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  September  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  September  30,  2002:  23,630,000  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>                                                 <C>
            Item 1.                Financial Statements

                                   Consolidated Balance Sheet as of
                                   September 30, 2002                                      3

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

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

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

                                   Notes to the Unaudited Consolidated Financial
                                   Statements                                           7-11

            Item 2.                Management's Discussion and Analysis of Financial
                                   Condition and Results of Operations                 12-19

            Item 3.                Controls and Procedures                                20


PART II.                           OTHER INFORMATION

            Item 6.                Exhibits and Reports on Form 8-K                       20

                                   Signatures                                             20
</TABLE>

                                 (Inapplicable Items have been omitted)


                                        2
<PAGE>

<TABLE>
<CAPTION>

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

                                     ASSETS

<S>                                                  <C>
Current Assets:

  Cash (Note 1c). . . . . . . . . . . . . . . . . .  $   8,351
  Accounts Receivable (Note 1e) . . . . . . . . . .     62,210
  Prepaid Expenses. . . . . . . . . . . . . . . . .     25,506
  Loan Receivable from Stockholder (Note 4) . . . .     21,500
                                                     ----------

  TOTAL CURRENT ASSETS. . . . . . . . . . . . . . .    117,567

Office Furniture and Equipment, at cost,
  net of accumulated depreciation of
  $5,463 (Notes 1i & 2) . . . . . . . . . . . . . .      4,605

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

  TOTAL ASSETS. . . . . . . . . . . . . . . . . . .  $ 124,663
                                                     ==========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

  Accounts Payable (Note 1j). . . . . . . . . . . .  $  78,895
  Accrued Expenses (Note 1j). . . . . . . . . . . .     21,545
                                                     ----------

  TOTAL CURRENT LIABILITIES . . . . . . . . . . . .    100,440

Commitments and Contingencies (Note 9). . . . . . .      - - -

Stockholders' Equity:

  Common Stock, $.001 par value; 75,000,000 shares
    authorized; 23,630,000 shares issued and
    outstanding (Notes 1b, 1l, 3 & 8) . . . . . . .  $  23,630
  Additional Paid in Capital. . . . . . . . . . . .    758,147
  Retained Deficit. . . . . . . . . . . . . . . . .   (757,554)
                                                     ----------

    TOTAL STOCKHOLDERS' EQUITY. . . . . . . . . . .     24,223
                                                     ----------

  TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY. . . .  $ 124,663
                                                     ==========
</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 September 30, 2002 & 2001 and
              For the Nine Months Ended September 30, 2002 & 2001


                           Three  Months  Ended         Nine  Months  Ended
                               September  30              September  30
                         -------------------------  -------------------------
                          2002            2001         2002          2001
                        ------------  ------------  ------------  -----------
                        (unaudited)   (unaudited)   (unaudited)   (unaudited)

<S>                     <C>           <C>           <C>           <C>
Revenues . . . . . . .  $   118,139   $    65,930   $   256,645   $   219,727

Cost of Sales. . . . .      101,485        15,700       101,485        63,423
                        ------------  ------------  ------------  -----------

Gross profit . . . . .       16,654        50,230       155,160       156,304

Operating expenses . .      748,217        84,939       888,876       191,452
                        ------------  ------------  ------------  -----------

Net (loss) . . . . . .  $  (731,563)  $   (34,709)  $  (733,716)  $   (35,148)
                        ============  ============  ============  ============


Net (loss)
  Per share:
    Basic & Diluted. .        (0.03)        (0.00)        (0.03)        (0.00)

Weighted average
  Shares outstanding:
    Basic & Diluted. .   22,135,879    21,390,000    21,638,889    20,340,088
</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  September  30,  2002

                                                                                                 Additional
                                                                                                 Paid-in
                                                               Common 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) September 30, 2001                                  ---          ---         ---       (35,236)         (35,236)
                                                         -----------  ------------   ----------  ------------  --------------

Balance at September 30, 2001 . . . . . . . . . . . . .   21,390,000       21,390      (3,613)      (35,236)         (17,459)

