<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

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

                FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30, 1997

[ ]      TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

                         Commission file number 0-11969
                     MEHL/BIOPHILE INTERNATIONAL CORPORATION
             (Exact name of registrant as specified in its charter)

         DELAWARE                                     22-2408186
(State or other jurisdiction of                    (I.R.S. Employer
incorporation or organization)                    Identification No.)

                               4127 N.W. 27th Lane
                           Gainesville, Florida 32606
                    (Address or principal executive offices)

       Registrant's telephone number, including area code: (352) 373-2565

Securities registered pursuant to Section 12(b) of the Act:  None

           Securities registered pursuant to Section 12(g) of the Act:
                          Common Stock, $.01 par value


Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No



The number of shares outstanding of the Registrant's class of common stock, as
of November 30, 1997 is 43,993,301 shares of common stock, $.01 par value.
<PAGE>   2
                     MEHL/BIOPHILE INTERNATIONAL CORPORATION

                                      Index

<TABLE>
<CAPTION>
                                                                             Page
<S>      <C>                                                                 <C>
PART I.  FINANCIAL INFORMATION:                                       
                                                                      
         Item 1.      Financial Statements:                           
                                                                      
                      Condensed consolidated balance sheet as         
                      of November 30, 1997                                     3
                                                                      
                      Condensed consolidated statements of            
                      operations for the six and three months ended   
                      November 30, 1997 and 1996                               4-5
                                                                      
                      Condensed consolidated statements of            
                      cash flows for the six months ended             
                      November 30, 1997                                        6-7
                                                                      
                      Notes to condensed consolidated financial       
                      Statements                                               8
                                                                      
         Item 2.      Management's discussion and analysis of         
                      financial condition and results of operations            10
                                                                      
PART II. OTHER INFORMATION:                                           
                                                                                                                
         Item 3.      Exhibits and Reports on Form 8-K                         15

         Item 5.      Other Information                                        15                          

                      Signature                                                17
</TABLE>                                                              
                                                                      
                                       2
<PAGE>   3
PART I.           FINANCIAL INFORMATION:

ITEM 1.           FINANCIAL STATEMENTS

                     MEHL/BIOPHILE INTERNATIONAL CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEET
                                   (UNAUDITED)
                                NOVEMBER 30, 1997

<TABLE>
<CAPTION>
                                     ASSETS
<S>                                                                           <C>
CURRENT ASSETS:                                                               $
  Cash and equivalents                                                            520,997
  Accounts Receivable, net of allowance for doubtful accounts of $271,535         975,712
  Inventories                                                                   5,827,892
  Current portion of note receivable                                               74,926
  Other current assets                                                          1,175,517
                                                                              -----------
         Total Current Assets                                                   8,575,044

PROPERTY AND EQUIPMENT, net of accumulated depreciation of $2,007,651           5,446,864
PATENTS AND PATENT RIGHTS, net of accumulated amortization of $2,140,705        4,467,527
NOTES AND LOANS RECEIVABLE, net of current portion                                400,000
OTHER ASSETS                                                                       13,790
DEFERRED LOAN COSTS net of accumulated amortization of $271,754                   123,127
                                                                              -----------
Total Assets                                                                   19,026,352
                                                                              -----------

                      LIABILITIES AND STOCKHOLDERS' EQUITY          

CURRENT LIABILITIES:
  Short Term Loan                                                               7,000,000
  Accounts Payable                                                              4,889,487
  Accrued Expenses                                                              1,661,774
  Other Current Liabilities                                                        57,165
                                                                              -----------
         Total Current Liabilities                                             13,608,426
                                                                              -----------

STOCKHOLDERS' EQUITY:
  Serial preferred stock, $10 par value, $1,000 stated value, authorized -
  200,000 shares:
     Series E, 5% cumulative convertible; issued and outstanding -
      12,231 shares                                                            12,231,000
  Common stock, $.01 par value, 60,000,000 shares
  Authorized - 46,468,260 shares issued                                           464,683
  Additional paid-in-capital                                                   26,749,304
  Accumulated deficit                                                         (33,067,828)
  Foreign currency translation adjustment                                          (3,634)
                                                                              -----------
                                                                                6,373,525
 Treasury stock, at cost, 2,474,959 common shares                                (955,599)
                                                                              -----------
         Total Stockholders' Equity                                             5,417,926
                                                                              -----------
Total Liabilities and Stockholders' Equity                                     19,026,352
                                                                              -----------


</TABLE>
                SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                       3
<PAGE>   4
                     MEHL/BIOPHILE INTERNATIONAL CORPORATION
                                AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                         SIX MONTHS ENDED
                                                           NOVEMBER 30
                                                     1997               1996
                                                     ----               ----
                                                                    (as restated)
<S>                                              <C>                <C>
                                                 $                   $
REVENUES                                           1,829,813          1,837,198
                                               
COST OF REVENUES                                   1,389,235            940,542
                                                 ------------------------------
                                               
GROSS MARGIN                                         440,578            896,656
                                                 ------------------------------
                                               
