**U.S. SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C.  20549**

**FORM 10-QSB**

[ X ]     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934            For the quarterly period ended March 31, 2002

[   ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934            For the transition period from     to

Commission File No. **0-32893**

**CAL-BAY INTERNATIONAL, INC.**

(Exact name of small business issuer as specified in its charter)

|**Nevada**

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

(IRS Employer Identification No.)
|-------------------------------------------------------------------------- | -------------------------------------------------

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

(Address of principal executive offices)

**714-258-7070**

(Issuer's telephone number)

Not Applicable

(Former name, address and fiscal year, if changed since last report)

Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the
preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [ X] No [  ]

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING
FIVE YEARS:

Check whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15(d) of the
Exchange Act subsequent to the distribution of securities under a plan confirmed by a court. Yes [ ] No [  ]

APPLICABLE ONLY TO CORPORATE ISSUERS:

State the number of shares outstanding of each of the issuer's classes of common equity, as of March 31, 2002: 21,390,000
shares of common stock.

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

**FORM 10-QSB**

**CAL-BAY INTERNATIONAL, INC.**

**INDEX**

|**PART I.**  | **FINANCIAL INFORMATION**                                                                                                                                          | **PAGE NO.**
|------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------
|             | Item 1. Financial Statements                                                                                                                                       |             
|             | Consolidated Balance Sheet as of March
31, 2002                                                                                                                    | 4           
|             | Comparative Unaudited Consolidated
Statements of Operations for the Period
of Inception to March 31, 2002, and for
the Three Months Ended March 31,
2002, and 2001 | 5           
|             | Unaudited Consolidated Statement of
Changes in Stockholders' Equity for the
Period Ended March 31, 2002                                                            | 6           
|             | Comparative Unaudited Consolidated
Statements of Cash Flows for the Period
of Inception to March 31, 2002, and for
the Three Months Ended March 31,
2002, and 2001 | 7           
|             | Notes to the Unaudited Consolidated
Financial Statements                                                                                                           | 8           
|             | Item 2. Management's Discussion and
Analysis of Financial Condition and
Results of Operations                                                                      | 16          
|**PART II.** | **OTHER INFORMATION**                                                                                                                                              |             
|             | Item 6.  Exhibits and Reports on Form
8-K                                                                                                                          | 23          
|             | (a) Exhibits                                                                                                                                                       |             
|             | (b) Reports on Form 8-K                                                                                                                                            |             
|             | Signatures                                                                                                                                                         | 23          

(Inapplicable items have been omitted)

**PART I.**

**Financial Information**

Item 1.  Financial Statements (unaudited)

In the opinion of management, the accompanying unaudited financial statements included in this Form 10-QSB reflect all
adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the results of operations for
the periods presented.  The results of operations for the periods presented are not necessarily indicative of the results to be
expected for the full year.

**CAL-BAY INTERNATIONAL, INC.**

**And Subsidiary**

**CONSOLIDATED BALANCE SHEET** (unaudited)

**March 31, 2002**

|**ASSETS**                                                                                                                  |           
|--------------------------------------------------------------------------------------------------------------------------- | ----------
|Current Assets:                                                                                                             |           
|Cash (Note 1c)                                                                                                              | $ 7,676   
|Loan Receivable from Stockholders (Notes 1f & 4)                                                                            | 18,500    
|                                                                                                                            | __________
|TOTAL CURRENT ASSETS                                                                                                        | 26,176    
|Office Furniture and Equipment, at cost, net of accumulated
depreciation of $4,538 (Notes 1h & 2)                           | 4,641     
|Deposit (Note 1g)                                                                                                           | 2,491     
|                                                                                                                            | __________
|TOTAL ASSETS                                                                                                                | $ 33,308  
|                                                                                                                            | ========= 
|**LIABILITIES AND STOCKHOLDERS' EQUITY**                                                                                    |           
|Current Liabilities:                                                                                                        |           
|Accrued Expenses (Note 1i)                                                                                                  | $ 34,972  
|Income Taxes Payable (Notes 1j & 6)                                                                                         | 1,600     
|                                                                                                                            | __________
|TOTAL CURRENT LIABILITIES                                                                                                   | 36,572    
|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                                                                                                            | (21,041)  
|                                                                                                                            | __________
|TOTAL STOCKHOLDERS' EQUITY                                                                                                  | (3,264)   
|                                                                                                                            | __________
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                  | $ 33,308  
|                                                                                                                            | ========= 

See notes to consolidated financial statements.

