TABLE OF CONTENTS
--------------------------------------------------------------------------------
                                      10-Q
PART 1 ....................................................................4
ITEM 1 ....................................................................4
Balance Sheet .............................................................4
Income Statement 1 ........................................................5
Income Statement 2 ........................................................5
Cash Flow Statement .......................................................6
Table 5 ...................................................................6
Table 6 ...................................................................7
Table 7 ...................................................................8
Table 8 ...................................................................9
Item 2  ...................................................................9
PART II ..................................................................11
Item 1  ..................................................................11
Item 2  ..................................................................11
Item 3  ..................................................................12
Item 4  ..................................................................12

                                      EX-27

Exhibit 27 Table .........................................................12


<PAGE>

                    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, 1999.

[ ] 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.)

                     1625 Knecht Avenue, Baltimore, MD 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 [ ]      No [x]

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

       4,523,536 Class A Common Shares  as of June 30,  1999
       1,000,000  Class B Common Shares as of June 30, 1999

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


<PAGE>

                                     PART I
                              FINANCIAL INFORMATION

     Item 1. Financial Statements

          The condensed financial  statements for the period ended June 30, 1999
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, 1999,  and the results of
operations  and cash flows for the six month  periods  ended  June 30,  1998 and
1999.

                      INTERNATIONAL MERCANTILE CORPORATION
                           CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>

                                                                                                           June 30,
                                                                                  December 31,                1999
                                                                                      1998                 Unaudited
                                                                                      ----                 ---------
 <S>                                                                             <C>                       <C>
                    ASSETS
 CURRENT ASSETS
   Cash and cash equivalents                                                       $  205,022                $214,905
   Loans receivable                                                                       -0-                 220,832
   Mortgages receivable                                                               108,800                     -0-
                                                                                      -------                 -------
   Current assets                                                                     313,822                 435,737
 CAPITAL ASSETS-NET                                                                     6,328                   5,159
 OTHER ASSETS
   Excess of purchase price over assets acquired                                    1,120,186               1,120,186
   Notes receivable-affiliated parties                                                232,591                 232,591
   S  Securities-available for sale                                                   481,872                 618,372
   Security deposit                                                                     5,488                   5,489
   Intangible assets                                                                   32,241                  24,192
                                                                                       ------               ---------
   TOTAL OTHER ASSETS                                                               1,872,378               2,000,830
                                                                                    ---------               ---------
 TOTAL ASSETS                                                                      $2,192,528              $2,441,726
                                                                                   ==========              ==========
                      LIABILITIES AND STOCKHOLDERS' EQUITY
 CURRENT LIABILITIES
   Accounts payable and accrued expenses                                           $    4,397                $  6,071
   Payroll liabilities and taxes payable                                               74,263                 126,403
   Warehouse loan payable                                                             103,360                  25,000
   Notes payable                                                                       57,494                  57,494
   Deferred income                                                                      5,440                     -0-
   Bank line of credit                                                                200,700                 202,628
                                                                                     --------               ---------
 Total current liabilities                                                            445,654                 417,596
 CAPITAL STOCK
   Preferred stock-  Series 1-  authorized  10,000,000  shares,  $0.10 par value
     each, at June 30, 1999, the number of shares outstanding is -0-.
   Preferred stock-  Series 2 -  authorized  2,000,000  shares,  $0.10 par value
     each, at June 30, 1999, the number of shares outstanding is -0-.
   Preferred stock - Series 3,  authorized  5,000,000,  $0.10 par value each. At
     June 30, 1999, the number of shares outstanding is -0- .
   Common stock-Class A-authorized 31,000,000 common shares, par value $0.01           33,236                  45,335
     each, at December 31, 1998 and June 30, 1999, the number of shares
     outstanding was 3,323,615 and 4,533,536 respectively
   Common stock - Class B - authorized 2,000,000, $0.01 par value each, the number     10,000                  10,000
     of shares outstanding at December 31, 1998 and June 30, 1999 is 1,000,000
     Unrealized gain on securities available for sale                                     -0-                 136,500
     Additional paid in capital                                                    13,783,133              14,194,512
            Retained earnings                                                     (11,265,312)            (11,548,034)
                                                                                   ----------              ----------
          Total stockholders' equity                                                2,561,057               2,838,313
          Less treasury stock                                                        (814,183)               (814,183)
                                                                                    ---------                 --------
          Total stockholders equity                                                 1,746,874               2,024,130
                                                                                    ---------               ---------
          Total liabilities and stockholders' equity                               $2,192,528              $2,441,726
                                                                                   ==========              ==========
</TABLE>


                 See accompanying notes to financial statements.