OPERATING EXPENSES:                            
  Selling, general and administrative              8,562,930          3,392,130
  Research and development                           656,543            693,779
                                                 ------------------------------
TOTAL OPERATING EXPENSES                           9,219,473          4,085,909
                                                 ------------------------------
                                               
OPERATING LOSS                                    (8,778,895)        (3,189,253)
                                                 ------------------------------
                                               
OTHER INCOME (EXPENSES)                        
Investment income                                     71,088           (297,873)
Interest Expense                                    (226,830)           (18,702)
                                               
NET LOSS                                          (8,934,637)        (3,505,828)
                                                 ------------------------------
                                               
NET LOSS PER COMMON SHARE                              (0.24)             (0.09)
                                               
LOSS APPLICABLE TO COMMON STOCK                  (10,427,624)        (3,741,653)
</TABLE>

               SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                       4
<PAGE>   5
                     MEHL/BIOPHILE INTERNATIONAL CORPORATION
                                AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                        THREE MONTHS ENDED
                                                            NOVEMBER 30
                                                     1997               1996
                                                     ----               ----
                                                                   (as restated)
<S>                                              <C>                <C>
                                                 $                  $
REVENUES                                              977,095            331,507
                                                                  
COST OF REVENUES                                      697,498            141,956
                                                  ------------------------------
                                                                  
GROSS MARGIN                                          279,597            189,551
                                                  ------------------------------
                                                                  
OPERATING EXPENSES:                                               
  Selling, general and administrative               4,013,586          1,869,247
  Research and development                            373,506            385,976
                                                  ------------------------------
TOTAL OPERATING EXPENSES                            4,387,092          2,255,223
                                                  ------------------------------
                                                                  
OPERATING LOSS                                      4,107,495          2,065,672
                                                  ------------------------------
                                                                  
OTHER INCOME (EXPENSES)                                           
Investment income                                      39,500           (471,586)
Interest Expense                                     (179,443)            (4,425)
                                                                  
NET LOSS                                           (4,247,438)        (2,541,683)
                                                  ------------------------------
                                                                  
NET LOSS PER COMMON SHARE                               (0.12)             (0.06)
                                                                  
LOSS APPLICABLE TO COMMON STOCK                    (5,131,418)        (2,652,508)
</TABLE>                                                      
                SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                       5
<PAGE>   6
                     MEHL/BIOPHILE INTERNATIONAL CORPORATION
                                AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                            SIX MONTHS ENDED
                                                                                               NOVEMBER 30
                                                                                        1997               1996
                                                                                        ----               ----
                                                                                                       (As restated)
<S>                                                                                <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:                                              $                   $

Net loss                                                                             (8,934,637)        (3,505,828)
Adjustments to reconcile net loss to net cash provided by operating
activities:

Provision for bad debts                                                                (400,173)
Provision for obsolete inventory                                                       (139,833)
Provision for notes and loans receivable                                                248,963
Realized loss on marketable and non marketable security investments                   1,611,438            542,127
Depreciation and amortization                                                                75            506,615

Changes in operating assets and liabilities, net of effects of acquisitions:

Accounts receivable                                                                    (200,957)           437,108
Inventories                                                                          (5,029,744)        (1,492,464)
Other operating assets                                                                 (293,764)          (745,105)
Accounts payable                                                                      1,076,224          1,115,072
Accrued expenses                                                                        (10,198)           189,236
Other operating liabilities                                                              91,159
                                                                                   -------------------------------

Net cash provided (used) by operating activities                                    (11,981,447)        (2,953,239)
                                                                                   -------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES:

Increase in notes and loans receivable                                                 (118,662)          (716,296)
Property and equipment acquisitions                                                   1,178,077           (645,408)
Proceeds from sale of marketable securities                                                                477,690
                                                                                   -------------------------------

Net cash used by investing activities                                                 1,059,415           (884,014)
                                                                                   -------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:

Common stock, net of issuance costs                                                                        204,172
Loans received                                                                        7,000,000
Note repayments                                                                                           (138,248)
Preferred stock dividends paid                                                         (155,285)          (153,521)
                                                                                   -------------------------------

Net cash from financing activities                                                    6,844,715            (87,597)


EFFECT OF EXCHANGE RATE ON CASH                                                         (90,993)           129,419
                                                                                   -------------------------------

DECREASE IN CASH FOR THE PERIOD                                                      (4,168,310)        (3,795,431)

CASH AND EQUIVALENTS, beginning of period                                             4,689,307          9,838,998
                                                                                   -------------------------------

CASH AND EQUIVALENTS, end of period                                                     520,997          6,043,567
                                                                                   -------------------------------
</TABLE>

               SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                       6
<PAGE>   7
                     MEHL/BIOPHILE INTERNATIONAL CORPORATION
                                AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                                         SIX MONTHS ENDED
SUPPLEMENTAL SCHEDULES OF NON-CASH, INVESTING AND                                            NOVEMBER 30
FINANCING ACTIVITIES
                                                                                       1997                1996
                                                                                                       (As restated)
<S>                                                                                  <C>               <C>
                                                                                     $                  $
EXISTING BUSINESS ACQUISITION COSTS:                                                                    
     Issuance of common stock                                                                               543,292
     Loans and advances applied toward purchase price                                                     1,946,380
                                                                                                        -----------
                                                                                                        $ 2,489,672
                                                                                                        -----------
                                                                                                        
