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                  U.S. Securities and Exchange Commission

                            Washington, DC 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 March 31, 2001

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

             For the transition period from ________ to _________

                        Commission File Number 0-7693
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                    INTERNATIONAL MERCANTILE CORPORATION
       -----------------------------------------------------------------
       (Exact name of small business issuer as specified in its charter)

            Missouri                                     43-0970243
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(State of other jurisdiction of                        (IRS Employer
 incorporation or organization)                      Identification No.)

              1625 Knecht Avenue, Baltimore, Maryland 21227
              ---------------------------------------------
                 (Address of principal executive offices)

                             (410) 242-5000
                       ---------------------------
                       (Issuer's telephone number)

              -----------------------------------------------------
              (Former name, former address, and former fiscal year,
                       if changed since last report)

Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 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  [__]

                 APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:

As of March 31, 2001, there were outstanding 1,960,028 shares of Class
A Common Stock, $0.10 par value, and 1,285,714 shares of Class B Common
Stock, $0.10 par value.

     Transitional Small Business Disclosure Format (check one);

                      Yes [__]       No  [ X ]

                   INTERNATIONAL MERCANTILE CORPORATION

                              Form 10-QSB Index
                              March 31, 2001

                                                                      Page
                                                                      ----

Part I: Financial Information .....................................     3

      Item 1. Financial Statements ................................     3

      Balance Sheets as of March 31, 2000
      and March 31, 2001 (unaudited)..............................    6-7

      Statement of Operations for the quaters ended
      March 31, 2000 and March 31, 2001 ..........................      8

      Statement of Changes in Stockholder's Equity
      for the quarters ended March 31, 2000 and March 31, 2001....      9

      Statement of Cash Flows for the quarters ended March 31,
      2001 and March 31, 2001 ....................................     10

      Notes to Financial Statements................................   11-21

     Item 2. Management's Discussion and Analysis
             or Plan of Operation .................................     22

Part II:   Other Information ......................................     27

     Item 1.    Legal Proceedings .................................     27

     Item 2.    Changes in Securities .............................     27

     Item 3.    Defaults Upon Senior Securities ...................     27

     Item 4.    Submission of Matters to a Vote of
                Security Holders ..................................     27

     Item 5.    Other Information .................................     27

     Item 6.    Exhibits and Reports on Form 8-K ..................     28

Signatures ........................................................     29

                                        2

                      INTERNATIONAL MERCANTILE CORPORATION

                                     PART I

                              FINANCIAL INFORMATION

Item 1.  Financial Statements

Management's Discussion and Analysis or Plan of Operation.

CAUTIONARY STATEMENT FOR PURPOSE OF THE "SAFE HORBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

The following discussion regarding International  Mercantile Corp ("the Company"
or "IMTE") and its business and operations contains "forward-looking" statements
within the meaning of Private Securities Litigation Reform Act of 1995. These
statements consist of any statement other than a recitation of historical fact
and can be identified by the use of forward-looking terminology such as "may,"
"except," "anticipate," "estimate," or "continue" or the negative or other
variations thereof or comparable terminology. The reader is cautioned that all
forward-looking statements are necessarily speculative and there are risks and
uncertainties that could cause actual events or results to differ materially
from those referred to in such forward-looking statements, including no history
of profitable operations, competition, risks related to acquisitions,
difficulties in managing growth, dependence on key personnel and other factors
discussed under the section titled "Management's Discussion and Analysis or plan
of Operations-Factors That May Affect Future Results" in the Company's quarterly
report on the form 10-Q for the quarter ended March 31, 2001. The Company does
not have a policy of updating or revising forward-looking statements and thus it
should not be assumed that silence of management over time means that actual
events are occurring as estimated in such forward-looking statements.

        The following discussion and analysis should be read in conjunction with
the financial statements appearing as Item {1} to this Report. These financial
statements reflect the operations of the Company for the quarters ended March
31, 2001 and March 31, 2000.

