U.S. Securities and Exchange Commission

Washington, D.C.  20549

Form 10-QSB

(Mark One)

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

For the quarterly period ended March 31, 2005



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

For the transition period from _____________ to ______________



Commission file number: 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)



P. O. Box 502548, San Diego, CA  92150-2548

(Address of principal executive offices)



858-243-2615

(Issuers telephone number)



1562 Parkway Loop, Suite A, Tustin, CA 92780

(Former address, if changed since last report)



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



APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING

THE PRECEDING FIVE YEARS



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



APPLICABLE ONLY TO CORPORATE ISSUERS



The aggregate number of shares issued and outstanding of the issuers common stock as of March 31, 2005 was 57,669,031 shares of $0.001 par value.



Transitional Small Business Disclosure Format (Check one):

Yes [  ]  No [X]





1







CAL-BAY INTERNATIONAL, INC. AND SUBSIDIARIES





INDEX







PART I.

FINANCIAL INFORMATION

PAGE NO.





Item 1.

Financial Statements

3



Consolidated Balance Sheets as of

March 31, 2005 and 2004

4



Comparative Consolidated Statements of Operations

for the Three Months Ended March 31, 2004

5



Consolidated Statement of Changes in

Stockholders Equity for the Period Ended

March 31, 2005

6



Comparative Consolidated Statements of Cash Flows

7

for the Three Months Ended March 31, 2005





Notes to the Consolidated Financial

Statements

8



Item 2.

Managements Discussion and Analysis of Financial

17

Condition and Results of Operations





Item 3.

Controls and Procedures

18





PART II.

OTHER INFORMATION





Item 2.

Changes in Securities and Use of Proceeds

19





Item 6.

Exhibits and Reports on Form 8-K

19



(a)

Exhibits



(b)

Reports on Form 8-K



Signatures

20











2







PART I- FINANCIAL INFORMATION



ITEM 1. Financial Statements



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.



3











CAL-BAY INTERNATIONAL, INC.

And Subsidiaries

CONSOLIDATED BALANCE SHEETS (unaudited)

March 31,

|ASSETS                                                                 |             |  |            
|---------------------------------------------------------------------- | ----------- |  | -----------
|                                                                       | 2005        |  | 2004       
|Current Assets:                                                        |             |  |            
|                                                                       |             |  |            
|Cash (Note 1c)                                                         | $1,274      |  | $2,931     
|Short-Term Loan Receivable                                             | 17,000      |  | -0-        
|                                                                       |             |  |            
|TOTAL CURRENT ASSETS                                                   | 18,274      |  | 2,931      
|                                                                       |             |  |            
|Property and Equipment, at cost,                                       |             |  |            
|net of accumulated depreciation of                                     |             |  |            
|$1,244 and $12,255 respectively (Notes 1h & 2)                         | 73,414      |  | 14,248     
|                                                                       |             |  |            
|Proprietary Technology (Note 1b)                                       | 225,000     |  | -0-        
|                                                                       |             |  |            
|Deposits (Note 1g)                                                     | 113,750     |  | 2,770      
|                                                                       |             |  |            
|TOTAL ASSETS                                                           | $430,438    |  | $19,949    
|                                                                       |             |  |            
|LIABILITIES AND STOCKHOLDERS EQUITY                                   |             |  |            
|                                                                       |             |  |            
|Current Liabilities:                                                   |             |  |            
|                                                                       |             |  |            
|Accounts Payable & Accrued Expenses (Note 1i)                          | $     4,756 |  | $    61,985
|Income Taxes Payable (Notes 1j & 6)                                    | 800         |  | 1,600      
|Loans from Shareholder (Notes 1f & 8)                                  | 231,771     |  | -0-        
|Loans Payable (Note 8)                                                 | 97,000      |  | -0-        
|Current Portion of Capital Lease Obligation (Note 9)                   | -0-         |  | 2,700      
|                                                                       |             |  |            
|TOTAL CURRENT LIABILITIES                                              | 334,327     |  | 66,285     
|                                                                       |             |  |            
|Capital Lease Obligation, net of Current Portion (Note 9)              | -0-         |  | 8,594      
|                                                                       |             |  |            
|TOTAL LIABILITIES                                                      | 334,327     |  | 74,879     
|                                                                       |             |  |            
|Commitments and Contingencies (Note 10)                                | - - -       |  | - - -      
|                                                                       |             |  |            
|Stockholders Equity:                                                  |             |  |            
|                                                                       |             |  |            
|Common Stock, $.001 par value; 75,000,000 shares                       |             |  |            
|authorized; shares issued and outstanding                              |             |  |            
|57,669,031 and 32,669,031 (Notes 1b, 1k, 3 & 5)                        | 57,669      |  | 32,669     
|Additional Paid in Capital                                             | 1,818,383   |  | 1,270,383  
|Retained Deficit                                                       | (1,741,841) |  | (1,357,982)
|Less Treasury Stock at Cost (762,000 and 0 shares at respective dates) | (38,100)    |  | -0-        
|                                                                       |             |  |            
|TOTAL STOCKHOLDERS EQUITY (DEFICIT)                                   | 96,111      |  | (54,930)   
|                                                                       |             |  |            
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                             | $ 430,438   |  | $   19,949 



See notes to consolidated financial statements.



4









CAL-BAY INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

For the Three Months Ended March 31, 2005 & 2004







|                    | Three Months Ended
|------------------- | ------------------
|                    | March 31          
|                    | 2005              
|                    |                   
|                    |                   
|Revenues            |                   
|Sales               | $           -0-   
|Commission Income   | -0-               
|                    |                   
|Total Revenues      | -0-               
|                    |                   
|Cost of Sales       |                   
|Purchases           | -0-               
|Commission expense  | -0-               
|                    |                   
|Total Cost of Sales | -0-               
|                    |                   
|Gross profit        | -0-               
|                    |                   
|Operating expenses  | 347,963           
|                    |                   
|Net (loss) income   | $ (347,963)       
|                    |                   
|                    |                   
|Net income          |                   
|Per share:          |                   
|Basic & Diluted     | $      (0.01)     
|                    |                   
|Weighted average    |                   
|Shares outstanding: |                   
|Basic & Diluted     | 47,169,031        

























See notes to consolidated financial statements.



5













CAL-BAY INTERNATIONAL, INC.

And Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(unaudited)

For the Period Ended March 31, 2005







|                                                           | Common     |  | Additional |  |             |  |               |  | Total     
|---------------------------------------------------------- | ---------- |  | ---------- |  | ----------- |  | ------------- |  | ----------
|                                                           | Number     |  | $0.001 par |  | paid-in     |  | Retained      |  | Treasury  
|                                                           | of shares  |  | amount     |  | capital     |  | (Deficit)     |  | Stock     
|                                                           |            |  |            |  |             |  |               |  |           
|Balance at December 31, 2003                               | 31,169,031 |  | $ 31,169   |  | $ 1,234,383 |  | $ (1,308,026) |  | $      ---
|                                                           |            |  |            |  |             |  |               |  |           
|Issuance of Common Stock for Services                      | 5,500,000  |  | 5,500      |  | 92,000      |  | ---           |  | ---       
|                                                           |            |  |            |  |             |  |               |  |           
|Net (Loss) at December 31, 2004                            | ---        |  | ---        |  | ---         |  | (85,852)      |  | ---       
|                                                           |            |  |            |  |             |  |               |  |           
|Balance at December 31, 2004                               | 36,669,031 |  | 36,669     |  | 1,326,383   |  | (1,393,878)   |  | ---       
|                                                           |            |  |            |  |             |  |               |  |           
|Issuance of Common Stock for TLCO Software, Inc. (1/05/05) | 15,000,000 |  | 15,000     |  | 210,000     |  | ---           |  | ---       
|                                                           |            |  |            |  |             |  |               |  |           
|Issuance of Common Stock for Services (2/17/05)            | 6,000,000  |  | 6,000      |  | 282,000     |  | ---           |  | ---       
|                                                           |            |  |            |  |             |  |               |  |           
|Purchase of Treasury Stock (762,000 shares)                | ---        |  | ---        |  | ---         |  | ---           |  | (38,100)  
|                                                           |            |  |            |  |             |  |               |  |           
|Net (Loss) at March 31, 2005                               | ---        |  | ---        |  | ---         |  | (347,963)     |  | ---       
|                                                           |            |  |            |  |             |  |               |  |           
|Balance at March 31, 2005                                  | 57,669,031 |  | $ 57,669   |  | $ 1,818,383 |  | $ (1,741,841) |  | $ (38,100)

