  Net Income December 31, 2001                                   ---          ---         ---        11,398           11,398
                                                         -----------  ------------   ----------  ------------  --------------

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

    Stock Issued for Services
(Note 1b)                                                  2,240,000        2,240     761,760           ---          764,000

  Net (Loss) September 30, 2002                                  ---          ---         ---      (733,716)        (733,716)
                                                         -----------  ------------   ----------  ------------  --------------

Balance at September 30, 2002 . . . . . . . . . . . . .   23,630,000       $23,630   $ 758,147   $  (757,554)   $     24,223
                                                         ===========  =============  ==========  =============  =============
</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 September 30, 2002 & 2001 and
                    For the Nine Months Ended September 30, 2002 & 2001

                                              Three  Months  Ended        Nine  Months  Ended
                                                  September  30              September  30
                                            -------------------------  -------------------------
                                               2002         2001          2002         2001
                                            -----------  ------------  ------------  -----------
                                           (unaudited)   (unaudited)   (unaudited)   (unaudited)

<S>                                        <C>           <C>           <C>           <C>
CASH FLOWS FROM
  OPERATING ACTIVITIES:
Net income (loss) . . . . . . . . . . . .  $  (731,563)  $   (34,709)  $  (733,716)  $   (35,148)
                                           ------------  ------------  ------------  ------------
Adjustments to reconcile net
  Income (loss) to net cash
  Provided by operating activities
Depreciation. . . . . . . . . . . . . . .          466           325         1,384           975
Stock based professional &
  Consulting expenses . . . . . . . . . .      764,000           -0-       764,000           -0-
Increase (decrease)
  To current assets &
  Current liabilities . . . . . . . . . .      (25,114)        9,105       (48,030)       34,137
                                           ------------  ------------  ------------  ------------

Total adjustments . . . . . . . . . . . .      739,352         9,430       717,354        35,112
                                           ------------  ------------  ------------  ------------

Net cash provided (used) by
  Operating activities. . . . . . . . . .        7,789       (25,279)      (16,362)          (36)
                                           ------------  ------------  ------------  ------------

CASH FLOWS FROM
  INVESTING ACTIVITIES:
Fixed asset purchases . . . . . . . . . .         (889)          -0-          (889)          -0-
Reverse acquisition of Cal Bay
International Inc. (net of cash acquired)          -0-           -0-           -0-         3,499
                                           ------------  ------------  ------------  ------------

Net cash (used) provided by
  Investing activities. . . . . . . . . .         (889)          -0-          (889)        3,499
                                           ------------  ------------  ------------  ------------

Net increase (decrease) In Cash . . . . .        6,900       (25,279)      (17,251)        3,463

Cash & equivalents,
  Beginning of period . . . . . . . . . .        1,451        31,310        25,602         2,568
                                           ------------  ------------  ------------  ------------
Cash & equivalents,
  End of period . . . . . . . . . . . . .  $     8,351   $     6,031   $     8,351   $     6,031
                                           ============  ============  ============  ============
Supplemental cash flow information:
Cash paid for interest. . . . . . . . . .  $       -0-   $       -0-   $       -0-   $       -0-
                                           ============  ============  ============  ============
Cash paid for taxes . . . . . . . . . . .  $     3,200   $       -0-   $     3,200   $       -0-
                                           ============  ============  ============  ============
</TABLE>

Supplemental  disclosure  of  non-cash  activities:
In  August  of  2002,  the  Company  issued  2,240,000 shares of common stock as
consideration  for  certain  professional and consulting expenses (see also Note
1b).

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
                         September 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
     nine 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.

     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.

     On  August  29,  2002,  the Company filed a Form S-8 Registration Statement
     with  the  Securities  and  Exchange Commission and issued 2,240,000 common
     shares  in  payment  for  professional  and  consulting  services.


                                        7
<PAGE>

                           CAL-BAY INTERNATIONAL, INC.
                                 AND SUBSIDIARY
                          NOTES TO FINANCIAL STATEMENTS
                         September 30, 2002 (unaudited)

(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  September  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.

     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  related  party  loan  receivable  is  with  the  majority
     stockholder,  is  interest  free  and is due and payable as of December 31,
     2002.  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.


