U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

(Mark One)
[X]  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
     1934

     For the fiscal year ended December 31, 2001

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

     For the transition period from ___________ to ___________

                     Commission file number: 333-52418

                           BAYLOR INDUSTRIES, INC.
                  --------------------------------------------
                 (Name of small business issuer in its charter)

      Nevada                                                   76-0639842
------------------------                                     --------------
(State or other jurisdiction of                              (IRS Employer
incorporation  or  organization)                             Identification No.)

    14601 Bellaire Blvd. Suite 338, Houston, TX                   77083
------------------------------------------------------          ---------
    (Address of principal executive offices)                    (Zip Code)

                                 (281) 564-6418
                             ----------------------
                           (Issuer's telephone number)

Securities registered under Section 12(b) of the Exchange Act:

Title of each class registered: None       Name of each exchange on which
                                           registered:  None

Securities registered under Section 12(g) of the Exchange Act:

                          Common Stock, par value $.001
                          -----------------------------
                                (Title of class)

     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]

     Check if no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]

     The issuer is a developmental stage pharmaceutical research company, and as
such has yet to generating any revenues.

     The Issuer's stock is not trading on any stock exchange.

     As of December 31, 2001, the issuer had 2,000,000 shares of common stock
outstanding.

     Documents incorporated by reference: None

     Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]



                                       1

<PAGE>


                                    CONTENTS

                                                                          PAGE
PART I

    Item 1.  Description of Business........................................3
    Item 2.  Description of Property.......................................13
    Item 3.  Legal Proceedings.............................................13
    Item 4.  Submission of Matters to a Vote of Security Holders...........13

PART II

    Item 5.  Market for Common Equity and Related Stockholder Matters......14
    Item 6.  Management's Discussion and Analysis or Plan of Operation.....15
    Item 7.  Financial Statements..........................................17
    Item 8.  Changes in and Disagreements with Accountants on
                Accounting and Financial Disclosure........................19

PART III

    Item 9.  Directors, Executive Officers, Promoters and Control
                Persons; Compliance with Section 16(a) of the
                Exchange Act...............................................19
    Item 10. Executive Compensation........................................20
    Item 11. Security Ownership of Certain Beneficial Owners and
                Management.................................................21
    Item 12. Certain Relationships and Related Transactions................21
    Item 13. Exhibits and Reports on Form 8-K..............................22

SIGNATURES   ..............................................................23



                           Forward-Looking Statements

This report contains forward-looking statements. The forward-looking statements
include all statements that are not statements of historical fact.  The
forward-looking statements are often identifiable by their use of words such as
"may," "expect," "believe," "anticipate," "intend," "could," "estimate," or
"continue," "Plans" or the negative or other variations of those or comparable
terms.  The Company's actual results could differ materially from the
anticipated results described in the forward-looking statements.  Factors that
could affect Baylor's results include, but are not limited to, those discussed
in Item 6, "Management's Discussion and Analysis or Plan of Operation" and
included elsewhere in this report.


                                       2

<PAGE>

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS.

(a) BUSINESS DEVELOPMENT

(i)    Business Development, Organization and Acquisition Activities

Baylor Industries, Inc., a developmental stage company, hereinafter
referred to as (the "Company") or ("Baylor"), was organized by the filing of
Articles of Incorporation with the Secretary of State of the State of Nevada
on March 29, 2000.  The original articles of the Company authorized the
issuance of twenty-five million (20,000,000) shares of Common Stock at par
value of $0.001 per share and five million (5,000,000) shares of Preferred
Stock at par value of $0.001.

Baylor Industries, Inc. is a developmental stage company, which plans to
produce generic pharmaceutical products, through contract laboratories and
manufacturing facilities, for pharmaceutical products that have lost their
innovator patent, and no other generics for these products are currently
available on the market. The company plans to distribute this product into
the marketplace through drug wholesalers, chain pharmacies and State Medicaid
programs.

It is the company's hope to enter the marketplace with the first versions of
generic drugs, after the innovator patent has expired.  There are no
guarantees that other generic pharmaceuticals could not enter the market
first with a similar product beforehand.

(ii)  Principal Products and Principal Markets

Baylor Industries, Inc. was incorporated to transact any lawful business.  The
Company hopes to develop a generic pharmaceutical product, utilizing contract
laboratory and manufacturing facilities.  The Company has limited itself to
the development of one product; however, this does not preclude the company
from seeking other product opportunities.  At this time, it does not have the
resources to pursue multiple products.  The Company plans to target a low
volume pharmaceuticals product, in which its U.S. patent recently expired.
Generally speaking, low volume pharmaceutical products are not quickly brought
to the market as generic products, by the larger generic pharmaceutical drug
facilities, since the cost to produce a low volume generic product out weights
its return on investment.  Baylor Industries, Inc., believes it can minimize
the cost to produce generic pharmaceutical products by out-sourcing the steps
necessary to obtain Food and Drug Administration (FDA) approval.

                                   3
<PAGE>

The goal of Baylor Industries, Inc. is to obtain an ANDA (Abbreviated
New Drug Application) from the FDA to produce and market a pharmaceutical
product where the patent on the brand name product has expired, and market
its generic version.  The FDA requires one holder (a primary contact) of the
ANDA.  The Company needs to consider where or not the contract manufacturer
will submit the submission package to the FDA, and be the holder of the ANDA
for this product.  If this becomes the case, the Company would need to enter
into a contract with the contract manufacturer to be the exclusive
distributor of this product.  At this time, the Company is still in the
process of identifying contract facilities to undertake this work.  Since
this is a lengthy process, the Company believes it is too premature to
determine the actual holder of the ANDA for this product.

Generic products generally sell at 1/3 the price of brand name products;
however, profit margins are higher for generic products since the companies
do not carry the overhead of research, administration, marketing, plants and
equipment.

The Company plans to begin with one product, it will take twelve to eighteen
months before the company can expect to generate any revenues.  It will take
that amount of time to obtain FDA approval to market said product.  The
Company is evaluating a low volume off-patent product. And, the innovator
product's patent expired.  Until the evaluation is completed, the Company
considers this evaluation proprietary information.

The target product has no known generic competition at this time.  Upon
release of this product, the Company hopes to capture the current market by
achieving an additional one percent of market share for each month the
generic product is on the market.  It should be cautioned, that the Company
hopes to generate sales volume upon the release of the product, provided no
other generic equivalents are on the market.  If a similar generic product
enters the market beforehand, sales results will suffer.

There are a finite number of end customers of generic pharmaceuticals
products.  If there are multiple generic pharmaceutical products on the
market for the same type of product, these products share the total market
sales in the marketplace.  Generally speaking, the first generic product
to enter the marketplace, captures a significant share of the market.
Price and distribution also become a major factors in determining which
generic product is utilized over a similar product.

The FDA requires that generic products produce a series of studies and the
results of its testing before companies are authorized to sell these
products.  At that time, the FDA will issue an Abbreviated New Drug
Application (ANDA), which allows the company to market a product.  If the
product fails these studies, the entire project and all funding can be lost.
It should be pointed out, if the company cannot pass the necessary studies
required by the FDA, the Company would be unable to fund additional studies.
This could place the Company's future at great risk, to the point, that the
Company would not have enough funds to continue in business.

