SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

**Form 10-KSB**

**Annual Report Pursuant to Section 13 or 15(d) of**

**the Securities Exchange Act of 1934**

(Mark One)

[ X ] Annual report pursuant to 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 0-32892

**Cal Bay International, Inc.**

(Name of small business issuer in its charter)

|**Nevada**

(State or other jurisdiction of incorporation or organization) | **33-0952044**

(I.R.S. Employer I.D. No.)
|-------------------------------------------------------------------------- | ------------------------------------------

**1582 Parkway Loop, Suite G, Tustin, CA 92780**

(Address and Zip Code of principal executive offices)

Issuer's telephone number, including area code: **714-258-7070**

Securities registered pursuant to Section 12(b) of the Exchange Act: None

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

$.001 par value, common voting shares

(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 report(s), and (2) has been subject to such
filing requirements for the past 90 days.  Yes [ X ]   No [   ]

Check if there is 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 the 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's revenue for its most recent fiscal year was: $396,150

The aggregate market value of the issuer's voting stock held as of March 28, 2002, by non-affiliates of the issuers was
$2,599,848.

As of March 28, 2002, issuer had 21,390,000 shares of its $.001 par value common stock outstanding.

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

Documents incorporated by reference: none

**PART I**

**Item 1.  Description of Business.**

The Company originally incorporated in the State of Nevada on December 9, 1998, under the name Var-Jazz
Entertainment, Inc. with 25,000,000 shares of common stock, par value $.001 per share, authorized.  Var-Jazz was
organized to engage in the business of music production and sales by producing compact discs of bands believed to have
potential for commercial success.  In June 1999, Var-Jazz completed a Regulation D, Rule 504 offering of 926,000 shares
of common stock for $46,300.  The offering was registered in the state of Nevada and the proceeds were used to implement
Var-Jazz's business plan.

Var-Jazz was not successful in its business venture and the board of directors determined it was in the best interest of the
Company to seek additional business opportunities.  On March 8, 2001, Var-Jazz entered into an Agreement and Plan of
Reorganization, (the "Agreement"), with Cal Bay Controls, Inc. whereby Var-Jazz changed its name to Cal Bay
International, Inc., and acquired Cal Bay Controls, Inc. as a wholly owned subsidiary in exchange for 17,112,000 shares of
common stock.

Cal Bay Controls, Inc. was originally formed in 1976 as sole proprietorship which was acquired by Robert J. Thompson in
1990.  On February 22, 2001, Cal Bay Controls incorporated in the state of Nevada, sold a non-controlling interest to two
other individuals and was acquired by Var-Jazz on March 8, 2001.

Cal Bay operates three divisions, the Representative/Distribution Division, the Systems Division and the New Products
Division.  Cal Bay's operations are focused mainly in California and Nevada with a small percentage of sales made
elsewhere in the United States.  Cal Bay does not currently have any international operations and does not intend to pursue
an international market at this time, but expects to do so in the future.

**Representative/Distribution Division**

Cal Bay is a manufacturer's representative and distribution company currently serving California, Nevada and Hawaii in
process, environmental, safety and laboratory markets.  The process control market involves instrumentation and
equipment used to help a plant control or improve the operations of specific production or manufacturing processes within
the plant.  The environmental market refers to instrumentation and equipment used to measure or help reduce the amount of
air and/or water pollution produced by an industrial, utility or municipal facility.

Typically environmental controls are required to meet EPA regulations.  The safety market refers primarily to
instrumentation used by various industries to meet personnel safety requirements that are typically imposed by OSHA
regulations.  The laboratory market refers primarily to research and development laboratories in various industries or
university and governmental research laboratories.  Cal Bay also targets new technologies and products for marketing and
distribution.  The Company supplies analytical products, services and associated equipment through license and
distribution agreements.

Cal Bay represents and/or distributes products from many manufacturers of engineered products for the process,
environmental, safety and laboratory markets.  The Company has a signed contract/agreement with each of the companies
it represents that grants Cal Bay the rights to sell the assigned products/services within a defined sales territory (typically
California, Nevada and Hawaii).  In most cases these contracts are exclusive in the sense that no other sales representative
is allowed to sell the products covered by the contract in the same sales area, however, there are a few contracts that are
non-exclusive in the sense that there may be more than one authorized sales agents in a given sales area.  Cal Bay receives
compensation for selling efforts in the form of commissions (typically 10-20% of the net sales price) on all sales of
products within the specified sales territory.

The Company does not currently have international operations but expects to do so in the future.

**Representative/Distributor Markets and Strategy**

Within the designated sales territory, Cal Bay serves the following markets:

*  Environmental market

*  Industrial Process Markets

*  Petroleum Refineries

*  Chemical plants

*  Pharmaceutical and Biotechnology

*  Computer related

*  Paint and coating

*  Printing

*  Metal processing

*  Bulk industrial gases and specialty gases

*  Semiconductor

*  Aerospace

*  Plastics/Polymers

*  Original Equipment Manufactures (OEM's)

The environmental market is typically driven by local, state and national regulations promulgated by regulatory agencies,
including:  the South Coast Air Quality Management District (SCAQMD), California Air Resources Board (CARB) and
the U.S. Environmental Protection Agency (EPA), which has both air and water protection departments.  The safety market
is also regulatory driven, usually by OSHA rules.  Cal Bay anticipates the safety market to remain fairly static in the near
future.

The EPA and OSHA implement new regulations every year seeking to improve quality, safety and the environment.
When new regulations are implemented, industry is required to comply with the regulations, often necessitating the
purchase of new equipment and controls. While Cal Bay cannot assure new regulations translate directly to additional sales
for the Company, it is management's experience that increased regulations typically result in an increase of the Company's
sales.

Cal Bay uses a multi-faceted marketing strategy to maximize the limited amount of resources available.  The following
marketing approaches are currently used or are planned for future use:

*  Press releases in local trade publications (i.e., ISA Newsletter, AWMA Journal)

*  Participation in local technical trade shows and exhibits

*  Networking with industry leaders, consultants, regulators, etc.

*  Strategic alliances with other suppliers of non-competitive products and services

*  Direct mail marketing to selected industry/market segments for selected products

*  Advertising in local trade publications (i.e., ISA Newsletter, AWMA Journal)

*  Telemarketing of selected market segments for selected products

*  Cooperation with marketing programs initiated by principals/vendors

Cal Bay sales of analytical instrumentation products are typically technology and/or regulatory driven.  Cal Bay sales and
management personnel have a great deal of technical knowledge and experience with the regulatory process.  Cal Bay often
uses a "consultative sales approach" with clients, in which Cal Bay helps to provide solutions to a client's environmental
compliance, process control or safety related problems.

Cal Bay relies on its status as a supplier of measurement and control products and services.  Many clients return to Cal Bay
for new purchases and also provide many referrals for new business opportunities.

**Representative/Distributor Division Growth Strategy**

Cal Bay is currently evaluating and/or searching for new products to represent/distribute in addition to its current base of
products.  Cal Bay has targeted new products that complement its existing product lines including water quality
instrumentation (pH, conductivity, etc.), toxic gas sensors for safety applications, and flow and level monitoring
instrumentation.

In addition to expanding our sales force and presence in California (see "Employees" below), the Company will evaluate
the possibility of opening a southern Nevada office at some time within the next two years.  Cal Bay will also evaluate the
possibility of expanding beyond its traditional role as a local sales representative/distributor by negotiating with one or
more foreign manufacturers of measurement and control products who wish to gain entry into the U.S. market.  In this
scenario, Cal Bay would become the U.S. distributor for such products and would be responsible for developing a national
sales representative network.

