`U.S. Securities and Exchange Commission

                              Washington, DC 20549

                                  Form 10-QSB/A

     [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
                                               ------

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

            Missouri                                     43-0970243
- ------------------------------------------------------------------------
(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/A 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


                      INTERNATIONAL MERCANTILE CORPORATION
                                TABLE OF CONTENTS
                                 MARCH 31, 2001

                                                                        Page

Accountants' Review Report                                                1

Balance Sheets                                                           2-3

Statements of Operations                                                  4

Statements of Changes in Stockholders' Equity                             5

Statements of Cash Flows                                                  6

Notes to the Financial Statements                                        7-21






To the Board of Directors and Stockholders
International Mercantile Corporation, an Missouri corporation

We have reviewed the accompanying balance sheet of International Mercantile
Corporation (a Missouri Corporation) as of March 31, 2000 and March 31, 2001,
and the related statements of operations, changes in stockholders' equity and
cash flows for the periods then ended.  Our review was performed in accordance
with Statements on Standards for Accounting and Review Services issued by the
American Institute of Certified Public Accountants.  All the information
included in these financial statements is the representation of the management
of International Mercantile Corporation.

A review consists principally of inquiries of Company personnel and analytical
procedures applied to financial data.  It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole.  Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles.

The financial statements for the year ended December 31, 2000 presented in the
financial statements were audited by us and we expressed an unqualified opinion
on them in our report dated April, 2001, but we have not performed any auditing
procedures since that date.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern.  As discussed in Note 12 to the
financial statements, the Company has incurred significant operating losses.
Although the Company is negotiating financing arrangements that will provide
additional working capital until revenues from full scale operations are
sufficient, the Company cannot predict what the outcome of the negotiations will
be.  These conditions raise substantial doubt about the Company's ability to
continue as a going concern.  The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

Caruso & Caruso, CPAs', P.A.

Boca Raton, Florida
May 21, 2001




                      INTERNATIONAL MERCANTILE CORPORATION
                                 BALANCE SHEETS


                                     ASSETS
                                                       Unaudited      Unaudited
                                         December 31    March 31       March 31
                                            2000          2000           2001
                                         -----------  ------------  ------------

Current Assets
--------------
   Cash and Cash Equivalents           $   63,157     $  (13,438)    $  31,788
   Marketable Securities - Trading            -              -             -
   Accounts Receivable Net of
     Allowance for Doubtful Accounts    1,036,458      1,302,921       594,227
   Inventory                              276,391        835,920       156,012
   Prepaids & Other Assets                 64,585        131,468        64,831
   Due From Related Party                  51,404            -             -
                                        ------------  ------------  ------------

      Total Current Assets              1,491,995      2,256,871       846,858

Investments
-----------
   Investment in Equity
      Securities-Available-For-Sale        80,000      2,725,642        80,000

Fixed Assets
------------
   Fixed Assets, net of
      Accumulated Depreciation            225,967        218,247       262,755

Other Assets
------------
   Organization Costs,
      Net of Amortization                 169,625        202,587       158,415
   Deposits                                32,604         36,042        32,604
   Capitalized Loan Costs,
      Net  of Amortization                130,468            -         101,917
                                        ------------  ------------  ------------
      Total Other Assets                  332,697        238,629       292,936
                                        ------------  ------------  ------------

         Total Assets                 $ 2,130,659    $ 5,439,389   $ 1,482,549
                                        ============  ============  ============






  See Accountants' Review Report and Accompanying Notes to Financial Statements

                                        2





                      INTERNATIONAL MERCANTILE CORPORATION
                                 BALANCE SHEETS

                       LIABILITIES & STOCKHOLDERS' EQUITY
                                                       Unaudited      Unaudited
                                         December 31    March 31       March 31
                                            2000          2000           2001
                                         -----------  ------------  ------------

Current Liabilities
-------------------
   Accounts Payable and
      Accrued Expenses                $ 1,097,194      $ 962,493   $ 1,172,819
   Cash Overdraft                             -              -         266,588
   Accrued Interest Payable               130,182         22,278       175,393
   Due to Related Party                       -          128,464           -
   Warranty Reserve - Current Portion      12,442          2,442        14,219
   Convertible Debentures -
      Current Portion                         -              -         500,000
   Note Payable - Related Parties,
      Current Portion                     455,209        596,609       393,929
   Line  of Credit                        588,908        600,000       588,908
   Loans Payable                          247,500         57,500       247,500
   Capitalized Lease Payable -
      Current Portion                      13,915         10,221        14,824
                                        ------------  ------------  ------------
      Total Current Liabilities         2,545,350      2,380,007     3,374,180

Long Term Liabilities
---------------------
   Committments and Contingencies
   Warranty Reserve, Net
      of Current Portion                    5,171          8,884         5,933
   Capitalized Lease Payable Net
      of Current Portion                   12,126         20,887         8,963
   Note Payable - Related Party
      Net of Current Portion               75,000         75,000        50,000
   Convertible Debentures                 500,000            -             -
                                        ------------  ------------  ------------
      Total Long Term Liabilities         592,297        104,771        64,896
                                        ------------  ------------  ------------

         Total Liabilities              3,137,647      2,484,778     3,439,076
                                        ------------  ------------  ------------

Stockholders' Equity
--------------------
   Common stock-Class A -
      31,000,000 authorized
      @ $.10 Par 9,333,536,
      @ .01 Par 16,534,847
      and @ $.10 Par 11,960,028
      shares respectively                 933,354        165,348     1,196,003
   Common stock-Class B - $.01 Par,
      2,000,000 shares authorized,
      1,000,000 and 2,000,000
      shares outstanding                   20,000         10,000        20,000
   Preferred stock - Series 1 -
      $1.00 Par, 2,000,000
      authorized, -0- and -0- shares
      outstanding                             -              -             -
   Preferred stock - Series 2 -
      $1.00 Par, 2,000,000 authorized,
      -0- and 285,714 shares
      outstanding                         285,714            -         285,714
   Preferred stock - Series 3 - $1.00
      Par, 5,000,000 authorized, -0-
      shares outstanding                      -              -             -
   Additional Paid in Capital           3,364,530      3,453,081     3,094,732
   Accumulated Deficit                 (5,610,586)      (673,818)   (6,552,976)
                                      --------------  ------------  ------------