                                   4
<PAGE>

(iii)  Status of Products and Services

To date, the Company has taken the following initiatives and steps in order
to further its operations and continues to execute its business plan:

a)  On March 14, 2000, the Company issued 2,000,000 shares of its $.001 par
value common stock for cash of $2,000.

b)  On December 21, 2000, the Company filed with the U. S. Securities and
Exchange Commission for their review and approval a SB-2 Registration to
further capitalize the Company by offering for sale 3,000,000 shares of
common stock, at a purchase price of $0.025 per share.  The completion
of this offering would further capitalize the Company by $75,000, less
$6,000 in offering costs for a net to the Company of $69,000.  Without
this funding, the Company will be unable to move its business plan further.

c)  The Company has slowly begun the process to identify a generic
pharmaceutical product, in which its innovator patent has recently expired.

(iv)  Industry Background and Current Status

The Industry and Potential Effect on the Company's Plan of Operation

The pharmaceutical business has consistently grown in gross profit and
revenues.  According to the U.S. Department of Commerce, there are currently
1,356 pharmaceutical manufacturers in the U.S. who sell $74.2 billion in
pharmaceutical products, in 1997.  Generic products account for 50 percent of
the unit volume and approximately 30 percent of the total dollar volume.

When a generic pharmaceutical product enters the market place, it is generally
priced at a 1/3 discount to the brand name product.  As multiple generics enter
the marketplace, additional price reductions take place.  Frequently, the brand
name product's price does not drop.  The company manufacturing and selling the
brand name product cannot afford to cut the price, since they are burdened,
with research, marketing, administration, and plant and equipment costs.
Additionally, once FDA approval is obtain, the brand name companies cannot make
claims of superiority of their product, since the FDA clearly states they are
the same.

There are very few generic pharmaceutical companies who target the lower
volume brand name products that have lost their patent.  The larger generic
pharmaceutical manufacturers, e.g., Zenith, Schein, Major Pharmaceuticals,
generally produce and market generic pharmaceutical products, in which the
total (generic and innovator) product sales exceed $40 million.  They need to
target the larger volume product to pay their overhead and expenses.  It is
the goal of Baylor Industries, Inc. to identify these smaller volume
products, and with little overhead, find a contract manufacturer who can
adhere to FDA guidelines to replicate these products.  If this can be
accomplished, the advantage for the Company in the opinion of management, is
that, it has very little overhead.  Additionally, there are contract
manufacturers that will help defray the additional funding needs for a
percent of the volume generated by this generic product.  If a firm contract
can been established with a contract manufacturer, then the Company might
consider negotiating a risk sharing agreement to determine the amount of
funds available versus the expected return on investment.  If any
negotiations do take place, one of the factors to be negotiated would be to
determine, which entity actually holds the ANDA.  The holder of the ANDA is
the primary contact with the FDA should they have any concerns with the
product.  At this time, the Company has no such agreements in place.

                                    5
<PAGE>

The Pharmaceutical Market

There are a number of pharmaceutical products with expired patents that have no
generic counterpart in the marketplace.  This information can be found on
public records.  Under the Drug Price Competition and Patent Term Restoration
Act (1984 Amendments) the FDA is required to make publicly available a list
of approved drug products with monthly supplements.  The FDA also publishes
through its own Web site a list of prescription pharmaceutical products and
the dates their patents expire.  The FDA publishes newly approved generic
product.  They state whether or not the generic product is equivalent to the
brand name product.

Once a product is approved by the FDA, the owner of the product, usually begins
the process of distribution for said generic product.  Depending on the nature
of the product, the distribution for pharmaceutical products begins with drug
wholesalers.  The drug wholesalers distribute to retail pharmacies, chains,
hospitals, Federal Government, and most managed health care organizations.

Many managed health care organizations and State Medicaid programs mandate that
generic products be used when they become available.  This gives a marketing
edge to the first generic products on the market.  If multiple generics become
available for the same brand name product, price becomes the driving factor in
substituting one generic product over another.  In the pharmacy arena, it
becomes a commodity driven market.  Some managed health care organizations
require a competing generic product be priced twenty (20) lower than an
equivalent product, in order to justify the administrative costs to switch from
one product to another.

Approval Process

The Federal Drug Administration (FDA), Center for Drug Evaluation and Research
under the Federal Food, Drug, and Cosmetic Act (the Act) approves drug products
on the basis of safety and effectiveness.

The main criterion for in the approval process of a pharmaceutical product is
that the product is the subject of an application with an effective approval
that has not been withdrawn for safety or efficacy reasons.  Additionally, the
FDA approves the marketing of approved multi-source prescription generic drug
products.

To contain drug costs, virtually every state in the United States has adopted
laws and/or regulations that encourage the substitution of drug products.
These state laws generally require either that substitution be limited to
drugs on a specific list (the positive formulary approach) or that it be
permitted for all drugs except those prohibited by a particular list (the
negative formulary approach).  Because of the number of requests in the late
1970s for FDA assistance in preparing both positive and negative formularies,
the FDA was inundated to meet the needs of each state on an individual basis.

The FDA also recognized that providing a single list based on common criteria
would be preferable to evaluating drug products on the basis of differing
definitions and criteria in various state laws.  As a result, on May 31, 1978,
the Commissioner of Food and Drugs sent a letter to officials of each state
stating FDA's intent to provide a list of all prescription drug products that
are approved by FDA for safety and effectiveness, along with therapeutic
equivalence determinations for multi-source prescription products.

                                   6
<PAGE>


The list was distributed as a proposal in January 1979.  It included only
currently marketed prescription drug products approved by FDA through new drug
applications (NDAs), abbreviated new drug applications (ANDAs), or abbreviated
antibiotic applications (AADAs) under the provisions of Section 505 or 507 of
the Act.  The therapeutic equivalence evaluations in the List reflect FDA's
application of specific criteria to the approved multi-source prescription
drug products on the List.

A complete discussion of the background and basis of the FDA's therapeutic
equivalence evaluation policy was published in the Federal Register on January
12, 1979 (44 FR 2932).  The final rule, which includes FDA's responses to the
public comments on the proposal, was published in the Federal Register on
October 31, 1980 (45 FR 72582).  The first publication, October 1980, of the
final version of the List incorporated appropriate corrections and additions.
Each subsequent edition has included the new approvals and made appropriate
changes in data.

On September 24, 1984, the President of the United States signed into law the
Drug Price Competition and Patent Term Restoration Act (1984 Amendments).  The
1984 Amendments require that FDA, among other things, make publicly available a
list of approved drug products with monthly supplements.  The Approved Drug
Products with therapeutic equivalence evaluations publication and its monthly
Cumulative Supplements satisfy this requirement.

