U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-QSB

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

For the quarterly period ended June 30, 2002

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 0-32893
CAL-BAY INTERNATIONAL, INC.
(Exact name of small business issuer as specified in its charter)

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

1582 PARKWAY LOOP, SUITE G, TUSTIN, CA 92780
(Address of principal executive offices)

714-258-7070
(Issuer's telephone number)

Not Applicable
(Former name, address and fiscal year, if changed since last report)

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

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

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

APPLICABLE ONLY TO CORPORATE ISSUERS:

State the number of shares outstanding of each of the issuer's classes of common
equity, as of June 30, 2002: 21,390,000 shares of common stock.

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

CAL-BAY INTERNATIONAL, INC. AND SUBSIDIARY

INDEX

PART I. FINANCIAL INFORMATION PAGE NO.
--------

Item 1. Financial Statements

Consolidated Balance Sheet as of
June 30, 2002. 3

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

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

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

Notes to the Unaudited Consolidated Financial
Statements 7-14

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

PART II. OTHER INFORMATION

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

Signatures 23

(Inapplicable Items have been omitted)

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

ASSETS

Current Assets:

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

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

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

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

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

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

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

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

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

Stockholders' Equity:

Common Stock, $.001 par value; 75,000,000 shares
authorized; 21,390,000 shares issued and
outstanding (Notes 1b, 1l, 3 & 8) . . . . . . . $ 21,390
Additional Paid in Capital - (Discount on Stock). (3,613)
Retained Deficit. . . . . . . . . . . . . . . . . (25,991)
---------

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

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY. . . . $ 35,623
=========

See notes to consolidated financial statements.

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

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

Revenues . . . . . . . $ 54,755 $ 100,827 $ 138,756 $ 153,798

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

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

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

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

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

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

See notes to consolidated financial statements.

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

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

Balance at inception
(February 22, 2001) . . . . . . 17,112,000 $17,112 $ (7,738) $ -0- $ 9,374

Recapitalization for Reverse
Acquisition on March 8, 2001 4,278,000 4,278 4,125 --- 8,403

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

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

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

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

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

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

See notes to consolidated financial statements

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

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

CASH FLOWS FROM
OPERATING ACTIVITIES:

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

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

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

CASH FLOWS FROM
INVESTING ACTIVITIES:

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

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

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

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

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

Supplemental cash flow information:
Cash paid for interest . . . . . . . $ -0- $ -0- $ -0- $ -0-
============ ============ ============ ========
Cash paid for taxes. . . . . . . . . $ -0- $ -0- $ -0- $ -0-
============ ============ ============ ========

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

See notes to consolidated financial statements

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

(1) Summary of Significant Accounting Policies

(a) Nature of Business

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

Cal-Bay Controls, Inc. (CBC) was originally a sole proprietorship,
being operated since 1990 under the name Cal-Bay Controls, in Tustin,
California, by its owner Robert Thompson. CBC, which represents the
only operating entity of the Company, is a manufacturer's
representative and distribution firm, serving California, Nevada and
Hawaii in process, environmental, safety and laboratory markets. On
February 22, 2001, CBC was incorporated under the name Cal-Bay
Controls, Inc. The accompanying consolidated statements of operations
and cash flows reflect the comparative three and six month periods of
operations of the sole proprietorship for the periods prior to
incorporation and include pro forma adjustments to the operations of
the sole proprietorship for comparison purposes.

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

(b) Capitalization

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

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

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

(1) Summary of Significant Accounting Policies (Continued)

(b) Capitalization (continued)

The surviving entity reflects the assets and liabilities of Cal-Bay
International, Inc. and CBC at their historical book values and the
historical operations of the Company are those of CBC. The issued
common stock is that of Cal-Bay International, Inc. and the retained
earnings is that of CBC.

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

For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid debt instruments with original maturities
of three months or less to be cash equivalents. There were no cash
equivalents as of June 30, 2002.

(d) Principles of Consolidation and Basis of Accounting

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

(e) Revenue Recognition

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

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

(1) Summary of Significant Accounting Policies (Continued)

(e) Revenue Recognition (continued)

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

(f) Loan Receivable From Stockholder & Related Parties

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

(g) Deposits

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

(h) Property and Equipment and Organizational Expenditures

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

(i) Accounts Payable an Accrued Expenses

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

(j) Income Taxes

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

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

(1) Summary of Significant Accounting Policies (Continued)

(j) Income Taxes (continued)

SFAS 109 "Accounting for Income Taxes" requires the liability method
in accounting for income taxes. Deferred tax assets and liabilities
arise from the difference between the tax basis of an asset or
liability and its reported amount on the financial statements.
Deferred tax amounts are determined by using the tax rates expected to
be in effect when the taxes will actually be paid or refunds received,
as provided under currently enacted laws. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount
expected to be realized. Income tax expense or benefit is the tax
payable or refundable, respectively, for the period, plus or minus the
change during the period, in deferred tax assets and liabilities. The
Company, exclusive of the operations of its wholly owned subsidiary
CBC, has experienced operating losses during its period of existence.
These losses occurred in a business activity unrelated to that of CBC
and the Company does not have any current plans to re-enter that
market. Therefore, future profitability of this related business
activity cannot be assured, resulting in reserves for the valuation
allowance of the entire amount of the determined deferred tax assets
(See also Note 6).