      Total Stockholders' Equity       (1,006,988)     2,954,611    (1,956,527)
                                      --------------  ------------  ------------

         Total Liabilities &
            Stockholders' Equity      $ 2,130,659    $ 5,439,389   $ 1,482,549
                                      ==============  ============  ============

  See Accountants' Review Report and Accompanying Notes to Financial Statements
                                        3





                      INTERNATIONAL MERCANTILE CORPORATION
                            STATEMENTS OF OPERATIONS




                            For the Year       For theThree        For theThree
                               Ended           Months Ended        Months Ended
                            December 31,         March 31,           March 31,
                               2000                2000                 2001
                                                Unaudited            Unaudited
                          ----------------    ----------------    --------------
Revenues

   Sales                    $ 7,064,025        $ 2,210,246         $ 1,015,655
   Cost of Merchandise
      Sold                    6,463,249          1,969,148             905,980
                          ----------------    ----------------    --------------

      Gross Profit              600,776            241,098             109,675
Operating Expenses
   Amortization                 109,796              9,212              39,761
   Bad Debts                    410,870              4,625             134,915
   Depreciation                  50,713             11,050              15,381
   Interest Expense             249,932             17,894              73,704
   Marketing, Advertising
      Expense & Sales Expense   432,765            118,418              72,352
   Other General &
      Administrative Expense  2,057,519            450,273             747,425
   Warranty Reserve              10,037              4,000               2,539
                          ----------------    ----------------    --------------

      Total Operating
         Expenses             3,321,632            615,472           1,086,077
                          ----------------    ----------------    --------------

      Net (Loss)
         From Operations     (2,720,856)          (374,374)           (976,402)

Other Revenues and (Expenses)
      Loss on Securities     (2,645,642)               -                   -
      Finance Charge Income      55,356                -                34,012
                          ----------------    ----------------    --------------

      Net (Loss) From
         Operations and
         Other Revenues    $ (5,311,142)        $ (374,374)         $ (942,390)
                          ================    ================    ==============

      Earnings (Loss)
         per share of
         common Stock
         - Basic              $ (1.4461)         $ (0.0374)          $ (0.0877)
                          ================    ================    ==============

      Weighted Average
         Shares - Basic       3,672,698         10,021,083          10,740,467
                          ================    ================    ==============

      Earnings (Loss)
         per share of Common
         Stock - Diluted      $ (0.9392)         $ (0.0340)          $ (0.0461)
                          ================    ================    ==============

      Weighted Average
         Shares - Diluted     5,655,036         11,021,083          20,454,753
                          ================    ================    ==============








  See Accountants' Review Report and Accompanying Notes to Financial Statements

                                        4





                      INTERNATIONAL MERCANTILE CORPORATION
                  STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
             FOR THE YEAR JANUARY 1, 2000 THROUGH DECEMBER 31, 2000
                    AND THE THREE MONTHS ENDED MARCH 31, 2001

                                                                       COMMON         PREFERRED        ADDITIONAL
                                                                       STOCK           STOCK            PAID IN        ACCUMULATED
                                                       SHARES          AMOUNT          AMOUNT           CAPITAL          DEFICIT
                                                   --------------------------------------------------------------------------------



Balance, Janaury 1, 2000, as adjusted for
    August 8, 2000 1:7 reverse stock split           1,728,920        $ 82,892        $    -           $ 2,945,874      $ (299,444)
Issuance of Common Stock of International
Mercantile Corporation a Missouri corp to
owners of Micromatix.com, Inc., a Delaware
corporation, as adjusted for August 8,
    2000 1:7 reverse stock split
    Class A Common Stock                               214,286          21,429             -                   -               -
    Class B Common Stock                             1,000,000          10,000             -                   -               -
Issuance of Common Stock of International
Mercantile Corporation a Missouri
corporation, as adjusted for August 8,
    2000 1:7 reverse stock split
    Class A Common Stock                             8,390,330         839,033             -               418,656             -
    Class B Common Stock                                   -               -               -                   -               -
    Series 2 Preferred Stock                           285,714             -           285,714                 -               -

Net (Loss)                                                 -               -               -                   -        (5,311,142)
                                                    --------------------------------------------------------------------------------

Balance,  December 31, 2000                         11,619,250         953,354         285,714           3,364,530      (5,610,586)

Issuance of Common Stock of International
Mercantile Corporation a Missouri
corporation, as adjusted for August 8,
    2000 1:7 reverse stock split
    Class A Common Stock                             2,626,492         262,649             -              (269,798)            -
    Class B Common Stock                                   -               -               -                   -               -
    Series 2 Preferred Stock                               -               -               -                   -               -

Net (Loss)                                                 -               -               -                   -          (942,390)
                                                    --------------------------------------------------------------------------------

Balance, March 31, 2001                             14,245,742     $ 1,216,003       $ 285,714         $ 3,094,732    $ (6,552,976)
                                                    ================================================================================



  See Accountants' Review Report and Accompanying Notes to Financial Statements
                                        5



                      INTERNATIONAL MERCANTILE CORPORATION
                            STATEMENTS OF CASH FLOWS

                                                                      Year Ended                    3 Months Ended
                                                                     December 31,             March 31,           March 31,
CASH FLOWS FROM OPERATING ACTIVITIES                                 2000                 2000                2001
------------------------------------
                                                                                             Unaudited           Unaudited
                                                                 -------------------------------------------------------------

Net (Loss)                                                          $ (5,311,142)           $ (374,374)          $ (942,390)
Adjustments to Reconcile Net Income to Net Cash
     Provided by Operating Activities
                 Bad Debts                                               410,870                   -                134,915
                 Depreciation & Amortization                             160,509                20,262               55,142
                 (Increase)Decrease in
                    Marketable Securities - Trading                      715,075               715,075                  -
                    Accounts Receivable                                 (712,457)             (453,450)             311,886
                    Inventory                                            199,235              (360,294)             106,120
                    Prepaids & Other Assets                              (50,287)             (117,170)                (246)
                    Deposits                                             (14,274)              (17,712)                 -
                    Organization Costs & Loan Costs                      (70,199)              (14,967)                 -
                    Due From Related Party                               (51,404)                  -                    -
                 Increase(Decrease)
                    Accounts Payable & Accrued Expenses                  473,106               217,275               75,625
                    Cash Overdraft                                           -                     -                266,588
                    Due to Related Party                                (261,322)             (132,858)                 -
                    Accrued Interest                                     121,130                13,226               45,211
                    Warranty Reserve                                      10,287                 4,000                2,539
                                                                 -------------------------------------------------------------
     NET CASH PROV. BY OPERATING ACTIVITIES                           (4,380,873)             (500,987)              55,390