**Systems Division**

In addition to selling products and services as a representative/distributor, Cal Bay also produces a small number of
equipment systems which incorporate a variety of products and parts from numerous vendors and that are integrated into a
completely operational system by Cal Bay. Cal Bay offers the EMS product and the CEMS product.

**EMS Product.**  The EMS product is an oxygen transfilling system supplied to Fire Departments for use in refilling the
oxygen in the breathing air tanks used by fire and emergency personnel.  The EMS system was designed by Cal Bay and
incorporates a manifold for the distribution of oxygen into multiple tanks, a very sensitive and accurate oxygen analyzer to
verify the purity of the oxygen supply to ensure the safety of this oxygen for use by emergency medical and fire personnel,
and a microprocessor based hardware and software system to validate and document the breathing air for human use.

**CEMS Product.**  Cal Bay occasionally provides small Continuous Emissions Monitoring Systems (CEMS) to selected
clients for regulatory compliance.  These clients typically have a special need that cannot be addressed by one of the larger
CEM integration companies.  On CEMS projects, Cal Bay will often act as the prime contractor with several
sub-contractors who will be responsible for design, manufacture, test and/or installation and certification to meet the
regulatory requirements.  A typical CEM system will include sample probe, heated sample line, sample conditioning
system to remove moisture and particulates, sample flow controller and distribution manifold, analyzer(s) for the gas
species to be measured, a micro-processor based system controller, data-logger and/or data acquisition and reporting
system, and calibration gases.  Services may include installation supervision, start-up and training, certification to meet
regulatory standards, maintenance contracts and regulatory permitting assistance.

**Systems Division Markets and Strategy**

Cal Bay serves the following markets for its systems products:

EMS - Fire departments and Industrial O2 Transfilling Operations

CEMS - Small industrial plants

The market for EMS systems is driven primarily by recent legislation requiring a check of the breathing air used by
humans.  The market for CEMS is entirely driven by local, state and national regulations promulgated by regulatory
agencies, including the South Coast Air Quality Management District, California Air Resources Board and the U.S.
Environmental Protection Agency.

Cal Bay uses a multi-faceted marketing strategy to maximize the limited amount of resources available.  The following
marketing approaches are currently used or are planned for future use:

**EMS**

*  Press releases/advertisement in Fire Department safety journals

*  Participation in local Fire Service trade shows and exhibits

*  Direct mail marketing to selected fire/emergency industry

**CEMS**

*  Cal Bay relies entirely on network marketing and referrals from consultants

Our CEMS product is sold by Cal Bay sales staff directly to the end user.

**Systems Division Growth Strategy**

Cal Bay believes that the current level of business for the EMS and CEMS products should remain stable or will grow in
the future.  If new environmental monitoring regulations are passed in the future, it is possible that the markets for CEMS
will increase significantly.  Also, due to the recent "energy crisis" in the Western U.S., there may be a significant increase
in the construction of new power plants and/or retrofitting of existing power plans, all of which should require new or
upgraded environmental monitoring systems.  Cal Bay will remain active in these markets and will attempt to gain
additional business by filling niche markets. Cal Bay will also continue to evaluate other possible system product
opportunities as they arise.

**New Products Division**

The Company is interested in expanding its core business into new areas of business opportunity.  Some potential methods
of accomplishing this goal are to expand into new markets with existing products, develop and manufacture new products
for sale into our existing markets and search for acquisition candidates.

We currently plan for only a limited amount of Research & Development in our New Products Division, and anticipate
that much of the costs associated with this R&D effort will be either shared with or born entirely by strategic partners.  The
new products division is not expected to provide any sales contribution to the Company for the remainder of 2001, but will
be expected to begin generating sales revenues and income in 2002.

**New Products Division Current Projects**

Cal Bay is currently exploring relationships with two companies with developing technology, NUMA/MRX Technology
and AET technology.  Following is a discussion of each project.

**NUMA/MRX Technology**

NUMA, Inc., a company located in Florida, has developed a new analytical technology using pattern recognition.  Cal Bay
has entered into a business relationship with NUMA in which Cal Bay has been granted the right to sell NUMA's MRX
products in the western U.S. territory. The terms of the agreement provide that Cal Bay has exclusive rights to sell the
MRX Technology and other associated products in California and includes the exclusive agreement with AET for the
explosives market in the United States.  See below for a discussion of the AET agreement.  Cal Bay has agreed to pay a
commission of 8% of the actual invoice price on the first $25,000 of sales in each calendar year and 10% thereafter.  The
agreement is perpetual unless proper notice is served by either party.

Currently however, the NUMA MRX technology has not been developed for use in many markets and/or applications and
NUMA has expressed limited interest in performing the marketing research to determine suitable applications for the
technology.  NUMA has also demonstrated an unwillingness to perform the product development necessary to refine the
basic technology into products designed for specific use in specific applications.

The technology patented by NUMA is referred to as Molecular Recognition (MRX) technology.  MRX uses pattern
recognition and neural net processing, together with software programming that enables almost any measurement based
technology to perform at improved levels.  Pattern recognition is the art of separating complex electronic signatures from
even more complex backgrounds. By improving the measurement signal and reducing the background noise, the MRX
product can provide results that are not achievable with conventional analytical devices.  As an analytical instrument, MRX
is unique in that it is fast responding (within milliseconds), accurate, sensitive (parts per trillion levels), inexpensive,
compact and can identify multiple substances at the molecular level.

Cal Bay sees an opportunity to perform the marketing research to determine viable markets and applications as well as the
features required to be successful in those markets.  Cal Bay would also be capable of arranging for the product
development and testing necessary to turn the basic NUMA "black box" into a finished, sellable product.  Cal Bay intends
to perform some product development work on the MRX product but will probably also contract out some additional
product development.  Presently, the Company does not have anyone identified or on contract to perform any MRX
product development.

In return for Cal Bay's sale and marketing efforts, and the redesign and packaging of a sellable product, Cal Bay will
receive exclusive rights to the NUMA MRX technology for those markets developed by Cal Bay.  Cal Bay will receive the
exclusive right to sell the MRX technology into each specific market in which Cal Bay develops the MRX technology into
a sellable product with the design features and capabilities required for that market.  These markets include many of the
same markets already served by the Company representative division, but may also include new markets which are yet to
be identified.

The Company intends to focus initially on the use of the NUMA MRX technology to enhance conventional technology
with which Cal Bay is most familiar, primarily in the measurement of various chemical compounds in the environmental,
process, safety, QC and laboratory markets.

At this time, Cal Bay has not prepared formal product development plans for the MRX product.  We have not yet chosen
or prioritized the markets that will be pursued and we have not developed a formal time table for any product development.
Until these markets and applications are defined for the first product development efforts, we will not be able to estimate
the costs involved.

**AET Strategic Alliance**

AET, a company headquartered in California has received funding to develop incineration technology for use in the
thermal destruction of obsolete military explosives and munitions.  AET is presently working at a military facility in Iowa
to develop the incinerator technology.  AET is an established government contractor with a secure government contract
number, is listed in several DOD databases and is currently a sub-contractor to American Ordinance, Inc., which is owned
by General Dynamics.

As an established government contractor, AET is listed with the Government Accounting Office as an approved supplier
with security clearance.  This database is circulated to all government and military procurement offices.  This is significant
because in our joint effort with AET, AET will not have to go through the government selection process when the DOD or
other governmental branches purchase from AET.   DOD databases include all U.S. defense and military organizations.