                                        8
<PAGE>

                           CAL-BAY INTERNATIONAL, INC.
                                 AND SUBSIDIARY
                          NOTES TO FINANCIAL STATEMENTS
                         September 30, 2002 (unaudited)

(1)     Summary  of  Significant  Accounting  Policies  (Continued)

(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.

     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 traded on the
     Over the Counter Bulletin Board under the symbol CBYI. The trading price at
     September  30,  2002  was  $0.30.  See  also  Notes  3,  5  and  8.

(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.


                                        9
<PAGE>
                           CAL-BAY INTERNATIONAL, INC.
                                 AND SUBSIDIARY
                          NOTES TO FINANCIAL STATEMENTS
                         September 30, 2002 (unaudited)

<TABLE>
<CAPTION>

(2)  Office  Furniture  and  Equipment

A summary of property and equipment is as follows:
<S>                                                 <C>
Office Furniture &
  Computer Equipment . . . . . . . . . . . . . . .  $10,068
Less: Accumulated Depreciation . . . . . . . . . .   (5,463)
                                                    --------
  Net Furniture and Equipment. . . . . . . . . . .  $ 4,605
                                                    ========
</TABLE>

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

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

     The  following  is  a  summary  of  the  financial  position of the Cal-Bay
     International,  Inc.  (CBYI)  and  CBC  at  September 30, 2002, without the
     consolidating  and  eliminating  adjustments:

<TABLE>
<CAPTION>

                             CBYI     CBC     Combined
                             -----  --------  ---------
<S>                          <C>    <C>       <C>
Current assets. . . . . . .  $ -0-  $117,567  $ 117,567
Property and equipment, net    -0-     4,605      4,605
Other assets. . . . . . . .    -0-     2,491      2,491
                             -----  --------  ---------
                             $ -0-  $124,663  $ 124,663
                             =====  ========  =========

Current liabilities . . . .  $ -0-  $100,440  $ 100,440
Stockholders' equity. . . .    -0-    24,223     24,223
                             -----  --------  ---------
                             $ -0-  $124,663  $ 124,663
                             =====  ========  =========
</TABLE>

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

<TABLE>
<CAPTION>

                          CBYI     CBC        Consolidated
                          -----  -----------  ----------
<S>                       <C>    <C>          <C>
  Net sales               $ -0-  $  256,645   $     256,645
                          =====  ===========  =============
  Net income (loss). . .  $ -o-  $ (733,716)  $  (733, 716)
                          =====  ===========  =============
</TABLE>

(4)  Related  Party  Transactions  &  Significant  Customers/Suppliers

     As  of  the  period  ended September 30, 2002, the Company has advanced the
     majority  stockholder  a  total  of  $21,500,  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).


                                       10
<PAGE>

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

<TABLE>
<CAPTION>

Shareholder/Position/Title                Shares Held  Ownership
--------------------------------          -----------  ----------
<S>                                       <C>          <C>
Robert Thompson - President &CEO. . . .    12,026,953       50.9%
Charles Prebay - Vice President & CFO .     2,000,000        8.5
Cede & Co. - Investor . . . . . . . . .     1,188,000        5.0
All  Other  Investors . . . . . . . . .     8,415,047       35.6
                                           ----------  ----------
Total  shares  issued  &  outstanding .    23,630,000      100.0%
                                           ==========  ==========
</TABLE>

(6)  Income  Taxes

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

     At  September  30,  2002  deferred  taxes  consisted  of  a  net tax assets
     (benefits)  of  approximately $160,199, due to operating loss carryforwards
     of  the  Company  totaling  $800,997,  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, and the issuance of 2,240,000 common shares on August 29,
     2002  for  services,  the  total outstanding shares amounted to 23,630,000.
     Each  common  share  is  entitled  to  one  vote  and  there  are  no other
     preferences.  The  Company  since  inception  has  paid  no  dividends.

(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.


                                       11
<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.

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.  On  March  7,  2002,  the  SEC  approved Cal-Bay
International'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 where Cal-Bay currently trades under
the  symbol  CBYI.