According to the FDA, pharmaceutical equivalents are drug products considered
pharmaceutical equivalents if they contain the same active ingredient(s), are
of the same dosage form and are identical in strength or concentration, and
route of administration.  Pharmaceutically equivalent drug products are
formulated to contain the same amount of active ingredient in the same dosage
form and to meet the same or compendia or other applicable standards (i.e.,
strength, quality, purity, and identity), but they may differ in
characteristics such as shape, scoring configuration, packaging, excipients
(including colors, flavors, preservatives), expiration time, and, within
certain limits, labeling.

Drug products are considered pharmaceutical alternatives if they contain the
same therapeutic moiety, but are different salts, esters, or complexes of that
moiety, or are different dosage forms or strengths.  Data are generally not
available for FDA to make the determination of tablet to capsule
bioequivalence.  Different dosage forms and strengths within a product line
by a single manufacturer are thus pharmaceutical alternatives, as are
extended-release products when compared with immediate-release or
standard-release formulations of the same active ingredient.

Drug products are considered to be therapeutic equivalents only if they are
pharmaceutical equivalents and if they can be expected to have the same
clinical effect when administered to patients under the conditions specified
in the labeling.

The FDA classifies as therapeutically equivalent those products that meet the
following general criteria: (1) they are approved as safe and effective; (2)
they are pharmaceutical equivalents in that they (a) contain identical amounts
of the same active drug ingredient in the same dosage form and route of
administration, and (b) meet compendia or other applicable standards of
strength, quality, purity, and identity; (3) they are bioequivalent in that (a)
they do not present a known or potential bio-equivalence problem, and they meet
an acceptable in vitro standard, or (b) if they do present such known or
potential problem, they are shown to meet an appropriate bioequivalence
standard; (4) they are adequately labeled; (5) they are manufactured in
compliance with Current Good Manufacturing Practice regulations.


                                   7
<PAGE>

The concept of therapeutic equivalence, applies only to drug products
containing the same active ingredients, and does not encompass a comparison
of different therapeutic agents used for the same condition.

The FDA considers drug products to be therapeutically equivalent if they meet
the criteria outlined above, even though they may differ in certain other
characteristics such as shape, scoring configuration, packaging, excipients
(including colors, flavors, preservatives), expiration time and minor aspects
of labeling (e.g., the presence of specific pharmacokinetic information).

The FDA believes that products classified as therapeutically equivalent can be
substituted with the full expectation that the substituted product will produce
the same clinical effect and safety profile as the prescribed product.

The term bioavailability describes the rate and extent to which the active drug
ingredient or therapeutic ingredient is absorbed from a drug product and
becomes available at the site of drug action.

This term bioequivalent drug products describes pharmaceutically equivalent
products that display comparable bioavailability when studied under similar
experimental conditions.  Section 505 (j)(7)(B) of the Act describes conditions
under which a test and reference listed drug shall be considered bioequivalent:

a) the rate and extent of absorption of the test drug do not show a significant
   difference from the rate and extent of absorption of the reference drug when
   administered at the same molar dose of the therapeutic ingredient under
   similar experimental conditions in either a single dose or multiple doses;

b) the extent of absorption of the test drug does not show a significant
   difference from the extent of absorption of the reference drug when
   administered at the same molar dose of the therapeutic ingredient under
   similar experimental conditions in either a single dose or multiple doses and
   the difference from the reference drug in the rate of absorption of the drug
   is intentional, is reflected in its proposed labeling, is not essential to
   the attainment of effective body drug concentrations on chronic use, and is
   considered medically insignificant for the drug. Where these above methods
   are not applicable (e.g., for topically applied products intended for local
   rather than systemic effect), other in vivo tests of bioequivalence may be
   appropriate.

Bioequivalence may sometimes be demonstrated using an in vitro bioequivalence
standard, especially when such an in vitro test has been correlated with human
in vivo bioavailability data or in other situations through comparative
clinical trials or pharmacodynamic studies.

Statistical Criteria for Bioequivalence

The FDA requires under the Drug Price Competition and Patent Term Restoration
Act of 1984, that companies seeking approval to market a generic drug must
submit data demonstrating that the drug product is bioequivalent to the pioneer
(innovator) drug product.  A major premise underlying the 1984 law is that
bioequivalent products are therapeutically equivalent and, therefore,
interchangeable.

                                   8

<PAGE>


The standard bioequivalence study is conducted in a crossover fashion in a
small number of volunteers, usually with 12 to 24 healthy normal male adults.
Single doses of the test and reference drugs are administered and blood or
plasma levels of the drug are measured over time.  Characteristics of these
concentration-time curves, such as the area under the curve (AUC) and the
peak blood or plasma concentration (C max), are examined by statistical
procedures.

Bioequivalence of different formulations of the same drug substance involves
equivalence with respect to the rate and extent of drug absorption.  Two
formulations whose rate and extent of absorption differ by 20% or less are
generally considered bioequivalent.  The use of the 20% rule is based on a
medical decision that, for most drugs, a 20% difference in the concentration
of the active ingredient in blood will not be clinically significant.

In order to verify, for a particular pharmacokinetic parameter, that the
-/+ 20% rule is satisfied, two one-sided statistical tests are carried out
using the data from the bioequivalence study.  One test is used to verify
that the average response for the generic product is no more than 20% below
that for the innovator product; the other test is used to verify that the
average response for the generic product is no more than 20% above that for
the innovator product.  The current practice is to carry out the two
one-sided tests at the 0.05 level of significance.

Computationally, the two one-sided tests are carried out by computing a 90%
confidence interval.  For approval of abbreviated new drug applications
(ANDA's), in most cases, the generic manufacturer must show that a 90 percent
confidence interval of the difference between the mean response (usually AUC
and max) of its product and that of the innovator is within the limits -/+ 20
percent of the innovator mean.  If the true difference between the products is
near 20 percent of the innovator mean, the confidence limit will likely be
outside the acceptable range and the product will fail the bioequivalence test.
Thus, an approved generic product is likely to differ from that of the
innovator by far less than this quantity.

The current practice of carrying out two one-sided tests at the 0.05 level of
significance ensures that if the two products truly differ by as much or more
than is allowed by the equivalence criteria (usually +/- 20 percent of the
innovator product average for the bioequivalence parameter, such as AUC or
Cmax) there is no more than a 5 percent chance that they will be approved as
equivalent.  This reflects the fact that the primary concern from the
regulatory point of view is the protection of the patient against the
acceptance of bioequivalence if it does not hold true.  The results of a
bioequivalence study must usually be acceptable for more than one
pharmacokinetic parameter.  As such, a generic product that truly differs by
20 percent or more from the innovator product with respect to one or more
pharmacokinetic parameters, would actually have less than a 5 percent chance
of being approved.  Therefore, the Company must be duplicate and demonstrate
to the FDA that their product can meet these criteria.

RISKS

a)  There are no assurances that the Company will ever become or remain
profitable.  The Company's future profitability will depend on whether or not
we can obtain approval from the Food and Drug Administration ("FDA") to market
a generic pharmaceutical product.  The Company expects to continue to incur
losses if and until they can obtain FDA approval to market a generic
pharmaceutical product.  The Company's operating expenses are expected to
continue to increase significantly in connection with its proposed activities,
specifically in the areas of product development, research, filing applications
to the FDA, and producing the final generic pharmaceutical product.  There are
no certainties that they will be able to accurately predict revenues,
particularly due to the general uncertainty of obtaining FDA approval and
whether or not other companies will come to the market first with the same
generic pharmaceutical product.