**CAL-BAY INTERNATIONAL, INC. AND SUBSIDIARY**

**CONSOLIDATED STATEMENTS OF OPERATIONS**

**For the Three Months Ended March 31, 2002 & 2001**

|                                     | **Three Months Ended March 31** | **Three Months Ended March 31**
|------------------------------------ | ------------------------------- | -------------------------------
|                                     | **2002**                        | **2001**                       
|                                     | (unaudited)                     | (unaudited)                    
|Revenues                             | $ 84,001                        | $ 52,971                       
|Cost of Sales                        | -0-                             | 13,183                         
|                                     | __________                      | __________                     
|Gross Profit                         | 84,001                          | 39,788                         
|Operating Expenses                   | 81,204                          | 22,773                         
|                                     | __________                      | __________                     
|Net Income                           | $ 2,797                         | $ 17,015                       
|                                     | =========                       | =========                      
|Earnings Per Share:                  |                                 |                                
|Basic & Diluted                      | 0.00                            | 0.00                           
|                                     | =========                       | =========                      
|Weighted average Shares outstanding: |                                 |                                
|Basic & Diluted                      | 21,390,000                      | 17,112,000                     
|                                     | =========                       | =========                      

See notes to consolidated financial statements.

**CAL-BAY INTERNATIONAL, INC.**

**And Subsidiary**

**CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY**

(unaudited)

**For the Period Ended March 31, 2002**

|                                                          | **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)                       
|Net Income March
31, 2002                                 | ---                  | ---                       | ---                                                | 2,797                | 2,797                         
|                                                          | __________           | __________                | __________                                         | __________           | __________                    
|Balance at March
31, 2002                                 | 21,390,000           | $ 21,390                  | $ (3,613)                                          | $ (21,041)           | $ (3,264)                     
|                                                          | __________           | __________                | __________                                         | __________           | __________                    

See notes to consolidated financial statements.

**CAL-BAY INTERNATIONAL, INC. AND SUBSIDIARY**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**For the Three Months Ended March 31, 2002 & 2001**



|                                                                                        | **Three Months Ended March 31** | **Three Months Ended March 31**
|--------------------------------------------------------------------------------------- | ------------------------------- | -------------------------------
|                                                                                        | **2002**                        | **2001**                       
|                                                                                        | (unaudited)                     | (unaudited)                    
|**Cash flows from operating activities:**                                               |                                 |                                
|Net income                                                                              | $ 2,797                         | $ 17,015                       
|Adjustments to reconcile net income
(loss) to net cash provided by operating
activities |                                 |                                
|Depreciation                                                                            | 459                             | 325                            
|Net (Decrease) to current assets &
current liabilities                                  | (21,182)                        | (15,823)                       
|                                                                                        | __________                      | __________                     
|Total adjustments                                                                       | (20,723)                        | (15,498)                       
|                                                                                        | __________                      | __________                     
|Net cash (used) provided by operating
activities                                        | (17,926)                        | 1,517                          
|**Cash flows from** **investing activities:**                                           |                                 |                                
|Reverse acquisition of Cal Bay
International, Inc. (net of cash acquired)               | -0-                             | 3,499                          
|                                                                                        | __________                      | __________                     
|Net cash provided by investing
activities                                               | -0-                             | 3,499                          
|                                                                                        | __________                      | __________                     
|Net (decrease) increase in Cash                                                         | (17,926)                        | 5,016                          
|Cash & equivalents, Beginning of
period                                                 | 25,602                          | 2,568                          
|                                                                                        | __________                      | __________                     
|Cash & equivalents, End of period                                                       | $ 7,676                         | $ 7,584                        
|                                                                                        | =========                       | =========                      
|Supplemental cash flow information:                                                     |                                 |                                
|Cash paid for interest                                                                  | $ -0-                           | $ -0-                          
|Cash paid for taxes                                                                     | $ -0-                           | $ -0-                          

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

See notes to consolidated financial statements

**CAL-BAY INTERNATIONAL, INC.**

**And Subsidiary**

**NOTES TO FINANCIAL STATEMENTS**

**March 31, 2002**(unaudited)

(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.  The accompanying consolidated statements of operations and cash flows reflect the comparative three
month period of operations of the sole proprietorship for the period prior to incorporation and include pro forma
adjustments to the operations of the sole proprietorship for comparison purposes.

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**

**March 31, 2002** (unaudited)

(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.

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 March 31, 2002.

(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**

**March 31, 2002** (unaudited)

(1) Summary of Significant Accounting Policies (Continued)

(e) Revenue Recognition (continued)

The Company recognizes 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) Loan Receivable From Stockholders & Related Parties

The balance of loan receivable from stockholders consists of two related party loans.  The first is with the majority
stockholder and the second is with another stockholder/officer.  The loans are interest free and are due on demand.  See
also Note 4.