One of the limiting factors currently faced by AET is the identification and characterization of the explosives and
munitions which may be present at a remediation site. Currently, the only method of determining the type and extent of
explosives present is to take physical samples and perform laboratory tests that are both expensive and time consuming.
AET is very interested in the possible use of a measurement technology that can be used on-site and that produces accurate
and timely test results in a cost-effective manner.

Cal Bay has finalized an exclusive agreement with AET to develop and market the NUMA MRX technology to the
military for the explosives detection market.  Based upon this agreement, AET and Cal Bay will jointly research and
develop the NUMA technology.  AET will purchase base units and following the joint development, will negotiate with
Cal Bay the rights to market the technology.  Cal Bay will be responsible for the market research, design and finished
product development and production.  Cal Bay agreed to exclusively develop the products with AET and to supply the
funding for AET to purchase the base MRX units from Numa.  Any sales profits will be split 50% to each party.  Cal Bay
will utilize AET's existing network of contacts within the military and governmental contractors to sell the MRX
technology for the measurement of explosives.  This represents a significant opportunity in a prime market with little or no
viable competition and an existing client base.  The term of the agreement is from July 17, 2001 to July 17, 2004 and is
renewable sixty days prior to termination.

AET and Cal Bay will also pursue the possibility of expanding joint efforts into several other markets related to the
explosives market.  These could include the airport security market and drug enforcement market.

**New Products Division Marketing and Strategy**

The Company anticipates the following to be potential markets for the MRX technology:

*  Explosives/Munitions testing

*  Airport Security

*  Drug Enforcement

*  Environmental, Process Control, Safety, QC and Laboratory

The initial market area for the MRX technology will be with AET in the explosives and munitions testing market for the
military.  There are hundreds of currently operating or recently closed military facilities in the U.S. that have existing
supplies of explosives and munitions that require safe disposal.   As discussed earlier, the MRX technology has not been
developed as of this date into a product that is currently capable of being marketed to these potential future markets.
Additional product development will be required, as well as a great deal of market research into each of these potential
markets in order to determine the product configuration and features that are desired by the purchasers/users of analyzer
products in each of these markets.

Again, the MRX technology has not been developed as of this date into a product that is currently capable of being
marketed to the explosives and munitions testing markets.  Additional product development will be required, as well as a
great deal of market research into this potential market in order to determine the product configuration and features that are
desired by the purchasers and/or users of analyzer products in this market.  As discussed earlier, Cal-Bay has entered into a
business relationship with AET to develop an analyzer product for this market using MRX technology.  Since AET already
has many contacts in the government and military, we anticipate that AET will be able to facilitate Cal-Bay in performing
the market research required to determine the best product design for this market.

Cal-Bay believes that the airport security market also has significant business potential. The airport security industry is
typically concerned with the detection of explosive substances, toxic and/or hazardous substances and illegal drugs.  The
identification of ammonia-based and nitrogen-based explosives, gunpowder, alcohol and any number of illegal drugs in a
rapid, non-invasive manner using the MRX technology as a stand-alone or portable recognition device could possibly
improve the airport security industry.  To date the MRX technology has not been tested on any explosives (except common
gunpowder), toxic or hazardous chemicals, or on illegal drugs.  The MRX technology will require future testing on all of
the above compounds in order to determine the accuracy, repeatability and sensitivity of each measurement, however the
basic measurement principle that is used in the MRX technology is proven and has been used successfully by many other
companies that manufacture analytical instrument products.

The MRX technology uses simple, proven photospectrometer hardware consisting of a light source (ie. photodiode, lamp,
or other radiant source), sample cell and reference cell, and an optical detector with signal amplifier, and CPU for analyzer
control and signal processing. These are the same hardware components that are contained in almost all photospectrometers
in use today, and all of these existing photospectrometers operate similiarly in that they beam optical (light) energy through
a sample gas or liquid and then measure the amount of optical energy absorbed at certain wavelengths or spectral regions.
The amount of optical energy absorbed at a specific wavelength can then be correlated to a specific chemical compound
and concentration (there are many published reference books containing optical spectra for almost any known chemical
compound - for additional information please refer to the Handbook of Chemistry and Physics, published by CRC Press).
The patented MRX technology involves a new way of using this proven photospectrometer hardware that is already in use
in many industries.  The MRX technology combines proven analytical hardware with new pattern recognition software that
should be capable of enhancing the analytical measurement results, either by improving the measurement accuracy,
providing lower limits of detection or reducing the interferences from other substances in the background.  The MRX
technology will need further research and development before it will be a viable product for the airport security market or
for any of the other potential future markets mentioned here. As mentioned previously, Cal-Bay intends to start with the
explosives market but the airport security market may be a logical extension of that market.

There are currently about 3,000 airport bomb-scanning systems in use worldwide.  Some of the major companies
providing security systems for this market includes: InVision Technologies, Vivid Technologies, Thermedics, EG7G KKO
Labs and Analogic Systems.  All of these companies would be potential OEM customers for the MRX technology.

The MRX technology is also ideal for use in a "screening" application to identify the presence of a targeted chemical
substance, such as an illegal drug.  The MRX analyzer can be programmed to store multiple drug signatures into memory
and can then be used to perform a very fast, accurate and sensitive, non-invasive screen of a person or property to
determine the presence of the targeted substance.  The market includes federal, state and local law enforcement agencies, as
well as hospitals, clinics and emergency health care facilities.

Cal Bay will also market the MRX technology to those markets that we are already currently serving through our
Representative/Distributor Division.

Existing regulations and governmental requirements will be a driving force behind the future sales of MRX technology to
the explosives/munitions, airport security, drug enforcement, environmental and safety markets.

Cal Bay will tailor the MRX technology for targeted markets and expects the initial marketing efforts will be limited until
Cal Bay is successful in demonstrating the technology and approvals from various industry standards organizations are
received.

The Company anticipates that sales to the explosives/munitions market will be through AET since they already have
numerous contacts and relationships.  Sales to the airport security market will probably be limited to OEM sales to the
existing major providers of security systems for that market.  The sales approach to the drug enforcement market will be
determined at a future date. Sale to the environmental, process control, safety, QC and laboratory markets will be via a
national network of independent sales representatives yet to be established and some direct sales to OEM clients.

**New Products Division Growth Strategy**

In addition to developing the MRX technology, the Company will continually search for other new technology ideas that
can be developed internally, in partnerships or be acquired in the future.

The New Products Division represents the area of largest growth potential for Cal Bay. This area also represents the largest
risk factor for any of the Company's business areas because of the research and development efforts we will have to
expend.  Cal Bay has been granted the right to sell NUMA's MRX products in the western U.S. territory.  The terms of the
agreement provide that Cal Bay has exclusive rights to sell the MRX Technology and other associated products in
California and includes the exclusive agreement with AET for the explosives market in the United States.   We do not have
any contracts for purchase of our NUMA/MRX technology and we cannot assure that the development of the technology
will be successful by Cal Bay under our agreement with NUMA or that we will successful in marketing the technology
under our agreement with NUMA.  Please see the section entitled NUMA/MRX Technology above for detailed description
of the technology.

**Competition**

**Representative/Distributor Division**

Cal Bay has rights to represent and distribute the products of the following manufacturers:

Thermo Environmental Instruments, Inc.

Servomex.

Thermo Anderson Instruments, Inc.

MIE, Inc.

Baldwin Environmental

EEMC.

Analytik JENA USA.

Specac.

Kem-Tek Analytical

MEECO

LSC

WTC Engineering.****

However, the companies and products represented and/or distributed by Cal Bay have many competitors, including both
domestic U.S. companies and international companies.  Cal Bay makes every effort to represent only manufacturers of the
highest quality products, with excellent reputations, the most advanced technology, a history of successful installations and
a commitment to customer service.