                                      9
<PAGE>


b)  The first step necessary in the Company's business plan is finding a
pharmaceutical product on which the innovator patent has expired.  The Company
has yet to selected any product.  Additionally, there are no guarantees that
Baylor Industries  will be able to arrange for its effective manufacture and
distribution.

c)  Before pharmaceutical companies are authorized to sell generic products,
the FDA requires that they perform a series of studies and publish the
results of their studies.  At that time, the FDA may issue an Abbreviated
New Drug Application (ANDA), which allows the company to market a product.
If the product fails these studies, the entire project and all funding can
be lost. If the Company is unable to pass the necessary studies required
by the FDA, Baylor Industries may be unable to fund additional studies and
would, consequently, have a material adverse affect on Baylor's business
operations.

d)  The Company's independent certified public accountants points out the
Company inability to continue as a going Concern.  This is especially the case,
if the Company does not obtain additional capital and financing for its planned
operations.  If we do not raise a minimum of $75,000 from the proposed SB-2
offering, the Company would be unable to be a Going Concern.  There are no
assurances that even if the Company obtains the proceeds from this offering
that they will be able to meet its cash requirements from these sources.  If
capital requirements or cash flow vary significantly from Baylor's current
estimates or if unforeseen circumstances occur, Baylor may require additional
financing sooner than is currently anticipated.  Therefore, the Company's
failure to raise these funds may:

     o    restrict growth;
     o    limit development of new products or improvements to
          existing products and services;
     o    limit ability to take advantage of future opportunities;
     o    lessen ability to compete; and
     o    limit ability to continue operations.

There are no assurances that additional financing will be available to Baylor
Industries, if needed, or that it will be available on terms acceptable to the
Company.  In addition, any sale of the Company's equity securities may involve
substantial dilution to then-existing shareholders..

e)  There is currently no established public trading market for Baylor
Industries securities.  A trading market in Baylor's securities may never
develop or, if developed, it may not be able to be sustained.  If for any
reason the Company's common stock is not listed on the NASD OTC Bulletin Board
or a public trading market does not otherwise develop, purchasers of the
shares may have difficulty selling their common stock should they desire to do
so.  Various factors, such as the Company's operating results, changes in laws,
rules or regulations, general market fluctuations, changes in financial
estimates by securities analysts and other factors may have a significant
impact on the market price of Baylor Industries securities.

                                     10
<PAGE>


(v)  Raw Materials and Suppliers

The raw material to produce a generic is a major concern.  Although many
innovator companies have their patents expire, they are the sole manufacturers
of the raw materials needed to make the generic counterparts.   In a sense,
they can prevent a generic product from entering the market place by
controlling the raw materials needed to produce it.  Therefore, the first
criteria, Baylor Industries, Inc., utilizes in selecting a generic
product, is to determine the availability of the raw materials to produce it.
As long as the raw materials are widely available, the Company will proceed
to evaluate whether or not it can be produced as a generic product.  This
company research to identify pharmaceutical raw materials should be
considered proprietary information.

The Company does not intend to manufacture any products.  The Company intends
to license to, or enter into strategic alliances with, larger pharmaceutical
and veterinary companies that are equipped to manufacture pharmaceutical
products that the Company plans to seek to develop and market.

(vi)  Customers

The Company plans to distribute its product - if and when it gets to this stage
of its business plan - into the marketplace through drug wholesalers, chain
pharmacies and State Medicaid programs.  As of December 31, 2000, no sales
revenues have been generated by the Company.  In addition, the Company does not
expect to generate any sales revenues in the foreseeable future.

The customer profile, however, for generic products in the U.S. currently
includes:

<TABLE>
<CAPTION>

   Business                                   Number
--------------                             -----------
<S>                                        <C>
Drug wholesalers                               278
Pharmacies                                   50,000
Drug Chain Headquarters                        100
Contracting Managed Health Care                 70
Federal Government (DOD)                         1
State Medicaid Programs                         50

</TABLE>


It should be noted that the ten (10) largest drug wholesalers, service and
distribute to approximately eighty (80) percent of the entire pharmaceutical
business in the U.S.  Therefore, once a drug receives FDA approval,
distribution then becomes the next concern of a pharmaceutical company.  With
limited resources, the Company believes that it will take a deal of time and
effort to obtain product distribution of a generic pharmaceutical product.
This could adversely affect the Company's sales results.

(vii)  Patents, Trademarks, Licenses, Franchises, Concessions, Royalty
Agreements, or Labor Contracts

The Company plans to produce generic pharmaceutical products, in which the
innovator's product patent has expired.  Patents are generally not issued to
generic pharmaceutical products.  If the company receives FDA approval to
sell a generic product, it plans to give the product a generic trade name
which would be registered with the US Trademark office.  It is too premature
to submit any entries, as the US Trademark Office requires that submissions
should not be made until at least six (6) months until the product is
marketed.   The Company expects the generic approval process will take
eighteen (18) to twenty-four (24) months.

                                      11
<PAGE>



(viii)  Regulation

The pharmaceutical industry is tightly regulated by the FDA, DEA, and State
Governments, and State Boards of Pharmacy. Under Section 510(h) of the Federal
Food, Drug, and Cosmetic Act, every drug establishment registered with the FDA
must be inspected at least once every two (2) years to determine if the drugs
they market are produced in conformance with current Good Manufacturing
Practices (GMP).  Copies of the inspection reports generated by the FDA
District conducting the inspection or any other inspections conducted are
available from the local Districts offices pursuant to the Freedom of
Information regulations.  These reports are also available from:  National
Technical Information Service, 5285 Port Royal Road, Springfield, VA  22161.

For this reason, the Company plans to use sub-contractors who are in good
standing with the FDA.  If the Company hopes to achieve FDA approval of a
generic drug, the Company needs to utilize FDA approved facilities.  When the
FDA reviews the submission package from the Company, they will quickly
ascertain which facilities did the testing and manufacturing and whether or
not they facilities are approved FDA facilities.  The Company believes the
usage of non-approved FDA sub-contractors would only delay the approval
process.

(ix)  Effect of Existing or Probable Government Regulations

Although the Company plans on obtaining all required federal and state permits,
licenses, FDA registrations and bonds to operate its facilities, there can be no
assurance that the Company's operations and profitability will not be subject
to more restrictive regulation or increased taxation by federal, state, or
local agencies.

(x)  Research and Development Activities

Baylor Industries, Inc., believes it can minimize the cost to produce
generic pharmaceutical products by out-sourcing the steps necessary to obtain
Food and Drug Administration (FDA) approval.