(a) Results of Operations

        For the quarter of operations ending 3/31/2000, our Company posted total
sales of $2,210,246.  Total sales for the three months ended 3/31/01 were
$1,015,655.  While sales for the first quarter of 2000 were strong, sales for
the first quarter of 2001 were subject to a flattening due to market conditions
that were reflected throughout the technology industry as a whole.  Management
anticipates increasing sales volume in the last half of 2001 as a result of the
commencement of a purchase order program which could result in a long term
relationship with a major defense contractor.  Financing is required to fulfill
these orders; management has begun negotiations to satisfy this requirement.
Capital is now required in order to have the inventory necessary to increase
sale volume that can be created by our sales team.

        In the third quarter of 2000, management began reducing the SG&A to
compensate for the lack of funding and the change in market conditions that
slowed down demand for product throughout the industry.

        The same market conditions currently exist in the financial market,
where NASDAQ stocks have plummeted in value and have brought a dramatic decline
in the value of our stock position in VLDC. This decline is shown as a
non-operating loss in our year ended December 31, 2000 statement. Additionally,
this slow down has caused delays in our ability to raise additional capital
necessary to expand our business.

        The industry trends which effected the Company's sales also effects our
customer's  ability to pay their  balances to us in a timely  manner.  While
the majority of our customers are current and paying on a timely basis.

        Our largest receivable refused to pay and we were forced to file suit on
September 28, 2000. This receivable totals $628,745. We have increased our
reserve for doubtful accounts to $410,870 in order to compensate for our
evaluation of this receivable. Efforts to settle this case have failed to date.
On April 7, 2001, this customer filed for relief under Chapter 11 Bankruptcy in
Federal Court in PA.

(b)  Plan of Operation

        Our primary emphasis through December 31, 1999 was placed upon our
capitalization,  the establishment of our website, our internal infrastructure,
our production lines and the development of our marketing team.  During the year
ended December 31, 2000, we placed more emphasis on sales and  production. We
endeavored to increase sales by capturing a larger  percentage of the growth in
the white box market.

        Plans for 2001 have been dramatically altered to compensate for the
lack of funding at this time. Management believes that demand for product will
return in the last half of 2001, but we are reacting cautiously.

        Efforts to reduce our overhead have been increased dramatically.  Staff
reductions and other cost-cutting efforts have been implemented by management in
order to bring our breakeven point to a more achievable level.

Reductions in SG&A expenditures and an increase in our GROSS PROFIT
MARGIN should now allow us to break even at a $500,000 monthly sales volume per
month or approximately $6,000,000 per year.

        Further growth in sales and profitability is dependant upon capital
infusion. Funds are needed to increase our inventory of parts, so that we can
increase our sales volume in the future.

        Current efforts to secure capital are in motion. We are negotiating
with several groups with various funding alternatives. These range from private
placements of equity or debt to SB-2 Registration.

        In addition, future growth strategies may include strategic acquisitions
should opportunities arise which would not jeopardize current operations.
The Company has signed a Stock Exchange Agreement (Amended To Asset Purchase
Agreement) to acquire LINUX One, inc, or its assets. LINUX One, inc, is a
privately held developer of embedded LINUX thin client systems. Final terms and
conditions must be agreed to by both parties in order to consummate the
agreement.  This agreement requires LINUX One to raise $3,000,000 in capital
prior to the closing of the transaction. As of this time, the capital has not
been raised and therefore, we do not anticipate closing in the near future.
The company is exploring other acquisitions to compliment its manufacturing
capabilities in the computer related industry. We are also searching
for financing to expand our growth internally as well as acquisitions.

        On Janurary 4, 2001, the Board of Directors of IMTE approved a plan to
transfer assets and liabilities of Micromatix to an existing wholly-owned
subsidiary, Micromatix.com.  This plan would allow the Company to pursue other
acquisitions, while segregating activities and management for new complimentary
businesses.  The transfer of the PC Computer activity into Micromatix.com will
occur as soon as all proper documentation has been processed.