**Systems Division**

There is currently very little competition in the EMS systems market.  There are several companies that provide analyzers
for oxygen purity, but very few companies that have designed and packaged an entire system to meet the needs of the
end-user.

There are many CEMS vendors offering a wide variety of CEM designs.  These vendors range from large companies with
a major share of the market, to small integrators that have other lines of business such as source testing or consulting that
exposes them to a few clients in need of a CEM for regulatory compliance.  Cal Bay does not compete aggressively in this
product area, and typically will only pursue a CEM system project if the Company knows that it has an excellent chance of
success due to prior work or relationships and referrals.

**New Products Division**

There are many existing analytical technology that may compete either directly or indirectly with the MRX technology.
However, all of the current technologies that can provide even marginally similar capabilities are very expensive and
difficult to operate.  These existing technologies include mass spectrometers, gas chromatographs, fourier-transform
infra-red analyzers, etc.  The sales price of these measurement devices is typically $50,000 to $150,000 or more and each of
these devices requires a highly trained operator in order to achieve reliable results.

In addition, Cal Bay is aware of other companies that are developing or attempting to develop competitive technologies
that also use pattern recognition.  One of these is Cyrano Sciences, which is a new company based in Pasadena, California
which purchased the patent rights for a new product technology originally developed by NASA.  Cyrano has received over
$23 million in recent funding for the development of polymer composite sensor technology to provide digital "smell"
capability. Cyrano's targeted markets are food quality and process monitoring, environmental and chemical, medical
diagnostics and monitoring.  Cal Bay believes Cyrano will be successful with their new product, however, the Company
also believes that the Cyrano product will have inherent limitations due to the basic sensor technology being used. The
sensor that the Cyrano technology is based on is not as accurate or as sensitive as the analytical technologies the MRX
product will use.

We believe the Cyrano sensor technology will be unable to accurately and reliably quantify the concentrations of a
measured substance, especially at low concentrations, therefore it will be limited to applications in which only the
qualification or indication of the presence of a substance is sufficient or in applications which do not require a high degree
of accuracy.  The Cyrano sensor is also likely to be subject to interferences from other substances with similar chemical
structures.  Unlike the Cyrano sensor, the MRX technology that Cal Bay plans to develop will be able to accurately and
reliability measure substances at levels in the parts-per-billion (ppb) and even parts-per-trillion (ppt).  This ability to both
qualify and quantify a measurement of a substance using pattern recognition technology will make the MRX technology
much more desirable in most applications.

Further, the Cyrano sensor technology is dependent upon the use of multiple sensors to perform a measurement.  This
approach is inherently hardware-dependent, which means that the future development of this technology is limited to the
potential improvements in hardware. Conversely, the MRX technology uses advanced software algorithms to significantly
improve upon the existing measurement ability of various sensor technology, which is a significant advantage.  When the
MRX software is applied to a proven sensor technology the result is typically many magnitudes of improvement.

The Company is not aware of any direct competitors in the NUMA/MRX technology area. However, other companies,
universities or technology developers may decide to explore this area and become competitors.

**Employees**

Cal Bay's officers and directors are employed full time by Cal Bay.  The Company recently opened an office in central
California that is currently staffed on a part time basis by an independent contractor.  Our independent contractor is paid
solely with commissions earned on sales.  Cal Bay intends to gradually increase the sales activities performed from this
office during the remainder of 2001 and if sales increase significantly, the Company will hire a full time sales engineer for
this office.  The Company intends to add an additional outside sales engineer in late-2001 in order to increase business in
southern California.  The Company also plans to hire an inside sales support person in early 2002.

**Item 2.  Description of Property**

Cal Bay currently leases a combined office/warehouse facility of approximately 2,328 square feet at 1582 Parkway Loop,
Suite G, Tustin, CA 92780.  The lease is paid on a monthly basis of $2,374.56 per month and expires on August 31, 2002.
Our facility is located in a small mixed use, commercial/light industrial office park in Central Orange County, California.
This facility consists of a reception area, three individual fully-enclosed offices, a conference room, a restroom, sales
literature storage area, printer/fax/copier area, and a combined warehouse/system production/equipment test area.
Management believes the currently leased space is adequate to meet Cal Bay's needs for at least the term of the lease.

The Company also recently opened an office in central California to expand sales presence.  The address is P. O. Box
4958, San Luis Obispo,  CA  93401.  This office is provided at no cost to the Company by our sales representative in San
Luis Obispo.  Our sales representative is an independent contractor and will provide this space at no cost as long as he
continues to represent Cal Bay.   The office is in a private residence.  Our representative provides a mailing address and
telephone number in central California for the Company.

**Item 3.  Legal Proceedings.**

No legal proceedings are threatened or pending against the Company or any of its officers or directors.  Further, none of
the Company's officers or directors or affiliates of the Company are parties against the Company or have any material
interests in actions that are adverse to the Company's interests.

**Item 4.  Submission of Matters to a Vote of Securities Holders.**

No matters were submitted during the fourth quarter of the fiscal year covered by this report to a vote of security holders.

**PART II**

**Item 5.  Market for Common Equity and Related Stockholder Matters.**

The Company's common stock is listed on the Pink Sheets under the symbol "CBYI". At March 28, 2002 the Company
had 75 shareholders holding 21,390,000 shares of common stock.   Of the issued and outstanding common stock, 3,388,000
are free trading, the balance of 18,002,000 are restricted stock as that term is used in Rule 144 and may be sold pursuant to
Rule 144.  The Company has not agreed to register any shares for resale by selling stockholders.  The following table
shows the highs and lows of the closing bid and ask on the Company's stock since June 1, 2000 (first available data)
through the year ended December 31, 2001.

|**YEAR**                                     | **CLOSING BID** | ****    | **CLOSING ASK** | ****   
|-------------------------------------------- | --------------- | ------- | --------------- | -------
|**2000**                                     | **High**        | **Low** | **High**        | **Low**
|June 1 thru June 30
(First available)        | .05             | .05     | .15             | .15    
|July 3 thru Sept. 29                         | .05             | .05     | .15             | .15    
|Oct. 2 thru Dec. 29                          | .125            | .01     | None            | None   
|**2001**                                     |                 |         |                 |        
|Jan. 2 thru Mar. 13                          | .61             | .125    | None            | None   
|Mar. 14 thru Mar. 30
(After a 3 for 1 split) | 1.30            | .43     | 2               | .65    
|June 1 thru June 30                          | 1.20            | .30     | 1.60            | .59    
|July 2 thru Sept. 28                         | 1.68            | 1.01    | 1.73            | 1.15   
|Oct. 1 thru Dec 31                           | 1.21            | .25     | 1.26            | .50    

The above quotations, as provided by the National Quotation Bureau, LLC, represent prices between dealers and do not
include retail markup, markdown or commission.  In addition, these quotations do not represent actual transactions.

The Company has not paid, nor declared, any dividends since its inception and does not intend to declare any such
dividends in the foreseeable future.  The Company's ability to pay dividends is subject to limitations imposed by Nevada
law.  Under Section 78.288 of the Nevada Revised Statutes, dividends may be paid to the extent that the corporation's
assets exceed its liabilities and it is able to pay its debts as they become due in the usual course of business and does not
affect preferential shareholders rights upon dissolution.

**Item 6.  Management's Discussion and Analysis or Plan of Operation.**

**Results of Operations for the periods ended December 31, 2001 and December 31, 2000**

For the period ended December 31, 2001, the Company generated revenues from sales and commission income totaling
$396,150.  Costs of sales were $69,195 resulting in gross profits of $326,955. The Company had expenses of $349,993
resulting in a net loss after taxes of $23,838.  Expenses were due chiefly to salaries and wages, property rent, payroll taxes,
and professional fees incurred during the reverse acquisition of Cal Bay Controls.