The goal of Baylor Industries, Inc. is to obtain an ANDA (Abbreviated New
Drug Application) from the FDA to produce and market a pharmaceutical product
where the patent on the brand name product has expired, and then subsequently
market its generic version.  The FDA requires one holder (a primary contact) of
the ANDA.  The Company needs to consider whether or not the contract
manufacturer will submit the submission package to the FDA, and be the holder
of the ANDA for this product.  If this becomes the case, the Company
would need to enter into a contract with the contract manufacturer to be the
exclusive distributor of this product.  At this time, the Company is still in
the process of identifying contract facilities to undertake this work.  Since
this is a lengthy process, the Company believes it is too premature to
determine who the actual holder of the ANDA for this product will be.

The Company needs additional capitalization before it can move forward in
developing any generic pharmaceutical product.  To accomplish this end,
the Company has filed with the U.S. Securities and Exchange Commission a
SB-2 registration to raise $75,000, by selling 3,000,000 shares of common
stock in the Company.

(xi)  Impact of Environmental Laws

The pharmaceutical industry is tightly regulated.  The Company plans to
subcontract almost all of its work to outside laboratories and to an outside
pharmaceutical manufacturer.  It is the Company's intent to only utilize FDA
approved facilities, as it needs to have its generic product FDA approved
before it can be marketed.


                                      12
<PAGE>


(xii)  Employees

The Company currently has one (1) employee (officer): one President/Secretary.
All of the research and development will be subcontracted to outside
laboratories and a manufacturing facility.  This subcontracting will be
coordinated by the President of the Company.  If the company can obtain an
ANDA from the FDA for a generic pharmaceutical product, at that time the
Company will either consider adding more employees, or selling its rights to
market the product to another Company.


ITEM 2.  DESCRIPTION OF PROPERTY.

The Company's corporate headquarters are located at 14601 Bellaire Blvd. Suite
338, Houston, TX 77083.  The office space is provided by the officer of the
Company at no cost to the Company.

ITEM 3.  LEGAL PROCEEDINGS.

As of the date hereof, Baylor Industries is not a party to any material
Legal proceedings, and none are known to be contemplated against Baylor
Industries, Inc.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

No matters were submitted to a vote of security holders during the fiscal
year ended December 31, 2001.

                                       13

<PAGE>

                                    PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

Market Information
------------------

The common stock of the Company is currently not traded on the NASDAQ OTC
Bulletin Board or any other formal or national securities exchange.  There is
no trading market for the Company's Common Stock at present and there has
been no trading market to date.

(a) There is currently no Common Stock which is subject to outstanding
options or warrants to purchase, or securities convertible into, the
Company's common stock.

(b)  There is currently no common stock of the Company which could be sold
under Rule 144 under the Securities Act of 1933 as amended or that the
registrant has agreed to register for sale by security holders.

Holders
-------

The number of holders of record of common stock as of December 31, 2001 is one.

Dividends
---------

Holders of common stock are entitled to receive such dividends as the board of
directors may from time to time declare out of funds legally  available for the
payment of dividends.  No dividends have been paid on the Company's common
stock, and Baylor Industries does not anticipate paying any dividends on its
common stock in the foreseeable future.

Recent Sales of Unregistered Securities
---------------------------------------

The Company is authorized to issue 20,000,000 shares of its $0.001 par
value common stock and 5,000,000 shares of its $0.001 par value preferred
stock.

On March 14, 2000, the Company issued 2,000,000 shares of its $.001 par
value common stock for cash of $2,000.

There have been no other issuances of common or preferred stock.

                                     14
<PAGE>


ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

General
-------

The current core business of Baylor Industries, Inc. is to develop
and contract manufacture generic prescription pharmaceutical products.
The Company hopes to develop a generic pharmaceutical product, utilizing a
FDA approved contract laboratory and contract manufacturing facilities.  The
Company hopes to obtain an Abbreviated New Drug Application (ANDA) for their
generic pharmaceutical product. The Company has limited itself to the
development of one product; however, this does not preclude the company from
seeking other product opportunities.  At this time, it does not have the
resources to pursue multiple products.  The Company plans to target a low
volume pharmaceuticals product, in which its U.S. patent recently expired.
Generally speaking, low volume pharmaceutical products are not quickly
brought to the market as generic products, by the larger generic
pharmaceutical drug facilities, since the cost to produce a low volume
generic product out weights its return on investment.  Baylor Industries,
believes it can minimize the cost to produce generic pharmaceutical products
by out-sourcing the steps necessary to obtain Food and Drug Administration
("FDA") approval.

The goal of Baylor Industries, Inc. is to obtain an ANDA (Abbreviated
New Drug Application) from the FDA to produce and market a pharmaceutical
product where the patent on the brand name product has expired, and market
its generic version.  The FDA requires one holder (a primary contact) of the
ANDA.  The Company needs to consider where or not the contract manufacturer
will submit the submission package to the FDA, and be the holder of the ANDA
for this product.  If this becomes the case, the Company would need to enter
into a contract with the contract manufacturer to be the exclusive
distributor of this product.

Results of Operations
---------------------

As a research and development Company, the Company has yet to generate any
Revenues.  In addition, the Company does not expect to generate any revenues
over the next approximately to eighteen (18) months.  During calendar year,
ended December 31, 2001, the Company experienced net losses $2,868.  The bulk
of these expenses were for legal and accounting purposes and filing fees.
The Company does not have any material commitments for capital expenditures.

                                      15
<PAGE>

Liquidity and Capital Resources
-------------------------------

The Company is authorized to issue 20,000,000 shares of its $0.001 par
value common stock and 5,000,000 shares of its $0.001 par value preferred
stock.

On March 14, 2000, the Company issued 2,000,000 shares of its $.001 par
value common stock for cash of $2,000.

On December 21, 2000, the Company filed with the U. S. Securities and
Exchange Commission for their review and approval a SB-2 Registration to
further capitalize the Company by offering for sale 3,000,000 shares of
common stock, at a purchase price of $0.025 per share.  The completion
of this offering would further capitalize the Company by $75,000, less
$6,000 in offering costs for a net to the Company of $69,000.  Without
this funding, the Company will be unable to move its business plan further.

In April 2001, the company's sole shareholder contributed $3,750 to the
Company as additional paid-in capital.


                                      16
<PAGE>

ITEM 7.  FINANCIAL STATEMENTS.









                            BAYLOR INDUSTRIES, INC.
                         (A DEVELOPMENT STAGE COMPANY)

                             FINANCIAL STATEMENTS

                          DECEMBER 31, 2001 AND 2000





                                   CONTENTS


<TABLE>
<CAPTION>

CONTENTS


                                                            PAGE
<S>                                                         <C>
INDEPENDENT AUDITORS' REPORT                                F-1
BALANCE SHEETS                                              F-2
STATEMENTS OF OPERATIONS                                    F-3
STATEMENT OF STOCKHOLDERS' EQUITY                           F-4
STATEMENTS OF CASH FLOWS                                    F-5
NOTES TO FINANCIAL STATEMENTS                               F-6-8


</TABLE>


                                     17

<PAGE>









                         INDEPENDENT AUDITORS' REPORT



To the Board of Directors of Baylor Industries, Inc.:

We have audited the accompanying balance sheet of Baylor Industries, Inc. (A
Development Stage Company) as of December 31, 2001, and the related
statements of operations, stockholders' equity and cash flows for the year
then ended.  These financial statements are the responsibility of the
Company's management. Our  responsibility is to express an opinion  on  these
financial  statements based  on  our  audit.   The  balance  sheet  of Baylor
Industries, Inc. as of December  31,  2000, and the related statements of
operations,  stockholders' equity and cash  flows  for  the  period  from
March  29, 2000 (inception) to December 31, 2000, were audited by other
auditors whose  report thereon, dated February 28, 2001, expressed an
unqualified opinion on those  statements.  The financial  statements  for
the  period  March  29,  2000 (inception)  through December 31, 2000, reflect
total revenue and a net loss  of  $-0-  and $1,581, respectively,  of  the
related  totals.  The other auditors' report has  been furnished to us, and
or opinion, insofar  as it relates to the amount included for such prior
period is based solely on the report of such other auditors.