Marketing

        We currently have a sales force consisting of five account executives,
with varying degrees of experience, but all with knowledge of computers
essential to assisting customers in configuring their orders optimally. In
addition, we have an account executive specializing in government sales and
marketing,  along with the management of our strategic  corporate accounts
(Fortune 500). Our website allows our customers  and potential customers to view
our specials and to apply for  active  account  status. In the second half of
year 2001, we have plans to upgrade our website to allow our customers to custom
configure their orders  online,  with real-time interaction with our inventory
software to allow them to ascertain availability of product, and an order
tracking function which will allow the customer to monitor their orders progress
through production. We anticipate that this upgrade will cost approximately
$75,000. Our sales department is currently faxing to all current customers and
potential customers in our extensive database our specials on a weekly basis.
Additionally, we have tele-marketers calling and updating our database of
prospective customers on a daily basis.

Production

        Our production department is designed for flexibility and staffed with
skilled assemblers and system integration technicians.  Small to medium
quantity orders can be easily produced on our existing  custom  configuration
line.  In addition, we have the capability, at very short notice, activating an
assembly line of skilled workers for large production builds. As these contracts
increase in consistency and quantity, these additional workers will be
utilized on a permanent basis. Our production facility has the capacity to add
additional assembly lines on an as needed basis. We have completed the required
independent audit for ISO 9002 certification and we were certified on
April 26, 2000. The ISO 9002 certification is an internationally accredited
standard, which guarantees that our product is processed to the highest quality
standard. In addition, it allows our Company to participate in and be awarded
state and federal government contracts.  In March of 2001, our ISO 9002
certification was renewed as a result of the ongoing process as required by the
certificate.

Inventory

         As mentioned in Results of Operations and Plan of Operation, capital to
increase the inventory is essential to the sales goals we have set for the
company.    We manage the quantity and quality of our component inventory
through our experienced purchasing personnel and warehousing policy and
procedures.  We strive to maximize our responsiveness to customer requirements
while optimizing inventory turnovers.  Inventory management is critical to
the success of our business.  Our strategy is to focus on products with high
turnover ratios to reduce exposure to product obsolescence,  changing consumer
demands and  declines in  market  prices, while  still fulfilling  the
needs of our  customers.  Our software program facilitates the control of
purchasing,  inventory, and accounts payable.  Each sales representative has
available real-time data with respect to our inventory levels. We believe
that we are able to take advantage of synergies and efficiencies arising out of
the combination of system assembly and inventory warehousing in a single
facility.

Vendor Relations

        Our Company has accounts with numerous suppliers that provide us with
the components  required to custom configure systems for our customers.
Pricing and availability primarily govern our purchasing decisions. We
currently do not have any guarantees to purchase from specified vendors for
any parts. Conversely, we also do not have any contracts that require any
vendor to segregate and maintain inventory  for our  consumption.  As a
result, we are at the mercy of market conditions  to obtain  products  at
reasonable  prices that allow us to operate profitably. Should market
conditions experience any shortages or price hikes, we would be subject to
such  conditions  and would be unable to compete  with other companies with
supplier contracts.

        In the second quarter we were extended additional credit by many of
our vendors,  or have made  arrangements to repay debts in  installments
until such time as the Company can complete it's arrangements for additional
funding.

Certain Factors That May Affect Future Results

        The white box PC industry is highly competitive. Competition is largely
based on price, quality,  range of service offered, shipping capabilities,
customer service, and product availability.  Many of our competitors are
larger, more established, and have greater name  recognition and financial
and marketing resources  than our  Company.  As a result, we could potentially
experience downward pricing pressure and increased competition, which would
drive down our revenues by either forcing a cut in our sales or in our prices.
There is always the risk of general market down turn,  which could adversely
impact our revenues and our growth.

        We are considered a start-up company and have no significant operating
history as Micromatix.net.  We have not generated significant revenue to
date to support operations on an ongoing  basis.  We cannot assure that we
will achieve sufficient  revenues to offset our anticipated operating  costs.
Our viability, profitability  and  growth depend  upon our  meeting  our
sales  goals and our attaining  sufficient  financing to purchase inventory
at competitive prices. We cannot  assure  that  we  will be able to generate
revenues  or ever  achieve profitable operations.