OUR  BUSINESS

     Cal-Bay  supplies  analytical  products,  services and associated equipment
through  license  and  distribution  agreements.  Cal-Bay  also  targets  new
technologies  and  products  for  research  and  development,  marketing  and
distribution.

     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.


                                       12
<PAGE>

REPRESENTATIVE/DISTRIBUTION  DIVISION

     Cal-Bay's Representative and Distribution Division currently serves markets
in California, Nevada and Hawaii. Cal-Bay represents and/or distributes products
from  many  manufacturers  of  engineered  products  for  the  process  control,
environmental,  safety  and  laboratory  markets.  The  process  control  market
involves instrumentation and equipment used to help manufacturing plants control
or  improve  the  operations  of  specific production or manufacturing processes
within  the  plant.  The  environmental  market  supplies  instrumentation  and
equipment  used to measure or help reduce air and/or water pollution produced by
industrial,  utility  or  municipal  facilities.  The  safety  market  primarily
supplies  instrumentation  used  by  various industries to meet personnel safety
requirements  typically  imposed  by  OSHA  regulations.  The  laboratory market
supplies equipment for research and development laboratories operated by private
industries,  universities  and  governmental  research  laboratories.

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

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

     *  Environmental  market
     *  Industrial  Process  Markets
     *  Petroleum  Refineries
     *  Chemical  plants
     *  Pharmaceutical  and  Biotechnology
     *  Computer  related
     *  Paint  and  coating
     *  Printing
     *  Metal  processing
     *  Bulk  industrial  gases  and  specialty  gases
     *  Semiconductor
     *  Aerospace
     *  Plastics/Polymers
     *  Original  Equipment  Manufactures  (OEM's)

     The  environmental  market is typically driven by local, state and national
regulations  promulgated  by regulatory agencies, including: the South Coast Air
Quality  Management District (SCAQMD), California Air Resources Board (CARB) and
the  U.S.  Environmental  Protection  Agency (EPA), which has both air and water
protection  departments.

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


                                       13
<PAGE>

     The safety market is also regulatory driven, usually by OSHA rules. Cal-Bay
anticipates  the  safety  market  to  remain  fairly  static in the near future.

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

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

SYSTEMS  DIVISION

     In  addition  to  selling  products  and  services  as  a
representative/distributor,  Cal-Bay  produces  a  small  number  of operational
systems  that  integrate  a  variety  of  products  and components from numerous
vendors.  Notably,  Cal-Bay  is  able to provide Continuous Emissions Monitoring
Systems  ("CEMS")  to  selected clients for regulatory compliance. These clients
typically have unique requirements 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:


                                       14
<PAGE>

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.

     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.


                                       15
<PAGE>

     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.

     Cal-Bay  has  also 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.


                                       16
<PAGE>

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
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  SEPTEMBER  30,  2002  AND  2001

     Cal-Bay  generated  $11,900  in  commission  income  from  our
representative/distributor  division,  and product sales in the systems division
of  $106,238,  for  a total revenue of $118,139 for the three-month period ended
September 30, 2002 with cost of sales of $101,485 for a gross profit of $16,654.
These  revenues  compare  with  $65,930  in  commission income and product sales
revenues  for the three-month period ended September 30, 2001 with cost of sales
of  $15,700 and gross profit of $50,230. Gross profit for the three-month period
ended  September  30,  2002 was $33,576 less than the same period ended in 2001.
Cash  provided by operating activities was ($731,563) for the three-month period
ended  September  30,  2002  compared  to ($34,709) for the same period ended in
2001.


                                       17
<PAGE>

     The revenues generated for the three-month period ending September 30, 2002
were  higher  than  the  normal  levels  of  revenues  forecast for this period,
primarily due to sales from one large project won in the systems division during
this  period. However, several other 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 or
until  next  year.

