998. These financial
statements, including the notes thereto, appear elsewhere in this Prospectus.
In management's opinion, all material adjustments necessary to reflect the
effects of the Acquisition have been made in the Pro Forma Financial
Statements. The unaudited Pro Forma consolidated statements of operations are
not necessarily indicative of what the actual results of operations of the
Company would have been assuming the Acquisition had been completed as of July
1, 1995, July 1, 1996 and July 1, 1997, respectively, nor is it necessarily
indicative of the results of operations for future periods. The results of the
Pro Forma operations for the nine months ended March 31, 1997 and 1998 are not
necessarily indicative of results to be expected for any future period. The
following selected financial data are qualified by the more detailed Financial
Statements included elsewhere in this Prospectus and should be read in
conjunction with such Financial Statements and the discussion under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Pro Forma(1) Pro Forma(1)
Year Ended June 30, Nine Months Ended March 31,
-------------------------------------- -----------------------------
1996 1997 1997 1998
----------------- ------------------ ------------- -------------
<S> <C> <C> <C> <C>
Statements of Operation Data:
Revenues .............................................. $ 75,057 $ 57,276 $ 42,911 $ 38,876
Research and development costs ........................ 347,318 276,259 219,595 187,143
Cost of services performed by subcontractors .......... -- -- -- 26,056
Cost of merchandise purchased ......................... 17,420 48,638 37,337 5,257
Marketing, general & administrative expenses .......... 493,614 383,219 267,771 353,823
Operating loss ........................................ (783,295) (650,840) (481,792) (533,403)
Net loss .............................................. (688,629) (661,324) (486,935) (535,697)
Net loss per share .................................... $ (.66) $ (.64) $ (.47) $ (.51)
Weighted average number of shares outstanding ......... 1,041,044 1,041,044 1,041,044 1,041,044

Balance Sheet Data: June 30, 1997 March 31, 1998
----------------- ------------------
Total assets .......................................... $ 25,000 $ 266,200
Working capital ....................................... 25,000 7,592
Current liabilities ................................... -- 258,608
Long-term liabilities ................................. 17,408 --
Stockholders' equity .................................. 7,592 7,592
</TABLE>

- -----------
(1) The unaudited Pro Forma financial statement of operations information
reflects the combined financial position and results of the Company and
Solmecs as if the Acquisition had been effective as of March 31, 1998,
July 1, 1995, July 1, 1996 and July 1, 1997, respectively, without giving
effect to the Offering. Such pro forma information gives effect to (i) the
acquisition by the Company, upon consummation of this Offering, of Solmecs
in consideration of the issuance to Bayou of 499,701 shares of Common
Stock accounted for as a purchase; (ii) the R&D Write-Off of acquired
research and development in process of $3,498,619; (iii) the Loan
Forgiveness by Bayou of a loan to Solmecs, of which $5,082,897 was
outstanding as of March 31, 1998; (iv) the Bayou Share Return; and (v) the
payment of $170,000, and $120,000 for fiscal years 1996 and 1997,
respectively, and $90,000 for the nine months ended March 31, 1998, to
officers in connection with employment agreements. See Pro Forma Financial
Information.

22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

The Company was organized to select, develop and commercially exploit
proprietary technologies, in various stages of development, invented primarily
by scientists who have recently immigrated to Israel from, and by scientists
and institutions in, Russia and other countries that formerly comprised the
Soviet Union. In furtherance of this goal, the Company will acquire Solmecs
Corporation N.V., a Netherlands Antilles company, the operations of which are
located in Israel, which owns certain technologies developed by such scientists
in the past and actively seeks to identify such technologies for exploitation.
The technologies of Solmecs and technologies identified by Solmecs for
exploitation are in various stages of development and include technologies that
have begun to be commercialized as well as technologies that the Company
believes are ready for commercialization in the near future. The Company itself
was organized in May 1997 and, since its inception, the Company has been
engaged principally in organizational activities, including developing a
business plan, and negotiating an agreement relating to the Acquisition.

The Company expects to manufacture and market certain technologies which
have been identified by Solmecs and shown to be commercially viable, such as
hot water tank display control systems, photo-voltaic cells and
plasma-chemically treated extra smooth rubber gaskets. The Company further
intends to offer its engineering services to industry and research institutions
in the fields of LMMHD power technology and liquid metal engineering. To date,
Solmecs has not generated significant revenues and the Company does not expect
to generate any meaningful revenues for the foreseeable future and until such
time, if ever, as it successfully commercializes one or more of Solmecs'
existing or future technologies or other technologies or sells proprietary
rights relating to one or more of such technologies. Although the LMMHD power
technology has been in development since the late 1970's, it has not yet
reached commercialization. In order to achieve commercialization of such
technology, the Company will be required to build a commercial scale
demonstration plant, which will require a significant capital expenditure. The
Company intends to commence building such a plant within the next few years,
provided that it will be able to obtain the necessary funds for such project.
Such funds will not be available from the proceeds of this offering. Solmecs
has incurred significant losses since its inception, resulting in an
accumulated deficit of $13,898,573 at March 31, 1998 and losses are continuing
through the date of this Prospectus. The rate of loss is expected to increase
after the Acquisition as the Company's activities increase and losses are
expected to continue for the foreseeable future and until such time, if ever,
as the Company is able to achieve sufficient levels of revenue from the
commercial exploitation of its technologies to support its operations. The
Company's independent public accountants have included an explanatory paragraph
in their report on the Company's financial statements stating that the fact
that the Company is dependent upon its ability to raise resources to finance
its operations raises substantial doubt about the Company's ability to continue
as a going concern. In addition, Solmecs' independent public accountants have
included an explanatory paragraph in their report on Solmecs' financial
statements stating that certain factors create a substantial doubt about
Solmecs' ability to continue as a going concern.

The Company intends to implement a four-step process with respect to the
development of proprietary technologies which it has identified for
exploitation. Initially the Company, through its scientific, engineering and
administrative personnel, will seek to identify and analyze a number of
proposed advanced technologies with potential commercial viability. The Company
will then assess the costs of further research and development (including the
building and testing of prototypes, if indicated), seek to obtain intellectual
property rights in viable technologies, develop a business plan detailing the
exploitation of such technologies from the research and development phase
through product commercialization, develop and, in some instances, implement
financing strategies to further such business plan, and suggest and, in some
cases, assemble a team of scientists and engineers most suitable for
implementation of such business plan. Upon completion of the business
development plan for each project, the Company may seek to manufacture and
market the project itself, enter into strategic alliances for such
commercialization, or sell or license the proprietary information and know-how
to third parties in consideration of technology transfer or license fees.

Completion of the research, development and commercialization of the
Company's technologies or any potential application of such technologies will
require significant additional effort, resources and time, including

23
<PAGE>

funding substantially greater than the proceeds of this offering and otherwise
currently available to the Company. Such research and development efforts
remain subject to all of the risks associated with the development of new
products based on emerging and innovative technologies, including, without
limitation, unanticipated technical or other problems and the possible
insufficiency of the funds allocated to complete such development, which could
result in delay of research or development or substantial change or abandonment
of research and development activities.

Results of Operations of Solmecs

Nine Months Ended March 31, 1998 Compared with Nine Months Ended March 31,
1997.

Total Revenues. Total revenues decreased by $4,035 or 9% to $38,876 for
the nine months ended March 31, 1998, from $42,911 for the nine months ended
March 31, 1997. The decrease is mainly attributable to a decrease in sales of
photovoltaic cells and panels due to the slow-down in growth of the Israeli
economy which caused a decrease in investments in the area of alternative
energy methods. The decrease in sales of photovoltaic cells and panels was
partly offset by income generated from the "Dead Sea Works" project.

Research and Development Costs. Research and development costs decreased
by $32,452 or 15% to $187,143 for the nine months ended March 31, 1998, from
$219,595 for the nine months ended March 31, 1997. The decrease is attributable
to the decrease in salaries and related expenses resulting from a shift of
personnel from research and development positions to general, administrative
and marketing positions as well as an increase in research and development
performed by third party subcontractors, the expense of which is included under
cost of contract services performed by subcontractors.

Cost of Merchandise Purchased. Cost of merchandise purchased decreased by
$32,080, or 86%, to $5,257 for the nine months ended March 31, 1998, from
$37,337 for the nine months ended March 31, 1997. This decrease was primarily
attributable to the aforesaid decrease in sales.

Marketing, General and Administrative Expenses. Marketing, general and
administrative expenses increased by $86,052 or 48%, to $263,823 for the nine
months ended March 31, 1998, from $177,771 for the nine months ended March 31,
1997. This increase was primarily attributable to an increase in (i) marketing
expenses related to the initial commercialization of Solmecs' products, (ii)
foreign travel related to new products, (iii) fees associated with the leasing
of new facilities in Omer Industrial Park, and (iv) an increase in salaries and
related expenses resulting from a shift of personnel from research and
development positions to general, administrative and marketing positions.

Operating Loss. Operating loss increased by $51,611, or 13%, to $443,403
for the nine months ended March 31, 1998 from $391,792 for the nine months
ended March 31, 1997. The increase in operating loss was primarily attributable
to an increase in marketing, general and administrative expense as set forth
above.

Financing Expenses, Net. Financing expenses of $301,239 for the nine
months ended March 31, 1998 and $282,143 for the nine months ended March 31,
1997 primarily related to the charge for imputed interest, at a rate of 8% per
annum, in connection with the loan from its parent company. The difference of
$19,096 is attributed to an increase in interest resulting from an increase in
principal of the loan from the parent company.

Net Loss. As a result of the foregoing, net loss increased by $71,762, or
11%, to $745,697 for the nine months ended March 31, 1998, from $673,935 for
the nine months ended March 31, 1997.

Fiscal Year Ended June 30, 1997 Compared with Fiscal Year Ended June 30, 1996.

Total Revenues. Total revenues decreased by $17,781 or 24% to $57,276 for
the fiscal year ended June 30, 1997, from $75,057 for the fiscal year ended
June 30, 1996. The decrease was attributable to no revenues generated from the
International Lead Zinc Research Organization, Inc. project in fiscal 1997 as
compared to $52,075 for fiscal 1996, which was partially offset by an increase
in sales of photovoltaic cells to $51,841 in 1997 from $22,982 in 1996.

Research and Development Costs. Research and development costs decreased
by $71,059 or 20%, to $276,259 for the fiscal year ended June 30, 1997, from
$347,318 for the fiscal year ended June 30, 1996. The decrease in research and
development costs was primarily attributable to a reduction in salaries and
related expenses and a reduction in consulting fees resulting from the internal
reorganization of the Company.

24
<PAGE>

Cost of Merchandise Purchased. Cost of merchandise purchased increased by
$31,218, or 179%, to $48,638 for the fiscal year ended June 30, 1997, from
$17,420 for the fiscal year ended June 30, 1996. This increase was primarily
attributable to the increase in sales of photovoltaic cells.

Marketing, General and Administrative Expenses. Marketing, general and
administrative expenses decreased by $60,395, or 19%, to $263,219 for the
fiscal year ended June 30, 1997, from $323,614 for the fiscal year ended June
30, 1996. This decrease was primarily attributable to a decrease in salaries
and consulting fees resulting from increased efficiencies, the move of the
Company's offices from Jerusalem to Beer-Sheva and from termination of certain
consulting arrangements.

Operating Loss. Operating loss decreased by $82,455, or 13%, to $530,840
for the fiscal year ended June 30, 1997 from $613,295 for the fiscal year ended
June 30, 1996. The decrease in operating loss was primarily attributable to a
decrease in general and administrative expenses and research and development
costs.

Financing Expenses, Net. Financing expenses of $390,484 for the fiscal
year ended June 30, 1997 and $300,069 for the fiscal year ended June 30, 1996
primarily related to the charge for imputed interest in connection with the
loan from its parent company. The difference of $90,415 is attributable to (i)
an increase in interest resulting from an increase in principal of the loan
from the parent company, and (ii) a decrease in interest received in connection
with the recovery of bad debt during the earlier period.

Net Loss. As a result of the foregoing and due to other income
(principally the recovery of bad debt from a related party in the amount of
$60,000 during the earlier period), net loss increased by $72,695, or 8.6%, to
$921,324 for the fiscal year ended June 30, 1997, from $848,629 for the fiscal
year ended June 30, 1996.

Liquidity and Capital Resources

As of March 31, 1998, Solmecs had a working capital deficit of $513,297, a
stockholders' deficiency of $5,708,236 and an accumulated deficit of
$13,898,573. The aforesaid stockholders' deficiency was chiefly due to
indebtedness of Solmecs to its parent company, Bayou, in the amount of
$5,082,897, which indebtedness will be forgiven prior to the consummation of
the Acquisition.

During the period from inception through March 31, 1998, Batei Sefer
Limlacha, a principal stockholder of the Company, loaned to the Company
$110,108 for working capital purposes and agreed that such loan and any
additional loans which may be made by Batei Sefer Limlacha to the Company shall
be due and payable on the earlier of December 31, 1998 or the consummation of
certain types of transactions, including this offering, that such loans will be
unsecured and will not bear interest unless an event of default occurs.

During the period from September 1997 through March 1998, Batei Sefer
Limlacha loaned to Solmecs $337,900 for working capital purposes and agreed
with Solmecs that such loan and any additional loans to be made by Batei Sefer
Limlacha to Solmecs shall be due and payable on earlier of June 30, 1998 or the
consummation of certain types of transactions, including the Acquisition which
will occur simultaneously with the consummation of this offering, and that such
loans will be unsecured and will bear interest at the rate of 8% per annum.

No assurance can be given that Batei Sefer Limlacha will make any
additional loans to the Company or Solmecs and it is not obligated to do so.

Subsequent to March 31, 1998, Solmecs (Israel) Ltd. obtained a line of
credit facility of approximately $270,000 from an Israeli bank allowing for
overdraft for working capital purposes. The line of credit facility is secured
by a fixed charge on Solmecs (Israel) Ltd.'s uncalled share capital and
goodwill and a floating charge on all of its present and future acquired
property and rights. As of May 25, 1998 Solmecs (Israel) Ltd. had drawn
approximately $115,000 under the line of credit facility. Solmecs (Israel) Ltd.
may, but is not required to repay such amounts from the proceeds of this
offering.

The Company's capital requirements will be significant. The Company is
dependent upon the proceeds of this offering to finance the operations of the
Company, including the costs of market research and marketing activities,
continued research and development efforts, establishing manufacturing
capabilities and the acquisition of intellectual property rights. The Company
anticipates, based on management's internal forecasts and

25
<PAGE>

assumptions relating to its operations (including assumptions regarding the
timing and progress of the Company's technologies), that the net proceeds of
this offering will be sufficient to satisfy the Company's contemplated cash
requirements for at least 12 months following the consummation of this
offering. In the event that the Company's plans change, its assumptions change
or prove inaccurate, or if the proceeds of this offering prove to be
insufficient to fund operations, the Company could be required to seek
additional financing. Based on the results of preliminary assessment activity
to be performed on several potential projects identified or to be identified by
the Company, the Company intends to engage in research and development of two
such projects in the first year and four projects in the second year (which may
include an additional years work on all or both of the projects from the first
year) and believes that a number of such projects will enter the
commercialization stage during such two-year period. Completion of the
research, development and commercialization of the Company's technologies or
any potential application of such technologies will require significant
additional effort, resources and time including funding substantially greater
than the proceeds of this offering and otherwise currently available to the
Company. Moreover, the proceeds received in this offering may be insufficient
to satisfy the scheduled projects, requiring the Company to seek additional
financing. The Company has no current arrangements with respect to, or sources
of, additional financing, and it is not anticipated that existing stockholders
will provide any portion of the Company's future financing requirements. There
can be no assurance that additional financing will be available to the Company
when needed, on commercially reasonable terms, or at all. See "Risk Factors."

New Accounting Pronouncements

In 1997, the Financial Accounting Standards Board issued SFAS No. 128,
"Earnings per Share." This statement establishes standards for computing and
presenting earnings per share ("EPS"), replacing the presentation of currently
required Primary EPS with a presentation of Basic EPS. For entities with
complex capital structures, the statement requires the dual presentation of
both Basic EPS and Diluted EPS on the face of the statement of operations.
Under this new standard, Basic EPS is computed based on the weighted average
number of shares actually outstanding during the year. Diluted EPS includes the
effect of potential dilution from the exercise of outstanding dilutive stock
options and warrants into common stock using the treasury stock method. SFAS
No. 128 is effective for financial statements issued for periods ending after
December 15, 1997 and earlier application is not permitted. The adoption of
this statement did not have a material effect on the Company's financial
position or results of operations.

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<PAGE>
BUSINESS

General

The Company was organized to select, develop and commercially exploit
proprietary technologies, in various stages of development, invented primarily
by scientists who have recently immigrated to Israel from, and by scientists
and institutes in, Russia and other countries that formerly comprised the
Soviet Union. In furtherance of this goal, the Company will acquire Solmecs
Corporation N.V., a Netherlands Antilles company the operations of which are
located in Israel, which owns certain technologies developed by such scientists
in the past and actively seeks to identify such technologies for exploitation.
The technologies of Solmecs and technologies identified by Solmecs for
exploitation are in various stages of development and include technologies that
have begun to be commercialized as well as technologies that the Company
believes are ready for commercialization in the near future.

The Company intends to implement a four-step process with respect to the
development of proprietary technologies which it has identified for
exploitation. Initially the Company, through its scientific, engineering and
administrative personnel, will seek to identify and analyze a number of
proposed advanced technologies with potential commercial viability. The Company
will then assess the costs of further research and development (including the
building and testing of prototypes, if required) and seek to obtain
intellectual property rights in viable technologies. Upon the establishment of
the commercial viability of certain technologies, the Company will develop a
business plan detailing the exploitation of such technologies from the research
and development phase through product commercialization, develop and, in some
instances, implement financing strategies to further such business plan, and
suggest and, in some cases, assemble a team of scientists and engineers most
suitable for implementation of such business plan. Upon completion of the
business development plan for each project, the Company may seek to manufacture
(directly or through contractors) and market (directly or through distributors)
the project itself, enter into strategic alliances for such commercialization,
or sell or license the proprietary information and know-how to a third party in
consideration of technology transfer or license fees. To a lesser extent, the
Company may seek to develop technologies invented by scientists from other
countries.