CASH FLOWS FROM INVESTING ACTIVITIES
------------------------------------
Acquisition of Fixed Assets                                              (87,127)              (29,289)             (52,167)
Permanent Impairment of Equity Securities
   Available-for-Sale                                                  2,645,642                   -                    -
                                                                -------------------------------------------------------------
     NET CASH (USED) IN INVESTING ACTIVITIES                           2,558,515               (29,289)             (52,167)

CASH FLOWS FROM FINANCING ACTIVITIES
------------------------------------
Proceeds from Loans, Notes Payable, Capital
    Leases and Line of Credit                                          1,695,000               650,000                    -
Payments on Loans, Notes and Line of Credit                           (1,413,591)             (767,624)             (86,280)
Payments on Capital Lease                                                 (8,422)               (2,900)              (2,255)
Issuance of Capital Stock & Capital Contributions Thereon              1,574,829               599,663               53,943
                                                                -------------------------------------------------------------

     NET CASH (USED) IN FINANCING ACTIVITIES+B15                       1,847,816               479,139              (34,592)
                                                                -------------------------------------------------------------

NET INCREASE (DECREASE) IN CASH                                           25,458               (51,137)             (31,369)

CASH - BEGINNING                                                          37,699                37,699               63,157
                                                                -------------------------------------------------------------

CASH - ENDING                                                           $ 63,157             $ (13,438)            $ 31,788
                                                                =============================================================

  See Accountants' Review Report and Accompanying Notes to Financial Statements
                                        6




                      INTERNATIONAL MERCANTILE CORPORATION



    Balance Sheets as of March 31, 2000, December 31, 2000 and March 31, 2001
     Statements of Operations for the Three Months Ended March 31, 2000 and
   Year Ended December 31, 2000 and for the Three Months Ended March 31, 2001
and for the Statements of Changes in Stockholders' Equity and Cash Flows for the
                               Periods Then Ended







                      INTERNATIONAL MERCANTILE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

1.  Organization and Summary of Significant Accounting Policies

ORGANIZATION

International Mercantile Corporation (The Company) is a profit corporation
organized under the laws of the State of Missouri on March 10, 1971 as
International Mercantile Corporation (IMTL).  On July 31, 1999, the Company
liquidated its' majority interest holdings in its' subsidiary, University
Mortgage, Inc., which represented the Company's operations, through a new
issuance of University Mortgage, Inc. stock to a related third party investor in
consideration of their capital investment in University Mortgage, Inc.  The
result of this action left an OTC Bulletin Board publicly traded company with no
substantial assets or liabilities.  On September 6, 1999, the Company merged
with Micromatix.com, Inc. (the predecessor company), a newly formed Delaware
corporation which maintained an Internet based personal computer manufacturing
business that sells build-to-order unbranded or "white box" PC systems and PC
related hardware throughout the United States to value added retailers and other
marketers of micro computer systems.  Shareholders of the predecessor company
received 2,500 shares of the Company's stock for each share of the predecessor
company; a total of 2,500,000 shares issued, in exchange for 100% of the
outstanding stock of the predecessor company.  The merger was accounted for as a
capital transaction with no recognition of goodwill or other intangible assets.
The Company, however, has not completed the requisite articles of merger and
related documents, which are required to be filed with the applicable state
authorities.  Immediately subsequent to the transaction, the owners of the
predecessor company assumed the management of the Company doing business as
Micromatix.net and owned approximately 26.92% of the outstanding stock of the
Company representing 48.32% of the voting rights.  Since this transaction was,
in substance, a recapitalization of Micromatix.com, Inc. (the predecessor
company) and not a business combination, pro forma information is not presented.
Accordingly, the historical data contained in the financial statements is that
of the predecessor company.  An unwind provision existed as part of the merger
agreement, whereby the merger agreement could be rendered void.  On September 2,
2000 this provision of the merger agreement expired.

REVENUE RECOGNITION

Revenues are derived primarily from sales of build-to-order personal computers
and related PC hardware via the Company's business-to-business e:commerce.
Revenues related to these sales are recognized when a computer product is
shipped and invoiced.

INVENTORY

Inventory consists primarily of component parts.  The Company maintains a
perpetual inventory system and determines quantities by the average cost method.
Inventory is valued at the lower of actual cost or market, net of inventory
allowance.

                                        7


                      INTERNATIONAL MERCANTILE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

ADVERTISING EXPENSE

The Company recognizes advertising expenses in accordance with Statement of
Position ("SOP") 93-7 "Reporting on Advertising Costs."  As such, the Company
expenses the costs of producing advertisements at the time production occurs,
and expenses the cost of communicating advertising in the period in which the
advertising space or airtime is used.

PROPERTY AND EQUIPMENT

Property and equipment is stated at cost.  Depreciation is computed using the
straight-line method based on the estimated useful lives of the assets, which
range from three to five years.  Costs for routine repairs and maintenance are
expensed as incurred and gains and losses on the disposal of assets are
recognized in the period such disposals occur.


SOFTWARE DEVELOPMENT COSTS

Internal and external costs incurred to develop internal-use software are
capitalized during the application development stage and are being amortized
over three years.


INTANGIBLE ASSETS

Costs incurred to organize the Company are capitalized and reported on the
balance sheet as other assets.  The costs are being amortized over a period of 5
years using the straight-line method.  Costs associated with the procurement of
loans and lines of credit are capitalized and reported on the balance sheet as
other assets.  The costs are amortized over the term of the related debt
instrument.