<PAGE>

                      INTERNATIONAL MERCANTILE CORPORATION
                      CONSOLIDATED STATEMENT OF OPERATIONS


<TABLE>
<CAPTION>
                                                                         For the six                 For the six
                                                                         months ended                months ended
                                                                           June 30,                     June 30,
                                                                            1998                         1999
                                                                          Unaudited                    Unaudited
                                                                          ---------                    ---------
<S>                                                                     <C>                            <C>

 Revenue                                                                  $  443,289                   $  541,890
 Mortgage related expenses                                                   253,706                      322,555
                                                                             -------                      -------
 Gross profit                                                                189,583                      219,335
                                                                             -------                      -------
 Operations:
   General and administrative                                              1,026,526                      442,981
   Depreciation and  amortization                                              1,682                        9,288
                                                                          ----------                      -------
   Total expense                                                           1,028,208                      452,269
                                                                              -------                      -------
 Income (loss) from operations                                              (838,625)                    (232,934)
 Corporate income taxes                                                          -0-                          -0-
 Other income
   Interest income                                                             2,385                       2,430
   Gain (loss) on sale of asset                                                  250                     (44,368)
   Interest expense                                                           (4,883)                     (7,850)
                                                                             --------                    --------
Net Profit (Loss)                                                          $(840,873)                  $(282,722)
                                                                             ========                    ========
 Net income (loss) per share - basic                                          $(0.21)                    $ (0.06)
                                                                              =======                    ========
 Number of shares outstanding                                              3,976,282                   4,533,536
                                                                           ==========                   =========
 Net income (loss) per share - diluted                                        $(0.21)                     $(0.06)
                                                                            =========                   =========
 Number of shares outstanding                                               3,976,282                   4,533,536
                                                                            =========                   =========
</TABLE>

                 See accompanying notes to financial statements.


<PAGE>

                      INTERNATIONAL MERCANTILE CORPORATION
                      CONSOLIDATED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
                                                                        For the three                For the three
                                                                        months ended                 months ended
                                                                          June 30,                      June 30,
                                                                            1998                          1999
                                                                          Unaudited                     Unaudited
                                                                          ---------                     ---------
<S>                                                                      <C>                            <C>

 Revenue                                                                  $ 210,403                     $ 204,627
 Mortgage related expenses                                                  117,053                       144,831
                                                                           --------                      --------
 Gross profit                                                                93,350                        59,796
                                                                           --------                      --------
 Operations:
   General and administrative                                               760,229                       182,262
   Depreciation and amortization                                                841                         4,670
                                                                           --------                       -------
   Total expense                                                            761,070                       186,932
                                                                           --------                       -------
 Income from operations                                                    (667,720)                     (127,136)
 Corporate income taxes                                                         -0-                           -0-
 Other income
   Interest income                                                              787                         1,010
   Gain (loss) on sale of asset                                                 250                       (44,368)
   Interest expense                                                          (2,200)                       (3,050)
                                                                           --------                        -------
Net Profit (Loss)                                                         $(669,133)                    $(173,544)
                                                                           ========                      ========
 Net income (loss) per share - basic                                         $(0.17)                       $(0.04)
                                                                           ========                      ========
 Number of shares outstanding                                             3,976,282                     3,533,536
                                                                          =========                     =========
 Net income (loss) per share - diluted                                       $(0.17)                       $(0.04)
                                                                           ========                      ========
 Number of shares outstanding                                             3,976,282                     3,533,536
                                                                          =========                     =========

</TABLE>


                 See accompanying notes to financial statements.



<PAGE>

                      INTERNATIONAL MERCANTILE CORPORATION
                      CONSOLIDATED STATEMENT OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                        For the six              For the six
                                                                       months ended              months ended
                                                                         June 30,                  June 30,
                                                                           1998                      1999
                                                                         Unaudited                 Unaudited
                                                                         ---------                 ---------
<S>                                                                      <C>                       <C>