We  conducted our  audit  in  accordance  with auditing  standards  generally
accepted in the United States of America.  Those  standards  require  that
we plan and  perform  the audit to obtain reasonable assurance about whether
the financial statements  are  free of  material misstatement.  An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes assessing
the accounting principles used  and significant  estimates  made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audit provides a reasonable basis for our
opinion.

In our opinion, based on our audit and the report of the other  auditors,
the financial  statements  referred  to  above  present  fairly,  in  all
material respects, the financial position of Baylor Industries, Inc. as of
December 31, 2001,  the  results  of  its  operations and its cash flows for
the year  then ended, and for the period from March 29, 2000 (inception) to
December 31 2001, in conformity with accounting principles  generally
accepted  in  the  United States of America.


                                     MERDINGER, FRUCHTER, ROSEN & CORSO, P.C.
                                     Certified Public Accountants

New York, New York


                                     F-1

<PAGE>

                           BAYLOR INDUSTRIES, INC..
                         (A Development Stage Company)
                                 BALANCE SHEET



<TABLE>
<CAPTION>

BALANCE SHEET


                                                        December 31,
                                                -----------------------------
                                                      2001           2000
                                                --------------  -------------
<S>                                             <C>             <C>
ASSETS
   Cash and cash equivalents                    $        2,386  $         504
                                                ==============  =============

LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
   Accounts payable and accrued expenses                    85             85
   Advances by shareholder                               1,000              -
                                                --------------  -------------

     Total current liabilities                           1,085             85
                                                --------------  -------------


STOCKHOLDERS' EQUITY
  Preferred stock, $0.001 par value;
    5,000,000 shares authorized,
    -0- shares issued and outstanding                        -              -
  Common stock, $0.001 par value;
    20,000,000 shares authorized,
  2,000,000 shares issued and outstanding                2,000          2,000
  Additional paid-in capital                             3,750              -
  Deficit accumulated during
   the development stage                               (4,449)        (1,581)

                                                --------------  -------------

     Total stockholders' equity                          1,301            419
                                                --------------  -------------

     Total liabilities and stockholders' equity $        2,386  $         504
                                                ==============  =============


</TABLE>












The accompanying notes are an integral part of these financial statements.

                                     F-2
<PAGE>
                            BAYLOR INDUSTRIES, INC.
                         (A Development Stage Company)
                           STATEMENTS OF OPERATIONS




<TABLE>
<CAPTION>

STATEMENT OF OPERATIONS


                                 For the Year  March 29, 2000  March 29, 2000
                                    Ended       (Inception)    (Inception) to
                                 December 31,   December 31,    December 31,
                                     2001           2000             2001
                                 ------------  --------------  --------------
<S>                              <C>           <C>             <C>
Revenue                          $          -  $            -  $            -

General and administrative
  expenses                              2,868           1,581           4,449
                                 ------------  --------------  --------------
Loss from operations before
  provision for income taxes          (2,868)         (1,581)         (4,449)

Provision for income taxes                  -               -               -
                                 ------------  --------------  --------------
Net loss                         $    (2,868)  $      (1,581)  $      (4,449)
                                 ============  ==============  ==============

Net loss per share -
  basic and diluted              $          -  $            -  $            -
                                 ============  ==============  ==============
Weighted average number of
  common shares                     2,000,000       2,000,000       2,000,000
                                 ============  ==============  ==============

</TABLE>


















The accompanying notes are an integral part of these financial statements.

                                       F-3

<PAGE>

                            BAYLOR INDUSTRIES, INC.
                         (A Development Stage Company)
                       STATEMENT OF STOCKHOLDERS' EQUITY





<TABLE>
<CAPTION>
STATEMENT OF STOCKHOLDERS' EQUITY

                                                      Deficit
                                                    Accumulated
                                         Additional During the     Total
                           Common Stock   Paid-In   Development Stockholders'
                       -----------------
                         Shares   Amount  Capital      Stage       Equity
                       ---------  ------ ---------- ----------- -------------
<S>                    <C>        <C>    <C>        <C>         <C>
Mar 31,2000 (Inception)        -  $    - $        - $         - $           -

Issued for cash        2,000,000   2,000          -           -         2,000

Net Loss                       -       -          -     (1,581)       (1,581)
                       ---------  ------ ---------- ----------- -------------

Balance Dec 31, 2000   2,000,000   2,000          -     (1,581)         (419)

Shareholder Contrib.           -       -      3,750           -         3,750

Net Loss                       -       -          -     (2,868)       (2,868)
                       ---------  ------ ---------- ----------- -------------


Balance, Dec 31, 2001  2,000,000  $2,000 $    3,750 $   (4,449) $       1,301
                       =========  ====== ========== =========== =============


</TABLE>






















The accompanying notes are an integral part of these financial statements.

                                       F-4
<PAGE>
                            BAYLOR INDUSTRIES, INC.
                         (A Development Stage Company)
                            STATEMENT OF CASH FLOWS



<TABLE>
<CAPTION>
STATEMENT OF CASH FLOWS

                                     For the Year  Mar 29, 2000  Mar 29, 2000
                                        Ended      (Inception)   (Inception)
                                         to            to            to
                                     Dec 31, 2001  Dec 31, 2000  Dec 31, 2001
                                     ------------  ------------  ------------
<S>                                  <C>           <C>           <C>

CASH FLOWS FROM OPERATING ACTIVITIES
 Net Loss                            $    (2,868)  $    (1,581)  $    (4,449)
 Stock issued for services                                                  -
 Increase in advances by shareholder        1,000                       1,000
 Increase in accounts payable and
  accrued expenses                                           85            85
                                     ------------  ------------  ------------

NET CASH USED IN OPERATING ACTIVITIES     (1,868)       (1,496)       (3,364)
                                     ------------  ------------  ------------

CASH FLOWS FROM FINANCING ACTIVITIES
  Sale of common stock                                    2,000         2,000
  Cost associated with the sale of
    common stock                                              -             -
  Funds paid into capital by officer        3,750             -         3,750
                                     ------------  ------------  ------------

NET CASH PROVIDED BY FINANCING
ACTIVITIES                                  3,750         2,000         5,750
                                     ------------  ------------  ------------

  Increase in cash and cash
    equivalents                             1,882           504         2,386

  Cash and cash equivalents -
    beginning of period                       504             -             -
                                     ------------  ------------  ------------
  Cash and cash equivalents -
    end of period                    $      2,386  $        504  $      2,386
                                     ============  ============  ============


Supplemental Information:
  Cash payments made for:
    Income taxes                     $          -  $          -  $          -
                                     ============  ============  ============
    Interest                         $          -  $          -  $          -
                                     ============  ============  ============

</TABLE>







The accompanying notes are an integral part of these financial statements.