(g) Deposits

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

(h) 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, 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.

(i) Accounts Payable an Accrued Expenses

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

(j) 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.

**CAL-BAY INTERNATIONAL, INC.**

**And Subsidiary**

**NOTES TO FINANCIAL STATEMENTS**

**March 31, 2002** (unaudited)

(1) Summary of Significant Accounting Policies (Continued)

(j) Income Taxes (continued)

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.  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.  Therefore, future profitability of this unrelated business
activity cannot be assured, resulting in reserves for the valuation allowance of the entire amount of the determined deferred
tax assets (See also Note 6).

(k) 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 March 31, 2002,
was $0.40 and has been consistently trading at that approximate price, as of and before the date of this filing.  See also
Notes 3, 5 and 8.

**CAL-BAY INTERNATIONAL, INC.**

**And Subsidiary**

**NOTES TO FINANCIAL STATEMENTS**

**March 31, 2002** (unaudited)

(1) Summary of Significant Accounting Policies (Continued)

(l)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.  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         | (4,538)   
|                                       | __________
|Net Furniture and Equipment            | $ 4,641   

(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.

**CAL-BAY INTERNATIONAL, INC.**

**And Subsidiary**

**NOTES TO FINANCIAL STATEMENTS**

**March 31, 2002** (unaudited)

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

The following is a summary of the financial position of the Cal-Bay International, Inc. (CBYI) and CBC at March 31,
2002, without the consolidating and eliminating adjustments:



|                            | **CBYI**   | **CBC**    | **Combined**
|--------------------------- | ---------- | ---------- | ------------
|Current assets              | $ -0-      | $ 26,176   | $ 26,176    
|Property and equipment, net | -0-        | 4,641      | 4,641       
|Other assets                | -0-        | 2,491      | 2,491       
|                            | __________ | __________ | __________  
|                            | $  -0-     | $ 33,308   | $ 33,308    
|                            | =========  | =========  | =========   
|Current liabilities         | $  -0-     | $ 36,572   | $ 36,572    
|Stockholders' equity        | -0-        | (3,264)    | (3,264)     
|                            | __________ | __________ | __________  
|                            | $  -0-     | $ 33,308   | $  33,308   
|                            | =========  | =========  | =========   

Included in consolidated results of operations for the period ended March 31, 2002 are the following results of the
previously separate companies:

|           | **CBYI** | **CBC**  | **Consolidated**
|---------- | -------- | -------- | ----------------
|Net sales  | $ -0-    | $ 84,001 | $ 84,001        
|Net income | $ -0-    | $ 2,797  | $ 2,797         

(4) Related Party Transactions & Significant Customers/Suppliers

As of the period ended March 31, 2002, the Company has advanced the majority stockholder and another
stockholder/officer a total of $18,500, which is included in the accompanying financial statements as loan receivable from
stockholders (see Note 1f).

A majority of CBC's commission income is derived from two unrelated manufacturing companies that it represents (see
also Note 7).

**CAL-BAY INTERNATIONAL, INC.**

**And Subsidiary**

**NOTES TO FINANCIAL STATEMENTS**

**March 31, 2002** (unaudited)

(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 March 31, 2002.



|**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 March 31, 2002, the Company had provided taxes on consolidated income for Federal and State income taxes,
estimated at $800.

At March 31, 2002 deferred taxes consisted of a net tax assets (benefits) of approximately $12,737, due to operating loss
carryforwards of the Company totaling $64,485, 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.

(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 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.

(8) Common Stock
The 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.  The Company since inception has paid no dividends.

**CAL-BAY INTERNATIONAL, INC.**

**And Subsidiary**

**NOTES TO FINANCIAL STATEMENTS**

**March 31, 2002** (unaudited)

(9) 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 March 31, 2003 | $ 8,941   
|--------------------------- | ----------
|Thereafter                  | -0-       
|                            | __________
|Total                       | $ 8,941   

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

**Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF** **FINANCIAL CONDITION OR PLAN OF
OPERATION**

**Forward-Looking Statement Notice**

When used in this report, the words "may," "will," "expect," "anticipate," "continue," "estimate," "project," "intend," and
similar expressions are intended to identify forward-looking statements within the meaning of Section 27a of the Securities
Act of 1933 and Section 21e of the Securities Exchange Act of 1934 regarding events, conditions, and financial trends that
may affect the Company's future plans of operations, business strategy, operating results, and financial position.  Persons
reviewing this report are cautioned that any forward-looking statements are not guarantees of future performance and are
subject to risks and uncertainties and that actual results may differ materially from those included within the
forward-looking statements as a result of various factors.  Such factors are discussed under the "Item 2.  Management's
Discussion and Analysis of Financial Condition or Plan of Operations," and also include general economic factors and
conditions that may directly or indirectly impact the Company's financial condition or results of operations.