For the period ended December 31, 2000, the Company generated total revenues of $174,325 with sales costs totaling
$78,930 resulting in gross profit of $95,395.  The Company's expenses were $55,434, mainly for telephone and utilities
charges, property rent, and equipment rentals. As a result, the Company realized net income of $39,961 during the year
ended December 31, 2000.

For the period ended December 31, 2001, the Company had total assets of $33,193 consisting of $25,602 in cash, office
equipment valued at $5,100, and a $2,491 security deposit.  The Company had total liabilities during the same period of
$39,254 consisting of $33,431 in accounts payable, $5,023 in sales tax payable, and $800 in income tax payable.  For the
period ended December 31, 2000, the Company had total assets of $8,959 consisting of $2,568 in cash, $3,900 in office
equipment, and a $2,491 security deposit.  The Company had $488 in liabilities consisting of accrued expenses.

A majority of the Company's commission income is derived from two unrelated manufacturing companies that it
represents.  The commission income from these two significant customers was $28,765 and $252,033, respectively, for the
period ended December 31, 2001, and $68,106 and $4,546, respectively for the period ended December 31, 2000.

The Company believes that it has sufficient cash on hand to satisfy its administrative needs for the next twelve months,
and anticipates increased commissions from its airport security and emergency services products during the next year.

**Recent Sales of Unregistered Securities.**

In March 2001, the Company exchanged 17,112,000 shares of common stock for all of the issued and outstanding shares
of Cal-Bay Controls, Inc., a Nevada corporation.  The transaction was a tax-free reorganization under Section 368(a)(1)(B)
of the Internal Revenue Code of 1986 and were exchanged pursuant to Section 4(2) of the Securities Act of 1933.  The
transaction did not involve any public offering and no commissions were paid on the transaction.

**Item 7.  Financial Statements.**

The financial statements of the Company appear at the end of this report beginning with the Index to Financial Statements
on page 18.

**Item 8.  Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.**

None.

**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 as of June 12, 2001, the name, age, and position of each executive officer and director and
the term of office for each director of the Company.

|**Name**           | **Age** | **Position**                           | **Since** 
|------------------ | ------- | -------------------------------------- | ----------
|Robert J. Thompson | 53      | President, Secretary and
Director      | March 2001
|Charles A. Prebay  | 46      | Vice President, Treasurer and
Director | March 2001

All officers hold their positions at the will of the Board of Directors.  All directors hold their positions for one year or until
their successors are duly elected and qualified.

The following is a brief biography of the officers and directors.

**Robert J. Thompson.**  Mr. Thompson holds a B.S. degree in Mechanical Engineering from Ohio State University.  He
has been employed in the analytical instrumentation industry for over 20 years.  Since 1990, Mr. Thompson has been self
employed as a representative/distributor in the analytical instrumentation industry.  Prior to 1990, Mr. Thompson was
employed by or associated with Hartshaw Chemical as Chief Engineer, Teledyne Analytical Instruments as Regional Sales
Manager, and Advanced Micro Instruments as a Partner.

**Charles A. Prebay.**  Mr. Prebay holds a B.S. degree in Biological Sciences from Michigan State University and has taken
graduate courses in marketing and management from the University of Michigan and the University of California/Irvine.
He has been employed in the analytical instrumentation industry for over 20 years.  Mr. Prebay was employed by or
associated with Teledyne Analytical Instruments as a Sales Engineer from 1979 to 1980.  He was at
Research-Cottrell/KVB as a Product Manager and Marketing Manager from 1980 until 1992 and served as Regional Sales
Manager at Anarad from 1992 until 1995. From 1995 until 2000, Mr. Prebay worked at Baseline Industries as Western
Regional Sale Manager.  Mr. Prebay has worked at Cal Bay Controls since June 2000.

**Item 10.  Executive Compensation**

The Company has no formal arrangements for the remuneration of its officers and directors, except that they will receive
reimbursement for actual, demonstrable out-of-pocket expenses, including travel expenses, if any, made on the Company's
behalf in the investigation of business opportunities.

**SUMMARY COMPENSATION TABLE**

|**Name and Principal
Position**                           | **Year**         | **Salary ($)**    | **Bonus ($)** | **Other Annual**
**Compensation**
|--------------------------------------------------------- | ---------------- | ----------------- | ------------- | ---------------------------------
|Robert J. Thompson

President, Secretary
and Director     | 2001

2000

1999 | 126,039

-0-

-0- | -0-

-0-

-0- | -0-

-0-

-0-                    
|Charles A. Prebay

Vice President,
Treasurer and Director | 2001

2000

1999 | 62,937

-0-

-0-  | -0-

-0-

-0- | -0-

-0-

-0-                    
|Arthur E. Vargas

Former Director                         | 2001

2000

1999 | -0-

-0-

-0-     | -0-

-0-

-0- | 3,538 (1)

-0-

-0-              

(1) The Company gave Mr. Vargas, president of the Company from inception until March 8, 2001, all right, title and
interest of inventory and the production and distribution of compact discs featuring Nevada lounge acts, valued at $3,538 as
compensation for past services to the Company.

**Employment Contracts, Termination of Employment and Change in Control**

There are no compensatory plans or arrangements, including payments to be received from the Company, with respect to
any person which would in any way result in payments to any person because of employment with the Company or its
subsidiaries, or any change in control of the Company, or a change in the person's responsibilities following a change in
control of the Company.

**Item 11.  Security Ownership of Certain Beneficial Owners and Management.**

The following table sets forth as of March 28, 2002 the name and the number of shares of the Registrant's Common Stock,
no par value, held of record or was known by the Registrant to own beneficially more than 5% of the 21,390,000 issued and
outstanding shares of the Registrant's Common Stock, and the name and shareholdings of each officer and director
individually and of all officers and directors as a group.

|Title of Class | Name and Address of
Beneficial Owner (1)                               | Amount and Nature of
Beneficial Ownership | Percentage of Class
|-------------- | ---------------------------------------------------------------------- | ----------------------------------------- | -------------------
|Common         | Robert J. Thompson (2)

1582 Parkway Loop, Suite G

Tustin,  CA  92780 | 12,026,953                                | 56.22%             
|Common         | Charles A. Prebay (2)

1582 Parkway Loop, Suite G

Tustin,  CA  92780  | 2,000,000                                 | 9.35%              
|Common         | Cede & Co.

PO Box 222

Bowling Green Station

New York, NY 10274      | 1,577,050                                 | 7.37%              
|Common         | Chris Walker

1860 South 1600 East

Salt Lake City, UT 84105           | 1,059,000                                 | 5.00%              
|Common         | Officers, Directors and
Nominees as a Group: 

4 persons               | 16,663,003                                | 77.90%             

(1) For purposes of this table, a beneficial owner is one who, directly or indirectly, has or shares with others (a) the power
to vote or direct the voting of the Voting Stock (b) investment power with respect to the Voting Stock which includes the
power to dispose or direct the disposition of the Voting Stock.

(2) Officer and/or director of the Company.

There are no contracts or other arrangements that could result in a change of control of the Company.

**Item 12.  Certain Relationships and Related Transactions.**

The Company is not expected to have significant dealing with affiliates.  However, if there are such dealings, the parties
will attempt to deal on terms competitive in the market and on the same terms that either party would deal with a third
person.

The Company had loaned $8,906 to Robert Thompson, an officer and director of the Company.  Mr. Thompson has since
repaid the loan.

**Item 13.  Exhibits and Reports on Form 8-K.**

**Reports on Form 8-K**

No reports on Form 8-K were filed during the quarter ended December 31, 2001.

**Exhibits**

None

**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.

CAL BAY INTERNATIONAL, INC.

Date: March 28, 2002      By:/s/ Robert J. Thompson

Robert J. Thompson

President and Director

Date: March 28, 2002      By:/s/ Charles A. Prebay

Charles A. Prebay

Treasurer and Director

**CAL-BAY INTERNATIONAL, INC.**

And Subsidiary

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED DECEMBER 31, 2001

CONTENTS

|                                                          | Page 
|--------------------------------------------------------- | -----
|Independent Auditor's Report                              | 20   
|Consolidated Balance Sheet                                | 21   
|Consolidated Statement of Operations                      | 22   
|Consolidated Statement of Changes in Stockholders' Equity | 23   
|Consolidated Statement of Cash Flows                      | 24   
|Notes to Financial Statements                             | 25-31

INDEPENDENT AUDITOR'S REPORT

Board of Directors

**CAL-BAY INTERNATIONAL, INC.**

I have audited the accompanying consolidated balance sheet of Cal-Bay International, Inc. (A Nevada Corporation), and
subsidiary, as of December 31, 2001, and the related consolidated statement of operations, changes in stockholders' equity
and cash flows for the period then ended. These financial statements are the responsibility of the Company's management.
My responsibility is to express an opinion on these financial statements based on my audit.

I conducted my audit in accordance with generally accepted auditing standards. Those standards require that I 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.  I believe that my audit provides a reasonable basis for my opinion.

In my opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of Cal-Bay International, Inc. and subsidiary, as of December 31, 2001, and the results of its operations, changes
in stockholders' equity and cash flows for the period then ended, in conformity with generally accepted accounting
principles.

/s/ARGY & COMPANY

February 15, 2002

Fountain Valley, California

**CAL-BAY INTERNATIONAL, INC.**

And Subsidiary

CONSOLIDATED BALANCE SHEET

December 31, 2001

|**ASSETS**                                                                                                                  |           
|--------------------------------------------------------------------------------------------------------------------------- | ----------
|Current Assets:                                                                                                             |           
|Cash (Note 1c)                                                                                                              | $ 25,602  
|Office Furniture and Equipment, at cost, net of accumulated
depreciation of $4,079 (Notes 1g & 2)                           | 5,100     
|Deposit (Note 1f)                                                                                                           | 2,491     
|                                                                                                                            | __________
|TOTAL ASSETS                                                                                                                | 33,193    
|****                                                                                                                        | ========= 
|**LIABILITIES AND STOCKHOLDERS' EQUITY**                                                                                    |           
|Current Liabilities:                                                                                                        |           
|Accounts Payable & Accrued Expenses (Note 1h)                                                                               | $33,431   
|Sales Tax Payable                                                                                                           | 5,023     
|Income Taxes Payable (Notes 1i & 6)                                                                                         | 800       
|                                                                                                                            | __________
|TOTAL CURRENT LIABILITIES                                                                                                   | 39,254    
|Commitments and Contingencies (Note 9)                                                                                      | - - -     
|Stockholders' Equity:                                                                                                       |           
|Common Stock, $.001 par value; 75,000,000 shares
authorized; 21,390,000 shares issued and outstanding (Notes
1b, 1k, 3 & 8) | $ 21,390  
|Additional Paid in Capital - (Discount on Stock)                                                                            | (3,613)   
|Retained Deficit                                                                                                            | (23,838)  
|                                                                                                                            | __________
|TOTAL STOCKHOLDERS' EQUITY                                                                                                  | (6,061)   
|                                                                                                                            | __________
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                  | $33,193   
|                                                                                                                            | ========= 

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

**CAL-BAY INTERNATIONAL, INC.**

And Subsidiary

CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE PERIOD FROM INCEPTION TO DECEMBER 31, 2001

|REVENUES:                                            |           
|---------------------------------------------------- | ----------
|Sales                                                | $ 77,111  
|Commission Income (Note 1e)                          | 319,039   
|                                                     | __________
|TOTAL REVENUES                                       | $396,150  
|COST OF SALES:                                       |           
|Purchases                                            | 69,195    
|                                                     | __________
|GROSS PROFIT                                         | 326,955   
|EXPENSES:                                            |           
|Salaries and Wages                                   | $ 188,976 
|Auto Expense                                         | 14,270    
|Depreciation Expense (Notes 1g & 2)                  | 1,262     
|Equipment Rentals                                    | 4,061     
|Insurance                                            | 7,763     
|Telephones & Utilities                               | 5,428     
|Property Rent (Note 9)                               | 23,979    
|Office Expenses & Miscellaneous                      | 4,606     
|Organizational Costs (Note 1g)                       | 1,554     
|Outside Services                                     | 12,409    
|Payroll Taxes                                        | 19,906    
|Professional Fees                                    | 59,860    
|Travel and Entertainment                             | 5,919     
|                                                     | __________
|TOTAL EXPENDITURES                                   | 349,993   
|                                                     | __________
|NET LOSS BEFORE TAXES                                | (23,038)  
|TAXES ON INCOME (Note 1i & 6)                        | 800       
|                                                     |           
|NET LOSS AFTER TAXES                                 | $(23,838) 
|                                                     | ========= 
|Basic and Fully Diluted Earnings Per Share (Note 1k) | .00       
|                                                     | ========= 
|Weighted Average Shares Outstanding (Note 1k)        | 21,198,038
|                                                     | ========= 

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

**CAL-BAY INTERNATIONAL, INC.**

And Subsidiary

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

For The Period Ended December 31, 2001

|                                                          | **Common Stock**     | ****                      | **Additional Paid-in
Capital (Discount
on Stock)** | **Retained Deficit** | **Total
Stockholders'
Equity**
|--------------------------------------------------------- | -------------------- | ------------------------- | -------------------------------------------------- | -------------------- | ------------------------------
|                                                          | **Number of Shares** | **($0.001 Par)
$ Amount** | ****                                               | ****                 | ****                          
|Balance at
inception (February
22, 2001)                  | 17,112,000           | $17,112                   | $(7,738)                                           | $-0-                 | $9,374                        
|Recapitalization for
Reverse
Acquisition on
March 8, 2001 | 4,278,000            | 4,278                     | 4,125                                              | ---                  | 8,403                         
|Net Loss December
31, 2001                                | --                   | --                        | --                                                 | (23,838)             | (23,838)                      
|                                                          | __________           | __________                | __________                                         | __________           | __________                    
|Balance at
December 31, 2001                              | 21,390,000           | $ 21,390                  | $ (3,613)                                          | $ (23,838)           | $(6,061)                      
|                                                          | =========            | =========                 | =========                                          | =========            | =========                     