CASH FLOWS FROM OPERATING ACTIVITIES
   Net income (loss)                                                    $ (840,873)               $ (282,722)
   Depreciation                                                              1,682                     9,288
   Non cash items                                                          378,699                       -0-
 Adjustments
   Accounts payable and accrued expenses                                    56,950                     1,674
   Accrued salaries and payroll taxes payable                              (12,495)                   52,140
                                                                           -------                   -------
TOTAL CASH FLOWS FROM OPERATIONS                                          (416,037)                 (219,620)
                                                                           -------                   -------
CASH FLOWS FROM INVESTING ACTIVITIES
   Mortgages receivable                                                    374,800                   108,800
   Fixed assets                                                             (2,500)                      (71)
   Notes and loans receivable                                              (66,667)                 (220,832)
                                                                           -------                   -------
TOTAL CASH FLOWS FROM INVESTING ACTIVITIES                                 305,633                  (112,103)
                                                                           -------                   -------
CASH FLOWS FROM FINANCING ACTIVITIES
   Sale of capital stock                                                   420,000                   423,478
   Warehouse loan payable                                                 (357,740)                  (78,360)
   Bank line of credit                                                     (79,000)                    1,928
   Deferred income                                                         (17,060)                   (5,440)
                                                                           -------                   -------
TOTAL CASH FLOWS FROM FINANCING ACTIVITIES                                 (33,800)                  341,606
                                                                           -------                   -------
NET INCREASE (DECREASE) IN CASH                                           (144,204)                    9,883
 CASH BALANCE BEGINNING OF PERIOD                                          290,951                   205,022
                                                                           -------                   -------
 CASH BALANCE END OF PERIOD                                               $146,747                  $214,905
                                                                           =======                   =======

</TABLE>


                 See accompanying notes to financial statements.


<PAGE>


                      INTERNATIONAL MERCANTILE CORPORATION
                  CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
<TABLE>
<CAPTION>

                          Preferred     Preferred     Preferred         Class A         Class A      Class B    Class B
                            Stock         Stock         Stock           Common           Common       Common     Common
 Date                      Series 1      Series 2      Series 3          Stock           Stock        Stock      Stock
 ----                      --------      --------      --------          ------        ---------      ------      -----
<S>                       <C>            <C>           <C>               <C>           <C>            <C>        <C>

12-31-1995                                                              3,133,151       $3,133,151
Net loss
                                                                        ---------        ---------
12-31-1996                                                              3,133,151        3,133,151
                                                                        ---------        ---------
Reflects 31 to 1 reverse split                                            101,083            1,011
Shares issued for consulting fees                                         946,500            9,465
Shares issued for acquisitions                                          1,910,000           19,100
Sale of shares through private                                            220,000            2,200
  Placement at $1.00 per share
12-31-1997 Net loss
Prior period correction -                                              (1,000,000)         (10,000)
Cancellation of shares                                                  ---------         ---------
12-31-1997                                                              2,177,583           21,776
 hares                                                                    420,000            4,200
Issuance of shares as                                                   1,093,699           10,937
 Non cash compensation
 Issuance of shares for                                                   125,000            1,250
 Legal expenses
Issuance of shares pursuant                                               507,333            5,073
 To S-8 options valued at $1.74
Exchange of shares                                                     (1,000,000)         (10,000)   1,000,000   10,000
12/31/98 Net loss
                           ----          ----         ----              ---------         ---------   ---------   ------
12-31-1998                  -0-           -0-          -0-              3,323,615        $  33,236    1,000,000   10,000
Sale of shares                                                          1,209,921           12,099
6-30-99 Net loss
                           ----          ----         ----              ---------         ---------   ----------  ------
6-30-99                     -0-           -0-          -0-              4,533,536        $  45,335    1,000,000   10,000
                           ====          ====         ====              =========         =========   ==========  ======


</TABLE>

<PAGE>

<TABLE>
<CAPTION>

                                   Additional       Treasury         Retained    Unrealized Gain
 Date                           Paid in capital      Stock           Earnings     on Securities             Total
 ----                            --------------      -----           --------     --------------            -----
<S>                              <C>                 <C>             <C>          <C>                        <C>

12-31-1995                         $5,326,395       $(814,183)     $(7,958,757)                         $(313,395)
12-31-1996 Net loss                                                         -0-                               -0-
                                   ----------       ----------      -----------                           --------
12-31-1996                          5,326,395       $(814,183)     $(7,958,757)                         $ (313,395)
                                   ----------       ----------      -----------                           --------
Reflects 31 to 1 reverse split      8,458,535        (814,183)     $(7,958,757)                           (313,395)
Shares issued for consulting          947,035                                                              956,500
Shares issued for acquisition       2,500,900                                                            2,520,000
Sale of shares - private plmt         217,800                                                              220,000
Prior period correction              (990,000)                                                          (1,000,000)
12-31-1997 Net loss                                                 (1,511,538)                         (1,511,538)
                                   ----------        ---------        ---------                          ---------
12-31-1997                         11,134,270         (814,183)     (9,470,295)                            871,568
Sale of shares                        415,800                                                              420,000
Issuance of shares as               1,100,762                                                            1,111,699
 Non cash compensation
Issuance of shares for                254,375                                                              255,625
 Legal expense
Issuance of shares pursuant           877,927                                                              883,000
 To S-8
Exchange of shares                                                                                             -0-
12-31-98 Net loss                                                   (1,795,017)                         (1,795,017)
                                   ----------        ---------       ----------                          ---------
         12-31-1998               $13,783,134        $(814,183)   $(11,265,312)                         $1,746,875
         Sale of shares               411,378                                                              423,477
         Unrealized Gain on Securities                                                 136,500             136,500
         6-30-99 Net loss                                             (282,722)                           (282,722)
                                   ----------        ---------       ----------       --------          ----------
         6-30-99                  $14,194,512        $(814,183)   $(11,548,034)        136,500          $2,024,130
                                   ==========         ========       ==========       ========          ==========