See notes to consolidated financial statements.



6







CAL-BAY INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

For the Three Months Ended March 31, 2005 & 2004



|                                                   | Three Months Ended
|-------------------------------------------------- | ------------------
|                                                   | March 31          
|                                                   | 2005              
|Cash Flows From Operating Activities:              |                   
|                                                   |                   
|Net (loss) income                                  | $ (347,963)       
|Adjustments to reconcile net                       |                   
|Income (loss) to net cash                          |                   
|Provided by operating activities                   |                   
|Depreciation                                       | 1,244             
|Common stock issued for services                   | 288,000           
|Net (Decrease)                                     |                   
|To current assets &                                |                   
|Current liabilities                                | (50,888)          
|                                                   |                   
|Total adjustments                                  | 238,356           
|                                                   |                   
|Total cash (used) by operating activities          | (109,607)         
|                                                   |                   
|Cash Flows From Investing Activities:              |                   
|                                                   |                   
|Short-term loans made to others                    | (17,000)          
|Deposits made on potential acquisitions            | (110,000)         
|Purchase of equipment                              | (48,477)          
|                                                   |                   
|Total cash (used) by investing activities          | (175,477)         
|                                                   |                   
|Cash Flows From Financing Activities:              |                   
|                                                   |                   
|Proceeds from short term loans                     | 328,771           
|Purchase of treasury stock                         | (38,100)          
|Payment of lease payable                           | (9,524)           
|                                                   |                   
|Total cash provided/(used) by financing activities | 281,147           
|                                                   |                   
|Net (decrease)                                     | (3,937)           
|In Cash                                            |                   
|Cash & equivalents,                                |                   
|Beginning of period                                | 5,211             
|Cash & equivalents,                                |                   
|End of period                                      | $     1,274       
|                                                   |                   
|Supplemental cash flow information:                |                   
|Cash paid for interest                             | $         -0-     
|Cash paid for taxes                                | $         -0-     



Supplemental disclosure of non-cash activities:



In March of 2004, the Company issued 1,500,000 shares of common stock as consideration for certain professional and consulting expenses.  In January of 2005, the Company issued 15,000,000 shares of common stock for the purchase of proprietary source code from TLCO.  In February of 2005, the Company issued 6,000,000 shares of common stock as consideration for certain professional and consulting expenses.



See notes to consolidated financial statements



7









CAL-BAY INTERNATIONAL, INC.

And Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2005







(1)

Summary of Significant Accounting Policies





(a)

Nature of Business





Cal-Bay International, Inc. and subsidiaries ("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 (CBYI).  The Company does not currently have any international operations but expects to in the future.



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 represented the only operating entity of the Company until the sale of all CBC assets and liabilities on January 6, 2005.  CBC is a manufacturers representative and distribution firm, serving California, Nevada and Hawaii in process, environmental, safety and laboratory markets.



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.



On August 17, 2003, the Company formed a Nevada corporation, Cal-Bay Analytical, Inc., (CBA) a wholly owned subsidiary.  As of January 6, 2005, all the assets and liabilities of CBA were sold along with CBC to Robert Thompson and Charles Prebay in exchange for their shares in CBYI and delivery of Atlantis Holdings, Inc., a shell company traded on the pink sheets.  As a result of this transaction and the 15,000,000 common shares issued to Roger Pawson on January 5, 2005, a new ownership group is managing the Company in 2005.



As discussed in more detail in the following notes, the Companys new director is acquiring several real estate activities and other entities and plans to file to become a real estate investment trust (REIT).







8







CAL-BAY INTERNATIONAL, INC.

And Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2005



(1)

Summary of Significant Accounting Policies (continued)



(b)

Capitalization



In March and November of 2004, the Company filed Form S-8 Registration Statements with the Securities and Exchange Commission and issued 5,500,000 unrestricted common shares in payment for consulting services.



On January 5, 2005, the Company issued 15,000,000 restricted common shares to Roger Pawson to acquire TLCO Software, Inc. (TLCO).  TLCO has no recent history of operations and only asset is proprietary technology consisting of source code for certain software applications.  The condensed unaudited pro forma disclosure is not provided herein, as the resulting pro forma financial statements after the transactions above result in no activities over the last two fiscal years.



On January 6, 2005, the former CEO, Robert Thompson, and former Vice President, Charles Prebay, resigned as officers and directors of the Company exchanging all their remaining shares with Mr. Roger Pawson, the new CEO and director.  As part of the transaction, the Companys subsidiaries CBC and CBA have been spun off into Atlantis Holding Corporation, a pink sheet company now owned by Robert Thompson and Chuck Prebay.



On February 17, 2005, the Company issued 6,000,000 unrestricted common shares for consulting services.



During the three months ended March 31, 2005, as detailed in a Form 8K filing, the Company repurchased from the open market 762,000 shares at a total repurchase cost of $38,100.  Additional shares were repurchased in the second quarter of 2005.  The Company intends to return the shares to certificate form and then have them retired.  The accounting for treasury stock transactions is under the cost method.



(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, 2005 or 2004.



(d) Principles of Consolidation and Basis of Accounting



The accompanying consolidated financial statements as of March 31, 2004 include the accounts of Cal-Bay International, Inc. and of its wholly owned subsidiaries, CBC and CBA, while the accompanying financial statements as of March 31, 2005 include the accounts of Cal-Bay International, Inc. and of its wholly owned subsidiary, TLCO.  All material inter-company transactions and accounts have been eliminated in consolidation.











9









CAL-BAY INTERNATIONAL, INC.

And Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2005



(1)

Summary of Significant Accounting Policies (continued)







(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 expenses earned by outside sales representatives are recorded as cost of sales when the commission income that it is related to is recognized; however, there has been no commission expenses incurred or deferred as of the date of these financial statements.



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)

Related Party Transactions



As of December 31, 2004 the Company leased office space from the previous CEO, Robert Thompson.  Currently, the Company has relocated its headquarters to San Diego, CA and is negotiating a new lease for office space with details forthcoming in the second quarter.  Roger Pawson, the new director and CEO has made loans to the Company amounting to $231,771 as of March 31, 2005.



(g)

Deposits



This balance consists of principally of two separate and distinct acquisitions.  The first is a deposit of $50,000 for the potential acquisition of Cam Holdings, Inc. and the second is a $60,000 deposit for the potential acquisition of RSGT.  This second deposit has been refunded in the second quarter.  The remaining deposit balances represent a security deposit on the Companys leased premises.



(h)

Property and Equipment; 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 and have been expensed as incurred in accordance with SOP 98-5.  Betterments and improvements are capitalized and depreciated over their estimated useful lives, while repairs and maintenance costs are expensed when incurred.









10







CAL-BAY INTERNATIONAL, INC.

And Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2005





(1)

Summary of Significant Accounting Policies (continued)





(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.



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 subsidiaries, has experienced operating losses during its period of existence.  These losses occurred in a business activity unrelated to that of CBC and the Company does not have any current plans to re-enter that market.  Future profitability of current and unrelated business activities cannot be assured, resulting in the recordation of reserves for the valuation allowance of the entire amount of the determined deferred tax assets (See also Note 6).



(k)

Transactions in Capital Stock



All securities issued by the Company and its subsidiaries 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 under the symbol CBYI.  The trading price at March 31, 2005, was $0.04.  See also Notes 3 and 5.





11









CAL-BAY INTERNATIONAL, INC.

And Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2005



(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 all years since inception.  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.



(m) Recently Issued Accounting Pronouncements



In April 2003, the Financial Accounting Standards Board (FASB) issued SFAS No. 149, Accounting for Derivative Instruments and Hedging Activities. This statement amends FASB Statement No. 133 to improve financial reporting by requiring that contracts with comparable characteristics be accounted for similarly.  This statement is effective for contracts entered into or modified after June 30, 2003.  The changes due to this statement will result in more consistent reporting of contracts as either derivatives or hybrid instruments.  The Company does not expect adoption of SFAS No. 149 to have a material impact, if any, on its financial position or results of operations.



In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.  This statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity.  The changes in this statement will result in a more complete depiction of an entitys liabilities and equity.  The changes will also enhance the relevance of accounting information by providing more information about the entitys obligations to transfer assets or issue shares.  The Company does not expect adoption of SFAS No. 150 to have a material impact, if any, on its financial position or results of operations.



In December 2003, the FASB issued a revised Interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46R).  FIN 46R addresses consolidation by business enterprises of variable interest entities and significantly changes the consolidation application of consolidation policies to variable interest entities and, thus improves comparability between enterprises engaged in similar activities when those activities are conducted through variable interest entities.  The Company does not hold any variable interest entities.





12







CAL-BAY INTERNATIONAL, INC.

And Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2005



(1)

Summary of Significant Accounting Policies (continued)



(m) Recently Issued Accounting Pronouncements (continued)



As a nonaccelerated filer, the Company plans to comply with Section 404 of the Sarbanes-Oxley Act and file their first internal control report by July 15, 2005.



(n)

Basis of Presentation



The Companys financial statements have been prepared on a going concern basis, which contemplates, among other things, the realization of assets and the satisfaction of liabilities in the normal course of business.  However, there is substantial doubt about the Companys ability to continue as a going concern because of its losses and its current ratio as of March 31, 2005.  The Companys continued existence is dependent upon its ability to generate more profitable business activities from its customers.  The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amount and classification of liabilities, or any other adjustment that might be necessary should the Company be unable to continue as a going concern.  The outcome of this uncertainty cannot be determined at this time.



(2)

Property and Equipment



A summary of property and equipment is as follows as of March 31:



2005

2004



Transportation Equipment

$

62,918

$

-0-

Furniture & Fixtures

3,740

-0-

Office Equipment

8,000

26,503

Subtotal Property and Equipment

74,658

26,503

Less: Accumulated Depreciation

(1,244)

(12,255)

Net Property and Equipment

$

73,414

$

14,248





(3)

Acquisition/Sale of Cal-Bay Controls, Inc.



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.



As previously discussed in Note 1a, CBC is no longer an operating subsidiary of CBYI and therefore no segmental reported is provided for 2005.



13







CAL-BAY INTERNATIONAL, INC.

And Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2005





(3)

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



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



March 31, 2004





CBYI & CBA

CBC

Combined



Current assets

$

-0-

$

2,931

$

2,931

Property and equipment, net

-0-

14,248

14,248

Other assets

-0-

2,770

2,770



$

-0-

$

19,949

$

19,949



Current liabilities

$

-0-

$

66,285

$

66,285

Long term liability

-0-

8,594

8,594

Stockholders' equity

-0-

(54,930)

(54,930)



$

-0-

$

19,949

$

19,949





(4)

Significant Customers/Suppliers



A majority of CBCs commission income is derived from five unrelated manufacturing companies that it represents.  The commission income from these five significant customers was $-0- and $18,750, respectively, for the three months ended March 31, 2005 and 2004.



(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 over 1 million shares of the Company's shares as of:



March 31, 2005





Shareholder/Position/Title

Shares Held

Ownership



Roger Pawson  President & CEO

27,176,653

47.1

%

Linwood C. Meehan III

2,000,000

3.5

Stephanie Burruss

5,000,000

8.6

George Hill

4,000,000

6.9

Dante Panella

1,010,000

1.8

Cede & Co. - Investors

17,503,794

30.4

All Other Investors

978,584

1.7

Total shares issued & outstanding

57,669,031

100.0

%









14









CAL-BAY INTERNATIONAL, INC.

And Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2005





(5)

Certain Beneficial Owners and Management (continued)



The following is a list of the officers and directors of the Company, along with all other shareholders owning over 1 million shares of the Company's shares as of:





March 31, 2004





Shareholder/Position/Title

Shares Held

Ownership



Robert Thompson  Former President & CEO

10,826,653

33.1

%

Charles Prebay  Former Vice President & CFO

1,750,000

5.4

Linwood C. Meehan III

2,750,000

8.4

Dante Panella

1,050,000

3.2

Cede & Co. - Investor

14,345,660

43.9

All Other Investors

1,946,718

6.0



Total shares issued & outstanding

32,669,031

100.0

%



(6)

Income Taxes



As of March 31, 2005, the Company had provided taxes on consolidated income for Federal and State income taxes at $800.  Additionally, as of March 31, 2005, deferred taxes consisted of a net tax assets (benefits) of $154,148, due to net operating loss of the Company totaling $347,963 which were fully offset by equal valuation allowances since there is no assurance of recovery.  The net operating loss carryforwards will expire beginning in 2020.



(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 five principal accounts.  The Company is currently not generating any revenues and will eventually need to establish operating revenues and profitability to maintain its goal of acquiring additional real estate entities.  Lastly, with continued interests in real estate the Company will be subject to the fluctuations in the real estate market and regional economic conditions.



(8)

Loans Payable



In the first quarter of 2005 the Company received loans from Roger Pawson totaling $231,771.  The loan is interest free and scheduled to be repaid within six months from the date the monies were received.



Additionally, the Company received short term loans from an unrelated party totaling $97,000 payable within one year.





15







CAL-BAY INTERNATIONAL, INC.

And Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2005





(9)

Leases



CBC leased certain office equipment that was accounted for as a capital lease and capitalized using interest rates appropriate at the inception of the lease.  These obligations were transferred along with the rest of CBCs assets and liabilities to Atlantis Holdings, Inc.



There are no future minimum commitments under capital lease arrangements at March 31, 2005.



(10)

Commitments and Contingencies



CBYI is negotiating a new office lease in San Diego and will have the details in the second quarter of 2005.  The lease is expected to be for a one year term at approximately $1,500 per month.



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



(11)

Subsequent Events



The Company is currently in negotiations for the acquisition of Cam Holdings, Inc., a private real estate holding company, which it expects to complete in the second quarter of 2005.



Likewise, the Company is negotiating the acquisition of Aspen Cove Resort Property and a Las Vegas residential property.  These potential acquisitions may also be completed in the second quarter of 2005.

















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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.



Business Description



General



The Company originally incorporated in the State of Nevada on December 9, 1998, under the name Var-Jazz Entertainment, Inc.  Var-Jazz was organized to engage in the business of music production and sales.  Var-Jazz did not succeed in the music business 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 with Cal-Bay Controls, Inc. whereby Var-Jazz changed its name to Cal-Bay International, Inc., and acquired Cal-Bay Controls, Inc. as a wholly owned subsidiary in exchange for 17,112,000 shares of common stock.



Cal-Bay Controls, Inc. originally formed in 1976 as a sole proprietorship that was acquired by Robert J. Thompson in 1990.  On February 22, 2001, Cal-Bay Controls incorporated in the State of Nevada and was subsequently acquired by Var-Jazz on March 8, 2001.  Cal-Bay Analytical, Inc. was incorporated on August 7, 2003 in the State of Nevada and was operated as a wholly owned subsidiary.



On March 7, 2002, Cal-Bay Internationals Form 10-SB registration statement went effective and in June of 2002, Cal-Bay International, Inc. moved from the Pink Sheets to the Over the Counter Bulletin Board where the Company currently trades under the symbol CBYI.



On January 5, 2005, Cal-Bay International, Inc. completed the acquisition of TLCO  Software, Inc. TLCO  Software  is  a Nevada corporation that designs proprietary software programs for commercial use in the internet web-hosting industry. One-hundred percent  (100%)  of  the  outstanding shares of TLCO Softwares common  stock  were  acquired  from  the  former owner, Mr. Roger Pawson  of San Diego,  California  for  consideration  of Fifteen  million (15,000,000) shares of  Cal-Bay International  (CBYI)  common stock.  TLCO Software, Inc. now operates  as a wholly-owned subsidiary of Cal-Bay International, Inc.



On January 6, 2005, Cal-Bay International, Inc. also completed the sale of its subsidiary companies, Cal-Bay Controls, Inc., Cal-Bay Analytical, Inc., and WetChem, Inc. to Atlantis Holding Corp. Both Cal-Bay Controls and Cal-Bay Analytical are Nevada corporations that operate as sales representative and distribution companies in the Western US for environmental, process-control, safety and laboratory instrumentation and related products and services.



WetChem, Inc. is incorporated  in  Florida,  but currently  has no business activities. One-hundred percent  (100%)  of  the outstanding shares of the common stock of Cal-Bay Controls, Cal-Bay Analytical and  WetChem, Inc. were purchased from Cal-Bay International, Inc. by Atlantis Holding Corporation for consideration of One million (1,000,000)shares of Atlantis Holding Corp. preferred B class stock.  Cal-Bay Controls, Cal-Bay Analytical and WetChem will operate in the future as wholly-owned subsidiaries of  Atlantis Holding Corp. Atlantis Holding Corp  is a Pink Sheet company,  incorporated in the State of Nevada.



17







On January 7, 2005, Cal-Bay International, Inc. announced the resignations of Robert J. Thompson and Charles A. Prebay from its board of directors and as officers of the company and announced the appointment of Roger Pawson to its Board of Directors,  where he will  serve as Chairman of the Board.  Mr. Pawson was also appointed to the positions of President and CEO, Secretary and Treasurer of Cal-Bay International, Inc.



On January 7, 2005, Cal-Bay International, Inc.  changed its mailing address to the following: P.O.Box 502548, San Diego, CA  92150-2548.  The telephone number was also changed to: (858) 243-2615.



Subsequent to the date of this report, Cal Bay is negotiating for the acquisition of Cam Holdings, Inc., a private real estate holding company, which it expects to complete in the second quarter of 2005. Likewise, Cal Bay is negotiating the acquisition of Aspen Cove Resort Property and a Las Vegas residential property.  These potential acquisitions may also be completed in the second quarter of 2005.



Three Month period Ended March 31, 2005 and 2004



Cal Bay did not generate any revenues for the three months ended March 31, 2005 compared to $19,903 in revenues for the same period in 2004.  Operating expenses for the three months ended March 31, 2005 were $347,963 compared to $69,296 for the same period in 2004.  Total net loss for the three months ended March 31, 2005 were $347,963 compared to $49,956.  The significant increase in net loss was due to the Company divesting itself of Cal Bay Analytical, Inc. and acquiring TLCO Software, Inc.  Operating expenses for the first three months of 2005 included purchase of a company vehicle, new office lease, increased administrative costs associated with property purchases, developing a company web site and legal and accounting costs.



Liquidity and Capital Resources



As of March 31, 2005, the Company had total assets of $430,438 consisting of $1,274 cash and $17,000 short term loan receivable as total current assets and $73,414 in property and equipment net of accumulated depreciation, $225,000 in proprietary technology and $113,750 in deposits.



Total liabilities at March 31, 2005 were $334,327 consisting of $4,756 in accounts payable and accrued expenses, $800 in income taxes payable, $231,771 in loans from Roger Pawson, our president and $97,000 in loans payable from a shareholder.  Both loans are interest free and payable on demand.



In order to continue its business operations and acquire suitable investment properties, the Company will require additional capital.  The Company may sell additional stock, arrange debt financing or seek other avenues of raising capital.However, as of the date of this report, the Company does not have any formal arrangements in place for any financing.



Item 3.  Controls and Procedures



(a)

Evaluation of disclosure controls and procedures. Based on the evaluation of our disclosure controls and procedures (as defined in Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) required by Securities Exchange Act Rules 13a-15(b) or 15d-15(b), our Chief Executive Officer and our Chief Financial Officer have concluded that as of the end of the period covered by this report, our disclosure controls and procedures were effective.



(b) Changes in internal controls. There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.





18







PART II.  Other Information



Item 2.  Changes in Securities and Use of Proceeds



On January 9, 2003 we issued 1,275,000 common shares to four individuals for professional and consulting services.  The services were not connected to any fund raising activities.  At the time of issuance, the common stock was valued at $216,750.  The shares were registered on Form S-8 as filed with the Securities and Exchange Commission.



On September 2, 2003 we filed a registration statement on Form S-8 dated August 29, 2003 reporting the issuance of 2,450,000 shares valued at $73,500.  The shares were issued to two individuals for ongoing consulting and legal services unrelated to fund raising activities.



In July and September of 2003, we issued a total of 3,008,356 restricted common shares of Cal-Bay to three unrelated individuals for ongoing consulting services.  The shares were issued in a private transaction without registration in reliance of the exemption provided by Section 4(2) of the Securities Act.  The investors had access to all material information pertaining to Cal-Bay and its financial condition.  The investors also completed and signed investment agreements attesting to their sophistication or accredited investor status and investment intent.  No broker was involved and no commissions were paid on the transactions.



On July 29, 2003, we sold 50,000 shares Cal-Bay common stock to an accredited investor for $1,500.  The shares were issued in a private transaction without registration in reliance of the exemption provided by Section 4(2) of the Securities Act.  The investor had access to all material information pertaining to Cal-Bay and its financial condition.  The investor completed and signed a statement attesting to his sophistication or accredited investor status and investment intent.  No broker was involved and no commissions were paid on the transaction.



On February 12, 2004 we filed a registration statement on Form S-8 reporting the issuance of 1,500,000 shares valued at $37,500.  The shares were issued to two individuals for ongoing consulting and investor relations services unrelated to fund raising activities.



In January 2005, we issued 15,000,000 shares of restricted common stock for the acquisition of TLCO Software, a Nevada corporation.  The shares were issued to Mr. Roger E. Pawson who then became the sole officer and director of the Company.  The shares were sold to an accredited investor in a private transaction in reliance on the exemption provided by Section 4(2) of the Securities Act of 1933.  Cal-Bay did not pay any commissions, use any underwriters or make any public solicitations in effecting the sale.



In February 2005, we filed a registration statement on Form S-8 reporting the issuance of 6,000,000 valued at $300,000.  The shares were issued to one individual for consulting services unrelated to fund raising activities.



ITEM 6.  Exhibits and Reports on Form 8-K



Exhibit #

Title

Location



Exhibit 31

Certification of Chief Executive Officer and Chief Financial

Attached

Officer pursuant to Section 302 of the Sarbanes- Oxley Act of 2002



Exhibit 32

Certification of Chief Executive Officer and Chief Financial

Attached

Officer pursuant to Section 906 of the Sarbanes- Oxley Act of 2002*



*The Exhibit attached to this Form 10-KSB shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act") or otherwise subject to liability under that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing.





19







(b)  Reports on Form 8-K:



Date

Description



January 14, 2005

Item 2.01  Completion of Acquisition or Disposition of Assets

Item 5.02  Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers

Item 8.01  Other Events

Item 9.01  Exhibits and Financial Statements



April 1, 2005

Item 8.01  Other Events





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 23, 2005

By: /s/ Roger Pawson

Roger Pawson,

Chief Executive Officer and

Chief Financial Officer



20