COMPONENTS OF ACQUIRED BUSINESSES, IN AGGREGATE, ARE AS FOLLOWS:                                        
     Accounts receivable                                                                                    534,448
     Inventories                                                                                            204,748
     Property and equipment                                                                                 222,952
     Patents and patent rights                                                                            5,183,180
     Other assets                                                                                             4,188
     Accounts payable and accrued expenses                                                               (1,028,515)
     Current portion of notes and loans                                                                  (1,119,838)
     Long-term debt                                                                                        (804,885)
     Other liabilities                                                                                      (83,134)
                                                                                                        -----------
                                                                                                        $ 3,113,144
                                                                                                        -----------
                                                                                                        
NOTES, LOANS AND ADVANCES USED TO RETIRE DEBT OF ACQUIRED BUSINESS                                      $ 1,253,620
                                                                                                        -----------
ISSUANCE OF COMMON STOCK:                                                                               
                                                                                                        
     Conversion of debt, net of unamortized issue costs                                                    $714,978
                                                                                                        -----------
     Payment of accrued interest                                                                            $16,436
                                                                                                        -----------
     Conversion of preferred stock                                                                      $ 1,729,000
                                                                                                        -----------
                                                                                                        
PREFERRED STOCK DIVIDEND EQUAL TO INTRINSIC VALUE OF BENEFICIAL                                         
CONVERSION FEATURES                                                                   1,187,211         
                                                                                     ----------
                                                                                                        
VALUATION OF DEFERRED LOAN COSTS ARISING IN CONJUNCTION WITH DEBT                       394,881         
                                                                                     ----------
</TABLE>

                 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                       7
<PAGE>   8

                    MEHL/BIOPHILE INTERNATIONAL CORPORATION
                                AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

1.       BASIS OF PRESENTATION
         The accompanying unaudited condensed financial statements have been
         prepared in accordance with generally accepted accounting principles
         for interim financial information and with the instructions to Form
         10-QSB and Regulation S.B.  Accordingly, they do not include all of
         the information and footnotes required by generally accepted
         accounting principles for complete financial statements.  In the
         opinion of management, all adjustments (consisting of normal recurring
         accruals) considered necessary for a fair presentation have been
         included.  Operating results for the three months and six months ended
         November 30, 1997 are not necessarily indicative of the results that
         may be expected for the year ending May 31, 1998.  For further
         information, refer to the consolidated financial statements and
         footnotes thereto included in the Company's annual report on Form
         10-KSB for the year ended May 31, 1997.

         The accounting policies followed by the Company are set forth in Note
         1 to the Company's financial statements in the 1997 MEHL/Biophile
         International Corporation and Subsidiaries Annual Report on form
         10-KSB for the year ended May 31, 1997.

2.       CAPITAL TRANSACTIONS

         On August 5, 1997, the Company completed a loan agreement with
         Clearwater Fund IV, LLC ("Clearwater") whereby the Company has
         borrowed  $7 million to be used in connection with the manufacture and
         delivery of laser hair removal systems and for general working capital
         purposes. The loan bears interest at 15% per annum payable in arrears
         on a monthly basis and was due on January 15, 1998 (Note 3 below
         describes an agreement to extend the period of the loan).  The loan is
         secured by all of the Company's assets and approval must be obtained
         from Clearwater for all expenditures made with the loan proceeds.  As
         additional consideration for the loan, the Company agreed to issue
         common stock purchase warrants according to the following schedule:

<TABLE>
<CAPTION>
                 Date                      Shares                   Price            Expiration
                 ----                      ------                   -----            ----------
         <S>                               <C>                      <C>              <C>

         08/05/97                            750,000                $2.50            08/05/02
         Date of second borrowing            750,000                $2.50            5 years from date of
                                                                                     second borrowing
         10/02/97                          1,000,000                $2.50            07/15/02
         12/02/97                            500,000                $2.50            07/15/02
</TABLE>

         The cost of these warrants, as valued using the Black Scholes model,
         is included as a deferred loan cost and is amortized over the period
         of the loan.  The deferred cost and amortization applied in the six
         month period covered by these financial statements are $394,881 and
         $123,127.

         Included as part of the loan agreement, the Company agreed to exchange
         all 2,231 shares of  $1,000 stated value Series C, 5% cumulative
         preferred stock and all 10,000 shares of $1,000 stated value Series D,
         5% cumulative convertible preferred stock for 12,231 shares of $1,000
         stated value Series E, 5% cumulative convertible preferred stock
         ("Series E").