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

**CAL-BAY INTERNATIONAL, INC.**

And Subsidiary

CONSOLIDATED STATEMENT OF CASH FLOWS

For The Period From Inception To December 31, 2001

|Cash Flows From Operating Activities:                                             |           
|--------------------------------------------------------------------------------- | ----------
|Loss from Operations                                                              | $ (23,838)
|Adjustments to reconcile net income to net cash provided by
operating activities: |           
|Depreciation (Note 1g & 2)                                                        | $ 1,262   
|Decrease in Prepaid Legal Fees                                                    | 2,275     
|Increase in Accounts Payable & Accrued Expenses                                   | 38,335    
|Increase in Sales Tax Payable                                                     | 5,023     
|Increase in Income Taxes Payable                                                  | 800       
|Total adjustments to net income                                                   | 47,695    
|                                                                                  | __________
|Total Cash Provided by Operating Activities                                       | 23,857    
|Cash Flows From Investing Activities:                                             |           
|Purchase of Fixed Asset                                                           | (2,679)   
|Reverse acquisition of Cal-Bay International, Inc. (net of
cash acquired)         | 3,499     
|                                                                                  | __________
|Total Cash Provided by Investing Activities                                       | 820       
|                                                                                  | __________
|Net Increase In Cash                                                              | 24,677    
|Cash at Inception                                                                 | 925       
|                                                                                  | __________
|Cash at December 31, 2001                                                         | $  25,602 
|                                                                                  | ========= 
|Supplemental Disclosures of Cash Flow Information:                                |           
|Cash paid during the year for:                                                    |           
|Interest                                                                          | $ -0-     
|Income taxes (Note 1i)                                                            | -0-       
|                                                                                  | __________
|Total                                                                             | $ -0-     
|                                                                                  | ========= 

Acquisition Note:  In connection with the reverse acquisition of Cal-Bay International, Inc. by Cal-Bay Controls, Inc.,
the Company acquired assets with a fair value of $8,442 (including cash of $4,904) and assumed liabilities of $39.  See also
Note 3.

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

**CAL-BAY INTERNATIONAL, INC.**

**And Subsidiary**

NOTES TO FINANCIAL STATEMENTS

December 31, 2001

(1) Summary of Significant Accounting Policies

(a) Nature of Business

Cal-Bay International, Inc. and subsidiary ("The Company"), was originally organized as Var-Jazz Entertainment, Inc.,
under the laws of the State of Nevada, on December 8, 1998. On March 8, 2001, Var-Jazz Entertainment, Inc. acquired
100% of the outstanding common shares of Cal-Bay Controls, Inc., which has been accounted for as a reverse acquisition.
Subsequent to this acquisition, Var-Jazz Entertainment, Inc. changed its name to Cal-Bay International, Inc.  The Company
does not currently have any international operations but expects to in the future.  See also Note 3.

Cal-Bay Controls, Inc. (CBC) was originally a sole proprietorship, being operated since 1990 under the name Cal-Bay
Controls, in Tustin, California, by its owner Robert Thompson.  CBC, which represents the only operating entity of the
Company, is a manufacturer's representative and distribution firm, serving California, Nevada and Hawaii in process,
environmental, safety and laboratory markets.  On February 22, 2001, CBC was incorporated under the name Cal-Bay
Controls, Inc.

CBC supplies analytical products, services and associated equipment through license distribution agreements, and
receives compensation for its selling efforts in the form of commissions, typically 10-20% of the net sales price, on all sales
of products within the specified sales territory.

(b) Capitalization

Var-Jazz Entertainment, Inc. was initially capitalized in December, 1998 by the issuance of 1,500,000 shares of its
common stock, at $0.004 per share, totaling $6,000.  In June, 1999 the Company circulated a self written confidential
offering memorandum, resulting in the issuance of an additional 2,778,000 common shares, for a total of $46,300, less
offering costs of $8,415.

On March 8, 2001, Cal-Bay International, Inc. (formerly Var-Jazz Entertainment, Inc.) acquired all of the issued and
outstanding common stock of CBC in exchange for 17,112,000 shares of its common stock.  The shares issued in the
acquisition resulted in the owners of CBC having operating control of Cal-Bay International, Inc. immediately following
the acquisition.  Therefore, for financial reporting purposes, CBC is deemed to have acquired Cal-Bay International, Inc. in
a reverse acquisition accompanied by a recapitalization.

**CAL-BAY INTERNATIONAL, INC.**

**And Subsidiary**

NOTES TO FINANCIAL STATEMENTS

December 31, 2001

(1) Summary of Significant Accounting Policies (Continued)

(b) Capitalization (continued)

The surviving entity reflects the assets and liabilities of Cal-Bay International, Inc. and CBC at their historical book
values and the historical operations of the Company are those of CBC.  The issued common stock is that of Cal-Bay
International, Inc. and the retained earnings is that of CBC.  The consolidated statement of operations includes operating
activities of CBC from February 22, 2001 (date of inception) through December 31, 2001 and operating activities of
Cal-Bay International, Inc. from March 8, 2001 (date of acquisition) through December 31, 2001.

Immediately subsequent to this acquisition, the Company increased its authorized common stock from 25,000,000 to
75,000,000 and initiated a forward 3 for 1 stock split, resulting in 21,390,000 total outstanding common shares.  See also
Note 3.

(c) Cash and Cash Equivalents

For purposes of the consolidated statements of cash flows, the Company considers all highly liquid debt instruments with
original maturities of three months or less to be cash equivalents.  There were no cash equivalents as of December 31,
2001.

(d) Principles of Consolidation and Basis of Accounting

The accompanying consolidated financial statements include the accounts of Cal-Bay International, Inc. and of its wholly
owned subsidiary, CBC.  All material inter-company transactions and accounts have been eliminated in consolidation. The
Company has no continuing operating activities other than that of CBC.

(e) Revenue Recognition

The Company recognizes commission income in accordance with SAB 101 - Topic 13.A.3.  The nature of each of CBC's
manufacturer's representation agreements requires that the products be shipped from the manufacturer to the customer, and
that either a significant period of time elapse thereafter or that the manufacturer must receive payment from the customer
before payments are ultimately made to CBC for orders submitted.  The determination as to exactly when the terms
specified in the sales arrangements are substantially completed or fulfilled by the manufacturer and have been accepted by
the customer and the ultimate collectibility of the commission can only be reasonably assured when the payments are
ultimately received by the Company. Commission expense is recorded when the commission income that it is related to is
recognized.

**CAL-BAY INTERNATIONAL, INC.**

**And Subsidiary**

NOTES TO FINANCIAL STATEMENTS

December 31, 2001

(1) Summary of Significant Accounting Policies (Continued)

(e) Revenue Recognition (continued)

The Company recognize sales revenue in the Systems and New Products divisions on the date of delivery of goods to the
customer in accordance with SAB 101.

(f) Deposits

This balance consists of a security deposit on the Company's leased premises.

(g) Property and Equipment and Organizational Expenditures

Office furniture and equipment is stated at cost and is depreciated using the straight line method over their estimated
useful lives, currently five years.  Organizational expenditures for the Company were paid as completed, totaling $1,554, as
of December 31, 2001, and have been expensed as incurred in accordance with SOP 98-5.  Betterment's and improvements
are capitalized and depreciated over their estimated useful lives, while repairs and maintenance costs are expensed when
incurred.

(h) Accounts Payable an Accrued Expenses

The balance consists primarily of unpaid operating expenditures and contractual obligations due currently.

(i) Income Taxes

The Company has applied the Financial Accounting Standards Board Statement 109,Accounting for Income Taxes (SFAS
109), to all operations since inception, for all periods disclosed in this financial examination, and all other disclosures of
information for periods prior to acquisitions of the operating subsidiary, CBC.

SFAS 109 "Accounting for Income Taxes" requires the liability method in accounting for income taxes.  Deferred tax
assets and liabilities arise from the difference between the tax basis of an asset or liability and its reported amount on the
financial statements.  Deferred tax amounts are determined by using the tax rates expected to be in effect when the taxes
will actually be paid or refunds received, as provided under currently enacted laws.

**CAL-BAY INTERNATIONAL, INC.**

**And Subsidiary**

NOTES TO FINANCIAL STATEMENTS

December 31, 2001

(1) Summary of Significant Accounting Policies (Continued)

(i) Income Taxes (continued)

Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
Income tax expense or benefit is the tax payable or refundable, respectively, for the period, plus or minus the change during
the period, in deferred tax assets and liabilities.  The Company, exclusive of the operations of its wholly owned subsidiary
CBC, has experienced operating losses during its period of existence. These losses occurred in a business activity unrelated
to that of CBC and the Company does not have any current plans to re-enter that market.  Future profitability of current and
unrelated business activities cannot be assured, resulting in the recordation of reserves for the valuation allowance of the
entire amount of the determined deferred tax assets (See also Note 6).

(j) Transactions in Capital Stock

All securities issued by the Company and CBC have not been registered under the Securities Act of 1933, as amended.
They may not be sold, offered for sale, transferred, pledged or hypothecated, in the absence of a registration statement in
effect with respect to the securities under such act, or an opinion of counsel or other evidence satisfactory to the Company
that such registration is not required, or unless sold pursuant to Rule 144 under such act.  The Company's free trading stock
is currently involved in limited trading on the pink sheets under the symbol CBYI.  The trading price at December 31,
2001, was $0.40 and has been consistently trading in limited transactions, as of and before the date of this report.  See also
Notes 3, 5 and 8.

(k) Earnings Per Share

In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 128,
"Earnings Per Share" (SFAS 128).  SFAS 128 specifies the computation, presentation, and disclosure requirements of
earnings per share and supersedes Accounting Principles Board Opinion 15, "Earnings Per Share".  SFAS 128 requires dual
presentation of basic and, where applicable, diluted earnings per share. Basic earnings per share, which excludes the impact
of common stock equivalents, replaces primary earnings per share.  Diluted earnings per share which utilizes the average
market price per share or ending market price per share when applying the treasury stock method in determining common
stock equivalents, replaces fully diluted earnings per share.

**CAL-BAY INTERNATIONAL, INC.**

**And Subsidiary**

NOTES TO FINANCIAL STATEMENTS

December 31, 2001

(1) Summary of Significant Accounting Policies (Continued)

(k) Earnings Per Share  (continued)

SFAS 128 is effective for the Company in 1999, 2000 and 2001.  However, there were no common stock equivalents
during the any of these periods and, therefore, there is no effect on the earnings per share presented for any of these periods,
due to the Company's adoption of SFAS 128.  Basic earnings per share have been computed using the weighted average
number of common shares outstanding.

(2) Office Furniture and Equipment

A summary of property and equipment is as follows:



|Office Furniture & Computer Equipment | $ 9,179   
|------------------------------------- | ----------
|Less: Accumulated Depreciation        | (4,079)   
|                                      | __________
|Net Furniture and Equipment           | $ 5,100   

(3) Acquisition of Cal-Bay Controls, Inc.

As previously discussed in Note 1b, Cal-Bay International, Inc. (formerly Var-Jazz Entertainment, Inc.) acquired all of the
issued and outstanding common stock of CBC in exchange for 17,112,000 shares of its common stock.  The transaction has
been accounted for as a reverse acquisition, in accordance with the terms of Accounting Principles Board Opinion No. 16,
paragraph 70 and SAB Topic 2A.  Since Cal-Bay International, Inc. was a non-operating public shell company with
minimal assets, the transaction has been treated as a capital transaction in substance, with no goodwill or intangible being
recorded, and no pro forma financial information being presented.

The following is a summary of the financial position of the Cal-Bay International, Inc. (CBYI) and CBC at December 31,
2001, without the consolidating and eliminating adjustments:



|                            | **CBYI**   | **CBC**    | **Combined**
|--------------------------- | ---------- | ---------- | ------------
|Current assets              | $ -0-      | $ 25,602   | $25,602     
|Property and equipment, net | -0-        | 5,100      | 5,100       
|Other assets                | -0-        | 2,491      | 2,491       
|                            | __________ | __________ | __________  
|                            | $  -0-     | $ 33,193   | $33,193     
|                            | =========  | =========  | =========   
|Current liabilities         | $  -0-     | $ 39,254   | $39,254     
|Stockholders' equity        | -0-        | (6,061)    | (6,061)     
|                            | __________ | __________ | __________  
|                            | $  -0-     | $ 33,193   | $33,193     
|                            | =========  | =========  | =========   

**CAL-BAY INTERNATIONAL, INC.**

**And Subsidiary**

NOTES TO FINANCIAL STATEMENTS

December 31, 2001

Included in consolidated results of operations for the period ended December 31, 2001 are the following results of the
previously separate companies for the period from February 23, 2001 to December 31, 2001:



|                  | **CBYI**  | **CBC**    | **Consolidated**
|----------------- | --------- | ---------- | ----------------
|Net sales         | $ -0-     | $ 396,150  | $ 396,150       
|Net income (Loss) | $ (8,403) | $ (15,435) | $ (23,838)      

(4) Related Party Transactions & Significant Customers/Suppliers

A majority of CBC's commission income is derived from two unrelated manufacturing companies that it represents.  The
commission income from these two significant customers was $28,765 and $252,033, respectively, for the period ended
December 31, 2001 (see also Note 7).

(5) Certain Beneficial Owners and Management

The following is a list of the officers and directors of the Company, along with all other shareholders owning directly or
indirectly at least 5% of the Company's shares as of December 31, 2001.  Robert Thompson, President and CEO was
compensated $126,039 during the year 2001.



|Shareholder/Position/Title            | Shares Held | Ownership 
|------------------------------------- | ----------- | ----------
|Robert Thompson - President &CEO      | 12,026,953  | 56.2 %    
|Charles Prebay - Vice President & CFO | 2,000,000   | 9.4       
|Chris Walker                          | 1,059,000   | 5.0       
|Cede & Co. - Investor                 | 1,188,000   | 5.5       
|All Other Investors                   | 5,116,047   | 23.9      
|                                      | __________  | __________
|Total shares issued & outstanding     | 21,390,000  | 100.0 %   

(6) Income Taxes

As of December 31, 2001, the Company had provided taxes on consolidated income for Federal and State income taxes,
estimated at $800.At December 31, 2001 deferred taxes consisted of a net tax assets (benefits) of approximately $13,417,
due to operating loss carryforwards of the Company totaling $67,282, which were fully offset by equal valuation
allowances since there is no assurance of recovery.  The net operating loss carryforwards will expire beginning in 2013.



**CAL-BAY INTERNATIONAL, INC.**

**And Subsidiary**

NOTES TO FINANCIAL STATEMENTS

December 31, 2001

(7) Off Balance Sheet Risk

The Company could be affected by the inability to establish a market for their shares of stock.  Additionally, since the
date of incorporation, the short-term sales revenue for the Company has come primarily from two principal accounts, which
is due to the fact that the markets for the products from these accounts have been very active recently.  Over the long-term,
management expects the markets for these products and accounts to diversify. Also, these principals are not the only
suppliers for these products and management has other sources for identical products if it becomes necessary to find other
suppliers.

Common StockThe Company is authorized to issue 75,000,000 common shares with a $0.001 par value.  Following a 3
for 1 forward split of common shares outstanding on March 8, 2001, total outstanding shares amounted to 21,390,000.
Each common share is entitled to one vote and there are no other preferences.  No dividends have been paid by the
Company since inception.

Commitments and Contingencies

CBC maintains an office/warehouse facility in Tustin, California.  The future minimum annual aggregate rental payments
required for the remaining non-cancelable lease term in excess of one year are as follows:



|Period Ended December 31, |           
|------------------------- | ----------
|2002                      | $ 19,184  
|Thereafter                | -0-       
|                          | __________
|Total                     | $ 19,184  

The Company was not involved in any litigation as of the date of this examination.