</TABLE>

                 See accompanying notes to financial statements.


<PAGE>


                      INTERNATIONAL MERCANTILE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                     FOR THE SIX MONTHS ENDED JUNE 30, 1999

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, 1998.

2. NET INCOME PER SHARE

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

                                       For the six           For the six
                                       months ended          months ended
                                         June 30,               June 30,
                                           1998                  1999
                                       -------------       --------------

Total number common
  shares outstanding                     3,976,282            4,533,536
                                         =========            =========

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.

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, 1998 and June 30, 1999,  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, 1998:

                                                             Estimated
                                        Gross       Gross       Fair
                                     Unrealized   Unrealized   Market
                              Cost      Gains       Losses      Value
                              -----     --------  ---------   -----
Cash                       $ 205,022    $  -0-      $  -0-   $ 205,022
                             -------    ------      -------  ---------
Total cash and cash
  equivalents              $ 205,022    $  -0-      $  -0-   $ 205,022
Securities-available for
     sale                  $ 580,000    $  -0-     $(98,128) $ 481,872
                            --------    ------      -------    -------
Total cash, cash
  equivalents and
  securities available
  for sale                 $ 785,022    $  -0-     $(98,128) $ 686,894
                            ========    ======      =======   ========


<PAGE>

       The   following   is  a   summary   of   cash,   cash   equivalents   and
available-for-sale securities by balance sheet classification at June 30, 1999:

                                                                       Estimated
                                                 Gross       Gross       Fair
                                               Unrealized   Unrealized   Market
                                      Cost        Gains       Losses     Value
                                      -----     --------   ---------     -----
Cash                              $ 214,905   $    -0-   $     -0-    $  214,905
                                  ---------   --------   ---------    ----------
Total cash and cash
  equivalents                     $ 214,905   $    -0-   $     -0-    $  214,905
Securities-available for
     sale                         $ 580,000   $190,000   $(151,628)   $  618,372
                                  ---------   --------   ---------    ----------
Total cash, cash
  equivalents and
  securities available
  for sale                        $ 794,905   $190,000   $(151,628)   $  833,277
                                  =========   ========   =========    ==========


5. Commitments and Contingencies
   a. The employment agreement with Mr. Walter Deronde has been cancelled.
   b. The employment agreement with Mr. Max Apple has also been cancelled.
   c. The financial consulting agreement with Frederic Richardson has been paid
        in full.

6. Private Placement

Pursuant to a private  placement  under Rule 506 of the  Securities Act of 1933,
the  Company  is  offering a minimum of 4 Units and a maximum of 80 Units of its
securities.  Each Unit is being sold at $25,000 per Unit and  consists of 20,833
shares  of Class A Common  Stock  and  20,833  shares  of  Convertible  Series 1
Preferred  Stock,  which are  convertible  into 20,833  shares of Class A Common
Stock. The Units are being offered on a "best-efforts" basis. The Minimum Amount
of  securities  offered  shall be 4  Units.  The  Units  must be  purchased  for
investment  purposes  only and the free  transferability  of the  securities  is
restricted.

This  Offering  will  terminate  on the  earlier of receipt  and  acceptance  of
subscriptions for all 80 Units or December 31, 1999, unless extended in the sole
discretion of the Company for an additional period of up to 90 days,  subject to
termination at any time prior thereto by the Company.

As of June 30,  1999,  the  Company  has sold  several  Units.  The  Company has
reserved approximately $200,000 worth of shares.

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

<PAGE>


                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                 for the six months ended June 30, 1998 and 1999
                ------------------------------------------------

       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 six months ended June 30, 1999 as compared to the
six months ended June 30, 1998.
--------------------------------------------------------------------------------

Revenues  were  $541,890  for the six months  ended June 30, 1999 as compared to
$443,289 for the six months ended June 30, 1998.  Mortgages and related expenses
for the six months ended June 30, 1999 were $322,555 as compared to $253,706 for
the six months ended June 30,  1998,  representing  a cost of mortgages  related
expenses  of 59.5% for the six months  ended June 30,  1999 as compared to 57.2%
for the six months ended June 30, 1998.