INTERIM FINANCIAL STATEMENTS

The accompanying unaudited interim financial statements at March 31, 2000 and
March 31, 2001 and for the quarters then ended do not include all disclosures
provided in the annual financial statements.  These interim financial statements
are the representation of management and should be read in conjunction with the
Company's annual audited financial statements and the footnotes thereto.
However, the accompanying interim financial statements reflect all adjustments
which are, in the opinion of management, of a normal and recurring nature
necessary for a fair presentation of the financial position and results of
operations of the Company.  Unless otherwise stated, all information other than
that related to December 31, 2000 and the year then ended is unaudited, and no
other form of assurance is provided.


                                        8


                      INTERNATIONAL MERCANTILE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

MARKETABLE SECURITIES AND INVESTMENT IN EQUITIES          AVAILABLE-FOR-SALE

The Company's marketable securities are comprised of equity and debt securities
and are classified as trading securities.  Trading securities are recorded at
fair value, with the change in fair value during the period included in net
earnings.  In the first quarter of the year 2000 the Company liquidated its
entire marketable trading securities portfolio.  The Company's Investment in
Equities Available-For-Sale is comprised of securities that management has not
demonstrated are being held for trading.  The investment is recorded at fair
market value on the balance sheet with any permanent decline in value recognized
in the statement of operations in accordance with SFAS 115.

WARRANTY RESERVE

The Company maintains a depot warranty on components sold and manufactured
systems for three years; the equivalent period of time that substantially all
components from supplier manufacturers are warranted.  As the Company has not
established a history of warranty service, a warranty reserve of one quarter of
1% of sales has been recorded at March 31, 2000, December 31, 2000, and at March
31, 2001.


INCOME TAXES

The Company files its tax return with the Internal Revenue Service as a  C
Corporation.  Applying statutory tax rates to future year's differences between
the tax bases and financial reporting amounts of assets and liabilities
recognizes deferred income taxes.    No deferred tax asset/valuation allowance
has been recognized for the losses incurred to date, as it is not determinable
that the Company will realize any tax benefit from such losses.  Loss
carryforwards, if any, expire fifteen years following the tax year-end in which
they occur.

USE OF ESTIMATES AND ASSUMPTIONS

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






                                        9

                      INTERNATIONAL MERCANTILE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

CONCENTRATIONS OF RISK

Financial instruments that potentially subject the Company to concentrations of
credit risk consist primarily of cash, cash equivalents and marketable
securities.  The Company maintains its cash and cash equivalents in bank
deposit accounts, the balances of which, at times, may exceed federally insured
limits.  Additionally, the Company assumes that computer chip and memory
availability will remain constant.  This assumption subjects the Company to
concentrations of risk should the availability of these items become uncertain
in the future

RECENT ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board issued SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities effective for all fiscal quarters
of fiscal years beginning after June 15, 1999.  The Company does not anticipate
the impact of this pronouncement will be material.  Further, the Company does
not believe that any recently issued, but not yet effective accounting standards
will have a material effect on the Company's financial position, results of
operations or cash flows.

In December 1999, the Securities and Exchange Commission staff released Staff
Accounting Bulletin No. 101, Revenue Recognition in Financial Statements
(SAB No. 101), which provides guidance on the recognition, presentation and
disclosure of revenue in financial statements.  SAB No. 101 does not impact the
Company's revenue recognition.

EARNINGS PER SHARE

As per Financial Accounting Standards Board Statement of Financial Accounting
Standards No. 128 (SFAS 128), Earnings Per Share, standards for computing and
presenting earnings per share (EPS) applies to publicly held common stock or
potential common stock.  It requires dual presentation of basic and diluted EPS
on the face of the income statement for all entities with complex capital
structures.  Basic EPS excludes dilution and is computed by dividing income
available to common stockholders by the weighted average number of common shares
outstanding for the period.  Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the entity.  In computing EPS for the
year ended December 31, 2000 and the quarters ended March 31, 2000 and March 31,
2001, the number of shares considered to be outstanding is computed as the
average actual number of shares of the Company outstanding during the period.





                                       10

                      INTERNATIONAL MERCANTILE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

EARNINGS PER SHARE CONT'D

Other appropriate adjustments have been made to deal with changes in numbers of
shares issued during the period.  Diluted EPS for the period ended March 31,
2000 were computed as a result of the Company's complex capital structure
including 1,000,000 shares of Class B Common stock (see reverse split) which
were authorized and unissued as of March 31, 2000.  These shares were
subsequently issued by April 12, 2000.  Diluted EPS for the year 2000 were
computed as a result of the Company's complex capital structure; including
285,714 shares of Series 2 Preferred stock, 20,000 shares of Class B Common
stock, and 1,250,000 equivalent converted shares represented by the $500,000
Convertible Debenture. Diluted EPS for the quarter ended March 31, 2001 were
computed as a result of the Company's complex capital structure; including
285,714 shares of Series 2 Preferred stock, 20,000 shares of Class B Common
stock, and 5,714,286 equivalent converted shares represented by the $500,000
Convertible Debenture.

DEVELOPMENT STAGE

The Company's principal operations, comprised of sales of build-to-order
unbranded or "white box" PC systems and PC related hardware were in a start up
phase through December 31, 1999.  Although some sales, manufacturing and
distribution of personal computers and related PC hardware had commenced, as of
December 31, 1999 there had been no significant revenue generated therefrom.
Substantially all the efforts of the Company were focused on capitalization of
the Company, the establishment of its' website, internal infrastructure,
production lines and development of a marketing team.  Accordingly, financial
statements of the Company as of December 31, 1999 and for the period September
2, 1999 (Date of Inception) through December 31, 1999 reflect the Company as in
the Development Stage.  Subsequently, thereto, the Company entered into normal
operations.

2.        Allowance for Doubtful Accounts

In accordance with Generally Accepted Accounting Principles the Company records
anticipated uncollectible amounts by creating an allowance account.  Bad Debt
Expense is recognized using the Percentage of Sales method.  For the year ended
December 31,  2000 and the quarters ended March 31, 2000 and March 31, 2001 the
Company recognized a bad debt expense of $410,870, $4,625, and $131,915
respectively.  In the year ended December 31, 2000 and the quarters ended March
31, 2000 and March 31, 2001 no actual receivables were directly written off.  As
a result, the allowance account included on the balance sheet, as net of account
receivables is $542,806 at December 31, 2000, $21,961 at March 31, 2000, and
$673,151 at March 31, 2001.