**Our business**

Cal Bay was organized under the corporate laws of the State of Nevada on December 9, 1998 originally under the name
Var-Jazz Entertainment, Inc.  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 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 which 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 which 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.

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.

During the 1980's and 1990's there were many new regulations, on the local and federal level, which required the
installation of new analytical instrumentation and monitoring systems for both air and water pollution control.  Cal Bay has
been very successful in selling analyzers for use in the environmental markets and we believe the market will continue to
be strong in this area.  During the late 1990's the number of new regulations declined, however, Cal Bay expects new
regulations to be implemented in several areas in the coming decade which should result in an increase in this market in the
near future.

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.

Process, industrial, Quality Control and laboratory markets are much less likely to be affected by regulatory concerns,
however, these markets are more likely to be affected by changes in the economy.  Sales to these markets are typically not
regulatory driven but are driven by the need for improved production efficiency, reductions in cost, improvement in
product quality, etc.  New technology developments are often the driving force behind sales of new equipment into these
markets as each company searches for a competitive advantage.

**Marketing Strategy**

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 and advertising 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

* Telemarketing of selected market segments for selected products

* Cooperation with marketing programs initiated by principals/vendors

**Growth Strategy**

Cal Bay plans to grow the sales representative business in several ways.  We are currently evaluating searching for new
products to represent/distribute in addition to our current base of products.  We have targeted new products that will
complement our existing product lines, including water quality instrumentation, toxic gas sensors and flow and level
monitoring instrumentation among others.

We intend to add an outside sales engineer in mid 2002 in order to increase business in southern California and we plan to
hire an inside sales support person for our main office in late 2002.

We hope to open an Eastern U.S. office in late 2002.  We anticipate this office will become the focus of additional sales
representative and distribution activities in the Eastern U.S. and will also serve as the office location for our new
Technology Director who is expected to join Cal Bay in mid or late 2002.

We will evaluate the possibility of opening a northern California office at some time within the next 1 - 2 years.  We
intend to also evaluate the feasibility of opening a southern Nevada office at some time within the next two years.

Finally, we will evaluate the possibility of expanding beyond our traditional role as a local sales representative/distributor
by negotiating with one or more foreign manufacturer's of measurement and control products who wish to gain entry into
the U.S. market.  Cal Bay anticipates it would be come 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.

**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.

Cal Bay serves the small industrial plants market for its CEMS product.  Cal Bay relies entirely on network marketing and
referrals from consultants for the CEMS product.

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.

We have no plans to develop another system product, but remain open to new opportunities as they arise.

**New Products Division**

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.

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 reached a tentative agreement with AET to develop and market the pattern recognition technology described
in the previous section to the military for the explosives detection market.  Based upon this agreement, AET will purchase
the basic technology and Cal-Bay will be responsible for the market research, design and finished product development and
production.  Cal-Bay will utilize AET's existing network of contacts within the military and government contractors to sell
the MRX technology for the measurement of explosives. The initial market area for the pattern recognition 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. which have existing of former supplies of explosives and munitions which
require safe disposal. This represents a significant opportunity in a prime market, with little or no viable competition, and
an existing client base.

AET and Cal-Bay will also pursue the possibility of expanding our joint efforts into several other markets related to the
explosives market.  These could include the airport security market, and drug enforcement markets.  The airport security
market also has a significant potential.

The capability of pattern recognition technology****to rapidly and accurately differentiate a wide variety of substances at very
low levels (parts per trillion) and its portability makes it ideal for airport security (including aircraft cargo bays, baggage
handling and passenger scans).  Identification of ammonia and nitrogen based explosives, gunpowder, alcohol and any
number of illegal drugs in a rapid non-invasive manner using this technology as a stand-alone or portable recognition
device could significantly improve the airport security industry.  There are currently about 3,000 airport bomb-scanning
systems in use worldwide.

Pattern recognition technology is ideal for use in a "screening" application to identify the presence of a targeted chemical
substance, such as an illegal drug.  This analyzer can be programmed to store multiple drugs 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.  This market includes federal, state and local law enforcement agencies, as well as
hospitals, clinics and emergency health care facilities.