     Operating  expenses  for  the  three  months  ended September 30, 2002 were
$748,217 compared to $84,939 for the same period in 2001, which is a increase of
$663,278. For the three month period ended September 30, 2002, Cal-Bay had a net
loss  of $731,563 compared to a net loss of $34,709 for the same period in 2001,
which is an decrease in net income of $696,854. The majority of this increase in
expenses  and  corresponding  decrease  in  net income is a direct result of the
issuance  of  2,240,000  shares  of common Cal-Bay stock, valued at $764,000, as
consideration  for  certain  existing  and  future  professional  and consulting
expenses.  For accounting purposes, the value of this stock is being taken as an
expense  in  this  period,  although  much  of  the  professional and consulting
services  will  be performed in the future, which should help to reduce expenses
in  the  future.

NINE  MONTH  PERIODS  ENDED  SEPTEMBER  30,  2002  AND  2001

     Cal-Bay  generated  $256,645  in  combined  commission  income  from  our
representative/distributor  division  and  revenues  from  product  sales in the
systems  division  for  the  nine-month  period  ended  September  30, 2002 with
$101,485  cost  of  sales  for  a  gross  profit of $155,160. This compares with
$219,727  in  commission  income  and  product sales revenues for the nine-month
period  ended  September 30, 2001 with cost of sales of $63,423 and gross profit
of $156,304. Gross profit for the nine-month period ended September 30, 2002 was
$1,144  less  than  the  same  period  ended in 2001. Cash provided by operating
activities  was  ($733,716)  for  the nine-month period ended September 30, 2002
compared  to  ($35,148)  for  the  same  period  ended  in  2001.

     The  revenues generated for the nine-month period ending September 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  early  in  this  period, and we believe that this decrease in business
activity  is  due  to  the  slowdown in the economy in general during this year.
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  or  early next year.

     Operating  expenses  for  the  nine  months  ended  September 30, 2002 were
$888,876  compared to $191,452 for the same period in 2001, which is an increase
of  $697,424.  For the nine month period ended September 30, 2002, Cal-Bay had a
net  loss  of  $733,716 compared to a net loss of $35,148 for the same period in
2001,  which  is  a  decrease  in  net  income of $698,568. The majority of this
increase in expenses and corresponding decrease in net income is a direct result
of the issuance of 2,240,000 shares of common Cal-Bay stock, valued at $764,000,
as  consideration  for  certain  existing and future professional and consulting
expenses.  For accounting purposes, the value of this stock is being taken as an
expense  in  this  period,  although  much  of  the  professional and consulting
services  will  be performed in the future, which should help to reduce expenses
in  the future. This increase in expenses is also 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  also informed that the health insurance premiums would increase


                                       18
<PAGE>

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.

     From  the initial period of operation through reorganization in March 2001,
CalBay's  officers  did  not draw a salary and were only reimbursed for expenses
directly  relating  to the operation of the Company. As of June 16, 2001, CalBay
agreed  to  pay salaries to the officers and 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  September  30, 2002, Cal-Bay has total assets of $124,663 including
cash  on  hand,  loan  receivables,  prepaid rent, security deposits, and office
furniture and equipment. Current liabilities total $100,440 in accrued expenses,
accrued salaries and wages, and income taxes payable. Legal and accounting costs
increased substantially in 2001 and early 2002 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 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  substantial  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  three 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.


                                       19
<PAGE>

ITEM  3.  CONTROLS  AND  PROCEDURES

     Within the 90-day period prior to the date of this report, we evaluated the
effectiveness  and  operation of our disclosure controls and procedures pursuant
to  Rule  13a-14  of  the  Securities  Exchange  Act  of  1934.  Based  on  that
evaluation,  our  Chief  Executive  Officer  and  Chief  Financial  Officer have
concluded that our disclosure controls and procedures are effective.  There have
been  no  significant  changes  in internal controls or other factors that could
significantly affect internal controls subsequent to the date we carried out our
evaluation.

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  September  30,  2002.

<TABLE>
<CAPTION>

Exhibits:

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

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.


Date:  November  6,  2002          /s/ Robert  Thompson
                                   ---------------------
                                   Robert  Thompson
                                   President




Date:  November  6,  2002          /s/ Charles  A.  Prebay
                                   -----------------------
                                   Charles  A.  Prebay
                                   Chief  Financial  Officer


                                       20
<PAGE>