<PAGE>   1

                    U. S. SECURITIES AND EXCHANGE COMMISSION
                            Washington, D. C. 20549
                                  FORM 10-Q

[x] Quarterly report pursuant to Section 13 or 15(d) of the Securities
    Exchange Act of 1934.
    For the quarterly period ended June 30, 1998.


[ ] 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


                       INTERNATIONAL MERCANTILE CORPORATION
    --------------------------------------------------------------------
       (Exact name of small business issuer as specified in its charter)


            MISSOURI                                  43-0970243
       -------------------------------------------------------------------
       (State or other jurisdiction                  (I.R.S. Employer
       incorporation or organization)                Identification No.)


                     7979 Old Georgetown Road, Bethesda MD
                 -------------------------------------------
                    (Address of principal executive offices)


                                 301-654-1980
                          ---------------------------
                          (Issuer's telephone number)



                                (Not Applicable)
          --------------------------------------------------------
              (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 [ ]    No [x]

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

     3,976,282 Common Shares as of June 30, 1998

    Transitional Small Business Disclosure Format Yes [  ]  No [X]



<PAGE>   2
     2

                                     PART I
                             FINANCIAL INFORMATION

     Item 1. Financial Statements

     The condensed financial statements for the period ended June 30, 1998
included herein have been prepared by International Mercantile Corporation,
(the "Company") without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission (the "Commission"). In the opinion of
management, the statements include all adjustments necessary to present fairly
the financial position of the Company as of June 30, 1998, and the results of
operations and cash flows for the six month periods ended June 30, 1997 and
1998.



<PAGE>   3

     3

                      INTERNATIONAL MERCANTILE CORPORATION
                           CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
                                                       December 31,  June 30,
                                                         1997          1998
                                                                   Unaudited
                                                      ---------   ------------
                             ASSETS
<S>                                                   <C>                <C>
Current assets
  Cash and cash equivalents                        $   290,951        $   146,747
  Mortgages  receivable                                687,500            312,700
                                                       -------            -------
  Current assets                                       978,451            459,447

Capital assets-net                                      14,323             15,141

Other assets
  Excess of purchase price over assets acquired      2,120,186          2,120,186
  Notes receivable-affiliated parties                  316,850            383,517
  Securities-available for sale                        367,000            367,000
  Intangible assets                                     49,209             49,209
                                                     ---------          ---------
  Total other assets                                 2,853,245          2,919,912
                                                     ---------          ---------
Total assets                                        $3,846,019        $ 3,394,500
                                                   ===========        ===========

                  LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
  Accounts payable and accrued expenses            $   487,699        $   544,649
  Loan payable                                         606,494            527,494
  Warehouse loan payable                               654,805            297,065
  Loan payable-related parties                         180,263            180,263
  Deferred income                                       32,695             15,635
  Corporate income tax payable                          12,495
                                                       -------          ---------
Total current liabilities                            1,974,451          1,565,106

Capital stock
  Common stock-authorized 5,000,000
common shares, par value $1.00 each, at
December 31, 1997 the number of shares
outstanding was 3,177,583 and 3,976,282
respectively                                         3,177,583          3,976,282
  Additional paid in capital                         8,978,462          8,978,462
  Retained earnings                                 (9,470,294)       (10,311,167)
                                                    ----------         ----------
Total stockholders' equity                           2,685,751          2,643,577
Less treasury stock                                   (814,183)          (814,183)
                                                     ---------          ---------
Total stockholders equity                            1,871,568          1,829,394
                                                     ---------          ---------
Total liabilities and stockholders' equity          $3,846,019        $ 3,394,500
                                                     =========        ===========
</TABLE>


               See accompanying notes to financial statements.

 



<PAGE>   4
     4


                      INTERNATIONAL MERCANTILE CORPORATION
                      CONSOLIDATED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>

                                 For the six             For the six
                                 months ended              months ended
                                   June 30,                 June 30,
                                     1997                      1998
                                   Unaudited                 Unaudited
                                   ---------                 ---------
<S>                                  <C>                        <C>
Revenue                              $-0-                       $443,289
 
Mortgage related expenses             -0-                        253,706
                                      ---                        -------
 
Gross profit                          -0-                        189,583

Operations:
  General and
administrative                     400,000                     1,026,526
  Depreciation and
amortization                          -0-                          1,682
                                      ----                     ---------
  Total expense                    400,000                     1,028,208
 