General  and  administrative  costs for the six months  ended June 30, 1999 were
$442,981,  a decrease of 56.8% over  expenses of  $1,026,526  for the six months
ended June 30, 1998.  Results of operations  for the three months ended June 30,
1999 as compared to the three months ended June 30, 1999.
-------------------------------------------------------------------------------

Revenues  were  $204,627 for the three months ended June 30, 1999 as compared to
$210,403  for the three  months  ended  June 30,  1998.  Mortgages  and  related
expenses for the three months ended June 30, 1999,  were $144,831 as compared to
$117,053  for the three  months  ended  June 30,  1998,  representing  a cost of
mortgages  related expenses of 70.8% for the three months ended June 30, 1999 as
compared to 55.6% for the three months ended June 30, 1998.

General and  administrative  costs for the three months ended June 30, 1999 were
$182,262,  a decrease of 76.0% over  expenses of $760,229  for the three  months
ended June 30, 1998.

Liquidity  and capital  resources as of the end of the six months ended June 30,
1999.
--------------------------------------------------------------------------------

The  Company's  cash  balance was  $214,905  and working  capital was a negative
$18,141 as at June 30, 1999.

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.

Income tax: As of June 30,  1999,  the Company has a tax loss  carry-forward  of
$12,213,646.  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  requirement  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



<PAGE>

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.

                                     PART II
                                OTHER INFORMATION

Item 1. Legal Proceedings.

The company of Browne of NY sued for outstanding printing invoices in the amount
of $18,000. Negotiations are in process.

Item 2. Changes in Securities

Amendment to the Certificate of Incorporation

The Company has  amended its  certificate  of  incorporation  to  authorize  the
Company to issue an aggregate of 50,000,000 shares of stock as follows:

       31,000,000  shares of Class A Common  Stock,  par value  $0.01 per share.
        2,000,000  shares of Class B Common Stock, $0.01 per share.
       10,000,000  shares  of  Preferred  Stock,  Series  1,  $0.10  per  share.
        2,000,000  shares  of  Preferred  Stock,  Series  2,  $0.10  per  share.
        5,000,000  shares of Preferred Stock, Series 2, $0.10 per share.

Class A Common Stock.

The holders of shares of Class A Common  Stock are  entitled to 1 vote per share
and do not have cumulative voting rights on the election of directors.  Upon any
liquidation,  dissolution  or  winding up of the  Company,  holders of shares of
Class A Common  Stock are  entitled to receive pro rata all of the assets of the
Company available for distribution to holders of shares of the Company's Class A
Common Stock.  Shareholders of the Company do not have any preemptive  rights to
subscribe for or purchase any stock,  obligations,  warrants or other securities
of the Company.

Class B Common Stock

The holders of shares of Class B Common Stock are entitled to 51 votes per share
and do not have cumulative voting rights on the election of directors.  Upon any
liquidation,  dissolution  or  winding up of the  Company,  holders of shares of
Class B Common  Stock are  entitled to receive pro rata all of the assets of the
Company available for distribution to holders of shares of the Company's Class B
Common Stock.  Shareholders of the Company do not have any preemptive  rights to
subscribe for or purchase any stock,  obligations,  warrants or other securities
of the Company.

Series 1 Convertible Preferred Stock

Each  share of Series 1  Preferred  Stock is  convertible  into one (1) share of
Class A Common Stock at any time for 3 years following  issuance,  at a price of
two dollars  ($2.00) per share.  The Series 1 Preferred Stock does not carry any
voting  rights.  In the event the  Company  declares  a  dividend,  the Series 1
Preferred Stock has a dividend preference to that of the Class A Common Stock.

The Series 1 Preferred  Stock is redeemable by the Company for $.10 per share at
any time after the first annual anniversary of issuance,  if the average closing
bid price of the Class A Common Stock for 10 business days immediately preceding
the date of such redemption notice is at least 125% of the exercise price of the
Series 1 Preferred Stock.  Following any such redemption  notice,  the holder of
the Series 1 Preferred  Stock shall have the opportunity to convert the Series 1
Preferred Stock for a period of 20 days following such notice.


<PAGE>


Item 3. Defaults upon Senior Securities

       None.

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

       None.

                                   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: ------------------
                                        PRESIDENT

 Dated: