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: 333-53516

                           MERCADO 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 Internet travel-booking 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.......................................10
    Item 3.  Legal Proceedings.............................................10
    Item 4.  Submission of Matters to a Vote of Security Holders...........10

PART II

    Item 5.  Market for Common Equity and Related Stockholder Matters......11
    Item 6.  Management's Discussion and Analysis or Plan of Operation.....12
    Item 7.  Financial Statements..........................................14
    Item 8.  Changes in and Disagreements with Accountants on
                Accounting and Financial Disclosure........................16

PART III

    Item 9.  Directors, Executive Officers, Promoters and Control
                Persons; Compliance with Section 16(a) of the
                Exchange Act...............................................16
    Item 10. Executive Compensation........................................17
    Item 11. Security Ownership of Certain Beneficial Owners and
                Management.................................................18
    Item 12. Certain Relationships and Related Transactions................18
    Item 13. Exhibits and Reports on Form 8-K..............................19

SIGNATURES   ..............................................................20



                           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.  Mercado's actual results could differ materially from the anticipated
results described in the forward-looking statements.  Factors that could affect
Mercado'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

Mercado Industries, Inc., a developmental stage company, hereinafter
referred to as ("Company") or ("Mercado"), 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.

Mercado Industries, Inc. is developmental stage company, which plans to
take advantage of booking online travel by creating an Internet site that is
aimed at drawing consumers who wish to book their own travel arrangements.

(ii)  Principal Products and Principal Markets

Mercado Industries, Inc. is a development stage entity, and has neither
engaged in any operations nor generated any revenues to date.

As of December 31, 2001, the company had developed a business plan, and
established what steps need to be taken to achieve the results set forth
in this plan.

The Company plans to take advantage of the interest in online travel
Companies by creating an Internet site that is aimed at drawing consumers
who wish to make their own travel arrangements for the lower fares that go
along with self-booked reservations.  This site is linked to an already
operational website called www.mercadoindustries.com that is set up to
facilitate these arrangements.

Mercado plans to offer consumers a simple, usable and complete do-it-
yourself travel site on the Internet.  This proposed on-line travel site
would offer a convenient way to configure and book any air, lodging
and auto rental package to destinations in the U.S.



                                    3

<PAGE>

Mercado's major expense will lie in providing the revenues necessary to
purchase listings with major Internet search engines who will funnel clients
to the Mercado website when those clients request low-cost fares, room rates
and vehicle rentals for travel.  As in the world of print advertising, the
more you pay, the greater the reach; though on the Internet, it is not
column inches you buy with the extra dollars, but prioritized placement of
the Company's website's listing in response to customer requests for
discounted travel providers.

The other proposed means of revenue generation is through direct-to-the-
customer advertising.  The Company is currently engaged in research to
ascertain what will be the most profitable way to apportion Mercado's
advertising budget.  Plans include print ads and links that will be
activated on other Internet sites.

(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 January 11, 2001, 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 establishing its website
and business to this website.

d)  The Company has kept active all yearly filings on Form 10-QSB and
Form 10-KSB with the U.S. Securities and Exchange Commission.

(iv)  Industry Background and Current Status

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

GROWTH OF THE INTERNET AND ONLINE COMMERCE.  The Internet and commercial
online services are emerging as a significant global communications
media enabling millions of people to share information and conduct
business electronically.  A number of factors have contributed to the
growth of the Internet and commercial online services usage.  These
factors include the large and growing installed base of advanced
personal computers in the home and workplace; improvements in network
infrastructure; easier, faster and cheaper access to the Internet and
commercial online services; the introduction of alternative Internet
access devices and increased awareness of the Internet; and additional
commercial online services among consumer and business users.

                                    4
<PAGE>


Computer Industry Almanac, Inc. estimates that the number of World Wide
Web users in the year 2000 will have grown to approximately 319
million.  The functionality and accessibility of the Internet and
commercial online services have made them an increasingly  attractive
commercial medium by providing features that historically have been
unavailable through traditional channels.  The Internet and commercial
online services provide users with convenient access to large volumes
of dynamic data to support their investment, purchase and other
decisions.  Online retailers are able to communicate effectively with
customers by providing frequent updates of featured selections,
content, pricing and visual presentations and provide tailored
services by capturing  valuable data on customer tastes, preferences,
shopping and buying patterns.  Online retailers are also able to
utilize consumer buying patterns to target their audience more
effectively.  Unlike most traditional distribution channels, online
retailers do not have the burden of managing and maintaining numerous
local sales facilities to provide their services on a global scale.
Because of these advantages, online retailers benefit from the
relatively low cost of reaching and electronically  serving customers
worldwide from a central location. As a result, an increasingly broad
base of products and services are being sold online, including books,
brokerage services, computers and music, as well as travel  services.
Forrester Research estimates that online retail sales will reach $184
billion by 2004, and that online travel revenues will exceed $29
billion by 2003, representing 12% of total industry revenue.

Moreover, as the number of online content, commerce and service
providers has expanded, strong brand recognition and strategic
alliances have become critical to the success of such providers.  Brand
development is especially important for online retailers due to the
need to establish trust and loyalty among consumers in the absence of
face-to-face interaction.

THE TRADITIONAL TRAVEL INDUSTRY.  The travel industry is large and
growing.  Historically, airlines, hotels, rental car agencies, cruise
lines and vacation packagers have relied on internal sales departments
and travel agencies as their primary distribution channels.  The
traditional travel agency channel is highly fragmented, with few
nationally recognized brands.  According to the American Society of
Travel Agents, there are over 23,000 travel agencies operating in more
than 33,000 locations in the United States alone, with the average
travel agency generating less than $3 million in annual gross bookings
per location.

Travel agents are compensated primarily through commissions paid by
travel suppliers on services booked.  Some travel agencies also charge
service fees to their customers.  Traditionally, standard retail base
commission rates paid by travel suppliers to travel agents have been
7% - 10% for airline tickets, 10% for hotel reservations and car
rentals, and 10% to 15% for cruises and vacation packages.  In
addition, travel agencies can earn significant performance-based
incentive compensation from travel suppliers that can substantially
impact financial performance.  These commission rates and override
commissions are determined by travel suppliers and are subject to
frequent change.  In recent years, commission capping has led to a
reduction in average commission rates.



                                    5

<PAGE>

Travel agencies typically book reservations by telephone and fax and
through electronic global distribution services, often referred to as
GDS systems.  Two such GDS systems are Galileo International's Apollo
system and SABRE Group Holdings Inc.'s SABRE system.  The GDS systems
provide real-time access to voluminous data on fares, availability and
other travel information.  The GDS data is constantly changing, with as
many as one million airfare changes being made daily.  Customers
traditionally have relied on travel agents to access and interpret
such rapidly changing information via complex and proprietary
interfaces to GDS systems.  As a result, the customer's prospects for
obtaining the most favorable schedules and fares has been subject to the
skill and experience of individual travel agents, whose availability may
be limited, as well as to the commission offered to travel agents.

THE NEW ONLINE TRAVEL INDUSTRY.  The opportunity in the online travel
industry is augmented by the trend in the traditional travel industry
to drive distribution costs lower combined with the need for a more
effective and efficient means of purchasing and distributing travel
services to address the needs of consumers.  The online market benefits
from this drive to lower costs.  In addition, at a time when many
traditional travel agencies are experiencing pressure to reduce levels
of service as a result of recent reductions in commission  rates, many
customers are demanding greater convenience and flexibility in how,
where and when they shop for travel services.  Customers are also
demanding more control over their travel decisions, including the
opportunity to compare prices and products and review availability. In
an effort to reduce their distribution costs and develop more direct
relationships with their customers, travel suppliers are seeking ways
to distribute their services outside of the traditional travel agency
channel.  The Internet provides this and, as a result of these trends,
has emerged as an attractive medium through which travel services can
be purchased.