Upon the consummation of this offering, the Company will complete the
Acquisition, pursuant to which all of the stock of Solmecs, currently a
wholly-owned subsidiary of Bayou International, Ltd., a public company the
Common Stock of which is traded in the over-the-counter market, will be
acquired by the Company. As a result of such acquisition, the Company will
acquire all of the assets of Solmecs, subject to all of Solmecs' liabilities.
The current management of Bayou has not participated in the organization of the
Company and is not expected to play any role in the management of the Company
following the completion of this offering. Solmecs was organized in 1980 to
engage in the research, development and commercialization of high efficiency,
low pollution products in the energy conversion and conservation fields.
Solmecs currently seeks to select, acquire and commercially exploit proprietary
technologies, primarily invented by scientists in the former Soviet Union. From
1980 until the mid-1990's Solmecs was primarily engaged in the development of
Liquid Metal Magnetohydrodynamics ("LMMHD") energy conversion technology, a
process developed approximately 20 years ago by Professor Herman Branover, a
Soviet emigre to Israel who is the President and a director of the Company.

The Company intends to apply the expertise and know-how in MHD phenomena
accumulated by Solmecs in the development of LMMHD power technology to the
development of new industrial processes. For example, Solmecs, in cooperation
with a scientist in Russia, has identified a potential use of MHD phenomena in
the growth of mono-crystals, which are among the critical components of the
electronic chip industry. The Company believes that the use of constant and
alternate magnetic fields for influencing the process of mono-crystal growth
will result in larger, higher quality (i.e. fewer dislocations) crystals. It is
believed that this will substantially increase the commercial value of such
mono-crystals. The Company intends to apply this method initially to
mono-crystals of silicon and subsequently to mono-crystals of gallium-arsenide
and cadmium-telluride, which the Company believes may serve as alternatives to
silicon chips (chips based on mono-crystals of silicon) in the computer and
electronics industries.

The Company also intends to (i) manufacture and market solar/electrical
hot-water tank control/display systems developed and tested by Solmecs; (ii)
market Russian-manufactured photo-voltaic cells for use in the conversion of
solar energy; and (iii) market plasma-chemically treated extra smooth rubber
gaskets developed

27
<PAGE>

and currently produced by a company in the former Soviet Union for the aviation
industry. Solmecs is currently in the process of marketing such photo-voltaic
cells and the Company believes that marketing activities with respect to the
solar/electric hot-water tank control/display system and the plasma-chemically
treated extra smooth rubber gaskets, both of which are at or near the
commercialization stage, could begin immediately after the Acquisition. Two
recent surveys performed for Solmecs demonstrate the commercial viability of
the hot-water tank control/display system in the French and Israeli markets,
respectively. In addition, the Company has identified approximately a dozen
projects in the viability testing stage, including those involving Solmecs
technologies and those not involving such technologies, in which the Company
may invest. These projects include new types of centrifugal pumps with
provisions for substantial savings of energy; new methods of prediction of
dispersion of contaminants in the atmosphere; and extraction of carbon-dioxide
from combustion gases. In addition, Solmecs currently sells its consulting and
development services to industry and research institutions in the fields of
LMMHD technology and liquid metal engineering. Such services are currently
being provided by Solmecs to the Israeli Dead Sea Works Industry (LMMHD
technology for magnesium handling). The Company has recently been approached by
the Nuclear Center of United Europe ("CERN"), located in Geneva, Switzerland,
to provide its expertise in molten lead energy conversion in the development of
a safe nuclear power plant which will generate power from the burning of
nuclear waste. The Company and CERN are currently in discussions relating to
such services and have not arrived at any understanding to date.

Background

The Company believes that the recent mass immigration to Israel of highly
trained and experienced scientists and engineers, when combined with Western
technology, infrastructure and commercial skill, will provide an opportunity for
the Company to exploit innovative technologies and products. Between 1989 and
1996, approximately 60,000 engineers and 11,000 scientists immigrated to Israel
from the former Soviet Union. These immigrants are highly skilled specialists
with unique expertise in a number of technological fields, particularly in
mechanical, electrical and chemical engineering, energy sources and energy
conversion, metallurgy, material sciences and others. Many of them are authors
of numerous inventions and novel advanced technologies. Although the immigration
began more than eight years ago and is continuing, the Company believes that the
Israeli government has not developed a database which contains an organized
listing of the professional skills, experience and intellectual property
possessed by each of the immigrants. To the Company's knowledge, there have only
been a few private initiatives which sought to develop such a database,
including the Public Center for Immigrant Employment (the "Public Center") a
center established by certain principals of the Company and others located in
Beer-Sheva, Israel in 1991. A partial database developed by the Public Center
reflected that approximately 70% of the Soviet immigrant job applicants seeking
the Public Center services held undergraduate or graduate science degrees and
approximately 20% of such applicants held doctoral degrees. Only 10% of the
applicants did not graduate from a university. By contrast, of the employment
opportunities the Public Center had identified, 62% of such opportunities were
suited for non-academic applicants. The Company believes that the disparity
between the types of employment opportunities and applicants shows that the
current Israeli economy cannot effectively absorb the number of scientists and
engineers that have immigrated.

The Company believes that Israeli absorption authorities have not been
able to deal with professional analysis, initial development and market
evaluations of the patents or patentable ideas which have been brought to
Israel by the immigrants. However, the Company believes that the current
immigration of leading scientists and engineers has created new opportunities
which should not be overlooked. The Company believes that linking Russian
know-how with Western technology and Israeli enterprise and creativity provides
a special opportunity to introduce innovative products and technologies into
Western markets.

Moreover, these immigrants appear to have a significant number of ideas
for patentable inventions. Of the 1,500 immigrants which have sought the Public
Center's services, 140 have authored inventions, of which many have been
patented in the former Soviet Union. The Company believes that the foregoing
provides support for its plan of operations.

28
<PAGE>

The Company is aware of potential difficulties in exploiting these
technologies. These difficulties are the result of differences between Russian
and Western cultures, approaches, and working styles, communications problems
and the relatively limited capacity of Israeli industry. However, the Company
believes that these difficulties can be overcome. The Company intends to employ
Israeli/Western specialists to analyze the scientific and commercial viability
of technologies proposed by immigrant scientists and engineers that are
developed or partially developed by the industries in the former Soviet Union
at which such scientists were employed, and perform the business development
functions set forth below. A contributing factor to the Company's business
development functions will be the significant experience that certain
administrative and scientific/technical personnel have in working with
immigrant scientists from the former Soviet Union.

Strategy

o Identify potential business opportunities. The Company's personnel,
including Professor Branover, consist of scientific and engineering
experts with numerous relationships with scientists who have recently
immigrated from the former Soviet Union, as well as with scientists,
universities, research institutes and industries in the former Soviet
Union. The Company intends to utilize such relationships in order to form
a database of proposals of advanced technologies and inventions from which
viable projects will be selected for acquisition and development. The
Company intends to hire financial experts with such relationships after
the consummation of this offering. The Company will, where appropriate,
seek to obtain intellectual property rights to the technologies and
inventions that it identifies for development.

o Commercialize technologies. Upon completion of the business plan, the
Company will achieve the manufacture and marketing of the technologies in
one of a number ways, including: the Company may develop, manufacture and
market the technology in house, as it intends to do with certain
applications of the LMMHD technology and other technologies acquired in
the Acquisition; the Company may choose to enter into strategic alliances
with companies with substantially greater capital and expertise in the
development, manufacture and marketing of certain products or
technologies; and the Company may sell or license the technologies and
proprietary rights to third parties in consideration of technology
transfer or license fees.

Technologies Currently Developed by Solmecs

Upon the consummation of this offering, the Company will complete the
Acquisition, pursuant to which all of the stock of Solmecs will be acquired by
the Company. Solmecs was organized in 1980 to engage in the research,
development and commercialization of high efficiency, low pollution products in
the energy conversion and conservation fields. Solmecs currently seeks to
select, acquire and commercially exploit proprietary

29
<PAGE>

technologies, primarily invented by scientists in the former Soviet Union. From
1980 until the mid-1990's, Solmecs was primarily engaged in the development of
LMMHD energy conversion, a process developed by Professor Branover. The LMMHD
energy conversion technology which is currently being utilized in a
developmental stage power plant facility, generates electric power (and, in
most cases, steam) by utilizing a non-conventional process in which an
electro-conducting fluid (such as molten lead) is forced through a magnetic
field. The Company believes that power generation facilities utilizing LMMHD
energy conversion technology will have a lower installed capital cost and
higher efficiency than conventional steam turbo-generator plants, resulting in
lower electricity costs and reduced pollutive effects. Although the LMMHD power
technology has been in development since the late 1970's it has not yet reached
commercialization. In order to achieve commercialization of such technology,
the Company will be required to build a commercial scale demonstration plant,
which will involve a significant capital expenditure. The Company intends to
commence building such a plant within the next few years, provided that it will
be able to obtain the necessary funds for such project. Such funds will not be
available from the proceeds of this offering. The Company believes that the
further development and commercialization of LMMHD energy conversion technology
is consistent with its intent to develop advanced technologies featuring
competitive advantages over existing products.

The Company intends to concentrate initially on the further development
and/or commercialization of a number of technologies, including certain
technologies to be acquired by the Company in the Acquisition, certain
technologies that are applications of MHD phenomena, as well as certain other
technologies.

The Company's initial plans include development of the following
technologies:

o Monocrystals. Solmecs, in cooperation with a scientist in Russia, has
identified a potential use of MHD phenomena in the growth of monocrystals
of gallium-arsenide and cadmium-telluride. The method of production of
these monocrystals lead to monocrystals of large size with fewer
imperfections and thus greater yield of usable material than standard
methods. This process is still in the development stage and it has not yet
been the subject of a patent application. The process is owned by the
aforesaid scientist who currently resides in Russia and certain executives
of the Company have a close relationship with him. The Company believes
that it can enter into an agreement with the scientist that would be
advantageous to the Company, but no assurances can be given in that
regard. The Company believes that this process will not be ready for
industrial application for at least two years. The major potential
application of these monocrystals is as a possible alternative to silicon
in electronic chips used in all types of electronics, including computers.
The Company estimates that the current size of the market for gallium-
arsenide monocrystals is approximately 15 billion dollars per year
worldwide.

o Hot water tank control and display system. Solmecs has developed a gauge
and display to indicate the amount of hot water in a hot water tank, which
is especially useful for solar and electrical hot water tanks. This new
system provides the user with accurate information on the amount of hot
water left for use in the domestic hot water tank and allows the user to
remotely control the operation of the water heating system, whether it
uses electricity or solar power. The device displays the necessary
information such as the number of standard showers available in the tank
and the user is able to fix the desired number of showers he wants to keep
in the system at time intervals he chooses. Thus, the device will help to
avoid unnecessary waste of energy and will allow a comfortable use of the
water heating system. The Company estimates that the hot water tank
display and control system will provide approximately 40% savings of
electrical energy. This technology is currently ready for manufacture.
Solmecs is currently in the process of selecting a partner for a joint
venture.

In a market survey performed on behalf of Solmecs by independent
consultants in France, manufacturers of hot water tanks (electrical and
solar) that are potential customers for the control and display system
responded favorably. In a market survey performed on behalf of Solmecs by
independent consultants in Israel, consumers that are potential end-user
customers responded favorably.

Solmecs has manufactured two prototypes of the control/display system
through a subcontracting arrangement with an Israeli firm and has entered
into discussions with two European based hot water tank manufacturers for
possible insertion of the control/display system into next generation
boiler and hot water tank systems.

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<PAGE>

o Advanced double-sided photo-voltaic cells. Solmecs has identified a
technology developed by Russian scientists working in the space and
military industries of the former Soviet Union that provides for reliable
solar panels that are more efficient than those currently available in the
market. These panels involve double-sided photovoltaic cells, allowing
more surface area to receive the reflection of solar energy, including
solar energy that is reflected back from the ground, and result in
approximately 30% more power. The unit also involves less space and fewer
panels than currently available technology. The Company will be required
to negotiate a license to allow it to produce these photo-voltaic cells in
Israel. No assurance can be given that the Company will be able to enter
into any such arrangement.

The Company has entered into an arrangement with a Russian manufacturer
pursuant to which the Company acts as the exclusive distributor of such
manufacturer's photovoltaic cells in Israel. This arrangement is scheduled
to continue through the end of 1998 at which time the parties will
renegotiate the terms of the arrangement.

o Rubber gaskets treatment. Solmecs is involved in the commercialization of
a method of surface treatment of rubber that results in smoother rubber
for use in gaskets for sophisticated machinery, especially in aircraft.
The rubber treatment process involves plasma-chemical modification
methods. The method was developed and the product is produced by a company
in the former Soviet Union. The Company and such company are currently
engaged in discussions towards an agreement pursuant to which the Company
would create the production capability for the product in Israel and would
improve on the technology. No assurances can be given that any
understanding will be reached on favorable terms or at all.

At present, the Company ships products directly to the Russian company
for surface treatment.

LMMHD Energy Conversion Technology

Solmecs is currently involved in further advancement and perfection of
LMMHD energy conversion technology. This technology is distinctive from
conventional energy producing steam turbo-generator technology in which steam,
produced in a boiler, propels a turbine which in turn forces the rotation of an
electrical generator. Although the LMMHD process also employs the use of steam,
in LMMHD power technology the steam is used to accelerate a stream of molten
metal across a magnetic field which leads to the generation of electricity.
This process does not require the use of moving or rotating mechanical
machinery but utilizes an assembly of hermetically sealed pipes in which the
energy conversion process occurs. The Company believes the process and
technology to be reliable and require only a marginal amount of maintenance,
and anticipates commercially developed systems to have a long life span.

According to the Company's calculations which were confirmed by a study
performed on behalf of Solmecs by an independent consultant, the developmental
cogeneration power plant facility, which utilizes LMMHD power technology, had
installed costs of $1,339 per KW as compared to an average of $1,850 per KW in
comparable conventional steam turbo generator facilities (a difference of 28%),
as well as higher electricity efficiency of approximately 17.4% as compared to
an average of 15.8% for comparable steam turbo generator facilities (a
difference of 10%).

Solmecs has constructed and completed several pilot plants utilizing the
LMMHD energy conversion technology and has developed an engineering design and
a universal computer code for the calculation, design and optimization for each
specific application of the LMMHD energy conversion system. The Company intends
to further engage in the improvement of the LMMHD system.

Although the LMMHD power technology has been in development since the late
1970's it has not yet reached commercialization. In order to achieve
commercialization of such technology, the Company will be required to build a
commercial scale demonstration plant, which will involve a significant capital
expenditure. The Company intends to commence building such a plant within the
next few years, provided that it will be able to obtain the necessary funds for
such project. Such funds will not be available from the proceeds of this
offering.

Future Technologies and Products

The Company has identified various Solmecs and non-Solmecs technologies,
some of which involve LMMHD technology, for potential acquisition and
development in the future:

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<PAGE>

o Carbon dioxide extraction. Ever increasing amounts of fossil fuel burned
in electrical power stations and combustion engines result in a permanent
increase in the amounts of carbon dioxide accumulated in the atmosphere.
This process is aggravated by the systematic destruction of the earth's
biosphere, through, as an example, the reduction of the rain forests which
absorb carbon dioxide. High concentrations of carbon dioxide make the
atmosphere less "transparent" for heat irradiated by the earth into outer
space, leading to global warming with all its adverse effects.

Solmecs established a professional relationship with a team of scientists
in Russia who are developing an efficient and economically attractive
method for extraction of carbon dioxide from combustion gases. Solmecs has
performed a preliminary feasibility study for a Norwegian company that has
expressed interest in a possible joint venture to further develop this
technology. The Company believes that the construction of a
semi-industrial scale demonstration plant can commence within the next few
months. A portion of the proceeds of this offering has been allocated for
acquisition of rights associated with this technology.

o Novel centrifugal pumps. Centrifugal pumps currently widely used in the
chemical and other industries are inefficient in that they are designed
for a particular flow rate and can be adjusted to provide for a lower flow
only through closing valves. This wastes large amounts of energy. Solmecs
has identified a centrifugal pump developed by others that solves this
problem, allowing adjustment to needed flow rates. The Company will seek
to obtain certain intellectual property rights in connection with the
centrifugal pump development and a portion of the proceeds of this
offering has been allocated for that purpose.

o Forecasting of atmosphere contaminants dispersion. The Solmecs LMMHD
know-how can be used to determine which geographic areas have greater
potential for atmosphere contamination. This technology has applications
in the power plant industry as well as other industries which burn large
quantities of fossil fuels.

o Boiler efficiency enhancement. Certain ex-Soviet engineers have been
demonstrating a process which treats the air used for combustion of fuels
in boilers with high voltage electric fields, enabling the oxygen molecules
present in the air to be split into single atoms, making the combustion
much more complete and resulting in the generation of more heat. In
addition, fewer poisonous compounds are exhausted into the atmosphere.

o Fertilizer treatment. Manure is recognized as the best fertilizer and is
widely used in agriculture. However, manure contains numerous kinds of
infectious bacteria that present a serious threat to public health. A
method was invented and developed by Russian engineers in which the manure
is moved through a generator of high frequency electromagnetic fields. This
not only destroys the harmful bacteria, but also accelerates the processes
leading to maturation of the manure and its conversion into a fertilizer.
Solmecs is currently involved in the assessment of this technology to
determine commercial viability.

o Reduction of carbon dioxide emissions. A process has been developed by
Russian scientists to reduce the levels of carbon dioxide emitted from the
combustion of natural gas, such as methane, in power stations. Known as
"pyrolysis," the process involves a natural gas thermal decomposition
whereby carbon is extracted from methane prior to the combustion process.
The oxygen component of the methane is released and the resulting natural
gas fuel is pure hydrogen which can be used for electrical or mechanical
power production without hazardous pollution of the environment. The
extracted carbon is captured in solid form (crystals and powder) which is
efficiently stored and may be utilized in production processes such as
rubber production and metallurgy. The Company may allocate a portion of
the proceeds of this offering for construction of a demonstration plant on
an intermediate semi-industrial scale.

o Vortex microconditioner air cooler. Conventional air
cooling/refrigerating devices involve a refrigeration cycle with freon
vapor compression which can be costly as well as ecologically unsound. The
Company has established a relationship with a group of Russian researchers
who have improved, to a near operative level, an air cooling technology in
which a turbulent fluid is rotated around an axis at a high rate of speed
through the use of compressed air, simulating the vortex of a tornado. The
flow is spontaneously thermally separated into two air streams, one hot
and one cold. The principle allows for the development

<PAGE>

of a smaller, lightweight device with no moving parts and which is
environmentally friendly (no freon), for application in industrial and
high-technology settings. The Company may allocate a portion of the
proceeds of this offering to acquire the technology and to further the
development of a commercially viable product.

o Luminescent flat multicolored light emitting polymers. The Company has
identified a Russian company that is in the late stages of development of
a new technology of multicolored light emitting polymers (LEP) which the
Company believes may serve as alternatives to conventional liquid crystal
displays (LCD) currently utilized in most computers, phones and other
consumer electronic equipment. The LEP technology could enable the
development of a new generation of display systems with greater
flexibility for size and location which would be extremely thin, have high
visibility without backlighting and permit attractive images from all
viewing angles without color filtration.

There can be no assurance that the Company will be able to obtain the
necessary rights to exploit the foregoing technologies or that any such
technologies will prove technologically or commercially viable.

Consulting Services

The Company anticipates entering into agreements to provide consulting and
development services to industry and research institutions in the fields of
LMMHD technology and liquid metal engineering. For example, in response to a
purchase order from the Israeli Dead Sea Works Industry ("Dead Sea Works"),
Solmecs recently developed a pumping system based on a conductive MHD pump for
use in magnesium handling. The system is currently installed at Dead Sea Works
as a demonstration system and is operated and supported by Solmecs. The system
is currently in early stages of operation tests. In the event this system
proves to be effective, the Company expects to provide additional systems to
Dead Sea Works and to use the current system as a demonstration site for
marketing the system to other companies. The Company has recently been
approached by CERN to provide its expertise in molten lead energy conversion in
connection with the development by CERN of a safe nuclear power plant which
will generate power from the burning of nuclear waste. The Company and CERN are
currently in discussions relating to such services and have not arrived at any
understanding to date. Disposal of nuclear waste produced by nuclear power
stations is regarded as one of the most acute concerns of the energy industry.
The method developed by CERN employs a process by which nuclear waste is
destroyed, thereby avoiding the necessity of disposal, and electricity is
generated. The CERN system entails a flux of accelerated protons hitting a
molten lead target and causing neutron emission directed on rods made from
highly radioactive nuclear waste. Ultimately, the generated thermal energy is
absorbed by the molten lead and converted to electricity. Solmecs has suggested
that the hot lead be directed into an LMMHD electricity generating device of
the type developed by Solmecs.

Intellectual Property

Solmecs currently owns five Israeli patents relating to the LMMHD
technology. All of such patents have corresponding patents registered in the
United States (one in the name of Ben-Gurion University of the Negev Research
and Development Authority), and a number of such patents have corresponding
patents registered in one or more other countries, including Australia, Canada,
France, Germany, Great Britain, Italy and Japan. In addition, Solmecs owns a
United States patent, not registered elsewhere, relating to the LMMHD
technology, and an Israeli patent, not registered elsewhere, relating to a
device for voltage conversion which can be used in conjunction with the LMMHD
technology. Three of such patents expire during the next five years, beginning
in April 1999. The Company does not believe that the expiration of such patents
will have a material adverse effect on the Company's business; however, no
assurance can be given in that regard.

Pursuant to an agreement dated November 5, 1981, between Solmecs,
Ben-Gurion University and B.G. Negev Technology and Applications Ltd. ("BGU"),
Solmecs is conducting research and development projects on the campus of
Ben-Gurion University in consideration for a fee for the use of the facilities.
Solmecs owns the patents connected with these projects and agreed to pay
royalties to BGU at the rate of 1.725% on sales of products and at the rate of
11.5% on income from licensing fees. Solmecs also agreed to assume the
obligation

<PAGE>

of BGU to pay royalties to the Ministry of National Infrastructure of the State
of Israel on products developed from these research and development projects
for its participation in the research and development costs of BGU. The
royalties are to be paid at the rate of 1% on sales of products and at the rate
of 5% on income from licensing fees. As of March 31, 1998, this liability
amounted to approximately $318,000 (including linkage to the Consumer Price
Index and interest at 4% per annum). Subsequent to the repayment of the
liability, Solmecs is required to pay royalties to the Ministry of National
Infrastructure at a reduced rate of .3% on sales of products and at the rate of
2% on income from licensing fees. To date, there were no sales or income on
which royalties were payable to BGU or the Ministry of National Infrastructure.

In March 1991, Solmecs entered into an agreement with International Lead
Zinc Research Organization, Inc. ("ILZRO") pursuant to which ILZRO funded
certain research of Solmecs and Solmecs agreed to pay a fee to ILZRO with
respect to any lead used in future production by Solmecs, up to a maximum of
$1,864,000. As of the date of this Prospectus, Solmecs has not used any lead
with respect to which it is required to pay such fee.

From 1981 to 1991, Solmecs received from the Office of the Chief Scientist
of the Ministry of Industry and Commerce of the Government of Israel (the
"OCS"), $2,274,420 in grants towards the cost of a research and development
project relating to LMMHD energy conversion technology. Under the terms of
Israeli Government participation, a royalty of 2% to 3% of the net sales of, or
licensing revenues from, products developed from a project funded by the OCS
must be paid, beginning with commencement of sales of products developed with
grant funds and ending when 100% to 150% of the grant is repaid. The terms of
Israeli Government participation also require that the manufacturing of
products developed with Government grants be performed in Israel, unless a
special approval has been granted. Such approval, if given, is generally made
subject to an increase in the maximum amount of royalties that must be repaid.
Separate Israeli Government consent is required to transfer to third parties
technologies developed through projects in which the Government participates.
Such restrictions do not apply to exports from Israel of products developed
with such technologies. Solmecs has not yet commenced marketing of products
developed through funds granted by the OCS. Accordingly, no royalties have been
paid to date.

Solmecs has agreed to pay the inventor of technology incorporated in its
hot water tank control and display systems certain royalties with respect to
sales of products incorporating such technology and/or the sale or licensing of
such technology.

Competition

The products that will be based on the Company's technologies will likely
be used in highly competitive industries. Numerous domestic and foreign
companies are seeking to research, develop and commercialize technologies
similar to those of the Company, many of which have greater name recognition
and financial, technical, marketing, personnel and research capabilities than
the Company. There can be no assurance that the Company's competitors will not
succeed in developing technologies and applications that are more cost
effective or have fewer limitations than, or have other advantages as compared
to, the Company's technologies. The markets for the technologies and products
to be developed or acquired by the Company are characterized by rapid changes
and evolving industry standards often resulting in product obsolescence or
short product life cycles. Accordingly, the ability of the Company to compete
will depend on its ability to complete development and introduce to the
marketplace, directly or through strategic partners, in a timely manner its
proposed products and technologies, to continually enhance and improve such
products and technologies, to adapt its proposed products to be compatible with
specific products manufactured by others, and to successfully develop and
market new products and technologies. There can be no assurance that the
Company will be able to compete successfully, that its competitors or future
competitors will not develop technologies or products that render the Company's
products and technologies obsolete or less marketable or that the Company will
be able to successfully enhance its proposed products or technologies or adapt
them satisfactorily.

The Company believes that Solmecs is the only commercial company engaged
in the development of LMMHD generator systems. However, the Company believes
that the competition in the worldwide market for energy conversion systems is
intense and the Company may encounter substantial competition from other
companies engaged in the development of competing energy conversion systems
which companies may have grater name recognition and financial, technical,
marketing, personnel and research capabilities than the Company.

34
<PAGE>

There can be no assurance that other companies are not dedicated to
identifying, obtaining and developing technologies of Russian scientists and
engineers currently residing in Israel. Any such competitors may have greater
financial, technical, marketing, personnel and other resources than the
Company.

Employees

Solmecs currently has eight full-time employees and five part-time
employees, including four administrative and executive personnel, two full-time
and one part-time senior scientists, two full-time and one part-time engineers
and technicians and three part-time support personnel. The Company anticipates
hiring one senior scientist, one engineer/technician and one marketing
specialist in each of the two years following the consummation of this
Offering. Solmecs believes that it has satisfactory labor relations with its
employees and has never experienced work stoppage.

Certain provisions of the collective bargaining agreements between the
Histadrut (General Federaton of Labor in Israel) and the Coordination Bureau of
Economic Organizations (including the Industrialists' Associations) are
applicable to Solmecs' employees by order of the Israeli Ministry of Labor.
These provisions concern principally the length of the work day, minimum daily
wages for professional workers, insurance for work-related accidents,
procedures for dismissing employees, determination of severance pay, and other
conditions of employment. Solmecs generally provides its employees with
benefits and working conditions beyond the required minimums.

Israeli law generally requires severance pay, which may be funded by
Managers' Insurance described below, upon the retirement or death of an
employee or termination of employment without cause (as defined in the law).
The payments pursuant thereto amount to approximately 8.33% of wages.
Furthermore, Israeli employees and employers are required to pay predetermined
sums to the National Insurance Institute, which is similar to the United States
Social Security Administration. Such amounts also include payments by the
employee for national health insurance. The total payments to the National
Insurance Institute are equal to approximately 14.6% of the wages (up to a
specified amount), of which the employee contributes approximately 66% and the
employer contributes approximately 34%.

A general practice followed by Solmecs, although not legally required, is
the contribution of funds on behalf of most of its employees to a fund known as
"Managers' Insurance." This fund provides a combination of savings plan,
insurance and severance pay benefits to the employee, giving the employee
payments upon retirement or death and securing the severance pay, if legally
entitled, upon termination of employment. The employer decides whether each
employee is entitled to participate in the plan, and each employee who agrees
to participate contributes 5% of his salary and the employer contributes an
amount equal to between 13.3% and 15.8% of the employee's salary.

The Company's success will be dependent to a large degree on its ability
to retain the services of key personnel and to attract additional qualified
personnel in the future. Competition for such personnel is intense. There can
be no assurance that the Company will be able to attract, assimilate or retain
key personnel in the future and the failure of the Company to do so would have
a material adverse affect on the Company's business, financial condition and
results of operations.

Facilities

In addition to its laboratory arrangement at the Ben Gurion University,
Solmecs occupies certain laboratory and office space in Omer Industrial Park,
Israel (near Beer-Sheva) pursuant to a two-year lease expiring in November 1999
with a renewal option for an additional three-year period, at an annual rent of
approximately $41,000.

35
<PAGE>

MANAGEMENT

Directors and Executive Officers

The directors and executive officers of the Company are as follows:

<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Emmanuel Althaus 51 Chairman of the Board of Directors and Secretary
Professor Herman Branover 66 President, Chief Executive Officer and Director
Dr. Shaul Lesin 44 Executive Vice President
Jacline Bavli 44 Chief Financial Officer
</TABLE>

Mr. Althaus has served as Chairman of the Board of Directors of the
Company since May 1997. He was Vice President and Director of Bayou from March
1990 through November 1996, and is a Director of Solmecs. Since 1986, Mr.
Althaus has been principally employed as Executive Director of National
Diversified Industries (Australia) Pty Ltd., a company that provides
administrative services to public companies. He serves on the board of
directors of Golden Triangle Resources N.L. (of which he is Chairman and
Managing Director) and Allegiance Mining N.L., each of which is a company
engaged in mineral exploration the stock of which is listed on the Australian
Stock Exchange.

Professor Branover has served as President, Chief Executive Officer and a
Director of the Company since May 1997 and as Scientific Director of Solmecs
(Israel) Ltd. since 1980. He served as Executive Vice President and Director of
Bayou from May 1989 until 1993. He has been principally employed as head of the
Center for MHD Studies of Ben Gurion University since 1981 and as the Lady
Davis Professor of Magnetohydrodynamics at Ben Gurion University since 1978.
Professor Branover received a Ph.D in Technical Sciences from Moscow Aviation
Institute in 1962 and a Doctor of Sciences Degree in Physics and Mathematics
from Leningrad Polytechnical Institute in 1969. He was also, for a number of
years, an Adjunct Professor of applied sciences at New York University and
served as a visiting researcher at Argonne National Laboratory in Chicago.
Professor Branover has also served as a director of the Joint Israeli Russian
Laboratory for Energy Research since 1991. He currently serves as an Advisor to
Israel's Prime Minister on immigrant employment and on the use of Russian
technologies in Israel. Professor Branover founded two Israeli high-tech
companies, Ontec, Inc., in 1991, located in Beer-Sheva, and Satec, Inc., in
1987, located in Jerusalem, both of which have developed commercially viable
products for sale in several foreign countries. Professor Branover is no longer
affiliated with either of those companies.

Dr. Lesin has served as Executive Vice President of the Company since May
1997. Dr. Lesin has held various positions with Solmecs (Israel) Ltd. since
1980, most recently serving as General Manager. Dr. Lesin also served as the
Deputy Director of the Joint Israeli Russian Laboratory for Energy Research
since 1991, and as a member of the Board of the Center for MHD Studies of Ben
Gurion University since 1986. He received his Ph.D in Mechanical Engineering
from Ben Gurion University in 1993.

Ms. Bavli has served as Chief Financial Officer of the Company since May
1997. Prior thereto, since 1996, she served as Financial and Marketing Manager
of Solmecs (Israel) Ltd. From 1995 to 1996, Ms. Bavli engaged in the private
practice of accounting. From 1990 until 1995, Ms. Bavli held various positions
with Kibbutz Magen, Israel, most recently serving as its Deputy Treasurer.

The Company's Directors are elected at the annual meeting of stockholders
to hold office until the annual meeting of stockholders for the ensuing year or
until their successors have been duly elected and qualified.

Officers are elected annually by the Board of Directors and serve at the
discretion of the Board.

The Underwriter has the right to designate one member to the Company's
Board of Directors for a period of three years following the Effective Date.
Pursuant to the Acquisition Agreement, the Board of Directors of

36
<PAGE>

the Company following this offering shall consist of five Directors including
Professor Branover and Mr. Althaus as well as a designee of Batei Sefer
Limlacha, one of the Company's principal stockholders, and a designee of the
Underwriter as described immediately above. The fifth Director shall be
appointed by the remaining Directors. Neither the Underwriter nor Batei Sefer
Limlacha has indicated a designee to date.

The Company has applied for a key man life insurance policy on the life of
Professor Branover in the amount of $1,000,000.

Executive Compensation

The following table sets forth the cost of compensation paid to Professor
Herman Branover, the Company's Chief Executive Officer, by Solmecs, in his
capacity as Scientific Director of Solmecs, for the fiscal years ended June 30,
1995, 1996 and 1997. No executive officer of the Company received aggregate
compensation and bonuses which exceeded $100,000 during such years.

Cost of Compensation Summary Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation Awards($)(1)
------------------------------------------------- --------------------------
Securities
Restricted Underlying
Fiscal Other Annual Stock Options/
Name and Principal Position Year Salary ($) Bonus($) Compensation ($) Award SARs(#)
- --------------------------- -------- --------------- ---------- ------------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Professor Herman Branover,
Chief Executive Officer ......... 1995 $ 72,613 $ -- $ -- -- --
1996 40,835(2)
1997 62,361
</TABLE>
- ------------
(1) The Company did not have any long-term incentive or option plans during the
fiscal years ended June 30, 1995, 1996 or 1997.

(2) During the fiscal year ended June 30, 1996, the Company paid an automobile
allowance to Professor Branover in the amount of $5,500.

Employment Agreements

Solmecs has entered into employment agreements, effective upon the
consummation of this offering, with Professor Herman Branover, Dr. Shaul Lesin
and Jacline Bavli, the Company's President and Chief Executive Officer,
Executive Vice President and Chief Financial Officer, which provide for annual
base compensation of $98,400, $98,400 and $39,600, respectively, payable in NIS
in accordance with the rate of exchange into U.S. dollars in effect on the date
of payment. The base compensation may be increased from time to time by the
Board of Directors in its sole discretion. In addition, Solmecs will contribute
on behalf of each employee an amount equal to 15.8% of such employee's salary to
a fund known as "Manager's Insurance" and 7.5% of such employee's salary to a
fund known as "Education Fund." See "Business -- Employees."

Solmecs has agreed to provide Messrs. Branover and Lesin with an
automobile and a cellular phone during the term of their employment for which
Solmecs shall pay all expenses. Solmecs has also agreed to pay the costs
associated with maintaining a telephone line in their homes during the course
of their employment with the Company.

Each of the employment agreements contains a confidentiality provision
preventing the employees from disclosing, during the terms of their respective
employment agreements and at any time following the termination of their
employment, any proprietary information of the Company without the Company's
consent. Further, each of the employment agreements contains a provision that
such employee will not directly or indirectly compete or engage in a business
competitive with the Company or solicit the employees or consultants of the
Company for employment in a business in competition with the Company, during
the term of the employment agreement and for a period of one year thereafter.

37
<PAGE>

Pursuant to the terms of the employment agreements the Company has agreed
to indemnify the employee for any claim or liability arising from such
employee's good faith fulfillment of his employment obligations provided that
the employee: (i) provides the Company with timely written notice of the claim
or liability; (ii) cooperates with the Company in the defense of the claim and
(iii) allows the Company to control defense of the claim.

The employment agreements for Messrs. Branover and Lesin provide that in
the event of termination other than "for cause" or as a result of a continuing
disability (as defined in the employment agreements) the employee shall be
entitled to: (i) an adjustment grant equal to three months base salary payable
in three equal monthly installments beginning on the first day of the month
following the date of termination; (ii) an additional payment of one month's
base salary for each year in which employee was employed; and (iii) the use of
an automobile and cellular phone for a period of three months following
termination. The Company may not terminate an employee "for cause" unless it
has given the employee (i) written notice of the basis for termination, and
(ii) at least 30 days to cure the basis for such termination.

Limitation of Liability and Indemnification Matters

Section 145 of the Delaware General Corporation Law ("DGCL") contains
provisions entitling the Company's Directors and officers to indemnification
from judgments, fines, amounts paid in settlement and expenses (including
attorneys' fees) actually and reasonably incurred as the result of an action,
suit or proceeding in which they may be involved by reason of having been a
director or officer of the Company. In its Certificate of Incorporation, the
Company has included a provision that limits the personal liability of its
Directors to the Company or its stockholders for monetary damages arising from
a breach of their fiduciary duties as Directors. This provision limits a
director's liability except where such Director (i) breaches his duty of
loyalty to the Company or its stockholders, (ii) fails to act in good faith or
engages in intentional misconduct or a knowing violation of laws, (iii)
authorizes payment of an unlawful dividend or stock purchase or redemption as
provided in Section 174 of the DGCL or (iv) obtains an improper personal
benefit. This provision does not prevent the Company or its stockholders from
seeking equitable remedies, such as injunctive relief or rescission. If
equitable remedies are found not to be available to stockholders in any
particular case, stockholders may not have any effective remedy against actions
taken by Directors that constitute negligence or gross negligence.

The Company's Certificate of Incorporation provides for the Company to
indemnify each Director and officer of the Company to the fullest extent
permitted by the DGCL. The foregoing provision may reduce the likelihood of
derivative litigation against Directors and may discourage or deter
stockholders or management from suing directors for breaches of their duty of
care, even though such an action, if successful, might otherwise benefit the
Company and its stockholders.

It is the position of the Commission that insofar as the foregoing
provisions may be invoked to disclaim liability for damages arising under the
Securities Act, such provisions are against public policy as expressed in the
Securities Act and are therefore unenforceable.

Liability Insurance

The Company intends to procure and maintain a policy of insurance under
which the Directors and officers of the Company will be insured, subject to the
limits of the policy, against certain losses arising from claims made against
such Directors and officers by reason of any acts or omissions covered under
such policy in their respective capacities as Directors or officers, including
liabilities under the Securities Act.

1997 Stock Option Plan

In December 1997, the Board of Directors and stockholders of the Company
adopted the 1997 Stock Option Plan (the "Plan"), pursuant to which 200,000
shares of Common Stock are reserved for issuance upon exercise of options. The
Plan is designed to serve as an incentive for retaining qualified and competent
employees, Directors and consultants.

38
<PAGE>

The Company's Board of Directors, or a committee thereof, administers the
Plan and is authorized, in its discretion, to grant options thereunder to all
eligible employees of the Company, including officers and Directors (whether or
not employees) of, and consultants to, the Company. The Plan provides for the
granting of both "incentive stock options" (as defined in Section 422 of the
Internal Revenue Code of 1986, as amended) and non-qualified stock options.
Options can be granted under the Plan on such terms and at such prices as
determined by the Board of Directors, or a committee thereof, except that the
per share exercise price of options will not be less than the fair market value
of the Common Stock on the date of grant. In the case of an incentive stock
option granted to a stockholder who owns stock of the Company possessing more
than 10% of the total combined voting power of all classes of stock ("10%
stockholder"), the per share exercise price will not be less than 110% of such
fair market value. The aggregate fair market value (determined on the date of
grant) of the shares covered by incentive stock options granted under the Plan
that become exercisable by a grantee for the first time in any calendar year is
subject to a $100,000 limit.

Options granted under the Plan will be exercisable during the period or
periods specified in each option agreement. Options granted under the Plan are
not exercisable after the expiration of ten years from the date of grant (five
years in the case of incentive stock options granted to a 10% stockholder) and
are not transferable other than by will or by the laws of descent and
distribution.

As of the date of this Prospectus, the Company has not granted any options
under the Plan.

PRINCIPAL STOCKHOLDERS

The following table sets forth information (based on information obtained
from the persons named below) regarding the beneficial ownership of the Common
Stock of the Company as of the date of this Prospectus and as adjusted to give
effect to the Acquisition and to reflect the sale by the Company of the
1,041,044 Units offered hereby, by (i) each person known by the Company to be
the beneficial owner of more than 5% of the outstanding shares of Common Stock,
(ii) each of the Company's executive officers and Directors and (iii) all
executive officers and Directors of the Company as a group.
<TABLE>
<CAPTION>
Percentage of
Outstanding Shares
---------------------
Amount and Nature of
Beneficial Prior to After
Name and Address of Beneficial Owner(1) Ownership(2) Offering Offering
- --------------------------------------- --------------------- ---------- ---------
<S> <C> <C> <C>
Bayou International, Ltd.(3) 499,701 -- 24%
210 Kings Way
South Melbourne Victoria 3205 Australia

Batei Sefer Limlacha(4) 312,313 58% 15%
766 Montgomery Street
Brooklyn, New York 11213

H.B. Capital Ltd.(5) 145,746 27% 7%

Emmanuel Althaus(6) 83,284 15% 4%

All executive officers and Directors as a group
(four persons) 229,030 42% 11%
</TABLE>
- ------------
(1) The address of H.B. Capital Ltd. and Mr. Althaus is c/o SCNV Acquisition
Corp., Omer Industrial Park, P.O.B. 3026, Omer, Israel 84965.

(2) Unless otherwise indicated, the Company believes that all persons named in
the table have sole voting and investment power with respect to all shares
of Common Stock beneficially owned by them. A person is deemed to be the
beneficial owner of securities that can be acquired by such person within
60 days from the date of this Prospectus upon the exercise of options or
warrants. Each beneficial owner's percentage ownership is determined by
assuming that options that are held by such person (but not those held by
any other person) and that are exercisable within 60 days from the date of
this Prospectus have been exercised. Except as otherwise indicated, the
Company believes that each of the persons named has sole voting and
investment power with respect to the shares shown as beneficially owned by
him.

39
<PAGE>
(3) Inasmuch as, following the consummation of this offering, each of Batei
Safer Limlacha and the Underwriter have the right to appoint a member of
the Company's Board of Directors and Professor Herman Branover and Mr.
Althaus have the right to be appointed to the Company's Board of
Directors, while Bayou has no such right, the Company does not consider
Bayou to be a control person of the Company. Moreover, Bayou has informed
the Company that it has no intention of seeking or exercising control over
the Company.

(4) Batei Sefer Limlacha is a religious corporation organized under the New
York Religious Corporation Law. David Laine is President and trustee and
Joseph Kazin and Benzion Raskin are the remaining trustees. Batei Sefer
Limacha may be deemed to be a "promoter" of the Company as such term is
defined under the Federal Securities Laws.

(5) Professor Herman Branover is the sole stockholder of H.B. Capital Ltd., an
Irish corporation. Professor Branover and Shmuel Gurfinkel are the
directors. H.B. Capital Ltd. may be deemed to be a "promoter" of the
Company, as such term is defined under the Federal securities laws.

(6) Mr. Althaus may be deemed to be a "promoter" of the Company, as such term
is defined under the Federal securities laws.

CERTAIN TRANSACTIONS

In May 1997, the Company issued 145,746 shares of Common Stock, 83,284
shares of Common Stock and 312,313 shares of Common Stock to HB Research Corp.
(which subsequently transferred such shares to H.B. Capital Ltd)., Emmanuel
Althaus and Batei Sefer Limlacha, respectively, for nominal consideration.
Emmanuel Althaus, the Chairman of the Board of Directors of the Company, is a
Director of Solmecs and was the Vice President and Director of Bayou from March
1990 through November 1996. Professor Herman Branover, a director and the sole
stockholder of H.B. Capital Ltd., is the President, Chief Executive Officer and
a Director of the Company, is Scientific Director of Solmecs (Israel) Ltd. and
was the Executive Vice President and Director of Bayou from May 1989 until 1993.

Simultaneously with the consummation of this offering, the Company will
acquire all of the issued and outstanding capital stock of Solmecs. Bayou, the
current parent of Solmecs, will receive 499,701 shares of the Company's Common
Stock in connection with the Acquisition. In connection with the Acquisition,
Bayou will forgive indebtedness of Solmecs in the amount, as of March 31, 1998,
of $5,082,897 as a capital contribution. Prior to the closing of the
Acquisition, Solmecs will have returned for cancellation shares of Bayou held
by it. The Acquisition is subject to, among other things, the prior approval of
the stockholders of Bayou. The 499,701 shares to be issued to Bayou will not be
registered in this offering but will be subject to certain registration rights
to be granted by the Company.

During the period from September 1997 through March 1998, Batei Sefer
Limlacha loaned to Solmecs $337,900 for working capital purposes and agreed
with Solmecs that such loan and any additional loans to be made by Batei Sefer
Limlacha to Solmecs shall be due and payable on the earlier of June 30, 1998 or
the consummation of certain types of transactions, including the Acquisition
which will occur simultaneously with the consummation of this offering, and
that such loans will be unsecured and will bear interest at the rate of 8% per
annum.

Transactions between the Company and its officers, Directors, employees
and affiliates will be on terms no less favorable to the Company than can be
obtained from unaffiliated parties. Any such transactions will be subject to
the approval of a majority of the disinterested members of the Board of
Directors.

40
<PAGE>

CONDITIONS IN ISRAEL

The Company's operations are directly affected by the economic and
political conditions in Israel. The information in this section is included in
order to advise prospective purchasers of the Units of certain conditions in
Israel that could affect the operations and financial results of the Company.

Economic Conditions

In the 1990's the economy of Israel experienced significant expansion.
During calendar years 1992 through 1997, Israel's gross domestic product
("GDP") increased by 6.2%, 6.7%, 3.4%, 6.5%, 6.8% and 2.1% (estimated),
respectively. The Israeli Government's monetary policy contributed to relative
price and exchange rate stability during most of these years despite
fluctuating rates of economic growth and a high rate of unemployment. The
inflation rate for 1994, 1995, 1996 and 1997 was 14.5%, 8.1%, 10.6% and 7.0%,
respectively. Although during 1997 the rate of devaluation of the NIS against
the dollar exceeded the rate of inflation in Israel, for the several years
preceding 1997 the rate of inflation in Israel exceeded the rate of devaluation
of the NIS against the dollar.

Israel's economy has been subject to numerous destabilizing factors,
including a period of rampant inflation in the early to mid-1980's, low foreign
exchange reserves, fluctuations in world commodity prices, military conflicts
and civil unrest. In response to these problems, the Israeli Government has
intervened in various sectors of the economy, employing, among other means,
fiscal and monetary policies, import duties, foreign currency restrictions and
controls of wages, prices and foreign currency exchange rates. The Israeli
Government frequently has changed its policies in all these areas.

Political Environment

Since the establishment of the State of Israel in 1948, a state of
hostility has existed, varying in degree and intensity, between Israel and the
Arab countries. In addition, Israel and companies doing business with Israel
have been the subject of an economic boycott by the Arab countries since
Israel's establishment. Furthermore, following the Six-Day War in 1967, Israel
commenced administering the territories of the West Bank and the Gaza Strip
and, since December 1987, increased civil unrest has existed in these
territories. Although, as described below, Israel has entered into various
agreements with Arab countries and the Palestine Liberation Organization
("PLO") and various declarations have been signed in connection with efforts to
resolve some of the aforementioned problems, no prediction can be made as to
whether a full resolution of these problems will be achieved or as to the
nature of any such resolution. To date, these problems have not had a material
adverse impact on the financial condition or operation of the Company, although
there can be no assurance that continuation of these problems will not have
such an impact in the future.

In 1979, a peace agreement between Israel and Egypt was signed under which
full political relations were established; however, economic relations have
been very limited. In September 1993, a breakthrough occurred in
Israeli-Palestinian relations. A joint Israeli-Palestinian Declaration of
Principles was signed by Israel and the PLO in Washington, D.C., outlining
interim Palestinian self-government arrangements. Since September 1993, Israel
and the PLO have signed several agreements for the implementation of the
principles of the September 1993 Declaration. In accordance with these
agreements, Israel has transferred the civil administration of the Gaza Strip,
Jericho and certain other areas of the West Bank to the Palestinian Self-Rule
Authority and the Israeli army has withdrawn from these areas. In January 1996,
elections were held in the West Bank and Gaza Strip for the election of
representatives to the Palestinian Authority. In October 1994, Israel and
Jordan signed a peace treaty, which provides, among other things, for the
commencement of full diplomatic relations between the two countries, including
the exchange of ambassadors and consuls.

Although Israel has entered into various agreements with certain Arab
countries and the PLO, and various declarations have been signed in connection
with efforts to resolve some of the economic and political problems in the
Middle East, no prediction can be made as to whether a full resolution of these
problems will be achieved or as to the nature of any such resolution. To date,
Israel has not entered into a peace treaty with either Lebanon or Syria.

41
<PAGE>

Army Service

Male adult permanent residents of Israel under the age of 50 are, unless
exempt, obligated to perform generally up to 30 days of military reserve duty
annually. Additionally, all such residents are subject to being called to
active duty at any time under emergency circumstances. Some of the employees of
the Company currently are obligated to perform annual reserve duty. While the
Company has operated effectively under these requirements in the past, no
assessment can be made of the full impact of such requirements on the Company
in the future, particularly if emergency circumstances occur.

Assistance from the United States

The State of Israel receives approximately $3 billion of annual grants for
economic and military assistance from the United States and has received
approximately $10 billion of United States Government loan guarantees, subject
to reduction in certain circumstances. The United States Government loan
guarantees were granted over a period of five years ($2 billion per annum)
commencing in 1993. The Israeli economy could suffer material adverse
consequences if such aid or guarantees are reduced significantly. There is no
assurance that foreign aid from the United States will continue at or near
amounts received in the past.

Trade Agreements

Israel is a member of the United Nations, the International Monetary Fund,
the International Bank for Reconstruction and Development and the International
Finance Corporation. Israel is also a signatory to the General Agreement on
Tariffs and Trade, which provides for reciprocal lowering of trade barriers
among its members. In addition, Israel has been granted preferences under the
Generalized System of Preferences from the United States, Australia, Canada and
Japan. These preferences allow Israel to export the products covered by such
programs either duty-free or at reduced tariffs.

Israel and the European Economic Community (known now as the "European
Union") signed a Free Trade Agreement, which became effective on July 1, 1975.
Pursuant to such agreement and subject to rules of origin, Israel's industrial
exports to the European Union are exempt from custom duties and other
non-tariff barriers (e.g. import restrictions).

In 1985, Israel and the United States entered into an agreement to
establish a Free Trade Area ("FTA") which is intended to eliminate all tariff
and certain nontariff barriers on most trade between the two countries. Under
the FTA agreement, all products now receive duty free status.

On January 1, 1993, an agreement between Israel and the European Free
Trade Association ("EFTA"), which includes Austria, Norway, Finland, Sweden,
Switzerland, Iceland and Liechtenstein, established a free-trade zone between
Israel and the EFTA nations. Manufactured goods and some agricultural goods and
processed foods are exempt from customs duties, while duties on other goods
have been reduced.

Israel is the only country which has free-trade area agreements with the
United States as well as with the European Union and the EFTA states.

The end of the Cold War has enabled Israel to establish commercial and
trade relations with a number of other nations, including Russia, China and the
nations of Eastern Europe, with which Israel had not previously had such
relations.

DESCRIPTION OF SECURITIES

General

The Company is authorized to issue 10,000,000 shares of Common Stock, par
value $.01 per share, and 1,000,000 shares of Preferred Stock, par value $.01
per share. As of the date of this Prospectus, after giving effect to the
Acquisition, there are 1,041,044 shares of Common Stock outstanding and no
shares of Preferred Stock outstanding.

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Units

Each Unit consists of one share of Common Stock and one Warrant to
purchase one share of Common Stock. The securities comprising the Units will
become detachable and separately transferable on the date that is three months
after their issuance unless earlier detached pursuant to an agreement between
the Company and the Underwriter.

Common Stock

The holders of Common Stock are entitled to one vote for each share held
of record on all matters to be voted on by stockholders. There is no cumulative
voting with respect to the election of Directors, with the result that the
holders of more than 50% of the shares voting for the election of Directors can
elect all of the Directors then up for election. The holders of Common Stock
are entitled to receive ratably such dividends when, as and if declared by the
Board of Directors out of funds legally available therefor. In the event of
liquidation, dissolution or winding up of the Company, the holders of Common
Stock are entitled to share ratably in all assets remaining which are available
for distribution to them after payment of liabilities and after provision has
been made for each class of stock, if any, having preference over the Common
Stock. Holders of shares of Common Stock, as such, have no conversion,
preemptive or other subscription rights, and there are no redemption provisions
applicable to the Common Stock. All of the outstanding shares of Common Stock
are, and the shares of Common Stock offered hereby, when issued in exchange for
the consideration set forth in this Prospectus, will be, fully paid and
nonassessable.

The Company has agreed with the Underwriter that it will not issue any
shares of Common Stock for a period of 24 months from the Effective Date
without the written consent of the Underwriter.

Redeemable Warrants

Each Warrant offered hereby entitles the registered holder thereof (the
"Warrant Holders") to purchase one share of Common Stock at a price of $7.50,
subject to adjustment in certain circumstances, at any time between June 29,
1999 and 5:00 p.m., Eastern Time, on June 28, 2003. The securities comprising
the Units will become detachable and separately transferable on the date that is
three months after their issuance, unless earlier detached pursuant to an
agreement between the Company and the Underwriter.

The Warrants are redeemable by the Company, at any time after becoming
exercisable, upon notice of not less than 30 days, at a price of $.01 per
Warrant, provided that the average of the closing bid quotations of the Common
Stock on any ten trading days ending within five days prior to the day on which
the Company gives notice has been at least $10.00 per share (subject to
adjustment). The Warrant Holders shall have the right to exercise their
Warrants until the close of business on the date fixed for redemption. The
Warrants will be issued in registered form under a warrant agreement by and
among the Company, Continental Stock Transfer & Trust Company, as warrant
agent, and the Underwriter (the "Warrant Agreement"). The exercise price and
number of shares of Common Stock or other securities issuable on exercise of
the Warrants are subject to adjustment in certain circumstances, including in
the event of a stock dividend, recapitalization, reorganization, merger or
consolidation of the Company. However, the Warrants are not subject to
adjustment for issuances of Common Stock at prices below the exercise price of
the Warrants. Reference is made to the Warrant Agreement (which has been filed
as an exhibit to the Registration Statement of which this Prospectus is a part)
for a complete description of the terms and conditions therein (the description
herein contained being qualified in its entirety by reference thereto).

The Warrants may be exercised upon surrender of the Warrant certificate
during the exercise period at the offices of the warrant agent, with the
exercise form on the reverse side of the Warrant certificate completed and
executed as indicated, accompanied by full payment of the exercise price (by
certified check or bank draft payable to the Company) to the warrant agent for
the number of Warrants being exercised. The Warrant Holders do not have the
rights or privileges of holders of Common Stock.

No Warrant will be exercisable unless at the time of exercise the Company
has filed a current registration statement with the Commission covering the
shares of Common Stock issuable upon exercise of such Warrant and such shares
have been registered or qualified or deemed to be exempt from registration or
qualification under

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the securities laws of the state of residence of the holder of such Warrant.
The Company will use its best efforts to have all such shares so registered or
qualified on or before the exercise date and to maintain a current prospectus
relating thereto until the expiration of the Warrants, subject to the terms of
the Warrant Agreement. While it is the Company's intention to do so, there can
be no assurance that it will be able to do so.

No fractional shares will be issued upon exercise of the Warrants.
However, if a Warrant Holder exercises all Warrants then owned of record by
him, the Company will pay to such Warrant Holder, in lieu of the issuance of
any fractional share which is otherwise issuable, an amount in cash based on
the market value of the Common Stock on the last trading day prior to the
exercise date.

Preferred Stock

The Board of Directors has the authority, without further action by the
stockholders, to issue up to one million shares of Preferred Stock in one or
more series and to fix the rights, preferences, privileges and restrictions
thereof, including dividend rights, conversion rights, voting rights, terms of
redemption, liquidation preferences, and the number of shares constituting any
series or the designation of such series. The issuance of Preferred Stock could
adversely affect the voting power of holders of Common Stock and could have the
effect of delaying, deferring or preventing a change in control of the Company.
The Company has no present plans to issue any shares of Preferred Stock. The
Company has agreed with the Underwriters that it will not issue any shares of
Preferred Stock for a period of 24 months from the Effective Date without the
written consent of the Underwriter.

Dividends

To date, the Company has not declared or paid any dividends on its Common
Stock. The payment by the Company of dividends, if any, is within the
discretion of the Board of Directors and will depend on the Company's earnings,
if any, its capital requirements and financial condition, as well as other
relevant factors. The Board of Directors does not intend to declare any
dividends in the foreseeable future, but instead intends to retain earnings, if
any, for use in the Company's business operations.

Delaware Anti-Takeover Law

Upon the consummation of this offering, the Company will be governed by
the provisions of Section 203 of the DGCL. In general, the law prohibits a
public Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner. "Business combination"
includes mergers, asset sales and other transactions resulting in a financial
benefit to the stockholder. An "interested stockholder" is a person who,
together with affiliates and associates, owns (or within three years, did own)
15% or more of the corporation's voting stock.

Transfer Agent and Warrant Agent

The transfer agent for the Common Stock and the warrant agent for the
Warrants is Continental Stock Transfer & Trust Company.

Reports to Stockholders

The Company intends to file a registration statement with the Securities
and Exchange Commission to register its Common Stock and Warrants under the
provisions of Section 12(g) of the Exchange Act prior to the date of this
Prospectus and has agreed with the Underwriter that it will use its best
efforts to continue to maintain such registration. Such registration will
require the Company to comply with periodic reporting, proxy solicitation and
certain other requirements of the Exchange Act.

SHARES ELIGIBLE FOR FUTURE SALE

Upon the consummation of this offering, the Company will have 2,082,088
shares of Common Stock outstanding (assuming no exercise of the Underwriter's
over-allotment, the Warrants or outstanding options or warrants), of which the
1,041,044 shares of Common Stock included in the Units offered hereby will be
freely tradable without restriction or further registration under the
Securities Act. All of the remaining 1,041,044 shares of

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Common Stock outstanding are deemed to be "restricted securities," as that term
is defined under Rule 144 promulgated under the Securities Act, in that such
shares were acquired by the stockholders of the Company in transactions not
involving a public offering, and, as such, may only be sold pursuant to a
registration statement under the Securities Act, in compliance with the
exemption provisions of Rule 144, or pursuant to another exemption under the
Securities Act. All of such restricted securities may become eligible for sale
commencing 90 days from the date of this Prospectus. Notwithstanding the
foregoing, all of the existing stockholders of the Company have agreed not to
sell or otherwise dispose of any such shares of Common Stock beneficially owned
by them for a period of 24 months from the date of this Prospectus without the
Underwriter's prior written consent.

In general, under Rule 144 a person (or persons whose shares are required
to be aggregated), including a person who may be deemed an "affiliate" of the
Company, who has beneficially owned restricted securities for at least one year
is entitled to sell a number of shares within any three-month period that does
not exceed the greater of (i) 1% of the then outstanding shares of Common
Stock, or (ii) an amount equal to the average weekly trading volume in the
shares of Common Stock during the four calendar weeks preceding such sale.
Sales under Rule 144 are also subject to certain requirements as to the manner
of sale, notice and the availability of current public information about the
Company. However, a person who is not deemed an affiliate and has beneficially
owned such shares for at least two years is entitled to sell such shares
without regard to the volume or other resale requirements.

Prior to this offering, there has been no market for the Common Stock and
no prediction can be made as to the effect, if any, that public sales of shares
of Common Stock or the availability of such shares for sale will have on the
market prices of the Units, Common Stock and Warrants prevailing from time to
time. Nevertheless, the possibility that substantial amounts of Common Stock
may be sold in the public market may adversely affect prevailing market prices
for the Units, Common Stock and Warrants and could impair the Company's ability
in the future to raise additional capital through the sale of its equity
securities.

CERTAIN TAX CONSIDERATIONS

U.S. Federal Income Tax Consequences

The following discussion is a summary of certain of the more significant
United States federal income tax consequences of the Acquisition and of an
investment in the Company based on the tax laws in effect as of the date
hereof. This discussion does not address the particular federal income tax
consequences that may be relevant to certain types of taxpayers subject to
special treatment under the federal income tax laws (such as life insurance
companies, tax-exempt organizations and taxpayers who are not U.S. domestic
corporations or citizens or residents of the United States), nor does it
discuss any aspect of state, local, foreign or other tax laws that may be
applicable to particular taxpayers, except certain Israeli income tax
consequences (see "Israeli Income Tax Consequences," below). The tax
consequences to investors may vary based on the individual circumstances of
each investor. There can be no assurance that the Internal Revenue Service (the
"Service") will not challenge any or all of the expected tax consequences of
the Acquisition and of an investment in the Company, or that such a challenge,
if asserted, would not be sustained.

The discussion and conclusions presented below may be affected by matters
not discussed herein. Each investor is strongly urged to consult with his own
tax advisor regarding the federal, state and local tax consequences of the
Acquisition and of an investment in the Company.

U.S. Tax Consequences to the Company

a. It is anticipated that the Acquisition will not result in any federal
income tax liability on the Company. The Acquisition is planned to qualify as a
tax-free reorganization described in section 368(a)(1)(B) of the Internal
Revenue Code of 1986, as amended (the "U.S. Tax Code"). Accordingly, neither
the Company nor Solmecs will recognize gain or loss for U.S. federal income tax
purposes as a result of the Acquisition. The Company's basis, for U.S. federal
income tax purposes, for its assets (that is, stock of Solmecs) and Solmecs'
basis for its assets (including stock of its Israeli subsidiary) will equal
such basis in the hands of Bayou as to stock of Solmecs and in the hands of
Solmecs as to the stock of its subsidiary, immediately prior to the
Acquisition.

b. The Company may be subject to one or more of the special anti-deferral
regimes pertaining to the ownership of stock of foreign corporations as a
consequence of its ownership of the stock of its subsidiaries. Various
provisions contained in the U.S. Tax Code impose special tax burdens in certain
circumstances on the shareholders of non-United States corporations as
described above.

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Controlled Foreign Corporations. Each of the subsidiaries will be a
controlled foreign corporation ("CFC") because more than 50% of the total
combined voting power, and, alternatively, because more than 50% of the value,
of the stock of each such Subsidiary is owned by a United States person (the
Company) which owns 10% or more of the total combined voting power of the stock
of such subsidiary (a "10% Shareholder"). If a subsidiary is a CFC, any U.S.
taxpayer that is a 10% Shareholder is required to include in its gross income
certain types of income earned by a CFC ("Subpart F income") regardless of
whether such amounts are actually distributed to it. Thus the Company will be
required to include in its gross income dividends which Solmecs receives from
its Israeli subsidiary even if it does not distribute them to the Company. Gain
realized on the disposition of shares of a current or former CFC by a U.S.
taxpayer may be recharacterized as a dividend. These rules could increase the
U.S. federal income tax liability of the Company at a time at which cash will
not be available to fund such liability.

Passive Foreign Investment Companies. Each of the subsidiaries would be a
passive foreign investment company ("PFIC") if 75% or more of its gross income
(including the pro rata gross income of any company with respect to which such
subsidiary is considered to own 25% or more of the shares by value) in a
taxable year is passive income. Alternatively, a subsidiary will be considered
to be a PFIC if at least 50% of the assets (averaged over the year and
generally determined based upon their fair market values) of any company
(including the pro rata basis of the assets of any company with respect to
which such subsidiary is considered to own 25% or more of the shares by value)
in a taxable year are held for the production of, or produce, passive income.
If a subsidiary becomes a PFIC, the Company would, upon certain distributions
by such subsidiary and upon disposition of such subsidiary's shares at a gain,
be liable to pay U.S. federal income tax at the then prevailing income tax
rates on ordinary income plus interest on the tax, as if the distribution or
gain (in the case of a disposition) had been recognized ratably over the
Company's holding period for the shares of the relevant subsidiary. The Company
does not believe as of the date hereof that either of the subsidiaries was a
PFIC for 1997 or will be a PFIC and intends to cause the subsidiaries to manage
their businesses so as to avoid PFIC status to the extent consistent with their
other business goals. However, there can be no assurance that neither of the
subsidiaries will become a PFIC in the future.

Notwithstanding these rules, for taxable periods beginning after 1997, a
corporation that is a CFC will not be considered to be a PFIC with respect to
stockholders that are required to include in their gross income their shares of
the CFC's Subpart F income (as described above). Accordingly, the PFIC rules
will only affect the Company in the event that, in the future, it sells a large
portion of its stock of the subsidiaries.

In the event that the Company concludes that either of the subsidiaries
will be treated as a PFIC for any taxable year, and the exception described in
the preceding paragraph does not apply, the Company may elect to treat such
subsidiary as a "qualified electing fund" for U.S. federal income tax purposes.
If the Company makes a "qualified electing fund" election for all taxable years
that it held the stock of such subsidiary and such subsidiary was a PFIC during
such time, distributions and gain from the subsidiary will not be recognized
ratably over the Company's holding period or be subject to an interest charge
and gain on the sale of the stock of such subsidiary will be characterized as
capital gain. Instead, the Company would be required to include in income, for
each taxable year, a pro rata share of the undistributed ordinary earnings of
the qualified electing fund as ordinary income and a pro rata share of the
undistributed net capital gain of the qualified electing fund as long-term
capital gain.

U.S. Tax Consequences of Owning Common Stock

An investor who is a U.S. taxpayer and receives dividend distributions
with respect to Common Stock will generally be required to include the amounts
of such distributions in his income to the extent such distributions are made
out of the Company's current and accumulated earnings and profits.
Distributions in excess of the Company's current and accumulated earnings and
profits will be treated as return of capital to the extent of the investor's
tax basis for his Common Stock. Distributions in excess of the Company's
earnings and profits and the investor's tax basis for his Common Stock will be
treated as capital gain to the extent of such excess.

An investor who is a U.S. taxpayer and who disposes of Common Stock will
recognize gain or loss equal to the difference between the amount realized on
the sale and the investor's tax basis for such Common Stock. Such gain or loss
generally will be capital in nature if the Common Stock constitutes a capital
asset in the hands of the investor and will, under the current rate structure,
be subject to tax at a reduced rate of no more than 28 percent if the Common
Stock is held for more than one year but no more than 18 months, and at a
reduced rate

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of no more than 20 percent if the Common Stock is held for more than 18 months.
In order to determine an investor's tax basis for his Common Stock, the amount
that the investor pays for his Unit is allocated between the Common Stock and
the Warrants that comprises such Unit based on their relative fair market
values upon the Acquisition.

U.S. Tax Consequences of Owning Warrants

An investor who is a U.S. taxpayer and who exercises Warrants will not
recognize gain or loss upon such exercise. The tax basis for any shares of
Common Stock acquired though the exercise of the Warrants will equal the sum of
the investor's tax basis for his Warrants immediately before such exercise and
the amount paid pursuant to the Warrants to acquire the Common Stock. If a
Warrant lapses without exercise, the investor may deduct his tax basis for such
Warrant, usually as a capital loss. His tax basis for his Warrant generally
will be the portion of his cost for his Unit that is allocated to the Warrants
pursuant to the preceding paragraph. For purposes of determining which rate of
tax on capital gains applies to gains from the sale of Common Stock acquired
through exercise of Warrants, the relevant holding period begins on the date of
such acquisition of stock without regard to how long the Warrant was held.

Backup Withholding

Information reporting may apply in the future to certain dividends paid on
the Common Stock and to the proceeds of sale of such stock paid to U.S.
investors other than certain exempt recipients (such as corporations). A 31%
backup withholding tax may apply in the future to such payments if the U.S.
investor fails to provide an accurate taxpayer identification number or
certification of exempt status, or fails to report in full dividend and
interest income.

Israeli Income Tax Consequences

Withholding Tax on Dividend Distributions

Nonresidents of Israel, including nonresident companies like the Company,
are subject to income tax on income derived from sources in Israel. On the
distribution of dividends other than bonus shares (stock dividends), income tax
is withheld at source at the rate of 25% or at the reduced rate of 15% for
dividends distributed from taxable income attributable to and accrued during
the benefits period of an Approved Enterprise. Inasmuch as the Company will,
upon the consummation of its Acquisition, own its interest in its Israeli
subsidiary indirectly through ownership of a Netherlands Antilles corporation,
the benefits of the Treaty, as described below, will not be available to the
Company. However, in the event the Company were to acquire shares of the
Israeli subsidiary or other Israeli entities directly, the benefits of the
Treaty, to the extent otherwise applicable, would be available to the Company.
Pursuant to the Convention between the Government of the State of Israel and
the Government of the United States of America with Respect to Taxes on Income
(the "Treaty"), dividends distributed to a United States corporation
("Recipient Corporation") by an Israeli corporation ("Distributing
Corporation") are taxed at a reduced rate of 12.5% if: (i) the income used to
pay the dividends is derived during a period in which the Distributing
Corporation is not entitled to "Approved Enterprise" benefits; (ii) the
Recipient corporation has held at least 10% of the outstanding voting shares of
the Distributing Corporation during the part of the Distributing Corporation's
taxable year which precedes the distribution of the dividends and during the
Distributing Corporation's previous taxable year; and (iii) not more than 25%
of the Distributing Corporation's gross income during the previous taxable year
was derived from interest or dividends.

An entity, such as the Company, which qualifies as a resident of the
United States pursuant to the Treaty, is entitled to claim a credit for taxes
paid in Israel on the receipt of dividends against the United States income tax
imposed with respect to the receipt of such dividends. In addition, a United
States corporation which owns at least 10% of the voting stock of an Israeli
corporation from which it receives dividends in any taxable year is entitled to
claim a credit for a certain amount of taxes paid or accrued in Israel by the
Israeli corporation on profits out of which the dividends were paid. Credits
granted by the United States are subject to the limitations in United States
laws applicable to foreign credits.

Capital Gains Tax

Israeli law imposes a capital gains tax on the sale of securities and any
other capital assets. Israeli capital gains tax applies to nonresidents of
Israel, like the Company, when the gain is derived from the sale of an asset

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located in Israel or of any asset located outside of Israel which constitutes a
right, directly or indirectly, to an asset located in Israel (including shares
held by Solmecs in its Israeli subsidiary and to shares which may be acquired
by the Company in an Israeli corporation). Capital gains tax will apply to any
sale by Solmecs of its shares of stock of its Israeli subsidiary and any sale
by the Company of shares which it may acquire in an Israeli corporation.

The law distinguishes between a "real gain" and an "inflationary amount".
Real gain is the excess of the total capital gain over the inflationary amount,
and the inflationary amount is computed on the basis of the increase in the
Israeli CPI (or, at the election of a nonresident of Israel, the Israeli
currency devaluation in relation to the foreign currency with which the capital
asset was purchased) between the date of purchase and the date of sale. The
inflationary amount accumulated until December 31, 1993 is taxed at a rate of
10% for residents of Israel but is reduced, with respect to shares, to no tax
for non-residents in the event that such non-residents have elected the Israeli
currency devaluation as an index, while the real gain is taxed at the rate
applicable to ordinary income. The inflationary amount accumulated from and
after December 31, 1993 is exempt from capital gains tax.

Pursuant to the Treaty, the sale, exchange or disposition of shares of
Common Stock by a person who qualifies as a resident of the United States
within the meaning of the Treaty and who is entitled to claim the benefits
afforded to such resident by the Treaty ("Treaty United States Resident") will
not be subject to the Israeli capital gains tax unless such Treaty United
States Resident holds, directly or indirectly, shares representing 10% or more
of the voting power of the Israeli company during any part of the 12 month
period preceding such sale, exchange or disposition subject to certain
conditions. A sale, exchange or disposition of Common Stock by a Treaty United
States Resident who holds, directly or indirectly, shares representing 10% or
more of the voting power of the Israeli company at any time during such
preceding 12 month period would be subject to such Israeli tax, if applicable.
Such Treaty United States Resident would be permitted to claim a credit for
such taxes against the Untied States income tax imposed with respect to such
sale, exchange or disposition, subject to the limitations in United States laws
applicable to foreign tax credits.

UNDERWRITING

Patterson Travis, Inc. (the "Underwriter") has agreed, subject to the
terms and conditions contained in the Underwriting Agreement, to purchase
1,041,044 Units from the Company. The Underwriter is committed to purchase and
pay for all of the Units offered hereby if any of such securities are
purchased. The Units are being offered by the Underwriter, subject to prior
sale, when, as and if delivered to and accepted by the Underwriter and subject
to approval of certain legal matters by counsel and to certain other
conditions.

The Underwriter has advised the Company that it proposes to offer the
Units to the public at the public offering price set forth on the cover page of
this Prospectus. The Underwriter may allow to certain dealers who are members
of the National Association of Securities Dealers, Inc. (the "NASD")
concessions, not in excess of $.575 per Unit, of which not in excess of $.575
per Unit may be reallowed to other dealers who are members of the NASD.

The Company has granted to the Underwriter an option, exercisable for 45
days from the date of this Prospectus, to purchase up to 156,156 additional
Units at the public offering price set forth on the cover page of this
Prospectus, less the underwriting discounts and commissions. The Underwriter
may exercise this option in whole or, from time to time, in part, solely for
the purpose of covering over-allotments, if any, made in connection with the
sale of the Units offered hereby.

The Company has agreed to pay the Underwriter a nonaccountable expense
allowance of 3% of the gross proceeds of this offering. The Company has also
agreed to pay all expenses in connection with qualifying the Units offered
hereby for sale under the laws of such states as the Underwriter may designate,
including expenses of counsel retained for such purpose by the Underwriter.

The Company has agreed to sell to the Underwriter and its designees for
$104.00, an option (the "Underwriter's Unit Purchase Option") to purchase up to
104,104 Units at an exercise price of $6.90 per Unit (120% of the public
offering price per Unit). The Underwriter's Unit Purchase Option may not be
sold, transferred, assigned or hypothecated for one year from the date of this
Prospectus, except to the officers and partners of the Underwriter and members
of the selling group, and are exercisable at any time and from time to time, in
whole or in part, during the four-year period commencing on the first
anniversary date of the date of this Prospectus

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(the "Exercise Term"). During the Exercise Term, the holders of the
Underwriter's Unit Purchase Option are given, at nominal cost, the opportunity
to profit from a rise in the market price of the Common Stock. To the extent
that the Underwriter's Unit Purchase Option is exercised, dilution to the
interests of the Company's stockholders will occur. Further, the terms upon
which the Company will be able to obtain additional equity capital may be
adversely affected since the holders of the Underwriter's Unit Purchase Option
can be expected to exercise it at a time when the Company would, in all
likelihood, be able to obtain any needed capital on terms more favorable to the
Company than those provided in the Underwriter's Unit Purchase Option. Any
profit realized by the Underwriter on the sale of the Underwriter's Unit
Purchase Option, the underlying shares of Common Stock or the underlying
Warrants, or the shares of Common Stock issuable upon exercise of such
underlying Warrants may be deemed additional underwriting compensation. The
Company has agreed, at the request of the holders of a majority of the
securities underlying the Underwriter's Unit Purchase Option, at the Company's
expense, to register the Underwriter's Unit Purchase Option, the shares of
Common Stock and Warrants underlying the Underwriter's Unit Purchase Option,
and the shares of Common Stock issuable upon exercise of the underlying
Warrants under the Securities Act on one occasion during the Exercise Term and
to include the Underwriter's Warrants and all such underlying securities in any
appropriate registration statement which is filed by the Company during the
five years following the date of this Prospectus.

The Underwriter shall have the right to designate one member to the
Company's Board of Directors for a period of three years following the
effective date. In the event that the Underwriter elects not to designate such
a member to the Company's Board of Directors, the Underwriter may designate a
person to attend all meetings of the Board of Directors.

The Company has agreed, in connection with the exercise of the Warrants
pursuant to solicitation (commencing one year from the date of this
Prospectus), to pay to the Underwriter a fee of 5% of the exercise price for
each Warrant exercised; provided, however, that the Underwriter will not be
entitled to receive such compensation in Warrant exercise transactions in which
(i) the market price of Common Stock at the time of exercise is lower than the
exercise price of the Warrants; (ii) the Warrants are held in any discretionary
account; (iii) disclosure of compensation arrangements is not made, in addition
to the disclosure provided in this Prospectus, in documents provided to holders
of Warrants at the time of exercise; (iv) the exercise of the Warrants is
unsolicited by the Underwriter; or (v) the solicitation of exercise of the
Warrants was in violation of Regulation M promulgated under the Exchange Act.

Regulation M, promulgated under the Exchange Act, may prohibit the
Underwriter from engaging in any market making activities with regard to the
Company's securities for the period from nine business days (or such other
applicable period as Regulation M may provide) prior to any solicitation by the
Underwriter of the exercise of Warrants until the later of the termination of
such solicitation activity or the termination (by waiver or otherwise) of any
right that the Underwriter may have to receive a fee for the exercise of
Warrants following such solicitation; and any period during which the
Underwriter or any affiliated parties participates in a distribution of
securities of the Company for the account of the Underwriter or any such
affiliate. As a result, the Underwriter may be unable to provide a market for
the Company's securities during certain periods while the Warrants are
exercisable.

In order to facilitate the offering, the Underwriter may engage in
transactions that stabilize, maintain or otherwise affect the prices of the
Units, Common Stock and Warrants. Specifically, the Underwriter may over-allot
in connection with the offering, creating a short position in the Units, Common
Stock and/or Warrants for its own account. In addition, to cover
over-allotments or to stabilize the price of the Units, Common Stock and
Warrants, the Underwriter may bid for, and purchase, Units, shares of Common
Stock and Warrants in the open market. The Underwriter may also reclaim selling
concessions allowed to a dealer for distributing the Units in the offering, if
the Underwriter repurchases previously distributed Units in transactions to
cover short positions, in stabilization transactions or otherwise. Any of these
activities may stabilize or maintain the market price of the Units, Common
Stock and Warrants above independent market levels. The Underwriter is not
required to engage in these activities, and may end any of these activities at
any time.

The Company's officers, Directors and all of the Company's securityholders
have agreed not to sell or otherwise dispose of any securities of the Company
beneficially owned by them for a period of 24 months from the date of this
Prospectus, without the prior written consent of the Underwriter.

49
<PAGE>

The Units, and once separately transferable, the Common Stock and Warrants
will be quoted on the OTC Electronic Bulletin Board under the symbols "SAQCU,"
"SAQC" and "SAQCW," respectively, but there can be no assurance that an active
trading market will develop. The Underwriter intends to make a market in all of
the publicly-traded securities of the Company.

The Underwriter has advised the Company that it does not expect to make
sales of the securities offered hereby to discretionary accounts.

The Company has agreed to indemnify the Underwriter against certain civil
liabilities, including liabilities under the Securities Act.

Prior to this offering, there has been no public trading market for the
Units, Common Stock or Warrants. Consequently, the initial public offering
price of the Units and the exercise price of the Warrants have been determined
by negotiations between the Company and the Underwriter. Among the factors
considered in determining these prices were the Company's financial condition
and prospects, market prices of similar securities of comparable
publicly-traded companies and the general condition of the securities market.

EXPERTS

The balance sheet of SCNV Acquisition Corp. as of June 30, 1997 and the
consolidated financial statements of Solmecs Corporation N.V. as of June 30,
1997 and for each of the two years in the period then ended, included in this
Prospectus and elsewhere in the Registration Statement, have been audited by
Arthur Andersen LLP and Luboshitz, Kasierer & Co., respectively, members of
Arthur Andersen, independent public accountants, as indicated in their reports
with respect thereto, and are included herein in reliance upon the authority of
said firms as experts in giving said reports. Reference is made to said reports
which each include an explanatory fourth paragraph with respect to the
Companies' ability to continue as a going concern.

LEGAL MATTERS

The legality of the securities offered by this Prospectus will be passed
upon for the Company by Tenzer Greenblatt LLP, New York, New York. Yigal Arnon
& Co., Tel Aviv, Israel has served as Israeli counsel to the Company. Berlack,
Israels & Liberman LLP, New York, New York, has acted as counsel to the
Underwriter in connection with this offering.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form SB-2 (the "Registration
Statement") under the Securities Act with respect to the securities offered by
this Prospectus. This Prospectus, filed as a part of such Registration
Statement, does not contain all of the information set forth in, or annexed as
exhibits to, the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulation of the Commission. For further
information with respect to the Company and this offering, reference is made to
the Registration Statement, including the exhibits filed therewith, which may
be inspected without charge at the Office of the Commission, 450 Fifth Street,
N.W., Washington D.C. 20549; and at the following regional offices: Midwest
Regional Office, Northwestern Atrium Center, 500 West Madison, Suite 1400,
Chicago, Illinois 60661-2511, and the Northeast Regional Office, 7 World Trade
Center, 13th Floor, New York, New York 10048. Copies of the Registration
Statement may be obtained from the Commission at its principal office upon
payment of prescribed fees. Statements contained in this Prospectus as to the
contents of any contract or other document are not necessarily complete and,
where the contract or other document has been filed as an exhibit to the
Registration Statement, each statement is qualified in all respects by
reference to the applicable document filed with the Commission. The Commission
maintains an Internet web site that contains reports, proxy and information
statements and other information regarding issuers that file electronically
with the Commission. The address of that site is http://www.sec.gov.

50
<PAGE>

SCNV ACQUISITION CORP.

FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
Page
-----
<S> <C>
SCNV Acquisition Corp.

Report of Independent Public Accountants ................................................. F-3

Balance Sheets as of June 30, 1997 (Audited) and as of March 31, 1998 (Unaudited) ........ F-4

Notes to the Financial Statements ........................................................ F-5

Solmecs Corporation N.V.

Report of Independent Public Accountants ................................................. F-7

Consolidated Balance Sheets as of June 30, 1997 (Audited) and as of March 31, 1998
(Unaudited)............................................................................. F-8

Consolidated Statements of Operations for the years ended June 30, 1996 and 1997
(Audited) and for the nine months ended March 31, 1997 and 1998 (Unaudited) ............ F-9

Consolidated Statements of Changes in Shareholders' Deficiency for the years ended June
30, 1996 and 1997 (Audited) and for the nine months ended March 31, 1998 (Unaudited) ... F-10

Consolidated Statements of Cash Flows for the years ended June 30, 1996 and 1997
(Audited) and for the nine months ended March 31, 1997 and 1998 (Unaudited) ............ F-11

Notes to the Consolidated Financial Statements ........................................... F-12

Pro Forma Financial Information .......................................................... F-19

SCNV Acquisition Corp. Pro Forma Consolidated Balance Sheet as of March 31, 1998
(Unaudited)............................................................................. F-20

SCNV Acquisition Corp. Pro Forma Consolidated Statements of Operations for the year ended
June 30, 1997 and for the nine months ended March 31, 1998 (Unaudited) ................. F-21

Notes and Management's Assumptions to Pro Forma Consolidated Financial Statements
(Unaudited)............................................................................. F-22
</TABLE>

F-1

<PAGE>

[THIS PAGE INTENTIONALLY LEFT BLANK]

F-2

<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To SCNV Acquisition Corp.:

We have audited the accompanying balance sheet of SCNV Acquisition Corp.
(a Delaware Corporation) as of June 30, 1997. This financial statement is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this balance sheet based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the balance sheet referred to above presents fairly, in
all material respects, the financial position of SCNV Acquisition Corp. as of
June 30, 1997, in conformity with generally accepted accounting principles.

The accompanying balance sheet has been prepared assuming that the Company
will continue as a going concern. As discussed in Note 5 to the balance sheet,
the Company is dependent upon the ability to raise resources to finance its
operations. This fact raises substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regards to this matter are
also discussed in Note 5. The balance sheet does not include any adjustments
that might result from the outcome of this uncertainty.

Arthur Andersen LLP

New York, New York
January 8, 1998

F-3
<PAGE>

SCNV ACQUISITION CORP.
BALANCE SHEETS

<TABLE>
<CAPTION>
June 30, March 31,
1997 1998
---------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Deferred public offering costs ............................................. $25,000 $266,200
------- --------
Total assets ............................................................. $25,000 $266,200
======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accrued expenses ........................................................... $ -- $108,500
Sundry payables ............................................................ -- 40,000
Short-term borrowings from stockholder ..................................... -- 110,108
------- --------
Total current liabilities ................................................ -- 258,608
LONG TERM LIABILITIES
Stockholder loan ........................................................... 17,408 --
------- --------
Total liabilities ........................................................ 17,408 258,608
------- --------
STOCKHOLDERS' EQUITY
Preferred stock $.01 par value, 1,000,000 shares authorized; none issued and
outstanding .............................................................. -- --
Common stock $.01 par value, 10,000,000 shares authorized; 541,343 shares
issued and outstanding ................................................... 5,413 5,413
Additional paid-in-capital ................................................. 2,179 2,179
------- --------
Total stockholders' equity ............................................... 7,592 7,592
------- --------
Total liabilities and stockholders'equity ................................ $25,000 $266,200
======= ========

</TABLE>

The accompanying notes are an integral part of these balance sheets.

F-4
<PAGE>
SCNV ACQUISITION CORP.

NOTES TO THE FINANCIAL STATEMENTS

Note 1 -- GENERAL

SCNV Acquisition Corp. (the "Company") was organized under the laws of the
State of Delaware on May 19, 1997, to acquire Solmecs Corporation N.V.
("Solmecs") and to select, develop and commercially exploit proprietary
technologies, in various stages of development, invented primarily by
scientists who have recently immigrated to Israel from, and by scientists and
institutions in, Russia and other countries that formerly comprised the Soviet
Union. To date, the Company has not had any operations.

The financial statements include the unaudited balance sheet as of March
31, 1998. This unaudited information has been prepared by the Company on the
same basis as the audited balance sheet and in management's opinion, reflects
all adjustments (consisting only of normal recurring adjustments) necessary for
a fair presentation of the financial information in accordance with generally
accepted accounting principles as of March 31, 1998.

Note 2 -- PROPOSED INITIAL PUBLIC OFFERING AND ACQUISITION

On June 19, 1997 the Company entered into a letter of intent with an
underwriter to pursue an Initial Public Offering of its Common Stock (the
"IPO"). The offering contemplates the sale of 1,041,044 Units, which is
composed of 1,041,044 shares of Common Stock and 1,041,044 redeemable Common
Stock purchase warrants ("Warrants"), exclusive of a 45 day option granted to
the underwriter to purchase an additional 15% of the securities offered in the
IPO. Each Warrant entitles the holder to purchase one share of common stock at
a price of $7.50, subject to adjustment in certain circumstances, at any time
during the four-year period commencing on the first anniversary date of the
date of the IPO.

In addition, the Company has agreed to sell to the underwriter and its
designees for an aggregate of $104, Warrants to purchase an additional 10% of
the securities offered in the IPO at an exercise price of 120% of the public
offering price per unit. The Warrants are exercisable at any time during the
four-year period commencing on the first anniversary date of the date of the
IPO.

Simultaneously with the consummation of the IPO, the Company will acquire
all of the issued and outstanding capital stock of Solmecs in consideration for
499,701 shares of the Company's common stock issued to Bayou International,
Ltd. ("Bayou"), the parent of Solmecs. The acquisition has been accounted for
as a purchase. The excess of purchase price over fair value of assets acquired
of $3,498,619, will be reflected as acquired research and development in
process and fully expensed at the date of the acquisition. Solmecs, the
operations of which are located in Israel, owns certain technologies developed
by it in the past. The technologies of Solmecs and certain offshoots of such
technologies are in various stages of development and include technologies that
have begun to be commercialized as well as technologies that the Company
believes will be ready for commercialization in the near future.

Note 3 -- STOCKHOLDER LOAN

The loan does not bear interest. The maturity is the earlier of December
31, 1998 or the consummation of certain types of transactions that will provide
proceeds of at least $3 million to the Company.

Note 4 -- STOCK CAPITAL

a. Preferred Stock

The Board of Directors has the authority, without further action by the
stockholders, to issue up to one million shares of preferred stock in one or
more series and to fix the rights, preferences, privileges and restrictions
thereof, including dividend rights, conversion rights, voting rights, terms of
redemption, liquidation preferences, and the number of shares constituting any
series or the designation of such series.

F-5
<PAGE>
SCNV ACQUISITION CORP.

NOTES TO THE FINANCIAL STATEMENTS -- (Continued)

Note 4 -- STOCK CAPITAL -- (Continued)

b. 1997 Stock Option Plan

In December 1997 the Board of Directors and stockholders of the Company
adopted the 1997 Stock Option Plan (the "Plan"), pursuant to which 200,000
shares of common stock are reserved for issuance upon exercise of options. The
Plan is designed to serve as an incentive for retaining qualified and competent
employees, directors and consultants. Options granted under the Plan will be
exercisable during the period or periods specified in each option agreement.
Options granted under the Plan are not exercisable after the expiration of ten
years from the date of grant (five years in the case of incentive stock options
granted to a 10% stockholder) and are not transferable other than by will or by
the laws of descent and distribution.

As of the date of these financial statements, the Company has not granted
any options under the Plan.

c. Reverse Stock Split

Subsequent to year-end, the Company effected a .7130438 for 1 reverse
split of Common Stock. All share data for all periods presented have been
retroactively restated, to give effect to this reverse stock split.

Note 5 -- GOING CONCERN

As described in Note 2, the Company will acquire Solmecs and operate
through it. As such, the Company is dependent upon the ability to raise
resources to finance its operation, including the costs of continued research
and development efforts, establishing manufacturing capabilities, market
research and acquisition of intellectual property rights. Accordingly, the
Company has signed a letter of intent with an underwriter with respect to the
IPO, which should provide the Company with approximately $4.8 million. The
Company believes that its cash resources augmented by the IPO will be
sufficient to fund the Company's operation for at least 12 months following the
consummation of the IPO.

F-6
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders of:
Solmecs Corporation N.V.

We have audited the accompanying consolidated balance sheet of Solmecs
Corporation N.V. (a Netherlands Corporation) as of June 30, 1997, and the
related consolidated statements of operations, changes in shareholders'
deficiency and cash flows for the years ended June 30, 1997 and 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company and
subsidiary as of June 30, 1997, and the results of their operations and their
cash flows for the years ended June 30, 1997 and 1996, in conformity with
accounting principles generally accepted in the United States.

As discussed further in Note 1, the Company has incurred substantial operating
losses, and at June 30, 1997, the Company has an accumulated deficit of
approximately $13.2 million and a shareholders' deficiency of approximately
$5.3 million. The Company anticipates that it will continue to incur losses for
some time. These factors, among others, as described in Note 1, create a
substantial doubt about the Company's ability to continue as a going concern.
The accompanying financial statements do not include any adjustments relating
to the recoverability and classification of asset carrying amounts or the
amount and classification of liabilities that might result should the Company
be unable to continue as a going concern.

LUBOSHITZ, KASIERER & CO.
Member of Arthur Andersen

Beer-Sheva, Israel
August 29, 1997

F-7
<PAGE>
SOLMECS CORPORATION N.V.