Income from operations            (400,000)                     (838,625)
 
Corporate income taxes                -0-
Other income
  Interest income                                                  2,385
  Gain on sale of asset                                              250
  Interest expense                                                (4,883)
                                                                 -------
  Total other income and
expense                               -0-                         (2,248)
 
Net Profit (Loss)                $(400,000)                   $ (840,873)
                                  ========                     ==========
 
Net income (loss)  per
share - basic                     $(3.96)                      $ (0.21)
                                  ========                     =========
Number of shares
outstanding                        101,083                     3,976,282
                                  ========                    ==========
 
Net income (loss) per
share - diluted                   $(3.96)                      $ (0.21)
                                                                 =======
Number of shares
outstanding                        101,083                    3,976,282
                                   =======                    =========
</TABLE>


                 See accompanying note to financial statements.

 

<PAGE>   5
     5


                      INTERNATIONAL MERCANTILE CORPORATION
                      CONSOLIDATED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>

                                 For the three             For the three
                                 months ended              months ended
                                   June 30,                 June 30,
                                     1997                      1998
                                   Unaudited                 Unaudited
                                   ---------                 ---------
<S>                                  <C>                        <C>
Revenue                              $-0-                       $210,403
Mortgage related expenses             -0-                        117,053
                                      ---                        -------
 
Gross profit                          -0-                         93,350
 
Operations:
  General and
administrative                      200,000                      760,229
  Depreciation and
amortization                          -0-                            841
                                     -----                       -------
  Total expense                     200,000                      761,070
 
Income from operations             (200,000)                    (667,720)
 
Corporate income taxes                -0-
Other income
  Interest income                                                    787
  Gain on sale of asset                                              250
  Interest expense                                                (2,200)
                                                                 -------
  Total other income and
expense                               -0-                         (1,413)
 
Net Profit (Loss)                  $(200,000)                 $ (669,133)
                                     =======                    ========
 
Net income (loss)  per
share - basic                         $(1.98)                    $ (0.17)
                                     ========                    =======
Number of shares
outstanding                          101,083                   3,976,282
                                     ========                 ==========
 
Net income (loss) per
share - diluted                       $(1.98                    $ (0.17)
                                      =======                    ======
Number of shares
outstanding                           101,083                  3,976,282
                                      =======                  =========
</TABLE>

                 See accompanying note to financial statements.



<PAGE>   6

     6


                      INTERNATIONAL MERCANTILE CORPORATION
                      CONSOLIDATED STATEMENT OF CASH FLOWS




<TABLE>
<CAPTION>
                                           For the six      For the six
                                           months ended     months ended
                                              June 30,       June 30,
                                                1997           1998
                                             Unaudited       Unaudited
                                             ---------       ---------
<S>                                             <C>              <C>
  Net income                                $(200,000)      $(840,873)
  Depreciation                                  -0-             1,682
  Gain on sale of asset
  Non-cash transactions                                       378,699
Adjustments
 Accounts payable and accrued expenses        200,000          56,950
 Income taxes payable                                         (12,495)
                                              -------         -------
TOTAL CASH FLOWS FROM OPERATIONS                 -0-         (416,037)
CASH FLOWS FROM INVESTING ACTIVITIES
  Mortgages receivable                                        374,800
  Securities-available for sale
  Capital assets                                               (2,500)
  Notes receivable                                            (66,667)
                                              -------          ------
TOTAL CASH FLOWS FROM INVESTING ACTIVITIES       -0-          305,633
CASH FLOWS FROM FINANCING ACTIVITIES
  Sale of capital  stock                                      420,000
  Warehouse loan payable                                     (357,740)
  Loan  payable                                              ( 79,000)
  Deferred income                                             (17,060)
                                              -------         -------
TOTAL CASH FLOWS FROM FINANCING ACTIVITIES     -0-           ( 33,800)
NET INCREASE (DECREASE) IN CASH                -0-           (144,204)
CASH BALANCE BEGINNING OF PERIOD               -0-            290,951
                                               ---            -------
CASH BALANCE END OF PERIOD                    $-0-           $146,747
                                              ====           ========
</TABLE>