        We have limited capital.  We require significant capital to developed
our business and acquisition program.  To date all of our costs have been
funded via sales of common stock and loans. We will continue to require
significant funds as we grow.

        We are currently generating limited revenue from our operations.  Other
than as discussed elsewhere herein, we have no current arrangements in place
with respect  to sources  of  additional financing. If we have to arrange
for financing to further the development of our business, we cannot assure
that such financing will be available on acceptable terms or at all. Our
inability to obtain additional financing, when needed, would have a material
adverse effect on us, including  possibly  requiring us to curtail or cease
our operations.

        Demand and market acceptance for white box PC systems are subject to a
high level of uncertainty.  We cannot assure that widespread acceptance of
white box PC systems, or our products in particular, will occur. We will
rely on Value Added Retailers {VAR's} who utilize white box PC systems to
purchase our products.  In order for us to be successful, these VAR's must
perceive us as their partner, not their competitor.  Further, issues
concerning the reliability, cost and quality of white box PC systems  may
affect our  market.  We cannot assure that VAR's will view us as "partners"
and  utilize our  products.  If our products do not achieve market
acceptance, our business, results of operations and financial condition
could be materially adversely affected.

                                     PART II
                                OTHER INFORMATION

Item 1. Legal Proceedings

     Not Applicable

Item 2. Change in Securities

Item 3. Defaults Upon Senior Securities

     Not Applicable

Item 4. Submission of Matters to a Vote of Security Holders

     Not Applicable

Item 5. Other Information

     Not Applicable

Item 6. Exhibits and Reports on Form 8-K

     (a)     Exhibits.

  (3)(i)(a)  Articles of  Incorporation  (incorporated by
             reference to our Report on Form 10-K for the year ended
             December 31, 1981).

       (b)   Articles of  Amendment  (incorporated  by
             reference to our Report on Form 10-K for the year ended
             December 31, 1981).

       (c)   Articles of  Amendment  (incorporated  by
             reference to our Report on Form 10-K for the year ended
             December 31, 1998).

       (d)   Articles of  Amendment  (incorporated  by
             reference to our Report on Form 10-K for the year ended
             December 31, 1998).

  (3)(ii)    Bylaws  (incorporated  by reference to the
             Company's  Report on Form 10-K for the year ended December
             31, 1987).

       (4)   Instruments defining the rights of holders
             (incorporated by reference to Exhibit (3) herein).

  (10)
       (1)   Our Acquisition  Agreement with Red River
             Trading  Company,  Inc. and  Micromatix.com,  Inc. and
             Addendum thereto  (incorporated by reference to our Report
             on Form 10-K for the year ended  December 31, 1999).

       (2)   Our  compensation   plan  agreement  with
             Frederic   Richardson (incorporated  by  reference  to our
             Report on Form 10-K for the year ended December 31, 1999).

       (3)   Our Lease Agreement  (incorporated  by
             reference to our Report on Form 10-K for the year ended
             December 31, 1999).

       (4)   Our Note  Payable  to Sarah  Saul Simon
             Trust  (incorporated  by reference to our Report on Form
             10-K for the year ended  December 31, 1999).

       (5)   Our Note Payable to Red River Trading
             (incorporated by reference to our Report on Form 10-K for
             the year ended December 31, 1999).

       (6)   Our Stock Exchange agreement with LinuxOne,Inc. (to be filed
             by later amendment to this Form 10-QSB).

      (11)   Earnings per share (See Financial Statements).

      (27)   Financial Data Schedule.

                                   SIGNATURES

     In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.

INTERNATIONAL MERCANTILE CORPORATION

By: /s/ C. Timothy Jewell
    --------------------------
        C. Timothy Jewell,
           Chief Exec. Officer
           President, Director

Date: May 21, 2001

By: /s/ C. Timothy Jewell
    --------------------------
        C. Timothy Jewell,
           Chief Exec. Officer
           President, Director

By: /s/ Frederic S. Richardson
    --------------------------
        Frederic S. Richardson,
           Director

By: /s/ Max W. Apple
    --------------------------
        Max W. Apple,
           Director

Date: May 21, 2001
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