The Travel Industry Association of America estimates that online
travel revenues will grow to $9 billion in 2002.  Jupiter
Communications is even more optimistic, projecting that online travel
bookings will reach over $16.6 billion in 2003. Whoever figures one
credits, it is clear that online travel is revolutionizing the way
that people get where they are going and is growing at a phenomenal
rate.  The interactive nature of the online medium enables consumers
to use reservation engines which automate the processing and
confirmation of travel reservations.  Management believes that this has
increased the consumers' control over the process by providing them
with additional choices, resulting in better service.

Mercado's strategy for tapping into this enormous market is a simple
one.  Mercado plans to purchase prime listings on major Internet search
engines, establish links from popular websites and advertise in newspapers
and other print media.

                                    6

<PAGE>


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
new customers can be attracted to the Company's website, and book travel
through this website.  Because the Company has a limited operating history in
e-commerce and because of the emerging nature of the markets in which Mercado
competes, any future revenues are highly unpredictable.  At the same time,
Mercado's current and future expense levels are based on the Company's
operating projections.  The Company is unable to predict with certainty how
the numbers will ultimately play out.  As a result, any significant revenue
shortfall would have an immediate negative effect on the results of the
Company's operations.

The Company's revenues will depend on the number of customers who funnel
through their business through its future website to book their travel
reservations.  Accordingly, the satisfactory performance, reliability and
availability of Mercado's web site and network infrastructure are critical
to the Company's operating results, as well as Mercado's ability to attract
and retain customers and maintain adequate customer service levels.  Any
system interruptions that result in the loss of data, the unavailability of
the Company's web sites or reduced performance of the linking system would
reduce the volume of reservations on which Mercado would receive its
override and the attractiveness of Mercado's service would be hampered.
This would have a negative effect on the Company's operating results.

b)  If the Company cannot raise a minimum of $75,000 from its 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 Mercado's current
estimates or if unforeseen circumstances occur, Mercado 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 Mercado
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..

c)  There is currently no established public trading market for Mercado
Industries securities.  A trading market in Mercado's securities may never
develop or, if developed, it may not be able to be sustained.  If for any
reason Mercado'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 Mercado's securities.

                                     7
<PAGE>

(d)  Some of Mercado's current and potential competitors have competitive
advantages due to various factors, which include, among others:

  o    greater brand recognition and web site traffic;

  o    longer operating histories;

  o    larger customer bases;

  o    greater financial, marketing and other resources; and

  o    ability to obtain travel inventory at greater discounts and
       on more favorable terms than we can.

In addition, the Company may face competitive pressure due to the expansion
of current and the creation of new technologies.  Increased competition could
reduce the Company's future operating margins and profitability, and result
diminished its brand recognition, which would materially and adversely
affect its business, results of operations and financial condition, and
thus significantly reduce the revenue the Company derives from its override
agreement.

e)  Experienced programmers may attempt on occasion to penetrate the security
on the Company's  websites.  Mercado expects that an attempt may occur from
time to time.  Because a hacker who is able to penetrate the security of web
sites could misappropriate proprietary information or cause interruptions in
the Company's links to its products and services, the Company may be required
to expend significant capital and resources to protect against or to alleviate
problems caused by such parties.  Additionally, the Company may not have a
timely remedy against a hacker who is able to penetrate the security on its
websites.  Such purposeful security breaches could have a material adverse
effect on Mercado's business, results of operations and financial condition.
In addition to purposeful security breaches, the inadvertent transmission of
computer viruses could expose Mercado to a material risk of loss or litigation
and possible liability.


(v)  Customers

The Company has yet to establish a customer base.  There are no assurances
that the Company will be able to offer products or services that would
attract future customers from its competition.


                                    8

<PAGE>

(vi)  PATENTS, TRADEMARKS, LICENSES, FRANCHISES, CONCESSIONS, ROYALTY
AGREEMENTS, OR LABOR CONTRACTS

The Company regards substantial elements of its future and underlying
infrastructure and technology as proprietary and attempts to protect them by
relying on trademark, service  mark, copyright and trade secret laws and
restrictions on disclosure and transferring title and other methods.  The
Company plans to enter into confidentiality agreements with its future
employees, future suppliers and future consultants and in connection with its
license agreements with third parties and generally seeks to control access
to and distribution of its technology, documentation and other proprietary
information.  Despite these precautions, it may be possible for a third party
to copy or otherwise obtain and use the Company's proprietary information
without authorization or to develop similar technology independently.  Legal
standards relating to the validity, enforceability and scope of protection of
certain proprietary rights in Internet-related businesses are uncertain and
still evolving, and no assurance can be given as to the future viability or
value of any of the Company's proprietary rights.  There can be no assurance
that the steps taken by the Company will prevent misappropriation or
infringement of its proprietary information, which could have a material
adverse effect on the Company's business, results of operations and financial
condition.