                                       F-5
<PAGE>
                            BAYLOR INDUSTRIES, INC.
                         (A Development Stage Company)
                         NOTES TO FINANCIAL STATEMENTS
                          DECEMBER 31, 2001 AND 2000



 NOTE 1 -  DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
           POLICIES

          Nature of Operations
          --------------------
          Baylor Industries, Inc. (the "Company") is currently a development-
          stage  company  under  the provisions of the  Financial  Accounting
          Standards  Board  ("FASB")   Statement   of   Financial  Accounting
          Standards ("SFAS") No. 7.  The Company was incorporated  under  the
          laws of the state of Nevada on March 29, 2000.

          Use of Estimates
          ----------------
          The   preparation   of  financial  statements  in  conformity  with
          generally accepted accounting  principles  requires  management  to
          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  revenue and expenses  during  the  reporting
          period.  Actual results could differ from those estimates.

          Cash and Cash Equivalents
          -------------------------
          The Company considers all highly liquid investments purchased with
          original  maturities  of  three   months   or   less  to  be  cash
          equivalents.

          Income Taxes
          ------------
          Income  taxes  are provided for based on the liability  method  of
          accounting pursuant  to  SFAS  No.  109,  "Accounting  for  Income
          Taxes."   Deferred  income  taxes, if any, are recorded to reflect
          the tax consequences on future  years  of  differences between the
          tax bases of assets and liabilities and their  financial reporting
          amounts at each year-end.

          Earnings Per Share
          ------------------
          The Company calculates earnings per share in accordance  with SFAS
          No.  128,  "Earnings  Per  Share," which requires presentation  of
          basic earnings per share ("BEPS")  and  diluted earnings per share
          ("DEPS").  The computation of BEPS is computed  by dividing income
          available to common stockholders by the weighted average number of
          outstanding common shares during the period.  DEPS gives effect to
          all  dilutive  potential  common  shares  outstanding  during  the
          period.   The  computation  of  DEPS  does not assume  conversion,
          exercise or contingent exercise of securities  that  would have an
          antidilutive  effect  on  earnings.  As of December 31, 2001,  the
          Company had no securities that would effect loss per share if they
          were to be dilutive.

          Comprehensive Income
          --------------------
          SFAS  No.  130,  "Reporting  Comprehensive   Income,"  establishes
          standards for the reporting and display of comprehensive income and
          its components  in  the financial statements.  The Company had
          no  items of other comprehensive  income  and  therefore  has  not
          presented a statement of comprehensive income.


                                     F-6
<PAGE>
                            BAYLOR INDUSTRIES, INC.
                         (A Development Stage Company)
                         NOTES TO FINANCIAL STATEMENTS
                          DECEMBER 31, 2001 AND 2000



NOTE 2 -  INCOME TAXES

          The components  of  the  provision  for income taxes for the period
          from January 1, 2001 to December 31, 2001 are as follows:

             Current Tax Expense
               U.S. Federal                           $           -
               State and Local                                    -
                                                      -------------
             Total Current                                        -
                                                      -------------

             Deferred Tax Expense
               U.S. Federal                                       -
               State and Local                                    -
                                                      -------------
             Total Deferred                                       -
                                                      -------------

             Total Tax Provision (Benefit) from
              Continuing Operations                   $           -
                                                      =============

            The reconciliation of the effective income  tax rate to the Federal
            statutory rate is as follows:

            Federal Income Tax Rate                             34.0%
            Effect of Valuation Allowance                    ( 34.0)%
                                                             --------
            Effective Income Tax Rate                            0.0%
                                                             ========

          At  December 31, 2001, the Company had net carryforward  losses  of
          $4,449.   Because  of  the  current  uncertainty  of  realizing the
          benefits  of the tax carryforward, a valuation allowance  equal  to
          the tax benefits for deferred taxes has been established.  The full
          realization  of  the  tax  benefit associated with the carryforward
          depends  predominantly  upon  the  Company's  ability  to  generate
          taxable income during the carryforward period.


          Deferred tax assets and liabilities  reflect  the net tax effect of
          temporary  differences between the carrying amount  of  assets  and
          liabilities  for  financial reporting purposes and amounts used for
          income  tax purposes.   Significant  components  of  the  Company's
          deferred  tax assets and liabilities as of December 31, 2001 are as
          follows:

          Deferred Tax Assets
           Loss Carryforwards                           $    1,500

           Less:  Valuation Allowance                      ( 1,500)
                                                        -----------
             Net Deferred Tax Assets                    $         -
                                                        ===========

            Net operating loss carryforwards expire in 2021.

                                       F-7
<PAGE>
                            BAYLOR INDUSTRIES, INC.
                         (A Development Stage Company)
                         NOTES TO FINANCIAL STATEMENTS
                          DECEMBER 31, 2001 AND 2000



NOTE 3 -  COMMON STOCK

          On March 14, 2000, the Company issued 2,000,000 shares of its $.001
          par value common stock for $2,000.

          In April 2001,  a  shareholder contributed $3,750 to the Company as
          additional paid-in capital.

NOTE 4 -  RELATED PARTY TRANSACTIONS

          The Company neither  owns nor leases any real or personal property.
          The officers/directors  of  the  Company  provide  office and other
          services  without  charge.   Such  costs  are  immaterial   to  the
          financial  statements  and,  accordingly,  have  not been reflected
          therein.    These  individuals  are  involved  in  other   business
          activities and  may,  in  the  future,  become  involved  in  other
          business  opportunities.   If specific business opportunity becomes
          available, such persons may  face  a  conflict in selecting between
          the Company and their other business interest.  The Company has not
          formulated a policy for the resolution of such conflicts.

          The Company is obligated to a stockholder pursuant to a note, dated
                     ,  in the amount of $1,000. These  funds  were  used  in
          -----------
          operations.  The note bears no interest and is payable upon demand.

          In April 2001,  a  shareholder contributed $3,750 to the Company as
          additional paid-in capital.




                                     F-8

<PAGE>


--------------------------------------------------------------------------------

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE.

The Company filed a Current Report dated March 18, 2002 on Form 8-K
containing information pursuant to Item 4 ("Changes in Accountants")
entitled "Changes in Registrant's Certifying Account."

There were no disagreements between the Company and its former CPA, G. Brad
Beckstead on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which, if not resolved
to the satisfaction of G. Brad Beckstead, would have caused them to make
reference to the subject matter of the disagreement in connection with its
report.