                                       11


                      INTERNATIONAL MERCANTILE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

3.  Related Party Transactions

The Company's financing since inception, throughout its development stage and
during the year ended December 31, 2000 and the quarters ended March 31, 2000
and 2001 has been provided by interest bearing loans, non-interest bearing loans
and capital contributions to the Company by its shareholders.  At March 31,
2000, December 31, 2000 and March 31, 2001, the Company had liabilities to a
major shareholder of $125,000, $100,000 and $100,000 respectively in the form of
an unsecured note payable bearing interest at 8% per annum.  The note calls for
six annual principal installments of $25,000 plus accrued interest.  In January,
2000 the Company paid the second annual principal installment of $25,000.  The
note was issued for the purchase of machinery, office equipment and furniture
from the shareholder.  Accrued interest through March 31, 2000, December 31,
2000 and March 31, 2001 is $2,894, $8,000, and $10,000 respectively.  As of
March 31, 2001, the Company is delinquent on its third annual installment of
$25,000.

A B securities, a shareholder of IMTL, acquired authorized, but unissued, shares
of University Mortgage, Inc. (UMI) diluting the voting and equity interest of
IMTL in UMI to less than 5%.  The shares of UMI remaining after the dilution
were then exchanged in a stock for stock transaction for registered shares of
Virtual Lender.com, Inc. (VLDC), a publicly traded company.  The investment was
originally recorded at cost.  On December 31, 1999 IMTL acquired 3,000,000
shares of VLDC's restricted common stock in exchange for 3,000,000 shares of
IMTL restricted Class A common stock. In April 2000, the Company received an
additional 1,000,000 shares of VLDC's restricted common stock in exchange for
the balance of IMTL's equity interest in UMI.  The investment is defined as an
investment in securities - available for sale, in accordance with Statement of
Financial Accounting Standards (SFAS 115) and is reported on the balance sheet
at its fair market value.  During the year ended December 31, 2000 the fair
market value declined significantly.  Since no conditions presently exist that
would demonstrate that the decline in value of this investment is other than
temporary, the loss is recognized in the statement of operations in the year
2000, the period of fair market value decline As of the date of these financial
statements the value of this investment remains unchanged from December 31,
2000.

    At December 31, 2000 the Company had outstanding a note payable to a major
stockholder due in one lump sum payment of principal and interest on or before
November 23, 2000.  The note, the principal balance of which is $571,609,
$430,209 and $343,929 at March 31, 2000, December 31, 2000 and March 31, 2001
respectively, bears interest at a rate of 8% per annum, and is unsecured.  As of
March 31, 2000, December 31, 2000 and March 31, 2001 unpaid interest has accrued
in the amount of $11,432, $19,791 and $0 on the liability respectively.  As a
result of a separate transaction the Company had a receivable from the same
related party in the amount of $51,404 at December 31, 2000.  This receivable
was offset against the above referenced note at March 31, 2001.
                                       12

                      INTERNATIONAL MERCANTILE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

4.    Commitments

The Company leases its corporate offices and manufacturing facilities in
Baltimore, Maryland under a six-year lease agreement, which began on October 1,
1999.  The lease encompasses commercial facilities of approximately 40,000
square feet.  Rent for the first year was $14,274 per month plus applicable
sales tax, utilities, maintenance and property tax reimbursement and increases
approximately 5% in each of the succeeding five years.  An additional security
deposit of $14,274, as required under the lease agreement, was paid to the
landlord on February 21, 2000.  During the periods ended March 31, 2000,
December 31, 2000, and March 31, 2001, the Company paid $44,009, $174,205 and
$15,303 in lease payments.  At March 31, 2001, the Company is delinquent on two
months rent payments totaling $31,506, and accordingly, is in technical default
of the lease agreement.  Under the default provisions as outlined in the lease
the Company could be subject to loss of possession of the leased premises, and
subject to damages including, but not limited to,  the total of:  any unpaid
rent, all future minimum rent requirements as outlined below, legal expenses
related to the landlord's exercise of its rights under the lease, and other
costs related thereto.

Future minimum requirements of the Baltimore, Maryland corporate offices and
manufacturing facilities are:

                          FYE  12/31/01              $167,068
                          FYE  12/31/02               187,040
                          FYE  12/31/03               189,957
                          FYE  12/31/04               195,790
                          FYE  12/31/05               130,257
                                                      -------
                                                     $870,112
                                                      =======


The Company issued 285,714 shares of Preferred, Series 2, $.10 Par stock to a
shareholder for the purpose of securing financing in the amount of $1,000,000.
The stock is being held in escrow pending the consummation of the financing
contract, which as of the date of these financial statements has not occurred,
nor, according to management is likely to occur.

Included in the Company's Trade Accounts Payable is a $140,000 payable to a
vendor, which the Company has secured with 150,000 restricted shares of Class A
common Stock.



                                       13

                      INTERNATIONAL MERCANTILE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

Commitments cont'd

In June 2000, the Company issued a private offering of convertible debt
debentures for the purposes of securing capital in the amount of $3,000,000.
The investment was funded by an initial payment of $500,000 at closing and is to
be followed by monthly installments of $250,000 each for ten months beginning
the month after an effective registration statement is filed with the Securities
and Exchange Commission (SEC).  On August 16, 2000 the Company filed a SB-2
registration statement with the SEC pursuant to this contract.  The SEC declined
to review the SB-2 statement and notified the Company as such on September 19,
2000.  As a result no additional funding has been received as of the date of
these financial statements as the Company is required to make substantive
amendments to the registration statement before the SEC will continue a review
of the prospectus.  To date these substantive amendments have not been made.
The Company has the right to prepay the Note at 130% of the principal balance at
the time of prepayment upon 10 days written notice.  Interest accrues on the
debenture at 8%  per annum payable in restricted Class A common stock.  As of
December 31, 2000 and March 31, 2001, the Company has accrued interest in the
amount of $22,889 and $32,889 respectively.  The equity instrument is
convertible, at any time, into Common Stock at a price equivalent to the lower
of 70% of the lowest closing bid price as reported on the OTC Bulletin Board for
the three days preceding receipt by the Company of a notice of conversion or
$.40.  Of the initial $500,000 funding, $150,000 was distributed in payment of
legal, consulting and brokerage fees incurred to facilitate the contract.  The
balance of $350,000 was used to reduce related party debt.