         Each share of Series E stock is convertible into common stock of the
         Company at 80% of the average market price on the five trading days
         prior to conversion with no minimum price, but in no event shall the
         conversion price be greater than $3.125.  The Company has filed a
         registration statement covering the public sale of the shares of
         common stock receivable upon conversion of the




                                      8
<PAGE>   9
         Series E stock and the holders agreed not to sell or transfer any such
         shares on or before February 28, 1998. The conversion price of the
         Series E stock is subject to an adjustment whereby for each complete
         month after the end of August 1997 that the common stock receivable
         upon conversion have not been registered, the conversion discount will
         increase by 2%.  At the end of November 1997, the conversion discount
         applying to these shares was 26%. Dividends of 5% per annum are to be
         paid quarterly ($152,888 per quarter) beginning August 31, 1997.  The
         implied dividend from the discount attributable to the conversion
         rights contained within the Series E stock and represented in these
         financial statements as a loss to common stock holders for the period
         is $1,187,211.
        
         In connection with the Loan Agreement dated as of August 5, 1997
         between the Company and Clearwater, Thomas L. Mehl, Sr., the Company's
         Chairman, guaranteed the repayment to Clearwater of all amounts
         borrowed by the Company and pledged all of the shares of Common Stock
         of the Company owned by him, amounting to 8,425,000 shares, as
         security for repayment of such borrowed amounts.                      

3        RECENT EVENTS

         The Clearwater loan dated August 5 and referred to in Note 2 above,
         was due for repayment on January 15, 1998.  An amendment to this
         agreement ("the Amendment"), dated January 16, 1998, was reached
         between the Company and Clearwater whereby:

         1)  Clearwater agreed to extend the due date of their $7 million
             loan by 90 days and provide additional extensions of 30 days
             on the remaining outstanding principal balance for each
             $1million of principal paid.  All other terms of the loan
             agreement remain in force.
         2)  The Company agreed to:
             a)  Continue to pay interest on the loan when due;
             b)  Make ongoing repayments of the loan amounting to:
                 *  10% of the gross sales proceeds from the sale of any hair 
                    removal lasers; 
                 *  10% of the gross proceeds from the financing of lasers
                    (e.g. from Medcap, as described below); 
                 *  100% of the outstanding balance due upon receipt of any
                    capital injection (debt or equity) in excess of $10 million;
                 *  25% of the proceeds from any capital injection of less
                    than $10 million

         In connection with the Amendment, Thomas L. Mehl Sr. and Nardo Zaias
         each agreed to contribute four million shares of the Common Stock to
         the treasury of the Company.  The contribution of capital by Dr. Zaias
         is to be effective immediately and the contribution by Mr. Mehl is to
         be effective upon the release of the pledge of his stock in the
         Company to secure the repayment of the $7 million loan from
         Clearwater.  In consideration to the capital contribution, Dr. Zaias
         received an option from the Company to purchase 4 million shares of
         Common Stock at $5 per share.  This option is exercisable on or after
         January 16, 2000 and expires on January 16, 2003.   Mr. Mehl will
         receive an option with the same terms upon the effectiveness of his
         capital contribution to the Company.

         Pursuant to the Amended and Restated Agreement and Plan of Merger
         dated as of June 4, 1996 between the Company, Classy Lady by Mehl of
         Puerto Rico ("Classy Lady") and Selvac Acquisition Corp. ("Merger
         Agreement"), individuals designated by a majority of the stockholders
         of Classy Lady had the right to share in certain proceeds derived from
         the sale of laser hair removal joint ventures entered into by the
         Company or its subsidiaries.  The Company has disclosed that the
         recipients to share in such proceeds were Thomas L. Mehl Sr. and Nardo
         Zaias. In connection with the Amendment to the Clearwater Loan
         Agreement, the Company, Mehl Technologies, Inc.




                                      9
<PAGE>   10
         (the successor to Classy Lady), Mr. Mehl and Dr. Zaias entered into a
         Termination Agreement, dated January 16, 1998, which eliminated the
         revenue sharing provisions set forth in the Merger Agreement.

         In connection with the contribution by Nardo Zaias of Common Stock to
         the Treasury of the Company and the waiver by Dr Zaias to receive any
         proceeds from the sale of laser hair removal joint ventures, Mehl
         Technologies, Inc. ("MTI") agreed that if MTI enters into a third
         sublicense arrangement under the exclusive sublicense held by MTI for
         the method of hair removal patented by Dr. Zaias: 
         1)  MTI will pay to Dr. Zaias 25% of the revenues derived by MTI
             from the third sub license; and 
         2)  If all or substantially all the assets or stock of MTI are 
             sold, Dr. Zaias will have the right to receive 25% of
             the fair market value of the third sublicense at the time of
             such sale payable in the form of consideration paid in the
             sale transaction.
         Under the joint venture presently in effect with Laser Industries
         Limited ("LIL"), MTI is not permitted to enter into a third
         sublicense.  This sublicense will only be entered into if the joint
         venture with LIL is terminated or if MTI otherwise reaches an
         agreement or settlement with LIL to permit such sublicense.

         On December 9 and 11, 1997, the Company entered into a two
         subscription agreements whereby J. Barrie Farrington and Pacific
         Advisors Ltd purchased an aggregate of 1,500, Convertible Preferred
         Stock, Series F for an aggregate consideration of $1,500,000.  The
         shares do not pay a dividend but are entitled to receive a dividend
         along with the holders on Common Stock on an as-if-converted basis.
         The shares are convertible into Common Stock of the Company, par value
         $0.01 per share (Common Stock), at any time 40 days after the issuance
         of the shares.  The shares are convertible at 75% of the average
         closing bid price for the five trading days immediately prior to the
         conversion.  The conversion price is subject to adjustment so that if,
         at the end of any month after the date which is 40 days after the
         original issuance date of the shares, the average closing bid price of
         the Common Stock on the five consecutive days prior to the end of such
         month is less than $1.50, then, in each case the percentage discount
         from the market price shall be increased by 2%. The shares were sold in
         reliance on Regulation S promulgated under the Securities Act 1993.
         The Company used the proceeds of this offering for working capital
         purposes.

         The intended acquisition of Converting Laboratories, Inc. ("CLI"),
         reported previously, has not been completed. CLI is the manufacturer
         of one the Company's new consumer products, the hair removal patch.
         The Company is continuing to evaluate the final terms of the
         transaction with a view to making a decision during 1998.  The Company
         has advanced a total of $969,065 to CLI, of which $156,065 has been
         paid in the six months to November 30, 1997.  The whole amount has
         been reserved.

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

RESULTS OF OPERATIONS:

         The Company has continued to accumulate losses and utilize its cash
         resources while developing its laser hair removal and consumer
         products businesses.  The loss for the three months and six months to
         November 30, 1997 was $4,247,438 and $8,934,637 respectively. The
         Company's revenues for the six months to November 30, 1997 have fallen
         marginally to $1,829,813 compared to $1,837,198 for the same period in
         1996.  However the losses have increased from $3,505,828 to
         $8,934,637. The Company's overall gross margin percentage has fallen
         in relation to the comparative period from 48.8% to 24%.  This results
         from lower margins arising in the Consumer Products Division and the
         high initial direct costs associated with installation of lasers and
         training customers under the Laser Services Agreement.  However, the
         principal contributory factor to the increase in losses is the rise in
         operating expenses from $4,085,909 to $9,219,473.           
        

                                      10
<PAGE>   11
         The increase in losses has resulted from the relatively high selling,
         general, administration costs, including legal costs associated to
         defend the Company's intellectual property rights, as the Company
         continues to its develop both its laser hair removal business and
         Consumer Products Division.  The main components of operating expenses
         for the period were Payroll ($2,146,004), Depreciation and
         Amortization ($1,611,438) Marketing & Selling ($927,990), Legal &
         Professional ($922,320) and Travel ($748,366).   The Company has
         identified savings in operating overheads, including significant
         payroll reductions, which will be implemented immediately.   Further
         the Company anticipates Legal & Professional and Travel costs to be
         similarly reduced.  Marketing & Selling costs are likely to increase
         as a result of the planned continued development of the business.

         The Company has continued its litigation actions against Laser
         Industries, Palomar and Spectron and this has been the principal
         reason for the Company incurring high legal costs.

         Research and Development costs have continued at a rate similar to the
         previous period especially as they relate to the continuing
         development of the Company hair removal laser products and the
         research into the hair removal treatment methods.  The Company
         anticipates similar continuing research and development costs into
         existing and new products areas.

         Laser Hair Removal

         Although the Company's total revenue is similar to the previous
         period, the mix of revenues has changed significantly reflecting the
         overall changing nature of the Company's operations.  The Company's
         laser hair removal division has generated 60% of the Company's
         revenue.  The decision to sell lasers has had an immediate effect on
         revenue as these laser sales of  $591,391 represented 32.3% of
         revenue. Revenue arising from the Company's share of laser hair removal
         services offered by the Company's licensed customers was $334,183 or
         18.3% of total revenue.

         Revenue generated by laser hair removal is below the Company's
         expectation.  As at January 16, 1998, the Company has placed 130
         lasers, which includes 69 in North America.  Recognizing that the
         Company has yet to realize the full potential of these contracts, the
         Company has adopted a revised marketing support program devised to
         enhance the ability of the licensed customer to generate a continuing
         income stream from laser hair removal services.  The Company
         anticipates that this program, which uses initial training and ongoing
         support to enhance the marketing activities of the customer, will lead
         to enhanced revenue generation.  The development of this marketing
         program in the short term, and therefore the increase in revenues, is
         dependent upon the Company being able to raise additional working
         capital to fund the program.

         Consumer Products

         Revenues from Consumer products were $731,880, at a gross margin of
         36%.  The division made a loss $140,682 compared to a profit of
         $294,936 for the comparative period in 1996.  The division's revenue
         and gross margin suffered from the phasing out of its Finally Free(tm)
         Ultra from its principal market, Japan, ahead of the launch of its
         replacement product the Finally Free(tm) Ultra Plus in November 1997.
         The division's future prospects were improved in October 1997 when the
         Company received FDA clearance to market the Finally Free Ultra in the
         United States.  The Company is actively marketing its products in the
         United States and anticipates significant revenue growth during 1998.
         A new product, the hair removal patch was launched in early January
         1998. This accessory to the Finally Free product is expected to result
         in increased sales of the Company's products throughout 1998 and
         initial levels of interest from the Company's overseas customers have
         been very encouraging.


                                      11
<PAGE>   12
FINANCIAL CONDITION

         The Company has continued to absorb cash resources as it builds its
         hair removal and consumer products divisions.  During the six month
         period to November 30, 1997 cash consumed by operating and investing
         activities of $10,922,032 was partly offset by the Clearwater loan of
         $7,000,000.  Otherwise the Company has utilized the majority of its
         available cash resources.  Cash at the end of the period was $520,997.
         Over the six month period to November 30, 1997, the Company has been
         consuming cash at an average rate of nearly $2 million per month,
         however as a result of the reductions in operating overhead costs
         mentioned above, the Company expects this consumption to significantly
         reduced with immediate effect.  The Company has suffered a severe cash
         shortage in the period to November 30, 1997.  The cash shortage has
         had a material effect on the way the business has been operated.
         During this period and in the intervening period the Company has not
         been able to meet all of its creditor payments as they have fallen
         due.  Although the Company has negotiated extended credit terms with
         some of its vendors, the cash shortage has had led to a shortage of
         some component parts for the manufacture, service and maintenance of
         its laser systems. This shortage in turn has led to a loss of income
         from customer's lasers being out of operation for a period.  The
         Company needs to locate additional sources of working capital in order
         to pay its current outstanding creditors.

         Under the terms of the agreement reached on January 16, 1998 the
         Clearwater loan repayment has been extended 90 days beyond its
         original repayment date of 15th January 1998.  The loan will be
         further extended by periods of 30 days, should the Company be able to
         make a payment of $1 million before the end of the 90 day extension.
         Subsequent payments of $1 million will give the Company further 30 day
         extension periods.  The Company is neither currently generating
         sufficient income, nor has the cash available to make this repayment.
         The Company will default on the repayment unless additional working
         capital financing can be located.  Management believes it has
         identified potential sources of capital sufficient to meet these
         obligations. The Company is not able, however, to make any assurances
         that the financing will be available before the revised repayment
         date.        

         In December 1997, the Company sold 1,500 Series F Preferred Shares for
         $1,500,000.  The proceeds of this sale have been used for operating
         purposes and payment of outstanding trade payables.  All cash
         generated from operations since the period end has been used to fund
         continuing operations.

         In December 1997, the Company entered into a financing arrangement
         with the Medcap Financial Corporation Inc. ("Medcap").  Under this
         agreement the Company will receive approximately $100,000 for each of
         its Chromos 694 ruby laser hair removal systems placed, under the
         terms of a new Laser Services Agreement, with customers in the United
         States.  The new Laser Services Agreement requires the Company's
         customers to commit to a minimum monthly payment over the term of a
         three year contract.  The lasers will become the property of Medcap
         for the term of the agreement and the Company has assigned its rights
         to the minimum monthly guaranteed amount to Medcap.  There is no
         recourse by Medcap to the Company in the event of a customer
         defaulting the minimum monthly payment. The Company has the right to
         repurchase the laser at the end of the term of the agreement for $10.
         The Company has received approval for financing of new Laser Services
         Agreements but has not yet completed any.

         Medcap has also agreed to provide approximately $100,000 for existing
         lasers providing the customers agree to switch to the new format
         contract.  The new Laser Services Agreement allows the share of
         revenues due to the Company to reduce if certain gross income targets
         are reached.

         As at November 30, 1997, the Company had outstanding accounts payables
         and accrued expenses of $6,551,261.  A large proportion of this is
         overdue.  If Company does not receive additional working capital, the
         ability of the company to continue operating will be severely
         diminished, as revenues are not currently sufficient to generate
         enough cash to settle outstanding accounts

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<PAGE>   13
         payable.  While the Company has identified additional potential
         sources to settle outstanding accounts payable, it can not make
         assurances that such funding will be achieved.

         The Company's cash flow statement for the six months to November 30,
         1997 shows disposal of plant & equipment of $1,178,077.  This has not
         generated cash inflow, but reflects an accounting change in the
         classification of assets between inventory and plant & equipment.  The
         reduction in plant & equipment is matched by a corresponding increase
         in inventory.  This arises due to an amendment in the Company's policy
         to build laser systems and accessories for its own use only.  The
         Company has made two changes in policy leading to the change in
         accounting treatment.  Firstly, a finance deal with Medcap, discussed
         above, will result in the Company selling the lasers to Medcap.
         Secondly, the Company has decided to sell lasers outright to customers
         in certain geographic territories of the world where a revenue sharing
         license arrangement is not financially attractive.  Had this change
         not taken place the Company's plant & equipment would have increased
         by $4,069,901.  The Company's increase in inventory of $5,029,744 is
         likewise affected and had this change not taken place the Company's
         inventory would have decreased by $218,234.