On March 18, 2002 the Registrant engaged Merdinger, Fruchter, Rosen &
Corso, P.C. as its principal accountant to audit the Registrant's financial
statements as successor to G. Brad Beckstead.  During the Registrant's two
most recent fiscal years or subsequent interim period, the Registrant has
not consulted Merdinger, Fruchter, Rosen & Corso, P.C. regarding the
application of accounting principles to a specific transaction, either
completed or proposed, or the type of audit opinion that might be rendered
on the Registrant's financial statements, nor did Merdinger, Fruchter,
Rosen & Corso, P.C. provide advice to the Registrant, either written or
oral, that was an important factor considered by the Registrant in
reaching a decision as to the accounting, auditing or financial reporting
issue.  Further, during the Registrant's two most recent fiscal years or
subsequent interim period, the Registrant has not consulted Merdinger,
Fruchter, Rosen & Corso, P.C. on any matter that was the subject of a
disagreement or a reportable event.

                                       18

<PAGE>


                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

The following table sets forth the current officers and directors of Baylor
Industries, Inc.


<TABLE>
<CAPTION>

        Name                    Age               Position
--------------------------- ----------- -------------------------------
<S>                             <C>             <C>
Candace J. Sherman              53              President, Director

</TABLE>

CANDACE J. SHERMAN, President & CEO, has served in this capacity since
the inception of Baylor Industries, Inc.  Born January 18, 1949, Ms.
Sherman, a member of Phi Beta Kappa, holds degrees from the University
of North Carolina at Greensboro and Houston Baptist University in
Texas, the latter a Master's Degree in Education.  She has been a
teacher with the Houston Independent School District for the past 25
years and has been named Teacher of the Year at her school.  She is
currently devoted to continuing her teaching career while also focused
on the continuing development of Baylor.  This is her first endeavor to
produce and market a generic pharmaceutical product.  She has resides at
11411 Dunlap, Houston, Texas  77035.

DIRECTOR COMPENSATION

Directors shall receive no cash compensation for their services to
Baylor as directors, but are reimbursed for expenses actually incurred
in connection with attending meetings of the Board of Directors.

Directors are elected in accordance with the Company's bylaws to serve until
the next annual stockholders meeting.  Baylor Industries does not currently
pay compensation to directors for services in that capacity.

Officers are elected by the board of directors and hold office until their
successors are chosen and qualified, until their death or until they resign or
have been removed from office.  All corporate officers serve at the discretion
of the board of directors.  There are no family relationships between any
director or executive officer and any other director or executive officer of
Baylor Industries, Inc.

                                     19
<PAGE>

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who beneficially own more than
ten percent of a registered class of our equity securities (referred to as
"reporting  persons"), to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes in ownership of common
stock and other equity securities.  Reporting persons are required by
Commission regulations to furnish us with copies of all Section 16(a) forms
they file.

To the Company's knowledge, all Section 16(a) filing requirements applicable
to its directors, executive officers and greater than ten percent beneficial
owners during such period were satisfied.

ITEM 10.  EXECUTIVE COMPENSATION.

As a result of the Company's current limited available cash, no officer or
director received compensation during the fiscal year ended December 31, 2001.

                           Summary Compensation Table

<TABLE>
<CAPTION>

               Name and Principal Position -- Annual Compensation
               ---------------------------    --------------------
                                     2001
                                     ----

                                                       Number of Shares
                                                       Underlying
                         Position    Salary    Bonus   Options (#)
                         --------  -------- ----------------------
<S>                      <C>         <C>       <C>     <C>
Candace J. Sherman       President   None      None    None

</TABLE>

Baylor Industries intends to pay salaries when cash flow permits.  No
officer or director received stock options or other non-cash compensation
during the fiscal year ended December 31, 2001.  The Company does have
employment agreements in place with each of its officer.

                                      20
<PAGE>

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information concerning the beneficial
ownership of the Company's outstanding common stock as of December 31, 2001,
by each person known by Baylor Industries to own beneficially more than 5% of
the outstanding common stock, by each of our directors and officer and by
all of our directors and officers as a group.  Unless otherwise indicated
below, all persons listed below have sole voting and investment power with
respect to their shares of common stock.

<TABLE>
<CAPTION>

                                   Number of     Percent of
         Name       Position       Shares        Ownership
         ----       --------      ---------      ----------
<S>                 <C>           <C>            <C>
Candace Sherman(1)  CEO/Director  2,000,000      100.00%
                                  --------------------------
All officers and directors
as a group (1 person)             2,000,000      100.00%

</TABLE>

(1) Candace Sherman, 14601 Bellaire Blvd., Suite 338, Houston, TX  77083


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

By Board Resolution, the Company hired the professional services of Merdinger,
Fruchter, Rosen & Corso, P.C., Certified Public Accountants, to perform
audited financials for the Company.  The members of the firm of Merdinger,
Fruchter, Rosen & Corso, P.C. own no stock in the Company.  The Company's
Certified Public Accountants are paid on a fee for service basis

The officer/director of the Company is involved in other business activities
and may, in the future, become involved in other business opportunities.  If
a specific business opportunity becomes available, such persons may face a
conflict in selecting between the Company and their other business interests.
The Company has not formulated a policy for the resolution of such conflicts.

                                       21
<PAGE>


ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K.

(a)  EXHIBITS.

The following documents are included or incorporated by reference as exhibits to
this report:



EXHIBIT
  NO.                        DOCUMENT DESCRIPTION
-------  -----------------------------------------------------------------------

(3)      ARTICLES OF INCORPORATION AND BY-LAWS

  3.1    Articles of Incorporation of the Company Filed March 29, 2000(2)

  3.2    By-Laws of the Company adopted March 29, 2000 (2)

(5)      CONSENT OF EXPERTS AND COUNSEL

  5.1    Letter of Consent from Thomas C. Cook, Esq., dated December 8, 2000 (2)

(23)     CONSENT OF EXPERTS AND COUNSEL

   23.1  Letter of Consent from G. Brad Beckstead, CPA (2)
   23.2  Letter of Consent from G. Brad Beckstead, CPA (1)

(27)     FINANCIAL DATA SCHEDULE

  27.1   Financial Data Schedule (2)
  27.2   Financial Data Schedule (1)

-------------
(1)  Filed herewith.

(2)  Previously filed as an exhibit to Baylor's registration statement on Form
     SB-2 which was filed on December 21, 2000, and incorporated herein by
     reference.

(b)  REPORTS ON FORM 8-K

The Company filed a Current Report dated March 18, 2002 on Form 8-K
containing information pursuant to Item 4 ("Changes in Accountants")
entitled "Changes in Registrant's Certifying Account."  (See Item 8 above,
entitled, "Changes in and Disagreements with Accountants on Accounting")


                                       22


<PAGE>

                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.


                                       BAYLOR INDUSTRIES, INC.
                                       -----------------------
                                           (Registrant)

Date:  March 28, 2002                  By: /s/ Candace J. Sherman
                                       -----------------------
                                               Candace J. Sherman
                                               President/
                                               principal executive officer/
                                               principal accounting officer
                                               and sole director

                                       23


<PAGE>