5.       Capital Lease Obligations

The Company leases its operational and accounting software under a capital
lease, which expires in December, 2002.  The lease requires monthly payments of
principal and interest of $1,235 plus applicable sales tax.  Interest is imputed
at 13.25% per annum. The lease agreement concludes with a $1 buy option at the
end of the lease term.  As of March 31, 2001, the Company is three months in
arrears of its lease obligation.  Approximate future lease payments under the
capital lease is as follows:

                             FYE 12/31/01                      $17,651
                             FYE 12/31/02                        9,414
                                                                 -----
                                                               $27,065
 Less Amount representing interest                               3,278
                                                                 -----
                                                                23,787
 Less current maturities                                        14,824
                                                                ------
 Long-term debt, less current maturities                      $  8,963
                                                                ======

                                       14

                      INTERNATIONAL MERCANTILE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

6.  Officers' Compensation

Prior to the reverse acquisition, the Company's day-to-day activities were
managed by certain  officer/shareholders, who contributed their time on the
Company's behalf without compensation in either cash or stock.  No value for
these services has been determined or recorded on the accompanying financial
statements.  Subsequent to the merger one of these officer/shareholders is
compensated as a consultant through a wholly owned corporation of the officer/
shareholder and another officer is being compensated through the Company's
payroll.

7.        Fixed Assets

Fixed assets for the Company consisted of the following at March 31, 2000:
                                                     Accumulated
                                    Fixed Asset      Depreciation      Balance
                                    -----------      ------------      --------
Website Development                $   5,637        $         414     $   5,226
 Furniture & Fixtures                 33,717                2,516        31,201
Manufacturing/Warehouse Equip         37,499                2,643        34,856
Computer Hardware                     71,214                6,549        64,665
Transportation Equip                   7,000                  758         6,242
Office Equipment                      36,577                3,385        33,192
Software Systems                      44,133                4,265        39,868
Leasehold Improvements                 4,000                1,000         3,000
                                  ----------------------------------------------
                                    $239,777        $      21,530     $ 218,247
                                  ==============================================

Fixed assets for the Company consisted of the following at December 31, 2000:
                                                     Accumulated
                                    Fixed Asset      Depreciation      Balance
                                    -----------      ------------      --------
Website Development                $    9,641       $       1,712     $  7,929
 Furniture & Fixtures                  33,142               6,064       27,078
Manufacturing/Warehouse Equip          38,026               6,724       31,302
Computer Hardware                      90,511              18,554       71,957
Transportation Equip                    7,000               1,808        5,192
Office Equipment                       36,909               8,972       27,937
Software Systems                       67,931              13,359       54,572
Leasehold Improvements                  4,000               4,000            0
                                  ----------------------------------------------
                                   $  287,160        $     61,193     $225,967
                                  ==============================================




                                       15


                      INTERNATIONAL MERCANTILE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

Fixed Assets cont'd

Fixed assets for the Company consisted of the following at March 31, 2001:
                                                     Accumulated
                                    Fixed Asset      Depreciation      Balance
                                    -----------      ------------      --------
Website Development                $   15,246       $       2,474     $ 12,772
 Furniture & Fixtures                  33,117               7,247       25,870
Manufacturing/Warehouse Equip          38,026               8,082       29,944
Computer Hardware                     134,398              25,274      109,124
Transportation Equip                    7,000               2,158        4,842
Office Equipment                       36,909              10,448       26,461
Software Systems                       70,631              16,891       53,740
Leasehold Improvements                  4,000               4,000            0
                                  ----------------------------------------------
                                   $  339,327       $      76,574     $262,753
                                  ==============================================

8.  Employee Stock Option Plan

The Company's Board of Directors has authorized officers of the Company to offer
certain employees benefits under an unqualified Employee Stock Option Plan,
which, as of the date of these financial statements, has not been consummated.
The terms of such options are contracted between each eligible employee and the
Company on a case-by-case basis.  As of the date of these financial statements,
7 such plans are either active, pending the start of employment or under
negotiation; none are vested.

9.  Notes Payable and Convertible Debentures

Notes Payable consisted of the following at March 31, 2000:

         Note Payable - related party dated September 6, 1999         $100,000
         Note Payable - related party dated November 23, 1999          571,609
                                                                       -------
                                                                       671,609
                           Less Current Portion                        596,609
                                                                       -------
                           Long Term Portion                          $ 75,000
                                                                      ========

Loans Payable consisted of the following at March 31, 2000:

            Loan Payable - Dated November, 1999                       $  7,500
            Loan Payable - Dated March, 2000                            50,000
                                                                        ------
                                                                        57,500
                           Less Current Portion                         (57,500)
                                                                       ---------
                  Long Term Portion                                   $       0
                                                                      ==========

                                       16

                      INTERNATIONAL MERCANTILE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

Notes Payable and convertible Debentures, cont'd

Based on the borrowing rates currently available to the Company for loans with
similar terms and average maturities, the fair value of the Company's long term
debt approximates the carrying amount.  Interest expense on the above notes and
loans amounted to $14,294 for the quarter ended March 31, 2000.

Notes Payable consisted of the following at December 31, 2000:

         Note Payable - related party dated September 6, 1999        $ 100,000
         Note Payable - related party dated November 23, 1999          430,209
                                                                       -------
                                                                       530,209
                           Less Current Portion                        455,209
                                                                       -------
                           Long Term Portion                         $  75,000
                                                                     =========

Loans Payable consisted of the following at December 31, 2000:

         Loan Payable - Dated November, 1999                         $   7,500
         Loan Payable - Dated March, 2000                               50,000
         Loan Payable - Dated April, 2000                              150,000
         Loan Payable - Dated May, 2000                                 40,000
                                                                       -------
                                                                       247,500
                           Less Current Portion                       (247,500)
                                                                      ---------
                           Long Term Portion                         $       -
                                                                     ===========

Convertible Debentures at December 31, 2000 are as follows:

              Convertible Debentures dated March 30, 2000             $500,000
                                 Less Current Portion                        0
                                                                     ----------
                                    Long Term Portion                 $500,000
                                                                     ===========

Based on the borrowing rates currently available to the Company for loans with
similar terms and average maturities, the fair value of the Company's long term
debt approximates the carrying amount.  Interest expense on the above notes and
convertible debentures for the year ended December 31, 2000 amounted to $73,395.

Notes Payable consist of the following at March 31, 2001:

         Note Payable - related party dated September 6, 1999         $100,000
         Note Payable - related party dated November 23, 1999          343,929
                                                                       -------
                                                                       443,929
                           Less Current Portion                        393,929
                                                                       -------
                           Long Term Portion                         $  50,000
                                                                      =========


17

                      INTERNATIONAL MERCANTILE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

Notes Payable and convertible Debentures, cont'd

Loans Payable consist of the following at March 31, 2001:

         Loan Payable - Dated November, 1999                         $   7,500
         Loan Payable - Dated March, 2000                               50,000
         Loan Payable - Dated April, 2000                              150,000
         Loan Payable - Dated May, 2000                                 40,000
                                                                        ------
                                                                       247,500
                           Less Current Portion                       (247,500)
                                                                      ----------
                           Long Term Portion                         $       0
                                                                      ==========

Convertible Debentures at March 31, 2001 are as follows:

              Convertible Debentures dated March 30, 2000            $ 500,000
                                 Less Current Portion                  500,000
                                                                      --------
                                    Long Term Portion                $       0
                                                                      ==========

Based on the borrowing rates currently available to the Company for loans with
similar terms and average maturities, the fair value of the Company's long term
debt approximates the carrying amount.  Interest expense on the above notes and
convertible debentures for the quarter ended March 31, 2001 amounted to $20,604.

10.  Line of Credit

On March 22, 2000 the Company entered into a factoring agreement with an
unrelated third party to fund the purchase of inventory to fulfill purchase
orders under an agreement to manufacture approximately 2,000 white-box computer
units per month for a national satellite distributed program network marketing
group.  The factoring arrangement is in the form of a one year revolving line of
credit, which allows for the drawing of funds by the Company in an amount equal
to 75% of the purchase orders received from the marketing group.  The line of
credit is capped at $750,000 representing up to $1,000,000 of purchase orders.
The financing calls for the payment of 3 points per month on open invoices and
is secured by an assignment of the underlying receivable, acquired inventory
related to the contract, and 214,286 restricted shares of the Company's Class A
common stock.  The Company issued 650,000 restricted shares to the lender as a
fee for securing the financing.  For the year ended December 31, 2000 the
Company paid $93,032 in financing costs and accrued an additional $79,502 of
interest payable related to the line of credit.  No payments were made during
the quarter ended March 31, 2001, however an additional $53,002 of interest
payable was accrued for the quarter related to the line of credit.  As of the
date of these financial statements, the line of credit is in default as payments
of principal and interest are past due.  Consequently, the lender has disallowed


                                       18

                      INTERNATIONAL MERCANTILE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

Line of Credit cont'd

further advances on the credit line.  As of December 31, 2000 and March 31, 2001
the Company was indebted on the line of credit including accrued interest
thereon for $668,410 and $721,412 respectively.  Management and the lender are
working jointly with counsel to collect the underlying receivable.  As of the
date of these financial statements legal action has been filed in this regard by
the Company to collect the underlying receivable.  The balance of the receivable
as of December 31, 2000 and March 31, 2001, including additional financing
charges, is $628,745 and $654,202 respectively.  The Company has reserved an
allowance of approximately $378,000, against this receivable at December 31,
2000 and March 31, 2001.

11.  Contingencies

The Company's sales during the year ended December 31, 2000 include one
significant customer that represents approximately 14% of the total sales.  As
of the date of these financial statements the Company is no longer providing
products or services to this customer as the customer is over 350 days past due
on outstanding invoices.

In July 1999 Bowne & Co, Inc., a financial corporate printer filed suit against
the Company in New York seeking approximately $18,000 for claims of outstanding
printed invoices.  As of March 31, 2001 the suit is still pending and the
outcome is not yet determinable.

In August 2000 Interim Atlantic Enterprises, LLC filed suit against IMTL for
$11,038 This suit concerns a claim that an employee did not work the minimum
number of days required under the terms of a contract between IMTL and Interim
Atlantic Enterprises, LLC.  As of March 31, 2001 the suit is still pending and
the outcome is not yet determinable.

On March 28, 2000, Microsoft Corporation filed a complaint against the Company
and an employee for alleged copyright and trademark infringement and related
causes of action.  On November 7, 2000 the Company filed an answer denying all
of Microsoft's claims.  As of the date of these financial statements the suit
is still pending and the outcome is not yet determinable.

12.  Going Concern

The Company's financing has been provided by related party loans, capital
contributions from shareholders and third party loans.  The Company anticipates
that through the rest of the year ended December 31, 2001 and following years,
sales will continue to increase as a result of its operations and capital will
be increased by continued sales of the


                                       19

                      INTERNATIONAL MERCANTILE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

Going Concern cont'd

Company's Common Stock.  If either or both of these sources fail to meet the
Company's capital requirements, the Company's ability to continue as a going
concern would be in doubt.  The financial statements do not include any
adjustments regarding the going concern and have been prepared with the
assumption that the Company will continue perpetually.

13.  Segment Information

The Company operates primarily in two industry segments:  (1) whitebox system
sales and (2) computer component sales.  The accounting policies of the segments
and the products and services provided by the operating segments are described
in Note 1.  The table below presents information about reported segments at
March 31, 2000:
                                   System           Component
                                   Sales              Sales          Other          Total
Sales                           $1,427,999        $  768,115     $   14,132      $2,210,246
Gross Profit                       170,429            56,537         14,132         241,098
Operating Income (Loss)             80,167            26,450       (480,991)       (374,374)
Assets                           1,633,742           544,581      3,303,066       5,481,389
Capital Expenditures                 3,374             1,125         24,790          29,289
Depreciation Expense                   723             1,208          9,119          11,050

The table below presents information about reported segments at
December 31, 2000:
                                   System           Component
                                   Sales              Sales          Other          Total
Sales                           $4,395,261        $2,607,430     $   61,334      $7,064,025
Gross Profit                       338,582           200,860         61,334         600,776
Operating Income (Loss)             72,367            42,932     (2,836,155)     (2,720,856)
Assets                           1,078,284           639,678        412,697       2,130,659
Capital Expenditures                 3,155             1,871         82,101          87,127
Depreciation Expense                 4,236             2,513         43,964          50,713

The table below presents information about reported segments at
March 31, 2001:
                                   System           Component
                                   Sales              Sales          Other          Total
Sales                             $612,242        $  403,413     $        0      $1,015,655
Gross Profit                        63,326            46,349              0         109,675
Operating Income (Loss)             11,520             9,070       (996,992)       (976,402)
Assets                             526,312           223,927        732,310       1,482,549
Capital Expenditures                     0                 0         52,167          52,167
Depreciation Expense                 2,110             2,210         11,061          15,381


                                       20

                      INTERNATIONAL MERCANTILE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

14.  Reverse Stock Split

On August 8, 2000 the Company, through a Board action, authorized a 1:7 reverse
split of the Company's outstanding Class A Common Stock, and outstanding Series
1, Series 2 and Series 3 Preferred Stock.  The Board approved the rounding up of
every fractional shareholder to a full share, with all shareholders equally
affected.  Coinciding with the reverse split, the Company increased the par
value of its Class A Common Stock from $.01 to $.10 per share, and increased the
par value of its Preferred Stock from $.10 to $1.00 per share.  The purpose of
the reverse split was to facilitate raising additional capital for the Company
and allow management to find possible merger and acquisition candidates.

Subsequent Events

On November 11, 2000 the Company signed a contract to acquire a privately held
developer (proposed acquired company) of embedded Linux thin client systems as a
wholly owned subsidiary of the Company.  The agreement is subject to due
diligence, including independent valuation of the proposed acquired company,
which if satisfactory to the Company's management, will result in the
consummation of the merger.  The terms of the merger call for each issued common
share, $.001 par value, of the proposed acquired company as of the closing shall
be converted into and exchanged for .85 shares of fully paid and non assessable
IMTL Class A common stock.  On April 5, 2001 the original contract dated
November 11, 2000 was amended to change the transaction from a merger agreement
to an asset acquisition agreement by the Company of selected assets of the
proposed acquired company.

On March 16, 2001, the Company, at the direction of the courts, entered into
mediation with management of a customer that, the Company has ascertained, owes
the Company $654,202.  The mediation was unsuccessful and a hearing date is
expected to be set by the courts in the near future.  The customer, on April 5,
2001, declared Chapter 11 Bankruptcy, and as a result the Company has reserved
approximately $378,000 against this receivable at March 31, 2001.

In April 2001, the Company received formal notice from its landlord that it was
delinquent on its lease payments for February, March and April of 2001.

On January 4, 2001 the Company's Board of Directors approved a plan to transfer
the Company's assets into Micromatix.com, a wholly owned subsidiary.  The
transfer of the Company's assets and operations will occur upon completion of
all of the appropriate documents.  As of the date of these financial statements
this has not yet occurred.




                                       21





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


CAUTIONARY STATEMENT FOR PURPOSE OF THE "SAFE HARBOR" 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

     During April 2000, we sold 135,400 shares of our common stock at various
prices  ranging  from  $0.30 to $0.50  per share  (depending  upon  OTCBB
price quotations for our common stock at the time of sale),  $67,200 in the
aggregate, pursuant to a private placement transaction.  The exemptions we
relied upon were Sections 4(2), 4(6) and Regulation D of the Securities Act
of 1933, as amended.  The  stock  was  sold  to 22  individuals  and/or
entities,  all of  whom  were "accredited" investors as that term is defined
in Regulation D. The net proceeds to our  Company for the sale of the
135,400  shares were approximately  $37,789 after  offering   expenses  and
commissions  of   approximately   $29,411.   No  underwriting  discounts
were  paid  by  our  Company  in connection  with  the abovementioned
transactions.

     During May 2000, we sold 161,500 shares of our common stock at various
prices  ranging  from  $0.30 to $.50  per share  (depending  upon  OTCBB
price quotations for our common stock at the time of  sale),  $80,000  in
the aggregate,  pursuant  to a  private   placement transaction.  The
exemptions  we  relied  upon  were Sections  4(2),  4(6) and Regulation D of
the Securities Act of 1933, as amended.  The stock was sold to 13 individuals
and/or entities,  all of whom were "accredited"  investors as that term is
defined in Regulation D. The net proceeds to our Company for the sale
of the 161,500  shares were  approximately  $53,287  after  offering
expenses  and commissions of approximately $26,713. No underwriting discounts
were paid by our Company in connection with the abovementioned transactions.

     During June 2000,  we sold  187,500  shares of our common  stock at
various prices  ranging  from  $0.25 to $0.35  per share  (depending  upon
OTCBB  price quotations for our common stock at the time of sale),  $45,000
in the aggregate, pursuant to a private placement transaction.  The
exemptions we relied upon were Sections 4(2),  4(6) and Regulation D of the
Securities Act of 1933, as  amended.  The  stock  was  sold  to 12
individuals  and/or entities,  all of  whom  were "accredited" investors as
that term is defined in Regulation D. The net proceeds to our  Company for
the sale of the 421,268  shares were approximately  $29,877 after  offering
expenses  and commissions  of   approximately   $15,123.   No underwriting
discounts  were  paid  by  our  Company  in connection  with  the
abovementioned transactions.

     From the period August 28, 2000 to November 26, 2000 the Company sold a
private placement memo under an exemption from registration as set forth in
Section 4(2) of the Act and Regulation D.  The Company offered 286 units
consisting of 10,000 shares of Restricted Class A Common Stock plus 10,000
warrants to purchase one share of Restricted Class A Common Stock shares at
$ 0.10 per share.  Warrants expire on August 31, 2001.  The purchase price of
each unit was $10,000.  The Company raised $1,169,025 in capital and issued
3,828,682 shares and warrants in the offering.

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

     Previously file 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`