Cal-Bay will also market pattern recognition technology to those markets that we are already currently serving through our
CBC - Representative/Distributor Subsidiary.

Existing regulations and governmental requirements will be a driving force behind the future sales of pattern recognition
technology to the explosives/munitions, airport security, drug enforcement, environmental and safety markets.  Marketing
for this technology will be tailored to the targeted markets.  We expect that the initial marketing efforts will be limited until
Cal-Bay is successful in demonstrating the technology and until we approvals from various industry standards
organizations.

**Future Product R&D**

In addition to the pattern recognition technology that Cal-Bay plans to develop, we will continually be searching for other
new technology ideas that we may develop internally, partner with or acquire in the future.

One resource that Cal-Bay will utilize to aid in the search for new technologies is the services of "technology brokers" that
specialize in identifying new technology and matching that technology with companies that are looking for new products to
develop.  Cal-Bay has recently used such a service to evaluate a new technology patented by the faculty of a public U.S.
university that had reached the "proof of concept" stage and needed additional funding and resources to complete the
development into a commercially-viable product.

Each year there are many thousands of new patent applications filed, including many by universities or by small, private
inventors who do not have the resources or facilities or inclination to complete the development of their new idea into a
commercial product.  Of these new patents, many are in areas of interest to Cal-Bay, including new sensor technology, new
analytical methodologies, and new processes for environmental measurement and remediation.  Cal-Bay will review new
patents in these areas, and will select appropriate new technologies to target for possible acquisition for future
development.

**Three Months Ended March 31, 2002 and 2001**

Cal-Bay generated $84,001 in combined commission income from our representative/distributor division and revenues
from product sales in the systems division for the three-month period ended March 31, 2002 with cost of sales of $-0- for a
gross profit of $84,001 or a 100% margin. This compares with $52,971 in commission income and product sales revenues
for the three-month period ended March 31, 2001 with cost of sales of $13,183 and gross profit of $39,788 or a 75%
margin. Gross profit for the three-month period ended March 31, 2002 was $31,030 more than the same period ended in
2001. Cash provided by operating activities was ($17,926) for the three-month period ended March 31, 2002 compared to
$1,517 for the same period ended in 2001.

The increase in revenues and gross profits is due to an increase in commission income received during the three months
ended March 31, 2002 from the sales of products in the representative/distributor division compared to the same period in
2001. This increase in business from our representative/distributor division is primarily the result greater sales focus on the
products sold through the representative/distributor division.

Operating expenses for the three months ended March 31, 2002 were $81,204 compared to $22,773 for the same period in
2001, which is an increase of $58,431. For the three month period ended March 31, 2002, Cal-Bay had a net income of
$2,797 compared to a net income of $17,015 for the same period in 2001, which is a decrease in net income of $14,218.
The majority of this increase in expenses is attributed to Cal-Bay becoming a reporting public company with increased fees
for accounting and legal services.

**Liquidity and Capital Resources**

As of March 31, 2001, Cal Bay has total assets of $33,308, including cash on hand of $7,676, loan receivables in the
amount of $18,500,  security deposit of $2,491 and office furniture and equipment valued at $4,641. Current liabilities total
$36,572 in accrued expenses, accrued salaries and wages, and income taxes payable. Legal and accounting costs have
increased substantially in 2002 for the Company due to the public company reporting requirements imposed as a result of
the Company's Form 10-SB registration statement. Cal Bay does not anticipate any major new capital expenditures for the
next twelve months, and does not plan to move to a new facility or to otherwise increase the overhead expense level in any
way. Cal Bay plans to continue the current operations of all divisions with the present management structure, financial and
operational goals for the near term. Based upon the sales, expense and income results from the first quarter of operations
and our projections for the remainder of the year, the Company believes that it can maintain the current level of operations
for the rest of the year without having to raise additional funds. The company believes that its cash needs to maintain
current operations can be met with cash on hand and revenues from accounts receivable on orders for at least the next
twelve months. However, should the Company require additional capital, the Company may sell additional stock, arrange
debt financing or seek other avenues of raising capital.

**PART II.  OTHER INFORMATION**

**Item 6.  Exhibits and Reports on Form 8-K.**

Reports on Form 8-K:  No reports on Form 8-K were filed by the Company during the quarter ended March 31, 2002.

Exhibits: None

**SIGNATURES**

In accordance with 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: May 14, 2002         By:   /s/ Robert Thompson

Robert Thompson

President

Date: May 14, 2002         By:   /s/ Charles A. Prebay

Charles A. Prebay

Treasurer