(k) Transactions in Capital Stock

All securities issued by the Company and CBC have not been registered
under the Securities Act of 1933, as amended. They may not be sold,
offered for sale, transferred, pledged or hypothecated, in the absence
of a registration statement in effect with respect to the securities
under such act, or an opinion of counsel or other evidence
satisfactory to the Company that such registration is not required, or
unless sold pursuant to Rule 144 under such act. The Company's free
trading stock is currently involved in limited trading on the Over The
Counter Bulletin Board (OTCBB) under the symbol CBYI. The trading
price at June 30, 2002 was $0.31 and has been consistently trading in
limited transactions, as of and before the date of this report. See
also Notes 3, 5 and 8.

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

(1) Summary of Significant Accounting Policies (Continued)

(l) Earnings Per Share

In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 128, "Earnings Per Share" (SFAS 128).
SFAS 128 specifies the computation, presentation, and disclosure
requirements of earnings per share and supersedes Accounting Principles
Board Opinion 15, "Earnings Per Share". SFAS 128 requires dual presentation
of basic and, where applicable, diluted earnings per share. Basic earnings
per share, which excludes the impact of common stock equivalents, replaces
primary earnings per share. Diluted earnings per share which utilizes the
average market price per share or ending market price per share when
applying the treasury stock method in determining common stock equivalents,
replaces fully diluted earnings per share. SFAS 128 is effective for the
Company in 1999, 2000, 2001 and 2002. However, there were no common stock
equivalents during the any of these periods and, therefore, there is no
effect on the earnings per share presented for any of these periods, due to
the Company's adoption of SFAS 128. Basic earnings per share have been
computed using the weighted average number of common shares outstanding.

(2) Office Furniture and Equipment

A summary of property and equipment is as follows:
Office Furniture &
Computer Equipment $ 9,178
Less: Accumulated Depreciation (4,997)
------
Net Furniture and Equipment $ 4,181
========

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

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

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

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

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

CBYI CBC Combined
----- -------- ----------

Current assets. . . . . . . $ -0- $28,951 $ 28,951
Property and equipment, net -0- 4,181 4,181
Other assets. . . . . . . . -0- 2,491 2,491

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

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

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

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

CBYI CBC Consolidated
----- --------- --------------

Net sales . . . . $ -0- $138,756 $ 138,756
===== ========= ==============
Net income (loss) $ -0- $ (2,153) $ (2,153)
===== ========= ==============

(4) Related Party Transactions & Significant Customers/Suppliers

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

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

(5) Certain Beneficial Owners and Management

The following is a list of the officers and directors of the Company, along
with all other shareholders owning directly or indirectly at least 5% of
the Company's shares as of June 30, 2002.

Shareholder/Position/Title Shares Held Ownership
- -------------------------------- ----------- ----------

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

(6) Income Taxes

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

At June 30, 2002 deferred taxes consisted of a net tax assets (benefits) of
approximately $13,887, due to operating loss carryforwards of the Company
totaling $69,434, which were fully offset by equal valuation allowances
since there is no assurance of recovery. The net operating loss
carryforwards will expire beginning in 2013.

(7) Off Balance Sheet Risk

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

(8) Common Stock

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

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

(9) Commitments and Contingencies

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

Period Ended June 30,

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

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

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

FORWARD-LOOKING STATEMENT NOTICE

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

OUR BUSINESS

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

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

REPRESENTATIVE/DISTRIBUTION DIVISION

Cal Bay is a manufacturer's representative and distribution company
currently serving California, Nevada and Hawaii in process, environmental,
safety and laboratory markets. The process control market involves
instrumentation and equipment used to help a plant control or improve the
operations of specific production or manufacturing processes within the plant.
The environmental market refers to instrumentation and equipment used to measure
or help reduce the amount of air and/or water pollution produced by an
industrial, utility or municipal facility. Typically environmental controls are
required to meet EPA regulations. The safety market refers primarily to
instrumentation used by various industries to meet personnel safety requirements
that are typically imposed by OSHA regulations. The laboratory market refers
primarily to research and development laboratories in various industries or
university and governmental research laboratories. Cal Bay also targets new
technologies and products for marketing and distribution. The Company supplies
analytical products, services and associated equipment through license and
distribution agreements.

Cal Bay represents and/or distributes products from many manufacturers of
engineered products for the process, environmental, safety and laboratory
markets. The Company has a signed contract/agreement with each of the companies
it represents which grants Cal Bay the rights to sell the assigned
products/services within a defined sales territory (typically California, Nevada

and Hawaii). In most cases these contracts are exclusive in the sense that no
other sales representative is allowed to sell the products covered by the
contract in the same sales area, however, there are a few contracts which are
non-exclusive in the sense that there may be more than one authorized sales
agents in a given sales area. Cal Bay receives compensation for selling efforts
in the form of commissions (typically 10-20% of the net sales price) on all
sales of products within the specified sales territory.

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

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

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

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

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

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

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

Process, industrial, Quality Control and laboratory markets are much less
likely to be affected by regulatory concerns, however, these markets are more
likely to be affected by changes in the economy. Sales to these markets are
typically not regulatory driven but are driven by the need for improved
production efficiency, reductions in cost, improvement in product quality, etc.

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

SYSTEMS DIVISION

In addition to selling products and services as a
representative/distributor, Cal Bay also produces a small number of equipment
systems which incorporate a variety of products and parts from numerous vendors
and that are integrated into a completely operational system by Cal Bay.
Cal Bay currently offers a Continuous Emissions Monitoring (CEMS) product
line. Until recently, Cal-Bay also offered an EMS product, but this product line
was recently discontinued.

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

The market for CEMS is entirely driven by local, state and national
regulations promulgated by regulatory agencies, including the South Coast Air
Quality Management District, California Air Resources Board and the U.S.
Environmental Protection Agency.

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

NEW PRODUCTS DIVISION

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

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

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

The Spectra products include the following:

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

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

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

Cal-Bay has been working on the development of a new type of analytical
product during the past few years that has tremendous potential. This product
uses pattern recognition and neural net processing, together with software
programming which enables almost any measurement based technology to perform at
improved levels. Pattern recognition is the art of separating complex electronic
signatures from even more complex backgrounds. By improving the measurement
signal and reducing the background noise, these products can provide results
that are not achievable with conventional analytical devices. As an analytical
technology it is unique in that it is fast responding (within milliseconds),
accurate, sensitive (parts per trillion levels), inexpensive, compact and can
identify multiple substances at the molecular level.

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

Cal-Bay intends to focus initially on the use of this new pattern
recognition technology to enhance conventional technology with which Cal-Bay is
most familiar, primarily in the measurement of various chemical compounds in the
environmental, process, safety, QC and laboratory markets. If the R&D of these
products is successful it is anticipated that these products will be
manufactured and sold either by a new subsidiary company to be established or by
a company to be acquired by Cal-Bay that already has a manufacturing capability
and sales organization.

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

This company is presently working at a military facility in Iowa to develop
new technology, has offices and laboratory facilities in Iowa, and is an
established government contractor with a secure government contract number, is
listed in several DOD databases, and is currently a sub-contractor to American
Ordinance Inc. which is owned by General Dynamics. Cal-Bay will utilize an
existing network of contacts within the military and government contractors to
sell the pattern recognition technology for the measurement of explosives. There
are hundreds of currently operating or recently closed military facilities in
the U.S. which have existing of former supplies of explosives and munitions
which require safe disposal. This represents a significant opportunity in a
prime market, with little or no viable competition, and an existing client base.

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

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

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

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

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

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

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

FUTURE PRODUCT R&D

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

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

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

Future Potential Mergers & Acquisitions by Cal-Bay International

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

THREE MONTH PERIODS ENDED JUNE 30, 2002 AND 2001

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

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

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

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

SIX MONTH PERIODS ENDED JUNE 30, 2002 AND 2001

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

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

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

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

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

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2002, Cal Bay has total assets of $35,623, including cash on
hand, loan receivables, prepaid rent, security deposits, and office furniture
and equipment. Current liabilities total $43,837 in accrued expenses, accrued
salaries and wages, and income taxes payable. Legal and accounting costs
increased substantially in 2001 for the Company due to the public company
reporting requirements imposed as a result of the Company's Form 10-SB
registration statement, which was finally approved by the SEC in March, 2002. In
June of 2002 Cal-Bay received approval from the NASD to move from the Pink
Sheets to the Over the Counter Bulletin Board (OTC BB) exchange. Cal Bay does
not anticipate any major new capital expenditures for the next twelve months,
and does not plan to move to a new facility or to otherwise increase the
overhead expense level in any way. Cal Bay plans to continue the current
operations of all divisions with the present management structure, financial and
operational goals for the near term. Based upon the sales, expense and income
results from the first two quarters of operations and our projections for the
remainder of the year, the Company believes that it can maintain the current
level of operations for the rest of the year without having to raise additional
funds for operational purposes. The company believes that its cash needs to
maintain current operations can be met with cash on hand and revenues from
accounts receivable on orders for at least the next twelve months. However,
should the Company require additional capital, the Company may sell additional
stock, arrange debt financing or seek other avenues of raising capital.

PART II. OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

Reports on Form 8-K: No reports on Form 8-K were filed by the Company during
the quarter ended June 30, 2002.

Exhibits:

EXHIBIT NUMBER TITLE LOCATION

99.1 Certification of Chief Executive Officer Attached

99.2 Certification of Chief Financial Officer Attached

SIGNATURES

In accordance with the Exchange Act, the registrant caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.

CAL-BAY INTERNATIONAL, INC.

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

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