                 See accompanying notes to financial statements

 
<PAGE>   7
     7


                      INTERNATIONAL MERCANTILE CORPORATION
                  CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY

<TABLE>
<CAPTION>
                                     Additional
                  Common   Common     paid in    Treasury     Retained
 Date             Stock    Stock      capital     Stock       Earnings        Total
 ------           -----   ------      --------    --------     --------       -----
<S>          <C>         <C>         <C>          <C>         <C>           <C>
12-31-1995    3,133,151  $3,133,151  $5,326,395   $(814,183)  $(7,958,757)  $ (313,395)
12-31-1996     Net loss                                          -0-           -0-
               --------   ----------  -----------   ---------   --------       ------
12-31-1996    3,133,151   3,133,151   5,326,395   $(814,183)  $(7,958,757)  $ (313,395)

06-01-1997(1)   101,083     101,083   8,358,463    (814,183)   (7,958,757)    (313,395)
12-31-1997(2)   946,500     946,500      10,000                                956,500
12-31-1997(3) 1,500,000   1,500,000                                          1,500,000
12-31-1997(3)   100,000     100,000     400,000                                500,000
12-31-1997(3)   135,000     135,000                                            135,000
12-31-1997(3)   175,000     175,000     210,000                                385,000
12-31-1997(4)   220,000     220,000                                            220,000
12-31-1997     Net loss                                        (1,511,538)  (1,511,546)
             ----------  ----------   ---------  ----------   -----------    ---------
              3,177,583   3,177,583   8,978,463    (814,183)   (9,470,295)   1,871,568

    Unaudited
06-30-1998(4)   420,000     420,000                                            420,000
06-30-1998(5)   378,699     378,699                                            378,699
06-30-1998     Net loss                                          (171,740)    (171,740)
               --------  ---------- ----------    ---------      --------    ---------
06-30-1998    3,976,282  $3,976,282 $8,978,463   $(814,183)  $(10,311,367)  $1,829,183
              =========  ========== ==========    ==========    =========    =========
</TABLE>

(1) Reverse split of shares in a ration of 31-1
(2) Shares issued for consulting fees at an average value of $1.01 per share.
(3) Shares issued for the acquisition of HAMC and UMI from CFC and AB Securities
    valued at an aggregate of $2,520,000 or $1.32 per share.
(4) Shares issued pursuant to the private placement at $1.00 per share.
(5) Shares issued for consulting fees at a value of $1.00 per share.


                See accompanying notes to financial statements.

 
<PAGE>   8
     8



                      INTERNATIONAL MERCANTILE CORPORATION
                         NOTES TO FINANCIAL STATEMENTS
                   FOR THE SIX MONTHS ENDED JUNE 30, 1998

1. BASIS OF PRESENTATION

     The accompanying unaudited financial statements of International
Mercantile Corporation, (the "Company"), reflect all adjustments which are, in
the opinion of management, necessary to a fair statement of the results of the
interim periods presented. All such adjustments are of a normal recurring
nature. The financial statements should be read in conjunction with the notes
to financial statements contained in the Company's Annual Report on Form 10-K
for the year ended December 31, 1997.


2. NET INCOME PER SHARE

     In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, EARNINGS PER SHARE
("Statement No. 128"). Statement No. 128 applies to entities with publicly
held common stock or potential common stock and is effective for financial
statements issued for periods ending after December 15, 1997. Statement No. 128
replaces APB Opinion 15, Earnings per Share ("EPS"). Statement No. 128 requires
dual presentation of basic and diluted earnings per share by entities with
complex capital structures. Basic EPS includes no dilution and is computed by
dividing net income by the total number of common shares outstanding for the
period. Diluted EPS reflects the potential dilution of securities that could
dilute the shares in computing the earnings of the Company such as common stock
which may be issuable upon exercise of outstanding common stock options or the
conversion of debt into common stock. Pursuant to the requirements of the
Securities and Exchange Commission, the calculation of the shares used in
computing basic and diluted EPS include the shares of common stock issued for
the acquisition of HAMC and UMI.

Shares used in calculating basic and diluted net income per share were as
follows:

<TABLE>
<CAPTION>
                                    For the six months   For the six months
                                     months ended    months ended
                                          June 30,          June 30,
                                           1997              1998
                                     -------------       --------------
 <S>                                      <C>             <C>
 Total number common
shares outstanding                    101,083(1)             3,976,282
                                      =======                =========
</TABLE>

(1) Pre split shares were 3,133,151


3. ACCOUNTING FOR INCOME TAXES

     The Company follows Statement of Financial Accounting Standards ("SFAS")
No. 109, "Accounting for Income Taxes," which requires an asset and liability
approach of accounting for income taxes. Deferred tax assets and liabilities
are computed annually for differences between financial statement basis and tax
basis of assets, liabilities and available general business tax credit
carry-forwards. A valuation allowance is established when necessary to reduce
deferred tax assets to the amount expected to be realized.

 
<PAGE>   9
     9



4. MARKETABLE SECURITIES

     The Company adopted Financial Accounting Standards Board ("FASB")
Statement No. 115, "Accounting for Certain Investments in Debt and Equity
Securities", which requires that investments in equity securities that have
readily determinable fair values and investments in debt securities be
classified in three categories: held-to-maturity, trading and
available-for-sale. Based on the nature of the assets held by the Company and
Management's investment strategy, the Company's investments have been classified
as available-for-sale. Management determines the appropriate classification of
debt securities at the time of purchase and reevaluates such designation as of
each balance sheet date. Securities classified as available-for-sale are carried
at estimated fair value, as determined by quoted market prices, with unrealized
gains and losses, net of tax, reported in a separate component of stockholders'
equity. At December 31, 1997 and June 30, 1998, the Company had no investments
that were classified as trading or held-to-maturity as defined by the Statement.


     The following is a summary of cash, cash equivalents and available-for-sale
securities by balance sheet classification at December 31, 1997:



<TABLE>
<CAPTION>
                                                            Estimated
                                        Gross       Gross     Fair
                                     Unrealized Unrealized   Market
                              Cost      Gains      Losses    Value
                             -----     --------  ---------   -----
<S>                           <C>        <C>        <C>       <C>
Cash                     $   290,951    $-0-      $   -0-    $ 290,951
                             -------    ------      -------  ---------
Total cash and cash
   equivalents           $   290,951    $-0-      $   -0-    $ 290,951

Securities-available for
     sale                $   580,000  $213,000              $  367,000
                            --------   -------                 -------
Total cash, cash
  equivalents and
  securities available
  for sale               $   870,951  $213,000               $ 657,951
                             =======   =======                 =======
</TABLE>

     The following is a summary of cash, cash equivalents and available-for-sale
securities by balance sheet classification at June 30, 1998:


The following is a summary of cash, cash equivalents and available-for-sale
securities by balance sheet classification at June 30, 1998:

<TABLE>
<CAPTION>

                                                                    Estimated
                                        Gross       Gross            Fair
                                     Unrealized   Unrealized         Market
                               Cost     Gains      Losses            Value
<S>                       <C>          <C>         <C>            <C>
Cash                      $   146,747    $-0-      $   -0-        $ 146,747
                              -------    ----       ------          -------
Total cash and cash
   equivalents            $   146,747    $-0-      $   -0-        $ 146,747

Securities-available for
     sale                 $   580,000              $213,000       $ 367,000
                             --------               -------         -------
Total cash, cash
  equivalents and
  securities available
  for sale                $   726,747              $213,000        $513,747
</TABLE>


 
<PAGE>   10
     10




5. Commitments and Contingencies

    a. Employment Agreement with Mr. Walter Deronde

     On January 1, 1997, the Company entered into an employment agreement with
Mr. Walter Deronde as Treasure and Vice President for an annual salary of
$120,000. In addition Mr. Deronde is responsible for evaluating merger and
acquisition candidates in the mortgage banking industry.

     For the six months ended June 30, 1998, the Company has accrued $60,000
in salary.

     b. Employment Agreement with Mr. Max Apple

     On May 1, 1995, the Company entered into an employment agreement for an
annual salary of $120,000 per annum and reimbursement of all "out-of-pocket
expenses.

      For the six months ended June 30, 1998, the Company has accrued $60,000 
in salary and paid an aggregate of $60,000 during the three months ended
June 30, 1998.
 
      c. Financial Consulting Agreement

     On May 1, 1995, the Company entered into a financial consulting agreement
with Frederic Richardson for a monthly fee of $10,000 per month and
reimbursement of all "out-of-pocket expenses". The term of this agreement is 10
years and is renewable. For the six months ended June 30, 1998, the Company has
accrued $60,000 and paid an aggregate of $130,000 during the three months ended
June 30, 1998.

 

<PAGE>   11
     11


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

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                for the SIX months ended June 30, 1997 and 1998
                ------------------------------------------------

     Except for the description of historical facts contained herein, this Form
10Q contains certain forward looking statements that involve risks and
uncertainties as detailed herein and from time to time in the Company's filings
with the Securities and Exchange Commission and elsewhere. Such statements are
based on management's current expectations and are subject to a number of
factors and uncertainties which could cause actual results to differ materially
from those described in the forward-looking statements. These factors include,
among others, the Company's fluctuations in sales and operating results, risks
associated with international operations and regulatory, competitive and
contractual risks and product development.
 
     Results of operations  for the three months ended June 30, 1998 as compared
to the three months ended June 30, 1997.
--------------------------------------------------------------------------------

     Revenues were $210,403 for the three months ended June 30, 1998 as compared
to $-0- for the three months ended June 30, 1997. Mortgages and related expenses
for the three months ended June 30, 1998, were $117,053 as compared to $0 for
the three months ended June 30, 1997 representing a cost of mortgages related
expenses of 0% for the three months ended June 30, 1997 as compared to 55.63%
for the three months ended June 30, 1998.

     General and administrative costs for the three months ended June 30, 1998
were $761,070, an increase of 380.0% over expenses of $200,000 for the three
months ended June 30, 1997.

     Results of operations for the three months ended June 30, 1997 as compared
to the three months ended June 30, 1996. -
--------------------------------------------------------------------------------

     Revenues were $-0- for the three months ended June 30, 1997 as compared to
$-0- for the three months ended June 30, 1996. Mortgages and related expenses
for the three months ended June 30, 1997, were $-0- as compared to $0 for the
three months ended June 30, 1996 representing a cost of mortgages related
expenses of 0% for the three months ended June 30, 1997 as compared to -0-% for
the three months ended June 30, 1996.

     General and administrative costs for the three months ended June 30, 1997
were $200,000, an increase of 100.0% over expenses of $-0- for the three months
ended June 30, 1996.
 

Liquidity and capital resources as of the end of the six months ended June 30,
1998.
--------------------------------------------------------------------------------

     The Company's cash balance was $146,747 and working capital was a negative
$1,105,659 as at June 30, 1998.

     The Company's primary short-term needs for capital, which are subject to
change, are for the search for acquisitions, operation of the Company's mortgage
business payment of the day to day operating expenses.
<PAGE>   12

 

     Income tax: As of June 30, 1998, the Company has a tax loss carry-forward
of $10,311,167. The Company's ability to utilize its tax credit carry-forwards
in future years will be subject to an annual limitation pursuant to the "Change
in Ownership Rules" under Section 382 of the Internal Revenue Code of 1986, as
amended. However, any annual limitation is not expected to have a material
adverse effect on the Company's ability to utilize its tax credit
carry-forwards.

 
     The Company expects its capital requirements to increase over the next
several years as it continues to develop its mortgage business and seek new
mortgage company related acquisitions, increases sales and administration
infrastructure and embarks on developing in-house business capabilities and
facilities. The Company's future liquidity and capital funding requirements will
depend on numerous factors, including the extent to which the Company's present
management can fund the continued capital requirements, the timing of regulatory
actions regarding the Company's potential acquisitions, the costs and timing of
expansion of sales, marketing activities, facilities expansion needs, and
competition in the mortgage business entered into.

     The Company believes that its available cash and cash from management
contributions will be sufficient to satisfy its funding needs for the day to day
mortgage banking activities for at least the next 12 months. Thereafter, if cash
generated from any newly acquired or developed business operations is
insufficient to satisfy the Company's working capital and capital expenditure
requirements, the Company may be required to sell additional equity or debt
securities or obtain additional credit facilities. There can be no assurance
that such financing, if required, will be available on satisfactory terms, if at
all.


<PAGE>   13
     14



                                     PART II
                                OTHER INFORMATION

Item 1. Legal Proceedings.

     No legal proceedings were brought, are pending or are threatened during the
quarter.


Item 2. Changes in Securities

     None.

Item 3. Defaults upon Senior Securities

     None.

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

     None.


 
<PAGE>   14
     15


                                   SIGNATURES



     In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant has caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.




                                   INTERNATIONAL MERCANTILE CORPORATION
                                      (Registrant)

                                    By: /s/ MAX APPLE
                                       ------------------
                                       MAX APPLE
                                       PRESIDENT


 Dated: August 14, 1998