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
June 30 March 31
1997 1998
---------------- ----------------
ASSETS (Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents ................................... $ 39,539 $ 5,459
Trade receivables ........................................... 32,267 33,377
Other receivables and prepaid expenses (Note 3) ............. 14,044 68,306
------------- -------------
Total current assets ................................... 85,850 107,142
------------- -------------
FIXED ASSETS (Note 4)
Cost ........................................................ 164,292 244,116
Less -- accumulated depreciation ............................ (126,459) (126,938)
------------- -------------
37,833 117,178
------------- -------------
Total assets ........................................... $ 123,683 $ 224,320
============= =============
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Short-term borrowing (Note 5) ............................... $ -- $ 429,254
Sundry payables and accrued expenses (Note 6) ............... 182,298 191,185
------------- -------------
Total current liabilities .............................. 182,298 620,439
------------- -------------
LONG-TERM LIABILITIES
Parent company (Note 7) ..................................... 4,988,293 5,082,897
Long-term loan (Note 8) ..................................... 200,000 200,000
Accrued severance pay (Note 9) .............................. 15,631 29,220
------------- -------------
Total long-term liabilities ............................ 5,203,924 5,312,117
------------- -------------
Total liabilities ...................................... 5,386,222 5,932,556
------------- -------------
COMMITMENTS AND CONTINGENCIES (Note 10)
SHAREHOLDERS' DEFICIENCY (Note 11)
Share capital
Preferred "A" shares of DFL 10 par value;
authorized 1,200 shares; issued and
outstanding 1,200 shares as of June 30, 1997
and March 31, 1998 ....................................... 6,154 6,154
Common "B" shares of DFL 10 par value;
authorized 23,800 shares; issued and
outstanding 7,286 shares as of June 30,
1997 and March 31, 1998 .................................. 48,028 48,028
Share premium ............................................... 8,336,155 8,636,155
Accumulated deficit ......................................... (13,152,876) (13,898,573)
------------- -------------
Total .................................................. (4,762,539) (5,208,236)
Less -- Cost of shares of parent company (Note 12) .......... (500,000) (500,000)
------------- -------------
Total shareholders' deficiency ......................... (5,262,539) (5,708,236)
------------- -------------
Total liabilities and shareholders' deficiency ......... $ 123,683 $ 224,320
============= =============

</TABLE>

The notes to the consolidated financial statements form an integral
part thereof.

F-8
<PAGE>

SOLMECS CORPORATION N.V.

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
For the For the
year ended nine months ended
June 30 March 31
----------------------------- -----------------------------
1996 1997 1997 1998
------------- ------------- ------------- -------------
(Unaudited)
<S> <C> <C> <C> <C>
REVENUES (Note 13)
Sales ............................................ $ 22,982 $ 51,841 $ 40,011 $ 6,511
Contract services ................................ 52,075 5,435 2,900 32,365
---------- ---------- ---------- ----------
Total revenues .............................. 75,057 57,276 42,911 38,876
---------- ---------- ---------- ----------
COSTS AND EXPENSES
Research and development costs (Note 14) ......... 347,318 276,259 219,595 187,143
Cost of merchandise purchased .................... 17,420 48,638 37,337 5,257
Cost of contract services performed by
subcontractors ................................. -- -- -- 26,056
Marketing expenses (Note 15) ..................... -- 42,906 14,508 73,234
General and administrative expenses (Note 16). 323,614 220,313 163,263 190,589
---------- ---------- ---------- ----------
Total costs and expenses .................... 688,352 588,116 434,703 482,279
---------- ---------- ---------- ----------
Operating loss .............................. (613,295) (530,840) (391,792) (443,403)
FINANCING EXPENSES, NET ........................... (300,069) (390,484) (282,143) (301,239)
---------- ---------- ---------- ----------
(913,364) (921,324) (673,935) (744,642)
OTHER INCOME (EXPENSES), NET (1996 --
Principally recovery of bad debt
from related party) ............................ 64,735 -- -- (1,055)
---------- ---------- ---------- ----------
Net loss .................................... $ (848,629) $ (921,324) $ (673,935) $ (745,697)
========== ========== ========== ==========
Net loss per common share ......................... $ (116.47) $ (126.45) $ (92.50) $ (102.35)
========== ========== ========== ==========
Weighted average number of common
shares outstanding ............................... 7,286 7,286 7,286 7,286
========== ========== ========== ==========
</TABLE>

The notes to the consolidated financial statements form an integral
part thereof.

F-9
<PAGE>
SOLMECS CORPORATION N.V.

CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' DEFICIENCY

<TABLE>
<CAPTION>
Cost of Shares
Preferred Common Share Accumulated of Parent
Shares Shares Premium Deficit Company Total
----------- ---------- ------------- ----------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Balance as of July 1, 1995 ..... $6,154 $48,028 $7,626,155 $ (11,382,923) $ (500,000) $ (4,202,586)
Imputed interest on long-
term loan from the parent
company ....................... -- -- 330,000 -- -- 330,000
Net loss for the year ended
June 30, 1996 ................. -- -- -- (848,629) -- (848,629)
------ ------- ---------- ------------- ---------- ------------
Balance as of June 30, 1996 6,154 48,028 7,956,155 (12,231,552) (500,000) (4,721,215)
Imputed interest on long-
term loan from the parent
company ....................... -- -- 380,000 -- -- 380,000
Net loss for the year ended
June 30, 1997 ................. -- -- -- (921,324) -- (921,324)
------ ------- ---------- ------------- ---------- ------------
Balance as of June 30, 1997 6,154 48,028 8,336,155 (13,152,876) (500,000) (5,262,539)
Imputed interest on long-
term loan from the parent
company ....................... -- -- 300,000 -- -- 300,000
Net loss for the nine months
ended March 31, 1998
(unaudited) ................... -- -- -- (745,697) -- (745,697)
------ ------- ---------- ------------- ---------- ------------
Balance as of March 31,
1998 (unaudited) .............. $6,154 $48,028 $8,636,155 $ (13,898,573) $ (500,000) $ (5,708,236)
====== ======= ========== ============= ========== ============
</TABLE>
The notes to the consolidated financial statements form an integral
part thereof.

F-10
<PAGE>

SOLMECS CORPORATION N.V.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
For the For the
year ended nine months ended
June 30 March 31
------------------------------- -------------------------------
1996 1997 1997 1998
-------------- -------------- -------------- --------------
(Unaudited)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net loss ............................................. $ (848,629) $ (921,324) $ (673,935) $ (745,697)
Adjustments to reconcile net loss to net cash used in
operating activities (see below) ................... 243,762 380,534 252,348 238,471
---------- ---------- ---------- ----------
Net cash used in operating activities ............. (604,867) (540,790) (421,587) (507,226)
---------- ---------- ---------- ----------
CASH FLOWS FROM INVESTING
ACTIVITIES
Investment in equipment .............................. (5,671) (3,853) (3,853) (56,671)
Short-term investment ................................ 35,000 -- -- --
Proceeds from sale of fixed assets ................... 15,813 -- -- 5,959
---------- ---------- ---------- ----------
Net cash provided by (used in) investing
activities ...................................... 45,142 (3,853) (3,853) (50,712)
---------- ---------- ---------- ----------
CASH FLOWS FROM FINANCING
ACTIVITIES
Short-term borrowings, net ........................... (151,640) -- -- 429,254
Increase in liability to parent company .............. 721,077 526,946 436,946 94,604
---------- ---------- ---------- ----------
Net cash provided by financing activities ......... 569,437 526,946 436,946 523,858
---------- ---------- ---------- ----------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS .......................................... 9,712 (17,697) 11,506 (34,080)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD ............................................ 47,524 57,236 57,236 39,539
---------- ---------- ---------- ----------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD ............................................... $ 57,236 $ 39,539 $ 68,742 5,459
========== ========== ========== ==========
ADJUSTMENTS TO RECONCILE NET LOSS TO
NET CASH USED IN OPERATING ACTIVITIES
Items not involving cash flows:
Imputed interest on long-term loan from the parent
company ........................................... 330,000 380,000 277,000 300,000
Depreciation ....................................... 10,515 9,364 7,071 8,577
Severance pay ...................................... (8,524) (10,779) (6,810) 13,589
Gain on sale of equipment .......................... (4,735) -- -- 1,055
Changes in operating assets and liabilities:
Decrease (increase) in receivables and prepaid
expenses .......................................... 19,738 (4,697) (1,767) (55,372)
Increase (decrease) in sundry payables and accrued
expenses .......................................... (103,232) 6,646 (23,146) (29,378)
---------- ---------- ---------- ----------
$ 243,762 $ 380,534 252,348 $ 238,471
========== ========== ========== ==========
</TABLE>
The notes to the consolidated financial statements form an integral
part thereof.

F-11
<PAGE>

SOLMECS CORPORATION N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Information as of March 31, 1998 and for the nine months ended
March 31, 1998 and 1997, is unaudited

Note 1 -- GENERAL

A. The Company, a registered company in the Dutch Antilles, is a wholly
owned subsidiary of Bayou International Ltd., (the "parent company") a publicly
traded corporation in the United States.

The Company is engaged, through its subsidiary, Solmecs (Israel) Ltd., in
the research and development of energy conversion systems, the provision of
contract services, and the sale of advanced photo-voltaic cells.

B. The financial statements of the Company have been prepared in U.S.
dollars, as the Company's revenues are determined principally in U.S. dollars
and its primary source of financing is received in U.S. dollars. Thus, the
functional currency of the Company is the U.S. dollar.

Transactions and balances denominated in U.S. dollars are presented at
their original amounts. Transactions and balances in other currencies are
remeasured into U.S. dollars in accordance with principles identical to those
set forth in Statement No. 52 of the Financial Accounting Standards Board of
the United States.

Exchange gains and losses from the aforementioned remeasurement are
reflected in the statement of operations. The representative rate of exchange
at March 31, 1998, was U.S.$ 1.00 = 3.597 New Israeli Shekel ("NIS") (1997 -
NIS 3.361) and at June 30, 1997, was U.S.$1.00 = NIS 3.587 (1996 - NIS 3.203).

C. The Company has incurred substantial operating losses and at March 31,
1998, has an accumulated deficit of approximately $13,899,000. At March 31,
1998, the Company's working capital deficiency and shareholders' deficiency
amounted to approximately $513,000 and $5,708,000, respectively. The Company is
not generating sufficient revenues from its operations to fund its activities
and anticipates that it will continue to incur losses for some time. The
Company is continuing its efforts in systems development which will require
substantial additional expenditures.

The parent company has historically provided the financing necessary for
the Company's operations and the Company's ability to continue as a going
concern is dependent on obtaining such financing from the parent company or
from other sources. There is no assurance that the Company will be able to
obtain such financing in the future.

D. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

E. Unaudited Information -- The financial statements include the unaudited
balance sheet as of March 31, 1998, and statements of operations and cash flows
for the nine month periods ended March 31, 1997 and 1998. This unaudited
information has been prepared by the Company on the same basis as the audited
consolidated financial statements and in management's opinion, reflects all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of the financial information in accordance with generally
accepted accounting principles for the periods presented. Operating results for
the nine month period ended March 31, 1998 is not necessarily indicative of the
results that may be expected for the year ending June 30, 1998.

Note 2 -- SIGNIFICANT ACCOUNTING POLICIES

The financial statements have been prepared in conformity with generally
accepted accounting principles in the United States. The significant accounting
policies followed in the preparation of the financial statements, applied on a
consistent basis, are:

F-12
<PAGE>

SOLMECS CORPORATION N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

Information as of March 31, 1998 and for the nine months ended
March 31, 1998 and 1997, is unaudited

Note 2 -- SIGNIFICANT ACCOUNTING POLICIES -- (Continued)

A. PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary. Material intercompany balances and
transactions have been eliminated in consolidation.

B. CASH EQUIVALENTS

Cash equivalents include deposits, the maturity of which, as of the date
of deposit, does not exceed three months.

C. FIXED ASSETS

Fixed assets are stated at cost less accumulated depreciation.
Depreciation is computed by the straight-line method over the estimated useful
lives of the assets, ranging from five to fifteen years. Leasehold improvements
are amortized over the period of the lease.

D. REVENUE RECOGNITION

Revenues from sales of merchandise are recognized upon shipment.

Revenues from contract services are recognized as the work is performed,
according to contract benchmarks.

At the end of each period presented, the balance of trade receivables is
comprised mainly of a few customers, and accordingly no allowance for doubtful
accounts is considered necessary.

E. RESEARCH AND DEVELOPMENT COSTS

Research and development costs are charged to operations as incurred.

F. EARNINGS (LOSS) PER SHARE

Earnings (loss) per share is computed based on the weighted average number
of ordinary shares outstanding during each period. Earnings are adjusted for
noncumulative dividends on preferred shares only if such dividends have been
declared.

Note 3 -- OTHER RECEIVABLES AND PREPAID EXPENSES
<TABLE>
<CAPTION>
June 30 March 31
1997 1998
--------- ---------
<S> <C> <C>
Advance payments to suppliers .................. $ 4,528 $ 158
Value Added Tax refundable ..................... 1,990 14,931
Grants receivable from the State of Israel ..... 3,067 5,655
Prepaid expenses ............................... 2,826 45,152
Other .......................................... 1,633 2,410
------- -------
$14,044 $68,306
======= =======
</TABLE>
F-13
<PAGE>

SOLMECS CORPORATION N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

Information as of March 31, 1998 and for the nine months ended
March 31, 1998 and 1997, is unaudited

Note 4 -- FIXED ASSETS
<TABLE>
<CAPTION>
June 30 March 31
1997 1998
------------ ------------
<S> <C> <C>
Cost
Computers and office equipment ......... 134,719 159,717
Motor vehicles ......................... 29,573 40,488
Leasehold improvements ................. -- 43,911
------- -------
164,292 244,116
------- -------
Accumulated depreciation
Computers and office equipment ......... 114,289 117,966
Motor vehicles ......................... 12,170 7,904
Leasehold improvements ................. -- 1,068
------- -------
126,459 126,938
------- -------
Net book value ......................... 37,833 117,178
======= =======
Principal annual depreciation rates:
Computers and office equipment ......... 7% 7%
Motor vehicles ......................... 15% 15%
Leasehold improvements ................. 20% 20%

</TABLE>

Note 5 -- SHORT-TERM BORROWING

<TABLE>
<CAPTION>
Interest June 30 March 31
Rate 1997 1998
---------- --------- ----------
<S> <C> <C> <C>
Banks in shekels unlinked .................................. 16.7% $ -- $ 91,354
Unsecured loans from private institution in U.S. dollars (*) 8.0% -- 337,900
---- --------
$ -- 429,254
==== ========
</TABLE>

(*) The maturity is the earlier of June 30, 1998, or the consummation of a
transaction or financing that will provide proceeds of at least $3 million to
the Company.

Note 6 -- SUNDRY PAYABLES AND ACCRUED EXPENSES
<TABLE>
<CAPTION>
June 30 March 31
1997 1998
----------- -----------
<S> <C> <C>
Ben-Gurion University for services rendered ......... $ 86,801 $ 86,801
Payroll and related expenses ........................ 50,357 36,764
Accrued expenses .................................... 20,194 13,664
Suppliers ........................................... 3,280 40,727
Advance from customer ............................... 16,767 --
Other ............................................... 4,899 13,229
-------- --------
$182,298 $191,185
======== ========
</TABLE>
Note 7 -- PARENT COMPANY

The loan from the parent company does not bear interest. Maturity dates
have not yet been determined, however the parent company has notified the
Company that it will not call the loan before April 1, 1999.

Imputed interest at a rate of 8% per annum was charged and reflected in
the statement of operations, and is presented as additional share premium.

F-14
<PAGE>

SOLMECS CORPORATION N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

Information as of March 31, 1998 and for the nine months ended
March 31, 1998 and 1997, is unaudited

Note 8 -- LONG-TERM LOAN

The long-term loan is interest free. The date of repayment has not yet
been determined.

Note 9 -- SEVERANCE PAY

The subsidiary's obligation in Israel in respect of severance pay to
employees is covered by insurance policies. The amounts on deposit with the
insurance companies are not under the control or management of the subsidiary,
and therefore, such amounts and the related liability are not reflected in the
balance sheet.

The accrual in the balance sheet represents the unfunded portion of the
severance obligation.

Note 10 -- COMMITMENTS AND CONTINGENCIES

A. Royalties -- BGU

In accordance with an agreement dated November 5, 1981, between the
Company, Ben-Gurion University and B.G. Negev Technology and Applications Ltd.
(BGU), the subsidiary in Israel is conducting research and development projects
on the campus of Ben-Gurion University in consideration for a fee for the use
of the facilities. The Company owns the patents connected with these projects
and agreed to pay royalties to BGU at the rate of 1.725% on sales of products
and at the rate of 11.5% on income from licensing fees.

The Company also agreed to assume the obligation of BGU to pay royalties
to the Ministry of National Infrastructure on products developed from these R&D
projects for its participation in the research and development costs of BGU.
The royalties are to be paid at the rate of 1% on sales of products and at the
rate of 5% on income from licensing fees. As of March 31, 1998, this liability
amounted to approximately $318,000 (including linkage to the Consumer Price
Index and interest at 4% per annum). Subsequent to the repayment of the
liability, the Company is to pay royalties to the Ministry of National
Infrastructure at a reduced rate of 0.3% on sales of products and at the rate
of 2% on income from licensing fees.

Through March 31, 1998, there were no sales or income on which royalties
were payable to BGU and the Ministry of National Infrastructure.

B. International Lead Zinc Research Organization (ILZRO)

In connection with a research contract with ILZRO, the 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 March 31, 1998, 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, the subsidiary received participations
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 March 31, 1998, there were no sales on which royalties were payable.

D. Royalties and Licensing Fees

In January 1998 an agreement was signed between the subsidiary and a party
which had participated in the development of a certain product. In this
agreement, the subsidiary undertook to pay royalties as a certain percentage of
sales and a certain percentage of revenues from licensing fees. As of March 31,
1998, no sales had been made for which royalties would be payable.

E. Lease Agreement

On October 28, 1997, the subsidiary entered into a lease agreement of
premises for a period of two years ending November 1999 for an annual rent of
$41,000. The Company has a renewal option for an additional three years.

F-15
<PAGE>

SOLMECS CORPORATION N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

Information as of March 31, 1998 and for the nine months ended
March 31, 1998 and 1997, is unaudited

Note 10 -- COMMITMENTS AND CONTINGENCIES -- (Continued)

F. Letter of Intent

In September 1997 the subsidiary signed a letter of intent in which it
agreed to cooperate with another party in establishing a jointly owned entity
for the development of certain technology. The other party will be responsible
for providing financing of the jointly owned entity. As of March 31, 1998, the
subsidiary had received $10,000 from the other party as participation in the
costs of technology development.