         Together with the introduction of the Medcap financing arrangement the
         Company has undertaken other measures designed to reduce the cash
         usage of the business.  Firstly, the Company is concentrating on
         cutting its cash outflows by reducing its fixed operating overhead.
         The Company does not anticipate its operations will be materially 
         affected by  these reductions.  Secondly, the Company has identified
         opportunities to increase its cash inflows from revenues generated. 
         As mentioned above, the Company has decided to sell laser systems
         outright in addition to boosting its revenue sharing program by
         introducing an enhanced  marketing support program.  This program has
         included the reallocation of the Company's resources to train and
         assist licensed customers develop their hair removal businesses
         through planned advertising and media campaigns.
        
         A temporary cessation in the contracting of the Company's Chromos 694
         ruby laser hair removal system while a source of laser financing (e.g.
         Medcap) was secured has resulted in the Company holding inventory of
         finished goods, work in progress and raw materials at the end November
         30, 1997 of $5,286,544 relating to its laser products.  The Company
         expects that the development of third party sales of laser systems and
         accessories will not only boost revenues but will result in
         inventories being held at lower levels.

         The Company has identified it needs to locate additional working
         capital of between $5 million and $10 million, to finance outstanding
         payables, repay the Clearwater loan and fund ongoing operations until
         the Company generates a positive cash flow. The amount of financing
         required will depend on the volume of laser sales and the revenue
         growth from Laser Service Agreements.  It is also dependent upon the
         amount of cash raised from laser financing (Medcap) resulting from new
         laser placements and the conversion of existing contracts to the new
         Laser Services Agreement.
        
CERTAIN FACTORS AFFECTING FUTURE OPERATING RESULTS

         This Form 10-QSB contains forward-looking statements within the
         meaning of Section 27A of the Securities Act of 1933 and Section 21B
         of the Securities Exchange Act of 1934. The Company's actual results
         could differ materially from those set forth in the forward-looking
         statements.  Factors that might cause such a difference include those
         discussed below.

         The Company's future results of operations initially depend to a
         substantial degree on the ability of the Company to: 
         1)  Raise additional working capital; 
         2)  Place lasers under the new Laser Service Agreement and thus 
             release working capital from Medcap; 
         3)  Persuade its targeted number of existing customers to adopt the new
             Laser Services Agreement and thus release working capital from 
             Medcap;

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<PAGE>   14
         4)   Fund the full implementation of its new marketing program and
              to achieve the expected levels of revenue share income growth;
              and
         5)   Make sufficient operating overhead cuts to reduce the cash
              outflow from the Company.  
         No assurance can be given that the Company will succeed in any or
         all of the above.

         The ability of the Company to generate revenues from Laser Services
         Agreements will in part depend on the public's acceptance of the use
         of lasers to remove hair, as to which there can be no assurance.  It
         will also be dependent upon the strength of the Company's competitors
         and the ability of those competitors to sell lasers into the same
         target markets as those of the Company.  The Company's existing or
         potential competitors have or may have substantially greater research
         and development capabilities, clinical, manufacturing, regulatory and
         marketing experience and financial and managerial resources than the
         Company.

         Further, the Company's future results may depend upon the Company's
         ability to successfully defend its intellectual property rights and in
         particular on the outcome of the current litigation against Palomar
         which alleges infringement of the Zaias patent. While Management
         believes the Company's patents are valid, no assurances can be given
         that the Company will able to successfully defend its intellectual
         property.

         Although Management believes the use of lasers is currently the most
         effective for long term hair removal, the Company can not make any
         assurances that a technological innovation by a competitor will not
         render its products obsolete.









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<PAGE>   15
PART II. OTHER INFORMATION

ITEM 3.  EXHIBITS AND REPORTS ON FORM 8-K

Exhibits:

         11       Computation of Net Loss Per Common Share
         27       Financial Data Schedule
         99.2     Consolidated Statements of Changes in Stockholders Equity

Reports on Form 8-K:
         The company filed the following Current Report on Form 8-K during the
         second quarter of 1998:

         Current Report on Form 8-K/A dated September 26, 1997


ITEM 5.  OTHER INFORMATION

         Antonius H. Clemens resigned from the office of Director in September
         1997.  At a meeting of the Board of Directors on January 12, 1998 Paul
         W. Hartloff Jr. resigned from the office of Director of the Company and
         AnnMarie Mehl resigned from offices of Director and Secretary of the
         Company.  At the same meeting David E. Fowler was appointed as
         Secretary of the Company. On January 15, 1998, Dr. Pitchit 
         Suvanprakorn resigned from the office of Director of the Company.

