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  June  30,  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                            26-0021800
      (State or other jurisdiction of     (IRS Employer Identification  No.)
       incorporation or organization)


                  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  June  30,  2002:  21,390,000  shares  of  common  stock.

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


<PAGE>

<TABLE>
<CAPTION>

                   CAL-BAY INTERNATIONAL, INC. AND SUBSIDIARY

                                      INDEX

PART I.          FINANCIAL INFORMATION                              PAGE NO.
                                                                    --------
<S>              <C>                                                <C>
Item 1.          Financial Statements

                 Consolidated Balance Sheet as of
                 June 30, 2002.                                            3

                 Comparative Unaudited Consolidated Statements of
                 Operations for the Three and Six Months Ended
                 June 30, 2002, and 2001                                   4

                 Unaudited Consolidated Statement of Changes in
                 Stockholders' Equity for the Period Ended
                 June 30, 2002                                             5

                 Comparative Unaudited Consolidated Statements of
                 Cash Flows for the Three and Six Months Ended
                 June 30, 2002, and 2001                                   6

                 Notes to the Unaudited Consolidated Financial
                 Statements                                                7-14

Item 2.          Management's Discussion and Analysis of Financial
                 Condition and Results of Operations                       15-22


PART II.         OTHER INFORMATION

Item 6.          Exhibits and Reports on Form 8-K                          23

                 Signatures                                                23

                (Inapplicable Items have been omitted)

</TABLE>


                                        2
<PAGE>

<TABLE>
<CAPTION>


                          CAL-BAY INTERNATIONAL, INC.
                                 AND SUBSIDIARY
                     CONSOLIDATED BALANCE SHEET (unaudited)
                                  June 30, 2002

                                     ASSETS

<S>                                                  <C>
Current Assets:

  Cash (Note 1c). . . . . . . . . . . . . . . . . .  $  1,451
  Loan Receivable from Stockholder (Note 4) . . . .    27,500
                                                     ---------

  TOTAL CURRENT ASSETS. . . . . . . . . . . . . . .    28,951

Office Furniture and Equipment, at cost,
  net of accumulated depreciation of
  $4,997 (Notes 1i & 2) . . . . . . . . . . . . . .     4,181

Deposit (Note 1h) . . . . . . . . . . . . . . . . .     2,491
                                                     ---------

  TOTAL ASSETS. . . . . . . . . . . . . . . . . . .  $ 35,623
                                                     =========

            LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

  Accrued Expenses (Note 1j). . . . . . . . . . . .  $ 42,237
  Income Taxes Payable (Notes 1k & 6) . . . . . . .     1,600
                                                     ---------

  TOTAL CURRENT LIABILITIES . . . . . . . . . . . .    43,837

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, 1l, 3 & 8) . . . . . . .  $ 21,390
  Additional Paid in Capital - (Discount on Stock).    (3,613)
  Retained Deficit. . . . . . . . . . . . . . . . .   (25,991)
                                                     ---------

    TOTAL STOCKHOLDERS' EQUITY. . . . . . . . . . .    (8,214)
                                                     ---------

  TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY. . . .  $ 35,623
                                                     =========
</TABLE>

See  notes  to  consolidated  financial  statements.


                                        3
<PAGE>

<TABLE>
<CAPTION>

                   CAL-BAY INTERNATIONAL, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS
              For the Three Months Ended June 30, 2002 & 2001 and
                  For the Six Months Ended June 30, 2002 & 2001


                            Three  Months  Ended          Six  Months  Ended
                                  June  30                     June  30
                        --------------------------  --------------------------
                            2002          2001          2002          2001
                        ------------  ------------  ------------  ------------
                        (unaudited)   (unaudited)   (unaudited)    (unaudited)

<S>                     <C>           <C>           <C>           <C>
Revenues . . . . . . .  $    54,755   $   100,827   $   138,756   $   153,798

Cost of Sales. . . . .          -0-        34,540           -0-        47,723


Gross profit . . . . .       54,755        66,287       138,756       106,075

Operating expenses . .       59,704        83,741       140,909       106,514
                        ------------  ------------  ------------  ------------

Net (loss) . . . . . .  $    (4,949)  $   (17,454)  $    (2,153)  $      (439)
==============================================================================

Net (loss)
  Per share:
    Basic & Diluted. .        (0.00)        (0.00)        (0.00)        (0.00)

Weighted average
  Shares outstanding:
    Basic & Diluted. .   21,390,000    21,390,000    21,390,000    19,806,431

</TABLE>

See  notes  to  consolidated  financial  statements.


                                        4
<PAGE>

<TABLE>
<CAPTION>

                          CAL-BAY INTERNATIONAL, INC.
                                 AND SUBSIDIARY
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                  (unaudited)
                       For the Period Ended June 30, 2002


                                                             Additional
                                                             Paid-in
                                        Commo  Stock         Capital                Total
                                    Number of  ($0.001 Par)  (Discount   Retained   Stockholders'
                                     Shares    $ Amount      on Stock)   Deficit    Equity
                                   --------------------      ----------  ---------  ---------
<S>                                <C>         <C>            <C>         <C>        <C>

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) June 30, 2001                ---      ---              ---       (527)      (527)
                                   ----------  -------        ----------  ---------  ---------

Balance at June 30, 2001. . . . .  21,390,000   21,390           (3,613)      (527)    17,250

  Net (Loss) December 31, 2001            ---      ---              ---    (23,311)   (23,311)
                                   ----------  -------        ----------  ---------  ---------

Balance at December 31, 2001. . .  21,390,000   21,390           (3,613)   (23,838)    (6,061)

  Net (Loss) June 30, 2002                ---      ---              ---     (2,153)    (2,153)
                                   ----------  -------        ----------  ---------  ---------

Balance at June 30, 2002. . . . .  21,390,000  $21,390        $  (3,613)  $(25,991)  $ (8,214)
                                   ==========  =======        ==========  =========  =========
</TABLE>

See  notes  to  consolidated  financial  statements


                                        5
<PAGE>

<TABLE>
<CAPTION>

                   CAL-BAY INTERNATIONAL, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              For the Three Months Ended June 30, 2002 & 2001 and
                  For the Six Months Ended June 30, 2002 & 2001


                                        Three  Months  Ended         Six  Months  Ended
                                              June  30                    June  30
                                      --------------------------   -----------------------
                                          2002          2001          2002        2001
                                      ------------  ------------  ------------  --------
                                     (unaudited)   (unaudited)   (unaudited)   (unaudited)
<S>                                   <C>           <C>           <C>           <C>
 CASH FLOWS FROM
 OPERATING ACTIVITIES:

Net income (loss). . . . . . . . . .  $    (4,949)  $   (17,454)  $    (2,153)  $  (439)
                                      ------------  ------------  ------------  --------
Adjustments to reconcile net
  Income (loss) to net cash
  Provided by operating activities
Depreciation . . . . . . . . . . . .          459           325           918       650
Increase (decrease)
  To current assets &
  Current liabilities. . . . . . . .       (1,735)       40,855       (22,916)   25,032
                                      ------------  ------------  ------------  --------

Total adjustments. . . . . . . . . .       (1,276)       41,180       (21,998)   25,682
                                      ------------  ------------  ------------  --------

Net cash provided (used) by
  Operating activities . . . . . . .       (6,225)       23,726       (24,151)   25,243
                                      ------------  ------------  ------------  --------

CASH FLOWS FROM
  INVESTING ACTIVITIES:

Reverse acquisition of Cal
  Bay International, Inc.
  (net of cash acquired) . . . . . .          -0-           -0-           -0-     3,499
                                      ------------  ------------  ------------  --------

Net cash provided by
  Investing activities . . . . . . .          -0-           -0-           -0-     3,499
                                      ------------  ------------  ------------  --------

Net increase (decrease). . . . . . .       (6,225)       23,726       (24,151)   28,742
  In Cash

Cash & equivalents,
  Beginning of period. . . . . . . .        7,676         7,584        25,602     2,568
                                      ------------  ------------  ------------  --------

Cash & equivalents,
  End of period. . . . . . . . . . .  $     1,451   $    31,310   $     1,451   $31,310
                                      ============  ============  ============  ========

Supplemental cash flow information:
Cash paid for interest . . . . . . .  $       -0-   $       -0-   $       -0-   $   -0-
                                      ============  ============  ============  ========
Cash paid for taxes. . . . . . . . .  $       -0-   $       -0-   $       -0-   $   -0-
                                      ============  ============  ============  ========
</TABLE>

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


                                        6
<PAGE>

CAL-BAY  INTERNATIONAL,  INC.
AND  SUBSIDIARY
NOTES  TO  FINANCIAL  STATEMENTS
June  30,  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 and six month periods of
          operations  of  the  sole  proprietorship  for  the  periods  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.


                                        7
<PAGE>

CAL-BAY  INTERNATIONAL,  INC.
AND  SUBSIDIARY
NOTES  TO  FINANCIAL  STATEMENTS
June  30,  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  June  30,  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.


                                        8
<PAGE>

CAL-BAY  INTERNATIONAL,  INC.
AND  SUBSIDIARY
NOTES  TO  FINANCIAL  STATEMENTS
June  30,  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  Stockholder  &  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.


                                        9
<PAGE>

CAL-BAY  INTERNATIONAL,  INC.
AND  SUBSIDIARY
NOTES  TO  FINANCIAL  STATEMENTS
June  30,  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  related 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 Over The
          Counter  Bulletin  Board  (OTCBB)  under  the symbol CBYI. The trading
          price  at June 30, 2002 was $0.31 and has been consistently trading in
          limited  transactions,  as  of and before the date of this report. See
          also  Notes  3,  5  and  8.


                                       10
<PAGE>

CAL-BAY  INTERNATIONAL,  INC.
AND  SUBSIDIARY
NOTES  TO  FINANCIAL  STATEMENTS
June  30,  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, 2001 and 2002. 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                  $  9,178
               Less:  Accumulated  Depreciation      (4,997)
                                                      ------
               Net  Furniture  and  Equipment       $  4,181
                                                    ========


(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.


                                       11
<PAGE>

CAL-BAY  INTERNATIONAL,  INC.
AND  SUBSIDIARY
NOTES  TO  FINANCIAL  STATEMENTS
June  30,  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  June  30,  2002,  without  the
     consolidating  and  eliminating  adjustments:

<TABLE>
<CAPTION>

                               CBYI     CBC      Combined
                               -----  --------  ----------
<S>                            <C>    <C>       <C>
  Current assets. . . . . . .  $ -0-  $28,951   $  28,951
  Property and equipment, net    -0-    4,181       4,181
  Other assets. . . . . . . .    -0-    2,491       2,491

                               -----  --------  ----------
                               $ -0-  $35,623   $  35,623
                               =====  ========  ==========

  Current liabilities . . . .  $ -0-  $ 43,837     $43,837
  Stockholders' equity. . . .    -0-   (8,214)     (8,214)

                               -----  --------  ----------
                               $ -0-  $35,623    $  35,623
                               =====  ========   =========
</TABLE>

     Included  in  consolidated  results of operations for the period ended June
     30,  2002  are  the following results of the previously separate companies:

<TABLE>
<CAPTION>

                     CBYI      CBC      Consolidated
                     -----  ---------  --------------
<S>                  <C>    <C>        <C>
  Net sales . . . .  $ -0-  $138,756   $     138,756
                     =====  =========  ==============
  Net income (loss)  $ -0-  $ (2,153)  $      (2,153)
                     =====  =========  ==============
</TABLE>

(4)  Related  Party  Transactions  &  Significant  Customers/Suppliers

     As of the period ended June 30, 2002, the Company has advanced the majority
     stockholder  and  another  stockholder/officer a total of $27,500, which is
     included  in  the accompanying financial statements as loan receivable from
     stockholder  (see  Note  1f).  Additionally, a majority of CBC's commission
     income  is  derived  from  two  unrelated  manufacturing  companies that it
     represents  (see  also  Note  7).


                                       12
<PAGE>

CAL-BAY  INTERNATIONAL,  INC.
AND  SUBSIDIARY
NOTES  TO  FINANCIAL  STATEMENTS
June  30,  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  June  30,  2002.

<TABLE>
<CAPTION>

Shareholder/Position/Title             Shares Held  Ownership
--------------------------------       -----------  ----------
<S>                                    <C>          <C>

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%
                                        ==========  ==========
</TABLE>

(6)  Income  Taxes

     As  of June 30, 2002, the Company had provided taxes on consolidated income
     for  Federal  and  State  income  taxes,  estimated  at  $1,600.

     At June 30, 2002 deferred taxes consisted of a net tax assets (benefits) of
     approximately  $13,887,  due to operating loss carryforwards of the Company
     totaling  $69,434,  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
     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.

(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.


                                       13
<PAGE>

CAL-BAY  INTERNATIONAL,  INC.
AND  SUBSIDIARY
NOTES  TO  FINANCIAL  STATEMENTS
June  30,  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  June  30,

             2003          $     -0-
             Thereafter          -0-
                          ----------
             Total         $     -0-
                           =========

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


                                       14
<PAGE>

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  operated  as  a  sole  proprietorship  in  early-2001,  until
incorporation  on February 22, 2001 and was involved in a reverse acquisition by
Var-Jazz  on  March  8, 2001. Cal-Bay received approval from the SEC on March 7,
2002  on  the  Company's Form 10-SB registration statement. And, in June of 2002
Cal-Bay received approval from the NASD to move from the Pink Sheets to the Over
the  Counter  Bulletin  Board  (OTC  BB)  exchange.

     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


                                       15
<PAGE>

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.

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

     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.


                                       16
<PAGE>

New  technology  developments  are  often  the driving force behind sales of new
equipment  into  these  markets  as  each  company  searches  for  a competitive
advantage.

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  currently offers a Continuous Emissions Monitoring (CEMS) product
line. Until recently, Cal-Bay also offered an EMS product, but this product line
was  recently  discontinued.

     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.

     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.

     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.

NEW  PRODUCTS  DIVISION

     Cal  Bay  is  currently  exploring  several  opportunities  to  develop new
products  and/or  technologies,  as  follows:

     SPECTRA  UNLIMITED  -  PRODUCT  ACQUISITION/DEVELOPMENT
     -------------------------------------------------------

     Cal-Bay  has  reached  tentative agreement and signed a letter of intent to
acquire  the  technology  rights  to  several  products  developed  by  Spectra
Unlimited, a recently dissolved company.  The rights to these products are owned
by  the  former  partners  in  Spectra  Unlimited.


                                       17
<PAGE>

     The  Spectra  products  include  the  following:

     -    Streaming  Current  Analyzer  -  this  analyzer  uses  the  proven
          thermoconductivity  principle of analysis and is unique in that it can
          discriminate  a single component of interest from a complex mixture of
          different  components.  Potential applications include: measurement of
          solids  in a binary solution, selective measurement of a single gas in
          a  complex  mixture  of  gases  for purity or quality control, various
          solvent ratios for process control, product quality measurements, etc.
     -    Infrared  Spectrometer  - This is a highly sensitive NDIR spectrometer
          designed  for  gas  measurements  in  environmental or process control
          applications.  It  uses  dual  measurement  channels  and  an
          energy-balancing  circuit  that  allows  the  use  of the same optical
          filters  for  sample  and  reference  wavelengths.
     -    Catalytic  Scrubbers - A series of proprietary non-depleting catalytic
          scrubbers  that  can  turn  most  active  substances  inert to improve
          sampling  and  analysis  in  difficult  applications.

     It is currently unknown what the market potential of these products are, or
the  amount of additional research and product development that will be required
before  taking  these  products to market, however Cal-Bay believes that each of
these  products  can  be developed with a fairly limited amount of resources and
that  these  products will fit very well into our existing areas of business. If
the  R&D  of  these products is successful it is anticipated that these products
will  be  manufactured  and  sold  either  by  a  new  subsidiary  company to be
established  or  by  a  company  to  be  acquired  by Cal-Bay that already has a
manufacturing  capability  and  sales  organization.


     PATTERN  RECOGNITION  TECHNOLOGY  -  PRODUCT  DEVELOPMENT
     ---------------------------------------------------------

     Cal-Bay  has  been  working  on the development of a new type of analytical
product  during  the  past few years that has tremendous potential. This product
uses  pattern  recognition  and  neural  net  processing, together with software
programming  which 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, these products can provide results
that  are  not achievable with conventional analytical devices. As an analytical
technology  it  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.

     Currently,  this  technology has not been developed for use in many markets
and/or  applications  and  little or no marketing research has been performed to
determine  suitable  applications  for  the  technology.  Additional  product
development  is  necessary to refine the basic technology into products designed
for  specific use in specific applications. Marketing research will be needed to
determine viable markets and applications as well as the features required to be
successful  in  those  markets.

     Cal-Bay  intends  to  focus  initially  on  the  use  of  this  new pattern
recognition  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. If the R&D of these
products  is  successful  it  is  anticipated  that  these  products  will  be
manufactured and sold either by a new subsidiary company to be established or by
a  company to be acquired by Cal-Bay that already has a manufacturing capability
and  sales  organization.


                                       18
<PAGE>

     Also,  Cal-Bay has developed a strategic alliance with another company that
will  provide Cal-Bay with an entry into the explosives detection market for the
military  which  has  significant  potential  for  growth.

     This company is presently working at a military facility in Iowa to develop
new  technology,  has  offices  and  laboratory  facilities  in  Iowa, and 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.  Cal-Bay will utilize an
existing  network  of contacts within the military and government contractors to
sell the pattern recognition technology for the measurement of explosives. 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.

     Cal-Bay  will  also pursue the possibility of expanding these joint efforts
into  several  other  markets  related  to  the  explosives market.  These could
include  the  airport  security  market,  and drug enforcement markets.  Each of
these  markets have significant potential, especially since the tragic events of
September 11, 2001, which has created a need for new analytical tools to be used
in  the  "homeland  security"  effort.

     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  also  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.

     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.

     ANALYTICAL  SENSORS  -  PRODUCT  DEVELOPMENT
     --------------------------------------------

     Cal-Bay  has  had  preliminary  discussions  with  the  former  owner of an
analytical  sensor  company regarding the potential development of a new line of
sensors.  Based  upon  these  initial discussions, we believe that a new line of
sensors  could  be  developed  for  use  in  a  wide  variety  of  analytical
instrumentation.  Initial  development  would be limited to specific sensors and
markets with the greatest return on investment. It is estimated that the initial
resources  required  for  product research and development would be minimal, and
that  profit  margins  and return on investment will be excellent. In return for


                                       19
<PAGE>

funding  the product R&D, providing manufacturing facilities and performing most
of the sales and marketing functions, Cal-Bay will receive majority ownership of
any  new  sensors  developed.

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.

     Future  Potential  Mergers  &  Acquisitions  by  Cal-Bay  International

     Cal-Bay  has identified a number of companies that would be good candidates
for  future  mergers  and/or  acquisitions.  Each  of  these  companies has been
selected  based  upon  such criteria as profitability, existing management team,
ownership  desire  for exit strategy, synergy/compatibility with Cal-Bay's goals
and  plans,  etc.  At  this time, Cal-Bay's management is evaluating each of the
candidates currently identified and we are actively searching for new candidates
in  order  to  determine  the  best  growth  strategy  for  the  future.

THREE  MONTH  PERIODS  ENDED  JUNE  30,  2002  AND  2001

     Cal-Bay  generated  $54,755  in  commission  income  from  our
representative/distributor  division  for  the three-month period ended June 30,
2002  with  cost  of  sales  of  $0 for a gross profit of $54,755. There were no
revenues  from  product  sales  in the systems division or new products division
during  this  period.  These revenues compare with $100,827 in commission income
and  product  sales revenues for the three-month period ended June 30, 2001 with
cost  of  sales of $34,540 and gross profit of $66,287 or a 65.7 % margin. Gross
profit  for the three-month period ended June 30, 2002 was $11,532 less than the
same  period  ended  in 2001. Cash provided by operating activities was ($6,225)
for  the three-month period ended June 30, 2002 compared to $23,726 for the same
period  ended  in  2001.

     The revenues generated for the three-month period ending June 30, 2002 were
less  than  the  anticipated levels of revenues forecast for this period, partly
due  to  the  lack  of  sales from the systems division or new products division
during  this  period,  and we believe that this decrease in business activity is
due  to  the  slowdown  in  the economy in general. Several projects that we had
forecast  for  this time period have been delayed, and we have been told by many
clients  that capital spending budgets have been reduced or placed on hold until
later in the year. However, since there were no product sales there were also no
cost  of  sales associated with these sales, therefore the gross profits for the


                                       20
<PAGE>

three-month  period  ending June 30, 2002 were higher than the comparable period
in  2001  in which there were higher revenues that were offset by higher cost of
sales  from  the  product  sales  during  this  period.

     Operating  expenses  for  the three months ended June 30, 2002 were $59,704
compared to $83,741 for the same period in 2001, which is a decrease of $24,037.
For the three month period ended June 30, 2002, Cal-Bay had a net loss of $4,949
compared  to  a  net  loss  of  $17,454 for the same period in 2001, which is an
increase  in net income of $12,505. The majority of this decrease in expenses is
attributed to an effort by Cal-Bay management to reduce expenses in anticipation
of  the  economic  slowdown.

SIX  MONTH  PERIODS  ENDED  JUNE  30,  2002  AND  2001

     Cal-Bay  generated  $138,756  in  combined  commission  income  from  our
representative/distributor  division  and  revenues  from  product  sales in the
systems  division  for  the six-month period ended June 30, 2002 with $0 cost of
sales  for a gross profit of $138,756. This compares with $153,798 in commission
income  and  product sales revenues for the six-month period ended June 30, 2001
with  cost  of sales of $47,723 and gross profit of $106,075 or a 68.9 % margin.
Gross  profit for the six-month period ended June 30, 2002 was $32,681 more than
the  same  period  ended  in  2001.  Cash  provided  by operating activities was
($24,151)  for  the six-month period ended June 30, 2002 compared to $25,243 for
the  same  period  ended  in  2001.

     The  revenues  generated for the six-month period ending June 30, 2002 were
less  than  the  anticipated levels of revenues forecast for this period, partly
due  to  the  lack  of  sales from the systems division or new products division
during  this  period,  and we believe that this decrease in business activity is
due  to  the  slowdown  in the economy in general.  Several projects that we had
forecast  for  this time period have been delayed, and we have been told by many
clients  that capital spending budgets have been reduced or placed on hold until
later  in  the year.  However, since there were no product sales there were also
no  cost  of  sales associated with these sales, therefore the gross profits for
the six-month period ending June 30, 2002 were higher than the comparable period
in  2001  in which there were higher revenues that were offset by higher cost of
sales  from  the  product  sales  during  this  period.

     Operating  expenses  for  the  six months ended June 30, 2002 were $140,909
compared  to  $106,514  for  the  same  period  in 2001, which is an increase of
$34,395. For the six month period ended June 30, 2002, Cal-Bay had a net loss of
$2,153  compared  to  a net loss of $439 for the same period in 2001, which is a
decrease  in  net income of $1,714. The majority of this increase in expenses is
attributed to Cal-Bay becoming a reporting public company with increased fee for
accounting  and  legal  services.  During  this  period, the accounting fees for
completion  of  an  audit, and legal fees and organizational expenses associated
with  our  incorporation  would  not have been incurred had Cal-Bay continued to
operate  as  a sole proprietorship. If these fees had not been incurred, our net
income  would  have  increased substantially. We expect our legal and accounting
fees  to  decrease  in the future, although we will require continuing legal and
accounting  services  for our future quarterly and annual reporting. During this
period,  Cal-Bay's  management  was  informed that the health insurance premiums
would  increase  significantly  this year, therefore a new health insurance plan
was  selected  in an attempt to limit the increase in costs. In addition, during
this  period  Cal-Bay's  management  approved  the  selection of a new liability
insurance  policy which resulted in additional expense to the Company. We do not
foresee  any other increases in expenses or any other major expenditures for the
remainder  of  2002.

     Cal-Bay  operated  as  a  sole  proprietorship  in  early-2001,  until
incorporation on February 22, 2001 and then the acquisition by Var-Jazz on March
8,  2001. For the initial period of operation after the acquisition by Var-Jazz,
the  officers  of  the Company did not draw a salary from Cal-Bay, and were only
reimbursed for expenses directly relating to the operation of the Company. As of


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<PAGE>

June 16, 2001 the Company agreed to pay salaries to the officers of the Company.
The  first  salary  payments  were  made to Cal-Bay employees at the end of June
2001.  We  believe that the salaries to be paid to the Cal-Bay officers are fair
and  reasonable  compensation consistent with the duties and responsibilities of
these positions. These executive salaries were based upon the expected levels of
revenues  for  Cal-Bay,  based  upon  the  projected  sales forecasts and income
projections  and  expense  budgets  for  the  year. At this time, based upon the
actual  sales  to  date and the projected sales for the remainder of the year it
appears  that the 2002 sales for Cal-Bay will probably be less than the forecast
for  the  year,  therefore the officers of Cal-Bay have agreed to accept company
stock  in  lieu  of  salary  if  required to maintain adequate cash flow for the
corporation.  In  anticipation of this, Cal-Bay's management is making an effort
to  reduce  our  operating expenses for the remainder of the year. Also, much of
the  expense  associated  with  becoming  a fully-reporting company has now been
incurred and is behind us, and therefore we expect the accounting and legal fees
to  stabilize  and  remain  fairly  constant  in  the  future.

LIQUIDITY  AND  CAPITAL  RESOURCES

     As of June 30, 2002, Cal Bay has total assets of $35,623, including cash on
hand,  loan  receivables,  prepaid rent, security deposits, and office furniture
and  equipment.  Current  liabilities total $43,837 in accrued expenses, accrued
salaries  and  wages,  and  income  taxes  payable.  Legal  and accounting costs
increased  substantially  in  2001  for  the  Company  due to the public company
reporting  requirements  imposed  as  a  result  of  the  Company's  Form  10-SB
registration statement, which was finally approved by the SEC in March, 2002. In
June  of  2002  Cal-Bay  received  approval  from the NASD to move from the Pink
Sheets  to  the  Over the Counter Bulletin Board (OTC BB) exchange. 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 two quarters 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  for  operational  purposes.  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.


                                       22
<PAGE>

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  June  30,  2002.

<TABLE>
<CAPTION>

Exhibits:

EXHIBIT NUMBER  TITLE                                     LOCATION
<C>             <S>                                       <C>

          99.1  Certification of Chief Executive Officer  Attached

          99.2  Certification of Chief Financial Officer  Attached
</TABLE>




                                   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.


August  9,  2002                   /s/ Robert  Thompson
                                   --------------------
                                   President




August  9,  2002                  /s/ Charles  A.  Prebay
                                  -----------------------
                                  Chief  Financial  Officer


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<PAGE>