G. Performance Guarantee

The subsidiary is contingently liable for a contract performance guarantee
issued by a bank in favor of a customer in the amount of $20,000.

H. Lien

Subsequent to balance sheet date, in connection with a credit line
provided by a bank, the subsidiary recorded in favor of the bank, in an
unlimited amount, a fixed charge on the subsidiary's uncalled share capital and
its goodwill and a floating charge on all its present and future acquired
property and rights. As of May 1998, the bank had provided the subsidiary with
a credit line of approximately $270,000.

Note 11 -- SHARE CAPITAL

The preferred "A" shares are entitled to a 5% non-cumulative dividend. All
other rights of the preferred shares are identical to those of the common "B"
shares.

Note 12 -- INVESTMENT IN SHARES OF PARENT COMPANY

The Company owns 50,000 shares of its parent company, the investment in
which is stated at cost. The fair market value of the shares as of March 31,
1998, is approximately $6,250.

Note 13 -- REVENUES

For the nine
For the year months
ended June 30 ended March 31
--------------- --------------
1996 1997 1997 1998
% % % %
------ ------ ------ -----
Revenues by geographic areas are as follows:
United States ............................. 69 -- -- --
Israel .................................... 31 100 100 100
-- --- --- ---
100 100 100 100
=== === === ===
Sales to single customers exceeding 10%:
Customer A ................................ 69 -- -- --
Customer B ................................ -- 60 73 --
Customer C ................................ -- 31 18 9
Customer D ................................ 16 -- 3 --
Customer E ................................ -- -- -- 73

F-16
<PAGE>

SOLMECS CORPORATION N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

Information as of March 31, 1998 and for the nine months ended
March 31, 1998 and 1997, is unaudited

Note 14 -- RESEARCH AND DEVELOPMENT COSTS

<TABLE>
<CAPTION>
For the year For the nine months
ended June 30 ended March 31
--------------------------- ---------------------------
1996 1997 1997 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Salaries and related expenses (after deduction of
immigrant absorption grant as follows March 31,
1998 - $5,711; 1997 - $9,846; June 30, 1997 -
$17,854; 1996 - none)................................ $ 275,939 $ 219,642 $ 165,633 $ 144,322
Materials ............................................ 8,157 6,187 6,187 1,957
Subcontractors ....................................... 10,337 18,285 20,003 11,373
Consultants .......................................... 26,049 9,074 2,624 6,631
Fee for use of facilities ............................ 13,200 13,711 9,900 17,127
Depreciation ......................................... -- -- -- 1,481
Other ................................................ 13,636 9,360 15,248 14,252
--------- --------- --------- ---------
347,318 276,259 219,595 197,143
Less -- participation in technology development (*). -- -- -- (10,000)
--------- --------- --------- ---------
$ 347,318 $ 276,259 $ 219,595 $ 187,143
========= ========= ========= =========
</TABLE>

(*) See Note 10F.

Note 15 -- MARKETING EXPENSES
<TABLE>
<CAPTION>
For the For the nine
year ended months ended
June 30 March 31
-------------------- -------------------------
1996 1997 1997 1998
------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Salaries and related expenses ......... $ -- $ -- $ -- $ 29,155
Market research ....................... -- 22,514 9,100 15,814
Foreign travel ........................ -- 17,614 2,517 36,880
Publications .......................... -- 2,778 2,891 490
Other ................................. -- -- -- 4,895
---- -------- -------- ---------
-- 42,906 14,508 87,234
Less -- government grants ............. -- -- -- (14,000)
---- -------- -------- ---------
$ -- $ 42,906 $ 14,508 $ 73,234
==== ======== ======== =========
</TABLE>

F-17
<PAGE>
SOLMECS CORPORATION N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

Information as of March 31, 1998 and for the nine months ended
March 31, 1998 and 1997, is unaudited

Note 16 -- GENERAL AND ADMINISTRATIVE EXPENSES
<TABLE>
<CAPTION>
For the For the nine
year ended months ended
June 30 March 31
-------------------------- -------------------------
1996 1997 1997 1998
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Salaries and related expenses ......... $ 136,689 $ 88,133 $ 64,962 $ 98,530
Professional fees ..................... 38,054 43,820 35,942 28,100
Consulting fees ....................... 31,438 822 262 1,314
Rent fee .............................. 11,483 3,614 4,061 10,953
Vehicle maintenance ................... 29,528 11,686 10,732 15,568
Communications ........................ 30,730 23,032 18,837 15,292
Foreign travel ........................ 13,956 9,143 1,238 --
Depreciation .......................... 10,515 9,364 7,071 7,096
Other ................................. 21,221 30,699 20,158 13,736
--------- --------- --------- ---------
$ 323,614 $ 220,313 $ 163,263 $ 190,589
========= ========= ========= =========
</TABLE>
Note 17 -- TAXES ON INCOME

A. The Company has carryforward losses of approximately $2.4 million as of
June 30, 1997, which expire in the years 1998-2002. Due to the uncertainty as
to realization of these losses, a valuation allowance for the entire amount of
the tax benefit has been recorded.

B. The subsidiary in Israel is subject to the Income Tax Law (Inflationary
Adjustments), 1985, which measures income on the basis of changes in the
Israeli Consumer Price Index. For tax purposes, the subsidiary reports on a
December 31 year-end.

The carryforward losses of the subsidiary for tax purposes as of December
31, 1997, are approximately $315,000. In addition, research and development
expenses in the approximate amount of $698,000 will be deductible for tax
purposes upon recognition of income derived from the R&D project. Due to the
uncertainty as to realization, a valuation allowance of approximately $365,000
has been recorded.

The subsidiary has received final income tax assessments through December
31, 1995.

F-18
<PAGE>

PRO FORMA FINANCIAL INFORMATION

The following Pro Forma Consolidated Financial Statements as of March 31, 1998
and for the year ended June 30, 1997 and the nine months ended March 31, 1998
have been prepared to reflect the combined financial position and the results
of SCNV Acquisition Corp. (the "Company") and Solmecs Corporation N.V. and its
subsidiaries ("Solmecs"), as if the Combination, described in Note 1, had been
effective as of March 31, 1998, July 1, 1996 and July 1, 1997, respectively.
The acquisition of Solmecs has been accounted for as a purchase and the excess
of purchase price over fair value of assets acquired of $3,498,619, will be
reflected as acquired research and development in process and fully expensed at
the date of the acquisition. The pro forma financial information is unaudited
and not necessarily indicative of the consolidated results which actually would
have occurred if the Combination had been consummated at the beginning of the
periods presented, nor does it purport to represent the future financial
position and results of operations for future periods.

F-19
<PAGE>
SCNV ACQUISITION CORP.
PRO FORMA CONSOLIDATED BALANCE SHEET
March 31, 1998
(Unaudited)

<TABLE>
<CAPTION>
SCNV Solmecs
Acquisition Corporation
Corp. N.V.
-------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents ................ $ -- $ 5,459
Trade receivables ........................ -- 33,377
Deferred public offering costs ........... 266,200 --
Other receivables and prepaid
expenses ............................... -- 68,306
-------- --------------
Total current assets ................... 266,200 107,142
-------- --------------
EQUIPMENT
Cost ..................................... -- 244,116
Less -- accumulated depreciation ......... -- (126,938)
-------- --------------
-- 117,178
-------- --------------
Total assets ............................. $266,200 $ 224,320
======== ==============
LIABILITIES AND
STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Short-term borrowing (mainly from
stockholder) ........................... $110,108 $ 429,254
Sundry payables .......................... 40,000 177,521
Accrued expenses ......................... 108,500 13,664
-------- --------------
Total current liabilities .............. 258,608 620,439
-------- --------------
LONG-TERM LIABILITIES
Stockholders' loans ...................... -- 5,082,897
Long-term loan ........................... -- 200,000
Accrued severance pay .................... -- 29,220
-------- --------------
Total long-term liabilities ............ -- 5,312,117
-------- --------------
Total liabilities ...................... 258,608 5,932,556
-------- --------------
STOCKHOLDERS' DEFICIENCY
Share capital ............................ 5,413 54,182
Share premium ............................ 2,179 8,636,155
Accumulated deficit ...................... -- (13,898,573)
-------- --------------
Total stockholders' deficiency ......... 7,592 (5,208,236)
-------- --------------
Less -- Cost of shares of parent com-
pany ................................... -- (500,000)
-------- --------------
Total stockholders' deficiency ......... 7,592 (5,708,236)
-------- --------------
Total liabilities and stockholders
deficiency ............................ $266,200 $ 224,320
======== ==============
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
Pro Forma Pro Forma
Adjustments SCNV
Acquisition Corp.
--------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents ................ $ -- $ 5,459
Trade receivables ........................ -- 33,377
Deferred public offering costs ........... -- 266,200
Other receivables and prepaid
expenses ............................... (40,000) 2(f) 28,306
------------------ -------------
Total current assets ................... (40,000) 333,342
------------------ -------------
EQUIPMENT
Cost ..................................... -- 244,116
Less -- accumulated depreciation ......... -- (126,938)
------------------ -------------
-- 117,178
------------------ -------------
Total assets ............................. $ (40,000) $ 450,520
================== =============
LIABILITIES AND
STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Short-term borrowing (mainly from
stockholder) ........................... $ -- $ 539,362
Sundry payables .......................... (40,000) 2(f) 177,521
Accrued expenses ......................... -- 122,164
------------------ -------------
Total current liabilities .............. (40,000) 839,047
------------------ -------------
LONG-TERM LIABILITIES
Stockholders' loans ...................... (5,082,897) 2(c) --
Long-term loan ........................... -- 200,000
Accrued severance pay .................... -- 29,220
------------------ -------------
Total long-term liabilities ............ (5,082,897) 229,220
------------------ -------------
Total liabilities ...................... (5,122,897) 1,068,267
------------------ -------------
STOCKHOLDERS' DEFICIENCY
Share capital ............................ (49,185) 2(a),2(e) 10,410
Share premium ............................ (5,767,872) 2(a),2(e) 2,870,462
Accumulated deficit ...................... 10,399,954 2(b)-2(e) (3,498,619)
------------------ -------------
Total stockholders' deficiency ......... 4,582,897 (617,747)
------------------ -------------
Less -- Cost of shares of parent com-
pany ................................... 500,000 2(d) --
------------------ -------------
Total stockholders' deficiency ......... 5,082,897 (617,747)
------------------ -------------
Total liabilities and stockholders
deficiency ............................ $ (40,000) $ 450,520
================== =============
</TABLE>

The accompanying notes and management's assumptions to the pro forma
consolidated financial statements are an integral part of this statement.

F-20
<PAGE>
SCNV ACQUISITION CORP.

PRO FORMA CONSOLIDTED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the year ended
June 30, 1997
--------------------------------------------------
Pro Forma
Solmecs SCNV
Corporation Pro Forma Acquisition
N.V. Adjustments Corp.
------------- -------------------- -------------
<S> <C> <C> <C>
REVENUES
Sales .................................. $ 51,841 $ -- $ 51,841
Contract services ...................... 5,435 -- 5,435
---------- ------------ ----------
Total revenues ..................... 57,276 -- 57,276
---------- ------------ ----------
COSTS AND EXPENSES
Research and development costs ......... 276,259 -- 276,259
Cost of merchandise purchased .......... 48,638 -- 48,638
Cost of services provided by
subcontractors ........................ -- -- --
Marketing expenses ..................... 42,906 -- 42,906
General and administrative expenses . 220,313 120,000 (2g) 340,313
---------- ------------ ----------
Total costs and expenses ........... 588,116 120,000 708,116
---------- ------------ ----------
Operating loss ..................... (530,840) (120,000) (650,840)
FINANCING EXPENSES, NET ................. (390,484) 380,000 (2h) (10,484)
---------- ------------ ----------
(921,324) 260,000 (661,324)
Other expenses, net ..................... -- -- --
---------- ------------ ----------
Net loss ........................... $ (921,324) $ 260,000 $ (661,324)
========== ============ ==========
Pro Forma Net loss per share ............ $ (0.64)
==========
Weighted average number of shares
outstanding ............................ 1,041,044
==========
<CAPTION>
For the nine months ended
March 31, 1998
--------------------------------------------------
Pro Forma
Solmecs SCNV
Corporation Pro Forma Acquisition
N.V. Adjustments Corp.
------------- ------------------- --------------
<S> <C> <C> <C>
REVENUES
Sales .................................. $ 6,511 $ -- $ 6,511
Contract services ...................... 32,365 -- 32,365
---------- ------------ ----------
Total revenues ..................... 38,876 -- 38,876
---------- ------------ ----------
COSTS AND EXPENSES
Research and development costs ......... 187,143 -- 187,143
Cost of merchandise purchased .......... 5,257 -- 5,257
Cost of services provided by
subcontractors ........................ 26,056 -- 26,056
Marketing expenses ..................... 73,234 -- 73,234
General and administrative expenses .... 190,589 90,000 (2g) 280,589
---------- ------------ ----------
Total costs and expenses ........... 482,279 90,000 572,279
---------- ------------ ----------
Operating loss ..................... (443,403) (90,000) (533,403)
FINANCING EXPENSES, NET ................. (301,239) 300,000 (2h) (1,239)
---------- ------------ ----------
(744,642) 210,000 (534,642)
Other expenses, net ..................... (1,055) -- (1,055)
---------- ------------ ----------
Net loss ........................... $ (745,697) $ 210,000 $ (535,697)
========== ============ ==========
Pro Forma Net loss per share ............ $ (0.51)
==========
Weighted average number of shares
outstanding ............................ 1,041,044
==========
</TABLE>
The accompanying notes and management's assumptions to the pro forma
consolidated financial statements are an integral part of these statements.

F-21
<PAGE>

SCNV ACQUISITION CORP.

NOTES AND MANAGEMENT'S ASSUMPTIONS TO
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

As of March 31, 1998 and for the year ended June 30, 1997 and
for the nine months ended March 31, 1998

1. Basis of Presentation

SCNV Acquisition Corp. (the "Company) was organized under the laws of the
State of Delaware on May 19, 1997, to raise equity capital, acquire Solmecs
Corporation N.V. ("Solmecs") and select, develop and commercially exploit
proprietary technologies, in various stages of development, invented primarily
by scientists who have recently immigrated to Israel from, and by scientists
and institutions in Russia and other countries that formerly comprised the
Soviet Union. In furtherance of these goals, the Company entered, on June 19,
1997, into a letter of intent with an underwriter to pursue an Initial Public
Offering of its common stock (the "IPO"). Simultaneously with the consummation
of the IPO, the Company will acquire all of the issued and outstanding capital
stock of Solmecs in consideration for 499,701 shares of the Company's common
stock issued to Bayou International, Ltd. ("Bayou"), the parent of Solmecs. The
acquisition has been accounted for as a purchase. The excess of purchase price
over fair value of assets acquired of $3,498,619, will be reflected as acquired
research and development in process and fully expensed at the date of the
acquisition.

The accompanying unaudited pro forma financial statements data reflects
the combined financial position and the results of the Company and Solmecs as
if the Combination had been effective as of March 31, 1998, July 1, 1996 and
July 1, 1997, respectively, without giving effect to the IPO.

This pro forma financial statement should be read in conjunction with the
historical financial statements and notes thereto of the Company as of March
31, 1998 (unaudited) and the financial statements of Solmecs as of June 30,
1997 and as of March 31, 1998 (unaudited). In management's opinion, all
material adjustments necessary to reflect the effects of the Combination have
been made.

The unaudited pro forma consolidated statements of operations is not
necessarily indicative of what actual results of operations of the Company
would have been assuming the Combination had been completed as of July 1, 1996
and July 1, 1997, respectively, nor is it necessarily indicative of the results
of operations for future periods.

2. Adjustments to Pro Forma Consolidated Financial Statements

The adjustments were made in order to reflect:

(a) The acquisition of Solmecs in consideration for 499,701 shares of the
Company's common stock issued to Bayou for a purchase price of
$2,873,280.

(b) One-time write-off of acquired research and development in process of
$3,498,619.

(d) The return of Bayou's shares held by Solmecs, amounted to $500,000.

(e) Consolidation of the Company's financial statements with Solmecs
financial statements.

(f) The elimination of inter-companies balances.

(g) The payment of approximately $120,000 (approximately $30,000 per
quarter) to officers in accordance with employment agreements.

(h) The elimination of imputed interest on the forgiven Bayou loan.

F-22

<PAGE>
================================================================================
No dealer, sales person or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus, and, if given or made, such information or representations must not
be relied upon as having been authorized by the Company or the Underwriter.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any security other than the securities offered by this Prospectus,
or an offer to sell or a solicitation of an offer to buy any securities by
anyone in any jurisdiction in which such offer or solicitation is not
authorized or is unlawful. The delivery of this Prospectus shall not, under any
circumstances, create any implication that the information contained herein is
correct as of any time subsequent to the date hereof.

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

TABLE OF CONTENTS

Page
---------
Prospectus Summary ....................... 3
The Company .............................. 8
Risk Factors ............................. 11
Use of Proceeds .......................... 19
Dilution ................................. 20
Capitalization ........................... 21
Selected Financial Data .................. 22
Management's Discussion and Analysis of
Financial Condition and Results of
Operations ............................ 23
Business ................................. 27
Management ............................... 36
Principal Stockholders ................... 39
Certain Transactions ..................... 40
Conditions in Israel ..................... 41
Description of Securities ................ 42
Shares Eligible for Future Sale .......... 44
Certain Tax Considerations ............... 45
Underwriting ............................. 48
Experts .................................. 50
Legal Matters ............................ 50
Additional Information ................... 50
Index to Financial Statements ............ F-1

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

Until September 27, 1998 (90 days after the date of this Prospectus), all
dealers effecting transactions in the securities offered hereby, whether or not
participating in this distribution may be required to deliver a Prospectus. This
is in addition to the obligation of dealers to deliver a prospectus when acting
as underwriters and with respect to their unsold allotments or subscriptions.

================================================================================
<PAGE>

================================================================================

1,041,044 Units

SCNV ACQUISITION
CORP.

1,041,044 Shares of Common Stock
and
Class A Redeemable Warrants to
Purchase
1,041,044 Shares of Common Stock

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

PROSPECTUS

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

Patterson Travis, Inc.

June 29, 1998

================================================================================