         The Clearwater loan dated August 5, 1997 was due for repayment on
         January 15, 1998.  An amendment to the loan agreement ("the
         Amendment") was reached between the Company and Clearwater on January
         16, 1998, whereby:

         1)  Clearwater agreed to extend the due date of their $7 million
             loan by 90 days and provide additional extensions of 30 days
             on the remaining outstanding principal balance for each
             $1million of principal paid.  All other terms of the loan
             agreement remain in force.
         2)  The Company agreed to:
             a)  Continue to pay interest on the loan when due;
             b)  Make ongoing repayments of the loan amounting to:
                 *  10% of the gross sales proceeds from the sale of any
                    hair removal lasers; 
                 *  10% of the gross proceeds from the financing of lasers
                    (e.g. from Medcap, as described below); 
                 *  100% of the outstanding balance due upon receipt of 
                    any capital injection (debt or equity) in excess of
                    $10 million;
                 *  25% of the from any capital injection of less than $10
                    million
             
         In connection with the Amendment, Thomas L. Mehl Sr. and Nardo Zaias
         each agreed to contribute four million shares of the Common Stock to
         the treasury of the Company.  The contribution of capital by Dr. Zaias
         is to be effective immediately and the contribution by Mr. Mehl is to
         be effective upon the release of the pledge of his stock in the
         Company to secure the repayment of the $7 million loan from
         Clearwater.  In consideration to the capital contribution, Dr. Zaias
         received an option from the Company to purchase 4 million shares of
         Common Stock at $5 per share.  This option is exercisable on or after
         January 16, 2000 and expires on January 16, 2003.   Mr. Mehl will
         receive an option with the same terms upon the effectiveness of his
         capital contribution to the Company.

         Pursuant to the Amended and Restated Agreement and Plan of Merger
         dated as of June 4, 1996 between the Company, Classy Lady by Mehl of
         Puerto Rico ("Classy Lady") and Selvac Acquisition Corp. ("Merger
         Agreement"), individuals designated by a majority of the stockholders
         of Classy Lady had the right to share in certain proceeds derived from
         the sale of laser hair removal joint ventures entered into by the
         Company or its subsidiaries.  The Company has disclosed that the

                                      15
<PAGE>   16
         recipients to share in such proceeds were Thomas L. Mehl Sr. and Nardo
         Zaias.   In connection with the Amendment to the Clearwater Loan
         Agreement, the Company, Mehl Technologies, Inc. (the successor to
         Classy Lady), Mr. Mehl and Dr. Zaias entered into a Termination
         Agreement, dated January 16, 1998, which eliminated the revenue
         sharing provisions set forth in the Merger Agreement.

         In connection with the contribution by Nardo Zaias of Common Stock to
         the Treasury of the Company and the waiver by Dr Zaias to receive any
         proceeds from the sale of laser hair removal joint ventures, Mehl
         Technologies, Inc. ("MTI") agreed that if MTI enters into a third
         sublicense arrangement under the exclusive sublicense held by MTI for
         the method of hair removal patented by Dr. Zaias: 
         1)  MTI will pay to Dr. Zaias 25% of the revenues derived by MTI from
             the third sub license; and 
         2)  If all or substantially all the assets or stock
             of MTI are sold, Dr. Zaias will have the right to receive 25% of
             the fair market value of the third sublicense at the time of
             such sale payable in the form of consideration paid in the
             sale transaction.
         Under the joint venture presently in effect with Laser Industries
         Limited ("LIL"), MTI is not permitted to enter into a third
         sublicense.  This sublicense will only be entered into if the joint
         venture with LIL is terminated or if MTI otherwise reaches an
         agreement or settlement with LIL to permit such sublicense.

         In connection with the Amendment the Company agreed to make certain
         management and operational changes. Upon the closing of the Amendment
         on January 16, 1998, the following became effective:

         1)  Thomas L. Mehl Sr. resigned as President and Chief Executive 
             Officer; 
         2)  Hans Frederick Heye, Gerard P. Melia and Jack W. Forrest were 
             elected to serve as Directors, as designees of Clearwater; 
         3)  Nardo Zaias resigned as a member of the Executive Committee of 
             the Board of Directors; 
         4)  Hans Frederick Heye was appointed to serve with Thomas L. Mehl
             Sr. and Robert Marc Clement on the Executive Committee of 
             the Board of Directors;          
         5)  David E. Fowler was elected President and Chief Operating Officer
             to report to and serve under the direction of the Executive 
             Committee;
         6)  The Company agreed to make substantial reductions to its 
             operating overhead costs in an amount not less than $2 million
             annually;

         On January 16, 1998 Thomas L. Mehl Sr. executed an Irrevocable Proxy
         and Letter of Direction in favor of Clearwater to vote his 8,425,000
         shares so long as any principal of their loan remains outstanding.
         Under the same proxy, Clearwater agreed to vote their shares in the
         Company and Mr. Mehl's shares subject to the proxy for a period of 18
         months, in favor of Mr Mehl's election as a Director and not to
         vote in favor of his removal.                                  

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<PAGE>   17
                                   SIGNATURES


Pursuant to the requirements of the Securities and Exchange Act 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                         MEHL/BIOPHILE INTERNATIONAL CORPORATION



By: /s/  David E. Fowler
-----------------------------------------
David E. Fowler
President and Chief Operating Officer              DATE: January 20th, 1998



By: /s/ Timothy J. Chapple
------------------------------------------
Timothy J. Chapple
Principal Financial and Accounting Officer         DATE: January 20th, 1998









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