(vii)  GOVERNMENT REGULATIONS AND LEGAL UNCERTAINTIES.

Mercado is subject to various laws and regulations relating to its
business.  Few laws or regulations are currently directly applicable to
access to the Internet.  However, because of the Internet's popularity
and increasing use, new laws and regulations may be adopted. Such laws
and regulations may cover issues such as:

  o    user privacy;
  o    pricing;
  o    content;
  o    copyrights;
  o    distribution; and
  o    characteristics and quality of products and services.

In addition, the growth of the Internet and electronic commerce,
coupled with publicity regarding Internet fraud, may lead to the
enactment of more stringent consumer protection laws.  These laws may
impose additional burdens on Mercado's business.  The enactment of any
additional laws or regulations may impede the growth of the Internet,
which could decrease the Company's potential revenues form electronic
commerce or otherwise adversely affect the Company's business, financial
condition and operating results.

Laws and regulations directly applicable to electronic commerce or
Internet communications are becoming more prevalent.  A recent session
of Congress enacted Internet laws regarding on-line copyright
infringement.  Although not yet enacted, Congress is considering laws
regarding Internet taxation.  The European Union recently enacted new
privacy regulations.  These are all recent enactments, and there is
uncertainty regarding their marketplace impact.  In addition, various
jurisdictions already have enacted laws that are not specifically
directed to electronic commerce but that could affect Mercado's business.
The applicability of many of these laws to the Internet is uncertain
and could expose us to substantial liability.


                                    9

<PAGE>

Any new legislation or regulation regarding the Internet, or the
application of existing laws and regulations to the Internet, could
materially adversely affect us.  If we were alleged to violate federal,
state or foreign, civil or criminal law, even if we could successfully
defend such claims, it could materially adversely affect us.

Several telecommunications carriers are seeking to have telecommunications
over the Internet regulated by the Federal Communications Commission in the
same manner as other telecommunications services.  Additionally, local
telephone carriers have petitioned the Federal Communications Commission to
regulate Internet service providers and online service providers in a manner
similar to long distance telephone carriers and to impose access fees on such
providers.  If either of these petitions are granted, the costs of
communicating on the Internet could increase substantially.  This, in turn,
could slow the growth of use of the Internet.  Any such legislation or
regulation could materially adversely affect the Company's business, financial
condition and operating results.

(vii)  EMPLOYEES

Mercado, Inc. currently has one (1) employee: its president.  Once the
Company's website is up and running and sales are being generated we will
consider adding employees in both technical and sales areas.

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, Mercado Industries is not a party to any material
legal proceedings, and none are known to be contemplated against Mercado
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.

                                       10

<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 Mercado's common stock,
and the Company 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.

                                     11
<PAGE>


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

General
-------

The current core business of Mercado Industries, Inc. is to develop a Internet
Website that is aimed at drawing consumers who wish to make their own travel
arrangements for the lower fares that go along with self-booked reservations.

Mercado plans to provide a simple, usable and complete do-it-yourself
travel site on the Internet.  It hopes to offer travel value in all-
inclusive travel at any price for both leisure and business travelers.
Mercado Industries plans to provide a convenient way to configure and
book any air, lodging and auto rental package to destinations in the U.S.

Mercado's sole major expense will lie in providing the revenues
necessary to purchase listings with major Internet search engines who
will funnel clients to the Mercado website when those clients request
low-cost fares, room rates and vehicle rentals for travel.  The major
purpose of this offering is to generate the revenues necessary to set up
the relationships with the search engines.  As in the world of print
advertising, the more you pay, the greater the reach; though on the
Internet, it is not column inches you buy with the extra dollars, but
prioritized placement of the Company's  website's listing in response to
customer requests for discounted travel providers.

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

As a development stage 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 twelve (12) to eighteen (18) months.  During calendar
year, 2001, the Company had no revenues and spent $2,868 on general and
administrative expenses.  The compares to $1,581 on general and
administrative expenses for the same period last year.

                                      12
<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 January 11, 2001, 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.



                                      13
<PAGE>

ITEM 7.  FINANCIAL STATEMENTS.



                           MERCADO INDUSTRIES, INC.
                         (A Development Stage Company)

                             FINANCIAL STATEMENTS

                          DECEMBER 31, 2001 AND 2000



                                      14


<PAGE>




                                   CONTENTS


<TABLE>
<CAPTION>

CONTENTS

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

</TABLE>


                                     15

<PAGE>



                         INDEPENDENT AUDITORS' REPORT



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

We  have audited the accompanying balance sheet of Mercado 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 Mercado
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 January 10, 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 our 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 Mercado Industries, Inc. as of December
31, 2001, and 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>

                           MERCADO 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>
                           MERCADO INDUSTRIES, INC.
                         (A Development Stage Company)
                           STATEMENTS OF OPERATIONS




<TABLE>
<CAPTION>

STATEMENTS 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>

                           MERCADO 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 Contribution          -       -      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>



                           MERCADO 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 ACTIV.         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>



                           MERCADO 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
            --------------------
            Mercado   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>



                           MERCADO 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>



                           MERCADO 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.

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.



                                    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 Mercado
Industries, Inc.


<TABLE>
<CAPTION>

        Name                    Age               Position
--------------------------- ----------- -------------------------------
<S>                             <C>             <C>
Ruth Selmon                     49              President, Director

</TABLE>


WORK EXPERIENCE
---------------

RUTH SELMON, PRESIDENT & CEO, has served in this capacity since the inception
of Mercado Industries, Inc.  Born April 17, 1952 in Houston, Texas, she
graduated from Austin High School in Houston.  She has been married for 25
years and has three children. Mrs. Selmon began working with Southwestern Bell
Telephone in 1970 and then later with AT&T prior to her retirement from the
telephone industry in 1992. Currently devoting her energies to her family,
Mrs. Selmon also volunteers her time to the local Girl Scout chapter, the local
elementary school, and various church functions.  She is a computer adept which
serves her well in setting up the start-up process for Mercado Industries, Inc.

DIRECTOR COMPENSATION

Directors shall receive no cash compensation for their services to
Mercado 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 Mercado's bylaws to serve until the
next annual stockholders meeting.  Mercado 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
Mercado Industries, Inc.

                                     16
<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, the sole
Company officer/director did not receive any 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>
Ruth Selmon,             President   None      None    None

</TABLE>

Mercado 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.

                                      17
<PAGE>

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information concerning the beneficial
ownership of Mercado's  outstanding common stock as of December 31, 1999, by
each person known by Mercado 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>
Ruth Selmon(1)      CEO/Director  2,000,000      100.00%
                                  --------------------------
All officers and directors
as a group (1 person)             2,000,000      100.00%

</TABLE>

(1) Ruth Selmon, 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 has
no formal contract with its accountants, they 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.

                                       18
<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(1)

  3.2    By-Laws of the Company adopted March 29, 2000 (1)

(5)      CONSENT OF EXPERTS AND COUNSEL

  5.1    Letter of Consent from Thomas C. Cook, Esq., dated Jan. 9, 2001 (1)

(23)     CONSENT OF EXPERTS AND COUNSEL

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

(27)     FINANCIAL DATA SCHEDULE

  27.1   Financial Data Schedule (1)

-------------
(1)  Previously filed as an exhibit to the Company's registration statement on
     Form SB-2. which was filed on January 11, 2001, 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")

                                       19


<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.


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

Date:  March 28, 2002                  By: /s/ Ruth Selmon
                                       -----------------------
                                               Ruth Selmon
                                               President/
                                               principal executive officer/
                                               principal accounting officer
                                               and sole director

                                       20

<PAGE>